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Income Tax Appellate Tribunal, KOLKATA BENCH “C”, KOLKATA
ORDER
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER This appeal filed by the assessee against the order dated 16.03.2018 u/s 263 of the Income Tax Act, 1961 (in short “Act”) passed by Pr. CIT-1, Kolkata for AY 2013-14.
The assessee is a company and filed its return of income on 05.09.2013 for the impugned assessment year. Pr.CIT passed a revision order u/s 263 of the Act on 16.03.2018 on the ground that section 50C of the Act comes into play in the case on hand and valuation as per Stamp Duty Authority is required to adopted for calculation of capital gains and hence, there was error on facts and in law committed by the causing prejudice to Revenue. Hence, he held that assessment order dated 18.01.2016 passed by the AO is erroneous and prejudicial to the interests of the Revenue. Aggrieved, the assessee is in appeal before us. Ld. Counsel for the assessee submitted that the assessee’s business is sale of plots and the income in question is assessed under the head “income from business and profession”. Ld.AR filed a Paper Book (ASSESSMENT YEAR-2013-14) running into 189 pages and drew the attention of the Bench to the reply given to the Pr.CIT on 17.02.2018, wherein it was contended that income arising from “sale of plots” is “business income” and hence, section 50C of the Act does not apply. It was further pointed out that the assessee had acquired land, plotted the land and then sub-divided the same into house sites, got necessary approval and thereafter, sold, plotted lands to third parties. It was submitted that the issue is whether the income in question is assessable under the head Business or under the head “Capital Gains”. He argued that the AO has assessed the income under the head “income of the business” and hence, section 50C of the Act does not apply.
Even otherwise ad without prejudice, it was submitted that, what was sold is only right in immovable property and not the land as such and that under these circumstances, the provisions of section 50C would not apply. For this proposition, he relied on the order of the Kolkata Bench of the Tribunal in the case of M/s. Baniara Engs. Pvt. Ltd. vs ITO in vide order dated 04.07.2018 and the decision of Ahmedabad Bench of the Tribunal in the case of ITO vs Shri Yasin Moosa Godil in ITA No.2519/Kol/2009 vide order dated 13.04.2012.
Ld. Counsel for the assessee further submitted that the AO had conducted inquiries and applied his mind to this issue to the applicability of section 50C of the Act to the facts of this case and had passed this assessment order. He submitted that it is well-settled that each and every enquiry and conclusion drawn need not be mentioned by the AO in his order. For the proposition, he relied upon the decision of Hon’ble High Court of Calcutta in CIT vs J L Morison (India) Ltd. reported in 366 ITR 593 (cal.) order dated 15.05.2014.
Ld. DR on the other hand submitted that the assessee had not treated the “plots of land” purchased by it as “stock in trade” and had treated the same as “current investments” and hence, the income in question cannot be assessed under the head “income from business”. He (ASSESSMENT YEAR-2013-14) submitted that the AO did not apply his mind to the facts whether section 50C of the Act applies and hence, it is a case of non-application of mind which is an error which caused prejudice to the interests of the Revenue. He submitted that the order of Pr.CIT be upheld.
In his re-joinder, Ld. Counsel for the assessee has submitted that the AO had recorded that the assessee is involved in trading of land and property and has disclosed the investment in question not has “Fixed Assets” but under the head “current investment” which has the classification of “closing stock”.
We have heard the rival contentions and perused the material available on record. The assessee, as per the nature of business brought out by the AO in Column No.8 of the assessment order, is also trading in “land and property”. The assessee filed his return of income claiming the income of sale and purchase of land as income under the head “income from business”. When the AO has held so, the question of applying section 50C of the Act to computation of “income from business” does not arise. The Ld. Pr.CIT has also not given any reasons as to why the AO was wrong in accepting the claim of the assessee that the income from sale of plots of land was assessable under the head “income from business” on the ground the revision facts.
Even otherwise, what was acquired and sold by the assessee were right in land. The land was not registered in the name of the assessee not did it register the plot of land in the name of buyers.
The “SMC” Bench of the Tribunal in the case of M/s. Baniara Engs. Pvt. Ltd. vs ITO (supra) is held that section 50C is held as follows:- 3. On these facts the issue is whether the Assessing Officer was right in invoking the provision of Section 50C of the Act on ground that the assessee sold flats and therefore market value as determined by Registration authority should be applied. The assessee submits, it had not transferred any land or building and hence the provision of Section 50C of the Act do not apply. The Revenue Authority did not accept this claim of assessee. Hence, the assessee before me.
(ASSESSMENT YEAR-2013-14) 4. I find that the issue is no more res integra. The ITAT ‘B’ Bench of Ahmedabad Tribunal in order dated 13.04.2012 in the case of Income Tax Officer vs. Shri Yasin Moosa Godil, under similar facts and circumstances at para-16 held as follows:- “16. From the reading of Sec. 50C, it is evident that Sec. 50C is a deeming provision and it extends to only to land or building or both. Section 50C can come into play only in a situation where the consideration received or accruing as a result of the transfer by an appellant of a capital asset, being land or both is less than the value adopted or assessed or assessable by any authority of State Government therefore for the purpose of payment of stamp duty in respect of such transfer. It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Clearly therefore, it is essential that for application of Sec. 50C that the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as “land or building or both” then section 50C will cease to apply. From the facts of the case narrated above, it is seen that the assessee has transferred booking rights and received back the booking advance. Booking advance cannot be equated with the capital asset and therefore section 50C cannot be invoked.” Respectfully following the same, I hold that Section 50C of the Act does not apply under the facts and circumstances of the case as what was sold was right in property but not land or building. Hence, this appeal of assessee is allowed.
Applying the proposition of law laid down in this case to the facts of this case, we have to hold that section 50C of the Act cannot be applied. Thus, there is no error in the order of the AO warranting revision of the assessment by the Pr.CIT u/s 263 of the Act. Hence, we quash the order passed by Pr.CIT u/s 263 and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 19.12.2018.