STANDARD CHARTERED BANK,MUMBAI vs. DDIT (IT) 2(1), MUMBAI

This appeal filed by Standard Chartered Bank [ The Assessee/ Appellant] for Assessment Year 2005-06 against the assessment order passed by the Assistant Director of Income Tax (International Taxation) 2(1), Mumbai [ The ld AO ] under section 143(3) read with section 144C (13) read with section 147 of the Act (hereinafter referred to as 'Act‟) dated 15th October, 2012. By this appeal, assessee has challenged the reopening of the assessment as well as the merits of

The learned Assessing Officer noted that assessee has offered capital gain of ₹3,56,77,724/- in Assessment Year 2004-05. However, the registered sale deeds are dated 23rd April, 2004 which falls in Assessment Year 2005-06, the difference between consideration as per stamp duty value and the value disclosed in sale deed amounting to ₹9,49,08,709/- was added for Assessment Year 2005-06. The draft assessment order was accordingly passed. 6. Assessee challenged it before the Dispute Resolution Panel-2, Mumbai [The LD DRP] that issued direction on 25th September 2012. The learned Dispute Resolution Panel directed that as the assessee has failed to provide evidence to substantiate the claim of

Based on this direction, the learned Assessing Officer passed the assessment order on 15th October, 2012, determining the total income of the assessee at ₹919,16,65,573/- therein, the only addition was of ₹9,49,08,709/- , being difference in actual sales consideration and Fair market value as per provision of section 50 C of the Act was made. The assessee is aggrieved with this order.

The learned Authorized Representative filed two paper books, one containing of factual documents containing 32 pages and other containing case law compilation of 96 pages. The learned Authorized Representative submitted that in notice under section 148 of the Act dated on 14th December 2010, wherein the reasons recorded shows that the reopening has been made for substituting fair market value of property sold by registered sale deed dated 23rd April 2004. The sale deed shows the sale consideration of ₹14,25,00,000/-

The learned Departmental Representative submitted that the registered sale deed executed in impugned Assessment Year 2005-06 and therefore, the learned Assessing Officer has correctly taxed the differential sale value for Assessment Year 2005-06. He further referred to the clause No.8 of the agreement to sale, wherein the sale deed is required to execute within 6 months of the agreement to sale. Therefore, according to him, the order of the learned Assessing Officer and the direction of the learned Dispute Resolution Panel are sustainable in law. He also

The learned Authorized Representative submitted that the transfer is required to be seen in view of the Provision of Section 2(47) of the Act. The decision of Hon‟ble Supreme Court is on section 54 of the Transfer of Property Act and does not deal with the provision of Income Tax Act. He further relied on the order of the learned Dispute Resolution Panel wherein addition only being difference between the sale considerations was confirmed and it did not say that the transfer did not take place in Assessment Year 2004-05, but in AY 2005-06, according to the provisions of the Income Tax Act. Thus, he submitted that even if the reopening was to be made it was for Assessment Year 2004-05 and could not have been made for Assessment Year 2005-06.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We also considered the various judicial precedents cited before

Assessee replied on 17 January 2011 stating that for both the properties, assessee bank has executed „agreement to sale‟ with the purchaser on 31st of August 2003 and they are falling in assessment year 2004 – 05. It was further stated that clause 1 and 2 of the „agreement to sale‟ , entire sale consideration of ₹ 142,500,000 was discharged by the purchaser on August 29, 2003 relevant to assessment year 2004 – 05, the entire sale consideration has been confirmed to have been received by the assessee. Further as per clause 2, sale consideration is not refundable to the purchaser Under any circumstances. It was further stated that the purchaser has confirmed that they have received the actual, physical, vacant possession of both the properties and the assessee bank is left with no right, title, interest, claim in the property and the purchaser has become the absolute owner of the property with full right to use the property as an absolute owner. The assessee also referred to clause 3 and 4 of the „agreement to sale‟ and therefore it was stated that the ownership and the property has been transferred to the purchaser during financial year 2003 – 04 relevant to assessment year 2004 – 05. The assessee also submitted that according to the

The provisions of Section 50 C of the income tax act clearly provides that fair market value of the property is required to be substituted as consideration received or accruing as a result of the transfer of a capital asset by the assessee where the actual sale consideration received or accruing is less than the value adopted or assessed by an authority of state government for the purpose of payment of stamp duty in respect of such transfer. The value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for the purposes of computation of capital gain u/s 48 of the income tax act. Accordingly for computation of capital gain according to the provisions of Section 48 of the income tax act which is chargeable according to the provisions of Section 45 of the act, the difference between the actual sale consideration and fair market

In the present case for assessment year 2005 – 06 there is no transfer of asset, and therefore, there is no chargeability of capital gain u/s 45 of the act. Thus the provisions of Section 48 are also not triggered for this year. Therefore for assessment year 2005 – 06 there is no implication of provisions of Section 50 C of the act.

In the present case,

For assessment year 2005 – 06, the only reason for taking action u/s 148 of the act is that the sale deed is registered on 23 April 2004, which falls in assessment year 2005 – 06. As per the provisions of Section 2 (47) of the act, the transfer in relation to capital asset includes any transaction involving the allowing of the possession of any immovable property to be taken on retained in part performance of a contract of the nature referred to in Section 53A of the transfer of property act. This is not disputed by the revenue. The learned AO impliedly has accepted in his assessment order also that the capital gain has already been charged to tax in assessment year 2004 – 05. The learned dispute resolution panel in paragraph number 2.5 has noted that assessee has failed to provide evidence to substantiate its claim of transfer of possession and final receipt of money in assessment year 2004 – 05 and as the property was registered on 23/4/2000 for i.e. during assessment year 2005 – 06, therefore, it confirmed the action of

Coming to the decision of the honourable Supreme Court in case of Suraj lamp and industries private limited versus state of Haryana 14 taxmann.com 103 (SC) (2011) referred by the learned departmental representative, we find that the honourable Supreme Court has held that Section 54 of the transfer of property act makes it clear that a contract of sale, that is an agreement of sale does not, of itself, create any interest in, or charge on such property. Transfer of immovable property by way of sale can only be by a deed of conveyance. In the absence of a deed of conveyance, which is duly stamped and registered as required by the law, no right, title, or interest in any immovable property, can be transferred. Honourable

In view of the above facts, we do not find any reason to uphold the reopening of the assessment as well as addition on merits for the reason that

Accordingly Ground no 1 & 2 of the appeal are allowed.

In the result, Appeal filed by the assessee is allowed quashing reopening of assessment and deleting addition on the merits.