M/s. Diamdell Intermediates Pvt.Ltd., Ahmedabad V. The Dy.CIT.,(OSD)Range-1, Ahmedabad

ITA 927/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6901 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KULSHRESTHA
• Assessee Lawyers: PF JAIN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Bad and doubtful debts; Capital expenditure
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.927/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) M/S.DIAMDELL INTERMEDIATES PVT.LTD. C/O. HEMANSHU M.PARIKH 14, SANSKRUTI APARTMENT NR.SITABAG SOCIETY AMBAJI TEMPLE MANINAGAR, AHMEDABAD / VS. THE DY.CIT (OSD) RANGE-I, AHMEDABAD ./ ./ PAN/GIR NO. : AAACD 0234 D ( # / APPELLANT ) .. ( $% # / RESPONDENT ) #& / APPELLANT BY : SHRI P.F. JAIN, A.R. $% #'& / RESPONDENT BY : SHRI B.KULSHRESTHA, SR.DR ()'* / DATE OF HEARING 08/12/2014 +,-.'* / DATE OF PRONOUNCEMENT 30/12/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDAB AD (CIT(A) IN ITA NO.927/AHD/ 2011 M/S.DIAMDELL INTERMEDIATES PVT.LTD. VS. DY.CIT ASST.YEAR 2007-08 - 2 - SHORT) DATED 24/01/2011 PERTAINING TO ASSESSMENT Y EAR (AY) 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL:- 1. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ESTIMATED ADDITION OF RS.25,29,412 ON ACCOUNT OF SH ORT-TERM CAPITAL GAIN U/S 50 ON SALE OF FACTORY BUILDING AND STRUCTU RE CONSTRUCTED ON THE LEASE HOLD LAND MADE BY THE ASSESSING OFFICER O N THE BASIS OF PAYMENT OF ADDITIONAL STAMP DUTY OF RS.1,50,500 WIT HOUT PROPERLY APPRECIATING THE FACTS OF THE APPELLANT. 2. HE HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE A DDITION OF SHORT TERM CAPITAL GAIN WITHOUT APPRECIATING THE FACTS TH AT THE PROVISIONS OF SECTION 50C WERE NOT APPLICABLE TO THE FACTS OF THE APPELLANT WHO HAS SOLD DEPRECIABLE ASSET CONSTRUCTED ON LEASE HOL D LAND. 3. ON THE FACTS AND IN LAW NO ADDITIONAL ADDITION OF R S.25,29,412 TOWARD SHORT TERM CAPITAL GAIN ON THE BASIS OF PAYM ENT OF ADDITIONAL STAMP DUTY OUGHT TO HAVE BEEN MADE. 2. BEFORE THIS TRIBUNAL, THE ASSESSEE HAS ALSO RAIS ED AN ADDITIONAL GROUND WHICH READS AS UNDER:- THE HONBLE, THE VICE PRESIDENT ITAT AND OTHER HON BLE MEMBERS, MAY IT PLEASE YOUR HONOURS. PETITION FOR CONSIDERATION OF CLAIM OF INDEXATION O N LONG TERM CAPITAL GAIN ON SALE OF LAND REMAINED TO BE TAKEN IN THE RE TURN OF INCOME : THE APPELLANT IN APPEAL PRAYS TO SUBMIT THE FOLLOWI NG GROUNDS AND PRAYER TO BE CONSIDERED IN THE ABOVE APPEAL. (1) ON THE LONG TERM CAPITAL GAIN ASSESSED, INDEXATION ON COST OF LAND REMAINED TO BE CLAIMED AS PER THE ACT ON ACCOUNT OF INADVERTENCE, OUGHT TO HAVE BEEN ALLOWED WHILE COMPUTING TAXABLE LONG TERM CAPITAL GAIN. PRAYER : ITA NO.927/AHD/ 2011 M/S.DIAMDELL INTERMEDIATES PVT.LTD. VS. DY.CIT ASST.YEAR 2007-08 - 3 - THE ASSESSEE PRAYS FOR CONSIDERING ALLOWING DEDUCTI ON OF INDEX COST FOR COMPUTING CAPITAL GAIN. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 24/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.3,46,000/ -, CAPITAL EXPENDITURE AMOUNTING TO RS.2,35,000/- AND MADE ADD ITIONS OF LONG TERM CAPITAL GAIN OF RS.44,04,258/- AND SHORT TERM CAPIT AL GAIN OF RS.31,62,549/-. AGAINST THIS, THE ASSESSEE FILED A N APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PA RTLY ALLOWED THE APPEAL. 3. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US . 4. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGAI NST THE CONFIRMATION OF THE ESTIMATED ADDITION OF RS.25,29,412/- ON ACCO UNT OF SHORT-TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE AO WAS NOT JUSTIFIED IN ADOPTING THE VALUE OF THE PROPERTY AS PER THE SUB-REGISTRAR, SRO-AHMEDABAD-5. HE SUBMITTED THAT EVEN THE LD.CIT (A) HAS FAILED TO TAKE NOTE OF THE FACT THAT THE BUILDING BEING A DEP RECIABLE ASSET AND WDV OF THE SAME WAS REFLECTED IN THE BALANCE-SHEET OF T HE EARLIER YEARS AS WELL ITA NO.927/AHD/ 2011 M/S.DIAMDELL INTERMEDIATES PVT.LTD. VS. DY.CIT ASST.YEAR 2007-08 - 4 - AS IN THE YEAR IN QUESTION. THEREFORE, THE CAPITA L GAIN WILL BE CALCULATED AS PER THE PROVISIONS OF SECTION 50 AND NOT AS PER PROVISIONS OF SECTION 48 AND 49 OF THE INCOME-TAX ACT, 1961. SECTION 50C A PPLIES ONLY FOR THE PURPOSE OF SECTION 48 OF THE ACT. 5. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE LD.CIT(A). HE SUBMITTED THAT THERE IS NOTHING WRONG IN THE ORD ER OF THE LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE B Y OBSERVING AS UNDER:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANTS SUBMISSION. IT IS NOT IN DISPUTE THAT A PPELLANT SOLD DEPRECIABLE ASSET AND THE CAPITAL GAIN ON SALE OF T HE SAME IS CHARGEABLE UNDER SECTION 50. SECTION 50 REFERS APPLICABILITY O F SECTION 48 AND 49 SUBJECT TO THE MODIFICATION THAT EXCESS OF CONSIDER ATION OVER WDV SHALL BE DEEMED TO BE CAPITAL GAIN ARISING FROM TRANSFER OF SHORT-TERM CAPITAL ASSET. THIS SECTION DOES NOT SAY THAT SECTION 48 AN D 49 WILL NOT APPLY IF CAPITAL GAIN IS CHARGED UNDER SECTION 50. THEREFORE TO THIS EXTENT APPELLANTS CLAIM IS NOT CORRECT. COMING TO SECTION 50 C WHICH SAYS THAT WHERE THE CONSIDERATION RECEIVED ON ACCOUNT OF LAND OR BUILDING IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY STAMP VALUATI ON AUTHORITY THEN FOR THE PURPOSE OF SECTION 48, SUCH VALUATION WILL BE DEEMED TO BE FULL VALUE OF CONSIDERATION. SINCE SECTION 50 DOES NOT S AY THAT SECTION 50C WILL NOT APPLY FOR SECTION 50, THE CONSEQUENCE OF S ECTION 50C WILL HAVE OVERTAKEN AND SALE CONSIDERATION FOR THE PURPOSE OF SECTION 48 WILL BE REPLACED BY SUCH VALUE. SINCE THERE IS SALE OF BUIL DING ON WHICH DEPRECIATION WAS CLAIMED, SECTION 50 IS APPLICABLE AND COMPUTATION IS TO BE MADE UNDER SECTION 48 SUBJECT TO MODIFICATION MENTIONED IN SECTION 50. HOWEVER FOR SALE OF BUILDING, THE SALE CONSIDERATION FOR THE ITA NO.927/AHD/ 2011 M/S.DIAMDELL INTERMEDIATES PVT.LTD. VS. DY.CIT ASST.YEAR 2007-08 - 5 - PURPOSE OF SECTION 48 IS TO BE REPLACED BY VALUE AD OPTED BY STAMP VALUATION AUTHORITY UNDER SECTION 50C. THEREFORE IT CAN BE CONCLUDED THAT SECTION 50 IS NOT IN EXCLUSION OF ALL OTHER SE CTIONS. EXCEPT SECTION 2(42A), ALL OTHER SECTIONS ARE APPLICABLE TO SECTIO N 50. THIS SECTION WAS EXCLUDED BECAUSE IT DEFINES SHORT-TERM CAPITAL ASSE T WHICH IS HELD FOR LESS THAN THREE YEARS. HOWEVER BLOCK OF ASSET CAN B E MORE THAN THREE YEARS AND THEREFORE TO TREAT THE SAME AS SHORT-TERM CAPITAL GAIN, THIS EXCEPTION WAS PROVIDED. ALL OTHER PROVISIONS ARE AP PLICABLE TO SECTION 50 INCLUDING SECTION 50C. THEREFORE IM OF THE CLE AR VIEW THAT THE UNDERVALUATION DETECTED BY STAMP VALUATION AUTHORIT Y WILL HAVE BEARING ON CAPITAL GAIN TAXABLE ON SALE OF DEPRECIABLE BUIL DING. IN VIEW OF THIS THE ADDITION MADE BY THE ASSESSING OFFICER IS SUSTA INED. EVEN OTHERWISE, THE SALE OF LAND AND BUILDING WAS T OGETHER AND VALUED BY STAMP AUTHORITY TOGETHER, THE EXCESS VALU E CAN BE ATTRIBUTED TO LAND WHICH IS NOT DEPRECIABLE ASSET AND OUTSIDE THE SCOPE OF SECTION 50. THE EXCESS CONSIDERATION CAN BE TAXED EVEN ON L AND. THUS ADDITION IS CONFIRMED ON EITHER CASE. 6.1. IN THE INSTANT CASE, IT IS TO BE EXAMINED WHET HER THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT SECTION 50C OF THE ACT WO ULD HAVE APPLICATION ON THE FACTS OF THE PRESENT CASE OR NOT. THE CONTENTI ON OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT THE DEPRECIATING ASSET WAS TRA NSFERRED, THEREFORE AS PER SECTION 50C OF THE ACT WOULD HAVE NOT APPLICATION. THERE IS NO DISPUTE THAT WHAT IS TRANSFERRED WAS INCLUDED THE BUILDING WHICH WAS A DEPRECIABLE ASSET AND INCLUDED IN THE BLOCK OF ASSE TS IN RESPECT OF DEPRECIATION HAS BEEN ALLOWED IN EARLIER YEARS. TH E CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 48 & 49 OF THE ACT R.W.S. 50C OF THE ACT HAVE NO APPLICATION. HOW EVER, LD.CIT(A) HAS CONCLUDED THAT SECTION 48 & 49 OF THE ACT WOULD HAV E APPLICATION ON THE ITA NO.927/AHD/ 2011 M/S.DIAMDELL INTERMEDIATES PVT.LTD. VS. DY.CIT ASST.YEAR 2007-08 - 6 - FACTS OF THE PRESENT CASE. WE FIND THAT AS PER SEC TION 50, THE PROVISIONS OF SECTION 48 & 49 SHALL BE SUBJECTED TO CERTAIN MODIF ICATION. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE LD.CIT(A) WHILE DECI DING THE ISSUE. THEREFORE, THIS ISSUE IS RESTORED TO THE FILE OF LD .CIT(A) FOR DECISION AFRESH IN ACCORDANCE WITH PROVISIONS OF LAW. THUS , THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 7. REGARDING THE ADDITIONAL GROUND RAISED BY THE AS SESSEE, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS BEI NG A LEGAL GROUND AND CAN BE RAISED AT THE APPELLATE STAGE. HE SUBMITTED THAT THE ASSESSEE CANNOT BE DENIED LEGAL CLAIM MERELY BECAUSE HE DID NOT RAISE THE ISSUE BEFORE THE AO OR THE FIRST APPELLATE AUTHORITY. 7.1. ON THE CONTRARY, LD.SR.DR OPPOSED THE CONTENTI ON OF THE LD.COUNSEL FOR THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. SINCE THIS IS A LEGAL ISSUE AND THE SAME IS RAISED FIRST TIME BEFORE THIS TRIBUNAL, THEREFORE THE GROUND IS ADMITTED AND RESTORED BACK TO THE FILE OF LD.CIT(A) FOR DECISION AFRESH IN ACCORDANCE WITH LA W. THUS, THIS ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.927/AHD/ 2011 M/S.DIAMDELL INTERMEDIATES PVT.LTD. VS. DY.CIT ASST.YEAR 2007-08 - 7 - 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON TUESDAY, THE 30 TH DAY OF DECEMBER, 2014 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/ 12 /2014 2*..,(.../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-VI, AHMEDABAD 5. 7(8$45 , *45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<) / GUARD FILE. / BY ORDER, %7$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 17.12.14 (DICTATION-PAD 8- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..23.12.14 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30.12.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.12.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER