ITO, New Delhi V. M/s Protex Plastics Pvt. Ltd., New Delhi

ITA 69/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86998 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 17-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY SENIOR
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.69/DEL./2013 ASSESSMENT YEAR : 2007-08 ITO, WARD 14 (4), VS. M/S. PROTEX PLASTICS PVT. L TD., NEW DELHI. W 18, OKHLA INDUSTRIAL AREA, PHASE II, NEW DELHI. (PAN : AAACP1684N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE REVENUE BY : SHRI VIKRAM SAHAY, SENIOR DR DATE OF HEARING : 17.02.2015 DATE OF PRONOUNCEMENT : .03.2015 O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XVII, NEW DELHI DATED 06.10.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 25.08.2007 DECLARING INCOME OF RS.1,31,760/-. DURING THE RELEVANT PERIO D, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF GARMENTS AND ROLLERS. THE ASSESSING OFFICER MADE AN ADDITION OF RS.83,40,901/- AS LONG TERM CAPITAL GAIN. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDING AS UNDER :- 2 ITA NO.69/DEL/2011 3.3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AS WELL AS THE SUBMISSIONS MADE BY THE LD. AR ALONG WITH THE J UDICIAL DECISIONS CITED BY HIM. IN THIS CASE, THE APPELLANT HAS SHOWN THE TRANSFER OF ITS LAND AND BUILDING (HEREINAFTER REFE RRED TO AS 'CAPITAL ASSETS') ON 03.11.2006. THE TRANSFER HAS BEEN MADE ON THE BASIS OF AN AGREEMENT MADE IN 1990. AT THE TIME OF THE TRANS FER, NO SALE DEED WAS REGISTERED. HOWEVER, A CONVEYANCE DEED WA S REGISTERED IN SUBSEQUENT YEAR I.E. AY. 2008-09 WHERE A VALUE O F RS.11,72,000/- WAS ADOPTED. THE APPELLANT HAS SUBMI TTED THAT CAPITAL GAIN WAS ASSESSABLE IN THE YEAR UNDER CONSI DERATION I.E. A.Y. 2007-08 BECAUSE THE NECESSARY FORMALITIES LIKE PAYM ENT OF CONSIDERATION AND HANDING OVER OF POSSESSION OF CAP ITAL ASSET WERE COMPLETED DURING THE A.Y. 2007-08 ITSELF. THERE IS NO DISPUTE BY THE AO ABOUT THE YEAR OF TRANSFER OF CAPITAL ASSET. HE HAS ACCEPTED THE CLAIM OF THE APPELLANT THAT TRANSFER TOOK PLACE IN A.Y. 2007-08. HOWEVER, INSTEAD OF ACCEPTING THE SALE CONSIDERATIO N OF RS.3,25,000/- AS SHOWN BY THE APPELLANT, HE HAS APP LIED THE CIRCLE RATE BY TAKING THE RECOURSE TO SECTION 50C. IT IS N OT THE CASE OF THE AO THAT ACTUAL SALE CONSIDERATION THAT PASSED BETWE EN THE APPELLANT AND THE BUYER WAS MORE THAN THAT WHAT HAS BEEN SHOW N BY THE APPELLANT. THEREFORE, THE ISSUE TO BE DECIDED IS WH ETHER SECTION 50C CAN BE INVOKED AND IF YES; WHAT VALUE HAS TO BE CON SIDERED AS FULL VALUE RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF CAPITAL ASSET. FOR THE SAKE OF CONVENIENCE, THE PROVISIONS OF SECTION 50C ARE REPRODUCED AS UNDER: 'SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES. 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUI NG AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE AD OPTED OR ASSESSED [OR ASSESSABLE] BY ANY AUTHORITY OF A STAT E GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO A S THE 'STAMP VALUATION AUTHORITY'') FOR THE PURPOSE OF PA YMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE S O ADOPTED OR ASSESSED [OR ASSESSABLE] SHALL, FOR THE PURPOSES OF SECTION 48,BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERAT ION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER-- -------------.' FROM THE PLAIN READING OF ABOVE