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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI G.S. PANNU & SHRI C.N. PRASAD
The captioned appeal by the assessee is directed against the order of CIT(A)-2, Mumbai dated 27.09.2013, pertaining to the Assessment Year 2009-10, which in turn has arisen from the order dated 09.12.2011 passed by the Assessing Officer, Mumbai under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
In its appeal, assessee has raised the following Grounds of appeal :-
M/s. Toshbro Trading Pvt. Ltd.
“1. The learned Commissioner of Income-tax (Appeals) committed a gross error of law and fact in confirming the addition of Rs.4,290,176/- on sale of property, by taking the stamp duty value of the property of Rs.5,140,000/- instead of the actual sale consideration of Rs.4,200,000/-.
2. The learned Commissioner of Income-tax (Appeals) failed to appreciate that the consideration of Rs.4,200,000/- was based on a report by a registered valuer, who had considered the particular features of the property. The learned Commissioner of Income-tax (Appeals), erred in placing reliance on the report of the DVO, as in the said report, the DVO had not at all considered all the relevant aspects, and had instead taken into account irrelevant aspects.
3. The learned Commissioner of Income-tax (Appeals) committed a gross error of law and fact in not allowing the set off of business loss of Rs.3,131,804/- and only allowing the set off of unabsorbed depreciation of Rs.2,462,653/-.
4. The learned Commissioner of Income-tax (Appeals) erred in not appreciating the provisions of Section 72 in proper perspective.
5. The Order of learned Commissioner of Income-tax (Appeals)) is against the weight of evidence, equity and natural justice.”
Insofar as the Grounds of appeal no. 1 & 2 are concerned, the relevant facts are that during the year under consideration, the Assessing Officer found that assessee had sold its land and factory building at Indore for a consideration of Rs.42,00,000/- and Capital Gain was declared on such basis. However, it was found that the value adopted by the Stamp Valuation authority of such property was Rs.51,40,000/- and, therefore, he show- caused the assessee as to why the value adopted by the Stamp Duty authority be not substituted as the full value of the consideration in view of Sec. 50C of the Act in order to compute the Capital Gains. Assessee objected to the value determined by the Stamp Duty authority and, therefore, the matter was referred to the Departmental Valuation Officer (DVO) by the M/s. Toshbro Trading Pvt. Ltd.
Assessing Officer. The Assessing Officer notes that the DVO vide report dated 24.11.2011 valued the property at Rs.83,52,900/-. The Assessing Officer relied upon Sec. 50C(3) of the Act and adopted the value determined by the Stamp Valuation authority at Rs.51,40,000/- as the full value of consideration for the purposes of computing the Capital Gains since the value estimated by the DVO was at a higher figure. Accordingly, after reducing the written down value of the property as on 01.04.2008 of Rs.8,49,824/-, the resultant Short Term Capital Gain was determined at Rs.42,90,176/-. This aspect has been affirmed by the CIT(A), against which assessee is in further appeal before us.
Before us, a preliminary point has been raised by the assessee, which is to the effect that the Valuation authority, i.e., the DVO as well as the Assessing Officer have not taken cognisance of the objections raised by the assessee with regard to the Valuation Report and, for that matter, referred to the communication dated 23.11.2011 and 07.12.2011 made to the DVO and the Assessing Officer respectively. On this aspect, it was also submitted that the assessee would be satisfied at the present stage if the matter is restored back to the file of the Assessing Officer to pass a speaking order on the objections so raised by the assessee.
On this aspect, the ld. DR has reiterated the stand of the Assessing Officer, which we have noted in the earlier paras, and is not being repeated for the sake of brevity.
We have carefully considered the rival submissions. In the present case, the Short Term Capital Gain declared by the assessee in the return of M/s. Toshbro Trading Pvt. Ltd.
income has been varied by the Assessing Officer primarily on an application of Sec. 50C of the Act. In terms of Sec. 50C of the Act, the Assessing Officer found that the actual sale consideration declared by the assessee was lower than the value adopted by the Stamp Valuation authority. Noting the objection of the assessee to the value adopted by the Stamp Valuation authority, the Assessing Officer referred the matter to the DVO, having regard to sub-section (2) of Sec. 50C of the Act. It transpires that the value arrived at by the DVO at Rs.83,52,900/- was even higher than the value adopted by the Stamp Valuation authority at Rs.51,40,000/-. The Assessing Officer restricted the application of Sec. 50C of the Act to Rs.51,40,000/-, being the value adopted by the Stamp Valuation authority because it was lower than the value arrived at by the DVO, having regard to sub-section (3) of Sec. 50C of the Act. The point sought to be raised by the assessee is that it had objected to the methodology of valuation adopted by the DVO and, in support, reference has been made to the copies of the written submission filed before the Assessing Officer. In its written submissions, assessee relied upon the valuation guidelines issued by the Collector, Indore and contended that the value of the property would be Rs.36,60,459/-, which was much lower than not only the value taken by the DVO, but also the value adopted by the Stamp Valuation authority. We find that such assertions of the assessee have not been addressed by the Assessing Officer, or even by the CIT(A), by way of a speaking order. Thus, it would be in the fitness of things that the matter is restored back to the file of the Assessing Officer for a de novo consideration with regard to the application of Sec. 50C of the Act, especially in the light of the objections raised by the assessee with regard to the valuation arrived at by the DVO. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard
M/s. Toshbro Trading Pvt. Ltd. before passing an order afresh on this aspect, as per law. Thus, insofar as Grounds of appeal nos. 1 & 2 are concerned, assessee succeeds for statistical purpose.
Grounds of appeal no. 3 & 4 which relate to similar issue are taken-up together. In terms of the said Grounds, assessee is aggrieved by the action of the lower authorities in denying set-off of brought forward business losses of earlier years amounting to Rs.31,31,804/- against the Short Term Capital Gain of the instant year. The Assessing Officer as well as the CIT(A) have denied the claim of the assessee by relying to Sec. 72 of the Act, which as per them permits brought forward business loss to be set-off only against income assessable under the head ‘business’. According to the income-tax authorities, what was assessable during the year is Short Term Capital Gain and not ‘Business Income’ and, therefore, such set-off was not permissible.
Before us, the learned representative for the assessee pointed out that the income arising to the assessee, though assessable as Short Term Capital Gain, was in the nature of ‘income from business’ and, therefore, assessee could set-off such income against the brought forward business losses. In this context, the learned representative for the assessee also relied upon the decision of the Mumbai Bench of the Tribunal in the case of Digital Electronics Ltd. vs Addl. Commissioner of Income tax, [2011] 16 taxmann.com 316 (Mumbai).
In this context, we find that the CIT(A) has disagreed with the assessee by, inter-alia, placing reliance on the decision of the Special Bench of the Tribunal in the case of Nandi Steels Ltd., Bangalore vs ACIT, ITA No.
M/s. Toshbro Trading Pvt. Ltd.
546/Bang/2008 dated 09.12.2011. In our view, the plea sought to be raised by the assessee is fully governed by the decision of the Special Bench of the Tribunal in the case of Nandi Steels Ltd., Bangalore (supra), wherein also the income from sale of business assets was sought to be set-off against brought forward business losses, a claim which was not found acceptable. Being the decision of a larger bench of the Tribunal, in our view, the CIT(A) made no mistake in relying on the same and deciding the issue against the assessee, which we hereby affirm. Thus, on this aspect, assessee has to fail.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 5th March, 2018.