Sh. Vinay Khetan, Noida V. JCIT, Noida

ITA 4082/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5551 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 02-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 08-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Sale consideration of property below Jantri Value; Business income; Depreciation; Cost of acquisition; Valuation report
• Section: 50C; 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI R.P.TOLANI AND SHRI A.K.GARODIA ITA NOS. 4081 & 4082/DEL/2009 ASSESSMENT YEARS : 2004-05 & 2005-06 SHRI VINAY KHETAN A-41, 42, SECTOR-2, NOIDA-201301 VS. JCIT, NOIDA RANGE, NOIDA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SAMPATH, C.A. RESPONDENT BY : SHRI N.K.CHAND, SR. D.R. ORDER PER A.K.GARODIA, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINS T TWO SEPARATE ORDERS OF LD. CIT(A), GHAZIABAD BOTH DATED 25/8/2 009 FOR ASSESSMENT YEARS 2004-05 AND 2005-06. FOR THE SAKE OF CONVENIE NCE, BOTH THE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST, WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2004-05 I.E. ITA NO.4081/DEL/2009. 3. IT IS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THAT GROUND NO.2 IS NOT PRESSED BECAUSE THIS ISSUE DOES NOT ARISE OUT OF TH E ORDERS OF THE AUTHORITIES BELOW. REGARDING GROUND NO.3, IT WAS SUBMITTED THAT THIS ISSUE IS CONSEQUENTIAL. REGARDING GROUND NO.4 IT WAS SUBMITT ED THAT THIS IS A GENERAL GROUND. ACCORDINGLY, GROUND NO.2 IS REJECTED AND NO SEPARATE ADJUDICATION IS 2 CALLED FOR REGARDING GROUND NO.3 BECAUSE ADMITTEDLY , THE ISSUE REGARDING CHARGING OF INTEREST U/S 234B, 234C AND 234D IS CON SEQUENTIAL. GROUND NO.4 IS GENERAL. 4. NOW, WE ARE LEFT WITH ONLY GROUND NO.1 WHICH WE WILL DECIDE IN THE FOLLOWING PARAGRAPHS. THIS GROUND READS AS UNDER: 1. THE LEARNED CIT(A) GROSSLY ERRED ON FACTS IN LAW IN SUSTAINING THE ORDER OF A.O. WHO DID NOT ACCEPT THE CLAIM AND WOR KING OF THE APPELLANT U/S 80HHC AND ALSO IN WRONGLY TREATING TH E DEPB SALES/CREDIT AMOUNTING TO RS.3,74,23,827/- AS APPEL LANTS INCOME FROM OTHER SOURCES. 5. BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED DE DUCTION U/S 80HHC OF RS.52,51,023/-. IT IS NOTED BY THE ASSESSING OFFICE R THAT AFTER REDUCING DUTY DRAW BACK/DEPB OF RS. 374.23 LACS, THERE IS A LOSS OF RS.161.78 LACS. BECAUSE OF THIS REASON THAT AFTER REDUCING THE AMOU NT OF DEPB/DUTY DRAW BACK, THERE IS A LOSS, THE ASSESSING OFFICER DID NO T ALLOW DEDUCTION TO THE ASSESSEE U/S 80HHC. BEING AGGRIEVED, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS AN D NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IT WAS SUBMITTED BY THE LD. A.R. OF THE ASSESSE E THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRI BUNAL RENDERED IN THE CASE OF TOPMAN EXPORTS AS REPORTED IN 318 ITR (AT) 87 (SPECIAL BENCH). IT WAS SUBMITTED BY HIM THAT THE MATTER MAY BE RESTORE D BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION IN THE LIGHT OF THIS DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TOPMAN EXPORTS (SUPRA). 3 7. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . OF THE REVENUE THAT AS PER THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL R ENDERED IN THE CASE OF TOPMAN EXPORTS (SUPRA), PROFIT ON SALE OF DEPB ONLY IS COVERED U/S 28(IIID) AND PROFIT ON SALE OF DEPB IS TO BE WORKED OUT BY D EDUCTING THE FACE VALUE OF THE SALE PROCEEDS OF DEPB FROM SALES PROCEEDS OF DEPB BUT FACE VALUE OF DEPB IS ALSO TAXABLE AND THE ASSESSING OFFICER SHOU LD BE DIRECTED ACCORDINGLY. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE FIND THAT IN THE PRESENT CASE, THE ASSES SING OFFICER HAS REDUCED THE SALE PROCEEDS OF DEPB FROM BUSINESS PROFIT AND ASSESSED THE SAME AS INCOME FROM OTHER SOURCES. WE ARE NOT IN AGREEMENT WITH THE ASSESSING OFFICER ON THIS ASPECT AND AS PER US, THE DEPB RECE IPTS ARE TAXABLE AS BUSINESS INCOME AND HENCE, THE SAME CANNOT BE ASSES SED AS INCOME FROM OTHER SOURCES BECAUSE AS PER SPECIAL BENCH ALSO, IT IS COVERED BY SECTION 28(IIIB). REGARDING DEDUCTION ALLOWABLE TO THE ASSE SSEE U/S 80HHC, IT WAS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL THAT ONLY PROFIT ON SALE OF DEPB IS TO BE CONSIDERED FOR 90% EXCLUSION FROM BUSINESS PR OFIT. REGARDING THE COMPUTATION OF PROFIT ON SALE OF DEPB, IT WAS HELD BY THE SPECIAL BENCH THAT SUCH PROFIT SHOULD BE COMPUTED BY DEDUCTING FACE VA LUE OF DEPB FROM SALE PROCEEDS OF DEPB. REGARDING THE FACE VALUE OF DEPB, IT WAS HELD BY THE SPECIAL BENCH THAT THE SAME IS COVERED BY CLAUSE (I IIB) OF SEC. 28. IN VIEW OF THIS, WE FIND THAT THE QUESTION RAISED BY THE D.R. OF REVENUE IS ALREADY ANSWERED BY THE SPECIAL BENCH IN THE CASE OF TOPMAN EXPORTS (SUPRA) AND HENCE, WE FEEL IT FIT AND PROPER THAT THIS MATTER S HOULD BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR A FRESH DECISION IN T HE LIGHT OF THIS DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE C ASE OF TOPMAN EXPORTS (SUPRA). ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND 4 RESTORE THIS MATTER BACK TO THE FILE OF ASSESSING O FFICER FOR A FRESH DECISION AS PER ABOVE DISCUSSION AND IN THE LIGHT OF THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF TOPMAN EXPO RTS (SUPRA). GROUND NO.1 OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 10. NOW, WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2005-06 I.E. ITA NO.4082/DEL/2009. 11. THE GROUNDS RAISED BY THE ASSESSEE READ AS UND ER: 1. THE LEARNED CIT(A) GROSSLY ERRED ON FACTS IN LAW IN SUSTAINING THE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN O F RS.12,64,708 MADE BY THE ASSESSING OFFICER U/S 50C OF THE INCOME TAX ACT ON THE SALE OF PROPERTY SITUATED AT G-38, SECTOR 6, NOIDA AGAINST LONG TERM CAPITAL LOSS OF RS.5,16, 095/- SHOWN BY THE APPELLANT IN THE RETURN. 2. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THE CO NTENTIONS OF THE APPELLANT THAT THE ASSESSING OFFICER HAD WRONGLY AP PLIED THE PROVISIONS OF SECTION 50C OF THE ACT WHILE DETERMIN ING LONG TERM CAPITAL GAINS IN RESPECT OF THE PROPERTY SOLD. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AME ND, TO WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 12. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSI NG OFFICER THAT THE ASSESSEE HAS SOLD ITS BUILDING SITUATED AT NOIDA FO R RS. 45 LACS. IT WAS NOTED BY THE ASSESSING OFFICER THAT WDV OF THE BUILDING A S ON 31/3/2004 WAS RS.42,42,780/- AND THE ASSESSEE AFTER DEDUCTING IND EXED COST OF THE BUILDING 5 AT RS.50,16,095/-, HAS CLAIMED LONG-TERM CAPITAL LO SS AT RS.5,16,095/-. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT UPTO AS SESSMENT YEAR 2004-05, THE ASSESSEE WAS OWNER OF THREE BUILDINGS IN NOIDA AND WAS CLAIMING DEPRECIATION THEREUPON. IT WAS FURTHER NOTED BY THE ASSESSING OFFICER THAT OUT OF THREE BUILDINGS, THE ASSESSEE HAS SOLD ONLY ONE BUILDING AND CLAIMED LONG-TERM CAPITAL LOSS ON IT. IT IS NOTED BY THE AS SESSING OFFICER THAT SINCE THE BLOCK OF ASSETS OF THE BUILDING DID NOT CEASE, THE ASSESSEES CLAIM FOR LONG- TERM CAPITAL LOSS AFTER INDEXATION IS NOT IN ACCORD ANCE WITH LAW. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH PUR CHASE DEED AND SALE DEED OF THE BUILDING. FROM THE SALE DEED, IT WAS NOTED B Y THE ASSESSING OFFICER THAT AS ON 19/12/2000, THERE WAS VALUATION OF BUILD ING AS WELL AS LAND. COST OF LAND WAS SHOWN AS PER THE VALUATION REPORT AT RS .27,34,935/- AND THE COST OF BUILDING AS PER THIS VALUATION REPORT WAS RS.25, 99,095/-. THIS BUILDING WAS PURCHASED BY THE ASSESSEE DURING FINANCIAL YEA R 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03 FOR RS.58.20 LACS WHICH INC LUDES COST OF LAND AND BUILDING AT RS.57.60 LACS AND OTHER EXPENSES AT RS. 60 LACS. THE ASSESSING OFFICER HAS GIVEN A FINDING THAT ASSESSEE HAS CLAIM ED DEPRECIATION ON THE TOTAL VALUE OF LAND AND BUILDING BOTH BUT DEPRECIAT ION IS NOT ALLOWABLE ON THE COST OF LAND. BY ALLOCATING THE OTHER EXPENSES OF R S.60,000/-, THE ASSESSING OFFICER WORKED OUT THE COST OF LAND AT RS.27,63,735 /- AND COST OF BUILDING AT RS.30,56,265/-. THE ASSESSING OFFICER WORKED OUT TH E LONG-TERM CAPITAL GAIN ON SALE OF LAND AT RS.12,64,708/- BY ADOPTING THE I NDEXED COST OF LAND ON THE BASIS OF PURCHASE COST OF LAND WORKED OUT BY HIM AT RS.2,76,735/- AND BY CONSIDERING THE SALE CONSIDERATION AS PER SECTION 5 0C AND IT WAS WORKED OUT AT RS.45,32,178/- BEING THE VALUE OF LAND AS PER ST AMP DUTY CALCULATION. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6 13. IT WAS SUBMITTED BY THE LD. A.R. OF THE ASSESSE E THAT IT HAS BEEN SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER THAT THE BUILDING IN THE PRESENT CASE COULD NOT BE SOLD OUT AT THE STAMP DUTY VALUE BECAUSE OF ITS ADVERSE LOCATION AND HENCE, THE CLAIM OF THE ASSESS EE REGARDING ACTUAL CONSIDERATION SHOULD BE ACCEPTED. IT WAS HIS FURTHE R SUBMISSION THAT IN ANY CASE, IF THE ASSESSING OFFICER WAS NOT SATISFIED HE SHOULD HAVE REFERRED THE MATTER TO THE DVO AS PROVIDED IN SUB-SEC. (2) OF SE C. 50C. 14. THE LD. D.R. OF THE REVENUE SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESENT CASE, THIS M ATTER HAS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION AFTER REFERRING THE MATTER TO DVO AS PER PROVISIONS OF SEC. 50C(2) AND HENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION AFTER REFERRING THE MATT ER TO THE DVO AS PER THE PROVISIONS OF SUB-SEC. (2) OF SEC. 50C. THE CAPITAL GAINS SHOULD BE WORKED OUT ON THE BASIS OF THE PROVISIONS OF SEC. 50C AFTE R OBTAINING REPORT OF THE DVO AND THEREAFTER THE ASSESSING OFFICER SHOULD PAS S NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING H EARD. 16. THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR S TATISTICAL PURPOSES. 7 17. IN THE COMBINED RESULT, THE APPEAL OF THE ASSES SEE FOR ASSESSMENT YEAR 2004-05 STANDS PARTLY ALLOWED FOR STATISTICAL PURPO SES AND THE APPEAL FOR ASSESSMENT YEAR 2005-06 STANDS ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY,2010. ( R.P.TOLANI) (A.K.GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : .02.2010. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR