Moram Veerabhadra Rao, Amalapuram V. THE ITO, WARD - 1, Amalapuram

ITA 226/VIZ/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1130 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AR SHRI K RAVI
• Assessee Lawyers: S RAMA RAO
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Fair market value
• Section: 50C; 148

Judgement Text

ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.226/VIZAG/2014 ( / ASSESSMENT YEAR: 2008-09) MORAM VEERABHADRA RAO AMALAPURAM VS. ITO, WARD - 1, AMALAPURAM [PAN: BJYPM1577N ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.266/VIZAG/2014 ( / ASSESSMENT YEAR: 2008-09) ITO, WARD - 1, AMALAPURAM VS. MORAM VEERABHADRA RAO AMALAPURAM / APPELLANT BY : SHRI S. RAMA RAO, / RESPONDENT BY : AR SHRI K. RAVI, DR / DATE OF HEARING : 07.04.2016 / DATE OF PRONOUNCEMENT : 27.05.2016 ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE ARE DIRECTED AGAINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 13.3.2014 FOR THE ASSESSMENT YEAR 2008-09. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A PARTNE R IN M/S. SURYA AGENCIES FILED THE RETURN OF INCOME FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION, IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT), TH E ASSESSEE HAS DECLARED A TOTAL INCOME OF RS.1,16,513/- AND AGRICULTURAL IN COME OF RS.1 LAKH. IN THE ASSESSMENT ORDER, THE A.O. HAS NOTED THAT THE A SSESSEE HAS SOLD HIS PROPERTY DURING THE YEAR AND HE HAS NOT ADMITTED CA PITAL GAIN ON SUCH TRANSACTION. THE A.O. FURTHER NOTED THAT THE CONSI DERATION STATED IN THE DOCUMENT FOR THE SALE CONSIDERATION OF PROPERTY WAS OF RS.11 LAKHS, WHEREAS THE STAMP DUTY VALUE WAS OF RS.48.96 LAKHS. HENCE, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLA IN WHY THE STAMP DUTY VALUE OF RS.48.96 LAKHS SHOULD NOT BE ADOPTED IN TERMS OF SECTION 50C OF THE ACT AND CAPITAL GAIN COMPUTED ACCORDINGL Y. BEFORE THE A.O., THE ASSESSEE HAS SUBMITTED THAT THE IMPUGNED PROPER TY IS NOT A CAPITAL ASSET, AS IT IS SITUATED 7 KMS. AWAY FROM YANAM AND IT WAS AN ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 3 AGRICULTURAL LAND, HENCE WOULD NOT BE A CAPITAL ASS ET. HE FURTHER SUBMITTED THAT THE STAMP DUTY VALUATION FOR THE SUB JECT YEAR WAS UNFAIR AS IT WAS REDUCED SUBSTANTIALLY IN THE YEAR 2010-11 I.E. 4 YEARS AFTER THE IMPUGNED TRANSACTION. THE ASSESSEE ALSO CONTENDED THAT THE ASSESSEE HAS PURCHASED SAID PROPERTY ONLY TO RESALE. HENCE, THE TRANSACTION SHOULD BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE. HOWEVER, THE A.O. HAS NOT ACCEPTED THE EXPLANATION OF THE AS SESSEE ON THE GROUND THAT THE IMPUGNED LANDS ARE PART AND PARCEL OF THE YANAM MUNICIPALITY AND NEAR INDUSTRIAL ESTATE, HENCE, IT WOULD CONSTITUTE A CAPITAL ASSET. THE A.O. ADOPTED THE STAMP DUTY VAL UATION AS A DEEMED CONSIDERATION U/S 50C OF THE ACT AND DETERMINED THE CAPITAL GAIN AT RS.37,41,419/-. ASSESSEE CARRIED THE MATTER IN APP EAL BEFORE THE CIT(A). IT WAS SUBMITTED THAT THE IMPUGNED TRANSAC TION SHOULD BE TAKEN AS ADVENTURE IN THE NATURE OF TRADE AND NO CA PITAL GAIN TAX CAN BE IMPOSED ON THE ASSESSEE. HE FURTHER SUBMITTED BEFO RE THE CIT(A) THAT THERE IS A SUBSTANTIAL DIFFERENCE IN CONSIDERATION ADMITTED IN THE DEED AND MARKET VALUE ADOPTED BY SUB REGISTRAR. THE A.O . ADOPTED THE SUB REGISTRAR VALUE AUTOMATICALLY WITHOUT REFERRING TO THE VALUATION OFFICER. ACCORDINGLY, THE CIT(A) DIRECTED THE A.O. TO REFER THE MATTER TO THE VALUATION OFFICER. AS PER THE DIRECTIONS OF THE CI T(A), THE ASSESSING ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 4 OFFICER HAS REFERRED THE MATTER TO THE VALUATION OF FICER AND FORWARDED THE REPORT TO LD. CIT(A). THE LD. CIT(A) HAS EXTRACTED THE VALUATION OFFICERS REPORT IN HIS ORDER. FOR THE SAKE OF CON VENIENCE WE REPRODUCE THE SAME AS UNDER: 8. IT IS SEEN THAT THE VALUATION OFFICER HAS ADOPTE D THE VALUATION IN THE FOLLOWING MANNER: THE GUIDELINE VALUE OF ` 750/- PER SQM. WAS TAKEN FOR ANALYSIS PURPOSE AND FURTHER FACTORS OF ADJUSTMENT ARE ADOPTED AS BELOW: RATE OF LAND PER SQM. = ` 750.00 1. LOCATION & SITUATION: THE LAND BEING WET LAND AT THE TIME OF ACQUISITION BY THE ASSESSEE AND REQUIRES LEVELING/FILLING FOR PROPER DRAINAGE AND NOT HAVING MAIN ROAD FACING ETC., 5% REDUCTION IN RATE IS ADOPTED = (-) ` 37.50 2. SHAPE: THE LAND DIMENSIONS ARE NOT OF RECTANGULAR SHAPE. HENCE 5% REDUCTION IN RATE IS ALLOWED ON THIS ACCOUNT = (-) ` 37.50 3. TIME GAP & OTHER FACTORS: SINCE THE ASSESSEE IS HAVING LIMITED CONTROL OVER THE LAND DUE TO PASSAGE (COMMON) LEFT FOR THE SERVICE ROAD, AS REGISTERED IN THE DOCUMENT ALSO, 15% REDUCTION IN RATE IS ALLOWED CONSIDERING OTHER FACTORS ALSO AS GIVEN IN THE SUB-ANALYSIS GIVEN BELOW SEPARATELY. = (-) ` 112.50 ---------------------- NET RATE = ` 562.50 ---------------------- SAY ` 563/- RATE PER SQUARE METER ADOPTED = ` 563/-. ADOPTING THE RATE AT ` 563/- PER SQ.MT. THE VALUATION DETERMINED AT ` 36,75,000/-. ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 5 9. THE AUTHORIZED REPRESENTATIVE HAS CONTENDED THAT THE VALUE ADOPTED BY THE VALUATION OFFICER IS NOT CORRECT. IT WAS POI NTED OUT THAT THE VALUATION OFFICER HAS GIVEN AN ALLOWANCE OF 5% ON A CCOUNT OF THE FOLLOWING FACTORS: (I) THE LAND BEING WET LAND REQUIRING LEVELING AND FILL ING (II) NOT HAVING PROPER DRAINAGE (III) NOT HAVING MAIN ROAD FACING. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CON TENDED BEFORE THE LD. CIT(A) THAT THE VALUATION OFFICER HAS GIVEN AN ALLOWANCE OF 5% ON ACCOUNT OF LEVELING AND CLEANING OF THE LAND NOT HA VING PROPER DRAINAGE, NOT HAVING A MAIN ROAD FACING AND ALLOWANCE SHOULD BE GIVEN AT 50% ON STAMP VALUE. THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE SUBMISSIONS OF THE ASSESSEE, HE HAS OBSERVED THAT THE VALUATION OF FICER HAS GRANTED THE ALLOWANCE AS PER THE GUIDELINES PRESCRIBED AND THE LAND IS SITUATED IN A DEVELOPED INDUSTRIAL AREA WITH PROSPECTS OF FUTURE GROWTH AND IS LOCATED ABOUT 6 KMS. FROM YANAM BUS STATION AND HE ALSO OBS ERVED THAT THERE IS NO JUSTIFICATION TO ADOPT THE REVERSE INDEXATION ME THOD AND ACCORDINGLY HE HAS DIRECTED THE A.O. TO TAKE FULL VALUE OF CONS IDERATION OF RS.36,75,000/- AND DIRECTED THE A.O. TO RE-COMPUTE THE CAPITAL GAINS. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE HAD PURCHASED THE LAND ON 22.11.2004 HELD AS A STOC K IN TRADE AND THE SAME WAS SOLD ON 21.5.2007 AND THE SAME HAS TO BE T REATED AS A ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 6 BUSINESS INCOME NOT AS A CAPITAL GAIN. HE FURTHER SUBMITTED THAT THE LAND PURCHASED BY THE ASSESSEE IS A WET LAND REQUIR ED LEVELING AND FILLING, NO PROPER DRAINAGE AND NOT HAVING MAIN ROA D FACING AND SUBMITTED THAT THE A.O. OUGHT TO HAVE APPLIED REVER SE INDEXATION METHOD. HE FURTHER SUBMITTED THAT THE VALUATION OF FICER NOT PROPERLY VALUED THE VALUE OF THE PROPERTY, THE ALLOWANCE GIV EN BY THE VALUATION OFFICER OF 5% ON ACCOUNT OF LEVELING AND FILLING, N OT HAVING DRAINAGE AND NOT HAVING ROAD FACING IS VERY LESS AND HE SHOULD H AVE GIVEN 50% ALLOWANCE. 5. ON THE OTHER HAND THE LD. D.R. HAS STRONGLY SUPP ORTED THE ORDER PASSED BY THE A.O. 6. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. SMT. KANTA KUMARI & OTHERS 270 ITR 442. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE HAD PURCHASED A LAND SITUATED NEAR INDUSTR IAL ESTATE AT ADAVIPALEM VILLAGE IN THE UNION TERRITORY OF YANAM ON 22.11.2004. THE ASSESSEE HAD SOLD THE SAME LAND, FOR THE CONSIDERAT ION STATED IN THE ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 7 DOCUMENT FOR SALE OF PROPERTY WAS OF RS.11 LAKHS ON 21 ST MAY, 2007, WHEREAS THE STAMP DUTY VALUE WAS RS.48.96 LAKHS. I T WAS SUBMITTED BEFORE THE A.O. THAT THE LAND PURCHASED BY THE ASSE SSEE IS NOT A CAPITAL ASSET AS IT IS SITUATED 7 KMS. AWAY FROM YANAM AND IT WAS AN AGRICULTURAL LAND AND HE ALSO SUBMITTED THAT THE AS SESSEE PURCHASED THE LAND WITH AN INTENTION TO RESALE, HENCE, THE TRANSA CTION SHOULD BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE. THE A.O. AFTER CONSIDERING ABOVE EXPLANATION OF THE ASSESSEE, HE O BSERVED THAT LANDS PURCHASED BY THE ASSESSEE ARE PART AND PARCEL OF TH E YANAM MUNICIPALITY AND NEAR INDUSTRIAL ESTATE AND HENCE I T WOULD CONSTITUTE A CAPITAL ASSET. ACCORDINGLY, THE A.O. ADOPTED THE S TAMP DUTY VALUE AS A CONSIDERATION U/S 50C OF THE ACT AND DETERMINED THE CAPITAL GAINS AT RS.37,41,419/-. THE ASSESSEE HAS RAISED VARIOUS OB JECTIONS BEFORE THE LD. CIT(A). THE LD. CIT(A) DIRECTED THE A.O. TO RE FER THE MATTER TO THE VALUATION AUTHORITY. AFTER RECEIVING THE REPORT FR OM THE A.O., HE HAS ADOPTED THE SALE CONSIDERATION AS PER THE VALUE DET ERMINED BY THE VALUATION AUTHORITY OF RS.36,75,000/-. THE MAIN CO NTENTION OF THE ASSESSEE BEFORE US IS THAT THE LAND PURCHASED BY TH E ASSESSEE IS AN ADVENTURE IN TRADE, THEREFORE, IT CANNOT BE CONSIDE RED AS A CAPITAL ASSET. WE FIND THAT THE ASSESSEE IS NOT ABLE TO ESTABLISH T HAT THE LAND ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 8 PURCHASED BY THE ASSESSEE IS IN THE NATURE OF ADVEN TURE IN TRADE. THIS ARGUMENT IS REJECTED FOR THE REASON THAT HE WAS NOT ABLE TO PLACE ANY MATERIAL TO SUBSTANTIATE HIS ARGUMENT. IN SO FAR A S HIS ARGUMENT IN RESPECT OF THE LAND SITUATED BEYOND 7 KMS. OF YANAM MUNICIPALITY IS CONCERNED, THE A.O. GAVE A FINDING THAT THE YANAM I S A SMALL TOWN OF PONDICHERRY SURROUNDED BY EAST GODAVARI DISTRICT AN D SEA, THE TOTAL AREA IS UNDER YANAM