Madras High Court
Commissioner Of Income Tax vs M/S.Maharaja Seafoods India P Ltd on 10 September, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 10.09.2014 CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKAR AND THE HONOURABLE MR. JUSTICE G.M.AKBAR ALI T. T.C.A. NOS. 813 & 814 OF 2013 AND M.P. NO. 1 OF 2013 Commissioner of Income Tax Chennai. .. Appellant in both the appeals - Vs - M/s.Maharaja Seafoods India P Ltd. 1, 5th Street, Dr.Radhakrishnan Salai Chennai 600 004. .. Respondent in both the appeals Appeals filed against the order dated 20.03.2013 passed by the Income Tax Appellate Tribunal, Madras 'C' Bench, made in ITA Nos.1017/Mds/2011 and 1018/Mds/2011. For Appellant : Mr. T.R.Senthilkumar For Respondent : Mr. S.Sridhar COMMON JUDGMENT
(DELIVERED BY R.SUDHAKAR, J.) These appeals have been filed by the appellant against the order dated 20.03.13 passed by the Income Tax Appellate Tribunal in ITA Nos.1017/Mds/2011 and 1018/Mds/2011.
2. The following substantial questions of law have been framed for consideration in these appeals :-
1) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in applying the value of the land at the average of the valuation rate adopted by the assessee and the revenue, for the purpose of arriving at the fair market value of the property as on 1st April, 1981?
2) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in rejecting the value adopted by the Revenue, on the basis of the guideline value, which is fixed on the basis of transactions in the area where the land is situated?
3. These appeals are filed by the Revenue against the order of the Tribunal in relation to capital gains in respect of certain lands sold, which is relatable to the assessment years 2004-2005 and 2005-2006. The assessee sold lands measuring 26,087 sq.ft., in Marakayar Nagar, Neelankarai Village at the rate of Rs.521/= per sq.ft. For the purpose of computation of capital gains under Section 48 r/w Section 55 (2) (b) (i) of the Income Tax Act, the assessee determined the cost of acquisition as on 1.4.1981 by adopting the fair market value of Rs.120/= per sq.ft, which the assessee did by referring to four documents, two documents of the year 1992, one document of the year 1994 and two documents of the year 1995. However, the abovesaid documents were not placed before the Assessing Officer, but placed only before the Commissioner of Income Tax (Appeals). Based on the value determined in those documents, by adopting the method called 'Reverse Indexation', the said fair market price of Rs.120/= per sq.ft. was claimed as on 1.4.81. However, the said price was not accepted by the Assessing Officer, but fixed the fair market price by relying upon the certificate of the Sub Registrar, Adyar, Chennai, which certificate determined the value in respect of survey No.92/2/A at Rs.3500/= per ground or Rs.1.46 per sq.ft. The Assessing Officer rejected the acquisition value relied upon by the assessee and proceeded to determine the long term capital gains on the basis of the value found in the certificate issued by the Sub Registrar.
4. The assessee, aggrieved by the assessment, preferred appeal to the Commissioner of Income Tax (Appeals), who, taking note of the abovesaid four documents submitted by the assessee, at the first instance before the Commissioner of Income Tax (Appeals) and taking note of the certificate issued by the Sub Registrar, which is relied upon by the Assessing Officer and relying upon a co-ordinate Bench decision in ACIT, Co. Cir. VI (1), Chennai Vs SAS Engineering P. Ltd. (ITA No.61/Mds/2008 dated 14.08.2008), adopted mean value at Rs.60/= per sq.ft. and held as under :-
7.17. In this case also, there can be no doubt that the property in the ECR is a valuable property where prices have risen astronomically in the last ten years. The guideline value at Rs.1.46 is the value as on 1.4.1981 and not kept pace with fast changing times. Similarly, the Valuation Report furnished by the appellant suffers from the infirmity of not quoting any specific sale instance. Therefore, in the interest of justice, and as also held by the Hon'ble ITAT in the case quoted supra, I direct the Assessing Officer to adopt a mean value of Rs.60 per sq.ft.
5. Aggrieved by the said order, the Revenue went on appeal before the Tribunal on two issues, viz., (i) relating to business income and (ii) relating to capital gains. Insofar as the question of business income is concerned, the Tribunal held that since the assessee had already closed its business, the income earned by the assessee from letting of buildings and land is not business income and, therefore, the business expenditures claimed by the assessee are not allowable and, therefore, the issue was answered in favour of the Revenue. However, insofar as the issue on capital gains is concerned, the Tribunal, relying upon the decision of this Court in CIT Vs J.Chelladurai (204 Taxmann 258 (Mad)), held that in computing capital gains, average of the values can be adopted and affirmed the order of the Commissioner of Income Tax (Appeals). Aggrieved against the said order of the Tribunal, while the Revenue is before this Court by filing the two appeals insofar as capital gains is concerned, the assessee has not chosen to file any appeal insofar as the claim of business income is concerned, which was held in favour of the Revenue.
6. At the threshold, it was pointed out by Mr.Senthilkumar, learned standing counsel for the Revenue that the facts in Chelladurai's case (supra) may not apply on all fours to the facts of the present case. The certificate issued by the Sub Registrar in respect of the property in question cannot be brushed aside, as in Chelladurai's case (supra), it was found that the certificate was found to be forged and, therefore, average method was adopted, which is not comparable with the case on hand. In the present case, the assessee has not shown comparable documents of the year 1981 to determine the fair market price as required under Section 55 (2) (b) (i) and, therefore, based on the certificate of the Sub Registrar, the guideline value was fixed by the Assessing Officer in arriving at the assessment and, therefore, the order of the Commissioner of Income Tax (Appeals) as also that of the Tribunal has to be set aside.
7. Per contra, Mr.Sridhar, learned counsel appearing for the assessee/respondent reiterated the pleadings as made before the Original Authority, the Commissioner of Income Tax (Appeals) and the Tribunal and contended that the value of the property in a very prime locality on the outskirts of the city cannot be fixed at Rs.1.46 per sq.ft. The certificate issued by the Sub Registrar determining the guideline value at Rs.1.46 sq.ft. was not even intimated to the assessee so as to give his objections, if any. Therefore, the stand of the Assessing Officer in fixing the value at Rs.1.46 per sq.ft. is arbitrary and is not sustainable in law. It is the further plea of Mr.Sridhar, learned counsel for the respondent that four documents, pertaining to subsequent period, were submitted before the Commissioner of Income Tax (Appeals) and on scrutiny of the abovesaid documents, the fair market price was determined based on reverse indexation by the Commissioner of Income Tax (Appeals), which was subsequently affirmed by the Tribunal and in such view of the matter, no interference is called for with the order passed by the Tribunal.
8. Heard Mr.T.R.Senthilkumar, learned standing counsel appearing for the appellant/Revenue and Mr.Sridhar, learned counsel appearing for the respondent/assessee and also perused the materials placed in the typed set of documents and the orders passed by the Commissioner of Income Tax (Appeals) and the Tribunal.
9. On a careful scrutiny of the records and on a perusal of the orders passed by the Commissioner of Income Tax (Appeals) and the Tribunal, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal have gone on a different plane altogether by adopting mean value of Rs.60/= per sq.ft. The respondent/assessee had adopted reverse indexation method in computing the value of the land. However, there is nothing on the record to indicate whether such a method could be adopted in computing the value. The further stand of Mr.Sridhar that the reverse indexation sought for by the assessee before the Commissioner of Income Tax (Appeals), though not before the Assessing Officer, has to be the determinable method as provided by law for computation of fair market value as required under Section 55 (2) (b) (i), this Court is of the considered opinion that the said question has to be gone into by the authorities and decided before such a method of computation can be adopted.
10. Perforce, we are not agreeable with the view of the Tribunal in following Chelladurai's case (supra) in arriving at its finding in relation to computation of fair market value, since the facts therein would reveal that on account of the forged certificate, the Court had adopted average method in the said case, while the facts in the present case stands on a different footing.
11. While we accept the plea of the Revenue that determination of fair market price by the Commissioner of Income Tax (Appeals) and confirmed by the Tribunal is not in consonance with law, we give credence to the stand taken by the learned counsel for the assessee that the determination of the fair market price for computation of capital gains, as was done by the assessee, was not given due regard by the Assessing Officer, but the Assessing Officer has arbitrarily taken the certificate issued by the Sub Registrar for fixing the fair market value, without offering an opportunity to the assessee to raise his objections.
12. For the reasons abovesaid, we find that there is a lacuna (i.e.) violation of principles of natural justice in the proceedings before the Commissioner of Income Tax (Appeals) and the Tribunal as also before the Assessing Officer for non-consideration of the above issues. In these circumstances, we deem it fit to remand the matter back to the Original Authority/Assessing Officer for determining the issue of fair market price as on 1.4.1981 by giving the assessee an opportunity to produce all relevant documents in support of its plea as also raise objections with regard to any document as may be relied on by the Assessing Officer.
13. Accordingly, this tax appeal is allowed by way of remand to the Assessing Officer for determining the issue of fair market price as on 1.4.1981, and the Assessing Officer shall give an opportunity to the assessee/respondent to produce all relevant documents in support of its plea and also raise objections with regard to any document that may be relied on by the Assessing Officer before a final decision is taken in the matter. Consequently, connected miscellaneous petition is closed. However, there shall be no order as to costs.
(R.S.J.) (G.M.A.J.)
10.09.2014
Index : Yes/No
Internet : Yes/No
GLN
To
Commissioner of Income Tax
Chennai.
R.SUDHAKAR, J.
AND
G.M.AKBAR ALI, J.
GLN
T.C.A. NOS. 813 & 814 OF 2013
10.09.2014