Bangalore pharmacetical & Research Laboratory Pvt. Ltd., Bangalore V. The Deputy Commissioner of Income Tax, Circle 1(1)(2), Bangalore

ITA 77/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8111 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-07-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 12-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Capital asset; Fair market value; Capital Gains
• Section: 243B; 234B; 143(1); 48; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.77/BANG/2017 ASSESSMENT YEARS : 2006-07 BANGALORE PHARMACEUTICAL & RESEARCH LABORATORY PVT. LTD., NO.163, RESERVOIR STREET, BENGALURU-560 004. PAN AAACB 5712 H VS. THE DY. COMMISSIONER OF INCOME- TAX, CIRCLE-1(1)(2), BENGALURU. APPELLANT RESPONDENT ITA NO.200/BANG/2017 ASSESSMENT YEARS : 2006-07 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(2), BENGALURU. VS. BANGALORE PHARMACEUTICAL & RESEARCH LABORATORY PVT. LTD., NO.163, RESERVOIR STREET, BENGALURU-560 004. PAN AAACB 5712 H APPELLANT RESPONDENT ASSESSEE BY : SHRI ANIL KUMAR, C.A REVENUE BY : SHRI MANJEET SINGH, ADDL. CIT DATE OF HEARING : 28-07-2020 DATE OF PRONOUNCEMENT : 21-08-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PAGE 2 OF 9 ITA NOS.77 & 200/BANG/2017 PRESENT CROSS APPEALS HAS BEEN FILED BY ASSE SSEE AS WELL AS REVENUE AGAINST ORDER DATED 29/09/2016 PASSED BY LD. CIT (A)-1, BANGALORE FOR ASSESSMENT YEAR 2006-07 ON FOLLOWING GROUNDS OF APPEAL: ITA NO.77/BANG/2017 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A), IN SO FAR AS IT IS AGAINST THE APPELLANT IS AGAINST LAW, FACTS OF THE CASE AND WEIGHT OF EVIDENCE. 2. THE LEARNED APPELLATE OFFICER HAS ERRED IN NOT D ECIDING THE VARIOUS OTHER ISSUES RAISED UNDER GROUND NO 4, AND AS ALSO 6 AND ADDITIONAL GROUND REGARDING CLAIM U/S 54G. AND THE SAID GROUNDS ARE M ENTIONED HERE IN BELOW FOR THE SAKE OF CLARITY. A) GROUND NO 4 THE LEARNED AO HAS ERRED IN COMPUTING THE 'INDEXED COST OF SALE AT RS.41,23,270/ AS AGAINST RS.1,90,41,525/- AS CLAIME D BY APPELLANT AND ACCEPTED BY AO EARLIER. B) GROUND NO 6 THE LEARNED AO OUGHT TO HAVE DELETED LTCG INCOME OF RS.86, 85,618/- AS THE SAME IS NOT ASSESSABLE FOR AN 2006- 07 BUT AN 2004-05 AS PER THE DECISION OF THE HIGH COURT OF KA RNATAKA. C) ADDITIONAL GROUNDS THE AO BE DIRECTED TO ALLOW DEDUCTION U/S 54G IN RE SPECT OF NEW UNIT SETUP AT NELAMANAGALA, COSTING RS. 15 CRORES. 3. THE APPELLATE OFFICER HAS ERRED IN CONCLUDING IN TEREST U/S 234B AMOUNTING TO RS.66, 29,369/- HAS BEEN PROPERLY LEVI ED AND THE INTEREST U/S 234B SHALL HAVE EFFECT AS PER TAX LEVI ED WHEN INTEREST U/S 234B CANNOT BE CHARGED AT ALL UNDER CLAUSE (3) OF SECTION 243B AS THE INCOME COMPUTED U/S 143(1) IS A LOSS. 4. THE APPELLANT PRAYS IT MAY BE PERMITTED TO ADDUC E ANY FURTHER EVIDENCE AT THE TIME OF HEARING OF THIS APPEAL. ITA NO.200/BANG/2017 1. THE ORDER OF THE LEARNED CIT(APPEALS), IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A) ERRED IN HOLDING THAT FOR THE PURP OSE OF CAPITAL GAIN COMPUTATION, VALUE OF LAND AS ON THE DATE OF J DA I.E., 5/10/2005 IS TO BE TAKEN AND NOT THE COST OF CONSTR UCTION OF SUPER BUILT-UP AREA TO BE RECEIVED, AS THE HON'BLE ITAT B ANGALORE BENCH PAGE 3 OF 9 ITA NOS.77 & 200/BANG/2017 'A' IN THE CASE OF N.S NAGARAJ (JTA NO. 676 ('BANG) OF 2011 AND CO NO. 45 (BANG) OF 2013 DTD.1/1212014 HAS HELD THAT S ECTION 48 NOWHERE TALKS OF FMV AND IT TALKS OF FULL CONSIDERA TION. IT IS FURTHER HELD IN THE CASE SUPRA THAT FULL CONSIDERATION IS T HE COST OF CONSTRUCTION INCURRED BY THE BUILDER ON THE ASSESSE E'S SHARE OF CONSTRUCTED AREA, BECAUSE THE ASSESSEE WOULD RECEIV E CONSTRUCTED AREA IN LIEU OF THE LAND SHARE, 3. THE LD.CIT(A) ERRED IN HOLDING THAT FOR THE PURP OSE OF CAPITAL GAIN COMPUTATION, VALUE OF LAND AS ON THE DATE OF J DA I.E., 5/10/2005 IS TO BE TAKEN AND NOT THE COST OF CONSTR UCTION OF SUPER BUILT-UP AREA TO BE RECEIVED, AS THE HON'BLE HIGH C OURT OF DELHI IN THE CASE OF SO/AM INTERNATIONAL LID. (386 1TR 580) (LID. 13105/2016 HAS HELD THAT THE EXPRESSION 'ACCRUING' AS USED IN SECTION 48 IS SYNONYMOUS TO ENTITLEMENT AND IF THE ASSESSEE IS ENTITLED TO THE CONSIDERATION, THEN THE SAME MUST B E TAKEN INTO ACCOUNT FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS IN TERMS OF SECTION 48. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF T HE LD.CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTO RED. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A COMPANY AND FILED ITS RETURN OF IN COME FOR YEAR UNDER CONSIDERATION DECLARING A LOSS OF RS.12, 06,272/-. ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF ALLOPATHY MEDICINES. 3. LD.AO OBSERVED THAT, DURING THE PREVIOUS YEAR RE LEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE EN TERED INTO JOINT DEVELOPMENT AGREEMENT WITH M/S PRATIBHA REALTORS PVT.LTD., VIDE AGREEMENT DATED 05/10/2005 AND ALSO EXECUTED A SUPPLEMENTARY AGREEMENT DATED 28/07/2008. ASSESSEE ACCORDINGLY HANDED OVER THE POSSESSION OF FACTORY BUILDING DULY CONVERTED INTO VACANT LAND ADMINISTERING 84980 M. AS PER THE AGREEMENT A SSESSEE WAS ENTITLED TO 1 LAKH SQUARE FEET OF CONSTRUCTIVE COMMERCIAL PAGE 4 OF 9 ITA NOS.77 & 200/BANG/2017 SPACE IN LIEU OF EXCHANGE OF LAND AT 50% AND ALSO A DDITIONAL SPACE THAT ASSESSEE HAD AGREED UPON FOR REIMBURSING TO THE DEVELOPER FOR SEEKING ADDITIONAL SPACE AREA OF 36% WHICH WAS WORKED OUT TO 42,000 FT.. 4. LD.AO WAS OF THE OPINION THAT, CAPITAL GAIN AROS E TO ASSESSEE DURING THE PREVIOUS YEAR WHEN JDA WAS EXEC UTED AND THE POSSESSION OF LAND WAS HANDED OVER TO THE DEVELOPER. LD.AO RELIED UPON DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF DR.D.K.DAYALU AND ALSO DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF SH.CHATURBHUJ DWARKADAS KAPADIA, REPORTED IN 260 ITR. 5. IT WAS NOTICED BY LD.AO THAT ASSESSEE HAD NOT DE CLARED ANY CAPITAL GAINS PURSUANT TO SUCH JDA AND ACCORDIN GLY, NOTICE UNDER SECTION 148 WAS ISSUED AND SERVED UPON ASSESSEE, IN RESPONSE TO WHICH, ASSESSEE VIDE LETTE R DATED 13/02/2013 INFORMED THAT, RETURN OF INCOME FILED ON 29/11/2006 TO BE TREATED AS RETURN FILED IN RESPONS E TO NOTICE UNDER SECTION 148. 6. ASSESSEE WAS THEREAFTER INTIMATED REASONS RECORD ED FOR INITIATING PROCEEDINGS UNDER 147, VIDE LETTER DATED 14/02/2013 AND SUBSEQUENTLY, NOTICES UNDER SECTION 142 (1) WAS ISSUED TO ASSESSEE CALLING FOR VARIOUS DETA ILS. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVES OF A SSESSEE APPEARED BEFORE LD.AO FROM TIME TO TIME AND CASE WA S DISCUSSED. 7. ASSESSEE WAS CALLED UPON BY LD.AO TO SHOW CAUSE, AS TO WHY, CAPITAL GAIN SHOULD NOT BE WORKED OUT, TAKI NG INTO ACCOUNT COST OF CONSTRUCTION ATTRIBUTABLE TO THE DE VELOPER, AS PAGE 5 OF 9 ITA NOS.77 & 200/BANG/2017 REFLECTED IN THEIR BOOKS OF ACCOUNT, AS SALE CONSID ERATION RECEIVED, FOR PURPOSES OF COMPUTING CAPITAL GAINS. LD.AO ALSO CALLED UPON THE DEVELOPER TO PROVIDE THE COST OF CONSTRUCTION OF PROPERTY DEVELOPED BY THE. THE DEVE LOPER THEREAFTER INFORMED LD.AO THAT, COST OF CONSTRUCTIO N HAS BEEN ACCOUNTED AT RS.1700/- PER SQUARE FEET, AND CONSTRUCTION WAS STATED TO HAVE BEEN SPREAD OVER FO R A PERIOD OF 3 YEARS. 8. ASSESSEE FILED VARIOUS DETAILS AND SUBMITTED VID E LETTER DATED 2/09/2013, STATING MANNER IN WHICH, THE DEVEL OPER HANDED OVER PHYSICAL POSSESSION OF CONSTRUCTED PREM ISES TO ASSESSEE, AND TRANSFERRED 50% UNDIVIDED INTEREST IN THE LAND DURING ACCOUNTING YEAR ENDED ON 31/03/2010 AND AS P ER SECTION 50 C OF THE ACT, THE VALUE OF UNDIVIDED RIG HT MUST BE DETERMINED AS PER THE GUIDANCE VALUE FIXED BY THE REGISTRATION AUTHORITY AS THE JDA ENTERED WAS REGIS TERED. 9. LD.AO AFTER GOING THROUGH THE DETAILED SUBMISSIO NS FILED BY ASSESSEE, WIDE LETTER DATED 24/09/2013 INT IMATED ASSESSEE THE REASONS FOR REJECTION OF THE CLAIM. IN RESPONSE TO THIS LETTER ISSUED BY LD.AO ASSESSEE AGAIN REPLI ED VIDE LETTER DATED 20/12/2013 WHICH HAS BEEN MORE PARTICU LARLY REPRODUCED IN THE ASSESSMENT ORDER. ASSESSEE HAD PL ACED RELIANCE UPON DECISION BY HONBLE KARNATAKA HIGH COURT IN CASE OF VED PRAKASH RAKHRA . 10. LD.AO AFTER CONSIDERING SUBMISSIONS, WAS OF OPI NION THAT, FACTS IN CASE OF VED PRAKASH RAKHRA WAS DISTINGUISHABLE, AND THEIR BY, REJECTED CLAIM OF AS SESSEE. LD.AO THUS, COMPUTED CAPITAL GAINS IN HANDS OF ASSE SSEE PAGE 6 OF 9 ITA NOS.77 & 200/BANG/2017 AMOUNTING TO RS.4,08,13,070/- FOR YEAR UNDER CONSIDERATION. 11. AGGRIEVED BY ADDITION MADE BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). BEFORE LD.CIT(A) ASSESSEE RAISED ADDITIONAL GROUND TO ALLOW DEDUCTION UNDER S ECTION 54G IN RESPECT OF NEW UNIT SET UP AT NELAMANGALA, C OSTING RS.15CRORES. LD.CIT(A) HELD THAT, FOR PURPOSES OF C APITAL GAIN COMPUTATION, VALUE OF LAND AS ON THE RATE OF JDA TH AT IS 05/10/2005 IS TO BE TAKEN AND NOT THE COST OF CONST RUCTION OF SUPER BUILT A PERIOD TO BE RECEIVED. FOR IN SUPP ORT LD.CIT(A) RELIED UPON DECISION OF COORDINATE BENCH OF TRIBUNAL IN CASE OF N.S NAGARAJ IN ITA NO.676/BANG/ 2011 CO NO.45/BANG /2013 DATED 01/12/2014. RELIANCE IS A LSO PLACED ON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SALORA INTERNATIONAL LTD ., REPORTED IN 386 ITR 580. 12. AGGRIEVED BY ORDER PASSED BY LD.CIT(A), BOTH AS SESSEE AS WELL AS REVENUE ARE IN APPEAL. 13. LD.AR AT THE OUTSET, SUBMITTED THAT LD.CIT(A) H AS NOT DECIDED ISSUES IN GROUND 4, 6 AND ADDITIONAL GROUND S RAISED BEFORE LD.CIT(A). HE THUS REQUESTED FOR THE ISSUES TO BE SENT BACK TO LD.CIT(A) FOR ADJUDICATION. 14. LD.SR.DR THOUGH OBJECTED FOR THE REQUEST, HOWEV ER COULD NOT CONTROVERT THAT, THESE ISSUES HAVE NOT BE EN DECIDED BY LD.CIT (A). 15. IN VIEW OF THE ABOVE, AND IN INTEREST OF NATURA L JUSTICE, WE DIRECT LD.CIT(A) TO DECIDE THESE ISSUE ON MERITS HAVING REGARD TO EVIDENCES FILED BY ASSESSEE. PAGE 7 OF 9 ITA NOS.77 & 200/BANG/2017 16. NEEDLESS TO SAY THAT, PROPER OPPORTUNITY OF BEI NG HEARD SHOULD BE GRANTED TO ASSESSEE IN ACCORDANCE WITH LA W. 17. GROUND NO.3 RAISED BY ASSESSEE IS AGAINST THE INTEREST LEVIED UNDER SECTION 234B OF THE ACT. IN OUR VIEW T HIS ISSUE BECOMES CONSEQUENTIAL AND ALSO SHOULD BE SENT BACK TO LEARN CIT (A). ACCORDINGLY, GROUNDS RAISED BY ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED FOR STATISTICAL PURPOSES. REVENUES APPEAL: 18. ONLY ISSUE RAISED BY REVENUE IS REGARDING THE V ALUE OF LAND TO BE CONSIDERED FOR PURPOSES OF COMPUTING CAP ITAL GAINS. 19. LD.SR.DR PLACED RELIANCE ON THE ORDERS PASSED B Y LD.AO. 20. LD.AR SUBMITTED THAT, WRITTEN SUBMISSION HAS BE EN FILED WHEREIN RELIANCE WAS PLACED ON DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. VED PRAKASH RAKHRA, REPORTED IN (2012) 210 TAXMAN 605 , IT WAS SUBMITTED THAT THERE IS SUBSTANTIAL DIFFERENCE BETW EEN COST OF CONSTRUCTION ADOPTED FOR PURPOSE OF COMPUTING CA PITAL GAINS ON SALE OF CAPITAL ASSETS AND EXPENDITURE BOO KED BY THE DEVELOPER IN THE COURSE OF CONSTRUCTION ACTIVIT Y. WE HAVE PERUSED DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF CIT VS. VED PRAKASH RAKHRA(SUPRA) AND NOTE THAT, IT SQUARELY APPLIES TO PRESENT FACTS. PAGE 8 OF 9 ITA NOS.77 & 200/BANG/2017 20. BASED UPON THE ABOVE OBSERVATIONS BY HONBLE KARNATAKA HIGH COURT , WE DO NOT FIND ANY MERITS IN THE ISSUE RAISED BY REVENUE. ACCORDINGLY THEY ARE DISMISSED. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2020 SD/- SD/- (A.K GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 21 ST AUGUST, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL. BANGALORE PAGE 9 OF 9 ITA NOS.77 & 200/BANG/2017 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -08-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -08-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -08-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -08-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -08-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -08-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -08-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS