Asst. Commissioner of Income Tax, Circle-1, Anantapur V. Kethireddy Venkata Mohan Reddy , Anantapur

ITA 259/Hyd/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8103 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2016-2017
• Appeal Filed On: 28-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Cost of acquisition; Capital Gains
• Section: 2; 143(3); 50C; 143(1); 48; 20

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.259/HYD/2019 ASSESSMENT YEAR: 2016 - 17 ACIT, CIRCLE - 1, ANANTAPUR. VS. KETHIREDDY VENKATA MOHAN REDDY, ANANTAPUR. PAN: AGBPR 1592 H (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI B. RAMAKRISHNA REVENUE BY: SRI D.J.P. ANAND, DR DATE OF HEARING: 20/06/2019 DATE OF PRONOUNCEMENT: 17 /0 7 /2019 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), KURNOOL IN APPEAL NO. 10079/CIT(A)/KNL/2018 - 19, DATED 14/12/2018 PASSED U/S. 143(3) & U/S. 250(6) OF THE ACT FOR THE ASSESSMENT YEAR 2016 - 17. 2. IN T HIS APPEAL, THE REVENUE HAS RAISED 5 GROUNDS HOWEVER THE CRUX OF THE ISSUE IS THAT T HE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE LD. AO OF RS. 3,04,97,633/ - TOWARDS LTCG INVOKING THE 2 PROVISIONS OF SECTION S. 5 0C WITH RESPECT TO THE TRANSFER OF HIS TWO PIECES OF LAND TO THE PARTNERSHIP FIRM IN WHICH HE IS A PARTNER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL , DOCTOR BY PROFESSION, EARNING INCOME FROM HIS NURSING HOME FILED HIS RETURN O F INCOME ON 23/9/2016 DECLARING INCOME OF RS. 20,00,350/ - . INITIALLY THE CASE WAS PROCESSED U/S. 143(1) AND THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND ORDERS U/S. 143(3) OF THE ACT WAS PASSED ON 27/7/2018 WHEREIN THE LD. AO MADE ADDITION OF RS. 1, 15,71,885/ - AND RS. 2,22,53,625/ - AGGREGATING TO RS. 3,38,25,510/ - WITH RESPECT TO THE TRANSITION OF TRANSFERRING HIS TWO PIECES OF LAND OF 39 CENTS AND 75 CENTS LOCATED IN GOOTY ROAD RESPECTIVELY TO THE FIRM WHEREIN THE ASSESSEE IS A PARTNER INVOKING THE PROVISIONS OF SECTION 45(3), 48 AND 50C OF THE ACT. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAD TRANSFERRED HIS 3 PIECES OF LAND TO THE FIRM IN WHICH HE IS A PARTNER AS DETAILED HEREIN BELO W: - SO NO. LOCATION / EXTENT OF LAND COST OF ACQUISITION / SUCCESSION (RS.) TRANSFER TO THE FIRM AT THE VALUE OF (RS.) 1. LAND AT SY. NO. 71/1/, GOOTY ROAD 39 CENTS RS. 16,54,650/ - RS. 16,54,650/ - 2. LAND AT SY. NO. 71/1/, GOOTY ROAD 75 CENTS RS. 25,867/ - RS. 25,867/ - 3. LAND AT SY. NO. 71/1/, GOOTY ROAD 20 CENTS (GIFTED FROM ASSESSEES BROTHER K. V. NAGIREDDY VIDE GIFT DEED DATED 20/8/2014) RS. 62,425 / - RS. 59,34,300/ - 3 5. THE LD. AO OPINED THAT SINCE THE ASSESSEE HAS TRANSFERRED HIS 3 PIECES OF LAND TO THE FIRM IN WHICH HE IS A PARTNER , PROVISIONS OF SECTION 45(3) WOULD BE ATTRACTED , AND THE ASSESSEE ALSO DID NOT OBJECT TO THE SAME. ACCORDINGLY, THE ASSESSEE COMPUTED HIS CAPITAL GAINS WITH RESPECT TO T HE TRANSFER OF THE 20 CENTS OF HIS LAND (ITEM NO.3) AT RS. 58,71,875/ - [ RS. 59,34,300 9(TRANSFER PRICE) RS. 62,425/ - (COST OF ACQUISITI ON)] ) WHICH WAS ACCEPTED BY THE LD. AO BECAUSE THE TRANSFER PRICE OF THE LAND WAS IN ACCORDANCE WITH THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY . HOWEVER, WITH RESPECT TO THE OTHER TWO PIECES OF LAND OF 39 CENTS AND 75 CENTS, THE LD. AO DID NOT ACCEPT THE VALUATION OF THE LAND AT RS. 16,54,650/ - AND RS. 25,867/ - RESPECTIVELY BECAUSE HE OPINED THAT THE VALUE OF THE LAND WHICH IS LOCATED IN THE SAME AREA WOULD BE IDENTICAL AND HENCE IT WOULD BE THE SAME AS THAT OF THE VALUE OF THE LAND OF 20 CENTS TRANSFERRED BY THE ASSESSEE TO HIS PARTNERSHIP WHICH WORKS OUT TO RS. 2,96,715/ - PER ACRE (RS. 59, 34,300 / 20 CENTS). BEFORE THE LD. AO THE ASSESSEE HAD CONTENDED AS FOLLOWS: - 1. THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY WHEN A SALE TRANSACTION I S REGISTERED, BUT WHERE SUCH REGISTRATION DOES NOT TAKE PLACE THE PROVISIONS OF SECTION 45(3) ARE APPLICABLE. 2. THE PROVISIONS OF SECTION 45(3) AND 50C ARE BOTH DEEMING PROVISIONS AND HENCE BASED ON DECISION OF THE HONBLE SC IN THE CASE OF M/S. MOON MILL S LTD 59 ITR 574 WHEREIN THE HONBLE SC HELD THAT ONE DEEMING FICTION CANNOT BE EXTENDED BY IMPORTING ANOTHER DEEMING FICTION, HENCE FOR PURPOSE OF DETERMINING OF FULL VALUE OF CONSIDERATION THE DEEMING PROVISIONS OF SECTION 50C CANNOT BE EXTENDED TO THE OTHER DEEMING PROVISION OF SECTION 45(3). 3. THE ASSESSEE ALSO RELIED ON DECISION OF MUMBAI ITAT IN THE CASE OF M/S. AMARTARA PVT LTD VS. DCIT, WHEREIN THE HONBLE ITAT BASED ON 4 THE HONBLE SC DECISION IN THE CASE OF M/S. MOON MILLS LTD HELD THAT ONE DEEMI NG FICTION CANNOT BE EXTENDED BY IMPORTING ANOTHER DEEMING FICTION. HOWEVER , THE LD. AO REJECTED THE SUBMISSION S OF THE ASSESSEE AND INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AND COMPUTED THE CAPITAL GAINS OF THE ASSESSEE FOR THE 39 CENTS OF LAND AND 75 CENTS OF LAND AT RS. 1,15,71,885/ - (RS. 2,96,715 X 39) AND RS. 2,22,53,625/ - (RS. 2,96,715 X 75) RESPECTIVELY . 7. WHEN THE MATTER CROPPED UP BEFORE THE LD. CIT (A), THE LD. CIT (A) AFTER ANALYSING THE ISSUE DELETED THE ADDITION MADE BY THE LD. AO BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT BY OBSERVING AS UNDER: 6. THE STATEMENT OF FACTS, GROUNDS OF APPEAL, AND ASSESSMENT ORDER HAVE BEEN PERUSED. IN THE INSTANT CASE, THERE IS ADMITTEDLY NO REGISTRATION OF THE TRANSFER UNDER REGISTRATION ACT AND NO STAMP DUTY HAS BEEN PAID. THEREFORE, PROVISIONS OF SECTION 50C CANNOT BE INVOKED. THE CASE IS THEREFORE, COVERED ONLY UNDER SEC. 45(3). THE PROVISIONS OF SECTION 45(3) IS AS UNDER: (3) THE PROFITS OR GAINS ARISING FROM THE TRANS FER OF A CAPITAL ASSET BY PERSON TO A FIRM OR OTHER ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS (NOT BEING A COMPANY OR A COOPERATIVE SOCIETY) IN WHICH HE IS OR BECOMES A PARTNER OR MEMBER, BY WAY OF CAPITAL CONTRIBUTION OR OTHERWISE, SHALL BE CHARGEABLE TO TAX AS HIS OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TAKES PLACE AND, FOR THE PURPOSES OF SECTION 48, THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM, ASSOCIATION OR BODY AS THE VALUE OF THE CAPITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. 6.1. CONSIDERING THE FACTS, ISSUE AND CIRCUMSTANCES OF THE INSTANT CASE AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT, BENCH - A, MUMBAI IN THE CASE OF DY. CIT - 9(1)(1), MUMBAI VS. M/S. AMARTARA PVT LTD IN ITA NO. 6050/MUM/2016 CITED (SUPRA), I HOLD THAT AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 50C, THEREFORE, THE VALUE AT WHICH CAPITAL ASSET IS TRANSFERRED TO THE FIRM AS RECORDED BY IT IN I TS BOOKS WOULD ONLY BE THE FULL VALUE OF THE CONSIDERATION FOR THE PURPOSE OF COMPUTING CAPITAL GAINS AS PER PROVISIONS U/S. 45(3) OF THE ACT. KEEPING IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO DELETE THE ADDITION MADE OF RS. 5 3,04,97,633/ - ON ACCOUNT OF LTCG ON THE TRANSFER OF TWO PIECES OF LAND TO THE FIRM. HENCE, THE ONLY GROUND IS ALLOWED. 8. THE LD . DR VEHEMENTLY ARGUED IN SUPPORTED THE ORDER OF THE LD. AO AND PLEADED FOR CONFIRMING THE SAME WHILE AS THE LD. AR RELIED IN THE ORDER OF THE LD. CIT ( A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. AS POINTED OUT BY THE LD. AR THE HONBLE APEX COURT IN THE CASE OF M/S. MOON M ILLS LIMITED REPORTED IN 59 ITR 574 IT HAS BEEN CATEGORICALLY HELD THAT ONE DEEMING FICTION CANNOT BE EXTENDED BY IMPORTING ANOTHER DEEMING FICTION. IN OTHER WORDS, WHILE INTERPRETING THE PROVISION OF THE STATUE WHICH HAS A DEEMING FICTION ANOTHER PROVISION WHICH HAS DEEMING FICTION CANNOT BE SUPER - IMPOSED. I N THE CASE OF THE ASSESSEE BY VIRTUE OF THE DEEMING FICTION IN SECTION 45(3) OF THE ACT THE IMMOVABLE PROPERTY BROUGHT INTO THE FIRM BY THE ASSESSEE IN WHICH HE IS A PARTNER IS TREATED AS TRANSFER. I N SUCH SITUAT ION, THE PROVISIONS OF SECTION 50C OF THE ACT WHICH HAS A LEGAL FICTION TO ADOPT THE VALUE DETERMINED BY THE STATE STAMP VALUATION AUTHORITY AS THE SALE VALUE WHERE THE SALE VALUE IS LESS THAN THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY CANNOT BE SUPERIMPOSED WHILE GIVING EFFECT TO THE PROVISIONS OF SECTION 45(3) OF THE ACT WHICH IS ALSO A PROVISION WITH LEGAL FICTION . CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) FOLLOWING THE RATIO LAID DOWN BY THE HONBLE APEX COURT 6 AND THE DECISION OF THE VARIOUS JUDICIAR IES HAD ALLOWED THE APPEAL OF THE ASSESSEE IN HIS FAVOUR. THEREFORE, IN THESE CIRCUMSTANCES, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. 10. IN THE RESULT, APPEAL OF THE R EVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17 TH JULY, 2019. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 17 TH JULY , 2019 OKK COPY TO: - 1) SRI KETHIREDDY VENKATA MOHAN REDDY, 12 - 2 - 878, 1 ST CROSS, SAI NAGAR, ANANTAPUR. 2) ACIT, CIRCLE - 1, ANANTAPUR, AAYAKAR BHAVAN, 3 RD ROAD, ANANTAPUR. 3) THE CIT(A) , KURNOOL. 4) THE PR. CIT , KURNOOL. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE