Dy. CIT, Circler-2(3), Hyderabad V. M/s Gulf Oils Corporation Limited, Hyderabad

ITA 23/HYD/2014

• Counselvise Citation: 2322514 RSA 2014
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAN SINGH SINGHANIA
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Transfer pricing; International transaction; Earning of tax free income; Fair market value; Notional interest; Reason to believe
• Section: 143(3); 50C; 14A; 260A; 115JB; 148; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 11/HYD/2014 ASSESSMENT YEAR: 2005-06 GULF OIL CORPORATION LTD., HYDERABAD. PAN AABCG8433B VS. ADDL. COMMISSIONER OF INCOME-TAX, RANGE 2, HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 23/HYD/2014 ASSESSMENT YEAR: 2005-06 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(3), HYDERABAD. VS. GULF OIL CORPORATION LTD., HYDERABAD. PAN AABCG8433B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI Y. RATNAKAR REVENUE BY : SHRI MOHAN SINGH SINGHANIA DATE OF HEARING : 29 -10-2015 DATE OF PRONOUNCEMENT : 30 -11-2015 O R D E R PER S. RIFAUR RAHAMAN, A.M.: THESE TWO CROSS APPEALS ARE FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) III HYDERABAD DATED 2 9/10/2013. SINCE THE GROUNDS OF APPEAL ARE SAME, WE ARE ADJUDICATING THE SAME IN ONE ORDER. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING OF LUBRICANT OIL. THE ASSESSEE FILED ITS RETURN OF 2 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. INCOME FOR THE AY 2005-06 ON 30.10.2006, ADMITTING LOSS FROM BUSINESS RS.274,03,615/- AND LONG TERM CAPITAL GAIN ON SALE OF LAND AT RS. 16,56,29,605/-. THE BOOK PROFIT UNDER SECTIO N 115JB WAS DECLARED AT RS. 17,77,38,422/-. THE CASE WAS SELECT ED FOR SCRUTINY AND AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE I NCOME TAX ACT, 1961 (IN SHORT ACT), DETERMINED THE TOTAL INCOME AT RS. 48,96,74,233/- 3. BRIEF FACTS OF THE CASE ARE: 3.1 ASSESSEE DECLARED LOSS OF RS. 20,17,814/-, WHI CH WAS DERIVED FROM RUNNING FLORICULTURE UNIT. THE INCOME DERIVED FROM THIS UNIT IS EXEMPT U/S 10 OF THE ACT. CONSIDERING THE EXEMPTED INCOME UNDER THIS ACT, AO DISALLOWED NOTIONAL INTEREST ESTIMATED AT RS. 10 LAKHS RELATING TO THIS ACTIVITY U/S 14A, AS PER THE OPINI ON OF THE AO, THE ASSESSEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT SE PARATELY FOR THIS OPERATION. 3.2 ASSESSEE DECLARED DIVIDEND INCOME OF RS. 89,6 1,467/- FROM THE INVESTMENT PORTFOLIO OF RS. 33.35 CRORES, AO DISALL OWED U/S 14A, ESTIMATED EXPENSES FOR EARNING THE EXEMPTED INCOME RELATING TO DIVIDEND AND MANAGEMENT OF INVESTMENT PORTFOLIO, DI SALLOWED RS. 10 LAKHS. 3.3 AO NOTICED THAT ASSESSEE HAD INVESTED RS. 23.2 2 CRORES IN INDUSIND BANK TOWARDS SHARES, AO PRESUMED THAT THE ABOVE INVESTMENTS WERE MADE OUT OF CAPITAL GAINS OF RS. 2 0.20 CRORES EARNED DURING THE YEAR UNDER CONSIDERATION. FOR THE BALANCE INVESTMENT OF 3 CRORES, HE CONSIDERED THE SAME AS U NEXPLAINED INVESTMENT AND CHARGED INTEREST ATTRIBUTABLE TO TH E UNEXPLAINED INVESTMENT @ 9% PER ANNUM, WHICH WORKED OUT TO RS. 27,00,000/-, DISALLOWED UNDER SECTION 14A OF THE ACT. 3 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. LONG TERM CAPITAL GAINS: 3.4 AO DISALLOWED COMMISSION PAYMENT OF RS. 37,00, 000/- TOWARDS SALE OF LAND AND HE OBSERVED THAT THE COMMISSION AGREEMENT WAS MADE ON 01.10.2003 WHEREAS THE AGREEMENT OF SALE WA S ENTERED WITH M/S ABHISHEK DEVELOPERS ON 28.06.2003. THE DATE OF ENTERING THE COMMISSION AGREEMENT BEYOND THE DATE OF ENTERING AG REEMENT WITH M/S ABHISHEK DEVELOPERS, WHICH ACCORDING TO HIM ARE AFTER THOUGHT. 3.5 AO ALSO DISALLOWED PAYMENT OF RS. 71,53,348/- TO M/S UDHYAMAN INVESTMENT P LTD AS COMPENSATION TOWARDS C ANCELLATION OF DEED ENTERED WITH THEM FOR DEVELOPMENT AND SALE OF LAND. AO OBSERVED THAT THIS PAYMENT WAS UNWARRANTED AS IN TH E NORMAL BUSINESS PARLANCE, THE PERSON WHO DEFAULTS HAS TO C OMPENSATE THE OTHER, WHERE IN THE PRESENT CASE, THE DEFAULTERS WE RE DEVELOPER M/S UDHYAMAN INVESTMENT BUT NOT THE ASSESSEE. ALSO THER E WAS NO LEGAL OBLIGATION ON THE PART OF ASSESSEE TO PAY SUCH AMOU NT. AO REJECTED THE CANCELLATION AGREEMENT DATED 16.03.2003, WHICH WAS SUBMITTED BY THE ASSESSEE FOR THE PAYMENT OF ABOVE SAID COMPE NSATION TO FACILITATE THE SALE OF LAND TO ABHISHEK DEVELOPERS. 3.6 ASSESSEE HAD TOTAL LAND OF 29015.77 SQ. METERS AND OUT OF WHICH IT SOLD 14507.885 SQ.MTS ON 28.06.2003, WHICH WAS IDENTIFIED AS A AND BALANCE OF LAND AS B. THE BALANCE LAND WAS SOLD AGAIN IN TWO PARTS, WHICH WAS IDENTIFIED AS B1 - 10012.483 SQ.MTS AND B2 - 4495.372 SQ.MTS. DURING THE CURRENT YEAR UNDER CONS IDERATION, ASSESSEE HAD SOLD AND REGISTERED ONLY 7551.2 SQ.MTS FOR THE CONSIDERATION OF RS. 18.50 CRORES AND BALANCE OF B1 LAND WAS SOLD AND REGISTERED FOLLOWING YEAR. ASSESSEE OFFERED AS SALES CONSIDERATION FOR COMPUTING CAPITAL GAIN FOR AY 200 5-06 RS. 18.50 CRORES AND IN AY 2006-07 RS. 6.03 CRORES ACCORDINGL Y AFTER COMPLETING THE DUE PROCESS OF REGISTRATION OF DOCUM ENTS . WHEREAS THE AO OBSERVED FROM THE SALE AGREEMENT THAT ALL TH E LAND IDENTIFIED AS B I.E., BOTH B1 AND B2, AGREED TO SELL BY THE ASSESSEE TO THE 4 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. DEVELOPER BUT PROCESS OF DOCUMENT REGISTRATION WAS COMPLETED SUBSEQUENTLY. SINCE THE AGREEMENT TO SELL WAS ENTER ED FOR WHOLE LAND, IT AMOUNTS TO TRANSFER EVEN THOUGH THE REGIST RATION WAS COMPLETED LATER AFTER THE AGREEMENT DATE. AO ALSO O BSERVED THAT THE POSSESSION WAS HANDED OVER AS PART PERFORMANCE OF T HE AGREEMENT. ACCORDING TO AO, IT IS IMMATERIAL WHEN THE CONSIDER ATION RECEIVED OR REGISTRATION PROCESS COMPLETED. ACCORDINGLY AO BROU GHT TO ASSESSMENT THE WHOLE LAND COMPRISING OF B1 AND B2. 3.7 AO OBSERVED THAT AS PER SEC 50C, MARKET VALUE AS PER STAMP VALUATION AUTHORITIES WAS REQUIRED TO BE ADOPTED AS FULL VALUE OF CONSIDERATION. AO SOUGHT THE INFORMATION FROM SRO A ND BASED ON THE INFORMATION, AO ADOPTED RS. 3400/- PER SFT FOR COMM ERCIAL AREA AND RS. 2800/- PER SFT FOR RESIDENTIAL AREA. BASED ON T HE PLAN OF DEVELOPMENT, WHICH WAS ACQUIRED BY AO FROM SRO OFFI CE, IN THE RATIO OF 80:20 FOR COMMERCIAL AREA AND RESIDENTIAL AREA DEVELOPMENT RESPECTIVELY. AO CALCULATED THE AVERAGE RATE OF RS. 3280/- PER SFT AS MARKET VALUE UNDER SECTION 50C. ACCORDINGLY CALCULA TED THE INCOME UNDER CAPITAL GAINS FOR THE AY 2005-06 TAKING THE A BOVE RATE AS FAIR MARKET VALUE. 3.8 ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSAC TION DURING THE YEAR UNDER CONSIDERATION. SINCE THE AGGREGATE VALUE OF INTERNATIONAL TRANSACTION EXCEEDS RS. 5 CRORES, CASE WAS REFERRED TO TPO. BASED ON THE ADVICE OF TPO, AN AMOUNT OF RS. 2,76,92,523/ - WERE DISALLOWED TOWARDS ROYALTY PAYMENT, WHICH WAS PAID TO ITS AE , GULF OIL INTERNATIONAL (MAURITIUS) INCORPORATED (GOIMI) AS THE SHORT FALL IN THE ARMS LENGTH PRICE. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE FILED A PPEAL BEFORE CIT(A). CIT(A) HAD GIVEN FOLLOWING RELIEF TO THE AS SESSEE: I) CIT(A) REDUCED THE DISALLOWANCE MADE BY THE AO F ROM RS. 47 LAKHS TO 7 LAKHS BY OBSERVING AS BELOW: 5 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. 6.4 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND ALSO RESPECTFULLY FOLLOWING THE ORDER OF THE HONOURABLE ITAT HYDERAB AD REFERRED TO SUPRA, I AM OF THE VIEW THAT THE INTEREST ATTRIBUTABLE TO E ARNING OF EXEMPT INCOME AMOUNTING TO RS. 47 LAKHS DOES NOT DESERVE TO BE ADDED. ON THE OTHER HAND, IT IS EXTREMELY IMPROBABLE TO SAY THAT FOR M AKING HUGE AMOUNTS OF INVESTMENTS TOWARDS THE EARNING OF DIVIDENDS ET CE TERA, NO EXPENDITURE HAS BEEN MADE AT ALL. THE TOP MANAGEMENT AS WELL AS T HE EMPLOYEES OF THE COMPANY DEFINITELY SPEND MAN-HOURS TO NOT ONLY DEC IDE ON THE INVESTMENTS BUT TO FILL THE RELEVANT FORMS, TO CONCLUDE THE ST ATUTORY OBLIGATIONS AND TO FOLLOW UP REGULARLY ON THE INVESTMENTS. THE APPELL ANT HAS NOT SHOWN ANY EXPENSE ON THIS ACCOUNT, WHICH IS NOT CORRECT. THE REFORE, I HOLD THAT AN AMOUNT OF RS. 7 LAKHS BE ADDED BACK ON ACCOUNT OF THE EXPENSES INCURRED FOR EARNING OF EXEMPT INCOME IS ON SECURITIES ET C ETERA. THE APPELLANT GETS RELIEF ACCORDINGLY THROUGH THE DELETION OF R S. 47 LAKHS AND INSTEAD MAKING THE ADDITION OF ONLY RS. 7 LAKHS. II) COMPUTATION OF ALP: CIT(A) HAD GIVEN DIRECTION TO AO BY FOLLOWING THE ASSESSEES OWN CASE IN ORDER OF COORDINATE BENC H OF THIS ITAT, HYDERABAD ON THIS ISSUE RELATING TO PREVIOUS AY 200 7-08, BY OBSERVING AS BELOW: 7.7 SINCE THE FACTS ARE THE SAME AS IN THE AFOREM ENTIONED CASE AND I HAVE ALSO EXAMINED ALL THE ISSUES THOROUGHLY, IM IN AGREEMENT WITH THE ORDER OF THE HONOURABLE DRP AS ABOVE. I ALSO HOLD THAT ON DOMESTIC SALES, NO ADDITION IS TO BE MADE WITH REGARD TO ROYALTY. WHEREAS, ON INTERNATIONAL SALES ROYALTY IS TO BE RESTRICTED TO 1% AS PER THE AFOREMENTIONED ORDER. THE APPELLANT WILL GET RELIEF ACCORDINGLY AND THES E GROUNDS ARE DECIDED PARTLY IN FAVOUR OF THE APPELLANT. III) CIT(A) AGREED WITH THE ARGUMENT OF THE ASSESSE E AND DIRECTED THE AO TO CONSIDER THE SALE OF LAND ONLY TO THE EXTENT OF THE LAND WHICH WAS TRANSFERRED AND REGISTERED DURING THE YEAR UNDE R CONSIDERATION I.E., TO THE EXTENT OF 7551.2 SQ.MTS BUT DIRECTED T HE AO TO CONSIDER THE SRO VALUE AS ADOPTED BY HIM UNDER SECTION 50C IN TH E ASSESSMENT ORDER. 5. AGGRIEVED WITH THE ABOVE ORDER OF CIT(A), REVENU E FILED THE BELOW GROUNDS OF APPEAL: 1. THE LEARNED CLT(A) ERRED ON FACTS AND IN LAW I N GRANTING RELIEF ON ACCOUNT OF DISALLOWANCE U/S 14A DESPITE THE FACT T HAT THERE IS APPARENT DIVERSION OF BORROWED FUNDS FOR USE BY FLORICULTUR E DIVISION, PURCHASE OF MUTUAL FUND UNITS AND SHARES, THE INCOME FROM WHOM IS EXEMPT FORM TAXATION. 2. THE LEARNED CLT(APPEALS) ERRED ON FACTS AND IN LAW IN RESTRICTING THE DISALLOWANCE U/S 14A WITHOUT MENTIONING COGENT REA SONS. 3. THE LEARNED CLT(APPEALS) ERRED ON FACTS AND IN LAW IN GRANTING RELIEF W.R.T. ADJUSTMENT TO ALP ON ACCOUNT OF ROYALTY TO MAURITIUS COMPANY 6 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. THOUGH THE ASSESSEE HAS STRONG BRAND VALUE, THERE IS NO NEED FOR THE ASSESSEE TO PAY ROYALTY, THE DETAILS OF TECHNICAL ASSISTANCE ARE NOT KNOWN. 4. THE LEARNED CLT(APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT SALE CONSIDERATION WITH REFERENCE TO BLOCK BI HAS TO BE APPORTIONED AS PER THE CLAIM OF THE ASSESSEE DESPITE THE FACT THAT THE EN TIRE SALE CONSIDERATION ACCRUED TO THE ASSESSEE IN THE CURRENT YEAR AS PER THE AGREEMENT WITH HE DEVELOPER. 5. THE LEARNED CLT(APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT SALE CONSIDERATION WITH REFERENCE TO BLOCK B2 HAD TO BE ASSESSED IN ANOTHER YEAR DESPITE THE FACT THAT THE ENTIRE SALE CONSIDE RATION ACCRUED TO THE ASSESSEE IN THE CURRENT YEAR AS PER THE AGREEMENT WITH THE DEVELOPER, THE DEVELOPER TOOK POSSESSION OF THE LAND AND THE DEVE LOPER DID NOT QUESTION THE TITLE TO THE LAND. 14A DISALLOWANCES: REVENUE GROUND 1 AND 2(SUPRA) AND ASSESSEE GROUND 2 AND 3 6. LD DR RELIED ON THE ASSESSMENT ORDER. HE SUBMIT TED THAT SECTION 14A DISALLOWANCE WAS ATTRACTED IN THE ASSES SEES CASE AS HUGE INVESTMENT IS REQUIRED TO RUN THE FLORICULTURE BUSINESS AND MADE INVESTMENT IN SHARES. HE VEHEMENTLY ARGUED THAT THE RE WAS HUGE DIVERSION OF FUNDS AND 14A DISALLOWANCE MADE BY TH E AO WAS JUSTIFIED. 7. AS REGARDS GROUND NOS. 1 & 2 REGARDING DISALLOW ANCE U/S 14A, THE LD AR SUBMITTED THAT EXCEPT MAKING GENERALIZED ALLEGATIONS THAT BORROWED FUNDS WERE UTILIZED FOR FLORICULTURE DIVIS ION AND PURCHASING MUTUAL FUND UNITS AND SHARES, THE REVENUE HAD NOT B ROUGHT ANY EVIDENCE TO SHOW THAT THERE WAS ANY SUCH DIVERSION AT ALL OF LOANS BORROWED. ON THE CONTRARY, ASSESSEE HAD PRODUCED PR OOF THAT THE FLORICULTURE DIVISION AND SHARES OF MUTUAL FUNDS WE RE ACQUIRED OUT OF OWN FUNDS. THE FLORICULTURE DIVISION AND THE SHARES WERE PURCHASED EARLIER YEAR AND NOT IN THE YEAR UNDER CONSIDERATIO N. HE SUBMITTED THAT UPTO ASSESSMENT YEAR 2002-03, THERE WAS NO SUC H DISALLOWANCE. LD. AR CONTENDED THAT THE DISALLOWANCE WAS MADE ON THE BASIS OF ASSUMPTIONS THAT SOME EXPENDITURE MAY HAVE BEEN INC URRED. HE 7 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. SUBMITTED THAT THE HON'BLE TRIBUNAL DELETED THE DIS ALLOWANCE MADE U/S.14A FOR ASST. YEARS 2003-04 AND 2004-05. 7.1 THE LD. AR, THEREFORE SUBMITTED THAT IT HAS NO T INCURRED ANY INTEREST LIABILITY FOR USE OF ANY BORROWED FUNDS TO WARDS FLORICULTURE DIVISION OR FOR PURCHASING THE SHARES. THE EXPENDIT URE ON FLORICULTURE HAS BEEN SEGREGATED, A SEPARATE ACCOUNT IS DRAWN UP AND IS DEALT WITH SEPARATELY IN THE COMPUTATION OF INCOME FILED ALONG WITH I.T. RETURN. THE INCOME AND EXPENSES OF THE FLORICULTURE HAS BEEN SEGREGATED AND SEPARATE ACCOUNTING IS MADE FOR THIS DIVISION . AS REGARDS SHARES, THERE WAS NO INTEREST LIABILITY BEC AUSE THE SHARES WERE ACQUIRED OUT OF OWN FUNDS. THERE WERE ALSO NO ADMINISTRATIVE EXPENSES INCURRED FOR COLLECTION OF DIVIDEND. 7.2 AS REGARDS THE DISALLOWANCE OF FLORICULTURE EXP ENSES OF RS. 10,00,000/-, THE LD. AR SUBMITTED THAT SIMILAR DISA LLOWANCE MADE FOR AY 2004-05 OF RS. 10,00,000/- WAS DELETED BY THE TR IBUNAL IN ITA NO. 1364/HYD/2008, DATED 18/12/2009. HE ALSO SUBMITTED THAT EVEN FOR AY 2003-04, THE DISALLOWANCE OF RS. 10,00,000 WAS DELE TED BY THE TRIBUNAL IN ITA NO. 535/HYD/07, DT. 08/06/12. 7.3 AS REGARDS THE INTEREST/ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO DIVIDEND INCOME OF RS. 10,00,000/-, THE LD. AR SUBM ITTED THAT THE SHARES ON WHICH DIVIDENDS DECLARED WERE ACQUIRED O UT OF OWN FUNDS AND THERE WAS NO ADMINISTRATIVE EXPENSES INCURRED F OR COLLECTION ON DIVIDENDS. HE SUBMITTED THAT A SIMILAR DISALLOWANCE OF RS. 3,00,000 WAS MADE BY THE AO FOR AY 2004-05, WHICH WAS REDUCE D TO RS. 1,00,000 BY CIT(A) AND THE SAME WAS ENTIRELY DELETE D BY THE TRIBUNAL IN ITA NO. 1364/HYD/2008 DT, 18/12/2009. 7.4 AS REGARDS THE DISALLOWANCE U/S.14A ON INVESTME NTS MADE IN INDUSIND BANK RS.27 IAKHS, LD. AR SUBMITTED THAT TH E ASSESSING OFFICER PRESUMED THAT A SUM OF RS.3 CRORES OUT OF B ORROWED FUNDS WERE UTILIZED FOR INVESTMENT IN SHARES OF INDUSIND BANK AND TAKING THE RATE OF INTEREST AT 9%. 8 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. 7.5 LD. AR CONTENDED THAT ASSESSEE HAD ITS OWN FUND S TO INVEST IN THE BUSINESS IN THE FORM OF SHARE CAPITAL AND RESERVES. IN ADDITION BUSINESS HAD GENERATED SUFFICIENT INCOME DURING THE YEAR AND THEREFORE IT CANNOT BE SAID THAT ANY LOANS WERE BOR ROWED FOR INVESTMENT IN THESE SHARES. LD AR SUBMITTED THAT ON LY RS.14.28 CRORES WAS INVESTED DURING THE YEAR OUT OF WHICH 10 CRORES WERE INVESTED IN SHARES OUT OF WHICH THE COMPANY HAS NOT EARNED ANY DIVIDEND INCOME. THE BALANCE INVESTMENT ALSO MADE B Y THE COMPANY ONLY OUT OF ITS OWN FUNDS. HE SUBMITTED THAT THE CO MPANY HAD AT THAT POINT OF TIME RS. 13.82 CRORES IN SHARE CAPITAL AND RS. 112.46 CRORES IN RESERVES. THIS SHOWS THAT THE COMPANY HAD ENOUGH OWN FUNDS TO CARRY OUT THE ABOVE INVESTMENTS. HE ALSO SUBMITTED THAT THE COMPANY HAD RECEIVED SALES PROCEED OF RS. 18.50 CRORES OUT OF SALE OF LAND. THERE WAS NO NECESSITY TO BORROW ANY FUNDS FOR INVE STMENT SEPARATELY. HE SUBMITTED THAT NO DISALLOWANCE WAS M ADE IN THE PAST YEARS. 8. CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND FACTS ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE HAD MA INTAINED SEPARATE BOOKS OF ACCOUNTS FOR FLORICULTURE DIVISION AND SUB MITTED THE PROFIT AND LOSS OF ITS DIVISION. THE REVENUE ALSO HAD ACCEPTED THIS UNTIL AY 2002- 03. SUBSEQUENTLY REVENUE MADE DISALLOWANCE, WHICH W ERE STRUCK DOWN BY THE CO ORDINATE BENCH OF THIS TRIBUNAL UPTO AY2004-05. RESPECTFULLY FOLLOWING THE CO ORDINATE BENCH ON THI S COUNT, WE ARE DISMISSING THE GROUND OF THE REVENUE. 8.1 AS FOR THE OTHER DISALLOWANCE UNDER SEC 14A OF THE ACT, CONSIDERING THE FINDINGS OF THE CO ORDINATE BENCH O F THIS TRIBUNAL IN THE EARLIER ADJUDICATION, THE ASSESSEE HAD SUFFICIENT O WN FUNDS TO MAKE INVESTMENT IN THE SHARES AND MUTUAL FUNDS. THERE WA S NO NECESSITY TO BORROW LOAN FUNDS FOR MAKING INVESTMENT. WE ARE INC LINED TO CANCEL THE PART DISALLOWANCE SUSTAINED BY THE CIT(A). IN T HE RESULT, GROUNDS OF THE ASSESSEE IS ALLOWED AND DISMISSED THE GROUND S OF THE REVENUE. 9 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. TRANSFER PRICING ADJUSTMENT OF ROYALTY: 9. LD DR RELIED ON THE ASSESSMENT ORDER AND SUBMITT ED THAT THERE IS STRONG BRAND VALUE EXISTS AND DOES NOT WARRANT PAYM ENT OF ROYALTY TO ITS AE. 10. AS REGARDS GROUND NO. 3 OF REVENUE ON TRANSFER PRICING, THE LD. AR SUBMITTED THAT AN AGREEMENT WAS ENTERED INTO BY THE ASSESSEE WITH GULF OIL INTERNATIONAL MAURITIUS (INC.) (GOIMI ) DT. 1-8-2003. GOIMI IS AN ASSOCIATED ENTERPRISE. UNDER THE AGREEM ENT DT. 1-8-2003 THE ROYALTY PAYABLE ON THE ENTIRE TURNOVER OF LUBRI CANTS INCLUDING DOMESTIC AND EXPORT SALES IS 5.5% (NET OF TAXES). I T IS SUBMITTED THAT AN APPLICATION WAS MADE TO THE GOVERNMENT OF INDIA FOR APPROVAL OF AGREEMENT. THE GOVERNMENT OF INDIA APPROVED THE AGR EEMENT WITH CHANGES RELATING TO THE RATE OF ROYALTY AND THE PER IOD OF ROYALTY. THE ROYALTY RATES WHICH WERE APPROVED BY THE GOVERNMENT OF INDIA ARE AS UNDER: A) ROYALTY ON INTERNAL SALES 5.5 (NET OF TAXES) B) ROYALTY ON EXPORT SALES 8% (NET OF TAXES) C) ROYALTY PAYABLE FOR A PERIOD OF 7 YEARS FROM TH E COMMENCEMENT OF COMMERCIAL PRODUCTION. 10.1 LD AR SUBMITTED THAT A SUPPLEMENTAL AGREEMENT DT. 10-11-2013 WAS ENTERED INTO WITH GOIMI INCORPORATING THE ABOVE AMENDMENTS AS REQUIRED BY THE GOVERNMENT OF INDIA IN ITS APPROVAL LETTER. SINCE THE ROYALTY PAYABLE WAS NET OF TAXES AND THE TAX RATE O F 15%, AS PER THE DTA AGREEMENT THE ROYALTY RATE INCLUSIVE OF TAXES A S APPROVED BY THE GOVERNMENT OF INDIA IS AS UNDER: A) DOMESTIC SALES 5.88% (INCLUSIVE OF TAXES) B) EXPORT SALES 9.41 % (INCLUSIVE OF TAXES) 10 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. 10.2. LD AR SUBMITTED THAT THE ROYALTY AGREEMENT EN TERED INTO RELATES TO THE USE OF PRODUCT FORMATION PROPRIETY OF GULF OIL INTERNATIONAL MAURITIUS (INC.) AND THE RELEVANT TRADE MARK 'GULF' IN INDIA AND FOR PROVIDING TECHNICAL INFORMATION, COMPOUNDING, TESTI NG, PACKAGING AND APPLICATION OF PRODUCTS AND LICENSE TO USE THE TRAD E MARK AND DESIGN INDICIA ON PRODUCTS. IT IS SUBMITTED THAT THE RBI PERMITTED THE ROYALTY AT 5% AND 8% ON DOMESTIC AND EXPORT SALES RESPECTIV ELY, THE ASSESSEE COMPANY HAD ACTUALLY PAID 1.05% AND 2.63% ON DOMESTIC AND EXPORT SALES RESPECTIVELY WHICH IS MUCH LESSER THAN THE APPROVED RATE. 10.3 LD AR SUBMITTED THAT SIMILAR DISALLOWANCE CAME UP FOR THE ASSESSMENT YEAR 2006-07 CONNECTED WITH THE PAYMENT OF ROYALTY UNDER THE VERY SAME AGREEMENT TO THE VERY SAME AE. ON DOMESTIC SALES THE ENTIRE ROYALTY PAYMENT WAS ALLOWED AS DED UCTION AND ON EXPORT SALES THE ROYALTY WAS RESTRICTED TO 1%. HE S UBMITTED THAT THIS ISSUE WAS UPHELD BY THE HON'BLE TRIBUNAL IN ITA NO. 1450/HYD./2010 DT. 22-1-2014. THE SAID ORDER CONFIRMED THE ENTIRE ROYALTY ON THE ENTIRE DOMESTIC SALES AND RESTRICTING THE ROYALTY T O 1 % ON EXPORT. 10.4 LD AR SUBMITTED THAT FOR THE ASSESSMENT YEAR 2 007-08 SIMILAR DISALLOWANCE WAS MADE. THE APPELLANT COMPANY FILED ITS OBJECTIONS BEFORE THE DRP. THE DRP BY ITS ORDER DT. 20-9-2011 ALLOWED THE PAYMENT OF ROYALTY ON DOMESTIC SALES IN FULL AND RE STRICTED THE ROYALTY ON EXPORT SALES TO 1%. 10.5 LD AR SUBMITTED THAT COMING TO THE ASSESSMENT YEAR 2008-09 THE TPO HIMSELF BY HIS ORDER DT. 28-10-2011 FOLLOWE D THE ORDERS OF THE DRP FOR THE ASSESSMENT YEAR 2007-08, ALLOWED THE EN TIRE ROYALTY PAYMENT ON DOMESTIC SALES AND RESTRICTED THE ROYALT Y TO 1 % ON EXPORT SALES 10.6 LD AR SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX IN HIS IMPUGNED ORDER DISCUSSED THE ISSUE OF TRANSFER PRICING AT PARAS 7 TO 7.7 (AT PAGES 9 TO 15) OF HIS ORDER. FOLLOWING T HE ORDERS OF THE 11 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. HON'BLE I.T.A.T AND THE DRP FOR LATER YEARS, HE HEL D THAT ON DOMESTIC SALES NO ADDITION IS TO BE MADE AND ON EXPORT SALES , THE ROYALTY IS TO BE RESTRICTED TO 1%. 11. CONSIDERING THE SUBMISSIONS OF BOTH COUNSELS AN D MATERIAL FACTS ON RECORD, WE ARE OF THE VIEW THAT THE PAYMENT OF T HE ROYALTY WAS APPROVED BY THE GOVERNMENT AND ALSO FOLLOWING THE V IEWS OF THE CO ORDINATE BENCH OF THIS TRIBUNAL, WE ARE INCLINED TO MENTION HERE THAT THIS ISSUE IS ALREADY SETTLED CONSIDERING THE FACT THAT DRP/AO HAD ALREADY ACCEPTED THE VIEW OF THE CO ORDINATE BENCH OF THIS TRIBUNAL FOR LATER YEARS. CONSIDERING THE ABOVE FACTS, WE ARE AL LOWING THE GROUND OF ASSESSEE AND DISMISSING THE GROUND OF THE REVENU E. CAPITAL GAINS LAND TRANSFER: REVENUE GROUNDS 4 AND 5: (ASSESSEES GROUNDS 8 AND 9) 12. LD DR RELIED ON THE ASSESSMENT ORDER AND SUBMI TTED THAT AGREEMENT FOR SALE WAS MADE TOGETHER TO SELL THE WH OLE LAND IDENTIFIED AS B1 AND B2, THE LANDS WERE ALSO HANDED OVER TO THE DEVELOPER AND REGISTRATION AS WELL AS THE PAYMENTS WERE RECEIVED SUBSEQUENTLY. THE CONSIDERATION FOR WHOLE LAND MUST BE CONSIDERED FOR CALCULATION OF CAPITAL GAIN. 13 AS REGARDS GROUND NOS. 8 & 9 REGARDING ASSESSMEN T OF B1 (PART II) AND B2 LANDS TO CAPITAL GAIN, THE LD. AR SUBMIT TED THAT THE ASSESSEE OWNED LAND ADMEASURING 29015.770 SQ.MTS. A T SANKEY ROAD, BANGALORE, WHICH WAS TRANSFERRED AND THERE WA S NO SALE DEED AS SUCH BUT MERELY AGREEMENTS WERE ENTERED INTO. TH E SALE PROCEEDS WERE RECEIVED UPON TRANSFER OF THE LAND FROM TIME T O TIME AND SAME IS SET OUT AT PAGE 4.6 OF PAPER BOOK VO.II. 13.1 LD.AR SUBMITTED THAT THE SALE CONSIDERATION FO R B1 (PART II) LANDS WERE RECEIVED IN THE FINANCIAL YEAR 2005-06 R ELEVANT TO ASST. YEAR 2006-07. THE POSSESSION OF B 1 (PART II) LANDS WAS HANDED OVER ON 16/9/2005, WHEN THE FIRST INSTALLMENT OF 4.5 CRO RES WAS RECEIVED, 12 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. WHICH FALLS IN THE ASST. YEAR 2006-07.THE ASSESSEE COMPANY HAS ALSO DECLARED THE CAPITAL GAIN FOR ASST. YEAR 2006-07 AN D WAS TAXED. 13.2. AS REGARDS B2 LAND ADMEASURING 4,495.402 SQ.M TS., LD.AR SUBMITTED THAT THE RELEVANT AGREEMENT WITH M/S HIN DUJA REALTY VENTURES LTD. WAS DATED. 31/3/2008. THE ENTIRE AMOU NT OF RS.11,50,00,000 WAS RECEIVED ON 31ST MARCH, 2008 .T HE POSSESSION OF THE PROPERTY WAS DELIVERED ON 31ST MARCH, 2008. THE CAPITAL GAIN WAS DECLARED AND WAS ASSESSED IN A.Y.2008-09. 14. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSEL S AND PERUSED MATERIAL FACTS ON RECORD. THE ASSESSEE HAD MADE MER ELY SUPPLEMENTARY AGREEMENT TO SELL ON 15.10.2004. WHER EIN IT HAD AGREED TO SPLIT THE LAND IDENTIFIED AS B INTO TWO P ARTS AS B1 AND B2 AND ACCEPTED THE REVISED PAYMENT SCHEDULE FROM THE DEVELOPER. THE ACTUAL REGISTRATION FOR SALE WERE MADE ONLY AFTER R ECEIPT OF FUNDS AS PER SCHEDULE AGREED WITH THE DEVELOPER. IN THE CURR ENT YEAR UNDER CONSIDERATION, IT HAD RECEIVED PAYMENTS ONLY FOR B1 PART I OF THE LAND AND ACCORDINGLY MADE ARRANGEMENT TO REGISTER THE SA LE DEED. ACCORDINGLY IT HAD OFFERED THE SAME FOR CAPITAL GAI NS. IT WAS NOT DISPUTED BY THE REVENUE. THE OTHER PORTIONS IN THE ABOVE SAID AGREEMENT WERE IN DISPUTE. THE ORIGINAL DEVELOPMENT AGREEMENT WAS MADE ON 28.06.2003. WE CANNOT FOLLOW THE LINE OF AR GUMENT OF THE REVENUE THAT SINCE THE AGREEMENT WAS MADE ON 15.10. 2004, THE WHOLE PART OF B SHOULD BE CONSIDERED AS AGREEMENT T O SALE AND CONSIDERED FOR CALCULATION OF CAPITAL GAINS. WE ARE INCLINED TO QUESTION OURSELVES, WHAT HAPPENS WHEN THE PARTIES C ANCELS THE AGREEMENT SUBSEQUENTLY IN CASE OF ANY DISPUTES ARIS ES IN THE LATER PERIOD. IN THE REAL ESTATE DEVELOPMENT, SUBSEQUENT TO THE AGREEMENT FOR DEVELOPMENT, THE DEVELOPER WILL TAKE THE POSSES SION OF THE LAND AND PROCEED WITH THE DEVELOPMENT ACTIVITIES. IT DOE SNT MEAN THAT THE OWNERSHIP HAD PASSED, IT IS ONLY PART PERFORMANCE. AS AND WHEN THE PAYMENT AND DEVELOPMENT ACTIVITIES ARE COMPLETED BY MUTUAL CONSENT, THE OWNERSHIP PASSED ON TO THE DEVELOPER B Y COMPLETING THE 13 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. FORMALITIES BY MAKING THE ACTUAL SALE REGISTRATION. IN THE PRESENT CASE, THE DEVELOPMENT ACTIVITIES AND PAYMENTS WERE RECEIV ED ONLY TO THE EXTENT OF LAND IDENTIFIED AS B1 PART I. THE SAME WA S RIGHTLY OFFERED FOR TAX BY THE ASSESSEE IN THE AY 2005-06. THE SAME WAS CONFIRMED BY THE LD CIT(A) AND WE DO NOT INFER TO MODIFY THE FIN DINGS OF THE LD CIT(A) AND DISMISS THE GROUNDS OF THE REVENUE. CAPITAL GAINS COMMISSION DISALLOWANCE: 13. AS REGARDS GROUND NO. 4 OF ASSESSEE REGARDING D ISALLOWANCE OF PAYMENT OF COMMISSION IN COMPUTING THE CAPITAL GAIN S RS.37,00,000, LD. AR SUBMITTED THAT A TOTAL SUM OF RS.1 ,24,66,57 3 WAS IN TOTO PAID AS COMMISSION TO M/S AASIA MANAGEMENT & CONSULTANCY (P) LTD. TOWARDS SERVICES RENDERED FOR TRANSFER OF ENTIRE EX TENT OF LAND. A SUM OF RS.37 LAKHS WHICH CORRESPONDS TO THE EXTENT OF A REA OF LAND WHICH WAS TRANSFERRED UNDER THE AGREEMENT FOR THE ASSESSM ENT YEAR 2005- 06 WAS CLAIMED AS DEDUCTION AS RELATABLE TO EXPENSE S FOR TRANSFER. LD AR SUBMITTED THAT THE SAME ISSUE VIZ. WHETHER THE C OMMISSION COULD BE ALLOWED AS DEDUCTION WHILE COMPUTING THE CAPITAL GAINS CAME UP FOR CONSIDERATION FOR ASSESSMENT YEAR 2004-05 BEFO RE THIS CO ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE. THE HONBLE BENCH IN ITS ORDER IN ITA NO. 1776/HYD./20 13 DT. 25-9-2014, DIRECTED THAT THE AMOUNT OF COMMISSION PAID TO M/S AASIA MANAGEMENT & CONSULTANCY (P) LTD. CANNOT BE DISALLO WED OUTRIGHT AND A DIRECTION WAS GIVEN TO EXAMINE ITS CHIEF EXEC UTIVE MR. V.G.GURNANI, WHO WORKED IN M/S AASIA MANAGEMENT & C ONSULTANCY (P) LTD., WAS INVOLVED IN THE TRANSACTION. THE DIR ECTION WAS ALSO TO CONSIDER THE WRITTEN CONFIRMATION FILED BY M/S AASI A MANAGEMENT & CONSULTANCY (P) LTD. FOR PAYMENT OF COMMISSION, AS EXPENDITURE WHILE COMPUTING THE CAPITAL GAINS. 14. CONSIDERING THE DIRECTION OF THIS CO ORDINATE B ENCH, WE FIND IT APPROPRIATE TO REMIT THIS BACK TO THE FILE OF THE A SSESSING OFFICER TO INVESTIGATE THE MATTER AS PER THE DIRECTION OF THE EARLIER BENCH IN THIS 14 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. MATTER. AO IS DIRECTED TO CONSIDER ALL THE RELEVANT ASPECT OF THIS TRANSACTION AND DO ACCORDING TO THE LAW. IT IS NEE DLESS TO MENTION THAT PROPER OPPORTUNITY BE GIVEN TO THE ASSESSEE OF BEING HEARD. IN THE RESULT, GROUND OF THE ASSESSEE IS ALLOWED. CAPITAL GAINS DISALLOWANCE OF TERMINATION CHARGES 15. AS REGARDS GROUND NO.5 OF THE ASSESSEE REGARDIN G DISALLOWANCE OF RS.71,53,340 PAID TO UDHYAMAN INVES TMENTS (P) LTD., THE LD. AR SUBMITTED THAT THE SAID ISSUE CAME UP FO R CONSIDERATION FOR AY 2004-05 BEFORE THE TRIBUNAL IN ASSESSEES OWN CA SE. THE HONBLE TRIBUNAL VIDE ITS ORDER DATED 18/12/2009 IN ITA NO. 1364/HYD/2008 HELD THAT THE AMOUNT PAID TO UDHYAMAN INVESTMENTS ( P) LTD. FOR TERMINATION OF AGREEMENT ENTERED INTO WITH IT CANNO T BE ALLOWED AS DEDUCTION TREATING IT EITHER AS COST OF THE LAND OR AS EXPENDITURE CONNECTED WITH THE TRANSFER FOR COMPUTATION OF CAPI TAL GAINS. HE SUBMITTED THAT AN APPEAL WAS FILED AGAINST THE SAID ORDER U/S 260A OF THE IT ACT AND THE SAME IS PENDING BEFORE THE HONB LE HIGH COURT. 16. CONSIDERING THE SUBMISSIONS OF THE LD.AR AND DE CISION OF THE CO ORDINATE BENCH OF THIS TRIBUNAL, RESPECTFULLY FOLLO WING THE VIEW EXPRESSED BY THE EARLIER BENCH, WE FIND IT APPROPRI ATE TO DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. APPLICATION OF SEC. 50C OF THE ACT: 17 COMING TO THE LAND TRANSFERRED ADMEASURING 7551 .200 SQ.MTS., LD. AR SUBMITTED THAT THE LAND IS TRANSFERRED FOR A SALE CONSIDERATION OF RS. 18.50 CRORES AND THE CAPITAL GAINS SHOULD BE CALCULATED ON THE SAID AMOUNT. THE AO MADE SOME ENQUIRIES AND ACCORDI NG TO HIM THE VALUE OF LAND AS PER THE INFORMATION OBTAINED FROM THE STAMPS & REGISTRATION DEPT. BANGALORE, WORKS OUT TO RS.3280 PER SQ.FT. EVEN RS.3280 PER SQ. FT. IS A FIGURE CALCULATED BY THE A SSESSING OFFICER HIMSELF BASED ON MATERIAL RECEIVED BY HIM FROM SRO OFFICE. HE CALCULATED THE SALE CONSIDERATION FOR 7551.200 SQ.M TS. AT 15 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. RS.26,65,05,521 ON THE ABOVE BASIS AND SUBSTITUTED THE SAME IN THE PLACE OF RS.18.50 CRORES ACTUALLY RECEIVED BY THE A PPELLANT UNDER THE DOCUMENT. 17.1 THE LD. AR SUBMITTED THAT BOTH AGREEMENT TO SELL AND SUPPLEMENTARY AGREEMENTS WERE UNREGISTERED DOCUMEN TS. NONE OF THESE AGREEMENTS WERE STAMPED WITH THE REQUIRED AMO UNT OF STAMP DUTY OR REGISTERED. THE SALE CONSIDERATION WAS RECE IVED ON THE BASIS OF PRICE AGREED IN THE MAIN AGREEMENT DT 28-6-2003 WHICH WAS ALSO AN UNREGISTERED DOCUMENT. THE LD AR SUBMITTED THAT THE PROVISIONS OF SECTION 50C OF THE IT ACT THEN IN VOGUE FOR THE ASS ESSMENT YEAR 2005-06 ARE APPLICABLE ONLY FOR THOSE TRANSACTIONS UNDER DOCUMENTS WHICH ARE REGISTERED BY THE SUB REGISTRAR UNDER THE STAMPS & REGISTRATION ACT AND ARE INAPPLICABLE FOR UNREGISTE RED DOCUMENTS. 17.2 LD.AR SUBMITTED THAT SECTION 50C OF THE IT ACT WAS INAPPLICABLE TO UNREGISTERED DOCUMENTS, WHICH WERE NOT REGISTERE D WITH THE STAMPS & REGISTRATION AUTHORITY. MOREOVER, CLAUSE-2 5 OF THE FINANCE (NO.2) ACT HAS BROUGHT ABOUT THIS AMENDMENT APPLICA BLE PROSPECTIVELY FOR AGREEMENTS ENTERED INTO AFTER 1-1 0-2009. THE ATTENTION IS INVITED TO THE MEMORANDUM EXPLAINING T HE PROVISIONS OF THE FINANCE (NO.2) BILL, 2009 REPORTED IN 314 ITR ( STATUES). 17.3 LD.AR SUBMITTED THAT SECTION 50C OF THE IT ACT DID NOT APPLY TO THE TRANSACTIONS RELATING TO THE TRANSFER OF LAND B Y THE ASSESSEE. HE ALSO SUBMITTED THAT THE PROPERTY WAS AGREED TO BE T RANSFERRED AT THE CORRECT MARKET VALUE AS PER THE AGREEMENT DATED 28- 6-2003. 17.4 LD.AR SUBMITTED THAT THE TRANSACTION ENTERED W AS A BONAFIDE TRANSACTION. THE ASSESSEE RECEIVED THE SALE CONSIDE RATION MENTIONED IN THE AGREEMENT AND IT WAS NOT HELD BY THE REVENUE THAT THE ASSESSEE RECEIVED SALE CONSIDERATION MORE THAN WHAT IS SPECIFIED IN THE DOCUMENT. SECTION 5OC OF THE IT ACT IS APPLICAB LE ONLY WHEN THERE WAS EVIDENCE THAT THE ASSESSEE HAD RECEIVED M ORE FUNDS THAN WHAT WAS STIPULATED IN THE DOCUMENT. IF THERE IS AN Y SUCH EVIDENCE 16 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. AVAILABLE, BUT THE ACTUAL AMOUNT IS NOT KNOWN, THEN IT MAY BE OPEN TO THE ASSESSING OFFICER TO INVOKE SECTION 50C OF THE IT ACT. IN THE PRESENT CASE, THE TRANSACTION ENTERED HAD BEEN ACCE PTED AS GENUINE AND BONAFIDE. LD AR RELIED ON THE DECISION OF THE H ON'BLE SUPREME COURT IN K.P.VARGHESE VS. I.T.O REPORTED IN 131 ITR 597. THE SAID DECISION THOUGH RENDERED IN RESPECT OF SECTION 52(2 ) OF THE I.T ACT, UNDER IDENTICAL CIRCUMSTANCES, WILL ALSO BE APPLICA BLE TO SECTION 50C OF THE I.T ACT. HE ALSO RELIED ON THE DECISION OF T HE PUNJAB & HARAYANA HIGH COURT IN CIT VS. CHANDANI BHOCHAR REP ORTED IN 323 ITR 510. THE HON'BLE COURT HELD THAT IN THE ABSENCE OF ANY ADMISSIBLE EVIDENCE THAT MORE MONEY HAD BEEN RECEIV ED BY THE SELLER THAN WHAT WAS RECORDED IN THE SALE DEED, THE PROVIS IONS OF SECTION 50C OF THE I.T ACT CANNOT BE INVOKED. THE HON'BLE C OURT FURTHER HELD THAT THE VALUATION DONE BY A STATE AGENCY FOR THE P URPOSE OF STAMP DUTY WOULD NOT IPSO FACTO SUBSTITUTE THE ACTUAL SAL E CONSIDERATION. 17.5 LD.AR SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX AT PARA 10.4 OF HIS ORDER DIRECTED THAT THE CAPITAL GAINS FOR THE SUBSEQUENT YEARS SHOULD ALSO BE ASSESSED INVOKING S ECTION 50C OF THE I.T ACT, WHICH IS NOT CORRECT INTERPRETATION OF THE ACT. 18. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE FACTS AND OTHER MATERIALS ON RECORD. THE MAIN I SSUE BEFORE US IS, WHETHER THE AO CAN ADOPT THE VALUE ARRIVED ON THE B ASIS OF INFORMATION FROM SRO ON THE SALE OF LAND FOR THE P URPOSE OF SECTION 50C OF THE ACT, WHEN THE DOCUMENT WAS UNREGISTERED ON THE DATE OF AGREEMENT TO SELL. 18.1. FROM THE SUBMISSIONS OF THE COUNSELS, THE FAC TS ON THIS ISSUE ARE AS BELOW: 1. THERE IS NO DISPUTE ON THE FACT THAT THE VALUE R ECEIVED AND VALUE IN THE AGREEMENT TO SELL ARE SAME, THIS ASPE CT WAS NOT CONTROVERTED BY THE REVENUE. 17 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. 2. THERE IS NO DISPUTE THAT THE AGREEMENT TO SELL A ND SUBSEQUENT SUPPLEMENTAL AGREEMENTS WERE ALL UNREGISTERED. 3. THE ASSESSEE RECEIVED THE CONSIDERATION BASED ON THE AGREEMENT TO SELL AND HANDED OVER THE POSSESSION OF LAND TO THE DEVELOPER. 18.2 THE SECTION 50C WILL GET ATTRACTED ONLY WHEN T HERE EXIST DIFFERENCE ON THE SALE CONSIDERATION AND ASSESSED V ALUE FOR THE PURPOSE OF STAMP DUTY BY THE AUTHORITY OF A STATE G OVERNMENT. IN THE PRESENT CASE UNDER CONSIDERATION, THE ASSESSEE ENTE RED INTO DEVELOPMENTAL AGREEMENT WITH M/S ABHISHEK DEVELOPER S ON 28/06/2003 FOR DEVELOPMENT OF LAND OF 29015.77 SQ.M TS. AT SANKEY ROAD, MALLESWARAM, BENGALURU. THE ASSESSEE AGREED T O DEVELOP THIS LAND WITH SALE CONSIDERATION AS SET OUT IN THE DEVE LOPMENT AGREEMENT DTD. 28/06/2003 (REFER PAPER BOOK). FOR CONVENIENCE , WE REPRODUCE THE RELEVANT PART OF THE AGREEMENT AS UNDER: CONSIDERATION: THE CONSIDERATION PAYABLE BY THE DEVELOPER TO THE OWNER IN RESPECT OF THE DEVELOPMENT RIGHTS HEREBY GRANTED SHALL CO NSIST OF TWO COMPONENTS, AS SET OUT HEREUNDER: A) FIXED COMPONENT TOWARDS COST OF LAND B) VARIABLE COMPONENT FOR DEVELOPMENTAL RIGHTS THESE ARE DETAILED BELOW: A) FIXED COMPONENT: THE FIXED COMPONENT SHALL BE AT THE RATE OF RS. 21,023/- PER SQ.M. FOR BLOCK A, ADMEASURING 14,507.885 SQ.MTS. AND FOR BLOCK B AT THE RATE OF RS. 24, 359 PER SQ.MTS. FOR AREA ADMEASURING ABOUT 14,507.885 SQ.MTS. THIS S HALL BE PAID BY THE DEVELOPER BY CHEQUES. IT IS HOWEVER, AGREED T HAT WHILE THE TOTAL AREA OF THE SAID PROPERTY IS 29,015 SQ.MTS. IN TH E EVENT THAT THERE IS FOUND ANY MINOR DIFFERENCE IN THE AREA, I.E., WIT HIN 2% MORE OR LESS, SUCH MINOR DIFFERENCE SHALL BE IGNORED. B) VARIABLE COMPONENT: IN ADDITION TO THE ABOVE PAYMENT FOR COST OF LAND , THE DEVELOPER SHALL PAY TO THE OWNER TOWARDS DEVELOPMENTAL RIGH TS 25% (OR IN SOME CASES AS DEFINED SEPARATELY IN THIS MOU 30%) OF THE AVERAGE SELLING PRICE REALIZED OVER AND ABOVE RS. 2500/- PER SQ.FT. OF SUPER BUILT UP AREA. 18 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. 18.3 FROM THE ABOVE, IT CAN BE SEEN THAT THE ASSESS EE RECEIVES SALE CONSIDERATION IN TWO PARTS. FIRST PART AS FIXED COM PONENTS TOWARDS COST OF LAND AND AS VARIABLE COMPONENTS IN THE FORM OF DEVELOPMENTAL RIGHTS. THERE IS NO DISPUTE THAT THE ASSESSEE HAD O FFERED TO TAX THE FIXED COMPONENT FOR CAPITAL GAINS TAX. THERE IS NO MATERIAL EVIDENCE THAT THE ASSESSEE HAD RECEIVED MORE THAN THE FIXED COMPONENT FROM THE DEVELOPER. SINCE THE VALUE AGREED TO BE EXCHANG ED FOR TRANSFER OF LAND WAS DETERMINED ON THE BASIS OF DEVELOPMENT AGR EEMENT, IT BECOMES THE FINAL SALE CONSIDERATION UNLESS CONTRAR Y IS PRODUCED BY THE REVENUE. IN THE PRESENT CASE, REVENUE HAS NOT B ROUGHT ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAD RECEIVED MOR E THAN THE AGREED VALUE AS IN THE DEVELOPMENTAL AGREEMENT. IN SUCH A SITUATION, WHETHER SECTION 50C WILL GET ATTRACTED OR NOT HAS T O BE DECIDED BASED ON THE PLAIN READING OF THE SECTION. 18.4 FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCIN G THE SECTION 50C OF THE ACT AS STOOD ON THE AY 2005-06 UNDER CON SIDERATION. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOV ERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER , THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. FROM THE ABOVE DEFINITION, IT IS CLEAR THAT THE VAL UE ADOPTED OR ASSESSED BY AUTHORITY OF A STATE GOVERNMENT WILL BE COMPARED WITH THE CONSIDERATION RECEIVED OR ACCRUING ON TRANSFER OF A CAPITAL ASSET. IN THE PRESENT CASE, BOTH THESE ARE SAME I.E., THE VALUE OF LAND HANDED OVER TO THE DEVELOPER WAS 7551.20 SQ.MTS. A ND CONSIDERATION RECEIVED DURING THE AY WERE RS.18.50 CRORES. IN THE CASE OF K.P.VARGHESE VS. I.T.O REPORTED IN 131 ITR 597, THE HONBLE SUPREME COURT HAS HELD AS UNDER: 19 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. 18. WE MUST, THEREFORE, HOLD THAT SUB-S. (2) OF S. 52 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER HAS BEEN UNDERSTATED BY THE ASSESSEE OR, IN OTHER WORDS, THE CONSIDERATION ACT UALLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT IS DECLARED OR DISCLOSE D BY HIM AND THE BURDEN OF PROVING SUCH AN UNDERSTATEMENT OR CONCEALMENT I S ON THE REVENUE. THIS BURDEN MAY BE DISCHARGED BY THE REVENUE BY ESTABLI SHING FACTS AND CIRCUMSTANCES FROM WHICH A REASONABLE INFERENCE CA N BE DRAWN THAT THE ASSESSEE HAS NOT CORRECTLY DECLARED OR DISCLOSED T HE CONSIDERATION RECEIVED BY HIM AND THERE IS AN UNDERSTATEMENT OR CONCEALME NT OF THE CONSIDERATION IN RESPECT OF THE TRANSFER. SUB- S. (2) HAS NO APP LICATION IN THE CASE OF AN HONEST AND BONA FIDE TRANSACTION WHERE THE CONSIDE RATION RECEIVED BY THE ASSESSEE HAS BEEN CORRECTLY DECLARED OR DISCLOSED BY HIM, AND THERE IS NO CONCEALMENT OR SUPPRESSION OF THE CONSIDERATION. W E FIND THAT IN THE PRESENT CASE, IT WAS NOT THE CONTENTION OF THE REVENUE THA T THE PROPERTY WAS SOLD BY THE ASSESSEE TO HIS DAUGHTER-IN-LAW AND FIVE OF HI S CHILDREN FOR A CONSIDERATION WHICH WAS MORE THAN THE SUM OF RS. 1 6,500 SHOWN TO BE THE CONSIDERATION FOR THE PROPERTY IN THE INSTRUMENT O F TRANSFER AND THERE WAS AN UNDERSTATEMENT OR CONCEALMENT OF THE CONSIDERAT ION IN RESPECT OF THE TRANSFER. IT WAS COMMON GROUND BETWEEN THE PARTIES AND THAT WAS A FINDING OF FACT REACHED BY THE IT AUTHORITIES THAT THE TRA NSFER OF THE PROPERTY BY THE ASSESSEE WAS A PERFECTLY HONEST AND BONA FIDE TRAN SACTION WHERE THE FULL VALUE OF THE CONSIDERATION RECEIVED BY THE ASSESSE E WAS CORRECTLY DISCLOSED AT THE FIGURE OF RS. 16,500. THEREFORE, ON THE CON STRUCTION PLACED BY US, SUB-S. (2) HAD NO APPLICATION TO THE PRESENT CASE AND THE ITO COULD HAVE NO REASON TO BELIEVE THAT ANY PART OF THE INCOME OF T HE ASSESSEE HAD ESCAPED ASSESSMENT SO AS TO JUSTIFY THE ISSUE OF A NOTICE UNDER S. 148. THE ORDER OF REASSESSMENT MADE BY THE ITO PURSUANT TO THE NOTIC E ISSUED UNDER S. 148 WAS ACCORDINGLY WITHOUT JURISDICTION AND THE MAJOR ITY JUDGES OF THE FULL BENCH WERE IN ERROR IN REFUSING TO QUASH IT. 19. WE, ACCORDINGLY, ALLOW THE APPEAL, SET ASIDE THE O RDER PASSED BY THE FULL BENCH AND RESTORE THE ORDER OF ISAAC J., ALLOWING THE WRIT PETITION AND QUASHING THE ORDER OF REASSESSMENT MADE BY THE ITO . THE REVENUE WILL PAY THE COSTS OF THE ASSESSEE THROUGHOUT. 18.5 THE HONBLE PUNJAB & HARAYANA HIGH COURT IN C IT VS. CHANDINI BHUCHAR REPORTED IN 323 ITR 510 HAS HELD A S UNDER: IN THE ABSENCE OF ANY ADMISSIBLE EVIDENCE, VALUAT ION DONE BY STAMP DUTY AUTHORITIES COULD NOT BE TAKEN AS ACTUAL SALE CONS IDERATION AND THE VALUE SHOWN IN THE SALE DEED HAD TO BE ACCEPTED. IT IS CLEAR THAT THERE HAS TO BE EXCESS MONEY SHOUL D HAVE PASSED ON TO THE SELLER OR THE VALUE CANNOT BE DETERMINED, TH EN ONLY THE SECTION 50C WILL GET ATTRACTED. IN ABSENCE OF SUCH VARIATIO N OR FINDING, SECTION 50C WILL HAVE NO JURISDICTION. 18.6 MOREOVER, THE ASSESSEE ENTERED INTO DEVELOPMEN T OF LAND AND NOT SIMPLE LAND TRANSFER, WHERE THE ASSESSEE WILL G ET CONSIDERATION 20 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. ONLY FOR TRANSFER RIGHT OVER LAND. IN THE PRESENT C ASE, THE CONSIDERATION RECEIVED BY THE ASSESSEE HAD TWO COMP ONENTS. THE FIXED COMPONENT IS TOWARDS TRANSFER OF LAND AND THE VARIABLE COMPONENT AS DEVELOPMENTAL RIGHTS. IT WILL GET THE VARIABLE COMPONENTS ONCE THE DEVELOPMENT OF THE PROPERTY IS OVER. AT THAT TIME, ASSESSEE WILL SHOW THESE COMPONENTS AS INCOME AS SHORT TERM CAPITAL. AS SUCH THERE IS NO LOSS TO THE REVENUE. 18.6 IN OUR CONSIDERED VIEW, THE ASSESSEE HAD RECEI VED ONLY THE SALE CONSIDERATION WHAT IS AGREED WITH THE DEVELOPER AND OFFERED THE SAME. THERE IS NO MATERIAL EVIDENCE, WHICH SHOWS TH AT THE ASSESSEE HAD RECEIVED MORE THAN THE VALUE AGREED AS PER THE DEVELOPMENT AGREEMENT. THE SAME HAS TO BE ADOPTED AS SALE CONSI DERATION AND SINCE THERE IS NO EVIDENCE FOR RECEIPT OF HIGHER CO NSIDERATION AND IT IS BONAFIDE TRANSACTION, SECTION 50C HAS NO JURISDICTI ON OVER THIS TRANSACTION. 18.7 CONSIDERING THE ABOVE CONCLUSION, WE ALLOW THE ASSESSEES GROUNDS OF APPEAL. 19. IN THE RESULT, THE GROUND OF THE ASSESS IS ALLO WED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER ACCOUN TANT MEMBER HYDERABAD, DATED: 30 TH NOVEMBER, 2015 KV 21 ITA NO. 11 & 23 /HYD/2014 GULF OIL CORPORATION LTD., HYD. COPY TO:- 1) GULF OIL CORPORATION LTD., P.B. NO. 1, SANATH NA GAR (I.E.), KUKATPALLI., HYDERABAD 500 018 2) ADDL. CIT, RANGE 2, HYDERABAD 3) DCIT, CIRCLE 2(3), HYDERABAD 4) CIT(A)-III, HYDERABAD 5) CIT-II, HYDERABAD 6) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.