Heritage Foods(India) Limited, Hyderabad V. DCIT, Circle-2(2), Hyderabad

ITA 307/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69933 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: GOPAL CHOUDARY
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Revised return; Capital expenditure
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 307/HYD/2012 ASSESSMENT YEAR : 2007-08 HERITAGE FOODS (INDIA) LTD., HYDERABAD. PAN: AAACH2778K VS. INCOME-TAX OFFICER, WARD - 5(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GOPAL CHOUDARY REVENUE BY : SHRI B. YADAGIRI DATE OF HEARING : 07-11-2013 DATE OF PRONOUNCEMENT : 13-11-2013 O R D E R PER B. RAMAKOTAIAH, A.M.: THIS IS AN APPEAL BY ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A), VIJAYAWADA, DATED 27-12-2011. ASSESSEE HAS RAISED 4 GROUNDS ON TWO ISSUES. GROUND NO. 1 IS ON THE DISAL LOWANCE OF RS. 2,26,54,471/- BEING CAPITAL EXPENDITURE. THIS GROUN D WAS NOT PRESSED IN THE COURSE OF HEARING, HENCE, DISMISSED AS WITHDRAWN. GROUND NO. 4 IS GENERAL IN NATURE. GROUND NOS. 2 & 3 PERTAIN TO THE ISSUE OF BRINGING TO TAX THE CAPITAL GAIN AROSE OUT OF THE SALE OF LAND IN THE IMPUGNED ASSESSMENT YEAR AND ALSO INVOK ING THE PROVISIONS OF SECTION 50C OF THE IT ACT. 2. BRIEFLY STATED, ASSESSEE FILED RETURN OF INCOME ADMITTING LONG TERM CAPITAL GAINS ON SALE OF LAND AT RS. 1,98,70,4 95/-. THE FACTS 2 ITA NO. 307/HYD/2012 HERITAGE FOODS (INDIA) LTD. LEADING TO THIS CAPITAL GAIN ARE THAT ASSESSEE COMP ANY ENTERED INTO AGREEMENT OF SALE WITH M/S HERITAGE INFRA DEVELOPER S LTD. ON 31- 03-2006 FOR TRANSFER OF TWO PIECES OF VALUABLE LAND SITUATED AT KONDAPUR, HYDERABAD FOR A CONSIDERATION OF RS. 2,74 ,08,000/- ( TWO AGREEMENTS OF DIFFERENT AMOUNTS). EVEN THROUGH THE AGREEMENT WAS ENTERED ON 31-03-2006, ASSESSEE RECEIVED SUBSTANTIA L AMOUNT OF RS. 2,64,68,600/- IN THE FY 2006-07 RELEVANT TO AY 2007-08. HOWEVER, THESE TWO AGREEMENTS WERE NOT REGISTERED A ND ASSESSEE HAS ENTERED INTO FRESH AGREEMENTS DATED 07-01-2008, WHICH WERE REGISTERED ON THAT DAY. THE AO IN THE COURSE OF AS SESSMENT PROCEEDINGS INVOKED PROVISIONS OF SECTION 50C AND R E-DETERMINED SALE PRICE ON THE BASIS OF THE STAMP VALUATION OF R EGISTRATION AUTHORITIES. IT WAS SUBMISSION OF ASSESSEE THAT SAL E AGREEMENTS WERE NOT REGISTERED AND, THEREFORE, PROVISIONS OF S ECTION 50C ARE NOT APPLICABLE. IT WAS FURTHER SUBMITTED THAT ASSES SEE HAS ENTERED INTO FRESH AGREEMENTS, WHICH WERE REGISTERED WHICH FALLS IN AY 2008-09. ACCORDINGLY VIDE LETTER DATED 31-12-2009, ASSESSEE COMPANY REQUESTED THE AO THAT THE CAPITAL GAINS NEE DS TO BE DELETED FROM THE COMPUTATION OF TOTAL INCOME FOR AY 2007-08 AND ASSESSED IN AY 2008-09. IT HAS MADE THREE CONTENTIO NS IN THE SAID LETTER, FIRST ONE IS THAT AS AGREEMENT OF SALE IS N OT DOCUMENT PRESENTED FOR REGISTRATION, THE PROVISIONS OF SECTI ON 50C ARE NOT APPLICABLE FOR AY 2007-08. SECOND ONE IS CAPITAL GA INS MAY BE ASSESSED IN AY 2008-09, WHEN IT WAS REGISTERED AND THIRD ALTERNATE ONE THAT CAPITAL GAIN MAY BE PARTLY ASSESSED IN 200 7-08 AS ADMITTED BY ASSESSEE AND DIFFERENTIAL AMOUNT, IF AN Y, INVOKING SECTION 50C MAY BE DONE IN AY 2008-09. THE AO, HOWE VER, DID NOT AGREE EVEN THOUGH IT WAS ACCEPTED THAT NO CONVEYANC E WAS DONE IN FY 2005-06. SINCE ASSESSEE ADMITTED THE INCOME ON R ECEIPT OF SUBSTANTIAL AMOUNT IN THE YEAR UNDER CONSIDERATION, HE WAS OF THE OPINION THAT CAPITAL GAINS IS TAXABLE IN THE YEAR. FURTHER, WITH 3 ITA NO. 307/HYD/2012 HERITAGE FOODS (INDIA) LTD. RESPECT TO THE ISSUE OF SECTION 50C, THE AO WAS OF THE OPINION THAT AMENDMENT WITH EFFECT FROM 01-10-2009 WAS CLARIFICA TORY IN NATURE AND IS APPLICABLE TO ALL PENDING ASSESSMENTS. ACCOR DINGLY, THE DIFFERENCE OF VALUE AS PER THE STAMP VALUE AUTHORIT IES AND THE AGREEMENT VALUE TO AN EXTENT OF 1,74,59,300 WAS BRO UGHT TO TAX UNDER THE HEAD LONG TERM CAPITAL GAIN ALONG WITH A DMITTED AMOUNT OF RS. 2,18,64,117/- (INCLUDING DIFFERENCE ADMITTED IN THE COURSE OF ASSESSMENT). 3. BEFORE THE LEARNED CIT(A), ASSESSEE CONTENDED TH AT PROVISIONS OF SECTION 50C ARE NOT APPLICABLE AND FU RTHER THE CAPITAL GAIN ITSELF IS NOT TAXABLE IN AY 2007-08. THE LEARN ED CIT(A) DID NOT AGREE AND CONFIRMED THE ACTION OF THE AO, HENCE, TH E PRESENT APPEAL. 4. THE LEARNED COUNSEL REITERATED THE FACTS AND SUB MITTED THAT AS PER LAW THE GAIN CANNOT BE TAXED IN AY 2007-08 F OR THE REASON THAT IF THE DATE OF AGREEMENT IS CONSIDERED, THEN, IT WILL BE ASSESSABLE IN AY 2006-07 AS THE AGREEMENT WAS ENTER ED ON 31-03- 2006. FOR INVOKING PROVISIONS OF SECTION 2(47) TH ERE IS NO POSSESSION BEING HANDED OVER TO PARTY AND THOSE AGR EEMENTS WERE NOT EVEN EXECUTED AS THEY LAPSED FOR NON-REGISTRATI ON WITHIN 4 MONTHS. THEREFORE, FRESH AGREEMENTS DATED 07-01-200 8 WERE ENTERED AND THE ADVANCES RECEIVED WERE CONSIDERED AS PART OF THAT AGREEMENT. IF THE REVISED AGREEMENT IS TAKEN INTO CONSIDERATION, THEN, TRANSACTION FALLS IN AY 2008-09 AND ACCORDING LY, ASSESSEE HAS INFORMED THE AO TO CONSIDER THE TAXING AMOUNT I N AY 2008-09. THE LEARNED COUNSEL REFERRED TO THE NOTE GIVEN TO A O DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBJECTING TO INVOC ATION OF SECTION 50C AND ALSO TAXING THE SAME IN AY 2007-08 ITSELF. HE ALSO THEN REFERRED TO CLAUSE (7) OF THE REVISED AGREEMEN T TO SUBMIT THAT 4 ITA NO. 307/HYD/2012 HERITAGE FOODS (INDIA) LTD. IT WAS AGREED TO DELIVER THE POSSESSION ON RECEIPT OF BALANCE CONSIDERATION OF RS. 8,74,400/- FROM THE SECOND PAR TY, WHICH WAS SUBSEQUENTLY RECEIVED IN LATER YEAR. HOWEVER, HE FA ILY ADMITTED THAT TRANSACTION CAN BE ASSESSED TO TAX IN AY 2008-09 SI NCE AGREEMENT ENTERED WAS ALSO REGISTERED ON 07-01-2008 AND HE HA S NO OBJECTION IF THE DIRECTIONS ARE GIVEN ACCORDINGLY. 5. THE LEARNED DR, HOWEVER, RELIED ON THE ORDERS OF AO AND CIT(A) AND SUBMITTED THAT ASSESSEE ITSELF HAS OFFER ED CAPITAL GAINS IN AY 2007-08 AND, THEREFORE, THERE IS NO NEED TO A SSESS THE SAME IN AY 2008-09. HE SUPPORTED THE ORDERS OF AO AND CI T(A) ON BOTH THE ISSUES. 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE CO NTENTIONS AS WELL AS VARIOUS AGREEMENTS PLACED ON RECORD ALON G WITH OTHER DOCUMENTS. IT IS TRUE THAT ASSESSEE HAS ENTERED TW O AGREEMENTS FOR SALE OF PROPERTY ON 31-03-2006. IT IS ALSO TRUE THAT CONSIDERATION WAS RECEIVED SUBSTANTIALLY IN FY 2006-07. HOWEVER, THESE TWO AGREEMENTS OF SALE ENTERED ON 31-03-2006 WERE NOT R EGISTERED. ONCE THE DOCUMENTS WERE NOT REGISTERED, INVOCATION OF PROVISIONS OF SECTION 50C FOR ADOPTING THE SAME STAMP VALUE DO ES NOT ARISE. THIS ISSUE WAS ALREADY CRYSTALLIZED BY VARIOUS ORDE RS OF ITAT WHEREIN IT WAS HELD THAT WHEN SALE AGREEMENT WAS NO T REGISTERED, PROVISIONS OF SECTION 50C OF THE ACT, WOULD NOT APP LY (ITO VS. KUMUDINI VENUGOPAL , 5 ITR (TRIB.)145(CHENNAI). IT IS ALSO ADMITTED THAT PROVISIONS OF THE ACT WERE AMENDED WITH EFFECT FROM 01-10- 2009 SO AS TO CONSIDER THE DOCUMENTS WHICH ARE NOT REGISTERED BY INCORPORATING THE WORD ASSESSABLE. SINCE THE WOR D ASSESSABLE WAS INSERTED WITH EFFECT FROM 01-10-2009, IT WAS HE LD BY VARIOUS JUDICIAL AUTHORITIES THAT PROVISIONS OF SECTION 50C CANNOT BE INVOKED IF THE TRANSACTION WAS NOT REGISTERED WITH THE REGI STRATION AUTHORITIES 5 ITA NO. 307/HYD/2012 HERITAGE FOODS (INDIA) LTD. BEFORE SUCH DATE. THEREFORE, THE ADDITION, PER SE, ON 50C CANNOT BE MADE IN THE IMPUGNED AY. ACCORDINGLY, ADDITION OF R S. 1,74,59,300/- STANDS DELETED, AND, THUS, GROUND NO. 3 OF ASSESSEE IS ALLOWED. 7. COMING TO THE ISSUE OF YEAR OF ASSESSABILITY OF CAPITAL GAINS, IT IS AN ADMITTED FACT THAT ASSESSEE OFFERED THE CA PITAL GAIN IN AY 2007-08 ON THE BASIS OF EARLIER AGREEMENTS AND THAT SUBSTANTIAL AMOUNT BEING RECEIVED IN THE YEAR. HOWEVER, THE RET URN ADMITTING THE INCOME WAS FILED ON 31-10-2007. HOWEVER, ON 07- 01-2008, THERE WERE REVISED AGREEMENTS WHICH WERE ALSO REGIS TERED, THEREFORE, ASSESSEES CONTENTION THAT CAPITAL GAINS ARISES IN AY 2008-09 AND NOT IN AY 2007-08 IS JUSTIFIED. JUST B ECAUSE ASSESSEE ADMITTED INCOME, THE SAME COULD NOT BE ASSESSED IN THE YEAR, WHEN IT IS NOT LEGALLY ASSESSABLE IN THAT YEAR. IF WE GO BY THE DATE OF AGREEMENT, THE SAME IS TAXABLE IN THE YEAR AY 20 06-07 AS AGREEMENT WAS ENTERED IN 31-03-2006. IF WE GO BY T HE PROVISIONS OF SECTION 2(47) OF TRANSFER, AS PER THE REVISED AG REEMENT, EVEN THE CONDITION OF TRANSFER WAS NOT COMPLETED TILL THE BA LANCE CONSIDERATION WAS RECEIVED EVEN AS PER THE REVISED AGREEMENT DATED 07-01-2008, THEREFORE, PROVISIONS OF SECTION 2(47) ON DEEMING THE TRANSFER UNDER THE TRANSFER PROPERTY AC T, DOES NOT ARISE IN AY 2007-08. BY THE TIME RETURN WAS FILED, ASSESSEE HAS NOT ENTERED INTO REVISED AGREEMENTS AND SO OFFERED CAPI TAL GAIN IN THE YEAR. THE SAME NEED NOT BE BROUGHT TO TAX IN THE YE AR WHEN ASSESSEE SUBSEQUENTLY REVISED THE TRANSACTION AND R EGISTERED THE LETTER DOCUMENT WITH THE REGISTRATION AUTHORITIES, ASSESSEE HAS GIVEN IT IN WRITING TO THE AO THAT THE CAPITAL GAIN COULD BE EXCLUDED IN AY 2007-08 AND TO INCLUDE THE SAME IN AY 2008-09 . MOREOVER, ASSESSEE IS ALSO AGREEABLE FOR INVOKING THE PROVISI ONS OF SECTION 50C IN AY 2008-09 AS THE DOCUMENT WAS REGISTERED IN THAT YEAR. IN 6 ITA NO. 307/HYD/2012 HERITAGE FOODS (INDIA) LTD. OUR VIEW, THE AO SHOULD HAVE ACCEPTED THE REQUEST O F ASSESSEE ALONG WITH OTHER ADJUSTMENTS MADE BY WAY OF REVISED RETURN AS CAN BE SEEN FROM THE ORDER OF THE AO. SINCE THE AMOUNT IS NOT TAXABLE AS SUCH IN AY 2007-08 AND ASSESSEES COUNSEL FAIRLY ADMITTED THAT ASSESSEE IS WILLING TO GET THE SAME TAXED IN AY 200 8-09, WE ACCORDINGLY DIRECT THE AO TO BRING CAPITAL GAINS ON THE SALE OF PROPERTY IN AY 2008-09 AND IF REQUIRED INVOKE PROVI SIONS OF SECTION 50C IN THAT YEAR. THEREFORE, THE CAPITAL GAINS TO T HAT EXTENT OFFERED BY ASSESSEE IN THIS ASSESSMENT YEAR HAS TO BE EXCLU DED. WITH THESE DIRECTIONS, ASSESSEES GROUND NO. 2 IS TREATE D AS ALLOWED. THE AO IS DIRECTED TO EXCLUDE IN AY 2007-08 AND INC LUDE THE CAPITAL GAIN IN AY 2008-09, FOR WHICH NECESSARY PRO CEEDINGS CAN BE INITIATED, IF NOT DONE. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2013. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RAMA KOTAIAH) JUDICIAL MEMBER ACCOU NTANT MEMBER HYDERABAD, DATED: 13 TH NOVEMBER, 2013. KV COPY TO:- 1) HERITAGE FOODS (INDIA) LTD., C/O RAJU & RAJU, C. AS., 401, DIAMOND HOUSE, ADJ. AMRUTHA HILLS, PUNJAGUTTA, HYD-82 2) DCIT, CIRCLE-2(2), HYDERABAD. 3) CIT(A), VIJAYAWADA 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A .T., HYDERABAD.