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ITO, 8 (1) (2) , Mumbai Versus M/s. Clublink (India) Pvt Ltd

2015 (8) TMI 5 - ITAT MUMBAI

Sale of land - Revaluation Reserve - land and building was transferred to Malhotra Group for ₹ 5 crore, the book value of which was ₹ 1,12,98,740/- Held that:- The main dispute revolves around the land shown in the Revaluation Reserve Account in the balance sheet. The land and building was transferred to Malhotra Group for ₹ 5 crore, the book value of which was ₹ 1,12,98,740/- The Assessing Officer held the difference of ₹ 3,87,01,260/- is nothing but a capital gain .....

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sessing Officer to correctly appreciate the facts after taking into consideration the contentions of the assessee and the observations made by the CIT(A) in the light of the material on record. - Decided in favour of revenue for statistical purpose. - ITA No. 4392/Mum/2010 - Dated:- 27-5-2015 - B R Baskaran, AM And Amit Shukla, JM,JJ. For the Appellant : Shri Sacchidanand Dubey For the Respondent : Shri N K Arora ORDER Per Amit Shukla, Judicial Member The aforesaid appeal has been filed by the R .....

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erred in not considering this fact that the Assessing Officer had rightly taxed the capital gain on account of transfer of capital assets i.e. land within the meaning of Section 2(47) 3. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the Assessing Officer's finding in the remand proceedings that the addition of ₹ 3,73,81,280/- should have been split and taxed as Short Term Capital Gain (Rs.3,61,84,5 .....

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tion Reserve, which included the revaluation of the land and certain expenditure incurred for the said land. The book value of the land was ₹ 1,12,98,740/- and after allocation of expenditure and certain liabilities, the difference in income was taken in the balance sheet to Capital Revaluation Reserve and was not recorded as income. The Assessing Officer observed that such a transaction between the assessee company and the erstwhile share holder is clearly a case of transfer of asset u/s. .....

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th the liabilities related to Link House. There was no money transaction which has taken place in pursuance of the settlement. The book value of the land given to Malhotra Group was at ₹ 1,12,98,740/-. The revaluation of the asset for the distribution as per the court order was capital appreciation and hence, the same was transferred to Capital Revaluation Reserve and there is no revenue receipt. The assessee further stated that the settlement among Malhotra Group and Pandit Group took pla .....

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ted the assessee's contention and made a very important observation that the block of fixed asset showed opening balance of land as on 01.04.2005 at ₹ 2,18,76,090/-. Out of this the amount of ₹ 1,12,98,740/- was declared as transfer and the balance amount of ₹ 1,05,77,350 was shown as closing balance of land as on 31.03.2006. The land was sold to Malhotra Group for ₹ 5 crore and the difference between the cost price and sale price of ₹ 3,87,01,260/- was profit o .....

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of ₹ 3,87,01,260/- had arisen. Accordingly, he taxed capital gain after taking the index value. 3. The learned CIT(A) however, deleted the said addition on the footing that the Assessing Officer has presumed that the amount represents revaluation of land which in fact is value of transfer of asset as per court settlement and the classification made in balance sheet is a mistake by the auditor. The relevant observations and findings of the CIT(A) in this regard is as under: "From the .....

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₹ 3,87,01,260/- in the balance sheet. The AO has presumed this amount as revaluation of the land shown at ₹ 1,12,98,740/-. Actually, the settlement as per the agreement and the court settlement is the transfer of land and building. The value of building (work in progress) was shown at ₹ 3,87,01,620/- in the balance sheet of earlier years also. Therefore, actually there was no revaluation of the assets but by mistake the auditor has written as capital revaluation reserve but it .....

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s are not rooted through the P & L A/c. On this fact, neither the AO nor the appellant has any dispute. The entry of capital revaluation reserve has created the doubt in the mind of the AO that the assets has been revalued, therefore, he was of the view that the capital gain should have been charged on this amount. But from perusal of the balance sheet, it is seen that there is no change in the value of assets shown in the balance sheet except word revaluation was written inadvertently and a .....

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n progress transferred. The AO has contended that once the appellant has mentioned work revaluation, therefore, capital gain has to be charged without understanding the fact that there is no revaluation of the assets. From these facts of the case, it is held that the AO has erred in taking the amount at ₹ 3,87,01,260/- as revaluation of assets and charging capital gain on this amount. Keeping in view all these facts and circumstances, it is held that there is no revaluation of land and bui .....

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