ROYAL HYDRAULIC P .LTD, MUMBAI V. ITO 7(2)(1), THANE

ITA 3416/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4016 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Assessee Lawyers: N V SHETH
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, J UDICIAL MEMBER ./ I.T.A. NO. 3416 /MUM/ 20 1 2 ( / ASSESSMENT YEAR : 2007 - 08 ) M/S ROYAL HYDRAULIC PVT LTD., A - 2, PAREKH MAHAL, 80, VEER NARIMAN POINT, MUMBAI - 400020 / VS. INCOME TAX OFFICER 7( 2 ) (1) , MUMBAI. ( / APPELLA NT ) .. ( / RESPONDENT ) /PAN. : AAACR2120D / APPELLANT BY : SHRI N V SHETH / RESPONDENT BY : SHRI A K SRIVASTAVA / DATE OF HEARING : 17 .12. 2015 / DATE OF PRONOUNCEMENT : 12. 2. 2016 O R D E R PER B.R.BASKARAN,AM : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 17.1.2012 PASSED BY THE LD. CIT(A) - 13, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 0 8. 2. THE GROUN DS URGED BY THE ASSESSEE RELATE TO THE FOLLOWING ISSUES : A ) DISALLOWANCE MADE UNDER SECTION 40A(2)(B) OF THE ACT; B ) ADDITION MADE U/S 50C OF THE ACT. ITA NO . 3416 / MUM/20 1 2 2 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF IMPORT AND SALE OF RUBBER PRODUCT AN D RUBBER CHEMICALS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS PAID SALARY OF RS.1,63,500/ - TO ITS DIRECTOR NAMED AS SMT. SAMINA MAZHAR VOHRA. THE AO NOTICED THAT THE AO , IN THE IMMEDIATELY PRECEDING YEAR HAS RESTRICT ED THE REMUNERATION PAID TO SMT.SAMINA MAZHAR VOHRA TO RS.96,380/ - BY INVOKING THE PROVISIONS OF SEC. 40A(2)(A) OF THE ACT AND ACCORDINGLY DISALLOWED THE BALANCE AMOUNT OF REMUNERATION . ACCORDINGLY, THE AO RESTRICTED THE SALARY OF SMT.SAMINA MAZHAR VOHRA T O RS.96,380/ - I N THE INSTANT YEAR ALSO , WHICH RESULTED IN A DISALLOWANCE TO RS.67,120/ - U/S 40A(2)(B) OF THE ACT. 4. THE AO ALSO NOTICED THAT THE ASSESSEE HAS SOLD A SHOP LOCATED AT VASHI FOR A SUM OF RS.5 LAKHS AND HAS OFFERED SHORT TERM CAPITAL GAIN S OF RS. 2,91,619/ - . THE AO NOTICED THAT THE SALE AGREEMENT WAS NOT REGISTERED AND HENCE THE AO CALLED FOR STAMP DUTY VALUATION FROM THE SUB - REGISTRAR WHO STATED THAT THE MARKET VALUE OF THE SAID SHOP WAS RS.11 LAKHS. ACCORDINGLY, THE AO ADOPTED THE MARK ET VALUE OF THE SHOP AT RS.11 LAKHS U/S 50C OF THE ACT AND ACCORDINGLY COMPUTED THE SHORT TERM CAPITAL GAINS . 5. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT IT HA S TRANSFER RED THE LEASE HOLD RIGHT HELD BY IT IN A BUILDING AND NOT THE BUILDING ITS ELF . ACCORDINGLY IT WAS CONTENDED THAT THE PROVISIONS OF SECTION 50C SHALL NOT APPLICABLE TO THE TRANSFER OF LEASE HOLD RIGHT IN A BUILDING, SINCE THE SAID PROVISIONS TALKS ABOUT THE TRANSFER OF LAND OR BUILDING OR BOTH . HOWEVER, THE LD.CIT(A) NOTICED TH AT THE BUILDER OF THE PROPERTY HAD ACQUIRED THE LAND FROM CITY AND INDUSTRIAL DEVELOPMENT CORPORATION(CIDCO) ON LEASE HOLD BASIS FOR A PERIOD OF 60 YEARS. HOWEVER, THE ASSESSEE HAS PURCHASED THE SHOP FROM THE BUILDER. ACCORDINGLY, THE LD.CIT(A) HELD THA T THE ITA NO . 3416 / MUM/20 1 2 3 ASSESSEE HAS PURCHASED AND TRANSFERRED THE BUILDING AND HENCE THE PROVISIONS OF SECTION 50C SHALL BE APPLICABLE . HE ALSO DIRECTED THE AO TO ADOPT THE VALUATION U/S 50C AT RS.11,84,000/ - , I.E. AT THE VALUE DETERMINED BY THE DVO . AGGRIEVED, THE ASSES SEE HAS FILED THIS APPEAL BEFORE US. 6 . WE HEARD THE PARTIES AND PERUSED THE RECORD. THE FIRST ISSUE RELATES TO DISALLOWANCE MADE UNDER SECTION 40A(2)(B) OF THE ACT. THE LD. AR SUBMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE SMC BENCH OF THE MU MB A I TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 AND THE TRIBUNAL , VIDE ITS ORDER DATED 28.2.2011 PASSED IN ITA NO. 8814/MUM/2010 , HAS DELETED THE ADDITION MADE U/S 40A(2)(B) OF THE ACT. 7 . WE HEARD THE LD.DR ON THIS ISSUE. WE HAVE EARLIER NOTICED THAT THE AO HAS MADE DISALLOWANCE U/S 40A(2)(B) OF THE ACT BY FOLLOWING THE ORDER PASSED BY HIM FOR THE ASSESSMENT YEAR 2006 - 07. NOW, WE NOTICE THAT THE ADDITION SO MADE IN THAT YEAR HAS SINCE BEEN DELETED BY THE TRIBUNAL . THUS, WE NOTIC E THAT VERY BASIS ON WHICH THE IMPUGNED ADDITION WAS MADE NO LONGER EXISTS. FURTHER THE TRIBUNAL HAS GIVEN A CLEAR FINDING THAT NO DISALLOWANCE WAS CALLED FOR U/S 40A(2)(A) OF THE ACT IN RESPECT OF SALARY PAID TO THE DIRECTOR NAMED SMT.SAMINA MAZHAR VOHR A. IN THE INSTANT YEAR, THE SALARY HAS BEEN PAID AT THE SAME LEVEL AS THAT WAS GIVEN IN THE YEAR RELEVANT TO AY 2006 - 07. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ADDITION MADE U/S 40A(2)(B) IS LIABLE TO BE DELETED. ACCORDINGLY, WE SET ASIDE THE ORDER ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 8 . THE NEXT ISSUE RELATES TO THE APPLICATION OF PROVISIONS OF SECTION 50C OF THE ACT TO THE SHOP TRANSFERRED BY THE ASSESSEE. THE LD. AR SUBMIT TED BEFORE US ALSO THAT THE ASSESSEE HAD HELD ON LY LEASE HOLD RIGHT ON THE SHOP AND THE PROVISION OF SECTION 50C SHALL NOT APPLICABLE TO THE TRANSFER LEASE ITA NO . 3416 / MUM/20 1 2 4 HOLD RIGHT. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY EH CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ATUL G PURANIK V/S ITO (2011) 132 ITD 499. 9 . ON THE CONTRARY, THE LD.DR PLACED RELIANCE ON THE DECISION DATED 14.12.2012 RENDERED IN THE CASE OF SHAVO NORGREN (I) P LTD PASSED IN ITA NO.8101 OF 2011 AND SUBMITTED THAT CO - ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT T HE PROVISIONS OF SECTION 50C SHALL BE APPLICABLE FOR TRANSFER OF LEASE HOLD RIGHTS ALSO. 10 . HOWEVER, WE NOTICE THAT THE LD.CIT(A) HAS GIVEN A CLEAR FINDING THAT THE ASSESSEE HAS PURCHASED THE SHOP FROM THE BUILDER AND HAS SOLD THE SHOP SO PURCHASED BY HIM. THE SAID SHOP WAS FOUND TO BE CONSTRUCTED ON THE LAND ACQUIRED BY THE BUILDER ON LEASE HOLD BASIS. THE LEASE HOLD RIGHT ON THE LAND HELD BY THE BUILDER, IN OUR VIEW, CANNOT BE EXTENDED TO THE ASSESSEE HEREIN. ACCORDINGLY, WE ARE OF THE VIEW THAT TH E ASSESSEE SHOULD BE CONSIDERED AS OWNER OF THE BUILDING AND HENCE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 50C OF THE ACT SHALL APPLY TO THE SHOP TRANSFERRED BY THE ASSESSEE. HENCE, IN OUR VIEW, THE RELIANCE PLACED BY BOT H THE PARTIES ON THE CASE LAWS CITED ABOVE ARE NOT APPLICABLE. 11. HOWEVER, ON A PERUSAL OF THE ASSESSMENT ORDER, WE NOTICE THAT THE ASSESSEE HAS TRANSFER RED THE SHOP BY WAY OF SALE AGREEMENT WHICH HAS NOT BEEN REGISTERED. THE QUESTION AS TO WHETHER T HE PROVISIONS OF SECTION 50C SHALL BE APPLICA BLE TO A TRANSFER OF LAND OR BUILDING MADE BY WAY OF UNREGISTERED SALE AGREEMENT OR NOT, HAS NOT BEE N EXAMINED BY THE TAX AUTHORITIES . HENCE, IN OUR VIEW, THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF TH E AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT (A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE APPLICABILITY OF THE PROVISIONS OF SECTION 50C TO THE BUILDING ITA NO . 3416 / MUM/20 1 2 5 TRANSFERRED BY WAY OF UNREGISTERED SALE AGR EEMENT. THE ASSESSEE IS ALSO DIRECTED TO SUBMIT NECESSARY INFORMATION AND EXPLANATION S IN THIS REGARD TO THE AO FOR COMPLETION OF ASSESSMENT EXPEDITIOUSLY. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 12TH FEB ,2016 . SD SD ( / SANDEEP GOSAIN) ( . . / B.R.BASKARAN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER MUMBAI ; DATED .. 12TH FEB ,201 6 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI