Appeal details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 2800 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 9 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-04-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2000-2001
Appeal Filed On
15-06-2006
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 642/HYD/2006 ASSESSMENT YEAR: 2000-01 THE SIRPUR PAPER MILLS LTD., ... APPELLANT HYDERABAD. (PAN AAACT7970R) VS. ASST. COMMISSIONER OF INCOME-TAX , RESPONDENT RANGE 3(3), HYDERABAD. ITA NO. 694/HYD/2006 ASSESSMENT YEAR: 2000-01 ASST. COMMISSIONER OF INCOME-TAX , APPELLANT RANGE 3(3), HYDERABAD. VS. THE SIRPUR PAPER MILLS LTD., ... RESPONDENT HYDERABAD. (PAN AAACT7970R) ASSESSEE BY : SHRI S/SHRI K. S AMPATH & JITEN OBEROI REVENUE BY : SHRI K.E. SUNIL DATE OF HEARING : 15/01/2013 DATE OF PRONOUNCEMENT : ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF CIT(A), TIRUPATI, DATED 12/04/2006, FOR THE ASSESSM ENT YEAR 2000-01. 2 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. ITA NO. 642/HYD/06 APPEAL BY THE ASSESSEE 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PAPER AND PAPER BOARD. TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED ON 29/11/2000, SHOWING COMPUTATION OF INCOME BOTH U NDER THE PROVISIONS OF SECTION 115JA OF THE ACT AND UNDE R THE PROVISIONS OF THE ACT OTHER THAN SECTION 115JA AND THE SAME WAS ACCEPTED VIDE INTIMATION DATED 30/1/2001. THERE AFTER, NOTICE U/S 142 READ WITH SECTION 143 WAS ISSUED RAI SING CERTAIN QUERIES WHICH WERE DULY REPLIED BY THE ASSE SSEE ALONG WITH SUPPORTING RECORD, DATA, DETAILS AND DOC UMENTS BASED ON WHICH THE ASSESSMENT WAS COMPLETED VIDE OR DER U/S 143(3) DATED 31/03/2003 AT A TOTAL INCOME OF RS . 4,01,63,100/- UNDER THE HEAD INCOME FROM CAPITAL G AINS AND AT RS. 3,32,71,280/- UNDER THE PROVISIONS OF SE CTION 115JA OF THE ACT. IN THE SAID ORDER AO MADE DISALLO WANCES ON COMPUTING THE TOTAL INCOME UNDER THE NORMAL PROV ISIONS OF THE ACT AS WELL AS UNDER THE PROVISIONS OF SECTI ON 115JA OF THE ACT. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 4. AS REGARDS PRIOR PERIOD EXPENSES OF RS. 1,14,684 /-, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO BY OBSERVING THAT THE AO MENTIONED IN HIS ASSESSMENT O RDER THAT SUCH EXPENDITURE RELATED TO FYS. 1994-95 AND 1 995-06, THEREFORE, THE SAID AMOUNT NEITHER ACCRUED NOR RELA TED TO THE INSTANT ASSESSMENT YEAR. 3 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US A ND RAISED THE FOLLOWING GROUND OF APPEAL: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWI NG THE CLAIM FOR DEDUCTION OF RS. 1,14,684/- ON THE GROUND THAT IT REPRESENTED LIABILITY PERTAINING TO EARLIER YEARS AND HENCE IS NOT ALLOWABLE AS DEDUCTIBLE EXPENDITUR E IN THE INSTANT YEAR. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI K. SAM PATH SUBMITTED THAT THE PERSONS TO WHOM COMMISSION HAS B EEN PAID PERTAINED ONLY IN THE PRESENT AY 2000-01. HE F URTHER SUBMITTED THAT THE LOWER AUTHORITIES HAVE FAILED TO BRING THE FACT THAT THOUGH COMMISSION PAID IN RESPECT OF SALE S MADE IN THE EARLIER YEAR, THE LIABILITY FOR PAYMENT OF THE SAME HAD ARISEN IN THE INSTANT YEAR, HENCE, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION FOR THE SAID AMOUNT IN THE YEAR UNDER CONSIDERATION. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: 1. RAJASTAN AND MADHYA PRADESH VS. NAGRI MILLS CO. LTD., [1958] 33 ITR 681] 2. GOVIND IMPEX (P) LTD., VS. APPROPRIATE AUTHORITY , [2011] 330 ITR 10 (SC) 3. CIT VS. EICHER LTD., [2010] 320 ITR 410 (DEL.) 4. CIT VS. NATHMAL TOLARAM [1973] 88 ITR 234 (GUA.) 5. SETH CHAMPALAL RAMSWARUP V. CIT, [1964] 52 ITR 201 (ALL.) 6. DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. M/S VISHNU INDUSTRIAL GASES P. LTD., ITA NO. 229/19 88, ORDER DTD. 6 TH MAY, 2008. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD AS WELL AS THE DECISIONS CITED. THOUGH THE TRANSACT ION MAY HAVE BEEN ENTERED INTO IN THE EARLIER YEARS, THE LI ABILITY MAY ACCRUE IN A LATER YEAR ON ACCOUNT OF THE SERVICE PR OVIDER RAISING THE INVOICE AT A LATER DATE. IN SUCH CASES IT CANNOT BE 4 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. CONCLUDED THAT THE LIABILITY HAS NOT ACCRUED IN THE YEAR IN WHICH THE ASSESSEE IS MADE AWARE OF THE CORRECT LIA BILITY. THE ASSESSEE HAS SUBMITTED THAT THAT THOUGH COMMISS ION PAID IN RESPECT OF SALES MADE IN THE EARLIER YEAR, THE LIABILITY FOR PAYMENT OF THE SAME HAD ARISEN IN THE INSTANT Y EAR, HENCE, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION FOR THE SAID AMOUNT IN THE YEAR UNDER CONSIDERATION. THE FO LLOWING CASES SUPPORT THIS VIEW. 1.SAURASHTRA CEMENTS & CHEMICAL INDUSTRIES LTD V CI T 213 ITR 523 GUJ. 2. CIT V ANNA TRANSPORTS CORPORATION LTD243 ITR 35 MAD. 3. CIT V JAGAJIT INDUSTRIES LTD., 339 ITR 382 DEL. 4.TOYO ENG INDIA LTD V JCIT, 100 TTJ 373 MUM 8. FURTHER THE HONBLE DELHI HIGH COURT IN THE CAS E OF M/S VISHNU INDUSTRIAL GASES P. LTD. (SUPRA) HAS HELD A S FOLLOWS: WE HAVE OFTEN WONDERED WHY THE INCOME TAX AUTHORITIES, IN A MATTER SUCH AS THIS WHERE THE DEDUCTION IS OBVIOUSLY A PERMISSIBLE DEDUCTION UNDE R THE INCOME TAX ACT, RAISE DISPUTES AS TO THE YEAR I N WHICH THE DEDUCTION SHOULD BE ALLOWED. THE QUESTION AS TO THE YEAR IN WHICH A DEDUCTION IS ALLOWABLE MAY B E MATERIAL WHEN THE RATE OF TAX CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEARS IS DIFFERENT; BUT I N THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WHETHER THE DEDUCTION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNT ING YEAR 1952, THAT IS IN THE ASSESSMENT YEAR 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO THE DEPARTMENT; AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT FRITTER AWAY ITS ENERGIES IN FIGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, JUDG ING FROM THE REFERENCES THAT COME UP TO US EVERY NOW AN D THEN, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE 5 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. DEPARTMENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER. THE SITUATION DOES NOT SEEM TO HAVE CHANGED OVER TH E LAST FIFTY YEARS AND THE REVENUE CONTINUES TO AGITA TE THE QUESTION WHETHER TAX IS LEVIABLE IN A PARTICULA R YEAR OR IN SOME OTHER YEAR. THIS IS HARDLY A QUESTION TH AT SHOULD REQUIRE US TO EXERCISE OUR MINDS PARTICULARL Y SINCE THERE IS NO DOUBT THAT THE TAX HAS BEEN PAID AND THE RATE OF TAX REMAINS THE SAME FOR BOTH THE ASSESSMENT YEARS. 9. IN VIEW OF THE ABOVE, WE DELETE DISALLOWANCE OF RS. 1,14,684/- MADE BY THE AO AND CONFIRMED BY THE CIT( A) ON ACCOUNT OF PRIOR PERIOD EXPENSES. 10. GROUND NO. 3 READS AS FOLLOWS: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) WAS NOT JUSTIFIED AND GROSSLY ERRED IN NOT ALLOWING DEDUCTION FOR INCOME EARNED BY THE APPELLA NT FROM THE BUSINESS OF GENERATION OF POWER IN COMPUTI NG THE BOOK PROFITS FOR THE PURPOSE OF SECTION 115JA O F THE ACT. 11. THE INCOME EARNED FROM BUSINESS OF GENERATION OF POWER WAS NOT REDUCED BY THE AO FOR COMPUTING BOOK PROFIT U/S 115JA OF THE ACT. ON APPEAL, THE CIT(A) OBSERVE D THAT THE AO HAD COMPUTED TOTAL INCOME AT RS. 4,01,63,100 /- UNDER NORMAL PROVISIONS OF THE ACT, WHICH BEING HIG HER THAN THE AMOUNT OF RS. 3,32,71,280/- COMPUTED U/S 115JA OF THE ACT BY THE ASSESSEE, WAS ADOPTED AS TOTAL INCOME U/ S 143(3) OF THE IT ACT. HE FURTHER OBSERVED THAT THE AO HAD NOT DONE ANY COMPUTATION IN RESPECT OF INCOME U/S 115JA BUT SIMPLY ACCEPTED THE ASSESSEES COMPUTATION AND ACCORDINGLY , THE ASSESSEE COULD HAVE NO OBJECTION TO THE SAME, BEING ITS OWN COMPUTATION. THE CIT(A) FURTHER OBSERVED THAT IT IS , HOWEVER, NOT EXPLAINED HOW THE BOOK PROFIT HAD BEEN 6 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. COMPUTED BY THE ASSESSEE AS THE SAME IS NEITHER EVI DENT FROM THE ORDER OF THE AO NOR PROVIDED BY THE ASSESS EE. UNLESS THE DEDUCTION WAS CLAIMED EITHER IN THE RETU RN OF INCOME OR DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE AO WOULD HAVE NO OCCASION OR OPPORTUNITY TO DECIDE THE ISSUE AND THE CLAIM IS MADE FOR THE FIRST TIME NOW BY THE ASSESSEE AGAINST ITS OWN POSITION AS REFLECTED IN T HE RETURN OF INCOME. THE CLAIM MADE NOW IS NOT BECAUSE OF ANY CHANGE OF FACTUAL OR LEGAL POSITION OR BECAUSE OF A NY CLARIFICATION OF LAW BY THE HIGHEST COURT OF THE LA ND. IT WAS OBSERVED THAT THE ISSUES CANNOT BE KEPT OPEN ENDED FOR INDEFINITE PERIOD AND THE ASSESSEE MUST MAKE ITS CL AIM EITHER IN THE RETURN OR REVISED RETURN. IN ANY CASE WHEN ASSESSEE HAD OFFERED CERTAIN INCOME IN THE RETURN T HE RIGHT FORUM TO ASK FOR RECONSIDERATION OF THAT RETURNED I NCOME IS WHEN IT IS EXAMINED FOR THE FIRST TIME BY THE AO AN D NOT IN APPELLATE STATE. ON MERIT ALSO, THE CIT(A) FOLLOWIN G HIS ORDER IN AY 2001-02, HELD THAT THE CLAIM OF THE ASSESSEE TO HAVE EARNED INCOME IN THE BUSINESS OF POWER GENERATION C ANNOT BE SUPPORTED AND DISMISSED THE GROUND OF APPEAL. 12. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 13. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTI ES AND PERUSED THE RECORD. UNDER SEC 115JA, EXPLANATION (I V) PROVIDES FOR DEDUCTION FROM THE BOOK PROFITS, THE A MOUNT OF PROFITS DERIVED BY AN INDUSTRIAL UNDERTAKING FROM T HE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER. THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2 007-08 IN ITA NO. 81/HYD/2011 VIDE ORDER DATED 15/06/2012 HELD AS FOLLOWS: 4THE ITAT HYDERABAD BENCH IN ASSESSEES OWN CASE IN ITA NO. 425/HYD/2001 AND ITA NOS. 547,548,963/HYD/2006 DATED 15/05/2007 FOR AYS. 7 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 1995-06 TO 2001-02, 2002-03 AND 2003-04 AND THE SUBSEQUENT ORDER OF THE ITAT IN ITA NOS. 207, 208 A ND 839/HYD/09 DATED 15/10/2009 FOR AYS. 2004-05 TO 2006-07 FOUND THAT THE ITAT HAS UPHELD THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA IN RESPECT OF T HE CAPTIVE POWER GENERATION UNDERTAKING AND 9.5 MW TURBINE POWER UNDERTAKING. AS THE TRIBUNAL (SUPRA) HAS HELD THAT THE ASSESSEE IS ENGAGED IN THE GENERATION OF POWER AND IS ENTITLED TO DEDUCTION U/S 80 IA(IV), CORRESPONDINGLY THE PROFIT DERIVED FROM THE GENERATION OF POWER IS TO BE REDUCED FROM THE BOOK PROFITS WHILE COMPUTING THE TAXABLE BOOK PROFITS U/ S 115JA. THE AO HAS NOT CONSIDERED THIS MATTER. THE AO THERE FORE MAY DETERMINE THE CORRECT OF AMOUNT OF PROFITS DERI VED FROM DISTRIBUTION OF POWER AND DEDUCT THE SAME FROM BOOK PROFITS, IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPO RTUNITY TO THE ASSESSEE. HENCE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO. 4 IS AS FOLLOWS:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED AND GROSSLY ERRED IN NOT ALLOWING EXCLUSION OF PROFIT ON SALE OF FIXE D ASSETS AMOUNTING TO RS. 4,79,67,569/- IN COMPUTING THE BOOK PROFITS FOR THE PURPOSE OF SECTION 115JA O F THE ACT. 15. WHILE COMPUTING THE BOOK PROFITS FOR THE PURPOS E OF SECTION 115JA OF THE ACT, THE AO NOT EXCLUDED THE P ROFIT ON SALE OF FIXED ASSETS AMOUNTING TO RS. 4,79,67,569/- . ON APPEAL BY THE ASSESSEE, THE CIT(A) OBSERVED THAT TH E AO HAD COMPUTED TOTAL INCOME AT RS. 4,01,63,100/- UNDE R NORMAL PROVISIONS OF THE ACT WHICH BEING HIGHER THA N THE AMOUNT OF RS. 3,32,71,280/- COMPUTED U/S 115JA OF T HE ACT BY THE ASSESSEE, WAS ADOPTED AS TOTAL INCOME U/S 14 3(3) OF THE IT ACT AND THE AO HAD NOT DONE ANY COMPUTATION IN 8 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. RESPECT OF INCOME U/S 115JA BUT SIMPLY ACCEPTED THE ASSESSEES COMPUTATION. FURTHER HE OBSERVED THAT TH E ASSESSEE WOULD HAVE NO OBJECTION TO THE SAME, BEING ITS OWN COMPUTATION, BUT, HOWEVER, IT IS NOT EXPLAINED HOW THE BOOK PROFIT HAS BEEN COMPUTED AND UNDER WHAT PROVISION T HE ASSESSEE WAS ENTITLED TO EXCLUDE THE PROFITS ON SAL E OF ASSETS FOR PURPOSES OF COMPUTING BOOK PROFIT. IT WAS FURT HER OBSERVED THAT THE ASSESSEE WAS OF THE VIEW THAT U/S 155JA BOOK PROFIT FLOWS FORM PROFIT AND LOSS ACCOUNT PREP ARED UNDER PART II AND III OF SCHEDULE VI OF THE COMPANI ES ACT AND DOES NOT INCLUDE ANY PROFIT ON SALE OF CAPITAL ASSET. THE CIT(A) WAS OF THE OPINION THAT THE THIS VIEW OF THE ASSESSEE CANNOT BE SUPPORTED AS NOT PROVIDED IN THE RELEVANT PROVISIONS AND SUCH ADJUSTMENTS ARE NOT CONTEMPLATE D IN THE SECTION 11JA, AS SEC. 115JA CONTEMPLATES COMPUTATIO N OF BOOK PROFIT BY VARIOUS ADJUSTMENTS TO NET PROFIT. T HE VARIOUS ADJUSTMENTS TO NET PROFIT ARE PROVIDED IN VARIOUS C LAUSES UNDER EXPLANATION TO SEC. 115JA WHEREAS NET PROFIT HAS TO BE ARRIVED AT AS PER COMPANIES ACT AS MENTIONED IN SEC . 115JA(2) OF THE IT ACT. THE ADJUSTMENTS SOUGHT TO B E MADE BY THE ASSESSEE TO THE NET PROFIT ARE NOT COVERED I N ANY OF THE CLAUSES UNDER EXPLANATION TO SEC. 115JA OF THE IT ACT. THE CIT(A) HELD THAT THE SUPREME COURTS DECISION I N THE CASE OF APOLLO TYRES LTD VS. CIT, [2002] 255 ITR 27 3, IS DIRECTLY APPLICABLE IN THIS CASE IN SO FAR AS THE N ET PROFIT AS PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCH EDULE VI TO COMPANIES ACT AND SCRUTINIZED AND CERTIFIED BY T HE CHARTERED ACCOUNTANT CANNOT BE TINKERED WITH EXCEPT AS PROVIDED IN SEC. 115JA TO ARRIVE AT BOOK PROFIT. AC CORDINGLY, HE DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE. 9 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 16. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 17. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH OF ITAT, HYDERABAD IN THE CASE OF RAIN COMMODITIES LTD. VS. DCIT, FOR AY 2004-05 I N ITA NO. 673/HYD/2009 VIDE ORDER DATED 02/07/2010. THE FOLLOWING WAS POSED BEFORE THE SPECIAL BENCH: 'WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT WAS JUSTIFIED IN INVOKING THE PROVISIONS OF S.263 AND DIRECTING THE ASSESSING OFFICER TO RE-COM PUTE THE BOOK PROFIT UNDER S.115JB OF THE ACT 1961 BY CONSIDERING THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956 ON ACCOUNT OF GAINS ARISING OUT OF THE TRANSFER OF ASSETS TO WHOLLY OWNED SUBSIDIARY A S PART OF BOOK PROFIT WITHOUT CONSIDERING THE PROVISI ONS OF S.47[IV] OF THE ACT 1961' 18. THE SPECIAL BENCH AFTER EXAMINING THE ISSUE ELABORATELY WITH VARIOUS CASE LAWS, HELD AS UNDER:- 30. WE, THEREFORE, ANSWER THE QUESTION REFERRED TO US AGAINST THE ASSESSEE AND HOLD THAT IN THE ABSENCE O F ANY PROVISION FOR EXCLUSION OF EXEMPTED CAPITAL GAI N IN THE COMPUTATION OF BOOK PROFIT UNDER THE PROVISIONS CONTAINED IN EXPLANATION TO SECTION 115JB OF THE AC T, THE ASSESSEE IS NOT ENTITLED TO THE EXCLUSION THERE OF AS CLAIMED. 19. RESPECTFULLY FOLLOWING THE DECISION OF THE SPEC IAL BENCH, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS IS SUE AND DISMISS THE GROUND OF APPEAL OF THE ASSESSEE. 20. GROUND NOS. 5 & 6 ARE AS FOLLOWS: 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ON DISPOSAL OF THIS APPEAL, IN THE EVENT TOTAL INCOME IS DETERMINED TO BE CHARGEABLE TO TAX U/S 115JA OF THE ACT, NECESSARY DIRECTIONS MAY BE GIVEN TO THE LEARN ED AO TO DETERMINE THE TAX CREDIT ELIGIBLE TO BE CARRI ED FORWARD TO SUBSEQUENT YEARS U/S 115JA OF THE ACT. 10 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, ON DISPOSAL OF THIS APPEAL, MATERIAL ADJUSTME NTS SHALL BECOME NECESSARY IN COMPUTING THE TOTAL INCOM E, BOOK PROFIT U/S 115JA, TAX AND INTEREST PAYABLE/RECEIVABLE BY THE APPELLANT AND NECESSARY DIRECTIONS MAY BE GIVEN TO THE AO TO CARRY THEM OUT IMMEDIATELY ON DISPOSAL OF THE APPEAL. 21. SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE TH E COORDINATE BENCH IN ASSESSEES OWN CASE FOR AYS 199 8-99 & 1999-2000 IN ITA NOS. 359 & 1060/HYD/04, VIDE ORDER DATED 16/11/2012, WHEREIN THE ASSESSEE HAS RAISED THIS GR OUND AS ADDITIONAL GROUND. THE COORDINATE BENCH, ADMITTED T HE ADDITIONAL AND REMITTED BACK TO THE FILE OF THE CIT (A) TO DECIDE AFRESH. RESPECTFULLY, FOLLOWING THE SAID DEC ISION, WE REMIT THIS ISSUE TO THE FILE OF THE CIT(A) TO DECID E THE SAME AFRESH. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 694/HYD/06 APPEAL BY THE REVENUE 23. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN HOLDING THAT THE RELINQUISHM ENT OF ITS RIGHT IN KAGAZNAGAR LAND BY THE ASSESSEE COMPANY AMOUNTED TO TRANSFER OF THE SAID ASSET. AT BEST, HE SHOULD HAVE ALLOWED THE COST OF THE LAND TO THE ASSESSEE. 3. EVEN IF IT IS TAKEN TO BE A TRANSFER AS DECIDED BY THE CIT(A), IT SHOULD HAVE BEEN HELD THAT THE RELINQUIS HMENT CONSTITUTES GIFT AS IT IS UNDISPUTED THAT THE ASSES SEE- COMPANY HAS NOT RECEIVED ANY CONSIDERATION FOR THE SAME. AS PER THE PROVISIONS OF CLAUSE (III) OF SECTION 47 OF THE ACT, ANY GIFT FALLS OUTSIDE THE SCOPE OF COMPUTATION OF INCOME FROM CAPITAL GAINS. THEREFORE, THE CIT(A) SHOULD NO T HAVE ALLOWED THE BENEFIT OF FAIR MARKET VALUE AS ON 01/0 4/1981 AND THE BENEFIT OF INDEXED COST. HE SHOULD HAVE ALL OWED ONLY THE ACTUAL COST TO THE ASSESSEE. 11 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 24. THE ASSESSEE OFFERED CAPITAL GAINS OF RS. 4,37, 09,632/- IN RESPECT OF SALE OF LAND AT BALANAGAR WHICH IS PA RTLY ADJUSTED AGAINST LOSS ON TRANSFER/RELINQUISHMENT OF LAND AT KOTHAPET VILLAGE, WHICH IS CALLED NOW AS KAGHAZNAGA R. THE AO HAD NOT DISPUTED THE COMPUTATION OF THE CAPITAL GAINS FORM THE SALE OF LAND AT BALANAGAR BUT DISALLOWED T HE CLAIM OF DEDUCTION OF LOSS FROM THE SAME IN RESPECT OF LA ND AT KOTHAPET VILLAGE. 25. THE AO MADE A DETAILED DISCUSSION REGARDING RELINQUISHMENT OF LAND AT KAGHAZNAGAR AND FAIR MARK ET VALUE OF SUCH LAND AS ON 01/04/1981. THE AO HAD HELD THAT NO TRANSFER OF 73.04 ACRES OF LAND AT KAGHAZNAGAR HAD TAKEN PLACE AS THE ASSESSEE DID NOT HAVE ANY RIGHT IN THE SAID LAND. THE AO FOUND THAT NO VALUE WAS RECEIVED FOR T HE RELINQUISHMENT OF THE KAGHAZNAGAR LAND AND FAIR MAR KET VALUE OF SUCH LAND AS ON 01/04/1981 WAS NIL. ALTERN ATIVELY, THE AO HAD FOUND THAT THE MARKET VALUE ADOPTED BY T HE ASSESSEE AS ON 01/04/1981 IS ABNORMALLY HIGH EVEN T HOUGH AO DID NOT DETERMINE THE REASONABLE MARKET VALUE OF THE SAID LAND AS ON 01/04/1981. THE AO ALSO FOUND THAT NO VALUE WAS RECEIVED FOR THE RELINQUISHMENT OF THE KAGHAZNA GAR LAND AND ACCORDINGLY DETERMINED THAT NO CAPITAL GAIN COU LD BE COMPUTED IN RESPECT OF THIS LAND AS COMPUTATION U/S 48 IS NOT POSSIBLE, HENCE, CHARGING SEC. 45 IS NOT APPLIC ABLE TO THIS LAND. THE AO HELD THAT SALES OF LAND AT BALANA GAR AND KAGHAZNAGAR ARE SEPARATE TRANSACTIONS, HENCE, COMPU TATION OF CAPITAL GAINS CANNOT BE CLUBBED, SO AS TO BE DON E SEPARATELY FOR EACH TRANSFER OF ASSET. THE AO, THUS , HELD THAT SINCE THE ASSESSEE DID NOT RECEIVE ANY AMOUNT FOR 12 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. KAGHAZNAGAR LAND, NO CAPITAL GAINS(LOSS) COULD BE C OMPUTED FOR THE SAID LAND. 26. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE CIT(A). 27. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSIONS, WHICH WERE REPRODUCED BY HIM IN HIS OR DER ARE EXTRACTED BELOW: 4.3 THE APPELLANT MADE DETAILED WRITTEN SUBMISSIONS . RELEVANT PORTIONS ARE EXTRACTED AS UNDER; 11 1. 1 SALE OF LAND AT BALANAGAR 1.1.1. THE APPELLANT OWNED 5.02 ACRES OF LA ND AT BALANAGAR, HYDERABAD. THE SAID LAND WAS PURCHASED FROM ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED IN 1975 FOR ESTABLISHMENT OF RESEARCH & DEVELOPMENT UNIT. UNDER THE PROVISIONS OF CLAUSE (A) OF SUB SECTION (1) OF SECTION 20 OF THE URBAN LAND (CEILING AND REGULATION) ACT, 1976 AND CENTRAL ACT 33 OF 1976, THE GOVERNMENT OF ANDHRA PRADESH GAVE THE PERMISSION TO THE APPEL/ANT TO ESTABLISH A RESEARCH AND DEVELOPMENT UNIT SUBJECT TO CERTAIN CONDITIONS. ONE OF THE PRIMARY CONDITIONS W AS THAT THE LAND SHOULD NOT BE LEASED OUT OR SOLD WITH OUT THE PERMISSION OF THE GOVERNMENT. 1.1.2. DURING THE PREVIOUS YEAR RELEVANT TO THE ASS T. YEAR UNDER CONSIDERATION, THE APPELLANT COMPANY PROPOSED TO SELL THE ABOVE LAND AT BALANAGAR. AS AFORESAID, SINCE THE BALANAGAR LAND COULD NOT HAVE BEEN OTHERWISE SOLD WITHOUT THE PERMISSION OF THE GOVERNMENT, THE APPELLANT REQUESTED THE GOVERNMENT TO GRANT PERMISSION TO SELL THE ENTIRE LAND OF 5.02 ACRES INCLUDING BUILDINGS, INDUSTRIAL SHED AND OTHER CONSTRUCTIONS TO THE FOLLOWING PARTIES: 13 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. SL.NO. NAME EXTENT OF LAND (ACRES) 1. M/S LOKESH MACHINES LTD. 1.71 2. M/S M.L.R. MOTORS PVT. LTD. 2.01 3. M/S M.K.R. INDUSTRIES 0.71 4. M/S ANIL STEEL INDUSTRIES 0.59 TOTAL 5.02 1.2 CONDITIONAL ORDER OF THE GOVERNMENT FOR THE SALE OF THE AFORESAID LAND 1.2.1 THE REVENUE (UC.III) DEPARTMENT OF THE GOVERNMENT OF A NDH RA PRADESH IN EXERCISE OF THE POWERS CONFERRED BY CLAUSE (A) OF SUB-SECTION 20 'OF THE URBAN LAND (CEILING AND REGULATION) ACT, 1976 (CENTRAL ACT, 33 OF 1976), VIDE G.OM.S.NO.125 DATED 12-02-1999, ACCORDED THE PERMISSION TO THE APPELLANT TO SELL THE AFORESAID LAND MEASURING 5.02 ACRES INCLUDING BUILDINGS, INDUSTRIAL SHED AND OTHER CONSTRUCTIONS THEREIN TO THE AFORESAID PARTIES ... ' THE SAID PERMISSION WAS HOWEVER GIVEN SUBJECT TO CERTAIN CONDITIONS WHICH ARE ENUMERATED HERE IN BEL OW AS EXTRACTED FROM THE G.O.M.S.NO.125 DATED 12-02- 1999;- '(I) THAT THE (1) MLS.LOKESH MACHINES LIMITED, (2) MLS.M.L.R.MOTORS PVF L TO (3) MLS.M.K.R.LNDUSTRIES AND (4) MLS.ANIL STEEL INDUSTRIES SHOULD NOT LEASE OUT THE LAND OR SELL WITHOUT PERMISSION OF THE GOVERNMENT. (II) THAT THE LAND SHOULD BE UTILIZED FOR THE PURPO SE OF RUNNING THE INDUSTRIES WITHIN 3 YEARS FROM THE DATE OF ISSUE OF THE ORDERS FAILING WHICH THE EXEMPTION GRA NTED SHALL STAND CANCELLED AND THE EXCESS LAND WILL BE SUBJECT TO THE PROVISIONS OF THE URBAN LAND (CEILIN G AND REGULATION) ACT, 1976; (III) THAT THE PURCHASERS OF THE LAND I. E., 14 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. (1) MLS. LOKESH MACHINES LIMITED (2) MLS.M.L.R.MOTORS PVT LTD (3) MLS.M.K.R.LNDUSTRIES; AND (4) MLS.ANIL STEEL INDUSTRIES, SHALL FILE A STATEME NT ULS.6 OR 15 OF THE- URBAN LAND (CEILING AND REGULATION) ACT, 1976 AS THE CASE MAYBE, BEFORE THE SPECIAL OFFICER AND COMPETENT AUTHORITY URBAN LAND CEILING HYDERABAD WITHIN THREE MONTHS FROM THE DATE OF REGISTRATION OF THE LAND IN THEIR FAVOUR. (IV) MLS. SIRPUR PAPER MILLS LIMITED IS DIRECTED TO RELINQUISH THE LAND SAID TO BE ENCROACHED BY THE 35 46 PERSONS IN KOTHAPET VII/AGE OF ADILABAD DISTRICT IN FAVOUR OF GOVERNMENT FOR REGULARIZATION OF THOSE ENCROACHMENT. THE APPELLANT FURTHER STATES IN THE WRITTEN SUBMISS IONS AS UNDER:- '1.3. CONSEQUENTIAL RELINQUISHMENT OF THE LAND AT KAGHAZNAGAR. 1.3.1 THE APPELLANT COMPANY ACCEPTED THE GOVERNMENT'S ORDER ISSUED THROUGH THE G. O. MS. NO. 125 DATED 12-02-21999, AND AGREED TO COMPANY WITH ALL THECONDITIONS LAID DOWN IN THE AFORESAID ORDER. CONSEQUENTIALLY, THE APPELLANT HAD TO RELINQUISH IT S LAND AT KOTHAPET VILLAGE (NOW CALLED AS KAGHAZNAGAR ), MEASURING 73.04 ACREES OF LAND, TO COMPLETE THE TRANSACTION OF SALE OF LAND AT BALANAGAR. 1.3.2 THE AFORESAID RELINQUISHMENT WAS RECORDED BY THE MANDAL REVENUE OFFICER, KAGHAZNAGAR IN HIS RECORDS WHEREIN HE DELETED THE SAID LAND MEASURING 73.04 ACRES FROM THE TOTAL AREA BELONGING TO THE APPELLAN T. THE COPY OF THE LETTER FROM THE MANDAL REVENUE OFFI CER DATED 26-09-1999 IS ..... ' THUS IT IS STATED THAT THE APPELLANT ACCORDINGLY RELINQUISHED ITS LAND AT KOTHAPET VILLAGE (NOW CALL ED KAGHAZANAGAR), MEASURING 73.04 ACRES OF LAND, TO COMPLETE THE TRANSACTION OF SALE OF LAND AT BALANAGAR. THE APPELLANT VALUED THE LAND AT KAGHAZNAGAR AT RS.40,41,0001- AS ON 1-4-1981 BY ENGAGING A REGISTERED VALUER. ACCORDINGLY, LONG-TER M CAPITAL GAINS WAS WORKED OUT TOGETHER FOR LANDS AT BALANAGAR AND KAGHAZNAGAR. 15 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 28. IN THE REMAND REPORT DT.23-02-2006, THE ASSESSI NG OFFICER HAS DEALT WITH QUESTION OF VALUATION OF THE LAND RELINQUISHED BY THE APPELLANT F OR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. THE ASSESSING OFFICER HAS STATED AS UNDER: - 'IT IS SUBMITTED THAT THE FAIR MARKET VALUE AS ON 1 .4.81 ESTIMATED AT RS. 40, 41,000/- IS INCORRECT. THE ESTIMATE OF THE ASSESSEE IS BASED ON REPORT PREPARE D BY PRIVATE VALUER. EVEN ACCORDING TO THE ASSESSING OFFICER & PRIVATE VALUER THE ENTIRE LAND WAS SITUATED IN THE SAME LOCALITY. IN SUCH CASE, THERE MAY NOT BE H UGE VARIATION IN THE FAIR MARKET VALUE OF LAND FROM ONE SURVEY NUMBER TO OTHER SURVEY NUMBER. HOWEVER, AS PER PRIVATE VALUER, THERE IS HUGE VARIATION IN MARK ET VALUE OF LAND FROM ONE SURVEY NUMBER TO OTHER SURVE Y NUMBER. THE LOWEST RATE ADOPTED IS RS. 2, 000 PER ACRE AND THE HIGHEST RATE IS RS. 1,93,600 PER ACRE. SUCH HUGE VARIATION IS VERY UNLIKELY FOR THE LAND LOCATE D IN SAME AREA. THIS IT SELF PROVES THAT THE VALUATION R ATES ADOPTED BY THE ASSESSEE ARE INCORRECT. IN ANY CASE, THE LAND IN QUESTION WAS LOCATED IN A REMOTE VII/AGE OF MOST BACKWARD DISTRICT OF THE STA TE AND IT APPEARS THAT THE RATE OF RS.1,93,600 PER ACR E AS ON 1-4-81 WAS NOT FIXED NOT ONLY FOR THE LANDS LOCA TED IN KOTHAPET VILLAGE BUT ALSO IN ANY OTHER VILLAGE O F ADILABAD DISTRICT. SINCE THE DATA FURNISHED BY THE PRIVATE VALUER IS N OT SUPPORTED BY ANY ACCEPTABLE EVIDENCE, THE MATTER WA S REFERRED TO THE ITO, WARD-1, MANCHIRYAL FOR ASCERTAINING THE SAME AS PER RECORDS OF SRO AS ON 1 -4- 1981. THE ITO HAS FORWARDED THE REPORT OF THE ITI V IDE LETTER DATED: 12-12-05 (RECEIVED ON 17-1-2006) WHIC H IS ENCLOSED TO THIS REPORT. THE VALUE AS PER ITI RE PORT AND THE RATES ADOPTED BY THE ASSESSEE ARE SHOWN IN THE FOLLOWING TABLE FOR READY REFERENCE: 16 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. SURVEY NO. AS PER REGD VALUER CONVERTED TO ACRES AS PER ASSESSEE AS PER ITIS REPORT 1 TO 6 2000 PER ACRE 2000 17/A 20/- PER SYD 96,800 5000 24/A/1 35/- PER SYD 1,69,400 8000 63/A TO 66/1 10,000 PER ACRE 10,000 67/1 40/- PER SYD 1,93,600 10,000 108 TO 171 10,000 PER ACRE 10,000 247/1 6,000 PER ACRE 6,000 248 12/- PER SYD 58,080 6,000 IF THE CORRECT RATES AS PER S.R.O. RECORDS, AS REPO RTED BY THE ITI IS ADOPTED THE MARKET VALUE OF THE LANDS WOULD BE AS UNDER: SURVEY NO. ACRES RATE TOTAL 1 TO 6 13.24 2000 26,480 17/A 3.30 5000 16,500 24/A/1 3.29 8,000 26,320 63/A TO 66/1 2.06 10,000 20,600 67/1 0.89 10,000 8,900 108 TO 171 41.88 10,000 4,18,800 17 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 247/1 5.89 6,000 35,340 248 2.49 6,000 14,940 TOTAL 73.04 5,67,880 THE APPELLANT, IN ITS COUNTER COMMENTS, STATED THAT THE REGISTERED VALUER AT PAGE-5 OF HIS VALUATION REPORT DT.8- 11-2000 EXTRACTED A SIMILAR TABLE WHICH SHOWS THAT THE REGISTERED VALUER WAS VERY MUCH AWARE OF THE NOTING S IN THE RECORDS OF THE SRO. THE APPELLANT ALSO STATE S THAT 'THE RVO IS REQUIRED TO DETERMINE THE MARKET VALUE ON A PARTICULAR DATE. SUCH IS RECORDED IN CLEAR AND GO OD DETAIL BY THE RVO ON PAGE 6 OF THE VALUATION REPORT. THE RVO HAS GONE AROUND AND FOUND OUT THE RATES FRO M THE REGISTRIES FOR DIFFERENT SURVEY NUMBERS CONTEMPORANEOUSLY. THOSE RATES WHICH ARE APPEARING IN THE SURVEY NUMBERS HAVE BEEN ADOPTED FOR THE PURPOSES OF DETERMINING THE FAIR MARKET VALUE. EVEN THEREAFTER THE VALUER HAS BEEN CONSCIOUSLY AFFORDED REDUCTION OF 30% FOR OTHER DEVELOPMENTAL FACILITIES ON SUCH VALUES.' 29. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND THE REMAND REPORT OBTAINED FROM THE ASSESSING OFFIC ER, THE CIT(A) HELD AS FOLLOWS: 4.5.1 I HAVE CAREFULLY CONSIDERED AND ANALYSED VARI OUS RELEVANT MATERIALS. THE APPELLANT STATED AS UNDER. 'THE APPELLANT ACQUIRED 619.27 ACRES OF LAND IN VAR IOUS SURVEY NUMBERS AT SIRPUR- KAGHAZNAGAR, THEN KNOWN A S KOTHAPETA VII/AGE DURING 1939-40. THE CONSIDERATION WAS PAID TO THE GOVERNMENT OF ANDHRA PRADESH FOR PURCHASE OF THE SAID LAND ALONG WITH OCCUPANCY RIGH TS OF THE SAME. THE AFORESAID IS EVIDENT FROM THE GO.MS.NO.40 DATED 07-01-1960, ISSUED BY THE REVENUE DEPARTMENT OF THE GOVERNMENT OF ANDHRA PRADESH. RELEVANT EXTRACTS OF THE AFORESAID G. O. M IS STATED HEREIN UNDER. 18 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 'IN 1939-40 THE SIR PUR PAPER MILLS AUTHORITIES WER E GIVEN PERMISSION OF 619 ACRES 27 GUNTAS OF LAND AT SIRPUR KAGHAZNAGAR (THEN KOTHAPET VII/AGE). THIS AR EA IS COMPRISED OF THE FOLLOWING: TOTAL PATTA LAND 471.04 KHARIZKHATA LANDS GOVERNMENT 129.18 PURAMPOKE 19.05 619.27 NOTIFICATIONS UNDER SECTION 3 AND 7 OF THE HYDERABA D LAND ACT WERE ISSUED AND THE TAHSILDAR PREPARED DETAILED LAND ACQ. STATEMENT SHOWING THE COMPENSATI ON FOR THE WHOLE AREA INCLUDING GOVERNMENT LAND. THE COMPANY HAD AT DIFFERENT TIMES PAID THE WHOLE COMPENSATION FIXED BY THE GOVERNMENT INCLUDING KHARIZKHATA LAND AND PURAMBOKE LANDS . . . .. .. THOUGH THE COMPENSATION ON GOVERNMENT LAN D WAS PAID AND THE MILLS AUTHORITIES HAVE BEEN REGULA RLY PAYING DHARKHAS SINCE 1940 WHEN THE LANDS WERE GIVE N IN THEIR POSSESSION, SO FAR THE LANDS HAVE NOT BEEN ENLISTED IN THE REVENUE RECORDS IN THE COMPANY'S NA ME 1. PATTA OF THE KARISHKHATA LAND AND PURAMBOKO LAND S ALREADY IN POSSESSION OF THE MILLS SINCE 1940 AND F OR WHICH COMPENSATION HAVE BEEN PAID BY THEM, SHOULD B E ENTERED IN THE VILLAGE RECORDS IN THE NAME OF THE M ILLS. 2.2.2. THE COMPANY ACQUIRED THE LAND AFTER ISSUANCE OF GAZETTE BY THE GOVERNMENT OF ANDHRA PRADESH THE APPELLANT ACQUIRED THE LAND UNDER THE THEN HYDERABAD LAND ACT BY THE GOVERNMENT OF ANDHRA PRADESH AFTER ISSUANCE OF GAZETTE NO.33 DATED 12TH AMARDAD 1349 FASLIL. THE APPELLANT WAS CALLED UPON TO PAY CONSIDERATION UNDER THE PROVISIONS OF A. P. (T. A.) LAND REVENUE ACT, 1317, FASLI, AND IT IS ONLY THERE AFTER A CERTIFICATE WASISSUED UNDER SECTION 54 OF THE SAI D ACT. COPIES OF THE AFORESAID GAZETTE (IN URDU LANGU AGE ALONG WITH RELEVANT ENGLISH TRANSLATION) AND THE CERTIFICATE ISSUED UNDERSECTION 54 OFTHE LAND REVEN UE ACT, 1317 FASLI ARE..... 19 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 2.2.3. THE STATUS OF THE APPEL/ANT IS THAT OF AN ABSOLUTE OWNER OF THE LAND THE CERTIFICATE ISSUED UNDER THE PROVISIONS OF THE AFORESAID ACT DEALS WITH GRANT OF OCCUPANCY RIGHTS WHICH ARE ABSOLUTE RIGHTS AND ARE HERITABLE AS WELL AS TRANSFERABLE UNDER THE PROVISIONS OF SECTION 58 OF THE LAND REVENUE ACT, 1317 FASLI. SECTION 58 STATES AS UNDER:- ` OCCUPANCY RIGHT IS HERITABLE AND TRANSFERABLE:- AN OCCUPANCY RIGHT TO LAND SHALL BE DEEMED TO BE HERITABLE AND `TRANSFERABLE. ' 2.2.4. BEING OWNERS, THE APPEL/ANT HAS BEEN ASSESSED AND HAS BEEN PAVING ' NALA TAX UNDER THE ANDHRA PRADESH NON-AGRICULTURAL LAND ASSESSMENT (NALA) ACT. 1963 THE COMPANY HAS BEEN PAYING NALA TAX ON THE SAID LAND AS IS EVIDENT FROM THE LETTER OF THE MANDAL REVENUE OFFICE DATED 26-09-1999 ... RELEVANT EXCERPTS OF THE NALA ACT ARE DISCUSSED HER E IN UNDER: SECTION 3 : LEVV OF ASSESSMENT ON 'ON- AGRICULTURAL/AND SECTION 3 OF THE NALA ACT, 1963 THAT DEALS WITH LEV Y OF ASSESSMENT ON NON- AGRICULTURAL LAND, CONTAINS THE FOLLOWING PROVISIONS: 'THERE SHALL BE LEVIED AND COLLECTED BY THE GOVERNMENT FOR EACH FASLI YEAR COMMENCING ON THE FIRST DAY OF JULY FROM THE OWNER OF SUCH LAND, AS ASSESSMENT, AT THE RATE SPECIFIED .... ' SECTION4: DETERMINATION ON ASSESSMENT AND ISSUE OF DEMAND NOTICE. FURTHER SECTION 4 OF THE SAID ACT CONTAINS PROVISIO NS ON DETERMINATION ON ASSESSMENT AND ISSUE OF DEMAND NOTICE. THE EXCERPTS OF THE ABOVE SECTION READS AS FOLLOWS: 20 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 'THE REVENUE INSPECTOR SHALL DETERMINE THE ASSESSME NT PAYABLE BY AN OWNER OF NON-AGRICULTURAL LAND ... AND CAUSE A NOTICE OF DEMAND TO BE SERVED ON THE OWNER THE OWNER IS ASSESSABLE UNDER THE NALA ACT IT IS EVIDENT FROM THE ABOVE PROVISIONS OF THE STAT UTE THAT ONLY THE OWNER OF THE LAND IS ASSESSABLE UNDER THE A.P. NALA ACT, 1963. THE FACT THAT THE APPELLANT COMPANY HAS BEEN PAYING TAX UNDER THE NALA ACT ESTABLISHES THAT IT IS THE OWNER OF THE IMPUGNED LA ND. FURTHER, THE DELETION OF THE AFORESAID LAND FOR THE PURPOSE OF PAYMENT OF NALA TAX BY THE MANDAL REVENUE OFFICER ONLY EVIDENCES THE FACT THAT THE LA ND HAS NOW BEEN TRANSFERRED BY THE APPELLANT AND HENCE IS NO MORE LIABLE TO PAY TAX ON THE IMPUGNED LAND. 2.2.5 THE LAND ADMEASURING 73.04 ACRES FORMS PART THE TOTAL LAND ADMEASURING 619.27 ACRES THE LAND ADMEASURING 73.04 ACRES FORMS PART OF THE AFORESAID LANDS ADMEASURING 619.27 ACRES. THE NATUR E OF TITLE OF APPELLANT COMPANY IN RESPECT OF THE SAI D LANDS ADMEASURING 73.04 ACRES IS ALSO THEREFORE, TH AT OF AN ABSOLUTE OWNER. 2.2.6. REGISTERED SALE DEED IS NOT THE SOLE PROOF OF OWNERSHIP RIGHTS THE LD. ASSESSING OFFICER HAS STATED THAT THE APPEL LANT COMPANY IS NOT HAVING ANY REGISTERED SALE DEED EXECUTED IN THEIR FAVOUR CONFERRING 'OWNERSHIP RIGH TS' AND THEREFORE IT IS NOT THE OWNER OF THE IMPUGNED L AND. IN THIS REGARD, REFERENCE MAY BE DRAWN FROM SECTION 3(1) OF THE INDIAN STAMP ACT 1899, WHICH PROVIDES A S FOLLOWS: 'SECTION3: INSTRUMENTS CHARGEABLE WITH DUTY .... PROVIDED THAT NO DUTY SHALL BE CHARGEABLE IN R ESPECT OF (I) ANY INSTRUMENT EXECUTED BY, OR ON BEHALF OF, OR IN FAVOUR OF THE GOVERNMENT IN CASES WHERE BUT FOR THI S EXEMPTION THE GOVERNMENT WOULD BE LIABLE TO PAY DUT Y 21 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. CHARGEABLE IN RESPECT OF THE SAID INSTRUMENT.' SUCH A DOCUMENT IS ALSO NOT REQUIRED TO BE REGISTER ED UNDER THE PROVISIONS OF SECTION 17(2)(XI/) OF REGISTRATION ACT 1908, WHICH STATES AS UNDER: 'SECTION 17: DOCUMENTS OF WHICH REGISTRATION IS COMPULSORY (XII) ANY CERTIFICATE OF SALE GRANTED TO THE PURCHA SER OF ANY PROPERTY SOLD BY PUBLIC AUCTION BY A CIVIL OR REVENUE OFFICER' THE AFORESAID PROVISIONS OF THE RELEVANT ACTS THUS EXPLAIN THE ABSENCE OF REGISTERED SALE DEED IN FAVO UR OF THE APPELLANT COMPANY, ALTHOUGH IT BEING THE OWNER OF THE IMPUGNED LAND. FURTHER TO THE ABOVE, IN THE CASE OF CIT -VS.- PODA R CEMENTS PVT. LTD. (1997) 226 ITR 625 (SC), IT HAS BEEN HELD BY THE APEX COURT THAT THE REQUIREMENT OF REGISTRATION OF THE SALE DEED IS NOT WARRANTED TO BECOME THE OWNER OF A PROPERTY FOR THE PURPOSES OF THE I. T. ACT. 2.2.7. THE COMPANY'S RIGHTS OVER THE LAND IS THEREFORE NOT RESTRICTED TO RIGHTS OF POSSESSION ONLV. IN VIEW OF THE AFORESAID SUBMISSIONS, YOUR APPELLANT HUMBLY SUBMITS BEFORE YOUR GOODSELF THAT THE ALLEGATIONS MADE BY THE LD. ASSESSING OFFICER THAT THE APPELLANT MERELY POSSESSES THE RIGHT OF POSSESSION AND THAT TOO HAS ERODED BY THE MERE FACT THAT THE LAND HAS BEEN ENCROACHED IS COMPLETELY WRONG, BASELESS AND H AS NO LEGS TO STAND UPON. ' IT IS DIFFICULT TO DISAGREE WITH THE CLAIMS OF THE APPELLANT THAT THE APPELLANT IS THE OWNER OF THE 73 .04 ACRES OF LAND IN KAGHAJNAGAR WHICH WAS RELINQUISHED ! TRANSFERRED TO THE GOVERNMENT OF ANDHRA PRADESH. TH E APPELLANT HAS BEEN IN POSSESSION OF THE SAID LAND O F 73.04 ACRES WHICH IS PART OF THE ENTIRE 619.27 ACRE S OF LAND, WHICH WAS GIVEN TO THE APPELLANT COMPANY IN T HE YEAR 1939-40 AS IS EVIDENT FROM THE GO MS. NO.40 DT.07-01-1960 OF THE REVENUE DEPARTMENT, 22 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. GOVERNMENT OF ANDHRA PRADESH. THE APPELLANT COMPANY HAS BEEN PAYING NON-AGRICULTURAL LAND ASSESSMENT (NALA) TAX FOR THE LAND. CONSIDERATION! COMPENSATIO N WAS ALSO PAID FOR ACQUIRING THE SAID LAND. ADVERSE POSSESSION HAS NOT TAKEN AWAY THE RIGHT OF THE APPELLANT TO THE PROPERTY AND THE OWNERSHIP OF THE APPELLANT TO THE LAND WAS NOT A FACT OF DISPUTE. 4.5.2. IT IS ALSO DIFFICULT TO DISAGREE WITH THE SUBMISSION OF THE APPELLANT THAT THE TRANSFER/ RELINQUISHMENT OF 73.04 ACRES OF LAND AT KAGHAJNAGA R WAS LINKED TO THE SALE OF LAND AT BALANAGAR. I HAVE ALSO GONE THROUGH THE GO MS. NO.125 DT.12-02-1999 OF THE GOVERNMENT OF ANDHRA PRADESH IN WHICH THE APPELLANT WAS GRANTED PERMISSION TO SALE THE BALANAGAR LAND A ND ALSO THE APPELLANT WAS DIRECTED TO RELINQUISH THE L AND AT KAGHAJNAGAR (73.04 ACRES). THE RELEVANT EXTRACT IS AS UNDER:- '(IV) MLS. SIRPUR PAPER MILLS LIMITED IS DIRECTED T O RELINQUISH HE LAND SAID TO BE ENCROACHED BY THE 354 6 PERSONS IN KOTHAPET VILLAGE OF ADILABAD DISTRICT IN FAVOUR OF GOVERNMENT FOR REGULARIZATION OF THESE ENCROACHMENT. THE COLLECTOR, ADILABAD DISTRICT IS REQUESTED TO TAKE NECESSARY FURTHER ACTION FOR RESUMING THE 73 ACRES OF LAND IN KOTHAPET VILLAGE O F ADILABAD DISTRICT FROM THE MLS. SIRPUR PAPER MILLS LIMITED, AS THE MANAGEMENT OF M/S. SIRPUR PAPER MILLS LIMITED IS WILLING TO RELINQUISH THE SAID LAND AND TAKE FURTHER ACTION FOR ISSUE OF PATTAS TO THE ENCROACHE RS TON THE ABOVE SAID LAND UNDER INTIMATION TO GOVERNMENT. (BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH)' I AM CONVINCED THAT THE MAIN PURPOSE OF THE APPELLA NT COMPANY TO RELINQUISH THE 73.04 ACRES OF KAGHAJNAGA R LAND IS TO GET PERMISSION TO SELL THE BALANAGAR LAN D. OF COURSE, THE APPELLANT COMPANY WAS EFFECTIVELY OUT O F POSSESSION OF THE SAID LAND WHICH WAS ENCROACHED UP ON BY 3546 PERSONS BY RELINQUISHING HAS MADE A VIRTUE OUT OF NECESSITY. THE APPELLANT COMPANY HAD INITIATED L EGAL STEPS BY GIVING SERVING SHOW-CAUSE NOTICES TO THE ENCROACHERS TO GET THE ENCROACHMENTS VACATED, PERHAPS WITHOUT MUCH SUCCESS. PROBABLY THE SALE OF LAND AT 8ALANAGAR WOULD NOT HAVE HAD HAPPENED UNLES S 23 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. THE APPELLANT AGREED TO RELINQUISH THE 76.04 ACRES OF LAND TO THE GOVERNMENT OF ANDHRA PRADESH ALREADY UNDER ADVERSE POSSESSION AS GOVERNMENT OF ANDHRA PRADESH'S APPROVAL WAS MANDATORY TO SALE 8ALANAGAR LAND. OTHERWISE THE APPELLANT,' WOULD NOT HAVE RELINQUISHED THE LAND FOR THE ONLY FACT OF ADVERSE. POSSESSION UNLESS THERE IS SOME OTHER GAIN. UNLESS THE APPELLANT IS BENEFITED THERE WAS NO REASON TO RELIN QUISH THE LEGAL RIGHT TO THE SAID 76.04 ACRES OF LAND AND THE BENEFIT WAS THE SALE OF LAND AT 8ALANAGAR. THUS, IT CANNOT BE SAID THAT THERE WAS NIL GAIN TO THE APPEL LANT FROM SALE OF 76.04 ACRES OF LAND AND IT CANNOT ALSO BE SAID THAT THE SALE OF LAND AT BALANAGAR AND KHAGAJN AGAR LAND CAN BE BIFURCATED. RELYING ON THE DECISION IN THE CASE OF 8C SRINIVAS SETTY VS. CIT (1981) 128 ITR 294 (SC), THE ASSESSING OFFI CER STATES THAT SINCE THE ASSESSEE DID NOT RECEIVE ANY CONSIDERATION FOR THE RELINQUISHMENT OF KHAGAJNAGAR LAND, THE CHARGING SEC.45 FAILS, HENCE COMPUTATION OF CAPITAL GAINS U/S 48 IS NOT POSSIBLE. IN THE INSTAN T CASE, THE APPELLANT HAS NOT RECEIVED ANY AMOUNT FOR RELINQUISHING KAGHAJNAGAR LAND EXCEPT THE RIGHT TO SALE THE BALANAGAR LAND. THE RIGHT TO SALE THE BALANAGAR LAND NEED NOT BE EVALUATED SEPARATELY AS THE 8ALANA GAR LAND HAS BEEN ACTUALLY SOLD AND THE SALE VALUE IS B OTH FOR BALANAGAR LAND AND FOR RELINQUISHING THE KAGHAJNAGAR LAND, FOR WHICH BOTH THE TRANSACTIONS H AVE TO BE CLUBBED TOGETHER FOR COMPUTING CAPITAL GAINS. IN RESPECT OF THE ASSESSING OFFICER'S OBSERVATION T HAT SEC.45 FAILS IN THE CASE OF THE APPELLANT, THE APPE LLANT STATES THAT THE PRINCIPLES LAID DOWN IN THE CASE OF CIT VS. BC SRINIVASA SETTY (1981) 128 ITR 294 (SC) ARE NOT APPLICABLE SINCE BOTH VALUES OF SALE CONSIDERAT ION AND COST OF ACQUISITION ARE DETERMINABLE IN THE APPELLANT'S CASE. THE B C SRINIVASA SETTY CASE WAS IN REGARD TO GOODWILL WHERE NEITHER COST OF ACQUISITION OR DATE OF ACQUIS ITION WAS KNOWN. IN RESPECT OF KAGHAJNAGAR LAND, SINCE TH E APPELLANT EXERCISED ITS RIGHT TO RELINQUISH THE OWN ERSHIP IN THE LAND, THE QUESTION OF RECEIVING ANY CONSIDERATION DOES NOT ARISE AND THE SAID RELINQUISHMENT AND THE RIGHT CAN BE SAID TO BE DONE ALTERNATIVELY AT NIL VALUE, IF THIS RELINQUISHMENT ALONG WITH SALE OF BALANAGAR LAND IS NOT CONSIDERED AS A 24 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. SINGLE TRANSACTION. NIL SALE VALUE DOES NOT PRECLUD E COMPUTATION OF CAPITAL GAINS. IN EITHER CASE, THERE IS A VALUE TO THE RELINQUISHMENT OF THE RIGHT IN THE OWNERSHIP OF KAGHAJNAGAR LAND. I HAVE NO HESITATION TO AGREE WITH THE VIEWS OF THE APPELLANT WHICH IS 'HEN CE, FROM THE ABOVE, THE ISSUE WHETHER THE ABOVE TRANSACTION COULD BE CONSIDERED AS ONE OR NOT IS NO T AT RELEVANT. EVEN IF THE TRANSACTIONS ARE CONSIDERED A S TWO DIFFERENT TRANSACTIONS, THE RESULT OF COMPUTATION A RRIVED WOULD BE THE SAME AS HAS BEEN DONE BY THE APPELLANT .' 4.6. THE NEXT STEP IS TO COMPUTE THE CAPITAL GAIN. THE APPELLANT ENGAGED A REGISTERED VALUER TO DETERMINE THE FAIR MARKET VALUE OF THE 76.04 ACRES OF KAGHAJNAGAR LAND AS ON 01-04-1981. THE REGISTERED VALUER M/S. MBG SHASTRI & ASSOCIATES, IN THEIR', DETAILED REPORT DT.08-11-2000, VALUED THE SAID LAND AT RS.40,41,000/- AS ON 01-04-1981. THE VALUATION BY THE REGISTERED VALUER CAN BE SUMMARIZED AS UNDER:- SURVEY NO. RATES ADOPTED BY THE REGD. VALUER MARKET RATES AS ON 01/04/1981 GATHERED FROM SRO, ADILABAD 1 TO 6 2000 PER ACRE 2000 PER ACRE 17/A 20/- PER SYD 20/- PER SYD 24/A/1 35/- PER SYD 35/- PER SYD 63/A TO 66/1 10,000 PER ACRE 10,000 PER ACRE 67/1 40/- PER SYD 40/- PER SYD 108 TO 171 10,000 PER ACRE 10,000 PER ACRE 247/1 6,000 PER ACRE 6,000 PER ACRE 248 12/- PER SYD 12/- PER SYD FROM THE ABOVE, IT IS EVIDENT THAT WHATEVER THE SRO REGISTER CONTAINS RATE PER SQUARE YARD. THE VALUERS HAVE ADOPTED THE SAME, HOWEVER, WHENEVER THE SRO REGISTER CONTAINS RATE PER ACRE, THE REGD VALUER HA VE 25 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. ADOPTED @ 15 PER SQ. YARD WHICH IS MUCH LESS THAN T HE HIGHEST RATE OF RS.401- PER SQ. YARD THOUGH HIGH COMPARED TO THE RATE OF SAY RS.2,OOO/- OR RS.6,OOO/- OR EVEN RS.1 0,000/- PER ACRE. THIS CAN BE VIEWED FROM ANOTHER ANGLE I.E, THE PER ACRE RATE AS PER SRO REG ISTER VARY WILDLY BETWEEN RS.2,OOO/- PER ACRE TO RS.1,93,606/- ( I.E. RS.401- PER SQUARE YARD). THIS SHOWS THAT THE REGISTERED VALUER WHILE ADOPTING THE HIGHE ST VALUE OF RS.1,93,606/- PER ACRE AS PER SRO REGISTER ALSO ADJUSTED THE LOWEST VALUE OF RS.2,OOOI- PER ACRE UPWARDS TO RS.72,602/- PER ACRE AFTER CONSIDERING VARIOUS FACTORS TO VALUE THE LAND AS ON 01-04-1981. THE REGISTERED VALUERS HAVE ALSO REPORTED THAT VALU E OF ALL SUCH LANDS WERE REVISED UPWARDS TO RS.100/ - PER SQUARE YARD AS ON 01-04-1982 WHICH IS SUBSTANTIALLY HIGHER THAN THE RATE ADOPTED AS ON 01-04-1981 WHICH AT THE HIGHEST LEVEL IS ONLY RS. 40/- PER SQUARE YA RD. THIS MEANS THAT BETWEEN THE VALUATION DATE OF 01-04 - 1981 AND 01-04-1982 I.E WITHIN ONE YEAR, THE VALUE OF THE COSTLIEST PIECE OF RELEVANT LAND HAS INCREASED BY 150% FROM RS.401- PER SQ. YD. TO RS.100/- PER SQ. Y D. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT IN RESPECT OF SURVEY NUMBERS WHERE THE RATE PER ACRE I S MENTIONED IN THE SRO REGISTER, THE REGISTERD VALUER HAS EXCESSIVELY TAKEN THE MARKET RATE @ 15 PER SQ. Y D AS ON 01-04-1981. I ACCORDINGLY FIND THAT THE REGISTER ED VALUERS HAVE TAKEN REASONABLE EFFORTS AND BASIS TO VALUE THE LAND AS ON 01-04-1981. THE ASSESSING OFFICER'S REMAND REPORT HAS BEEN EXTRACTED IN PARA. 4.4, ASSESSING OFFICER'S REPORT REFERS TO THE ENQUIRY REPORT OF THE INSPECTOR OF LNCOME-TA X WHO EXTRACTED INFORMATION FROM THE SRO'S REGISTER. HOWEVER, IN RESPECT OF SURVEY NOS.17 A, 24/A11 & 248, THE INSPECTOR REPORTS THAT SRO'S REGISTER DOES NOT CONTAIN VALUE AS ON 01-04-1981 AND SO HE HAS TAKEN VALUE OF NEAREST SURVEY NOS. WHEREAS THE INSPECTOR HAS CONSIDERED ONLY THE VALUE IN THE SRO'S REGISTER , THE REGISTERED VALUERS HAVE NOT ONLY CONSIDERED THE VAL UE IN THE SRO'S REGISTER BUT ALSO THE OTHER RELEVANT MATERIALS INCLUDING THE FACT OF REVISION OF THE MAR KET VALUE AFTER ONE YEAR. THE REGISTERED VALUERS HAVE A LSO DEDUCTED 30% AREA FOR DEVELOPMENT OF ROADS, ETC. TH E REGISTERED VALUER IS A TECHNICALLY COMPETENT AND AUTHORIZED PERSON AND HAS DONE A DETAILED VALUATION 26 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. AND NO MATERIAL-DEFECTS HAVE BEEN POINTED OUT THERE IN. IN VIEW OF THE SAME, THE REPORT OF THE REGISTERED VALUER HAS TO BE ACCEPTED. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE COMPUTATION OF CAPITAL GAINS OFFERED BY THE ASSESSEE. 30. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 31. WE HAVE HEARD THE ARGUMENT OF BOTH THE PARTIES AND PERUSED THE RECORDS. THE FIRST ISSUE IN THE REVENUE S APPEAL AGAINST THE DEDUCTIBILITY OF CAPITAL LOSS ARISING F ROM RELINQUISHMENT OF RIGHTS BY THE ASSESSEE IN 73.04 A CRES OF LANDS AT KAKHAZNAGAR, WHICH FORMS PART OF LAND MEAS URING MEASURING 619.27 ACRES AS FOLLOWS: TOTAL PATTA LAND 471.04 ACRES KARZHAKATA LANDS GOVERNMENT 129.18 ACRES. PURAMPOKE 19.05 ACRES TOTAL 619.27 ACRES AND WHETHER NATURE OF THE RIGHTS OF THE ASSESSEE CA N BE THAT OF ABSOLUTE OWNERSHIP IN RESPECT OF LANDS MEASURING 73.04 ACRES. 