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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
आदेश / O R D E R PER C.N. PRASAD, JM:
This appeal by the Revenue and the cross objection by the assessee are preferred against the order of the Ld. CIT(A)-24, Mumbai dated 23.02.2011 pertaining to assessment year 2007-08.
ITA No. 2395/M/2011 – Revenue’s appeal
2. At the very outset the Ld. Counsel for the assessee submits that the tax effect in Revenue’s appeal is less than 10 lakhs therefore, is liable to be dismissed.
3. The Ld. Departmental Representative also agreed that the tax effect is less than 10 lakhs.
Before going into the merits of the case, we consider CBDT’s latest instructions vide Circular No.21/2015 dated 10/12/2015, the relevant portion of which read as under:-
“ Circular No. 21/2015 F No 279/Misc. 142/2007-ITJ (Pt) Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes New Delhi the 10th December, 2015
Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court - measures for reducing litigation - Reg –
Reference is invited to Board's instruction No 5/2014 dated 10.07.2014 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Appellate Tribunal and High Courts and SLP before the Supreme Court were specified.
In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal and High Courts and SLP before the Supreme Court keeping in view the monetary limits and conditions specified below.
Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: -
S. Appeals in Income-tax Monetary Limit No matters (in Rs) 1. Before Appellate Tribunal 10,00,000/- 2. Before High Court 20,00,000/- 3. Before Supreme Court 25,00,000/-
It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.”
It is further clarified by the Board in its circular that these instructions will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts and Tribunals. It is also made clear that pending appeals below the monitory limits fixed in para-3 above may be withdrawn or not pressed.
In the case in hand, the total demand as per CIT(A)’s order is less than the amount of Rs. 10,00,000/-,which is below the monetary limits as mentioned in CBDT Circular dated 10.12.2015 (supra). Following the same, this appeal of the Revenue is dismissed.
C.O. No. 155/Mum/2011 – Assessee’s appeal
The first issue in the cross objection filed by the assessee is that Ld. CIT(A) erred in not allowing indexation u/.s. 48 on original cost to the previous owner stating that the underlying capital asset was only a right in the property and not property itself.
7.1. Brief facts are that during this assessment year, the assessee sold two properties one situated at Vaishakhare and the another at Bhandup. In the return of income filed, the assessee reduced cost of land at Vaishakhare and computed the capital gains. The Assessing Officer completed the assessment u/s. 143(3) of the Act and while computing the capital gains loss incurred for the land at Vaishakhare which was claimed set off against the capital gains arising from the sale of land at Bhandup was denied to the assessee. The Long Term Capital loss claimed by the assessee was rejected by the AO for the reason that there is no valid document for the property in assessee’s name. It was the contention of the assessee that the property was purchased by her father but there is no transfer document in the name of the assessee. It was the contention of the assessee that she being the only legal heir, the claim for capital loss is justified. However, this was denied by the AO though accepted the capital gains for the property at Bhandup in which case also there was no transfer deed in the name of the assessee.
On appeal, the Ld. CIT(A) held that the advance given by 8. assessee’s father for Vaishakhare land which is appearing in the balance sheet of the assessee’s father late Shri T.M. Obhan is a capital asset. The Ld. CIT(A) held that assessee has 5 C.O. No. 155/M/2011 relinquished/extinguished her right in the property and such relinquishment amounts to transfer within the meaning of Sec 2(47)(ii) of the Act. Thus he directed the AO to allow the capital loss without giving the benefit of indexation.
8.1. The Ld. Counsel for the assessee submits that the Ld. CIT(A) having held that there is a transfer and asset is a capital asset, there is no justification in denying indexation to such property. Referring to the provisions of Sec. 48 of the I.T. Act, the Ld. Counsel submits that once it was held as a capital asset, indexation has to be allowed.
8.2. The Ld. DR supports the orders of the lower authorities denying the indexation.
8.3. On reading of the provisions of Sec. 48 of the Act which describes the mode of computation, the second proviso makes it clear that where Long Term Capital gain arises from the transfer of a long term capital asset, the indexed cost of acquisition of the asset shall be deducted from the full value of consideration received or accruing as a result of the transfer of the capital asset. Thus, in our view having held that there is a transfer of capital asset in the case of the assessee, we do not see any valid reason to hold that assessee is not entitled for indexation. Thus, we direct the AO to compute the cost of acquisition by giving indexation.
The next issue in the cross objection of the assessee is that the Ld. CIT(A) erred in upholding disallowance of expenses incurred in relation to transfer of a capital asset amounting to Rs. 5,00,000/- out
During the course of the appellate proceedings, the assessee contended that it had incurred certain expenditure towards cost of improvements to the properties and the details were filed before the Ld. CIT (A). The Ld. CIT(A) referred the matter to the AO to forward it to DVO. The DVO in its report accepted that the assessee had incurred certain expenditures for development of property.
10.1. The Ld. CIT(A) considering the evidences before him and DVO’s report accepted the claim of the assessee that she has incurred expenditure to the extent of Rs. 20 lakhs only for demolishing, leveling and filling of plot. The Ld. Counsel for the assessee submits that disallowance was restricted to 5 lakhs for the only reason that the expenses cannot be verified at this stage. The Ld. Counsel pleads that there is no justification in restricting the disallowance to 5 lakhs for that reason alone when it is not in dispute of incurring expenditure by the assessee.
The Ld. DR supports the orders of the Ld. CIT(A).
We have heard the rival submissions, perused the orders of the lower authorities. On a perusal of the Ld. CIT(A)’s order, we find that the DVO stated in his report that the assessee had incurred expenditure for improvement. It is also claimed by the assessee before the AO in the course of assessment proceedings that she had incurred expenditure for improvement. It is the observation of the 7 C.O. No. 155/M/2011 Ld. CIT(A) that the assessee has drawn cash on various dates to meet the expenses. However, he accepted the claim of the assessee for Rs. 20 lakhs and balance 5 lakhs was disallowed for the reason that verification of these expense is not possible at this stage. Taking the totality of the facts and circumstances into account, we feel that the disallowance if restricted to 2.5 lakhs as against 5 lakhs would meet the ends of justice.
The third issue in the cross objection of the assessee is that the Ld. CIT(A) erred in upholding the action of the AO in adopting valuation of DVO at Rs. 2,34,71,360/- as against sale consideration of Rs. 2,17,60,000/- received by the assessee disregarding the fact that the difference in two valuations was less than 15% and applying the provisions of Sec. 55A of the I.T. Act, no adjustment of sale consideration is warranted.
13.1. Brief facts are that during the course of the assessment proceedings, the AO noticed that in respect of Bhandup property, the sale consideration was mentioned at 2,17,60,000/-. However, the value for the purpose of Stamp Duty was considered at Rs. 3,08,36,000/-. The assessee contended that the value adopted for stamp duty by the Registrar is on higher side than the actual sale price of Rs. 2,17,60,000/-. He further contended that the assessee could not get the market value of the property due to defect in the property as there was a DP road running through the plot and this affected the market rate. The assessee requested to refer the property to the DVO. The AO referred the matter to the DVO and the report was obtained on 21.12.2009 and the property was valued at
On appeal, the Ld. CIT(A) referring to the provisions of Sec. 50C(3) held that the value taken by the DVO is to be accepted. He further held that when the DVO’s valuation is more than the value done by the Stamp Valuation Authority, then the DVO’s valuation should not be taken. Since in this case, the DVO’s valuation is less than the Stamp duty valuation, he adopted the DVO’s valuation.
14.1. The Ld. Counsel for the assessee referring to provisions of Sec. 55A(b)(i) of the Act submits that reference to Valuation Officer should be made only when the fair market value of the asset is likely to exceeds the value of assets as claimed by the assessee by more than such percentage as is prescribed in Rule 111AA of I.T. Rules. He submits that the percentage prescribed in Rule 111AA is 15% and Rs. 25,000/-. The Ld. Counsel submits that in this case since the difference between the sale consideration adopted in sale deed and the valuation arrived by the DVO is less than 15%, the value adopted by the assessee in the agreement of sale shall be adopted instead of DVO’s valuation. He further submits that reference to DVO is not correct as the difference is less than 15%.
The Ld. DR placed reliance on the orders of the lower authorities.
9 C.O. No. 155/M/2011 16. We have heard both sides, perused the orders of the lower authorities and the submissions of the Ld. Counsel. For better understanding , we extract the provisions of Sec 55A(b)(i).
“Sec. 55A .. With a view to ascertaining the fair market value of a capital asset for valuation of capital asset to a Valuation Officer –
(b) (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf.”
As it could be seen from the above sub clause (i) of clause (b) of Sec. 55A, the AO with a view to ascertain the fair market value of a capital asset for the purpose of computation of income from capital gains may refer the valuation of capital assets to a Valuation Officer if the AO is of the opinion that the fair market value of the asset exceeds the value of the assets as claimed by the assessee by more than such percentage of the value of the asset as claimed by the assessee or by more than such amount as is prescribed in this behalf. It is relevant to note that the percentage and the amount prescribed in Rule 111AA is 15% and Rs. 25,000/- respectively. It is the contention of the assessee that since the difference between the sale consideration and the DVO’s valuation is less than 15%, the sale consideration mentioned in the agreement only has to be adopted appears to be not correct for the reason that sub-clause (i) of clause (b) of Sec. 55A states that if the fair market value of the asset exceeds 15% or 25,000/- than the value of the asset as claimed by the 10 C.O. No. 155/M/2011 assesse, then reference is to be made the Valuation Officer. In assessee’s case, though the difference between the sale consideration appearing in the sale agreement and the DVO’s valuation is less than 15%, since the fair market value of the asset as per the DVO is more than Rs. 25,000/- of the value adopted by the assessee in the sale agreement, it cannot be said that the reference is bad. Thus, we uphold the order of the Ld. CIT(A) in adopting the DVO’s valuation as sale consideration for the purpose of computing capital gains.
The last issue in the cross objection of the assessee is that the Ld. CIT(A) erred in upholding the adhoc disallowance of business expenses incurred for business.
18.1. The AO while computing the income disallowed expenses of Rs. 1,00,000/- from the income from business.
18.2. The assessee preferred an appeal before the Ld. CIT(A) and the CIT(A) has restricted the disallowance to Rs. 50,000/-.
18.3. The submission of the Ld. Counsel that the adhoc disallowance made by the AO deserves to be deleted because supporting vouchers in respect of these expenses were produced before the AO. He further submits that there is no reason mentioned in the assessment order as to why the AO has disallowed these expenses.
The Ld. DR placed reliance on the orders of the lower authorities.
We have perused the orders of the lower authorities and the rival contentions. On going through the orders of the lower
11 C.O. No. 155/M/2011 authorities and taking the totality of facts and circumstances into consideration, we restrict the disallowance to Rs. 25,000/- as against Rs. 50,000/-. This ground is partly allowed.
In the result, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is partly allowed.