DCIT Corporate Circle 1(2), CHENNAI V. Biomed Hitech Industries Limited, CHENNAI

ITA 327/CHNY/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2044 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A SUNDARARAJAN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Question of law; Right to appeal; Revised return; Set aside; Capital Gains
• Section: 143(3); 50C; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.327/CHNY/2019 ! / ASSESSMENT YEAR : 2008-09. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I (2) CHENNAI. VS. M/S. BIOMED HITECH INDUSTRIES LTD, FAGUN MANSION, NO.475, OLD MAHABALIPURAM ROAD, SHOLINGANALLUR, CHENNAI 600 119. [PAN AAACB 1953G] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. SANJEEV ADITYA, C.A. &' '# $ % /RESPONDENT BY : SHRI.A.SUNDARARAJAN, ADDL. CIT. ( ) $ * /DATE OF HEARING : 03-12-2019 +,! $ * /DATE OF PRONOUNCEMENT : 04-12-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 , CHENNAI ITA NO.327/2019 :- 2 -: (CIT(A) FOR SHORT) DATED 30.11.2018 FOR THE ASSES SMENT YEAR (AY) 2008-2009. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW , FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A) ERRED IN GIVING RELIEF TO THE ASSE SSEE BY HOLDING THAT PROVISIONS OF SECTION 50C OF THE ACT A RE NOT APPLICABLE TO THE PRESENT CASE IN VIEW OF CIRCULAR 5/2010 DATED 03.06.2010 ISSUED BY THE CBDT WHEN THE TRANSFER OF ASSETS IMPUGNED HAVE TAKEN PLACE BASED ON POWER OF ATTORNE YS (POAS) DATED 27/04/2007 & 28/11/2007 WHICH WERE REG ISTERED WITH THE STAMP DUTY VALUATION AUTHORITY. 3. THE LD.CIT(A) ERRED IN GIVING RELIEF TO THE ASSE SSEE BY HOLDING THAT PROVISIONS OF SECTION 50C OF THE ACT A RE NOT APPLICABLE TO THE PRESENT CASE WHEN THE ASSESSEE TH EMSELVES HAVE CONSIDERED THE TRANSACTION AS A TRANSFER UNDER SECTION 2(47) OF THE ACT AND OFFERED THE INCOME THERE ON UN DER THE HEAD CAPITAL GAINS FOR AY 2008-09. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 3. T HE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT ASSESSEE NAMELY M/S. BIOMED HITEC H INDUSTRIES LTD IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINES S OF MANUFACTURING MEDICAL CONSUMABLE. THE RETURN OF INCOME FOR THE AY 2008-09 WAS FILED ON 30.09.2008 ADMITTING NIL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES OF A9,37,41,619/-. THE SAID RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 (I N SHORT THE ACT) ITA NO.327/2019 :- 3 -: AND THERE WAS NO SCRUTINY ASSESSMENT. SUBSEQUENTLY , THE ASSESSING OFFICER FORMED AN OPINION THAT INCOME GOT ESCAPED A SSESSMENT TO TAX BASED ON THE INFORMATION THAT ASSESSEE HAD NOT OFF ERED TO TAX CAPITAL GAINS, ARISING ON SALE OF LAND SITUATED AT SHOLLIA NGANALLUR VILLAGE. ACCORDINGLY, THE ASSESSING OFFICER HAD ISSUED NOTIC E U/S.148 OF THE ACT WHICH WAS SERVED ON THE ASSESSEE ON 25.03.2013. I N RESPONSE TO THE SAME, THE ASSESSEE HAD FILED REVISED RETURN OF INCO ME AGAINST WHICH ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIO NER OF INCOME TAX, COMPANY CIRCLE I (2) CHENNAI (HEREINAFTER CALL ED AO) VIDE ORDER DATED 28.02.2014 PASSED U/S. 143(3) R.W S. 147 OF T HE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF A NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSS AND DEPRECIATION LOSS OF A 25,17,35,230/-. WHILE DOING SO, THE ASSESSING OFFICER ADOPTED GUI DELINE VALUE PRESCRIBED FOR REGISTRATION OF DOCUMENT AS DEEMED C ONSIDERATION U/S.50C OF THE ACT REJECTING THE ARGUMENT OF THE AS SESSEE THE PROVISIONS OF SECTION 50C OF THE ACT HAVE NO APPLIC ATION. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER ALLOWED THE APPEAL BY PLACI NG RELIANCE ON THE CBDT CIRCULAR NO.5/2010, DATED 03.06.2010, WHI CH CLEARLY CLARIFY THAT PROVISIONS OF SECTION 50C OF THE ACT SHALL H AVE APPLICATION ONLY W.E.F. 01.10.2009 AND THE PROVISIONS OF SECTION 5 0C OF THE ACT DO NOT ITA NO.327/2019 :- 4 -: INCLUDE TRANSACTIONS WHICH ARE NOT REGISTERED WITH THE REGISTRATION AUTHORITIES. 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL RELATE S TO WHETHER OR NOT THE PROVISIONS OF SECTION 50C OF THE ACT CAN BE INV OKED EVEN PRIOR TO 1 ST OCTOBER, 2009, IN RESPECT OF TRANSACTION WHICH TO OK PLACE PRIOR TO 1 ST OCTOBER, 2009. ADMITTEDLY, IN THE PRESENT CASE, THE RELEVANT MATERIAL WHICH ARE REQUIRED TO BE NOTED ARE THAT THE ASSESSEE HAD ENTERED INTO UNREGISTERED AGREEMENT FOR SALE WITH M/S. VISHRANTHI SABARI CONSTRUCTION ON 23.06.2006 FOR SALE OF 200 CENTS OF LAND SITUATED IN SURVEY NO.475, SHOLINGANALLUR VILLAGE FOR A CONSIDERATION OF A12,14,05,750/- AND ASSESSEE ALSO ENTERED INTO ANO THER AGREEMENT FOR SALE OF 126 CENTS OF LAND ON 2.11.2007 IN SURV EY NO.476, SHOLINGANALLUR VILLAGE FOR A CONSIDERATION OF A6,85 ,94,250/-. THE COMPANY HAD EXECUTED POWER OF ATTORNEY NOMINATED BY ICICI BANK TO WHOM ASSESSEE COMPANY OWES MONEY. THE SALE PROC EEDS DIRECTLY WERE DEPOSITED WITH ICICI BANK TOWARDS SETTLEMENT O F OUTSTANDING DUES. ASSESSEE HAD ADMITTED LONG TERM CAPITAL GAIN S OF A18,73,38,235/- ADOPTING APPARENT CONSIDERATION OF A19,65,33,677/-. ITA NO.327/2019 :- 5 -: THE ASSESSING OFFICER WAS OF THE OPINION THAT THE P ROVISIONS OF SECTION 50C OF THE ACT SHOULD BE INVOKED IN THE PRESENT TR ANSACTIONS, ACCORDINGLY HE COMPLETED THE ASSESSMENT BY ADOPTING GUIDELINE VALUE PRESCRIBED IN THE SAID PROPERTIES AS DEEMED CONSIDE RATION. THE PROVISIONS OF SECTION 50C OF THE ACT HAVE COME INTO VOGUE W.E.F. 01.10.2009 AND CLEARLY STATES THAT THE PROVISION WILL COME INTO EFFECT FROM 01.10.2009. FURTHER, THE CBDT CIRCULAR NO.5/2 010, DATED 03.06.2010, HAS ALSO CLEARLY EXPLAINED THAT THE P ROVISIONS OF SECTION 50C OF THE ACT WILL COME INTO EFFECT FROM 1 ST OCTOBER, 2009 AND IT IS FURTHER CLARIFIED THAT THE PROVISIONS OF SECTION 50 C OF THE ACT HAVE NO APPLICATION IN RESPECT OF TRANSACTION WHICH ARE NO T REGISTERED WITH THE REGISTRATION AUTHORITIES. THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. R. SUGANTHA RAVINDRAN, (2013) 352 ITR 488 HAD ALSO CLARIFIED THE POSITION AS UNDER:- 8.WE HAVE PERUSED THE ABOVE CIRCULAR. IT IS STATE D THEREIN THAT THE SCOPE OF THE PROVISIONS DOES NOT INCLUDE TRANSACTIO N WHICH ARE NOT REGISTERED WITH STAMP DUTY VALUATION AUTHORITY AND EXECUTED THROUGH AGREEMENT TO SELL OR POWER OF ATTORNEY. CONSEQUENTL Y, IT IS MADE CLEAR THEREIN THAT THE AMENDMENTS HAVE BEEN MADE AP PLICABLE WITH EFFECT FROM OCTOBER 1, 2009, AND, THEREFORE, THEY W ILL APPLY ONLY IN RELATION TO TRANSACTION UNDERTAKEN ON OR AFTER SUCH DATE. THE RELEVANT PORTION OF THE CIRCULAR IS EXTRACTED HEREUNDER (PAG E 319 OF 324 ITR) : '23.4. APPLICABILITY.THESE AMENDMENTS HAVE BEEN MA DE APPLICABLE WITH EFFECT FROM 1ST OCTOBER, 2009, AND WILL ACCORD INGLY, APPLY IN RELATION TO TRANSACTIONS UNDERTAKEN ON OR AFTER SUC H DATE.' 9. LEARNED COUNSEL FOR THE REVENUE IS NOT DISPUTING ABOUT THE EXISTENCE OF SUCH CIRCULAR ISSUED BY THE BOARD. IF THE BOARD HAS ISSUED A CIRCULAR CLARIFYING THE APPLICABILITY OF S ECTION 50C IN PURSUANCE OF THE AMENDMENT MADE BY THE AMENDMENT AC T 2 OF 2009, WE FAIL TO UNDERSTAND AS TO HOW THE REVENUE C AN CANVASS THE SAME ISSUE IN THIS CASE WHICH IN EFFECT IS AGAINST THE CIRCULAR ISSUED BY THE BOARD. CERTAINLY, THE REVENUE IS BOUND BY TH E CIRCULAR ISSUED ITA NO.327/2019 :- 6 -: BY THE BOARD. AT THIS JUNCTURE, IT IS PERTINENT TO NOTE THAT IN A DECISION MADE IN THE CASE OF STATE OF TAMILNADU V. INDIA CEMENTS LTD. REPORTED IN [2011] 40 VST 225 (SC), THE HONOURABLE SUPREME COURT HAS HELD THAT THE CIRCULARS ISSUED BY THE REV ENUE ARE BINDING ON THE DEPARTMENT AND, THEREFORE, THEY CANNOT REPUD IATE THAT THEY ARE INCONSISTENT WITH THE STATUTORY PROVISIONS. THE RELEVANT PARAGRAPHS 21 AND 22 ARE EXTRACTED HEREUNDER (PAGE 237) : '21. IT IS MANIFEST FROM THE HIGHLIGHTED PORTION OF THE CIRCULAR THAT AS PER THE CLARIFICATION ISSUED BY TH E COMMISSIONER OF COMMERCIAL TAXES, IN EXERCISE OF TH E POWER CONFERRED ON HIM UNDER SECTION 28A OF THE TNG ST ACT, THE BENEFIT OF THE SALES TAX DEFERRAL SCHEME W OULD BE AVAILABLE TO A DEALER FROM THE DATE OF REACHING OF BPV OR BSV, WHICH EVER IS EARLIER, AS IS PLEADED ON BEHALF OF THE FIRST RESPONDENT. IT IS TRITE LAW THAT CIRCULARS IS SUED BY THE REVENUE ARE BINDING ON THE DEPART MENTAL AUTHORITIE S AND THEY