DCIT 1(2)(2), MUMBAI V. PIROJ PALACE P. LTD., MUMBAI

ITA 857/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5459 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 07-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Question of law; Cost of acquisition; Capital Gains
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE S HRI B.R. BASKARAN (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 857 / MUM/20 1 7 ASSESSMENT YEAR: 2013 - 14 THE D.C.I.T. 1(2)(2), R. NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 VS. M/S PIROJ PALACE P. LTD., 2 ND FLOOR, 134 NAGINDAS MASTER ROAD, FORT, MUMBAI PAN: AAFCP0219E (APPELLANT) (RESPONDENT) CO NO. 171 /MUM/201 8 (ARISING OUT OF ITA NO. 857 /MUM/2017) ASSESSMENT YEAR: 2013 - 14 M/S PIROJ PALACE P. LTD., 2 ND FLOOR, 134 NAGINDAS MASTER ROAD, FORT, MUMBAI PAN: AAFCP0219E VS. THE D.C.I.T. 1(2)(2), R. NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M.V. RAJGURU ( DR) ASSESSEE BY : SHRI VIPUL JOSHI (A R) DATE OF HEARING: 29/08 /201 8 DATE OF PRONOUNCEMENT: 31 / 10 /201 8 O R D E R PER RAM LAL NEGI, JM THESE ARE T HE APPEAL AND CROSS OBJECTION FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST TH E ORDER DATED 11.11.2016 PASSED BY THE COMMISS IONE R OF INCOME TAX (APPEALS) (FOR SHORT THE CIT (A)) - 2 , MUMBAI PE RTAI NING TO THE ASSESSMENT YEAR 2013 - 11 , WHEREBY THE LD. CIT (A) HAS 2 ITA NO. 857 / MUM/2017 & CO NO. 171 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO. 857/MUM/2017 (ASSESSMENT YEAR: 2013 - 14 ) BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANAGEMENT OF PROPERTY AND RE - DEVELOPMENT OF REAL ESTATE, FILED ITS RETU RN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME AT RS. 5,897/ - . IN RESPONSE TO THE NOTICES U/S 143 (2) AND 142 (1), THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND FURNISHED THE DETAILS C ALLED FOR. IT WAS NOTICED THAT THE COMPANY HAD ENTERED INTO AN AGREEMENT FOR THE SALE TO TWO FLATS WITH SUSHMA SHAH AND MAYURI MANIAR VIDE AGREEMENT DATED 30.05.2012. IT WAS FURTHER NOTICED THAT THE COMPANY HAD RECEIVED CONSIDERATION OF RS. 30,00,000/ - FOR EACH FLAT. HOWEVER, THE STAMP DUTY AUTHORITIES ADOPTED THE VALUE AT RS. 71,80,000/ - FOR EACH OF THE FLATS FOR THE PURPOSE OF STAMP DUTY ON THE SAID AGREEMENTS. ACCORDINGLY, THE COMPANY WAS ASKED TO SHOW CAUSE AS TO WHY THE STAMP DUTY VALUE SHOULD NOT BE T AKEN AS SALE CONSIDERATION. THE AR SUBMITTED THAT THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITIES FOR THE SALE OF FLOOR SPACE INDEX (F SI ) IS EXCESS OF THE REAL MARKET VALUE OF THE FSI AND THE AUTHORITIES HAVE MECHANICALLY ADOPTED THE RATES SPECIFIED IN THE READY RECKONER. MOREOVER, THE PROVISIONS OF SECTION 50C OF THE ACT DO NOT APPLY TO TRANSFER OF FSI. THE AO REJECTING THE CONTENTION OF THE ASSESSEE TREATED THE SALE CONSIDERATION AT RS. 1,43,60,000/ - INSTEAD OF RS. 60,00,000/ - AND MADE DISALLOWANCE OF RS. 83,60,000/ - . 2. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT (A ) ON THE GROUND S THAT THE AO HAS ERRED IN INVOKING SECTION 50C OF THE ACT AND SUBSTITUTED THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY IN PLACE OF CONSIDERATION ACTUAL LY RECEIVED ON TRANSFER OF FSI AND THE LD. AO HAS ERRED 3 ITA NO. 857 / MUM/2017 & CO NO. 171 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 IN HOLDING THAT THE FSI WAS HELD BY THE ASSESSEE FOR LESS THAN 36 MONTHS CONTRARY TO THE EVIDENCE ON RECORD THAT THE ASSESSEE HAD HELD THE FSI FOR MORE THAN 36 MONTHS. THE LD. CIT (A) AFTER HEARING TH E ASSESSEE DECIDED BOTH THE GROUNDS IN FAVOUR OF THE ASSESSEE AND HELD THAT FSI WOULD NOT ATTRACT PROVISION OF SECTION 50C AND THAT SINCE THE COMPANY OWNED THE BUILDING IN 1991, T HE AO HAS WRONGLY TREATED THE PROFIT AS SHORT TERM CAPITAL GAIN. THE REVENUE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A). 3. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROU ND OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW THE LD. CIT (A) WAS CORRECT IN HOLDING THAT THE DEEMING PROVISIONS OF SECTION 50C ARE NOT ATTRACTED IN CASE OF TRANSFER OF FSI BY IGNORING THAT THE SAID SECTION APPLIES TO SALE OF ANY CAPITAL ASSET BEING LAND OR BUILDING OR BOTH AND FSI CANNOT HAVE AN ORIGIN FROM OTHER THAN LAND, FOR THE PURPOSE OF BUILDING? 4. BEFORE US, T HE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ASSESSMENT ORDER PASSED BY THE AO SUBMITTED THAT THE LD. CIT (A) HAS WRONGLY HELD THAT THE DEEMING PROVISIONS OF SECTION 50C ARE NOT APPLICABLE IN THE CASE OF TRANSFER OF FSI. THE LD. DR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 50C OF THE ACT APPLY TO SALE OF ANY CAPITAL ASSET BEING LAND OR BUILDING OR BOTH AND S INCE THE FSI IS RELATED TO LAND OR BUILDING , THE AO HAS RIGHTLY AP PLIED THE PROVISIONS OF SECTION 50C IN THE PRESENT CASE. 5. ON THE OTHER HAND , THE LD. COUNSEL FOR THE ASSESSEE RELYING ON THE FINDINGS OF THE LD. CIT (A) SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT C ASE IS SQUARELY COVERED BY THE ORDER OF THE MUMBAI TRIBUNAL RENDERED IN THE CASE OF VOLTAS LTD. VS. ITO (MUMBAI) (2016) 74 TAXMANN.COM 99 (MUM) , 4 ITA NO. 857 / MUM/2017 & CO NO. 171 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 ATUL G PURNAIK VS. INCOME TAX OFFICER 132 ITD (MUMBAI) AND THE RECENT JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF CIT CENTRAL - II, MUMBAI VS. M/S GREEN FIEL D HOTELS AND STATE PVT. LTD. 2016 389 ITR 68 (BOM) . SINCE, THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE DECISIONS OF VARIOUS BENCHES OF THE TRIBUNAL, THERE IS NO LEGAL OR FACTUAL INFIRMITY IN TH E ORDER OF THE LD. CIT (A) TO INTERFERE WITH. THEREFORE , THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESS EE. THE ONLY ISSUE TO BE ADJUDICATED IN THE PRESENT APPEAL IS THAT WHETHER THE PROVIS I ONS OF SECTION 50C ARE APPLICABLE IN THE CASE OF TRANSFER OF FSI ? THE LD. CIT (A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: - 6. I HAVE CONSIDER ED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS GIVEN BY THE AR OF THE APPELLANT COMPANY AND ALSO THE SECTION 50C OF THE ACT. SECTION 50C OF THE ACT HAS ALREADY BEEN REPRODUCED IN THE ASSESSMENT ORDER BY THE AO VIDE PAGE NO. 3 WHICH IS AS UNDER: - 50C ( 1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREINAFTER IN T HIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE FULL VALUE OF THE CONSID ERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. 7. FROM THE READING OF THE SECTION 50C ITSELF, IT IS CRYSTAL CLEAR THAT THERE IS NO MENTIONING OF RIGHTS OVER THE LAND & BUILDING. FURTHER, THE AR OF THE APPELLANT ALSO BRINGS TO MY NOTICE THE J URISDICTIONAL ITAT DECISION IN THE 5 ITA NO. 857 / MUM/2017 & CO NO. 171 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 CASE OF VOLTAS LTD. VS. ITO, WARD 7(3)(4), MUMBAI [2016] 74 TAXMANN.COM 99 (MUMBAI TRIB) DATED 16.09.2016 WHERE THE RULING IS AS UNDER: - SECTION 50C OF THE INCOME TAX ACT, 1961 - CAPITAL GAINS SPECIAL PROVISION FOR FUL L VALUE OF CONSIDERATION IN CERTAIN CASES (SALE OF DEVELOPMENT RIGHTS) ASSESSMENT YEAR 2005 - 06 WHETHER PROVISIONS OF SECTION 50C COULD NOT BE APPLIED TO SALE OF DEVELOPMENT RIGHTS OF LAND OWNED BY ASSESSEE - HEAD, YES (PARA 3.11) [ IN FAVOUR OF THE ASSESSEE ]. ATUL G. PURANIK VS. INCOME - TAX OFFICER, 12(1) (1) REPORTED IN 132 ITD 499 (MUM) DT. 13.05.2011 ITAT BENCH. SECTION 50C OF THE INCOME TAX ACT, 1961 - CAPITAL GAINS SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES - ASSESSMENT YEA R 2006 - 07 - WHETHER IN VIEW OF PROVISIONS OF SECTION 50C, DEEMING FICTION OF SUBSTITUTING ADOPTED OR ASSESSED OR ASSESSABLE VALUE BY STAMP VALUATION AUTHORITY AS FULL VALUE OF CONSIDERATION IS APPLICABLE ONLY IN RESPECT OF LAND OR BUILDING OR BO TH HELD, YE S. WHETHER LEAS RIGHT IN A PLOT OF LAND CANNOT BE INCLUDED WITHIN SCOPE OF LAND OR BUILDING OR BOTH AND, THUS, IN CASE OF TRANSFER OF LEASEHOLD RIGHTS IN LAND, PROVISIONS OF SECTION 50C CANNOT BE INVOKED - HELD, YES [ IN FAVOUR OF ASSESSEE]. 8. RESPEC TFULLY FOLLOWING THE JURISDICTIONAL HONBLE ITATS DECISION, MUMBAI CITED ABOVE AND ALSO RELYING ON THE PROVISIONS OF SECTION 50C, I AM OF THE CONSIDERED OPINION THAT FSI WOULD NOT ATTRACT PROVISIONS OF SECTION 50C AND I AM ALSO IS OF THE OPINION THAT BUIL DING WAS OWNED BY THE APPELLANT COMPANY FROM 1991 ONWARDS THE PROFIT AS LONG TERM CAPITAL GAIN. HENCE THE APPEAL IS ALLOWED. 7. WE NOTICE THAT THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE TWO DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL . APART FROM THE SAID DECISIONS, THE ISSUE INVOLVED IN THIS CASE IS FURTHER COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S GREEN FIELD HOTELS AND STATE PVT. LTD. (SUPRA) IN WHICH THE QUESTION TO BE 6 ITA NO. 857 / MUM/2017 & CO NO. 171 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 DETERMINED B Y THE HONBLE COURT WAS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER OF THE CIT (A) IN DELETING THE ADDITION OF LONG TERM CAPITAL GAIN ON THE GROUND THAT PROVISIONS OF SECTION 50C O F THE ACT WERE NOT APPLICABLE TO TRANSFER OF LAND AND BUILDING BEING A LEAS E HOLD PROPERTY. THE HONBLE HIGH COURT DISMISSED THE REVENUES APPEAL HOLDING THAT THE QUESTION AS FRAMED BY THE REVENUE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THE RATIO OF THIS DECISION WILL APPLY TO THE PRESENT CASE. 8. SINCE, THE FINDINGS OF THE LD. CIT (A) ARE BASED ON THE DECISIONS OF THE VARIOUS BENCHES OF THE TRIBUNAL AND THE FINDINGS OF THE HONBLE HIGH COURT DISCUSSED ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A). WE THEREFORE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THE SOLE GROUND OF THE APPEAL OF THE REVENUE. CO NO. 171 /MUM/2018 (ASSESSMENT YEAR: 2013 - 14 ) THE ASSESSEE HAS FILED THE CROSS OBJECTION A GAINST THE IMPUGNED ORDER ON THE FOLLOWING EFFECTIVE GROUND S : 1. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO CAPITAL GAIN ACCRUED AND ARISE AS TRANSFER OF FSI, FOR WHICH NO COST OF ACQUISITION WAS COMPUTABLE. 2. WITHOUT PREJUDICE TO THE ABOVE, THE ADDITION MADE BY THE A.O, BY INVOKING SECTION 50C BUT WITHOUT REFERRING THE MATTER TO DVO INSPITE OF SPECIFIC REQUEST OF THE AS S ESSEE, IS BAD IN LAW. 3. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT ASSUMING BUT NOT ADMITTIN G THAT SUBSTITUTION OF CONSIDERATION WAS CALLED FOR, THE AMOUNT OF ADDITION SO MADE IS NOT IN ACCORDANCE WITH THE LAW, IS ARBITRARY AND EXCESSIVE. 7 ITA NO. 857 / MUM/2017 & CO NO. 171 /MUM/2018 ASSESSMENT Y EAR: 2013 - 14 2. SINCE, THE CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE IN SUPPORT OF THE FINDINGS OF THE LD. CIT ( A) AND SINCE WE HAVE DISMISSED THE REVENUES APPEAL, THE CO HAS BECOME INFRUCTUOUS. HENCE, WE DISMISS THE CO FILED BY THE ASSESSEE. IN THE RESULT, APPEAL FILED BY THE REVENUE AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE, ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER , 2018 . SD/ - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 10 / 2018 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A ) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI