Income Tax Appellate Tribunal - Ahmedabad
M/S. Premani Prouducts,, Ahmedabad vs The Deputy Commissioner Of Income Tax, ... on 10 January, 2020
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ - अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD - BENCH 'A'
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 1146/Ahd/2017
नधा रण वष /Assessment Year: 2011-12
M/s.Premani Products DCIT, Cir.6(1)
406, Aniket Building Vs Ahmedabad.
Nr. Girish Cold Drinks
C.G. Road
Ahmedabad 380 009
PAN : AABFP 9455 H.
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : Shri Karan Shah, AR
Revenue by : Shri Deelip Kumar, Sr.DR
सन
ु वाई क तार ख/Date of Hearing : 07/01/2020
घोषणा क तार ख /Date of Pronouncement : 10/01/2020
ORDER
PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal
before the Tribunal against order of the ld.CIT(A)-6, Ahmedabad dated 20.4.2017 passed for the Asstt.Year 2011-12.
2. Revenue has taken four grounds of appeal which are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. However, prayer clause at the end of appeal exhibiting grievance of the assessee, reads as under:
1. The addition on account of reducing the cost of acquisition FMV as on 01.04.1981 and subsequently reducing the Index cost by Rs.21,48,394/- confirmed by the ld.CIT(A) may kindly be deleted."ITA No.1146/Ahd/2017 -2-
3. Brief facts of the case are that the assessee has filed its return of income on 11.09.2011 declaring total income at Rs.7,76,47,010/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts revealed to the AO that the assessee has declared long term capital gain on sale of land at Rs.7,92,41,360/-. The facts relating to such computation of long term capital gain are that in the year 1972 the assessee had purchased a land for a consideration of Rs.1,33,000/-. It was a plot of 5493 sq.meters. The assessee had valued the land for the purpose of indexation as on 1.4.1981 at Rs.8,24,000/-. After indexation benefit, its indexed cost representing acquisition cost was worked out at Rs.58,58,640/-. The assessee had adopted this value on the basis of report of registered valuer who took into consideration three sale deeds viz. (a) sale deed dated 17.10.1980 for Rs.95 per sq.meter, (b) sale deed dated 4.2.1980 for Rs.132.24 sq.meter, and (c) sale deed dated 17.6.1980 for Rs.107.81 per sq.meter. The assessee thereafter enhanced the acquisition cost by a sum of Rs.20 lakhs on the ground that the above land was given on rent to M/s.PP Products ("PPP" for short) at the rate of Rs.4800per annum. "PPP" has constructed a shed on the said land, and in order to get vacant possession, the assessee had to pay a sum of Rs.20 lakhs to "PPP". The ld.AO while considering the above details observed that nearest date in the sale instances was 17.10.1980. In other words, this sale instance was of Rs.95 per sq.meter and closure to 1.4.1981. Thus, ignoring the report of registered valuer, the ld.AO adopted the purchase value of the land as on 1.4.1981 at Rs.95/- per sq. meter. He calculated the fair market value at Rs.5,21,835/-, and after giving indexation benefit worked out value at Rs.37,10,246/- as against ITA No.1146/Ahd/2017 -3- Rs.58,58,640/-. In other words, FMV prior to indexation was worked out by the assessee at Rs.8,24,000/- (Rs.5423 sq.mt x Rs.150/- ). The AO has worked out at Rs.5,21,835/- (Rs.5493 sq.mt. x 95). This exercise has given a difference in the computation of capital gain, and the AO has enhanced capital gain by a sum of Rs.21,48,394/-. Similarly, he did not allow alleged improvement cost of Rs.20 lakhs and made addition of Rs.20 lakhs also. Dissatisfied with the assessment order, the assessee carried the matter in appeal before the ld.CIT(A), but appeal did not bring any relief to the assessee.
4. With the assistance of the ld.representatives, we have gone through the record carefully. A perusal of record would indicate that the stand of the assessee before the ld.Revenue authorities was that the ld.AO has not called for any report from the DVO. He has just adopted one of the sale deeds for the purpose of reducing the computation of cost of acquisition. Before the ld.CIT(A), the assessee has filed supplementary report of registered valuer who have justified adoption of rate at Rs.150 per sq.meters. Such submissions have been taken note by the ld.CIT(A) at page no.7 and relevant part of the report in this connection, reads as under:
"Whole plot is situated at junction of four TP Roads, P.P. 143 abuts 60' wide T.P. road on North side and 40 wide road on East side. Area of plot is 5493 sq.mt.
• Compared to the sales instances under serial no 1, 2 and 3 area of the property under consideration i.e. P.P. no 143 is very large. Almost 5 times or more.
• .It has very good development potential.
• . Frontage on road is more compared to its depth. It is leveled plot. • .Amenities such as water supply, electrical connection already exists. • .Such a large plot is not easily available in the vicinity. • . Whole plot abuts road on its North and East side. Hence it is possible to have separate exit and entry points for material and product handling which is ITA No.1146/Ahd/2017 -4- very crucial for a industrial unit. Also separate entrance can be possible for workers and visitors to maintain secrecy of the product/process. • .Also plot can be sub divided if required and most of sub divisions can have direct entry from road.
• LAYOUT PLAN SHOWING PROPERTY AND PROPERTY OF COMPARATIVE SALE INSTANCES IS ENCLOSED • Considering all the above points land rate of Rs. ISO/ sq.mts adopted for valuation is fair and reasonable in my opinion".
5. The ld.CIT(A) while rejecting contentions of the assessee observed that the assessee failed to give any specific evidence in support of adoption of rate of Rs.150/- per sq.meter. It has only produced three sale instances, and there is no reason as to why nearest sale instance from the appointed date i.e. 1.4.1981 should not be adopted. To our mind, moot point is to ascertain what is the FMV of a property purchased in 1972 as on 1.4.1981 would be ? There cannot be any straight jacket formula. It can only be ascertained on the basis of some scientifically estimate formula. There are various methods provided under different enactments i.e. rent capitalization method, trend in the market, or what is the potential value on the strength of comparative sale instance. The ld.Registered valuer has adopted method on the basis of comparative sale instance. He thereafter made little adjustment considering peculiar facts of the land. This is an opinion of the expert, and contrary to this nothing has been collected by the Revenue. There is no justification to reject this study merely under the reasoning that a single instance which is little closure to the date of transaction is to be taken into consideration. To our mind, this approach is not justifiable hence we set aside the finding of the Revenue authorities on this issue, and direct the AO to compute capital gain by adopting the land rate of Rs.150 per sq.meter as on 1.4.1981. He would thereafter give benefit of indexation on the alleged value of rs.8,24,000/-.
ITA No.1146/Ahd/2017 -5-6. As far as addition of Rs.20 lakhs is concerned, it is pertinent to observe that section 48 of the Income Tax Act contemplates that income chargeable under the head capital gain shall be computed by deducting from the value of consideration received or accruing as a result of the transfer, the amounts, viz. (i) expenditure incurred wholly and exclusively in connection with such transfer, and (ii) the cost of acquisition asset and the cost of any improvement thereto. The assessee has given this piece of land on rent to "PPP". The assessee has filed computation of income shown by the "PPP". In this return "PPP" has declared short term capital gain under section 50 at Rs.19,52,953/-. It has claimed depreciation on this shed. In the past, these details were submitted before the AO. The AO did not inquire from "PPP" whether they have erected a shed or not. He simply disbelieved assertion of the assessee on the ground since it has rented out the land, "PPP" would not have construed this shed. In other words, according to the AO since ownership title of the land was not with the "PPP", there is no question of raising the construction, allegedly in the name of "PPP" on this land.
7. On due consideration of the above facts and circumstances, we are of the view that the ld.AO has not justified in rejecting contentions of the assessee. It is pertinent to note that "PPP" has shown gains from business or profession at Rs.13,31,916/-. It has shown short term capital gain on sale of shed under section 50. Its tax liability has been worked out at Rs.5,93,419/-. Contrary to this, the assessee would show long term capital gain on sale of this shed. The assessee has disclosed sale value of the land at Rs.7,92,00,000/-. Hardly inclusion of Rs.20 lakhs or exclusion would make any difference to the assessee who is filing return ITA No.1146/Ahd/2017 -6- of more than Rs.7.76 crores. To our mind, sum of Rs.20 lakhs was very small amount in comparison to Rs.7.92 corees, and the assessee would not involve in manipulation of this small amount, when such huge sale consideration is available. Modus operandi at the end of the assessee could be construed, had there been a bigger allocation made by the assessee for reducing the tax liability. All these factors are to be weighed while appreciating the stand of the assessee vis-à-vis reasoning given by the AO. He has not given any concrete reasons, rather simply disbelieved the version of the assessee. Therefore, we do not find force in the reasoning of the AO. We direct the AO to delete the addition of alleged Rs.20 lakhs, and consider this amount as improvement cost of the capital asset whose sale has given rise to the capital gain.
8. In the result, appeal of the assessee is allowed.
Pronounced in the Open Court on 10th January, 2020
Sd/- Sd/-
(WASEEM AHMED) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER