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2016 (10) TMI 218 - ITAT CHENNAI

2016 (10) TMI 218 - ITAT CHENNAI - TM - Slump sale - valuation of property - capital gains on building and rental income - uideline value adopted by the Stamp Valuation Authority for the purpose of Stamp Duty - Held that:- 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, the assessee said to be rectified the sale deed through registered rectific .....

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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 &# .....

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ty. 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 mentioning the sale value at figures as compared to in words and this type of errors can be said that typographical errors happened in the normal course. The assessee with the malafide inten .....

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- 4240312I.T.A.No.817/Mds/2016 - Dated:- 18-8-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Department : Shri V. Vivekanandan, CIT For The Assessee : Shri Philip George & Shri, M.P.Senthil Kumar, Advocates ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the Revenue and the cross objection of the assessee are directed against the order of the Commissioner of Income-tax (Appeals)-6, Chennai, dated 28.1.2016 for assessment year 2012- .....

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eed. 2.3 The CIT(A) has erred in accepting the argument of the assessee that the mistake had occurred in consideration mentioned in the original sale deed which was to a huge extent. 2.4 The CIT(A) ought to have appreciated that the Valuation Officer had rebutted the objections raised by the assessee pointwise in his final report. 2.5 The CIT(A) erred in ignoring the agreement dt.14.06.2011 being a very vital evidence in arriving at the value of the property. 2.6 The CIT(A) while observing that .....

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. 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 th .....

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ly to complete the legal formality by way of registration, consequent to the transfer of the said property by way of a 'Slump Sale Agreement' dated 31.03.2011. It was contended that vide the Slump Sale, the vacant possession of the property on the date of agreement was transferred for a consideration of ₹ 3,15,00,000/-. The Assessing Officer, for the reasons mentioned in the order rejected the assessee s claim for slump sale, and held that the impugned transaction was liable for ca .....

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nadvertently crept in'. The rectification deed mentioned the following: (i) the sale of the property was at book value of ₹ 57,533/- for the land and ₹ 1,69,853/- towards the building totalling to ₹ 2,27,386/- (ii) The possession of the property was handed over on 31.3.2011 and not on the date of principal deed dt 9.11.2011. (iii) The address of the property mentioned as Door No.2/79, Old Mahabalipuram Road in the principal deed is not correct, as the impugned property has .....

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he assessee LLP filed its objections to the proposed valuation on 27.03.2015. The AO finalized the assessment on 31.03.2015 assessing the value of the property at ₹ 20,74,60,400/- being the guideline value adopted by the Stamp Valuation 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 i .....

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: 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, which are germane to the operations of an undertaking had been separate .....

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s the capital gains tax. This fact has not been disrupted by the appellant company in their written submissions in this appeal. The CIT(A) held that the Assessing Officer had rightly rejected the claim of the assessee company of the impugned transaction being a slump sale. As such, the CIT(A) dismissed the grounds of the assessee. 6. Regarding the valuation of the property, the CIT(A) observed that guideline value for Gangai Amman Koil Street is ₹ 636/- per sq ft and for the Pillaiyar Koil .....

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400/- equivalent to the guideline value adopted by the Stamp Valuation Authority for the purpose of stamp duty. This fact is evident from Para No.1 at Page 3 of the registered sale deed dt. 09.11.2011 for transfer of property by the assessee, which reads as follows: "That in pursuance of the said agreement and in consideration of ₹ 20, 74, 60,400/- (Rupees Twenty Crore Seventy Four Lakh Sixty Thousand Four Hundred only) paid by the PURCHASER to the VENDOR, the receipt of which sum the .....

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ed, 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 ord .....

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rectification deed' dt.17.12.2014 without any evidence whatsoever, to substantiate their claim, cannot be accepted. The 'rectification deed' of the assessee claims that the transfer of the property took place at book value on 31/03/2011 (Asst Year 2011-12) and not on 09/11/2011 (Asst Year 2012-13) as per the Sale Deed. The Assessing Officer did not accept this argument of the assessee while passing the Assessment Order and the Assessment was completed for the Asst Year 2012-13, consi .....

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ld. CIT(A) has erred I concluding that the sum of ₹ 20,74,60,400/- was never received by the assessee company, which is against the contents of the sale deed itself. " The 'rectification deed' dt.17/12/2014 seeks to rectify certain mistakes in the original sale deed dt 09/11/2011 as mentioned in Page 2 of the 'Rectification Deed' which is reproduced as follows: "And whereas in the Principal Deed there are certain mistakes and inaccuracies have accidentally and ina .....

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ervation in Para 9.9 of the order, which is reproduced as under: "The AD, in his order, without rebutting the objections of the appellant company has invoked the provisions of Sec. 50C based on the guideline value of OMR. " It is to be stated that the objections raised by the appellant against the observations of the District Valuation Officer cannot be rebutted by the Assessing Officer but can only be rebutted by the District Valuation Officer. The Valuation Officer has rebutted the o .....

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rship 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 impugn .....

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operty more specifically mentioned in the Schedule 'C', alongwith the area map;" From the above, it is clear that Shri Ranvir R.Shah was the owner of the Eastern Portion of the property having direct access from OMR and which is adjoining the impugned property purchased by Shri Ranvir R. Shah by way of Sale Deed dt 9/11/2011. This has been rightly observed and mentioned in the Valuation Report by the District Valuation Officer. The Fair Market Value of a property will depend on the .....

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2011 has a direct link to this fact, which has been clearly brought out by the DVO in his Valuation Report. This vita observation of the DVO has been ignored by the ld. CIT(A) in deciding the case in favour of the assessee . Para 9.12 of the Order, in his comments on the assessee not disputing the value adopted by the Stamp Valuation Authority, the CIT(A) has stated as follows: ……In any case, in so far as the stamp duty is concerned, the is paid by the purchaser of the property, in .....

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7; 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( .....

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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 squarely applies to the case of the assessee as explained below: 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 ₹ 2,9101- per sqft. at which the impugned property has been .....

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cie rate prevailing in the area, indicating that the guideline value as on the date of transfer could be much more than the one fixed by the government authorities at an earlier date. The District Valuation Officer, in his valuation of the property, has rightly applied this principle by providing for incremental value of the guideline value on account of appreciation from the last guideline value fixed on 01/08/2007. Thus, the decision of the CIT(A) is against the spirit of the decision of the H .....

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idered the objection filed by the assessee at various stages against the proposal of valuation of property by DVO. According to the ld. AR, the subject property access road is only Gangai Amman Koil Street and Pillaiyar Koil Street and not the OMR. The Sale Deed dated 09.11.2011 registered as Doc. No. 7497/2011 executed by the assessee in favour of Mr. Ranvir R. Shah on the North and West, the access road are mentioned as Gangai Amman Koil Street and Pillaiyar Koil Street respectively. Attached .....

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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 ₹ .....

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/79, Old Mahabalipuram Road, Thoraipakkam, Chennai 600 097 on the Eastern side of the subject property was owned by Mr. Ranvir R. Shah. The definition of fair market value as per section 2(22B) of the Act which reads as under: fair market value in relation to a capital asset meansITA (i) The price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) Where the price referred to in sub-clause(i) is not ascertainable, such price as may be determine .....

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llenged stamp duty levied for subject property by Sub Registrar. While arriving at the fair market value, the DVO is required to consider what price the property would fetch if it is sold in the open market. As per clause (b) to subsection (2) of section 50C, the value adopted by the stamp Valuation Authority should not have been disputed in any appeal or revision or reference before any authority, Court or High Court. The ld. LD. A.R further submitted that the reference u/s 50C(2) was not made .....

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ed the objection in the proper perspective and given evasive reply to uphold his draft valuation report. He further submitted that while replying 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 .....

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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 on eastern side of the subject property. As per the ld. Ld. A.R , the definition of fair market value the valuation officer has to estimate the value that it would fetch in .....

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t correct in considering the extraneous factors viz. the Purchaser from the assessee was owning another property abutting OMR will not in any way reflect or influence the fair market value of the subject property. 13. The ld. A.R further submitted that the DVO is not correct in adopting the base market value of the property under the heading Calculation at ₹ 2910/- per sq ft applicable for OMR as per the letter from the SRO, Neelangarai, to the DVO vide No.180/2015 dt 19.3.2015 without con .....

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sale deed was executed on 9.11.2011 in respect of property consisting of land and building at No.2/79, Okkiyam, for a consideration of ₹ 20,74,60,400/-. However, the assessee offered no capital gains in the return of income. It had claimed that it was slump sale for a consideration of ₹ 3,15,00,000/- and computed the capital gains on slump sale for assessment year 2011-12 as follows: Sale consideration Rs.3,15,00,000 Net worth Rs.3,14,98,548 Capital gain on slump sale ₹ 1,451 .....

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eed 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 ₹ 2,27,38 .....

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refer to section 50C which is as under: 50C(1) Special provision for full value of consideration in certain cases. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the .....

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tamp valuation authority under Sub-section (1) has Hot been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court. the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of Sub-sections (2), (3), (4), (5) and (6) of Section 16A, Clause (i) of Sub-section (1) and Sub-sections (6) and (7) of Section 23A, Sub-section (5) of Section 24, Section 34AA, .....

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here the value ascertained under Sub-section (2) exceeds the value adopted or assessee by the stamp valuation authority referred to in sub-section (1), the value so adopted 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 t .....

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cial 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 stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capita .....

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e with Section 55A of the Income-tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and shall take the full value of consideration to .....

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s than the value adopted or assessed by an authority of State Government for the purposes of stamp duty in respect of such transfer. Sub-section (2) thereof is applied in a situation where assessee claims before the Assessing Officer that the value adopted by State valuation authority has not been disputed in appeal, revision or reference before any authority ,Court or High Court. Under that situation, the Assessing Officer may refer valuation of the capital asset to a Valuation Officer and wher .....

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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 m .....

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gistered rectification deed and lowered the sale consideration to ₹ 2,27,386/-. The valuation by DVO was under sec. 50C was at ₹ 20,48,38,430/-. The Assessing Officer considered the original sale deed value reflected in the original sale deed dated 9.11.2011 at ₹ 20,74,60,400/- which is higher than the value determined by the DVO at ₹ 20,48,38,430/- and accordingly, calculated the capital gains. In our opinion, DVO s valuation to be considered for calculating the capital .....

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. The material brought on record by the assessee does not show that the valuation made by the DVO in any way adversely affect the fact that he has not taken the facts while valuing the property u/s 50C of the Act. The other contention of the ld. AR is that the DVO has not given any credence to the rectification deed dated 17.12.2014 though it was available at that time. In our considered view, this objection has no merit because what has to be compared as per sec. 50C(3) is the DVO s report and .....

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that it was not meant to apply to such facts. Section 94 of the Indian Evidence Act, 1872 also stipulated the same. Further, it is to be noted that sale deed is an important legal document for transfer of ownership of the property from the seller to the buyer which was prepared with utmost care. Errors may occur in a sale deed at times. 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 dim .....

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fter 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 consci .....

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ss 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 mentioning the sale value at figures as compared to in words and this type of errors can be said that typographical errors happened in the normal course. The assessee with the malafide intention, after a period of three years, changed the consideration which cannot be appreciated by this Tribunal. Accordingly, we are of the opinion that the considera .....

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hich was introduced with effect from 1.4.2003 is applicable from assessment year 2004-05. 22. In the result, the Revenue s appeal is partly allowed. 23. Coming to the cross objection filed by the assessee, Ground No.1 with regard to slump sale is already adjudicated in earlier part of this order while disposing of the Revenue s appeal. As such, this ground requires no specific adjudication. 24. Ground No.2 is with regard to valuation of property. Since we have reversed the order of the CIT(A) in .....

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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 .....

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