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Before: MS. SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue against the order dated 02.01.2015 passed by the Ld. CIT(Appeals)-23, New Delhi for AY 2011-12.
The Grounds of appeal are as under:
The order of Ld. CIT (A) is not correct in law and facts. 2. The Ld. CIT(A) has erred in law and in fact & circumstances of the case in deleting the addition of Rs.4,00,00,000/- made by the AO without appreciating the following facts:- a) That the assessee company has never indulged into business of purchase & sale of properties. The said property was taken on lease from NOIDA authority on 29.04.2005 and given on rent to Birla Soft. Thereby the assessee company has reflected rental income in its return of income till the AY 2009-10.
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b) The property of the assessee company was also not shown as stock in trade till FY 2008-09. The assessee company is holding the stated property as fixed assets and its transfer into stock in trade was made to absolve the provisions of Section 50C of the Income Tax Act, 1961. The company has obtained the permission to transfer the property only on 25.06.2010. c) The reply of the assessee company is silent about date of agreement to sale. Even copy of the agreement to sell has not been provided. Even if it is assumed that there was an agreement to sale then also the company was not in a position to transfer the property before 25.06.2010. d) Section 50 C(l) is a deeming provision wherein the registration value fixed by the State Government under the Stamp Act is deemed to be considered as the full value consideration. Section 50C(2), however, permits the assessee to contend before the Assessing Authority that the registration value fixed by the State under the Stamp Act is excessive and does not correspond with the fair market value of the property as on the date of the transfer and that the assessee should not have challenged the levy of stamp duty under the Stamp Act as being excessive and disproportionate to the fair market value of the property before the authorities under the Stamp Act or file any appeal, revision or reference to any Court or High Court against such order, in which event the Assessing Authority would refer the matter to the Valuation Officer to assess the fair market value of the property, keeping in view all the relevant consideration including the registration value fixed by the State, Subsection 3 provides that if the fair market value fixed by the Valuation Officer is in excess of the registration value, then the registration value should be considered for levy of the capital gain tax. If the Valuation Officer finds that the value of the property is less that the registration value, then, accordingly, the Assessing Authority should levy capital gains tax on the basis of market value stated by the Valuation Officer. In the instant case, the assessee can not absolve from liability by simply saying that the agreement to sell was made before two and the half year from the date of registration. As per deeming provision of Section 50C of the Income Tax Act, 1961, the liability would arise on the date of registration and payment of stamp duty. The assessee has not made any objection about the correctness of the registration value fixed by the State Government, if he has done so, then a reference would have been invoked under the provisions of section 55A for ascertainment of fair market value of the property. When the registration value has not the disputed question, now, at this stage, it is not permissible for the assessee to contend that the registration value is excessive and disproportionate to the market value of the property. In the absence of contra material, the deemed full value of consideration as stated in Section 50C of the IT Act would come into effect. e) After insertion of S. 50C in year 2003, value of land or building or both sold or otherwise transferred has to be value assessed by authority of State
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Government for purpose of stamp valuation. Intention of the parliament is that in case where land or building or both are sold or otherwise transferred, such transfer shall be deemed to have taken place only after stamp duty has been assessed by State Government, because it is on valuation made for purpose of stamp duty that tax is payable under Income tax Act. Intention of legislature is very clear from beginning that value for purpose of income tax shall be same as value for stamp duty. Assessee itself has not follow s.2(47)(v) because it did not offer transfer for taxation in year 2007-08 when possession is claimed to have been made over on basis of agreements for sale in accordance with s.2(47)(v). Designs to evade tax cannot be permitted.
The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.
A search and seizure operations under Section 132 of the Income Tax Act, 1961 was conducted at Parkland Group of cases on 05.04.2011. M/s R Info systems Pvt. Ltd. was covered u/s 132 of the Income Tax Act, 1961. Notice u/s 153A was issued on 21.09.2012, in response to which the assessee filed return on 26.07.2013 declaring income of Rs. 32,72,770/-. Notice u/s 143(2) and u/s 142(1) with questionnaire was issued on 06.08.2013. These notices were attended and requisite details were filed by the assessee. The Assessing Officer made addition of Rs. 4,32,72,770/- on account of Section 50C of the Income Tax Act, 1961.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee on statistical purpose.
The Ld. DR relied upon the order of the Assessing Officer and submitted that the order of the CIT(A) is not just and proper.
None appeared for the assessee despite sending notice. Therefore, we are taking up the submissions made before the CIT(A) as the submissions before us.
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We have heard the Ld. DR and perused the records. The assessee company obtained a commercial plot on lease from Noida authority, constructed a commercial building thereon and let out said property to M/s Birla Soft. Income from the said property was offered to tax as income from house property. In the balance sheets of the assessee, on 31.03.2009, the property was shown as capital work-in-progess of Rs. 5,55,17,496 (gross Block Rs.6,14,07,054/- less depreciation of Rs.58,89,558/-). As on 31.03.2010, the property was shown as closing stock in the balance sheet valued at the same book value of Rs. 5,55,17,496/-. No depreciation was charged for the F.Y. 2009-10. Since no depreciation was charged in the balance sheet dated 31.03.2010 or in the computation of income for A.Y. 2010-11, the claim of the assessee was not questioned by the revenue and the income from the sale of the property was accepted and taxed as business income. Before the Assessing Officer as well as before the CIT(A), the assessee submitted that the said property held by the assessee as a fixed asset was converted to stock-in-trade during the earlier year and since income from the sale of property was offered as business income and taxed as such, the provisions contained in Section 50C were not applicable in assessee’s case. Thus, the CIT(A) held as under:
“4.7 I have considered the revised computation and submissions of Ld. ARs. I hold that the provisions of section 50C are not applicable to the facts of the present case which is one of conversion of capital asset into stock-in- trade. After considering the law on the subject and the re-computation done by Ld. ARs., the income of the appellant from the conversion of land to stock- in-trade is recomputed as under: ………………….. 4.8 The difference in the net taxable loss recomputed by Ld. ARs at Rs.67,76,047/- and as recomputed above is on account of FMV of the property taken at Rs.8,80,00,000/- as per the assessment order. It is also noted that the FMV of land and building as on the date of conversion amounts to Rs.8,94,82,500/-, which is more than the FMV taken at Rs.8,80,00,000/- in the assessment order. Accordingly, I hold that the net result of the conversion of capital asset into stock-in-trade by the appellant
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is business loss of Rs.52,93,547/-. The AO is directed accordingly. However, as the original return of income was filed belatedly, the appellant shall not be entitled to carry forward and set-off the said loss.” Thus, the order of the CIT(A) is reasoned order and there is no need to interfere with the finding of the CIT(A). The appeal of the Revenue is dismissed.
In result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 15.06.2018
Sd/- Sd/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 15.06.2018 *Kavita Arora