ACIT - 9(1)(1), MUMBAI V. AMARTARA PVT. LTD., MUMBAI

ITA 6181/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3977 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Earning of tax free income; Cost of acquisition; Rule 8D
• Section: 50C; 14A; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI C. N. PRASAD, JM ITA NOS.6181 & 5569/MUM/2018 (ASSESSMENT YEARS: 2014-15 & 2010-11) ASST. CIT, RANGE - 9(1)(1) ROOM NO. 260A, 2 ND FLOOR, AAYKAR BHAVAN, M. K. ROAD, MUMBAI 400 020 VS. M/S. AMARTARA PVT. LTD. 190/191, INDIAN CORK MILLS COMPOUND, SAKI VIHAR ROAD, POWAI, MUMBAI PAN/GIR NO. AADCA 9217 F ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI MICHAEL JERALD RESPONDENT BY : NONE DATE OF HEARING : 22.01.2019 DATE OF PRONOUNCEMENT : 02.03.2020 O R D E R PER SHAMIM YAHYA, A. M.: THESE ARE APPEALS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-16, MUMBAI (LD.CIT(A) FOR SHORT) DATED 31.08.2018 AND PERTAINS TO THE ASSESSMENT YEARS (A.Y.) 2010-11 AND 2014-15 RESPECTIVELY. 2. SINCE THE ISSUES ARE COMMON AND CONNECTED AND TH E APPEALS WERE HEARD TOGETHER, THESE HAVE BEEN CONSOLIDATED AND DISPOSED OFF TOGET HER FOR THE SAKE OF CONVENIENCE. 3. THE FIRST COMMON ISSUE RAISED IN THESE APPEALS I S THE ADDITION MADE BY THE ASSESSING OFFICER (A.O. FOR SHORT) IN RESPECT OF LO NG TERM CAPITAL GAIN OF RS.9,63,17,800/- U/S. 50C OF THE INCOME TAX ACT, 1961 (THE ACT' FOR SHORT) FOR A.Y. 2014-15 AND RS.(4,77,32,000)/- FOR A.Y. 2010-11. 2 ITA NOS.6181 & 5569/MUM/2018 ASST. CIT VS. M/S. AMARTARA PVT. LTD. 4. SINCE THE FACTS ARE COMMON, WE ARE REFERRING TO FACTS AND FIGURES FROM A.Y. 2010- 11. 5. BRIEF FACTS OF THE CASE ARE THAT THE A.O. NOTED THAT THE ASSESSEE COMPANY HAD SHOWN TO HAVE TRANSFERRED ITS LAND (POWAI, MUMBAI) TO A PARTNERSHIP FIRM, M/S. SHREEM PROPERTIES IN WHICH THE ASSESSEE COMPANY WAS ONE OF THE PARTNERS. THE PLOT WAS TRANSFERRED AS CAPITAL CONTRIBUTION ON PART OF THE ASSESSEE COMPANY. THE CONSIDERATION FOR THE SAME WAS STATED TO BE RS.5,00,00,000/-. THE ASS ESSEE COMPANY HAD CLAIMED INDEX COST OF ACQUISITION AT RS.9,49,22,008/- THUS SHOWIN G LONG TERM CAPITAL LOSS OF RS.(4,49,22,008/-) ON TRANSFER OF ITS LAND TO THE F IRM. THE A.O. OBSERVED THAT THE VALUE OF THE SAID LAND FOR THE PROPOSES OF STAMP DUTY AS APP ARENT FROM THE RELEVANT AGREEMENT SUBMITTED BY THE ASSESSEE WAS RS.9,77,32,000/-. IN VIEW OF THESE FACTS, THE A.O. ISSUED A SHOW CAUSE ASKING THE ASSESSEE TO EXPLAIN WHY THE P ROVISIONS OF SEC. 50C OF THE ACT SHOULD NOT BE INVOKED AND THE LTCG ARISING THEREON BE RECOMPUTED ACCORDINGLY. 6. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AS SESSEE, THE A.O. WORKED OUT THE LTCG AMOUNTING TO RS.28,09,992/- AS AGAINST LTC LOS S COMPUTED BY THE ASSESSEE AT RS.(4,49,22,008)/-. 7. ON SIMILAR REASONING, BY SUBSTITUTING THE VALUE AS PER THE PROVISION OF SECTION 50C, THE A.O. MADE THE ADDITION OF RS.96,31,700/- AS AGA INST THE LONG TERM CAPITAL GAIN COMPUTED BY THE ASSESSEE AT RS.5,94,57,338/- FOR A. Y. 2014-15. 8. UPON THE ASSESSEES APPEAL, IN INDICIAL YEAR, TH E LD. CIT(A) REFERRED TO THE ORDER OF THE ITAT IN ASSESSEES OWN CASE AND DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: 3 ITA NOS.6181 & 5569/MUM/2018 ASST. CIT VS. M/S. AMARTARA PVT. LTD. 6.1.3 I HAVE CONSIDERED THE SUBMISSIONS MADE BY APP ELLANT AND THE MATERIAL AVAILABLE ON RECORD. THE HON'BLE MUMBAI BENCH OF TH E ITAT IN APPELLANT'S OWN CASE IN ITA NO.6050/M/2016 FOR ASSESSMENT YEAR 2012 -13 VIDE ORDER DATED 29.12.2017 HAS HELD AS FOLLOW:- 'HAVING HEARD BOTH THE SIDES, WE FIND MERIT IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT THE PROVISIONS OF SECTION 45(3) DEALS WITH SPECIAL CASES OF TRANSFER OF CAPITAL ASSET WHERE THE PROFITS OR G AINS ARISING FROM THE TRANSFER OF CAPITAL ASSET BY WAY OF CAPITAL CONTRIB UTION OR OTHERWISE SHALL BE CHARGEABLE TO TAX IN THE PREVIOUS YEAR IN WHICH SUC H TRANSFER TAKES PLACE AND FOR THE PURPOSE OF SECTION 48, THE AMOUNT RECOR DED IN THE BOOKS OF ACCOUNT OF THE FIRM SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER. A PLA IN READING OF PROVISIONS OF SECTION 45(3) MAKES IT DEAR THAT IT CONIES INTO OPE RATION ONLY IN SPECIAL CASES OF TRANSFER BETWEEN PARTNERSHIP FIRM AND PART NERS AND IN SUCH CIRCUMSTANCES, A DEEMED FULL VALUE OF CONSIDERATION SHALL BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN AS PER W HICH THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM SHALL BE TAKEN AS FULL VALUE OF CONSIDERATION. THOUGH THE PROVISIONS OF SECTION 45( 3) IS NOT A SPECIFIC PROVISION OVERRIDES THE OTHER PROVISIONS OF THE ACT , IMPORTING A DEEMING FICTION PROVIDED IN SECTION 50C OF THE ACT CANNOT B E EXTENDED TO ANOTHER DEEMING FICTION CREATED B\J THE STATUE BY WAY SECTI ON 45(3) TO DEAL WITH SPECIAL CASES OF TRANSFER. VIE PURPOSE OF INSERTION OF SECTION 45(3) IS TO DEAL WITH CASES OF TRANSFER BETWEEN PARTNERSHIP FIRM AND PARTNERS AND IN SUCH CASES, THE ACT PROVIDES FOR COMPUTATION MECHANISM O F CAPITAL GAIN AND ALSO PROVIDES FOR CONSIDERATION TO BE ADOPTED FOR THE PU RPOSE OF DETERMINATION OF FULL VALUE OF CONSIDERATION. SINCE THE ACT ITSEL F IS PROVIDED FOR DEEMING CONSIDERATION TO BE ADOPTED FOR THE PURPOSE OF SECT ION 48 OF THE ACT, ANOTHER DEEMING FICTION PROVIDED BY WAY OF SECTION 50C CANNOT BE EXTENDED TO COMPUTE DEEMED FULL VALUE OF CONSIDERAT ION AS A RESULT OF TRANSFER OF CAPITAL ASSET. THIS LEGAL PROPOSITION I S FURTHER SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS MOON MILLS LTD (SUPRA) WHEREIN IT WAS OBSERVED THAT ONE DEEMING FI CTION CANNOT BE EXTENDED BY IMPORTING ANOTHER DEEMING FICTION. THER EFORE, WE ARE OF THE CONSIDERED VIEW THAT THE PROFITS OR GAINS ARISING F ROM THE TRANSFER OF A CAPITAL ASSET BY A PARTNER TO A 'FIRM IN WHICH LIE IS OR BECOMES A PARTNER BY WAY OF CAPITAL CONTRIBUTION, THEN FOR THE PURPOSE O F SECTION 48, THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT AFFIRM SHALL BE DE EMED TO BEFALL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T RANSFER OF A CAPITAL ASSET. THE AO CANNOT IMPORT ANOTHER DEEMING FICTION CREATE D FAR THE PURPOSE OF DETERMINATION OF FULL VALUE OF CONSIDERATION AS A R ESULT OF TRANSFER OF A CAPITAL ASSET BY IMPORTING THE PROVISIONS OF SECTIO N 50C OF THE ACT, THE CIT(A), WITHOUT APPRECIATING THE FACTS, SIMPLY UPHE LD ADDITION MADE BY THE AO BY FOLLOWING THE DECISION OF ITAT, LUCKNOW BENCH IN THE CASE OF ACIT VS. CARLTON HOTEL PVT. LTD (SUPRA) WHERE THE I TAT HAS SIMPLY OBSERVED THAT THE PROVISIONS OF SECTION OVERRIDES T HE PROVISIONS OF SECTION 4 ITA NOS.6181 & 5569/MUM/2018 ASST. CIT VS. M/S. AMARTARA PVT. LTD. 45(3) BUT NOT GIVEN A CATEGORICAL FINDING. THE ITAT HAS GIVEN ITS FINDINGS UNDER DIFFERENT FACTS CONSIDERING THE FACT THAT WHE N A DOCUMENT IS REGISTERED UNDER THE PROVISIONS OF REGISTRATION ACT 1903, THE VALUE DETERMINED BY THE STAMP DUTY AUTHORITY SHALL BE REPLACED TO DETERMINE FULL VALUE OF CONSIDERATION, THEREFORE, WE REVERSE THE FINDING OF THE CIT(A) MID DELETE THE ADDITION MADE TOWARDS COMPUTATION OF LONG TERMS CAPITAL GAIN ON ACCOUNT OF TRANSFER OF CAPITAL ASSET INTO PARTNERSH IP FIRM. IN THE RESULT, APPEAL FILED BY THE ASSESSEE'S IS AL LOWED' 6.1.4. THE HON'BLE TRIBUNAL HAS ACCORDINGLY HELD T HAT THE DEEMING SECTION PROVIDED IN SECTION 50C CANNOT BE EXTENDED TO ANOTH ER DEEMING SECTION CREATED BY THE STATUE BY SECTION 45(3). THE TRIBUNAL HAS NOTED THAT SINCE THE ACT ITSELF HAS PROVIDED FOR DEEMING CONSIDERATION TO BE ADOPTED FO R THE PURPOSE OF SECTION 48 OF THE ACT, ANOTHER DEEMING SECTION PROVIDED BY SECTIO N 50C CANNOT BE EXTENDED TO COMPUTE DEEMED FULL VALUE OF CONSIDERATION ACCRUING AS A RESULT OF TRANSFER OF CAPITAL ASSETS BY PARTNER IN A FIRM AS CAPITAL CONT RIBUTION. THE HON'BLE TRIBUNAL HAS RELIED UPON THE DECISION OF THE SUPREME COURT IN CI T V. MOONMILL LTD (59 ITR 574) FOR THE PROPOSITION THAT ONE DEEMING SECTION C ANNOT BE EXTENDED BY IMPORTING ANOTHER DEEMING SECTION. ACCORDINGLY, THE HON'BLE T RIBUNAL HAS HELD THAT THE PROFITS AND GAINS ARISING FROM TRANSFER OF A CAPITA L ASSET BY A PARTNER TO A FIRM BY WAY OF CAPITAL CONTRIBUTION RECORDED IN THE BOOKS O F ACCOUNT OF THE FIRM (I.E. RS.7,50,00,000 IN THIS CASE) SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. 6.1.5. IT IS OBSERVED THAT THE AO, IN PARA 5.4 OF HIS ORDER HAS RELIED ON A DECISION OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF CARLTON HOTEL PVT. LTD. (122 TTJ 515). IT IS OBSERVED THAT THE HON'BLE BOMBAY TR IBUNAL WHILE DECIDING THE CASE OF THE APPELLANT HAS DULY CONSIDERED THE SAID LUCKN OW BENCH DECISION AND HAS DISTINGUISHED THE SAME. 6.1.6. RESPECTFULLY FOLLOWING THE DECISION OF THE BOMBAY BENCH OF THE TRIBUNAL IN THE APPELLANT'S OWN CASE, THE ADDITION MADE BY T HE AO AMOUNTING TO RS.3,68,60,462/- WHILE COMPUTING LONG TERM CAPITAL GAIN IS HEREBY DELETED AND THE APPEAL OF THE ASSESSEE OF THIS GROUND IS ALLOWED. 9. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 10. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE DESPITE NOTICE SENT. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR F OR SHORT) AND PERUSED THE RECORDS. THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSIONS. 11. UPON CAREFUL CONSIDERATION, WE FIND THAT THE IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT DECISION FOR THE A.Y. 2012-13 AS REFERRED BY THE LD. CIT(A) IN HIS 5 ITA NOS.6181 & 5569/MUM/2018 ASST. CIT VS. M/S. AMARTARA PVT. LTD. ORDER AS ABOVE. THE LD. DR DID NOT DISPUTED THE ABO VE PROPOSITION AND NO CONTRARY FACTS FOR THE CURRENT ASSESSMENT YEAR HAS BEEN BROUGHT TO OUR NOTICE. HENCE, RESPECTFULLY, FOLLOWING THE PRECEDENT AS ABOVE, WE UPHOLD THE ORD ER OF THE LD. CIT(A) AND DELETE THE DISALLOWANCE. 12. ANOTHER ISSUE RAISED FOR THE A.Y. 2014-15 IS WH ETHER THE LD. CIT(A) ERRED IN ALLOWING THE DEPRECIATION OF BLOCK OF ASSETS, BUILD ING AS CLAIMED BY THE ASSESSEE PREVAILING OVER THE PROVISIONS OF SECTION 45K OVER THE PROVISION OF SECTION 50C OF THE ACT. 13. BRIEF FACTS OF THE CASE ON THIS ISSUE IS THAT T HE A.O. ON THIS ISSUE HAS HELD THAT THE FINANCIAL STATEMENTS THAT DEPRECATION OF RS.59,15,6 37/- HAS BEEN CLAIMED @ 10% AGAINST THE BLOCK OF ASSETS BUILDING AFTER REDUCING RS.78 ,07,500/- FROM THE BLOCK ON ACCOUNT OF SALE OF THE AFORESAID FACTORY BUILDING. AS DISCUSSE D IN PARA 5.6 ABOVE, THE DEEMED VALUE OF THE BUILDING HAS BEEN INCREASED BY RS.42,83,038/ -. THEREFORE, THE A.O. OPINED THAT THE DEPRECATION CLAIMED BY THE ASSESSEE ON BUILDING W ILL BE RESTRICTED BY 10% OF THE SAME, I.E., RS.4,28,304/- AND DEPRECIATION OF RS.54,87,33 3/- WILL BE ALLOWED (59,15,637 4,28,304). HE FURTHER HELD THAT THE BOOK PROFIT WIL L ALSO BE INCREASED BY THE SUM OF RS.4,28,304/-. 14. WE NOTE THAT THE LD. CIT(A) HAS DEALT WITH THE ISSUE AS UNDER: 6.2.2 IN PARA 6 OF THE ASSESSMENT ORDER, THE LD. A. O. HAS MENTIONED THAT DEPRECIATION OF RS.59,15,637/- HAS BEEN CLAIMED AFT ER REDUCING RS.78,07,500/- FROM THE BLOCK OF ASSET. BUT AS THE DEEMED VALUE OF BUILDING HAS BEEN INCREASED BY RS.42,83,038/- THE DEPRECIATION IS RESTRICTED TO RS .54,87,333/-. 6 ITA NOS.6181 & 5569/MUM/2018 ASST. CIT VS. M/S. AMARTARA PVT. LTD. 6.2.3 THE APPELLANT SUBMITS THAT REDUCTION IN DEPRE CIATION IS MADE BY THE A.O. TAKING STAMP DUTY VALUATION APPLYING PROVISIONS OF 50C OF THE ACT FOR COMPUTING BLOCK OF ASSET AND THE SAME OUGHT TO BE DELETED AS THE SAME IS UNJUSTIFIED. 6.2.4 AS GROUND 1 IS DECIDED IN FAVOUR OF THE ASSES SEE CONSEQUENTIALLY PROVISIONS OF 45(3) WOULD PREVAIL OVER THE PROVISIONS OF SECTI ON 50C. HENCE, GROUND 5 BECOMES INFRUCTUROUS AND THE VALUE AS DEDUCTED FROM THE BLOCK OF ASSET BY THE APPELLANT HOLDS TRUE ALONG WITH THE DEPRECIATION CL AIMED THEREON. 15. SINCE THE ABOVE ISSUE HAS BEEN DECIDED BY THE L D. CIT(A) IN FAVOUR OF THE ASSESSEE ON THE SAME BASIS ON WHICH THE EARLIER ISSUE WAS DE CIDED IN FAVOUR OF THE ASSESSEE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A). ACCORDINGLY, WE UPHOLD THE SAME. 16. ONE ISSUE RAISED FOR A.Y. 2010-11 IS THAT THE L D. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S.14A R/W RULE 8D AMOUNTING TO RS.7, 07,992/- HOLDING THAT WHEN THE INVESTMENTS HAVE NOT GENERATED ANY INCOME, THE DEDU CTION ON ACCOUNT OF INTEREST COMPONENT ON BORROWED FUNDS WHICH WERE UTILIZED FOR MAKING THE INVESTMENTS CANNOT BE MADE. THE REVENUE IN ITS GRIEVANCE HAS ALSO RAISED THE ISSUE THAT THE ITAT HAS FAILED TO APPRECIATE THE CBDT CIRCULAR NO. 5 OF 2014 DATED 01 .02.2014 ON THIS ISSUE. 17. WE FIND THAT UPON A.O.S COMPUTATION OF DISALLO WANCE U/S.14A, THE LD. CIT(A) HAS HELD THAT THE DISALLOWANCE U/S. 14A SHOULD BE LIMIT ED TO THE EXEMPT INCOME EARNED. FOR THIS PROPOSITION, THE ASSESSEE HAS RELIED ON THE DE CISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DELITE ENTERPRISES (IN ITA NO. 110 OF 2009), THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CHEMINVEST LTD. IN 281 CTR 447 (DEL). AND THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE C ASE OF ACIT VS. VIREET INVESTMENTS (P) LTD. (82 TAXMANN.COM 4155). FOLLOWING THE ABOVE CASE LAW S, THE LD. CIT(A) UPHELD THAT THE DISALLOWANCE ONLY TO THE EXTENT OF EXEMPT INCOM E EARNED. 7 ITA NOS.6181 & 5569/MUM/2018 ASST. CIT VS. M/S. AMARTARA PVT. LTD. 18. AGAINST THIS ORDER, THE REVENUE HAS FILED THE A PPEAL BEFORE US. 19. UPON HEARING THE LD. DR AND PERUSING THE RECORD S, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORE-SAID DECISIONS REFERRED BY THE LD. CIT(A). MOREOVER, AS REFERRED IN THE SUBMISSIONS OF THE ASS ESSEE, THIS ITAT IN ASSESSEES OWN CASE FOR A.Y. 2012-13 VIDE ORDER DATED 29.12.2017 F OLLOWING THE SAME CASE LAWS HAS UPHELD THE SIMILAR ORDER BY THE LD. CIT(A). RESPECT FULLY FOLLOWING THE PRECEDENT AS ABOVE, WE UPHOLD THE ORDER OF THE LD. CIT(A). 20. IN THE RESULT, THESE APPEALS BY THE REVENUE STA NDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.03.2020 SD/- SD/- (C. N. PRASAD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 02.03.2020 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI