Pride Purple Properties, Pune, Pune V. Deputy Commissioner of Income Tax, Central Circle-1(1), Pune, Pune

ITA 480/PUN/2022

AI Insights

The case involves Pride Purple Properties, which appealed against the order of the Commissioner of Income Tax (Appeals)-11, Pune, concerning the assessment year 2013-14. The primary issues in the appeal were the disallowance of Rs. 4,81,500 under section 14A of the Income-tax Act, 1961, and the addition of Rs. 6,40,200 to capital gains. The Income Tax Appellate Tribunal (ITAT) found that the disallowance under section 8D(iii) needed recalibration and remanded the matter back to the Assessing Officer (AO) for accurate computation. Regarding the capital gains, the ITAT ruled that the addition was incorrect as the difference between the sale consideration and the DVO's valuation was within the 5% tolerance limit, thus not warranting any addition under section 50C.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136313 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-04-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 22-06-2022
• Other Referred Cases: Vishnu Anant Mahajan Vs ACIT, Minal Industries Ltd. Vs DCIT, CIT Vs. Vatika Township Pvt. Ltd., Government of India & Ors. v. Indian Tobacco Association, Vijay v. State of Maharashtra & Ors.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Earning of tax free income; Capital Gains
• Section: 50C; 14A; 250

Judgement Text

॥ आयकर अपीलीय न्यायाधिकरण, पुणे “बी” न्यायपीठ, पुणे में ॥ ITAT-Pune Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE “B” BENCH, PUNE BEFORE HON’BLE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपऩल सं. / ITA No. 480/PUN/2022 निर्धारण वर्ा / Assessment Year : 2013-14 Pride Purple Properties, Pride House, 5 th Fl.,S.No.108/7, Shivajinagar, Pune – 411 016 PAN: AAIFP0363B . . . . . . . अपऩलधथी / Appellant बनाम / V/s Dy. Commissioner Income Tax, Central Circle-1(1), Pune . . . . . . . प्रत्यथी / Respondent द्वारा / Appearances Assessee by : Shri Suhas Bora Revenue by : Shri M. G. Jasnani सपिवधई की तधरऩख / Date of conclusive Hearing : 12/04/2023 घोर्णध की तधरऩख / Date of Pronouncement : 12/04/2023 आदेश / ORDER PER G. D. PADMAHSHALI, AM; As against first appellate order of Commissioner of Income Tax(A)-11, [‘CIT(A)’] dt. 25/01/2022 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’], for assessment year [‘AY’] 2013-14, the assessee filed the present appeal with the following grounds; “1. The order of the Ld CIT (A) -11, Pune in the case is opposed to establish law and the judicial pronouncement. Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 2 of 8 2. The Ld CIT(A) erred both in facts as well as in law in confirming the disallowance of Rs.4,81,500/- u/s 14A of the Act without considering the fact that the income included in the hands of appellant was not the income which does not form part of the total income under the Act as envisaged in section 14A of the Act. 3. The learned Ld CIT(A) erred in confirming the addition at Rs.6,40,200/- without considering the facts: (a) That the difference between the sale consideration and value arrived by the DVO is less than 5% and the same needs to be ignored in view of various decisions of Hon’ble Pune Bench of ITAT. (b) That valuation is always a matter of estimation and some degree of difference is bound to occur. (c) The Ld. CIT(A) should have adhere to the decision of the Hon’ble Pune Bench on the issue. 4. The appellant may kindly be permitted to add to or alter any of grounds of appeal, if deemed necessary.” 2. Pithily stated the facts of the present case are; 2.1 The assessee firm filed its return of income for AY 2013-14 on 29/09/2013 declaring total income of ₹1,92,51,173/- as against which under regular assessment proceedings the Ld. Dy. CIT, Circle-1(1), Pune [‘AO’] vide his order dt. 16/09/2016 assessed the total income at ₹2,03,72,873/- u/s 143(3) of the Act, on account of following two additions/disallowances viz; Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 3 of 8 (i) Disallowance of expenditure ₹4,81,500/- u/s 14A r.w.r. 8D of IT Rules, 1962 towards expenditure incurred in earning exempt income. (ii) Addition of ₹6,40,200/- to ‘Capital Gain’ representing 50% share of difference between fair market value of ₹3,42,80,400/- determined by valuation officer [‘DVO’] on a reference u/s 142A of the Act over sale consideration of ₹3,30,00,000/-. 2.2 The assessee agitated these additions before the Ld. FAA; however of no success the matter travelled to the Tribunal by the extant appeal. 