Company director fails to prove land purchase made on behalf of company despite payment through company cheques

The ITAT Mumbai dismissed the appeal in a capital gains case involving transfer of non-agricultural land. The assessee, a company director, claimed he purchased land on behalf of the company, but the tribunal found insufficient evidence to support this claim. The registered deed showed the assessee as sole vendee, and despite the company paying consideration through cheques, no documentation established the purchase was made on the company's behalf. The tribunal applied section 50C, determining short-term capital gains based on stamp duty valuation rather than actual consideration received. The AO's computation of STCG at Rs. 1,45,60,000 was upheld, confirming the addition.

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Issues Involved:
1. Whether the appellant assessee purchased the said land on behalf of the company.
2. Whether short-term capital gain arising out of such transfer of land should be computed only with regard to the actual consideration received by the assessee and whether section 50C of the Act is applicable.

Summary:

Issue I: Purchase of Land on Behalf of the Company

The appellant argued that he, being a director of the company, purchased the land on behalf of the company, and the entire consideration was paid by the company. The development agreement executed on 23.03.2016 handed over possession to the company for development purposes. However, the Tribunal noted that the registered deed dated 29.11.2013 showed the land was purchased in the appellant's name without any indication that it was on behalf of the company. The development agreement and the company's account books did not clarify this fact. The Tribunal concluded that there was no evidence to support the claim that the land was purchased on behalf of the company and decided this point against the appellant.

Issue II: Applicability of Section 50C

The appellant contended that section 50C of the Act should not apply, and the short-term capital gains should be computed based on the actual consideration received. The Tribunal examined section 50C, which states that if the consideration received is less than the value assessed by the state valuation authority, the latter shall be deemed as the full value of consideration for the purposes of section 48. In this case, the consideration of Rs. 2,51,000/- was significantly lower than the government valuation of Rs. 1,66,60,000/-. The Tribunal referred to similar cases and concluded that section 50C was applicable. The short-term capital gain was rightly determined by the AO as Rs. 1,45,60,000/-, exclusive of stamp duty and registration fees. This point was also decided against the appellant.

Conclusion:

The Tribunal found no error in the order passed by the Ld. CIT(A) confirming the addition of Rs. 1,45,60,000/- as short-term capital gain. The appeal was dismissed.

Order Pronounced in open court on 02.05.2024.

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