HEARTBEAT COMMUNICATION P.LTD, MUMBAI V. ITO RG 6(30(2), MUMBAI

ITA 5142/MUM/2011

• Counselvise Citation: 514219914 RSA 2011
• Duration Of Justice: 2 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 03-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 04-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 5142/MUM/2011 ASSESSMENT YEAR : 2005-06 M/S. HEARTBEAT COMMUNICATION P. LTD. 101 SAMARTH, 151 L.T. P.N. KOTNIS MARG, MAHIM(W) MUMBAI-400 016. PAN NO.AAACH 1791 A VS. INCOME TAX OFFICER RANGE-6(3)(2) AAYAKAR BHAVAN MUMBAI-400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHUPENDRA K ARKH ANIS REVENUE BY : SHRI SANJEEV JAIN DATE OF HEARING : 03/09/2013 DATE OF PRONOUNCEMENT : 17 / 0 9 /2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS IS AN ASSESSEE:S APPEAL IN WHICH ASSESSEE HAS RAISED SIX GROUNDS AGAINST THE ORDER OF THE CIT(A)-12, MUMBAI DATED 15.2.2011. THE GROUND NO.1 PERTAINING TO VALIDITY OF RE-OPENIN G THE ASSESSMENT UNDER SECTION147 OF THE ACT WAS NOT PRESSED. WE HAV E HEARD THE LD. COUNSEL AND THE LD. DR IN DETAIL AND PERUSED THE PA PER BOOK PLACED ON RECORD FROM PAGE 1 TO 82. 2. GROUND NO.2 AND 3: THESE TWO GROUNDS ARE RAISED ON THE ISSUE OF CONFIRMING THE AMOUNT OF SHORT TERM CAPITAL GAIN AT RS.22,99,971/- ITA NO.5142/M/11 A.Y.05-06 2 AGAINST RS.8,59,610/- OFFERED BY THE ASSESSEE BY I NVOKING THE PROVISIONS OF SECTION 50C, WITHOUT REFERRING THE VALUE OF CAPI TAL ASSETS TO VALUATION OFFICER AS PER PROVISIONS. ASSESSEE SOLD OFFICE PRE MISES FOR A SUM OF RS.47,20,000/-. HOWEVER, THE STAMP DUTY VALUE OF TH E PREMISES WAS AT RS.53,88,610/-. AO PROCEEDED TO CALCULATE SHORT TE RM CAPITAL GAINS ON THE BASIS OF THE STAMP DUTY VALUE AND ACCORDINGLY D ETERMINED THE CAPITAL GAINS. THE ASSESSEE OBJECTED TO THE VALUATION BEING ADOPTED BY THE AO ON THE BASIS OF THE STAMP DUTY AUTHORITIES. HOWEVER, T HE AO VIDE PARA 4.4 AND 4.5 RECORDS THAT ASSESSEE DID NOT DISPUTE STAMP DUTY VALUATION IN ANY APPEAL OR REVISION AND ACCORDINGLY, HE REJECTS THE ASSESSEES SUBMISSION AND ADOPTS STAMP DUTY VALUATION. THE ASS ESSEE OBJECTED TO THE SAME BEFORE CIT(A) WHO ALSO REJECTED THE CONTEN TION ON A DIFFERENT REASON THAT ASSESSEE HAS NOT REQUESTED FOR REFERRIN G THE MATTER TO THE VALUATION OFFICER, SO HE CANNOT DIRECT. HE ACCORDIN GLY REJECTED THE CONTENTIONS. 2.1 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THE ASSESSEES OBJECTION HAS TO BE CONSIDERED IN IT S CORRECT PERSPECTIVE. SECTION 50(2) MAKES IT VERY CLEAR THAT WHENEVER ASS ESSEE CLAIMS BEFORE AO THAT HE HAS NOT CHALLENGED THE STAMP DUTY VALUAT ION AND SALE CONSIDERATION IS DIFFERENT BECAUSE OF VALID REASON, THEN THE AO IS REQUIRED TO REFER THE MATTER TO THE VALUATION OFFICER. WITH OUT GOING INTO THE INTERPRETATION OF THE WORD MAY, WHETHER IT SHOULD BE TAKEN AS MANDATORY OR NOT, THE PLAIN LOGIC IS THAT THE AO IS NOT AN EXPERT ON VALUATION AND LEGISLATURE HAS MANDATED THAT IF THER E IS STRONG OBJECTION FROM THE ASSESSEES SIDE WITHOUT CHALLENGING THE ST AMP DUTY VALUATION THEN VALUATION SHOULD BE REFERRED TO THE VALUATION OFFICER WHO IS AN EXPERT AND CAN DO THE CORRECT VALUATION. THE INTERP RETATION GIVEN BY THE AO OF SECTION 50C(2) IS NOT CORRECT AND HE IS BOUND TO REFER TO A VALUATION OFFICER ONCE ASSESSEE RAISED OBJECTION ON THE STAMP DUTY AUTHORITIES VALUATION UNDER THE PROVISIONS OF LAW. SIMILAR VIEW WAS ALSO EXPRESSED BY ITA NO.5142/M/11 A.Y.05-06 3 THE CO-ORDINATE BENCH IN THE CASE OF AJMAL FRAGRANCES & FASHIONS( P.) LTD. VS. ACIT (34 SOT 57)(MUM) . IN VIEW OF THIS, WE DIRECT THE AO TO REFER THE MATTER TO THE VALUATION OFFICER AS PER THE PROV ISIONS OF SECTION 50C(2) AND THEREAFTER COMPUTE THE CAPITAL GAINS AS PER PRO VISIONS OF THE ACT. ACCORDINGLY, THE ISSUE ON THIS IS SET ASIDE TO THE FILE OF AO FOR DOING THE NEEDFUL. GROUND NO.2 AND 3 ARE CONSIDERED ALLOWED F OR STATISTICAL PURPOSES. 3. GROUND NO.4: THIS GROUND IS RAISED BY THE ASSESS EE STATING THAT AO AND CIT(A) HAS NOT ALLOWED A DEDUCTION OF RS.1,9 5,000/- WHILE COMPUTING CAPITAL GAIN UNDER SECTION 50, BEING EXPE NSES INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH CAPITAL ASSET. THIS AMOUNT WAS SHOWN IN THE ASSESSEES COMPUTATION AS ADDITION TO THE ASSET IN BOOKS OF ACCOUNT, BALANCE SHEET AND ALSO IN COMPUTATION OF I NCOME. HOWEVER, WHILE WORKING OUT CAPITAL GAIN, THE AO HAS ONLY CON SIDERED THE CLOSING WDV AS ON 31.03.2004 WITHOUT CONSIDERING THE ADDITI ON TO THE ASSET OF RS.1,95,000/-. IT IS THE CONTENTION OF THE ASSESSE E THAT THIS AMOUNT SHOULD ALSO BE CONSIDERED AND ACCORDINGLY THE COMPU TATION OF CAPITAL GAIN SHOULD HAVE BEEN UNDERTAKEN BY THE AO. LD. C IT(A) REJECTED ON THE REASON THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE BEFORE HIM. IT WAS SUBMITTED THAT THIS AMOUNT HAD BEEN SPENT AS RECORD ED IN THE BOOKS OF ACCOUNT, SHOWN IN BALANCE SHEET AS AN ADDITION TO T HE ASSETS AND THEREFORE, BOTH AUTHORITIES ARE NOT CORRECTLY DENYI NG THE CLAIM. 3.1 WE HAVE EXAMINED THE ISSUE AND NOTICED THAT THE ASSESSEE DID CLAIM THIS AMOUNT AS ADDITION TO THE ASSET DURING T HE YEAR BEFORE ITS SALE, THEREFORE THE AO HAS TO CONSIDER ADDITION TO THE GR OSS BLOCK IN THE COURSE OF COMPUTATION OF INCOME. THEREFORE, WE DIRECT THE AO TO CONSIDER THE ABOVE AMOUNT. SINCE THIS ASPECT WAS NOT EXAMINED BY THE AO, HE MAY VERIFY THE EXPENDITURE, AS ISSUE OF CAPITAL GAIN CO MPUTATION ITSELF WAS RESTORED TO AO FOR REFERRING THE MATTER TO THE VALU ATION OFFICER IN GROUND ITA NO.5142/M/11 A.Y.05-06 4 NO.2 AND 3 ABOVE. THEREFORE, THIS GROUND IS ALSO R ESTORED TO THE FILE OF AO TO EXAMINE AND ALLOW THE SAME. GROUND IS ALLOWED. 4. GROUND NO.5 PERTAINS TO THE AMOUNTS RECEIVED FRO M TEMPORARY LEASE OF THE OFFICE PREMISES OF RS.4,10,000/-. THE ASSESSEE WAS OCCUPYING BUSINESS PREMISES AND HAS SINCE ASSESSEES BUSINESS CENTRE WAS NOT BEING RUN, IT HAS TEMPORARILY LEASED OUT OFFICE PRE MISES AND RECEIVED AMOUNT OF RS.4,10,000/- ON ACCOUNT OF BUSINESS CENT RE SERVICES. IT WAS OFFERED AS INCOME FROM BUSINESS. THE AO TREATED THE SAME AS INCOME FROM HOUSE PROPERTY. THE LD. CIT(A) CONFIRMED THE S AME. 4.1 AFTER CONSIDERING THE RIVAL CONTENTION, WE ARE OF THE OPINION THAT ORDERS OF THE AO ARE CONTRARY TO HIS STAND, AS SAME PREMISES WHICH WAS PARTLY LET OUT DURING THE YEAR WAS SOLD AT THE END OF THE YEAR AND CAPITAL GAINS WERE OFFERED AS SHORT TERM CAPITAL GAIN, AS A SSET BEING USED AS BUSINESS ASSETS ON WHICH DEPRECIATION WAS ALLOWED E ARLIER. SINCE THE AO HIMSELF TREATED THE PROPERTY AS BUSINESS ASSET AND ALSO COMPUTED CAPITAL GAIN ON SALE OF THE SAME UNDER SHORT TERM CAPITAL G AIN AS PER PROVISIONS OF THE ACT, THE STAND OF THE AO IN TREATING THE INC OME ON THE OFFICE PREMISES AS INCOME FROM HOUSE PROPERTY IS CONTRARY TO THE FACTS. THIS INCOME CAN BE ASSESSED EITHER UNDER THE HEAD BUSINE SS OR UNDER OTHER SOURCES BUT CANNOT BE CONSIDERED AS INCOME FROM HOU SE PROPERTY, AS NATURE OF PROPERTY CHANGES IF AOS CONTENTIONS WERE TO BE ACCEPTED. FOR THIS REASON ITSELF, THE ACTION OF THE AO CAN NOT BE UPHELD. EVEN OTHERWISE THIS IS A TEMPORARY LEASE OF OFFICE PREMISES WHICH WAS USED AS BUSINESS ASSET IN THE EARLIER ASSESSMENT YEARS AND SOLD THE PROPERTY ON 10.03.2005. THEREFORE, EVEN ON MERITS, WE ARE OF TH E OPINION THAT INCOME HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS HO USE PROPERTY INCOME. THEREFORE, GROUND NO.5 IS ALLOWED. AO IS DI RECTED TO TREAT AS BUSINESS RECEIPT. ITA NO.5142/M/11 A.Y.05-06 5 5. GROUND NO.6 PERTAINS TO CLAIM OF BUSINESS EXPENS ES. THE ASSESSEE BEING A COMPANY HAS SPENT OF VARIOUS EXPENDITURES L IKE ON RENT RATE, TAX CONSULTANCY, BUSINESS PROMOTION ETC. THE AO DENIED THE EXPENDITURE ON THE REASON THAT THERE IS NO BUSINESS INCOME. SINCE BUSINESS RECEIPTS SHOWN BY THE ASSESSEE ARE ASSESSED UNDER THE HEAD H OUSE PROPERTY, AO DISALLOWED THE ENTIRE EXPENDITURE, WITHOUT EVEN ALL OWING EXPENDITURE PERTAINING TO CORPORATE SET UP. SINCE THE RECEIPT O F THE BUSINESS CENTRE WAS DIRECTED TO BE ASSESSED AS BUSINESS INCOME, AS A CONSEQUENCE THE AO IS DIRECTED TO ALLOW THE BUSINESS EXPENDITURE AS CLAIMED AFTER DUE EXAMINATION. THE GROUND IS ALLOWED. 6. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER, 2013. SD/- SD/- (DR. S.T.M. PAVALAN) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 17/09/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.