I.T.O. 8(3)(1), MUMBAI V. CHANDULAL P. PATEL, MUMBAI

ITA 2892/MUM/2012

• Counselvise Citation: 289219914 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Assessee Lawyers: VIJAY MEHTA SHRI MAYUR MAKODIA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Fair market value; Valuation report
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI . . !' , !# ! $ BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER . : 2892 / / 2012 2007-08 ITA NO. : 2892/MUM/2012 (ASSESSMENT YEAR: 2007-08) ------------------------------------------ THE ITO 8(3)-1, ROOM NO. 201, 2 ND FLOOR, AAYAKAR BHAVAN, N M ROAD, MUMBAI -400 020 VS SHRI CHANDULAL P. PATEL, 703, 704, MADHUVAN APARTMENT, 7 TH FLOOR, 51 ST ROAD, TPS-III, OFF. FACTORY LZANE, BORIWAL(W), MUMBAI -400 092 PAN: AABPP 1941 N (APPELLANT) (RESPONDENT) APPELLANT BY : MS. C. TRIPURA SUNDARI RESPONDENT BY : SHRI VIJAY MEHTA SHRI MAYUR MAKODIA /DATE OF HEARING : 13-08-2013 / DATE OF PRONOUNCEMENT : 23-08-2013 ! ( O R D E R . . , . : PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007- 08 AGAINST THE ORDER OF LD. CIT(A) DATED 6 TH FEBRUARY, 2012. 2. THE ONLY ISSUE INVOLVED IS AS TO WHETHER THE PROPERT Y UNDER CONSIDERATION IS CAPITAL ASSETS AND TO WHICH SECTION 50C O F THE ACT IS APPLICABLE. SHRI CHANDULAL P. PATEL ITA 2892/M/2012 2 3. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL ARE THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS SOLD PROPERTY FOR RS. 12,85,000/- TO M/S JAJODIA AND PATEL PROPERTIES AN D THE MARKET VALUE AS PER STAMP DUTY VALUATION OF THE SAID PR OPERTY IS RS. 4,99,50,000/-. THE AO ASKED TO THE ASSESSEE AS TO WHY C APITAL GAINS SHOULD NOT BE CALCULATED AS PER PROVISIONS OF SECTION 50C OF THE INCOME-TAX ACT. THE ASSESSEE SUBMITTED VIDE LETTER DATE D 22 ND DECEMBER, 2009, INTER ALIA AS UNDER: (A) THAT THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS PURCH ASED THE PROPERTY SITUATED AT VILLAGE POISER, TALUKAR BORIVALI IN YEAR 1992 AND 1993; (B) THAT THERE ARE TOTAL 7 PARTS OF THE SAID PROPERTY, OUT OF THE 7 PARTS, THE ASSESSEE HAD PURCHASED 2 PARTS, AS UNDER: NAME OF VENDOR LILAWATI KRISHNARAO RAUT MANKBAI PANDHARINATH DATE OF AGREEMENT 10.04.1993 06.06.1992 AGREEMENT VALUE RS. 8,90,000/- RS. 8,90,000/- TOTAL CONSIDERATION PAID TILL DATED (A) RS 1,75,000 /- RS. 1,75,000/- OTHER COST INCURRED FOR ABOVE PROPERTY (B) RS 3,500/- RS 3,5000/- TOTAL (A + B) RS. 1,78,500/- RS. 1,78,500/- (C) THAT SECTION 50C IS NOT APPLICABLE TO THE FACTS OF THE CAS E BECAUSE THE RIGHTS IN THE SAID PROPERTY HAVE BEEN PURC HASED FOR THE DEVELOPMENT WHICH IS THE BUSINESS OF THE ASSESSEE; (D) THAT IN THE PAST ALSO SEVERAL PROPERTIES WERE PURCHASED AND SOLD BY THE ASSESSEE AND HAD BEEN TREATED AS STOCK IN TRADE OR PROFIT/LOSS ON THE SAID PROPERTY HAD BEEN DETERMINED; (E) THAT THE ASSESSEE HAS ALWAYS TREATED THIS PROPERTY A S STOCK IN TRADE AND RIGHTS IN THE SAID PROPERTY HAVE BEEN TRANSFE RRED AS STOCK IN TRADE ONLY, THEREFORE, THE PROVISIONS OF SECTION 5 0C IS NOT APPLICABLE AS IT APPLIES TO CAPITAL ASSETS ONLY AND NOT TO STOCK IN TRADE; SHRI CHANDULAL P. PATEL ITA 2892/M/2012 3 (F) THAT THE SAID PROPERTY IS IN LITIGATION AND TILL THE DATE, THE LITIGATION IS PENDING AND THE ASSESSEE HAD NOT RECEIVED AN Y POSSESSION OF THE PROPERTY; (G) THAT SINCE MORE THAN 20 YEARS ARE PASSED AND THERE IS NO CERTAINTY AS GETTING THE ACQUISITION OF THE PROPERTY, AND TO COME OUT OF PROLONGED LITIGATION, THE ASSESSEE HAS TRANSFER RED THE RIGHT TO ACQUIRE OF THE SAID PROPERTY TO M/S JAJODIA AND PATEL PROPERTIES ON 16 TH JUNE, 2006 ON AS IT IS WHERE IT BASIS AND WITH ALL THE RESPONSIBILITY TO PAY THE OWNERS, TENANTS, ANY CLAIMANT THROUGH THEM, ETC. INCLUDING THE COST OF LITIGATION AND RECEIVED BACK THE AMOUNT; (H) THAT THE SAID PROPERTY IS NEITHER TRANSFERRED TO THE AS SESSEE NOR FULL CONSIDERATION PAID FOR ACQUISITION OF THE PROPERTY; (I) THAT THE ASSESSEE HAD TRANSFERRED HIS RIGHT TO ACQUIRE THE PROPERTY GAIN IF ANY WOULD NOT BE ON TRANSFER OF IMMOVABLE ASSET BUT IT MAY BE CONSIDERED AS GAIN ON TRANSFER OF RIGHT; (J) THAT THE ASSESSEE HAD TRANSFERRED THE SAID RIGHT TO A CQUIRE THE PROPERTY AT COST FOR WHICH HE HAD ENTERED INTO THE AGR EEMENT, THEREFORE THE GAIN IS NIL. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE CONTEN TION OF THE ASSESSEE AND STATED THE FOLLOWING REASONS: (A) THAT ON VERIFICATION OF TRIAL BALANCE OF FINANCIAL YEAR 2005-06 , IT IS SEEN THAT THE SAID PROPERTY IS NOT REFLECTED. HAD T HE CASE NOT BEEN SELECTED THROUGH CASS, IT WOULD HAVE BEEN IMPOSSIBLE TO KNOW THAT THE ASSESSEE HAS SOLD THE PROPE RTY. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT HE HAS CONSIDERED THE RIGHT IN THE PROPERTY AS STOCK IN TRADE AND NOT CAPITAL ASSET IS NOT ACCEPTABLE SINCE THE ASSESSEE HAS N OT SHRI CHANDULAL P. PATEL ITA 2892/M/2012 4 SHOWN ANY BUSINESS INCOME/LOSS DURING THE ASSESSMENT YE AR UNDER CONSIDERATION IN THE COMPUTATION OF INCOME NOR IN TH E EARLIER YEARS; (B) THAT THE CONTENTION OF THE ASSESSEE THAT PROPERTY IS IN LITIGATION AND TILL DATE THE LITIGATION IS PENDING AND THE ASSESSEE HAS NOT RECEIVED ANY POSSESSION OF THE PROPE RTY IS NOT ACCEPTABLE BECAUSE IT IS SEEN THAT FROM LETTER DATE D 28 TH MARCH, 2002 WRITTEN BY MR. LILANI SHAH, ADVOCATE OF THE ASSESSEE TO SHRI M.R. PATEL, ADVOCATE STATING THAT THE ASSESSEE WAS IN POSSESSION OF THE SAID PROPERTY. THE AO HAS REPRODUCED THE SAID LETTER AT PAGES 3 & 4 OF THE ASSES SMENT ORDER, BUT WE DO NOT CONSIDER IT NECESSARY TO REPRODUC E THE SAME. IT IS SUFFICE TO STATE THAT THE AO HAS STATED THAT THE ASSESSEE JOINTLY WITH OTHER CO-OWNERS WERE IN LEGAL POSS ESSION OF THE PROPERTY AND EACH PART THEREOF; (C) THAT THE CONTENTION OF THE ASSESSEE THAT HE HAS TRANS FERRED THE PROPERTY TO M/S JAJODIA AND PATEL PROPERTIES TO CO ME OUT OF PROLONG LITIGATION IS NOT ACCEPTABLE BECAUSE ONE OF THE PARTNERS OF M/S JAJODIA AND PATEL PROPERTIES IS SHRI DUSHYANT C. PATEL, WHO IS THE SON OF THE ASSESSEE; (D) THAT THE CONTENTION OF THE ASSESSEE THAT THE SAID PROP ERTY IS NEITHER TRANSFERRED TO HIM NOR FULL CONSIDERATION PAID FOR ACQUISITION OF THE PROPERTY AND THERE WAS NO TRANSFER OF IMMOVABLE PROPERTY BUT ONLY TRANSFER OF RIGHT IS NOT ACCEPTABLE AND FOR THIS PURPOSE THE AO HAS REFERRED TO SAID AGREEMENT DATED 16 TH JUNE, 2006. HE HAS STATED THAT AS PER AGREEMENT, THE BALANCE AMOUNT OF RS. 48,40,000/- PAYABLE BY THE ASSESSEE AND OTHER CO-OWNERS TO THE EARLIER OW NERS WERE PAID BY M/S JAJODIA AND PATEL PROPERTIES. THEREFORE AS SUCH FULL CONSIDERATION HAD BEEN PAID BY THE ASSESSEE AND SHRI CHANDULAL P. PATEL ITA 2892/M/2012 5 OTHER CO-OWNERS FOR THE ACQUISITION OF THE PROPERTY. THE AO HAS STATED THAT THE ASSESSEE HAS BY USING THE WORD TRANSFER OR DEVELOPMENT OF RIGHTS HAS ACTUALLY SOLD THE PROPER TY AND THEREBY AVOIDING THE STAMP DUTY PAYABLE ON TRANSFER OF PROPERTY; (E) THAT THE STAMP DUTY PAYABLE ON TRANSFER OF RIGHTS IS 1%, WHEREAS, THE STAMP DUTY PAYABLE ON TRANSFER OF LAND IS MU CH HIGHER. HOWEVER, THE REALITY IS THAT THE ASSESSEE AND OTH ER CO- OWNERS HAVE LOCK, STOCK AND BARREL SOLD THE PROPERTY SIN CE AS PER THE AGREEMENT THE ASSESSEE AND THE OTHER CO-OWN ERS DO NOT HAVE ANY STAKE IN THE PROPERTY AND TO AVOID PAYING CAPITAL GAIN TAX. 5. IN VIEW OF THE ABOVE, THE AO HAS STATED THAT THE A SSESSEE HAS TRANSFERRED THE PROPERTY IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THOUGH THE SAID PROPERTY WAS NOT SHOWN BY THE ASSESSEE EITHER AS INVESTMENT OR STOCK IN TRADE. T HAT THE ASSESSEE, IN THE COMPUTATION OF INCOME, HAS ALSO NOT DISCLOSED EITHER CAPITAL GAIN/CAPITAL LOSS NOR TRADING GAIN/TRADING LOSS IN RESPECT OF THE SALE OF THE PROPERTY. SINCE THE SAID PROPERTY HAS NOT BEEN DISC LOSED PREVIOUSLY, THE SAME HAVE ALL THE CONNOTATIONS OF UNEXPL AINED INVESTMENT. THEREFORE, THE AO HAS CONSIDERED THE VALUE O F ACQUISITION OF THE SAID PROPERTY AT NIL FOR THE PURPOSE OF COMPUTAT ION OF CAPITAL GAIN AND BY APPLYING PROVISIONS OF SECTION 50C OF INCOME- TAX ACT, COMPUTED THE CAPITAL GAIN BY TAKING SALE CONSIDERATION AT RS. 4,99,50,000/-. SINCE THE ASSESSEES SHARE IS 2/7 TH , THE AO HAS TAKEN THE SALE CONSIDERATION AT RS. 1,42,71,429/- IN THE HAND OF T HE ASSESSEE AND THE SAME HAS BEEN CONSIDERED AS LONG TERM CAPITAL GAIN. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST AP PELLATE AUTHORITY. 6. THE LD. CIT(A) AFTER CONSIDERING SUBMISSIONS OF THE ASSES SEE HAS HELD THAT THE RIGHTS IN THE IMPUGNED PROPERTY HELD BY TH E ASSESSEE IS SHRI CHANDULAL P. PATEL ITA 2892/M/2012 6 STOCK IN TRADE AND NOT A CAPITAL ASSET AS STATED. THE L D. CIT(A) HAS STATED THAT THE DEVELOPMENT RIGHTS ACQUIRED BY THE ASS ESSEE VIDE AGREEMENTS DATED 6 TH JUNE, 1992 AND 10 TH APRIL, 1993 WERE HELD AS STOCK IN TRADE AND NOT AS CAPITAL ASSETS AND HENCE, PRO VISIONS OF SECTION 50C ARE NOT APPLICABLE. THE LD. CIT(A) FINDS THAT THE ASSESSEE IS POSSESSING SEVERAL PROPERTIES LIKE LAND, DEVELOPMENT RIGH TS ETC., WHICH ARE TREATED AS PART OF HIS STOCK IN TRADE. THAT TH E FACT THAT SEVERAL LANDS AND DEVELOPMENT RIGHTS ARE ACQUIRED BY THE ASSESSEE OVER A PERIOD ITSELF SHOWS THE INTENTION OF THE ASSESSEE THAT HE WANTED TO ACT AS A BUILDER AND DEVELOPER. THE LD. CIT(A) HAS STAT ED THAT THESE PROPERTIES HAVE BEEN SHOWN AND REFLECTED AS STOCK IN TRADE OVER S EVERAL YEARS, WHICH IS NEVER DISPUTED BY THE AO. HE HAS STATED THAT ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07 PASSED BY THE AO ON 24 TH DECEMBER, 2008 AND HE HAS SCRUTINIZED AND EXAMINED TH E NATURE OF THE ACTIVITY OF THE ASSESSEE AND THE NATURE OF OTHER DEVELOPMENT RIGHTS HELD BY THE ASSESSEE. WHILE EXAMINING THE NATURE OF SUCH RIGHTS AS TO WHETHER IT IS CURRENT ASSET OR STOCK IN TRADE, TH E AO MADE FOLLOWING OBSERVATIONS: 4.3 THE PERUSAL OF THE ABOVE DEFINITION OF CAPITAL ASSET CLEARLY INDICATES THAT ANY PROPERTY CONNECTED WITH THE BUSINESS IS NOT A C APITAL ASSET. THE SAID DEVELOPMENT RIGHT HAS BEEN PURCHASED BY THE AS SESSEE FOR HIS BUSINESS OF DEVELOPMENT OF PROPERTY. HOWEVER, THEY HAVE SOLD THE SAID RIGHTS DUE TO THEIR BUSINESS PRUDENCE. THUS, THE AS SESSEE HAS THROUGHOUT CONSIDERED THE SAID RIGHTS AS THEIR STOC K-IN-TRADE FOR THE BUSINESS OF DEVELOPMENT OF PROPERTY. THE LD. CIT(A) HAS STATED THAT THE AO HAS HELD, AFTER EXA MINING THE ACTIVITY OF THE ASSESSEE, THAT THE ASSESSEE CARRYING ON THE BUSINESS AS A DEVELOPER. 6.1 THAT THE LD. CIT(A) HAS FURTHER STATED ON PERUSAL OF C OPY OF TRIAL BALANCE FOR THE PAST YEAR FILED BY THE ASSESSEE BEFORE HIM THAT THE ASSESSEE WAS IN PRACTICE OF FILING THE TRIAL BALANCE INSTEAD O F THE BALANCE SHEETS ALONG WITH THE RETURNS OF INCOME; HENCE TH ESE DOCUMENTS WERE PART OF THE RETURN OF INCOME FILED BY THE ASSESSEE. THE SHRI CHANDULAL P. PATEL ITA 2892/M/2012 7 LD. CIT(A) HAS STATED THAT THE SAID TRIAL BALANCE SHOWS TH AT THE PAYMENT MADE BY THE ASSESSEE TOWARDS THE PURCHASE O F THE DEVELOPMENT RIGHTS HAVE BEEN SHOWN AS PART OF CURRENT ASSETS AND NOT THE FIXED ASSETS OR INVESTMENTS. THUS THE ACCO UNTING TREATMENT GIVEN BY THE ASSESSEE REFLECTS THE INTENTION OF THE ASSES SEE TO TREAT THE SAID DEVELOPMENT RIGHTS AS STOCK IN TRADE. THE LD. CIT(A ) HAS FURTHER STATED THAT AS PER AGREEMENT DATED 6 TH JUNE, 1992, A COPY OF WHICH IS FILED BEFORE HIM ALSO SHOWS THAT THE PAYMENT OF CONSIDERATIO N WAS TO BE MADE BY THE ASSESSEE ON SANCTIONING OF THE BUILDING PR OPOSAL PLAN AND ON OBTAINING THE COMMENCEMENT CERTIFICATE. THUS, IT SHO WS THAT THE TRANSFER OF DEVELOPMENT RIGHTS WAS MADE FOR THE PURP OSE OF CARRYING OUT CONSTRUCTION ACTIVITY ON THE PLOT. THUS, IT SH OWS THE INTENTION OF THE ASSESSEE FOR ACQUIRING THE SAID ASSET WAS FOR BUSINESS PURPOSES AND TO TREAT THE ASSETS AS STOCK IN TRADE. T HE PERUSAL OF THE CLAUSES OF THE AGREEMENT DATED 10 TH APRIL, 1993 ALSO SHOWS THAT THE ASSETS WERE ACQUIRED WITH THE CLEAR INTENTION OF DEVELOPING THE PROPERTY AND MAKING PROFITS OUT OF THE SAME. THE LD. CIT(A ) HAS ALSO STATED THAT HIS PREDECESSOR HAD REFERRED THE MATTER T O THE FILE OF THE AO FOR REFERRING THE SAME TO THE DVO AND TO ASCERTAIN THE FAIR MARKET VALUE OF THE SAID PROPERTY. THE MATTER WAS REFERRED TO T HE DVO AND THE VALUATION REPORT WAS OBTAINED. THE LD. CIT(A) HAS STATED T HAT THE REPORT OF THE DVO DATED 1 ST DECEMBER, 2010 DETERMINED THE VALUE OF THE PROPERTY AT RS. 1,30,91,000/- AS AGAINST STAMP DUTY VALUED AT RS. 4,99,50,000/- ADOPTED BY THE AO. THE LD. CIT(A) HAS FURTHER STATED THAT, AS PER VALUATION REPORT DATED 1 ST DECEMBER, 2010, A NOTE HAS BEEN TAKEN OF SEVERAL LITIGATIONS ON THE PROPERTY AND WHILE DETERMINING THE VALUATION, OBSERVED THAT THE PROPERTY IS UNDER MULTIP LE LITIGATION NOT HAVING ANY ACCESS, AFFECTED BY THE HIGH TENSION LINE AN D OTHER ENCUMBRANCES LIKE TEMPLE, ABUTTING SLUMS, RICKSHAW PARKING, C AR SERVICING, ETC. SINCE NUMBER OF PERSONS CLAIMED THE RIGHTS IN RESPECT OF THE IMPUGNED PROPERTY, THE ASSESSEE WAS UNABLE TO DEVE LOP THE PROPERTY AND HENCE DECIDED TO GET RID OF THE PROPERTY ITSELF COMES OUT SHRI CHANDULAL P. PATEL ITA 2892/M/2012 8 OF THE LITIGATION. THE LD. CIT(A) HAS STATED THAT THE PURPOS E AND INTENTION WITH WHICH THE PROPERTY WAS ACQUIRED AND THE M ANNER IN WHICH THE SAID PROPERTY WAS REFLECTED IN THE ACCOUNTS CLE ARLY SHOWS THAT THE PROPERTY HAS ALL THE ATTRIBUTES OF STOCK IN TRADE. 6.2 THE CIT(A) HAS STATED THAT, UNDER THE CIRCUMSTANCES , HE IS OF THE VIEW THAT THE FINDINGS OF THE AO THAT THE ASSET IS A CAPIT AL ASSETS AND NOT STOCK IN TRADE ARE CONTRARY TO THE FACTS BORNE OU T FROM RECORDS. THE LD. CIT(A) FURTHER STATED THAT THE SAID PROPERTY WAS A PART OF THE CURRENT ASSETS AS PER TRIAL BALANCE FOR AY 2000-01 AND THEREAFTER. EVEN DURING ASSESSMENT YEAR 2005-06, THE SAID ASSETS WERE R EFLECTED AS A PART OF THE CURRENT ASSETS. THE LD. CIT(A) HAS STATED T HAT THE ASSESSEE EXPLAINED THAT DUE TO ACCOUNTING ERROR, THE ASSETS WERE NOT REFLECTED IN THE TRIAL BALANCE IN THE A.Y. 2006-07. HOWEVER, THE SAID PRO PERTY WAS NOT SOLD DURING ASSESSMENT YEAR 2006-07 NOR THE AO RA ISED CLAIM THAT THE PROPERTY WAS SOLD DURING ASSESSMENT YEAR 2006-07. HENCE, THE OBJECTION RAISED BY THE AO HAS NO LOCUS STANDI . 6.3 THE LD. CIT(A) HAS FURTHER STATED THAT THE POSSESSION OF THE PROPERTY WAS NEVER WITH THE ASSESSEE ESPECIALLY CONSIDE RING THAT VIDE ORDER OF THE CITY CIVIL COURT, BOMBAY DATED 20.10.1993 IN NOTICE OF MOTION NO. 2639 OF 1990 IN SUIT NO. 3573 OF 1990 THE POS SESSION HAD BEEN HELD TO BE IN FAVOUR OF SHRI LALJI LACHCHMANDAS. H ENCE, THERE IS NO EVIDENCE TO HOLD THAT THE ASSESSEE WAS IN ACTUAL PHY SICAL POSSESSION OF THE PROPERTY. THE LD. CIT(A) HAS STATED TH E FACT THAT THE SON OF THE ASSESSEE IS A PARTNER IN M/S JAJODIA AND PA TEL PROPERTIES IS IRRELEVANT AND INCONSEQUENTIAL SINCE THE GENUINENESS OF THE TRANSACTION IN THE PRESENT CASE IN NOT IN DOUBT. THE LD. CIT(A) HAS STATED THAT IN VIEW OF ABOVE, THE PROVISIONS OF SECTION 50C CANNOT BE APPLIED TO THE FACT OF THE PRESENT CASE AND ACCORDINGLY, HE HAS UPHELD THE CLAIM OF THE ASSESSEE THAT THE PROPERTY WHICH IS THE SUBJECT MATTER OF TRANSFER WAS RIGHTLY TREATED AS STOCK IN TRADE BY TH E ASSESSEE. THE LD. CIT(A) HAS DIRECTED THE AO TO ADOPT THE SALE VALUE AS PER SHRI CHANDULAL P. PATEL ITA 2892/M/2012 9 AGREEMENT TO SALE OF DEVELOPMENT RIGHTS DATED 16.06.2006 , I.E. RS. 3,57,000/-. 6.4 THE LD. CIT(A), HAS STATED AND DISCUSSED THE FACT THAT AGREEMENTS ENTERED INTO IN 1992 AND 1993 WERE MERELY ENTERED ON STAMP PAPER OF RS. 10/- WHEREAS THE FINAL CONVEYANCE DE ED DATED 21.04.2006 WAS REGISTERED AFTER PAYMENT OF FULL STAMP DUTY OF RS. 21,70,100/-. HE HAS STATED THAT THE ASSESSEE CANNOT BE CONSIDERED TO BE THE OWNER OF THE IMPUGNED PROPERTY AND THEREFORE T HE PROVISIONS OF SECTION 50C CANNOT BE APPLIED ON THE NATURE OF ASSETS H ELD BY THE ASSESSEE. 6.5 BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 7. DURING THE COURSE OF HEARING, THE LD. DR SUPPORTED T HE ORDER OF THE AO AND MADE HER SUBMISSIONS ON THE LINES OF REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER, WHICH, WE HAVE STATED H EREINABOVE IN DETAIL. ON THE OTHER HAND, THE LD. AR MADE HIS SUBMISSIONS ON THE LINE OF SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE CONFIRMED. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHO RITIES BELOW AND SUBMISSIONS OF LEARNED REPRESENTATIVE OF THE PARTIES. W E HAVE ALSO GONE THROUGH RELEVANT PAGES OF THE PAPER BOOKS, WHICH C OMPRISES OF 270 PAGES AND CONTENTS OF RELEVANT AGREEMENTS ENTERED INTO BY THE ASSESSEE DATED 6 TH JUNE, 1992 AND 10 TH APRIL, 1993, DEVELOPMENT AGREEMENT ENTERED INTO BETWEEN ASSESSEE AND OTHERS WITH M/S JAJODIA AND PATEL PROPERTIES AS WELL AS COPIES OF THE TRIAL BALANCE, COPY OF THE ORDER OF THE CITY CIVIL COURT, BOMBAY DATED 20 TH OCTOBER, 1993 AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE AUTHORITIES BELO W. 9. WE OBSERVE THAT THE LD. DR HAS NOT DISPUTED THE FAC T THAT THE ASSESSEE HAS DISCLOSED THE PROPERTY IN TRIAL BALANCE FOR A LL THE YEARS FROM 2000-01 TO 2005-06 AS PART OF STOCK IN TRADE. WE A LSO OBSERVE SHRI CHANDULAL P. PATEL ITA 2892/M/2012 10 THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR EA RLIER YEAR I.E. ASSESSMENT YEAR 2006-07, THE AO, HIMSELF OBSERVED THAT T HE ASSESSEE WAS IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT RIGHT S PURCHASED BY THE ASSESSEE IS PART OF STOCK IN TRADE. ON PERUSAL OF THE RELEVANT PAGES OF THE PAPER BOOK, PLACED BEFORE US, WE AGREE WITH THE LD. AR THAT THE PROPERTY WAS AFFECTED WITH INNUMERABLE COURT PR OCEEDINGS AND THE ASSESSEE COULD NOT GET POSSESSION OF THE SAID PROPE RTY TILL THE DATE THE ASSESSEE TRANSFERRED HIS RIGHTS IN THE SAID PROPERTY TO M/S JAJODIA AND PATEL PROPERTIES, VIDE AGREEMENT DATED 16 TH JUNE, 2006, COPY OF WHICH IS PLACED ON PAGES 52 TO 90 OF THE PAPER BOOK. 10. THE ABOVE FACT IS ALSO EMPHASIZED THAT THE ASSESSEE WAS NEVER IN POSSESSION OF THE SAID PROPERTY, AS THE SAID AGREEMENTS DATED 6 TH JUNE, 1992 AND 10 TH APRIL, 1993 WERE ENTERED INTO ON STAMP PAPER OF RS. 10/-AND WAS NOT REGISTERED. HENCE, THE RIGHTS OF THE ASS ESSEE IN THE SAID PROPERTY WERE NOT VALIDLY TRANSFERRED TO THE ASSES SEE. THE DVO IN HIS REPORT DATED 1 ST DECEMBER, 2010, WHILE DETERMINING THE VALUE OF THE PROPERTY AT RS. 1,30,91,000/- HAS ALSO REFERRED TO LITIG ATION ON THE PROPERTY AND ALSO POINTED OUT OTHER ENCUMBRANCES, REFER ENCE OF WHICH, WE HAVE ALREADY MENTIONED HEREINABOVE. NOT ONLY THIS, TH E LD. CIT(A) HAS ALSO REFERRED THE AGREEMENT DATED 6 TH JUNE, 1992 AND 10 TH APRIL, 1993 TO REFLECT THE INTENTION OF THE ASSESSEE FOR ACQUIRING THE SAID ASSETS THAT THE ASSESSEE ACQUIRED ONLY DEVELOPMENT RIG HTS IN THE PROPERTY FOR THE PURPOSE OF CARRYING OUT CONSTRUCTION A CTIVITY ON THE PLOT. THE LD. DR HAS NOT DISPUTED THE SAID FACTS AS POINTE D OUT BY THE LD. CIT(A) IN THE IMPUGNED ORDER. IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT CLAIMED ANY BENEFIT OF INDEXATION IN THE COST OF ACQUISITIO N. THE ABOVE FACTS ESTABLISHES THAT THE ASSESSEE HAS TREATED THE SAID PROPERTY AS STOCK IN TRADE. THERE IS NO DISPUTE TO THE FACT THAT IF A PROPERTY IS IN THE NATURE OF STOCK IN TRADE, THE PROVISIONS OF SECTION 5 0C ARE NOT APPLICABLE AS IT APPLIES ONLY IN RESPECT OF CAPITAL ASSETS B EING LAND OR BUILDING OR BOTH. FOR READY REFERENCE, WE REPRODUCE SECTIO N 50C(1) OF THE ACT, WHICH IS AS UNDER: SHRI CHANDULAL P. PATEL ITA 2892/M/2012 11 WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BU ILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAM P DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF S UCH TRANSFER. ON PERUSAL OF ABOVE SECTION 50C, SHOWS THAT THE PROVISIO NS ARE APPLICABLE ONLY IN RESPECT OF CAPITAL ASSET, BEING LAND OR BU ILDING OR BOTH AND THERE IS NO REFERENCE THAT THE SAID PROVISIONS IS APPLICABLE TO STOCK IN TRADE. 11. IN VIEW OF THE ABOVE FACT AND CONSIDERING THE MATERIAL ON RECORD, WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. C IT(A) TO HOLD THAT THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE TO T HE PROPERTY UNDER CONSIDERATION. THE DEPARTMENT HAS ALSO NOT BROUGH T ANY MATERIAL ON RECORD THAT THE SALE VALUE AS PER AGREEMENT FOR SALE OF DEVELOPMENT RIGHTS DATED 16 TH JUNE, 2006, I.E. RS. 3,57,000/-, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS NOT GENUINE. H ENCE, WE UPHOLD THE ORDER OF LD. CIT(A) IN THE FACTS AND CIRCUMSTAN CES OF THE CASE BY REJECTING THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT. 12. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2013. SD/- SD/- ( !' ) ( . . ) !# (RAJENDRA) (B.R. MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 23 RD AUGUST, 2013 SHRI CHANDULAL P. PATEL ITA 2892/M/2012 12 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ! !' ( ) 18, MUMBAI / THE CIT (A)- 18 , MUMBAI. 4) ! !' /CIT -8 , MUMBAI / THE CIT -8, MUMBAI 5) #$% & , ! & , '() / THE D.R. C BENCH, MUMBAI. 6) %* + COPY TO GUARD FILE. !,-. / BY ORDER / / TRUE COPY / / [ / / 0 (1 ! & , '() DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *340 . . * CHAVAN, SR. PS