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TMI Blog2018 (1) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Y. 2006-07, wherein the order of the CIT(A) had been assailed before us on the following grounds of appeal: "On the facts and in the circumstances of the case and in law, the CT(A) erred in not upholding the application of sec. 50C of the Act, which was rightly invoked by the AO" "On the facts and in the circumstances of the case and in law, the CT(A) erred in directing the AO to accept the sale consideration as per the sale agreements which is in contravention of the provisions of section 50C of the Act" "On the facts and in the circumstances of the case and in law, the CT(A) erred in relying y\upon various decisions of High Courts which were rendered in 1979, 1980 and 1993, i.e prior to the insertion of sec. 50C in the Act by Finance Act, 2002, w.e.f 01.04.2003" "On the facts and in the circumstances of the case and in law, the CT(A) erred in not appreciating that the ITAT, Mumbai "F" Special bench in the case of ITO vs. United Marine Academy, 138 TTJ (Mumbai)(SB) 129 has held that the provisions of sec. 50C are applicable to transfer of depreciable assets covered by sec. 50 and therefore, capital gains arising from such transfer have to be computed by adopting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the respective sale deeds of the aforesaid 19 industrial galas was more than the sale consideration of Rs. 1,81,21,800/- received by the assessee, therefore, the A.O taking recourse to the provisions of Sec. 50C of the Act computed the income of the assessee under the head "Capital gain" by adopting the value of Rs. 2,06,10,719/- as the sale consideration. The A.O thereafter recomputing the written down value of the building forming part of the "block of assets" on 01.04.2005 at Rs. 3,15,025/-, worked out the income of the assessee from the sale of the aforesaid industrial galas chargeable under the head capital gain at Rs. 2,02,95,694/-. 5. Aggrieved, the assessee assailed the order of the A.O before the CIT(A). The CIT(A) observed that as the assessee had claimed that the value of the industrial galas as adopted by the Stamp Valuation authority was higher than their fair market value (for short "F.M.V"), therefore, called for a remand report from the A.O. The A.O during the course of the remand proceedings made a reference to the DVO under Sec. 50C(2) of the Act. The A.O after receiving the valuation reports from the office of the Assistant Valuation Officer-1, Mumbai (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted age of building in years. Value for R.C.C Pukka Structure /other Pucca Structure after depreciation Value for Half or Semi-Pukka Structure after depreciation. 0 to 2 100% 100% Above 2 to 5 95% 95% Above 5 to 10 90% 85% Above 10 to 20 80% 75% Above 20 to 30 70% 60% Above 30 to 40 60% 45% Above 40 to 50 50% 30% Thus, in the backdrop of the aforesaid contentions it was averred by the assessee that for the galas constructed in the year 1962 it was entitled to depreciation @ 50/70% as against 20% considered by the AVO. Similarly, for the galas/properties which were constructed in the year 1977 it was entitled to get depreciation @30%/40% as against 20% considered by the AVO. The assessee in the backdrop of its aforesaid objections submitted before the CIT(A) that if the aforesaid mistakes were rectified/considered, then the value of the properties would be more or less than that shown in the respective agreements to sell. The assessee thus submitted before the CIT(A) that as the fair market value of the galas/building after considering the aforesaid facts would be found to be in conformity with the sale consideration received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, directed the A.O to consider the sale price shown by the assessee for computing the capital gain and not the value adopted by the A.O by taking recourse to Sec. 50C or the value determined by the AVO. 11. The revenue being aggrieved with the order of the CIT(A) had carried the mater in appeal before us. The ld. Departmental representative (for short "D.R") submitted that the CIT(A) while concluding that the provisions of Sec 50C would not be applicable to the case of the case had wrongly relied on the judicial pronouncements which were rendered prior to insertion of Sec. 50C on the statute w.e.f 01.04.2003. Per Contra, the ld. Authorised representative (for short "A.R") for the assessee relied on the order of the CIT(A). The ld. A.R submitted that the CIT(A) had bifurcated the sale consideration between Land (70%) and Building (30%), which thus would be liable to be assessed as "Long term Capital Gain" (LTCG) and "Short Term Capital Gain" (STCG), respectively. The ld. A.R taking us through the facts of the case submitted that the CIT(A) had rightly concluded that the valuation of the property under consideration was to be valued as per the rent capitalization method. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rent control legislations and its impact on the valuation of tenanted properties cannot be ignored. In our view, it would be unreasonable if not absurd to value such property on the basis of a notional market value in disregard of such control". We thus are of the considered view that as the tenancies in Mumbai are statutorily controlled by the rent control legislations and rent fetched were likely to remain unaltered for years to come, therefore, in the case of the present assessee before us the valuation of the property, as observed by us hereinabove, was required to be done as per the Rent Capitalization Method. We though are principally in agreement with the view taken by the CIT(A) who had held that the most appropriate method of valuation of the galas/building of the assessee was by applying the Rent Capitalization method, but however, do not approve of the summary acceptance by him of the claim of the assessee that as the sale price of the galas/buildings received by the assessee was more than the value determined as per the Rent Capitalisation Method, therefore, no addition was called for in the hands of the assessee. We though are not oblivious of the fact that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me at Rs. Nil. The return of income of the assessee was processed as such under Sec. 143(1) of the Act. The case of the assessee was thereafter selected for scrutiny assessment under Sec. 143(2). 16. That during the course of the assessment proceedings the A.O observed that the assessee had during the year under consideration, viz. A.Y. 2007-08 converted the tenancy rights of 10 parties into ownership. The assessee claimed that as the accrual of capital gain had taken place in A.Y. 2008-09 and not during the year under consideration, therefore, the income arising from the sale of the property was taken as the income of the said succeeding year. However, the A.O being of the view that as all of the 10 agreements were executed during the year under consideration, therefore, the income from the sale of the property/conversion of the tenancy rights into ownership were liable to be brought to tax during the year under consideration. 17. That as the value that was adopted by the Stamp valuation authority at Rs. 59,55,952/- while registering the respective sale deeds of the aforesaid 10 galas was more than the sale consideration of Rs. 33,44,000/- received by the assessee, therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a "Short Term Capital Loss" (for short "STCL") of Rs. 76,50,000/-. During the course of the assessment proceedings, though initially the assessee did not come forth with the details as regards its aforesaid claim of loss, but finally submitted that it had purchased 4,500 shares of M/s Instamac P. Ltd. for a consideration of Rs. 81,00,000/-, which thereafter were sold for Rs. 4,50,000/-, thus resulting into a STCL of Rs. 76,50,000/-. 23. The assessee during the course of the assessment proceedings submitted before the A.O that M/s Instamac P. Ltd which was engaged in the business of making tea and coffee powder for last many years was running into losses, but the directors were hopeful of turn around in company"s financial position. It was submitted that the company, viz. M/s Instamac P. Ltd having developed a new product, i.e Herbal ready mix tea & coffee powder, which was approved by M/s Hindustan Unilever Limited (for short "HLL"), was to get an estimated order of Rs. 15 crores every year for supply of the said product from HLL. The assessee submitted that the aforesaid issue was discussed at the boards meeting of the assessee company on 02.03.2006, and it was resolved to acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the considered view that he had conclusively proved that the transaction carried out by the assessee was merely a sham transaction with a purpose of evading the tax liability. We have deliberated at length on the orders of the lower authorities as regards the issue under consideration and find ourselves to be in agreement with the view taken by the lower authorities. Before parting, we may herein observe that nothing was brought to our notice which could prove that the observations of the lower authorities were perverse or incorrect. The Ground of appeal No. 1 raised by the assessee is dismissed. The Ground of appeal No. 2 being general in nature is dismissed as not pressed. 27. The appeal of the assessee is dismissed. ITA NO. 5658/Mum/2012 A.Y. 2008-09 28. We shall now advert to the appeal of the revenue for A.Y. 2008- 09, wherein the order of the CIT(A) had been assailed before us on the following grounds of appeal: "On the facts and in the circumstances of the case and in law, the CT(A) erred in not upholding the application of sec. 50C of the Act, which was rightly invoked by the AO" "On the facts and in the circumstances of the case and in law, the CT(A) erred in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him while disposing of the appeal of the assessee for A.Y. 2006-07, observed that as the property of the assessee was an old tenanted property, therefore, the most appropriate method for valuation was the Rent Capitalization Method. The CIT(A) thus being of the view that as the consideration/sale price shown by the assessee was more than the value as per Rent Capitalization Method, therefore, directed the A.O to consider the sale price shown by the assessee for computing the capital gain and not the value adopted by the A.O by taking recourse to Sec. 50C or the value determined by the AVO. 33. The revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. We find that as the facts and the issue involved in the present appeal of the assessee for A.Y. 2008- 09 are the same as were involved in the earlier appeal of the revenue for A.Y. 2006-07, marked as ITA No. 5656/Mum/2012, therefore, our order passed in the said appeal shall apply mutatis mutandis for disposing of the present appeal of the revenue for A.Y. 2008-09, marked as ITA No. 5658/Mum/2012. 34. The appeal of the revenue is allowed for statistical purposes in terms of our observat ..... 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