Income Tax Appellate Tribunal - Mumbai
Midcity Bhoomi Developers P. Ltd, ... vs Department Of Income Tax on 15 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI "B" BENCH
BEFORE SHRI G.E. VEERABHADRAPPA, PRESIDENT AND
SHRI S.S.GODARA, JUDICIAL MEMBER
ITA No. 5099/M/2011
Assessment Year: 2008-09
ACIT Cir - 4(2),
Room No. 642, 6th Floor,
Aayakar Bhavan, M.K. Road,
Mumbai - 400 020. ....... Appellant
Vs.
M/s. Midcity Bhoomi Developers P. Ltd.,
71/B, Bada Mandir Compound,
1st Floor, Panjarpole Road,
Mumbai - 400 004.
PAN: AACCM 6805E ....... Respondent
Appellant by: Shri P.C. Mourya
Respondent by: Shri Sanjiv M Shah
Date of hearing: 14.5.2012 Date of Order:15.6.2012
ORDER
PER S.S. GODARA, JM:
This Revenue's appeal is directed against order dated 21.4.2011 passed by ld CIT (A) for Assessment Year 2008-09.
2. The only effective ground raised in the appeal reads as under:
"On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition made by the AO on account of sale of flats below market value amounting to Rs. 1,54,31,916/-".
3. Concise facts of the case are that the assessee / builder had shown sale of 17 flats, in its return. The AO compared the sale considerations in question with market value of 2 ITA No. 5099/M/2011 all flats u/s 50C of the Act which gave rise to difference in total value of Rs. 11,54,31,916/-. So, AO sought explanation from assessee who contended that the aforesaid provision was not applicable in its business as it only applies in sale of capital assets and not business assets. The AO rejected the said contention by holding that in view of aforesaid provision, sale transactions of immovable property could not be lower than the value as prescribed by Stamp Authorities and computed difference between sale value and market value as 'undisclosed income' vide assessment order dated 16.12.2010.
4. In appeal, the assessee's contention stands accepted by ld CIT (A) by holding as under:
" From the assessment order, I find that the assessee's income has been determined by the AO as income from business and profession and no income from capital gain has been assessed for the instant year by the AO. Therefore, admittedly the income from sale of flats have been assessed by the AO as business income and the impugned flats have been treated by the AO as business assets and not capital assets of the assessee. Accordingly, the provisions of section 50C cannot be invoked in the case of the assessee, as has been held in the case of Thiruvengadam Investments Pvt. Ltd. (supra) and Inderlok Hotels Pvt Ltd. in respectful compliance of which I hold that the addition of Rs. 1,54,31,916/- by taking recourse to the provisions of section 50C is not sustainable. The addition of Rs. 1,54,31,916/- is, therefore, deleted. The appeal on these grounds is allowed."
5. In support of the issue raised, ld DR has relied on the AO's findings in assessment order and submitted that ld CIT (A) has erred in accepting assessee's contention. Hence, prayed for acceptance of the appeal.
6. On the other hand, ld AR has relied on ld CIT (A) order and case law as referred to by the ld CIT (A) in case of Inderlok Hotels etc. (supra), also produced on record photocopies of the cases cited.
3ITA No. 5099/M/2011
7. We have heard both parties at length and have gone through case law. Undisputedly, in the present case, the assessee's assets have been treated as 'business assets' in place of 'capital assets' and income as derived from business instead of 'capital gains'. In such a case, Ld. Coordinate Bench in case of Inderlok Hotels (2009) 122 TTJ (Mumbai) 145 Inderlok Hotels (P) Ltd. vs. ITO has held as under:
"It is abundantly clear from the explanation given in the CBDT circular that the basic intention to insert s. 50C is for the purpose of determining full value of sale consideration for the purpose of computation of capital gains under sec. 48 of the Act. It is well-settled rule of interpretation that meaning ascribed by the authority (sic). The issuing of notification or circular is good guide of contemporaneous exposition of the position of the law and this rule is popularly known as 'contemporanea expositio'. This rule of interpretation has been given recognition by the Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358: (1981) 131 ITR 597 (SC). In our opinion, there should not be any cloud of doubt that s. 50C has application only to the extent determining sale consideration for computation of capital gain under Chapter IV-E of the Act and it cannot be applied for determining the income under other heads.
We are therefore, of the opinion that, when admittedly in the present case the sale of the flats is treated as the business income and not as a capital gain, hence, the provision of sec. 50C is not applicable. We, therefore, delete the addition made by the AO of Rs. 51,22,956/- and set aside the order of the CIT (A) on this issue. The ground no.1 is therefore allowed."
8. In the other case law cited i.e. (2010) 229 CTR 284, Hon'ble Madras High Court has also affirmed the ld Coordinate Bench's view as under:
"It is not in dispute that the activity of the assessee is property promoter. It can be Gathered from the facts available on record that the assessee has obtained power of attorney from the owner of the property and paid a sum of Rs. 3,19,49,496/- to the owner of the property and also incurred expenditure in a sum of Rs. 2,55,87,815/- in connection with the said property for the asst. yr. 2004-05 and the balance of Rs. 63,61,681/- during the asst. yr. 2004-05 (sic). The amounts so paid were shown under the head 'Loans and advances' in the balance sheet and not under the head 'Fixed assets'. Later on, the property was sold to M/s MRF Ltd. for a sum of Rs. 5 crores by a deed of conveyance, in which, the assessee represented the owner in the capacity of the power of attorney holder. The AO, in order to determine the value of the property, has invoked the provision of sec. 50C of the Act and thereby brought the entire amount of Rs. 6,94,45,920/-.4 ITA No. 5099/M/2011
The appellate authority has deleted that portion of the order of the AO having the sale consideration to Rs. 6,94,45,920/- as against Rs. 5 crores - the apparent sale consideration shown in the sale deed. The Tribunal also, taking note of the facts stated above, has come to the conclusion that invocation of Sec. 50C of the Act is not warranted as the property was never held by the assessee as capital asset and as per the accounts also, the amount given to the owner of the property has been shown as loans and advances thereby the property has been treated as business asset and not as capital asset. The invocation of Sec. 50C of the Act as can be seen from the provisions of the Act can be made in order to find out the true value of the capital asset. In the very facts and circumstances of the case, the property in the hands of the assessee was treated as business asset and not as capital asset, there is no question of invoking the provisions of sec. 50C of the Act, which is, as already stated, pertaining to determining the full value of the capital asset. The Tribunal has taken in aid the observation of the Mumbai Bench in the case of Inderlok Hoteld (P) Ltd. vs. ITO (2009) 122 TTJ (Mumbai) 145 : (2009) 20 DTR (Mumbai ) (Trib) 148, which, in our considered view, is in consonance with the statutory provisions and is well in accordance with law."
9. Therefore, drawing support from the order of Coordinate Bench as well as Hon'ble Madras High Court (cited supra), we also hold that sec. 50C of the Act is not applicable in case in hand where income has been treated as 'business receipt' instead of 'capital gain'. We see no reason to interfere.
10. Dismissed.
Order pronounced in the open court on15.6.2012.
Sd/- Sd/-
(G.E. VEERABHADRAPPA) (S.S. GODARA)
PRESIDENT JUDICIAL MEMBER
Date : 15.6.2012
At :Mumbai
Okk
Copy to :
1. ACIT Cir-4(2), Mumbai.
2. M/s. Midcity Bhoomi Developers P. Ltd.
3. The CIT (A)-8, Mumbai.
4. The CIT concerned.
5. The DR "B", Bench, ITAT, Mumbai.
6. Guard File.
5
ITA No. 5099/M/2011
// True Copy//
By Order
Assistant Registrar
ITAT, Mumbai Benches, Mumbai