TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 936
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....olding the actions of the Assessing officer [hereinafter referred to as the AO] of computing the long term capital gains on transfer of Development Rights in respect of 2 plots of land at Panchpakdi, Thane, based on the Stamp Duty value, as per his assessment order u/s 143(3) dated 31.12.2007 and subsequently, by Rectification order u/s 154 dated 8.5.2008, computing the long term capital gains based on the values assigned by the District Valuation Officer [hereinafter referred to as the DVO] in his report No. DVO/MUM/TOC/487/2007-08/685 dated 27.3.2008, as against the Appellant Company's claim to consider the actual amount of consideration received. The CIT(A) further erred in upholding the actions of the AO in considering the Fair Market Value (FMV) as on 1.4.198 1 as ascertained by the DVO in respect of the aforesaid plots of land. 1.2. The AO had erred in considering the values of 2 plots of land at Thane based on Stamp Duty value, as per Section SOC of the Income tax Act, 1961, instead of actual consideration received by the Appellant Company. As the Stamp Duty value was objected by the Appellant Company, the AO referred the matter to the DVO and in the absence of the val....
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....s/units and all investments were made out of internal accruals and no interest cost or administrative expenses was incurred for earning dividend income. The AO had made a disallowance u/s 14A, by notionally attributing the interest expense and administrative overhead expenses, on prorata basis as expenses attributable towards earning dividend income which is exempt from tax u/s 10(33) of the Income-tax Act. 3.2. The CIT (A) has directed the AO to retook into the Appellant Company's claim or alternatively, compute the disallowance u/s 14A as per Rule 8D of the Income tax Rules, 1962. 3.3. The Appellant Company prays that the AO be directed to delete the disallowance under section 14A, as the Appellant Company has not incurred any interest cost or administrative cost for earning exempt dividend income. 3. During the course of hearing Ld. Counsel of the assessee submitted supplementary grounds to the original grounds and these are reproduced as under: "Supplementary Grounds to Ground No.1 - Long Term Capital Gains on sale of Land: 1.5.Since the report of the District Valuation Officer (DVO) had not been received by the Assessing Officer (AO) within the period of limitatio....
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....ed 30/6/2011 in ITA No.31 27/Mum/10. Supplementary Grounds to Ground No. 2 - Short Term Capital Gains on Sale of Residential Flat. 2.3 Since the Appellant claimed before the Assessing Officer (AO) that the value adopted by the Stamp Valuation Authority exceeded the fair market value of the property, it was obligatory on the part of the AO to refer under section 50C(2)(a), the valuation of the Flat to the District Valuation Officer (DVO) and as he failed to do so, he had no authority to adopt stamp dutyvaluation and consequently the addition made in relation to Capital Gains on transfer of the Flat is bad in law and illegal and must be deleted. 2.4 The CIT(A) abdicated his duty and jurisdiction by not adjudicating upon the correctness of the Valuation Report of the DVO. Since the order of CIT(A) does not legally justify the addition made by the AO, it is prayed that the same should be deleted. 2.5. Since both the AO and the CIT(A) have passed their respective orders in violation of principles of natural justice and specific statutory provisions, the addition made and sustained in orders respectively, ought to be deleted without giving them any further opportunity of passing ....
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.... applying the provisions of section 50C as well as the action of DVO in issuing impugned valuation report was rejected by Ld CIT(A). 3.4. Being aggrieved, the assessee filed an appeal before the Tribunal. 3.5. During the course of hearing before us numerous arguments have been made challenging various actions of the lower authorities on many grounds. It was contended by the Ld. Counsel that since report of the DVO was not received by the AO before framing of the assessment order therefore, power to make valuation reverts back to the AO. Under these circumstances, AO was bound to make the valuation applying his own mind independently. Thus, under these circumstances, the AO could not have adopted any other value as assessed by any other authority. Reliance in this regard was placed on the Judgment of Hon'ble Calcutta High Court in the case of Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. vs CIT 208 ITR 882. It was further contended by the Ld. Counsel that in case valuation report is not received before the assessment is completed then reference u/s 55A becomes invalid because the purpose for which a valuation report could be utilized, namely, for completion of the assessment ....
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....fer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of State Government.......... Thus, it is noted that the term 'capital asset' mentioned in the section specifically refers and confines its meaning to 'land or building or both'. Thus, scope of section 50C is restricted by the legislature itself to these two types of capital assets only. 3.9. Turning back to the facts of the case before us, the capital asset transferred by the assessee was 'Development Rights in the land' and not the 'Land' itself. If we go through few other similar provisions of the Act, we find that the legislature has used this expression consciously and carefully and keeping in view its need and objective of legislating section 50C. For example, in section 269A, the expression 'immovable property' has been defined as under: "Immovable property" means- (i) any land or any building or part of a building, and includes, where any land or any building or part of a building is transferred together with any machinery, plant, furniture, fittings or other thing which machinery, plant furniture, fittings or other things also....
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....ceived by the assessee, while computing income under the head of capital gains. Under these circumstances, ground No.1.2 of the main grounds of the assessee is allowed. Since we have allowed the grounds of the assessee on the preliminary objection itself and therefore we are not dealing with other arguments at this stage as these have been become academic in nature. Thus, supplementary ground nos. 1.5 to 1.10 and original ground nos.1.1 to 1.4 are partly allowed with our directions as given above. 4. Grounds No.2.1 & 2.2 of the original grounds and 2.3, 2.4 & 2.5 of the supplementary grounds deal with the grievance of the assessee with respect to action of the lower authorities in computing the short term capital gain on the valuation done by the Stamp Valuation Authority on sale of residential flat at Jyoti Darshan Building, Mumbai. It is noted that during the course of assessment proceedings the AO suggested to apply the value adopted by the Stamp Valuation Authority as deemed value of consideration for the impugned flat. But, the assessee objected for the same on many grounds and the submissions of the assessee have also been partly reproduced by the AO in its assessment order.....
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....ws: "the amount of income to which any of the provisions of section 10(other than the provisions contained in clause (38) thereof or section 11 or section 12 apply, if any such amount is credited to the profit and loss account." 6.2. It was unanimously stated by both the parties before us that the said amendment may create additional tax liability in the hands of the assessee. It is noted by us that it has nowhere been mentioned that this amendment is clarificatory in nature. The amendment seeks to bring out a change in the substantive law. Under these circumstances, we find that the force of this amendment cannot be applied retrospectively in the impugned assessment year i.e. A.Y. 2005-06. Thus, we direct the AO to recompute the amount of book profits and tax payable u/s 115JB without considering the aforesaid amendment. Thus ground may be treated as allowed. 6.3. As a result appeal of the assessee is partly allowed. Now we shall take up assessee's appeal in ITA No.5331/Mum/09. The assessee has filed the appeal on following grounds: GROUND NO 1: LONG TERM CAPITAL GAIN ON SALE OF LAND The learned Commissioner of Income-tax (Appeals) [hereinafter referred to as the CIT(A)] e....