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2016 (10) TMI 936 - ITAT MUMBAI

2016 (10) TMI 936 - ITAT MUMBAI - TMI - Applicability of section 50C - sale of development rights - power of the AO to refer the valuation to DVO after completion of assessment - AO adopted the valuation determined by the DVO - Held that:- The provisions of section 50C are deeming provisions. It is settled law and well accepted rule of interpretation that deeming provisions are to be construed strictly. Thus, while interpreting deeming provisions neither any words can be added nor deleted from l .....

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f has not been transferred by the assessee. Thus, in our opinion provisions of section 50C have been wrongly applied upon the impugned transaction. Thus, we reverse the action of lower authorities in applying the provisions of section 50C and in substituting any value other than the amount of actual sales consideration received by the assessee. - It is also noted by us that for the assessment year under consideration there is no other provisions on the statute which permit the AO to substit .....

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nesh Vyas (AR) For The Revenue : Shri Asghar Zain (DR) ORDER Per Bench: These appeals pertain to same assessee involving identical issues and therefore these were heard together and being disposed of by this common order for the sake of convenience. 2. During the course of hearing, arguments were made by Shri Dinesh Vyas, Authorised Representatives (AR) on behalf of the Assessee and by Shri Asghar Zain, Departmental Representative (DR) on behalf of the Revenue. We first take up assessee s appeal .....

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espect of 2 plots of land at Panchpakdi, Thane, based on the Stamp Duty value, as per his assessment order u/s 143(3) dated 31.12.2007 and subsequently, by Rectification order u/s 154 dated 8.5.2008, computing the long term capital gains based on the values assigned by the District Valuation Officer [hereinafter referred to as the DVO] in his report No. DVO/MUM/TOC/487/2007-08/685 dated 27.3.2008, as against the Appellant Company's claim to consider the actual amount of consideration receive .....

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o the DVO and in the absence of the valuation report from the DVO, proceeded with completing the assessment based on Stamp Duty value but stated in his order, that the same would be rectified, to give effect to the valuation as per the DVO. 1.3. The DVO had not considered all the relevant factors and impediments attached to the 2 plots of land in question and made his own assumptions for determining the FMV of the land. The fact that the actual consideration received by the Appellant Company, on .....

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and circumstances be duly considered and the AO be suitably directed in the matter. (Refer page 11 to 14, para 7.1 of the Assessment order and page 6 to 9, para 4.1 to 4.13 of the CIT(A) order) GROUND NO 2: SHORT TERM CAPITAL GAIN ON SALE OF RESIDENTIAL FLAT 2.1 The learned CIT(A) erred in upholding the AO's action of computing the short term capital gains based on the Stamp Duty value instead of actual consideration received by the Appellant Company on sale of a residential flat at Joyti D .....

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in the given circumstances. The Appellant Company prays that the relevant facts and circumstances be duly considered and the AO be directed in the matter, accordingly. (Refer page 14 to 16, para 7.2 of the Assessment Order and page 9, para 5.1 and 5.2 of CIT(A) order) GROUND NO 3: DISALLOWANCE U/S 14A 3.1. The CIT(A) failed to appreciate that the Appellant Company had not borrowed any amount for making investment in shares/units and all investments were made out of internal accruals and no inter .....

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e tax Rules, 1962. 3.3. The Appellant Company prays that the AO be directed to delete the disallowance under section 14A, as the Appellant Company has not incurred any interest cost or administrative cost for earning exempt dividend income. 3. During the course of hearing Ld. Counsel of the assessee submitted supplementary grounds to the original grounds and these are reproduced as under: Supplementary Grounds to Ground No.1 - Long Term Capital Gains on sale of Land: 1.5.Since the report of the .....

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deleted. 1.6 Since the report of the DVO had not been received by the AO within the period of limitation and passing of the assessment order, the valuation proceeding before the DVO had become invalid and bad in law and consequently, the AO could not thereafter rely upon the Report of the DVO for the purpose of making the Assessment. It is therefore prayed that the addition made in relation to the Capital Gains on transfer of land be deleted. 1.7. The reference to the DVO made by the AO is bad i .....

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y Finance Act 2012) and within its statutory limits and jurisdiction and therefore, it should be totally ignored. The DVO had no jurisdiction to ascertain the valuation of the land as on 1/4/1981 and therefore, his order is totally vitiated. Therefore, it is prayed that addition made in relation to Capital Gains on transfer of land be deleted. 1.9 The CIT(A) abdicated his duty and jurisdiction by not adjudicating upon the correctness of the Valuation Report of the DVO. Since the order of CIT(A) .....

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r dated 30/6/2011 in ITA No.31 27/Mum/10. Supplementary Grounds to Ground No. 2 - Short Term Capital Gains on Sale of Residential Flat. 2.3 Since the Appellant claimed before the Assessing Officer (AO) that the value adopted by the Stamp Valuation Authority exceeded the fair market value of the property, it was obligatory on the part of the AO to refer under section 50C(2)(a), the valuation of the Flat to the District Valuation Officer (DVO) and as he failed to do so, he had no authority to adop .....

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principles of natural justice and specific statutory provisions, the addition made and sustained in orders respectively, ought to be deleted without giving them any further opportunity of passing a fresh order (as held by a coordinate Bench of the Hon'b!e Tribunal in Tata Chemicals Limi ted vs. DCT, Order dated 30/6/2011 in ITA No.3127/M/10) . 3.1. During the course of hearing, it was submitted by the Ld. Counsel that supplementary grounds are primary grounds, therefore, they should be take .....

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asis of Development Agreement dated 8th June 2004 entered into by the assessee with M/s Sheth Developers Private Ltd. During the course of assessment proceedings, the AO asked the assessee that why not sales consideration should be substituted with the value adopted by the stamp valuation authority in view of section 50C of the Act. In response, the assessee objected to the value adopted by the stamp valuation authority and also objected to the very invoking of section 50C of the Act upon the im .....

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nt Rights of the land accordingly. 3.3. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein exhaustive submissions were filed and the addition made by the AO was challenged on many grounds. But, Ld. CIT(A) did not find any force in any of the submissions made by the assessee and it was held by him that provisions of section 50C were rightly invoked and the AO had rightly adopted the figures of valuation determined by the DVO by suitable amending his assessment order u/s 1 .....

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f the DVO was not received by the AO before framing of the assessment order therefore, power to make valuation reverts back to the AO. Under these circumstances, AO was bound to make the valuation applying his own mind independently. Thus, under these circumstances, the AO could not have adopted any other value as assessed by any other authority. Reliance in this regard was placed on the Judgment of Hon ble Calcutta High Court in the case of Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. vs .....

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eport for substituting the amount of sales consideration in the hands of the assessee. The reliance was placed in this regard on the judgment of Hon ble Calcutta High Court in the case of Reliance Jute and Industries Ltd. v. ITO 150 ITR 643 and Bhalanath Majumdar v. ITO 221 ITR 608. It was also submitted that no reference can be made u/s 55A for the purpose of determination of sales consideration on the ground that the expression full value of consideration cannot be construed as having referenc .....

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rd has been placed on the judgment of Hon ble Bombay High Court in the case of CIT v. Puja Prints 360 ITR 697 (Bom) & Amiya Bala Paul 262 ITR 407(SC). 3.6. Lastly, it was submitted without prejudice to the above submissions that in any case transaction of sale of Development Rights is not covered u/s 50C. In support of this argument, Ld. Counsel drew our attention on other allied provisions of the Act such as section 269A of the Act. Ld Counsel vehemently argued that on this ground itself ad .....

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ment of the assessee which is directly on the scope of section 50C. The perusal of section 50C shows that the section 50C shall be applicable where the consideration received as a result of transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of State Government………. Thus, it is noted that the term capital asset mentioned in the section specifically refers and confines its meaning .....

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tion 50C. For example, in section 269A, the expression immovable property has been defined as under: Immovable property means- (i) any land or any building or part of a building, and includes, where any land or any building or part of a building is transferred together with any machinery, plant, furniture, fittings or other thing which machinery, plant furniture, fittings or other things also. Explanation- for the purposes of this [sub-clause], land building part of a building, machinery, plant, .....

