DADHA ESTATES PVT LTD, CHENNAI V. ACIT, CORP RANGE 1, CHENNAI

ITA 3325/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6798 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 05-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: D ANAND
• Keywords: Fair market value

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.3325/CHNY/2018 /ASSESSMENT YEAR: 2004-05 M/S.DADHA ESTATES PVT. LTD., C/O. SHRI AJIT KUMBHAT, B.COM., FCA, KUMBHAT & CO., CHARTERED ACCOUNTANTS, KUMBHAT COMPLEX, 5 TH FLOOR, NO.29, RATTAN BAZAAR, CHENNAI-600 003. VS. THE ASST. COMMISSIONER- OF INCOME TAX, CORPORATE RANGE-1, CHENNAI. [PAN: AAACD 3177 C ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR. D.ANAND, ADVOCATE *+) , /RESPONDENT BY : MR. R.CLEMENT RAMESH- KUMAR, ADDL.CIT , /DATE OF HEARING : 23.07.2019 , /DATE OF PRONOUNCEMENT : 23.07.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2004-05 AGAINST THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, IN ITA NOS.222, 22 1 & 219/CIT(A)- ITA NOS.3325/CHNY/2018 :- 2 -: 1/2015-16 DATED 14.02.2018 FOR THE ASSESSMENT YEARS 2004-05 TO 2006-07. 2. MR. D.ANAND REPRESENTED ON BEHALF OF THE ASSESSEE AND MR. R.CLEMENT RAMESH KUMAR REPRESENTED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED LD.AR THAT THE ASSESSEE IS A COMP ANY, WHICH OWNED 22,042 SQ. FT. OF LAND IN FLOYDS ROAD, CHENNA I. THE ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT (JDA) WI TH M/S.READY MONEY LTD., ON 29.04.1994. AS PER THE JDA, THE ASSESSEE HAD AGREED TO TRANSFER 50% OF UNDIVIDED INTEREST IN THE LAND TO M/S.READY MONEY LTD., FOR A CONSIDERATION OF RS.22 LAKHS IN CASH AND A MINIMUM OF 17,820 SQ. FT. OF CONSTRUCTED AREA. AS PER THE AGREEMENT, M/S.READY M ONEY LTD., WAS REQUIRED TO CONSTRUCT 20 FLATS, OUT OF WHICH 8 FLAT S WERE TO BE ALLOTTED TO THE ASSESSEE AND THE BALANCE 12 FLATS WERE TO BE RE TAINED BY M/S.READY MONEY LTD. IT WAS A SUBMISSION THAT CONSEQUENTLY CA PITAL GAINS CAME TO BE ASSESSED IN THE HANDS OF ASSESSEE FOR THE ASSESS MENT YEAR 1995-96 VIDE ASSESSMENT ORDER PASSED U/S.144 R.W.S.147 OF T HE ACT DATED 31.03.2003, WHEREIN THE VALUE OF THE 8 FLATS REPRES ENTING 17,820 SQ. FT. OF CONSTRUCTED AREA WAS DETERMINED AT RS.62,37,000/- A ND THE VALUE OF 50% OF THE LAND AS ON 01.04.1981 WAS DETERMINED AT RS.5 /- LAKHS. THE LD.AR PLACED BEFORE US A COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1995-96 PASSED U/S.143(3) R.W.S.147 DATED 31.03.200 3. IT WAS A FURTHER SUBMISSION THAT ON ACCOUNT OF CERTAIN DISPUTES BETW EEN THE ASSESSEE AND M/S.READY MONEY LTD., THE JDA DID NOT GO THROUGH. L ITIGATIONS WERE FILED ITA NOS.3325/CHNY/2018 :- 3 -: AND IN 1998, M/S.READY MONEY LTD., WERE REMOVED FRO M THE PREMISES AND SUBSTANTIALLY CONSTRUCTED BUILDING CONSISTING OF NE ARLY 18,199 SQ.FT. OF BUILDING ALONG WITH THE LAND REVERTED BACK TO THE A SSESSEE. IN THE MEANTIME, M/S.READY MONEY LTD., HAD ALSO SOLD 11 OU T OF 12 FLATS AND TAKEN THE MONEY. 4 . THE ASSESSEE HAD ENTERED INTO ANOTHER AGREEMENT FOR COMPLETION OF THE CONSTRUCTION OF THE BUILDING AND THE SALE CONSI DERATION RECEIVED IN RESPECT OF ONE UNSOLD FLAT FROM THE SHARE OF M/S.R EADY MONEY LTD., WAS USED FOR THE CONSTRUCTION OF THE BALANCED PORTION O F THE BUILDING ALONG WITH FURTHER FUNDS PROVIDED BY THE PURCHASER OF OTHER FL ATS AND THE ASSESSEE PROPORTIONATELY. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS FOR ASSESSMENT YEAR 2004-05, THE ASSESSEE SOLD 6 FLATS FROM THE SHARE OF ASSESSEES 8 FLATS. IT WAS A SUBMISSION THAT OUT OF 17,820 SQ. FT. DUE TO THE ASSESSEE, THE ASSESSEE HAD SOLD NEARLY 12,474 S Q. FT. REPRESENTING 6 FLATS FOR A CONSIDERATION OF RS.1,96,24,550/-. IT WAS A SUBMISSION THAT THE ASSESSING OFFICER HAD DETERMINED THE CAPITAL GAINS IN RESPECT OF SALE OF SAID SIX (6) FLATS AT RS.1,93,27,086/-. ON APPEAL, THE LD.CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO COMPUTE THE CAPIT AL GAINS BY ADOPTING FAIR MARKET VALUE OF THE UNDIVIDED INTEREST OF LAND TRANSFERRED IN RESPECT OF THE SAID SIX FLATS BY TAKING THE COST OF THE LAN D AT RS.5/- LAKHS AND SUITABLEY INDEXED THE SAME, ALSO THE LD.CIT(A) HAD DIRECTED THE ADDITIONAL COST INCURRED BY THE ASSESSEE IN CONSTRUCTING THE I NCOMPLETE BUILDING TO BE TAKEN INTO ACCOUNT. THE LD.CIT(A) DID NOT GIVE THE BENEFIT OF PROPORTIONATE COST TO THE ASSESSEE IN RESPECT OF 17 ,820 SQ. FT. OF SUPER ITA NOS.3325/CHNY/2018 :- 4 -: STRUCTURE, WHICH WAS ALLOTTED TO THE ASSESSEE AS PE R THE ORIGINAL AGREEMENT AND WHICH WAS TAKEN INTO CONSIDERATION FO R LEVY OF CAPITAL GAINS FOR THE ASSESSMENT YEAR 1995-96. IT WAS A PRAYER T HAT PROPORTIONATE COST OF THE 17,820 SQ. FT., REPRESENTED BY AN AMOUNT OF RS.62,37,000/- MAY BE GRANTED TO THE ASSESSEE. 5. IN REPLY, LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE ORDER OF LD.CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO PERUSED THE ORDER OF LD.CIT(A). IT IS NOTICED THAT IN PARA-20 OF HIS ORDER, LD.CIT(A) HEL D THAT THE COST OF THE LAND WAS TO BE TAKEN AS AT RS.5/- LAKHS AS ON 1.4.1 981 AND SUITABLY INDEXED. THE LD.CIT(A) SPECIFICALLY HAS RECORDED T HAT EARLIER PREDECESSOR LD.CIT(A) HAS NOT GIVEN ANY DIRECTION TO FURTHER AL LOW ANY DEDUCTION ON ACCOUNT OF THE COST OF THE CONSTRUCTION EARLIER INC URRED BY M/S.READY MONEY LTD., ON PROPORTIONATE BASIS. THE LD.CIT(A) ALSO RECOGNIZED THAT THE ASSESSING OFFICER HAS RIGHTLY NOT ADDRESSED THE SAME IN THE SAID ORDER AND CONSEQUENTLY, DENIES THE ASSESSEE THE BENEFIT O F CORRESPONDING COST BY HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO RAI SE THE ISSUE IN RESPECT OF WHICH NO RELIEF OR DIRECTION HAS BEEN GIVEN BY THE LD.CIT(A). A PERUSAL OF PREDECESSOR LD.CIT(A) ORDER, SHOWS HE HAS ADMITTEDL Y GIVEN THE DIRECTIONS TO RE-WORK AND CAPITAL GAINS LIABILITY. THE PROPOR TIONATE COST IN RESPECT OF THE SAID 17,820 SQ. FT., IS NOT A NEW CLAIM BY THE ASSESSEE, BUT IS AN ASSESSED FIGURE BY THE REVENUE FOR THE ASSESSMENT Y EAR 1995-96. IT IS THE ISSUE OF COMPUTATION OF CAPITAL GAINS THAT IS B EFORE THE LD.CIT(A). IT IS ITA NOS.3325/CHNY/2018 :- 5 -: NOT AN APPEAL AGAINST THE ORDER OF LD.CIT(A) PASSED ON 27.01.2014 THAT IS BEFORE THE LD.CIT(A) NOW. WHEN COMPUTING CAPITAL G AINS IF A PARTICULAR COST IS AVAILABLE TO THE ASSESSEE TO BE REDUCED, TH EN THE SAME CANNOT BE DENIED TO THE ASSESSEE BY HOLDING THAT SUCH COST WA S NOT CONSIDERED BY THE PREDECESSOR, ESPECIALLY WHEN THE FACTS ARE CLEA RLY RECOGNIZED BY AN ACT OF THE REVENUE BY PASSING AN ASSESSMENT ORDER. THI S BEING SO, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE PROPO RTIONATE COST IN RESPECT OF SIX FLATS SOLD BY ADOPTING THE COST AS DETERMINE D FOR LEVY OF CAPITAL GAINS FOR ASSESSMENT YEAR 1995-96 AND GRANTED INDEX ATION BENEFIT TO THE ASSESSEE ON SUCH COST ALSO AND DETERMINE THE CAPITA L GAINS IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON 23 RD JULY, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 23 JULY, 2019. K S SUNDARAM , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF