Madras Sheet Glass Works Pvt. Ltd., CHENNAI V. ITO, CHENNAI

ITA 766/CHNY/2013

• Counselvise Citation: 76621714 RSA 2013
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 19-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.766/MDS/2013 ASSESSMENT YEAR : 2009-10 M/S MADRAS SHEET GLASS WORKS PVT. LTD 67-A, VILLAGE STREET THIRUVOTTIYUR CHENNAI 600 019 VS THE INCOME TAX OFFICER COMPANY WARD IV(1) CHENNAI [PAN AAACM 5340 G ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D. ANAND, ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 02-12-2013 DATE OF PRONOUNCEMENT : 05-12-2013 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE FOR ASSESSM ENT YEAR 2009-10, IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME- TAX (APPEALS)-V, CHENNAI, DATED 28.2.2013, PASSED I N APPEAL NO. 405/2011-12, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). I.T.A.NO.766/13 :- 2 -: 2. A PERUSAL OF THE GROUNDS RAISED BY THE ASSESSEE R EVEALS THAT PRINCIPALLY, ITS GRIEVANCE IS IN TWO FOLDED I. E THE AUTHORITIES BELOW HAVE WRONGLY NOT ALLOWED IT TO SET OFF ENTIRE BUSIN ESS LOSS OF ` 19,66,761/- AND ERRED IN COMPUTING CAPITAL GAINS OF ` 2,28,36,000/-. 3. IN THE COURSE OF HEARING, THE ASSESSEE VEHEMENTL Y REITERATES THE PLEADINGS AND PRAYS FOR RELIEF ON BO TH COUNTS STATED ABOVE. IN SUPPORT OF THE SUBMISSIONS, PAPER BOOK A ND CASE LAW HAVE BEEN FILED [WHICH WOULD BE DISCUSSED HEREUNDER]. 4. THE REVENUE STRONGLY SUPPORTS THE CIT(A)S ORDER CO NFIRMING THE FINDINGS OF THE ASSESSING OFFICER ON BOTH ISSUE S AND PRAYS FOR CONFIRMATION THEREOF. 5. FIRST WE COME TO THE ISSUE OF BUSINESS LOSS OF ` 19,66,761/-. THE ASSESSEE IS A COMPANY WHICH USED TO MANUFACT URE AND DEAL IN SHEET GLASS ITEMS. ON 23.10.2009, IT HAD FILED ITS RETURN DECLARING INCOME AS ` .NIL WHICH WAS SUMMARILY PROCESSED ON 10.12.2010. 6. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICER CAME ACROSS THE ASSESSEES CLAIM OF BUSINESS LOSS AFORESAID. IN HIS VIEW, THE VERY ISSUE HAD BEEN DISALLOWED AGAINST THE ASSESSEE IN PRECEDING ASSESSMENT YEAR AS WELL ON THE GROUND THAT NEITHER THERE WAS ANY I.T.A.NO.766/13 :- 3 -: MANUFACTURING ACTIVITY UNDERTAKEN IN RELEVANT PREVI OUS YEAR/ ASSESSMENT YEAR NOR THERE WAS ANY BUSINESS OPERATIO N. THE ASSESSING OFFICER ALSO NOTICED THE FACT THAT ASSESSEE HAD IT SELF DECLARED ITS RECEIPT UNDER THE HEAD INCOME FROM HOUSE PROPERTY . PER ASSESSING OFFICER, SINCE THE ASSESSEE HAD NO BUSINESS ACTIVI TY IN THE RELEVANT PREVIOUS YEAR, THE BUSINESS LOSS IN QUESTION COULD NOT BE ALLOWED TO BE SET OFF. THIS PROMPTED HIM TO MAKE DISALLOWANCE VI DE ASSESSMENT ORDER DATED 29.12.2011. THE CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER. 7. BEFORE US, THOUGH THE ASSESSEE HAS ARGUED THAT THE ENTIRE BUSINESS LOSS AFORESAID DESERVES TO BE SET OFF, ON BEING PUT UP A QUERY AS TO OUTCOME OF THE PROCEEDINGS OF THE PRECEDING ASSESSMENT YEAR SINCE THE VERY DISALLOWANCE HAD BEEN MADE OR ANY DI STINCTION ON FACTS QUA IMPUGNED ASSESSMENT YEAR, IT HAS NOT CONTROVERT ED THE AFORESAID FACTUAL POSITION. THAT BEING THE CASE, WE SEE NO R EASON TO INTERFERE ON THE GROUND THAT ONCE THE ASSESSEE HAS NO BUSINESS ACTIVITY I.E EITHER OF MANUFACTURING OR ANY OTHER OPERATION, THE BUSINE SS LOSS IN QUESTION CANNOT BE ALLOWED TO BE SET OFF. HENCE, THIS DISAL LOWANCE STANDS SUSTAINED. I.T.A.NO.766/13 :- 4 -: 8. NOW, WE COME TO THE SECOND GRIEVANCE OF THE ASSESS EE (SUPRA). IN THE COURSE OF SCRUTINY, THE ASSESSIN G OFFICER FOUND THE ASSESSEE TO HAVE DECLARED LONG TERM CAPITAL GAINS O F ` 11,62,066/-. ON 2.9.1959, THE ASSESSEE HAD PURCHASED LAND IN TH IRUVOTTIYUR VILLAGE MEASURING 1.1 ACRE. ON 19.3.2003, IT HAD ENTERED I NTO AN AGREEMENT [UNREGISTERED] WITH M/S KHIVRAJ ESTATES LTD FOR DEV ELOPING THE SITE. ON 12.8.2008, THE ASSESSEE HAD EXECUTED POWER OF ATTOR NEY IN FURTHERANCE TO THE AFORESAID AGREEMENT. THERE IS N O DISPUTE BETWEEN THE PARTIES THAT THE AGREEMENT AND THE POWER OF ATT ORNEY ARE UN- REGISTERED DOCUMENTS FOR THE PURPOSE OF STAMP VALUA TION. THE AGREED CONSIDERATION FOR THE LAND BETWEEN THE VENDOR ( ASS ESSEE) AND VENDEE (M/S KHIVRAJ ESTATES LTD.) WAS ` 67 LAKHS. THE PARTIES ARE FAIR ENOUGH TO POINT OUT BEFORE US THAT FROM 19.3.2003 T O 12.8.2008, ENTIRE CONSIDERATION MONEY STOOD PAID TO THE ASSES SEE. WHILST COMPUTING LONG TERM CAPITAL GAINS, THE ASSESSEE HA D TAKEN FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 TO BE ` 9,51,535/- @ ` 50,000/- PER GROUND. ACCORDINGLY, INDEXED COST OF ACQUISITI ON AS IN 2008 I.E THE YEAR OF TRANSFER, WAS COMPUTED AT ` 55,37,934/- LEADING TO LONG TERM CAPITAL GAINS OFFERED BY THE ASSESSEE AS ` 11,62,066/-. I.T.A.NO.766/13 :- 5 -: 9. THE ASSESSING OFFICER SOUGHT FOR FAIR MARKET VALUE OF THE LAND SOLD BY THE ASSESSEE AS ON 1.4.1981. HE ALSO WROTE A LETTER TO THE SUB-REGISTRAR, NORTH CHENNAI FOR THE VERY PURPO SE. WE READ FROM THE ASSESSMENT ORDER THAT THE SUB-REGISTRAR INFORM ED THE ASSESSING OFFICER ABOUT THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 TO BE ` 10,000/- PER GROUND. ON BEING PUT TO NOTICE, THE ASSESSEE SUBMITTED THAT THE AREA OF ITS LAND WAS LOW LYING A ND USED TO FACE WATER STAGNATION BUCKINGHAM CANAL WATER USED TO OVE RFLOW INTO THE POCKETS OF THE LAND MAKING IT UNFIT FOR UTILIZATION AND CONSTRUCTION. THE ASSESSING OFFICER OBSERVED IN THE ASSESSMENT ORDER THAT THE SAID GEOGRAPHICAL DISABILITY AFORESAID EXISTED AS ON 1.4 .1981 WHICH HAD JUSTIFIED THE RATES DISCLOSED BY THE SUB-REGISTRAR. ACCORDINGLY, HE COMPUTED THE COST OF ACQUISITION AS ` 11,64,000/-. 10. IT IS TO BE SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE PR OPERTY WAS TRANSFERRED IN 2008 AND UNREGISTERED SALE AGREEMENT HAD BEEN EXECUTED BETWEEN THE PARTIES ON 19.3.2003, THE SAME ATTRACTED APPLICABILITY OF SECTION 50C OF THE ACT I.E NOT ONL Y THE SALE PRICE ADOPTED OR ASSESSED HAD TO BE TAKEN INTO CONSIDERAT ION, BUT ALSO THE ASSESSABLE PRICE. ON THIS, THE ASSESSEES REPLY BEFORE THE ASSESSING I.T.A.NO.766/13 :- 6 -: OFFICER WAS THAT THE CONSIDERATION MONEY WAS ONLY ` 67 LAKHS AND THE TRANSFER HAD BEEN COMPLETED IN THE YEAR 2003 BY WA Y OF AGREEMENT, SECTION 50C WOULD NOT APPLY IN ITS CASE. IT REITER ATED THE FACTUAL POSITION THAT THE LAND WAS IN ECONOMICALLY BACKWARD AS WELL AS IN HAZARDOUS INDUSTRIAL AREA. THIS FAILED TO CONVINCE THE ASSESSING OFFICER, WHO TOOK GUIDELINE VALUE OF THE PROPERTY I N THE YEAR 2008 AS ` 2,40,00,000/- BY OBSERVING THAT IN THE YEAR 2003 NO TRANSFER HAD TAKEN PLACE AND COMPUTED CAPITAL GAINS AND ARRIVED AT IMP UGNED LONG TERM CAPITAL GAINS OF ` 2,28,36,000/-. THE CIT(A) HAS ALSO UPHELD THE AFORESAID COMPUTATI ON OF CAPITAL GAINS. THEREFORE, THE ASSESSEE HAS RAISED THE RELEVANT G ROUNDS. 11. WE HAVE HEARD BOTH PARTIES AND PERUSED THE CASE FIL E AS WELL AS THE CATENA OF CASE LAW SUBMITTED BY THE ASSESSE E. THERE IS NO DISPUTE THAT THE ASSESSEE HAD EXECUTED UNREGISTERED AGREEMENT TO SELL IN MARCH 2003 I.E ON 19.3.2003 TO BE PRECISE. THER EAFTER, ON 12.8.2008, IT HAD TRANSFERRED ITS LAND BY WAY OF A POWER OF ATTORNEY AND NO REGISTERED SALE DEED HAS BEEN EXECUTED TILL DATE. BOTH THE AFORESAID INSTRUMENTS I.E THE AGREEMENT AS WELL AS POWER OF ATTORNEY I.T.A.NO.766/13 :- 7 -: ARE UNREGISTERED DOCUMENTS SO FAR AS STAMP VALUATIO N IS CONCERNED. IN THIS BACKDROP OF FACTS, THE MAIN ARGUMENT ADVANCED BY THE ASSESSEE BEFORE US IS THAT SINCE THE ENABLING PROVISION OF SECTION 50C COMPRISING THE WORD ASSESSABLE WAS INSERTED BY T HE LEGISLATURE ONLY WITH EFFECT FROM 1.10.2009, THE SAME COULD NOT HAVE BEEN RETROSPECTIVELY INVOKED IN ITS CASE. AFTER PERUSIN G THE CASE LAW AUOTED I.E [2013] 352 ITR 488 (MAD) CIT VS R.SUGANTHA RAVI NDRAN, WE FIND FORCE IN THE CONTENTIONS OF THE ASSESSEE. THEIR L ORDSHIPS IN THE AFORESAID CASE HAVE CATEGORICALLY HELD THAT THE UNR EGISTERED POWER OF ATTORNEY OR SALE AGREEMENT WHICH HAVE BEEN ADOPTED AS MEANS OF TRANSFER ON OR AFTER 1.10.2009 ONLY CAN BE SUBJECTE D TO THE TENOR OF THE PROVISION. THE RELEVANT OBSERVATIONS IN THE CA SE LAW READ AS FOLLOWS: 6. THE ISSUE INVOLVED IN THIS CASE IS AS TO WHETHE R THE ASSESSING OFFICER IS ENTITLED TO TAKE THE VALUE OF THE PROPERTY ASSESSABLE BY THE AUTHORITY OF THE STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SAID TRANSFER OR NOT. ADMITTEDLY, IN THIS CASE, NO REGISTRATION OF S ALE DEED HAD TAKEN PLACE. IT IS THE CASE OF THE REVENUE THAT ONL Y IN PURSUANCE OF THE AGREEMENT OF SALE, THE ASSESSEE HAD TRANSFER RED THE PROPERTY AND RECEIVED THE SALE CONSIDERATION. IN SU CH CIRCUMSTANCES, WHETHER SECTION 50C OF THE ACT WOULD BE MADE APPLICABLE EVEN IN RESPECT OF CASES WHERE THE REGIS TRATION HAD NOT TAKEN PLACE, IS THE ONLY ISSUE TO BE DECIDED IN THIS' CASE. 7. LEARNED COUNSEL FOR THE ASSESSEE PLACED A CIRCUL AR IN CIRCULAR NO.5/2010/(F.NO.142/13/2010-SO(TPL)) DATED 03.06.20 10 ISSUED BY THE BOARD AND SUBMITTED THAT AS PER THE C IRCULAR, IT IS MADE CLEAR THAT THE AMENDMENT MADE BY THE FINANCE ( NO.2) ACT, 2009 IS ONLY PROSPECTIVE IN NATURE AND CANNOT BE APPLIED RETROSPECTIVELY. I.T.A.NO.766/13 :- 8 -: 8. WE HAVE PERUSED THE ABOVE CIRCULAR. IT IS STATED THEREIN THAT THE SCOPE OF THE PROVISIONS DOES NOT INCLUDE TRANSA CTION WHICH ARE NOT REGISTERED WITH STAMP DUTY VALUATION AUTHOR ITY AND EXECUTED THROUGH AGREEMENT TO SELL OR POWER OF ATTO RNEY. CONSEQUENTLY , IT IS MADE CLEAR THEREIN THAT THE AMENDMENTS HAVE BEEN MADE APPLICABLE WITH EFFECT FROM 01.10.20 09 AND THEREFORE,THEY WILL APPLY ONLY IN RELATION TO TRANS ACTION UNDERTAKEN ON OR AFTER SUCH DATE. THE RELEVANT PORT ION OF THE CIRCULAR IS EXTRACTED HEREUNDER: '23.4. APPLICABILITY:- THESE AMENDMENTS HAVE BEEN M ADE APPLICABLE WITH EFFECT FROM 1ST OCTOBER, 2009 AND WILL ACCORDINGLY, APPLY IN RELATION TO TRANSACTIONS UNDE RTAKEN ON OR AFTER SUCH DATE.' IN VIEW THEREOF, WE CONCLUDE THAT SINCE THE ASSE SSEES POWER OF ATTORNEY S DATED 12.8.2008, THE AUTHORITIE S BELOW COULD NOT HAVE BEEN APPLIED SECTION 50C OF THE ACT SO AS TO F IND OUT THE ASSESSABLE VALUE OF THE LAND SOLD. ACCORDINGLY, THE RELEVANT GROUNDS OF THE ASSESSEE ARE DECIDED IN FAVOUR OF THE ASSE SSEE. 12. THE NEXT ARGUMENT OF THE PARTIES IS ABOUT THE MAR KET VALUE OF THE LAND SOLD AS ON 1.4.1981. AS STATED IN THE PRECEDING PARAS, THE ASSESSEE HAD TAKEN THE FAIR MARKET VALUE OF LAND SU BJECT MATER OF TRANSFER @ ` 50,000/- AS ON 1.4.1981 WHEREAS THE REVENUE HAS ADOPTED IT @ ` 10,000/-. TO SUPPORT THE VALUE ADOPTED BY THE LOW ER AUTHORITIES, THE DR QUOTES ASSESSEES OWN EXPLA NATION WHEREIN IT WAS SUBMITTED THAT THE LAND WAS SITUATED IN HAZARDO US INDUSTRIAL ZONE IN LOW LYING AREA WITH WATER STAGNATION(SUPRA) SINC E ITS ACQUISITION. HOWEVER, WE DO NOT FIND ANY MATERIAL SUPPORTING THE SAID SUBMISSION I.T.A.NO.766/13 :- 9 -: ON THE GROUND THAT THE SAME EXISTED VERY MUCH AT TH E TIME OF ACQUISITION IN 1959 OR 1981 AS THE CASE MAY BE. IT HAS ALSO NOT BEEN ABLE TO PROVE THAT THE SAID FACTORS HAVE DIMINISHED VALUE OF THE LAND PERMANENTLY. SO FAR AS THE VALUATION ADOPTED BY TH E OFFICE OF SUB- REGISTRAR IS CONCERNED, WE ARE CONSCIOUS OF THE FAC TUAL POSITION THAT THE COLLECTOR RATES ARE NOT SPECIFIC BUT ONLY GENER AL IN NATURE FIXED BY TAKING A PARTICULAR LOCALITY AS A WHOLE. IN OUR V IEW, THIS DOES NOT IN ANY CASE, ALTOGETHER DENT THE ASSESSEES CASE THAT SINCE THE LAND WAS A CAPITAL ASSET SINCE LONG MERELY BECAUSE IT WAS LOW LYING OR INDUSTRIALLY HAZARDOUS OR DUE TO WATER STAGNATION, ITS VALUE WOULD DRASTICALLY CAME DOWN TO SUCH AN EXTENT AS STATED B Y THE REVENUE. HENCE, WE OBSERVE THAT THE VALUATION ADOPTED BY THE AUTHORITIES BELOW CANNOT BE ALTOGETHER CONCURRED WITH. AT THE SAME T IME, THE RELEVANT FACTUAL POSITION ABOUT THE DIMINISHING FACTORS OF ASSESSEES LAND BEFORE THE ASSESSING OFFICER CANNOT BE ALTOGETHER I GNORED. WE ARE ALSO CONSCIOUS OF THE FACT THAT FACED WITH SIMILAR CASE OF DIFFERENT VALUATIONS ADOPTED BY THE REVENUE AND ASSESSEE, TH E HON'BLE JURISDICTIONAL HIGH COURT IN [2012] 17 TAXMANN.COM 73(MAD) CIT VS J. CHELLADURAI, HAS ADOPTED AVERAGE OF THE VALUATIONS AS ON 1.4.1981. BUT IN THIS CASE, IN ADDITION TO THE AVERAGE PRINCI PLE, THERE ARE OTHER DISADVANTAGES(SUPRA) FACED BY THE PROPERTY SOLD. IN THESE I.T.A.NO.766/13 :- 10 -: CIRCUMSTANCES, BY EXERCISING OUR JURISDICTION U/S 254(1) OF THE ACT, WE DEEM IT APPROPRIATE THAT THE FAIR MARKET VALUE OF T HE PROPERTY WOULD BE REASONABLE IN CASE IT IS ADOPTED @ ` 25,000/- PER GROUND AS ON 1.4.1981 AND DIRECT THE ASSESSING OFFICER TO PASS A CONSEQUENTIAL ORDER AFTER ADEQUATELY HEARING THE ASSESSEE. 13. THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 05 TH OF DECEMBER, 2013, AT CHENNAI SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 05 TH DECEMBER, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR