ITO 8(3)(4), MUMBAI V. UNIVERSAL FOUNDRY P.LTD, MUMBAI

ITA 5656/MUM/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0942 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 01-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANTOSH PA RM
• Assessee Lawyers: POOJA SWAROOP
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Opportunity of being heard; Fair market value; Valuation report
• Section: 143(3); 50C

Judgement Text

ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 1 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, M UMBAI BEFORE SHRI B.R BASKARAN , AM AND SHRI RAVISH SOOD, JM ITA(S) NOS. 5710/MUM/2012 ( / ASSESSMENT YEAR:2007 - 08) UNIVERSAL FOUNDARY P. LTD. OLD NAGARDAS ROAD, MOGRA VILLAGE, ANDHERI (EAST), MUMBAI 400 069. / VS. INCOME - TAX OFFICER 8(3)(4), MUMBAI. ./ ./ PAN NO. AAACU5016B ( / APPELLANT) : ( / RESPONDENT ) ITA(S) NOS. 5656 TO 565 8 /MUM/2012 ( / ASSESSMENT YEAR:2006 - 07 TO 200 8 - 0 9 ) INCOME - TAX OFFICER 8(3)(4), MUMBAI . / VS. UNIVERSAL FOUNDARY P. LTD. OLD NAGARDAS ROAD, MOGRA VILLAGE, ANDHERI (EAST), MUMBAI 400 069. ./ ./ PAN NO. AAACU5016B ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI. SANTOSH PA RM AR / RESPONDENT BY : MS. POOJA SWAROOP, D.R. / DATE OF HEARING : 02.11.2017 ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 2 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD / DATE OF PRONOUNCEMENT : 10 .01.2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT SET OF APPEALS ARE DIRECTED AGAINST THE ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 18, MUMBAI , FOR A.YS 2006 - 07, 2007 - 08 AND 2008 - 09, EACH DATED 21.06.2012, WHICH IN ITSELF ARISES FROM THE ORDERS PASSED BY THE A.O UND ER SEC. 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT), DATED 30.12.2008 , 31.12.2009 AND 21.12.2010, RESPECTIVELY. TH AT BOTH THE ASSESSEE AND THE REVENUE HAVE FILED CROSS APPEALS AGAINST THE ORDER OF THE CIT(A) FOR A.Y. 2007 - 08 , WHILE FOR THE REVENUE IS IN APPEAL AGAINST THE ORDERS OF THE CIT( A ) FOR A.YS 2006 - 07 AND 2008 - 09. THAT AS CERTAIN COMMON ISSUES ARE INVOLVED IN THE SE APPEALS, THEREFORE, THEY ARE TAKEN UP AND DISPOSED OF BY WAY OF A CONSOLIDATE ORDER. WE SHALL FIRST TAKE UP THE APPEAL OF THE RE VENUE FOR A.Y. 2006 - 07, WHEREIN THE ORDER OF THE CIT(A) HAD BEEN ASSAILED BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN NOT UPHOLDING THE APPLICATION OF SEC. 50C OF THE ACT, WHICH WAS RIGHTLY INVOKED BY THE AO ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN DIRECTING THE AO TO ACCEPT THE SALE CONSIDERATION AS PER THE SALE AGREEMENTS WHICH IS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 50C OF THE ACT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN RELYING Y \ UPON VARIOUS DECISIONS OF HIGH COURTS WHICH WERE RENDERED IN 1979, 1980 AND 1993, I.E PRIOR TO THE INSERTION OF SEC. 50C IN THE ACT BY FINANCE ACT, 200 2, W.E.F 01.04.2003 ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 3 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN NOT APPRECIATING THAT THE ITAT, MUMBAI F SPECIAL BENCH IN THE CASE OF ITO VS. UNITED MARINE ACADEMY, 138 TTJ (MUMBAI)(SB) 129 HAS HELD THAT THE PROVI SIONS OF SEC. 50C ARE APPLICABLE TO TRANSFER OF DEPRECIABLE ASSETS COVERED BY SEC. 50 AND THEREFORE, CAPITAL GAINS ARISING FROM SUCH TRANSFER HAVE TO BE COMPUTED BY ADOPTING THE STAMP DUTY VALUATION. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND S OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN PROPERTY BUSINESS HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2006 - 07 ON 28.11.2006, DECLARING INCOME OF RS. 27,093/ - . THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBTAINED THE DETAILS OF THE SUNDRY CREDITORS OF RS. 2,00,18,823/ - REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2006 - 07. THE A.O DELIBERATING ON THE DETAILS OF THE CREDITORS OBSERVED THAT THE SAME COMPRISED OF AN AMOUN T OF RS. 1,81,21,800/ - SHOWN UNDER THE HEAD OWNERSHIP OF GALA. THE ASSESSEE SUBMITTED BEFORE THE A.O THAT THE AMOUNT OF RS. 1,81,21,80 0 / - WAS THE ADVANCE RECEIVED FROM ITS TENANTS OF THE GALAS IN ITS PREMISES AT UNIVERSAL ESTATE FOR CONVERTING THEIR TE NANCY RIGHTS INTO OWNERSHIP. THE A.O OBSERVED THAT THE ASSESSEE HAD TOTAL 31 TENANTS IN ITS PREMISES AT UNIVERSAL ESTATE . THAT A PERUSAL OF THE FACTS REVEALED THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2006 - 07 HAD ENTERED INTO A GREEMENT FOR SALE OF 19 INDUSTRIAL GALAS. THAT THE BUYERS COMPRISED OF 17 REGULAR TENANTS WHO WERE ALREADY IN POSSESSION OF THE RESPECTIVE PROPERTIES, WHILE FOR TWO BUYERS WERE NOT THE EXISTING TENANTS OF THE ASSESSEE AND WERE ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 4 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD INDEPENDENT BUYERS . THE ASSESSEE CLAIMED THAT AS THE POSSESSION OF THE RESPECTIVE PROPERTIES WAS DELIVERED TO THE BUYERS IN THE IMMEDIATELY SUCCEEDING YEAR, VIZ. THE PERIOD RELEVANT TO A.Y. 2007 - 08, THEREFORE, THE INCOME ARISING FROM THE SALE OF THE PROPERTY WAS TAKEN AS TH E INCOME OF THE SAID SUCCEEDING YEAR. HOWEVER, THE A.O BEING OF THE VIEW THAT AS THE SALE DEEDS FOR ALL THE 19 INDUSTRIAL GALAS WERE EXECUTED DURING THE YEAR UNDER CONSIDERATION AND THE CONDITIONS CONTEMPLATING A TRANSFER AS PER SEC. 2(47)(V) WERE SATISFIE D, THEREFORE, THE INCOME FROM THE SALE OF THE PROPERTY /CONVERSION OF THE TENANCY RIGHTS INTO OWNERSHIP WERE LIABLE TO BE BROUGHT TO TAX DURING THE YEAR UNDE R CONSIDERATION ITSELF . 4. THAT AS THE VALUE THAT WAS ADOPTED BY THE STAMP VALUATION AUTHORITY AT RS . 2,06,10,719/ - WHILE REGISTERING THE RESPECTIVE SALE DEEDS OF THE AFORESAID 19 INDUSTRIAL GALAS WAS MORE THAN THE SALE CONSIDERATION OF RS. 1,81,21,800/ - RE C EIVED BY THE ASSESSEE , THEREFORE, THE A.O TAKING RECOURSE TO THE PROVISIONS OF SEC. 50C OF THE ACT COMPUTED THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAIN BY ADOPTING THE VALUE OF RS. 2,06,10,719/ - AS THE SALE CONSIDERATION. THE A.O THEREAFTER RECOMPUTING THE WRITTEN DOWN VALUE OF THE BUILDING FORMING PART OF THE BLOCK OF ASSETS ON 01.04.2 005 AT RS. 3,15,025/ - , WORKED OUT THE INCOME OF THE ASSESSEE FROM THE SALE OF THE AFORESAID INDUSTRIAL GALAS CHARGEABLE UNDER THE HEAD CAPITAL GAIN AT RS. 2,02,95,694/ - . 5. AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER OF THE A.O BEFORE THE CIT(A). THE CIT(A ) OBSERVED THAT AS THE ASSESSEE HAD CLAIMED THAT THE VALUE OF THE INDUSTRIAL GALAS AS ADOPTED BY THE STAMP VALUATION AUTHORITY WAS HIGHER THAN THEIR FAIR MARKET VALUE (FOR SHORT F.M.V), THEREFORE, CALLED FOR A REMAND REPORT FROM THE A.O. THE A.O DURING T HE COURSE OF THE REMAND PROCEEDINGS MADE A REFERENCE TO THE DVO UNDER ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 5 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD SEC. 50C(2) OF THE ACT. THE A.O AFTER RECEIVING THE VALUATION REPORTS FROM THE OFFICE OF THE ASS ISTANT VALUATION OFFICER - 1, MUMBAI (FOR SHORT AVO), OBSERVED THAT OUT OF 31 PROPERTIES R EFERRED FOR VALUATION, IN FIVE CASES THE AMOUNT OF SALE CONSIDERATION RECEIVED BY THE ASSESSEE AS PER THE AGREEMENT TO SELL WAS MORE THAN THE FAIR MARKET VALUE , WHILE FOR IN THE REMAINING 26 PROPERTIES THE FAIR MARKET VALUE DETERMINED BY THE AVO W A S FOUND TO BE MORE THAN THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE AS PER THE AGREEMENT TO SELL. 6. THE ASSESSEE DURING THE COURSE OF THE APPELLATE PROCEEDINGS OBJECTED TO THE VALUATION DONE BY THE AVO. IT WAS SUBMITTED BY THE ASSESSEE THAT THOUGH THE AVO HA D CLAIMED IN THE VALUATION REPORT THAT THE COMBINATION OF PHYSICAL METHOD OF VALUATION USING APPROPRIATE SALE INSTANCE AND RENT CAPITALISATION WAS ADOPTED FOR VALUATION OF PROPERTY, BUT HOWEVER , THE PROPERTIES WERE VALUED BY HIM BY ADOPTING ONLY THE PHYS ICAL METHOD OF VALUATION USING APPROPRIATE SALE INSTANCE IN RESPECT OF ALL THE 26 PROPERTIES. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE VALUATION OF THE PROPERTIES BY THE AVO BY USING APPROPRIATE SALE INSTANCE WAS CONTRARY TO THE PROVISIONS OF LAW. THE ASSESSEE SUBMITTED THAT AS ALL THE 26 GALAS/PROPERTIES SOLD BY THE ASSESSEE WERE LET OUT TO VARIOUS PERSONS OVER THE YEARS, THEREFORE, AS PER SCHEDULE III - PART B OF THE WEALTH TAX ACT, 1957, THE SAID PROPERTIES SHOULD HAVE BEEN VALUED BY USING RENT C APITALISATION METHOD. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) A CHART, WHICH REVEALED THAT THE VALUATION OF ALL THE 31 GALAS/PROPERTIES ARRIVED AS PER SCHEDULE III PART B OF THE WEALTH TAX ACT, 1957, REVEALED THAT THE FAIR MARKET VALUE OF THE AFORESAID PROPERTIES WAS LESS THAN THE VALUE FOR WHICH THE PROPERTIES HAD BEEN SOLD BY THE ASSESSEE AS PER THE RESPECTIVE AGREEMENTS TO SELL. ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 6 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD 7. THE ASSESSEE FURTHER OBJECTED TO THE VALUATION OF THE AVO ON TWO COUNTS, VIZ. (I). THAT THE AVO HAD ERRED IN UNIFORMLY CONSIDERING 1977 AS THE YEAR OF CONSTRUCTION FOR ALL THE 26 PROPERTIES, AS MOST OF THE GALAS/BUILDINGS WERE CONSTRUCTED BY THE ASSESSEE IN THE YEAR 1962, WHILE FOR IN THE YEA R 1965 A REVISED PLAN WAS SUBMITTED TO THE BMC FOR EXTENSION OF ADDITIONAL CONSTRUCTION WHICH WAS COMPLETED IN THE YEAR 1977 ; AND (II). THAT THE DEDUCTION OF 20% ALLOWED BY THE AVO ON ACCOUNT OF THE STRUCTURE OF THE BUILDINGS BEING AN OLD SHED WAS NOT IN C ONFORMITY WITH THE RATE OF DEPRECIATION AS WAS ALLOWED ON OLD BUILDINGS FOR THE PURPOSES OF STAMP DUTY VALUATION, AS UNDER: COMPLETED AGE OF BUILDING IN YEARS. VALUE FOR R.C.C PUKKA STRUCTURE /OTHER PUCCA STRUCTURE AFTER DEPRECIATION VALUE FOR HALF OR SEM I - PUKKA STRUCTURE AFTER DEPRECIATION. 0 TO 2 100% 100% ABOVE 2 TO 5 95% 95% ABOVE 5 TO 10 90% 85% ABOVE 10 TO 20 80% 75% ABOVE 2 0 TO 30 70% 60% ABOVE 30 TO 40 60% 45% ABOVE 40 TO 5 0 50% 30% THUS, IN THE BACKDROP OF THE AFORESAID CONTENTION S IT WAS AVERRED BY THE ASSESSEE THAT FOR THE GALAS CONSTRUCTED IN THE YEAR 1962 IT WAS ENTITLED TO DEPRECIATION @ 50/70% AS AGAINST 20% CONSIDERED BY THE AVO. SIMILARLY, FOR THE GALAS/PROPERTIES WHICH WERE CONSTRUCTED IN THE YEAR 1977 IT WAS ENT ITLED TO GET DEPRECIATION @30%/40% AS AGAINST 20% CONSIDERED BY THE AVO. THE ASSESSEE IN THE BACKDROP OF ITS AFORESAID OBJECTIONS SUBMITTED BEFORE THE CIT(A) THAT IF THE AFORESAID MISTAKES WERE RECTIFIED/CONSIDERED, THEN THE VALUE OF THE PROPERTIES ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 7 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD WOULD B E MORE OR LESS THAN THAT SHOWN IN THE RESPECTIVE AGREEMENTS TO SELL. THE ASSESSEE THUS SUBMITTED BEFORE THE CIT(A) THAT AS THE FAIR MARKET VALUE OF THE GALAS/BUILDING AFTER CONSIDERING THE AFORESAID FACTS WOULD BE FOUND TO BE IN CONFORMITY WITH THE SALE CO NSIDERATION RECEIVED AS PER THE RESPECTIVE AGREEMENTS TO SELL, THEREFORE, THE PROVISIONS OF SEC. 50C WOULD CLEARLY BE OUSTED. 8. THE CIT(A) AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE TO THE VALUATION OF THE AVO, THEREFORE, REMANDED THE MATTER TO THE A.O FOR OBTAINING THE REPORT OF THE AVO. THE AVO MEETING OUT THE OBJECTIONS OF THE ASSESSEE SUBMITTED THAT THE RENT CAPITALIZATIO N METHOD WAS NOT FOLLOWED IN THE CASE OF THE ASSESSEE, BECAUSE THE RENT FETCHED WAS NOT REASONABLE. THE AVO SUBMITTED THAT THE RENT CAPITALIZATION METHOD COULD BE ADOPTED ONLY WHEN THE RENT IS FAIR, THEREFORE, IN THE CASE OF THE ASSESSEE AS THE RENT PAID B Y THE TENANT WAS FOUND TO BE ARBITRARY, RANGING FROM R S . 0.50 PER SQ. FT TO RS. 2.50 PER SQ. FT, WHICH WAS SU BSTANTIALLY LESS THAN THE REASONABLE RENT , THEREFORE, THE RENT CAPITALISATION METHOD WAS NOT FOLLOWED . 9. THE ASSESSEE ON RECEIPT OF THE REPORT OF T HE AVO OBJECTED TO THE SAME. IT WAS CLAIMED BY THE ASSESSEE THAT THE CONTENTION OF THE AVO WAS NOT ONLY ARBITRARY BUT ALSO BASELESS. IT WAS SUBMITTED BY THE ASSESSEE THAT A PROPERTY WHICH WAS SUBJECT TO RENT CONTROL LEGISLATION HAD TO BE VALUED BY APPLYI NG YIELD OR RENT CAPITALIZATION METHOD ONLY AND CANNOT BE VALUED BY APPLYING THE NOTIONAL MARKET VALUE METHOD. THE ASSESSEE IN SUPPORT OF ITS CONTENTION RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. ANUP KUMAR KAPO OR & OTHERS ( 1980) 125 ITR 684 (CAL) . IT WAS THUS SUBMITTED BY THE ASSESSEE THAT AS THE TENANCIES IN MUMBAI ARE STATUTORILY CONTROLLED BY THE RENT CONTROL LEGISLATIONS AND RENT FETCHED WERE LIKELY TO REMAIN UNALTERED FOR YEARS TO COME, THEREFORE, THE YIE LD OR RENT ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 8 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD CAPITALIZATION METHOD WAS THE MOST APPROPRIATE METHOD FOR VALUATION OF THE GALAS/BUILDING OF THE ASSESSEE. THE ASSESSEE ON THE BASIS OF HIS AFORESAID FACTS SUBMITTED THAT THE ADDITION MADE IN THE HANDS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC. 50C COULD NOT BE SUSTAINED AND WERE LIABLE TO BE DELETED. 10. THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE IN THE BACKDROP OF THE CASE LAW RELIED UPON, OBSERVED THAT AS THE PROPERTY OF THE ASSESSEE WAS AN OLD TENANTED PROPERTY, THEREFORE, THE M O ST APPROPRIATE METHOD FOR VALUATION WAS THE RENT CAPITALIZATION METHOD. THE CIT(A) THUS BEING OF THE VIEW THAT AS THE CONSIDERATION /SALE PRICE SHOWN BY THE ASSESSEE WAS MORE THAN THE VALUE AS PER RENT CAPITALIZATION METHOD, THE REFORE, DIRECTED THE A.O TO CONSIDER THE SALE PRICE SHOWN BY THE ASSESSEE FOR COMPUTING THE CAPITAL GAIN AND NOT THE VALUE ADOPTED BY THE A.O BY TAKING RECOURSE TO SEC. 50C OR THE VALUE DETERMINED BY THE AVO. 11. THE REVENUE BEING AGGRIEVED WITH THE ORD ER OF THE CIT(A) HAD CARRIED THE MATER IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT THE CIT(A) WHILE CONCLUDING THAT THE PROVISIONS OF SEC 50C WOULD NOT BE APPLICABLE TO THE CASE OF THE CASE HAD WRONGLY RELIED O N THE JUDICIAL PRONOUNCEMENTS WHICH WERE RENDERED PRIOR TO INSERTION OF SEC. 50C ON THE STATUTE W.E.F 01.04.2003. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). THE LD. A.R SUBMITTED THAT THE CIT(A) HAD BIFURCATED THE SALE CONSIDERATION BETWEEN LAND (70%) AND BUILDING (30%) , WHICH THUS WOULD BE LIABLE TO BE ASSESSED AS LONG TERM CAPITAL GAIN (LTCG) AND SHORT TERM CAPITAL GAIN (STCG), RESPECTIVELY. THE LD. A.R TAKING US THROUGH THE FACT S OF THE CASE SUBMITTED THAT THE CIT(A) HAD RIGHTLY CONCLUDED THAT THE VALUATION OF THE PROPERTY UNDER CONSIDERATION WAS ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 9 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD TO BE VALUED AS PER THE R ENT C APITALIZATION M ETHOD. THE LD. A.R TOOK US THROUGH THE VALUE OF THE 31 GALAS/BUILDINGS OF THE ASSESSEE IN UNIVERSAL FOUNDRY, AS DETERMINED ON THE BASIS OF RENT CAPITALIZATION METHOD PROVIDED IN SCHEDULE III PART B OF THE WEALTH TAX ACT, 1957 ( PAGE 6 OF APB). 12. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE REVENUE MISDIRECTING ITSELF AND MISCONSTRUING THE OBSERVATION S OF THE CIT(A) THAT THE PROVISIONS OF SEC. 50C WOULD NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE , HAD ASSAILED THE SAME BEFORE US. WE FIND THAT THE CIT(A) HAD CONCLUDED THAT THE PROVISIONS OF SEC. 50C WOULD NOT BE ATTRACTED IN THE CASE OF THE ASSESSEE , NOT FOR THE REASON THAT THE SAME WERE NOT APPLICABLE IN THE CASE OF DEPRECIABLE ASSETS, BUT RATHER , FOR THE REASON THAT THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE AS PER THE AGREEMENT TO SELL , WAS FOUND TO BE MORE THAN THE FAIR MARKET VALUE OF THE TENANTED GALAS/BUILDING AS DETERMINED BY APPLYING THE RENT CAPITALISATION METHOD CONTEMPLATED IN SCHED ULE III PART B OF THE WEALTH TAX ACT, 1957 . BE THAT AS IT MAY, WE HEREIN ADVERT TO THE CHALLENGE THROWN BY THE REVENUE TO THE FINDING OF THE CIT(A) THAT THE PROVISIONS OF SEC. 50C WOULD NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE. WE FIND THAT IT REMAI NS AS A MATTER OF FACT THAT AS CONCEDED BY THE A.V.O IN HIS REP O RT FILED WITH THE A.O THAT THE RENT CAPITALIZATION METHOD WAS NOT ADOPTED FOR VALUATION OF THE PROPERTY AS THE RENT FETCHED BY THE GALAS/BUILDING UNDER CONSIDERATION WAS NOT FOUND TO BE REASON ABLE. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R THAT AS THE TENANCIES IN MUMBAI ARE STATUTORILY CONTROLLED BY THE RENT CONTROL LEGISLATIONS , AND RENT FETCHED IS LIKELY TO REMAIN UNALTERED FOR YEARS TO COME, THEREFORE, THE RENT CAPITALISATION METHOD CONTEMPLATED IN SCHEDULE III PART B OF THE ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 10 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD WEALTH TAX ACT, 1957 WAS THE MOST APPROPRIATE METHOD FOR VALUATION OF THE GALAS/BUILDING OF THE ASSESSEE . WE FIND THAT OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE H IGH COURT OF CALCUTTA IN THE CASE OF CIT VS. ANUP KUMAR KAPOOR & OTHERS ( 1980) 125 ITR 684 (CAL) , WHEREIN THE HIGH COURT OBSERVED THAT I N CASE OF TENANTED PROPERTY, 'YIELD OR RENTAL METHOD' SHOULD BE APPLIED, HELD AS UNDER: TENANCIES IN CALCUTTA ARE STATUTORILY CONTROLLED BY THE RENT CONTROL LEGISLATIONS AND ITS IMPACT ON THE VALUATION OF TENANTED PROPERTIES CANNOT BE IGNORED. IN OUR VIEW, IT WOULD BE UNREASONABLE IF NOT ABSURD TO VALUE SUCH PROPERTY ON THE BASIS OF A NOTIONAL MARKET VALUE IN DISREGAR D OF SUCH CONTROL . WE THUS ARE OF THE CONSIDERED VIEW THAT AS THE TENANCIES IN MUMBAI ARE STATUTORILY CONTROLLED BY THE RENT CONTROL LEGISLATIONS AND RENT FETCHED WERE LIKELY TO REMAIN UNALTERED FOR YEARS TO COME, THEREFORE, IN THE CASE OF THE PRESENT A SSESSEE BEFORE US THE VALUATION OF THE PROPERTY, AS OBSERVED BY US HEREINABOVE, WAS REQUIRED TO BE DONE AS PER THE R EN T CAPITALIZATION METHOD. WE THOUGH ARE PRINCIPALLY IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) WHO HAD HELD THAT THE MOST APPROPRIATE M ETHOD OF VALUATION OF THE GALAS/BUILDING OF THE ASSESSEE WAS BY APPLYING THE RENT CAPITALIZATION METHOD, BUT HOWEVER, DO NOT APPROVE OF THE SUMMARY ACCEPTANCE BY HIM OF THE CLA I M OF THE ASSESSEE THAT AS THE SALE PRICE OF THE GALAS/BUILDINGS RECEIVED BY THE ASSESSEE WAS MORE THAN THE VALUE DETERMINED AS PER THE RENT CAPITALISATION METHOD, THEREFORE, NO ADDITION WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. WE THOUGH ARE NOT OBLIVIOUS OF THE FACT THAT THE ASSESSEE HAD PLACED ON RECORD THE VALUATION OF THE 31 GALAS/BUILDING AS PER THE SCHEDULE III PART B OF THE WEALTH TAX ACT, 1957, BUT THEN, WE ARE OF THE CONSIDERED VIEW THAT THE SAID VALUATION FURNISHED BY THE ASSESSEE WAS REQUIRED TO BE VERIFIED AND COULD NOT HAVE BEEN ACCEPTED ON THE VERY FACE OF IT. WE T HUS IN ALL FAIRNESS RESTORE THE MATTER TO THE FILE OF A.O, AND THEREIN DIRECT THAT THE FAIR ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 11 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD MARKET VALUE OF THE PROPERTY BE GOT DETERMINED AS PER THE RENT CAPITALIZATION METHOD. NEEDLESS TO SAY, DURING THE COURSE OF THE SET ASIDE PROCEEDINGS THE ASSESSEE S HALL BE AFFORDED SUFFICIENT OPPORTUNITY OF BEING HEARD BY THE LOWER AUTHORITIES, AND SHALL FURTHER REMAIN AT A LIBERTY TO SUPPORT ITS CLAIM ON OTHER GROUNDS AS REGARDS THE ISSUE UNDER CONSIDERATION. 13. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. ITA NO. 5 657 /MUM/2012 A.Y. 2007 - 08 1 4. WE SHALL NOW TAKE UP THE APPEAL OF THE REVENUE FOR A.Y. 2007 - 08, WHEREIN THE ORDER OF THE CIT(A) HAD BEEN ASSAILED BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN NOT UPHOLDING THE APPLICATION OF SEC. 50C OF THE ACT, WHICH WAS RIGHTLY INVOKED BY THE AO ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN DIRECTI NG THE AO TO ACCEPT THE SALE CONSIDERATION AS PER THE SALE AGREEMENTS WHICH IS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 50C OF THE ACT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN RELYING Y \ UPON VARIOUS DECISIONS OF HIGH COURTS WHICH WERE RENDERED IN 1979, 1980 AND 1993, I.E PRIOR TO THE INSERTION OF SEC. 50C IN THE ACT BY FINANCE ACT, 2002, W.E.F 01.04.2003 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN NOT APPRECIATING THAT TH E ITAT, MUMBAI F SPECIAL BENCH IN THE CASE OF ITO VS. UNITED MARINE ACADEMY, 138 TTJ (MUMBAI)(SB) 129 HAS HELD THAT THE PROVISIONS OF SEC. 50C ARE APPLICABLE TO TRANSFER OF DEPRECIABLE ASSETS COVERED BY SEC. 50 AND THEREFORE, CAPITAL GAINS ARISING FROM SUCH TRANSFER HAVE TO BE COMPUTED BY ADOPTING THE STAMP DUTY VALUATION. ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 12 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 15 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2007 - 08 ON 12.11.2007, DECLARING INCOME AT RS. NIL. THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 16 . THAT DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVED THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2007 - 08 CONVERT ED THE TENANCY RIGHTS OF 10 PARTIES INTO OWNERSHIP. THE ASSESSEE CLAIMED THAT AS THE ACCRUAL OF CAPITAL GAIN HAD TAKEN P LACE IN A.Y. 2008 - 09 AND NOT DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE INCOME ARISING FROM THE SALE OF THE PROPERTY WAS TAKEN AS THE INCOME OF THE SAID SUCCEEDING YEAR. HOWEVER, THE A.O BEING OF THE VIEW THAT AS ALL OF THE 10 AGREEMENTS WERE EXEC UTED DURING THE YEAR UNDER CONSIDERATION , THEREFORE, THE INCOME FROM THE SALE OF THE PROPERTY/CONVERSION OF THE TENANCY RIGHTS INTO OWNERSHIP WERE LIABLE TO BE BROUGHT TO TAX DURING THE YEAR UNDER CONSIDERATION. 17 . THAT AS THE VALUE THAT WAS ADOPTED BY TH E STAMP VALUATION AUTHORITY AT RS. 59,55,952/ - WHILE REGISTERING THE RESPECTIVE SALE DEEDS OF THE AFORESAID 10 GALAS WAS MORE THAN THE SALE CONSIDERATION OF RS. 33,44,000/ - RECEIVED BY THE ASSESSEE, THEREFORE, THE A.O TAKING RECOURSE TO THE PROVISIONS OF S EC. 50C OF THE ACT COMPUTED THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAIN BY ADOPTING THE VALUE OF RS. 59,55,952/ - AS THE SALE CONSIDERATION. 18 . AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER OF THE A.O BEFORE THE CIT(A). THE CIT(A) BY REFERRING T O THE OBSERVATIONS AS WERE RECORDED BY ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 13 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD HIM WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y. 2006 - 07, OBSERVED THAT AS THE PROPERTY OF THE ASSESSEE WAS AN OLD TENANTED PROPERTY, THEREFORE, THE MOST APPROPRIATE METH OD FOR VALUATION WAS THE RENT CAPITALIZATION METHOD. THE CIT(A) THUS BEING OF THE VIEW THAT AS THE CONSIDERATION/SALE PRICE SHOWN BY THE ASSESSEE WAS MORE THAN THE VALUE AS PER RENT CAPITALIZATION METHOD, THEREFORE, DIRECTED THE A.O TO CONSIDER THE SALE PR ICE SHOWN BY THE ASSESSEE FOR COMPUTING THE CAPITAL GAIN AND NOT THE VALUE ADOPTED BY THE A.O BY TAKING RECOURSE TO SEC. 50C OR THE VALUE DETERMINED BY THE AVO. 19 . THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL OF THE ASSESSEE FOR A.Y. 2007 - 08 ARE THE SAME AS WERE INVOLVED IN THE EARLIER APPEAL OF THE REVENUE FOR A.Y. 2006 - 07, MARKED AS ITA NO. 5656/MUM/2012, THEREFORE, OUR ORDER P ASSED IN THE SAID APPEAL SHALL APPLY MUTATIS MUTANDIS FOR DISPOSING OF THE PRESENT APPEAL OF THE REVENUE FOR A.Y. 2007 - 08, MARKED AS ITA NO. 5657/MUM/2012. 20 . THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR OBSERVATIONS RECO RDED WHILE DISPOSING OFF THE APPEAL OF THE REVENUE FOR A.Y. 2006 - 07, MARKED AS ITA NO. 565 6 /MUM/2012. ITA NO. 5710/MUM/2012 A.Y. 2007 - 08 21. WE SHALL NOW ADVERT TO THE APPEAL OF THE ASSESSEE FOR A.Y. 2007 - 08. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND IN LAW THE LD . CIT(A) ERRED IN CONFIRMING A.OS ACTION OF NOT ALLOWING SET - OFF OF ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 14 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD THE SHORT TERM CAPITAL LOSS OF RS. 76,50,000/ - AGAINST THE CAPITAL GAINS. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MODIFY AND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 22. BRIEFLY STATED, THE FACTS PERTAINING TO THE ISSUE UNDER CONSIDERATION ARE THAT THE ASSESSEE HAD IN ITS RETURN OF INCOME CLAMED A SHORT TERM CAPITAL LOSS (FOR SHORT STCL) OF RS. 76,50,000/ - . DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THOUGH INITIA LLY THE ASSESSEE DID NOT COME FORTH WITH THE DETAILS AS REGARDS ITS AFORESAID CLAIM OF LOSS, BUT FINALLY SUBMITTED THAT IT HAD PURCHASED 4,500 SHARES OF M/S INSTAMAC P. LTD. FOR A CONSIDERATION OF RS. 81,00,000/ - , WHICH THEREAFTER WERE SOLD FOR RS. 4,50,00 0/ - , THUS RESULTING INTO A STCL OF RS. 76,50,000/ - . 23. THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS SUBMITTED BEFORE THE A.O THAT M/S INSTAMAC P. LTD WHICH WAS ENGAGED IN THE BUSINESS OF MAKING TEA AND COFFEE POWDER FOR LAST MANY YEARS W AS RUNNING INTO LOSSES, BUT THE DIRECTORS WERE HOPEFUL OF TURN AROUND IN COMPANYS FINANCIAL POSITION. IT WAS SUBMITTED THAT THE COMPANY, VIZ. M/S INSTAMAC P. LTD HAVING DEVELOPED A NEW PRODUCT, I.E HERBAL READY MIX TEA & COFFEE POWDER, WHICH WAS APPROVED BY M/S HINDUSTAN UNILEVER LIMITED (FOR SHORT HLL), WAS TO GET AN ESTIMATED ORDER OF RS. 15 CRORES EVERY YEAR FOR SUPPLY OF THE SAID PRODUCT FROM HLL. THE ASSESSEE SUBMITTED THAT THE AFORESAID ISSUE WAS DISCUSSED AT THE BOARDS MEETING OF THE ASSESSEE COMP ANY ON 02.03.2006, AND IT WAS RESOLVED TO ACQUIRE 4500 SHARES OF R S . 100/ - EACH OF M/S INSTAMAC P. LTD AT A PREMIUM OF RS. 1800/ - PER SHARE, THAT IS FOR A TOTAL CONSIDERATION OF RS. 81 LAC. HOWEVER, AS THE BANK DECLINED TO GIVE LOAN TO M/S INSTAMAC P. LTD FOR PURCHASING NEW MACHINES AS WELL AS THE NEW VENTURE CAPITALIST WHO HAD EARLIER AGREED TO BACK THE PAYMENT ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 15 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD TOOK A NEGATIVE STAND , THEREFORE, IN THE BACKDROP OF THE AFORESAID CHANGE IN CIRCUMSTANCES, THE ENTIRE PROJECT HAD TO BE SCRAPPED. IT WAS SUBMITTED BY THE ASSESSEE THAT AT THE SAID TIME ONE MR. SHRIKANT SHAH WAS READY TO PURCHASE THE SHARES OF M/S INSTAMAC P. LTD SO HELD BY THE ASSESSEE, BUT FOR A CONSIDERATION OF RS. 4,50,000/ - . IT WAS SUBMITTED BY THE ASSESSEE THAT IT WAS UNDER THE AFORESAID COMPEL LING CIRCUMSTANCES THAT THE ASSESSEE ACCEPTED THE OFFER AND SOLD THE SHARES FOR A CONSIDERATION OF RS. 4,50,000/ - , WHICH THUS HAD RESULTED TO STCL OF RS. 76,50,000/ - IN THE HANDS OF THE ASSESSEE. 24. THE A.O AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO ACCEPT THE SAME. THE A.O AFTER DEALING WITH THE AFORESAID CLAIM OF LOSS OF THE ASSESSEE AT LENGTH, THEREIN OBSERVED THAT THE EXPLANATION OF THE ASSESSEE SUFFERED FRO M SERIOUS INFIRMITIES AND THUS COULD NOT BE ACCEPTED. THE A.O WHILE DISCARDING THE AFORESAID CLAIM OF STCL OF THE ASSESSEE OBSERVED THAT THE SAME WAS CLEARLY A SHAM TRANSACTION THAT WAS CARRIED OUT TO REDUCE THE TAXABLE SHORT TERM CAPITAL GAIN OF THE ASSES SEE. 25. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) UPHELD THE ORDER OF THE A.O IN RESPECT OF THE ISSUE UNDER CONSIDERATION BY OBSERVING AS UNDER: 15. I HAVE CONSIDERED THE SUBMISSIONS OF LD. COUNSEL AND THIS GRO UND OF APPEAL IS DISMISSED SINCE, THE A.O ON PAGE NO. 15, PARA 13 OF THE ASSESSMENT ORDER HAS VERY CLEARLY HELD THE TRANSACTION TO BE SHAM AND NOT GENUINE AND A DEVICE TO REDUCE THE TAXABLE SHORT TERM CAPITAL GAIN HENCE, THIS GROUND OF APPEAL IS DISMISSE D. ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 16 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD 26. THE ASSESSEE BEING AGGRIEVED WITH THE AFORESAID ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. DURING THE COURSE OF HEARING OF THE APPEAL NEITHER ANY SUCH SUBMISSION AS REGARDS THE ISSUE UNDER CONSIDERATION WAS MADE, NO R ANY MATERIAL WAS PLACED ON RECORD WHICH COULD PERSUADE US TO DISLODGE THE AFORESAID OBSERVATION OF THE CIT(A). WE HAVE FURTHER PERUSED THE ORDER OF THE A.O IN CONTEXT OF THE ISSUE UNDER CONSIDERATION AND ARE OF THE CONSIDERED VIEW THAT HE HAD CONCLUSIVELY PROVED THAT THE TRANSACTION CARRIED OUT BY THE ASSESSEE WAS MERELY A SHAM TRANSACTION WITH A PURPOSE OF EVADING THE TAX LIABILITY. WE HAVE DELIBERATED AT LENGTH ON THE ORDERS OF THE LOWER AUTHORITIES AS REGARDS THE ISSUE UNDER CONSIDERATION AND FIND OURSE LVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES. BEFORE PARTING, WE MAY HEREIN OBSERVE THAT NOTHING WAS BROUGHT TO OUR NOTICE WHICH COULD PROVE THAT THE OBSERVATIONS OF THE LOWER AUTHORITIES WERE PERVERSE OR INCORRECT. THE GROUND OF AP PEAL NO. 1 RAISED BY THE ASSESSEE IS DISMISSED. THE GROUND OF APPEAL NO. 2 BEING GENERAL IN NATURE IS DISMISSED AS NOT PRESSED. 27. THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 5 658 /MUM/2012 A.Y. 200 8 - 0 9 2 8 . WE SHALL NOW ADVERT TO THE APPEAL OF THE REVENUE FOR A.Y. 200 8 - 0 9 , WHEREIN THE ORDER OF THE CIT(A) HAD BEEN ASSAILED BEFORE US ON THE FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN NOT UPHOLDING THE APPLICATION OF SEC. 50C OF THE ACT, WHICH WAS RIGHTLY INVOKED BY THE AO ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN DIRECTING THE AO TO ACCEPT THE SALE CONSIDERATION AS PER THE SALE ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 17 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD AGREEMENTS WHICH IS IN CONTRAVENTION OF THE PROV ISIONS OF SECTION 50C OF THE ACT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN RELYING Y \ UPON VARIOUS DECISIONS OF HIGH COURTS WHICH WERE RENDERED IN 1979, 1980 AND 1993, I.E PRIOR TO THE INSERTION OF SEC. 50C IN THE AC T BY FINANCE ACT, 2002, W.E.F 01.04.2003 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CT(A) ERRED IN NOT APPRECIATING THAT THE ITAT, MUMBAI F SPECIAL BENCH IN THE CASE OF ITO VS. UNITED MARINE ACADEMY, 138 TTJ (MUMBAI)(SB) 129 HAS HELD THAT THE PROVISIONS OF SEC. 50C ARE APPLIC ABLE TO TRANSFER OF DEPRECIABLE ASSETS COVERED BY SEC. 50 AND THEREFORE, CAPITAL GAINS ARISING FROM SUCH TRANSFER HAVE TO BE COMPUTED BY ADOPTING THE STAMP DUTY VALUATION. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE A ND THAT OF TH ITO/AC/DCIT BE RESTORED. 2 9 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 200 8 - 0 9 ON 30.10.2010 , DECLARING INCOME OF RS. 8,27,660/ - . THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3 0 . THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVED THAT THE ASSESSEE HAD DURING THE YEAR UND ER CONSIDERATION, VIZ. A.Y. 200 8 - 0 9 CONVERTED THE TENANCY RIGHTS OF 2 PARTIES INTO OWNERSHIP. T HE A.O BEING OF THE VIEW THAT AS THE 2 AGREEMENTS WERE EXECUTED DURING THE YEAR UNDER CONSIDERATION, THEREFORE, THE INCOME FROM THE SALE OF THE PROPERTY/CONVERSION OF THE TENANCY RIGHTS INTO OWNERSHIP WERE LIABLE TO BE BROUGHT TO TAX DURING THE YEAR UNDER CONSIDERATION. ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 18 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD 31 . THAT AS THE VALUE T HAT WAS ADOPTED BY THE STAMP VALUATION AUTHORITY AT RS. 56,78,036/ - WHILE REGISTERING THE RESPECTIVE SALE DEEDS OF THE AFORESAID 2 GALAS WAS MORE THAN THE SALE CONSIDERATION OF RS. 11,05,000/ - RECEIVED BY THE ASSESSEE, THEREFORE, THE A.O TAKING RECOURSE TO THE PROVISIONS OF SEC. 50C OF THE ACT COMPUTED THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAIN BY ADOPTING THE VALUE OF RS. 56,78,036/ - AS THE SALE CONSIDERATION. 32 . AGGRIEVED, THE ASSESSEE ASSAILED THE ORDER OF THE A.O BEFORE THE CIT(A). THE C IT(A) BY REFERRING TO THE OBSERVATIONS AS WERE RECORDED BY HIM WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR A.Y. 2006 - 07, OBSERVED THAT AS THE PROPERTY OF THE ASSESSEE WAS AN OLD TENANTED PROPERTY, THEREFORE, THE MOST APPROPRIATE METHOD FOR VALUATION WAS THE RENT CAPITALIZATION METHOD. THE CIT(A) THUS BEING OF THE VIEW THAT AS THE CONSIDERATION/SALE PRICE SHOWN BY THE ASSESSEE WAS MORE THAN THE VALUE AS PER RENT CAPITALIZATION METHOD, THEREFORE, DIRECTED THE A.O TO CONSIDER THE SALE PRICE SHOWN BY THE ASSESSEE FOR COMPUTING THE CAPITAL GAIN AND NOT THE VALUE ADOPTED BY THE A.O BY TAKING RECOURSE TO SEC. 50C OR THE VALUE DETERMINED BY THE AVO. 33 . THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. WE FI ND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL OF THE ASSESSEE FOR A.Y. 200 8 - 0 9 ARE THE SAME AS WERE INVOLVED IN THE EARLIER APPEAL OF THE REVENUE FOR A.Y. 2006 - 07, MARKED AS ITA NO. 5656/MUM/2012, THEREFORE, OUR ORDER PASSED IN THE SAID APPEAL SHALL APPLY MUTATIS MUTANDIS FOR DISPOSING OF THE PRESENT APPEAL OF THE REVENUE FOR A.Y. 200 8 - 0 9 , MARKED AS ITA NO. 565 8 /MUM/2012. 34 . THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR OBSERVATIONS RECORDED WHILE DISPOS ING OFF THE APPEAL OF THE REVENUE FOR A.Y. 2006 - 07, MARKED AS ITA NO. 565 6 /MUM/2012. ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 19 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD 35. THE APPEAL OF THE ASSESSEE FOR A.Y. 2007 - 08, MARKED AS ITA NO. 5710/MUM/2012 IS DISMISSED. THE APPEALS OF THE REVENUE FOR A.YS. 2006 - 07, 2007 - 08 AND 2008 - 09, MARKED AS ITA NO. 5656/MUM/2012, ITA NO. 5657/MUM/2012 AND ITA NO. 5658/MUM/2012 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 10 /01/2018. SD/ - SD/ - (B.R BASKARAN) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 10 .01.2018 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NO. 5656 TO 5658/MUM/2012 - A.YS. 2006 - 07, 2007 - 08 & 2008 - 09 ITA NO. 5710/MUM/2012 20 UNIVERSAL FOUNDARY P. LTD. VS. ITO ITO VS. UNIVERSAL FOUNDARY P. LTD