ITO, PALI V. Shri Ramprakash Urf Prakash Chand, SOJAT CITY

ITA 235/JODH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70207 (ITAT-JODHPUR)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 17-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: GAUTAM MUTHA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition; Fair market value
• Section: 50C; 54F; 133(6); 148

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 235/JODH/2013 (A.Y. 2007-08) ITO, VS. SHRI RAMPRAKASH URF PRAKASH WARD-3, CHAND PALI. S/O DHANNARAMJI TAK, C/O PRAKASH HOTEL, SOJAT CITY. PAN NO. ANWPC7968N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C.PARWAL & SHRI GAUTAM MUTHA. DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 19/09/2013. DATE OF PRONOUNCEMENT : 23/09/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 01/02/2013 OF LD. CIT (A), JODHPUR. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 2 1. THE LD. CIT(A) HAS ERRED IN DELETING CAPITAL GAI NS DETERMINED BY AO AT RS. 17,47,458 AS PER SECTION 50C READ WITH SECTI ON 45 & 48 OF THE IT ACT, 1961. 2. THE CIT(A) HAS ERRED IN IGNORING THE CHARGING SE CTION 45 READ WITH SECTION 48 WHICH PROVIDE MODE OF COMPUTATION OF CAP ITAL GAIN ON TRANSFER OF CAPITAL ASSET. THEREFORE, FOR THE PURPO SE OF COMPUTATION OF CAPITAL GAIN HE OUGHT TO HAVE CONSIDERED FULL VA LUE CONSIDERATION AS PER SECTION 50C OF THE IT ACT, 1961. 3. THE CIT(A) HAS ERRED IN IGNORING THE POSITION OF LAW THAT BENEFIT OF SECTION 54F SHOULD BE INTERPRETED STRICTLY IN ACCOR DING TO THE PROVISION OF SECTION 54F AND THEREFORE, DEDUCTION I S ALLOWABLE FOR RS. 1428765/- ONLY. 4. THE CIT(A) HAS ERRED IN IGNORING THE PROVISION O F SECTION 45 WHICH SAYS 'ANY PROFIT OR GAINS ARISING FROM TRANSFER OF CAPITAL ASSET EFFECTED IN PREVIOUS YEAR SHALL SAVE AS OTHERWISE P ROVIDED IN SECTION 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G AND 54H BE CHARGEABLE TO INCOME TAX UNDER THE HEAD' CAPITAL GA IN' AND SHALL BE DEEMED TO BE THE INCOME OF PREVIOUS YEAR IN WHIC H THE TRANSFER TOOK PLACE'. THEREFORE, THE CIT(A) OUGHT TO HAVE SE EN THAT MEANING GIVEN IN EXPLANATION TO SECTION 54F FOR ' NET CONSI DERATION' IS FOR THE PURPOSE OF SECTION 54F ONLY AND NOT FOR COMPUTA TION OF CAPITAL GAIN ON TRANSFER OF CAPITAL ASSET. THE DECISIONS IN THE CASE OF SH. GYAN CHAND BATRA REPORTED IN 45 DTR 41/33 TTJ 382 AND SH.PRAKASH KAMAWAT VS ITO IN ITA NO. 364/JP/2011 BY ITAT, JAIPUR, AS CITED BY THE CIT(A) HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT, AND DUE TO LOWER TAX EF FECT IN THESE CASES, NO APPEAL BEFORE HON'BLE HIGH COURT WAS FILE D. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR A LTER ANY OR ALL THE GROUNDS OF APPEAL ON OR BEFORE THE DATE THE APP EAL IS FINALLY HEARD FOR DISPOSAL. 2 FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ON LY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF CAPITAL G AINS DETERMINED BY THE ASSESSING OFFICER AT RS. 17,47,458/- AFTER CONS IDERING THE PROVISIONS 3 OF SECTION 50C OF THE I.T. ACT, 1961 (HEREINAFTER R EFERRED TO AS ACT, FOR SHORT) R.W.S. 45 AND 48 OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE F ILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,23,570/-,WHI CH INCLUDED BUSINESS INCOME OF RS. 41,203/- AND THAT OF AGRICUL TURAL INCOME OF RS. 82,370/-. THE RETURN WAS PROCESSED UNDER SECTION 1 43(1) OF THE ACT. SUBSEQUENTLY, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD DISPOSED OF IMMOVABLE PROPERTIES. THE TRANSACT IONS, AS SUCH ALBEIT DELIVERED CAPITAL GAINS, BUT THE ASSESSEE HA D NOT DECLARED THE RESULTANT INCOME FROM CAPITAL GAINS. CONSEQUENTLY, NOTICE UNDER SECTION 148 OF THE ACT DATED 26/05/2009 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE STATED THAT THE RETURN AS FILED ON 08/08/2008 MAY BE TREATED TO HAVE BEEN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT . THE ASSESSING OFFICER OBTAINED INFORMATION FROM THE SUB-REGISTRAR UNDER SECTION 133(6) OF THE ACT AND NOTICED THAT THERE WAS DIFFER ENCE BETWEEN THE SALE CONSIDERATION AS SHOWN IN THE SALE DEEDS AND T HAT OF THE MARKET VALUE FOR STAMP DUTY INASMUCH AS THE SALE CONSIDERA TION, AS SHOWN IN THE SALE DEED AT RS. 13,70,000/- WHEREAS THE VALUE ADOPTED BY THE SUB-REGISTRAR FOR STAMP DUTY PURPOSES WAS AT RS. 34 ,84,536/-. HE, THEREFORE, PROPOSED TO REWORK OUT THE CAPITAL GAIN BY ADOPTING THE SALE 4 CONSIDERATION UNDER SECTION 50C OF THE ACT AT RS. 3 4,84,536/-. THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT TH E VALUE ADOPTED BY THE SUB-REGISTRAR WAS ON HIGHER SIDE AND THE DLC RA TE OF THE AREA WAS MUCH LOWER THAN THE VALUE ADOPTED BY THE SUB-REGIST RAR, EVEN, LOWER THAN THE SALE CONSIDERATION RELIED BY THE ASSESSEE, THEREFORE, THE VALUATION OF PLOT TAKEN BY THE ASSESSEE MAY BE ACCE PTED. IT WAS FURTHER STATED THAT THE LAND WAS SITUATED IN REMOTE AND UNPOPULATED AREA AND ALSO NONE OF THE FACILITY EXISTED IN THE P ROXIMITY OF THE LAND, THEREFORE, THE CONSIDERATION AS SHOWN IN THE SALE D EED MAY BE ACCEPTED. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND STATED THAT HE HAD ALL THE REASONS FOR ADOPTING THE MARKET VALUE OF THOSE PROPERTIES AS TA KEN BY THE SUB- REGISTRAR FOR STAMP DUTY TO DETERMINE THE CAPITAL G AIN AS ARISING OUT OF THOSE TRANSACTIONS. THE ASSESSING OFFICER CONCLUDE D THAT IN VIEW OF THE PROVISIONS OF SECTION 50C OF THE ACT, THE NET CONSI DERATION OF THESE TRANSACTION AGGREGATED TO RS. 34,54,536/- AND THE I NDEXED VALUE OF COST OF ACQUISITION AS PROVIDED BY THE ASSESSEE WAS AT RS. 5,22,744/-. HE THEREFORE, DETERMINED THE CAPITAL GAIN AT RS. 29 ,61,792/- (RS.34,84,536- RS. 5,22,744/-). THE ASSESSING OFFI CER ALSO OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENT OF RS. 14,28, 765/- IN 5 CONSTRUCTION OF HOUSE. HE THEREFORE CALCULATED THE CAPITAL GAIN ON PRO- RATA BASIS AS UNDER:- CAPITAL GAINS EXEMPT FROM TAX = CAPITAL GAINS X ( COST OF NEW ASSET DIVIDED BY NET CONSIDERATION IN RESPECT OF ORIGINAL ASSET) 1214334.00 = 2961792.00 X (1428765.00 DIVIDED BY 3 484536.00). THUS, THESE TRANSACTIONS HAVE DELIVERED THE TAXABLE LONG TERM CAPITAL GAINS OF THE ORDER OF RS. 1747458.00; (BEING TOTAL CAPITA L GAINS - EXEMPT CAPITAL GAINS, AS CALCULATED ABOVE). EVIDENTLY, TH E ASSESSEE HAS NOT DECLARED ANY CAPITAL GAINS FROM THESE TRANSACTION, I MAKE AN ADDITION OF RS. 1747458.00 ON ACCOUNT OF CAPITAL GAINS AS AR ISING OUT OF THE CONSIDERATION RECEIVED ON SALE OF LAND/PLOTS. HOWE VER, THIS SHALL ATTRACT TAXATION AT THE SPECIAL RATE OF, AS PROVIDE D UNDER SECTION 112 OF THE ACT. ACCORDINGLY, AN ADDITION OF RS. 17,47,458/- WAS MA DE ON ACCOUNT OF CAPITAL GAIN. 4. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT SECTION 50C OF THE ACT IS A SPECIAL PROVISION FOR DEEMING THE VALUE ADOPTED BY THE STAMP VALUATIO N AUTHORITY AS FULL VALUE OF CONSIDERATION. IT WAS STATED THAT THE ASS ESSEE POINTED OUT BEFORE THE ASSESSING OFFICER THAT THE VALUATION MAD E BY THE STAMP AUTHORITY WAS MUCH MORE THAN THE FAIR MARKET VALUE OF THE PROPERTIES. SO, HE WAS OBLIGED TO MAKE A REFERENCE TO VALUATION CELL TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY, BUT THE ASSE SSING OFFICER HAD NOT REFERRED THE PROPERTY FOR VALUATION TO DVO AND EVEN IF THE VALUE AS ADOPTED BY STAMP AUTHORITY WAS ACCEPTED. STILL NO C APITAL GAIN WAS CHARGEABLE TO TAX INASMUCH AS ASSESSEE HAD INVESTED THE ENTIRE ACTUAL 6 SALE CONSIDERATION IN CONSTRUCTION OF RESIDENTIAL H OUSE. THEREFORE, THE ASSESSEE WAS ENTITLED TO BENEFIT OF DEDUCTION UNDER SECTION 54F OF THE ACT. IT WAS FURTHER STATED THAT AS PER SECTION 54F , NET CONSIDERATION WAS REQUIRED TO BE INVESTED IN THE NEW ASSET WITHIN THE PARTICULAR TIME FRAME EXPLANATION OF SECTIONS 45(1), 48, 50C AND 54 F OF THE ACT AND THE SAID EXPLANATION, NOWHERE PROVIDES THAT FULL OF CONSIDERATION WOULD ALSO COVER THE VALUE ADOPTED FOR STAMP VALUATION UN DER SECTION 50C OF THE ACT. IT WAS CONTENDED THAT THERE WAS NO REFEREN CE OF SECTION 50C IN SECTION 54F AND VIS VERSA, THOUGH, THERE IS A RE FERENCE OF SECTION 48 IN SECTION 50C OF THE ACT. THEREFORE, FOR THE PURP OSE OF SECTION 54F, FULL VALUE OF CONSIDERATION WOULD BE ONLY THE ACTUA L CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER AND NO T THE DEEMED CONSIDERATION OF SECTION 50C OF THE ACT. IT WAS FU RTHER STATED THAT FOR THE PURPOSE OF SECTION 54F OF THE ACT, IT WAS ONLY THE ACTUAL CONSIDERATION AND NOT THE DEEMED CONSIDERATION WHIC H WAS REQUIRED TO BE INVESTED FOR CLAIMING THE DEDUCTION. RELIANCE W AS PLACED ON THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF GYAN CHAND BATRA VS. ITO, JAIPUR REPORTED IN 45 DTR 41/33 TTJ 382 5. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD INVESTED THE ENTIRE NET CONSIDERATION IN THE PURCHASE OF NEW ASSET AND THE DECISION RELIED B Y THE ASSESSEE WAS 7 IDENTICAL. HE, THEREFORE, BY FOLLOWING THE DECISIO N OF ITAT JODHPUR BENCH DELETED THE ADDITION MADE BY THE ASSESSING OF FICER. NOW, THE DEPARTMENT IS IN APPEAL. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSES SEE INVESTED THE ENTIRE SALE CONSIDERATION IN CONSTRUCTION OF HOUSE AND THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO SUB STANTIATE THAT THE ASSESSEE RECEIVED EXTRA CONSIDERATION THAN WHAT WAS RECORDED IN THE BOOKS OF ACCOUNTS. IN THE PRESENT CASE, WHEN THE A SSESSING OFFICER PROPOSED TO ADOPT THE VALUE TAKEN BY THE SUB-REGIST RAR FOR STAMP DUTY PURPOSES FOR CALCULATION OF THE CAPITAL GAIN, ASSES SEE OBJECTED BY STATING THAT THE ACTUAL PRICE WAS LESS IN THE AREA WHERE THE PROPERTY OF THE ASSESSEE WAS LOCATED. IN THAT SITUATION, THE A SSESSING OFFICER WAS REQUIRED TO REFER THE MATTER FOR VALUATION PURPOSES TO THE VALUATION CELL. HOWEVER, HE DID NOT MAKE ANY SUCH REFERENCE, THEREFORE, THE ACTION OF THE ASSESSING OFFICER WAS NOT JUSTIFIED. ON A SIMILAR ISSUE, THE ITAT JAIPUR A BENCH, JAIPUR IN THE CASE OF GY AN CHAND BATRA VS. ITO, JAIPUR (XLIV) (T.W) 89 (COPY OF WHICH IS PLACE D ON RECORD) HELD THAT FULL VALUE OF SALE CONSIDERATION SHALL BE VALUE AS SPECIFIED IN THE SALE DEED FOR THE PURPOSES OF COMPUTATION OF CAPITA L GAINS AND THAT 8 THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. SINCE IT CONTAIN ONLY THE DEEMING PROVISION IN AS MUCH AS ONLY THE ARTIFI CIAL MEANING OF FULL VALUE OF SALE CONSIDERATION HAS BEEN GIVEN IN THIS SECTION WHICH IS MEANT FOR SPECIFIC ASSET AND HENCE ASSESSEE WILL BE ENTITLED FOR DEDUCTION UNDER SECTION 54F OF THE ACT FOR THE ENTI RE AMOUNT OF CAPITAL GAINS . IN THE PRESENT CASE, SINCE LEARNED CIT(A) DELETED THE ADDITION BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF I TAT JAIPUR AND NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE DEPARTMENT, THEREFORE, WE DO NOT SEE ANY VALID GROUND TO INTERF ERE WITH THE FINDINGS OF THE LEARNED CIT(A) AND ACCORDINGLY, DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 7. IN THE RESULT, APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 23 RD SEPTEMBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD SEPTEMBER, 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.