ARYA TEXURISERS & TWISTER, MUMBAI V. DCIT 14(2), MUMBAI

ITA 6906/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4275 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 12-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KALIK SINGH
• Assessee Lawyers: K SHIVARAM
• Keywords: Sale consideration of property below Jantri Value; Earning of tax free income; Valuation report
• Section: 50C; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI . , ! ' #'' '$ , % ! & BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 6906 / / 2011 A.Y. 2008-09 ITA NO. : 6906/MUM/2011 (ASSESSMENT YEAR: 2008-09) M/S ARYA TEXTURISERS & TWISTER, C/O. JBF INDUSTRIES LIMITED, 8 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI -400 002 .: PAN: AABFA 2182 Q VS INCOME TAX OFFICER, WARD 22(3)(1), TOWER NO. 6, 3 RD FLOOR, VASHI RLY STATION, R. NO. 306, VASHI, NAVI MUMBAI -400 703 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SHIVARAM RESPONDENT BY : SHRI KALIK SINGH /DATE OF HEARING : 03-07-2013 !' / DATE OF PRONOUNCEMENT : 10 -07-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 25, MUMBAI, DATED 11.08.2011, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. THE LD. CIT(A) ERRED IN UPHELD THE DECISION TA KEN BY THE LEARNED DCIT FOR NOT ACCEPTING THE SALE CONSIDERATION OF RS . 1,00,00,000/- AGAINST FACTORY BUILDING AS PER VALUA TION REPORT DATED 5 TH MARCH 2008 GIVEN BY THE GOVT. APPROVED VALUER MR. SONAL SHAH AND MR. RAHESH SHAH FOR THE PURPOSE OF C ALCULATION CAPITAL GAIN ON ALE OF LAND & BUILDING AT RS. 2,50, 00,000/-, AND CONFIRM THE VALUE OF RS. 32,34,295/- I.E. W.D.V . AS STOOD AS ON 01.04.2007. 1.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACTS T HAT VALUATION REPORT WAS INCORPORATED IN THE AGREEMENT REGISTERED ON 7 TH MARCH 2008 ON PAGE NO 7 WHEREIN IT IS MENTIONED THA T THE SONAL M/S ARYA TEXT URISERS & TWISTER ITA NO. 6906/MUM/2011 2 SHAH, RAJESH SHAH GOVERNMENT APPROVED VALUERS HAS I SSUED CERTIFICATE DATED 05.03.2008 IN RESPECT OF FACTORY BUILDING AND ESTIMATED THE MARKET VALUE OF THE SAID FACTORY AT R S. 1,00,00,000/-. 1.2 THE LEARNED CIT(A) FAILED THE APPRECIATE THE FACT S THAT THE SUB REGISTRAR HAS ACCEPTED THE SALE DEED AND REGISTERED THE DOCUMENTS IN FAVOUR OF BUYERS ON PAYMENT OF DUTY @ 1% OF TOTAL VALUE OF SALE CONSIDERATION OF RS. 2,50,00,000/-. 1.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC TS THAT THEY DID NOT EVEN CONSIDERED THE REPLY GIVEN VIDE LETTER DAT ED 18.07.2011 AND 29.07.2011 WHILE DISPOSING THE APPEAL. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF INTEREST OF RS. 71,976/- AND OTHER EXPENDITURE OF R S. 6,70,764/- BY APPLYING RULE 6D. 2.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC TS THAT DETAILED REPLY VIDE LETTER DATED 18.07.2011 WAS GIVEN WHEREI N IT WAS EXPLAIN TO CIT(A) THAT INTEREST OF RS. 71,976/- PAI D TO BANKS ARE RELATED TO EXPORT ACTIVITIES AND ALSO ENTIRE EXPEND ITURE AS SHOWN IN PROFIT AND LOSS ACCOUNT ARE RELATED TO MANUFACTU RING AND TRADING ACTIVITIES AND NOTHING IS ATTRIBUTABLE TO I NVESTMENT ACTIVITIES. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC TS THAT THE APPELLANT IS NEITHER A TRADER NOR INVESTOR, HOWEVER HOLDING ON TO OLD INVESTMENTS IN SHARES OF JBF INDUSTRIES LIMITED IN WHICH HARDLY ONE DIVIDEND IS RECEIVED IN A YEAR ON WHICH NO EXPENDITURE WAS INCURRED. 2. THE FACTS IN BRIEF ARE, THAT THE ASSESSEE IS A PARTNER SHIP FIRM AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING & TEXTURIZED Y ARN. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD A NON AGRICU LTURAL LAND ALONG WITH FACTORY SHED AND ELECTRICITY CONNECTION, SITUATE D AT VILLAGE UMARKUIN, UNDER THE UT OF DADRA & NAGAR HAVELI, MEASURING 4900 SQ. MT. TO M/S DEEPAK POLYTEXT FOR A CONSIDERATION OF RS. 2.50 CRORES, WHERE WDV WAS RS. 32,34,295/-, IN THE BOOKS OF THE ASSESS EE. THE ASSESSEE ALSO GOT ITS VALUATION DONE THROUGH GOVERNMENT APPROVED VALUER, WHO VALUED THE TRANSACTION AT RS. 1.00 CRORE ON E STIMATED BASIS, AS PER HIS REPORT DATED 05.03.2008. THE SALE CONSIDE RATION, AS ENTERED INTO BY THE ASSESSEE WAS ACCEPTED BY THE SUB REGISTRAR AND DUTY WAS ALSO PAID THEREON. THE ASSESSEE SUBMITTED BEFO RE THE AO THAT THE VALUE AS ESTIMATED BY THE GOVT. APPROVED VALUER SHO ULD BE TAKEN FOR THE PURPOSES OF VALUATION OF CAPITAL GAINS. 3. THE AO, REJECTED THE REPORT AND TOOK THE TOTAL CON SIDERATION AT RS. 2.50 CRORES AND REDUCED THEREFROM THE WDV AND TOOK THE RESIDUE M/S ARYA TEXT URISERS & TWISTER ITA NO. 6906/MUM/2011 3 TO BE THE LTCG AND AFTER INDEXATION, ARRIVED AT THE FINAL FIGURE OF LTCG AT RS. 1,98,33,719/-. 4. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), WHO SU STAINED THE ADDITION MADE. 5. THE ASSESSEE IS NOW BEFORE THE ITAT. 6. BEFORE US, THE AR SUBMITTED THAT FOR APPLICATION OF SECT ION 50C WHAT IS NECESSARY IS THAT IN CASE THE AO IS NOT SATISFIED WITH THE VALUATION HE MUST REFER THE ISSUE TO THE VALUATION OFFICER FO R HIS REPORT. IN THE INSTANT CASE, THE ASSESSEE HAS DONE, WHAT IT WAS REQUIRED TO DO, I.E. GETTING THE VALUATION DONE BY THE GOVERNMENT APPROVE D VALUER. THE AO SHOULD HAVE ACCEPTED IT OR IF HE HAD ANY DOUBTS, REFE RENCE SHOULD HAVE BEEN MADE TO THE VALUATION CELL. THIS, THE AO FAILED TO DO. IN THIS CONTEXT, THE AR REFERRED TO THE DECISIONS REPORTED IN I) 103 ITD 113 -ITO VS UNITED MARINE ACADEMY (MUM-SB); II) 79 TTJ 573 - MRS. SOSAMMA PAULOSE VS JCIT (COCHIN), III) 212 TAXMAN 411 CIT VS RAMAN KUMAR SURI (BOM) THE AR POINTED OUT THAT THE ORDER OF CIT(A) WAS INFIRM, AS THE CIT(A) DID NOT TAKE INTO CONSIDERATION THE WRITTEN SUBMISSIONS DA TED 18.07.2011 & 29.07.2011. 7. THE DR, PLACED RELIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES. 8. ON GOINING THROUGH THE VARIOUS DETAILS AND SUBMISSIONS AND THE FACT THAT THE CIT(A) DID NOT TAKE INTO CONSIDERATION THE T WO LETTERS MENTIONED ABOVE, MERITS THE CASE TO BE RESTORED TO THE FILE OF THE CIT(A). WE ARE ALSO AWARE THAT THE ISSUE OF VALUATION, STILL HA S THE DENTS, AS THE CASES REFERRED TO ABOVE HOLD THAT VALUATIO N DONE BY THE GOVERNMENT APPROVED VALUER CANNOT BE BRUSHED ASIDE, AS IT HAS BEEN DONE BY A QUALIFIED PERSON. WE, THEREFORE, FEEL, THAT IN THE IN TEREST OF JUSTICE, THE ISSUE OF VALUATION OF PROPERTY BE RESTORED T O THE FILE OF THE AO. M/S ARYA TEXT URISERS & TWISTER ITA NO. 6906/MUM/2011 4 9. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RESTORE THE ISSUE TO THE FILE OF THE AO, WHO SHALL EXAMINE THE ISSUE AFRESH, AS PER LAW. 10. GROUND NO. 2 PERTAINS TO DISALLOWANCE U/S 14A. 11. THE FACTS ARE THAT THE ASSESSEE HAS RECEIVED RS. 2 ,93,88,575/- IN DIVIDEND AND HAS CLAIMED INTEREST AT RS. 1,42,560/-. 12. AS PER THE AO, THE ASSESSEE HAD TOTAL INVESTMENTS O F RS. 13,40,72,899/- IN SHARES AND MUTUAL FUNDS. 13. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE CONTE NDED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN THE EXEMPT INCOMES. HOWEVER, IT SUBMITTED A WORKING OF THE DISALLOWANCE U/S 14A AT RS. 7,42,341/- (PARA 3.2, PAGE 5 OF THE ASSESSMENT ORDE R). THIS WAS ACCEPTED BY THE AO AND ADDED IT TO THE INCOME OF THE ASSESSEE. 14. THE ASSESSEE APPROACHED THE CIT(A), WHO SUSTAINED TH E DISALLOWANCE. 15. THE ASSESSEE IS NOW BEFORE THE ITAT. 16. BEFORE US, IN THE GROUNDS OF APPEAL, IN GROUND NO. 2.2 SA YS THAT THE ASSESSEE WAS HOLDING ON TO OLD INVESTMENT IN SHARES OF JBF INDUSTRIES LTD. IN WHICH HARDLY ONE DIVIDEND IS RECEIVED IN A YEAR ON WHICH NO EXPENDITURE WAS INCURRED. 17. THIS ACCORDING TO US IS QUITE INCOMPREHENSIBLE, BECAUSE INCOME CLAIMED TO BE EXEMPT IS RS. 2,93,88,575/- IN DIVIDENDS, AND RE CEIVING THE SAME IN ONE DIVIDEND WARRANT, TO OUR MIND IS IMPROBABLE. 18. WE HAVE SEEN THE CONNECTED GROUNDS WITH REGARD TO NON ADJUSTMENT OF INTEREST EXPENSE AND OTHER EXPENSE, AND WE ALSO FIND THAT THE AO HAS ACCEPTED THE COMPUTATION OF DISALLOWANCE , AS M/S ARYA TEXT URISERS & TWISTER ITA NO. 6906/MUM/2011 5 SUBMITTED BY THE ASSESSEE. IN SUCH A CIRCUMSTANCE, WE DO NOT SEE, AS TO WHAT GRIEVANCE, THE ASSESSEE HAS, IN SO FAR AS INSTANT DISALLOWANCE IS CONCERNED. 19. IN THESE CIRCUMSTANCES, WE REJECT THE GROUND NO. 2 AND ITS SUB GROUNDS AS IN THE GOA BEFORE US AND SUSTAIN THE ORDERS OF THE REVENUE AUTHORITIES. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2013. SD/- SD/- ( . ) ( #'' '$ ) ! ! (B. RAMAKOTAIAH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 10 TH JULY, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A)-25, MUMBAI. 4) & & ' 14, MUMBAI / THE CIT14, MUMBAI. 5) ()* + , , & + , -. / THE D.R. A BENCH, MUMBAI. 6) */ 0 COPY TO GUARD FILE. &12 / BY ORDER 3 / 4 5 & + , -. DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *784 . . * CHAVAN, SR. PS