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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI B.R. BASKARAN (AM) & SHRI RAM LAL NEGI (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “D”, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) Assessment Year: 2013-14 The D.C.I.T. 1(2)(2), M/s Piroj Palace P. Ltd., R. No. 535, 5th Floor, 2nd Floor, 134 Nagindas Master Aayakar Bhavan, Road, Fort, M.K. Road, Vs. Mumbai Mumbai - 400020 PAN: AAFCP0219E (Appellant) (Respondent) CO No. 171/MUM/2018 (Arising out of ITA No.857/MUM/2017) Assessment Year: 2013-14 M/s Piroj Palace P. Ltd., The D.C.I.T. 1(2)(2), 2nd Floor, 134 Nagindas Master R. No. 535, 5th Floor, Road, Fort, Aayakar Bhavan, Mumbai Vs. M.K. Road, Mumbai - 400020 PAN: AAFCP0219E (Appellant) (Respondent) Revenue by : Shri M.V. Rajguru (DR) Assessee by : Shri Vipul Joshi (AR) Date of Hearing: 29/08/2018 Date of Pronouncement: 31/10/2018
O R D E R PER RAM LAL NEGI, JM These are the appeal and cross objection filed by the revenue and the assessee respectively against the order dated 11.11.2016 passed by the Commissioner of Income Tax (Appeals) (for short ‘the CIT (A)’)-2, Mumbai pertaining to the Assessment Year 2013-11, whereby the Ld. CIT (A) has 2 ITA No. 857/MUM/2017 & CO No. 171/Mum/2018 Assessment Year: 2013-14
allowed the appeal filed by the assessee against order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’). Brief facts of the case are that the assessee company engaged in the business of management of property and re-development of Real Estate, filed its return of income for the assessment year under consideration declaring the total income at Rs. 5,897/-. In response to the notices u/s 143 (2) and 142 (1), the authorized representative (AR) of the assessee attended the proceedings and furnished the details called for. It was noticed that the company had entered into an agreement for the sale to two flats with Sushma Shah and Mayuri Maniar vide agreement dated 30.05.2012. It was further noticed that the company had received consideration of Rs. 30,00,000/- for each flat. However, the stamp duty authorities adopted the value at Rs. 71,80,000/- for each of the flats for the purpose of stamp duty on the said agreements. Accordingly, the company was asked to show cause as to why the stamp duty value should not be taken as sale consideration. The AR submitted that the value adopted by the stamp duty authorities for the sale of floor space index (FSI) is excess of the real market value of the FSI and the authorities have mechanically adopted the rates specified in the ready reckoner. Moreover, the provisions of section 50C of the Act do not apply to transfer of FSI. The AO rejecting the contention of the assessee treated the sale consideration at Rs. 1,43,60,000/- instead of Rs. 60,00,000/- and made disallowance of Rs. 83,60,000/-. 2. The assessee challenged the assessment order before the CIT (A) on the grounds that the AO has erred in invoking section 50C of the Act and substituted the value adopted by stamp valuation authority in place of consideration actually received on transfer of FSI and the Ld. AO has erred
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in holding that the FSI was held by the assessee for less than 36 months contrary to the evidence on record that the assessee had held the FSI for more than 36 months. The Ld. CIT (A) after hearing the assessee decided both the grounds in favour of the assessee and held that FSI would not attract provision of section 50C and that since the company owned the building in 1991, the AO has wrongly treated the profit as short term capital gain. The revenue is in appeal against the said findings of the Ld. CIT (A). 3. The revenue has raised the following effective ground of appeal against the impugned order passed by the Ld. CIT (A):-
“Whether on the facts and in the circumstance of the case and in Law the Ld. CIT (A) was correct in holding that the deeming provisions of section 50c are not attracted in case of transfer of FSI by ignoring that the said section applies to sale of any capital asset being land or building or both and FSI cannot have an origin from other than land, for the purpose of building?”
Before us, the Ld. Departmental Representative (DR) relying on the assessment order passed by the AO submitted that the Ld. CIT (A) has wrongly held that the deeming provisions of section 50C are not applicable in the case of transfer of FSI. The Ld. DR further submitted that the provisions of section 50C of the Act apply to sale of any capital asset being land or building or both and since the FSI is related to land or building, the AO has rightly applied the provisions of Section 50C in the present case. 5. On the other hand, the Ld. counsel for the assessee relying on the findings of the Ld. CIT (A) submitted that the issue involved in the present case is squarely covered by the order of the Mumbai Tribunal rendered in the case of Voltas Ltd. vs. ITO (Mumbai) (2016) 74 taxmann.com 99 (Mum),
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Atul G Purnaik vs. Income Tax Officer 132 ITD (Mumbai) and the recent judgment of the Hon’ble High Court in the case of CIT Central-II, Mumbai vs. M/s Green Field Hotels and State Pvt. Ltd. 2016 389 ITR 68 (Bom). Since, the findings of the Ld. CIT (A) are based on the decision of the Hon’ble jurisdictional High Court and the decisions of various Benches of the Tribunal, there is no legal or factual infirmity in the order of the Ld. CIT (A) to interfere with. Therefore, there is no merit in the appeal of the revenue. 6. We have heard the rival submissions and also gone through the material on record including the cases relied upon by the Ld. counsel for the assessee. The only issue to be adjudicated in the present appeal is that whether the provisions of Section 50C are applicable in the case of transfer of FSI? The Ld. CIT (A) has decided this issue in favour of the assessee holding as under:-
“6. I have considered the Assessment Order as well as submissions given by the AR of the appellant company and also the Section 50C of the Act. Section 50C of the Act has already been reproduced in the Assessment Order by the AO vide page No. 3 which is as under:- ‘50C (1) where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereinafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be full value of the consideration received or accruing as a result of such transfer’. 7. From the reading of the Section 50C itself, it is crystal clear that there is no mentioning of rights over the land & building. Further, the AR of the appellant also brings to my notice the jurisdictional ITAT decision in the 5 ITA No. 857/MUM/2017 & CO No. 171/Mum/2018 Assessment Year: 2013-14
case of Voltas Ltd. vs. ITO, Ward 7(3)(4), Mumbai [2016] 74 taxmann.com 99 (Mumbai Trib) dated 16.09.2016 where the ruling is as under:- “Section 50C of the Income Tax Act, 1961- Capital gains – Special provision for full value of consideration in certain cases (Sale of development rights) Assessment Year 2005-06 whether provisions of section 50C could not be applied to sale of development rights of land owned by assessee- Head, yes (para 3.11) [ in favour of the assessee]”. Atul G. Puranik vs. Income-tax Officer, 12(1) (1) reported in 132 ITD 499 (Mum) dt. 13.05.2011 ITAT Á’ Bench. “Section 50C of the Income Tax Act, 1961- Capital gains – Special provision for full value of consideration in certain cases- Assessment Year 2006-07-Whether in view of provisions of section 50C, deeming fiction of substituting adopted or assessed or assessable value by stamp valuation authority as full value of consideration is applicable only in respect of ‘land or building or both’ Held, yes. Whether leas right in a plot of land cannot be included within scope of ‘land or building or both’ and, thus, in case of transfer of leasehold rights in land, provisions of section 50C cannot be invoked- Held, yes [ in favour of assessee]. 8. Respectfully following the jurisdictional Hon’ble ITAT’s decision, Mumbai cited above and also relying on the provisions of section 50C, I am of the considered opinion that FSI would not attract provisions of Section 50C and I am also is of the opinion that building was owned by the appellant company from 1991 onwards the profit as Long term capital gain. Hence the appeal is allowed.” 7. We notice that the findings of the Ld. CIT (A) are based on the two decisions of the coordinate Benches of the Tribunal. Apart from the said decisions, the issue involved in this case is further covered by the decision of the Hon’ble jurisdictional High Court in the case of CIT vs. M/s Green Field Hotels and State Pvt. Ltd. (supra) in which the question to be 6 ITA No. 857/MUM/2017 & CO No. 171/Mum/2018 Assessment Year: 2013-14
determined by the Hon’ble Court was whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CIT (A) in deleting the addition of long term capital gain on the ground that provisions of Section 50C of the Act were not applicable to transfer of land and building being a lease hold property. The Hon’ble High Court dismissed the revenue’s appeal holding that the question as framed by the revenue does not give rise to any substantial question of law. The ratio of this decision will apply to the present case. 8. Since, the findings of the Ld. CIT (A) are based on the decisions of the various Benches of the Tribunal and the findings of the Hon’ble High Court discussed above, we do not find any reason to interfere with the findings of the Ld. CIT (A). We therefore uphold the findings of the Ld. CIT (A) and dismiss the sole ground of the appeal of the revenue.
CO No. 171/MUM/2018 (Assessment Year: 2013-14)
The assessee has filed the cross objection against the impugned order on the following effective grounds:
“It is submitted that in the facts and the circumstances of the case, and in law, no capital gain accrued and arise as transfer of FSI, for which no cost of acquisition was computable. 2. Without prejudice to the above, the addition made by the A.O, by invoking section 50C but without referring the matter to DVO inspite of specific request of the assessee, is bad in law. 3. Without prejudice to the above, it is submitted that assuming but not admitting – that substitution of consideration was called for, the amount of addition so made is not in accordance with the law, is arbitrary and excessive.”
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Since, the Cross Objection has been filed by the assessee in support of the findings of the Ld. CIT (A) and since we have dismissed the revenue’s appeal, the CO has become infructuous. Hence, we dismiss the CO filed by the assessee. In the result, appeal filed by the revenue as well as the Cross Objection filed by the assessee, are dismissed.
Order pronounced in the open court on 31st October, 2018. (B.R. BASKARAN) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 31/10/2018
Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आदेशानुसार/ BY ORDER, सत्य दपि प्रदि //// उि/सहायक िंजीकार (Dy./Asstt.