T vs. INFRASTRUCTURE PRIVATE LIMITED,MUMBAIVS.ACIT-2(3)(1), MUMBAI

5. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who confirmed the action of the assessee by holding as under:- This ground relates to disallowing the indexation of Rs.1,47,65,584/- and treating sale of land being short term capital gain without indexation instead of long term capital gain. 8.2 The AO in the assessment order has mentioned that assessee being in the business of building and developing superstructures had purchased land and built superstructure in Thirssur. As part of retail units and reorganizing its business structure, the assessee had sold this unit too. According to the AO, this falls under the provisions of section 3 AY 2014-15 M/s TVS Infrastructure P. Ltd 50Bwhereby the net assets value and sale consideration have to be taken into consideration for determining capital gains. Although the sale deed clearly emphasized that assessee owned a building worth Rs.30 lacs, assessee had represented the sale as mere sale of land. This transfer of business unit transfer falls under the provision of section 50B of the Act. Hence, assessee was asked to show cause why the indexation amounting to Rs.1,47,67,584/- claimed in such transaction is not an allowable expenditure and should not be disallowed. In response, the assessee submitted that the company had held land situated at Thirssur as a Capital Asset, theholding period of which was more than 36 months. Thus, the company had computed Capital Gains on the basis of section 48 of the Income Tax Act, 1961. The company had not constructed any superstructure on the said land during the course of its holding. The purchaser at the time of purchase had valued the land separate from a shed on the land and accordingly the same was mentioned in the sale agreement. The assessee further submitted that they had only purchased and sold the land. As the asset was a long-term capital asset, indexation benefit should be allowed. However, the AO did not agree with the submission of the assessee. According to the AO, assessee had reorganized its business and sold retail business units during the year. As part of business reorganization, the sale clearly falls u/s 50B. As per slump sale provisions, assessee was required to compute gains by providing valuation report. However, the assessee failed to furnish the same. Hence, the AO considered the sale value and book value to compute the resulting capital gain amounting to Rs.1,47,67,584/- which he disallowed and added to the total income of the assessee.

4 AY 2014-15 M/s TVS Infrastructure P. Ltd 8.3 During the course of appellate proceedings, the Ld. AR has filed written submission, relevant part of which is reproduced as under:- "Disallowance of indexation of land sold The AO had erred in disallowing the indexation of Rs. 1,47,67,584/- and treated sale of land being short term capital gain without indexation instead of long term capital gain. The land was purchased as is where is basis and sold as is where is basis. At the time of purchase, a small shed was there, no separate valuation was done in purchase agreement. As the same was of no use to assessee, the agreement value had been treated as land in the books of account of the Company: no construction activity was carried on it. The company has treated the same as land all throughout the holding period. The company has not generated any rental income from either the land of the said shed. At the time of sale of the said land, the buyer as per his convenience valued the shed at Rs.30 lacs in the sale agreement, the AO treated superstructure as unit and sale as slump sale. Therefore, indexation benefit be allowed on the sale of Land." 8.3.1 In the submission filed vide their letter dated 27.10.2017, the appellant company has stated that the land was treated as such throughout the holding period and the company has not generated any rental income from either the land or the said shed and it is only as per the buyers convenience that the shed on the property has been valued at Rs. 30,00,000/- and the AO has treated the shed as unit and sale as slump sale. The appellant has enclosed copy of Purchase Agreement and Ledger as Annexure 8 of the submission.

5 AY 2014-15 M/s TVS Infrastructure P. Ltd 8.4 I have carefully considered the facts of the case, discussion of the AO in the impugned order as well as oral contentions and written submissions of the appellant The AO has treated the sale of the questioned land alongwith the shed constructed on it as slump sale, it is the contention of the assessee that throughout the holding period, the land was treated as such and the company has not generated any rental income from either the land or the said shed which was their right at the time of purchase by the company and that the entire property was sold on as is where is basis. In this regard, is seen from the Annexure 8 enclosed with the submission that the same are ledger accounts of advance for the land from 1 April 2010 to 31 March, 2014 and there is nothing mentioned to have been spent from 01.04.2013 to 31.03.2014. Further, a copy of the sale deed has been enclosed for purchase of the said land by the assesses and subsequent sale of the said land to Ms Kalyan Silks Trichur Pvt. Ltd. However, it is seen from Annexure 7 of the submission where copies of the sale agreement of various parties have been given including that of property located at Thrissur which is the questioned property sold to Ms Kalyan Silks Trichur (Private) Limited for a consideration of Rs 8 crores wherein attached to the sale deed is Form No 18. The Form No.18 is having two parts - Part No. 1 is a landed property which is shown to be on Survey No.141 with an area of 37.10 Ares valued at Rs.5.7 crores. Part 2 of Form No.18 is pertaining to Buildings wherein at point no.3, the year of construction is mentioned as 2013 The built-up area of that property has been shown as 600 sq. meters having Tinned Roof and RCC Roof and at point no.6, it is clearly mentioned that it has a Compound Wall as also the Bore Well which is reflected at point no.7. As per point no.8, electrical installations are there which have 50 number of points and which have been valued at Rs 30,00,000/- The appellant in their submission, has contended that the property was purchased with a small construction thereon in 2010 from 6 AY 2014-15 M/s TVS Infrastructure P. Ltd Ms. Ginza Soman and Power of Attorney holder, Sri P Soman. The appellant has contended that at the time of purchase, only the shed was existing Le in 2010 and that the entire property alongwith the shed was sold as is where is basis. However, the Form No. 18 of the Sale Deed clearly indicates year of construction of the shed as 2013. This fact contradicts the assessee's submission that there was no construction done on the said piece of land. The documents as in Form No.1B has been signed by the authorized signatory and has been attached along with the Sale Deed and clearly points out to the fact that the property was constructed in 2013. As regards built-up area of 600 sq. m., it has a Cement floor, Tinned Roof and RCC Roof, has Bore Well, Compound Wall and 50 numbers of electrical points. Having these facts which are part of the sale deed of the property and has been signed by the Director of the company and authorized signatory of the company, Shri Ravi Kumar S., the facts are clear and therefore the submission of the assessee that there was no activity of construction etc. done on the property subsequent to the purchase of the land by them in 2010 is not the correct fact of the case. The construction of the shed on the property with the details as have been given hereinabove is clearly in the year 2013 and the sale thereof as taken in the year 2013-14 pertain to the assessment year under consideration. Under these facts, the contention of the assessee that the concerned sale should be treated as Long-term Capital Gain and indexation should be allowed is not found to be acceptable. While there cannot be any dispute that the land in question was purchased in 2010, it also cannot be disputed having regard to Form No. 1B of the Sale Deed that the shed with the details mentioned hereinabove was constructed in 2013. In these facts, what has to be seen and examined is that the land was not purchased by the assessee as any kind of investment. It was part of 7 AY 2014-15 M/s TVS Infrastructure P. Ltd either the business assets or the stock-in-trade of the assessee wherein after the construction of the shed with aforesaid details was sold by the assessee immediately after the construction of the said shed. Accordingly, the difference between cost of purchases and cost of construction included therein and the sale consideration has to be treated as an adventure in the nature of trade and the consequent income has to be treated as business income of the assessee and taxed accordingly. The AO has treated the same as slump sale. Such action of the AO though not found to be in consonance with the facts of the case, however, with the finding as given hereinabove, the quantum of income computed does not change and the taxation thereof is directed to be treated as business income as assessee has undertaken an adventure in the nature of trade. Under these facts, there cannot be any case of allowing any indexation benefit to the assessee. This ground of appeal is accordingly disposed off with the directions hereinabove and for statistical purposes, is treated as partly allowed.

6. Aggrieved, by the aforesaid action of the Ld.CIT(A), the assessee is before us. The Ld. AR has submitted that the AO had erred in disallowing the indexation of Rs. 1,47,67,584/- and treated sale of land being short term capital gain without indexation ignoring the assessee’s claim of long term capital gain. According to him, the land in question was purchased as is on where is basis; and sold as is on where basis. It was pointed out by him that at the time of purchase, a small shed was there, and no separate valuation was made/shown in purchase agreement; and since the same was of no use to assessee, the agreement value had been treated as land in the books of account of the Company. According to him, the assessee company has treated the same as land all throughout the holding period; and it has not generated any rental income either from the land or the said shed. Further, the 8 AY 2014-15 M/s TVS Infrastructure P. Ltd Ld. AR submitted that at the time of sale of the said land, the buyer as per his convenience valued the shed at Rs. 30 lakhs in the sale agreement, and the AO erred in treating the shed as unit and sale as slump sale and therefore Pleaded that indexation benefit be allowed on the sale of land.

7. And moreover the assessee had filed the certificate dated 09-02-2023 issued by the auditor B.K. khare & Co. chartered accountants which is found placed at page 3 to 6 of the Paper book wherein the independent practitioner’s report is given as under :- Independent practitioners' report The Board of Directors TVS Industrial and Logistics Parks Private Limited

Managements' Responsibility for the Statement 9 AY 2014-15 M/s TVS Infrastructure P. Ltd 3. The preparation of the accompanying Statement is the responsibility of the Management of the Company. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and presentation of the Statement, and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

4. The Management is also responsible for ensuring that the Company complies with the requirements of Hon'ble Income Tax Appellate Tribunal, Mumbai and tax authorities and courts and for providing all relevant information to them.

Practitioner's Responsibility 5. Our responsibility is to provide specific assurance as to whether the details mentioned in the Statement are correctly extracted from the audited financial statements for FY 2010-11 (being year of purchase of the property), FY 2011-12, FY 2012-13 and FY 2013-14 (being year of sale of the property), books of accounts for those financial years and other relevant records maintained in connection with this property by the Company.

8. We note that the assessee’s claim for Long Term Capital Gain (LTCG) on sale of land situated at Thirssur was disallowed by taking note of the fact that in the sale-deed, there was an averment stating that the sale consideration includes shed valued Rs.30 Lakhs, therefore, the AO disallowed the assessee’s claim of capital gain and treated it as business income u/s 50(b) of the Act, mainly due to the failure on the part of the assessee to furnish Valuation Report. According to the assessee, there was no shed as such in the land in question at Thirssur. Therefore, assessee’s claim of LTCG cannot be disallowed merely on assertion made in the 12 AY 2014-15 M/s TVS Infrastructure P. Ltd sale-deed and pleaded that no proper opportunity assessee got before AO on this issue. Further, according to assessee, given an opportunity, assessee would be able to prove that there was no such shed worth any valuation as shown in sale-deed. Therefore, in the interest of justice and fair play and based on the Hon’ble Supreme Court decision in the case of Tin Box Company Vs. CIT (249 ITR 216) (SC) wherein the Hon’ble Supreme Court has held as under: - “ It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : "We will straightway agree with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard." That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard. 2. Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee ?" In our opinion, there can only be one answer to this question which is inherent in the question itself : in the negative and in favour of the assessee.

13 AY 2014-15 M/s TVS Infrastructure P. Ltd 3. The appeals are allowed. The order under challenge is set aside. The assessment orders, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.”

9. Since we have found in the present case that on this issue, no proper opportunity the assessee got before the AO, we relying on the aforesaid decision of the Hon’ble Supreme Court in the case of Tin Box Company (supra) set aside partly [ on this limited issue] the impugned order of the Ld. CIT(A) and remand the same back to the file of the AO and direct the AO to frame on this issue the assessment de-novo after hearing the assessee in accordance to law. The assessee is at liberty to file documents/material/written submission before the AO to substantiate its claim. And we direct the assessee to be diligent before the AO during the assessment proceedings as undertaken before us.