Rajkot Jilla Co Operative Cotton Marketing Union Ltd., RAJKOT-GUJARAT V. The Joint Commissioner of Income Tax, Range-I, RAJKOT-GUJARAT

ITA 600/RJT/2012

• Counselvise Citation: 60024914 RSA 2012
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-04-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANKUR GARG
• Assessee Lawyers: S A D VYAS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Question of law; Cost of acquisition; Corroborative evidences; Valuation report; Assessment record; Unabsorbed depreciation
• Section: 37; 143(3); 50C

Judgement Text

S , IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. .. A, R D . . D , D BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 600 /RJT/20 1 2 . I I / ASSESSMENT YEAR 20 09 - 10 SHRI RAJKOT JILLA CO - OPERATIVE COTTON MARKETING UNION LTD, SAHKAR TRIVENI, 30, KARAN PARA, RAJKOT. C/O A D VYAS & CO., KOTECHA NAGAR MAIN ROAD OPP KOTECHA GIRLS HIGH SCHOOL, RAJKOT - 360001 PAN: AA A AR4310H ( H / APPELLANT) VS. THE JOINT COMMISSIONER OF INCOME TAX - RANGE - 1 AMRUTA ESTATE, M G ROAD, RAJKOT - 360001. VAH / RESPONDENT I / ASSESSEE BY M R S. A D VYAS 1 / REVENUE BY SHRI ANKUR GARG S / DATE OF HEARING 10.4.2013 S / DATE OF PRONOUNCEMENT 19. 4.2013 / ORDER .. A, R D / T. K. SHARMA, J. M. TH IS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 22.8.2012 OF CIT(A) - I, RAJKOT FOR THE ASSESSMENT Y EAR 20 09 - 10 . 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY , ENGAGED IN THE BUSINESS OF GINNING AND PRESSING OF COTTON AND ALSO HAVING INCOME FROM OTHER SOURCES LIKE, COMMISSION, RENT, DIVIDEND ETC. FOR THE ASSESSMENT YEAR U NDER APPEAL THE ASSESSEE - SOCIETY FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,97,30,430/ - . THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 23.11.2011 WHEREIN HE MADE THE FOLLOWING ADDITIONS : ITA NO.600/RJT/2 012. 2 A) BIFURCATING THE LONG TERM CAPITAL GAIN & SHORT TERM CAPITAL GAIN OF LAND AND BUILDING AT : I) SHORT TERM CAPITAL GAIN = RS.3,47,97,023/ - II) LONG TERM CAPITAL GAIN = RS.1,46,43,321/ - B) DISALLOW ANCE OF EXP ENSES = RS. 32,61,294/ - 3. ON APPEAL, IN THE IMPUGNED ORDER THE LD. CIT(A) UPHELD THE ACTION OF THE AO WITH REGARD TO BIFURCATION OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN OF LAND AND BUILDING AT RS.1,46,43,321/ - AND RS.3,47,97,023/ - AS AGAINST THE CLAIM OF THE ASSESSEE OF RS.1,55,72,880/ - AND RS.1,82,77,499/ - RESPECTIVELY . THE LD. CIT(A) IN THE IMPUGNED ORDER CONFIRMED THE CALCULATION OF SHORT TERM CAPITAL GAINS BY ADOPTING THE WDV OF THE ASSETS SOLD AT RS. 6,59,91,501/ - AS AGAINST THE CLAIM OF THE ASSESSEE THAT IT SHOULD BE RS.7,93,87,361/ - . THE LD. CIT(A) ALSO CONFIRMED THE DISALLOWANCE OF VALUATION EXPENSES I.E. FEE PAID TO VALUER RS.1,23,238/ - AND ALSO DISALLOWANCE OF EXPENSES OF RS.24,08,872/ - OUT OF THE TOTAL ELECTRICITY BILL AMOUNTING TO RS.25,16,072/ - BY CONSIDERING THE SAME AS PENALTY FOR VIOLATION . FINALLY, IN THE IMPUGNED ORDER THE LD. CIT(A) HAS NOT ADMITTED THE ADDITIONAL GROUND OF ALLOWANCE OF UNABSORBED DEPRECIATION AMOUNTING TO RS.90,56 ,157/ - . HOW, AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMING THE CALCULATION MADE BY THE LD.JC I T, RANGE - I, RAJKOT (HERE INAFTER REFERRED TO AS AO) OF THE LONG TERM CAPITAL GAIN AT RS.1,46,,43,321/ - AND SHORT TERM CAPITAL GAIN RS.3,47,97,023/ - BY BIFURCATING THE TOTAL SALE CONSIDERATION AT RS.8,31,14,000/ - RECEIVED TOWARDS LAND AND BUILDING AS UNDER : LAND : 2,43,11,476/ - BUILDING : 5,88,02,524/ - THE ABOVE MENTIONED BIFURCATION WAS CONFIRMED BY THE LD. CIT(A) AFTER MAKING PRO - RATA VALUATION OF LAND AND BUILDING IN THE PROPORTION OF 29.25% AND 70.25% RESPECTIVELY. LD. CIT(A) OUGHT TO HAVE CONSIDERED TH AT BIFURCATION OF VALUE MADE BY HIM BETWEEN LAND AND BUILDING IS TOTALLY IN DISREGARD OF THE FACTS AND NOT BASED ON REAL MARKET VALUE OF THE PROPERTY. SO ADDITION MADE IN THIS REGARD DESERVE TO BE DELETED. 2. THE LD. CIT(A) HAS WRONGLY CONFIRMED THE SH ORT TERM CAPITAL GAIN CALCULATED BY AO WITHOUT APPRECIATING THE FACTS ON THE RECORDS. TOTAL WDV OF THE ASSET SOLD IS OF RS.7,93,87,361/ - HOWEVER LEARNED ITA NO.600/RJT/2 012. 3 CIT(A) HAS TAKEN THE WDV AT RS.6,59,91,501/ - FOR CALCULATING THE SHORT TERM CAPITAL GAIN. THE ADDIT ION IS TOTALLY BAD ON FACTS AND WITHOUT APPRECIATION OF THE BOOKS OF ACCOUNTS AND AUDITED BALANCE SHEETS OF THE ASSESSEE, DESERVES TO BE DELETED. 3. THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ADDITION MADE OF VALUATION EXPENSES OF RS.1,23,238/ - OUT OF MISCELLANEOUS EXPENSES BY CONSIDERING THE SAME AS CAPITAL EXPENSES. LT. CIT(A) SHOULD HAVE APPRECIATED THE FACT THAT SUCH AS CAPITAL EXPENSES. LD. CIT(A) SHOULD HAVE APPRECIATED THE FACT THAT SUCH EXPENSES ARE NECESSARY FOR SELLING OF PLANT AND MA CHINERY. SO ADDITION MADE IN THIS REGARD IS REQUIRED TO BE DELETED. 4. THE LD. CIT(A) FURTHER ERRED IN DISALLOWING THE EXPENSES OF RS.24,08,872/ - OUT OF THE TOTAL ELECTRICITY BILL AMOUNTING TO RS.25,16,072/ - BY CONSIDERING THE SAME AS PENALTY FOR VIOLA TION . THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT THE SAME AS PENALTY FOR VIOLATION. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT THE SAME AMOUNT WAS NOT PENALTY BUT THE STATE ELECTRICITY BOARD HAS ISSUED BILL IN THE HEAD OF S.P.BIL OF SEA SONAL AND CHARGED AMOUNT OF CONSUMPTION CHARGES AND NOT UNDER ANY HEAD OF PENALTY. SO ADDITION MADE IS TOTALLY UNWARRANTED ON FACTS MAY KINDLY BE DELETED 5. THE LD. CIT(A) FURTHER ERRED IN NOT ADMITTING THE GROUND OF UNABSORBED DEPRECIATION AMOUNT ING TO RS.90,56,157/ - . THE LEARNED AO OUGHT TO HAVE CONSIDERED THAT THE ASSESSEE HAS ONLY CLOSED ITS ACTIVITIES NAMED, GINNING AND PRESSING. ASSESSEE HAS CONTINUED OTHER ACTIVITIES OF THE BUSINESS SO DISALLOWANCE OF UNABSORBED DEPRECIATION ON THE BA SIS OF CLOSURE OF BUSINESS IS NOT IN ACCORDANCE WITH LAW AND UNWARRANTED ON THE FACTS OF THE CASE REQUIRES TO BE QUASHED. SO ADDITION MADE ON THIS GROUND MAY KINDLY BE DELETED. 4. AT THE TIME OF HEARING, BEFORE US, WITH REGARD TO THE CONTROVERSY INV OLVED IN GROUND NO.1 M R S. A.D. VYAS, LD. COUNSEL OF THE ASSESSEE EXPLAINED THAT THE AO BIFURCATED THE TOTAL SALE CONSIDERATION OF RS.8,31,14,000/ - RECEIVED TOWARDS VALUE OF LAND AT RS.2,43,11,476/ - AND TOWARDS BUILDING AT RS.5,88,02,524/ - . THIS BIFURCATION OF THE SALE CONSIDERATION WAS MADE BY THE AO AFTER MAKING PRO - RATA VALUATION OF LAND AND BUILDING IN THE PROPORTIONATE OF 29.25% AND 70.75% RESPECTIVELY ON THE BASIS OF CALCULATION MADE BY THE SUB - REGISTRAR, GONDAL AS AGAINST RS.1,55,89,965/ - AND RS.1,82,77,499/ - RESPECTIVELY CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME . SHE FURTHER EXPLAINED THAT THE ASSESSEE SOLD THE LAND AND BUILDING FOR COMPOSITE SALE CONSIDERATION OF RS.8,31,14,000/ - WITH COMMON SALE AGREEMENT FOR BOTH WITHOUT A SSIGNING SPECIFIC SALE CONSIDERATION TOWARDS THE ASSETS. THE TAXABILITY OF SALE OF ITA NO.600/RJT/2 012. 4 LAND FALL UNDER L ONG T ERM C APITAL GAIN (LTCG) , AND TAXABILITY OF BUILDING FALLS UNDER S HORT T ERM C APITAL GAIN AS BUILDING WAS DEPRECIABLE ASSETS AND YEAR WISE DEPRECIATI ON IS CLAIMED ON THE SAME. THE ASSESSEE CLAIMED THE SALE VALUE OF LAND AT RS.4,08,31,000/ - ON THE BASIS OF VALUATION REPORT OF THE GOVERNMENT APPROVED VALUER VIS SHRI KAMLESH PAREKH. IN THE VALUATION REPORT, THE GOVERNMENT APPROVED VALUER SHRI KAML ESH PAREKH HAS STATED THAT HE VISITED THE PROPERTY PERSONALLY ON 15.7.2008 WHEREAS THE ASSTT. REGISTRAR NEVER VISITED THE PROPERTY. THE LAND IN QUESTION IS DIVIDED IN TWO SURVEY NOS. AND TWO DIFFERENT PLACES I.E. GAM BHOJPARA AND GAM BILIYALA ( I.E REV ENUE SURVEY NO.51 OF BILIYALA AND REVENUE SURVEY NO.24 OF BHOJPARA ). THE LAND VALUE PER SQ. METER OF THE LAND BILIYALA IS TAKEN AT THE RATE OF RS.195 / - , WHILE THE SAME FOR THE LAND OF BHOJPARA IS TAKEN AT THE RATE OF RS.130/ - . AS BOTH THE REVENUE SURVEY NOS. ARE AT IMMEDIATE VICINITY OF EACH OTHER, IT SHOULD NOT BE VALUED AT COMMON BAS IS . THE SAME VIEW IS TAKEN BY DELHI HIGH COURT IN THE CASE OF RAVI KANT V/S ITO ON 13.7.2007, (2007) 110 TTJ DELHI 297 BENCH. VIEWS EXPRESSED IN THE SAME DECISION AS UNDER : THE VALUATION BY THE STAMP VALUATION AUTHORITY IS BASED ON THE CIRCLE RATES. THESE CIRCLE RATES ADOPT UNIFORM RATE OF LAND FOR AN ENTIRE LOCALITY, WHICH INHERENTLY DISREGARDS PECULIAR FEATURES OF A PARTICULAR PROPERTY. EVEN IN A PARTI CULAR AREA, ON ACCOUNT OF LOCATION FACTORS AND POSSIBILITIES OF COMMERCIAL USE, THERE CAN BE WIDE VARIATIONS IN THE PRICES OF LAND. HOWEVER, CIRCLE RATES DISREGARD ALL THESE FACTORS AND ADOPT A UNIFORM RATE FOR ALL PROPERTIES IN THAT PARTICULAR AREA. IF TH E CIRCLE RATE FIXED BY THE STAMP VALUATION AUTHORITIES WAS TO BE ADOPTED IN ALL SITUATIONS, THERE WAS NO NEED OF REFERENCE TO THE DVO UNDER S. 50C(2). THE SWEEPING GENERALIZATIONS INHERENT IN THE CIRCLE RATES CANNOT HOLD GOOD IN ALL SITUATIONS. IT IS, THER EFORE, NOT UNCOMMON THAT WHILE FIXING THE CIRCLE RATES, AUTHORITIES DO ERR ON THE VALUATION OF THE PROPERTY 5. THE LD. COUNSEL OF THE ASSESSEE ALSO EXPLAINED THAT CONSTRUCTION R ATE TAKEN BY THE SUB - REGISTRAR GONDAL AT FLAT RATE OF RS.4,500/ - PER S Q. METER WITHOUT LOOKING INTO THE CONDITION OF THE CONSTRUCTION AND CURRENT SITUATION OF THE PROPERTY. SHE POINTED OUT THAT THE ACTUAL COST OF THE BUILDING AS PER AUDITED BOOKS OF ACCOUNTS OF BUILDING IS RS.3 , 89 , 51 , 080/ - AS UNDER : ITA NO.600/RJT/2 012. 5 DATE WISE DETAI LS OF ADDITION IN BUILDING CONSTRUCTION YEAR 2005 - 06 09.10.2005 33167 09.01.2006 32400 04.02.2006 627189 08.02.2006 28456862 08.02.2006 957858 A - 30107476 YEAR 2006 - 07 18.11.2006 6239424 28.12.2006 291773 B - 6531 197 YEAR 2007 - 08 11.04.2007 2263566 11.04.2007 48841 C - 2312407 TOTAL COST OF BUILDING(A+B+C) 38951080 SHE EXPLAINED THAT THERE IS HARDLY ANY APPRECIATION IN THE BUILDING, THEREFORE F M V OF BUILDING ON THE DATE OF SALE AS ADOP TED BY THE ASSESSEES VALUE D AT RS.4,22 , 83,000/ - IS FAIR AND REASONABLE AND BOTH DEPARTMENTAL AUTHORITIES SHOULD HAVE ACCEPTED THE SAME KEEPING IN VIEW THE FACT THAT THE ACTUAL COST OF CONSTRUCTION OF THE BUILDING IS RS.3,89,51,080/ - . SHE ALSO POINTED OUT THAT IT IS WELL KNOWN FACT THAT BUILDING IS A DEPRECIABLE ASSETS WHEREAS THE LAND IS ALWAYS APPRECIATES ON DAY - TO - DAY BASIS. ITS VALUE NEVER FALL. 6. THE LD. COUNSEL OF THE ASSESSEE DREW OUT ATTENTION TO FOLLOWING THREE FIGURES : I) THE WDV OF THE BUILDING AT THE BEGINNING : RS. 3,10,64,284 OF THE YEAR OF SALE I.E. AS ON 1.4.2009 II) ACTUAL COST OF CONSTRUCTION OF THE BUILDING : RS. 3,89,51,080/ - AS ACCEPTED BY THE INCOME TAX DEPARTMENT AS PER AUDITED BOOKS OF ACCOUNTS IS III) THE GOVERNMENT APPROVED VALUER : RS.4,22,83,000/ - VALUED THE BUILDING IN QUESTION ON THE DATE OF SALE I.E 25.8.2008. 7. ON THE BASIS OF ABOVE, SHE POINT ED OUT THAT THE AO OUGHT TO HAVE ACCEPTED THE VALUATION OF BUILDING FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN AS PER GOVERNMENT APPROVED VALUERS VALUATION REPORT ITA NO.600/RJT/2 012. 6 RS.4,22,83,000/ - . KEEPING IN VIEW THE FACTS THAT THE BUILDING IN QUESTION WAS CONST RUCTED IN FOUR YEARS, I F VALUE DEPRECIATED AND VALUATION DONE BY THE GOVERNMENT APPROVED VALUER IS MORE THAN 10% MORE THAN BOOK VALUE. THE ALLOCATION OF SALE CONSIDERATION BETWEEN LAND AND BUILDING IN THE PROPORTION OF 29.25% AND 70.75% RESPECTIVELY D ONE BY THE AO IS UNREALISTIC . IT SHOULD BE APPROXIMATELY 50:50 AS DONE BY THE GOVERNMENT APPROVED VALUER IN ITS VALUATION REPORT ON THE DATE OF SALE. 8. WITH REGARD TO VALUE OF LAND, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT ACTUAL COST OF LAN D RS.82,56,139/ - WHICH IS AS UNDER : SR. NO. DATE AMOUNT 1 11/04/2005 13,667/ - 2 15/04/2005 61,56,187/ - 3 15/04/2005 5,17,400/ - 4 16/04/2005 95,503/ - 5 19/04/2005 9,000/ - 6 27/07/2005 1,751/ - 7 01/08/2005 7,40,000/ - 8 02/08/2005 77,055/ - 9 20/0 9/2005 2,800/ - 10 30/03/2006 6,42,776/ - TOTAL COST OF LAND SOLD 82,56,139/ - SHE EXPLAINED THAT THE VALUATION OF LAND AT RS.4,08,31,000/ - HAS DONE BY THE GOVERNMENT APPROVED VALUER VIZ SHRI KAMLESH PARESH BE ACCEPTED. WITH REGARD TO JANTRI PRICE/ CIRCLE RATE ARE UNIFORM IN AN AREA WHEREAS IN ONE CIRCLE ACTUAL PRICE VARY FROM PLOT TO PLOT. FOR STAMP DUTY, THE VALUE IS ADOPTED AT UNIFORM RATE WITHOUT TAKING INTO CONSIDERATION THE ALLOCATION AND VICINITY OF THE PLOT. THE ACTUAL SALE PRICE IS GENE RALLY HIGHER THAN CIRCLE RATE AND FOR THIS PURPOSE IN THE INCOME TAX ACT SECTION 50C WAS INTRODUCED BY THE FINANCE ACT 2002 WITH EFFECT FROM 1.4.2003. TO SUM UP SHE CONCLUDED THAT THE ASSESSEES GOVERNMENT VALUER ALLOCATED SALE CONSIDERATION BETWEEN LA ND AND BUILDING IS MORE REALISTIC BASIC. IN THE RETURN OF INCOME FOR COMPUTING CAPITAL GAIN, THE ASSESSEE HAS BIFURCATED THE SALE CONSIDERATION ON THE BASIS OF VALUATION DONE BY GOVERNMENT APPROVED VALUERS REPORT I.E. RS. RS.4,08,31,000/ - TOWARDS L AND AND RS.4,22,83,000/ - TOWARDS BUILDING BE ACCEPTED. ITA NO.600/RJT/2 012. 7 9 . ON THE OTHER HAND, SHRI ANKUR GARG, THE LD. DR POINTED OUT THAT THE AO ADOPTED THE BIFURCATED VALUE OF THE SALE CONSIDERATION ON THE BASIS OF INFORMATION SUPPLIED BY THE SUB - REGISTRAR, GONDAL, T HEREFORE, BOTH THE DEPARTMENTAL AUTHORITIES BELOW IS LEGALLY AND FACTUALLY CORREC T IN ACCEPTING THE SAME . HE FURTHER POINTED OUT THAT VALUATION APPLIED WHICH IS BINDING ON ASSESSEE AS WELL AS ON THE DEPARTMENT. AS AGAINST, COUNSEL OF THE ASSESSEE DR EW OUR ATTENTION TO THE PROVISIONS OF SECTION 50C (1) OF THE ACT WHICH INTER - ALIA PROVIDE IN CASE THE ACTUAL SALE CONSIDERATION (WHICH IS HIGHER) US H IS MORE THAN THE STAMP VALUATION , IN THAT EVENT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN ACTUAL S ALE CONSIDERATION SHOULD BE ADOPTED. 10 . RIVAL SUBMISSIONS WERE CONSIDERED. THE HONBLE SUPREME COURT IN THE CASE OF MISS DHUN DADABHOY KAPADIA V. CIT [1967] 63 ITR 651 (SC) HELD THAT I N WORKING OUT C APITAL G AIN OR LOSS, THE PRINCIPLES THAT HAVE TO BE APPLIED ARE THOSE WHICH ARE A PART OF THE COMMERCIAL PRACTICE OR WHICH AN ORDINARY MAN OF BUSINESS WILL RESORT TO WHEN MAKING COMPUTATION FOR HIS BUSINESS PURPOSES . FOR THE PURPOSES OF CAPITAL GAIN, I F VALUATION BY INSPECTION AND EMPIRICAL EXAMINATION IS NOT POSSIBLE, THE OTHER METHODS, OF VALUATION HAVE TO BE ADOPTED. THE HONBLE KOLCATA HIGH COURT IN THE CASE OF SHAHDARA (DELHI) SAHARANPUR LIGHT RAILWAY CO. LTD. V. CIT [1994] 208 ITR 882 (CAL.) HELD THAT O NE HAS THEN TO GO BY THE BOOK VALUE OR GO B Y THE MARKET VALUE AS ON THE DATE OF ACQUISITION WITH SUCH ADJUSTMENTS AS THE CIRCUMSTANCES OF THE CASE MAY CALL FOR . THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. DR. D.L. RAMACHANDRA RAO [1999] 236 ITR 51 (MAD.) HAS HELD THAT I N COMPOSITE SALES, GA INS MUST BE BIFURCATED INTO LONG - TERM AND SHORT - TERM THE LAND IS A LONG - TERM CAPITAL ASSET AND THE BUILDING THEREON IS A SHORT - TERM CAPITAL ASSET, AND BOTH ARE SOLD TOGETHER FOR A CONSOLIDATED CONSIDERATION, THE GAINS MUST BE BIFURCATED INTO LONG - TERM (PER TAINING TO LAND) AND SHORT - TERM (PERTAINING TO BUILDING) AND BROUGHT TO TAX, SINCE THE LAND IS AN INDEPENDENT AND ITA NO.600/RJT/2 012. 8 IDENTIFIABLE CAPITAL ASSET, AND IT CONTINUES TO REMAIN SO EVEN AFTER THE CONSTRUCTION OF BUILDING . 11. IT IS PERTINENT TO NOTE THAT THE ASSE SSEE - CO - OPERATIVE SOCIETY HAS EXECUTED A COMBINED SALE DEED SELLING LAND AND BUILDING. THERE IS NO DISPUTE THAT TOTAL SALE CONSIDERATION IS REQUIRED TO BE BIFURCATED FOR THE PURPOSE OF COMPUTING THE LONG TERM AND SHORT TERM CAPITAL GAINS . T HE PROFIT E ARNED ON SALE OF DEPRECIABLE ASSETS IS ASSESSABLE AS SHORT TERM CAPITAL GAINS, WHEREAS THE PROFIT EARNED ON SALE OF LAND WHICH IS HELD FOR MORE THAN THREE YEARS IS ASSESSABLE AS LONG TERM CAPITAL GAINS. THE TOTAL SALE CONSIDERATION IS RS . 8 , 31 , 14 , 000/. THE GOVERNMENT APPROVED VALUER HAS BIFURCATED RS . 4 . 08 . 31 . 000/ TOWARDS SALE VALUE OF LAND AND RS . 4 , 22 , 83 , 000/ - TOWARDS SALE OF BUILDING. IN PERCENTAGE TERMS TOWARDS LAND WORKS OUT TO 49.13% AND TOWARDS BUILDING 50.87%. AS AGAINST THIS, THE AO ON T HE BASIS OF INFORMATION SUPPLIED BY SUB - REGISTRAR, GONDAL BIFURCATED THE SALE CONSIDERATION AFTER MAKING PRO - RATA VALUATION OF THE LAND AND BUILDING IN THE PROPORTION OF 29.25% AND 70.25% RESPECTIVELY. ADMITTEDLY, THE ACTUAL COST INCURRED BY THE ASSES SEE TOWARDS COST OF BUILDING BEGINNING FROM THE YEAR 2005 - 06 TO 2007 - 08 IS RS.3 , 89 , 51 , 080/ . THIS ACTUAL COST HAS DULY CERTIFIED BY THE AUDITOR AS PER BOOKS OF ACCOUNTS AND AUDITED PROFIT AND LOSS ACCOUNT FURNISHED BY T HE ASSESSEE WITH THE INCOME TAX DEPARTMENT IN THE EARLIER ASSESSMENT YEARS. IT IS WELL KNOWN FACT THAT COST OF CONSTRUCTION OF BUILDING REMAINS ALMOST STATIC WHEREAS THE COST OF LAND INCREASES ON DAY - TO - DAY BASIS. THE SUB - REGISTRAR, GONDAL VALUED THE COST OF LAND AS PER STAMP DUTY VALUATION WHEREAS EVEN AS PER SECTION 50C (1) OF THE ACT, FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS, ONE HAS TO SEE ACTUAL CONSIDERATION RECEIVED AND NOT STAMP VALUATION ADOPTED BY THE AO IN THE ASSESSMENT. AFTER TAKING INTO CONSIDERATION, WE A RE OF THE VIEW THAT BIFURCATION OF THE SALE CONSIDERATION AS DONE BY THE ASSESSEES VALUER WHICH IS 49.13% FOR LAND AND 50.87 % FOR BUILDING IS FAIR AND REASONABLE. WE, THEREFORE, DI RECT THE AO TO ACCEPT THE SAME AND ALLOCATE THE SALE PRICE RECEIVED OF ITA NO.600/RJT/2 012. 9 RS . 8 . 31 . 14 . 000/ - TOWARDS LAND AND BUILDING AS PER THE APPROVED VALUER . GROUND NO.1 IS ALLOWED . 12 . FACTS WITH REGARD TO THE CONTROVERSY INVOLVED IN THE GROUND NO.2, ARE THAT THE ASSESSEE HAS EXECUTED TWO SALE DEEDS I.E. ONE FOR LAND AND BUILDING AND ANOTHER FOR PLANT AND MACHINERY. THE TOTAL SALE CONSIDERATION MENTIONED IN THE SECOND SALE DEED FOR PLANT AND MACHINERY IS RS.4,19,86,000/ - . THE COUNSEL OF THE ASSESSEE POINTED OUT THAT TOTAL WDV OF ASSETS SOLD IS RS . 7 , 93 , 87 , 361/ - (WHICH INTERALI A INCLUDES BALANCE RS.3,10,64,284 OF BUILDING WDV ) HOWEVER THE LEARNED CIT HAS TAKEN THE VALUE AT RS . 6 , 59 , 91 , 501/ - BY EXCLUDING THE VALUE OF FOLLOWING ASSETS OF RS . 32 , 87 , 544/ - AS UNDER : A. BAIL PACKING MATERIALS RS. 67,9 42/ - B. PGVCL GON DAL, SECURITY DEPOSIT RS.1 6 ,37,060/ - C . PGVCL GONDAL, DEVELOPMENT CHARGES RS. 9,00,000/ - D . MACHINERY STORE ROOM RS. 6,82,542/ - SHE POINTED OUT THAT IT WAS THE DUTY OF THE AO WH ILE COMPUTING THE SHORT TERM CAPITAL GAINS TO ALLOW THE WDV OF ASSETS AS WELL AS THE AFORESAID FOUR ITEMS AMOUNTING TO RS.3 2,87,577 / - WHICH ARE ALSO TRANSFERRED TO THE BUYER. IN SUPPORT THIS CONTENTION SHE RELIED ON THE CIRCULAR NO.14(XL - 35) DATED 11.4. 1955 WHICH PROVIDES THAT IT IS A DUTY OF THE AO TO DRAW THE ATTENTION OF THE ASSESSEE TO ANY RELIEF OR CLAIM WHICH ASSESSEE IS CLEARLY ENTITLED TO WHICH THEY OMITTED TO CLAIM FOR SOME REASON OR THE OTHER. FOLLOWING THE CIRCULAR, THE AO OUGHT TO HAVE ALLOW ED THE SAME. SINCE THIS WAS NOT ALLOWED BY THE AO, BEFORE THE LD. CIT(A) , THE ASSESSEE TOOK SPECIFIC GROUND THE LD. CIT(A) REFUSED TO ADJUDICATE THE SAME. SHE POINTED OUT THAT KEEPING IN VIEW THE SPIRIT OF THE CIRCULAR OF CBDT (SUPRA) THE AO BE DIRECTED TO ALLOW THE SAME. ON THE OTHER HAND, THE LD. DR POINTED OUT THAT SINCE THIS CLAIM WAS NOT MADE IN THE RETURN OF INCOME, THEREFORE, AT THE APPELLATE STAGE THIS CANNOT BE ALLOWED. 13 . WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. ADMITTED, THE ASSESSEE DID NOT MAKE THIS CLAIM IN THE RETURN OF INCOME BUT IT IS THE DUTY OF THE AO TO CORRECT THE CLAIM OF SHORT TERM CAPITAL GAIN ON ITA NO.600/RJT/2 012. 10 SALE OF PLANT AND MACHINERY. ALL THE FIGURES OF WDV AND PLANT AND MACHINER IES ARE AVAILABLE ON ASSESSMENT RECORD . ASSETS SOLD AS PER SALE DEED INCLUDES PGVCL SECURITY DEPOSIT OF RS . 16 , 37 , 060/ AND PGVCL DEVELOPMENT CHARGES OF RS.9,00,000/ - ALSO TOGETHER WITH ALL THE MACHINERIES. ASSETS OF BAIL PACKING MACHINE OF RS . 67 , 942 / - , DEAD STOCK OF RS . 3 , 40 , 060 / - AND MACHINERY STORE ROOM OF RS . 6 , 82 , 542/ ARE ALSO HANDED OVER TO THE BUYERS AS PER SALE DEED. WE, THEREFORE, DIRECT THE AO TO VERIFY THE SALE FIGURE AS RECORDED IN THE SALE DEED AND RECOMPUTE THE CORRECT AMOUNT OF CAPITAL GAIN ON THE BAS IS OF FACTS AND FIGURES AVAILABLE IN THE ASSESSMENT ORDER. GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES . 1 4 . FACTS REGARDING THE CONTROVERSY INVOLVED IN GROUND NO.3 ARE THAT THE ASSESSEE HAS PAID RS.1,23,238/ - TO THE GOVERNMENT APPROVED VALUE R FOR PREPARING VALUATION REPORT. THIS AMOUNT WAS CLAIMED WHILE COMPUTING THE CAPITAL GAIN . THE AO HELD THAT THIS EXPENDITURE IS NOT ALLOWABLE, THE LD. CIT(A) UPHELD THE ACTION OF THE AO FOR THE DETAILED REASONS GIVEN IN PARAGRAPH 7.2 OF HIS ORDE R WHICH IS REPRODUCED BELOW: 7.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. THE VALUATION CHARGES INCURRED BY THE APPELLANT NOT SPENT IN CONNECTION WITH COST OF ACQUISITION OR CO ST OF IMPROVEMENT OF ASSET IS NOT DEDUCTIBLE. IN THIS REGARD, RELIANCE CAN BE PLACED ON THE DECISION IN THE CASE OF VIJAY KUMAR M. SHAH (2010) 124 ITD 93; 2 ITR (TRIB) 116 (MUM) . IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND THE LEGA L POSITION IN THE ABOVE - REFERRED DECISION, THE ADDITION OF RS.1,23,238/ - IS HEREBY CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 1 5 . AT THE TIME OF HEARING, THE LD.,AR COULD NOT POINT OUT UNDER WHICH SPECIFIC PROVISION OF THE ACT, THE AMOUNT PAID T O THE GOVERNMENT APPROVED VALUER RS.1,23,238/ - IS ALLOWABLE. WE, THEREFORE, INCLINED TO UPHELD THE VIEW TAKEN BY THE LD. CIT(A). THIS GROUND OF APPEAL IS REJECTED. 1 6 . FACTS REGARDING THE CONTROVERSY INVOLVED IN GROUND NO.4 ARE THAT THE AO DISAL LOWED RS.24,08,872/ - BEING PAYMENT MADE TO STATE ELECTRICITY BOARD. THE AO WAS OF THE VIEW THAT THIS IS A PENALTY FOR VIOLATION OF ITA NO.600/RJT/2 012. 11 TERMS FOR ELECTRICITY USER AGREEMENT. AT THE TIME OF HEARING BEFORE US, THE LD COUNSEL OF THE ASSESSEE POINTED OUT T HAT THESE EXPENSES CLAIM ARE NOT PENALTY BUT EXPENSES INCURRED AS PER RULES OF GUJARAT STATE ELECTRICITY BOARD (GSEB). SHE EXPLAINED THAT GSEB LEVIED THESE HIGHER CHARGES AS THE ASSESSEE HAS CONSUMED LESS ELECTRICITY THAN SANCTIONED IN CONTRACT WITH GSEB IN RESPECT OF CONSUMPTION OF ELECTRICITY. IT IS COST OF ELECTRICITY CONSUMED WHICH IS ALLOWABLE AS NORMAL BUSINESS EXPENDITURE FOR USE OF ELECTRICITY U/S 37 OF THE I - T ACT. AS AGAINST THIS THE LD DR POINTED OUT THAT THE ASSESSEE HAS SOLD THE PROPERTY IN QUESTION ON 25.08.2008. THIS BILL IS FOR THE WHOLE CALENDAR YEAR. HE CONTENDED THAT THE LD CIT (A) RIGHTLY CONFIRMED THE DISALLOWANCE AND HE RELIED ON THE DECISION OF THE LD. CIT(A) IN THIS REGARD AS CONTENDED IN PARA 8.2 OF THE ORDER WHICH READS AS UNDE R: - 8.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT HAS SUBMITTED A COPY OF ELECTRICITY BILL DATED 22/1/2009 S HOWING TOTAL CONSUMPTION CHARGES AS WELL AS CURRENT MONTHS BILL AT RS.17,05,653.69P. NARRATION IS ALSO THERE AS RECOVERY OF AMC BILL FOR THE CALLENDER YEAR - 2008. HOWEVER, I FIND THAT THIS ONLY IS NOT SUFFICIENT TO SUBSTANTIATE ITS CLAIM. THE AP PELLANT WAS ENGAGED IN GINNING AND PRESSING ACTIVITIES AND THERE WAS NO BUSINESS ACTIVITIES FROM 1/4/2008 TILL THE DATE OF CLOSURE OF THE UNIT, I.E. 25/08/2008. HOWEVER, IT HAS BEEN CONTENDED THAT THE APPELLANT HAD USED ELECTRICITY FOR FOUR MONTHS, I.E. J ANUARY 2008 TO APRIL 2008 AND THE PURCHASER PARTY HAD USED ELECTRICITY FOR THREE MONTHS, I.E. OCTOBER 2008 TO DECEMBER 2008 AND THE AMOUNT OF RS.17,05,653/ - REPRESENTS CONSUMPTION CHARGES ONLY. IF, FOR A MOMENT, THE AMOUNT OF RS.17,05,653/ - IS TO BE CONS IDERED AS CONSUMPTION CHARGES, THE SAME IS NOT TENABLE IN VIEW OF THE FACT THAT THERE WERE NO BUSINESS ACTIVITIES DURING THE PERIOD 1/4/08 TO 25/8/08. WITH REGARD TO THE AMOUNT OF RS.1,07,200/ - BEING THE AMOUNT OF ELECTRICITY EXPENSES INCURRED AFTER SAL E OF PROPERTY, THE SAME IS ALLOWED TO BE DEDUCTED IN VIEW OF THE STIPULATION MADE IN THE SALE AGREEMENT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE ADDITION TO THE EXTENT OF RS.1,07,200/ - IS DELETED AND THE BALANCE ADDITION MADE O N ACCOUNT OF PENALTY OF RS.24,08,872/ - STANDS CONFIRMED IN ABSENCE OF ANY SUPPORTING EVIDENCES IN THIS REGARD. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 1 7 . WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. PRIMA FACIE IT APPEARS THAT HIG HER CHARGES IS LEVI ED BY GSEB AS PER THE CONTRACT OF THE ASSESSEE WITH THE BOARD. THIS AMOUNT IS NOT PENALTY; IT IS ACTUALLY PAID FOR CONSUMPTION. HOWEVER, SINCE THE ASSESSEE HAS SOLD THE PROPERTY IN QUESTION ON 25.08.2008, THE CHARGES ONLY UPTO 25.08.200 8 ARE ITA NO.600/RJT/2 012. 12 ALLOWABLE. WE THEREFORE DIRECT THE ASSESSEE TO FURNISH THE WORKING OF THESE CHARGES TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WILL VERIFY AND ALLOW THE CHARGES LEVIED WHICH PERTAINS TO DATE OF SALE I.E. 25.08.2008. THIS GROUND IS PARTLY ALL OWED. 1 8 . FACTS WITH REGARD TO THE CONTROVERSY INVOLVED IN THE GROUND NO.5 ARE THAT THE COUNSEL OF THE ASSESSEE POINTED OUT THAT BEFORE THE LD. CIT(A) THE GROUND NO.9 WAS NOT RAISED IN THE GROUNDS OF APPEAL BUT DURING THE COURSE OF HEARING BEFORE T HE LD. CIT(A) THIS GROUND WAS TAKEN BY THE ASSESSEE IN WRITTEN SUBMISSIONS. THEREFORE , THE LD. CIT(A) REFUSED TO ADJUDICATE UPON IT. A DDITIONAL GROUND BEING GR.NO.9 WHICH READS AS UNDER : 9. THE LEARNED JCIT HAS DISALLOWED THE UNABSORBED DEPRECIATION OF RS.90,56,157/ - ON THE GROUND THAT ASSESSEE HAS DISCONTINUED BUSINESS AND ASSETS HAS BEEN SOLD OUT, WHICH MAY BE ALLOWABLE AS PER EXPLANATION PRODUCED BELOW. 1 9 . THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE LD. CIT(A) HAS NOT ADJUDICATED UPON THIS GROUND. THIS IS A N ADDITIONAL GROUND RAISED BEFORE HIM INVOLVES PURE QUESTION OF LAW WHICH HAS ARISEN FROM THE ORDER OF THE AO, THEREFORE, THE LD. CIT(A) OUGHT TO HAVE ADJUDICATED THE SAME. SHE ACCORDINGLY POINTED OUT THAT THE TRIBUNAL MAY A DJUDICATE THIS GROUND. THE LD. DR POINTED OUT THAT THIS GROUND WAS NOT RAISED BEFORE THE LD. CIT(A). ONLY IN THE WRITTEN STATEMENT THIS GROUND WAS RAISED, THEREFORE, THE LD. CIT(A) CORRECTLY REFUSED TO ADMIT AND ADJUDICATE UPON IT. 20 . AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HONBLE SUPREME COURT IN THE CASE OF PANNALAL BINJRAJ V. UNION OF INDIA (1975) 31 ITR 565 (SC) HELD THAT RELEVANT PROVISIONS OF INCOME TAX SHOULD BE APPLIED IN A HU MAN AND CONSIDERATE MANNER. THE RELEVANT PORTION OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN PANNALAL BINJRAJ (SUPRA) IS REPRODUCED HEREUNDER: A HUMAN AND CONSIDERATE ADMINISTRATION OF THE RELEVANT PROVISIONS OF THE INCOME TAX ACT WOULD GO A LONG WAY IN ALLAYING THE APPREHENSIONS OF THE ASSESSEE AND IF THAT IS DONE IN ALL THE TRUE SPIRIT, NO ASSESSEE WILL BE IN A POSITION TO CHARGE THE REVENUE WITH ADMINISTERING THE PROVISIONS OF THE ACT WITH AN EVIL EYE AND AN UNEQUAL HAND ITA NO.600/RJT/2 012. 13 ADMITTEDLY, IN TH E GROUND OF APPEAL FILED ALONG WITH FORM NO.35, THE ASSESSEE HAS NOT RAISED GROUND NO.9. HOWEVER, IN THE WRITTEN SUBMISSION THE ASSESSEE FILED THIS GROUND BEFORE THE LD. CIT(A) AS IS EVIDENT FROM REPRODUCTION OF ASSESSEE S SUBMISSIONS IN PARAGRAPH 10. 00 OF CIT(A)S ORDER. THEREFORE, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS CIT , (1998) 229 ITR 383(SC) , THE LD. CIT(A) OUGHT TO HAVE ADMITTED THE SAME. SINCE THIS GROUND WAS NOT ADMITTED, WE FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PANNALAL BINJRAJ V. UNION OF INDIA (SUPRA) DIRECT THE LD. CIT(A) TO ADMIT GROUND NO.9 AND ADJUDICATE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE S IDES. 21 . IN THE RESULT, FOR STATISTICAL PURPOSE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( .. P1 / D. K. SRIVASTAVA) ( S.. I / T. K. SHARMA) 012. / ACCOUNTANT MEMBER 1 / JUDICIAL MEMBER N/ ORDER DATE 19. 4. . 201 3 . /RAJKOT SRL RJO O / COPY OF ORDER FORWARDED TO: - . H / APPELLANT - 2. VAH / RESPO NDENT - 3. H / CONCERNED CIT , 4. H - / CIT (A) , 5. V, S , / DR, ITAT, RAJKOT 6. I / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.