TaxTMI 
TaxTMI 
2010 (1) TMI 886
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....or consideration in both the appeals. In assessee's appeal, the issue is whether the provisions of section 2(24)(iv) of the Act will apply and, if so, whether the valuation determined by the CIT(A) is correct or not. In the revenue's appeal in addition to the above issue of determination of the value of benefit under section 2(24)(iv) wherein the CIT(A) has reduced the Assessing Officer's valuation from Rs. 3.85 crores to Rs. 89.35 lakhs, there is another issue of perquisite for the rent chargeable by the company in assessee's case, again under section 2(24)(iv) of the Act. 3. The assessee's grounds are as under :- "The Commissioner of Income-tax (Appeals)-XII, Mumbai [hereinafter referred to as the CIT(A)] erred in holding that the Deputy Commissioner of Income-tax, Range-8(3), Mumbai (hereinafter referred to as DCIT) was right in applying the provisions of section 2(24)(iv) of the Act and, accordingly, confirming the addition to the extent of Rs. 80,00,000 made by the DCIT on transfer of flat situated at Maker Tower-A, Cuffe Parade, Mumbai-400021 by M/s. Semcon Electronics Private Limited to the appellant. The appellant submits as under:- (a) that the provisions of secti....
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....has referred for the fair market value to the District Valuation Officer, he gathered information from the society for sale instances and estimated the market value of the said flat at Rs. 3.85 crores. Reducing Rs. 10,00,000 paid by the assessee to the company, the difference of Rs. 3.75 crores was considered as value of benefit or perquisite within the meaning of section 2(24)(iv) of the Income-tax Act. In addition the Assessing Officer also considered that the actual rent paid by the assessee for a period of three months up to the date of purchase to the company was less than the market rent and relying on Schedule ILL of the Wealth-tax Act, he determined the rent payable per month at Rs. 1,55,000 and since the assessee paid Rs. 5,000 as rent the difference of Rs. 1,50,000 per month for a period of three months, totalling to Rs. 4,50,000 was brought to tax as valuation of benefit during the period of tenancy. Accordingly, he made two additions. It was the contention of the assessee that the assessee was occupying the flat as a tenant since 1994 and has been paying monthly rent of Rs. 5,000 to the company and, accordingly, he was a protected tenant under the Maharashtra Rent Contr....
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....s aggrieved that the CIT(A)-has reduced the benefit under section 2(24)(iv) from Rs. 3.75 crores to Rs. 80,00,000 and so the grounds are raised accordingly. 5. The learned D.R. submitted that the assessee purchased the flat being a Director of the company and there is no dispute with reference to the fact of being Director of the company and obtaining benefit of purchasing the apartment owned by the company for himself. The issue is whether the assessee has obtained benefit or not. Relying upon the principles laid down by the decision of the ITAT in the case of Diwan Rahul Nanda v. Dy. CIT [2008] 25 SOT 454 (Mum.), it was submitted that the provisions of section 2(24)(iv) are applicable to the Director of the company. Accordingly, relying on the principle of CIT v. S. Varadarajan [1997] 224 ITR 9, [1996] 89 Taxman 457 (Mad.), the difference between the market value and the price for which property was transferred by the company to its Director is assessable as income of the Director by virtue of the provisions of section 2(24)(iv). It is further submitted that the CIT(A) is not correct in reducing the value as the fair market value is to be considered ignoring the protected tena....
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....ome-tax Act, the stamp value determined becomes sacrosanct as far as income-tax provisions are concerned and since the Stamp Authority has accepted the value of Rs. 10,00,000, the price paid is higher than the market value and so the order of the CIT(A) in fixing the value as Rs. 80,00,000 is unsustainable. 7. The learned D.R., in reply submitted that the assessee was liable for taxing the benefit received by the Director from the company as he has special relationship with the company and the company has not taken any steps to vacate him as a tenant. The transaction is a collusive transaction being an interested party and so the benefit is to be brought to tax under the provisions of the Act. 8. We have considered the issue and examined the paper book filed and considered the contentions raised in this regard. The facts indicate that the assessee was a Promoter Director of the company and was in service of the company till the beginning of the assessment year. He resigned during the year under consideration and was retained by the company as consultant. The provisions of section 2(24)(iv) are as under:- "2. ** ** ** (24) "income" includes:- ** ** ** (iv) the v....
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....ould have taken recourse to vacating the assessee from the property even though it is a long run process. The Assessing Officer's contention that the company has not taken any recourse to either section 16 of the Maharashtra Rent Control Act or section 22 as the case may or even section 630 of Companies Act, 1956 has some truth in its contention. (ii) The resolution passed by the company for transferring the property to the assessee was also perused. Since the assessee is an interested party and since the company has accepted the offer of purchase of property on the pretext that it is a common practice, in case of encumbered properties the property can be sold at consideration of 112 months of rent, the same cannot be considered as an arm's length transaction between the company and the assessee Director. Since the company agreed to sell at a lesser value than the book value, we are of the opinion that the resolution passed by the Board does not in any way support the plea of the assessee that he did not receive any benefit from the company. (iii) The next contention that the value was accepted by the Stamp Authorities also does not support assessee's contention. It is the as....
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.... of the property has to be accepted. Since the proceedings were only with reference to the attachment of the property acceptance of the assessee's contention by the Hon'ble Court has no relevance as far as considering the benefit obtained by the assessee in the purchase of property. For the reasons stated above, we are of the view that the assessee had obtained a benefit in purchase of property at a lesser value than the property would have been sold in the open market. The issue, however, boils down to the valuation of the value of property to determine the value of benefit obtained by the assessee under section 2(24)(iv). 13. There is direct evidence in the form of loss incurred by the company which in turn can be considered as the benefit obtained by the assessee. We have already referred to the fact that SEPL suffered a loss of Rs. 67,16,731 on sale of the property to the assessee. The same was claimed as loss by SEPL and also was allowed by the Assessing Officer in its income-tax proceedings for the assessment year 2003-04. We are of the view that there is no need to consider any other factor in determining the value of the benefit. Even though the CIT(A) has gone on a d....
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....ue and held as under:- "The assessee, V, who was a director of a transport company S, had purchased five vehicles from the company S at certain price. In the assessment of the company, the revenue had found that the market value of the vehicles was very much higher and the sale was effected at a lower price. The provisions of section 52(2) had been invoked in the case of the company and the fair market value of the vehicles transferred to the assessee had also been fixed. As there was a difference between the fair market value and the price paid, accordingly to the Income-tax Officer, it was clear that the assessee had received a benefit within the meaning of section 2(24)(iv) of the Income-tax Act, 1961, which was determined at Rs. 52,600. He, accordingly, reopened the assessment for the assessment year 1975-76 and assessed the amount of Rs. 52,600. In the case of the assessee E, for the assessment year 1975-76, the Income-tax Officer noticed that the assessee who had a substantial interest in the transport company S, had purchased from the said company four vehicles. The Income-tax Officer held that the difference of Rs. 82,200 was assessable in the hands of the assessee E, un....
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....d. Moreover, the CIT(A) himself has given a finding that the Assessing Officer's adopting of the value at Rs. 3.85 crores was not correct and the correct value of the property according to the Assessing Officer's calculation was only Rs. 2.53 crores. In spite of the factual mistake pointed out by the CIT(A), the revenue has contested the total value determined by the Assessing Officer at Rs. 3.85 crores. Since we are of the opinion that the fair market value of the property cannot be determined in any other way except based on the book value, the revenue's grounds on this issue cannot be accepted and, accordingly, they are rejected. Issue of benefit on rent:- 18. Ground No. 2 in revenue's appeal is with reference to the deletion of the addition of Rs. 4,50,000 made under section 2(24)(iv) of the Act towards rent paid for three months period till the property was purchased by the assessee. It was Assessing Officer's contention that the rent was paid at Rs. 5,000 per month whereas the market value of the rent was about Rs. 1,55,000. He not only considered the addition in this year for a period of three months but also reopened the assessments for assessment years 1999-2000 to 2....