CANNOT BE PERMITTED TO REPUDIATE THE SAME ON T HE PLEA THAT IT IS INCONSISTENT WITH THE STATUTORY PROVISIO NS OR IT MITIGATES THE RIGOUR OF THE LAW. 22. IN PAPER PRODUCTS LTD. V. CCE [2001] 247 ITR 128 (SC) ; [1999] 7 SCC 84), WHILE INTERPRETING SECTION 37B OF THE CENTRAL EXCISE ACT, 1944, WHICH IS IN PARI MATERIA WITH SECTION 28A OF THE TNGST ACT, THIS COURT HAD HELD T HAT THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF EXCISE AND CUSTOMS ARE BINDING ON THE DEPARTMENT AND THE DEPARTMENT IS PRE CLUDED FROM CHALLENGING THE CORRECTNESS OF THE SAID CIRCULARS, EVEN ON THE GROUND OF THE SAME BEING INCONSISTENT W ITH THE STATUTORY PROVISION. IT WAS FURTHER HELD THAT THE D EPARTMENT IS PRECLUDED FROM THE RIGHT TO FILE AN APPEAL AGAIN ST THE CORRECTNESS OF THE BINDING NATURE OF THE CIRCULARS AND THE DEPARTMENT'S ACTION HAS TO BE CONSISTENT WITH THE C IRCULAR WHICH IS IN FORCE AT THE RELEVANT POINT OF TIME.' 10. EVEN OTHERWISE, WE ARE OF THE FIRM VIEW THAT TH E INSERTION OF THE WORDS 'OR ASSESSABLE' BY AMENDING SECTION 50C W ITH EFFECT FROM OCTOBER 1, 2009, IS NEITHER A CLARIFICATION NO R AN EXPLANATION TO THE ALREADY EXISTING PROVISION AND IT IS ONLY AN INCLUSION OF NEW CLASS OF TRANSACTIONS, NAMELY, THE TRANSFERS OF PRO PERTIES WITHOUT OR BEFORE REGISTRATION. BEFORE INTRODUCING THE SAID AMENDMENT, ONLY THE TRANSFERS OF PROPERTIES WHERE THE VALUE AD OPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY WERE SUBJ ECTED TO SECTION 50C APPLICATION. HOWEVER, AFTER INTRODUCTIO N OF THE WORDS 'OR ASSESSABLE' AFTER THE WORDS 'ADOPTED OR ASSESSE D', SUCH TRANSFERS WHERE THE VALUE ASSESSABLE BY THE STAMP V ALUATION AUTHORITY ARE ALSO BROUGHT INTO THE AMBIT OF SECTIO N 50C. THUS, SUCH INTRODUCTION OF NEW SET OF CLASS OF TRANSFER W OULD CERTAINLY HAVE THE PROSPECTIVE APPLICATION ONLY AND NOT OTHER WISE. HENCE, THE ASSESSEE'S TRANSFER ADMITTEDLY MADE EARLIER TO SUCH AMENDMENT CANNOT BE BROUGHT UNDER SECTION 50C. ITA NO.327/2019 :- 7 -: 11. APPLYING THE ABOVESAID DECISION OF THE HONOURAB LE APEX COURT TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS BY CONSIDERING THE SCOPE OF SECTION 50C, WE HOLD THAT THE REVENUE IS NOT ENTITLED TO CANVASS THE CORRECTNESS OF THE ORDE R PASSED BY THE TRIBUNAL, MORE PARTICULARLY IN THE LIGHT OF THE CIR CULAR ISSUED BY THE BOARD. ACCORDINGLY, THE TAX CASE APPEAL IS DISMISSE D AND THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED AGAINST THE REVENUE. NO COSTS. IN THE LIGHT OF THE ABOVE FACTS AND LEGAL POSITIO N, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. ORDER PRONOUNCED ON 4TH DAY OF DECEMBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED:4TH DECEMBER, 2019 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF