RAVIKIRAN PROPERTIES P. LTD, MUMBAI V. ITO 2(3)-1, MUMBAI

ITA 5520/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2720 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 01-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Business income; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 5520/M/08 ASSESSMENT YEAR: 2004-05 M/S RAVIKIRAN PROPERTIES PVT. LTD., APPELLAN T 301, GUNDECHA CHAMBERS, N.M. ROAD, MUMBAI 400 023 (PAN AAACR2968K) VS. INCOME TAX OFFICER, RESPONDENT WARD 2(3)(1), AAYAKAR BHAVAN, MUMBAI 400 023. APPELLANT BY : MR. VIJAY KOTHARI RESPONDENT BY : MR. L.K. AGRAWAL O R D E R PER A.L. GELHOT, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A), MUMBAI, PASSED ON 01.07.2008 FOR THE AS SESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED SIX GROUNDS OF APPEAL, T HE SUM AND SUBSTANCE WHICH IS WHETHER THE AO IS CORRECT IN EST IMATING THE VALUE OF THE FLAT AT RS. 35.00 LAKH AGAINST THE DECLARATI ON OF VALUE BY THE ASSESSEE FOR RS. 12,60,000/- FOR THE PURPOSE OF COM PUTING BUSINESS PROFIT U/S 28(IV) ON ACCOUNT OF SURRENDER OF RIGHTS ON MAHIM PLOT IN LIEU OF FLAT IN THE PROPOSED BUILDING. ANOTHER ISSU E IS IN RESPECT OF LEVY OF INTEREST U/S 234 B & 234 C OF THE ACT. ITA NO. 5520/MUM/08 M/S RAVIKIRAN PROPERTIES PVT. LTD.. 2 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY INCORPORATED ON 12.06.1995 ENGAGED IN THE BUSINESS OF DEVELOPMENT OF IMMOVABLE PROPERTIES. ONE PLOT OF LAND MEASURING 240.49 SQ. METRES WAS ACQUIRED AT PATRA CHAWL, PITAMBER LANE, MAHIM, MUMBAI BY WAY OF AN AGREEMENT FOR SALE DATED 03.08.1995 FR OM THREE PERSONS AND ALSO A TRIPARTITE AGREEMENT DATED 30.04.2003 FO R A CONSIDERATION OF RS. 50 LAKHS AGAINST WHICH THE ASSESSEE HAD PAID RS. 10,00,000/- TO THE LAND OWNERS. THE SAID PLOT WAS PURCHASED FOR THE PURPOSE OF BUSINESS THEREFORE SAME WAS TAKEN AS SOCK IN TRADE. THE SAID AGREEMENT WAS CANCELLED ON 30.4.2003 .AS PER THE AG REEMENT THE ASSESSEE WAS TO RECEIVE A FLAT MEASURING 550SQ FT I N THE BUILDING TO BE CONSTRUCTED. THE SAID FLAT WAS TAKEN AS INVESTMENT .THE VALUE OF THAT FLAT WAS TAKEN AT RS 12.60 LAKHS AND SAME WAS SHOWN UNDER THE HEAD INVESTMENT IN THE BALANCE SHEET AS ON 31.03.2004. AFTER EXAMINING THE ISSUE BY RAISING QUERIES AND COLLECTING INFORMA TION FROM THE ASSESSEE, THE AO FOUND THAT THE ASSESSEE BY WAY OF SURRENDERING ITS RIGHT IN THE PROPERTY I.E. PLOT, ACQUIRED ANOTHER R IGHT BY WAY OF FLAT THE MARKET VALUE OF WHICH WAS NOT LESS THAN RS. 35 LAKH S WHERE AS THE ASSESSEE HAD CLAIMED THE SAME TO BE AT RS. 12.60 LA KHS. THEREFORE, THE AO TREATED THE DIFFERENTIAL AMOUNT OF RS. 22.40 LAKH AS BUSINESS INCOME OF THE ASSESSEE UNDER SECTION 28(IV) OF THE ACT. THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE LIMITED ISSUE TO BE DECIDED BY US IS IN RESPECT OF MARKET VALUE OF ASSET AT THE TIME OF CONVERSION OF CONVERSION FROM STOCK IN TRADE TO ASSET FOR THE PURPOSE OF CALCULAT ION OF BUSINESS INCOME U/S 28(IV). THE ASSESSEE DECLARED MARKET VAL UE OF ASSET RS. 12,60,000/- WHEREAS THE AO TAKEN THE SAME AT RS. 35 .00 LAKHS. IT WAS SUBMITTED THAT THE PROPOSED ASSET WAS SOLD IN AY 2007-08 AND SHORT TERM CAPITAL GAIN WAS OFFERED FOR TAXATION BY TAKING COST OF THAT ITA NO. 5520/MUM/08 M/S RAVIKIRAN PROPERTIES PVT. LTD.. 3 ASSET AT RS. 13,35,000/-. THE RELEVANT DETAILS IN T HIS REGARD FROM THE ASSESSEES COMPUTATION OF TOTAL INCOME FOR AY 2007- 08 ARE AS UNDER:- II CAPITAL GAINS/LOSS SHORT TERM CAPITAL GAIN SALE VALUE 25,00,000 LESS COST OF FLAT 13,35,000 11,65,000 ======== 4.1 THE ABOVE FACTS ARE UNDISPUTED FACTS OF THE CA SE. WE FIND THAT WHEN THE ASSESSEE SOLD THE SAME ASSET/FLAT IN AY 20 07-08 THE COST OF FLAT WAS TAKEN AT RS. 13,35,000/- WHILE CALCULATING SHORT TERM CAPITAL GAINS. IT WAS SUBMITTED THAT THE DEPARTMENT HAS BEE N ACCEPTED THE SAID COST IN AY 2007-08. WHEN THAT WAS THE COST OF RS. 13,35,000/- IN AY 2007-08 OF THE FLAT, THE SAME AMOUNT MUST BE TH E MARKET RATE OF THE FLAT/PROPERTY AT THE TIME OF CONVERSION OF STOC K-IN-TRADE TO INVESTMENT IN AY 2004-05. BECAUSE MARKET RATE OF TH E FLAT/PROPERTY AT THE TIME OF CONVERSION OF STOCK-IN-TRADE TO ASSET/I NVESTMENT IN AY 2004-05 MUST BE THE COST OF THE SAID PROPERTY WHEN IT WAS SOLD IN AY 2007-08. IN OTHER WORDS, THERE IS NO DISPUTE ABOUT THE COST OF THAT FLAT/ RIGHT IN PROPERTY FOR RS. 13,35,000/- IN AY 2007-08.THEREFORE, SAME SHOULD HAVE THE ESTIMATION OF THE MARKET VALU E OF PROPERTY IN AY 2004-05. WE, THEREFORE, REJECTED BOTH THE ESTIMA TION MADE BY THE AO AT RS. 35,00,000/- AND THE ESTIMATION BY THE ASS ESSEE AT RS. 12,60,000/- AND AO IS DIRECTED TO TAKE THE VALUE O F THE FLAT AT RS. 13,35,000/- IN AY 2004-05 FOR THE PURPOSE OF CALCUL ATION OF PROFIT UNDER SECTION 28(IV) OF THE ACT ON ACCOUNT OF SURRE NDER OF RIGHTS ON MAHIM PLOT IN LIEU OF FLAT IN THE PROPOSED BUILDING . CHARGING INTEREST IS CONSEQUENTIAL, THE AO IS DIRECTED ACCORDINGLY. ITA NO. 5520/MUM/08 M/S RAVIKIRAN PROPERTIES PVT. LTD.. 4 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AS INDICATED ABOVE. ORDER PRONOUNCED ON 10 TH DECEMBER, 2009. SD/- SD/- (D. MANMOHAN) (A.L. GEHLOT ) VICE PRESIDENT ACCOUNTAN T MEMBER DATED: 10 TH DECEMBER, 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, D BENCH , I.T.A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTALS 1. DRAFT DICTATED ON 18.11.09 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 19.11.09 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER