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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI INTURI RAMA RAO]
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER
This is an appeal filed by the Revenue directed against the order of the Commissioner of Income Tax (Appeals)-1, Chennai :- 2 -: (‘CIT(A)’ for short) dated 30.11.2018 for the Assessment Year (AY)
2008-2009.
The Revenue raised the following grounds of appeal: 2.
‘’1. The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case.
The Ld.CIT(A) erred in giving relief to the assessee by holding that provisions of section 50C of the Act are not applicable to the present case in view of Circular 5/2010 dated 03.06.2010 issued by the CBDT when the transfer of assets impugned have taken place based on Power of Attorneys (POAs) dated 27/04/2007 & 28/11/2007 which were registered with the Stamp Duty Valuation Authority.
The Ld.CIT(A) erred in giving relief to the assessee by holding that provisions of section 50C of the Act are not applicable to the present case when the assessee themselves have considered the transaction as a transfer under section 2(47) of the Act and offered the income there on under the head ‘Capital Gains’ for AY 2008-09.
For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored’’.
The brief facts of the case are as under: 3.
The Respondent – assessee namely M/s. Biomed Hitech Industries Ltd is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing medical consumable. The return of income for the AY 2008-09 was filed on 30.09.2008 admitting Nil income after set off of brought forward losses of �9,37,41,619/-. The said return of income was processed u/s.143(1) of the Income Tax Act, 1961 (in short ‘’the Act’’) :- 3 -: and there was no scrutiny assessment. Subsequently, the Assessing Officer formed an opinion that income got escaped assessment to tax based on the information that assessee had not offered to tax capital gains, arising on sale of land situated at Shollianganallur Village.
Accordingly, the Assessing Officer had issued notice u/s.148 of the Act which was served on the assessee on 25.03.2013. In response to the same, the assessee had filed revised return of income against which assessment was completed by the Assistant Commissioner of Income Tax, Company Circle I (2) Chennai (hereinafter called “AO”) vide order dated 28.02.2014 passed u/s. 143(3) r.w s. 147 of the Income Tax Act, 1961 (in short ‘the Act’) at total income of � Nil after setting off of brought forward loss and depreciation loss of �25,17,35,230/-.
While doing so, the Assessing Officer adopted guideline value prescribed for registration of document as deemed consideration u/s.50C of the Act rejecting the argument of the assessee the provisions of Section 50C of the Act have no application.
Being aggrieved, an appeal was preferred before ld. CIT(A), 4. who vide impugned order allowed the appeal by placing reliance on the CBDT Circular No.5/2010, dated 03.06.2010, which clearly clarify that provisions of Section 50C of the Act shall have application only w.e.f. 01.10.2009 and the provisions of Section 50C of the Act do not :- 4 -: include transactions which are not registered with the registration authorities.
Being aggrieved, the Revenue is in appeal before us in the 5. present appeal.
We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to whether or not the provisions of Section 50C of the Act can be invoked even prior to 1st October, 2009, in respect of transaction which took place prior to 1st October, 2009. Admittedly, in the present case, the relevant material which are required to be noted are that the assessee had entered into unregistered agreement for sale with M/s. Vishranthi Sabari Construction on 23.06.2006 for sale of 200 cents of land situated in Survey No.475, Sholinganallur Village for a consideration of �12,14,05,750/- and assessee also entered into another agreement for sale of 126 cents of land on 2.11.2007 in Survey No.476, Sholinganallur Village for a consideration of �6,85,94,250/-. The company had executed Power of Attorney nominated by ICICI bank to whom assessee company owes money. The sale proceeds directly were deposited with ICICI bank towards settlement of outstanding dues. Assessee had admitted long term capital gains of �18,73,38,235/- adopting apparent consideration of �19,65,33,677/-.
ITA No.327/2019 :- 5 -:
The Assessing Officer was of the opinion that the provisions of Section 50C of the Act should be invoked in the present transactions, accordingly he completed the assessment by adopting guideline value prescribed in the said properties as deemed consideration. The provisions of Section 50C of the Act have come into vogue w.e.f.
01.10.2009 and clearly states that the provision will come into effect from 01.10.2009. Further, the CBDT Circular No.5/2010, dated 03.06.2010, has also clearly explained that the provisions of Section 50C of the Act will come into effect from 1st October, 2009 and it is further clarified that the provisions of Section 50C of the Act have no application in respect of transaction which are not registered with the registration authorities. The Hon’ble Jurisdictional High Court in the case of CIT vs. R. Sugantha Ravindran, (2013) 352 ITR 488 had also clarified the position as under:-
‘’8.We have perused the above circular. It is stated therein that the scope of the provisions does not include transaction which are not registered with stamp duty valuation authority and executed through agreement to sell or power of attorney. Consequently, it is made clear therein that the amendments have been made applicable with effect from October 1, 2009, and, therefore, they will apply only in relation to transaction undertaken on or after such date. The relevant portion of the circular is extracted hereunder (page 319 of 324 ITR) : "23.4. Applicability.—These amendments have been made applicable with effect from 1st October, 2009, and will accordingly, apply in relation to transactions undertaken on or after such date."
Learned counsel for the Revenue is not disputing about the existence of such circular issued by the Board. If the Board has issued a circular clarifying the applicability of section 50C in pursuance of the amendment made by the Amendment Act 2 of 2009, we fail to understand as to how the Revenue can canvass the same issue in this case which in effect is against the circular issued by the Board. Certainly, the Revenue is bound by the circular issued
ITA No.327/2019 :- 6 -: by the Board. At this juncture, it is pertinent to note that in a decision made in the case of State of Tamilnadu v. India Cements Ltd. reported in [2011] 40 VST 225 (SC), the honourable Supreme Court has held that the circulars issued by the Revenue are binding on the Department and, therefore, they cannot repudiate that they are inconsistent with the statutory provisions. The relevant paragraphs 21 and 22 are extracted hereunder (page 237) : "21. It is manifest from the highlighted portion of the circular that as per the clarification issued by the Commissioner of Commercial Taxes, in exercise of the power conferred on him under section 28A of the TNGST Act, the benefit of the sales tax deferral scheme would be available to a dealer from the date of reaching of BPV or BSV, which ever is earlier, as is pleaded on behalf of the first respondent. It is trite law that circulars issued by the Revenue are binding on the Depart mental authorities and they cannot be permitted to repudiate the same on the plea that it is inconsistent with the statutory provisions or it mitigates the rigour of the law.
In Paper Products Ltd. v. CCE [2001] 247 ITR 128 (SC) ; [1999] 7 SCC 84), while interpreting section 37B of the Central Excise Act, 1944, which is in pari materia with section 28A of the TNGST Act, this court had held that the circulars issued by the Central Board of Excise and Customs are binding on the Department and the Department is pre cluded from challenging the correctness of the said circulars, even on the ground of the same being inconsistent with the statutory provision. It was further held that the Department is precluded from the right to file an appeal against the correctness of the binding nature of the circulars and the Department's action has to be consistent with the circular which is in force at the relevant point of time."
Even otherwise, we are of the firm view that the insertion of the words "or assessable" by amending section 50C with effect from October 1, 2009, is neither a clarification nor an explanation to the already existing provision and it is only an inclusion of new class of transactions, namely, the transfers of properties without or before registration. Before introducing the said amendment, only the transfers of properties where the value adopted or assessed by the stamp valuation authority were subjected to section 50C application. However, after introduction of the words "or assessable" after the words "adopted or assessed", such transfers where the value assessable by the stamp valuation authority are also brought into the ambit of section 50C. Thus, such introduction of new set of class of transfer would certainly have the prospective application only and not otherwise. Hence, the assessee's transfer admittedly made earlier to such amendment cannot be brought under section 50C.
:- 7 -: 11. Applying the abovesaid decision of the honourable apex court to the facts and circumstances of the case as well as by considering the scope of section 50C, we hold that the Revenue is not entitled to canvass the correctness of the order passed by the Tribunal, more particularly in the light of the circular issued by the Board. Accordingly, the tax case appeal is dismissed and the substantial question of law is answered against the Revenue. No costs.
In the light of the above facts and legal position, we do not find any error in the order of the ld. CIT(A). Accordingly, the appeal filed by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue stands 7. dismissed.
Order pronounced on 4th day of December, 2019, at Chennai.