M/s. Surya Properties, Ghaziabad V. ACIT, Ghaziabad

ITA 867/DEL/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0132 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Assessee Lawyers: S K CHATURVEDI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Fair market value
• Section: 50C

Judgement Text

1 ITA NO. 867/ DEL/14 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEMBER I.T.A .NO.-867/DEL/2014 (ASSESSMENT YEAR-2008-09) SURYA PROPERTIES 54, PHASE-II, ANSAL CHIRANJIV VIHAR GHAZIABAD AAMFS0147E (APPELLANT) VS ACIT CIRCLE-2 GHAZIABAD (RESPONDENT) APPELLANT BY SH. S. K. CHATURVEDI, C.A RESPONDENT BY SH. ROBIN RAWAL, JCIT ORDER PER S. V. MEHROTRA, AM THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDE R DATED 1/11/2013 OF CIT(A)- MUZAFFARNAGAR , IN APPEAL NO. 454/2010-11/G ZB.. 2. THE ASSESSESES REPRESENTATIVE FILED AN ADJOURNM ENT APPLICATION. HOWEVER, DID NOT PRESS THE SAME AT THE TIME OF HEARING AND, THEREFORE, THE SAME IS REJECTED. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD FI LED RETURN OF INCOME DECLARING INCOME OF RS.8,65,450/-. THE ASSESSEE FIRM IN THE RELEVANT ASSESSMENT YEAR, WAS WORKING AS ESTATE AGENTS. THE ASSESSING OFFICER HA S MADE AN ADDITION OF RS. 80,000/-ON ACCOUNT OF INTEREST NOT CHARGED FROM THE SE PARTIES TO WHOM ADVANCES WERE GIVEN OUT OF INTEREST BEARING FUND. THE ASSES SING OFFICER FURTHER NOTED THAT ASSESSEE FIRM HAD SOLD TWO SHOPS. THE ASSESSING OF FICER MADE ADDITION U/S 50C OF RS. ,3,70,000/- IN RESPECT OF THESE TWO SHOPS ON AC COUNT OF DIFFERENCE IN DATE OF HEARING 25.06.2015 DATE OF PRONOUNCEMENT 30.06.2015 2 ITA NO. 867/ DEL/14 CONSIDERATION AS A RESULT OF TRANSFER OF THE CAPITA L ASSET AND THE VALUE ADOTED BY STAMP VALUATION AUTHORITY. FURTHER, HE NOTED THAT ASSESSEE HAD SHOWN A NEW CAR AS ADDITION IN ITS FIXED ASSETS, HOWEVER, THE CAR HAD NOT BEEN REGISTERED IN THE NAME OF FIRM AND WAS REGISTERED IN THE NAME OF THE BROTHER OF THE PARTNERS OF THE FIRM. AFTER CONSIDERING THE ASSESSEES CONTENTIONS, THE A SSESSING OFFICER DISALLOWED THE EXPENSES CLAIMED IN RESPECT OF VEHICLE RUNNING AND MAINTENANCE AND ALSO THE DEPRECIATION CLAIMED BY ASSESSEE. HE, ACCORDINGLY, MADE AN ADDITION OF RS. 1,74,447/- AS UNDER:- . ADDITION: I) DEPRECIATION ON CAR- RS.66,645/- II) VEHICLE RUN & MAINT. RS.1,01,188/- III) INTEREST ON CAR LOAN RS. 6,614/- TOTAL RS. 1,74,447/- 4. LD. CIT(A) CONFIRMED ALL THE THREE ADDITIONS. B EING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE ME AND HAS TAKEN FOLLOWING GROU NDS OF APPEAL:- 1. THE ORDER PASSED BY LD. CIT(A), MUZAFFARNAGAR IS AGAINST THE FACTS OF THE CASE AND NOT IN ACCORDANCE WITH LAW. 2. LD. CIT(A), MUZAFFARNAGAR HAS ERRED BY CONFIRMI NG THE ADDITION OF RS. 80000/-, THE AMOUNT OF INTEREST ON BANK BORROWING I N DISREGARD OF THE TOTALITY OF FACTS AND MERELY ON THE GROUND THAT INTEREST FREE L OANS AND ADVANCES WERE PAID OUT OF INTEREST BEARING LOANS WHEREAS THE INTEREST FREE FUNDS AVAILABLE WERE FAR MORE THAN THE AMOUNT OF LOANS AND ADVANCES. 3. LD. CIT(A), MUZAFFARNAGAR HAS ERRED BY CONFIRMIN G THE ADDITION OF RS. 370000/- ON SALE OF SHOPS BY INVOKING THE PROVISION S OF SECTION 50C BY DISREGARDING THE FACTS OF THE CASE THAT THE PROFIT FROM THESE SHOPS WAS SHOWN AS BUSINESS PROFIT AND ALSO BY REJECTING THE SPECIFIC REQUEST FOR REFERRING THE MATTER TO VALUATION CELL FOR VALUATION BEFORE INVOKING THE PR OVISIONS OF SECTION 50C. 4. LD. CIT(A), MUZAFFARNAGAR HAS ERRED BY CONFIRMIN G THE ADDITION OF DEPRECIATION ON CAR AT RS.66645/-, VEHICLE RUNNING EXPENSES AT RS. 101188/- AND INTEREST ON CAR LOAN AT RS.6614/- ON THE SOLE REASO N THAT THE CAR WAS NOT REGISTERED IN THE NAME OF THE APPELLANT BY DISREGARDING THE BO OKS OF ACCOUNTS, DOCUMENJTARY 3 ITA NO. 867/ DEL/14 EVIDENCES AND THE FACT THAT THE CAR WAS EXCLUSIVELY USED FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT. 5. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, MODIF Y AND GROUND OF APPEAL WITH THE LEAVE OF HONBLE BENCH. 5. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES. 6. APROPOS GROUND NO. 1, THE SUBMISSION OF LD. COUN SEL IS THAT THE INTEREST FREE ADVANCES WERE MADE FROM OWN FUNDS AND NOT FROM INTEREST BEARING FUNDS. I FIND FROM THE ORDERS OF THE AUTHORITIES BELOW THAT THIS PLEA OF ASSESSEE HAS NOT BEEN CONSIDERED BY THEM. THE SPECIFIC MENTION OF THIS P LEA IS IN THE WRITTEN SUBMISSIONS MADE BEFORE THE LD. CIT(A) AS NOTED IN PARA 3 OF HI S ORDER. IT IS WELL SETTLED LAW THAT IF THE INTEREST FREE ADVANCES ARE MADE FROM IN TEREST FREE FUNDS THEN NO DISALLOWANCE IS CALLED FOR. LD. CIT(A) HAS OBSERVE D THAT THIS ARGUMENT OF ASSESSEE HAS NO BASIS IN VIEW OF THE FACT THAT THE ASSESSES HAD NOT FURNISHED REQUISITE DETAILS AND EVIDENCES IN SUPPORT OF THIS CLAIM. I FIND TH AT IN THE DETAILED REPLY, REPRODUCED IN LD. CIT(A)S ORDER, THE ASSESSEE HAS GIVEN DETAILS REGARDING HIS FUND MOVEMENT AND, THEREFORE, IN ALL FAIRNESS THE M ATTER IS TO BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR EXAMINING THE ASSESSEES C ONTENTION. ACCORDINGLY, THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OF FICER FOR DE NOVO ADJUDICATION. 7. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATIS TICAL PURPOSES. 8. APROPOS GROUND NO. 2, I FIND FROM THE SUBMISSION S MADE BEFORE ASSESSING OFFICER AS WELL AS BEFORE LD. CIT(A) THAT ASSESSEE HAD CLEARLY STATED THAT THE SECTOR RATE ON WHICH THE STAMPS HAVE BEEN CHARGED WAS MORE THAN THE SALE CONSIDERATION AND HAD, ACCORDINGLY, REQUESTED THE ASSESSING OFFI CER TO REFER THE SHOPS FOR VALUATION BY DEPARTMENTAL VALUERS. AS PER SECTION 5 0C (2) WHERE THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY UNDER SUB SECTION 1 EXCEEDS THE FAIR MARKET VALUE 4 ITA NO. 867/ DEL/14 OF THE PROPERTY AS ON THE DATE OF TRANSFER, THE ASS ESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFIC ER AND THIS VALUE IS TO BE SUBSTITUTED. THEREFORE, WHEN THE ASSESSEE MAKES A REQUEST FOR MAKING REFERENCE TO DVO, THE ASSESSING OFFICER IS REQUIRED TO MAKE SUCH REFERENCE ELSE HE HAS TO GIVE SPECIFIC REASONS FOR NOT ACCEDING TO ASSESSEES REQ UEST. THE DISCRETION HAS TO BE JUDICIOUSLY EXERCISED. I, THEREFORE, SET ASIDE THE ORDER OF LOWER REVENUE AUTHORITIES AND RESTORE THE MATTER TO THE FILE OF ASSESSING OFF ICER WITH THE DIRECTION TO MAKE REFERENCE TO DVO AS REQUESTED BY ASSESSEE. 9. IN THE RESULT, THIS GROUND IS ALLOWED FOR STATIS TICAL PURPOSES. 10. APROPOS GROUND NO. 3, I FIND THAT THERE IS NO D ISPUTE THAT THE CAR HAD BEEN USED IN ASSESSESES BUSINESS AND THE ONLY DISPUTE I S THAT THE CAR WAS NOT REGISTERED IN THE NAME OF THE FIRM. THE ASSESSEE IN ITS REPLY BEFORE AO HAS CLEARLY STATED THAT THE CAR COULD NOT BE FINANCED IN FIRMS NAME. THERE FORE, THE SAME WAS BOUGHT IN THE NAME OF MR. NARENDRA KUMAR BROTHER OF BOTH THE PARTNERS. IT WAS FURTHER POINTED OUT THAT THE OLD CAR WAS SOLD AND THE NEW C AR INNOVA WAS PURCHASED. IT WAS FURTHER POINTED OUT THAT THE CAR HAD BEEN TAKEN BY ARRANGING LOAN FROM ICICI BANK, THE LOAN AMOUNT HAD BEEN CLEARLY REFLECTED AS SECUR ED LOAN AND THE AMOUNT OF MARGIN PAID BY MR. NARENDRA KUMAR HAD BEEN SHOWN UN DER THE HEAD SUNDRY CREDTIOR IN ASSESSEES BOOKS OF ACCOUNT. THESE FAC TS ARE NOT DISPUTED BY DEPARTMENT AND, THEREFORE, THE FIRM WAS THE BENEFIC IAL OWNER OF THE VEHICLE. FURTHER IT WAS POINTED OUT THAT THE SALE LETTER A S REQUIRED UNDER MOTOR VEHICLES ACT HAD BEEN SIGNED BY MR. NARENDRA KUMAR AND LOAN REPAYMENT WAS CREDITED TO HIS ACCOUNT BY REDUCING THE LOAN AMOUNT. THE HONB LE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD VS. CIT 239 ITR 775 HAS HELD THAT THE TERM OWN U/S 32(1) OF THE INCOME TAX ACT MUST BE ASSIGNED A WIDE MEANING. ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY 5 ITA NO. 867/ DEL/14 AS WOULD ENABLE OTHERS BEING EXCLUDED THERE FROM AN D HAVING THE RIGHT TO HOUSE AND OCCUPY THE PROPERTY AND /OR TO ENJOY ITS USUFRU CT IN HIS OWN RIGHT WOULD BE THE OWNER OF THE BUILDING THOUGH A NORMAL DEED OF TITL E MAY NOT HAVE BEEN EXECUTED AND REGISTERED AS CONTEMPLATED BY THE TRANSFER OF P ROPERTY ACT, REGISTRATION ACT ETC. IT WAS FURTHER OBSERVED THAT THE VERY CONCEPT OF DEPRECIATION THAT THE TAX BENEFIT ON ACCOUNT OF DEPRECIATION LEGITIMATELY BEL ONGS TO ONE WHO HAS INVESTED IN THE CAPITAL ASSET AND IS UTILIZING THE CAPITAL ASSE T AND THEREBY LOOSING GRADUALLY THE INVESTMENT CAUSED BY WEAR AND TEAR, AND WOULD NEED TO REPLACE THE SAME BY HAVING LOST ITS VALUE FULLY OVER A PERIOD OF TIME. IN THE PRESENT CASE ALSO LOAN HAS BEEN TAKEN BY THE BROTHER OF PARTNERS BUT WAS REPAID FRO M THE CAUFFERS OF FIRM AND THE UTILIZATION OF THE VEHICLE WAS ALSO FOR FIRMS BUSIN ESS. UNDER SUCH CIRCUMSTANCES, NO DISALLOWANCE WAS CALLED FOR. 11. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH OF JUNE 2015. SD/- (S. V. ME HROTRA) ACCOUNTANT MEMBER DATED:- 30 /06/2013 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT A SSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 867/ DEL/14 DATE 1. DRAFT DICTATED ON 25.06.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 26.06.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .06.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .06.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 867/ DEL/14