Samrendra Tibarewalla, Kolkata V. DCIT, Circle - 36, Kolkata, Kolkata

ITA 355/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48177 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 03-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P P SARKAR
• Assessee Lawyers: S K RUNGTA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C; 54F; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . , ! '# '# '# '# /AND ' # , ! ) [BEFORE HONBLE SHRI S. V. MEHROTRA, AM & HONBLE S RI MAHAVIR SINGH, JM] #$ #$ #$ #$ / I.T.A NO. 355/KOL/2011 %& ''( %& ''( %& ''( %& ''(/ // / ASSESSMENT YEAR: 2006-07 SAMRENDRA TIBAREWALLA. VS. DEPUTY COMMISSIONER O F INCOME-TAX, (PAN-ABRPT 3988 Q) CIRCLE-36, KOLKATA ( *+ /APPELLANT ) (,-*+/ RESPONDENT ) *+ . / / FOR THE APPELLANT: SHRI S. K. RUNGTA ,-*+ . / / FOR THE RESPONDENT: SHRI P. P. SARKAR 0 / ORDER PER MAHAVIR SINGH, JM/ ' # ' # ' # ' # , ! ! ! ! : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A)-XX, KOLKATA IN APPEAL NO.342/CIT(A)-XX/CIR-36/2008-09/KOL VIDE DATED 27.1 2.2010. THE ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-36, KOLKATA U/S.143(3) OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORD ER DATED 19.12.2008. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE ADDITION ON LONG TERM CAPITAL GAIN. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND: 1. BECAUSE THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS WRONG IN LAW AS WELL AS IN FACTS IN UPHOLDING THE ADDITION OF RS .10,20,530/- MADE BY THE ASSESSING OFFICER UNDER THE HEAD LONG TERM CAPITAL GAIN IN AC CORDANCE WITH SEC. 50C OF INCOME TAX ACT, 1961. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSING OFFICER DURING THE COURS E OF ASSESSMENT PROCEEDINGS COMPUTED LONG TERM CAPITAL GAIN BY APPLYING THE PROVISIONS OF SEC TION 50C OF THE ACT. THE ASSESSING OFFICER NOTED THE FACTS THAT ASSESSEE HAS SOLD LANDED PROPE RTY FOR A TOTAL CONSIDERATION OF RS.8,01,000/- (CONSIDERATION NOTED AS PER SALE DEED) AND CLAIMED DEDUCTION U/S. 54F OF THE ACT. THE ASSESSING OFFICER FROM THE SALE DEED NOTED THAT THE STAMP VALUATION AUTHORITY HAS TAKEN THE MARKET VALUE OF THE PROPERTY FOR CHARGING STAMP DUT Y AT RS.18,21,530/- AS AGAINST THE SALE CONSIDERATION IN THE SALE DEED, WHILE SELLING HIS L ANDED PROPERTY AT RS.8,01,000/-. THE 2 ITA 355/K/2011 SAMRENDRA TIBAREWALLA A.Y.06-07 ASSESSING OFFICER TAKING THE MARKET VALUE ADOPTED B Y STAMP VALUATION AUTHORITY AS FULL VALUE OF CONSIDERATION IN VIEW OF PROVISIONS OF SECTION 5 0C OF THE ACT MADE ADDITION AT RS.10,20,530/- BEING THE DIFFERENCE BETWEEN THE CON SIDERATION NOTED IN SALE DEED I.E. ACTUAL CONSIDERATION AND THE MARKET VALUE AS ADOPTED BY ST AMP VALUATION AUTHORITY FOR THE PURPOSE OF COLLECTING STAMP DUTY. AGGRIEVED, ASSESSEE PREFERR ED APPEAL BEFORE CIT(A) AND HE ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER BY STATING THAT IN THE GIVEN FACTS AND CIRCUMSTANCES PROVISIONS OF SECTION 50C ARE APPLICABLE IN THE CAS E OF THE ASSESSEE FOR COMPUTING LONG TERM CAPITAL GAINS, BUT ALLOWED DEDUCTION U/S. 54F OF TH E ACT TO THE EXTENT OF INVESTMENT MADE FOR THE PURPOSE BY DIRECTING THE ASSESSING OFFICER ACCO RDINGLY. AGGRIEVED AGAINST UPHOLDING THE ACTION OF THE ASSESSING OFFICER APPLYING THE PROVIS IONS OF SECTION 50C OF THE ACT FOR COMPUTATION OF LONG TERM CAPITAL GAINS, THE ASSESSE E PREFERRED SECOND APPEAL BEFORE US. 4. WE FIND THAT THE UNDISPUTED FACTS ARE THAT THE A SSESSEE SOLD HIS LANDED PROPERTY FOR A TOTAL CONSIDERATION OF RS.8,01,000/- AS AGAINST THE MARKET VALUE ADOPTED BY STAMP VALUATION AUTHORITY FOR THE PURPOSE OF COMPUTING STAMP DUTY A T RS.18,21,530/- AND THE ASSESSEE HAS PAID THE STAMP DUTY CHARGES ACCORDINGLY. THE ASSESSING O FFICER APPLIED THE PROVISIONS OF SECTION 50C OF THE ACT. NOW WE HAVE TO GO TO THE PROVISION S OF SECTION 50C AS INSERTED BY FINANCE ACT 2002 W.E.F. 1.4.2003. THE RELEVANT PROVISION OF SE CTION 50C(1) AND (2) OF THE ACT READ AS UNDER: 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILD ING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOV ERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOP TED OR ASSESSED SHALL, FOR THE PURPOSES OF SECTION 48 , BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATI ON RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1), WHERE ( A ) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; ( B ) THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP VA LUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISION S OF SUB-SECTIONS (2), (3), (4), (5) AND (6) OF SECTION16A, CLAUSE ( I ) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) O F SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATIO N TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. 3 ITA 355/K/2011 SAMRENDRA TIBAREWALLA A.Y.06-07 WE FIND THAT EVEN NOW BEFORE US THE ASSESSEE HAS NO T ARGUED THAT HE REQUESTED EITHER THE ASSESSING OFFICER OR THE CIT(A) THAT THE MARKET VAL UE OF THE PROPERTY SOLD IS LESS THAN THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY AND FOR THIS H E REQUIRES THAT THE PROPERTY BE REFERRED TO VALUATION CELL FOR VALUING THE EXACT MARKET PRICE O F THE PROPERTY. IN THE ABSENCE OF THE SAME, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFIC ER AS WELL AS CIT(A) HAS RIGHTLY APPLIED THE PROVISIONS OF SECTION 50C OF THE ACT ON SALE OF THE PROPERTY BY THE ASSESSEE, DETERMINING THE MARKET VALUE OF PROPERTY AS DETERMINED BY THE STAMP VALUATION AUTHORITY AT RS.18,21,530/-. WE CONFIRM THE ORDER OF THE LOWER AUTHORITIES AND T HIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST PAID ON BORROWED CAPIT AL. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUND: 2. BECAUSE THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS WRONG IN LAW AS WELL AS IN FACTS IN CONFIRMING THE DISALLOWANCE OF INTEREST PAID ON BORROWED CAPITAL OF RS.54,574/-. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH RELEVANT FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE FAIRLY CONCEDE D THAT HE HAD NOT DISCLOSED ANY RENTAL INCOME I.E. INCOME FROM HOUSE PROPERTY IN HIS COMPUTATION. HE DREW OUR ATTENTION TOWARDS ASSESSEES PAPER BOOK PAGE 23 AND TO THAT EXTENT HE WAS REASON ABLE AND FAIR. SINCE THERE WAS NO INCOME FROM HOUSE PROPERTY, WE CONFIRM THE ORDERS OF THE L OWER AUTHORITIES. THIS ISSUE OF THE ASSESSEES APPEAL IS DISMISSED. 7. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEMAT CHARGES AGAINST SHORT TE RM CAPITAL GAIN. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUND: 3. BECAUSE THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS WRONG IN LAW AS WELL AS IN FACTS IN CONFIRMING THE DISALLOWANCE OF DEMAT CHARGES OF RS.4,988/- AGAINST SHORT TERM CAPITAL GAIN. 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH RELEVANT FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ISSUE IS SQUARELY COVER ED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF ACIT VS. RAGHUPATI SINGHANIA & ORS. VIDE IT A NOS.1761 TO 1763/K/2010 AND RAGHUPATI SINGHANIA & ORS. VS ACIT VIDE CO NOS. 165 TO 167/K/2010 DATED 27 TH MAY, 2011, WHEREIN IN THE SAID COS THE TRIBUNAL HAS HELD AS UN DER: 4 ITA 355/K/2011 SAMRENDRA TIBAREWALLA A.Y.06-07 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS CLAIMED MA NAGEMENT FEE AND OTHER EXPENSES PAID TO PMFS AND ALSO CLAIMED CUSTODY FEE FOR DEMAT CHARGES. NOW THE CLAIM OF THE ASSESSEE IS THAT THESE EXPENSES ARE ADMISSIBLE DEDU CTION U/S. 48 OF THE ACT. FOR THIS LD. COUNSEL FOR THE ASSESSEE HAS MADE ARGUMENTS AS UNDE R: AS PER PROVISION OF SECTION 48, THE INCOME CHARGEA BLE UNDER THE HEAD CAPITAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNT, NAMELY: I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER, II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F IMPROVEMENT THERETO. AS REGARDS TO CUSTODY FEE FOR DEMAT CHARGES THE LD. COUNSEL ARGUED THAT THIS DEMAT CHARGES ARE PAID FOR CUSTODY OF SHARES AND SECURITI ES AFTER PURCHASE AND TILL THE DATE OF SALE/TRANSFER. HE STATED THAT DEMAT ACCOUNT IS NOW STATUTORILY COMPULSORY TO MAINTAIN AND WITHOUT THAT NO TRANSACTION IN STOCK EXCHANGES CAN BE CARRIED OUT. HE ALSO STATED THAT WITHOUT KEEPING THE SHARES AND SECURITIES IN T HE DEMAT ACCOUNT, THE SAME CANNOT BE PURCHASED OR SOLD AND IN SUCH CIRCUMSTANCES THESE E XPENSES ARE ALLOWABLE AS DEDUCTION UNDER CLAUSE (I) AND (II) OF SECTION 48 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF DAMODAR G. NAGALIA V S. ACIT (2007)12 SOT 599 (MUM), WHEREIN THE ASSESSEE OWNED A FLAT IN A HOUSING COOP ERATIVE SOCIETY. HE PAID RS.4 LAKHS TO THE HOUSING COOPERATIVE SOCIETY TO OBTAIN NO OBJ ECTION CERTIFICATE (NOC) FROM THE SOCIETY AND CLAIMED THE SAME AS A DEDUCTION IN COMP UTING CAPITAL GAIN ON THE SALE OF THE FLAT. IN THE ASSESSMENT IT WAS DISALLOWED AS DEDUC TION. THE ITAT HELD THAT THE OBTAINING OF THE NOC FROM THE HOUSING COOPERATIVE SOCIETY WAS NECESSARY FOR THE PURPOSE OF SALE OF THE FLAT. THEREFORE, IT WAS AN ALLOWABLE DEDUCT ION U/S. 48 OF THE I. T. ACT IN COMPUTING CAPITAL GAIN. 8. NOW WE HAVE TO EXAMINE THE PROVISION OF SECTION 48 AND THE RELEVANT PROVISIONS READS AS UNDER: ( MODE OF COMPUTATION) 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN S SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATI ON RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOL LOWING AMOUNTS, NAMELY I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN C ONNECTION WITH SUCH TRANSFER, II) THE COST OF ACQUISITION OF THE ASSET AND THE CO ST OF ANY IMPROVEMENT THEREOF; WHAT CAN BE DEDUCTED UNDER SECTION 48(1)(A)(I) AND (II) IS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER CON TEMPLATED BY SECTION 45. IN COMPUTING CAPITAL GAINS, EXPENDITURE INCURRED WHOLL Y AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF A CAPITAL ASSET HAS TO BE DEDUCTED UNDER SECTION 48(1)(A)(I)&(II). THE WORDS IN CONNECTION WITH SUCH TRANSFER OCCURRING IN THAT SECTION MEAN INTRINSICALLY RELATED TO THE TRANSFER. THERE IS NO WARRANT FOR IM PORTING A RESTRICTION THAT, TO QUALIFY FOR DEDUCTION, THE EXPENDITURE MUST NECESSARILY HAVE BE EN INCURRED PRIOR TO THE PASSING OF TITLE. IT IS IMMATERIAL WHETHER THE ELIGIBLE EXPEN DITURE WAS INCURRED PRIOR OR SUBSEQUENT TO THE PASSING OF TITLE. BUT IN THE PRESENT CASE BE FORE US, THE EXPENDITURE IN THE NATURE OF MANAGEMENT FEE AND OTHER EXPENSES PAID TO PMFS AND CUSTODY FEE PAID FOR MAINTAINING DEMAT ARE NOT IN RELATION TO TRANSFER OF SHARE RATH ER IT IS PAID FOR PRESERVATION OF ASSETS I.E. THE SHARES AND SECURITIES. MAINTAINING DEMAT ACCOUNT IS STATUTORILY COMPULSORY BUT 5 ITA 355/K/2011 SAMRENDRA TIBAREWALLA A.Y.06-07 CUSTODY FEE PAID ARE FOR TAKING CARE OF THE PORT FO LIO BY THE COMPANY FOR MAINTAINING DEMAT ACCOUNT. SIMILARLY, THE MANAGEMENT FEE AND O THER EXPENSES PAID TO PMFS ARE ALSO IN THE NATURE OF ADVISORY EXPENSES AND CANNOT BE DEDUCTED FROM THE CAPITAL GAINS UNDER SECTION 48 OF THE ACT. ACCORDINGLY, WE CONFI RM THE ORDER OF CIT(A) AND C.OS OF THE ASSESSEE ARE DISMISSED. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE A FORESAID DECISION, TAKING A CONSISTENT VIEW, WE DISMISS THIS ISSUE OF ASSESSEES APPEAL. 9. THE FOURTH ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE TOWARDS BANK INTEREST O F RS.14,001/-, BANK CHARGES OF RS.2,768, MEMBERSHIP FEE OF RS.2,800/-, INTEREST OF RS.3,715/ - AND LEGAL EXPENSES OF RS.1,200/- AGAINST THE INCOME FROM INTEREST ON FIXED DEPOSIT UNDER THE HEAD INCOME FROM OTHER SOURCES. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUND: 4. BECAUSE THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN LAW AS WELL IN FACTS IN CONFIRMING THE DISALLOWANCE MADE BY ASSESSING OFFICER TOWARDS BANK INTEREST OF RS.14,001/-, BANK CHARGES OF RS.2, 768, MEMBERSHIP FEE OF RS.2,800/-, INTEREST OF RS.3,715/- AND LEGAL EXPENSES OF RS.1,2 00/- AGAINST THE INCOME FROM INTEREST ON FIXED DEPOSIT UNDER THE HEAD INCOME FROM OTHER S OURCES. 10. WE FIND THAT THE ISSUE IS DEALT BY THE CIT(A) A S UNDER : 6. GROUND NO. 4 RELATES TO DISALLOWANCE OF EXPENSE S AGAINST INTEREST ON FIXED DEPOSIT. THE A.O DISALLOWED CLAIM OF BANK INTEREST, BANK CHA RGES, MEMBERSHIP FEE, INTEREST AND LEGAL EXPENSES AGAINST INTEREST ON FIXED DEPOSIT. THE LD. AR SIMPLY SUBMITTED THAT THE CLAIM SHOULD HAVE BEEN ALLOWED. NO MATERIAL HAS BE EN BROUGHT ON RECORD TO JUSTIFY THE CLAIM OF EXPENSES AGAINST INTEREST ON FIXED DEPOSIT . GROUND NO. 4 IS DISMISSED. SIMILARLY, SINCE THE ASSESSEE COULD NOT BRING ANYTH ING ON RECORD WHICH PROVES THAT THE ASSESSEES CLAIM IS BONA FIDE, ACCORDINGLY, WE DISM ISS THIS ISSUE OF THE ASSESSEES APPEAL 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 12. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . . ! ' '' ' # # # # , ! (S. V. MEHROTRA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( 1 1 1 1) )) ) DATED 6 TH JUNE, 2011 '23 %45 6' JD.(SR.P.S.) 6 ITA 355/K/2011 SAMRENDRA TIBAREWALLA A.Y.06-07 0 . ,7 87'9- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SHRI SAMRENDRA TIBAREWALLA, 12A, NETAJI SUBHAS ROAD, 2 ND FLOOR, ROOM NO. 11, KOLKATA-700 001.. 2 ,-*+ / RESPONDENT, DCIT, CIRCLE-36, KOLKATA 3 . 0% ( )/ THE CIT(A), KOLKATA 4. 0% / CIT, KOLKATA 5 . '? ,% / DR, KOLKATA BENCHES, KOLKATA -7 ,/ TRUE COPY, 0%@/ BY ORDER, #5 /ASSTT. REGISTRAR .