M/s. Srinivasa Foundation, CHENNAI V. DCIT, CHENNAI

ITA 3183/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7541 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 17-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Cost of acquisition; Fair market value

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L REDDY, JUDICIAL MEMBER ./ ITA NO.:3183/MDS/2016 / ASSESSMENT YEAR : 2009-10 M/S. SRINIVASA FOUNDATION C/O. SHRI S. SRIDHAR, ADVOCATES, NEW NO.14, OLD NO.82, FLAT NO.5, 1 ST AVENUE, INDIRA NAGAR, ADYAR, CHENNAI 600 020 PAN: ABAFS7944N V. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 2, CHENNAI 600 034. ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT /DATE OF HEARING : 05.01.2017 /DATE OF PRONOUNCEMENT : 15.03.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER : THIS APPEAL OF THE ASSESSEE ARE DIRECTED AGAINS T THE ORDER OF LD.CIT(A) DATED 31.10.2016 FOR ASSESSMENT YEAR 200 9-10. 2. THE FIRST GROUND RAISED IN THIS APPEAL IS WITH REGARD TO SUSTENANCE OF DISALLOWANCE U/S.40A(2)(B) OF THE ACT AT ` 1,32,37,000/-. 2 I.T.A. NO. 3183/MDS/2016 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 7,61,87,920/- AS PURCHASE COST OF LAND IN ITS PROF IT & LOSS ACCOUNT, WHICH INCLUDES PURCHASE OF LAND AT ` 2,45,83,000/- FROM THE PARTNER OF THE FIRM SHRI PRABHU AND HIS WIFE MRS. L ATHA PRABHU @ ` 2,600/- PER SQ. FT. ACCORDING TO AO, IF THE MARKET VALUE OF THE SAID LAND IS ONLY ` 1,200/- SQ. FT., HENCE, HE COMPUTED THE EXCESS VALU E OF 9,455/- SQ.FT. @ ` 1,400/- WORKED OUT AT ` 1,32,37,000/- U/S.40A(2)(B) OF THE ACT. ON APPEAL, THE CIT(A) CONFIRMED THE AC TION OF THE AO AND THE SAME IS ADDED TO THE LAW UNDER THE HEAD BUSINE SS. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD.A.R SUBMITTED THAT THE AO BASED HIS CONCLUSION ONLY ON THE GUIDE LINES VALUE (GLV) OF THE PROPERTIES SITUA TED NEARBY VICINITY OF THE SAID PROPERTY AND HE HAS NOT CONSIDERED THE VA LUE OF EXACT COMPARABLE CASE SO AS TO DISALLOW U/S.40A(2)(B) OF THE ACT. IN OUR OPINION, GLV CANNOT BE CONSIDERED AS FAIR MARKET VA LUE (FMV) OF THE LAND AND IT IS ONLY A VALUE FIXED BY THE STATE AUTH ORITY FOR THE PURPOSE OF REGISTRATION. FURTHER, WE ALSO MAKES IT CLEAR T HAT THE AO/DVO HAS TO BRING A RECORD OF SALE INCIDENCE OF COMPARABLE CASE S TAKEN PLACE IN THE SAME LOCATION DURING THE RELEVANT POINT OF TIME AND COMPARED THE SAME, THEN HE HAS TO DISALLOW U/S.40A(2)(B) OF THE ACT. ACCORDINGLY, WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF AO TO BRING THE COMPARABLE CASES SO AS TO COMPARE THE VALUE OF THE PURCHASE CO ST OF THE LAND AND 3 I.T.A. NO. 3183/MDS/2016 THEN NECESSARY DISALLOWANCE, IF REQUIRE, U/S.40A(2) (B) OF THE ACT. HENCE, THIS GROUND IS REMITTED BACK TO THE FILE OF AO FOR FURTHER VERIFICATION. 5. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE U/S.14A R.W.R.8D(2)(III) OF INCOME TAX RULES, 1962. 6. THE FACTS OF THE ISSUE ARE THAT THE AO OBSERVED DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE RECEIVED A DIVIDEND INCOME OF ` 44,51,243/- FROM INVESTMENT IN MUTUAL FUNDS AND IT WAS CLAIMED AS EXEMPTED U/S.10(34) OF THE ACT. HOWEVER, THE ASSES SEE HAD NOT DISALLOWED ANY EXPENDITURE IN CONNECTION WITH EXEMP TED INCOME EARNED. HOWEVER, THE ASSESSEE STATED THAT THE ASSES SEE INVESTED ITS OWN FUND OUT OF SALE PROCEEDS RECEIVED FROM M/S.SHR IPROP STRUCTURE PVT LTD. FOR 59.73 CRORES AND AS ASSESSEE USED ITS OWN FUNDS THAT CANNOT BE ANY DISALLOWANCE U/S.14A R.W.R.8D(2)(III) OF RULES. THE LD. ASSESSING OFFICER HAS NOT AGREED WITH THE CONTENTION OF THE A SSESSEES COUNSEL AND MADE DISALLOWANCE U/S.14A R.W.R.8D(2)(III) OF R ULES AT ` 4,82,387/-. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF TH E AO. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD.A.R IS THAT THE ASSESSEE HAS INVESTED ITS OWN FUND IN INVESTMENTS YIELDING EXEMP TED INCOME AND NOT AT ALL INCURRED ANY INTEREST EXPENDITURE IN YIELDIN G EXEMPTED INCOME. IN 4 I.T.A. NO. 3183/MDS/2016 OUR OPINION, THE LOWER AUTHORITIES IN THIS CASE HAV E NOT BROUGHT ON RECORD THE DETAILS OF AVAILABILITY OF OWN FUNDS WIT H THE ASSESSEE SO AS TO INVEST ANY EXEMPTED INCOME. IF THE ASSESSEE INVEST ED ITS OWN FUNDS, WHICH BEARS NO INTEREST, THERE CANNOT BE ANY DISALL OWANCE U/S.14A R.W.R.8D(2)(III) OF RULES. ACCORDINGLY, WE REMIT TH E ISSUE IN DISPUTE TO THE FILE OF AO TO EXAMINE WHETHER THE ASSESSEE INVE STED ITS OWN FUNDS OR BORROWED FUNDS IN INVESTMENTS YIELDING EXEMPTED INCOME. ACCORDINGLY, THIS ISSUE IN DISPUTE IS REMITTED TO T HE FILE OF AO FOR FRESH CONSIDERATION. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 15 TH MARCH, 2017 AT CHENNAI. SD/- SD/- ( (( ( ) )) ) ( ) (DUVVURU R.L REDDY) (CHAN DRA POOJARI) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 15 TH MARCH, 2017. KSSUNDARAM. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A)-2, CHENNAI 4. /CIT 5. /DR 6. /GF.