3. After hearing to rival contentions of both parties; and subject to the provisions of rule 18 of ITAT, Rules 1963 perusal of material placed on record. We shall first deal with ground number 1 & 2 which are directed against the impugned addition of ₹4,81,500/- made u/s 14A of the Act; 3.1 We find that, the appellant builder for a year under consideration had investments in various Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 4 of 8 partnership firms which yielded to it a tax free income in the form of exempt share of profit to the tune of ₹1,43,32,189/-. Admittedly, while filing a return of income the appellant made no suo-motto disallowance in terms of section 14A of the Act r.w.r. 8D of the IT-Rules, 1962 in relation to aforestated earning of share of profit from investee firms. 3.2 Putting assessee to notice, the Ld. AO computed the disallowance u/r 8D(iii) @0.5% of average investment of ₹9.63Crs held by the appellant which has been rightly confirmed by the Ld. CIT(A) by placing reliance on decision of Special Bench of the Tribunal in ‘Vishnu Anant Mahajan Vs ACIT’ vide ITA No. 3002/AHD/2009 and in ‘Minal Industries Ltd. Vs DCIT’ vide ITA No. 7419/MUM/2017. 3.3 Without disputing the action of disallowance in law, the Ld. AR submitted that while computing said disallowance u/r 8D(iii) the Ld. AO did give no weightage to credit balance of investments held Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 5 of 8 which resulted into excessive disallowance. So being the uncontroverted factual position, for the reason the payer of the appellant to remand the matter back for correct computation of disallowance u/s 8D(iii) in all the fairness deserves to be approved. Thus we remand this issue for statistical purpose to the file of Ld. AO. 4. We shall now deal with ground number 3 and its counterparts; 4.1 We note that, the appellant had 50% ownership in certain plots of land which were sold during the impugned year for sum of ₹3,30,00,000/- as against stamp duty valuation of ₹3,45,80,000/-. On the basis of fair market value of ₹3,42,80,400/- as determined by the Ld. DVO on a reference made to him u/s 142A of the Act, the Ld. AO computed the differential value consideration of i.e. ₹12,80,400/- and resultantly 50% thereof added to total income u/h ‘Capital Gains’ being 50% share of appellant. Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 6 of 8 4.2 In an appeal, the contention of appellant that since the differential value is less than 5% hence no addition is warranted has been rejected by the Ld. CIT(A) reiterating that, tolerance limit as envisaged in section 50C has no application for impugned AY. 5. The sole grievance of the appellant relates to denial of retrospective application of beneficial provisions of section 50C of the Act. After a thoughtful consideration, in answering the question in favour of the appellant we deem it necessary & purposive to quote ratio-decidendi laid in para 33 by the Hon’ble Supreme Court in ‘CIT Vs. Vatika Township Pvt. Ltd.’ (2014) 367 ITR 466 (SC) as; “33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by legislation, the rule against a retrospective construction is different. If legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 7 of 8 retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association [5], the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. [6] It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature.”. (Emphasis supplied) 6. By introducing third provisio in question, the law maker very courteously accepts that there were lacunas in the provisions of Section 50C in the sense that even in the cases of genuine variations between the agreed consideration and stamp duty valuation, anti-avoidance provisions u/s 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these are effective from the date on which the related provision itself was introduced or amended. In our considered view, therefore the application of third Pride Purple Properties, ITA No.480/PUN/2022 AY: 2013-14 ITAT-Pune Page 8 of 8 proviso to Section 50C (1), as they stand now, must be held to be effective from date of its insertion i.e. 1st April 2003. 7. In the extant appeal, as the difference between stated consideration vis-à-vis DVO’s valuation is admittedly within the tolerance limit envisaged u/s 50C of the Act, hence in our considered view Section 50C will have no application in this case, resultantly enhancement in the capital gain computed & made by the Ld. AO is disapproved, directed for deletion. 8. Resultantly, the appeal is allowed FOR STATISTCIAL PURPOSE in aforestated terms. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Wednesday 12 th day of May, 2023. -S/d- -S/d- S. S. GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; दिन ांक / Dated :25 th day of May, 2023. आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1.अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A)-11, Pune 4. The Pr.CIT(Central), Pune (MH-India) 5. DR, ITAT, Pune Bench ‘B’, Pune 6. ग र्डफ़ इल / Guard File. Ashwini आिेश नुस र / By Order वररष्ठ निजऩ सनिव / Sr. Private Secretary आयकर अपऩलऩय न्यधयधनर्करण, पपणे / ITAT, Pune.