Income Tax Appellate Tribunal - Mumbai
Troika Estate Pvt. Ltd., Mumbai vs Acit Range 2(3), Mumbai on 17 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
SHRI N.K. PRADHAN, ACCOUNTANT MEMBER
MA No.283/M/2016
(Arising out of ITA No.5032/M/2012 date of decision: 03.02.2016)
Assessment Year: 2006-07
M/s. Troika Estates Pvt. Ltd., Assistant Commissioner of
2nd Floor, Citimall, Income Tax,
Andheri Link Road, Vs. Range-2(3),
Andheri (W), Mumbai
Mumbai-400 053
PAN: AAACT 5759N
(Appellant) (Respondent)
Present for:
Assessee by : Shri Nitesh Joshi, A.R.
Revenue by : Shri B.S. Bist, D.R.
Date of Hearing : 03.02.2017
Date of Pronouncement : 17.03.2017
ORDER
Per Sanjay Garg, Judicial Member:
The present is a miscellaneous application moved by the assessee under section 254(2) of the Income Tax Act, 1961 pleading that a mistake apparent on record has occurred in the order dated 03.02.16 passed in ITA No.5032/M/2012.
2. The brief facts relevant for deciding the present application are that the assessee entered into a development agreement dated 16.09.05 with M/s. Yogi Developers Corporation (the developer). As per the terms of agreement, the assessee had given development rights to the developer and to use FSI and in return the developer agreed to pay to the assessee a sum of Rs.1,50,00,000/- in cash and to provide 25% of total super built up area to be constructed by the developer. Though the assessee offered the amount received in cash for the purpose of computation of capital gains but it did not offer any capital gain 2 MA No.283/M/2016 M/s. Troika Estates Pvt. Ltd.
towards the consideration receivable in kind i.e. 25% of the total super built up area.
3. The agreement also provided that the developer would be entitled to deduct from the said 25% of the super built up area of the value proportionate and equivalent to the amount paid by the developer to the third party discharging the liabilities of the assessee. The value of such developed area was agreed to be calculated at the rate of Rs.1000/- per sq ft. Since the assessee did not offer any capital gains towards the constructed area receivable by the assessee, the AO too the value of such area @ Rs.2000/- per sq. feet. The AO thereafter passed order under section 143(3) of the Act computing the capital gain at Rs.3,57,49,051/- as against loss of Rs.4,33,30,409/- computed by the assessee by considering full value of consideration at Rs.7,67,60,000/- (i.e. 38,380 sq mt. Rs.2000/- per sq. mt) as against Rs.1,50,00,000/- declared by the assessee and by disallowing cost of improvement of Rs.70,00,000/- being amount paid by the assessee to State Bank of Bikaner & Jaipur.
4. In appeal, the Ld. CIT(A) provided part relief to the assessee by directing the AO as under:
"a. to adopt consideration in respect of constructed area to be received at Rs.5,70,50,365/- (i.e. 1,14,100 Sq Feet @ Rs.500 per sq. ft.) as determined by the DVO in addition to Rs.1,50,00,000/- cash consideration received by the appellant.
b. Confirmed disallowance of Rs.70,00,000/- paid to SBBJ for clearing its title as cost of improvement.
c. to adopt value of land as on 1.4.1981 as given by DVO at Rs.82,51,700/- as against Rs.1,03,28,050/- adopted by the company."
5. Being aggrieved by the said order of the Ld. CIT(A), the assessee preferred appeal before this Tribunal. The following grounds were taken before this Tribunal:
"1. The Learned Commissioner of Income Tax (Appeals) {CIT(A)} 3 MA No.283/M/2016 M/s. Troika Estates Pvt. Ltd.
has erred in not accepting the appellant's contention that there is no transfer of the property at Ulhashnagar (the property) as defined u/s 2(47) of the Income Tax Act; there being no transfer of the property, no capital gains ought to be computed.
2. Without prejudice to Ground No 1, Learned CIT(A) has erred in holding that full value of consideration for the purpose of transfer should be taken at Rs.7,20,50,365/-. On the facts and in the circumstances of the case, Learned CIT(A) ought to have accepted alternative submission of the appellant that full value of consideration accruing or arising as a result of transfer should be taken either at Rs. 1,50,00,000/- or at Rs. 3,88,71,000/-.
3. While adopting the full value of consideration, learned CIT(A) has erred in not considering and dealing with the objections of the appellant to the valuation adopted by the District Valuation Officer (DVO) vide Valuation Report dated 20.07.2011 on the ground that no appeal lies on the valuation done by the DVO. On the facts and in the circumstances of the case and in law, the Learned CIT(A) ought to have considered and dealt with the objections filed by the appellant to the valuation report submitted by the DVO.
4. Learned CIT(A) has erred in directing the AO to adopt the value of the property as on 01.04.1981, for the purpose of computation of cost of acquisition, at Rs. 82,51,700/- on the basis of value determined by the DVO vide valuation report dated 20.07.2011 as against Rs.1,03,28,050/- adopted by the appellant.
On the facts and in the circumstances of the case and in law, the Learned CIT(A) ought to have held that:
i) The reference made by Learned AO to DVO is without jurisdiction and ought to be ignored.
ii) Cost of acquisition of Rs. 1,03,28,050/- on the basis of market value of the property as at 01.04.198 1 ought to be adopted.
5. Learned CIT(A) has erred in confirming the action of AO in disallowing the cost of improvement of Rs.70,00,000/- on the basis that the expenses, so incurred, is neither to be treated as the cost of improvement nor expenditure in connection with transfer. On the facts and in the circumstances of the case and in law, the said payment ought to be allowed as cost of improvement or in the alternative as expenditure incurred in connection with the transfer.
6. The appellant craves to add, alter, amend and/or rescind any grounds of appeal during the course of the hearing."
6. The Tribunal while adjudicating ground Nos.2 & 3 of the appeal observed as under:
4 MA No.283/M/2016M/s. Troika Estates Pvt. Ltd.
"18. The next issue raised before us is relating to the value of the consideration received/receivable by the assessee on transfer of development rights. The contention of the assessee has been that the sale value should be taken either at Rs.1,50,00,000/- which has been actually received by the assessee or at Rs.3,88,71,000/- as computed by the assessee as discussed and reproduced in the chart in the paras above. The Ld. A.R., in this respect, has relied upon certain case laws e.g. (i) CIT vs. Puja Prints - 360 ITR 697 wherein it has been held that in view of the specific provisions of section 55A(a), as were existent and applicable for the assessment year in question, a reference could be made to the Departmental Valuation Officer only when the value adopted by the assessee was less than the fair market value. It has also been held that the subsequent amendment to the relevant section where the relevant words "is less than the fair market value" have been substituted by the words "is at variance with its fair market value" is prospective and not applicable retrospectively. It has also been held that even the reference to the DVO under section 55A(a)(ii) was not acceptable for the reason that section 55A(b) of the Act very clearly states that it would apply in any other case i.e. a case not covered by section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in section 55A(b)(ii) and that the CBDT circular dated 25.11.72 has no application in view of above stated position of law. The Ld. A.R., thus, has submitted that the value as on 01.04.1981, as per the report of the Registred Valuation Officer which has been placed and relied upon by the assessee is to be considered. He, therefore, has submitted that the action of the AO for reference to the DVO was wrong and illegal in view of the law laid down by the Hon'ble Bombay High Court in the case of M/s. Puja Prints (supra). He has further contended that the sale value of the property should be taken as calculated by the assessee as reproduced and discussed in paras above of this order.
19. We have considered the rival contentions in this respect also. First of all, we find that the property/land in question had come to the assessee by way of scheme of arrangement as approved by the Hon'ble Bombay High Court in the company petition vide which certain assets and liabilities of the M/s. BRHM were transferred to the assessee. The AO has not gone into the question as to the same was a case of transfer or devolution of interest. However, since this issue has neither been raised before us nor gone into by the AO, hence we restrain ourselves from further discussion on this issue and assume that the assessee was entitled to claim the cost of acquisition as on 01.04.1981. In view of the law laid down by the Hon'ble Bombay High Court in the case of M/s. Puja Prints (supra), where the valuation of the property as per the registered valuer report was more than the fair market value in the opinion of the AO, the reference cannot be made to the DVO as the same, as per the relevant provisions, could be made only if the same is less than the fair market value in the opinion of the AO. The law laid down by the Hon'ble Jurisdictional High Court is binding on this Tribunal. Respectfully following the same, we hold that the action of the AO in referring the estimation of the value of the property as on 01.04.1981 was not in accordance with law and hence the value assessed by the DVO of the land in question as on 01.04.1981 cannot be adopted. The only evidence left in this respect which is available on file is the report of Regd. Valuer, we accordingly direct the AO to adopt the report of the registered valuer for arriving out at the value of the property as on 1.4.1981.5 MA No.283/M/2016
M/s. Troika Estates Pvt. Ltd.
20. So far as the sale value of the property as on the date of agreement is concerned, we do not agree with the calculation offered by the assessee. We, even do not find it justified to adopt the value of the DVO regarding the land in question. From the record, we find that the assessee has to receive Rs.1,50,00,000/- as cash component and further 25% of the constructed super built up area. The developer had agreed to owe and pay certain liabilities of the assessee for which the developer was entitled to deduct from the said 25% of super built up area, such proportionate and equivalent cost calculated at the rate of Rs.1000/- per sqr. feet. Further, a perusal of the various clauses of the agreement reveals that in this case the developer had to offer 25% of the super built up area out of the FSI already available on the land in question. The developer was under no liability in relation to any other constructed area upon the FSI obtained by the developer from the market or in lieu of FSI available on any other land. The above clauses clearly depict that the right to construct as per the FSI already available on the land was available with the assessee itself. The assessee was not entitled to receive any share of built up area in relation to any further FSI received or receivable by the developer upon the land in question. Under such circumstances, it can be safely assumed that the assessee had transferred the development rights in relation to 75% of the total FSI available and the assessee had retained the 25% of the FSI already available and what the assessee got in lieu of the 75% transfer of the development rights/FSI on the land was the cost of construction in relation to 25% of the super built up area of the land in question plus Rs. 1,50,00,000/-. The cost of construction of the said super built up area has already been quantified and ascertained in the 'supplementary development agreement,' itself, which is at the rate of Rs.1000/- per sqr. feet. The available FSI on the land as discussed above has already been mentioned by the assessee itself as 38380 sq. mtrs which is equal to 412968 sq. ft. Hence, the total sale consideration received/receivable by the assessee is Rs.1,50,00,000/- plus cost of 25% of the super built up area as attributable to the available FSI on the plot calculated at Rs. 1000/- per sq. feet. The developer has been given the liberty to deduct the amount paid towards liabilities of the assessee out of the said amount, which does not, in any manner, effect the quantum/ price of the sale consideration settled between the parties. The AO is, therefore, directed to compute capital gains/loss by taking the value as on 01.04.1981 as provided by the registered valuer and the sale value as may be arrived as discussed above.
18. At this stage, we would like to refer the case law strongly relied upon by the Ld. A.R. in the case of "CIT vs. M/s. Chemosyn Ltd., Mumbai" ITA No.361 of 2013 decided on 11.02.15 (Bombay High Court). We find that the facts and circumstances of the above stated decision are not applicable to the case of the assessee. In the said case, the original agreement was replaced by another agreement. In the original agreement, the developer had agreed to handover certain built up area. However, vide substituted agreement, the said condition was dropped and in the substituted tripartite agreement, the plots in question were transferred to the new buyer for a cash consideration and the condition of handing over of built up area was dropped. Under such circumstances, the Hon'ble Bombay High Court held that the consideration with respect to the built up area had not 6 MA No.283/M/2016 M/s. Troika Estates Pvt. Ltd.
accrued to the assessee. The facts of the said case, thus, are not applicable to the case of the assessee."
7. Now the assessee through this application has pleaded that the above findings of the Tribunal has in fact resulted in enhancement of the taxable income of the assessee as against the relief given by the Ld. CIT(A) and that this itself is a mistake apparent on record.
8. The Ld. D.R. has objected to the said application and has stated that the Tribunal has rightly adjudicated the issue and that there is no mistake apparent on record.
9. We have considered the rival submissions. Admittedly, it is the assessee who has agitated the valuation report of the district valuation officer regarding the value adopted of the constructed area receivable by the assessee. The Tribunal, after considering the relevant facts on the file, noticed that in this case there was no question of estimation of the value when a specific agreement was executed between the parties and the same was available on record vide which the parties have agreed to transact as per certain value of the constructed area. The Tribunal, while adjudicating the appeal, observed that the assessee and the developer had agreed to adopt the cost of the constructed area at the rate of Rs.1000/- per sq. ft. as per the supplementary development agreement. The Tribunal, while considering the above documents on the file, directed the AO to compute capital gains/loss by taking the consideration receivable by the assessee towards super built up area at Rs.1000/- per sq. ft. as has been agreed to by the parties as against the value adopted by the AO @ Rs.2000/- per sq. feet and that under the circumstances there was no question of any estimation of the same by the valuer. In this case, the Tribunal has neither on its own behalf has opened up any issue nor adjudicated any issue which was not disputed by the parties. The issue before the Tribunal was regarding the valuation to be adopted for the constructed area for the purpose 7 MA No.283/M/2016 M/s. Troika Estates Pvt. Ltd.
of computation of capital gains and the Tribunal adjudicated the issue in the light of evidence available on file i.e. the supplementary agreement between the parties which was not only executed but was also acted upon. The Tribunal has given a finding of fact on the file and even the existence of the said agreement has not been disputed by any of the parties. While implementing the order of the Tribunal even if it has resulted into enhancement of taxable income of the assessee as against the income arrived out of the implementation of the order of the CIT(A), that itself cannot be said to be a mistake apparent on record in the order dated 03.02.16. Even otherwise it can not be said to be case of enhancement of income at the hands of the Tribunal as against determined by the AO who has taken the value of the constructed area @ Rs.2000/- per sq. feet whereas the Tribunal has directed to adopt the same @ Rs.1000/- per sq. feet in the light of the facts and evidences on the file. The assessee himself should have been careful enough in filing the appeal before the Tribunal while agitating the value adopted by the Ld. CIT(A) of the constructed area. Once the assessee has brought the issue before the Tribunal and the Tribunal has given a finding of fact by considering the evidence available on the file and the authenticity or validity of those evidences have not been disputed, then, under such circumstances, we do not think that there is any infirmity in the order of the Tribunal. There is no merit in the present miscellaneous petition and the same is therefore dismissed.
Order pronounced in the open court on 17.03.2017.
Sd/- Sd/-
(N.K. Pradhan) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 17.03.2017.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
8 MA No.283/M/2016
M/s. Troika Estates Pvt. Ltd.
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.