M/s Spectra Punjab Limited, Chandigarh V. ACIT, Chandigarh

ITA 660/CHANDI/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5141 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Cost of acquisition; Valuation report

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 660/CHD/2014 ASSESSMENT YEAR: 2009-10 M/S SPECTRA PUNJAB LIMITED, VS. THE ACIT, CIRCLE 4 (1), CHANDIGARH CHANDIGARH PAN NO. AAECS8115R (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PARIKSHIT AGGARWAL RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 20.04.2017 DATE OF PRONOUNCEMENT : 19.05.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 27.02.2014 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)], CHANDIGARH. 2. THE SOLE GROUND TAKEN BY THE ASSESSEE IN THIS AP PEAL IS AGAINST THE COMPUTATION OF LONG TERM CAPITAL GAIN AT RS. 92,58, 143/- BY THE ASSESSING OFFICER BY WAY OF REJECTION OF THE CLAIM OF THE ASS ESSEE REGARDING THE 2 INDEXED COST OF ACQUISITION AS AGAINST LONG TERM CA PITAL LOSS CLAIMED BY THE ASSESSEE AT RS. 1,24,53,137/- IN RELATION TO SALE O F CAPITAL WORK IN PROGRESS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS FORMED AS JOINT VENTURE OF SPECTRA NET LIMITED (SNL), PUNJ AB STATE ELECTRICITY BOARD (PSEB) AND PUNJAB STATE ELECTRICITY DEVELOPME NT AND PRODUCTION CORPORATION LTD (PSEDPL). SUBSEQUENTLY, PSED AND PS EDPL WITHDREW FROM JV AGREEMENT ON 21.11.2000 AS PER THE DIRECTIO NS OF THE GOVERNMENT OF PUNJAB. THE MAIN OBJECT OF THE ASSESSEE COMPANY WAS TO LAY OPTICAL FIBRE CABLE AND COPPER NETWORK WITH AN AIM TO PROVI DE INTERNET SERVICES IN THE STATE OF PUNJAB. THE COMPANY HAD STARTED WORK O F LAYING DUCT FOR THE OPTICAL FIBRE, BUT THE WORK WAS DISCONTINUED AFTER SOMETIME. THE ASSESSEE HAD SHOWN CAPITAL WORK IN PROGRESS IN THIS BALANCE SHEET AS UNDER:- AS ON 31.3.2001 RS. 6,33,17,7626/- AS O 31.3.2002 RS., 5,98,26,245/- THE ASSESSEE SOLD ITS CAPITAL WORK IN PROGRESS VIDE AGREEMENT DATED 18.6.2008 TO CITIGROUP FOR RS. 6,85,46,638/- AND HA D COMPUTED CAPITAL LOSS AS UNDER:- SALE CONSIDERATION RS. 6,85,46,638/- LESS INDEXED COST OF ACQUISITION (YEAR OF ACQUISITION - FINANCIAL YEAR 2001-02 CWIP RS. 5,98,26,245/- LIABILITY WRITTEN BACK RS. 5,37,750/- TOTAL ACQUISITION COST RS. 5,92,88,495/- COST OF ACQUISITION AFTER INDEXATION RS. 8.09,00,77 5/- 3 LONG TERM CAPITAL LOSS RS. 1,24,53,137/- TO VERIFY THE WORK IN PROGRESS AND SOURCE OF THE EX PENDITURE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE ITS BOOKS OF ACCOUNT AND BILLS & VOUCHERS. THE ASSESSEE SUBMITTED THAT THERE WAS NO CHANGE IN CAPITAL WORK IN PROGRESS AFTER 31.3.2002. THE ASSES SEE CONVEYED TO THE ASSESSING OFFICER THAT THE DOCUMENTS RELATING TO CW IP SHOULD NOT BE INSISTED UPON AND THAT THE FIGURES PROVIDED IN THE AUDITED BALANCE SHEET SHOULD BE ACCEPTED. THE ASSESSEE ALSO CONTENDED THA T THE ASSESSEE HAVING INCOME ABOVE TAXABLE LIMITS WAS REQUIRED TO MAINTAI N BOOKS OF ACCOUNT FOR A PERIOD OF 6 YEARS ONLY AS PER SECTION 44AA OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED W ITH THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD NO T PRODUCED BOOKS OF ACCOUNT AND BILLS & VOUCHERS RELATING TO THE EXPEND ITURE ON CAPITAL WORK IN PROGRESS. THE ASSESSING OFFICER FINALLY COMPUTED LO NG TERM CAPITAL GAIN AT RS. 92,58,143/- WITH THE FOLLOWING OBSERVATIONS:- THE ASSESSEE HAS SUBMITTED THE DETAIL REGARDING CW IP DATED 9.12.2012. IN THIS ASSESSEE HAS INCLUDE THE S ALES TAX LIABILITY 2000-2001 AMOUNT OF RS. 9001.50 IN CW IP, IT IS CLEAR THAT SALES TAX LIABILITY CAN NOT MAKE T HE PART OF CWIP, BUT THE ASSESSEE HAS INCLUDED THIS AMOUNT IN CWIP. IN ANOTHER ENTRY DATED 31.3.2002 HE HAS ADDED LOSS ON SALE OF DUCT AMOUNT OF RS. 5,88,856/- IN CW IP. IT IS NOT UNDERSTANDABLE HOW THE LOSS CAN MAKE THE PAR T OF CWIP. IT IS ALSO NOT CLEAR HOW THE CWIP REDUCED FRO M RS. 6,33,17,626/- IN MARCH, 2001 TO AT RS. 5,98,26, 245/- IN MARCH, 2002 IN THE AMOUNT OF RS. 34,91,81/-. IN THE ABSENCE OF BOOKS OF ACCOUNT, BILLS AND VOUCH ERS OF THIS EXPENDITURE CAPITAL WORK IN PROGRESS. THE ASSE SSEE 4 CLAIM OF COST OF ACQUISITION IS NOT ACCEPTABLE. THE DETAILS PRODUCED BY THE ASSESSEE ARE NOT SUFFICIENT. IN THE ABOVE FACTS OF THE ASSESSEE COST OF ACQUISIT ION IF NOT ACCEPTABLE AND IN THE ABSENCE OF EVIDENCE ASSES SEE CLAIM OF INDEXATION IS NOT ALLOWED . SALE CONSIDERATION AS SHOWN RS. 6,85,46,638/- LESS : COST OF ACQUISITION RS. 5,92,88,495/- PROFIT ON SALE (LONG TERM CAPITAL GAIN) RS. 92,58,1 43/- 4. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 5. LD. CIT(A) WHILE UPHOLDING THE ORDER OF THE ASSE SSING OFFICER OBSERVED THAT SINCE THE ASSESSEE FAILED TO PRODUCE THE RELEVANT EVIDENCES FOR VERIFICATION REGARDING THE COST OF ACQUISITION AND IT WAS EVEN NOT ASCERTAINABLE AS TO WHAT WAS THE YEAR OF ACQUISITIO N, SO THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE BENEFIT OF INDEX ATION. THE LD. CIT(A) FURTHER DIRECTED THE ASSESSING OFFICER TO EXCLUDE T HE SALE TAX LIABILITY OF RS. 9001/- FOR ASSESSMENT YEAR 2000-01 AND LOSS ON SALE OF DUCT OF RS. 5,88,856/- OUT OF THE CAPITAL WORK IN PROGRESS WHIL E WORKING OUT THE LONG TERM CAPITAL GAIN. 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE ASSESSEE HAS COME UP IN APPEAL BEFORE US RAISING THE ONLY SOLE I SSUE REGARDING THE INDEXED COST OF ACQUISITION. 5 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O GONE THROUGH THE RECORD. NO DOUBT THE INITIAL BURDEN WAS ON THE ASS ESSEE TO PROVE THE COST OF ACQUISITION. THE ASSESSEE, HOWEVER, COLD NOT PRO DUCE THE BILLS AND VOUCHERS IN THIS RESPECT. THE ASSESSEE HAS RELIED U PON THE BALANCE SHEET FROM THE ASSESSMENT YEAR 2001-02 ONWARDS AND HAS SU BMITTED THAT THE SAME WORK IN PROGRESS WAS CARRIED FORWARD UP TO 31.3.200 8 BECAUSE THE PROJECT HAS STOPPED. HOWEVER, THE SAID CAPITAL WORK IN PRO GRESS WAS SOLD OUT IN ASSESSMENT YEAR 2009-10 VIDE AGREEMENT DATED 18.6 .2008. THE ASSESSEE HAS ALSO SUBMITTED TO THE ASSESSING OFFICER THE REP ORT OF THE REGISTERED VALUER REGARDING THE COST OF ACQUISITION OF THE SOL D ASSETS. NO DOUBT THE ASSESSEE HAD NOT GIVEN SUFFICIENT EVID ENCE REGARDING THE COST INCURRED FOR THE ACQUISITION OF THE ABOVE CAPI TAL WORK IN PROGRESS BUT IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER TH AT THE SAID CAPITAL WORK IN PROGRESS WAS ACQUIRED BY THE ASSESSEE WITHOUT ANY C OST. ADMITTEDLY, THE PROJECT WAS STARTED AS A JOINT VENTURE. THE ASSESSE E HAS ALSO PRODUCED ON FILE THE COPIES OF ITS AGREEMENT WITH PSEB AND PSED PL DATED 14.6.2000. THIS AGREEMENT WITH GOVERNMENT UNDERTAKINGS IS EVID ENCE REGARDING THE COMMENCEMENT OF THE PROJECT AND REGARDING THE PERIO D OF THE ACQUISITION OF THE ASSETS. SO FAR AS THE COST OF ACQUISITION IS CO NCERNED, THE ASSESSEE HAS PRODUCED THE VALUATION REPORT OF THE REGISTERED VAL UER. ONCE THESE EVIDENCES PRODUCED WERE ON THE FILE, THE BURDEN GOT SHIFTED ON THE ASSESSING OFFICER TO MAKE ENQUIRES FOR THE PURPOSE OF VERIFICATION OF THE COST OF THE ASSETS. THE ASSESSING OFFICER INSTEAD O F MAKING ANY INDEPENDENT VERIFICATION OR ENQUIRY, SURPRISINGLY, HAS ADOPTED THE COST OF ACQUISITION OF THE ASSETS AS CLAIMED BY THE ASSESSEE. ONCE THE COS T OF ACQUISITION OF ASSETS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER, HE WAS SUPPOSED TO GIVE THE 6 ASSESSEE THE BENEFIT OF INDEXATION AS PER THE PROVI SIONS OF SECTION 48 READ WITH SECTION 55 OF THE INCOME TAX ACT. WE DO NOT FI ND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN DENYING THE AS SESSEE THE BENEFIT OF INDEXED COST OF ACQUISITION ONCE THE LOWER AUTHORIT IES HAD TAKEN AND ADMITTED THE COST OF ACQUISITION OF ASSETS. WE, THE REFORE, DIRECT THE ASSESSING OFFICER TO ALLOW THE ASSESSEE THE BENEFIT OF INDEXATION OF COST AS PER THE PROVISIONS OF LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.05.2017. SD/- SD/- ( ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 TH MAY, 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR