TMI Blog2016 (10) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... tnesses. Being so, any apparent error noticed after the execution of the sale deed could be rectified by rectification deed. In the present case, the assessee wants to rectify the total consideration paid and received by other parties which is clearly mentioned in the sale deed by substituting the sale consideration at ₹ 2,27,386/- in place of original sale consideration of ₹ 20,74,64,400/-. This is not a factual error pertaining to this transaction and the reason submitted by the ld.AR for rectification is shocking to the conscious of the Bench. In our opinion, such rectification cannot be given any credence and it cannot be said that it is bona fide. The assessee’s contention is that the purchaser also agreed that the consideration passed was only ₹ 2,27,386/- and actually the consideration of ₹ 20.74,64,400/- is not at all passed to the other party. We cannot appreciate this argument of the assessee’s ld. AR. We do not say that there cannot be chances of occurring some mistakes. It may happen in the process of execution of documents and that mistake cannot be to such exent of changing the consideration in such a manner. There can be typing errors in menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as per the registered .sale deed and signed by the parties. 2.7 The CIT(A) ought to have appreciated that the guideline value adopted by the Stamp Valuation Authority is reflective of the true market value of the property as the Stamp Valuation Authority has not deviated from the guideline value of ₹ 2,910/- per sq.ft. 2.8. The relied upon decision of the Supreme Court in the case of R. Sai Bharathi Vs. J. Jayalalitha Others is distinguishable from the instant case. 3. In the cross objection, the assessee has raised the grounds with regard to slump sale, valuation of property, capital gains on building and rental income. 4. Facts of the case are that the assessee LLP is engaged in the business of manufacture and export of readymade garments and fabrics. The Assessing Officer received AIR information that the assessee LLP had registered a document on 9.11.2011 for transfer of property for a consideration of ₹ 20,74,60,400/- but no capital gains was disclosed in the return of income for the assessment year 2012- 13. The assessee LLP was the owner of land and building situated at Door No.2/79, Old Mahabalipuram Road (hereinafter referred as OM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation Authority at the time of the registration, invoking the provisions of Section 50C of the Act. DVO, after countering the objections of the assessee LLP, issued his final valuation on 27.05.2015. In the report, the DVO estimated the Fair Market Value of the impugned property, as per the draft report, the amount being ₹ 20,48,38,430/-. 5. Regarding slump sale, the CIT(A) observed that as per Section 2(42C) of the Act, Slump Sale is a transfer of one or more undertakings for lump sum consideration, without values being assigned to the individual assets and liabilities. In view of the facts and circumstances of the assessee s case, the CIT(A) hold that the impugned transaction will not qualify for slump sale due to the reasons mentioned hereunder: a)There is no transfer of 'business' or 'undertaking'. The Director of the appellant company has admitted during the course of survey that there has been no business or manufacturing activity since A.Y.2002-03. b) Slump Sales involves Sale of the entire business or undertaking together without individual values being assigned. In the appellant s case, it is seen that the Plant and Machinery of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f scrutiny proceedings stating that the consideration for' the transferred property was only ₹ 2,27,386/-, as against ₹ 20,74,60,400/- as per the registered sale deed, cannot change the taxability of Capital Gains in the hands of the assessee. The learned CIT(A) accepting this single argument of the assessee has lead his wrong inference in the case. He further submitted that the learned CIT(A) has grossly erred in listing out the 'undisputed facts' in his order: At Para 9.8 of the order, the CIT(A) states as follows: I have carefully considered the rival submissions. Let us recall the undisputed facts and circumstances (emphasis supplied in the order) necessary to adjudicate on the matter. a. b. e. The amount of ₹ 20,74,60,400/- mentioned in the Principal deed was never received by the appellant company. .. . The learned CIT(A) has erred in making the above observation when the parties to the Registered document dt.9.1.2011 have reduced to writing under their signature that the consideration of ₹ 20,74,60,400/- had passed to the Seller from the Purchaser. The change of this position by the parties to the sale deed in the 'r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer but can only be rebutted by the District Valuation Officer. The Valuation Officer has rebutted the objections raised by the assessee, point-wise, in his final report. The learned CIT(A) has erred in ignoring the agreement dt. 14/06/2011, being a very vital evidence in arriving at the value of the property. The agreement dt.14/06/2011 is the retirement deed between the assessee company and Shri.Ranvir R Shah (Le between the partners of M/s.R K Textiles (India), a partnership firm in which the assessee company and Shri.Ranvir R Shah were partners). Shri.Ranvir R Shah retired from the said partnership on 31/0312011 and as per the above retirement deed, the Eastern portion of the property having direct entry from OMR (adjoining the impugned property on the Western side) was to be transferred in favour of Shi. Ranvir Shah. The learned CIT(A) has ignored the vital fact that as on the date of sale deed on 09/11/2011 of the impugned property, Shri. Ranvir R Shah, the Purchaser was already in possession of the Eastern portion of the property having direct access from OMR (adjoining the impugned property on the Western side). This is evident from Clause 7 at Page 5 of the Retire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of ₹ 20,74,60,400/ - by the assessee as per the Registered Sale Deed dt. 09/11/2011 and signed by the parties to the Registered Deed has been ignored by the CIT(A) without assigning any reason, in deciding the case in favour of the assesee. Further, the CIT(A), in Para 9.12 of the order, has referred to the decision of the Hon' ble Supreme Court of I ndia, in its judgement dt.24/11/2003 in the case of R.Sai Bharathi Vs J.Jayalalitha Others. The gist of the decision reproduced by the CIT(A) is as under: The guideline value has relevant only in the context of Section 47 A of the Indian Stamp Act (as amended by TN Act 24 of 1967) which provides for dealing with instruments of conveyance which are undervalued. The guideline value is a rate fixed for authorities under the Stamp Act for the purpose of determining the true market value of property disclosed in an instrument requiring payment of stamp duty. Thus, the guideline value fixed is not final rate only a prima facie rate prevailing in the area. (emptiasis supplied) The CIT(A) has failed to appreciate that the above observation of the Hon'ble Supreme Court of India in the said case squarel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om this property. According to the ld. LD. A.R , Deed of Rectification dated 17.12.2014 registered as Doc. No.9231/2014 also makes it clear that the subject property is Northern portion of Door No.2/79 Old Mahabalipuram Road, having access only from Gangai Amman Koil Street and Pillaiyar Koil Street and without any access from Old Mahabalipuram Road. The DVO has not replied nor considered the objectin that the subject property has no access to OMR. The DVO had more than once stated that the valuation of the subject property is arrived only on the basis of physical feature after physical inspection and nothing has been added extra in the calculation of the fair market value, but adopted the base market value of he property at ₹ 2,910/- per sq ft applicable for OMR as per the letter from the SRO, Neelangarai, to the District Valuation Officer vide No.180/2015 dt 19.3.2015, without considering the value of ₹ 636/- per sq ft for Gangai Amman Kol Street and ₹ 800/- per sq ft for Pillaiyar Koil Street, which are the access roads for the subject property. As regards the adjacent property owned by Mr. Ranvir R. Shah, the ld. ld. A.R submitted that the main factor influenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to objection No.1, the DVO made a reference to last para under About the property in the Valuatio Report for access t the property. The assessee s submission was that the subject property has no access to OMR. In the last para cited by DVO, which was aslso objected to by the assessee in Objection No.7, has after referring to Pillaiyar Koil Street o the West and Gangai Amman Koil Street on the North, stated that s the subject site has got additional advantage of multiple access from two or more streets in addition to the direct entry/access through OMR. This observation was made by DVO by referring to the following factors: (i) In between OMR and Eastern side of the subject property, another property comprised in Survey No.81[part] and 114[part] was owned by Mr. Ranvir R. Shah. (ii) Mr Ranvir R. Shah is one of the partner [sic] of the asse and R.K. Textiles (India) (iii) Assessee is also one of the partner of R.K. Textiles (India) (iv) Annexure A to valuation report reflects direct access to the subject property from OMR through the adjacent property owned by Mr. Ranvir R. Shah. (v) As per Retirement Deed dt 14.6.2011, Mr. Ranvir R. Shah was the owner of property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company has admitted during the course of survey that there was no business or manufacturing activity since assessment year 2002-03. Further the assessee has already sold the plant and machinery of the business of the assessee undertaking separately during the financial year 2005-06. It is also brought on record that the assessee has assigned separate specific value to the aeets even in the rectification deed dated 17.12.2014, a value of ₹ 57,533/- has been assigned to the land and value of ₹ 1,69,853/- assigned to the factory building. The Directors of the assesseecompany, during the course of survey admitted that it is not a case of slump sale. In view of this, the CIT(A) observed that the transaction is not a slump sale and liable for capital gain tax. However, he has given effect to rectification deed dated 17.12.2014 wherein total sale consideration was reduced to ₹ 2,27,386/- from ₹ 20,74,60,400/-. 16. Now coming to the value of the property, the assessee s main plea is that rectification deed executed on 17.12.2014 to be considered in the place of sale deed duly registered on 9.11.2011 showing sale consideration of ₹ 20,74,60,400/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 17.1 This section was introduced by the Finance Act, 2002 with effect from 1.4.2003. The intention of the Legislature for introducing this section can be gauged from the Explanatory notes to the amendment. For this purpose, we refer to the same as under: Introduction.- By the Finance Act, 2002 (20 of 2002), new Section 50C has been inserted (with effect from 1.4.2003). the scope and effect of such insertion have been elaborated in the following portion of the departmental circular No. 8 of 2002, dated 27th August, 2002, as under: 37. Computation of capital gains in real estate transactions. 37.1 The Finance Act, 2002, has inserted a new Section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Assessing Officer under Section 50C of the I.T. Act. Thus, the provisions of Section 50C(2) are on the lines of Section 55A with certain modifications. 17.3 Sub-section (3) of Section 50C is applicable where the value ascertained by the DVO exceeds the value adopted or assessed by stamp valuation authority as referred to in Section 50C(i). In that situation, the value so adopted or assessed by such Stamp Valuation Authority shall be taken to be the full value of consideration received or accruing as a result of the transfer. From this it follows that where the assessee does not object to the valuation made by the Stamp Valuation Authority, then that valuation would be adopted and where he objects and accordingly Assessing Officer makes a reference to the DVO and if valuation as per DVO is higher than the value as per Stamp Valuation Authority, then as per Sub-section (3), the valuation as done by Stamp Valuation Authority will be adopted as a sale consideration. 18. In the present case, the assessee shows the sale consideration through valid sale deed executed on 9.11.2011 at ₹ 20,74,60,400/-. However, after a long period of around three years, n 17.12.2014, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some of the common errors in a sale deed which could be rectified subsequently are as follows: (i) Incorrect description of the property such as its area and dimension (ii) Incorrect description of parties such as their names and addresses (iii) Incorrect location, address and survey number of the property (iv) Incorrect description of revenue records (v) Incorrect information about prior title deeds (vi) Incorrect details about ownership or power of attorney (vii) Typographical errors 20. The sale deed is executed on a stamp paper and signed by both the parties to the sale deed, witnessed by appropriate witnesses. Being so, any apparent error noticed after the execution of the sale deed could be rectified by rectification deed. In the present case, the assessee wants to rectify the total consideration paid and received by other parties which is clearly mentioned in the sale deed by substituting the sale consideration at ₹ 2,27,386/- in place of original sale consideration of ₹ 20,74,64,400/-. This is not a factual error pertaining to this transaction and the reason submitted by the ld.AR for rectification is shocking to the conscious of the Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication dated 23.9.2015 submitted the following issues for enhancement of assessment: (a) As per Annexures 1A to the sale deed, market value of building on the date of sale is ₹ 48,49,185/- WDV of such building as on 1.4.2011 as per the Depreciation Table is ₹ 1,69,853/-. Hence, the difference f ₹ 46,79,332/- needs to be assessed as Short Term Capital Gains under Section 50B of the Act ad taxed at the rate of 30% as against 20% levied. (b) As per the Statement recorded from the Managing Director of he assessee on 25.2.2015 the land with building at Lkkiam, Thoraipakkan was let out to M/s Fabrics India, and a rental of ₹ 2,50,000/- per annum was being received, and the same needed to be taxed in the present assessment year 2012-13. 26. On this, as regards the first issue, the CIT(A) observed that the building sold by the assessee was a depreciable asset. In case of depreciable asset, the WDV has to be taken as the cost of acquisition. The difference between the market value of the depreciable asset and the WDV as on the date of transfer is treated as short term capital gain and taxed as such. The CIT(A) further observed that it is immaterial t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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