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he perusal of the definitions given in these sections when compared with section 50C shows that legislature was conscious about the proper expression to be used as per its intention, scope, object and purpose of the section 50C, wherein it has been expressly mentioned that capital asset should be land or building or both . It has not been mentioned that any type of rights shall also be included in the definition of capital assets to be transferred by an assessee. 3.11. The provisions of section .....

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ded that since the impugned capital asset transferred by the assessee upon which long term capital gain has been computed by the AO is on account of transfer of Development Rights in the land of the assessee. The land itself has not been transferred by the assessee. Thus, in our opinion provisions of section 50C have been wrongly applied upon the impugned transaction. Thus, we reverse the action of lower authorities in applying the provisions of section 50C and in substituting any value other th .....

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see on the preliminary objection itself and therefore we are not dealing with other arguments at this stage as these have been become academic in nature. Thus, supplementary ground nos. 1.5 to 1.10 and original ground nos.1.1 to 1.4 are partly allowed with our directions as given above. 4. Grounds No.2.1 & 2.2 of the original grounds and 2.3, 2.4 & 2.5 of the supplementary grounds deal with the grievance of the assessee with respect to action of the lower authorities in computing the sho .....

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der these circumstances, as per provisions of section 50C, before substituting the amount of sales consideration shown by the assessee, the AO was duty bound to refer the matter to the valuation officer and also comply with the procedure as has been further described in section 50C. It is brought to our notice that the AO failed in its duty to do so. Similarly, Ld. CIT(A) has also upheld the action of AO without giving any proper reasoning. Under these circumstances, we find it appropriate to se .....

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adequate opportunity of hearing to the assessee and after considering the entire material held on record on objective basis, this issue shall be decided afresh. These grounds may be treated as allowed for statistical purposes. 5. Ground No.3: In this ground, the assessee has challenged the action of AO in making the disallowance u/s 14A. 5.1. It is noted from the perusal of the order of the Ld. CIT(A) that Ld. CIT(A) has directed the AO to follow the order of the Tribunal in assessee s own case .....

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hat amendment in clause (ii) of explanation 1 of second proviso to sub-section (2) of section 115JB inserted by the Finance Act of 2006 w.e.f. 01.04.2007 was clarificatory in nature and thus he upheld the action of AO in applying the amendment in the impugned assessment year. 6.1. With the assistance of the parties before us, it is noted by us that the amended provisions read as follows: the amount of income to which any of the provisions of section 10(other than the provisions contained in clau .....

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cannot be applied retrospectively in the impugned assessment year i.e. A.Y. 2005-06. Thus, we direct the AO to recompute the amount of book profits and tax payable u/s 115JB without considering the aforesaid amendment. Thus ground may be treated as allowed. 6.3. As a result appeal of the assessee is partly allowed. Now we shall take up assessee s appeal in ITA No.5331/Mum/09. The assessee has filed the appeal on following grounds: GROUND NO 1: LONG TERM CAPITAL GAIN ON SALE OF LAND The learned C .....

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ered by him at the time of assessment, without the values assigned by the DVO. The CIT(A) further erred in upholding the actions of the AO in considering the Fair Market Value (FMV) as on 1.4.1981 as ascertained by the DVO in respect of the aforesaid plots of land. 1.2. The CIT(A) ought to have appreciated that the 2 plots of land certain negative factors and impediments and should have considered the actual facts and circumstances and consideration received by the Appellant company for transfer .....

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e course of hearing it was submitted by the Ld. Counsel of the assessee that in case relief is provided in the identical grounds of ITA No.5330/Mum/09, then this appeal may be treated as infructuous. 7.1. Since we have allowed the relief in identical grounds of ITA No.5330, therefore this appeal is treated as infructuous and dismissed as such. Now we shall take up appeal filed the Department in ITA No. 5320/Mum/09. The revenue filed appeal on the following grounds: On the facts and in the circum .....

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addition amounting to ₹ 12 lacs made by the AO on account of Wealth tax in computing the book profit u/s. 115JB. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. restored. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary. 8. Ground No.1: In this ground, the revenue has agitated the action of Ld. CIT(A) for directing the AO to allow the trade guarantee provision of ₹ 528.36 lakhs m .....

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