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M/s. Maheshwari Mega Ventures Ltd. Versus The Asst. Commissioner of Income Tax, Circle-16 (2) , Hyderabad and Vica-Versa

2016 (7) TMI 513 - ITAT HYDERABAD

Addition u/s. 69C - determination of value - sale of capital asset after conversion into stock in trade - applicability of section 50C - Held that:- While computing the business income, assessee has claimed certain cost of construction and most of the amounts were spent in earlier years. Instead of verifying the expenditure incurred during the year, the AO undertook the exercise of referring the cost of construction to valuation itself which indicated certain differences in valuation. As rightly .....

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elated parties at a value which is not disputed. Since the sale occurred during the year, assessee has offered Long Term Capital Gain and business profits on the total project including the portions which are acquired to fulfill the sale and the assessee has reduced the values correspondingly to arrive at the market value on the day of offering the gains. As seen from the agreement of sale and the amounts paid by assessee which are not disputed by the Revenue for the purpose of determination of .....

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After considering the evidences placed on record and the working as adopted by assessee, we are of the opinion that the rate 2,000/- and 1100/- adopted by assessee in arriving at the cost of acquisition for the purpose of capital gains is reasonable and accordingly, the grounds raised by assessee are allowed - Decided against revenue - Revision u/s 263 - Non consideration of provisions of Section 50C while determining the capital gain - Held that:- As noticed in the appeals considered earli .....

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ware about the conversion of fixed assets to work-in-progress on 01-01-2008 and subsequent sale on 31-03-2008, consequently the transaction does not attract the provisions of Section 50C as directed by Ld.CIT. It is also to be noted that assessee adopted the valuation as certified by the authorities in taking the sale consideration on the date of conversion which was accepted by the AO. In view of this, question of invoking the provisions of Section 50C as on 31- 03-2008 does not arise. Moreover .....

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no hesitation in setting aside the order of the CIT as the order of AO is not erroneous and prejudicial to the interest of Revenue - Decided in favour of assessee - 190/Hyd/2012, 305/Hyd/2012, 1218/Hyd/2013, 1602/Hyd/2014 - Dated:- 5-7-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri K.C. Devdas, AR For The Revenue : Smt. G.V. Hemalatha Devi, CIT DR and Shri M. Sitaram, DR ORDER PER B. RAMAKOTAIAH, A.M. : These are batch of appeals .....

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014 is the appeal filed by Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Hyderabad giving relief to assessee on the consequential order u/s. 263 of the Act. 2. Briefly stated, assessee is engaged in the business of real estate constructing flats etc., For the AY. 2008-09, assessee filed its return of income declaring total income of ₹ 2,20,88,896/- on 30-09-2008. In the return, assessee admitted capital gains on the conversion of property from capital asset to st .....

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ce to Ellareddyguda Project and Chirag Ali Lane Projects are excessive by an amount of ₹ 13,81,515/- and ₹ 11,46,046/- respectively. AO has reduced the cost of construction of the project by the said amounts while computing the business income thereby making an addition. With reference to Himayathnagar Project, the value shown by the assessee is lesser by an amount of ₹ 30,03,740/- as compared to the value determined by the Valuation Officer. Therefore, the AO invoked the provi .....

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capital gains at ₹ 3,11,57,643/-. The sale consideration was accepted but cost of acquisition claimed by assessee was examined. AO adopted ₹ 550/- per Sq. Ft., as market value for 427.98 Sq.ft., as against assessee s rate adopted at 1100/- per Sq.ft. He also adopted same value on the further area of 4,000 Sq.ft., claimed at 2,000 Per Sq.ft., by assessee thereby determining the excess cost of acquisition which has ultimately increased the capital gains to ₹ 3,93,06,085/-. Thus, .....

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n the case of Himayathnagar Project. Ld. CIT(A) also noticed that the cumulative difference on all the projects in the valuation between assessee s book values and departments valuation was only 0.1% and held that the difference is negligible by all standards. Thus, CIT(A) deleted the additions/disallowances made by the AO under head business income . 3. Coming to the issue of re-determination of Long Term Capital Gains, Ld. CIT(A) after considering the detailed submissions of assessee, however, .....

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spect of Himayathnagar Project. 5. The other ground is with reference to determination of value at ₹ 625 per Sq. ft., as against ₹ 550/- per Sq. ft., which Revenue contends that the Ld. CIT(A) does not have any basis for calculations. 6. After considering the rival submissions, we are of the opinion that there is no merit in Revenue s appeal. In fact while computing the business income, assessee has claimed certain cost of construction and most of the amounts were spent in earlier ye .....

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do not see any merit in Revenue s appeal on Ground Nos. 2 & 3. 7. Ground No. 4 is regarding determination of cost of acquisition which issue is agitated by assessee in their appeal and will be considered in that appeal. ITA No. 190/Hyd/2012: 8. As briefly stated above, assessee is questioning the determination of cost of acquisition at ₹ 625/-by Ld. CIT(A) which was increased from ₹ 550/- adopted by the AO, whereas assessee has adopted cost of acquisition at ₹ 2,000/- per .....

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land was under litigation and the matter was pending before the Hon ble Supreme Court. The litigation was in between the original owners i.e. (1) Mohd. Kazam Ali Khan & his family members (2) Mrs.Qaisarunnisa Begum and Mis. Shasun Finance Ltd. At that point of time the assessee company entered into the picture and agreed for certain terms and conditions which were incorporated in the documents No.1604/2000 dated 31.05.2000 and Doc.No.855/2001 dated 31.01.2001 respectively. As per the terms .....

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mentioned owners of the land and M/s.Shasan Finance Ltd. Originally there were some other claimants known as Mr.Mustafa Ali Khan & Others in respect of the same property. They already entered into a development agreement with M/s.Shasan Finance Ltd. As per that document Mis Shasan Finance Ltd should allot 11000 sq ft to Mr.Mustafa Ali Khan & Others in exchange of their right in the above mentioned site. Therefore, the assessee company entered into an agreement of sale cum irrecoverable G .....

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regard to the claim of right in the property by Mr.Mustafa Ali Khan & Others, the assessee company entered into an agreement with two of six claimants who agreed for a settlement by surrendering their respective rights in the constructed area of 1571 sq ft with undivided share ofland vide documents nos.3757/2009 dated 02.12.2009 and doc.no. 3839/2009 dated 03.12.2009. Thus, as can be seen from the above details the assessee settled the matters with M/s.Shasan Finance Ltd and also two of the .....

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of 3550 sq. yards to the same vendee and the resultant capital gain was declared for tax purpose for the asst. year 2007- 08. Thus, the present transaction is in respect of the balance of developed land of2261 sq. yards with constructed area. As per the sale documents mentioned above the assessee company has to provide the land area of 5811 sq. yards with super structures. However, as submitted earlier the claimants of the property i.e. Mr.Kazam Ali Khan & Others were having a title for cons .....

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the constructed area of 11000 sft for which Mr.Mustafa Ali Khan & Others were having a right, the assessee bought back 3142 sft vide documents nos.3757/2009 dated 02.12.2009 and doc.n03839/2009 dated 03.12.2009. With the above background the issue came up for consideration of the assessing officer during the course of scrutiny assessment proceedings was whether the assessee was correct in adopting ₹ 2000 per sft for 4000 sft constructed area and rate of ₹ 1100 per sft towards the .....

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gain. In the light of above facts the issue now for adjudication before the Hon'ble CIT(A) is whether the assessing officer was correct in adopting the rate at ₹ 550 per sft in the process of buy back of the relevant properties instead of rates ₹ 2000 per sft as well as ₹ 1100 per sft adopted by the assessee company . 9. Ld. CIT(A) adopted value of ₹ 625 per sft. After considering the rival considerations, we do not see any reason in the action of the AO and CIT(A) i .....

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et value on the day of offering the gains. As seen from the agreement of sale and the amounts paid by assessee which are not disputed by the Revenue for the purpose of determination of capital gains, we are of the opinion that the rates adopted by assessee are reasonable. Moreover, in determining the value at ₹ 550/-, the AO adopted only the value of cost of construction on the structure, ignoring the corresponding land value. Therefore, the very premise on which AO has restricted the amou .....

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ce assessee s grounds are allowed, Revenue s contention on the order of the CIT(A) in Ground No. 3 above in their appeal become infructuous and accordingly, the same is also rejected. 10. In the result, assessee s appeal is allowed and Revenue s appeal is dismissed. ITA No. 1218/Hyd/2013: 11. This is an appeal by assessee against the order of CIT-IV, Hyderabad u/s. 263 dt. 26-03-2013. On noticing that AO has not considered the provisions of Section 50C while determining the capital gain, Ld. CIT .....

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., as certified by the stamp authority was considered the value was taken at ₹ 12,02,50,000/-. It was further submitted that assessee has sold the property as business transaction on 31-03-2008 but the document was registered much later in December, 2009 and the valuation of ₹ 14,15,60,000/- pertaining to date of actual registration was subsequent to the closure of assessment year. Ld. CIT however, did not accept and directed the AO to examine and adopt the value after giving due opp .....

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the rival contentions, we are of the view that there is no justification for the CIT to invoke the powers u/s. 263. As noticed in the appeals considered earlier on the orders u/s. 143(3), AO was very much aware that assessee has converted the fixed asset into stock-in-trade as on 01-01-2008 and he has computed the Long Term Capital Gain on that day by making certain adjustments to the cost claimed by assessee. Not only that, AO also has brought to tax the business profits of subsequent sale and .....

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date of conversion which was accepted by the AO. In view of this, question of invoking the provisions of Section 50C as on 31- 03-2008 does not arise. Moreover, as seen from the registered document, the value of ₹ 14.51 Crores pertain to the date of registration which was in the year 2009 but not on 31-03-2008. On that fact also, the valuation of ₹ 14.51 Crores cannot be adopted as on 31-03-2008. Since the asset sold on 31-03-2008 is no longer a fixed asset and being stock-in-trade, .....

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