ACIT CIR 4(2), MUMBAI V. MIDCITY BHOOMI DEVELOPERS P. LTD, MUMBAI

ITA 5099/MUM/2011

• Counselvise Citation: 509919914 RSA 2011
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MOURYA
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH BEFORE SHRI G.E. VEERABHADRAPPA, PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO. 5099/M/2011 ASSESSMENT YEAR: 2008-09 ACIT CIR 4(2), ROOM NO. 642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. . APPELLANT VS. M/S. MIDCITY BHOOMI DEVELOPERS P. LTD., 71/B, BADA MANDIR COMPOUND, 1 ST FLOOR, PANJARPOLE ROAD, MUMBAI 400 004. PAN: AACCM 6805E . RESPONDENT APPELLANT BY: SHRI P.C. MOURYA RESPONDENT BY: SHRI SANJIV M SHAH DATE OF HEARING: 14.5.2012 DATE OF ORDER:15.6.20 12 ORDER PER S.S. GODARA, JM: THIS REVENUES APPEAL IS DIRECTED AGAINST ORDER DA TED 21.4.2011 PASSED BY LD CIT (A) FOR ASSESSMENT YEAR 2008-09. 2. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL R EADS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF SALE OF FLATS BELOW MARKET VALUE AMOUNTING TO RS. 1,54,31,916/-. 3. CONCISE FACTS OF THE CASE ARE THAT THE ASSESSEE / BUILDER HAD SHOWN SALE OF 17 FLATS, IN ITS RETURN. THE AO COMPARED THE SALE CONSIDERAT IONS IN QUESTION WITH MARKET VALUE OF 2 ITA NO. 5099/M/2011 ALL FLATS U/S 50C OF THE ACT WHICH GAVE RISE TO DIF FERENCE IN TOTAL VALUE OF RS. 11,54,31,916/-. SO, AO SOUGHT EXPLANATION FROM ASS ESSEE WHO CONTENDED THAT THE AFORESAID PROVISION WAS NOT APPLICABLE IN ITS BUSIN ESS AS IT ONLY APPLIES IN SALE OF CAPITAL ASSETS AND NOT BUSINESS ASSETS. THE AO REJECTED T HE SAID CONTENTION BY HOLDING THAT IN VIEW OF AFORESAID PROVISION, SALE TRANSACTIONS OF I MMOVABLE PROPERTY COULD NOT BE LOWER THAN THE VALUE AS PRESCRIBED BY STAMP AUTHORITIES A ND COMPUTED DIFFERENCE BETWEEN SALE VALUE AND MARKET VALUE AS UNDISCLOSED INCOME VIDE ASSESSMENT ORDER DATED 16.12.2010. 4. IN APPEAL, THE ASSESSEES CONTENTION STANDS ACCE PTED BY LD CIT (A) BY HOLDING AS UNDER: FROM THE ASSESSMENT ORDER, I FIND THAT THE ASSESSEE S INCOME HAS BEEN DETERMINED BY THE AO AS INCOME FROM BUSINESS A ND PROFESSION AND NO INCOME FROM CAPITAL GAIN HAS BEEN ASSESSED FOR THE INSTANT YEAR BY THE AO. THEREFORE, ADMITTEDLY THE INCOME FROM SALE OF FLATS HAVE BEEN ASSESSED BY THE AO AS BUSINESS INCOME AND THE IMPUGNED FLATS HA VE BEEN TREATED BY THE AO AS BUSINESS ASSETS AND NOT CAPITAL ASSETS OF THE ASSESSEE. ACCORDINGLY, THE PROVISIONS OF SECTION 50C CANNOT B E INVOKED IN THE CASE OF THE ASSESSEE, AS HAS BEEN HELD IN THE CASE OF THIRU VENGADAM INVESTMENTS PVT. LTD. (SUPRA) AND INDERLOK HOTELS PVT LTD. IN R ESPECTFUL COMPLIANCE OF WHICH I HOLD THAT THE ADDITION OF RS. 1,54,31,916/- BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 50C IS NOT SUSTAINABLE. THE ADDITION OF RS. 1,54,31,916/- IS, THEREFORE, DELETED. THE APPEAL O N THESE GROUNDS IS ALLOWED. 