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Amrit Lal Jain, Prop. M/s Munshi Ram Arjun Lal Jain & Co. Versus ITO, Ward 1, Sonepat

2015 (10) TMI 2245 - ITAT DELHI

Addition in respect of capital gains - non-applicability of section 50C - Held that:- A deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Turning to section 50C, it is seen that the deeming fiction of substituting adopted or assessed or assessable value by the stamp valuation authority as full value of consideration is applicable only in respect of "land or building or both". If the capital asset u .....

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fact that dealing with special provision for full value of consideration in certain cases under section 50C, which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. As section 50C applies only to a capital asset, being land or building or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease right for sixty years in the Plot and not land itself, the provisions of s .....

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hed any nexus between the loans taken with the business activity carried on by the appellant.We are therefore inclined to send this issue back to the file of ld.AO for establishing nexus if any and then to consider the claim of the appellant. - Decided in favour of assessee for statistical purposes. - I.T.A .No. 1912/Del/2011 - Dated:- 23-9-2015 - Shri Inturi Rama Rao, Accountant Member And Smt. Beena pillai, judicial member For the Appellant : Sh. K. Sampath, Adv. Sh. Rajan Kumar Adv. For the R .....

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he case and in law, the authorities below erred in construing capital gains of ₹ 3,37,540/- in respect of the alleged transfer of a short at Sonepat; 3. That on the facts and in the circumstances of the case and in law, the addition in a sum of ₹ 40,003/- on account of mortgage expenses incurred for obtaining credit facilities for business is erroneous, unwarranted and uncalled for and must be quashed; 4. That on the facts and in the circumstances of the case and in law, the addition .....

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plan under clause (8) of ITR 4 of the guidelines during the financial year 2008-09. The assessment proceedings were completed by making an addition of ₹ 2,87,910/- under the following head: • Long term capital gains ₹ 3,37,540/-; • Mortgage expenses of ₹ 40,000/- • And household expenses amounting to ₹ 22,900/- 3. Aggrieved by the order passed by the ld. AO. The respondent appellant went into appeal before the ld. CIT(A). 4. The ld. CIT(A) confirmed the ac .....

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he addition in respect of capital gains amounting to ₹ 3,37,450/-. The ld. AR submitted that the appellant had claimed capital gain loss on sale of shop plot no.120, New Anaj Mandi Sonepat which the appellant had purchased from M/s. Bhagat Ram Jug lal on 22.02.2001 for ₹ 6,54,500/- which was paid in the following manner; 22.02.2001 ₹ 80,000/- 22.09.2001 ₹ 83,625/- 26.09.2001 ₹ 4,80,875/- 8. The indexed cost of the plot was calculated by the appellant at ₹ 7,16 .....

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by the Haryana Government for establishing the grain market. The ld. AR submits that the said plot cannot be transferred to any other party till the entire and final payment has been made and NOC is obtained from Haryana Market Board who allots the plots. The ld. AR submits that the installment paid by the appellant in respect of the plot is deposited in the name of original allottee being M/s. Bhagat Ram Jug lal and legally the plot remains with the original allottee and legally the plot remain .....

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otment of such plot. 11. The ld. AO calculated the long term capital gain as under: 1. Purchase price of plot on 22.2.2001 ₹ 6,54,500 (asstt. year 2001-02) 2. Index Cost of plot ₹ 654500 X 519 ₹ 8,36,660 406 3. Sale price of plot of 190 sq. yards By applying average sale rate @ ₹ 6180/- per sq. yards ₹ 11,74,200 Long term capital gain ₹ 3,37,540 (1174200 - 836660) 12. Aggrieved by the order of the ld.AO, the appellant preferred appeal before the ld.CIT(A). The .....

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of the provisions of section 2(47). 13. The ld. AR further submits that as there has been no conveyance deed that has been entered into between the appellant and M/s Bhagat Ram Jhugla provisions of section 50C of the Act cannot be invoked. The ld. AR places reliance on the decision by Mumbai Tribunal in the case of Atulji Puranik vs. ITO 12(1)(i) reported in (2011) 11 taxmann.com 92. 14. The ld. DR supports the findings of the authorities below. 15. The major contention put forth on behalf of t .....

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ecide the controversy before us in the light of correct and complete facts as noted above. There is no dispute that M/s Bhagat Ram Jhuglal was the owner of the plot which was acquired by the appellant. Further it is also not disputed that no agreement to transfer the immovable property against the consideration has been entered into between the appellant and M/s Bhagat Ram Jhuglal, when the plot was purchased. Similarly, when the plot was further sold by the appellant, no agreement has been ente .....

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s year. It is only the nature of asset transferred in the year which is to be taken into consideration for computing profit or gains chargeable to tax under the head 'Capital gains'. Only the nature of the capital asset so transferred in the previous year is to be viewed de hors the source from which it was acquired. If a 'Capital asset' as per section 2(14) is purchased out of agricultural income, that would not lose its character of capital asset notwithstanding the fact that t .....

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acts of the instant case, once the assessee acquired rights in the Plot. 18. During the course of assessment proceedings, the appellant contended that the cost of acquisition of the plot was ₹ 3000/- per sq.yard, by applying market rate of the Plot at ₹ 3950 per sq. mtr. on the date of transfer. The Assessing Officer, on the other hand, came to the conclusion that the sale price was liable to be taken at ₹ 6,180/- per sq. yards 19. The appellant argued that the market value of .....

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-4-2006 to 31-12-2007 was Rs. v per sq. meter. The Commissioner (Appeals) upheld the action of the Assessing Officer on this score. 21. On going through the provision of section 50C(1), it transpires that where the full value of consideration shown to have been received or accruing on the transfer of an asset, being land or building or both, is less than the value adopted or assessed or assessable by stamp valuation authority, the value so adopted etc. shall, for the purposes of section 48, be d .....

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ng as a result of transfer of land or building or both is deemed to be any amount other than that actually received. From the language of sub-section (1), it is clear that the value of land or building or both adopted or assessed or assessable by the stamp valuation authority shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such a transfer. Two things are noticeable from this provision. Firstly, it is a deeming provisio .....

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y if a capital asset being land or building or both is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted or assessed or assessable by the stamp valuation authority, the deeming fiction under sub-section (1) shall be activated to substitute such adopted or assessed or assessable value as full value of consideration received or accruing as a result of such transfer in the given situation. It is a settled legal proposition that a deem .....

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ot;. If the capital asset under transfer cannot be described as 'land or building or both', then section 50C will cease to apply. From the facts of this case narrated above, it is seen that the assessee was allotted lease right in the Plot for a period of sixty years, which right was further assigned to 'P' in the year in question. It is axiomatic that the lease right in a shop plot neither is 'land or building or both' as such, nor can be included within the scope of  .....

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