32. THE CIT(A) HAS ELABORATELY DEALT WITH THE SAME AFTER OBTAINING A REMAND REPORT FROM THE ASSESSING OFFICE R. THE LAND WAS GIVEN TO THE ASSESSEE IN 1939-40 BY MEANS OF NOTIFICATION UNDER SEC 3 AND 7 OF THE HYDERABAD LAN D ACT. THE COMPANY PAID COMPENSATION FOR THE LAND TO THE S TATE GOVERNMENT AND THE COMPANY WAS PAYING DHARKHA SINCE 1940 WHEN THE LANDS WERE GIVEN IN THEIR POSSESSION. THE ASSESSEE HAD REFERRED TO THE GO NO 40 DATED 7.1.196 0 IN WHICH IT HAS BEEN MENTIONED THAT THE KHARISHKHATA L ANDS AND PURAMBOKE LANDS WHICH WERE IN POSSESSION OF THE MILLS SINCE 1940 AND FOR WHICH COMPENSATION HAS BEEN PAID BY THE MILLS TO THE GOVERNMENT, SHOULD BE ENTERED IN THE V ILLAGE 27 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. RECORDS IN THE NAME OF THE MILLS. THE ASSESSEE HAS BEEN ASSESSED TO AND PAYING NALA TAX SINCE 1963, WHICH L EVIED AND COLLECTED ON THE OWNER OF THE LANDS. THE STATE GOVERNMENT HAS PERMITTED THE ASSESSEE RIGHTS TO USE THE LAND AT KAKHAZNAGAR WHICH IS AKIN TO FULL OWNERSHIP OF LAND. AS HELD BY THE APEX COURT IN THE CASE OF MYSORE MIN ERALS LTD V CIT (239 ITR 775), ANYONE IN POSSESSION OF PROPER TY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERT Y AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HA VING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDING THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXE CUTED AND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF P ROPERTY ACT, THE REGISTRATION ACT, ETC. 33. GIVEN THE ABOVE FACTS, IT IS CLEAR THAT AS FAR AS THE STATE GOVERNMENT IS CONCERNED THE ASSESSEE IS TREAT ED AS THE OWNER OF THE ENTIRE LANDS MEASURING 619.27 ACRE S AT KAKHAZNAGAR, WHICH INCLUDES 73.04 ACRES RELINQUISHE D BY THE ASSESSEE. ON THE BASIS OF THE ELABORATE DISCUSSIONS OF THIS MATTER BY THE CIT(A) AND ALSO THE RATIO OF THE DECI SION OF THE APEX COURT IN THE CASE OF MYSORE MINERALS LTD V CIT (239 ITR 775), SUPRA , WE CONCUR WITH THE CONCLUSION OF THE CIT(A) THAT THE ASSESSEE SHOULD BE CONSIDERED AS THE OWNER OF THE ENTIRE LANDS MEASURING 619.27 ACRES AT KAKHAZHNAGAR . 34. THE GOVERNMENT VIDE THEIR G.O. MS. NO 125 DATED 12.2.1999 HAD NOT ONLY ACCORDED PERMISSION TO THE A SSESSEE TO SELL THEIR LANDS AT BALANAGAR BUT AS A CONDITION THERETO HAS DIRECTED THE COMPANY TO RELINQUISH THEIR RIGHTS IN 73.04 ACRES THE LANDS AT KAKHAZHNAGAR WHICH HAVE BEEN 28 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. ENCROACHED. AS A CONSEQUENCE THE ASSESSEE RELINQUIS HED THEIR ENTIRE RIGHTS IN LANDS MEASURING 73.04 ACRES AT KAKHAZNAGAR IN FAVOUR OF THE STATE GOVERNMENT. THE DIRECTIONS OF THE GOVERNMENT IN RESPECT OF THE TWO LANDS SHOULD BE READ TOGETHER. THE GO CANNOT BE READ TO M EAN THAT THE ASSESSEE IS TO GIFT THE LANDS TO THE GOVER NMENT. THE ASSESSEE WAS REQUIRED TO RELINQUISH THEIR INTER EST IN LAND SO THAT THE STATE GOVERNMENT MAY REGULARISE TH E ENCROACHMENTS. THIS CAN ONLY MEAN THAT IN VIEW OF T HE ENCROACHMENTS, THE ASSESSEE WAS REQUIRED TO TRANSFE R THE LAND TO THE STATE GOVERNMENT FOR NIL CONSIDERATION. SEC 2(47)(I) OF THE IT ACT PROVIDES THAT TRANSFER IN RE LATION TO A CAPITAL ASSET WILL INCLUDE SALE, EXCHANGE OR RELIN QUISHMENT OF THE ASSET. HERE THE ENTIRE ASSET VIZ., LANDS MEA SURING 74.04 ACRES AT AKHAZNAGAR HAS BEEN RELINQUISHED IN FAVOUR OF THE GOVERNMENT. HENCE THERE IS A TRANSFER OF THE ASSET WITHIN THE MEANING OF SEC 45 READ WITH SEC 2(47) OF THE IT ACT. 35. THE PROFIT OR LOSS ARISING FROM THE RELINQUISHM ENT OF LANDS AT KAKHAZNAGAR HAS TO BE COMPUTED BY DEDUCTIN G FROM THE SALE CONSIDERATION (HERE NIL), THE INDEXED COST OF ACQUISITION OF THE LAND. AS THE LAND WAS IN POSSESS ION OF THE ASSESSEE PRIOR TO 1.4.1981, THE MARKET VALUE OF THE LAND AS ON 1.4.1981 SHOULD BE TAKEN AS THE COST OF ACQUISIT ION. IN THIS THE AO HAS VALUED THE MARKET VALUE OF THE LAND S AS ON 1.4.1981 AT RS. 5,67,880/- VIDE HIS REMAND REPORT D ATED 1.3.2006. THE ASSESSEE HAS TAKEN THE VALUE OF THE L AND AS ON 1.4.1981. AT RS. 40,41,000/-. 29 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. 36. THE ASSESSEE HAD VALUED THE LAND ON 1.4.1981 AS PER THE VALUATION REPORT OF A REGISTERED VALUER M/S MBG SHASTHRI & ASSOCIATES IN THEIR REPORT DATED 8.11.2000. IT WO ULD APPEAR THAT THE VALUE ADOPTED BY THE REGISTERED VAL UER IS THE MARKET RATES AS ON 1.4.1981 GATHERED FROM SRO, ADILABAD. HOWEVER THE REGISTERED VALUER HAS MADE C ERTAIN ADJUSTMENTS TO LANDS WHICH HAVE BEEN VALUED AT A LO W VALUE. THEY HAVE SUBSTANTIATED THE SAME BY THE ARGUMENT TH AT THE VALUE OF THE LANDS HAVE BEEN INCREASED SUBSTANTIALL Y AS ON 1.4.1982 AND THE VALUE TAKEN BY THE REGISTERED VALU ER IS REASONABLE COMPARING THE VALUE OF THE LANDS AS PER SRO RECORDS AS ON 1.4.1982. ON THE OTHER HAND THE AO, I N THE REMAND REPORT HAS ADOPTED THE VALUATION MADE BY ITI TO WHOM THE MATTER WAS REFERRED TO, HAS VALUED THE TOA L LAND AS ON 1.4.1981 AT RS. 5,67,880/-. 37. THE ASSESSEE HAS ADOPTED THE VALUE AS PER SRO RECORDS. NEITHER THE AO NOR AT THE TIME OF THE APPE AL PROCEEDINGS ANYTHING WAS PLACED ON RECORD TO SHOW W HY THE VALUE AS PER SRO RECORDS CANNOT BE TAKEN. WE THEREF ORE AGREE WITH THE CIT(A) THAT THE VALUATION ADOPTED BY THE ASSESSEE MADE AS PER THE SRO RECORDS AS ON 1.4.1981 MAY ADOPTED TO DETERMINE THE VALUE OF THE LANDS AS ON 1 ,4,1981. HOWEVER WE WOULD LIKE TO ADD THAT THE VALUE AS PER SRO REGISTER AS ON 1.4.1981 SHOULD BE ADOPTED WITHOUT A NY MODIFICATION AND ONLY IF THE SRO RECORDS DO NOT CON TAIN THE VALUE FOR ANY PORTION OF LANDS AS ON 1.4.1981, THE VALUE OF LANDS OF NEAREST SURVEY NOS CAN BE TAKEN. BUT IF TH E VALUE OF THE LAND AS ON 1.4.1981 IS AVAILABLE AS PER SRO REC ORDS NO FURTHER ADJUSTMENTS CAN BE MADE WHETHER ON THE BASI S OF PHENOMENAL INCREASE OF VALUE AS ON 1.4 1982 OR VALU E OF ANY 30 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD. NEARBY LANDS. SUBJECT TO THE ABOVE VERIFICATION WE CONFIRM THE CONCLUSION OF THE CIT(A) THAT THE LOSS ON RELIN QUISHMENT OF THE LANDS AT KAKHAZNAGAR CAN BE CLAIMED AS LONG TERM CAPITAL LOSS AND THE COST OF ACQUISITION OF LAND AT KAKHAZNAGAR AS ON 1.4.1981 ADOPTED BY THE ASSESSEE AS PER THE VALUATION REPORT OF THE REGISTERED VALUER, SUBJ ECT TO VERIFICATION ABOVE, MAY BE TAKEN AS COST OF ACQUISI TION AS ON 1.4.1981 IN COMPUTING THE LOSS ACCRUING TO THE ASSE SSEE FROM RELINQUISHMENT OF THE LANDS AT KAKHAZNAGAR. 38. APPEAL OF THE REVENUE IS DISMISSED. 39. TO SUM UP, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 04/04/2013. SD/- SD/- ( CHANDRA POOJARI) (ASH AVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 4 TH APRIL, 2013 KV COPY TO:- 1) THE SIRPUR PAPER MILLS LTD., 5-9-22/1/1, 1 ST FLOOR, OPPORTUNITY. NEW MLA QUARTERS GATE, ADARSHNAGAR, HYDERABAD 500 063. 2) ACIT, RANGE 3(3), AAYKAR BHAVAN, HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) CIT-1, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 31 ITA NO. 642 & 694/HYD/2006 THE SIRPUR MILLS LTD.
