ITO 20(3)(5), MUMBAI V. YUSUF ARABI, MUMBAI

ITA 4582/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3913 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 06-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVAJI B GHODE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, ITA. NO. 4582/MUM/2015 (ASSESSMENT YEAR:2006-07) INCOME-TAX OFFICER, 20(3)(5), MUMBAI APPELLANT VS. SHRI YUSUF ARABI C/O. M/S. REAL RESTAURANT, 180, JAFFERY BUILDING, REAY ROAD, BARRISTER NATH PAI ROAD, DOCKYARD ROAD, MUMBAI 400 010 RESPONDENT PAN: ABFPA3274J /BY APPELLANT : SHRI SHIVAJI B. GHODE, D.R. /BY RESPONDENT : NONE /DATE OF HEARING : 02.08.2016 /DATE OF PRONOUNCEMENT : 08.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-32, ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 2 MUMBAI, DATED 29.05.2015 FOR A.Y. 2006-07 ON FOLLOW ING GROUND: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN NOT CONSIDERING APPLICABILITY OF SECTION 50C OF THE INCOME TAX ACT, 1961 IN TRANSFER OF TENANCY RIGHTS WITHOUT APPRECIATING THE FACT THAT AS PER SECTION 50C THE PRIME CONDITION FOR LEVY OF THIS SECTION IS THERE SHOULD BE TRANSFER OF CAPITAL ASSET. 2.1 THE BRIEF FACTS OF THE CASE ARE THAT AS PER AIR INFORMATION, ASSESSEE SOLD PROPERTY FOR RS.44,91,46 8/- DURING A.Y. 2006-07, BUT NO RETURN OF INCOME WAS FI LED. ASSESSING OFFICER PASSED ORDER U/S.144 R.W.S. 147 O F THE ACT WHEREBY ADDED RS.44,91,468/- TO THE TOTAL INCOME. 2.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, MA TTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHERE IN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND H AVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF TO ASSES SEE. 2.3 SAME HAS BEEN OPPOSED BEFORE ME ON BEHALF OF REVENUE INTER ALIA SUBMITTING THAT CIT(A) ERRED IN NOT CONSIDERING APPLICABILITY OF SECTION 50C OF THE INC OME TAX ACT, 1961 IN TRANSFER OF TENANCY RIGHTS. ACCORDING LY, ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICE R ON THE ISSUE BE RESTORED. ON THE OTHER HAND, NONE APPEARE D ON BEHALF OF ASSESSEE. THEREFORE, I PROCEED TO DECIDE THE CASE EX ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 3 PARTE ON THE BASIS OF SUBMISSION OF LD. DEPARTMENTA L REPRESENTATIVE AND MATERIALS AVAILABLE ON RECORD. 2.4 AFTER GOING THROUGH THE SUBMISSION OF LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIA L ON RECORD, I FIND THAT ISSUE BEFORE ME IS REGARDING AP PLICABILITY OF PROVISIONS OF SECTION 50C OF THE ACT IN RESPECT OF TRANSFER OF TENANCY RIGHTS. AS STATED ABOVE, ASSESSING OFFI CER ADDED RS. 44,91,468/- IN ASSESSMENT PROCEEDINGS. I FIND THAT ITAT, MUMBAI IN CASE OF SMT. KISHORI SHARAD GAITOND E VS. ITO IN ITA NO.1561/MUM/2009 FOR A.Y. 2005-06 IN SIM ILAR STATE OF SITUATION OF TRANSFER/ASSIGNMENT OF TENANC Y RIGHTS AND APPLICABILITY OF SECTION 50C OF THE ACT HAS DEC IDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: PARA 3.2 IT IS OBSERVED THAT SECTION 50C WAS INSER TED BY THE FINANCE ACT, 2002 WITH EFFECT FROM 1-4-2003. CLAUSE 24 OF THE FINANCE BILL AS PER NOTES ON CLAUS ES STATES THAT THE INSERTION OF THIS PROVISION IS TO P ROVIDE FOR A SPECIAL PROVISION FOR THE FULL VALUE OF CONSIDERATION IN CERTAIN CASES. IT HAS BEEN PROVIDE D THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUING A S A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VA LUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO A S THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAY MENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALU E SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECT ION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERA TION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 4 3.3 MEMORANDUM EXPLAINING PROVISIONS OF FINANCE BILL, 2002 STATES IN THIS REGARD AS UNDER: THE BILL PROPOSES TO INSERT A NEW SECTION 50C IN T HE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDERATION IN CASE S OF TRANSFER OF IMMOVABLE PROPERTY. IT IS PROPOSED TO PROVIDE THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHA LL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION , AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. IT IS FURTHER PROPOSED TO PROVIDE THAT WHERE THE ASSESSEE CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE O F THE PROPERTY AS ON THE DATE OF TRANSFER AND HE HAS NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR REFERENCE BEFORE ANY AUTHORIT Y OR COURT THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORD ANCE WITH SECTION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OF F ICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES , THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VAL UE TO BE FULL VALUE OF CONSIDERATION. HOWEVER, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES, THE ASSESSING OFFICER SHALL NOT ADOP T SUCH FAIR MARKET VALUE AND WILL TAKE THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. IT IS ALSO PROPOSED TO PROVIDE THAT IF THE VALUE ADOPTED OR ASSESSED FOR STAMP DUT Y PURPOSES IS REVISED IN ANY APPEAL, REVISION OR REFERENCE, THE ASSESSMENT MADE SHALL BE AMENDED TO ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 5 RECOMPUTE THE CAPITAL GAINS BY TAKING THE REVISED V ALUE AS THE FULL VALUE OF CONSIDERATION. THESE AMENDMENTS WILL TAKE EFFECT FROM 1-4-2003, AN D WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSM ENT YEAR 2003-04 AND SUBSEQUENT YEARS. PARA 3.4 FROM THE PERUSAL OF NOTES ON CLAUSES AND MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2002, IT BECOMES EXPLICITLY CLEAR THAT IF THE CONSIDERATION DECLARED TO BE RECEIVED ON SALE OF LA ND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF THE STATE GOVERNMENT F OR THE PURPOSES OF STAMP DUTY IN RESPECT OF SUCH TRANS FER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION AND CAPITAL GAIN SH ALL BE COMPUTED ACCORDINGLY UNDER SECTION 48 OF THE ACT. A DEEMING PROVISION HAS BEEN ENSHRINED IN SECTION 50C BY VIRTUE OF WHICH A LEGAL FICTION HAS BEEN CREATED FOR ASSUMING THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF STATE GOVERNMENT AS THE FULL VALUE OF SALE CONSIDERATION RECEIVED IN RESPECT OF SUCH TRANSFER. A LEGAL FICTION HAS BEEN CREATED ONLY IN RESPECT OF T HE CASES WHERE THE CONSIDERATION RECEIVED BY THE ASSES SEE IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY OF THE STATE GOVERNMENT F OR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER. IT IS A TRITE LAW THAT THE LEGAL FI CTION CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS ENACTED. SECTION 50C EMBODIES THE LEGAL FICTION BY WHICH THE VALUE ASSESSED BY THE STAMP DUTY AUTHORITIES IS CONSIDERED AS THE FULL VALUE OF CONSIDERATION FOR THE PROPERTY TRANSFERRED. IT DOES NOT GO BEYOND THE CASES IN WHICH THE SUBJECT TRANSFERRE D PROPERTY HAS NOT BECOME THE SUBJECT-MATTER OF THE PROVISIONS OF SECTION 50C. BY NO STRETCH OF IMAGINATION, THE LEGAL FICTION CONFINED TO RESTRICT ED OPERATION CAN BE WIDENED TO INCLUDE WITHIN ITS SWEE P ALL THE CASES WHERE SUCH PROPERTY IS NOT COVERED. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. AMAR ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 6 CHAND SHROFF [1963] 48 ITR 59 HAS HELD THAT LEGAL FICTION IS ONLY FOR A DEFINITE PURPOSE AND THEY AR E LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED A ND SHOULD NOT BE EXTENDED BEYOND THE LEGITIMATE FIELD . SIMILAR VIEW HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. MOTHER INDIA REFRIGERATION INDUSTRIES (P.) LTD. [1985] 155 ITR 7 111. HONBLE SUPREME COURT IN THE CASE OF ORISA STATE WAREHOUSING CORPORATION / RAJASTHAN STATE WAREHOUSING CORPORATION 237 ITR 589 (SC) OBSERVED AS UNDER:- PAGE NO 604 LET US, HOWEVER, AT THIS JUNCTURE, CONSIDER SOME OF THE OFT CITED DECISIONS PERTAINING TO THE INTERPRETATION OF THE FISCAL STATUTES BEING THE FOCAL POINT OF CONSIDERATION IN THESE APPEALS. LORD HALSB URY AS EARLY AS 1901, IN COOKE V. CHARLES A. VOGELER COMPANY [1901] AC 102 (HL) STATED THE LAW IN THE MANNER FOLLOWING: A COURT OF LAW HAS NOTHING TO DO WITH THE REASONABLENESS OR UNREASONABLENESS OF A PROVISION O F A STATUTE EXCEPT SO FAR AS IT MAY HOLD IT IN INTERPRE TING WHAT THE LEGISLATURE HAS SAID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANING, TH E LEGISLATURE MUST BE TAKEN TO HAVE MEANT AND INTENDE D WHAT IT HAS PLAINLY EXPRESSED, AND WHATEVER IT HAS IN CLEAR TERMS ENACTED MUST BE ENFORCED THOUGH IT SHOU LD LEAD TO ABSURD OR MISCHIEVOUS RESULTS. IF THE LANGU AGE OF THIS SUB-SECTION BE NOT CONTROLLED BY SOME OF TH E OTHER PROVISIONS OF THE STATUTE. IT MUST, SINCE, IT S LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE ENFORCED, AND YOUR LORDSHIPS' HOUSE SITTING JUDICIALLY IS NOT CONCERNED WITH THE QUESTION WHETHER THE POLICY IT EMBODIES IS WISE OR UNWISE, OR WHETHER IT LEADS TO CONSEQUENCES JUST OR UNJUST, BENEFICIAL OR MISCHIEVOUS.' THE OFT-QUOTED OBSERVATIONS OF ROWLATT J. IN THE CA SE OF CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64 OUGHT ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 7 ALSO TO BE NOTICED AT THIS JUNCTURE. THE LEARNED JU DGE OBSERVED: ... IN A TAXING STATUTE, ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMEN T. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOO K FAIRLY AT THE LANGUAGE USED.' THE OBSERVATIONS OF ROWLATT J. AS ABOVE STAND ACCEP TED AND APPROVED BY THE HOUSE OF LORDS IN A LATER DECIS ION, IN THE CASE OF CANADIAN EAGLE OIL CO. LTD. V. THE K ING [1946] AC 119; [1945] 2 ALL ER 499. LORD THANKERTON ALSO IN A MANNER SIMILAR IN IRC V. ROSS AND COULTER (BLADNOCH DISTILLERY CO. LTD.) [1948] 1 ALL ER 616 AT PAGE 625 OBSERVED : 'IF THE MEANING OF THE PROVISION IS REASONABLY CLEA R, THE COURTS HAVE NO JURISDICTION TO MITIGATE SUCH HARSHNESS.' THE DECISION OF THIS COURT IN KESHAVJI RAVJI AND CO . V. CIT [1990] 183 ITR 1 ALSO LENDS CONCURRENCE TO THE VIEWS EXPRESSED ABOVE. THIS COURT OBSERVED: (PAGE9) PAGE 605-'AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PR OCESS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSI BLE. THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT TH EN BE APPEALED TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT I S NOT IN THE WORDS USED, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE STATUTE ARE, ON THEIR OWN TERMS, AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE... ARTIFICIAL AND UNDULY LATITUDINARIAN RULES OF CONSTRUCTION, WHICH WITH THEIR GENERAL TENDENCY TO ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 8 'GIVE THE TAXPAYER THE BREAKS', ARE OUT OF PLACE WH ERE THE LEGISLATION HAS A FISCAL MISSION.' BE IT NOTED THAT INDIVIDUAL CASES OF HARDSHIP AND INJUSTICE DO NOT AND CANNOT HAVE ANY BEARING FOR REJECTING THE NATURAL CONSTRUCTION BY ATTRIBUTING NORMAL MEANINGS TO THE WORDS USED SINCE 'HARD CASES DO NOT MAKE BAD LAWS'. IN FINE THUS, A FISCAL STATUTE SHALL HAVE TO BE INTERPRETED ON THE BASIS OF THE LANGUAGE USED THERE IN AND NOT DE HORS THE SAME. NO WORDS OUGHT TO BE ADDE D AND ONLY THE LANGUAGE USED OUGHT TO BE CONSIDERED S O AS TO ASCERTAIN THE PROPER MEANING AND INTENT OF TH E LEGISLATION. THE COURT IS TO ASCRIBE THE NATURAL AN D ORDINARY MEANING TO THE WORDS USED BY THE LEGISLATU RE AND THE COURT OUGHT NOT, UNDER ANY CIRCUMSTANCES, T O SUBSTITUTE ITS OWN IMPRESSION AND IDEAS IN PLACE OF THE LEGISLATIVE INTENT AS IS AVAILABLE FROM A PLAIN REA DING OF THE STATUTORY PROVISIONS. 3.5 FROM ABOVE DISCUSSIONS I NOTICED FROM PLAIN READING OF THE SECTION 50C THAT UNLESS THE PROPERTY TRANSFERRED HAS BEEN COVERED BY THAT SECTION 50C, T HAT IS A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH REGISTERED BY SALE DEED AND FOR THAT PURPOSE THE VA LUE HAS BEEN ASSESSED AND STAMP DUTY HAS BEEN PAID BY THE PARTIES, ONLY THEN SECTION 50C CANNOT COME INTO OPERATION. IN THE CASE UNDER CONSIDERATION THERE IS TRANSFER OF TENANCY RIGHT THOUGH THAT IS CAPITAL AS SET BUT NOT A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH. 2.5 NOTHING CONTRARY WAS BROUGHT TO MY KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, I AM NO T INCLINED TO INTERFERE WITH THE FINDING OF CIT(A) WH O HAS HELD THAT TRANSFER/ASSIGNMENT DEED OF RS.5 LAKH WAS TO B E CONSIDERED TO COMPUTE THE CAPITAL GAIN AND NOT THE VALUE ADOPTED BY ASSESSING OFFICER U/S.50C OF THE ACT. ITA NO. 4582/MUM/15 A.Y. 06-07 [ITO VS. SHRI YUSUF ARABI] PAGE 9 ACCORDINGLY, ASSESSING OFFICER WAS RIGHTLY DIRECTED TO RE- COMPUTE THE CAPITAL GAIN AFTER TAKING RS.5 LAKHS AS GROSS CONSIDERATION WHICH NEEDS TO BE REDUCED BY COST OF ACQUISITION OF IMPUGNED TENANCY RIGHTS, THEREAFTER RESULTANT FIGURE BE DISTRIBUTED AMONG THREE CO-OWNERS EQUALLY INCLUDING ASSESSEE AS MENTIONED IN TRANSFER/ASSIGNM ENT DEED. THIS REASONED FINDING OF CIT(A) NEEDS NO INT ERFERENCE FROM MY SIDE. I UPHOLD THE SAME. 3. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 8 TH DAY OF AUGUST, 2016. SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER MUMBAI: DATED 08/08/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. BY ORDER / , / , ,