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Income-tax Officer, Ward 3 (3) , Hyderabad Versus Southern Steel Ltd.

2018 (1) TMI 582 - ITAT HYDERABAD

Capital gain computation - AO has invoked section 50C merely relying on the SRO value for the purpose of stamp duty - sale of assets by the bank through action due to default in paying debts - Held that:- The sale was distress sale - AO cannot adopt the sale consideration at ₹ 21,88,97,000/- and invoke section 50C. See CIT Vs. Shr. Chandra Narain Chaudhri [2013 (9) TMI 646 - ALLAHABAD HIGH COURT] . Accordingly, we deem it fit to dismiss the grounds raised by the revenue. - ITA No. 1220/Hyd .....

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come of Rs. Nil. The return of income was processed u/s 143(1) on 31/03/2014. The case was selected for scrutiny under CASS and accordingly notices u/s 143(2) and 142(1) of the Act was issued. 2.1 Assessee is engaged in manufacturing cold rolled strips and started commercial production in 1972. Over the years, assessee suffered continuous business losses resulting in erosion of the entire net worth of the company. The matter was referred to Board of Industrial Financial Reconstruction (BIFR), wh .....

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us land which can be sold. Accordingly, in order to fix the reserve price, IDBI obtained valuation report from V. Jagannath Rao & Associates dated 07/12/2009, as per which, sale value was determined at ₹ 8.02 crores. Subsequently, news paper advertisements were given in leading newspapers like business standards, the Hindu, Eenadu on 12/05/2010 for inviting tenders for sale of factory land. The Committee received various tenders and the tenders were opened by ASC Committee on 26/06/201 .....

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e at NIL. 2.3 Although, as per sale deed dated 17/05/2011, the sale consideration received by assessee was ₹ 12 crores, for the purpose of stamp duty, the market value of the property was assessed by Sub-registrar, Malkajgiri at ₹ 21,88,97,000/-. Therefore, the AO had invoked provisions of section 50C and adopted sale consideration at ₹ 21,88,97,000/- as against ₹ 12 crores adopted by the assessee and arrived at LTCG at ₹ 11,29,46,806/- and made the addition accordi .....

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se is whether Sec. 5OC can be invoked when the purchaser is a government undertaking i.e, Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC). In the real estate business it is prevalent that the substantial part of the consideration is unaccounted. In order to tax this unaccounted portion of consideration deeming provision was introduced as Section 5OC wherein when the consideration is less than stamp duty value, such stamp duty value is to be treated as full value consideratio .....

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herefore the entire transaction took place between two government entities where there is no scope for payment of any unaccounted money. In this back ground it is pertinent to mention the decision of Krishi Utpanna Bazaar Samitee Vs DCIT in ITA 2043/PN/2012 dtd 20-3-2014. The facts in this case were, the assessee Krishi Utpanna Bazaar Samitee was a state body of a Govt. of Maharashtra. It sold two properties in a public auction and received an amount of ₹ 91,00,000/- and ₹ 15,51,000/ .....

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discussion when the property was purchased by the government entity in public auction for an amount of ₹ 12 crores. The Assessing Officer cannot adopt the sale consideration at ₹ 21,88,97,000/- and invoke Section 5OC. In such circumstances when the consideration actually received was ₹ 12 crores and there is no scope for payment of any unaccounted money, the provisions of Section 5OC cannot be invoked. The Hon'ble Pune Tribunal also observed that the stamp duty paid by the .....

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the provisions of Sec. 5OC to the facts of the case in proper perspective. 4. Any other ground(s) that may be urged at the time of hearing. 5. The DR relied on the order of AO while the ld. AR of the assessee relied on the order of the CIT(A) as well as placed reliance on few cases, in particular, the decision of the ITAT Pune Bench in the case of Krishi Utpanna Bazar Samittee, ITA No. 2043/PN/2012, dated 20/03/2014, a copy of which is placed on record. 6. Considered the rival submissions and pe .....

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constituted Asset Sale Committee (ASC) to identify surplus assets in the company. Accordingly, it has identified factory land of 6.64 acres belonging to the company located at Industrial Estate, Moula Ali, Secunderabad. In order to fix the reserve price, IDBI obtained valuation report from the Registered Valuer i.e. Mr. V. Jagannath Rao and Associates on 07/12/2009, as per which, the registered value was at ₹ 8.02 crores. ASC invited tenders by advertising in the leading news papers. The C .....

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oint Secretary. b) Assessee was never a decision maker in the above process of sale and always remain as a sick industrial undertaking under distress for revival. c) The purchaser is another public sector undertaking of Govt. of AP. d) The operating agency i.e. IDBI has obtained valuation report from the registered valuer determining the value of the property at ₹ 8.02 crores, which is far below both the SRO value as well as the value at which it was sold. e) Moreover, the AO has not broug .....

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dence in assessing the valuation of property for calculating the capital gain. The deeming provision under Section 50C(1) of the Act is rebuttable. It is well known that an immovable property may have various attributes, charges, encumbrances, limitations and conditions. In the present case, it is stated that the property was under the tenancy of father of the purchaser since 1969 and thus the assessee being land lord of the property, offered it for sale to the tenant, which could not have attra .....

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t to determine the true, correct and fair market value on Which it may be purchased by a Willing purchaser Subject to and taking into consideration its situation, condition and of her attributes such as it occupation by tenant, any charge or legal encumbrances. ii) In the case of Krishi Utpanna Bazar Samittee Vs. DCIT, in ITA No. 2043/PN/2012 and others vide order dated 20/03/2014, on similar issue as in the case under consideration, observed as under: 8. We have carefully considered the rival s .....

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deration received or accruing as a result of such transfer for the purposes of computing capital gain in terms of section 48 of the Act. In the present case, the Revenue has sought to justify invoking of section 50C of the Act primarily on the ground that the value adopted by the Stamp Valuation Authority for the purposes of payment of stamp duty in respect of transfer of the two properties in question is higher than the actual consideration accruing to the assessee as a result of their sale. Th .....

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marketing of agricultural produce as a public utility. The moot question is as to whether the aforesaid proposition of the assessee is in accordance with law or not. 9. As noted earlier, the objective of section 50C of the Act is to substitute the value adopted by a Stamp Valuation Authority as the full value of consideration in cases where the actual consideration received or accruing to an assessee is lower than the value assessed by Stamp Valuation Authority. In other words, in such situation .....

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the cases where sale is conducted by Debt Recovery Tribunal and other Government or non-government organizations by Public auction. Considering the provisions of rule 4(6) of the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, the said Circular prescribes that in aforesaid cases the highest price as certified shall be considered as the fair market value for the purposes of payment of stamp duty. The relevant portion of the Circular, a copy of which has been placed on .....

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the price as per ready recknoer should not be considered. 2. The registering authority should assess the stamp duty on the value mentioned in the Sale certificate and the said Sale certificate and extract of property card should be made annexure of the document to be registered. 3. The market value as defined in Section 2 [na] of The Bombay Stamp Act, 1958 in respect of such property should be restricted to the value declared in sale certificate only for registration of such document. Therefore .....

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from the Director of Panan of Maharashtra State. Factually speaking, in our considered opinion, the impugned transfers effected by the assessee by way of public auction fall within the purview of the Circular issued by Government of Maharashtra dated 30.06.2005 (supra) for the purposes of payment of stamp duty. In terms of the said Circular, the highest price in the sale auction is considered to be the fair market value for the purposes of payment of stamp duty. This would mean that the conside .....

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