Sri Balasubramania Mills Ltd., Coimbatore V. ACIT, Coimbatore

ITA 831/CHNY/2011

• Counselvise Citation: 83121714 RSA 2011
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K BALASUBRAMNIAN
• Keywords: Depreciation; Cost of acquisition; Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.831(MDS)/2011 ASSESSMENT YEAR: 2007-08 SHRI BALASUBRAMANIA MILLS LTD., 483, KAMARAJ ROAD, UPPILIPALAYAM, COIMBATORE-641 015. PAN AADSC1887K. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE I(1), COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.BALASUBRAMNIAN , C.A. RESPONDENT BY : DR. I.VIJAYAKUMAR, IRS, CO MMISSIONER OF INCOME-TAX DATE OF HEARING : 15 TH NOVEMBER, 2011 DATE OF PRONOUNCEMENT : 15 TH NOVEMBER, 2011 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2007-08. THE APPEAL IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I AT - - ITA NO.831 OF 2011 2 COIMBATORE, DATED 22-2-2011 AND ARISES OUT OF THE A SSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. 2. THE ASSESSEE IS A COMPANY UNDER BIFR. IT HAD SOLD ITS LAND MEASURING 72.37 CENTS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, WHICH GENERATE D LONG TERM CAPITAL GAINS. IN THE LIGHT OF THAT SURPLUS, THE A SSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSM ENT YEAR ADMITTING NIL INCOME AFTER ADJUSTING BROUGHT FORWAR D UNABSORBED LOSS AND DEPRECIATION AGAINST THE CAPITAL GAINS. I T IS STATED THAT THE ASSESSEE HAD SET OFF THE BROUGHT FORWARD LOSS A ND DEPRECIATION AGAINST THE LONG TERM CAPITAL GAINS AR ISING ON SALE OF ITS LAND IN ANTICIPATION OF THE ORDER OF THE BIFR P ERMITTING THE ASSESSEE COMPANY TO ADJUST THE CAPITAL GAINS AGAINS T THE UNABSORBED LOSS AND DEPRECIATION. IN FACT THE ASSE SSEE COMPANY HAD FILED AN ANALOGOUS SCHEME BEFORE THE BI FR, FOLLOWING THE DECISION OF THE BIFR RENDERED IN THE CASE OF M/S. NATIONAL TEXTILE CORPORATION. 3. ANYHOW, WHILE THE ASSESSMENT WAS TAKEN UP, NO SUCH POSITIVE ORDER CAME OUT FROM BIFR AND THE ASSE SSING AUTHORITY PROCEEDED TO COMPLETE THE ASSESSMENT AS P ER THE - - ITA NO.831 OF 2011 3 PROVISIONS OF THE INCOME-TAX ACT, 1961 PERTAINING T O THE CLASSIFICATION OF INCOME. ACCORDINGLY, THE CAPITAL GAINS THAT AROSE TO THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR UNDER APPEAL STOOD SEPARATE, UNAVAILABLE FOR S ET OFF OF UNABSORBED LOSS AND DEPRECIATION. THIS GAVE WAY TO COMPUTING THE LONG TERM CAPITAL GAINS. 4. THE ASSESSEE COMPANY HAD ACQUIRED 26.70 ACRES OF LAND FOR A TOTAL COST OF ` 3,86,051/-, IN 1936. THE COST OF ACQUISITION ACCORDINGLY WORKED OUT TO ` 144/- PER CENT. AS THE PROPERTY WAS ACQUIRED PRIOR TO 1981, THE ASSESSEE C OMPANY HAD THE OPTION TO ADOPT THE FAIR MARKET VALUE (FMV) AS ON 1-4-1981. THIS OPTION WAS ALLOWED BY THE ASSESSING AUTHORITY. HE TOOK THE FMV OF THE LAND AS ON 1-4-1981 AT ` 160/- PER CENT. THE INCREASE GIVEN BY THE ASSESSING AUTHORITY WAS ONLY ` 16/- PER CENT. FOR A PERIOD OF 46 YEARS IT AMOUNTED TO AN I NCREASE OF 35 PAISE PER CENT PER YEAR, WHICH ACCORDING TO THE ASS ESSEE WAS DEPLORABLY LOW. THE MATTER WAS TAKEN BEFORE TH E COMMISSIONER OF INCOME-TAX(APPEALS). THE COMMISSIONER OF INCOME-TAX(APPEALS) CONSIDERED THE MATTER IN FUR THER DETAIL AND ACCEPTED ALMOST ALL THE CONTENTIONS OF THE ASSE SSEE - - ITA NO.831 OF 2011 4 COMPANY REGARDING THE FEATURES OF THE LAND SOLD BY IT. HE ALSO CONSIDERED THE CASE OF CERTAIN COMPARABLE TRANSACTI ONS. THE COMMISSIONER OF INCOME-TAX(APPEALS) FINALLY DETERMI NED THE FMV OF THE LAND AS ON 1-4-1981 AT ` 9,500/- PER CENT. THE ASSESSEE IS STILL AGGRIEVED AND, THEREFORE, THE SEC OND APPEAL BEFORE US. 5. WE HEARD SHRI K.BALAUBRAMANIAN, THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE COM PANY AND DR. I.VIJAYAKUMAR, THE LEARNED COMMISSIONER OF INCO ME-TAX APPEARING FOR THE REVENUE. 6. AFTER CONSIDERING THE FACTS OF THE CASE, WE FIN D THAT THERE WAS NO GUIDELINE VALUE AVAILABLE IN THE CONCE RNED SUB- REGISTRARS OFFICE AS ON 1-4-1981 WITH REFERENCE TO THE PROPERTY SOLD BY THE ASSESSEE. THEREFORE, IT IS NECESSARY T O DECIDE THE FMV AS ON 1-4-1981 IN THE LIGHT OF THE LOCATIONAL A DVANTAGES OF THE PROPERTY AND THE OTHER INSTANCES OF TRANSACTION S, IF AVAILABLE. THE LAND SOLD BY THE ASSESSEE COMPANY IS WELL WITHI N THE CITY LIMITS OF COIMBATORE. THE LOCATION IS ABOUT 3.5 KM S. AWAY FROM PSG COLLEGE OF TECHNOLOGY, A PROMINENT EDUCATIONAL INSTITUTION OF COIMBATORE. THE PROPERTY IS ALSO PROXIMATE TO P SG MEDICAL - - ITA NO.831 OF 2011 5 COLLEGE AND HOSPITAL AND OTHER INSTITUTIONS OF IMPO RTANCE. ALL THESE MATTERS HAVE BEEN ACKNOWLEDGED BY THE COMMISS IONER OF INCOME-TAX(APPEALS) IN HIS ORDER. 7. THE ASSESSEE HAD FILED A REPORT FROM AN APPROVE D ENGINEER, WHEREIN THE VALUE HAS BEEN ARRIVED AT ` 25,987/- PER CENT. ANOTHER INSTANCE OF TRANSACTION POINTED OUT BY THE ASSESSEE COMPANY IS A SETTLEMENT DEED IN RESPECT OF A PROPERTY LYING WITHIN A DISTANCE OF 1.5 KMS. FROM THE LAND S OLD BY THE ASSESSEE COMPANY. THE VALUE REFLECTED IN THE SETTL EMENT DEED IS ` 35,072/- PER CENT. IN YET ANOTHER CASE OF SALE IN FEBRUARY, 1986, THE VALUE IS ` 7,200/- PER CENT. THIS PROPERTY IS SITUATED IN THE INTERIOR OF UPPILIPALAYAM VILLAGE, SINGANALLUR, COIMBATORE. 8. AFTER CONSIDERING ALL THE FACTUAL ASPECTS OF TH E PRESENT CASE, WE FIND THAT THE FMV ADOPTED BY THE A SSESSING AUTHORITY WAS ABSOLUTELY RIDICULOUS. THE ASSESSING AUTHORITY HAS EXERCISED HIS STATUTORY POWERS IN A HIGHHANDED MANN ER. THE ONLY RAY OF JUSTICE IN THE PRESENT CASE IS FOUND IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). BUT WHEN WE E XAMINE THE LANDMARKS OF THE PRESENT PROPERTY, WE FIND THAT THE VALUE OF ` 9,500/- DETERMINED BY THE COMMISSIONER OF INCOME- - - ITA NO.831 OF 2011 6 TAX(APPEALS) IS STILL INADEQUATE. TO BE FAIR AND R EASONABLE, WE FIX THE FMV OF THE PROPERTY AS ON 1-4-1981 AT ` 17,000/- PER CENT. THE LONG TERM CAPITAL GAINS ACCOUNTABLE IN THE HAND S OF THE ASSESSEE COMPANY WILL BE RECOMPUTED ACCORDINGLY. 9. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 15 TH OF NOVEMBER, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 15 TH NOVEMBER, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.