5. IN SUPPORT OF THE ISSUE RAISED, LD DR HAS RELIED ON THE AOS FINDINGS IN ASSESSMENT ORDER AND SUBMITTED THAT LD CIT (A) HAS ERRED IN AC CEPTING ASSESSEES CONTENTION. HENCE, PRAYED FOR ACCEPTANCE OF THE APPEAL. 6. ON THE OTHER HAND, LD AR HAS RELIED ON LD CIT (A ) ORDER AND CASE LAW AS REFERRED TO BY THE LD CIT (A) IN CASE OF INDERLOK HOTELS ETC. ( SUPRA), ALSO PRODUCED ON RECORD PHOTOCOPIES OF THE CASES CITED. 3 ITA NO. 5099/M/2011 7. WE HAVE HEARD BOTH PARTIES AT LENGTH AND HAVE GO NE THROUGH CASE LAW. UNDISPUTEDLY, IN THE PRESENT CASE, THE ASSESSEES A SSETS HAVE BEEN TREATED AS BUSINESS ASSETS IN PLACE OF CAPITAL ASSETS AND INCOME AS DERIVED FROM BUSINESS INSTEAD OF CAPITAL GAINS. IN SUCH A CASE, LD. COORDINATE BE NCH IN CASE OF INDERLOK HOTELS (2009) 122 TTJ (MUMBAI) 145 INDERLOK HOTELS (P) LTD. VS. I TO HAS HELD AS UNDER: IT IS ABUNDANTLY CLEAR FROM THE EXPLANATION GIVEN I N THE CBDT CIRCULAR THAT THE BASIC INTENTION TO INSERT S. 50C IS FOR THE PURPOSE OF DETERMINING FULL VALUE OF SALE CONSIDERATION FOR TH E PURPOSE OF COMPUTATION OF CAPITAL GAINS UNDER SEC. 48 OF THE ACT. IT IS W ELL-SETTLED RULE OF INTERPRETATION THAT MEANING ASCRIBED BY THE AUTHORI TY (SIC). THE ISSUING OF NOTIFICATION OR CIRCULAR IS GOOD GUIDE OF CONTEMPOR ANEOUS EXPOSITION OF THE POSITION OF THE LAW AND THIS RULE IS POPULARLY KNOW N AS CONTEMPORANEA EXPOSITIO. THIS RULE OF INTERPRETATION HAS BEEN GIVEN RECOGNITION BY THE HONBLE SUPREME COURT IN THE CASE OF K.P. VARGHESE VS. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC). IN OUR OPINION, THERE SHOULD NOT BE ANY CLOUD OF DOUBT THAT S. 50C HAS APPLICATION ONLY TO THE EXTENT DETERMINING SALE CONSIDERATION FOR COMPUTATION OF CAPITAL GAIN UNDER CHAPTER IV-E OF THE ACT AND IT CANNOT BE APPLIED FOR DETERMINING THE IN COME UNDER OTHER HEADS. WE ARE THEREFORE, OF THE OPINION THAT, WHEN ADMITT EDLY IN THE PRESENT CASE THE SALE OF THE FLATS IS TREATED AS TH E BUSINESS INCOME AND NOT AS A CAPITAL GAIN, HENCE, THE PROVISION OF SEC. 50C IS NOT APPLICABLE. WE, THEREFORE, DELETE THE ADDITION MADE BY THE AO OF RS . 51,22,956/- AND SET ASIDE THE ORDER OF THE CIT (A) ON THIS ISSUE. THE GROUND NO.1 IS THEREFORE ALLOWED. 8. IN THE OTHER CASE LAW CITED I.E. (2010) 229 CTR 284, HONBLE MADRAS HIGH COURT HAS ALSO AFFIRMED THE LD COORDINATE BENCHS VIEW AS UND ER: IT IS NOT IN DISPUTE THAT THE ACTIVITY OF THE ASSES SEE IS PROPERTY PROMOTER. IT CAN BE GATHERED FROM THE FACTS AVAILA BLE ON RECORD THAT THE ASSESSEE HAS OBTAINED POWER OF ATTORNEY FROM THE OW NER OF THE PROPERTY AND PAID A SUM OF RS. 3,19,49,496/- TO THE OWNER OF THE PROPERTY AND ALSO INCURRED EXPENDITURE IN A SUM OF RS. 2,55,87,815/- IN CONNECTION WITH THE SAID PROPERTY FOR THE ASST. YR. 2004-05 AND THE BAL ANCE OF RS. 63,61,681/- DURING THE ASST. YR. 2004-05 (SIC). THE AMOUNTS SO PAID WERE SHOWN UNDER THE HEAD LOANS AND ADVANCES IN THE BALANCE SHEET AND NOT UNDER THE HEAD FIXED ASSETS. LATER ON, THE PROPERTY WAS SOLD TO M/S MRF LTD. FOR A SUM OF RS. 5 CRORES BY A DEED OF CONVEYANCE, IN WHICH, THE ASSESSEE REPRESENTED THE OWNER IN THE CAPACITY OF THE POWER OF ATTORNEY HOLDER. THE AO, IN ORDER TO DETERMINE THE VALUE OF THE PROPERTY, HAS INVOKED THE PROVISION OF SEC. 50C OF THE ACT AND THEREBY BROUGHT THE ENTIRE AMOUN T OF RS. 6,94,45,920/-. 4 ITA NO. 5099/M/2011 THE APPELLATE AUTHORITY HAS DELETED THAT PORTION OF THE ORDER OF THE AO HAVING THE SALE CONSIDERATION TO RS. 6,94,45,920/- AS AGAINST RS. 5 CRORES THE APPARENT SALE CONSIDERATION SHOWN IN THE SALE D EED. THE TRIBUNAL ALSO, TAKING NOTE OF THE FACTS STATED ABOVE, HAS COME TO THE CONCLUSION THAT INVOCATION OF SEC. 50C OF THE ACT IS NOT WARRANTED AS THE PROPERTY WAS NEVER HELD BY THE ASSESSEE AS CAPITAL ASSET AND AS PER TH E ACCOUNTS ALSO, THE AMOUNT GIVEN TO THE OWNER OF THE PROPERTY HAS BEEN SHOWN AS LOANS AND ADVANCES THEREBY THE PROPERTY HAS BEEN TREATED AS B USINESS ASSET AND NOT AS CAPITAL ASSET. THE INVOCATION OF SEC. 50C OF TH E ACT AS CAN BE SEEN FROM THE PROVISIONS OF THE ACT CAN BE MADE IN ORDER TO F IND OUT THE TRUE VALUE OF THE CAPITAL ASSET. IN THE VERY FACTS AND CIRCUMSTA NCES OF THE CASE, THE PROPERTY IN THE HANDS OF THE ASSESSEE WAS TREATED A S BUSINESS ASSET AND NOT AS CAPITAL ASSET, THERE IS NO QUESTION OF INVOKING THE PROVISIONS OF SEC. 50C OF THE ACT, WHICH IS, AS ALREADY STATED, PERTAINING TO DETERMINING THE FULL VALUE OF THE CAPITAL ASSET. THE TRIBUNAL HAS TAKEN IN AID THE OBSERVATION OF THE MUMBAI BENCH IN THE CASE OF INDERLOK HOTELD (P) LTD. VS. ITO (2009) 122 TTJ (MUMBAI) 145 : (2009) 20 DTR (MUMBAI ) (TRI B) 148, WHICH, IN OUR CONSIDERED VIEW, IS IN CONSONANCE WITH THE STATUTOR Y PROVISIONS AND IS WELL IN ACCORDANCE WITH LAW. 9. THEREFORE, DRAWING SUPPORT FROM THE ORDER OF COO RDINATE BENCH AS WELL AS HONBLE MADRAS HIGH COURT (CITED SUPRA), WE ALSO HOLD THAT SEC. 50C OF THE ACT IS NOT APPLICABLE IN CASE IN HAND WHERE INCOME HAS BEEN TREATED AS B USINESS RECEIPT INSTEAD OF CAPITAL GAIN. WE SEE NO REASON TO INTERFERE. 10. DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON15.6.2012. SD/- SD/- (G.E. VEERABHADRAPPA) (S.S. GODARA) PRESIDENT JUDICIAL MEMBER DATE : 15.6.2012 AT :MUMBAI OKK COPY TO : 1. ACIT CIR-4(2), MUMBAI. 2. M/S. MIDCITY BHOOMI DEVELOPERS P. LTD. 3. THE CIT (A)-8, MUMBAI. 4. THE CIT CONCERNED. 5. THE DR B, BENCH, ITAT, MUMBAI. 6. GUARD FILE. 5 ITA NO. 5099/M/2011 // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI