M N S BARIUM SALTS,KADAPA vs. ITO, WARD-1, KADAPA

ITA 2412/HYD/2025Status: DisposedITAT Hyderabad16 October 2026AY 2020-2112 pages
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What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in not referring the matter to the District Valuation Officer (DVO) for ascertaining the correct Fair Market Value (FMV) of the property, as the appellate proceedings are a continuation of assessment proceedings. Consequently, the issue of LTCG computation was set aside and remitted back to the AO with a direction to obtain a report from the DVO. Regarding STCG, the Tribunal found that the AO erred in computing a deemed STCG, as there is no such concept. For plant & machinery, sold for Rs. 1,20,000 as per the Sale Deed, the AO should have accepted the sale value. For Furniture & Fixtures, if the assessee could justify the sale consideration of Rs. 34,000 with evidence, the AO was directed to adopt it; otherwise, the AO was to consider the WDV as per Section 50(2). Grounds related to cost of improvement and transfer expenses were dismissed as withdrawn.

What were the facts?

The assessee, M/s. M.N.S. Barium Salts, filed its return for AY 2020-21 declaring a loss. The assessee sold land & building, plant & machinery, and furniture & fixtures for Rs. 1,52,08,476. The Assessing Officer (AO) invoked Section 50C, using the stamp duty value of Rs. 1,77,70,000 for land & building, computing Long Term Capital Gain (LTCG) at Rs. 1,58,93,101. The AO also computed Short Term Capital Gain (STCG) on depreciable assets at Rs. 1,27,81,437, rejecting the assessee's claim of Short Term Capital Loss (STCL). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's computation of LTCG but set aside the disallowance of cost of improvement and transfer expenses for verification. The assessee appealed to the Tribunal.

What were the issues?

1. Whether the sale of depreciable assets should be treated as Short Term Capital Assets, and the resulting loss/gain computed accordingly, as argued by the assessee, or if the AO was justified in computing a deemed STCG, as held by the lower authorities? 2. Whether the AO and CIT(A) were justified in computing LTCG by adopting the stamp duty value of Rs. 1.77 crores as against the actual sale consideration of Rs. 1.52 crores, and whether the AO should have referred the matter to the Valuation Cell before applying Section 50C, as contended by the assessee? 3. Whether the CIT(A) erred in rejecting the claim for improvements made by the assessee and the expenditure incurred for transfer of property, as argued by the assessee? Assessee's Contentions: - Depreciable assets should be treated as STCA, and the loss/gain computed correctly. - The AO and CIT(A) erred in adopting the stamp duty value for LTCG computation and should have referred the matter to the Valuation Cell as per Section 50C(2). - The claim for improvements and transfer expenses should have been allowed as deductions. Revenue's Contentions: - The revenue did not record specific arguments for the STCG issue, but implicitly supported the AO's action. - The revenue agreed to the withdrawal of grounds related to cost of improvement and transfer expenses.

Which sections of the Income-tax Act were involved?

Section 50C,Section 50(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI MANJUNATHA.G, HON’BLE & SHRI RAVISH SOOD, HON’BLE

PER MANJUNATHA.G, AM: This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), [in short “the Ld.CIT(A)”] Delhi, dated 28.10.2025, and pertains to assessment year 2020-21. 2. The assessee has raised the following grounds of appeal:

ITA 2412/HYD/2025 M N S BARIUM SALTS

1) The order of the learned CIT (A) is erroneous both on facts and in law;

The order continues below.

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