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Ambalal Sarabhai Enterprises Ltd. Versus Dy. Commissioner of Income-tax, Circle 1 (1) (1) , Vadodara

2017 (9) TMI 845 - ITAT AHMEDABAD

Capital gain computation - fair market value issue as on 01.04.1981 qua the impugned capital asset sold in the relevant previous year - Held that:- There is hardly any quarrel that both the lower authorities have made it clear in their respective orders that the very issue had arisen in preceding assessment years (supra). Mr. Soparkar at this stage refers to this tribunal’s order in assessment year 2008-09 and 2009-10 pertaining to assessee’s appeal itself has decided on 11.04.2016 adopting the .....

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y paid back to its vendee within two days from both sale deed and MOU as expenditure u/s.48 (i) &(ii) - Held that:- It emerges from assessee’s registered agreement to sale dated 28.07.2008 at page 102 containing clause 9 that the vendee had agreed to purchase the land in the same zone i.e. industrial than commercial on as it is basis. The said vendee further undertook to bear all liabilities/responsibilities of costs and expenses etc. for the purpose getting approval relating to abovestated conv .....

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ndustrial to commercial did not come within 180 days. We therefore see no merit in its contention raised that it had to part with the impugned sum as an obligation in the nature of retention money. Assessee has not been able to prove that the impugned expenditure to be falling under Section 48 (i) & (ii) of the Act for the purpose of computing consequential capital gains. - Correctness of Section 14A disallowance followed by consequential addition in book profits u/s.115JB - Held that:- CIT( .....

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he impugned addition. The Revenue’s fourth substantive ground is therefore declined whereas assessee’s substantive ground is dismissed as rendered infructuous being consequential in nature. - Expenditure on various heads like barricading of main gate side with material and labour work, scooter parking shed opposite main gate, waterproofing of civil work of boiler house - Held that:- Uphold the CIT(A)’s order treating the impugned repair expense as revenue in nature - ITA Nos. 953 And 1314/Ah .....

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rt the Act . 2. We come to rival pleadings. The assessee raises four substantive grounds in its appeal inter alia averring that the CIT(A) has erred in law as well as on facts in disallowing ₹ 1,20,097/- @ 5% of total expenditure claim of ₹ 29,46,561/-, in rejecting approved government valuer s report adopting fair market value of the capital asset sold as on 01.04.1981 thereby restricting the said valuation from ₹ 2200/- per sq.mtr. to ₹ 550/- per sq.mtr. in lower appell .....

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grounds. It challenges correctness of the lower appellate order inter alia deleting disallowances/addition of expenses aggregating to ₹ 6,84,716/-, capital expenses of ₹ 4,91,318/- relating to replacement or major renovation work, in directing the assessing authority to adopt FMV of assessee s capital asset as on 01.04.1981 to be @ ₹ 550/- per sq.mtr. instead of ₹ 250/- and in deleting Section 14A r.w. Rule 8D disallowance of ₹ 49,03,488/-; as made in assessment or .....

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esponding substantive ground also raises the very issue since seeking to revive the entire disallowance sum of ₹ 8,04,813/- including telephone and vehicle expenses of ₹ 6,84,716/-. The CIT(A) admittedly has followed his predecessor s order in assessment year 1998-99 in restricting the impugned disallowance to that @5%. The Revenue fails to indicate any distinction on facts in the two assessment years. We therefore uphold the CIT(A) s order. Both parties fail in their first substanti .....

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r ₹ 33,53,80,000/-. Its registered valuer adopted cost of acquisition as on 01.04.1981 @ 2250 per sq.mtr. for 7600mtrs. The Assessing Officer observed in assessment order that the very issue had arisen between the parties in proceeding assessment year(s) as well wherein he had adopted cost of acquisition to be ₹ 250/- per sq. mtr. for the purpose of computing consequential capital gains. He therefore recomputed assessee s capital gains. The CIT(A) grants part relief to assessee in en .....

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2008-09 and 2009-10 pertaining to assessee s appeal itself has decided on 11.04.2016 adopting the said cost of acquisition as on 01.04.1981 has to be ₹ 980/- per sq.mtr. Both parties fail to indicate any distinguishing facts in the impugned assessment year. We therefore direct the Assessing Officer to adopt cost of acquisition on assessee s capital asset as on 01.04.1981 @ ₹ 980/- per sq.mtr. to be followed by re-computation of capital gains. The assessee partly succeeds in its grie .....

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see pleaded before Assessing Officer that the said MOU s conditions stipulated payment of the impugned sum in case the land in question would not be converted from industrial to commercial use within a period of 180 days from the date of conveyance deed executed on 02.04.2009. The assessee therefore claimed to have paid the sum in question back to the purchaser. It then adopted the balance sale price of ₹ 31,19,81,395/- for the purpose of computing consequential capital gains. It further r .....

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to be discharged on assessee s part. He quoted Section 48 of the Act to the effect that the impugned amount was not incurred wholly and exclusively in connection with the conveyance deed in question. 10. The CIT(A) affirms Assessing Officer s findings as under: 4.4.2. I have considered the AO's observations, appellant's submissions, the agreement of sale dated 28.07.2008, the register deed for conveyance of the land dated 02.04.2009 and the MOU referred to by the appellant dated 02.04.20 .....

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ender and vide tender dated 16.05.2008, the purchaser of the land quoted price of ₹ 33,53,80,000/-. The appellant company agreed to sell the land at this price to the purchaser after obtaining the approval of the Hon'ble Board for this purpose. Subsequently the agreement to sale dated 28.7.2008 was signed. Clause No. 9 of the agreement of sale states as follows: The said land has been agreed to be sold for the zone for which it is classified as at present. Ay proposed change use by the .....

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not at all concerned with the same. 4.4.2.1. Further to this, the deed of conveyance was executed on 02.04.2009. The deed clearly mentions that this being executed for the sale consideration of ₹ 33,53,80,000/-. Clause B of the sale deed also states that the representations made under the said agreement to sale dated 28.07.2008 are valid& true and correct and are deemed to be repeated herein. Thus, the condition incorporated in the agreement to sale that any change for the land use ha .....

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s been paid by the vendee to the vendor and the vendor has also acknowledge full receipts and realization of the same in the manner as narrated on Page No. 7 & 8 of the deed of conveyance. Thus, the entire amount had been received by the appellant on the date of execution of sale deed itself. 4.4.2.2. Now, the appellant has claimed that another MOU was executed on 02.04.2009 as per which the appellant company agreed to refund back certain part of the sale consideration. This MOU states that .....

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the vendee. Thus, this MOU is in direct contravention to the agreement to sale entered on 28.07.2008 which has been fully incorporated in the deed of conveyance made on 02.04.2009. As per these legally executed documents, the appellant: was not at all required to make any effort for revised land use of the land and the entire responsibility was on the purchaser. Thus, by entering into this MOU, the appellant has taken over the liability of the purchaser voluntarily. Such action of the appellant .....

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this amount is not on account of diversion of income at source. The income of the appellant accrued as per the narration made in the agreement to sale and deed of conveyance. Such income is liable for income tax and any .payment made by the appellant after receipt of the income and that too voluntarily and as a gratuitous act cannot be allowed as a deduction in computation of income of the appellant. The appellant was under no obligation to refund such amount to the purchaser as the sale consid .....

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ability of some other person is not deductible in computation of its income. For this reliance is placed upon the decision in the case of 226 ITR 680(Mad), Kumudam Printers Pvt. Ltd., in which Hon'ble Madras High Court has held as follows: the liability to pay ₹ 1.75 lakhs was not that of the assesseecompany and the assessee-company did not have anything to do with the said liability of the vendor. The payment of the amount by the assesseecompany was only a voluntary and gratuitous pay .....

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d that the AO has rightly considered the sale consideration mentioned in the deed of conveyance for the purposes of computation of capital gain in this case. Besides the payment made by the appellant to the purchaser subsequent to the registration of the land is not deductible as an expense as the same has not been incurred for the purposes of transfer of land, since the same has been paid as a gratuitous payment for liability of another party and is not a payment made for the purposes of transf .....

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n ble Mr. Justice B. J. Diwan (retired) and four other members, this committee invited sale tenders, the vendee herein offered purchase price of ₹ 33,53,80,000/-, the sale committee placed the same before the above Board who granted necessary approval in its order dated 27.05.2008 in assessee s application; respectively. It emerges from assessee s registered agreement to sale dated 28.07.2008 at page 102 containing clause 9 that the vendee had agreed to purchase the land in the same zone i .....

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ein about its MOU of the same date wherein it agreed to pay the amount in question of ₹ 2,33,98,605/- in the nature of retention money in case revised permission of conversion of the asset in question from industrial to commercial did not come within 180 days. We therefore see no merit in its contention raised that it had to part with the impugned sum as an obligation in the nature of retention money. 12. Mr. Soparkar refers to assessee s MOU page nos. 90 to 93 followed by impugned payment .....

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version did not come making it obligatory for the assessee to part with the impugned refund amount after the agreement in question. We again see no reason to accept this contention since the assessee s claim of having made the payment within two days does not inspire confidence in view of the abovestated overwhelming material going against the instant MOU s terms. Mr. Soparkar quotes various case laws i.e. Godhra Electricity Co. Ltd. vs. CIT (1997) 225 ITR 746 (SC), CIT vs. Axel Co. Ltd. (2013) .....

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0 (Mad.) in upholding tribunal s decision allowing gratuity liability of the said assessee. We however notice that in taking over agreement therein of the undertaking specifically included gratuity liability as against facts of the instant case wherein the assessee appellant has failed to prove that its MOU dated 2.04.2009 is in tune with registered documents (supra). We therefore see no justification in interfering with well thought CIT(A) s conclusion upholding Assessing Officer s action. 13. .....

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ird substantive ground raises the issue of disallowance of salary and wages of Packart Press Unit amounting to ₹ 28,78,876/-. Mr. Soparkar refers to abovestated co-ordinate bench order in preceding assessment year (supra) setting aside the very issue back to the Assessing Officer. Both parties are ad idem that there is no distinction on facts involved in the two assessment years. We therefore follow the very course of action herein as well in remitting the issue back to the Assessing Offic .....

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