Income Tax Appellate Tribunal - Mumbai
Decent Restaurant, Mumbai vs Assessee on 2 April, 2013
आयकर अपील य अ धकरण "D" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
ी आर.के. गु ा, या यक सद य एवं ी ी डी. क णाकर राव, लेखा सद य के सम ।
BEFORE SHRI R.K. GUPTA, JM AND SHRI D. KARUNAKARA RAO, AM
आयकर अपील सं./I.T.A. No.6555/M/2012
( नधारण वष / Assessment Year :2009-2010)
M/s. Decent Restaurant, बनाम/ DCIT-24(1),
बनाम
55, Venna Dalwai Ind. Vs. Pratyakshkar Bhavan,
Estate, S.V. Road, Bldg. No.C-13, Bandra Kurla
Oshiwara, Jogeshwari, Complex,
Mumbai - 400 049. Mumbai - 400 051.
थायी ले खा सं . /PAN : AAFFD 4076 N
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri B.R. Majithia
यथ क ओर से/ Respondent by : Shri Manoj Kumar, DR
सन
ु वाई क तार ख /Date of Hearing : 02.04.2013
घोषणा क तार ख /Date of Pronouncement : 01.05.2013
आदे श / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 30.10.2012 is against the order of CIT (A)-34, Mumbai dated 22.8.2012 for the assessment year 2009-2010.
2. In this appeal, assessee raised the following grounds which read as under:
"1. The Ld CIT (A) erred in concluding the calculation of short term capital gain by ARBITRORILY dividing the actual sales consideration of Rs. 1,35,00,000/- in the ratio of WDV of the fixed assets ie immovable & immovable assets. The agreement for sale was compositely made for all the assets, whereas the learned CIT (A) has valued the Land & Building as per section 50C & taken the FMV of Rs. 1,45,03,819/- and for movable assets the sales consideration is ARBITRORILY derived as Rs. 43,13,925/-. Please refer page No.22 & 26 of CIT (A) order.
2. By applying the provision of section 50C, CIT (A) has treated the capital gain on land & building worth Rs. 1,06,77,667/- as short term capital gain in spite of the fact that the learned CIT (A) has himself mentioned "that the assets were 2 held for more than 36 months and the appellant needs to disclose LTCG", (para 2.4.3 on page no.14 of CIT (A) order) as the date of purchase of property (land & building) is on 24.3.2005 and the date of sale is 24.2.2009.
3. Even though the valuation u/s 50C was challenged by assessee before Assessing Officer & requested Assessing Officer to refer the matter to valuation officer which was neither considered by Assessing Officer nor CIT (A)."
3. At the outset, bringing our attention to the grounds raised by the assessee, Shri B.R. Majithia, Ld Counsel for the assessee mentioned that the assessee aggrieved against the order of CIT (A) primarily for his arbitrarily decision of dividing the sale consideration of Rs. 1.35 Cr in the ratio of WDV of movable and immovable assets, when the said consideration is otherwise received on different grounds. Assessee is also aggrieved against invoking of provisions of section 50C of the act and adopting a high FMV, ignoring the facts mentioned in the agreement and also ignoring the assessee's request for making a reference to the Valuation Officer for arriving at the Fair Market Value. Further, Ld Counsel brought our attention to the additional grounds filed before us and mentioned that the assessee does not want to press not only the said additional grounds but also the issue of invoking of provisions of section 50C of the Act, but on the condition that the capital gains are properly worked out after considering the asset specific WDV.
4. Tracing the background facts and figures, Ld Counsel mentioned that assessee runs a restaurant and the same was sold to M/s. Jasraj Restaurant Pvt. Ltd for a sum of Rs. 1.35 Cr on slum sale basis and worked out the capital gains of Rs. 72,66,782/-, after adjusting the WDV of the entire block of assets of Rs. 62,33,218/- from the sale consideration of Rs. 1.35 Cr (sale consideration of Rs. 1,35,00,000 - Rs. WDV of Rs 62,33,218 = Rs. 72,66,782/-). Assessing Officer attempted to apply the provisions of section 50B relating to 'slump sale'. For the land and building, AO invoked the provisions of section 50C of the Act and worked out the short term capital gains out of said sale of land and building. Thus, AO computed the short term capital gains of Rs. 1,06,77,667/- on land and building and Rs. 22,09,224/- for other assets. The additions made by the AO, in brief, are as under:
3"The Assessing Officer vide order u/s 143(3) dated 24.11.2011 made the following additions under the head Capital Gain (Short Term).
Particulars Amount added to
Total Income
Land and building valued u/s 50C-stamp Value, despite the fact that Rs. 1,06,77,667/-
the sale transactions is attracted under slump sale u/s 50B as also agreed by the Assessing Officer.
Less: Actual Short Term Capital Gains as claimed in return. Rs. 72,66,789?- Rs. 34,10,885/- STCG on sale of other assets (other than land and building) Rs. 22,09,224/- calculated as per section 50B ie Net Worth Method. The cost ie Net Worth of other assets is wrongly considered as Short Term Capital Gains instead of considering the same as Short Term Capital Loss against which no separate consideration is received by the assessee.
STCG as computed by the AO Rs. 56,20,109/-
5. During the first appellate proceedings, assessee was aggrieved with the manner of invoking the provisions of section 50C of the Act to the land and builidng in spite of the fact that the AO considered the entire sale as a slump sale u/s 50B of the Act. It was argued before the CIT (A) that the provisions of section 50C should not be applied to a case of slump sale u/s 50B of the Act. Assessee prayed for deletion of addition of Rs. 34,10,885/- u/s 50C of the Act. At the end, CIT (A) noticed that the assessee has not transferred six assets of the restaurant namely Electric fittings; Gas; Glass; Music System; Water Filter and Bicycle. Para 2.4.13 of the impugned order is relevant in this regard. Finally, CIT (A) held that this is not a case of slump sale as mentioned in section 50B of the Act and dismissed the appeal of the assessee with enhancement u/s 251(2) of the Act and the manner of determining the short term capital gains at the back of the AO, which was given in page 26 & 27 of the impugned order and the relevant part of the same reads as under:
"In view of the above, I am convinced that the transfer includes entire 12 assets and not the 6 assets as proposed by the earlier. The contention of the appellant in this regard is accepted. Accordingly, the short term capital gain on the other assets is revoked as under:
The proposition of full value of consideration received on all Rs. 51,97,500/- 12 assets (please refer para 2.4.13) WDV of all the assets as per Blanace Sheet Rs. 24,04,064/-
Short term capital gain Rs. 27,90,436/-
The total short term capital gain out of sale of land and building together with all the assets is now worked out as under:-
STCG on Land and Building Rs. 1,06,77,667/-
STCG on transfer of other assets Rs. 27,90,436/-
Total Rs. 1,34,68,103/-
The Assessing Officer is accordingly directed to assess the short term capital gain of Rs. 1,34,68,103/- as per provisions of section 50 of the IT Act. This ground of appeal is dismissed."4
5.1. From the above, it is evident that the CIT (A) dismissed the appeal of the assessee by working of the capital gains as per the provisions of section 50 r.w.s. 50C of the Act. In the background of the above, Ld Counsel mentioned that the above computation of capital gains was done at the back of the AO, by arbitrarily dividing the sale consideration between the fixed assets ie land and building and other assets, not on a scientific basis. He also mentioned that assessee's request for making reference to the DVO for determining the market value of the land and building was also not entertained. In the background of the above, Ld Counsel submitted that the issues may be remanded to the files of the AO for examining the issue afresh. Of course, Ld Counsel made a submissions at Bar that he will not have any objection for invoking the provisions of section 50C of the Act, provided, the allocation of the sale consideration among the assets was not done properly in a composite manner which is prima facie artificial and it should be rejected.
6. On the other hand, Ld DR fairly mentioned that so long as the assessee has no objection of invoking the provisions of section 50C, merely for re-allocation of the sale consideration among the assets, he will have no objection for a limited purpose of re-computation of the capital gains in accordance with the provisions of section 50C of the Act.
7. We have heard both the parties, perused the orders of the Revenue Authorities as well as the paper book filed before us. There is no dispute on the facts and figures that the sale consideration of the movable and immovable assets of the restaurant is Rs. 1.35 Crs. Is it a case of slump sale? In our opinion, the answer is negative considering the retention of certain assets undisputedly. In such circumstances, we confirm the finding of the CIT(A) that it is not the case of a slump sale. Ex consequenti, we dismiss the AO's manner of invoking the provisions of section 50B of the Act relating to the slump sale. In the result the capital gains have to be computed only in accordance with the provisions of section 50 of the Act. It is also a fact that the CIT (A) should have granted an opportunity to the AO while invoking the different provisions for the first time, deviating entirely from the manner of assessment done by the AO. It is also a fact that there is no dispute 5 about the applicability of provisions of section 50C to the depreciable assets referred to in section 50 of the Act. Of course, Ld Counsel made a concession before us that for want of finality of the litigation he shall not make an issue regarding the adoption of the FMV of the land and building. Considering the above, we are of the opinion that there is need for re-computation of the capital gains in accordance with the provisions of section 50 of the Act. In the set aside proceedings, AO shall adopt the FMV as conceded by the assessee's Counsel. Accordingly, the matter is set aside to the files of the AO for adjudication of the issue afresh after granting a reasonable opportunity of being heard to the assessee.
8. In the result, appeal filed by the assessee is allowed for statistical purposes.
प रणामतः नधा रती अपील सां यक य उ े य के लए वीकृत क जाती है ।
Order pronounced in the open court on 01.05.2013. .
आदे श क घोषणा खुले यायालय म दनांकः 01/05/2013को क गई ।
Sd/- Sd/-
(R.K. GUPTA) (D. KARUNAKARA RAO)
य यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मंब
ु ई Mumbai; दनांक Dated: 01/05/2013
व. न.स./OKK , Sr. PS
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-
4. आयकर आयु / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER,
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.
उप/ Registrar)
आयकर अपील य अ धकरण,
धकरण, मुंबई / ITAT, Mumbai