MUNICIPALITY AND IT IS NO RURAL AREA . SINCE THE ASSESSEE SOLD THE PROPERTY IN THE NOTIFIED MUNICIPALITY AREA , THE PROVISIONS OF SECTION 50C OF THE ACT HAVE TO BE APPLIED AND TAXED ACCORDINGLY. IN THIS CONNECTION, THE LD. CIT(A) ALSO GAVE A FINDING THAT THE IMPUGNED PROPERTY IS LOCATED ABOUT 6 KMS. FROM YANAM BUS STA TION. THE ASSESSEE IS NOT ABLE TO CONTRADICT THE ABOVE FINDINGS GIVEN BY BOTH THE AUTHORITIES BELOW BY PRODUCING COGENT MATERIAL. UNDER THESE FA CTS AND CIRCUMSTANCES OF THE CASE, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE IMPUGNED LAND IS AGRICULTURAL LAN D IS REJECTED. IN SO FAR AS GRANTING THE ALLOWANCE IS CONCERNED, ON ACCO UNT OF LEVELING, DRAINAGE AND ROAD FACING, THE VALUATION OFFICER BY FOLLOWING THE DUE PROCEDURE 5% ALLOWANCE IS GRANTED. WE FIND THAT NO INFIRMITY IN THE PROCEDURE ADOPTED BY THE VALUATION OFFICER TO DETER MINE THE FAIR MARKET VALUE AT RS.36,75,000/-. IN SO FAR AS ANOTHER ARGU MENT RAISED BY THE ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 9 LD. COUNSEL FOR THE ASSESSEE THAT THE A.O. OUGHT TO HAVE BEEN ADOPTED REVERSE INDEXATION METHOD. THE ASSESSEE HAS NOT PL ACED ANY MATERIAL TO SAY THAT THE A.O. HAS TO FOLLOW THE REVERSE INDE XATION METHOD. HE SIMPLY RELIED ON THE JUDGEMENT OF THE DELHI HIGH CO URT IN THE CASE OF SMT. KANTA KUMARI (SUPRA) WHEREIN THE HONBLE DELHI HIGH COURT HAS OBSERVED THAT THE FAIR MARKET VALUE OF THE PROPERT Y IN QUESTION WHICH IS VERY LARGE COULD NOT BE DETERMINED ON THE BASIS OF SALE INSTANCES OF LANDS OF SMALLER SIZE AND THEREFORE, IT WAS NOT PRO VED THAT THE FAIR MARKET VALUE OF THE PROPERTY WAS MORE THAN THE CONS IDERATION SHOWN IN THE INSTRUMENT OF TRANSFER BY MORE THAN 50%. APPEA L FILED BY THE DEPARTMENT IS DISMISSED. IN THIS CASE, THE ASSESS EE HAS SOLD THE LAND TO THE EXTENT OF 6,110 SQ.MTRS. TO M/S. SRIDEVI BIO TECH PVT. LTD. COMPANY AND THEREFORE, THE FACTS OF THE PRESENT CAS E ARE ENTIRELY DIFFERENT FROM THE CASE LAW RELIED BY THE LD. COUNS EL FOR THE ASSESSEE. 8. KEEPING IN VIEW OF THE ENTIRE FACTS AND CIRCUMST ANCES OF THE CASE WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSE D BY THE LD. CIT(A). THIS GROUND OF APPEAL FILED BY THE ASSESSEE IS DISM ISSED. SO FAR AS REVENUE APPEAL IS CONCERNED, THE LD. CIT(A) HAS RIG HTLY DIRECTED THE A.O. TO REFER THE MATTER TO THE VALUATION OFFICER T O DETERMINE FAIR MARKET ITA NOS.226 & 266/VIZAG/2014 MORAM VEERABHADRA RAO, AMALAPURAM 10 VALUE OF THE PROPERTY. THEREFORE, THERE IS NO MERI T IN THE GROUND RAISED BY THE REVENUE AND THUS REVENUE APPEAL IS ALSO DISM ISSED. 9. IN THE RESULT, THE APPEALS FILED BY BOTH THE ASS ESSEE AS WELL AS THE REVENUE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH MAY16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 27.05.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI MORAM VEERABHADRA RAO, S/O S RI VENKATA RATNAM, MARUTHI TOWERS, SBI COLONY, AMALAPURAM-533 201. 2. / THE RESPONDENT THE ITO, WARD-1, AMALAPURAM 3. ) / THE CIT, RAJAHMUNDRY 4. ) / THE PRINCIPAL CIT-2, VISAKHAPATNAM 5. ) ( ) / THE CIT(A),VISAKHAPATNAM 6. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM