ITO 3(3)(4), MUMBAI V. VRINDA RESORTS P. LTD, MUMBAI

ITA 4283/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Assessee Lawyers: B V JHAVERI
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Opportunity of being heard; Fair market value
• Section: 50C; 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BE NCH, MUMBAI , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 4283/MUM/2013 ( ( ( ( ( / ASSESSMENT YEAR : 2009-10 THE ITO 3(3)(4), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. VRINDA RESORTS PVT. LTD., 216, TULSIANI CHAMBERS, NARIMAN POINT, MUMBAI-400 021 ) !& ./ * ./ PAN/GIR NO. : AABCV 3854D ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY: SHRI SACHCHIDANAND DUBEY ,-)+ / . ! / RESPONDENT BY: SHRI B.V. JHAVERI / 01& / DATE OF HEARING :19.02.2015 23( / 01& / DATE OF PRONOUNCEMENT :25.02.2015 !4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-7, MUMBAI DT. 21.01.2013 PERTAINING TO ASSES SMENT YEAR 2009-10. 2. THE GRIEVANCES OF THE REVENUE READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING TH AT THE ITA NO. 4283/M/2013 2 ASSESSEE CASE WOULD NOT BE COVERED UNDER THE AMBIT OF SECTION 50C(2) AS THE PROPERTY TRANSFER TOOK PLACE ON 03/04/2008. WITHOUT APPRECIATING THE FACT THAT THE WORD ASSESSABLE ADDED IN SECTION 50C IS CLARIFICATORY IN NATURE AND THEREBY APPLICABLE SINCE THE INCEPTION OF SECTI ON 50C. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDIN G THAT THE PROVISIONS OF SECTION 50 AND NOT THOSE OF SECTION 5 0C ARE APPLICABLE TO THE SALE OF LAND, IGNORING THE TACT T HAT LAND IS NOT A DEPRECIABLE ASSET UNDER THE PROVISIONS OF THE INCOME FAX ACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN THE LD. CIT(A) HAS ERRED IN GRANTING EX CESSIVE RELIEF TO THE ASSESSEE ON ACCOUNT OF UNSUBSTANTIATE D EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE EXPENSES AND FAILED TO SUBSTANTIATE AND EXPLAIN THE REASON FOR SUCH INCREA SE IN ITS EXPENSES BEFORE THE A.O. AND ALSO BEFORE THE CIT(A) . 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING CATERING SERVICES AND ACTING AS COMMISSION AGENT. T HE RETURN OF INCOME WAS FILED ON 25.3.2011 DECLARING TOTAL LOSS AT RS. 2,67,729/- WHICH INCLUDED BUSINESS LOSS OF RS. 2,59,511/- AND SHORT TERM CAPITAL LOSS OF RS. 8,418/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 3.1. ON PERUSING THE COMPUTATION OF INCOME, THE ASS ESSING OFFICER NOTICED THAT THE ASSESSEE HAS DECLARED SHORT TERM C APITAL LOSS OF RS. 8,418/- ON SALE OF ASSETS U/S. 50(2) OF THE ACT. T HE AO FURTHER OBSERVED THAT THE ASSESSEE HAS DISPOSED OFF ITS PROPERTY CON SISTING OF LAND AND BUILDING SITUATED AT VAIJNATH VILLAGE, KARJAT FOR R S. 3,30,08,418/- WHICH INCLUDED LAND HAVING OPENING BALANCE OF RS. 11,91,0 90/-. THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF THE TRANSACTION OF SALE OF PROPERTY. THE ITA NO. 4283/M/2013 3 ASSESSEE EXPLAINED THAT IT HAS SOLD BUNGALOW AND LA ND AND OTHER ASSETS TO ONE OF THE DIRECTOR OF THE ASSESSEE COMPANY FOR A T OTAL CONSIDERATION OF RS. 3.30 CRORES. 3.2. AFTER GOING THROUGH THE SALE AGREEMENT, THE AO NOTICED THAT THE ASSESSEE HAS DISPOSED OFF THE RESIDENTIAL BUNGALOW ALONGWITH STRUCTURE STANDING THEREON FOR A TOTAL CONSIDERATION OF RS. 3 .30 CRORES. THE AO OBSERVED THAT THERE IS NO MENTION OF SALE OF OTHER ASSETS LIKE GENERATOR SET, FURNITURE & FIXTURE, KITCHEN EQUIPMENTS, MOBILE PHO NES ETC. THE AO FURTHER NOTICED THAT THE SALE AGREEMENT IS NOT REGI STERED HENCE TO DETERMINE THE STAMP DUTY VALUATION OF THE PROPERTY, NOTICE U/S. 133(6) WAS ISSUED TO THE SUB-REGISTRAR CALLING FOR INFORMATION AS REGARDS STAMP DUTY VALUATION RATE. THE SUB-REGISTRAR FURNISHED THE RE LEVANT DATA, PERUSAL OF WHICH SHOWS THAT THE STAMP DUTY VALUE RATE WAS RS. 700/- PER SQ. MTR. THE ASSESSEE WAS PROVIDED WITH THE SAID STAMP DUTY RATE AND ASKED TO SHOW CAUSE AS TO WHY THE SALE VALUE OF LAND SHOULD NOT BE TAKEN AT RS. 3,33,43,233/- AS PER STAMP DUTY RATE OF RS. 700/- P ER SQ. MTR. 3.3. THE AO OBSERVED THAT IN THE SCHEDULE OF FIXED ASSETS OF THE BALANCE SHEET, IT APPEARS THAT THE ASSESSEE HAS SOLD ALL TH E ASSETS AT ITS WRITTEN DOWN VALUE. HOWEVER, THE ASSESSEE HAS FAILED TO FU RNISH ANY EVIDENCE TO ESTABLISH THAT ALL THE ASSETS HAVE BEEN TRANSFERRED TO THE DIRECTOR FOR A CONSIDERATION OF RS. 3.30 CRORES. THE AO WAS OF TH E OPINION THAT THE ASSESSEE HAS ONLY TRANSFERRED RESIDENTIAL BUNGALOW AND THE TRANSFER DEED IS SILENT IN RESPECT OF OTHER ASSETS SUCH AS AIR CONDI TIONER, GENERATOR SET, FURNITURE, KITCHEN EQUIPMENT, MOBILE PHONES, MUSIC SYSTEM ETC. THE AO FURTHER OBSERVED THAT THERE IS NO BIFURCATION IN TH E AGREEMENT OF THE CONSIDERATION FOR SALE OF LAND AND SALE OF BUNGALOW . THE AO COMPUTED THE CAPITAL GAIN AS FOLLOWS: ITA NO. 4283/M/2013 4 SALE VALUE OF LAND AT KARJAT RS. 3,33,43,233/- LESS: INDEXED COST (11,91,090X582/426) RS. 16,27 ,264/- LTCG RS. 3,17,15,969/- EVEN IF THE AMOUNT OF SALE CONSIDERATION OF RS. 3,3 0,00,000/- IS NOT APPORTIONED BETWEEN LAND AND BUILDING, THE CAPITAL GAIN WORKS OUT TO RS. 3,17,15,969/- AS UNDER: SALE VALUE OF LAND U/S. 50C AS WORKED ABOVE RS. 3,33,43,233/- SALE VALUE OF BUNGALOW AT WDV AS PER ASSESSEES ACCOUNTS RS. 2,95,32,343/- TOTAL CONSIDERATION RS. 6,28,75,576/- LESS: COST OF BUNGALOW WDV AS PER BOOKS 2,95,32,343 INDEXED COST OF LAND AS WORKED OUT ABOVE 16,27,284 RS. 3,11,59,607/- TAXABLE CAPITAL GAIN RS. 3,17,15,969/- THUS, THE LONG TERM CAPITAL GAIN ON SALE OF LAND AN D BUILDING WORKS OUT TO RS. 3,17,15,969/- AS AGAINST SHORT TERM CAPI TAL LOSS SHOWN AT RS. 8,418/- BY THE ASSESSEE. CAPITAL GAIN IS ASSESSED AT RS. 3,17,15,969/-. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED BEFORE THE LD. C IT(A) THAT THE ASSESSEE HAS TRANSFERRED DEPRECIABLE ASSET AND THER EFORE RIGHTLY DISCLOSED THE CAPITAL GAIN U/S. 50(2) OF THE ACT. IT WAS FUR THER EXPLAINED THAT AS PER THE EXPLICIT, PROVISION OF SEC. 50C OF THE ACT, IT IS AMPLY CLEAR THAT THE ITA NO. 4283/M/2013 5 VALUE OF STAMP DUTY AUTHORITY WILL BE TAKEN IN PLAC E OF ACTUAL TRANSFER VALUE ONLY, IF THE SAID PROPERTY TRANSFERRED AND RE GISTERED UNDER THE STAMP DUTY ACT. IT WAS EXPLAINED THAT THOUGH THE TRANSFE R TOOK PLACE ON 3 RD APRIL, 2008 AS PER SALE AGREEMENT BUT THE PROPERTY WAS NOT REGISTERED UNDER THE STAMP DUTY ACT THEREFORE THE ACTION OF TH E AO ADOPTING PROVISIONS OF SEC. 50C OF THE ACT IS COMPLETELY AGA INST THE PROVISIONS OF LAW. 4.1. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT T HE WORKING OF CAPITAL GAIN SHOULD BE IN ACCORDANCE TO SEC. 50C OF THE ACT THEREFORE THE ACTION OF THE AO WAS COMPLETELY INCORRECT. IT WAS CLAIMED THAT THE COST OF ASSETS TRANSFERRED SHOULD BE ADOPTED AT RS. 3,30,08,418/- ONLY. THE ASSESSEE SUBMITTED THAT IT HAS TRANSFERRED ALL THE ASSETS FO R A TOTAL CONSIDERATION OF RS. 3.30 CRORES WHEN THE WRITTEN DOWN VALUE OF ALL THE ASSETS WAS RS. 3,30,08,418/- THEREFORE IT IS INCORRECT TO SAY THAT OTHER ASSETS WERE NOT TRANSFERRED AS PER SALE AGREEMENT. COMING BACK TO THE APPLICABILITY OF THE PROVISIONS OF SEC. 50C OF THE ACT, IT WAS CLAIM ED THAT THE AMENDMENT BROUGHT TO THE PROVISIONS BY THE FINANCE ACT, 2009 ARE APPLICABLE FOR THE TRANSFER ON OR AFTER 1.10.2009 SINCE IN ASSESSEES CASE, THE TRANSFER TOOK PLACE ON 3.4.2008, THE APPLICABILITY OF SEC. 50C(2) (A) OF THE ACT IS NOT JUSTIFIED. 4.2. AFTER CONSIDERING THE FACTS AND THE SUBMISSI ONS AND THE RELEVANT PROVISIONS OF LAW, THE LD. CIT(A) WAS CONVINCED THA T THE APPLICATION OF SEC. 50C OF THE ACT IS COMPLETELY UNJUSTIFIED AND INCORRECT IN THE GIVEN FACTS OF THE CASE. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE WAS DISCLOSING ITS INCOME FROM BUSINESS AND MAKING CLAI M OF DEPRECIATION ON THE ASSETS WHICH WERE TRANSFERRED AS PER SALE AGREE MENT AND THE DEPRECIATION WERE ALLOWED BY THE DEPARTMENT IN EARL IER ASSESSMENT YEAR. AFTER CONSIDERING ALL THE FACTS IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE ITA NO. 4283/M/2013 6 ACT, THE LD. CIT(A) HELD THAT PROVISIONS OF SEC. 5 0C ARE NOT APPLICABLE AND ACCORDINGLY DELETED THE ADDITIONS MADE BY THE A O AS PER PROVISIONS OF SEC. 50C OF THE ACT, HOWEVER, DIRECTED THE AO TO WORK OUT THE CAPITAL GAIN UNDER RELEVANT PROVISIONS OF THE ACT. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE ASSESSMENT ORDER. IT IS THE SAY OF THE LD. DR THAT THE ASSESSEE HAS GROSSLY FAILED IN PROVING THAT OTHER ASSETS IN THE BALANCE SHEET WERE ALSO TRANSFERRED BY THE SAME TRANSFER DEED BY WHICH BUN GALOW WITH ITS STANDING STRUCTURE WAS TRANSFERRED. THE DR FURTHER SUBMITTED THAT THE ONUS WAS UPON THE ASSESSEE TO SHOW THAT THE ENTIRE BLOCK OF FIXED ASSETS WAS TRANSFERRED TO THE DIRECTOR OF THE COMPANY. 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. THE UNDISPUTED FACT IS THAT THE BUNGALOW WITH ITS STAND ING STRUCTURE WAS TRANSFERRED VIDE SALE AGREEMENT DT. 3.4.2008. IT IS ALSO AN UNDISPUTED FACT THAT THE SAID AGREEMENT WAS NEVER REGISTERED WITH T HE STAMP DUTY AUTHORITY. THE AO HAS INVOKED THE PROVISIONS OF SEC . 50C OF THE ACT BY ADOPTING THE STAMP DUTY VALUE WHICH IS INCORRECT AN D HAS BEEN RIGHTLY HELD SO BY THE LD. CIT(A). THE AMENDMENT WAS BROUG HT BY THE FINANCE ACT, 2009 W.E.F. 1.10.2009 AND THE CBDT CIRCULAR NO . 5 DT. 3.6.2010 AT PARA 23.4 HAS MADE IT CLEAR THAT THESE AMENDMENTS H AVE BEEN MADE APPLICABLE W.E.F. 12.10.2009 AND WILL ACCORDINGLY A PPLY IN RELATION TO TRANSACTIONS UNDERTAKEN ON OR AFTER SUCH DATE. TO THIS EXTENT, WE CONFIRM THE FINDINGS OF THE LD. CIT(A). HOWEVER, AT THE SA ME TIME, WE FIND THAT THE ENTIRE BLOCK OF ASSETS HAVE BEEN TRANSFERRED BY THE ASSESSEE AT THE ITA NO. 4283/M/2013 7 WDV AS PER THE BALANCE SHEET FOR THE YEAR. SINCE T HE ENTIRE PROPERTY HAS BEEN TRANSFERRED THROUGH AN UNREGISTERED DOCUMENT, THE FAIR MARKET VALUE HAS TO BE DETERMINED FOR THE COMPUTATION OF CAPITAL GAIN EVEN IF DEPRECIABLE ASSETS HAVE BEEN TRANSFERRED. THEREFOR E, MODIFYING THE DIRECTIONS OF THE LD. CIT(A), THE AO IS DIRECTED TO GET THE FAIR MARKET VALUE OF THE ASSETS BY REFERRING THE MATTER TO THE VALUATION OFFICER AS PER THE PROVISIONS OF LAW AND DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2015 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 5 DATED : 25 TH FEBRUARY, 2015 . . ./ RJ , SR. PS !4 !4 !4 !4 / // / ,0 ,0 ,0 ,0 6!(0 6!(0 6!(0 6!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 89 ,0 , , / DR, ITAT, MUMBAI 6. 9: / GUARD FILE. !4 !4 !4 !4 / BY ORDER, -0 ,0 //TRUE COPY// ; ;; ; / < < < < (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI