Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): The present appeal is filed against Pr. CIT's order dated 27th January, 2016 passed under section 263 of the Income Tax Act, 1961 ("the Act"), revising assessment order dated 13th March, 2014 passed by the AO. 2. Ground Nos. 1 to 5 are against the Pr. CIT's View that section 50 C of the Act applies to the depreciable assets. Ground Nos. 6 and 7 are against the Pr. CIT's action of not dealing with the Assessee's submissions that it is eligible for exemption under section 54 EC of the Act in respect of short term capital gains made under section 50 where the assets were held for more than three years.
2 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd., 3. In its order u/s.263, CIT observed that while computing the short term capital loss on residential property, the value of sale consideration i.e. Rs.30 lakhs was reduced from the WDV of residential property which was Rs.74,87,519 and in this manner the loss of Rs.44,87,519/- was arrived at by the assessee. It is seen from sale deed that the residential property was purchased on 16.11.2003 for Rs.1,04,47,003/- and sold during the year to Mrs. Alka B Birewar, the managing director of the assessee company for Rs.30,00,000/ - against the stamp duty valuation of the property of Rs.1,42,83,000/-. On perusal of the records, it is found that the Assessing Officer has failed to adopt value of the property as per stamp duty valuation. As per the provisions of section 50C, while computing the short term capital gain or loss , sale consideration should have been taken at Rs.1,42,83,000/ - instead of Rs.30,00,000/-. In the light of the above facts emerging from the records CIT held that the order passed by the Assessing Officer was erroneous in so far prejudicial to the interest of revenue. 4. The CIT observed that the Hon'ble Supreme Court in the case of M/s Malabar Industrial Co. Ltd. 243 ITR 83 (SC) has laid down the conditions precedent by which the CIT can invoke the provisions of section 263. The Hon'ble Supreme Court has held that "if the order of the A.O. is erroneous in so far as it is prejudicial to the interest of the Revenue." It is further held that an incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous.
3 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd., 5. After discussing various judicial pronouncements, CIT held that AO has not correctly applied the provisions of Section 50C, accordingly his order was erroneous as well as prejudicial to the interest of the Revenue. 6. It was argued by learned AR that the AO has made the enquiry In respect of both the issues stated under Para 3 above. In support thereof, the reference may be made to the following pages of the Paperbook. Page No. 1 : In the Computation of Total Income, the assessee has added back to the Net Profit as per the Profit & Loss A/ c, loss on sale of assets amounting to Rs. 65,77,156/- as per books. The said loss is reflected under Schedule "Q" to the Profit & Loss A/ c which is on the Page 10 of the Paperbook. 7. The assessee has reduced from the Net profit as per the Profit & Loss A/ c profit - amounting to Rs. 1,09,00,343/- as The said profit is reflected under Schedule “N” the Profit & Loss A/ c which is on Page 9 of the Paperbook. The above items have been separately shown on Page 2 of the assessment order in the Computation of Total Income made by the AO, which shows application of mind by the AO. The Computation of Short Term Capital Gain under section 50 is reflected on Page 3 of the Paperbook and the STCG (Net) of Rs. 33,76,849/- is offered as Income In the Computation of Total Income made by the assessee which is on Page 1 of the Paperbook. The Computation of Short Term Capital Gain under section 50 which is reflected on Page 3 of the Paperbook has been reproduced by the AO on Page 2 of his assessment order while making Computation of Total Income.
4 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd.,
In view of the above, he further contended that the AO after application of mind to the above issues accepted the submissions of the assessee while passing assessment order in which he has not applied Section 50 C to depreciable assets and has granted benefit of Section 54 EC. 9. With regard to the merit of the addition, learned AR contended that In the case of Panchiram Nahata V / s. Jt. CIT 127 TTJ 128 (Kol), decided on 13th November 2009 it has been held that section 50 C is not applicable to the depreciable assets. The Department had preferred an appeal in the said case to the Calcutta High Court which was admitted on 22nd April, 2010. However, the Department's Appeal was dismissed by the Calcutta High Court on 23rd December, 2015 as the tax effect was less than 20 Lakhs and therefore Calcutta High Court decision holds the field. However, learned AR fairly considered that In case of United Marine Academy 138 TTJ 129 (Mumbai SB) decided on 25th April, 2011 it has been held that section 50 C is applicable to the depreciable assets. 10. As per learned AR, the issue with regard to applicability of section 54 EC to capital gain computed under section 50 in respect of long term capital assets is concluded by the Bombay High Court decision dated 7th March, 2005 in the case of ACE Builders Pvt. Ltd. 281 ITR 210 holding that benefit under section 54 EC can be claimed in respect of capital gain computed under section 50 where the assets are long term. The said decision has been approved by the Supreme Court in the case of CIT V/s. V. S. Dempo Co. Ltd. 387 ITR 354. He further contended that the issue
5 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd., with regard to applicability of Section 50 C to the depreciable assets remains debatable till the issue is finally settled by the judgment of the Supreme Court. It is very likely that this issue may be pending for final hearing at the High Court stage in India and therefore until the Supreme Court decides this issue, the same will remain debatable. In the case of CIT V / s. Ansal Properties & Industries Pvt. Ltd. 315 ITR 225 (Delhi) it has been held that CIT cannot revise the assessment order when the AO has not levied surcharge on the amount of income tax in case of block assessment as the issue was debatable till it was settled by the Supreme Court in the case of CIT V / s. Suresh Gupta 297 ITR 322 where the Supreme Court held that surcharge is leviable on income tax in case of block assessment. The issue with regard to applicability of Section 54 EC to capital gain computed under section 50 in respect of long term capital assets is concluded by the Bombay High Court' decision in the case of ACE Builders Pvt. Ltd. 281 ITR 210 holding that benefit under section 54 EC can be claimed in respect of capital gain computed under section 50 where the assets are long term. The said decision has been approved by the Supreme Court in the case of CIT V/s. V. S. Dempo Co. Ltd. 387 ITR 354. 11. On the other hand learned DR relied on the order of CIT passed u/s.263 and contended that AO has not applied correctly provisions of Section 50C with respect to the building transfer to its Director, therefore, CIT was justified in invoking provisions of Section 263.
6 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd., 12. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by CIT in his order u/s.263 as well as cited by learned AR and DR during the course of hearing before us. 13. From the record, we found that the assessee company has sold the property and shown sale consideration at Rs.30 lakh whereas the stamp duty value of the property Rs.1,42,83,000/- and accordingly the Assessee arrived at loss of Rs.44,87,519/- on sale of the residential property. While passing the order u/s.143(3), the AO has not uttered a single word with regard to applicability of provisions of Section 50C in respect of building sold by assessee to its Managing Director. The provisions of the Section 50C are applicable in the case of transfer of land and building including depreciable capital asset. The provision of section 50C contains a special provision for determining full value of consideration and as per provisions of section 50C when the consideration received or accruing as a result of the transfer by an Assessee of capital asset being land or building or both, is less than the value adopted or assessed by an authority of the State Government for the payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purpose of Section 48, be the full value of consideration received or accruing as a result of such transfer. In the instant case, the property has been transferred to Mrs. Alka B Birewar, the Managing director of the assessee company for Rs. 30 lakhs against the stamp duty valuation of the property of Rs.1,42,83,000/ -. The Hon'ble Bombay High court in the case of Bhatia
7 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd., Nagar Premises Co-Operative society Ltd. had an occasion to consider the scope of on 50 C and it is held by their Lordships that Section 50C is a measure provided to bridge the gap as it was found that the assessee were not correctly declaring the full value of consideration or in other words resorting to the practice of under valuation. Further, the decision of Special Bench in the case of ITO vs. United Marines Academy (supra) has made it clear that section 50C will be applicable on the sale value of depreciable asset. 14. With regard to the decision of Calcutta High Court as relied by learned AR in case of Panchiram Nahata, we found that appeal was dismissed on the ground of tax effect and they have not considered the merits of the case, therefore, it is wrong to hold that issue is covered by the decision of Calcutta High Court. In the instant case, the Assessing Officer has erred by not taking the sale value of the property as adopted by the Stamp Duty Authority .i.e sale value as per Section 50C of the I T Act. Further, the Hon'ble ITAT in case of Rallis India Ltd., vs. Addl. CIT (IT Appeal No.2464 (Mum) of 2010) also held that the applicability of provisions of Section 50C in the case of depreciable asset is now squarely covered by the ITAT Mumbai Special Bench in ITO vs. United Marine Academy (2011) 130 ITD 113 (Mum). 15. In view of the above discussion, we can safely conclude that not applying the provisions of Section 50C to the facts of the instant case has rendered the order of the AO not only erroneous but also prejudicial to the interest of Revenue, accordingly, CIT has correctly invoked the provisions
8 ITA No.797/Mum/2016 M/s. Abhideep Chemicals Pvt. Ltd., of Section 263. It is pertinent to mention here that nowhere CIT has disturbed the order of the AO with regard to exemption allowed u/s 54 EC of the IT Act. Accordingly, the argument of learned AR is of no relevance in so far as the assessee will continue to enjoy the exemption u/s.54EC of the IT Act. 16. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on this 15/05/2017 Sd/- Sd/- (RAVISH SOOD) (R.C.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 15/05/2017 Karuna Sr.PS
Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. BY ORDER, 6. Guard file. सत्यापित प्रतत //True Copy// (Asstt. Registrar) ITAT, Mumbai