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Facts
The assessee, Tirupati Niryat Pvt. Ltd., sold land and building in AY 2012-13, computing profit after segregating values but paying no capital gains tax. The AO treated the building as a capital asset, calculated Long Term Capital Gain (LTCG) of Rs. 1,91,83,329/- based on stamp duty valuation for the assessee's 1/4th share, and made an addition. The assessee appealed to the CIT(A), who allowed the appeal, leading the Revenue to file the present appeal.
Held
The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal. The CIT(A) had correctly applied the 5% safe harbor rule under the 3rd proviso to Section 50C, treating it as a declaratory and retrospective amendment. Additionally, the CIT(A) rightly deleted the disallowance under Section 14A, as the assessee had not earned any exempt income, and directed the AO to verify the TDS credit claimed.
Key Issues
1. Applicability of the 5% safe harbor rule under the 3rd proviso to Section 50C for Assessment Year 2012-13. 2. Disallowance under Section 14A when no exempt income is earned. 3. Verification and allowance of TDS credit.
Sections Cited
50C, 14A, 50, Rule 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-20 (hereinafter referred to as the “Ld. CIT(A)”] dated 30.01.2024 for the AY 2012-13.
It appears from the report of the registry that the appeal has been filed after a delay of 59 days. At the time of hearing the counsel of the assessee explained the reason for delay in filing the appeal. The Ld. A.R did not raise any objection in condoning the delay. Keeping in view, the submission made by the A.R. and the judicial pronouncement that a case should be decided on merit not on technical issue, the delay is hereby condoned
4. Being aggrieved and dissatisfied, the Revenue has preferred the appeal.
The ld. DR challenges the very impugned order on the following grounds: - “1. That on the facts and circumstances of the cases, the Id. CIT(A) erred in deleting the income under the head capital gains to the tune of Rs. 1,91,83,329/- and allowing the assessee's claim of safe harbour rule of 5% variation between stamp duty value and sale consideration for the AY 2012-13 under 3rd proviso of Section 50C, when the said proviso to Section 50C and explanatory notesto Finance Act 2018 clearly mentions that the amendment, would be effective from 01.04.2019.
2. That on the facts and circumstances of the cases, the Ld. CIT(A) erred in relying on the decisions of Kolkata, ITAT which held the insertion of the 3rd proviso to section 50C of the IT Act to be a declaratory, curative and procedural amendment in nature when
7. Upon hearing the submissions of the counsel of the respected parties, we have perused the order passed by the ld. CIT (A) and find that property in question is situated at 145, Rashbehari Avenue, Kolkata-29, comprising of both land and building. The assessee is one of the co- owners in the said property along with three other co-owners and they are M/s Santosh Promoters Pvt. Ltd., M/s Pennar Trading Pvt. Ltd and M/s Delight Suppliers Pvt. Ltd. It is pertinent to mention here that the ld. AO has calculated the capital gain by taking into consideration of valuation as per stamp duty valuation and ignoring the reality that the assessee has strongly objected the report given by the Stamp valuation authority. It is important to mention here that in the case of one of the co-owners of immovable property reference was made to the DVO for determining the fair value of the property. Valuation report was received from the DVO and as per the report of the District Valuation Officer (DVO) value of the property was arrived at ₹12,07,89,700/- out of which the assessee’s share would be ₹3,01,97,425/-. Since the report of the DVO and the valuation of the property was at ₹12,07,89,700/-, the difference between the value determined by the DVO and the said consideration declared by the assessee is less than 5% of the sale consideration declared by the assessee. We have gone through the order passed by the ld. CIT (A) and find that the ld. CIT (A) in its order has discussed the valuation report of one of the co-owners and “3.3 I have carefully considered the facts of the case and submission of the appellant. A.O. did not refer the valuation to DVO. However, assessee is a co-owner with Delight Suppliers Pvt. Ltd. Valuation report of the DVO has been received after the assessment order was finalised in the case of Delight Suppliers Pvt. Ltd. As per the valuation report, the estimated value of the property as on 31.01.2012 was Rs. 12,07,89,700/-whereas assessee had declared the sale consideration of Rs.11,51,08,600/- as on 31.01.2012. Thus, the difference between the estimated value and the declared value was less than 5% of the declared value. Appellant in its submissions had claimed that safe harbour rule of 5%, as per the 3rd proviso to section 50C, would be applicable in its case in view of several judicial pronouncements. There are several decisions including those of Kolkata ITAT, as mentioned by the appellant in its submissions, which have held the insertion of 3rd proviso to section 50C of the I.T. Act to be declatory and curative in nature. It is held that this amendment is not a substantive amendment. Rather it is only a procedural amendment. Therefore, even when the statute does not specifically state so, such amendment are in the nature of retrospective amendment and these should be treated as effective from the date when 50C was introduced in the statute, i.e. w.e.f. 01.04.2003. As in the appellant's case, the difference between the estimated value and the declared value does not exceed 5% of the declared value, assessee is entitled for safe harbour rule of 5% as per 3 rd proviso to section 50C, as held in various judicial decisions, as mentioned in the preceding paras. In view of the above discussion, addition of Rs. 1,91,83,329/- under the head 'Long Term Capital gains' is deleted.
Grounds of Appeal
No.3 4.1 Assessee had made investments in shares. However, assessee had not disallowed any expenses u/s 14A of the IT Act. Hence, invoking circular no. 5/2014 of CBDT, AO has applied Rule 8D and computed disallowable amount u/s 14A at Rs. 75,186/- and added the same to the total income. 4.2 Appellant has pointed out that it has not earned any exempt income on its investments in the current year. Hence, no disallowance u/s 14A should be made in view of the following decisions:
1. Supreme Court Ruling in case of PCIT v. GVK project and Technical Services Ltd. [2019] 106 taxmann.com 181 (SC)
2. Supreme Court of India in case of Commissioner of Income Tax, (Central) 1 v. Chettinad Logistics (P.) Ltd. [2018] 95 taxmann.com 250 (SC)
3. Supreme Court of India Principal Commissioner of Income Tax v. Oil Industry Development Board [2019] 103 taxmann.com 326 (SC) 4.3 I have carefully considered the facts of the case and the submissions of the appellant. There are several judgements, including these cited above by the assessee, which says that disallowance u/s 14A cannot be exceed the amount of exempt income earned during the year. This implies that when no exempt income has been earned, disallowance u/s
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 23.06.2025.