9911796707
TMI Blog2021 (6) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... dismiss this ground as not pressed. 4. Ground no.2, relates to cost of acquisition of 925 shares of Somani & Company. 5. Brief facts are, during the assessment proceedings, the Assessing Officer observed that the assessee has declared long term capital gain on sale of 3,425 equity shares of M/s. Somany & Co. Pvt. Ltd. When the assessee was asked to provide details of the same, the assessee filed the details of acquisition of shares as per below table:- Number of Shares Year of Acquisition Cost (`) Indexed Cost (`) 925 Equity shares prior to 01.04.1981 3545525*785/100 1981-82 35,45,525 2,78,32,371 500 Equity shares 50000*785/519 2006-07 50,000 75,626 2000 Equity shares 2500000*785/463 2003-04 25,00,000 42,38,661 Total: 3,21,46,658 6. The assessee was asked to provide supporting documents in support of the above quantity of indexed cost arrived by the assessee. In response, the assessee filed copy of wealth tax return for the assessment year 1979-80, and copy of wealth tax return order for the assessment year 1979-80 to prove that 925 shares were held by the assessee prior to 1st April 1981. In the statement of total wealth for the year ended 31st Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee as on 31st March 1979, in his wealth tax return @ Rs. 105 per share and adjusted the inflation for two years and determined the value per share as at Rs. 120 per share. Accordingly, he allowed the revised indexed cost of 935 shares sold by the assessee. Aggrieved with the above order, the assessee preferred appeal before the learned CIT(A). 8. Before the learned CIT(A), an Affidavit was filed by the assessee. The relevant portion of the Affidavit reproduced by the learned CIT(A) is extracted below:- "2. During the year under consideration I have sold 3,425-equity shares of Somani & Co. Pvt. Ltd (hereinafter referred to as the said (Company) to M/s Sat-guru Corporate Services Private Limited. The LTCG arising from the sale of these shares has been disclosed in the Return of Income at Rs. 53,37,65,018/-. 3. Out of 3,425 shares, 925 shares were purchased by me in 1979 and therefore for the purposes of determining the cost of acquisition of these 925 shares, the value per share had to be determined as on 1st April, 1981. The method adopted for determining the fair Market Value of the shares as on 01-04-1981, is the Net Asset Valuation Method. As per this method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer and the Assessing Officer filed remand report dated 27th January 2017. For the sake of clarity, it is reproduced below:- "4.1(a) During the AY under consideration, the assessee had sold 3425 equity shares of M/s Sonani & Co. Pvt Ltd (hereinafter referred to as the said company) to M/s Satguru Corporate Services Pt Ltd. The LTCG declared from the sale of these shares in the ROI was at Rs. 53,37,65,o18/-. Part of the shares, that is about 925 shares were purchased by the assessee in 1979 and therefore the cost of acquisition of these 925 shares had to be determined as on 1' April, 1981. (b)Value of the said shares was determined by adopting the net asset valuation method to arrive at the fair market value of the said shares as on 01/04/81. (c)During the course of assessment proceedings, the assessee only submitted the valuation report pertaining to the land belonging to the said company. The assessee has now submitted a valuation certificate dated 04/10/2016 from the chartered accountant, certifying that the value of the share as on 1st April, 1981 was Rs. 3,881/- per-share. This value was arrived at based on the valuation of the underlying assets of the said company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es had to be determined as on 1' April, 1981. b)Value of the said shares was determined by adopting the net asset valuation method to arrive at the fair market value of the said shares as on 01/04/81. (c)During the course of assessment proceedings, the assessee only submitted the valuation report pertaining to the land belonging to the said company. The assessee has now submitted a valuation certificate dated 04/10/2016 from the chartered accountant, certifying that the value of the share as on ist April, 1981 was Rs. 3,881/- per-share. This value was arrived at based on the valuation of the underlying assets of the said company as on 01-04-81. It is the case of the assessee appellant 111CI this certificate had not been submitted at the time to assessment as it was the bonafide belief that the valuation report pertaining to the land held by the company was sufficient to justified the value per share as on 01/04/81. 4.2 (a)The said issue has been dealt with by the AO in assessment order. The dispute between the AO and the assessee is with regard to the adoption of the fair market value of the share as on v of April, 1981. The assessee in its wealth tax return for AY 1979-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xim "Allegans contraria non est audiendus" meaning "lie is not to be heard who alleges things contrary to each other", squarely applies to the assessee case. Accordingly, it is requested that this additional evidence need not be admitted." 10. After considering the submissions of the assessee, remand report and the response to remand report filed by the assessee, the learned CIT(A) sustained the addition made by the Assessing Officer with the following observations:- "7.5 I have perused the facts of the case and the contentions of the AO & appellant carefully. I find that in the Chartered Accountant's certificate filed under Rule 46A, the Cost of acquisition as on 01.04.1981 of the shares of Somani & Co. Pvt. Ltd. is arrived @ Rs. 3881/- per share, after considering Value of Land of said company as on 01.04.1981 at Rs. 7,66,80,110/- as per separate Valuation Report of M/s. Shah & Shah, a Govt. approved valuer. The question to be examined is whether or not the revaluation of asset of company is permitted for computing the fair market value of unquoted shares. In this regard, I find that as per Rule 11UA of Income Tax Rules, 1962, the fair market value of unquoted equity share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of the Co-ordinate Bench in ITO v/s Smita Vinod Bhagwati, ITA no.6709/Mum./2012, order dated 12th August 2016 and submitted that in the above case, it was held that the adoption by the Assessing Officer of the value arrived at under the Wealth Tax Act, for the purpose of computing capital gain under the Income Tax Act, 1961, is wrong as per law. Further he relied upon the decision of the Hon'ble Delhi High Court in Madhu Tyagi v/s DCIT, [2008] 19 SOT 612 (Del.) to submit that the wordings and the purpose of allowing deduction towards cost of acquisition for computing capital gains is quite different from the purpose of levy of wealth tax and it is not permissible to import and apply principle laid down under the Income Tax Act to Wealth Tax Act or vice-versa. Further, relying upon the decision of the Co-ordinate Bench of the Tribunal in Shashi Dharnidharka v/s ITO, ITA no.5314/Mum./2018, order dated 22nd October 2010, the learned Counsel for the assessee submitted that the facts in the present case are identical to the case relied upon by the learned Counsel in Shashi Dharnidharka (supra) wherein it was held that fair market value of the shares as on 1st April 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company as on 1st April 1981. It is fact on record that the assessee or the company never re-valued the land earlier, all along the company was declaring the value of land as per Balance Sheet. The latest information submitted by the assessee before the taxing authorities of the fair market value per share which was declared in the wealth tax return @ Rs. 105 per share as a fair market value. Before us, the learned Counsel submitted that the Assessing Officer adopted the wealth tax valuation which was submitted by the assessee as on 31st March 1979, and re-adjusted to re-value the value of share as on 1st April 1981. He objected to the above adoption of value based on wealth tax valuation rather than calculating the value of shares of un-quoted shares. We are in agreement with the assessee that the assessee has an option to replace the value of market value as on 1st April 1981 as per section 55(2)(b)(i) of the Act and also the judicial precedence suggest that wealth tax valuation cannot be adopted for Income Tax purpose. Therefore, the Assessing Officer cannot fully rely upon the value declared for wealth tax purpose in Income Tax assessment. Even the learned CIT(A) accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reverse indexation to determine the value as on 1st April 1981. Therefore, the value of each share will be @ Rs. 1,250 x Rs. 100 / 463 = Rs. 270 per share. Since the Assessing Officer cannot adopt the value as per wealth tax valuation considering the judicial precedent, we deem it fit to direct the Assessing Officer to adopt the fair market value as on 1st April 1981 @ Rs. 270 per share. 16. We noticed that the assessee prayed to restore this issue to the file of the Assessing Officer to refer this matter to the valuation officer. In view of our above observations, we do not see any reason to refer this issue to the valuation officer at this stage. Accordingly, ground no.2, is partly allowed. 17. Ground no.3, relates to the dispute in learned CIT(A)'s order in confirming the deemed sale consideration at Rs. 8,44,18,460 (being the market value on which stamp duty is paid) as against Rs. 5,72,76,000, being the agreement value and the amount actually received. 18. Brief facts are, the Assessing Officer observed that the assessee has sold land in proprietorship concern M/s. Gopal Corporation, for a consideration of Rs. 5,72,76,000. The assessee filed a copy of agreement and from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld a portion of land admeasuring 1,591 sq. mtrs., which was held under my proprietary concern, Shree Gopal Corporation for a consideration of Rs. 5,72,76,000/-. Although the deal was concluded in December, 2011, the same could not be completed and registered since the Joint Sub-Registrar of Assurances was short staffed. The sale agreement was registered on 04.01.2012. Enclosed on Page 134-137 of Paper book are the email correspondences which show that the deal was concluded in December, 2011. 9. The Ready Reckoner rate in 2011 U)1S Rs. 30,300/- 'MV= 4,82,00,000/-) and in 2012 was Rs. 37,900/- per sq. mtr. (MV 6,02,98,900/-). Thus there was an increase of 25% in the ready reckoner rates within a period of 4 days from the end of the calendar year 2011. Thus had the sale agreement been registered in 2011, the agreement value was much higher than the ready reckoner rates. Enclosed on Page 128-133 of the Paper book are the relevant extracts of the Stamp Duty Reckoner showing the values in 2011 & 2012. 10. The stamp duty has been paid at higher value of Rs. 8,44,18,460/-. This is because, the stamp Authorities computed the value by taking the value by taking the value at 140% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd admeasuring 1951 m2, which was held under the proprietary concern of the assessee [shree Gopal Corporation] for a consideration of Rs. 5,72,76,000/-. It is the case of assessee that the deal was concluded in December, 2011, however the same could not be completed and registered since the joint sub registrar of assurances was short stuffed and the same came to be registered on 01/04/2012. Further, the ready reckoner rate in 2011 was Rs. 30,300/- [Market Value Rs. 4,82,00,000/-I and in 2012 was 37,900/- per square metre [Market Value Rs. 6,02,98,900/-J. The assessee had contended that the stamp duty authorities had taken the value of lund considering utilisation of TDR [Transfer of Development Rights]. Accordingly, the assessee submitted that the stamp duty authorities had taken valuation at 140% of land value which was not correct as no TDR could be loaded on the said plot of land. The assessee obtained information pertaining to the same through RTI vide letter dated 11/04/2012 and submitted the same before the AO. The AO, held that the assessee should have requested the registrar's office to rectify/ correct the valuation on the basis of the RTI information and as the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an increase of 25% in the ready reckoner rates within a period of 4 days from the end of the calendar year 2011. Thus, has the sale agreement been registered in 2011, the agreement value was much higher than the ready reckoner rates. 16. The stamp duty has been paid at higher value of Rs. 8,44,18,460/-.This is because, the Stamp Authorities computed the value by taking the value at 140% of the Ready Reckoner Value of Rs. 6,02,98,900/-, which is inclusive of TDR, although the ready reckoner states that only land capable of utilizing TDR should be valued at 1.4 times the land rate. 17. The Appellant has procured a clarification from MMRDA vide letter dated 11-04-2012, that no TDR can be loaded on the said plot of land, thus the Appellant made the claim before the Assessing Officer that although the stamp duty was paid on Rs. 8,44,18,460/-, the market value has been wrongly computed on the higher amount of Rs. 8,44,18,460/-. 18. In para 5.3 of the Remand Report, the learned AO has held that the Land sold as per Ready Reckoner Rates. We submit that the ready reckoner rates prescribed by the Government are guidelines with respect to the market rates and therefore the immova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the AO to refer the matter to the DVO, who after considering all the facts and circumstances of the case would arrive at the correct market value. It is provided that where the consideration received or accruing us a result of the transfer of a capital asset being land or building or both is less than the value adopted by an authority of the State Government for the purposes of payment of Stamp duty in respect of such transfer, then the value so adopted by the State Government authority shall be deemed to be the full value of consideration received or accruing as a result of such transfer. The said provisions of sub-section (i) of section 50C are further circumscribed by sub-section (2) of section 50C. in terms of clause ('a) of subsection (2) of section 50C, it is provided that where an assessee claims before the Assessing Officer that the value adopted o4 assessed by the Stamp valuation authority under sub-section (i) exceeds the fair market value of the property as on the date of transfer, then the Assessing Officer may refer valuation of the Capital asset to the Valuation Officer. In this case, factually it is evident that the assessee had claimed in the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the ready reckoner rates of 2011 and not of 2012. This is because the terms and conditions of the agreement was concluded in 2011 itself, but the mere formality of signing and registering was done on 4th January 2012. Kindly note that the terms and condition of the conveyance Deed was finalized and mutually agreed upon on 14th December 2011, (as can be seen from the email dated 14th December, 2011) and the intention of the Parties to execute and register the same before 31 December, 2011. It was only due to unfortunate circumstances that the same could not he completed. (ii) We request you to kindly refer to the Valuation Report dated 9th February, 2016 which has valued the land in question at Rs. 30,300/- per sq. mtr. The ready reckoner rate for 2011: Rs. 4,82,07,300/- The ready reckoner rate for 2012: Rs. 6,02,98,900/- Agreement consideration : Rs. 5,72,76,000/- Thus it can be seen that the deal was concluded before Dec., 2011 and the consideration agreed upon was Rs. 5,72,76,000/-, (about 19% higher) than the ready reckoner rate for on of Rs. 4,82,07,300/-. Therefore the ready reckoner rate for 2011 should be taken into consideration for determining the 50C issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not-justified in substituting the value determined by the DVO for the sale consideration disclosed by the assessee. * Sita Bai Khetan us. ITO (ITAT Jaipur) dated August, 2016 S. 50C: Valuation is a matter of estimation and some degree of difference is bound to be there. If the difference between the stamp duty valuation and the declared sale consideration is less than 10% addition u/s 50C should not be made. * ACIT vs. S. Suuarna Rckha (ITA No. 743/Hyd/2009 dated 29-10-2010 Held: if difference between valuation for the purpose of stamp duty and the sale consideration actually received by the assessee is io% or less, then the value actually received by the assessee should be adopted for the purpose of computing the long term capital gain. * M/s. LGW Limited vs. ITO (KOL ITAT):A.Y. 09-10, Decided on 0710.2015: ITA No. 267/Ko1/2013 Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 50C, I find the assessing officer was bound to adopt the value adopted by stamp valuation authority of Rs. 8,44,19,000/- as the full value of consideration received. This resulted in net addition of Rs. 2,71,43,000/- (i.e. Rs. 8,44,19,000 - 5,72,76,000), which is confirmed, and therefore, Ground No.3 is dismissed." 23. Aggrieved with the above order, the assessee is in appeal before the Tribunal. 24. Before us the learned Counsel for the assessee brought to our notice the details of sale of plots in the same area plot no.4, sold by Mahalaxmi Rope Works Ltd. He also brought to our notice the area map indicating plots no.4, 9, 3 and 5. All these plots are within the vicinity of the plot no.7. The issue under consideration is only about Plot no.7. He submitted that this plot of land was sold by registered document only on 4th January 2012. He brought to our notice at Page-93 of the paper book to indicate that the stamp duty valuation was calculated at 37,900 per sq.mtr. and adopted premium of 40% more to the stamp duty rate to arrive at the stamp valuation of Rs. 8,44,18,460, and he also brought to our notice Page-105 of the paper book to indicate that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that the assessee has negotiated and sold the land based on the earlier stamp valuation rate in December 2011 itself whereas the effective ready reckoner rates were changed w.e.f. 1st January 2012. Further, the assessee submitted that the stamp duty authorities not only adopted effective new rate on this transaction plus adopted TDR @ 140% of the effective rates. Its fact on record that the assessee has not challenged before the stamp duty authorities and also not prayed for reference to the DVO before the Assessing Officer. We notice that it is brought to our notice that in the adjacent Plot no.4, the stamp duty valuation was made adopting new effective rate, however, the TDR rates were not applied on the above said plot which is situated within the vicinity of Plot no.7. In case of Mahalaxmi Rope Works Ltd. (supra) the learned CIT(A) referred the issue to the DVO for valuation afresh and it was found that the difference between the actual sales and stamp valuation having difference of only 5.8%. Accordingly, the addition was deleted and the same was confirmed by the Co-ordinate Bench in the aforesaid case. After considering the over all situation, we notice that even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed about the reply to notice under section 133(6) of the Act. In response, the assessee submitted that the dispute was arisen between him and the builder. The builder disputed the allotment of the above said flat to the assessee. Further, the assessee submitted that the assessee had issued a public notice in the newspapers and filed a Suit against the builder in the High Court. In the interim order, the Hon'ble Jurisdictional High Court has restrained the builder from disposing off the said flat namely Flat no.B-504, till pending the hearing and final disposal of the case. Meanwhile, the Assessing Officer informed to the assessee that the deduction under section 54F of the Act can be allowed if the assessee invest / purchase new residential property within the prescribed time. In the given case, the Assessing Officer observed that the assessee failed to provide any documentary proof that he had invested / purchased a new property. The unsigned and unfilled application for registration / enrolment form does not give any right to the ownership of the flat. Further, the Assessing Officer observed that iN this case the builder had also denied allotment of a flat as payment in kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ru Corporate Services Pvt. Ltd. (Paper book Page no.93-125, being the subject matter of addition u/s 50C discussed above). I find that nowhere in said agreement, there is any reference of any Escrow Arrangement / Sale of shares. Hence, the said agreement has to be considered independent of any such arrangement, if at all. 9.6 Alternatively, even if it is assumed that the sale consideration of said shares was partly in kind in the form of residential flat to be acquired by the appellant, there is merit in A.O's contention that the investment in purchase of residential property is application of income from capital gains. In my opinion, for computing the capital gain, the sale consideration received as well receivable, need to be taken into account. In view of above, the long term capital gain computed on sale of said shares are not to be disturbed by the allowability or not of deduction u/s 54F. 9.7 Now as regard the allowbility of deduction u/s 54F, the allotment letter submitted by the appellant on page-148-154 of the paper book in blank & unsigned, hence has to evidentiary value. The Builder has denied having allotted any flat to the appellant. The injunction order by Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, the learned Departmental Representative supported the findings of the authorities below and submitted that the learned CIT(A) has rightly concluded and denied the benefit. 32. Considered the rival submissions and perused the material on record. We notice that the assessee has sold the residential land and entered into a separate deal with the buyer for allotment of a flat in the up-coming project. The part sale consideration received by the assessee as payment in kind. In that process, the assessee entered into an escrow arrangement with Satguru Corporate Services Pvt. Ltd., against the allotment of new flat. As per escrow arrangement, the assessee made full payment against the allotment of the flat. Due to certain dispute with the builder, the builder could not complete the flat against which the assessee issued a public notice in the newspaper and also filed a suit in the Hon'ble Jurisdictional High Court against the builder. The assessee also filed a copy of the order dated 16th June 2014, passed by the Hon'ble Jurisdictional High Court and also filed a copy of public notice in the newspaper as part of paper book from Page-155-164 of the paper book. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the reasonableness of the time frame of investment then the Courts have taken liberal view in giving deduction under section 54F of the Act. Therefore, in our considered view, in the given case the assessee has not received sale consideration to the extent of value of flat and there is no mistake on the part of the assessee, therefore, in our considered view, the assessee had paid full purchase consideration for flat, therefore, the assessee is eligible for the claim under section 54F of the Act. Accordingly, ground no.4, raised by the assessee is allowed. 33. With regard to the deduction claimed by the assessee to the extent of Rs. 2 crore on capital gain deposit scheme, we notice that the learned CIT(A) has already allowed the claim of the assessee. Therefore, we do not see any reason to disturbe the findings fo the learned CIT(A). 34. In the result, assessee's appeal is partly allowed. ITA no.3888/Mum./2017 Assessee's Appeal - A.Y. 2012-13 [Mrs. Shrilekha Vinay Somani] 35. The issue arose out of Grounds no.1(a) to 1(d) raised by the assessee relates to cost of acquisition of 925 shares of Somani & Company. 36. Having considered the submissions of the learned Counsel ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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