ELMA ELECTRIC CO. P. LTD, THANE V. ITO WD 3(2), THANE

ITA 579/MUM/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4174 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABANIKANT NAYAK
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Fair market value; Unabsorbed depreciation
• Section: 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO. 579/MUM/2009 ( ( ( ( ( / ASSESSMENT YEAR : 2005-06 M/S. ELMA ELECTRIC CO. PVT. LTD., PLOT NO.D-10,MIDC COMPOUND, ROAD NO. 33, WAGLE ESTATE, THANE THE ITO, WARD 3(2), VARDAAN, GROUND FLOOR, MIDC, WAGLE ESTATE, THANE ') % ./ *+ ./PAN/GIR NO. : AAACE 3263E ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI HIRO RAI -.), 0 / /RESPONDENT BY : SHRI ABANIKANT NAYAK 0 12% / DATE OF HEARING :02.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT : 05.07.2013 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, THANE DT.14.11.2008 PERTAINING TO A.Y. 2 005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING 3 SUBSTANTIVE GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDE R OF THE AO, ADOPTING THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY, UNDER PROVISIONS OF SEC. 50C, FOR THE TRANSFER OF PROPERTY AT WAGLE ESTATE. ITA NO.579/M/09 2 2. THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE AO WAS JUSTIFIED IN NOT REFERRING THE VALUATION OF THE ASSET TO VALUATION OFFICER AS REQUIRED UNDER PROVISION OF SEC. 50C(2). 3. THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT BROU GHT FORWARD UNABSORBED DEPRECIATION OF RS. 32,76,385/- CANNOT BE SET OFF AGAINST THE LONG TERM CAPITAL GAI NS OF THE CURRENT YEAR. 3. FACTS RELATING TO THE GRIEVANCE RAISED VIDE GROU ND NO. 1 & 2 RELATES TO THE SALE OF PROPERTY OF WAGLE ESTATE. DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE HAS MADE TRANSFER OF CAPITAL ASSETS BEING LAND AND BUILDINGS LOCATED AT POONA AND WAGLE ESTATE. HOWEVER, WE ARE CONCERNED ONLY WITH PROPERTY AT WAGLE ESTATE, THANE. 3.1. IN THE COMPUTATION OF INCOME FOR THE YEAR UND ER CONSIDERATION, THE ASSESSEE HAS CONSIDERED RS. 55 LACS AS SALE CONSIDE RATION FOR LAND AT WAGLE ESTATE, THANE FOR THE PURPOSE OF COMPUTING C APITAL GAINS AS AGAINST THE ACTUAL SALE CONSIDERATION OF RS. 1,23, 09,500/-. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE PROVISIONS OF SEC. 50C OF THE I.T. ACT SHOULD NOT BE APPLIED ON THE FACTS OF THE CASE. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DT. 18.12.2007 AND EXPLA INED THE URGENCY /NECESSITY FOR THE SALE OF THE SAID LAND AT WAGLE E STATE, THANE. THE REPLY OF THE ASSESSEE IS REPRODUCED AT PAGE-3 & 4 OF THE ASSESSMENT ORDER. THE AO WAS OF THE OPINION THAT THE REASONS GIVEN BY THE ASSESSEE ARE NOT SUFFICIENT TO BE CONSIDERED AS IT CLEARLY VIOLATE T HE PROVISIONS OF SEC. 50C OF THE ACT. THEREAFTER, THE AO WENT ON TO RECOMPUT E THE CAPITAL GAINS BY ADOPTING THE STAMP DUTY VALUE AT RS. 1,23,09,500/-. ITA NO.579/M/09 3 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. THE LD. CIT(A) WAS CONVINCED THAT PROVISIONS OF SEC. 50C ARE CLEARLY APPLICABLE AND HAS BEEN RIGHTLY INVOKED BY THE AO. 5. AGGRIEVED BY THE FINDING OF THE LD. CIT(A), ASSE SSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ACTION OF THE AO IS NOT IN CONSONANCE WITH THE PROVISIONS OF SEC. 50C(2) OF THE ACT. IT IS THE SAY OF THE LD. COUNSEL THAT THE AO SHOULD HA VE REFERRED THE MATTER TO THE DVO, ONCE THE ASSESSEE HAS CLAIMED, WHY THE STAMP DUTY VALUE SHOULD NOT BE ADOPTED. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES AND SUBMITTED THA T PROVISIONS OF SEC. 50C ARE MANDATORY. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. FINANCE ACT OF 2002 HAS INSERTED SEC. 50C UNDER THE HEAD SPECIAL PROVISION FOR FULL VALUE OF CONS IDERATION IN CERTAIN CASES. SEC. 50C(1) PROVIDES THAT WHERE THE CONSID ERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF A CAPITAL ASSET IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE FOR THE PURPOSE O F PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOP TED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED AS A RESULT OF SUCH TRANSFER. HOWEVER, CLAUSE (2) TO SEC. 50C PROVIDES THAT WITHO UT PREJUDICE TO THE PROVISIONS OF SUB-SECTION (1) WHERE THE ASSESSEE CL AIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSE D BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE O F THE PROPERTY AS ON THE ITA NO.579/M/09 4 DATE OF TRANSFER, THE AO MAY REFER THE VALUATION O F THE CAPITAL ASSET TO A VALUATION OFFICER. A PERUSAL OF THE REPLY FILED BY THE ASSESSEE BEFORE THE AO DT. 18.12.2007 CLEARLY SHOWS THAT THE ASSESSEE C LAIMED WHY THE TRANSACTION VALUE SHOULD BE ACCEPTED FOR THE PURPOS E OF CAPITAL GAIN. IF THE AO WAS TO INVOKE THE PROVISIONS OF SEC. 50C, TH EN IN OUR HUMBLE OPINION , HE SHOULD HAVE FIRST REFERRED THE MATTER TO THE VALUATION OFFICER. THE AO HAS ERRED IN NOT REFERRING THE MATTER TO THE VALUATION OFFICER. THE LD. CIT(A) HAS ALSO ERRED IN NOT ASKING THE AO TO REFER THE MATTER FOR VALUATION, THEREFORE, IN THE INTEREST OF JUSTICE AN D FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILES OF THE AO. THE AO IS DIREC TED TO REFER THE MATTER OF VALUATION TO THE APPROPRIATE VALUATION AUTHORITY AS PER THE PROVISIONS OF THE ACT AFTER GIVING REASONABLE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. GROUND NO. 1 & 2 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO. 3 RELATES TO THE DENIAL OF THE SET OF F OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 32,76,385/- AGAINST LONG TERM CAPITAL GAINS OF THE CURRENT YEAR. 10. THIS GRIEVANCE APPEARS TO BE CONSEQUENTIAL TO T HE GRIEVANCE RAISED VIDE GROUND NO. 1 & 2, AS THE AO HAS COMPUTED THE DEEMED CAPITAL GAIN, THE ASSESSEE HAS CLAIMED SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION TO BE SET OFF AGAINST THE LONG TERM CA PITAL GAINS SO COMPUTED. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THIS PLEA HAS NOT BEEN ENTERTAINED BY THE AO. WHEN THIS MATTER WAS A GITATED BEFORE THE LD. CIT(A), THE LD. CIT(A) AT PARA 5.3 WHILE DISPOS ING GROUND NO. 4 OF THAT APPEAL HAS THUS HELD AS UNDER: ITA NO.579/M/09 5 THERE IS NO MERIT IN THIS GROUND OF APPEAL AS THE BROUGHT FORWARD UNABSORBED DEPRECIATION CANNOT BE SET OFF AGAINST THE LONG TERM CAPITAL GAIN COMPUTED IN THE HANDS OF THE APPELLANT ON TRANSFER OF PROPERTY. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE PLE ADED THAT AS PER PROVISIONS OF SEC. 32(2) OF THE ACT, THE UNABSORBED DEPRECIATION BROUGHT FORWARD SHALL BE MERGED WITH CURRENT YEARS DEPRECI ATION AND SINCE CURRENT YEARS DEPRECIATION CAN BE SET OFF AGAINST LONG TERM CAPITAL GAINS, THE SAME TREATMENT SHOULD BE GIVEN TO THE UN ABSORBED BROUGHT FORWARD DEPRECIATION. 12. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THIS ISSUE IS C ONSEQUENTIAL TO THE ISSUES RELATED TO GROUND NO. 1 & 2. HOWEVER, AT THIS POIN T, WE WOULD LIKE TO REFER TO THE DECISION IN ITA NO. 5375/M/2011 IN THE CASE OF SURESH INDUSTRIES (P) LTD. VS ACIT 54 SOT 450 WHEREIN ONE OF US (AM) IS THE AUTHOR OF THE SAID JUDGEMENT ,HAS HELD THAT CURREN T YEARS DEPRECIATION IS TO BE ALLOWED AS SET OFF FROM THE LONG TERM CAPITAL GAINS AND BROUGHT FORWARD DEPRECIATION IS TO BE TREATED AS CURRENT YE ARS DEPRECIATION AS PER THE LEGAL FICTION OF SEC. 32(2) OF THE ACT, THE SA ME IS ALSO BE ALLOWED TO BE SET OFF FROM THE LONG-TERM CAPITAL GAINS. RESPE CTFULLY FOLLOWING THIS DECISION OF THE TRIBUNAL, WE DIRECT THE AO TO FIRST DETERMINE THE LONG TERM CAPITAL GAIN AS PER THE DIRECTIONS GIVEN HEREINABOV E AND THEREAFTER ALLOW THE CLAIM OF SET OFF OF UNABSORBED DEPRECIATION FRO M THE SAME. THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSE. ITA NO.579/M/09 6 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.07.2013 . &5 0 4( % 6 7&8 5.7.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 5.7.2013 . . ./ RJ , SR. PS &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI