Shri Nareshbhai Ishwardas Patel, Gandhinagar V. ITO, Ward-6(1)(3), Ahmedabad

ITA 809/AHD/2018

AI Insights

The case involves Shri Nareshbhai Ishwardas Patel, who appealed against the order of the CIT(A) which upheld the addition of Rs. 27,31,250 to his income under section 50C of the Income Tax Act, 1961, and the disallowance of Rs. 59,91,687 as cost of improvement. The assessee had transferred land to a partnership firm as a capital contribution and claimed that the transaction should be governed by section 45(3), which pertains to the transfer of capital assets by a partner to a firm, rather than section 50C, which deals with the transfer of land or building at a consideration less than the stamp duty value. The Tribunal found merit in the assessee's arguments, partly allowing the appeal and directing the AO to re-evaluate the capital gains under section 45(3).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135826 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 09-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 02-04-2018
• Other Referred Cases: Hotel (P) Ltd. Vs ACIT, Carlton Hotels (P) Ltd Vs ACIT, CIT Vs Carlton Hotels Pvt. Ltd, State of Rajasthan Vs Gopi Kishan Sen, M. Ambalal Desai Vs ITO
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEEBEFOREUSFILEDTHECOPYOF; SHRIATULPANDEY
• Assessee Lawyers: SHRIR.B.TANK
• Keywords: Sale consideration of property below Jantri Value; Search and seizure

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’C’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं ./ITANo.809/AHD/2018 धििाधरणवरध/Asstt.Year:2014-15 ShriNareshbhaiIshwardasPatel, A/102MahavirHills, PandavVadi, KobatoGandhinagarRoad, Opp.Kamalam(BJP)MainOffice, Gandhinagar-382007. PAN:AOEPP9028D Vs. I.T.O, Ward-6(1)(3), Ahmedabad. (Applicant)(Respondent) Assesseeby:ShriR.B.Tank,A.R Revenueby:ShriAtulPandey,Sr.D.R सुिवाईकीतारीख/DateofHearing:10/07/2023 घोरणाकीतारीख /DateofPronouncement:23/08/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals),Vadodara,(in short“Ld.CIT(A)”)arisinginthematterofassessmentorderpassedunders. ITAno.809/AHD/2018 Asstt.Year2014-15 2 143(3)oftheIncomeTaxAct1961(here-in-afterreferredtoas"theAct") relevanttotheAssessmentYear2014-15. 2.Theassesseehasraisedfollowinggroundsofappeal: 1.ThelearnedCommissionerofIncomeTax(Appeal)-6Ahmedabad,hasgrievously erredinfactsandlawwhilepassingtheorderunderconsideration. 2.ThelearnedCommissionerofIncomeTax(Appeal)-6Ahmedabad,erredinfacts andinlawinupholdingtheadditionofRs.27,31,250/-madebytheAssessingOfficer u/s.50CofIncomeTaxAct,1961. 3.ThelearnedcommissionerofIncomeTax(Appeal)-6Ahmedabad,erredinfacts andinlawinholdingthedisallowanceincostofimprovementofRs.59,91,687/-madeby theAssessingOfficer. 4.Theappellantreserveshisrighttoaddalteramendmodifyorcancelanyoneor moreofthegroundsofappealbeforethefinalizationoftheappeal. 3.ThefirstissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingtheadditionofRs.27,31,250/-madeundersection50CoftheAct. 4.Thefactsinbriefarethattheassesseeinthepresentisanindividualand engagedintheproprietarybusinessofprocessingofplasticrawmaterialsinto articlesunderthenameandstyleof“M/sGokulPlastic”.Theassesseeisalsoa partnerinthefirmnamely“M/sPoojaBuildcon”.TheassesseeintheF.Y.2009-10 alongwithotherpersonacquiredanimmovablepropertyforRs.70Lakhinwhich hissharewas50%only.Duringtheyearunderconsiderationi.e.F.Y.2013-14, theassesseealongwithco-ownersold5%ofimpugnedpropertyfora considerationofRs.18,35,000/-andtheremaining95%ofpropertywas transferredtopartnershipfirm“M/sPoojaBuildcon”aspartner’scapital contributionatRs.1,47,01,250/-(assesseeshare).TheAO,consideringthe marketvalueof5%ofimpugnedproperty,believedthattheremainingproperty shouldhavebeentransferredtopartnershipfirmatRs.3,48,65,000/-inwhich assesseesharecomesatRs.1,74,32,500/-onlyinsteadofatRs.1,47,01,250/- only.Therefore,theAOpurposedtoinvoketheprovisionofsection50Cofthe ActandtreattheconsiderationinhandoftheassesseeatRs.1,74,32,500/- insteadofRs.1,47,01,250/-only. ITAno.809/AHD/2018 Asstt.Year2014-15 3 4.1Theassesseeinreplysubmittedthathetransferredtheimpugnedproperty ascapitalcontributiontothefirm.Therefore,thetransactionfallsunderthe provisionofsection45(3)oftheActwhereinitisprovidedthatacapitalasset transferredtoafirmbyapartnerbywayofcapitalcontribution,thentheamount atwhich,thefirmrecordssuchcapitalassetsinitsbooksshallbedeemedasfull ofvalueofconsiderationforthepurposeofsection48oftheAct.Hence,the provisionofsection50CoftheActcannotbeappliedtotheimpugnedtransferof property. 4.2However,theAOdisagreedwiththecontentionoftheassesseeandheld thatprovisionundersection50CoftheActisaspecialprovisionwithrespectto capitalassets,beinglandorbuilding.Aspersection50CoftheAct,thefullvalue ofconsiderationontransferoflandorbuildingshallbethevalueatwhichstamp dutyisassessedorassessableandinthecaseofassessee,suchvaluecomesat Rs.1,74,32,500/-(50%)only.Thus,theAOaddedanamountofRs.27,31,250/- (1,74,32,500-1,47,01,250)tothetotalincomeoftheassessee. 5.AggrievedassesseepreferredanappealbeforethelearnedCIT(A). 6.TheassesseebeforethelearnedCIT(A)reiteratedthathemadecapital contributioninfirmbywayoftransferofcapitalassets,thereforethe considerationshouldbedeterminedaspertheprovisionofsection45(3)ofthe Actandnotaspersection50CoftheAct.Theassesseefurthersubmittedthatto applytheprovisionofsection50C,thereshouldbeconsiderationreceivedor receivablebytheassesseeontransferofcapitalassetsbeinglandorbuildingand suchconsiderationshouldbelessthanthevalueadoptedorassessedor assessablebythestategovernmentauthoritytochargestampdutyinconnection withsuchtransfer.However,inhiscase,thereisnoconsiderationreceivedor receivablebyhimforreasonthathehasmadecapitalcontributioninthefirmin theformofland.Hence,thereisnoassessablevalueoflandforchargingstamp ITAno.809/AHD/2018 Asstt.Year2014-15 4 dutyinconnectionwithsuchtransfer.Therefore,theprovisionofsection50C cannotbemadeapplicableinhiscaseintheabsenceofconsiderationreceivedor receivableandintheabsenceofassessablevalueoflandforthestampduty purposes. 7.However,thelearnedCIT(A)afterconsideringthefactsintotality confirmedthefindingsoftheAObyobservingasunder: Duringtheassessmentproceedings,theAOnotedthattheappellanthadpurchaseda propertyinP.Y.2009-10inwhichhehad50%share.Further,thatduringtheyearunder consideration,theappellantsold5%ofhisshareinthepropertyforRs.10,35,000/-, Remainingshareinproperty1.e.95%ofhisshareinpropertywasintroducedina partnershipfirmPoojaBulldconashiscapitalcontributionatvalueofRs.1,47,01,250/-. TheAOheldthatsection50CoftheActwasapplicabletoIntroductionoflandascapital contributioninfirm.TheAOheldthat,basedonmarketvalueof5%ofpropertysoldby appellant,thestampdutyvalueofland(95%)Introducedinfirmcomesto Rs.1,74,32,500/-asagainstvalueofRs.1,47,01,250/-shownbytheappellant.Accordingly, theAOaddedRs.27,31,250/-u/s50CoftheAct.Theappellantisinappealagainstthis actionoftheAO.Duringtheappealproceedings,theappellantprimarilysubmittedthatthe caseoftheappellantdoesnotfallinsection50CoftheActbutitfallswithintheambitof section45(3)oftheAct.Hencethevaluerecordedinbooksofaccountswouldbethe valueofforthepurposeofcapitalgainstax.Theappellantsubmittedthatsection45(3)of theActcreatesafictionofanamounttocalculatethe"fullvalueofconsideration"for computingcapitalgainsonthecontributionofcapitalassetbyapartnertoapartnership firm.Theappellantsubmittedthatthedeemed"fullvalueofconsideration"isan expressiondifferentfromthephrase"considerationreceivedoraccruing"asappearingin section50CoftheAct.Hence,theamountdeterminedasconsiderationincaseof contributionofanimmovablepropertybyapartnertopartnershipfirmisdeemedone, whichisreceivedbyoraccruedtothepartner.Hence,theappellantsubmittedthatsection 50CoftheActshouldnotbeinvokedinsuchcasesandsection45(3)oftheActshould apply.Insupportofhiscontention,theappellantrelledonjudgmentofHon'bleITAT, LucknowinHotel(P)Ltd.VsACIT(2009)TaxPub(DT)1039(Luck-Trib).Submittingthus theappellantsubmittedthatadditionofRs.27,31,250/-maybedeleted. Afterconsideringallfactsandcircumstancesofthecase,IamnotInclinedto agreewiththeappellant.Section45(3)oftheActwasInsertedwithaviewtoshutdown theescaperouteavailabletoanindividualbyenteringintoashamtransactionwithafirm. Section50CoftheActwasInsertedtocontroltransactionsinunaccountedIncomeby practiceofunder-statementofconsiderationinacquisitionofaproperty.Whetherstamp dutyispayableornot,isnotafactorrelevantforattractingsection50CoftheAct.Itisa settledlegalpositionthatsection45(3)andsection50CoftheActarenotexclusive.The appellantinsupportofhiscontentionhasreliedonjudgmentofhon'bleITAT,Lucknowin CarltonHotels(P)LtdVs.ACIT(supra).isnoteworthythatthisjudgmentofhon'bleITAT wasreversedbyhon'bleAllahabadHighCourtinCITVsCarltonHotelsPvt.Ltd,Tax AppealNo.31of2009.ThequestionbeforetheHon'bleCourtwasasfollows:- "(1)WhetherTribunalhaserredinlawinholdingthatfullvalueofconsideration shallbedeterminedaspersection45(3)ofandnotu/s50CoftheAct,1961 withoutappreciatingthattransferoflandbyAssessee,havingonly5%sharein thefirmisasgoodastransfertoM/sSaharaIndiaCommercialCorporationLtd., ITAno.809/AHD/2018 Asstt.Year2014-15 5 havingashareof90%Inthefirmandthatsuchtransferoflandtofirmisonlya colourabledevicetoavoidpaymentoftax?" Afterdetaileddiscussionofallaspectsofthecasethehon'bleCourtansweredtheabove questioninfavourofRevenueandagainsttheassessee.SLPfiledbytheassesseeagainst abovejudgmentwasdismissedbyHon'bleSupremeCourtinSLP(C)No(S)28637/2017, 2017-TIOL-417-SC-IT.ItmustbementionedthatfactsinCITVsCarltonHotels(supra)are identicaltothefactsofthepresentcase.InCITvsCarltonHotels(supra)alsothe assessee(CarltonHotels)hadtransferredlandtothefirmasitscapitalcontribution.Inthis casethecourtheldasfollows:- "90.Inthepresentcase,inthegarbofenteringintoapartnershipandtaking recoursetosomeearlierlaws,anattemptwasmadetoavoidexecutionofa registereddocumentwhichwouldhaveneededstampdutytotheStateand,as resultthereof,therecouldhavebeenanoccasionforpaymentoftaxundertheAct, 1961.Therequirementregistrationconsiderationinthelightoffactthat contributionofImmovablepropertyaspartnershipassetbyaperson"transfer" andhastheeffectofextinguishingorlimitingrightsandinteresttheowner partner....."(Emphasissupplied) Assaidabovealso,factsoftheabovecaseareidenticaltothefactsofthepresentcase andhenceratioofabovejudgmentissquarelyapplicabletothepresentcase. InviewofdiscussionaboveandrelyingonjudgmentofHon’bleAllahabadHigh CourtinCITVsCaritonHotels(supra),IholdthattheAOwasjudtifiedinmakingaddition ofRs.27,31,250/-u/s.50CoftheAct.Accordingly,additionofRs.27,31,250/-isupheld. Thusgroundofappealisrejected. 8.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 9.ThelearnedARbeforeussubmittedthatpropertyindisputewas transferredbytheassesseeascapitalcontributionandtherefore,thesameis subjecttotaxundertheprovisionsofsection45(3)oftheActandnotunderthe provisionsofsection50CoftheAct. 10.Ontheotherhand,thelearnedDRbeforeusfiledpaperbookswhichare availableonrecordandvehementlysupportedtheorderoftheauthoritiesbelow. 11.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thefactsrelatingtotheissueathandhavebeen elaboratelydiscussedinpreviousparagraphs.Therefore,wearenotinclinedto repeatthesameforthesakeofbrevityandconvenience.Thelimitedissuebefore ITAno.809/AHD/2018 Asstt.Year2014-15 6 usistoadjudicatethatacapitalassettransferredbytheassesseetoafirmas capitalcontributioncanbebroughtunderthenetofprovisionsofsection50Cof theActasheldbytherevenueauthoritiesortheconsiderationshouldbe determinedaspertheprovisionofsection45(3)oftheActasclaimedbythe learnedARoftheassessee.Beforegoingintothespecificquestion,weproceedto analyzetheprovisionofrespectivesectioni.e.section45(3)and50C(1)ofAct whicharereproducedasunder: Capitalgains. 45.(1)*********** (2)************** (2A)************* (3)Theprofitsorgainsarisingfromthetransferofacapitalassetbyapersontoafirmor otherassociationofpersonsorbodyofindividuals(notbeingacompanyoraco-operative society)inwhichheisorbecomesapartnerormember,bywayofcapitalcontributionor otherwise,shallbechargeabletotaxashisincomeofthepreviousyearinwhichsuch transfertakesplaceand,forthepurposesofsection48,theamountrecordedinthebooks ofaccountofthefirm,associationorbodyasthevalueofthecapitalassetshallbe deemedtobethefullvalueoftheconsiderationreceivedoraccruingasaresultofthe transferofthecapitalasset. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Specialprovisionforfullvalueofconsiderationincertaincases. 50C.(1)Wheretheconsiderationreceivedoraccruingasaresultofthetransferbyan assesseeofacapitalasset,beinglandorbuildingorboth,islessthanthevalueadopted orassessedorassessablebyanyauthorityofaStateGovernment(hereafterinthissection referredtoasthe"stampvaluationauthority")forthepurposeofpaymentofstampduty inrespectofsuchtransfer,thevaluesoadoptedorassessedorassessableshall,forthe purposesofsection48,bedeemedtobethefullvalueoftheconsiderationreceivedor accruingasaresultofsuchtransfer. 11.1Fromtheperusaloftheprovisionsofsection45(3)oftheAct,itis transpiredthatthesaidprovisionisspecificprovisiondealingwithregardtovalue ofconsiderationinthecaseofacapitalassettransferredbytheassesseetoafirm orAOP/BOIinwhichsuchassesseeispartnerormemberandsuchcapitalassetis transferredascapitalcontributionwhereastheprovisionofsection50C(1)ofthe Actdealswiththevalueofconsiderationinthecaseofacapitalassetbeingland orbuildingtransferredbyanassesseeforaconsiderationwhichislessthanthe valueadoptedforchargingstampdutyonsuchtransfer.Thus,inourconsidered ITAno.809/AHD/2018 Asstt.Year2014-15 7 viewtheprovisionofsection50C(1)oftheActisgeneralprovisioninthegiven factsandcircumstanceswhereastheprovisionofsection45(3)oftheActis specificprovisiondealingwiththespecifictransferofcapitalassetsbythepartner topartnershipfirmbywaycapitalcontribution.Itistheacceptedruleof constructionthatspecialprovisionswouldprevailovergeneralprovisionsasper thefamouslatinmaxim"GeneraliaSpecialibusNonDerogant".Whentwo conflictingprovisionsoflawoperateinthesamefield,theprovisionthat specificallyoperatesinthatfieldwouldapplyoverthegeneralrule.Inholdingso wedrawsupportandguidancefromthejudgmentofHon’bleSupremecourtin caseofStateofRajasthanv.GopiKishanSenAIR1992SC1754whereinitwas heldasunder: "Theruleofharmoniousconstructionofapparentlyconflictingstatutoryprovisionsiswell- establishedforupholdingandgivingeffecttoalltheprovisionsasfarasitmaybepossible, andforavoidingtheinterpretationwhichmayrenderanyofthemineffectiveorotiose.Inthe presentcase,rule29dealingwithpaymentofincrementisingeneraltermswhiletheSchedule inthe1969Rulesmakesaspecialprovisiongoverningtheuntrainedteachers,attractingthe maximgeneralibusspecialiaderogant,i.e.,ifaspecialprovisionismadeonacertainsubject, thatsubjectisexcludedfromthegeneralprovision.TheScheduleinthe1969Rules,therefore, mustbeheldtoprevailoverthegeneralprovisionsof1951Rules." 11.2Inthecaseonhand,thepresentassesseeisapartnerinafirmnamelyM/s PoojaBuildconandtransferslandpropertytosuchpartnershipfirmbywayof capitalcontribution.Thisisaspecifictransactionbetweenpartnershipandpartner forwhichthereisspecialprovisionenactedbythelegislatorvidesection45(3)of theAct.Therefore,inourconsideredviewtheconsiderationinthehandofthe partner(presentassessee)shallbedeterminedaspertheprovisionofsection 45(3)oftheActandnotaspertheprovisionsofsection50CoftheAct.Inthis regardwealsofindsupportandguidancefromtheorderofthespecialbenchof DelhiTribunalincaseof“DLFUniversalLtdvs.DCITreportedin36SOT1” whereininidenticalfactsandcircumstancesthespecialbenchoftribunalheldthat personalassetscontributedbythepartnerintofirmascapitalcontributionis capitaltransactionandthesameshallbetaxedascapitalgainandthe considerationforthesameshallbetakenaspertheprovisionofsection45(3)of theAct.Therelevantobservationofspecialbenchisextractedasunder: ITAno.809/AHD/2018 Asstt.Year2014-15 8 Undoubtedpropositionoflawisthatthatthereisnotransferonmereconversionof stock-in-tradeintocapitalassetsand/oronrevaluationthereofintheassessee’sbooks andnoincomearisesonsuchconversion.Inotherwords,therecannotbeanyactual profitorlossonwithdrawalofstock-in-tradefromatradingbusinessanditsconversion intocapitalasset.Thereisnodeemingfictiontodeemtheconversionofstock-in-trade intocapitalassetsasatransferortodeemthefairmarketvalueasonthedateof conversionasthecostofacquisitionofthecapitalassets.However,atransferdoestake placewhenanypersonalassetofapartnerisintroducedintoafirmashiscapital contribution,andthevalueoftheassetrecordedinthebooksofthefirmshallbe deemedtobefullvalueoftheconsiderationreceivedoraccruingasaresultofthe transferofsuchanassetcontributedbythepartner.Consequently,intheinstantcase, therewasnotransferoflandheldbytheassesseeasstock-in-tradewhenthesamewas merelyrevaluedatamarketvalueinitsbooksanditwasconvertedintocapitalasset and,thus,noprofitorgainhadaccruedtotheassesseemerelyonitsrevaluationata highervalue,morethanthecosttotheassesseeinitsbooksoronitsmereconversation fromstock-in-tradetoacapitalasset.Insuchacase,theconversionofstock-in-trade intoinvestmenthastobeatcost/bookvalue.Thus,thelegalpropositionthatnoman canmakeaprofitoutofhimselfortherecannotbeanyrealprofit/lossonwithdrawalof stockfromatradingbusiness,shallgovernsuchtypeofcases. However,thepositionwouldbedifferentincaseswhereonorafterconversionofstock- in-tradeintoacapitalasseteitherbyimplicationoflaworbyanactorconductofthe assessee,orotherwise,theassetiscontributedtoafirmascapitalcontributionbya partneratthevaluemorethanthecosttotheassessee.Insuchacase,thereisa transferofassettakingplaceandthevalueoftheassetrecordedinthebooksofthe firmshallbedeemedtobethefullvalueofconsiderationreceivedoraccruingasaresult ofthetransferoftheasset.[Section45(3)]. Therefore,intheinstantcase,whenthelandinquestionwascontri-butedbythe assesseetothefirmasitscapitalcontribution,inwhichtheassesseebecameapartner, atransferofcapitalassethadtakenplace,andtheamountrecordedinthebooksof accountofthefirmasthevalueofthelandwouldbedeemedtobethefullvalueofthe considerationreceivedoraccruedasaresultofthetransferoftheland,andtheprofits orgainsarisingfromsuchtransferwouldbechargeabletotaxasitsincomeofthe previousyearinwhichsuchtransferhadtakenplace. (x)Inthelightoftheviewtakenasabove,itwastobeheldthatthesurplusarosetothe assesseefromthetransactionofcontributionoflandheldbyittothefirmascapital contributionandwouldbeassessabletotaxasprofitsorgainsunderthehead‘Capital gain’undersection45,andforthatpurpose,theamountofRs.11.50croresrecordedin thebooksofaccountofthepartnershipfirmasthevalueofthelandwouldbedeemed tobethefullvalueoftheconsiderationreceivedoraccruingasaresultofthetransferof thelandassoprovidedundersub-section(3)ofthesection45. 11.3BeforepartingitisalsoimportanttohighlightthatthelearnedCIT(A)while confirmingtheorderoftheAO,referthejudgmentofHon’bleAllahabadHigh CourtincaseofCITvs.CarltonHotelPvt.Ltd.reportedin88taxmann.com257. WehaveperusedthejudgmentofHon’bleAllahabadHighCourtintheabove- mentionedcaseandfindthatoneM/sCarltonHotelPvtLtd(CHPL)washoldinga landpropertyadmeasuringto364937sq.ft.outofwhichaminorportionofland admeasuringto10000sqftwassoldtoSaharaIndiaCommercialCorporationLtd ITAno.809/AHD/2018 Asstt.Year2014-15 9 (SICCL)videsaledeedandofferedcapitalgainonthesameaspertheprovision ofsection50CoftheAct.Subsequently,CHPL,SICCLandanindividualMr.I Ahmadenteredintoagreementtoformpartnershipfirminthenameandstyleof “M/sIndiaHousing”inwhichCHPLmadecapitalcontributionbywayoftransferof remaininglandatvalueofRs.7,81,96,735/-andSICCLmadecontributionofRs. 1,36,37,700/-andNILcontributionmadebyMr.IAhmad.However,profitsharing ratiodecidedintheratioof5%toCHPL,5%toMr.IAhmadand90%toSICCL. Theassessee(CHPL),offercapitalgainontransferoflandpropertytoPartnership firmbytheadoptingthefullvalueofconsiderationatRs.7,81,96,735/-as prescribedundersection45(3)oftheAct.However,theAOdisputedthesame andinvokedtheprovisionofsection50CoftheActandworkedthefullvalueof considerationaccordingly.TheactionoftheAOcametobeconfirmedbythe learnedCIT(A).Onsecondappealbytheassesseethecoordinatebenchof LucknowTribunalheldthattheprovisionofsection50CofActcannotbemade applicabletotransactionofcapitalassetstransferredbyassesseetoapartnership firmbywaycapitalcontribution.Thetribunalfurtherheldthatforsuchtransaction thereisspecificprovisionundersection45(3)oftheActandfullvalue considerationshallbedeterminedonlyaspertheprovisionofsection45(3)ofthe Act.Thus,thetribunalallowedtheappealoftheassessee(CHPL).Onappealby theDepartment,theHon’bleAllahabadHighCourtreversedtheorderofLucknow tribunalasdiscussionandrestoretheorderoftheAO.Tothisextent,thefacts involveinthecaseofthepresentassesseeandinthecaseofCHPLprimafacie seemsidentical.However,oncarefulperusaloffindingoftheHon’bleAllahabad HighCourt,wefindtheHon’bleHighCourtreversedtheorderofTribunalon completelydifferentfooting.AssuchtheHon’bleHighCourtheldtheentire transactionofestablishingpartnershipfirmandtherebytransferringlandtofirm foraminorshareinprofitwasshamtransactiondesignedforevadingduetaxes. Assuch,theactualtransactionwassaleoflandbytheassesseeCHPLtoSICCL. Therefore,theHon’bleHighinthelightofabovefactsreversedtheorderofthe tribunalandrestoredtheorderoftheAO.Thus,theprincipleslaiddownbythe Hon’bleAllahabadHighCourtinabovementionedcasecannotbeappliedinthe ITAno.809/AHD/2018 Asstt.Year2014-15 10 caseofpresentassesseeandinourconsideredview,thelearnedCIT(A)erredin applyingsuchprinciplesinthecaseofpresentassessee. 11.4Inviewofdetaildiscussionmadeinaboveparagraph,weherebysetaside thefindingofthelearnedCIT(A)anddirecttheAOtotakefullvalueof considerationasprescribedundersection45(3)oftheActandworkoutthe amountofcapitalgainaccordingly.Hencethegroundofappealoftheassesseeis herebyallowed. 12.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofclaimrepresentingcostofimprovementforRs. 59,91,687.00only. 13.Thenecessaryfactscontinuefromthepreviousgroundofappealarethat theassesseeagainstthesaleoflandandtransferoflandtopartnershipfirm claimedcertainamountincurredindifferentyearsascostofimprovementwhich includesinterestpaidtooneShriSureshPatelindifferentyearsandcompensation paidtooneShriSanatNon-TradingAssociationofRs.25Lakhinlieuof cancellationdeedexecutedbytheimpugnedpartyandpartiesfromwhomthe assesseepurchasedtheimpugnedlandproperty. 13.1However,theAOduringtheassessmentproceedingsfoundthatthe assesseealongwithhisbrotherpurchasedimpugnedpropertyvidepurchases deeddated10-08-2009foraconsiderationofRs.70Lakhoutofwhichanamount ofRs.45lakhwaspaidincashandremainingamountofRs.25Lakhwaspaidby cheque.Thus,assessee’sshareintheamountpaidthroughchequewasofRs. 12.5lakhonlywhereastheassesseeisclaimingthathetookloanthroughbanking channelforRs.40LakhfromShriSureshPatelforpurchaseofimpugnedproperty. TheloanfromthepartyShriSureshPatelclaimedtobereceivedon18-8-2009i.e. afterpurchaseofproperty.Theassesseeinsupportofgenuinenessofloan furnishedledgerconfirmationfromthepartyfortheAYs2011-12and12-13along ITAno.809/AHD/2018 Asstt.Year2014-15 11 withcopyofreturnwhereasloanclaimedtobetakeninA.Y.2010-11.Thus,the copyofconfirmationandITRofthepartyhasnorelevance.Theassesseeonly submittedthebankofthepartynamelyShriSureshPatelshowinganamountof 40Lakhason18-08-2009videchequeno.3897transferredfromthebankbut assesseefailedtosubmithisownbankstatementtodemonstratethecreditof correspondingamountandutilizationofthesame.Thus,theAOinviewofthe abovedisallowedtheclaimofcostofimprovementonaccountofinterest expenditurewhichisdetailedasunder: YearAmountofInterestIndexedCost 2009-10Rs.2,25,860/-Rs.3,35,574/- 2011-12Rs.4,13,860/-Rs.4,95,050/- 2012-13Rs.4,49,975/-Rs.4,95,923/- 13.2Likewise,theAOregardingtheclaimofcompensationpaidto“OmShri SanatTradingOwner’sAssociationforRs.50Lakh(assesseeshare25lakh)and stampdutychargesofRs.6,72,595/-(paidforcancellationdeed)foundthatthe copyofagreementdated18-06-2000andcancellationdeeddated1-10-2010 between“OmShriSanatTradingOwner’sAssociation”andthepersonfromwhom assesseehaspurchasedlandwerefurnished.However,onperusalofthesame therewasnomentionedofpaymentofcompensationforRs.50Lakheitherbythe assesseeorbythepersonfromwhomtheassesseehaspurchasedlandfoundin thosedocuments.Similarly,thecopyofconfirmationletterfrom“OmShriSanat TradingOwner’sAssociation”wasalsofurnishedbutsuchconfirmationdoesnot containthePAN.Further,aspersuchconfirmationletterthetransactionwas between“OmShriSanatTradingOwner’sAssociation”and“M/sPoojaBuildcon” butnotwiththeassessee.TheassesseefailedtofilecopyofITRofthepartyi.e. “OmShriSanatTradingOwner’sAssociation”andfailedtodemonstratethatthe partyhasofferedincomeofRs.50Lakhonaccountofcompensationpaidbythe assessee.Thus,theAOdisallowedtheclaimofindexcostofimprovementofRs. 