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Before: Shri Sanjay Arora & Shri Duvvuru RL Reddy
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 16, Chennai, dated 27.03.2017 relevant to the assessment year 2012-13, wherein, besides the ld. CIT(A) has not adjudicated the additional ground raised by the assessee with regard to the claim of exemption under section 54F of the Income Tax Act, 1961 [“Act” in short], the ld. CIT(A) has erred in confirming various disallowances made under section 50C of the Act, confirming disallowance of cost incurred for acquisition of properties as well as levy of interest under section 234B and 234C of the Act.
Brief facts of the case are that the assessee is an individual and non- resident filed her return of income on 31.12.2012 admitting total income of ₹.6,40,31,572/-. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 08.08.2013 and duly served on the assessee. Notice under section 142(1) of the Act was also issued on 09.06.2014. The assessee has claimed exemption under section 54 and 54F of the Act and thereafter arrived at long term capital gains. For the purpose of LTCG, the Assessing Officer adopted guideline value under section 50C of the Act as deemed sale consideration as against sale deed value and accordingly, the difference of ₹.2,61,05,992/- was brought to tax. The assessee has claimed additional cost of purchase of property for ₹.2,10,76,000/-. However, the assessee could not substantiate the additional purchase cost. Therefore, the sum of ₹.2,10,76,000/- was disallowed and added to the total income of the assessee. The assessee has also claimed brokerage expenses of ₹.30,22,500/-. The same could not be substantiated with evidences. Therefore, the Assessing Officer disallowed the brokerage expenses of ₹.30,22,500/- and assessed the total income of the assessee at ₹.12,50,38,021/- and completed the assessment under section 143(3) of the Act.
The assessee carried the matter in appeal before the ld. CIT(A) and disputed the disallowances/addition made by the Assessing Officer. After considering the written submissions of the assessee, DVO’s report, etc., the ld. CIT(A) dismissed the grounds raised by the assessee.
On being aggrieved, the assessee is in appeal before the Tribunal.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. During the financial year 2011-12, the assessee sold lands at Sholinganallur village and also house property at Vijayaraghavachari Road, T. Nagar and admitted capital gains after claiming indexation on cost of purchase. The assessee claimed deduction under section 54 as well as under section 54F of the Act and arrived at taxable long term capital gains of ₹.5,27,40,546/-. From the sale deed furnished by the assessee, the Assessing Officer noticed that the sale consideration shown by the assessee in respect of sale of three properties is less than the value adopted by the stamp value authority for the purpose of stamp valuation as detailed below: S.No. Document Sale Value adopted by Difference No. consideration stamp value authority between A & B shown – A B 1. 2568/2011 1,28,75,000/- 1,64,80800/- 36,05,800/- 2. 2735/2011 8,44,60,000/- 8,63,35,016/- 18,75,016/- 3. 2736/2011 7,36,45,000/- 9,42,70,176/- 2,06,25,176/- Total 17,09,80,000/- 19,70,85,992/- 2,61,05,992/- When the assessee was asked as to why the value adopted by the stamp value authorities for stamp valuation as sale consideration as per section 50C of the Act, it was the submission of the assessee that the buyer has protested the valuation adopted by the stamp value authorities and has referred to the valuation authorities of the State Government. However, the assessee has not produced any evidence in this regard. As per section 50C(1) of the Act, where the consideration received by the assessee as a result of transfer of a capital asset, being land, building or both, is less than the value adopted or assessed by an authority of State Government [Stamp Valuation Authority] for the purpose of stamp duty, the value so assessed shall for the purpose of section 48 of the Act be deemed to be the full value of consideration received on such transfer. In view of the above, the value adopted by the stamp value authority of the purpose of stamp duty should be taken as sale consideration for all purposes.
1 However, vide letter dated 10.03.2015, the assessee has requested for valuation and accordingly, the Assessing Officer referred the same to the Valuation Officer under section 142A of the Act. Pending receipt of valuation report, the Assessing Officer proceeded to adopt the value of the property so adopted by the stamp duty authorities as per section 50C(1) of the Act and computed the capital gains by making addition of ₹.2,61,05,992/- being the difference of sale consideration admitted by the assessee and the value adopted by the stamp valuation authorities and brought the same to tax.
2 During the course of appellate proceedings, the valuation report of DVO was brought on record, who has determined the value of the property at ₹.27,36,04,000/- The valuation report dated 15.07.2015 was handed over to the AR of the assessee for his comment on the issue. Before the ld. CIT(A), it was the submission of the assessee that they have raised objection before the DVO and moreover, the order of the DVO was incorrect and cannot be adopted as it exceeds the stamp duty value. After considering the objections raised before the DVO, the ld. CIT(A) has observed that the DVO has given careful consideration to the objections raised by the assessee before him while arriving the value of the property at ₹.27,36,04,000/-. Since as per the provisions of section 50C(2) r.w.s. 50C(3) of the Act has a mandate that subject to the provision contained in sub- section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the Stamp Valuation Authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer, the ld. CIT(A) was of the opinion that the Assessing Officer has rightly adopted 50C value of the property as the sale consideration for computing the capital gain and accordingly rejected the ground raised by the assessee.
3 In this case, as per the request of the assessee, the Assessing Officer referred the matter to the DVO for valuation. After inspecting the site, the Departmental Valuation Officer passed an order dated 15.07.2015 fixing the fair market value of the properties at ₹.27,36,04,000/-. It was the stand of the Department that there was no provision in the Income Tax Act to accept the claim of the assessee to accept the valuation report of a registered valuer. It was the submission of the ld. Counsel for the assessee that the guideline value of the SRO is very high since the land sold was vacant land situated in the ECR Link road, which was sluggish and the correcting roads to ECR was not completed at the time of sale of the property. Moreover, there was no housing project and commercial project started upto 2012 on either side of ECR link road and the impugned property was vacant land and the place was completely underdeveloped. Therefore, the value adopted by the SRO/Stamp Valuation Authority was totally unfair and prayed that the sale consideration actually received by the assessee should be taken for computing capital gain. If the value adopted by the SRO was high, then, the assessee should have approached the appropriate revenue authorities in appeal to determine or fix the guideline value of the property before requesting the Assessing Officer to refer the matter to the Departmental Valuation Officer. In this case, the assessee has not challenged the guideline value of the property before the higher forum, but submitted before the Assessing Officer that the buyer has protested the valuation adopted by the stamp value authorities and has referred to the valuation authorities of the State Government, but no evidence was submitted either before the ld. CIT(A) or even before the Tribunal. Thus, once the value determined by the State Revenue Authorities and collected the difference from the buyers for registration of the properties, the sale consideration of the properties would be the rate adopted by the Stamp Valuation Authority, which was rightly adopted by the Assessing Officer for computing the capital gain as per the provisions of section 50C of the Act. Under the above facts and circumstances, we are of the considered opinion that the ld. CIT(A) has rightly held that the Assessing Officer has correctly invoked the section 50C of the Act and adopted the guideline value of the property as deemed sale consideration for the purpose of computing capital gains. In view of the above, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the assessee is dismissed.
The next ground raised by the assessee is with regard to disallowance of additional cost of ₹.2,10,76,000/-.
1 From the income computation filed along with the return of Income, the Assessing Officer has noticed that the assessee has included an additional amount of ₹. 2,10,76,000/- towards the cost of purchase of property. In this regard the assessee was asked to submit documentary evidence to show that the excess sum of ₹. 2,10,76,000/- was paid towards purchase of property. In response, the AR of the assessee has submitted before the Assessing Officer that the total payments made by the assessee for the purchase of Sholinganallur Property was ₹. 6,90,16,400/-, of which the property was registered for ₹. 5,01,85,514/-. Further, he has stated that the difference of ₹.2,10,76,000/- represents the actual cost of the property incurred by the assessee. The assessee has enclosed copy of bank statement of the Karur Vysya Bank and State Bank of India as proof for payments made to vendors.
2 From the purchase deed submitted by the assessee, the Assessing Officer has noticed that the assessee has purchased lands at Sholinganallur village during the financial year 2006-07. The total cost of purchase of lands as per registered document was ₹.5,01,85,514/- only, whereas the assessee has claimed that she has made an excess payment of ₹.2,10,76,000/- towards cost of purchase. The assessee has not produced any documentary evidence to show that the lands were purchased at a higher cost than the value registered in the deed. The assessee produced a chart showing payment made to different sellers and copy of bank account statement. On comparison of the payments said to have been made as per the chart furnished, with the bank account, the Assessing Officer has noted that all the amounts does not tally. The entries which tally are the payments reflected in the purchase deed. Moreover, merely because the name of the person in the sale deed and that appearing in the bank account are same cannot explain that the amounts were paid towards purchase of land. After verification of the balance sheet of assessee’s husband Shri K.R. Jaganathan, the Assessing Officer has noted that the cost of lands at Shollinganallur was recorded in the books at ₹.5,42,18,902/- only. The additional cost claimed to have been paid by the assessee was not recorded in the books also. Hence, in absence of any documentary evidence to show that the amount of ₹.2,10,76,000/- was indeed paid towards cost of purchase of lands, the Assessing Officer has not allowed the same as purchase cost. On appeal, the ld. CIT(A) confirmed the disallowance.
3
We have heard rival contentions. In the computation of income, the assessee has claimed additional amount of ₹.2,10,76,000/- towards the cost of purchase of property. The total cost of purchase of lands as per registered document was ₹. 5,01,85,514/- only, whereas the assessee has claimed before the Assessing Officer that she has made an excess payment of ₹.2,10,76,000/- towards cost of purchase. On examining the chart showing payments said to have been made as per the chart to different seller and copy of bank account statement, the Assessing Officer observed that all the amounts does not tally. The entries which tally are the payments reflected in the purchase deed. Therefore, the Assessing Officer has not accepted the submissions of the assessee since the assessee could not file any proper evidence. Since the assessee could not succeed before the Assessing Officer, before the ld. CIT(A), the assessee took a different stand that the said amounts were paid for development of the land by the seller on behalf of the assessee. Generally, if at all any development has to be made in the landed property; the same are being carried out before selling the property. But, in this case, after sale of the property, the seller has paid the amount for development of the land on behalf of the assessee. This statement of the assessee is not acceptable, because, the assessee has not produced any evidence for development charges before the authorities below. During the appellate proceedings, when the AR was asked to prove as to how the cost incurred after the date of sale deed is part of cost and also to prove its genuineness, the AR of the assessee could not furnish any evidence clarifying the above contention. Further, the assessee’s contention that the payments were made through banking route to the person mentioned in the sale deed could not be proved before the appellate authority. Thus, in the absence of any documentary evidence to show that the amount of ₹.2,10,76,000/- was paid towards cost of purchase of land or towards improvement of the land after sale, could not be proved, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. Before the Tribunal also, the assessee could not file any evidence either paid towards cost of purchase of land or towards improvement of the land after sale. Hence, we are of the considered opinion that the disallowance made by the Assessing Officer was rightly confirmed by the ld. CIT(A) and we find no reason to interfere with the order passed by the ld. CIT(A). Thus, the ground raised by the assessee is dismissed.
The next ground raised in the appeal of the assessee is that the ld. CIT(A) has not adjudicated the following additional ground raised by the assessee: “The Learned Assessing Officer while allowing the exemption under section 54F of the Act failed to recompute the same on the basis of assessed capital gains, without appreciating the provisions of secti9on 54F of the Act requiring exemption to be computed on the basis of long term capital gains computed thereon.”
1 It was the submission of the ld. Counsel that by not adjudicating the above additional ground, the ld. CIT(A) has erred in indirectly upholding the action of Assessing Officer in not re-computing the deduction eligible under section 54F of the Act on account of additions made to the capital gain under section 50C of the Act.
2 We find from the assessment order that the assessee has claimed exemption under section 54 and 54F of the Act from the long term capital gains computed by her. The assessee was asked to submit proof for the same. The assessee submitted that she has made investment in capital gain account scheme for ₹.9,99,00,000/- with SBI and submitted proof for the same. Accordingly, the Assessing Officer allowed the same. However, by way of additional ground, the assessee has disputed that exemption under section 54F of the Act was not allowed while re-computing the deduction eligible under section 54F of the Act on account of additions made to the capital gain under section 50C of the Act. For instant reference, the relevant provisions of section 54F of the Act are reproduced as under: 54F. (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: [Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.] Explanation.—For the purposes of this section,— “net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
3 From the above, Explanation to sub-section (1) of section 54F of the Act, it is clear that exemption under section 54F of the Act is available to the assessee on the full value of sale consideration, as a result of transfer of a capital asset, and now it has to be analysed with regard to the full value sale consideration for the purpose of computation of capital gains within the meaning of section 48 of the Act. It is relevant to reproduce the provisions of section 48 of the Act as under:
The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :— (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company : Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and “indexed cost of any improvement” had respectively been substituted:
4 In the present case, the indexed cost of acquisition was allowed to the assessee by the Assessing Officer and however, the cost of improvement was not allowed since the assessee could not file any cogent evidence.
5 With regard to full value of consideration as a result of transfer of a capital asset, the provisions of section 48 of the Act is very clear that the income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset. In this case, as per section 50C(1) of the Act, where the consideration received by the assessee as a result of transfer of a capital asset, being land, building or both, is less than the value adopted or assessed by an authority of State Government [Stamp Valuation Authority] for the purpose of stamp duty, the value so assessed shall, for the purpose of section 48 of the Act, be deemed to be the full value of consideration received on such transfer. Thus, the full value adopted for the purpose of computation of capital gain tax as per the provisions of section 45 r.w. section 50C of the Act was at ₹.19,70,85,992/-, as determined by the Stamp Value Authority. In the same scenario, for claiming the exemption under section 54F of the Act from the capital gain chargeable under section 45 of the Act, the full value on transfer of asset should also be the same as determined by the Stamp Value Authority and not less than that. As explained in CIT v. Citi Bank N.A. [2003] 261 ITR 570 (Bom), the different provisions of Chapter IV-E of the Act form part of one integrated code. The same are to be read harmoniously and not disjointedly. A deeming provision, it is trite law, is to be read in light of the object of the provision and, further, is to be taken to its logical end. When, for the purpose of computation under section 48 of the Act, the full value of consideration was taken as per section 50C of the Act, the Assessing Officer was not justified in adopting the sale consideration as admitted in the sale deed viz., ₹.17,09,80,000/-. Similar view has also been taken by the Tribunal in ITO v. Kondal Reddy Mandal Reddy in I.T.A. No. 848/Hyd/2015 dated 13.05.2016. 7.6 In view of the foregoing, we direct the Assessing Officer to adopt the full value on transfer of asset as was determined under the provisions of section 50C of the Act, viz., ₹.19,70,85,992/- for allowing the claim of exemption under section 54F of the Act. Accordingly, the ground raised by the assessee is allowed and the Assessing Officer is directed to recompute the taxable income after allowing the claim of exemption under section 54F of the Act.
With regard to payment of interest under section 234B and 234C of the Act, the levy of interest under section 234B of the Act, if an assessee, who is liable to pay advance tax under section 208 of the Act has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 of the Act is less than ninety per cents of the assessed tax, the assessee is liable to pay interest under section 234B of the Act. Therefore, the Assessing Officer has rightly levied interest under section 234B of the Act, which is mandatory. Similarly, payment of interest for deferment of advance tax under section 234C of the Act is also consequential in nature. As such, levy of interest under section 234B and 234C of the Act cannot be cancelled.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on the 27th September, 2017 at Chennai. (SANJAY ARORA) JUDICIAL MEMBER Chennai, Dated, the 27.09.2017 Vm/- आदेश क" ""त"ल"प अ"े"षत/Copy to: 1. अपीलाथ"/Appellant, 2.""यथ"/ Respondent, 3. आयकर आयु"त (अपील)/CIT(A), 4. आयकर आयु"त/CIT, 5. "वभागीय ""त"न"ध/DR & 6. गाड" फाईल/GF.