Income Tax Appellate Tribunal - Hyderabad
Mucherla Satyanarayana Srikanth, Hyd, ... vs Acit, Circle-12(1), Hyd, Hyderabad on 31 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A", HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
I.T.A. No. 756/HYD/2016
Assessment Year: 2007-08
Mr. Mucherla Asst. Commissioner
Satyanarayana Srikanth, Vs of Income Tax,
HYDERABAD Circle-12(1),
[PAN: AGNPM5124G] HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri P.N. Moorthy, AR
For Revenue : Shri V. Sreekar, DR
Date of Hearing : 28-08-2017
Date of Pronouncement : 31-08-2017
ORDER
PER INTURI RAMA RAO, A.M. :
This appeal filed by assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-1, Hyderabad, dated 02-03-2016 for the AY. 2007-08. The appellant raised the following Grounds of Appeal:
"1. That the Learned Commissioner of Income Tax- Appeals, relied on the endorsement made by the Sub- Registrar, Shameerpet, U/s. 40 & 42 of the Stamp Duty & Registration Act, 1899, on the Instrument of Registered Sale Deed No: 21233/2006, is not correct in dismissing the Appeal.
2. That the Learned Commissioner Of Income Tax-Appeals, as well as the Assessing Officer, have not given any cognizance to the Registered Agreement of Sale No: 19132/2006, between the Appellant and one Sri.P. Sudhakar Reddy & Sri. P. Narender Reddy. That the Sale consideration I.T.A. No. 756/Hyd/2016 :- 2 -:
was only Rs. 20 Lakhs for 2 Acres( Rs. 10 Lakhs/Acre) as per the Valuation Card of the Land issued by the Sub- Registrar, Shameerpet on 17-11-2006.
3. Either The Learned Commissioner Of Income Tax- Appeals, or the Assessing Officer, have not gone through the Registered Document No:
19132/2006 dated 28/11/2006, wherein the consideration of Rs. 20 Lakhs was passed and acknowledged by the Vendors much earlier to the Registration of the Document and also given the possession of the Property as defined U/s. 2(47) of the I.T. Act 1961, based on the Card issued by the Sub- Registrar, Shameerpet, on 17/11/2006, under the genuine belief that the value of the Property transferred was according to the Card value.
4. That neither the Learned Commissioner of Income Tax- Appeals has given any Cognizance to the Letter bearing the Number 240/2015, dated 17/11/2015, addressed to the Assistant Commissioner of Income Tax, Circle 12(1), Hyderabad, wherein the Sub- Registrar cleared stated that the Cost of Land transferred by the Appellant under Survey NO; 40 of Nagaram cost between Rs. 20 Lakhs to Rs. 30 Lakhs per Acre nor has brought on Record any comparable case.
5. That neither the Learned Commissioner of Income Tax- Appeals nor the Assessing Officer/ Sub-Registrar, have brought/adduced any proof on Record to show that the Appellant sold the Land by converting the same into plots by adopting the value of Rs. 48,42,000/- per Acre.
6. The endorsement made by the sub-Registrar, Shameerpet, U/s. 40 & 42 of the Stamp Duty & Registration Act, 1899, failed to bring on Record that the Appellant converted the land into residential Plots to arrive at the value of Rs. 1000/ sq,Yard and for 1 Acre Rs. 48,42,000/-.
7. Both The Learned CIT- Appeals and the Assessing Officer have failed to peruse the Registered Documents properly, that the Land sold by the Appellant was for Industrial Purpose (M/s. ICOMM STEEL LIMITED) but not for Residential purpose and at every stage they protested the values of each Registered Document.
8. The CIT- Appeals and the Assessing Officer are not justified in applying the Section 50C as Amendment on 1-10-2009, (Assessable), when the land was transferred and given possession by the Appellant vide Agreement of Sale Cum General power Of Attorney No: 19132 of 2006, based on the Card issued by the sub- Registrar, Shameerpet, dated 17/11/2006. Even going by the Registered Sale Deeds: 21233/2006 dated 19th December 2006 & 146/2007 dated 4th January 2007 @ Rs. 30 Lakhs/ Acre in the name ICOMM STEEL LIMITED, is in consonance to the values as per the Letter No: 240/2015 dated 17/11/2015, by the Sub-
Registrar, Keesara, R.R. District, Telangana but not Rs. 48, 40,000/- per I.T.A. No. 756/Hyd/2016 :- 3 -:
Acre as adopted by the Assessing Officer as well confirmed by the CIT- Appeals.
9. That the Learned CIT- Appeals is not correct in her Order dated 2-3-
2016, at Paragraph 5, stating that the Appellant has not pressed the Grounds 2,5 & 6, by ignoring the written submission given the A.R. of the Appellant on 18-02-2016".
2. Briefly, facts of the case are that the appellant is an individual, deriving income under the heads 'salary' and 'income from other sources'. The appellant filed return of income for the AY. 2007-08 on 04-09-2007 admitting a total income of Rs. 11,68,261/-. Against the said return, assessment was completed vide order dt. 15-12-2009 u/s. 143(3) of the Income Tax Act [Act]. Subsequently, the Assessing Officer (AO) had come to know that the appellant had sold two acres of land situated at Nagaram Village, Keesara Mandalam, R.R. District for a consideration of Rs. 60 Lakhs, claimed the same as exempt from capital gains treating it as agricultural land. However, the AO was of the opinion that the land falls within the urban agglomeration and therefore, cannot be treated as agricultural land. Therefore, issued a notice u/s. 148 of the Act proposing to re-assess the income arising on account of sale of the said land.
3. It is the case of AO that the assessee sold two acres of land situated in Survey No. 40 at Nagaram (V), Keesara (M), R.R. District. These lands were acquired by the appellant in the year 1999 and these lands were sold in two parts vide sale deed dt. 19- 12-2006 and 04-01-2007 for a total consideration of Rs. 60 Lakhs. The AO conducted enquiries with the office of the Commissioner, HMDA, Hyderabad, MRO, Keesara Mandal, R.R. District and the Director Planning, HMDA in order to ascertain the character of the I.T.A. No. 756/Hyd/2016 :- 4 -:
land whether agricultural or not? The Commissioner, HMDA vide his letter dt. 12-12-2011 responded as follows:
"The Sy.No. 40 of Nagaram (V), Keesara (M), R.R. District was earmarked as Industrial use zone..... as per G.O.Ms.No. 160 MA dt: 28.3.1989. The part of Nagaram (V), Keesara (M), R.R. dist is within 5 KM peripheral area and also is in agglomeration are as per G.O.Ms.No. 733, dt: 31.10.1988. Vide HMDA letter dt. 12.4.2012 it was conveyed that "........ the whole Sy.No. 40 of Nagaram (V), Keesara (M), R.R. District is falling under peripheral area of the Urban Agglomeration as per the revised maps approved by the Joint Director, Survey & Land Records, Hyderabad...... as per G.O.Ms. 288 MA dt: 3.4.2008 the Sy.No. 40 of Nagaram (V), Keesara (M), R.R. District is Manufacturing zone..."
4. Based on the above information given by the authorities, the AO had come to the conclusion that the character of land is no longer agriculture and therefore, profit if any, arising on sale of the said land is liable to be taxed under the head 'capital gains'. The AO further noted that the assessee has shown a consideration of only Rs. 30 Lakhs per acre as against Rs. 48,40,000/- per acre and therefore, the provisions of Section 50C of the Act are attracted and accordingly, show cause notice issued to the assessee dt. 08-02- 2013 as to why the provisions of Section 50C cannot be applied by adopting the consideration of Rs. 48,40,000/- per acre. In response to the said show cause notice, the appellant made the following submissions vide letter dt. 15-02-2013:
"(i) Sec. 50C was originally inserted by Finance Act 2-2002 w.e.f. 1.4.2003 with regard to Assessing the transfer of property for the purpose of capital gains u/s.48 by insertion of sale value has to be assessed for the purpose of computing the consideration received as per the Stamp Valuation Authority for the purpose of the stamp duty so adopted or assessed by the said authority.
(ii) The above said section further amended on l.l0.2009 by inserting further word "assessable" wherever necessary by the said SVA where of transfer of properties which have been avoided registration by virtue of I.T.A. No. 756/Hyd/2016 :- 5 -:
agreement of sale/or agreement of sale cum power of attorney to bring such transfers and adopt the value as per the value (adopted/assessed/assessable by the SVA.
(iii) The SVA who had adopted the value of the property assessed/assessable was in order to get revenues to the State Govt. on Fictional valuation but not real values of the properties or some times the property sold in disastrous conditions.
(iv) In order to substantiate the fictional values adopted/assessed/assessable by the stamp valuation authority the valuation and stamp duty certificate issued by the sub-registrar, Shamirpet on 17.11.2006 fixing the value @ Rs.10,00,000/- per acre for 2 acres - Rs.20,00,000/- and corresponding stamp duty and registration values.
(v) From the above certificate it is evident within a short period of 2 months that the same registering authority quoted the registered documents vide Redg.Deed.No.21233/06 dated 19.12.2006 and 146/07 dated 4.1.2001 each acre costs @Rs.48,40,000/- and collected the duty accordingly.
Whereas in the Regd.Documents it was Rs.30,00,000/- per acre consideration which has been paid and received and accepted by the said registering authority.
(vi) In the light of the above judgement the assessee has received only Rs.60,00,000/- but not Rs.96,80,000/- as adopted by the SVA which is nothing but than an fiction value and hence, it cannot be adopted for the purpose of arriving the capital gain. What is actual consideration received is only to be taken as a full value for the purpose of sec.48, where it was clearly stated "the income chargeable under the head 'capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset".
5. The above submissions had been turned down by the AO. By adopting the consideration of Rs. 96,80,000/-, proceeded to compute the capital gains. While doing so, the AO had disallowed the cost of improvement at 25% of Rs. 1,50,000/- per acre claimed by the appellant. However, the AO has allowed the exemption claimed by the appellant under the provisions of Section 54F of the Act in respect of acquisition of new house i.e., Villa No. 44, Indu Fortune Fields, 13th Phase, KPHB Colony, Kukatpally, Hyderabad.
I.T.A. No. 756/Hyd/2016 :- 6 -:
The appellant claimed a sum of Rs. 62,91,248/- towards cost of new house as exemption under the provisions of Section 54F. However, the AO has disallowed 25% of Rs. 3,85,000/- being the self-made vouchers towards painting and wood work etc., and finally computed the Long Term Capital Gain at Rs. 27,49,269/- as follows:
Working of Long Term Capital Gain by giving the benefit of indexation to the cost and Exemption u/s. 54F for acquiring the new asset:
Rs. Rs.
Sale consideration adopted on a/c. sale of
2 acres of land (as discussed above) 96,80,000
Less: Expenses for sale (brokerage) 1,05,000
Net consideration 95,75,000
(A) Cost of Acquisition on 1 acre land on
25.3.1999 - 4,50,000
Add: Registration charges 52,794
Add: Cost of improvement (as discussed 1,12,500
above)
6,15,294
(B) Cost of Acquisition on 1 acre land on
25.3.1999 4,30,000
Add: Registration charges 50,596
Add: Cost of improvement (as discussed
above) 1,12,500
5,93,096
Total cost of acquisition(A)+(B)= 12,08,390 Less: Indexed cost of acquisition = Rs.
12,08,390 X 519/351 17,86,764 Long Term Capital Gain 77,88,236 Eligible exemption u/s. 54F: Eligible exemption u/s. 54F = LTCG X Cost of New Asset Net Consideration Rs. 77,88,236 X 61,94,998 95,75,000 50,38,967 Taxable LTCG: Long Term Capital Gains (as computed earlier) - Exemption u/s. 54F = Taxable LTCG = Rs. 77,88,236 - Rs. 50,38,967 = 27,49,269 Taxable LTCG 27,49,269 I.T.A. No. 756/Hyd/2016 :- 7 -:
6. Being aggrieved, appellant filed an appeal before the CIT(A) contending inter alia that the provisions of Section 50C are not applicable, in as much, as the market value of the property sold is not more than the apparent sale consideration shown in the sale deeds. In support of this, the certificate given by the Sub-Registrar, Shamirpet, dt. 17-11-2006 according to which, market value of the said property is only Rs. 20 Lakhs is also produced.
6.1. It was further contended that the Sub-Registrar was not justified in adopting Rs. 48,40,000/- per acre without adducing any reasons as against the value given by the Sub-Registrar, Shamirpet on 17-11-2006 is only Rs. 20 Lakhs. Thus, it was contended that the market value adopted by the AO has no basis. However, these contentions were overruled by the CIT(A) as follows:
"Before me, the appellant submitted that before registering the property of 2 acres of land, they had entered into a registered agreement for sale for a consideration of Rs. 20 lakhs each for 2 acres. Hence, the assessable' sale value consideration has to be taken as Rs. 20 lakhs and not Rs. 96,80,000/- as adopted by the Assessing Officer.
To ascertain once again, a remand report was called for from the assessment officer in which the Sub-Registrar gave his confirmation as below:
"With reference to the subject cited, I hereby submit that this office has bifurcated from SRO, Shamirpet and opened on 1-10- 2007 at SRO, Keesara. Where as in application you have requested the M. V. as on 19-12-2006 & 04-1-2007 of Nagaram Village, Keesara MandaI, Ranga Reddy District for which the records and Market Value can be obtained at SRO, Shamirpet. Further the M. V. as on 1-10-2007 in the Survey No. 40 of Nagaram @ Rs. per square yard 1200/- for residential area and Main Road Rs. 2200/- per square yard (Nagaram to Keesara Road) and 2800/- per square yard,( Nagaram to Dammaiguda Road) 3500/- per square yard (Nagaram to Kapra Road) and for agriculture land 20,00,000/- per acre inside, 30,00,000/- per acre main road side.
I.T.A. No. 756/Hyd/2016 :- 8 -:
Before me, the applicant written submissions, copy of sale deed, where the registered office has partly said "Endorsement under Sections 40 & 42 of Act II of 1899 No. 21233/2006 Dated: 19-12-2006 Hereby certify that proper deficit stamp duty of Rs. 4,35,600/- has been levied in respect of this instrument from Srikanth on basis of the Market Value / Consideration of Rs. 48,40,000/-.
REGISTRAR OFFICE REGISTRAR / COLLECTOR SHAMIRPET (Under Indian Stamp Act) 19-12-06
From the above, it is very clear that the registration value or the market value as per the stamp duty is Rs. 48,40,000/-. The price of the land is highly volatile and changing according to the details and location. The most prefect valuation will be at the time of registration. The stamp duty paid on the basis of registration date, i.e. 19-12-2006. The assessee has paid this at that rate at the time of registration. Hence, this amount to be taken as correct.
Hence, I take the value given in the registration deed, i.e, Rs. 48,40,0001/-".
7. Being aggrieved, appellant is before us in the present appeal. We have heard the rival submissions and perused the material on record. The only issue in this appeal is whether the AO was justified in invoking the provisions of Section 50C of the Act. In the present case, the Sub-Registrar had adopted market value of Rs. 48,40,000/- per acre at the time of registering the sale deed for the purpose of stamp duty. The AO adopted the same as deemed consideration for the purpose of computing capital invoking the provisions of Section 50C of the Act. The provisions of Section 50C are only the deeming provisions for the limited purpose of adopting market value as deemed consideration for the purpose of computation of capital gains. The provisions are also rebutable provisions. It is always open to the assessee to contend that the I.T.A. No. 756/Hyd/2016 :- 9 -:
market value adopted by the Sub-Registrar for stamp duty purpose is not correct and also to contend that the market value adopted by Sub-Registrar exceeds the fair market value of the property sold. In the present case, the appellant always contended that the fair market value is lower than the value adopted by the Sub-Registrar for stamp duty purpose and the appellant filed certificate issued by the Sub-Registrar, Shamirpet. It is further contended that this property, which was sold was falling within the zone of manufacturing area and it can be transferred only to technocrats, on account of these restrictions, the value of property is adversely affected. But the AO never met objections raised by the assessee nor referred the matter to the DVO for the purpose of ascertaining the fair market value. The provisions of Sub-section (2) of Section 50C empowers the AO to refer the matter of valuation of the capital asset to the Valuation Officer. In the present case, the AO had not complied with the mandatory provisions of sub-section (2). The Co-ordinate Bench of the Tribunal in the case of Janakiram Vs. ACIT [63 taxmann.com 139 (Hyderabad-Trib.)] held that the value of land is adversely affected as a result of restrictive use of property for the industrial purpose. Similarly, the Hon'ble Bombay High Court in the case of CIT Vs. Prabhu Steel Industries Ltd., [36 taxmann.com 393 (Bom.)] held that it is obligatory in terms of provisions of Sub-section (2) of Section 50C to refer the matter of valuation to the DVO in case the objections are raised by the assessee on the value adopted by the AO. Hence, having regard to above referred legal propositions, since in the present case, the AO had simply ignored the objections raised by assessee on the value adopted by the AO, had failed to adhere to the mandatory requirements of law of Sub-section(2) of Section 50C, Hence, the I.T.A. No. 756/Hyd/2016 :- 10 -:
present addition cannot be sustained in the eyes of law. The grounds raised by assessee are allowed.
8. In the result, appeal of assessee is allowed.
Order pronounced in the open court on 31st August, 2017 Sd/- Sd/-
(D. MANMOHAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, Dated 31st August, 2017 TNMM Copy to :
1. Mr. Mucherla Satyanarayana Srikanth, C/o. P.N. Moorthy, Tax Consultant, 1-8-518/16/1, 1st Floor, Chikkadpally, Hyderabad.
2. The Asst. Commissioner of Income Tax, Circle-12(1), Hyderabad.
3. CIT (Appeals)-1, Hyderabad.
4. Pr.CIT-1, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.