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2016 (9) TMI 448 - ITAT KOLKATA

2016 (9) TMI 448 - ITAT KOLKATA - TMI - Short Term Capital Gain - transfer of cost of improvement being addition to building - whether the sale proceed received by Director of assessee-company was also forming part of the sale against the building occupied by assessee-company? - Held that:- From the facts of the case, we find that the assessee, after having incurred renovation expense on the land and building belonging to the Director of assessee-company, made the place as usable for the purpose .....

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ning stock - Held that:- Assessee has written off its stock of finished goods on the ground it became unfit for human consumption and for this reason stock of finished goods was for an amount of ₹ 7,19,336/- was destroyed. However the AO found that some sale out of the opening stock of finished goods was made during the relevant year. Therefore the claim of assessee was declined by AO. However, Ld CIT(A) deleted the addition made by AO as the amount involved of meager amount of ₹ 24 .....

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usiness of assessee as decreasing on yearto- year basis. Accordingly, we agree with the contention of Ld AR that the opening stock of finished goods became unfit for human consumption and same was duly debited in the profit and loss a/c of assessee. Ld DR has not brought anything contrary to the find of Ld CIT(A). - Addition on account of damage/destruction of entire opening stock of packing material - Held that:- AO made the addition on surmise and conjecture without bringing any evidenc .....

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al by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-I, Kolkata in appeal No.328/CIT(A)-I/C-1/09-10 dated 31.01.2011. Assessment was framed by DCIT, Circle-1, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 25.11.2009 for assessment year 2007-08. Shri P.J.Bhide, L d Authorized Representative appeared on behalf of assessee and Shri Sallong Yaden, L d Departmental Representative appeared on behalf of Revenue. 2. .....

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se company was not the owner of the asset when such cost towards addition to building was incurred by the assessee company, capitalized the same in its accounts, depreciation was claimed in the returns and was allowed in assessment. 3. Facts in brief are that assessee is a Private Limited Company engaged in the business of fruit processing. During the assessment proceedings, assessee has filed its return of income declaring Nil income . The Director of the assessee-company purchased land with g .....

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id expenses by making additions to the block of buildings, the assessee claimed depreciation allowance on the aforesaid amounts in its books of account. 4. In the instant case, Director of assessee-company was the owner of the land with godown but assessee was the owner of the expense incurred on flooring etc., as discussed above. The Director of assessee-company has sold land with godown along with the renovation work carried out by assessee for a consideration of ₹ 1,05,08,013/-. The sal .....

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y adopting the some basis which have been detailed on page 6 of the assessment order. However the details of the bifurcation between land and building stand as under :- Particulars Indexed cost of acquisition/improvement Amount Land & godown purchased by Shri M.N Mitra on 08.11.1990 for a total consideration of ₹ 1,85,625/- Rs.1,85,625/- x 519 / 182 5,29,337/- (A) Addition to building / godown made by assessee company in different years F.Y 1998- 99 Actual cost ₹ 2,74,071/- Rs.2, .....

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on of sale attributable to assessee company) 64,97,321/- As per the working of AO a sum of ₹ 64,97,321/- out of the sale proceeds of the land & building was pertaining to the building expenses incurred by assessee on which the assessee claimed the depreciation on the building. Therefore, there was arising STCG which worked out as under :- Sale price of the building of Rs.64,97,321/- Less cost of acquisition of ₹ 2,89,849/- Balance STCG of ₹ 62,07,472/- Accordingly, AO worke .....

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re fully supported by these two deeds. In the sale deed between Shri M.N.Mitra and the purchaser M/s Rajendra Trading Co., the appellant s name does not appear at all. The sale deed clearly states that it is Mr. Mitra and not the appellant who was the owner of the said property. The sale consideration was agreed and paid at ₹ 40.00 Lacs. The memo of sale consideration clearly states that a sum of ₹ 27,60,00/- was paid by the purchaser to the State bank of India, Commercial Branch ,NS .....

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ovision of Section 2(47) and Section 45 of the Act. I therefore, hold that the AO was not justified in holding that the appellant earned capital gain of ₹ 62,07,472/- and adding the same to the income of the appellant. The addition is therefore deleted. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 6. Before us both the parties relied on the orders of Authorities Below as favourable to them. L d AR submitted paper book which is running pages from 1 to 125 and .....

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he rival contentions and perused the materials available on record. From the aforesaid discussion, we find that Director of assessee-company has purchased a piece of land for a consideration which was given on rent free basis to the assessee. The assessee has incurred several renovation expenses and used that place as factory. We find that in the present case, the Director of assessee-company never charged any rent from the assessee in the year under consideration. The director sold land and bui .....

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ale proceed as towards the building of which the assessee was deemed owner and he worked out STCG for ₹ 62,07,472/- (649732 - 289849/-). However, same was deleted by L d CIT(A) on the ground that assessee was not the owner of the land and building. Now issue before us arise so as to whether the sale proceed received by Director of assessee-company was also forming part of the sale against the building occupied by assessee-company. From the facts of the case, we find that the assessee, afte .....

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f assessee-company. In view of above, we uphold the order of Ld. CIT(A). Revenue s appeal is dismissed. 8. Next issue raised by Revenue in Ground No. 2 & 3 is that Ld. CIT(A) erred in not adopting the value assessed by Stamp Valuation Authority as sale consideration. For this, Revenue s grounds reproduced below:- 2. That on the acts and in the circumstances of the assessee the Ld. CIT(A) has erred in law by holding that provisions u/s. 50C is not applicable in this case as it has come into f .....

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ation of sale in respect of capital asset being unit-2 when the stamp valuation Authority has adopted and assessed the market value of the property at ₹ 57,36,000/- which was considered in assessment as consideration of sale for the purpose of computing assessable capital gain. 9. The assessee during the year has sold its land and building of its unit No.2 in Barasat by an agreement dated 26.12.2006 to M/s Santex Mills Ltd. As per the agreement, the sale price was determined at ₹ 51 .....

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ared the income in the FY 2006-07 corresponding to AY 2007-08. However the property was finally registered in the name of the buyer on 09.04.2007 which is corresponding to the next FY. The AO during the course of assessment proceedings, observed that market value as determined by Stamp Valuation Authority as per the registered conveyance deed at ₹ 57.86 lakh. The AO accordingly, opined that sale consideration for the purpose of working out the capital gains should be the valuation as asses .....

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01.10.2009 and therefore same is not applicable for the year under consideration. Ld. CIT(A) after considering the contention of assessee has deleted the addition made by AO by observing as under:- 4.3 I have carefully considered the app s submission including the agreement for sale, Deduction of Conveyance, copies of which have been submitted along with the appeal. It is a fact that the appellant sold its Unit No.2 comprising of Land 7 Building in terms of agreement dated 26.12.2006 and handed .....

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orce only on 01.10.2009 and were not at all applicable for any transfer of capital asset, which has taken place prior to that date,, in this case, on 28.3.2007 is correct. I, therefore, direct the Assessing Officer to determine Long Term and Short Term Capital Gain for the assets arising to the appellant on sale of its Unit No. only with reference to the agreed sale price of ₹ 51,00,000/- and determine capital gains after allowing the index cost of land and written down value of the buildi .....

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ital gains. He, in support of his contention, relied in the order of Hon'ble jurisdictional High Court in the case of M/s Bagri Impex Private Ltd. vs. ACIT in GA No. 3302 of 2012, wherein it was held that amendment made in Sec. 50C of the Act came into force on 1.10.2009 vis-à-vis to make the provisions ease and simple but the intention of legislature was very clear that the value for the purpose of income tax shall be same as the value for stamp duty. By adopting devices to defeat th .....

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the case of M/s Bagri Impex Private Ltd. (supra) is no longer applicable to the instant case. He relied on the order of Ld. CIT(A). 12. We have heard rival contentions and perused the materials available on record. At the outset it was observed that this issue is pending before Hon ble Supreme Court in the case of Bagri Impex Pvt. Ltd. in civil appeal no. 17138/2013 and subsequently Hon'ble Supreme Court has stayed this judgment of Hon'ble jurisdictional High Court vide order 10-05-2013 .....

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ision of Hon'ble Supreme Court and decide the issue accordingly. This issue of assessee s appeals is remitted back to the file of AO and allowed for statistical purposes. 13. Next issue raised by Revenue is that Ld. CIT(A) erred in deleting the addition made by AO for Rs. 7,19,336/- on account of damaged opening stock. For this, Revenue has raised the following ground:- 4. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in directing to allow loss of ₹ 7,19,3 .....

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as submitted that assessee is a manufacturer and exporter of fruit and vegetable products. The raw materials used for the purpose of such production are green mango slices which are highly perishable. In the earlier year, assessee was maintaining stock of the raw materials as it was able to do the export business but the export business has gradually reduced and therefore the stock was piled up with the assessee. Besides, this there was a fire broke out in office building which has severely affe .....

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home consumption, finally, it was destroyed. However, AO during the course of assessment proceedings observed that assessee has made sale on 03.04.2006 and which was out of the available stock of finished goods of the earlier year. Therefore, the contention of assessee was not accepted by AO, accordingly, disallowed the same and added the sum of ₹ 7,19,336.00 to the total income of assessee. 15. Aggrieved, assessee preferred an appeal before Ld. CIT(A), whereas assessee submitted that some .....

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goods appears reasonable. Accordingly, L d CIT(A) deleted the addition made by AO. Being aggrieved by this order of L d CIT(A) Revenue is in appeal before us. 16. Before us L d DR vehemently relied on the order of AO whereas L d AR relied on the order of L d CIT(A) 17. We have heard the rival submissions and perused the materials available on record. From the aforesaid discussion, we find that assessee has written off its stock of finished goods on the ground it became unfit for human consumpti .....

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We also find that business of assessee was of fruit and vegetable and raw materials used for the business was of green mango which was highly perishable. The business of assessee was severely affected for the reason discussed above. From the facts we also find that assessee had to sale its property under distress to repay the loan of the bank. As such, we find that the business of assessee as decreasing on yearto- year basis. Accordingly, we agree with the contention of L d AR that the opening s .....

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rial. For this, Revenue has reproduced below:- 5. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in directing to allow loss of ₹ 3,75,123/- claimed by the assessee on account of damage / destruction of entire opening stock of packing materials by observing that the export sale have been made only of purchase specifically made for export without appreciating the fact that no such fact is brought into record and when assessee itself admitted that green mango was .....

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observed that during the year assessee made domestic sales of ₹ 24,501/- and export sale of ₹ 16,87,665/- without debiting any amount in the name of packing materials. The exports of finished goods were not possible without using packaging materials. Therefore, claim of assessee for the loss of packing material is disallowed and added to the total income of assessee. 20. Aggrieved, assessee preferred an appeal before L d CIT(A) whereas assessee submitted that goods were exported and .....

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