,
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E" MUMBAI
[^ .., Û. /
BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER /AND
^ Û], ..
SHRI RAJENDRA, ACCOUNTANT MEMBER
. / ITA No. 7797/Mum/2010
[ [ /Assessment Year 2006-07
The Income Tax Officer M/s. Shreeji Cable Industries
19(1)-4, Samarpan Building,
Room No. 308, 3rd Floor, Vs. 3rd Floor, North Avenue
Piramal Chambers, Road, Sir Vithaldas Nagar,
Lalbaugh, Santacruz (West),
MUMBAI 400 012. MUMBAI-400 054.
PAN: AACFS 3600 C
( /Appellant) (× / Respondent)
Revenue by : Shri P.K. Singh
Assessee by : Shri Dhiren P. Talati
/ Date of Hearing : 21-03-2013
/ Date of Pronouncement : 10-04-2013
/ O R D E R
PER RAJENDRA, A.M.
Following Grounds of Appeal have been filed by the Assessing Officer (AO)
against the order dt. 31-08-2010 of CIT(A)-30, Mumbai:
1. On the facts and under the circumstances of the case and in law, the ld. CIT
(A) has erred in deciding against substitution of fair market value based on rates
available with the office of District Registrar & Collector of Stamp Duty where
sale/purchase documents are not registered.
2. On the facts and under the circumstances of the case and in law, the ld. CIT
(A) ought to have remanded the matter for obtaining valuation from a Valuation
Officer.
3. The appellant prays that the order of the CIT(A) on the above ground be set
aside and that of the AO be restored.
4. The appellant craves for leave to amend or alter any ground or add a new
ground which may be necessary.
2 ITA No. 7797/Mum/2010
M/s. Shreeji Cable Industries
2. Assessee-firm, engaged in the business of manufacturing of different types of
Aluminum and Copper Wires & Cables, filed its return of income on 03-11-2006
declaring total income at Rs. 50,073/-. Initially, the return was processed u/s. 143(1)
of the Income Tax Act, 1961 (Act). Later on, the case was selected for scrutiny and
assessment was finalised by the Assessing Officer (AO) u/s. 143(3) of the Act on 30-
12-2008 determining the total income of the assessee at Rs. 44.11 Lakhs.
3. During the assessment proceedings, AO found that assessee had offered
Short Term Capital Gain (STCG) of Rs. 20.07 Lakhs on sale of Industrial Gala No.
A/4 (4000 Sqft. Built up + 3936 Sqft. Open space) at Hatekesh Udyog Nagar, Kashi
Mira Road, Mira Road (E), Thane. As per the Agreement dt. 08-02-2005, the
Industrial Gala was sold for Rs. 22 Lakhs. AO directed the assessee to submit Stamp
Duty price of Factory Gala. Assessee submitted that the documents of the other
property were not registered hence it was not possible for him to submit Stamp Duty
Price of the said property. AO deputed the Income Tax Inspector to obtain the rates
of ready reckoner giving details of market value of various locations in Thane city and
Thane rural. After obtaining information from his inspector, AO issued a Show
Cause Notice to explain as why the Stamp Duty Price should not be substituted in
place of sale consideration offered by the assessee for the purpose of calculating
STCG. AO proposed Rs. 18,000/- per Sq. Mtr., for the built up area and Rs. 5,100/-
per Sq. Mtr., for open space. In response, assessee submitted his explanation vide
letter dt. 30-12-2008 and filed a revised return of income on same day declaring
business loss of Rs. 4.39 Lakhs. The revision was result of treating capital gains on
sale of land as arising from Long Term Capital Asset instead of deemed STCG as
claimed in the original return of income. Assessee also raised objection for
computation of capital gain on the basis of rate given by the ready reckoner, that was
received from the office of the District Registrar and Collector of Stamp Duty. AO
gave an opportunity to the assessee to submit Stamp Duty Price. Assessee again
submitted that it would not in a position to supply the same as the documents were not
registered.
3.1 After considering the submissions of the assessee and rates mentioned in the
ready reckoner and the report of the Ward Inspector, AO treated the entire capital gain
on sale of Factory Gala and surrounding open space as STCG. AO held that return
filed by the assessee on 30-12-2008 was invalid return as per the provisions of Section
139 of the Act. As per the AO, the due return u/s. 139(1) of the Act was 30-10-2006
for the AY. 2006-07. Assessee had filed the return on 03-11-2006 which was beyond
the time limit. He further held that revised return was filed on 30-12-2008 before
completion of assessment on 30-12-2008 and same could not be considered as valid
return. He rejected the claim made by the assessee for treating LTCG of sale of land
as arising from Long Term Capital Asset instead of deemed STCG. AO revised
working of the STCG as under:
3 ITA No. 7797/Mum/2010
M/s. Shreeji Cable Industries
Factory Gala No. A/4:
Built up area = 4,000 = 371.75 Sq.ft.
10.76
= 371.75 X 18,000 = 66,91,500
Less: Depreciation for old building at 30%
(Dt. Of construction 05-04-1979) 20,07,450
46,84,050
Open Space:
In front of Gala No. A/4 = 3,936 = 365.80 Sq.ft.
10.76
= 365.80 X 5,100 = 18,65,576
65,49,626
Less: Cost of acquisition Rs. 1,41,450 WDV on 31-03-05 +
51,000 (brokerage) 1,92,450
Taxable Short Term Capital Gain @ 30% 63,57,176
========
4. Assessee preferred an appeal before the First Appellate Authority (FAA).
After considering the assessment order and the submissions of the assessee including
the case laws relied upon by the Authorised Representative (AR) of the assessee, FAA
held that the property was not registered with the registration authorities, that taking
re-course of Section 50C of the Act for substituting the agreement value by Stamp-
Duty-Ready-Reckoner value was not as per the provisions of the Act. He further held
that for invoking the provisions of Section 50C, there must exist the adoption/
assessment by any authority of a State Government i.e., Stamp Valuation Authority
for the purpose of payment of Stamp Duty in respect of such transfer and that
consideration received or accrued as a result of the transfer by an assessee of a capital
asset being land or building or both was less than the value so adopted or assessee.
FAA was of the opinion that amended provisions of Section 50C were not applicable
for the AY under consideration, same were made applicable w.e.f. 01-10-2009. He
referred to the cases of Navneet Kumar Thakkar [112 TTJ (Jd) 76] and Shingar India
Pvt. Ltd., (ITA No. 1785/M/2007). Following the decision of Shingar India Pvt. Ltd.,
(supra), he held that in the case of appellant, provisions of Section 50C were not
applicable and he allowed the appeal filed by the assessee.
5. Before us, Departmental Representative (DR) relied upon the order of the AO.
AR submitted that property-in-question was not registered, that sale consideration
received by the assessee-firm could not be substituted by the value mentioned in the
ready reckoner, that in absence of registration of documents value shown by the
assessee was rightly adopted by the FAA.
4 ITA No. 7797/Mum/2010
M/s. Shreeji Cable Industries
6. We have heard the rival submissions and perused the material put before us.
We find that in the case of Shingar India Pvt. Ltd., (supra), the issue was decided in
favour of the assessee by the Tribunal.
We have heard both the parties and perused the relevant orders as well as the
paper book filed before us. The paper book contains the copies of the submissions
made before the CIT(A),valuation report, annual accounts and the copy of the
Jodhpur Bench decision of the SMC in the case of Navneet Kumar Thakkar (110 lTD
525)(2007). The case of the assessee is that the provisions of section 5OC are
inapplicable to a case of a depreciable asset such as factory building and also the
referral to DVO u/s. 50C(2) cannot be made unless the said asset transferred is
registered by a sale deed and for that purpose, the value of the asset has been
assessed and stamp duly was been paid by the parties. Per contra, the case of the
revenue is that the provisions of sections 50 and 5OC, since contained a reference to
section 48, have application to cases of transfer of the depreciable assets such as the
factory building in the present case. In this regard, to start with, we have perused the
provisions of 5OC of the Act. Sub section (1) reads 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 by any authority of a State Government (hereinafter in this
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 shall, for the
purposes of section 48, be deemed to be the full value of the consideration received or
accruing as a result of such transfer:
7. As seen from above, for invoking the provisions of section 50C, there must exist (i)
the adoption or assessment by any authority of a State Government i.e., stamp
valuation authority for the purpose of payment of stamp duty in respect of such
transfer; and (ii) 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 so
adopted or assessed. In the light of the above legal position, we have examined the
facts of the case ie transfer of the factory building a depreciable asset by way of book
entries, there is neither a sale deed nor there is any the adoption or assessment by any
authority of a State Government ie stamp valuation authority for the purpose of
payment of stamp duty in respect of such transfer. Under these circumstances, in our
considered opinion, there is no case for application of the provisions of section 50C of
the Act.
8.Further, we have examined the issue of the referral of the said factory building to the
DVO u/s 50C(2). Sub section (2) reads as follows.
"(2) Without prejudice to the provisions of subsection (1), where-
a. The assessee claims before any Assessing Officer that the value adopted or
assessed by the stamp valuation authority under subsection (1) exceeds the fair
market value of the property as on the date of transfer;
b. The value so adopted or assessed by the stamp valuation authority under sub-
section (1) has not been disputed in any appeal or revision or no reference has been
made before any other authority, court or the High Court, the Assessing Officer may
refer the valuation of the capital asset to a Valuation Officer and ...."
5 ITA No. 7797/Mum/2010
M/s. Shreeji Cable Industries
From the above, it is clear that the Assessing Officer may refer the valuation of the
capital asset to a Valuation Officer under a couple of circumstances namely, (i) the
value adopted or assessed by the stamp valuation authority under subsection (1)
exceeds the fair market value (FMV) of the property; and (2) value so adopted or
assessed by the stamp valuation authority has not been disputed. Considering the fact
that there is neither a sale deed in the assessee case nor there is any the adoption or
assessment by any authority of a State Government ie stamp valuation authority for
the purpose of payment of stamp duty in respect of such transfer, the question of
comparison with that of the FMV, does not arise. The dispute referred to in clause (b)
above, being contingent on the said adoption or assessment, consequently, the
application of the provisions of section 50C(2)(b) also does not arise. Therefore, in
our opinion, the referral of the AO u/s 5OC(2) is misconceived. Therefore, the
provisions of section 50C have no application to the case of the assessee. In principle,
the said views are fortified by the SMC decision of the Jodhpur Bench in the case of
Navneet Kumar Thakkar (supra). Considering the fact that we have upheld the
invalidity of the referral to the DVO, the grounds 2 and 4 raised on demerit of the
valuation are only academic and therefore, no separate adjudication is given.
Accordingly, the decision of the CIT(A) in the impugned order has to be reversed in
this regard. Accordingly, grounds 1 to 4 of the assessee's appeal are allowed.
Respectfully following the same, we decide the issue against the AO.
As a result, appeal filed by the AO stands dismissed.
[- .
Order pronounced in the open court on 10th April, 2013.
Û 10 April, 2013
Sd/- Sd/-
(.. / B.R. MITTAL) (Û] / RAJENDRA)
Û / JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Mumbai, /Date: 10th April, 2013
TNMM
/Copy of the Order forwarded to :
1. Appellant
2. Respondent
3. The concerned CIT (A)
4. The concerned CIT
5. DR "E" Bench, ITAT, Mumbai
6. Guard File
× //True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, / ITAT, Mumbai
|
