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Income Tax Appellate Tribunal, BENCH ‘A’, CHENNAI
Before: SHRI SANJAY ARORA & SHRI G. PAVAN KUMAR
आदेश /O R D E R
Per Sanjay Arora, AM:
This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-3, Chennai (‘CIT(A)’ for short) dated 30.03.2016, confirming and enhancing the impugned addition in assessee’s appeal contesting its’ assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 26.03.2013 for the assessment year (AY) 2010-11.
2 (AY 2010-11) Renowned Engineers v. Asst CIT 2. The issue arising in this appeal is the correct amount of capital gains chargeable under Chapter IV-E of the Act, i.e., in law, in the given facts and circumstances of the case. The facts of the case, which are admitted and undisputed, are that the assessee-company sold two pieces of land (measuring a total of 4.38 acres) during the relevant year for a consideration of Rs. 515.40 lacs, returning short-term capital gain (STCG) thereon at Rs. 475.08 lacs. The stamp valuation thereof being Rs. 810.96 lacs, the Assessing Officer (AO), invoking s. 50C(1), adopted the same as the full value of the consideration for the purposes of s. 48 and, accordingly, computed STCG at Rs. 770.64 lacs, i.e., by making an addition for Rs. 295.56 lacs on account of difference in valuation. The assessee’s plea for reference to the Valuation Officer (VO) was not accepted by him as the stamp valuation was admittedly disputed, so that the condition of the s. 50C(2), where-under the said reference could be made, was not met and, thus, inadmissible. In appeal, the assessee found favour with the ld. CIT(A) for making reference to the VO, and directed the AO accordingly in the remand proceedings. The VO, after hearing the assessee, who supported its’ valuation by an approved valuer, determined the fair market value (f.m.v.) of the property at Rs. 955.87 lacs, i.e., at an increase of Rs. 144.91 lacs over the guideline value as per the Stamp Act. The first appellate authority, accordingly, after show causing the assessee in respect of the said enhancement, directed the same. The assessee, it was explained by him, raising a specific ground in its respect, had itself insisted upon and sought reference to the VO, denied by the AO for want of the satisfaction of the condition of s. 50C(2). It could not now plead adoption of the guideline value as per the Stamp Act, which is only for the reason that the VO determines the f.m.v. of the capital assets transferred at a higher value. The value placed by the VO is binding on the AO, even as clarified by the Board per its Circular No. 96 dated 25.11.1972, reproducing the same in his order. In the instant case, the reference to the VO having been made by the appellant’s request, binds him as well. The assessee is thereby resorting to approbate and reprobate, which is impermissible. There is no 3 ITA No.1267/Mds/2016 (AY 2010-11) Renowned Engineers v. Asst CIT need to invoke the deeming provision (of s. 50C) when the f.m.v. stands ascertained by resort to the machinery proceedings, i.e., s. 55A. Capital gains is chargeable u/s. 45, and it is not necessary to confine the value, for the purpose of computing the same, to s. 50C alone. Aggrieved, the assessee is in second appeal.
Before us, the assessee’s case revolved around the nature of the reference made by the AO to the VO, contending it to be u/s. 50C and not u/s. 55A. Even assuming it was u/s. 55A, the same cannot be adopted in view of there being no provision in the Act deeming the f.m.v. as the full value of the consideration received or arising as a result of transfer (of the capital asset). Sec.52, which so deemed in cases beyond a certain threshold different (between the stated consideration and the f.m.v.), was struck down by the Hon'ble Apex court in K.P. Varghese v. ITO [1981] 131 ITR 597 (SC), and stands since omitted. On the Bench observing some Grounds (viz. Gds. 4, 6) disputing the valuation by the VO, so that the VO shall also have to be heard in the matter, the ld. AR – the assessee’s counsel, Shri R.Vijayaraghavan, would concede that he does not press those grounds, and that the assessee’s case be confined to that as argued by him. The ld. Departmental Representative (DR) would, on the other hand, support the impugned order, stating that in view of the bar u/s. 50C(2), it is clear that the reference to the VO in the instant case was only u/s. 55A. That being so, the assessee, who does not dispute the value per se, is bound by it, which is only for the purpose of Chapter IV-E, i.e., computation of capital gains. Accepting the assessee’s stand would imply that the VO’s report becomes relevant (for computing the capital gain) only where it yields a value lower than that by the Stamp Valuation Authority (SVA), and which cannot be.
We have heard the parties, and perused the material on record, and given our careful consideration to the matter. The assessee having not disputed the reference, nor could possibly do, in-as- much as the same is only toward ascertaining the f.m.v. (of the capital asset/s 4 (AY 2010-11) Renowned Engineers v. Asst CIT transferred), which the AO is entitled to for the purposes of Chapter IV-E, being in the present case in fact only at the assessee’s instance. The assessee, whose objections were considered by the VO, has not disputed the determination of the f.m.v. (i.e., as estimated by the VO) of the capital asset/s under reference, i.e., at Rs. 955.87 lacs. The fair market value of the capital asset (i.e., 4.38 acres of land) transferred by the assessee during the year gets thus crystallized at Rs. 955.87 lacs. The moot question, however, that arises is whether the same would substitute, for the purposes of s. 48 - which provides for the mode of computation of capital gains, the full value of the consideration received or arising as a result of it’s transfer. The reference to the VO by the AO, though on the direction by the ld. CIT(A), is yet only u/s. 55A. However, we find no provision (in Chapter IV-E), save s. 50D, deeming the f.m.v. as the full value of the consideration, which only is to be adopted for computing capital gains. Section 50-D reads as under: ‘Fair market value deemed to be the full value of the consideration in certain cases. 50-D. Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.’ In the present case, the consideration received/accruing is in terms of money. It is therefore difficult to say that it is not ascertainable, which is a necessary pre- condition for invoking s. 50-D. As explained by the ld. AR, on a question by the Bench during hearing, as to what, then, is the import of a reference u/s. 55A, that the same would hold only where one capital asset is exchanged for another, so that the f.m.v. of one becomes the consideration for the other. Sec. 50-D would thus not apply, so that notwithstanding the f.m.v. being determined at a higher sum, we find no legal basis to support the Revenue’s case. The question is not if the reference is u/s. 55A, which it is, or u/s. 50C, which is precluded on account of the stamp valuation being under dispute, or even it’s binding nature, but of its’ import, i.e., application in computing the capital gains. There is no deeming, akin to s. 50C, in s.
5 (AY 2010-11) Renowned Engineers v. Asst CIT 55A, while s. 50D is not applicable. The assessee, by seeking reference has only sought to achieve, through s. 55A, what he was prevented to u/s. 50C. The legality of the reference is not before us, with in fact the ld. AR submitting before us that there are decisions by the Hon'ble jurisdictional High Court holding that where the assessee so requests, the AO is bound to make a reference to the VO. Be that as it may, that would become relevant only when the value determined by the VO, and through him by the AO, could be adopted for computing the capital gains. The incidents to the reference to the VO by the AO, whereby the provisions of sec. 16A, as well as the specified provisions of ss. 23A, 24, 34AA, 35 & 37 of the Wealth Tax Act, 1957, become applicable, obtain irrespective of whether the reference is u/s. 50-C or u/s. 55-A. The same in substance yields an estimate of the f.m.v. by the VO. The legal status of the two (references) must thus be at par; the difference being only at whose instance the same is made. Section 50-C(3) in fact contemplates a situation where the reference yields an estimate higher than that determined by the SVA, providing that in such a case, the latter, lower value shall prevail. Would it therefore imply that while a reference u/s. 50C would have led to the adoption of a lower value, i.e., the stamp value, a higher value would have to be adopted as the reference is u/s. 55A. That would defeat the very purpose of enacting s. 50C, which provides for a situation that obtains in the present case, i.e., a f.m.v. higher than the guideline value as per the Stamp Act. There is in any case no occasion to infer casus omissus and, therefore, in the absence of a deeming provision, the value determined u/s. 55A cannot be regarded as the deemed consideration for the purposes of s. 48 in computing the capital gain chargeable u/s.
Accordingly, the stamp valuation would be the deemed consideration in the present case, i.e., u/s. 50C (1) r/w. s. 50C(3). We decide accordingly, and the assessee gets part relief.