PROVISION, IT IS AP PARENT THAT UPTO 30.09.2009 THE VALUE ACTUALLY ADOPTED BY STAMP VALUATION AUTHORITY HAS TO BE DEEMED AS FULL VALUE OF CONSIDE RATION RECEIVED 3 ITA NO.69/DEL/2011 OR ACCRUING AS A RESULT OF TRANSFER. THE FINANCE (N O 2) ACT 2009, W.E.F. 01.10.2009 HAS INSERTED THE WORD 'ASSESSABLE ' MEANING THEREBY THAT EVEN IF THERE IS NO REGISTRATION, THEN ALSO, THE VALUE ASSESSABLE AS PER STAMP VALUATION AUTHORITY CAN BE TAKEN AS FULL VALUE OF CONSIDERATION RECEIVED. SINCE THIS AMENDME NT HAS COME INTO EFFECT W.E.F. 01.10.2009, THE SAME CANNOT BE A PPLIED RETROSPECTIVELY. UPTO 30.09.2009, SECTION 50C CANNO T BE APPLIED IF THERE IS NO REGISTRATION OR VALUE ASSESSED BY STAMP VALUATION AUTHORITY. SINCE THE CIRCLE RATES WERE NOT EVEN NOT IFIED DURING A.Y. 2007-08, THE SAME COULD NOT HAVE BEEN ADOPTED BY A.O. FOR THE PERIOD DURING WHICH THEY WERE NOT IN EXISTENCE. IN THE CASE OF CARLTON HOTEL PVT. LTD. VS ACIT (200 9) 122 TT J 515 (LUCK) IT WAS HELD BY THE LUCKNOW BENCH OF HO N'BLE IT AT THAT IF TRANSFER BY WAY OF SALE IS NOT REGISTERED U NDER REGISTRATION ACT AND NO STAMP DUTY IS PAID, THEN SECTION 50C CAN NOT BE INVOKED. SIMILARLY, IN THE CASE OF M. SIVA PARVATHI & OTRS V S ITO (2010) 129 TTJ 463 (VISAKHA), IT WAS HELD BY THE ITAT THAT WHE RE SALE AGREEMENT WAS ENTERED INTO BEFORE INTRODUCTION OF S ECTION 50C AND REGISTRATION WAS COMPLETED AFTER INTRODUCTION OF SA ID SECTION, SECTION 50C COULD NOT BE APPLIED. ADMITTEDLY THE CONSIDERATION STATED AS PER THE AGRE EMENT WAS RS.3,25,000/- AND ACCORDINGLY THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AN OBSERVATION THAT THIS AGREEMENT HAS NO LEGAL SANCTITY, AS THE CONVEYANCE DEED HAS BEEN EXECUTED BY THE DDA ON 25.09.2007 ON THE BASIS OF THE SAME. IN CASE THE AS SESSING OFFICER'S CASE IS THAT THE TRANSFER HAS TAKEN PLACE ONLY ON T HE DATE OF EXECUTION OF CONVEYANCE DEED BY DDA THEN ADMITTEDLY THE TRANSFER WILL BE ON 25.09.2007 I.E. AY 2008-09 AND NOT THE AY UNDER CONSIDERATION I.E. AY 2007-08. IF THE ARGUMEN T OF THE ASSESSING OFFICER ON THIS POINT IS ACCEPTED THEN TH ERE WILL BE NO CAPITAL GAIN CHARGEABLE IN THE YEAR UNDER CONSIDERA TION. THE ASSESSING OFFICER HAVING RECOGNIZED THE TRANSFER DU RING THE YEAR, THE ONLY BASIS FOR COMPUTING CAPITAL GAIN WILL BE THE A GREEMENT TO SELL ON THE BASIS OF WHICH TRANSFER HAS TAKEN PLACE DURI NG THE YEAR AND THE CONSIDERATION STATED THEREIN. THE ASSESSING OFF ICER CANNOT TAX A CAPITAL GAIN IN THIS YEAR BY APPLYING LAW OF SUBSEQ UENT YEAR. AS PER THE PROVISION OF SECTION 50C WHERE THE CONSI DERATION RECEIVED IS LESS THAN THE VALUE ADOPTED BY ANY AUTH ORITY FOR THE 4 ITA NO.69/DEL/2011 PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED IS TO BE DEEMED TO BE THE FULL VAL UE OF CONSIDERATION RECEIVED. THE ASSESSING OFFICER IN TH IS CASE IN PARA 9 HAS APPLIED A CIRCLE RATE ON HYPOTHETICAL BASIS OF THE NEXT YEAR AND THEREAFTER BY A REVERSE INDEXATION HAS COMPUTED THE SALE CONSIDERATION. THIS ACTION IS AGAINST THE EXPRESS P ROVISION OF THE SECTION 50C OF THE ACT. THE SAID SECTION NOWHERE MA NDATES THIS. IF THE CIRCLE RATES ARE REVISED IN SUBSEQUENT YEAR THE N THAT WILL NOT MEAN THAT THE AO CAN USE THE CIRCLE RATE OF SUBSEQU ENT YEAR BY APPLYING REVERSE INDEXATION TO WORK OUT THE SALE CO NSIDERATION U/S 50C OF THE ACT. SECTION 50C CREATES A DEEMING FICTI ON AND ACCORDINGLY THIS PROVISION HAS TO BE CONSTRUED. STR ICTLY. THE ADMITTED FACT HERE IS THAT FOR THE YEAR UNDER CONSI DERATION, THERE WAS NO CIRCLE RATE NOTIFIED BY THE GOVERNMENT. THE CIRC LE RATE IN DELHI GOT NOTIFIED VIDE CIRCULAR NO. F.2(12)/FIN.(E.1)/PA RT FILE/VOL.1(II)/3548 DATED 18.07.2007. IF THAT BE TH E CASE, PROVISION OF SECTION 50C SHALL NOT BE APPLICABLE IN RESPECT O F ANY TRANSFER ON ANY DAY BEFORE THAT DATE. IF THE ARGUMENT OF THE AS SESSING OFFICER IS TO BE ACCEPTED, IT WILL LEAD TO A TOTAL ANOMALY WHE REBY THE ASSESSING OFFICER CAN APPLY THE CIRCLE RATE OF SUBSEQUENT YEA R TO ANY OF THE EARLIER ASSESSMENT YEAR WHICH CANNOT BE PERMITTED U NDER SECTION 50C. AS REGARDS THE COMPARATIVE SALE INSTANCE STATED BY THE ASSESSING OFFICER IN PARA 10 OF HIS ORDER, I FIND F ORCE IN THE CONTENTION OF THE APPELLANT THAT THE SALE CONSIDERA TION U/S 48 HAS TO BE THE ACTUAL CONSIDERATION AND NOT THE CONSIDERATI ON WHICH OUGHT TO HAVE BEEN RECEIVED. THE CASE LAW RELIED UPON BY THE APPELLANT I.E. CIT VS GEORGE HENDERSON AND CO 66 ITR 622 IS SQUARE LY APPLICABLE TO THE PRESENT FACTS. THIS ISSUE IS ALSO COVERED BY THE APEX COURT JUDGMENT IN THE CASE OF K.P. VARGHESE VS ITO 131 ITR 597 (SC) AND BY THE DELHI HIGH COURT IN THE CASE OF CIT VS GULSHAN KUMAR 175 CTR 416. MOREOVER, AFTER THE INTR ODUCTION OF SECTION 50C THE ASSESSING OFFICER CAN ADOPT THE VAL UE FOR THE PURPOSE OF STAMP DUTY. IN VIEW OF THE SPECIFIC PROV ISION IN THE ACT WHEREBY A DEEMING FICTION HAS BEEN CREATED THE ASSE SSING OFFICER CANNOT SUBSTITUTE THE VALUE WITH ANY OTHER VALUE. T HE PROVISION OF SECTION 50C ARE VERY SPECIFIC WHEREBY, IF THE CONSI DERATION RECEIVED IS LESS THAN THE VALUE ADOPTED FOR THE PURPOSE OF P AYMENT OF STAMP DUTY THE SAME HAS TO BE DEEMED TO BE SALE CONSIDERA TION. ACCORDINGLY, THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN SUBSTITUTING THE VALUE BY THE SALE INSTANCE. IN VIEW OF THE ABOV E DISCUSSION, THE ACTION OF THE ASSESSING OFFICER IN INVOKING THE PRO VISION OF SECTION 5 ITA NO.69/DEL/2011 50C CANNOT BE SUSTAINED. HENCE, THE ADDITION MADE B Y THE AO IS DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 3. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE CONVEYANCE DEED WAS REGISTERED IN THE FINANCIAL YEAR PERTAINING TO ASSE SSMENT YEAR 2008-09 WHEREBY VALUE HAS TAKEN RS.11,72,000/-. THE FINANCE (NO.2) ACT, 2009 HAS INSERTED THE WORD ASSESSABLE MEANING THEREBY THAT EVEN IF THERE IS NO REGISTRATION, THEN ALSO, THE VALUE ASSESSABLE AS PER STAMP VALUATION AUTHORI TY CAN BE TAKEN AS FULL VALUE OF CONSIDERATION RECEIVED. THIS AMENDMENT HAS COME INTO EFFECT W.E.F. 01.10.2009 ONLY. THEREFORE, IT CANNOT BE RETROSPEC TIVELY IMPLEMENTED OR APPLIED. FURTHER, THE ASSESSING OFFICER HAS HIMSEL F HAS TAKEN THE YEAR FOR WORKING OUT THE CAPITAL GAIN AS ASSESSMENT YEAR 200 7-08 AND FOR THAT PERIOD, NO CIRCLE RATES WERE SPECIFIED BY THE STAMP VALUATION AUTHORITY FOR DELHI. THE CIRCLE RATES IN DELHI HAVE BEEN NOTIFIED ONLY BY CI RCULAR NO. F.2(12)/FIN.(E.1)/PART FILE/VOL.1(II)/3548 DATED 18 .07.2007. KEEPING ALL THESE FACTS IN VIEW, WE FIND NO FAULT IN THE ORDER OF THE CIT (A) AND WE DISMISS THIS APPEAL OF THE REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 20 TH DAY OF MARCH, 2015. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 20 TH DAY OF MARCH, 2015 TS 6 ITA NO.69/DEL/2011 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.