M/s Ara Properties Pvt. Ltd., Kolkata V. D.C.I.T., Circle-12, Kolkata

ITA 288/KOL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9868 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-08-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 19-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PROBHAS ROY
• Assessee Lawyers: S M SURANA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Capital receipt; Set aside; Capital Gains
• Section: 50C

Judgement Text

I.T.A. NO 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. A RA PROPERTIES PVT. LIMITED PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZO NE) I.T.A. NO. 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. ARA PROPERTIES PVT. LIMITED,................. ...............................APPELLANT P-95, LAKE VIEW ROAD, KOLKATA-700 029 [PAN: AAECA 2191 D] -VS.- DEPUTY COMMISSIONER OF INCOME TAX, ................ ..........................RESPONDENT CIRCLE-12, KOLKATA, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-700 069 APPEARANCES BY: SHRI S.M. SURANA ADVOCATE, FOR THE APPELLANT SHRI PROBHAS ROY, ADDL. CIT, , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : AUGUST 01, 2019 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 25, 2019 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-5, KOLKATA DAT ED 13.08.2018. 2. THE ISSUE INVOLVED IN GROUND NO. 1 RELATES TO TH E ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT( APPEALS) BY COMPUTING SHORT-TERM CAPITAL GAIN ARISING FROM THE SALE OF J ASMINE TOWER OFFICE BY THE ASSESSEE AT RS.11,11,159/- AS AGAINST THE DECLA RED SHORT-TERM CAPITAL GAIN OF RS.43,159/-. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 31.10.2007 DECLARING TOTAL INCOME OF RS.14,74,059/-. DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD ITS OFFICE PRE MISES AT JASMINE I.T.A. NO 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. A RA PROPERTIES PVT. LIMITED PAGE 2 OF 6 TOWER FOR A CONSIDERATION OF RS.17,00,000/- AND AF TER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS.16,56,841/-, SHOR T-TERM CAPITAL GAIN OF RS.43,159/- WAS DECLARED BY IT IN THE RETURN OF INC OME. AS NOTICED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE CONCERNED REGISTERING AUTHORITY HAD DETERMINED THE MARKET VALUE OF THE ASSESSEES OFFICE PREMISES AT JASMINE TOWER FOR T HE PURPOSE OF STAMP DUTY AT RS.27,68,000/- BY INVOKING THE PROVISIONS O F SECTION 50C. THE ASSESSING OFFICER ADOPTED THE SAID VALUE AS DEEMED CONSIDERATION AND AFTER REDUCING THE INDEXED COST OF ACQUISITION OF R S.16,56,841/-, THE SHORT-TERM CAPITAL GAIN CHARGEABLE TO TAX IN THE HA NDS OF THE ASSESSEE WAS COMPUTED BY HIM AT RS.11,11,159/-. ON APPEAL, T HE LD. CIT(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THIS ISSUE. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE STAMP DUTY VALUE DETE RMINED BY THE REGISTERING AUTHORITY WAS ADOPTED BY THE ASSESSING OFFICER AS SALE CONSIDERATION BY INVOKING THE PROVISIONS OF SECTION 50C WITHOUT MAKING A REFERENCE TO THE DVO FOR DETERMINING THE ACTUAL MAR KET VALUE OF THE PROPERTY SOLD BY THE ASSESSEE AND THIS POSITION CLE ARLY EVIDENT FROM THE ORDER OF THE ASSESSING OFFICER IS NOT DISPUTED EVEN BY THE LD. D.R. IN THE CASE OF SUDHIR KUMAR AGARWAL VS.- CIT [372 ITR 83] CITED BY THE LD. COUNSEL FOR THE ASSESSEE, HONBLE CALCUTTA HIGH COU RT HAS HELD THAT THE ASSESSING OFFICER IS DUTY BOUND TO MAKE A REFERENCE TO THE VALUATION OFFICER BEFORE ADOPTING THE VALUE OF ASSETS DETERMINED BY THE STAM P VALUATION AUTHORITY FOR THE PURPOSE OF COMPUTING CAPITAL GAIN EVEN WITHOUT THER E BEING ANY OBJECTION RAISED BY THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, I SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR DECIDING THE SAME AFRESH AFTER MAKING A REFERENCE TO THE D.V.O. FOR DETERMINATION OF THE MARKET VALUE OF THE PROPERTY SOLD BY THE ASSESSEE. GROUND NO. 1 OF THE ASSESSEE S APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. A RA PROPERTIES PVT. LIMITED PAGE 3 OF 6 5. THE ISSUE INVOLVED IN GROUND NO. 2 RELATES TO TH E ADDITION OF RS.10,63,100/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF CAPITAL GAIN ARISING FRO M THE SALE OF ASSESSEES PROPERTY NAMELY DIMPLE COURT. 6. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E-COMPANY HAD SOLD ITS OFFICE PREMISES AT DIMPLE COURT FOR A CO NSIDERATION OF RS.25,00,000/- AND AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS.10,80,598/-, THE BALANCE AMOUNT WAS OFFERED TO T AX AS LONG-TERM CAPITAL GAIN. AS FOUND BY THE ASSESSING OFFICER DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE VALUE OF THE SAID PROPE RTY, WHICH HAD BEEN TAKEN OVER BY THE ASSESSEE ON LEASE, WAS DETERMINED BY THE REGISTERING AUTHORITY FOR THE PURPOSE OF STAMP DUTY AT RS.35,63 ,100/-. HE ACCORDINGLY ADOPTED THE SAID VALUE AS SALE CONSIDERATION BY INV OKING THE PROVISIONS OF SECTION 50C AND ENHANCED THE LONG-TERM CAPITAL GAIN SHOWN BY THE ASSESSEE BY RS.10,63,100/-. ON APPEAL, THE LD. CIT( APPEALS) CONFIRMED THE SAID ADDITION. 7. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN THE CASE OF TEJENDER SINGH [50 SOT 391] CITED BY THE LD. COUNSEL FOR THE ASSESSEE, THE PROVISIONS OF SECTION 50C ARE HELD TO BE NOT APPLIC ABLE IN THE CASE OF A LEASEHOLD PROPERTY BY THE COORDINATE BENCH OF THIS TRIBUNAL FOR THE FOLLOWING REASONS:- 'A PLAIN LOOK AT THE UNDISPUTED FACTS OF THIS CASE CLEARLY SHOWS THAT THE ASSESSEE WAS A LESSEE IN THE PROPERTY WHIC H WAS SOLD BY THE KSCT; THERE IS NO DISPUTE ON THIS ASPECT OF THE MATTER. YET, THE ASSESSING OFFICER HAS TREATED THE ASSESSEE A SELLER OF PROPERTY APPARENTLY BECAUSE THE ASSESSEE WAS A PART Y TO THE SALE DEED, AND BECAUSE, ACCORDING TO THE ASSESSING OFFICER, 'CONSIDERATION IS PAID ON SALE OF THE PROPERTY FOR GIVING UP RIGHT OF THE OWNER OF THE PROPERTY' AND THAT 'IN TH E CASE OF LEASEHOLD PROPERTY, THE RIGHT OF OWNER IS DIVIDED B ETWEEN LESSOR AND LESSEE'. WE ARE UNABLE TO SHARE THIS LIN E OF I.T.A. NO 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. A RA PROPERTIES PVT. LIMITED PAGE 4 OF 6 REASONING. IT IS NOT NECESSARY THAT CONSIDERATION P AID BY THE BUYER OF A PROPERTY, AT THE TIME OF BUYING THE PROP ERTY, MUST ONLY RELATE TO OWNERSHIP RIGHTS. IN THE CASE OF TEN ANTED PROPERTY, AS IS THE CASE BEFORE US, WHILE THE BUYER OF PROPERTY PAYS THE OWNER OF PROPERTY FOR OWNERSHIP RIGHTS, HE MAY ALSO HAVE TO PAY, WHEN HE WANTS TO HAVE POSSESSION OF TH E PROPERTY AND TO REMOVE THE FETTERS OF TENANCY RIGHTS ON THE PROPERTY SO PURCHASED, THE TENANTS TOWARDS THEIR SURRENDERING T HE TENANCY RIGHTS. MERELY BECAUSE HE PAYS THE TENANTS, FOR THEIR SURRENDERING THE TENANCY RIGHTS, AT THE TIME OF PUR CHASE OF PROPERTY, WILL NOT ALTER THE CHARACTER OF RECEIPT I N THE HANDS OF THE TENANT RECEIVING SUCH PAYMENT. WHAT IS PAID FOR THE TENANCY RIGHTS CANNOT, MERELY BECAUSE OF THE TIMING OF THE PAYMENT, CANNOT BE TREATED AS RECEIPT FOR OWNERSHIP RIGHTS IN THE HANDS OF THE ASSESSEE. THIS DISTINCTION BETWEEN THE RECEIPT FOR OWNERSHIP RIGHTS IN RESPECT OF A PROPERTY AND R ECEIPT FOR TENANCY RIGHTS IN RESPECT OF A PROPERTY, EVEN THOUG H BOTH THESE RECEIPTS ARE CAPITAL RECEIPTS LEADING TO TAXA BLE CAPITAL GAINS, IS VERY IMPORTANT FOR TWO REASONS - FIRST, T HAT THE COST OF ACQUISITION FOR TENANCY RIGHTS, UNDER SECTION 55 (2)(A). IS, UNLESS PURCHASED FROM A PREVIOUS OWNER - WHICH IS A DMITTEDLY NOT THE CASE HERE, TREATED AS 'NIL'; AND, - SECOND, SINCE THE PROVISIONS OF SECTION 50C CAN ONLY BE APPLIED IN RE SPECT OF 'TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH IF, THE PROVISIONS OF SECTION 50C WILL APPLY ON RECEIPT OF CONSIDERATION ON TRANSFER OF A PROPERTY, BEING LAND OR BUILDING OR BOTH, THESE PROVISIONS WILL NOT COME INTO PLAY IN A CASE WHERE ONLY TENANCY RIGHTS ARE TRANSFERRED OR SURRENDERED. IT IS, THEREFORE, IMPORTANT TO EXAMINE AS TO IN WHAT CAPACITY THE ASSESSEE RECEIVED THE PAYMENT. NO DOUBT THE ASSESSEE WAS A PARTY TO THE REGISTERED TRIPARTI TE DEED DATED 20TH JULY 2007 WHEREBY THE PROPERTY WAS SOLD BY THE KSCT, BUT, AS A PERUSAL OF THE SALE DEED UNAMBIGUOU SLY SHOWS, THE ASSESSEE HAS GIVEN UP ALL THE RIGHTS AND INTERE STS IN THE SAID PROPERTY, WHICH HE HAD ACQUIRED BY THE VIRTUE OF LEASE AGREEMENTS WITH OWNER AND WHICH WERE, THEREFORE, IN THE NATURE OF LESSEE'S RIGHTS; THESE RIGHTS COULD NOT H AVE BEEN, BY ANY STRETCH OF LOGIC, COULD BE TREATED AS OWNERSHIP RIGHTS. IT HAS BEEN SPECIFICALLY STATED IN THE SALE DEED THAT THE LESSEE, WHICH INCLUDED THIS ASSESSEE BEFORE US, HAD PROCEED ED TO, INTER ALIA, 'GRANT, CONVEY, TRANSFER AND ASSIGN THEIR LEA SEHOLD RIGHTS, TITLE AND INTEREST IN THE SAID PREMISES'. T HERE IS NOTHING ON THE RECORD TO EVEN REMOTELY SUGGEST THAT THE ASSESSEE WAS OWNER OF THE PROPERTY IN QUESTION. THE MONIES RECEIVED BY THE ASSESSEE, UNDER THE SAID AGREEMENT, WERE THUS CLEARLY IN THE NATURE OF RECEIPTS FOR TRANSFER OF T ENANCY RIGHTS, AND, ACCORDINGLY, AS THE LEARNED CIT(A) RIGHTLY HOL DS, SECTION SOC COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THI S CASE. REVENUE'S CONTENTION THAT THE PROVISIONS OF SECTION SOC ALSO APPLY TO THE TRANSFER OF LEASEHOLD RIGHTS IS DEVOID OF LEGALLY SUSTAINABLE MERITS AND IS NOT SUPPORTED BY THE PLAI N WORDS OF THE STATUTE. SECTION 50C CAN COME INTO PLAY ONLY IN A SITUATION I.T.A. NO 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. A RA PROPERTIES PVT. LIMITED PAGE 5 OF 6 'WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEI NG LAND OR BUILDING OR BOTH, (EMPHASIS SUPPLIED BY US BY UNDER LINING) IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSAB LE BY ANY AUTHORITY OF A STATE GOVERNMENT ' .... FOR THE PURP OSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER'. CLEARLY, THEREFORE, IT IS SINE QUA NON FOR APPLICATION OF SE CTION 50C THAT THE TRANSFER MUST BE OF A 'CAPITAL ASSET, BEIN G LAND OR BUILDING OR BOTH', BUT THEN A LEASEHOLD RIGHT IN SU CH A CAPITAL ASSET CANNOT BE EQUATED WITH THE CAPITAL ASSET PER SE. WE ARE, THEREFORE, UNABLE TO SEE ANY MERITS IN REVENUE'S CO NTENTION THAT EVEN WHEN A LEASEHOLD RIGHT IN 'LAND OR BUILDI NG OR BOTH' IS TRANSFERRED, THE PROVISIONS OF SECTION SOC CAN B E INVOKED. WE, THEREFORE, APPROVE THE CONCLUSION ARRIVED AT BY THE CIT(A) ON THIS ASPECT OF THE MATTER. IN THE PRESENT CASE, THE PROPERTY AT DIMPLE COURT SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS A LEASEHOLD PROPERTY AND THIS BEING THE UNDISPUTED POSITION, WE FOLLOW THE DECISI ON OF THIS TRIBUNAL IN THE CASE OF TEJENDER SINGH (SUPRA) AND HOLD THAT TH E ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS) BY INVOKING THE PROVISIONS OF SECTION 50C IS NOT SUSTAINABLE. THE S AME IS ACCORDINGLY DELETED ALLOWING GROUND NO. 2 OF THE ASSESSEES APP EAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 25, 2019. SD/- (P.M. JAGTAP) VICE-PRESIDENT (KZ) KOLKATA, THE 25 TH DAY OF SEPTEMBER, 2019 COPIES TO : (1) M/S. ARA PROPERTIES PVT. LIMITED, P-95, LAKE VIEW ROAD, KOLKATA-700 029 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12, KOLKATA, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-5, KOLKA TA, (4) COMMISSIONER OF INCOME TAX- , I.T.A. NO 288/KOL/2019 ASSESSMENT YEAR: 2007-2008 M/S. A RA PROPERTIES PVT. LIMITED PAGE 6 OF 6 (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.