ITO, Ooty V. Guruensey Estates, The Nilgiris

ITA 719/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9088 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G SARANGAN
• Keywords: Fair market value

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO. 719/MDS/2016 ( )( / ASSESSMENT YEAR : 2012-13 THE INCOME TAX OFFICER, WARD-2, INCOME TAX OFFICE, OOTY. V. M/S GURENSEY ESTATES, COONOOR TEA ESTATE BELMONT ROAD, SPRINGFIELD POST, COONOOR, THE NILGIRIS 643 104. PAN : AABFE 7856 R (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT -.+, / 0 / RESPONDENT BY : SHRI G. SARANGAN, SR. ADVOCATE 1 / 2% / DATE OF HEARING : 31.05.2016 3') / 2% / DATE OF PRONOUNCEMENT : 17.06.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 3, COIMB ATORE, DATED 15.12.2015 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2. SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT ONE OF THE PARTNERS OF THE ASSESSEE- FIRM BROUGHT IN 2 I.T.A. NO.719/MDS/16 THREE ACRES OF AGRICULTURAL LAND AS STOCK-IN-TRADE. IN FACT, THE PARTNER BROUGHT THE LAND AT THE COST OF ` 2 CRORES PER ACRE. THE ASSESSING OFFICER ESTIMATED THE VALUE OF THE LAND AT ` 1.70 CRORES PER ACRE AND FOUND THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF ` 30 LAKHS PER ACRE. ACCORDINGLY, FOR THREE ACRES OF LAND, TH E EXCESS EXPENDITURE INCURRED BY THE ASSESSEE-FIRM WAS ` 90,00,000/-. THIS WAS DISALLOWED BY THE ASSESSING OFFICER UNDER SECTI ON 40A(2)(A) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THE LD. D.R. POINTED OUT THAT WHEN THE ASSESSEE MADE THE PAYMENT TO ONE OF THE PARTNERS, THE PAYMENT MADE OVER AND ABOVE THE MARKE T RATE HAS TO BE CONSTRUED AS IN VIOLATION OF SECTION 40A(2)(A) O F THE ACT. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS RIGHTLY FOUND THAT ` 90,00,000/- WAS PAID OVER AND ABOVE THE FAIR MARKET VALUE OF THE LAND, HENCE, THE SAME WAS DISAL LOWED UNDER SECTION 40A(2)(A) OF THE ACT. 3. ON THE CONTRARY, SHRI G. SARANGAN, LD. SR. COUNS EL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE-FIRM HAS NOT INCURRED ANY EXPENDITURE AT ALL FOR THE PURPOSE OF DISALLOWANCE UNDER SECTION 40A(2)(A) OF THE ACT. ACCORDING TO THE LD. SR. COU NSEL, THE PARTNERSHIP FIRM WAS, IN FACT, CONSTITUTED ON 10.12 .1999. ONE OF THE 3 I.T.A. NO.719/MDS/16 PARTNERS M/S COONOOR INVESTMENTS LTD. BROUGHT IN CO MMON STOCK OF THE FIRM TO THE EXTENT OF 3.50 ACRES OF LAND AS ITS SHARE CAPITAL. THE FIRM WAS RECONSTITUTED ON 10.12.2003. ONE OF THE P ARTNERS M/S SUA FINANCE AND INVESTMENTS LTD. CONTRIBUTED 3.50 ACRES OF LAND TOWARDS CAPITAL OF THE FIRM. THE LD. SR. COUNSEL F URTHER SUBMITTED THAT THE TOTAL AREA OF THE LAND BROUGHT INTO THE FI RM AS CAPITAL WAS 7 ACRES OF LAND AND OPENING STOCK OF THE LAND AS ON T HE BEGINNING OF THE FINANCIAL YEAR, I.E. 01.04.2011 WAS 3.93 ACRES OF LAND AND THE SAME WAS VALUED AT ` 1,57,27,098/-. DURING THE YEAR UNDER CONSIDERATION, M/S SUA FINANCE AND INVESTMENTS LTD. HAS BROUGHT IN 3 ACRES OF LAND AS ADDITIONAL CAPITAL CONTRIBUTION WHICH WAS VALUED AT ` 6 CRORES. IN OTHER WORDS, THE 3 ACRES OF LAND BROU GHT IN AS ADDITIONAL CAPITAL CONTRIBUTION WAS VALUED AT ` 2 CRORES PER ACRE. THE VALUE OF THE LAND BROUGHT IN BY M/S SUA FINANCE AND INVESTMENTS LTD. WAS CREDITED IN THE PARTNERS ACCO UNT. ACCORDING TO THE LD. SR. COUNSEL, THE ASSESSEE HAS NOT CLAIME D ANY EXPENDITURE AT ALL IN THE COMPUTATION OF INCOME. T HE VALUE OF THE LAND BROUGHT IN BY ONE OF THE PARTNERS WAS CREDITED IN THE PARTNERS CAPITAL ACCOUNT. 4 I.T.A. NO.719/MDS/16 4. REFERRING TO SECTION 40A(2)(A) OF THE ACT, THE L D. SR. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS SECTION MAY BE APPLICABLE WHEN THE ASSESSEE INCURS AN EXPENDITURE IN RESPECT OF WH ICH THE PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON. IN THIS C ASE, NO PAYMENT WAS MADE AT ANY POINT OF TIME. THE ASSESSEE WAS AL SO NOT REQUIRED TO MAKE ANY PAYMENT TOWARDS THE COST OF THE LAND. WHAT WAS BROUGHT IN BY THE PARTNER IS THE CAPITAL CONTRIBUTI ON TO ASSESSEE-FIRM FOR CARRYING OUT THE BUSINESS. THEREFORE, ACCORDIN G TO THE LD. SR. COUNSEL, THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT IS NOT APPLICABLE AT ALL. MOREOVER, THE PAYMENT IS NOT W ITH REGARD TO VALUE OF GOODS, SERVICES OR FACILITIES. IN THIS CASE, TH E LANDED PROPERTY CANNOT BE CONSTRUED AS GOODS, SERVICE OR FACILITY. THEREFORE, ACCORDING TO THE LD. SR. COUNSEL, THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT IS NOT APPLICABLE AT ALL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE- FIRM WAS, IN FACT, ORIGINALLY CONSTITUTED ON 10.12. 1999 AND IT WAS RECONSTITUTED ON 10.12.2003. DURING THE YEAR UNDER CONSIDERATION, ONE OF THE PARTNERS, NAMELY, M/S SUA FINANCE AND IN VESTMENTS LIMITED BROUGHT IN 3 ACRES OF LAND AS ADDITIONAL CA PITAL CONTRIBUTION. 5 I.T.A. NO.719/MDS/16 A SUPPLEMENTARY PARTNERSHIP DEED WAS ALSO EXECUTED ON 20.10.2011. THE ADDITIONAL CAPITAL CONTRIBUTION BY WAY OF 3 ACRES OF LAND BROUGHT IN BY M/S SUA FINANCE AND INVESTMENTS LIMITED WAS VALUED AT ` 2 CRORES PER ACRE AND THE SAME WAS CREDITED IN THE PARTNERS CAPITAL ACCOUNT. THEREFORE, IT IS OBVIOU S THAT WHAT WAS BROUGHT INTO THE FIRM WAS LAND BY WAY OF CAPITAL CO NTRIBUTION BY ONE OF THE PARTNERS AND THERE IS NO EXPENDITURE INCURRE D BY THE ASSESSEE. IT IS A CAPITAL FOR THE PURPOSE OF CARRY ING ON THE BUSINESS OF PARTNERSHIP FIRM. THEREFORE, AS RIGHTLY SUBMITT ED BY THE LD. SR. COUNSEL OF THE ASSESSEE, THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT MAY NOT BE APPLICABLE IN RESPECT OF THE CAPITAL BROUGHT IN BY ONE OF THE PARTNERS. 6. MOREOVER, THE ASSESSEE-FIRM / THE PARTNERS VALUE D THE LAND AT FAIR MARKET VALUE AT ` 2 CRORES PER ACRE. THE ASSESSING OFFICER VALUED THE SAME AT ` 1.70 CRORES. THE DIFFERENCE BETWEEN THE VALUATION MADE BY THE ASSESSEE/ PARTNERS AND THE AS SESSING OFFICER IS ` 30 LAKHS PER ACRE. THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT WHEN THE FAIR MARKET VALUE OF A LAND WAS ESTIMATED, NO VALUER COULD ESTIMATE THE FAIR MARKET VALUE AT A PARTICULAR FIGU RE. THE VALUATION IS ALWAYS BOUND TO DIFFER BETWEEN ONE INDIVIDUAL TO AN OTHER. THIS 6 I.T.A. NO.719/MDS/16 TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSING OFFICER VALUED THE LAND AT ` 1.70 CRORES PER ACRE AND THE ASSESSEE HAS VALUED THE SAME AT ` 2 CRORES PER ACRE, THE DIFFERENCE IS ONLY ` 30 LAKHS. THIS DIFFERENCE IN VALUATION OF FAIR MAR KET VALUE CANNOT BE CONSIDERED FOR DISALLOWANCE UNDER SECTION 40A(2) (A) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT IS NOBODYS CASE THAT THE ASSESSEE HAS PAID ANY MONEY FOR TAKING THE LANDED PROPERTY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-FI RM. IN FACT, IT WAS BROUGHT IN BY ONE OF THE PARTNERS AND THE SAME WAS CREDITED IN THE BOOKS OF THE ASSESSEE AS ADDITIONAL CAPITAL CONTRIB UTION BY THE PARTNER. THEREFORE, THE PROVISIONS OF SECTION 40A( 2)(A) OF THE ACT MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. TH EREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON 17 TH JUNE, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 17 TH JUNE, 2016. KRI. 7 I.T.A. NO.719/MDS/16 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-3, COIMBATORE 4. PRINCIPAL CIT-2, COIMBATORE 5. 7: -2 /DR 6. ;( < /GF.