Kwality Spinning Mills Ltd., CHENNAI V. DCIT, Coimbatore

ITA 1837/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7385 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: S SRIDHAR; T KALAIRAJ
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C

Judgement Text

, , [ : ] IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI [ CAMP: COIMBATORE ] . . ! . ' , # !$% & '( .*+*,, . !$% !/ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER !&./ ITA NO.1837/MDS/2016 # , 1, / ASSESSMENT YEAR : 2009-10 M/S KWALITY SPINNING MILLS LTD., UDUMALPET ROAD, POLLACHI 642 003. PAN : AABCK 3313 J V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1, COIMBATORE. (34/ APPELLANT) (534/ RESPONDENT) 34 6 7 !/ APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE & SHRI T. KALAIRAJ, CA 534 6 7 ! / RESPONDENT BY : SH. PATHLAVATH PEERYA, CIT ! 6 . / DATE OF HEARING : 19.01.2017 81 6 . / DATE OF PRONOUNCEMENT : 29.03.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 1, COIMB ATORE, DATED 24.03.2016 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS COMPU TATION OF CAPITAL GAINS. 2 I.T.A. NO.1837/MDS/16 3. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE SOLD AN AGRICULTURAL LAND SITUATE D IN SOLAPALAYAM VILLAGE. ACCORDING TO THE LD. COUNSEL, THE ASSESSE E, IN FACT, RECEIVED ` 4,18,20,000/- DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE PHYSICAL POSSESSION OF THE PROPERTY WA S NOT HANDED OVER TO THE PURCHASER. THE SALE DEED WAS NOT EXECU TED, HENCE, THERE WAS NO TRANSFER OF PROPERTY WITHIN THE MEANIN G OF SECTION 2(47)(V) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). SINCE NO REGISTERED SALE DEED WAS EXECUTED DURING THE YEAR U NDER CONSIDERATION AND THE POSSESSION OF THE PROPERTY WA S NOT HANDED OVER TO THE PURCHASER, ACCORDING TO THE LD. COUNSEL , THERE WAS NO TRANSFER OF PROPERTY DURING THE YEAR UNDER CONSIDER ATION. IN FACT, THE SALE DEED WAS EXECUTED ON 28.04.2009 WHICH FALLS IN THE ASSESSMENT YEAR 2010-11. THEREFORE, ACCORDING TO T HE LD. COUNSEL, THERE CANNOT BE ANY CAPITAL GAINS IN THE YEAR UNDER CONSIDERATION. IN CASE THE CAPITAL GAIN IS TO BE ASSESSED DURING T HE YEAR UNDER CONSIDERATION, THE GAIN OFFERED FOR ASSESSMENT YEAR 2010-11 HAS TO BE DELETED. REFERRING TO THE FAIR MARKET VALUE UND ER SECTION 50C OF THE ACT, LD.COUNSEL SUBMITTED THAT FAIR MARKET VALU E AS ON 3 I.T.A. NO.1837/MDS/16 01.04.1981 HAS TO BE ESTIMATED FOR THE PURPOSE OF A RRIVING AT THE COST OF ACQUISITION IN ORDER TO DETERMINE THE LONG TERM CAPITAL GAINS. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE CIT(APPEALS) HAS ALSO FAILED TO CONSIDER THE COST O F IMPROVEMENT INCURRED BY THE ASSESSEE TO THE EXTENT OF ` 20,00,000/-. MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE MATERIAL EVIDENCE TO SUPPORT THE CLAIM OF THE COST OF IMPROVEMENT THAT C ANNOT BE A REASON TO DISALLOW THE CLAIM OF THE ASSESSEE TOTALL Y. 5. ON THE CONTRARY, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE CLAIMS THAT POSSESSION OF PROPERTY WAS NOT HANDED OVER DUR ING THE YEAR UNDER CONSIDERATION, THEREFORE, THERE WAS NO TRANSF ER. ACCORDING TO THE LD. D.R., THE ASSESSEE HAS RECEIVED ENTIRE SALE CONSIDERATION OF ` 4,18,20,000/-. NO PURCHASER WOULD PAY ` 4,18,20,000/- WITHOUT TAKING PHYSICAL POSSESSION OF PROPERTY. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT IT IS ONLY LOGIC TO ASSUME T HAT NO BUYER WILL PART WITH ` 4,18,20,000/- WITHOUT OBTAINING PHYSICAL POSSESSION OF THE PROPERTY. HENCE, ACCORDING TO THE LD. D.R., THE CI T(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICE R. REFERRING TO THE VALUE, THE LD. D.R. SUBMITTED THAT DETERMINATION OF COST OF 4 I.T.A. NO.1837/MDS/16 ACQUISITION AS ON 01.04.1981 AS WELL AS SALE CONSID ERATION BY ADOPTING SECTION 50C OF THE ACT WOULD BECOME ACADEM IC, THEREFORE, IT NEED NOT BE ADJUDICATED IN THE PRESENT. THE ASS ESSEE CLAIMS THAT IT INVESTED MORE THAN ` 20,00,000/- FOR THE IMPROVEMENT OF THE PROPERTY. HOWEVER, THE ASSESSEE COULD NOT PRODUCE ANY SUPPORTING MATERIAL FOR THE SO CALLED IMPROVEMENT SAID TO BE M ADE. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE SALE DEED WAS EXECUTED BY THE ASSESSEE FOR TRANSFER OF LAND ON 28.04.2009, WHICH FALLS IN THE ASSESSMENT YEAR 2010 -11. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2009-10. TH ERE IS NO MATERIAL TO INDICATE THAT THE ASSESSEE HANDED OVER THE PHYSICAL POSSESSION OF THE PROPERTY DURING THE YEAR UNDER CO NSIDERATION. NO DOUBT, THE ASSESSEE HAS RECEIVED ` 4,18,20,000/- DURING THE YEAR UNDER CONSIDERATION FOR SALE OF THE PROPERTY. THE CIT(APPEALS) FOUND THAT NO PERSON WOULD HAND OVER ` 4,18,20,000/- WITHOUT RECEIVING PHYSICAL POSSESSION OF THE PROPERTY. THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE CANNOT BE ANY PRE SUMPTION WITH 5 I.T.A. NO.1837/MDS/16 REGARD TO HANDING OVER OF THE PROPERTY. WHEN THE A SSESSEE AGREED TO SELL THE PROPERTY AND THE PURCHASER WILLINGLY AC CEPTED THE SAME AND PAID ` 4,18,20,000/-, IN THE ABSENCE OF ANY INDICATION IN THE AGREEMENT FOR SALE REGARDING HANDING OVER OF PHYSIC AL POSSESSION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE RE WAS NO TRANSFER OF PROPERTY DURING THE YEAR UNDER CONSIDERATION BY VIRTUE OF PROVISIONS OF SECTION 2(47) OF THE ACT. THE ASSESS EE HAS FILED A COPY OF THE REGISTERED SALE DEED DATED 28.04.2009. CLAUSE 8 OF THE SALE DEED READS AS FOLLOWS:- 8. THE VENDORS HAVE THIS DAY DELIVERED VACANT POSSES SION OF THE PROPERTY HEREBY CONVEYED AND MORE FULLY SET OUT IN THE SCHEDULE HEREUNDER TO THE PURCHASERS AND ALSO HANDED OVER THE ORIGINAL TITLE DEEDS RELATING TO TH E PROPERTY HEREBY CONVEYED . 7. IN VIEW OF SPECIFIC CLAUSE IN THE REGISTERED SAL E DEED, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PHYS ICAL POSSESSION WAS HANDED OVER BY THE ASSESSEE TO THE PURCHASER ON LY ON 28.04.2009 WHEN THE SALE DEED WAS EXECUTED. THEREF ORE, THERE CANNOT BE ANY PRESUMPTION THAT THE ASSESSEE HANDED OVER PHYSICAL POSSESSION OF THE PROPERTY ON THE DATE OF RECEIPT O F SALE CONSIDERATION OF ` 4,18,20,000/-. 6 I.T.A. NO.1837/MDS/16 8. IT IS COMMON PRACTICE TO RECEIVE PART SALE CONSI DERATION OR ENTIRE SALE CONSIDERATION AND TO EXECUTE THE SALE D EED IN A LATER STAGE. IT IS ALSO COMMON PRACTICE TO HAND OVER PHY SICAL POSSESSION OF THE PROPERTY AT THE TIME OF EXECUTION OF SALE DE ED. IN THE ABSENCE OF ANY MATERIAL TO INDICATE ABOUT HANDING OVER OF P HYSICAL POSSESSION TO THE PURCHASER WHETHER BY WAY OF AGREE MENT OR ARRANGEMENT, THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT THERE IS NO TRANSFER OF PROPERTY DURING THE YEAR UNDER CONSI DERATION, HENCE, THERE CANNOT BE ANY LEVY OF CAPITAL GAIN TAX. 9. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS OFFERED CAPITAL GAINS FOR THE ASSESSMENT YEAR 2010-11. WHEN THE AS SESSEE EXECUTED THE SALE DEED AND HANDED OVER THE PHYSICAL POSSESSION OF THE PROPERTY ON 28.04.2009, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CAPITAL GAINS ACCRUED TO THE ASSES SEE ONLY ON 28.04.2009, THEREFORE, THE ASSESSEE RIGHTLY OFFERED THE SAME FOR TAXATION DURING THE ASSESSMENT YEAR 2010-11. IN VI EW OF THE ABOVE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(APPEAL S). ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE CIT(APPEALS) IS DELETED. 7 I.T.A. NO.1837/MDS/16 10. NOW COMING TO APPLICATION OF SECTION 50C OF THE ACT, AS RIGHTLY SUBMITTED BY THE LD. DEPARTMENTAL REPRESENT ATIVE, IT BECOMES ACADEMIC. THEREFORE, IT NEED NOT BE ADJUDI CATED DURING THE YEAR UNDER CONSIDERATION. 11. COMING TO THE ASSESSEES CLAIM OF ` 20,00,000/- AS COST OF IMPROVEMENT TO THE PROPERTY, NO DOUBT, THERE IS NO MATERIAL FILED BEFORE THE LOWER AUTHORITIES FOR CLAIMING THE SAME. UNDER THE PROVISIONS OF INCOME-TAX ACT, THE ASSESSEE IS ENTIT LED TO COST OF IMPROVEMENT. HOWEVER, IT IS OBLIGATORY ON THE PART OF THE ASSESSEE TO PRODUCE NECESSARY MATERIAL IN SUPPORT OF COST OF IMPROVEMENT. SINCE THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT A REASONABLE ESTIMAT ION HAS TO BE MADE WITH REGARD TO COST OF IMPROVEMENT. BY TAKING INTO CONSIDERATION OF THE NATURE OF THE PROPERTY AND THE PERIOD OF HOLDING, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE MIGHT HAVE SPENT NEARLY ` 3,00,000/- FOR IMPROVEMENT OF THE PROPERTY. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW ` 3,00,000/- TOWARDS COST OF IMPROVEMENT. 8 I.T.A. NO.1837/MDS/16 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 29 TH MARCH, 2017 AT CHENNAI. SD/- SD/- ('( .*+*, ) ( . . ! . ' ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) . !$%/ ACCOUNTANT MEMBER # !$% /JUDICIAL MEMBER /CHENNAI, :$& /DATED, THE 29 TH MARCH, 2017. KRI. $ 6 5# ;1 /COPY TO: 1. 34 /APPELLANT 2. 534 /RESPONDENT 3. < () /CIT(A)-1, COIMBATORE 4. PRINCIPAL CIT-1, COIMBATORE 5. =' 5## /DR 6. '>, ? /GF.