INTER TRIM LINING FABRICS P.LTD, MUMBAI V. ACIT (OSD) 1 CIR 7,

ITA 861/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79083 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 04-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AN D DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 861/MUM/2013 ASSESSMENT YEAR: 2009-10 INTER TRIM LINING FABRICS P. LTD. 154-B, GURU GOVIND SINGH INDUSTRIAL ESTATE, GOREGAON (E), MUMBAI- 400 063 VS. ACIT (OSD)-1, C.R. 7 MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. AAACI 4803 N ASSESSEE BY : SHRI PARESH SHAPARIA REVENUE BY : SHRI SUNIL AGRAWAL DATE OF HEARING : 04.06.2014 DATE OF PRONOUNCEMENT : 04.06.2014 O R D E R PER DR. S.T.M. PAVALAN: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD. CIT(A)-40, MUMBAI DATED 07.11.2012 FOR THE ASSESSME NT YEAR 2009-10. 2. GROUND NO. 1 RELATES TO THE RECALCULATION OF LON G TERM CAPITAL GAINS AND SALE OF 1,00,000/- SHARES OF ITL INDUSTRIES LTD BY TAKIN G SELLING PRICE AT RS.4.51 INSTEAD OF RS.21 AS DECLARED BY THE ASSESSEE. GROUND NO. 2 RELATES TO THE TREATMENT OF DIFFERENCE BETWEEN SALE OF VALUE AND BOOKS VALUE OF 1,00,000/- SHARES OF ITL INDUSTRIES LTD AS INCOME FROM OTHER SOURCES. AS THE TWO GROUNDS ARE INTER-RELATED THE SAME ARE BEING TAKEN TOGETHER FOR THE DISPOSAL OF THIS APPEAL. 3. BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF GARMENTS/ACCESSORIES DURING THE YE AR UNDER CONSIDERATION HAD SHOWN A LONG TERM CAPITAL GAINS OF RS.1,47,104/- IN ITS RETURN AND A CAPITAL LOSS OF RS.11,00,000/- WAS WORKED OUT AFTER CONSIDERING IN THE COST OF ACQUISITION. ON PERUSAL OF THE COMPUTATION OF THE INCOME REGARDING LONG TERM CAPITAL GAIN, THE AO ITA NO. 861/MUM/2013 INTER TRIM LINING FABRICS P. LTD. ASSESSMENT YEAR: 2009-10 2 FOUND THAT THE ASSESSEE HAD SOLD 1,00,000/- SHARES OF ITL INDUSTRIES LTD AT RS.21. THE AO FURTHER NOTED FROM BALANCE SHEET OF ITL INDU STRIES LTD THAT THE EQUITY SHARE CAPITAL HAD BEEN SHOWN AS RS.1,82,09,500/- I.E., 18 ,20,950 SHARES AT FACE VALUE OF RS.10. ACCORDING TO THE AO, THE ASSESSEE HAD SOLD 1 ,00,000/- SHARES OF ITL INDUSTRIES LTD. AT RS.21 WHICH WERE VALUED AT HIGHE R RATE AND HENCE HE CALCULATED THE BOOK VALUE PER SHARE AT THE RATE OF RS.4.51 FOR CAPITAL GAINS. THE BALANCE AMOUNT OF RS.16.49 PER SHARE HAD BEEN ASSESSED AS I NCOME FROM OTHER SOURCES. ON APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD IT IS PERTINENT TO MENTION THAT THE ASSESSEE FOR THE PURPOSE OF ACQ UIRING CONTROLLING ITL INDUSTRIES LTD BY ITL EMBELLISHMENTS I.E., THE PURCHASERS ENTE RED INTO THE TRANSACTION OF SELLING THE SHARES. IT IS PERTINENT TO MENTION THAT SECTION 48 OF THE ACT STATES THAT INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE CO MPUTED BY DEDUCTING FROM FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. IT IS PERTINENT TO MENTION THAT TH E FULL VALUE CONSIDERATION RECEIVED IN THE INSTANT CASE IS AT THE RATE OF RS.21 FOR 1,00,0 00/- SHARES. IN IS RELEVANT TO STATE THAT IN CASE WHERE THE FULL VALUE CONSIDERATION IS DETERMINABLE, THERE ARE NO PROVISIONS UNDER THE INCOME TAX ACT AVAILABLE TO TH E AO TO DETERMINE OR ADOPT THE FULL VALUE CONSIDERATION AT A VALUE DIFFERENT FROM THE ACTUAL SALES CONSIDERATION. FURTHER, AS PER THE PROVISION RELATING TO CAPITAL G AINS I.E., FROM SECTIONS 45 TO 55A, ONLY SECTION 50(C) PROVIDES FOR FULL VALUE OF CONSI DERATION IN CERTAIN CASES CONFERS POWER TO THE AO TO REPLACE THE STAMP DUTY VALUE TO THE SALE CONSIDERATION IN CASE THE SALE CONSIDERATION IS LESS THAN THE STAMP DUTY VALUATION. EVEN IN SUCH CASES, WHERE THE SALE CONSIDERATION IS LESSER THAN THE STA MP DUTY VALUATION, THE ASSESSEE CAN REFER TO THE VALUATION OFFICER. THIS IMPLIES TH AT WHEREVER THE LEGISLATURE INTENDS TO GIVE AUTHORITY TO AO TO REPLACE THE VALUE I.E., THE SALE CONSIDERATION, SPECIFIC PROVISION HAVE BEEN PROVIDED FOR. IN THE ABSENCE OF SPECIFIC PROVISION, THE AO CANNOT CHOSE TO REPLACE THE VALUE. IN THIS CONNECTI ON, IT IS RELEVANT TO STATE THAT THE TRIBUNAL IN THE CASE OF ACIT VS. B. ARUN KUMAR & COMPANY IN ITA NO. 8272/MUM/2011, VIDE ITS ORDER DATED 24.05.2013, WHILE DECIDING AN ISSUE WHETHER ITA NO. 861/MUM/2013 INTER TRIM LINING FABRICS P. LTD. ASSESSMENT YEAR: 2009-10 3 THE AO HAS POWER TO SUBSTITUTE THE VALUE OF CONSIDE RATION IN PLACE OF SALE CONSIDERATION SHOWN BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN, HAS HELD THAT ONCE IT IS FOUND THAT SHARES ARE SOLD AT A PARTICULAR PRICE IT IS NOT POSSIBLE FOR THE AO TO DISTURB THE FIGURE WITHOUT B RINGING ANY MATERIAL FACTS CONTRADICTORY TO THE CALCULATION MADE BY THE ASSESS EE. FURTHER, THE TRIBUNAL IN THE CASE OF M/S. MORAR JEE TEXTILES LTD. IN ITA NO. 2077/MUM/20 09 , VIDE ITS ORDER DATED 10.05.2013, HAS HELD THAT THE SALE PRICE OF SHARES ON THE BASIS OF BOOK VALUE CANNOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF DETE RMINING THE VALUE OF SALE OF SHARES IN CASE OF FULL VALUE CONSIDERATION IS DETER MINABLE. THE TRIBUNAL HAS FURTHER HELD THAT THE AO DOES NOT HAVE POWER UNDER THE INCO ME TAX ACT TO SUBSTITUTE FAIR MARKET VALUE FOR FULL VALUE OF CONSIDERATION. CONSI DERING THE ENTIRETY OF FACTS AND THE POSITION OF LAW AS DISCUSSED, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO. THEREFORE, WE ALLOW THE CLAIM OF TH E ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JUNE, 2014. SD/- SD/- (D. KARUNAKARA RAO) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 04.06.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.