ACIT Corporate Circle 3(2), CHENNAI V. VVA Hotels Pvt. Ltd., CHENNAI

ITA 2013/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0056 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 22-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDIPCIT
• Assessee Lawyers: SRINATH SRIDEVAN
• Keywords: Valuation report

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , . , ! BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.2013 & 2014/CHNY/2018 /ASSESSMENT YEARS: 2013-14 & 2014-15 THE ASST. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-3(2), CHENNAI-600 034. VS. M/S.VVA HOTELS PVT. LTD., NO.2, RADISSON BLUE HOTEL, ETHIRAJ SALAI, C-IN-ROAD, EGMORE, CHENNAI-600 008. [PAN: AABCV 8672 P ] ( % /APPELLANT) ( &'% /RESPONDENT) DEPART MENT BY : MR. SAILENDRA MAMIDI, PCIT ASSESSEE BY : MR.SRINATH SRIDEVAN, ADV. ) /DATE OF HEARING : 26.03.2019 ) /DATE OF PRONOUNCEMENT : 26.03.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI, I N ITA NOS.219 & 240/16-17 DATED 20.03.2018 FOR THE AYS 2013-14 & 20 14-15. 2. MR. SAILENDRA MAMIDI, PCIT, REPRESENTED ON BEHAL F OF THE REVENUE AND MR. SRINATH SRIDEVAN, ADV., REPRESENTED ON BEHA LF OF THE ASSESSEE. ITA NOS.2013 & 2014/CHNY/2018 :- 2 -: 3. BOTH THE REVENUE APPEALS ARE DELAYED BY 14 DAYS, FOR WHICH, THE REVENUE HAS FILED NECESSARY APPLICATION FOR CONDONA TION OF DELAY. THE LD.AR HAS NOT RAISED ANY SERIOUS OBJECTION ON THE S AME. CONSEQUENTLY, THE DELAY IN FILING OF THE APPEAL IS CONDONED AND T HE APPEALS ARE DISPOSED OFF ON MERITS. 4. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: IN ITA NO.2013/CHNY/2018 FOR THE AY 2013-14 : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LA W AND FACTS AND CIRCUMSTANCES OF THE CASE. ON THE ISSUE OF LIMITATION OF TIME FOR ASSESSMENT 2. THE CIT(A) ERRED IN HOLDING THAT THE AO SHOULD HAV E TREATED THE PART VALUATION REPORT AS FINAL VALUATION REPORT AND COMPLETED THE ASSESSMENT . 3. THE CIT(A) ERRED IN HOLDING THAT AO SHOULD HAVE CO MPLETED THE ASSESSMENT, WITHOUT WAITING FOR THE BALANCE VALUATION REPORTS, EVEN THO UGH THERE WAS TIME AVAILABLE TO THE DVO TO SUBMIT THE SAME. ON THE ISSUE OF SHARE PREMIUM 4. THE CIT (A) ERRED IN IGNORING THE HUGE VARIATION IN THE VALUE OF SHARE, TO THE EXTENT OF TEN TIMES, BETWEEN THE VALUE ADOPTED BY THE ASSESSE E COMPANY AS AGAINST IT ACTUAL VALUE OF UNDERLYING ASSETS, PHYSICALLY AVAILABLE. 5. THE CIT (A) ERRED IN IGNORING THE AOS FINDING THA T THERE IS NO BASIS FOR THE DISCOUNT FACTOR ADOPTED BY THE ASSESSEE COMPANY AS AT 16%. 6. THE CIT (A) HAS ERRED IN HOLDING THAT THE HUGE DI FFERENCE BETWEEN THE ACTUAL SALE REVENUE AND THE PROJECTED REVENUE, AS ADOPTED BY IT WHILE COMPUTING IN DCF METHOD, SAY IN AY 16-17 TO THE EXTENT OF 24 %, AND WHICH WORKS OUT TO BE A VARIATION TO THE EXTENT OF 1/4 THE SALES REVENUE, AS A MARGINAL VARIATION. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASI DE AND THAT OF THE ASSESSING OFFICER RESTORED. IN ITA NO.2014/CHNY/2018 FOR THE AY 2014-15 : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LA W AND FACTS AND CIRCUMSTANCES OF THE CASE. ON THE ISSUE OF SHARE PREMIUM ITA NOS.2013 & 2014/CHNY/2018 :- 3 -: 2. THE CIT (A) ERRED IN IGNORING THE HUGE VARIATION IN THE VALUE OF SHARE, TO THE EXTENT OF TEN TIMES, BETWEEN THE VALUE ADOPTED BY THE ASSESSE E COMPANY AS AGAINST IT ACTUAL VALUE OF UNDERLYING ASSETS, PHYSICALLY AVAILABLE. 3. THE CIT (A) ERRED IN IGNORING THE AOS FINDING THA T THERE IS NO BASIS FOR THE DISCOUNT FACTOR ADOPTED BY THE ASSESSEE COMPANY AS AT L6%. 4. THE CIT (A) HAS ERRED IN HOLDING THAT THE HUGE DI FFERENCE BETWEEN THE ACTUAL SALE REVENUE AND THE PROJECTED REVENUE, AS ADOPTED BY IT WHILE COMPUTING IN DCF METHOD, SAY IN AY 16-17 TO THE EXTENT OF 24 %, AND WHICH WORKS OUT TO BE A VARIATION TO THE EXTENT OF THE SALES REVENUE, AS A MARGINAL VARIATION. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASI DE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. THERE ARE TWO ISSUES, ONE IN RESPECT OF THE ISSU E OF LIMITATION AND THE SECOND ISSUE WHICH IS COMMON FOR BOTH THE AYS, BEING ISSUE OF SHARE PREMIUM. 6. IT WAS SUBMITTED BY THE LD.DR THAT IN THE COURSE OF THE ASSESSMENT, THE AO HAD ISSUED 2,04,594 SHARES HAVING A FACE VAL UE OF RS.10/- WITH SHARE PREMIUM OF RS.1,000/- PER SHARE. THE ASSESSE E HAD VALUED THE SHARES BY APPLYING PROVISIONS OF RULE 11UA(2) OF TH E INCOME TAX RULES, 1962. THE AO HAD ADOPTED THE PROVISIONS OF SEC.56( 2)(VIIB) OF THE ACT AND HAD CONSEQUENTLY, ARRIVED AT A VALUE OF RS.105. 17 PER SHARE BY APPLYING A NET ASSET METHOD (IN SHORT NAM) AFTER VALUATION OF APPRECIATION OF THE LAND, PLANT & MACHINERY. CONSE QUENTLY, THE AO HELD THAT FOR THE AY 2013-14, AN AMOUNT OF RS.18,51,22,7 90/- AND FOR THE AY 2014-15, AN AMOUNT OF RS.1,39,08,530/- WAS EXCESS C ONSIDERATION EARNED BY THE ASSESSEE U/S.56(2)(VIIB) OF THE ACT AND ASSE SSED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. IT WAS A SUB MISSION THAT BASICALLY, THE ISSUE WAS THAT THE ASSESSEE HAD ADOPTED THE PRO VISIONS OF RULE ITA NOS.2013 & 2014/CHNY/2018 :- 4 -: 11UA(2) FOR THE PURPOSE OF DETERMINING THE QUANTUM OF THE SHARE PREMIUM AND THE VALUATION OF THE SHARES AND THE AO HAD ADOPTED THE NET ASSET METHOD OF VALUATION AFTER RE-VALUING THE LAND OF THE ASSESSEE BY APPLYING NAM. IT WAS A SUBMISSION THAT ON APPEAL, THE LD.CIT(A) FOR THE AY 2013-14, AT THE OUTSET, HELD THAT THE ASSESSMENT ORDER WAS BARRED BY LIMITATION IN SO FAR AS THE ASSESSMENT GOT TIME BAR RED IN THE SECOND WEEK OF JUNE, 2016 AND EVEN IF THE FULL SIX MONTHS PERIO D WAS GRANTED TO THE AO U/S.142A, THE ASSESSMENT WAS TIME BARRED BY 30.10.2 016 AND THE ASSESSMENT ORDER HAVING BEEN PASSED ON 31.10.2016, WAS BARRED BY LIMITATION. IT WAS A SUBMISSION THAT 30.10.2016 WAS A SUNDAY AND SO THE ORDER PASSED ON 31.10.2016 WAS NOT LIABLE TO BE HEL D TO BE BARRED BY LIMITATION. IT WAS A FURTHER SUBMISSION THAT ON ME RITS THE LD.CIT(A) FURTHER WENT ON TO HOLD THAT THE MARGINAL DIFFERENC E BETWEEN THE ACTUAL SALES REVENUE AND THE PROJECTED SALES REVENUE WAS J USTIFIED AND THE LD.CIT(A) HAD HELD THAT THE ASSESSEE COMPANY HAD TH E PRIVILEGE TO CHOOSE THE OPTION BETWEEN THE NAM AND THE DISCOUNTED CASH FLOW METHOD (IN SHORT DCF) FOR ARRIVING AT THE VALUATION OF THE S HARES. THE LD.CIT(A) WENT ON TO HOLD THAT THE ASSESSEE COMPANY HAD BEEN REASONABLE IN ITS DCF VALUATION AND HAD CONSEQUENTLY, DELETED THE ADD ITION MADE BY THE AO. THE LD.DR VEHEMENTLY SUPPORTED THE ORDER OF TH E AO. 7. IN REPLY, THE LD.AR SUBMITTED THAT THE ASSESSMEN T ORDER WAS HAND DELIVERED TO THE ASSESSEE ONLY ON 14.12.2016 THOUGH THE ASSESSMENT ORDER DATE IS 31.10.2016. IT WAS A SUBMISSION THAT THE AO HAVING ITA NOS.2013 & 2014/CHNY/2018 :- 5 -: ADOPTED THE PROVISIONS OF SEC.142A, THE LIMITATION HAS BEEN CALCULATED IN THE CHART AT PAGE NOS.7 & 8 OF THE ORDER OF THE LD. CIT(A). IT WAS A SUBMISSION THAT THE ASSESSMENT ORDER WAS BARRED BY LIMITATION. IT WAS ALSO A SUBMISSION THAT THERE WAS NO REASON FOR THE AO TO DELAY THE SERVICE OF THE ORDER. IT WAS SUBMITTED BY THE LD.AR ON MER ITS THAT HE REITERATED ITS SUBMISSIONS AS RECORDED BY THE LD.CIT(A) IN PAG E NOS.13-25 OF THE ORDER OF THE LD.CIT(A). IT WAS A SUBMISSION THAT T HE ASSESSEE HAD ADOPTED DCF METHOD AS AVAILABLE U/R.11UA FOR ARRIVI NG AT THE VALUE OF THE SHARES ALLOTTED AND THE SHARE PREMIUM RECEIVED. TH E AO ADOPTED THE NAM AND FURTHER WENT ON TO RE-VALUE THE LAND OWNED BY THE ASSESSEE COMPANY FOR THE PURPOSE OF DETERMINING THE SHARE VA LUE OF THE PREMIUM, THEREON, BY APPLYING THE NAM. IT WAS A SUBMISSION THAT THE ASSESSEE HAVING ADOPTED A PARTICULAR METHOD WHICH IS PRESCRI BED UNDER THE ACT AND WHERE, THE ASSESSEE HAS BEEN GIVEN AN OPTION TO APP LY A PARTICULAR METHOD, JUST BECAUSE, IT GIVES ADDITIONAL BENEFIT T O THE ASSESSEE, THE METHOD CANNOT BE DISCARDED. THE LD.AR VEHEMENTLY S UPPORTED THE ORDER OF THE LD.CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 9. COMING TO THE ISSUE ON MERITS, IT IS NOTICED THA T THE ASSESSEE HAS ADOPTED RULE 11UA FOR THE PURPOSE OF VALUING ITS SH ARES AND THE SHARE PREMIUM RECEIVED. THIS IS ACCEPTED METHOD OF VALUA TION AND THE SAID METHOD OF VALUATION DOES PROVIDE FOR ESTIMATION. T HE AO HAS ADOPTED THE ITA NOS.2013 & 2014/CHNY/2018 :- 6 -: NAM AND FOR THE PURPOSE OF THE SAME HAS PROCEEDED T O RE-VALUE THE ASSETS OF THE ASSESSEE BEING THE VALUATION OF THE L AND. THE AO HAS DISCARDED THE ASSESSEES METHOD OF DCF BY HOLDING T HAT THE ACTUAL REVENUES VARIED FROM THE PROJECTED REVENUES FOR THE FOUR ASSESSMENT YEARS. ADMITTEDLY, WHEN A PROJECTED VALUE IS TAKEN , IT IS AN ESTIMATE. THE VARIATION IN THE ESTIMATE IS ALSO LESS THAN 10%. T HEREFORE, IT CANNOT BE SAID THAT THE PROJECTED REVENUES ARE FABRICATED OR MANIPULATED. FURTHER, THE FACT THAT THE ASSESSEE HAS ADOPTED A METHOD PRE SCRIBED UNDER THE ACT AND NO ERROR IN RESPECT OF THE SAID METHOD HAS BEEN SPECIFICALLY POINTED OUT. JUST BECAUSE, THERE IS A MINOR VARIATION IN TH E ESTIMATE, THAT METHOD CANNOT BE REJECTED. THIS BEING SO, WE FIND NO REAS ON TO INTERFERE IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AS RECORDED BY HIM IN PARA NOS.10 & 11 OF HIS ORDER. IN THESE CIRCUMSTANCES, GROUND NO S.4 TO 7 OF THE REVENUES APPEAL FOR THE AY 2013-14 ARE DISMISSED. 10. IN RESPECT OF THE ISSUE OF LIMITATION FOR THE A Y 2013-14, A PERUSAL OF THE ORDER OF THE LD.CIT(A) SHOWS THAT THE LD.CIT(A) IN PARA NO.7 OF HIS ORDER, HAS CLEARLY EXAMINED THE ISSUE OF LIMITATION AND HAS TAKEN INTO CONSIDERATION, THE TIME LIMIT OF SIX MONTHS AVAILAB LE TO THE AO U/S.142A TO HOLD THAT THE ASSESSMENT ORDER GOT TIME BARRED ON 3 0.10.2016. THE ARGUMENT BY THE LD.DR THAT 30.10.2016 WAS A SUNDAY AND THEREFORE, THE ASSESSMENT ORDER WAS PASSED ON 31.10.2016, ADMITTED LY IS A VALID ISSUE AND ON THIS GROUND THE ASSESSMENT CANNOT BE ANNULLE D AS THE ASSESSMENT ORDER HAS BEEN ALLEGEDLY PASSED ON 31.10.2016 BEING THE DAY IMMEDIATELY ITA NOS.2013 & 2014/CHNY/2018 :- 7 -: AFTER THE HOLIDAY BEING 30.10.2016. HOWEVER, THE R EVENUE HAS NOT BEEN ABLE TO GIVE ANY JUSTIFIABLE REASON FOR THE INORDIN ATE DELAY OF NEARLY ONE AND A HALF MONTHS FOR THE SERVICE OF THE ORDER BY H AND ON 14.12.2016. THIS BEING SO, ADMITTEDLY THE CLAIM BY THE REVENUE THAT THE ASSESSMENT ORDER HAS BEEN PASSED ON 31.10.2016 ITSELF IS QUEST IONABLE. WE ARE NOT GOING INTO THE ABOVE SAID ISSUE TO ADJUDICATE AS TO WHETHER THE INORDINATE DELAY IN SERVICE OF THE ASSESSMENT ORDER WOULD MAKE THE ASSESSMENT ORDER BARRED BY LIMITATION AS ON MERITS, WE HAVE HE LD THE ISSUE IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH DAY OF MARCH, 2019 IN CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, / /DATED: 26 TH MARCH, 2019. TLN ) &01 21 /COPY TO: 1. % /APPELLANT 4. 3 /CIT 2. &'% /RESPONDENT 5. 1 & /DR 3. 3 ( ) /CIT(A) 6. /GF