ITO 19(1)-4, MUMBAI V. SHREEJI CABLE INDUSTRIES, MUMBAI

ITA 7797/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3809 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-03-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Cost of acquisition; Fair market value; Valuation report; Revised return
• Section: 139; 143(3); 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 7797/MUM/2010 / ASSESSMENT YEAR 2006-07 THE INCOME TAX OFFICER 19(1)-4, ROOM NO. 308, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUGH, MUMBAI 400 012. VS. M/S. SHREEJI CABLE INDUSTRIES SAMARPAN BUILDING, 3 RD FLOOR, NORTH AVENUE ROAD, SIR VITHALDAS NAGAR, SANTACRUZ (WEST), MUMBAI-400 054. PAN: AACFS 3600 C ( / APPELLANT) ( ! / RESPONDENT) REVENUE BY : SHRI P.K. SINGH ASSESSEE BY : SHRI DHIREN P. TALATI # $%& / DATE OF HEARING : 21-03-2013 '( # $%& / DATE OF PRONOUNCEMENT : 10-04-2013 )* / O R D E R PER RAJENDRA, A.M. FOLLOWING GROUNDS OF APPEAL HAVE BEEN FILED BY THE ASSESSING OFFICER (AO) AGAINST THE ORDER DT. 31-08-2010 OF CIT(A)-30, MUMB AI: 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) HAS ERRED IN DECIDING AGAINST SUBSTITUTION OF F AIR MARKET VALUE BASED ON RATES AVAILABLE WITH THE OFFICE OF DISTRICT REGISTRAR & C OLLECTOR OF STAMP DUTY WHERE SALE/PURCHASE DOCUMENTS ARE NOT REGISTERED. 2. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) OUGHT TO HAVE REMANDED THE MATTER FOR OBTAINING VALUATION FROM A VALUATION OFFICER. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE APPELLANT CRAVES FOR LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 7797/MUM/2010 M/S. SHREEJI CABLE INDUSTRIES 2 2. ASSESSEE-FIRM, ENGAGED IN THE BUSINESS OF MANUFACTU RING OF DIFFERENT TYPES OF ALUMINUM AND COPPER WIRES & CABLES, FILED ITS RETUR N OF INCOME ON 03-11-2006 DECLARING TOTAL INCOME AT RS. 50,073/-. INITIALLY, THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 (ACT). LATER ON, THE C ASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FINALISED BY THE ASSESSING OFFICER ( AO) U/S. 143(3) OF THE ACT ON 30- 12-2008 DETERMINING THE TOTAL INCOME OF THE ASSESSE E AT RS. 44.11 LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT AS SESSEE HAD OFFERED SHORT TERM CAPITAL GAIN (STCG) OF RS. 20.07 LAKHS O N SALE OF INDUSTRIAL GALA NO. A/4 (4000 SQFT. BUILT UP + 3936 SQFT. OPEN SPACE) A T HATEKESH UDYOG NAGAR, KASHI MIRA ROAD, MIRA ROAD (E), THANE. AS PER THE AGREEME NT DT. 08-02-2005, THE INDUSTRIAL GALA WAS SOLD FOR RS. 22 LAKHS. AO DIRE CTED THE ASSESSEE TO SUBMIT STAMP DUTY PRICE OF FACTORY GALA. ASSESSEE SUBMITTED THA T THE DOCUMENTS OF THE OTHER PROPERTY WERE NOT REGISTERED HENCE IT WAS NOT POSSI BLE FOR HIM TO SUBMIT STAMP DUTY PRICE OF THE SAID PROPERTY. AO DEPUTED THE INCOME TAX INSPECTOR TO OBTAIN THE RATES OF READY RECKONER GIVING DETAILS OF MARKET VALUE OF VARIOUS LOCATIONS IN THANE CITY AND THANE RURAL. AFTER OBTAINING INFORMATION FROM HIS INSPECTOR, AO ISSUED A SHOW CAUSE NOTICE TO EXPLAIN AS WHY THE STAMP DUTY PRICE SHOULD NOT BE SUBSTITUTED IN PLACE OF SALE CONSIDERATION OFFERED BY THE ASSESSEE FOR THE PURPOSE OF CALCULATING STCG. AO PROPOSED RS. 18,000/- PER SQ. MTR., FOR T HE BUILT UP AREA AND RS. 5,100/- PER SQ. MTR., FOR OPEN SPACE. IN RESPONSE, ASSESSE E SUBMITTED HIS EXPLANATION VIDE LETTER DT. 30-12-2008 AND FILED A REVISED RETURN OF INCOME ON SAME DAY DECLARING BUSINESS LOSS OF RS. 4.39 LAKHS. THE REVISION WAS RESULT OF TREATING CAPITAL GAINS ON SALE OF LAND AS ARISING FROM LONG TERM CAPITAL ASSE T INSTEAD OF DEEMED STCG AS CLAIMED IN THE ORIGINAL RETURN OF INCOME. ASSESSEE ALSO RAISED OBJECTION FOR COMPUTATION OF CAPITAL GAIN ON THE BASIS OF RATE GI VEN BY THE READY RECKONER, THAT WAS RECEIVED FROM THE OFFICE OF THE DISTRICT REGISTRAR AND COLLECTOR OF STAMP DUTY. AO GAVE AN OPPORTUNITY TO THE ASSESSEE TO SUBMIT STAMP DUTY PRICE. ASSESSEE AGAIN SUBMITTED THAT IT WOULD NOT IN A POSITION TO SUPPLY THE SAME AS THE DOCUMENTS WERE NOT REGISTERED. 3.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND RATES MENTIONED IN THE READY RECKONER AND THE REPORT OF THE WARD INSPECTOR , AO TREATED THE ENTIRE CAPITAL GAIN ON SALE OF FACTORY GALA AND SURROUNDING OPEN SPACE AS STCG. AO HELD THAT RETURN FILED BY THE ASSESSEE ON 30-12-2008 WAS INVALID RET URN AS PER THE PROVISIONS OF SECTION 139 OF THE ACT. AS PER THE AO, THE DUE RETURN U/S. 139(1) OF THE ACT WAS 30-10-2006 FOR THE AY. 2006-07. ASSESSEE HAD FILED THE RETURN ON 03-11-2006 WHICH WAS BEYOND THE TIME LIMIT. HE FURTHER HELD THAT REVISED RETUR N WAS FILED ON 30-12-2008 BEFORE COMPLETION OF ASSESSMENT ON 30-12-2008 AND SAME COU LD NOT BE CONSIDERED AS VALID RETURN. HE REJECTED THE CLAIM MADE BY THE ASSESSEE FOR TREATING LTCG OF SALE OF LAND AS ARISING FROM LONG TERM CAPITAL ASSET INSTEAD OF DEEMED STCG. AO REVISED WORKING OF THE STCG AS UNDER: ITA NO. 7797/MUM/2010 M/S. SHREEJI CABLE INDUSTRIES 3 FACTORY GALA NO. A/4: BUILT UP AREA = 4,000 = 371.75 SQ.FT. 10.76 = 371.75 X 18,000 = 66,91,500 LESS: DEPRECIATION FOR OLD BUILDING AT 30% (DT. OF CONSTRUCTION 05-04-1979) 20,07,450 46,84,050 OPEN SPACE: IN FRONT OF GALA NO. A/4 = 3,936 = 365.80 SQ.FT. 10.76 = 365.80 X 5,100 = 18,65,576 65,49,626 LESS: COST OF ACQUISITION RS. 1,41,450 WDV ON 31- 03-05 + 51,000 (BROKERAGE) 1,92,450 TAXABLE SHORT TERM CAPITAL GAIN @ 30% 63,57,176 ======== 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE ASSESSEE INCLUDING THE CASE LAWS RELIED UPON BY THE AUTHORISED REPRESE NTATIVE (AR) OF THE ASSESSEE, FAA HELD THAT THE PROPERTY WAS NOT REGISTERED WITH THE REGISTRATION AUTHORITIES, THAT TAKING RE-COURSE OF SECTION 50C OF THE ACT FOR SUBSTITUTIN G THE AGREEMENT VALUE BY STAMP- DUTY-READY-RECKONER VALUE WAS NOT AS PER THE PROVIS IONS OF THE ACT. HE FURTHER HELD THAT FOR INVOKING THE PROVISIONS OF SECTION 50C, TH ERE MUST EXIST THE ADOPTION/ ASSESSMENT BY ANY AUTHORITY OF A STATE GOVERNMENT I .E., STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER AND THAT CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TH E TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH WAS LESS THAN THE VALUE SO ADOPTED OR ASSESSEE. FAA WAS OF THE OPINION THAT AMENDED PROVISIONS OF S ECTION 50C WERE NOT APPLICABLE FOR THE AY UNDER CONSIDERATION, SAME WERE MADE APPL ICABLE W.E.F. 01-10-2009. HE REFERRED TO THE CASES OF NAVNEET KUMAR THAKKAR [112 TTJ (JD) 76] AND SHINGAR INDIA PVT. LTD., (ITA NO. 1785/M/2007). FOLLOWING THE DE CISION OF SHINGAR INDIA PVT. LTD., (SUPRA), HE HELD THAT IN THE CASE OF APPELLANT, PRO VISIONS OF SECTION 50C WERE NOT APPLICABLE AND HE ALLOWED THE APPEAL FILED BY THE A SSESSEE. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO. AR SUBMITTED THAT PROPERTY-IN-QUESTION WAS NOT REGI STERED, THAT SALE CONSIDERATION RECEIVED BY THE ASSESSEE-FIRM COULD NOT BE SUBSTITU TED BY THE VALUE MENTIONED IN THE READY RECKONER, THAT IN ABSENCE OF REGISTRATION OF DOCUMENTS VALUE SHOWN BY THE ASSESSEE WAS RIGHTLY ADOPTED BY THE FAA. ITA NO. 7797/MUM/2010 M/S. SHREEJI CABLE INDUSTRIES 4 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. WE FIND THAT IN THE CASE OF SHINGAR INDIA PVT. LTD. , (SUPRA), THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELE VANT ORDERS AS WELL AS THE PAPER BOOK FILED BEFORE US. THE PAPER BOOK CONTAINS THE COPIES OF THE SUBMISSIONS MADE BEFORE THE CIT(A) , VALUATION REPORT, ANNUAL ACCOUNTS AND THE COPY OF T HE JODHPUR BENCH DECISION OF THE SMC IN THE CASE OF NA VNEET KUMAR THAKKAR (110 LTD 525)(2007). THE CASE OF THE ASSESSEE IS THAT THE PR OVISIONS OF SECTION 5OC ARE INAPPLICABLE TO A CASE OF A DEPRECIABLE ASSET SUCH AS FACTORY BUILDING AND ALSO THE REFERRAL TO DVO U/S. 50C(2) CANNOT BE MADE UNLESS THE SAID ASSET TRANSFERRED IS REGISTERED BY A SALE DEED AND FOR THAT PURPOSE, THE VALUE OF THE ASSET HAS BEEN ASSESSED AND STAMP DULY WAS BEEN PAID BY THE PARTIE S. PER CONTRA, THE CASE OF THE REVENUE IS THAT THE PROVISIONS OF SECTIONS 50 AND 5 OC, SINCE CONTAINED A REFERENCE TO SECTION 48, HAVE APPLICATION TO CASES OF TRANSFER O F THE DEPRECIABLE ASSETS SUCH AS THE FACTORY BUILDING IN THE PRESENT CASE. IN THIS REGA RD, TO START WITH, WE HAVE PERUSED THE PROVISIONS OF 5OC OF THE ACT. SUB SECTION (1) READS AS UNDER: 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 BUILD ING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOV ERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORI TY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE S O ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECTION 48 , BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATIO N RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER: 7. AS SEEN FROM ABOVE, FOR INVOKING THE PROVISIONS OF SECTION 50C, THERE MUST EXIST (I) THE ADOPTION OR ASSESSMENT BY ANY AUTHORITY OF A ST ATE GOVERNMENT I.E., STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF S TAMP DUTY IN RESPECT OF SUCH TRANSFER; AND (II) THE CONSIDERATION RECEIVED OR AC CRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILD ING OR BOTH, IS LESS THAN THE VALUE SO ADOPTED OR ASSESSED. IN THE LIGHT OF THE ABOVE LEGA L POSITION, WE HAVE EXAMINED THE FACTS OF THE CASE IE TRANSFER OF THE FACTORY BUILDI NG A DEPRECIABLE ASSET BY WAY OF BOOK ENTRIES, THERE IS NEITHER A SALE DEED NOR THERE IS ANY THE ADOPTION OR ASSESSMENT BY ANY AUTHORITY OF A STATE GOVERNMENT IE STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THERE IS NO CASE FOR APPLICATIO N OF THE PROVISIONS OF SECTION 50C OF THE ACT. 8.FURTHER, WE HAVE EXAMINED THE ISSUE OF THE REFERR AL OF THE SAID FACTORY BUILDING TO THE DVO U/S 50C(2). SUB SECTION (2) READS AS FOLLOWS. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUBSE CTION (1), WHERE- A. THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRAN SFER; B. THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP VA LUATION AUTHORITY UNDER SUB- SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUA TION OFFICER AND . ITA NO. 7797/MUM/2010 M/S. SHREEJI CABLE INDUSTRIES 5 FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFI CER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER UNDER A COUPLE OF CIRCUMSTANCES NAMELY, (I) THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AU THORITY UNDER SUBSECTION (1) EXCEEDS THE FAIR MARKET VALUE (FMV) OF THE PROPERTY ; AND (2) VALUE SO ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY HAS NOT B EEN DISPUTED. CONSIDERING THE FACT THAT THERE IS NEITHER A SALE DEED IN THE ASSESSEE C ASE NOR THERE IS ANY THE ADOPTION OR ASSESSMENT BY ANY AUTHORITY OF A STATE GOVERNMENT I E STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE QUESTION OF COMPARISON WITH THAT OF THE FMV, DOES NOT ARISE. TH E DISPUTE REFERRED TO IN CLAUSE (B) ABOVE, BEING CONTINGENT ON THE SAID ADOPTION OR ASS ESSMENT, CONSEQUENTLY, THE APPLICATION OF THE PROVISIONS OF SECTION 50C(2)(B) ALSO DOES NOT ARISE. THEREFORE, IN OUR OPINION, THE REFERRAL OF THE AO U/S 5OC(2) IS M ISCONCEIVED. THEREFORE, THE PROVISIONS OF SECTION 50C HAVE NO APPLICATION TO TH E CASE OF THE ASSESSEE. IN PRINCIPLE, THE SAID VIEWS ARE FORTIFIED BY THE SMC DECISION OF THE JODHPUR BENCH IN THE CASE OF NAVNEET KUMAR THAKKAR (SUPRA). CONSIDERING THE FACT THAT WE HAVE UPHELD THE INVALIDITY OF THE REFERRAL TO THE DVO, THE GROUNDS 2 AND 4 RAISED ON DEMERIT OF THE VALUATION ARE ONLY ACADEMIC AND THEREFORE, NO SEPAR ATE ADJUDICATION IS GIVEN. ACCORDINGLY, THE DECISION OF THE CIT(A) IN THE IMPU GNED ORDER HAS TO BE REVERSED IN THIS REGARD. ACCORDINGLY, GROUNDS 1 TO 4 OF THE ASS ESSEES APPEAL ARE ALLOWED. RESPECTFULLY FOLLOWING THE SAME, WE DECIDE THE ISS UE AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. + ,- -% / )01 # 2 34 # $ 56. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH APRIL, 2013. )* # '( & 8 9): 10 APRIL, 2013 ( # 2 ; SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) ), / JUDICIAL MEMBER & ), / ACCOUNTANT MEMBER / MUMBAI, 9)/ DATE: 10 TH APRIL, 2013 TNMM )* )* )* )* # ## # $= $= $= $= >=$ >=$ >=$ >=$ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE !=$ $ //TRUE COPY// )* )* )* )* / BY ORDER, ? ?? ? / 5 5 5 5 DY./ASST. REGISTRAR , / ITAT, MUMBAI