The ITO, Ward-4(3), Ahmedabad V. Harley Street Pharmaceuticals Ltd., Ahmedabad

ITA 2492/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8797 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 07-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SRDR
• Assessee Lawyers: MINISH B SHAH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Business income; Fair market value; Deemed dividend; Capital Gains
• Section: 50C; 69B; 41(2); 69; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.2492/AHD/2007 ASSESSMENT YEAR:2004-05 DATE OF HEARING:16.3.10 DRAFTED:18.3.10 INCOME TAX OFFICER, WARD-4(3), AHMEDABAD V/S. HARLEY STREET PHARMASSUTICALS LTD., 29/3, PHASE-III, GIDC INDUSTRIAL ESTATE, NARODA, AHMEDABAD PAN NO.AACH4623F (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. NEETA SHAH, SR-DR RESPONDENT BY:- SHRI MINISH B SHAH, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VIII, AHMEDABAD IN APPEAL NO. C IT(A)-VIII/ITO/ 4(3)/ 203/06-07 DATED 02-03-2007. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD-4(3), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 13-11-2006 FOR THE ASSESSMENT YEAR 2004 -05. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY ASSESSING OFFICER U/S .69B OF THE ACT. FOR THIS, REVENUE HAS RAISED THE EFFECTIVE GROUND NO.1 AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO DELETE THE ADDITION OF RS.31,04,100/- MADE IN THE ASSESSMENT ORDER, ON ACCOUNT OF INVESTMENT IN GIDC PLOT NOT FULLY DIS CLOSED IN THE BOOKS OF ACCOUNT U/S.69B OF THE I.T. ACT. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS PURCHASED LAND ALONG WITH BUI LDING ON 22-12-2003 FROM ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 2 SELECTO PLOT NO.30/4, PHASE-III, GIDC INDUSTRIAL ES TATE, NARODA, AHMEDABAD AMOUNTING TO RS.18.90 LAKH THROUGH DEED OF ASSIGNME NT AND STAMP DUTY OF RS.2,11,700/- WAS PAID THEREON. THE AO NOTED FROM T HE SALE DEED THAT THE SUB- REGISTRAR, AHMEDABAD-6 (NARODA) HAD REGISTERED THE DOCUMENT VIDE REGISTRATION NO.3758/2003 AND HAD COLLECTED ADDITIONAL STAMP DUT Y OF RS.3,47,337/- VIDE RECEIPT NO.2398371 DATED 29-12-2003. ACCORDING TO ASSESSING OFFICER, THE SUB-REGISTRAR HAS ASSESSED THE VALUE OF PROPERTY AT RS.49,91,400 AT THE PREVALENT MARKET VALUE AS PER THE JANTRI AND ADDITIONAL STAMP DUTY @ 10.8% WAS COLLECTED FROM THE ASSESSEE. THE ASSESSEE HAS DECLARED THE PURCHASE CONSIDERATIO N IN BOOKS OF ACCOUNT AT RS.18.90 LAKH ONLY AS AGAINST THE VALUE DETERMINED BY THE REVENUE AUTHORITIES AT RS.41,91,400/-. ACCORDINGLY, ASSESSEE HAS NOT DISC LOSED THE UNDISCLOSED INVESTMENT OF RS.31,01,400/- IN ITS BOOKS OF ACCOUN T AND TREATED BY THE AO AS UNACCOUNTED INVESTMENT BY U/S.69B OF THE ACT BY STA TING AS UNDER:- THUS SECTION 50C DETERMINES THE VALUE OF SALES CON SIDERATION OF PROPERTY IN TRANSACTION WHERE VALUE SHOWN IN DOCUMENT / BOOKS I S LESS THAN VALUE DETERMINED BY THE LAND REVENUE AUTHORITIES. ONCE TH E SALES CONSIDERATION IS DETERMINED, IT CAN NOT BE SAID THAT IT IS APPLICABL E ONLY TO SELLER. THE AMOUNT PAID BY PURCHASER CAN NOT BE DIFFERENT THEN WHAT IS THE SALES CONSIDERATION FOR THE SELLER. THUS THE SALES CONSIDERATION DETERMINED BY STAMP VALUATION AUTHORITY UNDOUBTEDLY BECOMES THE PURCHASES PRICE P AID BY THE BUYER. IT CANNOT HAPPEN THAT SALES CONSIDERATION OF RS.49,91, 400/- ON WHICH STAMP DUTY IS PAID, REMAINS SALES CONSIDERATION OF RS.49, 91,400/- FOR SELLER BUT IT BECOMES PURCHASE PRICE OF RS.18,90,000/- FOR PURCHA SER IGNORING THE VALUE DETERMINED. IN VIEW OF THIS THE PURCHASE PRICE PAID BY ASSESSEE IS TAKEN AT RS.49,91,400/-. SINCE THE PURCHASE PRICE RECORDED I N BOOKS IS ONLY RS.18,90,000/- THE DIFFERENCE OF RS.311,01,400/- IS TREATED AS INVESTMENT NOT FULLY DISCLOSED IN THE BOOKS AND RS.31,01,400/- IS THEREFORE ADDED U/S.69B OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A). THE CIT(A) DELETED THE ADDITION VIDE PARA-3.3 OF HIS APPELLATE ORDER AS UNDER:- 3.3 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AS WELL AS EXAMINED TH9E VARIOUS ARGUMENTS AND SUBMISSIONS OF THE APPELLANT. IN THIS CASE, THE AO HAS TREATED SELLER AND THE BUYER ON THE SAME FOOTING IN MAKING ADDITION REFERRING TO HIGHER VALUE TAKEN FOR STAMP DUTY PURPOSE. IT IS THE CONTENTION OF THE APPELLANT THAT THEY DID NOT PAY ANYTHING MORE THAN THAT STATED IN THE PURCHASE/SALE DEED. THEY ALSO REFERRED TO THE ALLOT MENT PRICE OF PLOTS IN INDUSTRIAL ESTATE AS DECIDED BY GIDC ON AN ANNUAL B ASIS. THERE IS NO EVIDENCE TO THE EFFECT THAT THE APPELLANT PAID MORE THAN WHAT WAS STATED IN THE DEED OF CONVEYANCE. RELIANCE PLACED ON THE DECISION S CITED ABOVE IS JUSTIFIABLE AND SECTION 50C CANNOT BE SAID TO BE GO VERNED U/S.69B AS WELL. A PROVISION OPERATING AS A LEGAL FICTION FOR DETERMIN ING THE CAPITAL GAINS MAY NOT ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 3 HAVE THE SAME FORCE IN THE HANDS OF THE BUYER. A LE GAL FICTION CANNOT BE EXTENDED BEYOND ITS LOGICAL CONCLUSION AND IT IS ON LY BY PRESUMPTION THAT THE ADDITION WAS MADE IN THE HANDS OF THE BUYER EQUATIN G THE DEEMED SALE CONSIDERATION FOR THE PURCHASE CONSIDERATION. THE A O HAS NOT FOUND THAT THE APPELLANT HAD PAID MORE THAN RECORDED IN THE BOOKS OF ACCOUNT. ADMITTEDLY, THE APPELLANT PAID EXTRA STAMP DUTY AS DETERMINED B Y THE REGISTRATION OFFICIALS. BUT THAT ALONE IS NOT CONCLUSIVE OR REAS ONABLE PROOF THAT THERE WAS ANY EXCESS INVESTMENT. IN THAT VIEW OF THE MATER, T HE DECISIONS RELIED ON BY THE APPELLANT SHALL BE OF ASSISTANCE TO THE APPELLA NTS CLAIM AND ACCORDINGLY I HOLD THAT THE ADDITION MADE BY AO IS PURELY ON NOTI ONAL BASIS NOT SUPPORTED BY EITHER FACTS OR A LEGAL BASIS BUT ONLY ON PRESUM PTION. IN THAT VIEW OF THE MATTER, THE ADDITION MADE U/S.69B IS DIRECTED TO BE DELETED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). NOW THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS THAT, WHETHER THE PROVISION OF SE CTION 50C OF THE ACT APPLIES TO PURCHASER OR NOT. FOR THIS, WE HAVE TO GO TO THE R ELEVANT PROVISION OF SECTION 50C OF THE ACT AS INTRODUCED BY SECTION 24 OF THE FINANCE ACT, 2002 WITH EFFECT FROM 1-4- 2003, FOR AND FROM ASSESSMENT YEAR 2003-04, NAMELY: - S.50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES, - (1 WHERE THE CONSIDERATION RECEIVED O ACCRUING AS A RE SULT 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 STA TE GOVERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ST AMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECT ION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1), WHERE (A) THE ASSESSEE CLAIMED BEFORE ANY ASSESSING OFFIC ER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT Y UNDER SUB- SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PR OPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP V ALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTH ORITY, COURT OR THE HIGH COURT,THE ASSESSING OFFICER MAY REFER THE VALU ATION OF THE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REF ERENCE IS MADE, THE PROVISIONS OF SUB-SECTIONS (2), (30, (4), (5) AND ( 6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, S ECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957) , SHALL, WITH ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 4 NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESS ING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION FOR THE PURPOSES OF THIS SECTION VAL UATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE OF SECTION 2 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957). (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2), WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SE CTION (1), THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAKE N AS THE FULL VALUE OF THE CONSIDERATION RECEIVED ON ACCRUING AS A RESULT OF T HE TRANSFER. 5. THE RELEVANT PROVISION OF SECTION 50C OF THE ACT WAS EXPLAINED AND ELABORATED IN THE FOLLOWING PORTION OF THE DEPARTME NTAL CIRCULAR NO.8 OF 2002 DATED 27-08-2002, AS UNDER:- 37 . COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANS ACTIONS, - 37.1 THE FINANCE ACT, 2002 HAS INSERTED A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL V ALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. 37.2 IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUI LDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION, AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. 37.3 IT IS FURTHER PROVIDED THAT WHERE THE ASSESSEE CLA IMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, AND HE HAS NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR REFERENCE BEFORE ANY AUTHORITY OR COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SECTION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES , THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VALU9E TO BE THE FULL VAL UE OF CONSIDERATION. HOWEVER, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY P URPOSES THE ASSESSING OFFICER SHALL NOT ADOPTED SUCH FAIR MARKET VALUE AN D SHALL TAKE THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. 37,4 THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2003-04 AND SUBSEQUENT YEARS [SECTION 4]. ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 5 6. WE FURTHER FIND THAT THIS PROVISION WAS ELABORAT ED IN THE NOTES ON CLAUSES AND MEMO. EXPLAINING PROVISIONS IN THE FINANCE BILL, 20 02 AS UNDER:- NOTES ON CLAUSES:- CLAUSE 24 SEEKS TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO PROVIDE FOR A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERA TION IN CERTAIN CASES. THE PROPOSED SUB-SECTION (1) OF THE SAID SECTION SE EKS TO PROVIDE THAT 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 STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. THE PROPOSED SUB-SECTION (2) OF THE SAID SECTION SE EKS TO PROVIDE THAT WHERE THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER TH AT THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) EXC EEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND THE VALUE SO ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY OTHER AUTHORITY, COURT OR A HIGH COURT, THE ASSESSING OFFICER MAY RE FER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER, AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTIONS (2), (3), (4), (5) A ND (6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SEC TION 37 OF THE WEALTH-TAX ACT, 1957, SHALL, WITH THE NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THA T ACT. THE VALUATION OFFICER SHALL BE THE VALUATION OFFICER AS DEFINED IN CLAUSE OF SECTION OF THE WEALTH- TAX ACT, 1957. THE PROPOSED SUB-SECTION (3) PROVIDES THAT WHERE T HE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY REFERRED TO IN SUB-SECTION (1), THE VALUE SO ADOPTE D OR ASSESSED BY THE AUTHORITY SHALL BE TAKEN AS THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. MEMORANDUM EXPLAINING PROVISIONS OF SECTION 50C IN THE FINANCE BILL, 2002, AS UNDER:- THE BILL PROPOSES TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. IT IS PROPOSED TO PROVIDE THAT WHERE THE CONSIDERAT ION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOTH, IS LESS THAN ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 6 THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A SATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION, AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. IT IS FURTHER PROPOSED TO PROVIDE THAT WHERE THE AS CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE ATE OF TRANSFER, AND HE H AS NOT DISPUTE THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR RE FERENCE BEFORE ANY AUTHORITY OR COURT, THE ASSESSING OFFICER MA REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SEC TION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE TO BE THE FULL VALUE OF CONSIDERATION. HOWEVER, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION O FFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES, THE ASSESSING OFFICER SHALL NOT ADOPT SUCH FAIR MARKET VALUE AND WILL TAK E THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. IT IS ALSO PROPOSED TO PROVIDE THAT IF THE VALUE AD OPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL, REVISION OR REFERENCE, THE STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL, REVISION OR REFE RENCE, THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. [CLAUSES 24 AND 59] 7. IN VIEW OF THE ABOVE PROVISION AND EXPLAINING TH E PROVISION, WE ARE OF THE VIEW THAT THE LAW U/S. 50C HAD BEEN PROVIDED ADEQUATE PR OTECTION TO THE TAX-PAYERS AGAINST ADOPTION OF ARBITRARY VALUES FOR THE COMPUT ATION OF CAPITAL GAINS AND THE FOLLOWING PRECAUTIONARY ARE PROVIDED:- (I) THE VALUE WHICH IS CONSIDERED AS THE PROPER VAL UE OF THE PROPERTY AS FIXED BY THE AUTHORITY FOR REGISTRATION FOR STAMP DUTY PU RPOSES IS PRESUMED TO BE THE FAIR MARKET VALUE FOR THE PURPOSES OF COMPUTATION O F CAPITAL GAINS ON THE SALE OF PROPERTY. (II) IT IS OPEN TO THE TAXPAYER TO PLEAD THAT SUCH STAMP VALUE IS ABNORMAL AND CONTEST THE SAME IN APPEAL UNDER THE STAMP LAW REQU IRING ADOPTION OF REDUCED VALUE. IF SUCH VALUE IS REDUCED IN APPEAL UNDER THE PROVISIONS OF THE RELEVANT STAMP LAW, SUCH REDUCED VALUE WOULD ALONE BE ADOPTE D. (III) WHERE SUCH STAMP VALUE IS NOT DISPUTED, IT IS OPEN TO THE ASSESSEE TO REQUIRE THE ASSESSING OFFICER TO REFER THE VALUATIO N TO THE VALUATION OFFICER, ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 7 WHO SHALL FIX THE VALUATION BY ADOPTION OF THE PROC EDURE PRESCRIBED UNDER SECTION 16A OF THE WEALTH-TAX ACT. IT IS SUCH VALUE , WHICH WILL BE ADOPTED BY THE ASSESSING OFFICER. WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF SECTION 50C IN THE FINANCE BILL, 2002, WHICH CLEARLY STATES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAN D OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A SAT E GOVT. FOR THE PURPOSES OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDE RATION AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY U/S.48 OF THE ACT. IN CASE TH E VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL, REVIS ION OR REFERENCE, THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY FOR THE COMPUTAT ION OF CAPITAL GAINS IN REAL ESTATE TRANSACTION IN RESPECT TO SELLER ONLY AND NOT FOR T HE PURCHASER. WE FIND FROM SECTION 50C OF THE ACT THAT IT CREATES A LEGAL FICTION THER EBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VA LUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED ACCORDINGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITED TO THE AREA FOR WHICH IT IS CREATED. HON 'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HELD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEG ITIMATELY INTENDED BY THE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PROVISIONS O F SEC. 171(1) OF THE I.T.ACT IN THE CONTEXT OF WHICH IT WAS HELD THAT JOINT FAMILY SHAL L BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CASES OF JOINT FAMILIE S WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSSIBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY THE HON'BLE KERLA HIGH COURT IN CIT V. KAR VALVES LTD. (1987) 168 ITR 416 (KER.) WHEREIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND COULD NOT BE EXTENDED BEYOND THAT L EGITIMATE FRAME, HON'BLE KERALA HIGH COURT WAS DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABILITIES ARE NOT LIQUIDATED AND OUTSTANDING ARE NOT COLLECTED, THEN BUSINESS COULD BE DEEMED TO CONTINU E. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTI ON THE COURT SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREATED 2ND AFTER DOING SO ASSUME ALL FACTS WHICH ARE ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 8 LOGICAL TO GIVE EFFECT TO THE FICTION, HON'BLE SUPR EME COURT IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITGR 711 (SC) HELD THAT LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIM ITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CIT V, BHARANI PICTURES (1981) 129 ITR 244 (MAD,) IT IS HELD THAT LEGAL FICTIONS A RE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED A ND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATUTORY FICTI ON INTRODUCED IN ONE ENACTMENT CANNOT BE INCORPORATED IN ANOTHER ENACTMENT. THE POINT THA T LEGAL FICTION CANNOT BE EXTENDED TO A NEW FIELD WAS HIGHLIGHTED BY HON'BLE MADRAS HIGH COURT IN CIT V. RAJAM T.S, (1988) 125 ITR 207(MAD,) WHEREIN IT IS H ELD THAT SECTION 41(2) CREATES A LEGAL FICTION UNDER WHICH THE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WHEN THIS AMOUNT IS DISTRIB UTED TO SHAREHOLDERS THEN IT WOULD NOT BECOME DEEMED DIVIDEND AND IT WOULD BE ONLY A C APITAL RECEIPT AND NOT DISTRIBUTION OF ACCUMULATED PROFITS. THUS, A LEGAL FICTION WAS INVOKED IN THE HANDS OF THE ASSESSEE COMPANY AND WAS NOT EXTENDED IN THE HA NDS OF THE SHAREHOLDERS. IN THE PRESENT CASE, SECTION 50C CREATES A LEGAL FICTI ON FOR TAXING CAPITAL GAINS IN THE HANDS OF THE SELLER AND IT CANNOT BE EXTENDED FOR T AXING THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTMENT U/S 69. IN FACT, SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS INCOME IF IT IS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICTION FROM ELS EWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF SECTION 69. IT IS F OR THE LEGISLATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RE CEIPTS OR EXPENDITURE WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT . IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UN DERSTATING APPARENT SALE CONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES FOR THE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOU GHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SALE CONSIDER ATION BY VALUATION DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION CANNOT BE EXTEN DED ANY FURTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO TAX THE D IFFERENCE IN THE HANDS OF THE PURCHASER. HON'BLE MADRAS HIGH COURT IN CGT V, R. D AMODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHORITIES HAVE THEIR OW N METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE FOR THE PURPOSE OF STAMP D UTY, PROPERTY IS VALUED AT HIGHER COST, IT CANNOT BE SAID THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS STATED IN ITA 2492/AHD/2007 A.Y.2004-05 ITO WD-4(3) ABD V. HARLEY ST. PHARMASUTICALS LTD. PAGE 9 THE SALE DEED. THE HON'BLE ALLAHABAD HIGH COURT IN DINESH KURNAR MITTAL V. ITO (1992)193 ITR 770 (ALL.) QUASHED THE ORDER OF AUTHORITIES BELOW, WHEREIN HALF OF THE DIFFERENCE BETWEEN THE AMOUNT PAID AND THE VALUE FOR PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY THE ASSESSIN G OFFICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALUE DETE RMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUAL CONSIDERATION PASSED BE TWEEN THE PARTIES TO THE SALE. IN THE PRESENT CASE THE ASSESSING OFFICER HAS APPLIED THIS PROVISION OF SECTION 50C FOR THE COMPUTATION OF UNEXPLAINED INVESTMENT U/S.69B O F THE ACT AND WHICH IS NOT PERMISSIBLE UNDER THE ACT. APART FROM THE STAMP DU TY VALUATION, THERE IS NOTHING ON RECORD WHICH SUGGESTS THAT THE REVENUE HAS PROVED T HAT THE ASSESSEE HAS ACCEPTED OVER AND ABOVE, WHAT HAS BEEN RECORDED AS PURCHASE CONSIDERATION OF THE LAND IN THE INSTRUMENT I.E. THE SALE DEED. WE ARE IN FULL AGREEMENT WITH THE ARGUMENTS OF THE ASSESSEE THAT SECTION 50C IS NOT APPLICABLE IN THE CASE OF PURCHASER AND THIS PROVISION BEING A DEEMING PROVISION WILL APPLY FOR DETERMINING THE FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER OF CAPITAL AS SETS FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS U/S.48 OF THE ACT. WE FURTHER FIN D THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CONSIDERATION OVER AND ABOVE, WHAT HAS BEEN RECORDED IN THE SALE DEED, HAS BEEN MADE BY THE ASSESSEE AND IN THE ABSE NCE OF THE SAME, NO ADDITION OF UNDISCLOSED INVESTMENT CAN BE MADE BY INVOKING T HE PROVISION OF SECTION 69B OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT( A) DELETING THE ADDITION AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16/03/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 16/03/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 4. THE CIT CONCERNS. 2. THE RESPONDENT. 5 . THE DR, ITAT, AHMEDABAD 3. THE CIT(APPEALS)-VIII, AHMEDABAD 6. GUARD FIL E. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD