VOLTAS LTD, MUMBAI V. ITO WD 7(3)(4), MUMBAI

ITA 5330/MUM/2009

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2995 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 29-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 17-09-2009
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Assessee Lawyers: DINESH VYAS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business expenditure; Rectification of order; Period of limitation; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C; 14A; 115JB; 54; 154

Judgement Text

, , F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.5330/MUM/2009 ASSESSMENT YEAR: 2005-06 & ITA NO.5331/MUM/2009 ASSESSMENT YEAR: 2005-06 VOLTAS LTD. VOLTAS HOUSE-A, DR. BABASHEB AMBEDKAR RD, CHINCPOKLI, MUMBAI-400033 / VS. ITO WD 7(3)(4) AAYAKAR BHAVAN, MUMBAI-40020 ( APPELLANT ) (RESPONDENT ) P.A. NO. AAACV2809D ITA NO.5320/MUM/2009 ASSESSMENT YEAR: 2005-06 ITO WD 7(3)(4) AAYAKAR BHAVAN, MUMBAI-40020 / VS. VOLTAS LTD. VOLTAS HOUSE-A, DR. BABASHEB AMBEDKAR RD, CHINCPOKLI, MUMBAI-400033 (APPEL LANT ) (RESPONDENT ) P.A. NO. AAACV2809D APPELLANT BY SHRI DINESH VYAS ( A R) REVENUE BY SHRI ASGHAR ZAIN (DR) / DATE OF HEARING: 28/07/2016 / DATE OF ORDER: 16/09/2016 VOLTAS LTD. 2 / O R D E R PER BENCH: THESE APPEALS PERTAIN TO SAME ASSESSEE INVOLVING IDENTICAL ISSUES AND THEREFORE THESE WERE HEARD TOG ETHER AND BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI DINESH VYAS, AUTHORISED REPRESENTATIVES (AR) O N BEHALF OF THE ASSESSEE AND BY SHRI ASGHAR ZAIN, DEPARTMENT AL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO.5330/MUM/2009 FOR A.Y. 2005-06 FILED AGAINST THE ORDER OF LD. CIT(A) DATED 10.07.2009 PASSED AGAINST ASSESSMENT ORDER U/S 143(3) DATED 31.12.2007 ON THE FOLLOWING GROUNDS: GROUND NO 1: LONG TERM CAPITAL GAIN ON SALE OF LAND 1.1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) [HEREINAFTER REFERRED TO AS THE CIT(A)] ERRED IN UP HOLDING THE ACTIONS OF THE ASSESSING OFFICER [HEREINAFTER R EFERRED TO AS THE AO] OF COMPUTING THE LONG TERM CAPITAL GA INS ON TRANSFER OF DEVELOPMENT RIGHTS IN RESPECT OF 2 PLOT S OF LAND AT PANCHPAKDI, THANE, BASED ON THE STAMP DUTY VALUE, AS PER HIS ASSESSMENT ORDER U/S 143(3) DATED 31.12.2007 AND SUBSEQUENTLY, BY RECTIFICATION ORDER U/S 154 DATED 8.5.2008, COMPUTING THE LONG TERM CAP ITAL GAINS BASED ON THE VALUES ASSIGNED BY THE DISTRICT VALUATION OFFICER [HEREINAFTER REFERRED TO AS THE D VO] IN HIS REPORT NO. DVO/MUM/TOC/487/2007-08/685 DATED 27.3.2008, AS AGAINST THE APPELLANT COMPANY'S CLAIM TO CONSIDER THE ACTUAL AMOUNT OF CONSIDERATION RECEIVE D. THE CIT(A) FURTHER ERRED IN UPHOLDING THE ACTIONS O F THE VOLTAS LTD. 3 AO IN CONSIDERING THE FAIR MARKET VALUE (FMV) AS ON 1.4.198 1 AS ASCERTAINED BY THE DVO IN RESPECT OF T HE AFORESAID PLOTS OF LAND. 1.2. THE AO HAD ERRED IN CONSIDERING THE VALUES OF 2 PLOTS OF LAND AT THANE BASED ON STAMP DUTY VALUE, A S PER SECTION SOC OF THE INCOME TAX ACT, 1961, INSTEA D OF ACTUAL CONSIDERATION RECEIVED BY THE APPELLANT COMPANY. AS THE STAMP DUTY VALUE WAS OBJECTED BY THE APPELLANT COMPANY, THE AO REFERRED THE MATTER T O THE DVO AND IN THE ABSENCE OF THE VALUATION REPORT FROM THE DVO, PROCEEDED WITH COMPLETING THE ASSESSMENT BASED ON STAMP DUTY VALUE BUT STATED IN HIS ORDER, THAT THE SAME WOULD BE RECTIFIED, TO GIVE EFFECT TO THE VALUATION AS PER THE DVO. 1.3. THE DVO HAD NOT CONSIDERED ALL THE RELEVANT FA CTORS AND IMPEDIMENTS ATTACHED TO THE 2 PLOTS OF LAND IN QUESTION AND MADE HIS OWN ASSUMPTIONS FOR DETERMINI NG THE FMV OF THE LAND. THE FACT THAT THE ACTUAL CONSI DERATION RECEIVED BY THE APPELLANT COMPANY, ON 'AS-IS-WHERE- IS' BASIS WAS NOT CONSIDERED. THE AO SUBSEQUENTLY PASSED A RECTIFICATION ORDER U/S 154 BASED ON THE VALUES ASSIGNED BY THE DVO AND IGNORED THE FACTS SUBMITTED BY THE APPELLANT COMPANY. 1.4. THE CIT(A) OUGHT TO HAVE CONSIDERED AND RELIED ON THE REGISTERED VALUER'S REPORTS SUBMITTED BY THE APPELL ANT COMPANY FOR COMPUTING THE LONG TERM CAPITAL GAINS ON TRANSFER OF DEVELOPMENT RIGHTS OF 2 PLOTS OF LAN D AT THANE. THE APPELLANT COMPANY THEREFORE PRAYS THAT THE RELE VANT FACTS AND CIRCUMSTANCES BE DULY CONSIDERED AND THE AO BE SUITABLY DIRECTED IN THE MATTER. (REFER PAGE 11 TO 14, PARA 7.1 OF THE ASSESSMENT OR DER AND PAGE 6 TO 9, PARA 4.1 TO 4.13 OF THE CIT(A) ORD ER) GROUND NO 2: SHORT TERM CAPITAL GAIN ON SALE OF RESIDENTIAL FLAT 2.1 THE LEARNED CIT(A) ERRED IN UPHOLDING THE AO'S ACTION OF COMPUTING THE SHORT TERM CAPITAL GAINS BA SED ON THE STAMP DUTY VALUE INSTEAD OF ACTUAL CONSIDERA TION RECEIVED BY THE APPELLANT COMPANY ON SALE OF A RESIDENTIAL FLAT AT JOYTI DARSHAN BUILDING, MUMBAI. 2.2 THE CIT(A) FAILED TO APPRECIATE THAT THE BUILDI NG 'JOYTI DARSHAN' WAS A 40 YEAR OLD BUILDING AND NOT VOLTAS LTD. 4 WELL MAINTAINED. THE CONDITION OF THE FLAT WAS BAD DUE TO HEAVY WATER LEAKAGE DURING MONSOON SEASON AND THERE WAS CONTINUOUS LEAKAGE DUE TO THE WATER TANK BEING JUST ABOVE THE FLAT. THE CIT(A) ALSO FAILED T O APPRECIATE THAT THE FLAT WAS SOLD BY THE APPELLANT COMPANY ON 'AS-IS-WHERE-IS' BASIS AND THE SALE CONSIDERATION RECEIVED WAS FAIR AND REASONABLE, IN THE GIVEN CIRCUMSTANCES. THE APPELLANT COMPANY PRAYS THAT THE RELEVANT FACTS AND CIRCUMSTANCES BE DULY CONSIDERED AND THE AO BE DIRECTED IN THE MATTER, ACCORDINGLY. (REFER PAGE 14 TO 16, PARA 7.2 OF THE ASSESSMENT OR DER AND PAGE 9, PARA 5.1 AND 5.2 OF CIT(A) ORDER) GROUND NO 3: DISALLOWANCE U/S 14A 3.1. THE CIT(A) FAILED TO APPRECIATE THAT THE APPEL LANT COMPANY HAD NOT BORROWED ANY AMOUNT FOR MAKING INVESTMENT IN SHARES/UNITS AND ALL INVESTMENTS WERE MADE OUT OF INTERNAL ACCRUALS AND NO INTEREST COST OR ADMINISTRATIVE EXPENSES WAS INCURRED FOR EARNING DI VIDEND INCOME. THE AO HAD MADE A DISALLOWANCE U/S 14A, BY NOTIONALLY ATTRIBUTING THE INTEREST EXPENSE AND ADMINISTRATIVE OVERHEAD EXPENSES, ON PRORATA BASIS AS EXPENSES ATTRIBUTABLE TOWARDS EARNING DIVIDEND INCO ME WHICH IS EXEMPT FROM TAX U/S 10(33) OF THE INCOME-T AX ACT. 3.2. THE CIT (A) HAS DIRECTED THE AO TO RETOOK INTO THE APPELLANT COMPANY'S CLAIM OR ALTERNATIVELY, COMPUTE THE DISALLOWANCE U/S 14A AS PER RULE 8D OF THE INCOME T AX RULES, 1962. 3.3. THE APPELLANT COMPANY PRAYS THAT THE AO BE DIRECTED TO DELETE THE DISALLOWANCE UNDER SECTION 1 4A, AS THE APPELLANT COMPANY HAS NOT INCURRED ANY INTEREST COST OR ADMINISTRATIVE COST FOR EARNING EXEMPT DIVIDEND INCOME. 3. DURING THE COURSE OF HEARING LD. COUNSEL OF THE AS SESSEE SUBMITTED SUPPLEMENTARY GROUNDS TO THE ORIGINAL GRO UNDS AND THESE ARE REPRODUCED AS UNDER: S UPPLEMENTARY GROUNDS TO GROUND NO.1 - LONG TERM CAPITAL GAINS ON SALE OF LAND: VOLTAS LTD. 5 1.5.SINCE THE REPORT OF THE DISTRICT VALUATION OFFI CER (DVO) HAD NOT BEEN RECEIVED BY THE ASSESSING OFFICE R (AO) WITHIN THE PERIOD OF LIMITATION, THE ORIGINAL POWER OF THE AO TO MAKE THE VALUATION HAD REVIVED AND AS HE DID NOT EXERCISE THAT POWER WHILE PASSING THE ASSESSMEN T ORDER, THE ADDITION MADE BY HIM FOR COMPUTING THE C APITAL GAINS IN RELATION TO THE TRANSFER OF LAND, IS BAD I N LAW, ILLEGAL AND WITHOUT JURISDICTION. IT IS THEREFORE P RAYED THAT THE SAID ADDITION IN RELATION TO THE CAPITAL G AINS ON TRANSFER OF LAND BE DELETED. 1.6 SINCE THE REPORT OF THE DVO HAD NOT BEEN RECEIV ED BY THE AO WITHIN THE PERIOD OF LIMITATION AND PASSING OF THE ASSESSMENT ORDER, THE VALUATION PROCEEDING BEFORE T HE DVO HAD BECOME INVALID AND BAD IN LAW AND CONSEQUENTLY, THE AO COULD NOT THEREAFTER RELY UPON THE REPORT OF THE DVO FOR THE PURPOSE OF MAKING THE ASSESSMENT. IT IS THEREFORE PRAYED THAT THE ADDITIO N MADE IN RELATION TO THE CAPITAL GAINS ON TRANSFER O F LAND BE DELETED. 1.7. THE REFERENCE TO THE DVO MADE BY THE AO IS BAD IN LAW AND ILLEGAL IN THE ABSENCE OF ANY RECORDING OF HIS OPINION ON THE BASIS OF MATERIAL ON RECORD THAT IT IS NECESSARY TO MAKE SUCH REFERENCE. SINCE THE VERY IN ITIATION OF REFERENCE IS INVALID, THE ADDITION MADE IN RELAT ION TO THE CAPITAL GAINS ON TRANSFER OF LAND IS BAD IN LAW AND ILLEGAL AND THEREFORE THE SAME SHOULD BE DELETED. 1.8. WITHOUT PREJUDICE, THE VALUATION REPORT MADE BY DVO IS BAD IN LAW AND ILLEGAL SINCE IT IS NOT PASSE D IN TERMS OF SECTION 55A (AS IT STOOD BEFORE ITS AMENDM ENT BY FINANCE ACT 2012) AND WITHIN ITS STATUTORY LIMITS A ND JURISDICTION AND THEREFORE, IT SHOULD BE TOTALLY IG NORED. THE DVO HAD NO JURISDICTION TO ASCERTAIN THE VALUATION OF THE LAND AS ON 1/4/1981 AND THEREFORE, HIS ORDER IS TOTALLY VITIATED. THEREFORE, IT IS PRAYED THAT ADDI TION MADE IN RELATION TO CAPITAL GAINS ON TRANSFER OF LAND BE DELETED. 1.9 THE CIT(A) ABDICATED HIS DUTY AND JURISDICTION BY NOT ADJUDICATING UPON THE CORRECTNESS OF THE VALUAT ION REPORT OF THE DVO. SINCE THE ORDER OF CIT(A) DOES N OT LEGALLY JUSTIFY THE ADDITION MADE BY THE AO, IT IS PRAYED THAT THE SAME SHOULD BE DELETED. 1.10 SINCE BOTH THE AO AND THE CIT(A) HAVE PASSED T HEIR RESPECTIVE ORDERS IN VIOLATION OF PRINCIPLES OF NAT URAL VOLTAS LTD. 6 JUSTICE AND SPECIFIC STATUTORY PROVISIONS, THE ADDI TION MADE AND SUSTAINED IN ORDERS RESPECTIVELY, OUGHT TO BE DELETED WITHOUT GIVING THEM ANY FURTHER OPPORTUN ITY OF PASSING A FRESH ORDER (AS HELD BY A COORDINATE BENCH OF THE HON'BLE TRIBUNAL IN TATA CHEMICALS LIMITED VS. DCIT, ORDER DATED 30/6/2011 IN ITA NO.31 27/MUM/10. SUPPLEMENTARY GROUNDS TO GROUND NO. 2 - SHORT TERM CAPITAL GAINS ON SALE OF RESIDENTIAL FLAT. 2.3 SINCE THE APPELLANT CLAIMED BEFORE THE ASSESSIN G OFFICER (AO) THAT THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDED THE FAIR MARKET VALUE OF THE PROPERTY, IT WAS OBLIGATORY ON THE PART OF THE AO T O REFER UNDER SECTION 50C(2)(A), THE VALUATION OF THE FLAT TO THE DISTRICT VALUATION OFFICER (DVO) AND AS HE FAILED T O DO SO, HE HAD NO AUTHORITY TO ADOPT STAMP DUTYVALUATION AN D CONSEQUENTLY THE ADDITION MADE IN RELATION TO CAPIT AL GAINS ON TRANSFER OF THE FLAT IS BAD IN LAW AND ILL EGAL AND MUST BE DELETED. 2.4 THE CIT(A) ABDICATED HIS DUTY AND JURISDICTION BY NOT ADJUDICATING UPON THE CORRECTNESS OF THE VALUATION REPORT OF THE DVO. SINCE THE ORDER OF CIT(A) DOES N OT LEGALLY JUSTIFY THE ADDITION MADE BY THE AO, IT IS PRAYED THAT THE SAME SHOULD BE DELETED. 2.5. SINCE BOTH THE AO AND THE CIT(A) HAVE PASSED T HEIR RESPECTIVE ORDERS IN VIOLATION OF PRINCIPLES OF NAT URAL JUSTICE AND SPECIFIC STATUTORY PROVISIONS, THE ADDI TION MADE AND SUSTAINED IN ORDERS RESPECTIVELY, OUGHT TO BE DELETED WITHOUT GIVING THEM ANY FURTHER OPPORTUN ITY OF PASSING A FRESH ORDER (AS HELD BY A COORDINATE BENCH OF THE HON'B!E TRIBUNAL IN TATA CHEMICALS LIMITED VS. DCT, ORDER DATED 30/6/2011 IN ITA NO.3127/M/10). 3.1. DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY THE LD. COUNSEL THAT SUPPLEMENTARY GROUNDS ARE PRIMARY GROU NDS, THEREFORE, THEY SHOULD BE TAKEN FIRST; ACCORDINGLY WE SHALL FIRST TAKE UP SUPPLEMENTARY GROUNDS: SUPPLEMENTARY GROUND NO. 1.5 TO 1.10:- IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF ACTIONS OF LOWER VOLTAS LTD. 7 AUTHORITIES WITH RESPECT TO ADDITION MADE ON THE BA SIS OF REPORT OF THE DEPARTMENTAL VALUER I.E. DVO. 3.2. BRIEF BACKGROUND OF THE ISSUES INVOLVED IN THESE G ROUNDS IS THAT THE ASSESSEE DISCLOSED LONG TERM CAPITAL GA INS ON SALE OF DEVELOPMENT RIGHTS WITH REGARD TO PLOT OF LAND L OCATED AT PANCHPAKDI, THANE, ON THE BASIS OF DEVELOPMENT AGRE EMENT DATED 8 TH JUNE 2004 ENTERED INTO BY THE ASSESSEE WITH M/S SHETH DEVELOPERS PRIVATE LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE T HAT WHY NOT SALES CONSIDERATION SHOULD BE SUBSTITUTED W ITH THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY IN V IEW OF SECTION 50C OF THE ACT. IN RESPONSE, THE ASSESSEE O BJECTED TO THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY AND ALSO OBJECTED TO THE VERY INVOKING OF SECTION 50C O F THE ACT UPON THE IMPUGNED TRANSACTION OF SALE OF DEVELOPMEN T RIGHTS. THE AO REFERRED THE MATTER TO DISTRICT VALU ATION OFFICER FOR VALUATION OF THE SALES CONSIDERATION AS WELL AS COST OF ACQUISITION OF THE PROPERTY. BUT, VALUATION REPORT OF THE DVO WAS NOT RECEIVED BY THE AO TILL CONCLUSION OF THE ASSESSMENT PROCEEDINGS AND THEREFORE THE AO ADOPTED VALUE OF STAMP VALUATION AUTHORITY AND SUBSTITUTED IT WITH ACTUAL SALES CONSIDERATION SHOWN BY THE ASSESSEE AN D COMPUTED THE LONG TERM CAPITAL GAINS ON SALE OF DEVELOPMENT RIGHTS OF THE LAND ACCORDINGLY. 3.3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN EXHAUSTIVE SUBMISSIONS WERE FILE D AND THE ADDITION MADE BY THE AO WAS CHALLENGED ON MANY GROUNDS. BUT, LD. CIT(A) DID NOT FIND ANY FORCE IN ANY OF THE VOLTAS LTD. 8 SUBMISSIONS MADE BY THE ASSESSEE AND IT WAS HELD BY HIM THAT PROVISIONS OF SECTION 50C WERE RIGHTLY INVOKED AND THE AO HAD RIGHTLY ADOPTED THE FIGURES OF VALUATION DET ERMINED BY THE DVO BY SUITABLE AMENDING HIS ASSESSMENT ORDE R U/S 154 AFTER RECEIPT OF REPORT OF THE DVO. THUS GRIEVA NCE OF THE ASSESSEE AGAINST AOS ACTION IN APPLYING THE PROVIS IONS OF SECTION 50C AS WELL AS THE ACTION OF DVO IN ISSUING IMPUGNED VALUATION REPORT WAS REJECTED BY LD CIT(A) . 3.4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE TRIBUNAL. 3.5 . DURING THE COURSE OF HEARING BEFORE US NUMEROUS ARGUMENTS HAVE BEEN MADE CHALLENGING VARIOUS ACTION S OF THE LOWER AUTHORITIES ON MANY GROUNDS. IT WAS CONTE NDED BY THE LD. COUNSEL THAT SINCE REPORT OF THE DVO WAS NO T RECEIVED BY THE AO BEFORE FRAMING OF THE ASSESSMENT ORDER THEREFORE, POWER TO MAKE VALUATION REVERTS BACK TO THE AO. UNDER THESE CIRCUMSTANCES, AO WAS BOUND TO MAKE THE VALUATION APPLYING HIS OWN MIND INDEPENDENTLY. THUS , UNDER THESE CIRCUMSTANCES, THE AO COULD NOT HAVE AD OPTED ANY OTHER VALUE AS ASSESSED BY ANY OTHER AUTHORITY. RELIANCE IN THIS REGARD WAS PLACED ON THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAHDARA (DELHI) SAHARANPUR LIGHT RAILWAY CO. LTD. VS CIT 208 ITR 88 2. IT WAS FURTHER CONTENDED BY THE LD. COUNSEL THAT IN CASE V ALUATION REPORT IS NOT RECEIVED BEFORE THE ASSESSMENT IS COM PLETED THEN REFERENCE U/S 55A BECOMES INVALID BECAUSE THE PURPO SE FOR WHICH A VALUATION REPORT COULD BE UTILIZED, NAMELY, FOR COMPLETION OF THE ASSESSMENT IN CONFORMITY WITH THE VALUATION VOLTAS LTD. 9 REPORT, WAS NOT LONGER EXISTENT, SINCE THE ASSESSME NT WAS COMPLETED IN THE MEANTIME. UNDER THESE CIRCUMSTANCE S, THE AO WAS NOT PERMITTED TO SUBSEQUENTLY REFER TO THE V ALUATION REPORT FOR SUBSTITUTING THE AMOUNT OF SALES CONSIDE RATION IN THE HANDS OF THE ASSESSEE. THE RELIANCE WAS PLACED IN THIS REGARD ON THE JUDGMENT OF HONBLE CALCUTTA HIGH COU RT IN THE CASE OF RELIANCE JUTE AND INDUSTRIES LTD. V. ITO 15 0 ITR 643 AND BHALANATH MAJUMDAR V. ITO 221 ITR 608. IT WAS A LSO SUBMITTED THAT NO REFERENCE CAN BE MADE U/S 55A FOR THE PURPOSE OF DETERMINATION OF SALES CONSIDERATION ON THE GROUND THAT THE EXPRESSION FULL VALUE OF CONSIDERATION CAN NOT BE CONSTRUED AS HAVING REFERENCE TO THE MARKET VALUE O F ASSETS TRANSFERRED BUT ONLY MEANS FULL VALUE OF CONSIDERAT ION ACTUALLY RECEIVED BY THE TRANSFEROR. IN THIS REGARD RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMT NILOFER I SINGH 309 ITR 233 AND ALSO UPON D EV KUAMR JAIN VS. ITO & ANR., 309 ITR 240 (DEL). IT WAS ALSO SUBMITTED THAT IN SECTION 55A, POWER TO MAKE REFERENCE FOR VA LUATION FOR ASCERTAINING COST OF ACQUISITION AS ON 01.04.1981 I S NOT AVAILABLE. RELIANCE IN THIS REGARD HAS BEEN PLACED ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT V. PUJA PRINTS 360 ITR 697 (BOM) & AMIYA BALA PAUL 262 ITR 407(SC) . 3.6. LASTLY, IT WAS SUBMITTED WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS THAT IN ANY CASE TRANSACTION OF SALE OF DEVELOPMENT RIGHTS IS NOT COVERED U/S 50C. IN SUPPO RT OF THIS ARGUMENT, LD. COUNSEL DREW OUR ATTENTION ON OTHER A LLIED PROVISIONS OF THE ACT SUCH AS SECTION 269A OF THE A CT. LD VOLTAS LTD. 10 COUNSEL VEHEMENTLY ARGUED THAT ON THIS GROUND ITSEL F ADDITION MADE BY THE AO BECOMES ILLEGAL AND DESERVES TO BE D ELETED. 3.7 . PER CONTRA, LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE AO HAS SUBSTITUT ED THE AMOUNT OF SALES CONSIDERATION ON THE BASIS OF REPOR T OF THE DVO. SINCE, THE VALUATION SHOWN BY THE DVO IS MORE THAN THE CONSIDERATION SHOWN BY THE ASSESSEE, THEREFORE, AS PER SECTION 50C HIGHER VALUE SHOULD BE ADOPTED. 3.8 . WE HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSES SEE. WE SHALL FIRST DEAL WITH THE LAST ARGUMENT OF THE A SSESSEE WHICH IS DIRECTLY ON THE SCOPE OF SECTION 50C. THE PERUSAL OF SECTION 50C SHOWS THAT THE SECTION 50C SHALL BE APP LICABLE WHERE THE CONSIDERATION RECEIVED AS A RESULT OF TRA NSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH , IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSES SABLE BY ANY AUTHORITY OF STATE GOVERNMENT . THUS, IT IS NOTED THAT THE TERM CAPITAL ASSET MENTIONED IN THE SECT ION SPECIFICALLY REFERS AND CONFINES ITS MEANING TO LA ND OR BUILDING OR BOTH. THUS, SCOPE OF SECTION 50C IS RESTRICTED BY THE LEGISLATURE ITSELF TO THESE TWO TYPES OF CAPITAL AS SETS ONLY. 3.9. TURNING BACK TO THE FACTS OF THE CASE BEFORE US, T HE CAPITAL ASSET TRANSFERRED BY THE ASSESSEE WAS DEVE LOPMENT RIGHTS IN THE LAND AND NOT THE LAND ITSELF. IF W E GO THROUGH FEW OTHER SIMILAR PROVISIONS OF THE ACT, WE FIND TH AT THE LEGISLATURE HAS USED THIS EXPRESSION CONSCIOUSLY AN D CAREFULLY AND KEEPING IN VIEW ITS NEED AND OBJECTIVE OF LEGIS LATING SECTION 50C. FOR EXAMPLE, IN SECTION 269A, THE EXPR ESSION IMMOVABLE PROPERTY HAS BEEN DEFINED AS UNDER: VOLTAS LTD. 11 IMMOVABLE PROPERTY MEANS- (I) ANY LAND OR ANY BUILDING OR PART OF A BUILDING, AND INCLUDES, WHERE ANY LAND OR ANY BUILDING OR PART OF A BUILDING IS TRANSFERRED TOGETHER WITH ANY MACHINERY , PLANT, FURNITURE, FITTINGS OR OTHER THING WHICH MACHINERY, PLANT FURNITURE, FITTINGS OR OTHER THING S ALSO. EXPLANATION- FOR THE PURPOSES OF THIS [SUB-CLAUSE], LAND BUILDING PART OF A BUILDING, MACHINERY, PLANT, FURN ITURE, FITTINGS AND OTHER THINGS INCLUDE ANY RIGHTS THEREI N; (II) ANY RIGHTS OF THE NATURE REFERRED TO IN CLAUSE (B) OF SUB- SECTION (1) OF SECTION 269AB.. 3.10 . SIMILARLY, IN SECTION 269 UA ALSO IDENTICAL DEFIN ITION HAS BEEN GIVEN. IN THESE CASES, RIGHTS IN LAND & BUI LDING HAVE BEEN SPECIFICALLY INCLUDED AS PER REQUIREMENT OF TH ESE SECTIONS. IN OTHER WORDS, TERM LAND & BUILDING AN D RIGHTS THEREIN HAVE BEEN CLEARLY UNDERSTOOD AND TREATED A S INDEPENDENT FROM EACH OTHER. THUS, THE PERUSAL OF T HE DEFINITIONS GIVEN IN THESE SECTIONS WHEN COMPARED W ITH SECTION 50C SHOWS THAT LEGISLATURE WAS CONSCIOUS ABOUT THE PROPER EXPRESSION TO BE USED AS PER ITS INTENTION, SCOPE, OBJECT AND PURPOSE OF THE SECTION 50C, WHEREIN IT HAS BEEN EXP RESSLY MENTIONED THAT CAPITAL ASSET SHOULD BE LAND OR BUI LDING OR BOTH. IT HAS NOT BEEN MENTIONED THAT ANY TYPE OF RIGHTS SHALL ALSO BE INCLUDED IN THE DEFINITION OF CAPITAL ASSET S TO BE TRANSFERRED BY AN ASSESSEE. 3.11. THE PROVISIONS OF SECTION 50C ARE DEEMING PROVISIO NS. IT IS SETTLED LAW AND WELL ACCEPTED RULE OF INTERPRETA TION THAT DEEMING PROVISIONS ARE TO BE CONSTRUED STRICTLY. TH US, WHILE VOLTAS LTD. 12 INTERPRETING DEEMING PROVISIONS NEITHER ANY WORDS C AN BE ADDED NOR DELETED FROM LANGUAGE USED EXPRESSLY. WE SHOULD APPLY THE RULE OF STRICT INTERPRETATION AS WELL A S RULE OF LITERAL CONSTRUCTION WHILE UNDERSTANDING THE MEANI NG AND SCOPE OF DEEMING PROVISIONS. IN OUR OPINION, UNDER THE GIVEN FACTS AND CIRCUMSTANCES, LD. COUNSEL HAS RIGHTLY CO NTENDED THAT SINCE THE IMPUGNED CAPITAL ASSET TRANSFERRED B Y THE ASSESSEE UPON WHICH LONG TERM CAPITAL GAIN HAS BEEN COMPUTED BY THE AO IS ON ACCOUNT OF TRANSFER OF DEV ELOPMENT RIGHTS IN THE LAND OF THE ASSESSEE. THE LAND ITSELF HAS NOT BEEN TRANSFERRED BY THE ASSESSEE. THUS, IN OUR OPINION P ROVISIONS OF SECTION 50C HAVE BEEN WRONGLY APPLIED UPON THE IMPU GNED TRANSACTION. THUS, WE REVERSE THE ACTION OF LOWER A UTHORITIES IN APPLYING THE PROVISIONS OF SECTION 50C AND IN SUBST ITUTING ANY VALUE OTHER THAN THE AMOUNT OF ACTUAL SALES CONSIDE RATION RECEIVED BY THE ASSESSEE. IT IS ALSO NOTED BY US TH AT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THERE IS NO OTH ER PROVISIONS ON THE STATUTE WHICH PERMIT THE AO TO SU BSTITUTE ANY OTHER VALUE WITH THE FULL AMOUNT OF CONSIDERATI ON ACTUALLY RECEIVED BY THE ASSESSEE, WHILE COMPUTING INCOME UN DER THE HEAD OF CAPITAL GAINS. UNDER THESE CIRCUMSTANCES, G ROUND NO.1.2 OF THE MAIN GROUNDS OF THE ASSESSEE IS ALLOW ED. SINCE WE HAVE ALLOWED THE GROUNDS OF THE ASSESSEE ON THE PRELIMINARY OBJECTION ITSELF AND THEREFORE WE ARE N OT DEALING WITH OTHER ARGUMENTS AT THIS STAGE AS THESE HAVE BE EN BECOME ACADEMIC IN NATURE. THUS, SUPPLEMENTARY GROUND NOS. 1.5 TO 1.10 AND ORIGINAL GROUND NOS.1.1 TO 1.4 ARE PARTLY ALLOWED WITH OUR DIRECTIONS AS GIVEN ABOVE. VOLTAS LTD. 13 4. GROUNDS NO.2.1 & 2.2 OF THE ORIGINAL GROUNDS AND 2. 3, 2.4 & 2.5 OF THE SUPPLEMENTARY GROUNDS DEAL WITH THE GRIEVANCE OF THE ASSESSEE WITH RESPECT TO ACTION OF THE LOWER AUTHORITIES IN COMPUTING THE SHORT TERM CAPITAL GAI N ON THE VALUATION DONE BY THE STAMP VALUATION AUTHORITY ON SALE OF RESIDENTIAL FLAT AT JYOTI DARSHAN BUILDING, MUMBAI. IT IS NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO SUGGESTED TO APPLY THE VALUE ADOPTED BY THE STAMP V ALUATION AUTHORITY AS DEEMED VALUE OF CONSIDERATION FOR THE IMPUGNED FLAT. BUT, THE ASSESSEE OBJECTED FOR THE SAME ON MA NY GROUNDS AND THE SUBMISSIONS OF THE ASSESSEE HAVE ALSO BEEN PARTLY REPRODUCED BY THE AO IN ITS ASSESSMENT ORDER. 4.1. UNDER THESE CIRCUMSTANCES, AS PER PROVISIONS OF SE CTION 50C, BEFORE SUBSTITUTING THE AMOUNT OF SALES CONSID ERATION SHOWN BY THE ASSESSEE, THE AO WAS DUTY BOUND TO REF ER THE MATTER TO THE VALUATION OFFICER AND ALSO COMPLY WIT H THE PROCEDURE AS HAS BEEN FURTHER DESCRIBED IN SECTION 50C. IT IS BROUGHT TO OUR NOTICE THAT THE AO FAILED IN ITS DUT Y TO DO SO. SIMILARLY, LD. CIT(A) HAS ALSO UPHELD THE ACTION OF AO WITHOUT GIVING ANY PROPER REASONING. UNDER THESE CIRCUMSTAN CES, WE FIND IT APPROPRIATE TO SEND THESE GROUNDS BACK TO T HE FILE OF THE AO. THE ASSESSEE SHALL BE FREE TO RAISE ALL LEGAL A ND FACTUAL ISSUES AND TO SUBMIT REQUISITE DETAILS AND DOCUMENT ARY EVIDENCES. IN CASE AO IS KEEN TO INVOKE PROVISIONS OF SECTION 50C, THEN HE MUST FIRST REFER THE MATTER TO THE VAL UATION OFFICER. THE VALUATION OFFICER SHALL ALSO GIVE ADEQ UATE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE GIVIN G ITS REPORT. VOLTAS LTD. 14 THE AO SHALL PROVIDE A COPY OF THE VALUATION REPORT TO THE ASSESSEE TO SEEK ITS REPLY AND SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND AFTER CONSIDERING TH E ENTIRE MATERIAL HELD ON RECORD ON OBJECTIVE BASIS, THIS IS SUE SHALL BE DECIDED AFRESH. THESE GROUNDS MAY BE TREATED AS ALL OWED FOR STATISTICAL PURPOSES. 5. GROUND NO.3: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF AO IN MAKING THE DISALLOWANCE U/S 14A . 5.1. IT IS NOTED FROM THE PERUSAL OF THE ORDER OF THE L D. CIT(A) THAT LD. CIT(A) HAS DIRECTED THE AO TO FOLLOW THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04. I T IS REQUESTED DURING THE COURSE OF HEARING THAT DIRECTI ON GIVEN BY THE LD. CIT(A) SHOULD BE REINFORCED. ACCORDINGLY, W E DIRECT THE AO TO FOLLOW THE DIRECTIONS GIVEN BY THE LD. CIT(A) AND FOLLOW THE ORDER OF THE TRIBUNAL FOR A.Y.2003-04 AFTER GIV ING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO.4: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN UPHOLDING THE AOS CONT ENTION THAT AMENDMENT IN CLAUSE (II) OF EXPLANATION 1 OF SECOND PROVISO TO SUB-SECTION (2) OF SECTION 115JB INSERTED BY THE F INANCE ACT OF 2006 W.E.F. 01.04.2007 WAS CLARIFICATORY IN NATU RE AND THUS HE UPHELD THE ACTION OF AO IN APPLYING THE AMENDMEN T IN THE IMPUGNED ASSESSMENT YEAR. 6.1. WITH THE ASSISTANCE OF THE PARTIES BEFORE US, IT I S NOTED BY US THAT THE AMENDED PROVISIONS READ AS FOLLOWS: THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISION S OF SECTION 10(OTHER THAN THE PROVISIONS CONTAINED IN C LAUSE VOLTAS LTD. 15 (38) THEREOF OR SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT. 6.2 . IT WAS UNANIMOUSLY STATED BY BOTH THE PARTIES BEF ORE US THAT THE SAID AMENDMENT MAY CREATE ADDITIONAL TAX L IABILITY IN THE HANDS OF THE ASSESSEE. IT IS NOTED BY US THAT I T HAS NOWHERE BEEN MENTIONED THAT THIS AMENDMENT IS CLARI FICATORY IN NATURE. THE AMENDMENT SEEKS TO BRING OUT A CHANG E IN THE SUBSTANTIVE LAW. UNDER THESE CIRCUMSTANCES, WE FIND THAT THE FORCE OF THIS AMENDMENT CANNOT BE APPLIED RETROSPEC TIVELY IN THE IMPUGNED ASSESSMENT YEAR I.E. A.Y. 2005-06. THU S, WE DIRECT THE AO TO RECOMPUTE THE AMOUNT OF BOOK PROFI TS AND TAX PAYABLE U/S 115JB WITHOUT CONSIDERING THE AFORESAID AMENDMENT. THUS GROUND MAY BE TREATED AS ALLOWED. 6.3 . AS A RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. NOW WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO.5331/MUM/09. THE ASSESSEE HAS FILED THE APPEAL ON FOLLOWING GROU NDS: GROUND NO 1: LONG TERM CAPITAL GAIN ON SALE OF LAND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] ERRED IN UP HOLDING THE ACTIONS OF THE ASSESSING OFFICER [HEREINAFTER R EFERRED TO AS THE AO] OF COMPUTING THE LONG TERM CAPITAL GA INS ON TRANSFER OF DEVELOPMENT RIGHTS IN RESPECT OF 2 PLOT S OF LAND AT THANE, BASED ON THE VALUES ASSIGNED BY THE DISTRICT VALUATION OFFICER [HEREINAFTER REFERRED TO AS THE DVO] THE AO PASSED A RECTIFICATION ORDER U/S 54 DAT ED 8.5.2008 WHEREBY THE SUBSTITUTED THE STAMP DUTY VALUE EARLIER CONSIDERED BY HIM AT THE TIME OF ASSESSMENT, WITHOUT THE VALUES ASSIGNED BY THE DVO. THE CIT(A) FURTHER ERRED IN UPHOLDING THE ACTIONS O F THE AO IN CONSIDERING THE FAIR MARKET VALUE (FMV) AS ON VOLTAS LTD. 16 1.4.1981 AS ASCERTAINED BY THE DVO IN RESPECT OF TH E AFORESAID PLOTS OF LAND. 1.2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE 2 PLOTS OF LAND CERTAIN NEGATIVE FACTORS AND IMPEDIME NTS AND SHOULD HAVE CONSIDERED THE ACTUAL FACTS AND CIRCUMSTANCES AND CONSIDERATION RECEIVED BY THE APPELLANT COMPANY FOR TRANSFER OF 2 PLOTS OF LAND O N AS IS WHERE IS BASIS. THE CIT(A) OUGHT TO HAVE ALSO CONSIDERED THE RELIED ON THE REGISTERED VALUERS RE PORTS SUBMITTED BY THE APPELLANT COMPANY. THE DVO HAD NOT CONSIDERED ALL THE RELEVANT FACTORS AND IMPEDIMENTS ATTACHED TO THE 2 PLOTS OF LAND IN QUESTION AND MAD E HIS OWN ASSUMPTIONS FOR DETERMINING THE FMV OF THE LAND. THE AO PASSED A RECTIFICATION ORDER U/S 154 BASED ON THE VALUES ASSIGNED BY THE DVO AND IGNORED THE FACTS SUBMITTED BY THE APPELLANT COMPANY. 7. DURING THE COURSE OF HEARING IT WAS SUBMITTED BY T HE LD. COUNSEL OF THE ASSESSEE THAT IN CASE RELIEF IS PROV IDED IN THE IDENTICAL GROUNDS OF ITA NO.5330/MUM/09, THEN THIS APPEAL MAY BE TREATED AS INFRUCTUOUS. 7.1. SINCE WE HAVE ALLOWED THE RELIEF IN IDENTICAL GROU NDS OF ITA NO.5330, THEREFORE THIS APPEAL IS TREATED AS IN FRUCTUOUS AND DISMISSED AS SUCH. NOW WE SHALL TAKE UP APPEAL FILED THE DEPARTMENT IN ITA NO. 5320/MUM/09. THE REVENUE FILED APPEAL ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE TRADE GUARANTEE PROVISION OF RS. 528.36 LACS MADE FOR EXPENSES TO BE INCURRED DURING THE WARRANTY PERIOD AS BUSINESS EXPENDITURE IGNORING THE FACT THAT THE DECISION OF THE HON'HLE ITAT ON THE IDENTICAL ISSUE FOR THE EARLIER YEARS HAS NO T VOLTAS LTD. 17 BEEN ACCEPTED BY THE DEPARTMENT AND IS BEING CONTESTED IN FURTHER APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION AMOUNTING TO RS.12 LACS MADE BY THE AO ON ACCOUNT OF WEALTH TAX IN COMPUTING THE BOOK PROFIT U/S. 115JB. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR AL TER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSAR Y. 8. GROUND NO.1: IN THIS GROUND, THE REVENUE HAS AGITATED THE ACTION OF LD. CIT(A) FOR DIRECTING THE AO TO ALLOW THE TRADE GUARANTEE PROVISION OF RS.528.36 LAKHS MADE FOR EXP ENSES TO BE INCURRED DURING THE WARRANTY PERIOD AS BUSINESS EXPENDITURE. IT IS NOTED THAT THIS ISSUE HAS BEEN D ECIDED BY THE LD. CIT(A) BY RELYING UPON THE ORDER OF THE TRI BUNAL IN ASSESSEES OWN CASE OF EARLIER YEARS. DURING THE CO URSE OF HEARING IT WAS FAIRLY SUBMITTED BY THE LD. DR THAT THIS ISSUE STANDS COVERED WITH THE ORDER OF THE TRIBUNAL OF EA RLIER YEARS. WE HAVE GONE THROUGH THE FACTS RECORDED BY THE LD. CIT(A) AND FIND THAT LD. CIT(A) HAS ANALYSED THE FACTS PROPERL Y AND FOLLOWED THE ORDER OF THE TRIBUNAL OF EARLIER YEARS . NO DISTINCTION IN FACTS OR LEGAL POSITION HAS BEEN BRO UGHT BEFORE US. WE DO NOT FIND ANY NEED OR JUSTIFICATION TO INT ERFERE IN THE FINDINGS OF LD. CIT(A) AND THEREFORE, ORDER OF LD. CIT(A) WAS UPHELD AND GROUND RAISED BY THE REVENUE IS DISMISSE D. 9. GROUND NO.2: IN THIS GROUND THE REVENUE HAS CONTENDED ACTION OF LD. CIT(A) IN DELETING THE ADDITION AMOUN TING TO RS.12 LAKHS MADE BY THE AO ON ACCOUNT OF WEALTH TAX IN COMPUTING BOOK PROFIT U/S 115JB. VOLTAS LTD. 18 9.1. IT IS NOTED THAT LD. CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE FOLLOWING THE ORDER OF THE TRIBUNAL DATED 14.01.2009 FOR A.Y. 2002-03 & 2003-04. 9.2. DURING THE COURSE OF HEARING IT WAS FAIRLY SUBMITTE D BY THE LD. DR THAT THIS ISSUE IS ALSO COVERED IN FAVOU R OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THERE IS NO CHANGE IN FACTS OR LEGAL POSITION. THUS, IN OUR VIEW, NO INTE RFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A) AND THERE FORE, SAME IS UPHELD. GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 9.3 . AS A RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. 10. IN THE RESULT, THESE APPEALS FILED BY THE ASSESSEE ARE ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 16 /09/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI