9911796707
TMI Blog2023 (6) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... ay is extracted herein below: "1...... 2........ 3. That the case of the assessee was referred to the Transfer Pricing Officer, Hyderabad for determining the Arms Length Price with respect to International Transactions entered into by the company with Associate Enterprises. 4. That an order U/s. 143(3) r.w.s 144C dated 22/2/2018 was passed making a TP Adjustment of Rs. 4,40,25,275/- and raising a demand of Rs. 37.70 lakhs. 5. That subsequently the order passed U/s. 143(3) r.w.s 144C(3) was revised by the Pr. CIT, Visakhapatnam by passing an order U/s. 263 of the Act on 27/03/2021. 6. That the order of revision U/s. 263 has set aside the assessment with respect to the long term capital gains returned by the assessee with a direction to the Assessing Officer to re-do the same by referring to the valuation of the property to DVO and also to reclassify the income as business income instead of long term capital gains as returned by the assessee and after giving an opportunity of hearing to the assessee. 7. That since the above order of the Pr. CIT has not raised any fresh demand by increasing the income already determined by the previous assessment order the company was un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sold 14 plots in FY 2013-14 and 8 plots in FY 2014-15. The Ld. Pr. CIT exercised his revisionary jurisdiction U/s. 263 of the Act and issued a show cause notice dated 11/5/2018 and posted the case on 7/6/2018. Responding to the show cause notice, the assessee filed its written submissions stating that the assessee entered into an agreement to sell the entire piece of land of 5.8275 Acres (28,423 sq yds) with Mr. R. Ashok on 03/07/2013 for a consideration of Rs. 6,34,23,000/-. It was submitted before the Ld. Pr. CIT that since the operations of the assessee company have increased, the assessee requested for allotment of additional land in the same industrial estate wherein the APIIC expressed its inability to allot any additional land in that industrial estate but offered to allot the requisite land in Parawada Industrial Estate, Visakhapatnam. Therefore, the assessee acquired about 45 Acres of land in Parawada Industrial Estate, Visakhapatnam and shifted its manufacturing operations to Visakhapatnam. Since the land at Patancheru, Medak District was lying vacant and idle, the assessee decided to dispose of the same. Being an industrial land comprising to a huge extent of 5.8275 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the Ld. AR is that the exercise of jurisdiction U/s. 263 of the Act by the Ld. Pr. CIT in the absence of satisfaction of the twin conditions namely the order of the Ld. AO is erroneous and also prejudicial to the interest of the Revenue, the Ld. AR argued that the order may be considered as erroneous but not prejudicial to the interest of the Revenue as even if the provisions of section 45(2) of the Act are applied, there is no revenue loss to the Department. The Ld. AR further placed his argument that the assessee has not converted the character of the land which is industrial in nature but has only sub-divided the land into parts to fetch a higher market price on the sale of the same. The Ld. AO also referred to paper book page 46 where the APIIC has approved the sub-division of plots comprising of 23765.24 sq mtrs into 22 parts. The Ld. AR further submitted that the land was divided into 22 parts to facilitate the assessee to market it at a better price as no individual was willing to buy the larger extent of 5.8275 Acres. The Ld. AR therefore pleaded that the order of the Ld. Pr. CIT be set aside. Per contra, the Ld. DR submitted that the Ld. Pr. CIT has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd [1973] 88 ITR 192 (SC). The Ld. AR therefore submitted that the sale of land should be treated as capital gains and not as business profits since the estate is held as fixed asset as per the financials for the FY 2013-14. The Ld. AR further submitted that the assessee has not converted it into stock-in-trade, the provisions of section 45(2) cannot be applied. Per contra, the Ld. DR submits that since the assessee has sub-divided the plots, the provisions of section 45(2) should be applied and it should be treated as business profits of the assessee. 9. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. It is not in dispute that the assessee has entered into a sale agreement with Mr. R. Ashok on 3/7/2013 for a total consideration of Rs. 6,34,23,000/- for the full extent of land of 5.8275 Acres. The sale deed was executed with various buyers both during the FY 2013-14 and 2014-15. The contention of the assessee that the sale agreement has been entered into with Mr. R. Ashok for the entire area of land of 5.8275 Acres where Mr. Ashok is respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration." 10. From the plain reading of the 3rd proviso to section 50C(1) of the Act, we find that the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten percent [110%] of the consideration received or accruing as a result of the transfer. Accordingly, the consideration received shall be deemed to be the full value of consideration for the purposes of section 48 of the Act. In the instant case, the Ld. DVO has valued the property at Rs. 6,96,36,350/- which is less than 110% of the value of sale consideration received by the assessee as declared in the sale deeds. Since the character of the land has not been recategorized and has been sold as a fixed asset by the assessee, we hereby direct the Ld. AO to compute the income of arising out of the sale of the parts of the industrial land as capital gains of the assessee by considering the actual consideration received by the assessee. Thus, the grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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