46,65,140/-onaccountofpaymentofcompensationforRs.25Lakhandstamp dutychargesofRs.6,72,595/-. ITAno.809/AHD/2018 Asstt.Year2014-15 12 13.3Thus,theAOinviewoftheabovemadeaggregatedisallowancesof indexedcostofimprovementforRs.59,91,687/-fromthecomputationofcapital gain. 14.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A)who confirmedthedisallowancesmadebytheAObyobservingasunder: Duringappealproceedings,theappellantsubmittedthat“thelandownersweredemanding moneyfromtheappellantandhencetheappellanthasborrowedamountfromShri GhanshyambhaiPatelon12.8.2009andpaidtheconsiderationtothelandlord. Subsequently,theappellantacquiredtheloanfromShriSureshbhaipateltorepaytheloan takenfromShriGhanshyambhaiPatelandhencechequewasclearedon18.8.2009.The appellantwouldliketosubmitthatultimatelyloanamounttakenfromShriSureshbhai Patelwasutilizedforpurchaseofland.” Thoughtheappellantsubmittedasabove,butnodocumentaryevidencein supportofabovecontentionwasfiled.Itisdifficulttoacceptthecontentionthatloanfrom ShriSureshR.Patelwasusedforpurchaseoflandonfacevalue.Intheabsenceof corroborativeevidence,insupportofthesame,itisseenfromtheSaleDeedofthe propertythatoutofRs.70,00,000/-,Rs.25,00,000/-havebeenpaidbychequewhile Rs.45,00,000/-havebeenpaidincashwithnodetailsastowhopaid,howmuchandby whatmode.Theappellantfailedtofilethenecessarydetails.Thoughappellant'sshareis 50%i.e.Rs.35,00,000/-butnodetailhasbeengivenastohowmuchtheappellant actuallypaidandbywhatmodeandwhatwasthesourceofthis.Assaidabove,loan takenfromSureshPatelisRs.40,00,000/-whileappellant'sshareinpurchaseoflandis onlyRs.35,00,000/-.Intheabsenceofdetailsofactualamountpaidforpurchaseofland, andevidencethatloantakenfromShriSureshPatelwasusedforpaymentofland,itis difficulttoacceptthecontentionofappellantinrespectofinterestpaidtoShriSuresh Patelclaimedaspartofcostofpurchase.Caselawsreliedonbytheappellantarenot applicableasthesamearedistinguishedonfacts.Hence,theAOwasrightinholdingthat interestpaidtoShriSureshR.Patelcannotbeallowedaspartofcostofpurchase. Furtherduringassessmentproceedings,theAOnotedthattheappellanthas claimedtohavepaidRs.25,00,000/-(TotalpaidRs.50,00,000/-,appellantshare Rs.25,00,000/-)toOmShreeSanatNon-TradingOwners'Association(OmShreeSanat)for cancellationofdeedbetweenOmShreeSanatandownersoflandfromwhomappellant purchasedlandandclaimedthesameaspartofcostofpurchaseafterindexation.TheAO hasraisedfollowingobjections:- 1)CancellationDeednowherementionsthatappellanthaspaidthemoney, 2)NoPANofOmShreeSanatismentionedonitsconfirmation, 3)NoproofthatOmShreeSanathasofferedRs.50,00,000/-fortaxation, 4)Whilelandwaspurchasedon10.8.2009,cancellationdeedisdated1.10.2010 5)AsperconfirmationofOmShreeSanatfiled,thetransaction(CancellationDeed)is betweenOmShreeSanatandPoojaBulldcon. Outoftheabove,whiletheappellantmaynotberequiredtofileInformationatSr.No.3 above,restoftheInformationhastobefiledandtheobjectionsraisedbyAOneedtobe clarified.However,evenattheappellatestage,theappellanthasfalledtoclarifytheabove ITAno.809/AHD/2018 Asstt.Year2014-15 13 objections.Further,perusaloftheCancellationDeedshowedthatitisbetweenOmShree SanatNon-TradingOwners'AssociationandPoojaBullcon,partnershipfirminwhichthe appellantisapartner.Whenaskedtoclarifythis,theappellantcouldnotgivea satisfactoryreply.Inviewofabove,theAOwasjustifiedinnotallowingdeductionofRs. 25,00,000/-(afterindexation)fromcostofpurchase.Thecaselawsrelledonbythe appellantarenotapplicableasthesamearedistinguishedonfacts. Inviewofdiscussionabove,theAOwasjustifiedIndisallowingRs.59,91,687/-outof totalIndexedcostofImprovement.Accordingly,additionofRs.59,91,687/-Isupheld. Thusgroundofappealisrejected. 15.BeingaggrievedbytheorderofthelearnedCIT(A)theassesseeisin appealbeforeus. 16.ThelearnedARbeforeussubmittedthatthepropertyinquestionwas purchasedoutoftheinterest-bearingloanandthereforetheinterestpaidonthe loanshouldbeallowedasdeduction.ThelearnedARlikewisesubmittedthatthe compensationpaidtothepartyshouldalsobeallowedasdeductionwhile computingtheincomeundertheheadcapitalgain. 17.Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe authoritiesbelow. 18.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Admittedly,theassesseeagainstthetransferofland propertyclaimedcostofimprovementonaccountinterestcostincurredonthe amountborrowedforpurchaseoflandaswellasamountpaidascompensationto thepartynamely“OmShriSanatTradingOwner’sAssociation”forwaivingoffits absoluterightfromlandpurchasedbytheassessee.Theclaimoftheassesseehas beendisallowedbytheAOwhichwassubsequentlyupheldbythelearnedCIT(A) forthereasonstatedintheirrespectiveorders.Fromthediscussionmadeinthe precedingparagraphs,theissuesbeforeustobeadjudicatedaredetailedas under: (i)Whethertheassesseehasacquiredlandpropertyindisputeoutofthe borrowingtakenfromShriSureshPatelornot. ITAno.809/AHD/2018 Asstt.Year2014-15 14 (ii)Whethertheassesseehaspaidcompensationtothepartynamely“Om ShriSanatTradingOwner’sAssociation”ornot. 18.1Asfarasthefirstissueisconcerned,wenotethattheassesseebeforethe learnedCIT(A)contendedthattheimpugnedlandwaspurchasedbyhimandhis brotherforRs.70LakhandincurredstampdutychargesofRs.12,14,000/-onthe same.Thus,thetotalcostincurredforacquisitionofsuchpropertywasRs. 82,14,000/-inwhichhissharewasofRs.41,07,700/-only.Outoftotal considerationofRs.70Lakh,anamountofRs.45Lakhwasalreadypaidincash tothevenderbytheco-purchaserandthevendorswerepressurizingfor remainingconsiderationtobepaidatearliest.Therefore,theassesseehastaken shorttermloanfromarelativenamelyShriGhanshayambhaiPatelforRs.40Lakh andutilizedthesameformakingpaymentofRs.25Lakhtothevendorofland andstampdutychargesofRs.12,14,000/-only.FurtheranamountofRs.2lakh waspaidtoco-purchaseragainstthecashpaymentmadetovendoronhisbehalf. Subsequently,hehastakenloanfromShriSureshPatelforRs.40Lakhand utilizedthesameforrepaymentofloantakenfromShriGhanshyambhaiPatel. TheexplanationoftheassesseewasnotacceptedbythelearnedCIT(A)in absenceofdocumentaryevidencesuchascopyofbankstatementoftheassessee aswellcopyofbankstatementofShriGhanshayambhaiPatelandhisconfirmation, ITRetc.NowthelearnedARfortheassesseebeforeusfiledthecopyof abovementioneddocumentaryevidenceandpleadedtoadmitthesameas additionalevidence.Attheoutset,wefindthattheseadditionalevidencesare crucialevidenceinordertodecidetheissuewhethertheloantakenbythe assesseeformShriSureshPatelwasutilizedforacquiringthelandpropertyornot andconsequentlytheassesseeshouldbeallowedtheclaimofinterestexpenses ascostofimprovementornot.Therefore,consideringtheimportanceofthe additionalevidencewhichhasdirectbearingontheoutcomeofthedispute,we herebyexercisethepowerconferredunderrule29ofIncomeTax(Appellate Tribunal)Rule1963andadmitthesame.However,wearealsoconsciousofthe factthattherevenueauthorityhasnotgottheopportunitytoverifytheveracityof ITAno.809/AHD/2018 Asstt.Year2014-15 15 theseadditionalevidences.Therefore,forthesakeofjusticeandfair-playwe herebysetasidetheissueofallowanceofinterestexpensesascostof improvementtothefileoftheAOforde-novoadjudicationinthelightof additionalevidencesfurnishedbytheassesseeandasperthelaw. 18.2Comingthesecondissuei.e.genuinenessofthecompensationpaidbythe assesseeto“OmShriSanatNon-TradingOwnersAssociations”.Fromthe materialsavailableonrecord,thecopyofpurchasedeeddated10-08-2009 throughwhichtheassesseeandhisbrothernamelyShriManubhaiIshwarPatel jointlypurchasedimpugnedlandandthe3differentpurchasedeeddated17-06- 2000betweenthepersonsfromwhomassesseepurchasedimpugnedlandand “OmShriSanatNon-TradingOwnersAssociations,itisrevealedthattheimpugned landhadalreadybeensoldtoM/S“OmShriSanatNon-TradingOwners Associations”inJune2000bythevendors.Theassesseebeforethelower authoritiesexplainedthatonrealizationofdisputeregardingtitleclearance,he andhisbrotherrequestedtothemanagementof“OmShriSanatNon-Trading OwnersAssociations”tocancelthepurchasedeeddated17-06-2000fora considerationofRs.50Lakh.Accordingly,the“OmShriSanatNon-Trading OwnersAssociations”andthevendorsenteredinacancellationdeedason1-10- 2010andcompensationofRs.50LakhwaspaidfromtheaccountofM/sPooja BuildconwhichhasbeenshowninthebooksofM/sPoojaBuildconascapital drawingbythepartner.Theassesseeinsupportfurnishedthecopy“Declaration- IndemnityBond”from“OmShriSanatNon-TradingOwnersAssociations”stating theyhavewaivedofftheirrightsintheimpugnedpropertyinlieuofcompensation ofRs.50lakhinfavourofpartnersofM/sPoojaBuildcon.Thecopyof “Declaration-IndemnityBond”,ledgercopyofM/sPoojaBuidconandbank statementofthepartyshowingamountreceivedareavailableonrecord.However, theexplanationoftheassesseewasnotacceptedbythelowerauthoritiesbecause thecancellationdeednotcontainingtheinformationaboutpaymentof compensationandnodetailprovidedbytheassesseetoshowthe“OmShriSanat Non-TradingOwnersAssociations”hasofferedincomeonRs.50Lakh. ITAno.809/AHD/2018 Asstt.Year2014-15 16 Nevertheless,wefindthatthelowerauthorityfailedtopointoutanyinfirmityin theevidencemadeavailablebytheassesseebutrejectedtheclaimofthe assesseemerelyonthereasoningthatthecancellationdeeddidnotcontainthe detailofpaymentandpartyhasnotofferedincomeonreceiptofsuch compensation.Inourconsideredopinion,thereasonsassignedbytheAOandby thelearnedCIT(A)torejecttheclaimoftheassesseeisnotjustifiedespecially consideringthedocumentaryevidencemadeavailablebytheassesseequalifying thepaymentofcompensation. 18.3Bethatasitmaybe,wefindidenticalclaimofcostofimprovementon accountofcompensationto“OmShriSanatNon-TradingOwnersAssociations” madebytheCo-owneri.e.brotheroftheassesseeShriManubhaiIshwarbhai PatelwhichhasbeenacceptedbytheRevenueintheassessmentframedunder section143(3)oftheAct.Therefore,inourconsideredviewwhenthesameclaim ofcostofimprovementmadebytheco-ownerhasbeenaccepted,thenthe assesseecannotbetreateddifferently.Inthisregard,wefindsupportand guidancefromtheorderofcoordinatebenchofthistribunalincaseofM.Ambalal Desaiv.ITO[ITAppealNo.1870(AHD.)of2015,dated7-1-2021whereinitwas heldasunder: "7.Wehaveconsideredthesubmissionofboththepartiesandgonethroughtheordersof LowerAuthoritiescarefully.WehavealsodeliberatedonvariouscaselawsreliedbytheAR oftheassessee.Beforeus,theARoftheassesseevehementlysubmittedthatin assessee'sco-ownercase,therevenuehasacceptedsimilarLongTermCapitalGaininthe scrutinyassessment.Copyoftheassessmentorderinrespectoftwoco-ownersisplaced onrecord.Wehavenotedthatnocountertothesubmissionoftheassessee,wasmadeby DRthatsimilarLongTermCapitalGainwasacceptedincaseofco-owner. 8.TheHon'bleMadrasHighCourtinICTv.KumararaniMeenakshiAchi(supra)heldthat duringthesameassessmentyearsamequantityofwealthinpossessionofco-shareris subjectedtoalowerrateoftaxation,itwouldbehighlyimpropertoburdenasimilarly situatedco-sharerwithahigherrateoftax.Ifsuchanactiononthepartoftheassessing authoritiesissanctioneditwouldmilitateagainsttheprincipleofequalityoflawsenshrined inArticle14oftheConstitution.Byfollowingthesameprinciple,theCo-ordinateBenchof thisTribunalinChetanbhaiPrahladbhaiGamiv.ITOinITANo.2082/AHD/2013dated19- 7-2019,theTribunalgrantedrelieftotheassesseeholdingthatwhilemakingthe assessmentofthesamepropertythesimilartreatmentshouldbegranted. 9.Wehavenotedthatinassessee'sco-owner'scasewithrespecttothepropertyagainst thesaleofwhichtheassesseeclaimedLongTermCapitalGain,theAOinassessee'sco- ownercaseinPrabhodhchandraAmbelalDesaiallowedthesimilarLong TermCapitalGainbypassingthefollowingorder: ITAno.809/AHD/2018 Asstt.Year2014-15 17 "3.Onperusalofrecordsanddetailssubmittedbytheassesseeitwasfoundthat theassesseewasco-ownerhavingshareof6.25%inthepropertysoldforRs. 2,00,00,001/-on19-1-2009situatedatSurveyNo.86,Lunsikui,Navsari.Valueof propertyasperstampdutyvaluationwasdeterminedatRs.4,09,01,000/-.The assesseehasnotdeclaredcapitalgainashehasnotfiledReturnofIncomeforAY 2009-10.Thesaidpropertywasinheritedbytheassessee.Theassesseehas submittedvaluationreportofthepropertyfromGovt.ApprovedValuerwhohas arrivedvalueofpropertyatRs.66,61,020ason1-4-1981.Thevalueofthe assessee'ssharecomestoRs.4,16,314.Indexedcostaspersection48oftheAct isworkedoutatRs.24,22,947/-.Asperstampdutyauthoritytheassessee'sshare being6.25%ofsalevalueinthepropertycomestoRs.25,56,310/-. ThuscapitalgaincomestoRs.1,33,363/-,whichwastaxableinthehandsofthe assessee.ThecapitalgainofRs.1,33,363hasnowbeenshownbytheassesseein theReturnofIncomefiledinresponsetonoticeu/s148oftheAct.However,the assesseehasnotdeclaredsuomotoLongTermCapitalGainashehasnotfiled returnofIncome.Theassesseehasconsciouslynotfiledreturnofincometoavoid paymentoftax.Therefore,Penaltyproceedingsu/s.271(1)(c)oftheActare initiatedonthisissueforconcealmentofincome." 10.Wehavenotedthatidenticalwordedassessmentorderwaspassedinotherco- ownercasei.e.Smt.PrabhabenHarshadraiDesai,relevantpartoftheassessmentorderis extractedbelow;: "3.Onperusalofrecordsanddetailssubmittedbytheassesseeitwasfoundthat theassesseewasco-ownerhavingshareof6.25%inthepropertysoldforRs. 2,00,00,001/-on19-1-2009situatedatSurveyNo.86,Lunsikui,Navsari.Valueof propertyasperstampdutyvaluationwasdeterminedatRs.4,09,01,000/-.The assesseehasnotdeclaredcapitalgainashehasnotfiledReturnofIncomeforAY 2009-10.Thesaidpropertywasinheritedbytheassessee.Theassesseehas submittedvaluationreportofthepropertyfromGovt.ApprovedValuerwhohas arrivedvalueofpropertyatRs.66,61,020ason1-4-1981.Thevalueofthe assessee'ssharecomestoRs.4,16,314.Indexedcostaspersection48oftheAct isworkedoutatRs.24,22,947/-.Asperstampdutyauthoritytheassessee'sshare being6.25%ofsalevalueinthepropertycomestoRs.25,56,310/-. ThuscapitalgaincomestoRs.1,33,363/-,whichwastaxableinthehandsofthe assessee.ThecapitalgainofRs.1,33,363hasnowbeenshownbytheassesseein theReturnofIncomefiledinresponsetonoticeu/s148oftheAct.However,the assesseehasnotdeclaredsuomotoLongTermCapitalGainashehasnotfiled returnofIncome.Theassesseehasconsciouslynotfiledreturnofincometoavoid paymentoftax.Therefore,Penaltyproceedingsu/s.271(1)(c)oftheActare initiatedonthisissueforconcealmentofincome." 11.Inviewoftheaboveaforesaidfactualandlegaldiscussionandrespectfullyfollowing thedecisionofMadrasHighCourtinKumararaniMeenakshiAchi(supra)anddecision ofCo-ordinateBenchinPrabhodhchandraAmbelalDesai(supra),therevenuecannottreat theassesseeindifferentway,therefore,theadditiontotheLongTermCapitalGainadded bytheAO,confirmedbyld.CIT(A)isdeleted.Intheresultthegroundsofappealraisedby theassesseeareallowed." 18.4Thus,consideringtheaboveelaboratedfactualandlegalposition,we herebysetasidefindingoflearnedCIT(A)regardingtheclaimofcostof improvementonaccountofcompensationpaidto“OmShriSanatNon-Trading OwnersAssociation”anddirecttheAOtoallowtheclaimoftheassesseeinthis ITAno.809/AHD/2018 Asstt.Year2014-15 18 regard.Hence,intotalitytheclaimoftheassesseeontheissueraisedbyhimvide impugnedgroundsofappealareherebypartlyallowedforstatisticalpurposes. 19.Intheresult,theappealoftheassesseeisherebypartlyallowedfor statisticalpurposes. OrderpronouncedintheCourton23/08/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated23/08/2023 Manish