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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PAWAN SINGH, JM & SHRI S. RIFAUR RAHMAN, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JM & SHRI S. RIFAUR RAHMAN, AM आयकरअपीलसं./ I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 (निर्धारणवर्ा / Assessment Year: 2012-13 &2013-14)
ITO 15(3)(3), Sankalpan Infrastructure R. No. 480, 4th floor, Pvt. Ltd. बिधम/ 304, Sentinel, Aayakar Bhavan, M. K. Hiranandani Business Road, Mumbai-400 020 Vs. Park, Powai, Mumbai- 400 076 स्थायीलेखासं./जीआइआरसं./PAN No. AAICS6802P (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : ShriSubodh Ratnaparkhi, AR प्रत्यथीकीओरसे/Respondentby : Shri V. Vinod Kumar, DR सुनवाईकीतारीख/ : 21.01.2020 Date of Hearing घोषणाकीतारीख / : 15.06.2020 Date of Pronouncement आदेश / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANTMEMBER): The present two appeals have been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-
2 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 24, Mumbai, dated 02.06.17 for AY 2012-13 &2013-14 respectively.
Since the issues raised in these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. Firstly, we are taking ITA No. 6010/Mum/2018 for AY 2012-13 filed by the assessee.
Brief facts of the case are, assessee company engaged in the business of architectural and infrastructure service and filed its return of income for the assessment year 2012-13 declaring total loss of ₹ 2,513,900/-on 29.11.2012. The return of income was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS and notice under section 143(2) and 142(1) were issued and served on the assessee. In response, AR of the assessee filed the relevant information as called for.
4 During the assessment proceedings, assessing officer observed in the tax audit report in form No. 3 CD in clause No. 20,
3 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. the auditor has disclosed the details of amount of profit chargeable to tax under section 41, as below:- Other deduction Rs. 56,77,411/- Rebate and settlement Rs. 40,29,086/- 5. Further, the assessing officer observed that the assessee has disclosed the total income in its profit and loss account, but assessee has not disclose the above said income in its statement. On enquiry, assessee has explained the details of miscellaneous income which is already disclosed in its profit and loss account, the net income of Rs. 1,648,325/-. They explained that assessee has withheld certain portion of contract money awarded to M/s Talin Modular Office Furniture System and M/s Kevin Electricals Private Limited. Subsequently, in an settlement reached with the above said companies, assessee has settled ₹ 4,029,086/- out of total outstanding of ₹ 5,677,411/-. The difference of above settlement is already recognized as miscellaneous income in its financial statement. However, assessing officer not convinced with the submissions of the assessee, completed the assessment by making addition of Rs. 97,06,497/- that is total of other deduction and rebate/settlement.
4 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 6. Further, the assessing officer observed that assessee has given Sankalpan building at Wagle Estate, Thane on rent to M/s Lanxess India P Ltd. and has received an amount of Rs. 93,33,288/- as a rent during the year. The assessee has declared the above said rental income under the head income from business. On enquiry, the assessee submitted that assessee has acquired leasehold rights title and interest in respect of industrial plots of land in MIDC, Wagle industrial area in Thane in the year 2007 and has developed the information technology park by obtaining loan from Thane Janata Sahakari Bank Ltd. In order to have business line, assessee had entered into agreement with Lanxess India private limited for letting out of the proposed IT park, apart from providing the building, assessee has provided various facilities and amenities to the units housed therein to get a status of technology park. It was also informed that the intention was for not only letting out the building but also to carry on a complex commercial activity of setting up a software technology Park in which various amenities are to be provided. As per the agreement, assessee is responsible to the licensee for property management services for a separate consideration. The scope of work for property
5 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. management service for IT park building consist of operation and maintenance of common electrical system, HVAC system, maintenance of lift, fire protection system, generator and other related equipments.
The assessee informed the assessing officer that the development of IT park was covered under government industrial policy and the government envisaged the development of IT park as similar to the industrial activity and not merely construction of building. The entire activities were intended to carry out in an organized manner to earn a profit out of the above investment. It was also informed that the above said assets and its character are having commercial property hence it does not fall under the provisions of section 22 of the Act. The commercial asset was let out and income from above said lease is a business income therefore by relying on judicial pronouncement assessee submitted that it is a business income. After considering the submissions of the assessee and other judicial pronouncements relied on by the assessee, Assessing Officer rejected the contention of the assessee by relying on the Hon’ble Supreme Court decision in the case of Shambhu Investment Pvt. Ltd. 263 ITR 143(SC) and brought
6 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. the income declared by the assessee as income from house property and assessed the same under the head Income from House Property.
Since, the above said rental income was assessed as income from house property, the claim of the assessee on the depreciation of building was disallowed to the extent of ₹ 1,63,58,960/-. Apart from that, assessing officer has disallowed expenditure under section 43B, disallowance of interest, 14A and disallowance of expenses due to non deduction of TDS.
Aggrieved with the above order, assessee preferred an appeal before Ld. CIT(A) and has submitted an elaborate submission before him. After considering the submissions of the assessee Ld CIT(A) dismissed all the grounds raised by the assessee except giving relief for disallowance made under section 14A of the Act.
Aggrieved with the above order, assessee preferred an appeal before us raising following grounds of appeal:-
The Hon. CIT (A) erred in upholding addition of Rs.97,06,497/-, made on account of erroneous reading
7 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. of the comments of the auditor at clause no. 20 of form no.3CD, being tax audit report, with regards to computation of miscellaneous income offered to tax u/s 41 of the I.T Act 1961.
The Hon. CIT (A) erred in upholding the addition of Rs.65,33,301/- as income from house property, in respect of I.T Park premises owned by the appellant at Wagale Estate, Thane, given on leave and license basis to a third party, not appreciating that apart from premises, the appellant was also required to offer a series of services resulting in the income being required to be assessed under the head "business income" and not "income from house property".
The Hon. CIT (A) erred in confirming the disallowance of depreciation to the tune of Rs. 1,63,58,9607-, claimed u/s 32 of the I.T Act 1961 in respect of I.T Park premises at Wagale Estate, Thane owned by the appellant and given on leave and license basis to a third party.
The Hon. CIT (A) erred in confirming the addition of Rs.64,045/-, u/s 40(a)(ia) of the I.T Act 1961 on account of non-deduction of TDS on interest paid to Kotak Mahindra Prime Ltd., ignoring that payee had included the interest amount in computing its total
8 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. income and therefore disallowance u/s 40(a)(ia) of the I.T Act 1961 was not justified.
The appellant craves leave to add, alter, amend and/or vary any of the above grounds of appeal/relief claimed at any time before the decision of the appeal
With regard to ground No. 1, Ld. AR brought to our notice page 101 of the paper book, which is the auditor’s report in form 3CD, the auditor has disclosed the details of other deduction, rebate and settlement and further it is disclosed that “shown under other income”. He submitted that the auditor has not qualified his report but he gave the details of miscellaneous income which assessee has already disclosed the same in its financial statement, the difference of the other deductions and rebate and settlement of ₹ 1,648,325/- which the assessee already disclosed as miscellaneous income under the head other income in its financial statement. He further submitted that the Ld CIT(A) has also observed in his order that the auditor would have appropriately disclosed if he is convinced with the submissions of the assessee, since the auditor has not convinced, he has disclosed the details. Therefore, he rejected the contention of the assessee. And he
9 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. submitted that the auditor has not qualified the report rather he gave the details of the miscellaneous income declared by the assessee. Further he brought to our notice page 9 of the paper book in which assessee has submitted before Ld. CIT(A) that the assessing officer has misunderstood the comments of the auditor and if required the matter may be remanded to assessing officer to make the enquiry and seek clarification from the auditor so that the intension of the auditors remark in-Clause 20 of tax audit report would be clear. He submitted that the Ld CIT(A) has not sought any clarification from the auditor. He prayed that the ground No. 1 may be allowed in favour of the assessee.
With regard to ground No. 2, he brought to our notice page 24 of paper book which is rental agreement as per which assessee entered rental agreement with Lanxes India Private Limited and further he brought to our notice page 42 of the paper book as per which assessee has provided other utility services to the licensee which includes providing power, power backup, air condition, elevators et cetera, further he brought to our notice object Clause in its Memorandum of Association, particularly Clause ‘C’, as per which assessee can develop IT parks and give and let out the
10 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. properties. Therefore he submitted that the facts in this case are similar to the case of Chennai Properties and Investment Ltd 373 ITR 673(SC)(2015). Further, he relied on the case of Soham Trading and Investment Private Limited.
With regard to ground No. 3, he submitted that the depreciation claimed by the assessee is consequential to the findings in ground No. 2.
With regard to ground No. 4, he submitted that assessee has paid EMI to Kotak Mahendra Bank, the above payment inclusive of principal and interest. He brought to our notice certificate from bank which is placed at page 66 to 68 of the paper book. He submitted that the breakup given by the bank which includes interest only to the extent of ₹ 64,045/-and as per the 2nd proviso to section 40(a)(ia) of the Act, if the concerned party has included the amount in computing the total income and filed return of income under section 139 then disallowance is not called for. In the present case the bank has included the requisite amount in computing their taxable income therefore disallowance under section 40(a)(ia) of the Act is uncalled for. In support of that, he
11 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. relied on the case of CIT vs. Rajender Kumar and CIT vs Unsubtle Landmark Township.
On the other hand, Ld. DR brought to our notice findings of assessing officer and CIT(A) in detail, brought to our notice the respective findings in assessment order and appellate order. He vehemently argued the findings of the tax authorities as proper and just.
Considered the rival submissions and material placed on record, we notice from the record that the tax auditor has disclosed certain details of information in Clause 20 of tax audit report, but he did not elaborate what those information are. However, when analyzing those information, it says other deduction (income) and other information rebates and settlement. When we deduct the income and settlement amount, the difference is ₹ 1,648,325/- which matches with the Miscellenous income declared by the assessee in its financial statement.
When the assessee tries to explain the tax authorities they did not believe and also not verified the same by calling for explanation from the tax auditors. In our considered view that tax
12 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. authorities should have called for clarification from the tax auditor and completed assessment based on the clarification. In our view, the information matches with the submissions of the assessee therefore we are inclined to accept the submissions of the assessee therefore the addition made by the assessing officer is accordingly deleted. Hence, the ground No. 1 raised by the assessee is allowed.
With regard to ground No. 2, when we consider the facts on this issue by combined reading of facts in both AY 2012-13 and 2013-14, we notice that assessee has acquired absolute assignment right from M/s Ravi Fisheries Ltd. on the basis of deed of assignment dated 25th Jan 2007 on the plot of land bearing Plot No.-‘A’, 162, 163 & 164 total admeasuring 2915 Sq. Mtrs together with the structures standing thereon in Thane Industrial Area, which comes within the limit of Thane Municipal Corporation. Subsequently, in order to construct an I.T. Park in that industrial area, assessee has taken a loan from Thane Janta Sahakari Bank Ltd and by taking due permission from Maharashtra Industrial Development Corporation to construct an IT Park in the above said plots. Assessee has acquired sanction of plan in respect of
13 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. consumption of 100% additional floor space index on the said plots vide commencement certificates dated 3rd Aug 2010.
18.1 We further notice that assessee has acquired absolute lease of the above said plots in the Thane Industrial Area before taking permission to build an IT Park. The assessee has entered into two Memorandum of Understanding (MOU) with M/s Aanaya Realities Pvt. Ltd. (old name of Nisarg Reality Pvt. Ltd.) to construct an IT park in the above said plots. As per the first MOU dated 17.06.10, assessee to construct 50,000 Sq.ft. with car parking. As per the MOU, assessee has to construct and transfer the right on the property to NRPL (Nisarg Reality Pvt. Ltd.) of the total sale consideration of Rs. 18.25 crores. Subsequently, assessee entered into MOU with NRPL to build 44,000 Sq. ft. with car parking facilities at an agreed sale consideration of Rs. 16.11 crores. Both the sale consideration to be received by assessee based on the stages of completion of milestones in the construction. After entering into the above said MOU’s, the second MOU dated 5th Aug 2010, assessee has entered into an leave and license agreement with M/s Lanxes India Pvt. Ltd. (LIPL) dated 6th Aug 2010 to allow the LIPL to occupy 50,000 Sq.
14 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. Ft with 50 car parking when the construction was under process. During the construction period, assessee entered into leave and license agreement with LIPL on 9th Sept 2011 to allow them to occupy the space and accordingly, assessee has received rent for the period from 1st Jan 2012 onwards. Subsequently, in the financial year 2012-13, assessee has finally entered into deed of assignment with NRPL and assigned all the rights to them. We notice that assessee has taken interest free security deposit from LIPL and the same was adjusted in sale consideration paid to the assessee for transfer of assignment to NRPL.
18.2 From the above facts, it clearly indicates that assessee is engaged in the business of development of turnkey projects and other related construction services. Therefore, assessee has acquired lease rights from Maharashtra Industrial Corporation and it entered into development agreement with NRPL to construct IT park on behalf of them and during construction period, since assessee was holding lease rights, assessee with the prior consent of NRPL, entered into leave and license agreement with M/s Lanxes India Pvt. Ltd, accordingly gave the constructed building to them on 9th Sept. 2011. It is important to note that the deed of
15 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. entering an MOU with NRLP dated 5th Aug 2010 and entering into leave and license agreement with LIPL dated 6th Aug 2010, it clearly indicates that assessee has prior approval from NRPL to allow LIPL to occupy the building based on license agreement. Later, the leave and license agreement can be transferred to NRPL once the total project is completed. Based on the above MOU, assessee has completed the construction of building and transferred the complete right based on deed of assignment dated 11.04.12 to NRPL.
18.3 From the above facts, it is clear that assessee has only indulged in construction of IT Park and during the construction period, the vacant area was allowed to use the same for commercial activities with the prior approval of the NRPL and therefore, it is not the actual intent of the assessee to give the above property for lease. It is only an arrangement with NRPL and assessee to explore the commercial opportunity to find out large business opportunities and find multinational company to occupy such commercial venture. Accordingly, they found a multinational company M/s Lanxes India Pvt. Ltd. and accordingly to set their requirement and IT Park was developed and handed over to them.
16 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 18.4 In our considered view, even though one of the object of the assessee to give the property developed by them as on lease. But as per the above facts, it is clear that it is only an arrangement between NRPL and assessee to explore the option of finding a large multinational company and construct the commercial property and then transfer the same to NRPL as per the MOU entered with them. By the time, assessee completed the total project and received a considerable sale consideration from NRPL, which clearly indicates that assessee has carried on its main object of construction and giving the IT Park on lease, is only an arrangement and not the main objective of the assessee company. Therefore, relying on the decision of Hon’ble Supreme Court in the case of Chennai Properties and Investment Ltd Vrs. CIT 373 ITR 673(SC) is farfetched and as per this, the income received from letting out of property is the main objective of the above company of which the main objective as per the MOU of the company is to earn the rental income and maintaining the same is the main objective. In the present case, the main objective of the assessee company is only to construct and complete the turnkey projects and letting out the commercial property is only an
17 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. arrangement with that party(assignor) based on the MOU. Therefore, the rental income earned by the assessee can only be taxed under the head ‘Income from house property’ and not under the head ‘Income from business’. Accordingly, ground no. 2 raised by the assessee is dismissed.
With regard to ground no. 3, as we have concluded above in para 18 (18.1 to 18.4) that the income of the assessee can only be assessed under the head ‘Income from house property’, therefore the claim of the assessee on depreciation of the building is accordingly rejected (it is not the actual owner) and we are inclined to accept the finding of Ld. CIT(A). Accordingly, ground no. 3 raised by the assessee is dismissed.
With regard ground no. 4, by relying on the decision of Hon’ble Delhi High Court in the case of CIT vs. Rajinder Kumar 362 ITR 241, CIT vrs. Ansal Land Mark Township (P) Ltd, 377 ITR 635 and various case law in this respect and also as per the confirmation received from the company that bank has already declared the income in the return of income, we are of the considered view that section 40(a)(ia) of the Act cannot be invoked
18 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. in this regard. Accordingly, ground no. 4 raised by the assessee is allowed.
Consequently, the appeal filed by the assessee is partly allowed.
ITA No. 2400/Mum/2018 (AY 2013-14)
Now we take up the other appeal filed by the assessee in ITA No. 2400/Mum/2018 for AY 2013-14 on the grounds mentioned herein below:-
The Hon. CIT (A) erred in confirming the addition of Rs. 2,86,31,608/-, as short term capital gain arising on transfer of premises to M/s Nisarg Realtors Pvt. Ltd., not appreciating that the appellant having transferred the building premises used for business, the consideration for sale would have to be reduced from the block of assets, as provided u/s 43(6) of the I. T. Act 1961 and computation of short term capital gams separately was not correct by law.
The Hon. CIT (A) erred in upholding the applicability of section 50C to the transfer of leasehold rights in a plot of land with structure constructed thereon to one M/s Nisarg Realtors Pvt. Ltd., inspite of
19 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. agreeing at Para 3.3.2.3/Page 23 of the appeal order that section 50C was not attracted to lease hold rights and therefore the addition of Rs. 2,72,66,500/- should have been deleted by the Hon. CIT(A).
The Hon. CIT (A) erred hi confirming the addition of Rs. 49,631/-, u/s 40(a)(ia) of the I.T Act 1961 on account of non-deduction of TDS on interest paid to Kotak Mahindra Prime Ltd., ignoring that payee had included the interest amount in computing its total income and therefore disallowance u/s 40(a)(ia) of the I.T Act 1961 was not justified.
The Hon. CIT (A) erred in confirming the addition of Rs. 13,41,505/- u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T Act 1961 towards delayed deposit of ESIC contribution of employees, not appreciating that the entire amount has been well deposited prior to the last day of filing IT return as provided by sec. 139(1) of the I.T. Act 1961 and therefore the addition was not justified.
The Hon. CIT (A) erred in not granting deduction of Rs. 59,07,437/- for expenses pertaining to the year under appeal which were paid in the subsequent asst. year i.e A.Y. 2014-15 and were disallowed in the computation of income, as prior period expenditure and therefore such amount was required to be allowed as
20 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. deduction in computing the total income for the year under appeal.
The appellant craves leave to add, alter, amend and/or vary any of the above grounds of appeal/relief claimed at any time before the decision of the appeal.
With regard to Ground No. 1, the brief facts of the case relating to this ground are, during the year, assessee has shown profit on sale of fixed assets at Rs. 291,39,751/- which works out as under:-
Sale consideration of building Rs. 37,62,4200/- Less book value of Rs. Rs. 34,71,02,241/- Below profit Rs. 2,91,39,751/- 23.1 Before the AO, assessee has submitted that it has acquired lease holds right title and interest in industrial plots of land and building which was acquired from Ravi Fisheries Pvt. Ltd and assessee has taken a loan from Thane Janta Sahakari Bank Ltd. and constructed the I.T. Park. In the previous year, assessee has constructed IT park and gave it on lease to M/s Lanxes India Pvt. Ltd and assessee has one of the main objective to lease out all the industrial park and accordingly, gave the building on lease to M/s
21 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. Lanxes India Pvt. Ltd. and claimed depreciation in the previous year. Therefore, the building which is transferred is depreciable and business assets, accordingly, it is to be treated as short term capital gain and further disclosed the profit. AO rejected the contention of the assessee and completed the assessment treating the above transaction under the head ‘Income from capital gain’ and assessed as below:-
Particular Amounts in Rupees A. Sale consideration (as per sale deed) 37,62,42,000 B. Cost of Acquisition Cost of Building as on 10/04/2012 32,71,79,217 (without considering Depreciation) Add: Addition during of CWIP till 2,04,31,175 34,76,10,392 10/04/2012 C. Short term Capital Gain (A-B) 2,86,31,608
24 From the above, AO rejected the claim of depreciation claimed by the assessee.
25 Aggrieved with the above order, assessee preferred the appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of assessee, sustained the addition made by AO.
22 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 26. Aggrieved with the above, assessee is in appeal before us.
Considered the rival submission and material placed on record as well as our conclusion in earlier paragraphs i.e. para no. 18(18.1 to 18.4), we are inclined to accept the findings of Ld. CIT(A). We notice that assessee is in the business of construction and it has constructed IT park based on the MOU with NRPL and accordingly, developed the IT park and gave the building on rent to LIPL, therefore we cannot accept the contention of the assessee and moreover, we notice that assessee has completed the construction of building during this assessment year and assessee has collected all the sale consideration based on the stages of completion of milestones of the construction from NRPL, therefore the transfer of right on the land of building is not part of the fixed assets, but it is a commercial transaction of the assessee company. Hence, the sale consideration can only be treated as transfer of lease hold rights in the land and building. Therefore, it will be assessed under the head ‘Income from capital gains’ and AO has assessed the same by following the provisions of capital gains. Accordingly, ground no. 1 raised by the assessee is dismissed.
23 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 28. With regard to ground no. 2, during the assessment proceedings, AO observed that assessee has sold the property to NRPL on 10.04.12 at a sale consideration of Rs 37.62 crores, whereas the stamp value of the said property for the relevant period was Rs. 40.35 crores. Accordingly, assessee was asked as to why the stamp duty valuation cannot be assessed. In reply, assessee has submitted as under:-
"The Property was sold for Rs.37,62,42,000/-. However, the stamp duty valuation was Rs.40,35,08i500/-. You have sought the explanation for not taking the stamp duty valuation being higher of the two amounts as sate consideration as stipulated in Section 50C of the IT Act. In this regard, I request your honour to consider the following submissions:
a) The valuation adopted by the assessing officer was higher side and should be lower than the sale consideration.
b) Moreover, Our Company entered into 2 MOUs, dated 17.06.2010 and 06.08.2010 with M/s Nisarg Realtors Pvt limited for selling of property.
c) We also received advance from the prospective buyer from time to time.
24 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. d) Since construction of the building was in progress, no sale agreement was entered into.
e) The sale agreement was entered on 11.04.2012.
f) Since our sale consideration was fixed as per rate stated in above Moils referred in point no.2, we took sale consideration of Rs.37,62,42,000/-.
g) Under these circumstances the sales consideration of Rs. 37,62,42,000/- is considered as appropriate."
After considering the submission of assessee, AO rejected the contention of the assessee by invoking the provision of section 50C and brought to tax the difference between stamp duty valuation and sale consideration.
Aggrieved with the above order, assessee is in appeal before Ld CIT(A) and Ld. CIT(A) sustained the addition made by the AO.
Aggrieved with the above order, assessee is in appeal before us.
Before us, Ld. AR submitted as under
3.1 Ld. AO has made addition of Rs.2,72,66,5007- (erroneously taken as Rs.2,77,66,500/- in the asst. order
25 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. while computing income) on assignment of lease hold rights of premises to M/s. Nisarg Realtors Pvt. Ltd. by relying on the provisions of section 50C of the I.T. Act 1961. As stated above, the appellant has in the year under appeal, vide deed of assignment dt. 11.04.2012, transferred and assigned all leasehold rights in premises being plot at Wagle Industrial area, Thane alongwith constructed IT park building to M/s. Nisarg Realtors Pvt. Limited for the total consideration of Rs.3 7,62,42,000/-. The market value of the said property as per stamp Valuation authorities on the date of registration was Rs. 40,35,08,500/-. The appellant has claimed the transaction to be in the realm of business transaction and therefore reduced the WDV of block building in the fixed assets by the amount of consideration received on assignment of leasehold rights, whereas the Id. AO has held the transaction to be in the nature of short-term capital gain. In the result, the Id AO has relied upon the provisions of section 50C by adopting the market value as per stamp valuation authority in place of actual sale consideration resulting in addition of Rs. 2,72,66,500/- (Rs. 40,35,08,500 - Rs.37,62,42,000).
3.2 It is submitted that the Id. AO erred in relying upon the deeming provisions of section 50C of the I.T. Act 1961 for adopting the market value as per stamp
26 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. valuation authorities as sale consideration in respect of transfer of leasehold rights in plot & structure.
The appellant has transferred leasehold rights in plot alongwith constructed building at MDC, Wagle Industrial Estate, Thane (West). The Id. AO failed to appreciate that the appellant is only a lessee and not the owner of the said premises. The appellant accordingly submits that as the appellant has not transferred any "land or building or both" and the provisions of section 50C have no application to the facts of the matter.
3.3 In support of the proposition that the deeming provisions of sec. 50C are not attracted to transfer of leasehold rights, the appellant relies upon the following decisions.
(i) CIT-Vs- Greenfield Hotels and Estates Pvt. Ltd, 77 taxman.com 308 (Bombay) (2017)
(ii) ACIT-Vs- Greenfield Hotels and Estates Pvt. Ltd, ITA No. 5053/Mum/2012, Hon. Members, "G" Bench, ITATMumbai, order dt. 23.10.2013
(iii) Atul G. Puranik -Vs- ITO, 11ITR120 (Mum Trib.) (iv) ITO -Vs- Pradeep Steel Re-Rolling Mills (P) Ltd., 61 SOT 104 (Mum Trib.)
27 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. (v) Farid Gulmohamed-Vs- ITO (International Taxation), 46 CCH 300 (Mum Trib.)
(vi) Kancast Pvt. Ltd. -Vs- ITO, 68 SOT 110 (Pune Trib.)
On the other hand, Ld. DR relied on the orders passed by the revenue authorities.
34 Considered the rival submissions and material placed on record, we notice that the Coordinate Bench of ITAT in the case of ACIT vs. Greenfield Hotels and Estates Pvt. Ltd in ITA No. 5053/Mum/2012 has passed its order in favour of the assessee by determining that the provision of section 50C are not attracted to transfer of leasehold rights.
35 Therefore, respectfully following the decision of Coordinate Bench of ITAT, which is applicable mutatis mutandis to the present case, we are inclined to accept the submission of Ld. AR. Accordingly, we allow the ground no. 1 raised by the assessee.
36 With regard to ground no. 3 & 4, we notice that the Coordinate Bench of ITAT in the case of CIT vs. Rajinder
28 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. Kumar 362 ITR 241 (Delhi) and CIT vs. Ghatge Patil Transport Ltd. 368 ITR 749(Bom) respectively, has passed its order in favour of the assessee. Therefore, respectfully following the decision of Coordinate Bench of ITAT, which is applicable mutatis mutandis to the present case, we are inclined to accept the submission of Ld. AR. Accordingly, we allow these ground grounds raised by the assessee.
37 With regard to Ground no. 5, we notice from the submission of Ld. AR that assessee has filed his return of income during this assessment year without claiming expenditure incurred by the assessee and made this expenditure in the AY 2014-15 and the same was disclosed in the financial statements and assessee has disallowed the same in its computation of income for AY 2014-15 to the extent of Rs. 59,07,437/-. Since assessee has not claimed deduction in the AY 2014-15 as prior to that extent and assessee has made the above claim only in the assessment proceedings and as per the judicial proceedings we know that AO cannot allow the above said claim, however the appellate authority can only allow the said claim as per the decision of High Court in the case of CIT vs Pruthvi Brokers & Shareholders Pvt. Ltd. 349 ITR 336 (Bom.).
29 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 38. Therefore, respectfully following the decision of Hon’ble Bombay High Court, we direct the AO to verify the claim of the assessee as allowable deduction during this assessment year. Accordingly, ground raised by the assessee is allowed for statistical purposes.
In the net result, both the appeal filed by the assessee are partly allowed.
It is pertinent to mention here that this order is pronounced after a period of 90 days from the date of conclusion of the hearing. In this regard, we place reliance on the decision of co-ordinate bench of this Tribunal in the case of JSW Ltd in ITA Nos. 6264 & 6103/Mum/2018 dated 14.5.2020, wherein this issue has been addressed in detail allowing time to pronounce the order beyond 90 days from the date of conclusion of hearing by excluding the days for which the lockdown announced by the Government was in force. The relevant observations of this tribunal in the said binding precedent are as under:-
However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being
30 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows:
(5) The pronouncement may be in any of the following manners :— (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement.
(c ) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.
Quite clearly, “ordinarily” the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said rule itself. This rule was inserted as a result of directions of Hon’ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by
31 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.
Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide
32 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.
In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made time- bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules,
33 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.
To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.
Respectfully following the aforesaid judicial precedent, we proceed to pronounce this order beyond a period of 90 days from the date of conclusion of hearing. 42 Order pronounced as per Rule 34(5) of ITAT Rules and by placing the pronouncement list in the notice board on 15.06.2020. Order pronounced in the open court on 2020. Sd/- Sd/- (Pawan Singh) (S. Rifaur Rahman) न्याययकसदस्य / Judicial Member लेखासदस्य / Accountant Member मुंबई Mumbai;यदनांकDated 15.06.2020 Sr.PS. Dhananjay
34 I.T.A. No. 6010/Mum/2017 & 2400/Mum/2018 Sankalpan Infrastructure Pvt. Ltd. आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : अपीलाथी/ The Appellant 1. 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT- concerned 4. 5. यवभागीयप्रयतयनयि, आयकरअपीलीयअयिकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई/ ITAT, Mumbai