Income Tax Appellate Tribunal - Mumbai
Vrinda Resorts P. Ltd, Mumbai vs Department Of Income Tax on 25 February, 2015
अिधकरण मुंबई यायपीठ 'एफ' मुंबई ।
आयकर अपीलीय अिधकरण,
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
सव ौी वजय पाल राव, याियक सदःय एवं नरे ि कुमार ब#लै%या, लेखा सदःय के सम'
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 4283/Mum/2013
िनधा रण वष / Assessment
(िनधा Year : 2009-10
The ITO 3(3)(4), M/s. Vrinda Resorts Pvt.
Aayakar Bhavan, Ltd.,
Mumbai-400 020 216, Tulsiani Chambers,
Nariman Point,
Mumbai-400 021
ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABCV 3854D
(अपीलाथ+ /Appellant) .. (ू-यथ+ / Respondent)
अपीलाथ+ ओर से/ Appellant by: Shri Sachchidanand
Dubey
ू-यथ+ क/ ओर से/Respondent by: Shri B.V. Jhaveri
सुनवाई क/ तार1ख / Date of Hearing :19.02.2015
घोषणा क/ तार1ख /Date of Pronouncement :25.02.2015
आदे श / O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the Revenue is directed against the order of the Ld. CIT(A)-7, Mumbai dt. 21.01.2013 pertaining to assessment year 2009-10.
2. The grievances of the Revenue read as under:
1. "Whether on the facts and in the circumstances of the case in law, the Ld. CIT(A) has erred in holding that the 2 ITA No. 4283/M/2013 assessee' case would not be covered under the ambit of section 50C(2) as the property transfer took place on 03/04/2008. without appreciating the fact that the word 'assessable' added in section 50C is clarificatory in nature and thereby applicable since the inception of Section 50C."
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions of section 50 and not those of section 50C are applicable to the sale of land, ignoring the tact that land is not a depreciable asset under the provisions of the Income Fax Act."
3. "Whether on the facts and in the circumstances of the case and in the Ld. CIT(A) has erred in granting excessive relief to the assessee on account of unsubstantiated expenses without appreciating the fact that the assessee had failed to prove the genuineness of the expenses and failed to substantiate and explain the reason for such increase in its expenses before the A.O. and also before the CIT(A)."
3. The assessee company is engaged in the business of providing catering services and acting as commission agent. The return of income was filed on 25.3.2011 declaring total loss at Rs. 2,67,729/- which included business loss of Rs. 2,59,511/- and Short Term Capital Loss of Rs. 8,418/-. The return was selected for scrutiny assessment and statutory notices were issued and served upon the assessee.
3.1. On perusing the computation of income, the Assessing Officer noticed that the assessee has declared Short Term Capital Loss of Rs. 8,418/- on sale of assets u/s. 50(2) of the Act. The AO further observed that the assessee has disposed off its property consisting of land and building situated at Vaijnath Village, Karjat for Rs. 3,30,08,418/- which included land having opening balance of Rs. 11,91,090/-. The assessee was asked to furnish details of the transaction of sale of property. The 3 ITA No. 4283/M/2013 assessee explained that it has sold bungalow and land and other assets to one of the Director of the assessee company for a total consideration of Rs. 3.30 crores.
3.2. After going through the sale agreement, the AO noticed that the assessee has disposed off the residential bungalow alongwith structure standing thereon for a total consideration of Rs. 3.30 crores. The AO observed that there is no mention of sale of other assets like generator set, furniture & fixture, kitchen equipments, mobile phones etc. The AO further noticed that the sale agreement is not registered hence to determine the stamp duty valuation of the property, notice u/s. 133(6) was issued to the Sub-Registrar calling for information as regards stamp duty valuation rate. The Sub-Registrar furnished the relevant data, perusal of which shows that the stamp duty value rate was Rs. 700/- per sq. mtr. The assessee was provided with the said stamp duty rate and asked to show cause as to why the sale value of land should not be taken at Rs. 3,33,43,233/- as per Stamp Duty rate of Rs. 700/- per Sq. mtr.
3.3. The AO observed that in the schedule of fixed assets of the balance sheet, it appears that the assessee has sold all the assets at its written down value. However, the assessee has failed to furnish any evidence to establish that all the assets have been transferred to the Director for a consideration of Rs. 3.30 crores. The AO was of the opinion that the assessee has only transferred residential bungalow and the transfer deed is silent in respect of other assets such as air conditioner, generator set, furniture, kitchen equipment, mobile phones, music system etc. The AO further observed that there is no bifurcation in the agreement of the consideration for sale of land and sale of bungalow. The AO computed the capital gain as follows:
4 ITA No. 4283/M/2013Sale value of land at Karjat Rs. 3,33,43,233/-
Less: Indexed cost (11,91,090X582/426) Rs. 16,27,264/-
LTCG Rs. 3,17,15,969/-
Even if the amount of sale consideration of Rs. 3,30,00,000/- is not apportioned between land and building, the capital gain works out to Rs. 3,17,15,969/- as under:
Sale value of land u/s. 50C as Rs. 3,33,43,233/- worked above Sale value of bungalow at WDV as Rs. 2,95,32,343/-
per assessee's accounts
Total consideration Rs. 6,28,75,576/-
Less: Cost of bungalow WDV as 2,95,32,343
per books
Indexed cost of land as worked out 16,27,284 Rs. 3,11,59,607/-
above
Taxable Capital gain Rs. 3,17,15,969/-
Thus, the long term capital gain on sale of land and building works out to Rs. 3,17,15,969/- as against short term capital loss shown at Rs. 8,418/- by the assessee. Capital Gain is assessed at Rs. 3,17,15,969/-."
4. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). It was strongly contended before the Ld. CIT(A) that the assessee has transferred depreciable asset and therefore rightly disclosed the capital gain u/s. 50(2) of the Act. It was further explained that as per the explicit, provision of Sec. 50C of the Act, it is amply clear that the 5 ITA No. 4283/M/2013 value of stamp duty authority will be taken in place of actual transfer value only, if the said property transferred and registered under the stamp duty Act. It was explained that though the transfer took place on 3rd April, 2008 as per sale agreement but the property was not registered under the stamp duty Act therefore the action of the AO adopting provisions of Sec. 50C of the Act is completely against the provisions of law.
4.1. The main contention of the assessee was that the working of capital gain should be in accordance to Sec. 50C of the Act therefore the action of the AO was completely incorrect. It was claimed that the cost of assets transferred should be adopted at Rs. 3,30,08,418/- only. The assessee submitted that it has transferred all the assets for a total consideration of Rs. 3.30 crores when the Written Down Value of all the assets was Rs. 3,30,08,418/- therefore it is incorrect to say that other assets were not transferred as per sale agreement. Coming back to the applicability of the provisions of Sec. 50C of the Act, it was claimed that the amendment brought to the provisions by the Finance Act, 2009 are applicable for the transfer on or after 1.10.2009 since in assessee's case, the transfer took place on 3.4.2008, the applicability of Sec. 50C(2)(a) of the Act is not justified.
4.2. After considering the facts and the submissions and the relevant provisions of law, the Ld. CIT(A) was convinced that the application of Sec. 50C of the Act is completely unjustified and incorrect in the given facts of the case. The Ld. CIT(A) further observed that the assessee was disclosing its income from business and making claim of depreciation on the assets which were transferred as per sale agreement and the depreciation were allowed by the department in earlier assessment year. After considering all the facts in the light of the relevant provisions of the 6 ITA No. 4283/M/2013 Act, the Ld. CIT(A) held that provisions of Sec. 50C are not applicable and accordingly deleted the additions made by the AO as per provisions of Sec. 50C of the Act, however, directed the AO to work out the capital gain under relevant provisions of the Act.
5. Aggrieved by this, the Revenue is before us.
6. The Ld. Departmental Representative strongly supported the assessment order. It is the say of the Ld. DR that the assessee has grossly failed in proving that other assets in the balance sheet were also transferred by the same Transfer Deed by which bungalow with its standing structure was transferred. The DR further submitted that the onus was upon the assessee to show that the entire block of fixed assets was transferred to the Director of the company.
7. Per contra, the Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities.
8. We have carefully perused the orders of the authorities below. The undisputed fact is that the bungalow with its standing structure was transferred vide sale agreement dt. 3.4.2008. It is also an undisputed fact that the said agreement was never registered with the Stamp Duty authority. The AO has invoked the provisions of Sec. 50C of the Act by adopting the Stamp duty value which is incorrect and has been rightly held so by the Ld. CIT(A). The amendment was brought by the Finance Act, 2009 w.e.f. 1.10.2009 and the CBDT Circular No. 5 dt. 3.6.2010 at para 23.4 has made it clear that these amendments have been made applicable w.e.f. 12.10.2009 and will accordingly apply in relation to transactions undertaken on or after such date. To this extent, we confirm the findings of the Ld. CIT(A). However, at the same time, we find that the entire block of assets have been transferred by the assessee at the 7 ITA No. 4283/M/2013 WDV as per the balance sheet for the year. Since the entire property has been transferred through an unregistered document, the fair market value has to be determined for the computation of capital gain even if depreciable assets have been transferred. Therefore, modifying the directions of the Ld. CIT(A), the AO is directed to get the fair market value of the assets by referring the matter to the Valuation Officer as per the provisions of law and decide the issue afresh after giving reasonable and sufficient opportunity of being heard to the assessee.
9. In the result, the appeal filed by the Revenue is treated as allowed for statistical purpose.
Order pronounced in the open court on 25th February, 2015 Sd/- Sd/-
(VIJAY PAL RAO ) (N.K. BILLAIYA) याियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER
मुंबई Mumbai; 5दनांक Dated : 25th February, 2015 व.िन.स./ RJ , Sr. PS आदे श क/ ूितिल प अमे षत/Copy षत of the Order forwarded to :
1. अपीलाथ+ / The Appellant
2. ू-यथ+ / The Respondent.
3. आयकर आयु7(अपील) / The CIT(A)-
4. आयकर आयु7 / CIT
5. वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानुसार/ ार BY ORDER, स-या पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai