TaxTMI 
TaxTMI 
2022 (7) TMI 1202
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as taken by the assessee himself. 3. The assessee in ITA 72/JP/2022 has raised the following grounds of appeal: 1. That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining the stamp duty value of the property at Rs. 11,19,40,441/- as deemed consideration u/s. 50C of the I.T. Act as against the actual sale consideration of Rs. 8,81,00,000/- coincides with the fair market value of property prevailing on the date of transfer of property. The ld. CIT(A) ignored the fact that the objection raised by the appellant during the assessment proceedings giving full particulars of the fair market value of the property. 2. That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 without considering the fact that WDV was on date of discontinue of business, the buildings of discontinued business as kept investment for period more than 3 years and since then no depreciation claimed on that building. 3. That on the facts and circumstances of the case and in law the ld. C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the sale consideration of capital asset, replacing the declared sale consideration, if it happens to be less than Stamp Duty valuation. For charging capital gain in view of Section 45, to be computed as provided in Section 48, this deemed consideration would be applied. As per Para 3.11 of the assessment order, since assessee has not furnished separate consideration received from the sale of land and building, the Assessing Officer requisitioned the Sub-Registrar, Jhanwar, Jodhpur to furnish the details of the DLC value of the land and building separately taken by him for charging the stamp duty on sale of property under reference. In response, the Sub-Registrar, Jhanwar, Jodhpur vide his office letter No. 298 dated 23.12.2019, informed that out of full value of the property at Rs. 11,19,40,441/-, the value of land is Rs. 9,90,99,000/- and that of buildings is Rs. 1,28,41,441/-. Accordingly, value of consideration of the land for the purpose of computation of capital gain is taken at Rs. 9,90,99,000/- in accordance with the provisions of section 50C(1) the Income Tax Act, instead of Rs. 6,55,07,063/- taken by the assessee in his income tax return for computation of capital gain. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reliance on several judicial precedents cited in his written submission, appellant submitted to direct the Assessing Officer to accept the actual sale consideration which coincides with fair market value for the purpose of computing capital gain. 6.1.3 I have carefully perused the submission of the appellant with reference to the facts emanating from the assessment order. The appellant is aggrieved that the stamp duty value has been adopted by the Assessing Officer as sale consideration of the property for the purpose of computing capital gains. In this regard appellant has contended that (i) the actual sale consideration of Rs. 8,81,00,000/- coincides with the fair market value prevailing on the date of transfer of the property, (ii) the rate of Rs. 7000/- per square Meter adopted by the Stamp Duty Valuation Authorities for the said land of the appellant is very much on the higher side when compared to the rate of Rs. 2,500/- of the land in Argo Food park which is adjacent to that of the appellant's land and shares a common boundary and (iii) despite objection raised by the appellant on adopting the stamp duty value, Assessing Officer has not referred the matter to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted by the appellant in its submission during the assessment proceedings because it is higher than the value of Rs. 1,28,41,441/- fixed for the buildings by the Stamp Valuation Authority. In this respect, the appellant is right in contending that the Assessing Officer's adaptation of deemed value for land at Rs. 9,90,99,000/- and for building at Rs. 2,18,50,441/- totals to Rs. 12,09,49,441/- which is higher than the stamp duty value of the impugned property, land and building of Rs. 11,19,40,441/-. The Assessing Officer cannot apply double standard in adopting the stamp duty value for land alone and not for the buildings when the Stamp Valuation Authority has specifically fixed the value for buildings at Rs. 1,28,41,441/-. Therefore, the AO is directed to adopt the stamp duty value of Rs. 1,28,41,441/- as the value/sale consideration for the buildings as well. Except as above, in the absence of any documentary proof that the dispute raised by the buyer before the Stamp Valuation Authority has been decided in favour of the buyer thereby lowering the stamp duty value, I sustained the stamp duty value of the property at Rs. 11,19,40,441/as deemed consideration of the impugned prop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er submitted by the appellant as objection raised during course of assessment proceeding by ignoring the provision of section 50C(2). The ld. CIT Appeal again misconception of fact by stating to be pendency of an appeal under the stamp Act filed before stamp duty authority, making reference to DVO on the same issue is legally unviable. In fact there was no any such appeal pending before such authority. The fact is that only the buyer given notice to Sub Registrar itself (Who made the stamp duty valuation) to intimate the excess stamp duty charged and no any appeal to appellate authority under the Stamp Duty Act. (PB page no 135-138). As such there is no any appeal is pending before stamp duty authority. The Ld. CIT Appeal factually wrong while rejecting ground of appellant. 2.1.2 That the appellant sold the property at fair market value as on the date of transfer. However Stamp duty authority charged higher stamp duty from buyer considering excess value without looking the fact or visit of property. It is also stated that the sold land situated in Industrial Park, Bornada Industrial Area which is just adjacent to the boundary wall of Agro Food Park, Boranada and share comm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not satisfied with the explanation of the assessee, he 'should' refer the matter to the DVO for the mentioned purpose * Mrs. Arlette Rodrigues Versus Income-tax Officer, Ward 15(2) (2), Matru Mandir Tardeo, Mumbai 2011 (2) TMI 1284 - ITAT MUMBAI - TMI - IT APPEAL NO. 343 (MUM.) OF 2010 it held that where assessee has filed the objection before the Assessing Officer in respect of the valuation adopted for payment of the stamp duty for registration of the conveyance, the Assessing Officer should have referred the matter to the DVO as per the provisions of section 50C(2) of the Act * ITAT, Mumbai in Ajmal Fragrances & Fashions (P.) Ltd. Vs ACIT Circle 13(1) [2009] 34 SOT 57 (MUM.) it was held that sec. 50 sub-section (2) makes it very clear that whenever assessee claims before the Assessing Officer that he has not challenged the stamp duty valuation and sale consideration is different because of valid reason, then the Assessing Officer is required to refer the matter to Valuation Officer. Without going into the interpretation of the word "may" whether it should be taken only as mandatory or not the plain logic seems to be that Assessing Officer is not exper....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... officer fixed the value of building Rs. 12841441. The ld. A.O is in misconception of fact for declared value of building by appellant in his order. The appellant only submitted the estimated bi-frication of consolidated stamp duty value which is for computing capital gain separately of land and building at stamp duty value as suggested by ld. AO is a clerical work not the declared market value. Also there was no separate consideration of land or building decided in transaction but the stamp duty valuation authority specifically fixed the value of land and building. Considering the fact, the ld. CIT Appeal rightly directed assessing office to adopt the stamp duty value for building of Rs. 12841441 for computing capital gain on building. Your honor is requested to dismiss the ground of department. 7. We have heard both the parties and perused the materials available on record, written submission and orders of the authorities below. We find that the ld. CIT(A) has confirmed the finding of the AO in invoking the provision of Section 50C of the Act, in adopting the Stamp Duty value as sale consideration of the impugned property for computing capital gains u/s. 48. However, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that he is in disagreement with valuation report submitted in support of claim. In our view, if the assessee had made an objection for invoking section 50C(1), the Assessing Officer ought to have either referred the matter to the Valuation Officer as per section 50C(2) to ascertain fair Market value. Without doing so, the Assessing Officer had estimated the capital gains tax with taking estimated value, higher from the actual consideration or fair market value. In the various judicial decision, it is very much clear that in such case, the LD A.O. should have adopt the provision of section 50C(2) for applying deeming provision of sale consideration. 9. There, is no dispute that the submissions as referred above raising objection for substituting the value of immovable property on circle rate as per stamp duty authority against real consideration were filed before the Ld. AO during the course of assessment proceedings. Thus, as a matter of fact detailed reasons along with sufficient evidences were filed before the Ld. AO to demonstrate that these were old and un-maintained house property, in bad condition not fit for living being sold as per market rates. Thus, according to the su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee, who may not have been properly instructed in law, the Assessing Officer, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law." 12. The ITAT Jaipur Bench 'A', Jaipur in the case of 'Smt. Sharda Devi Alwar Vs ITO 1(4)', Alwar Tax World, May 2013, Vol 49-part 5, has observed that if objection made by the assessee for value taken, A.O. should have adopted provision of sec 50C(2). 13. In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. The AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we hold tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Office of the Assessing Officer does not contain any material disproving the submission of the appellant. There is no finding negating the explanation that the properties shown in the trading account are basically unusable houses of about 40-50 years old and in destroyed condition not fit for habitation neither for residence nor commercial unless major renovation is under taken. That there is no electricity and water connection in the said properties till the end of previous year relevant to this assessment year in appeal is not commented upon. There is no material on record to demonstrate falsity in the submission of the appellant that despite appellant's efforts, the houses could not be sold due to which these properties are kept for trading as stock in trade. Therefore, in my considered opinion, the said residential houses cannot be taken as capital asset within the meaning of Section 2(14). Thus, it cannot be held that appellant owned more than c one residential house as on the date of transfer of the impugned property. 6.3.1 As a matter of fact, the AO himself has hailed the aforesaid seven properties as traded properties by computing notional rent based on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,00,000 within specified time. Copy of registered deed for purchases new house submitted (PB page 139-164). With regards to contention of ld. A.O. that the appellant has ownership of more than one residential house, it is submitted that the ld. A.O. grossly in misconception of fact in presuming property shown as stock in trade are residential house property as mentioned in para 3.14.3 of his order. The ld. AO has taken this presumption that properties held as stock in trade are holding since long and purchases are not for earning profit but to accumulate house properties only. The ld. A.O further alleged with own presumption stating in said para that ''the assessee has purchases a residential house in the year under reference and claimed the same as a residential house property as stock in trade just to claim deduction u/s. 54F of the IT Act arises on sale of capital asset as discussed in foregoing para of this assessment order''. As against stated by Ld. A.O, we submit fact as under: * The appellant has started to deal in property business since previous year relevant to assessment year 2012-13 and maintaining separate trading account for property business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gation of ld. AO being property kept as stock in trade just to claim deduction u/s. 54F is a presumption without considering the fact that assessee started to deal in property since 2011-12 and capital gain arises in 2016-17. The Tax liability on Capital gain & Claim of 54F exemption cannot be forecasted in 5 years advance. Hence the assumption is totally baseless and interpreted to only disallow the claim u/s. 54f anyway. Further the assessee recorded in his regular books of accounts as purchases of stock in trade. The accounts of assessee were audited and property stock in trade clearly shown in separate trading account are part of audited financial statement. 1.2 The other ground taken by the ld. A.O while disallowing the claim u/s. 54F is that in section 54F of IT Act the word used is residential house and there is no such distinction has been made in this section between the residential house properties held as investment or stock in trade as stated in para 3.14.6 of his order against which we submit as under: * That restriction as per proviso to section 54F" Owns more than one residential house other than new assets on date of transfer of the original asset"....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the Act. We, Therefore, have to go by the natural meaning which the term would assume in common parlance. In our view, the flats constructed by the assessee, which were the assessee's Stock-in-trade of business carried on by the assessee, are meant for sale and cannot assume the character of 'residential house' owned by the assessee. There is no evidence record to show that the stock- in-trade of the assessee was treated as Residential house owned by the assessee. On the other hand, it is clear from the accounting treatment that all the seven flats were treated as stock-in-trade. The income from these flats is offered to tax under the head 'income from house property' because of the specific provisions of section 22 of the Act read with section 14 of the Act Such treatment of income by the assessee cannot be treated as an Act by which the assessee has considered the seven flats as residential house owned by him. We are, therefore, of the view that denial of the claim of the assessee for deduction u/s. 54F of the Act is unassailable. The AO is, therefore, directed to given the deduction as claimed by the assessee. We, therefore, allow the appeal of the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....conditions stipulated u/s. 54F stands fulfilled by the assessee. Thus, taking into consideration, the facts, circumstances of the case and written submissions of the assessee, we feel that the ld. CIT(A) has been justified in judiciously allowing the deduction u/s. 54F of the Act, to the assessee and therefore, we concur with the findings of the ld. CIT(A). Thus Ground No. 1 of the Department is dismissed. 19. In Ground No. 2, the assessee is aggrieved that the ld. CIT(A) has erred in sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 without considering the fact that WDV was on date of discontinue of business, as the buildings of discontinued business were kept as an investment for period more than 3 years and since then no depreciation was claimed on that building. 20. The facts as emerges from the assessment order of the AO are as under:- 3.7 I have gone through the submission made by the assessee but the same is not found tenable. It is noted that the assessee had claimed depreciation on the above building for the assessment years 2008-09 to 2012-13. The assessee did not claim depreciation on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....building under reference, but subsequently no business operations were carried on there from, that does not mean that it ceased to be a business asset. Thus, the provisions of section 50 of the IT Act are clearly applicable in the case under reference. Section 32 of IT Act enables claiming deductions in respect of depreciation on the tangible and intangible assets owned, wholly or partly, by the assessee and used for the purpose of business or the profession. One of the aspects in respect of any block of assets is that such percentage of the written down value thereof, as may be prescribed, can be claimed. 3.9 Section 50 of the IT Act sets out special provision for computation of capital gains in case of depreciable assets. Section 50 of the IT Act reads as under: Special provision for computation of capital gains in case of depreciable assets. 50. Notwithstanding any thing contained in clause(42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or by succession/inheritance or devolution and/or on distribution of assets on liquidation of a company or under a transfer to a revocable or an irrevocable trust etc., the cost of such acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. Both these provisions are subject to modifications setout in Section 50, where capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed. 3.10 From above discussion, it is concluded that the initial introduction of an asset in the books of the assessee is the material part. The expression 'block of assets' means a group of assets falling within the assets enumerated in Section 2(11) of the IT Act. That section does not make any distinction between different units or different types of businesses, which may be carried out by the assessee. Only requirement in respect of an asset which forms part of assets is that same percentage of depreciation should be prescribed. The relevant rule has been referred above. Once the law enables claiming of depreciation on the block of assets, then, It is not possible to agree with the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... being attracted, then, nothing as held above further needs to be decided. The present case is distinct and no claim for depreciation was in issue. The question of thrusting it upon the assessee does not, therefore, arise. It is for avoiding the tax liability, arising because of the applicability of Section 50, that the assessee raised the plea of depreciation being thrust on her even though gala no. 210 was not used by her. That plea has rightly been rejected. 31. We dispose of this reference by answering the essential questions framed for our opinion namely question nos. 1 and 2, in favour of revenue and against the assessee. Therefore, question no. 3 also would have to be answered on the touchstone that Section 50 of the I.T. Act was attracted and the Tribunal was right in law in the view it took. Income Tax Reference is disposed of accordingly. (ii) Hon'ble Kerala High Court Decision in case of Commissioner of Income Tax Vs. Sakthi Metal Depot reported in (2011)-333-ITR- 492 (Ker). In this case, the Hon'ble Court held that: "4. While the contention of the Revenue is that the asset in respect of which depreciation has been claimed when sold sho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in respect of which depreciation was claimed in any year as defined under section 43(6) of the Act towards cost of acquisition within the meaning of sections 48 and 49 of the Act. The condition for computation of short-term capital gains in the way it is stated in section 50A is that the assessee should have been allowed depreciation in respect of a depreciable asset sold in any previous year which obvious means that for the purpose of assessment of profit on the sale of a depreciable asset, the assessee need not have claimed depreciation continuously for the entire period upto the date of sale of the asset. In other words, in our view, the building which was acquired by the assessee in 1974 and in respect of which depreciation was allowed to 15 of 22 ITR. 9.6.2000 it as a business asset for 21 years, that is up to the assessment year 1995-96, still continued to be part of the business asset and depreciable asset, no matter the non- user disentitles the assessee for depreciation for two years prior to the date of sale. We do not know how a depreciable asset forming part of a block of assets within the meaning of section 2(11) of the Act can cease to be part of the block of assets. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....course of hearing, the ld. AR of the assessee submitted that the CIT(A) was wrong in sustaining the addition against sale of building of discontinued business treated as short term capital gain in terms of Section 50 without considering the WDV as on date of discontinue of business, since the buildings of discontinued business was kept as an investment for period more than 3 years and since then no depreciation was claimed on that building. He prayed that the lower authorities have wrongly invoked the provisions of Section 50 of the Act for which the ld. AR has filed the following written submissions. ''3 - CLASIFICATION OF LONG TERM CAPITAL GAIN ON BUILDING AS SORT TERM GAIN (Ground 2 assessee) 3.1 The appellant have capital gain on sale of land and building at SEZ Jodhpur on combined consideration. The ld. A.O assessed capital gain on land as long term and on building as short term as per provision of section 50 ignoring the fact in the case. In fact the cost of building included in block of assets in 2006-07 but from 1st April 2012 due to building was not used for the purpose of assessee's business the said building at Jodhpur was considered to be i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....long as the assessee continued business, the building forming part of the block of assets, will retain its character as such but in our case the particular business got completely closed at that place and vacated building was kept as investment which was not in the case referred. There was no question of definition of 'block of assets' being applicable. As submitted above, the Ld. CIT Appeal wrong, unjust and error in law in allowing computing capital gain on building as short term as per provision of 50.'' 23. On the other hand, the ld. DR relied on the orders of the authorities below. 24. We have heard both the parties and perused the materials available on record. We find that the assessee was having land & buildings at SEZ Jodhpur which was used for business upto the period relevant to assessment year 2012-13. The business of the assessee was discontinued from 01-04-2012. The assessee had kept the land and building as investment assets. However, the assessee had excluded the WDV from block of assess and separately shown in balance sheet in order to comply with the Section 50 of the Act in the year of assets discarded as business assets. It is also....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the ratio laid down in the case of M/s. Ansal Housing Finance and Leasing Ltd. by the Hon'ble High Court of Delhi. 26. The AO had made addition of Rs. 32,28,309/- under the head income from house property as assessee charged with notional rent on house property which were claimed by the assessee as old and unused property situated at Jawahar Nagar, and being held as its stock in trade. In this case the AO has taken recourse of the decision of Hon'ble Delhi High Court in the case of CIT vs Ansal Housing Finance & Leasing Co. Ltd. 27. In first appeal, the ld. CIT(A) had accepted the decision of Hon'ble Delhi High Court in the case of CIT vs Ansal Housing Finance & Leasing Co. Ltd. as mentioned by the AO in his order. The Ld. AR argued that the ld. CIT(A) has not appreciated the facts as submitted by the assessee that the seven house properties forming stock-in-trade are old and damaged/dilapidated condition with no electricity and water supply and also not habitable. However, the ld. CIT(A) directed the AO to ascertain the ALV of building for which the property might reasonably be expected to let from year to year without bringing on record any corroborative support....