Income Tax Appellate Tribunal - Mumbai
Manubhai A. Sheth Larger Huf, Mumbai vs Department Of Income Tax on 20 June, 2012
Manubhai A. Sheth Larger HUF
I.T.A. Nos.3841 & 3842/M/09
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'F', MUMBAI
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER &
SHRI VIVEK VARMA, JUDICIAL MEMBER
I.T.A. NOS. 3841 & 3842/Mum/2009
Assessment Years : 2003-04 & 2006-07
Asst. Commissioner of I.T. 12(1), Vs. M/s Manubhai A Sheth Larger HUF,
Mumbai. 501, Janmabhoomi Chambers,
29, Walchand Hirachand Marg,
Ballard Estate,
Mumbai 400 001.
PAN: AAAHM 5487 K
(Appellant) (Respondent)
Appellant by : Mr. Subhachan Ram (CIT DR)
Respondent by : Mr. Vinod Kumar Bindal &
Mr. Gaurav Bansal.
Date of Hearing: 20-06-2012.
Date of Pronouncement: 04-07-2012.
ORDER
Per VIVEK VARMA, JM:
The two appeals filed by the department arise from the orders of the CIT(A) XII, Mumbai, dated 30-03-3009.
2. As the grounds raised in both the appeals are identical, we are passing a common order for the sake of convenience. The department has taken the following grounds of appeal:
1) "On the facts and in the circumstances of the case the Ld. CIT(A) erred in directing to consider capital gain i.e. 56.78 Crores as against Rs. 283.24 Crores taken by the A.O. in the hand of M/s Manubhai A. Sheth Larger HUF for computing Long Term Capital Gain with regards to the transfer of Land to Sumer Corporation."
1a. "On the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that as per assessee's own submission and as per the return of income filed, the transfer of immovable property took place in AY 2003-04 and as such the provision of section 2(47) will apply". Page 1 of 11
Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 1b. "On the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that going by the sequence of events and as per the Award of Arbitration between transferor and transferee, which was accepted by both the parties, the transfer of immovable property crystallized in AY 2003-04 and as such the provision of section 2(47) of the Income Tax Act will apply". 1c. "On the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that as the transfer of immovable property took place during the AY 2003-04, the provision of section 50C applicable from AY 2003-04 will be attracted wherever consideration shown by the assessee is less than the value as per the records of Stamp Duty Authority". 1d. "On the facts and in the circumstances of the case, the Led. CIT(A) failed to appreciate that from the AY 2003-04 regarding transfer of immovable property as per provisions of section 50C where the consideration for transfer shown by the assessee is less than the value adopted for stamp duty purposes to arrive at the capital gain former consideration/ value automatically gets substituted by the later one as per the provisions of section 50C".
1e. "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the judgment given in the cases of (i) Raza Sugar Co. Ltd. 130 ITR 421 (Del) (ii) Hanemp Property Ltd. 101 ITD 10 (Del) wherein it is held that in case of transfer of immovable property, the value need not be taken as declared by the assessee. Based on those judgments valuation as per Stamp Duty Authority which is prescribed as per provisions of section 50C can be one of the parameter to arrive at the full value of the property that is to be transferred".
2) "On the facts and in the circumstances of the case the Ld. CIT(A) erred in not accepting the fact that 'the assessee is owner of the property and has full rights on title of property'. The confirming parties are the tenants of the property and they have only tenancy rights and also they have no independent rights to enter into transaction for sale of the said property."
3) "On the facts and circumstances, of the case the Ld. CIT(A) erred in deciding that the Section 50C can not be applied to the transaction with M/s Sumer Corporation as valuation has to be done by Stamp Duty Authority and not by A.O. himself."
3.1 "The conclusion of the CIT(A) is riot factually correct, the amount of consideration was taken by A.O. as per the value narrated in ready reckoner. The ready reckoner is itself a document of stamp duty valuation prepared by Stamp Duty Officer."
4. "The appellant prays that the order of CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored."
3. The issues involved in the grounds taken by the department are, as to when exactly the property in question was actually transferred and whether the provisions of section 50C shall apply, once the value is adopted based on the stamp duty valuation.
4. The facts of the case are that the assessee was the owner of a huge piece of land located in the Village Chandivali, Taluka Kurla, Mumbai, and it transferred land admeasuring 3,23,538.72 sq. mts. to Page 2 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 Sumer Corporation for development on 31-07-1998 vide development agreement dated 03-01-2000, registered on 10-01-2000 in terms of the MOU entered into in 1998. Possession of the land was given to the buyer and the assessee received a sum of Rs. 58.25 crores, computed @ Rs. 1,800/- per sq. mt. The assessee, on signing of the MOU and having taken almost the entire sale consideration at the time of signing of the MOU, applied for the requisite NOC from the Appropriate Authority, under the provisions of Chapter XX-C of the Income Tax Act and received the same on 16-12-1998 (copy of the NOC was provided by the assessee during the course of the hearing). It is seen from the orders of the revenue authorities, that the final payment and documented transfer took place on 20-09-2002.
5. In these sequence of events, the AO disallowed the valuation adopted by the assessee and recomputed the value of land as per the provisions of section 50C. The AO based his computation on general rates as per the stamp duty ready reckoner and arrived at the rate of Rs. 8,800/- per sq. mt. and thus arrived at the transfer figure of Rs. 213,24,94,518/- in place of Rs. 56,78,52,782/- taken by the assessee as per its MOU dated 31-07-1998, thus arrived at the long term capital gains figure of Rs. 226,46,41,736/-. On arriving at this figure, the AO reopened the assessment proceedings under section 147, which were unsuccessfully agitated by the assessee before the first appellate authority, but since the outcome of the appeal before the CIT(A) was Page 3 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 in the favour of the assessee, the assessee has not agitated this issue in the cross appeal before the ITAT.
6. Before the CIT(A), the assessee reiterated its stand and submissions and pointed out the facts. The assessee submitted that "the applicability of Section 50C, was from 01/04/2003. As the plot of land was transferred in a period prior to the introduction of the said section, it does not apply in its case. The Assessing Officer adopted the prevalent circle rate though no valuation was made by the Stamp Duty Authorities. The Assessing Officer had averred to the order of the AY 2005-06 where it was mentioned that the value as mentioned in Section 50C is the value to be adopted, had the interested parties approached the Stamp Authorities for the purpose of valuation during the relevant year. This observation of Assessing Officer is a surmise. Section 50C does not empower the Assessing Officer to adopt or alter any value except that what has been adopted by the Stamp Duty authorities. The statute does not allow the Assessing Officer to fix such value, if it has not been assessed or adopted by the Stamp authority and it does not suggest in any manner as to what should be the value for the purpose of what should the assessee have done in the given circumstances. The MOU dated 31/07/1998 had been considered by the Appropriate Authority u/Chapter XXC and the declared value was considered equivalent to the fair market value and no order for its compulsory acquisition was passed. The provisions of Section 50C is to ensure that revenue recovers proper capital gains tax where it suspects that the consideration shown is not the full consideration. It is not to victimize the seller or assessee who has returned the correct sale consideration. The Assessing Officer cannot ignore the Page 4 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 provisions of Chapter XXC while applying Section 50C, as the said transfer value stands admitted as the FMV for the purpose of transfer".
7. The CIT(A), after considering the entire facts, observed as under :
3.4 I have considered the submissions made for the appellant, the assessment order and the appellate order for the AY 2005-06.
Regarding the applicability of section 50C of the Act, l am of the view that the same is not applicable. The Assessing Officer applied the prevalent Stamp Duty rate though no such valuation was made by the local Stamp Duty authorities in respect of the said property The Assessing Officer had repeatedly averred to the order for the A.Y. 2005-06 where it was held that the value as calculated in terms of the section 50C must be adopted as the sale value The opinion of the Assessing Officer was that had the interested parties approached the Stamp Valuation Authority for the purpose of valuation during the relevant period, a different value would have been there. Admittedly this property had been valued for Stamp Duty purpose by the Stamp Authorities in January 2000 when it was registered on 10/1/2000 and there is no provision in law to get it valued again I am in agreement with the submission of the appellant that Section 50C does not empower the Assessing Officer to adopt any or alter any value for the purpose of the Stamp Duty payment for a property other than what is adopted by the authorities. The statute has not empowered the Assessing Officer to fix such value if it has not been assessed or adopted by authorities or to suggest in any manner as to what, should be the value for the purpose or what should the assessee in the given circumstances while determining the consideration for transfer. The appellant had also filed ample evidence for its proposition that the capital gains arising out of the transfer of land to Sumer Corporation is not taxable in the instant year. The MOU was made in the year 1998 and Rs 50 Crores out of the total consideration of Rs 58.25 Crores was received accordingly.
The development agreement and its registration occurred in the year 2000. In view of the decisions in the cases of Chaturbhuj Dwarkadas Kapadia, Geetadevi Pasari and Ajay Kumar Shah Jagati (supra), the transfer of the land has to be considered as occurring in the year 2000 when the provisions of Section 5OC was not in force. In view of the above, the action of the Assessing Officer in invoking the provisions of Section 50C in respect of the capital gains shown by the appellant for the transfer of land to Sumer Corporation is held to be unjustified The enhancement of capital gains by Rs 226,46,41,736/- is deleted and the Assessing Officer is directed to adopt Rs. 56,78,52,782/- as the capital gain arising from the transfer of land to Sumer Corporation".
8. Against these factual and legal findings, the department is in appeal before the ITAT.
Page 5 of 11
Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09
9. Before us, the DR vehemently argued the case of the department. On the other hand, the Authorised Representative strongly supported the order of the CIT(A).
10. We have heard the rival submissions and have perused the orders of the revenue authorities and material placed on record. From the facts emanating from the orders and the evidence, that the MOU with Sumer Corporation was signed on 31-07-1998, at the rate of Rs. 1,800 per sq. mt. and the assessee took non refundable consideration of Rs. 50 crores out of Rs. 58.25 crores and took the NOC from Appellate Authorities as required under the law as it then was, under Chapter XX-C of the I.T. Act and the possession of land was given. The controversy arose because of another MOU signed with Unique wherein the issue of LTCG and application of section 50C arose in assessment year 2005-06. Because of the valuation adopted by the circle rate for the purpose of stamp duty valuation, which came to at Rs. 8,800/- per sq. mt., the AO proceeded to reopen the assessment proceedings in 2003-04 and recomputing the capital gains at Rs. 226 crores (Rs. 284.71 crores - Rs. 56.78 crores). On these facts, the short point for our consideration is whether the AO was within his legal authority to import the figure of stamp duty valuation without actually referring to them and that too in a case when certificate u/s 269 UL(3) had been obtained way back on 16-12-1998. We have seen from the order of the AO, that the expression used by the AO are "... it transpires that the valuation as per stamp authority, which is Page 6 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 prescribed as per the provisions of section 50C can be one of the parameters to arrive at the full value of the property that is to be transferred". We, are therefore, in agreement with the assessee that the observation made by the AO in para 7.18 of the assessment order is basically a surmise. On the other hand, we endorse the findings of the CIT(A) that "the transfer of the land has to be considered on occurring in the year 2000, when the provisions of section 50C were not in force".
11. In the light of this, we do not find any merit in the appeal filed by the department, we therefore, uphold the decision of the CIT(A) that the capital gains computed by the AO on the basis of valuation adopted as per section 50C was totally unjustified and the enhancement made on capital gains be deleted.
12. We hold accordingly and thus, the appeal filed by the department is dismissed.
Assessment year 2006-07:
13. In the instant year, the facts are at variance but the issue is the same, i.e. whether provisions of section 50 can be legally applied on the transfer of assets by the assessee.
14. The facts herein, in this appeal are that the assessee entered into an agreement with the Unique Estates Development Co. Ltd. (Unique) on 24-04-1992 and which was registered on 27-04-1999, and the possession was handed over to Unique prior to May, 2000. Page 7 of 11
Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 However the final installment and transfer, after removal of all encumbrances was done in 2005, therefore, the assessee declared the capital gains in the current year.
15. The AO, disregarded the computation of capital gains at Rs. 1.36 crores as submitted by the assessee and held that provisions of section 50C shall apply and recomputed the LTCG on such basis at Rs. 9,52,67,250/- plus Rs. 13,00,024/- as LTCG for transfer of land to Mr. Nilesh Doshi.
16. The CIT(A), taking into consideration all the facts as submitted by the assessee and also the decision in CIT(A) in assessment year 2005-06, which actually pertained to the transaction in question, held, as under:
"2.3 I have considered the submissions made for the appellant, the assessment order and the appellate order for the AY 2005-06. On examination of the facts as above, I am of the view that these grounds no. 1 to 3 are already covered in favour of the appellant by the appellate order dated 09/07/2008 of my predecessor passed in the case of the appellant for the A.Y. 2005-06 in appeal no. IT/259/O7-08. The then CIT(A) had elaborately discussed the issue regarding the transfer of the property made to M/s Unique estates in the appellate order for AY 2005-06. In the said order it was held that since the impugned property had already been conveyed to the buyer prior to ÀY 2001-02, the capital gains could not be taxed in ÀY 2005-
06. In the instant year, the property transferred is the same and the appellant had only received part consideration of the property. The facts narrated by Assessing Officer in arriving at the conclusion that the property was actually transferred in the instant year, do not indicate any occurrence in the FY 2005-06. The conclusion drawn by the Assessing Officer is on facts and occurrence upto FY 2004-05. From the facts narrated by the Assessing Officer it could he seen that the appellant had received Rs 136 Crores during the relevant year which is less than 10% of the total consideration, for the said property. The appellant had received more than 90% of the consideration prior to FY 2005-06. The Assessing Officer had not brought any materials to substantiate his finding that he property was conveyed during the FY 2005-06. The appellant through its submissions had amply demonstrated that the property had been conveyed prior to FY 2005-06, which has been reinforced by the Page 8 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 findings of the CIT(A) for the AY 2005-06. In view of the above, it is held that the Assessing Officer was not justified in taxing the capital gain erroneously shown by the appellant as taxable in the AY 2006-
07. The Assessing Officer was also not justified in taxing the capital gain erroneously shown by the appellant as taxable in the AY 2006- 07sing Officer was also not justified in applying the provisions of the section 5OC of the Act for the purpose of determining the consideration of impugned property. What is not permitted by law cannot be assumed by the Assessing Officer as no valuation for the Stamp duty purpose during the year was made by the Stamp Authorities and the value declared by the appellant was duly dated by the concerned authorities Further if something is not at all assessable as income for the relevant period the same cannot be assessed just because the appellant erroneously declared the same as taxable in the return. No advantage of any ignorance of the law of the appellant can be taken by the revenue, who is duty bound to charge the tax which is statutorily due nothing else. In view of the above and also relying upon the elaborate findings of my Learned predecessor for the AY 2005-06, I hold that the property was not transferred in the FY 2005- 06 and the capital gains arising thereof cannot be taxed in the instant year. Further, it is also held that the provisions of Section 50C does not apply to the case of the assessee in the instant year as the capital gains arising thereof cannot be taxed in the instant year".
17. The department is in appeal before the ITAT against these findings of the CIT(A).
18. Taking into account the arguments of the DR and facts coming out of the orders of the revenue authorities, it is clear that the property had already conveyed to the buyer prior to 2001-02 and it was only the final part payment which was made during the year along with the formal documentation. The fact that the property in question was agreed to be sold and conveyance done even prior to financial year 2001-02 is not disputed even in the assessment order. The only skin of the nail, which the AO is using is the final payment and documentation and on that basis, the application of section 50. It is crystal clear from the fact that except for the last instalment everything was completed prior to 2001-02, in which case, the provisions of section 50C were Page 9 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 neither there nor could have been applied. In these circumstances, we have to accept the findings of the CIT(A) who has based his order on the CIT(A)'s order for assessment year 2005-06, where, the then CIT(A) has dealt with all the issues elaborately.
19. In these circumstances, we do not deem it fit to disturb the findings of the CIT(A). The AO is directed to accept the LTCG as determined and offered by the assessee in its return.
20. On the issue of capital gains being taxed in the current year, we find that the CIT(A) has rightly held that when the transfer of the garage was dated May, 2006, and the assessee has offered the same to be taxed in assessment year 2007-08, there was no occasion with the AO to bring the same to tax in the current year.
We endorse the findings of the CIT(A) on this aspect as well and uphold the findings.
21. In the result, the appeal filed by the department is dismissed.
Order pronounced in the open Court on this day of 04/07/2012.
Sd/- Sd/- (B.RAMAKOTAIAH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: 04/07/2012. P/-* Page 10 of 11 Manubhai A. Sheth Larger HUF I.T.A. Nos.3841 & 3842/M/09 Page 11 of 11