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2023 (8) TMI 1186
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....Officer u/s. 50C of Income Tax Act, 1961. 3. The learned commissioner of Income Tax (Appeal)-6 Ahmedabad, erred in facts and in law in holding the disallowance in cost of improvement of Rs. 59,91,687/- made by the Assessing Officer. 4. The appellant reserves his right to add alter amend modify or cancel any one or more of the grounds of appeal before the finalization of the appeal. 3. The first issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 27,31,250/- made under section 50C of the Act. 4. The facts in brief are that the assessee in the present is an individual and engaged in the proprietary business of processing of plastic raw materials into articles under the name and style of "M/s Gokul Plastic". The assessee is also a partner in the firm namely "M/s Pooja Buildcon". The assessee in the F.Y. 2009-10 along with other person acquired an immovable property for Rs. 70 Lakh in which his share was 50% only. During the year under consideration i.e. F.Y. 2013-14, the assessee along with co-owner sold 5% of impugned property for a consideration of Rs. 18,35,000/- and the remaining 95% of property was transferred to....
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....such transfer. However, in his case, there is no consideration received or receivable by him for reason that he has made capital contribution in the firm in the form of land. Hence, there is no assessable value of land for charging stamp duty in connection with such transfer. Therefore, the provision of section 50C cannot be made applicable in his case in the absence of consideration received or receivable and in the absence of assessable value of land for the stamp duty purposes. 7. However, the learned CIT(A) after considering the facts in totality confirmed the findings of the AO by observing as under: During the assessment proceedings, the AO noted that the appellant had purchased a property in P.Y. 2009-10 in which he had 50% share. Further, that during the year under consideration, the appellant sold 5% of his share in the property for Rs. 10,35,000/-, Remaining share in property 1.e. 95% of his share in property was introduced in a partnership firm Pooja Bulldcon as his capital contribution at value of Rs. 1,47,01,250/-. The AO held that section 50C of the Act was applicable to Introduction of land as capital contribution in firm. The AO held that, based on marke....
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....dgment of hon'ble ITAT was reversed by hon'ble Allahabad High Court in CIT Vs Carlton Hotels Pvt. Ltd, Tax Appeal No. 31 of 2009. The question before the Hon'ble Court was as follows:- "(1) Whether Tribunal has erred in law in holding that full value of consideration shall be determined as per section 45(3) of and not u/s 50C of the Act, 1961 without appreciating that transfer of land by Assessee, having only 5% share in the firm is as good as transfer to M/s Sahara India Commercial Corporation Ltd., having a share of 90% In the firm and that such transfer of land to firm is only a colourable device to avoid payment of tax ?" After detailed discussion of all aspects of the case the hon'ble Court answered the above question in favour of Revenue and against the assessee. SLP filed by the assessee against above judgment was dismissed by Hon'ble Supreme Court in SLP (C) No (S) 28637/2017, 2017-TIOL-417-SC-IT. It must be mentioned that facts in CIT Vs Carlton Hotels (supra) are identical to the facts of the present case. In CIT vs Carlton Hotels (supra) also the assessee (Carlton Hotels) had transferred land to the firm as its capital contribution. ....
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....ion i.e. section 45(3) and 50C(1) of Act which are reproduced as under: Capital gains. 45. (1) *********** (2) ************** (2A) ************* (3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or a....
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....ion is made on a certain subject, that subject is excluded from the general provision. The Schedule in the 1969 Rules, therefore, must be held to prevail over the general provisions of 1951 Rules." 11.2 In the case on hand, the present assessee is a partner in a firm namely M/s Pooja Buildcon and transfers land property to such partnership firm by way of capital contribution. This is a specific transaction between partnership and partner for which there is special provision enacted by the legislator vide section 45(3) of the Act. Therefore, in our considered view the consideration in the hand of the partner (present assessee) shall be determined as per the provision of section 45(3) of the Act and not as per the provisions of section 50C of the Act. In this regard we also find support and guidance from the order of the special bench of Delhi Tribunal in case of "DLF Universal Ltd vs. DCIT reported in 36 SOT 1" wherein in identical facts and circumstances the special bench of tribunal held that personal assets contributed by the partner into firm as capital contribution is capital transaction and the same shall be taxed as capital gain and the consideration for the same shall be ....
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....he land in question was contributed by the assessee to the firm as its capital contribution, in which the assessee became a partner, a transfer of capital asset had taken place, and the amount recorded in the books of account of the firm as the value of the land would be deemed to be the full value of the consideration received or accrued as a result of the transfer of the land, and the profits or gains arising from such transfer would be chargeable to tax as its income of the previous year in which such transfer had taken place. (x)In the light of the view taken as above, it was to be held that the surplus arose to the assessee from the transaction of contribution of land held by it to the firm as capital contribution and would be assessable to tax as profits or gains under the head 'Capital gain' under section 45, and for that purpose, the amount of Rs. 11.50 crores recorded in the books of account of the partnership firm as the value of the land would be deemed to be the full value of the consideration received or accruing as a result of the transfer of the land as so provided under sub-section (3) of the section 45. 11.3 Before parting it is also important to highli....
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....r of Tribunal on completely different footing. As such the Hon'ble High Court held the entire transaction of establishing partnership firm and thereby transferring land to firm for a minor share in profit was sham transaction designed for evading due taxes. As such, the actual transaction was sale of land by the assessee CHPL to SICCL. Therefore, the Hon'ble High in the light of above facts reversed the order of the tribunal and restored the order of the AO. Thus, the principles laid down by the Hon'ble Allahabad High Court in above mentioned case cannot be applied in the case of present assessee and in our considered view, the learned CIT(A) erred in applying such principles in the case of present assessee. 11.4 In view of detail discussion made in above paragraph, we hereby set aside the finding of the learned CIT(A) and direct the AO to take full value of consideration as prescribed under section 45(3) of the Act and work out the amount of capital gain accordingly. Hence the ground of appeal of the assessee is hereby allowed. 12. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of claim representing cost of improvement f....
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....-10-2010 between "Om Shri Sanat Trading Owner's Association" and the person from whom assessee has purchased land were furnished. However, on perusal of the same there was no mentioned of payment of compensation for Rs. 50 Lakh either by the assessee or by the person from whom the assessee has purchased land found in those documents. Similarly, the copy of confirmation letter from "Om Shri Sanat Trading Owner's Association" was also furnished but such confirmation does not contain the PAN. Further, as per such confirmation letter the transaction was between "Om Shri Sanat Trading Owner's Association" and "M/s Pooja Buildcon" but not with the assessee. The assessee failed to file copy of ITR of the party i.e. "Om Shri Sanat Trading Owner's Association" and failed to demonstrate that the party has offered income of Rs. 50 Lakh on account of compensation paid by the assessee. Thus, the AO disallowed the claim of index cost of improvement of Rs. 46,65,140/- on account of payment of compensation for Rs. 25 Lakh and stamp duty charges of Rs. 6,72,595/-. 13.3 Thus, the AO in view of the above made aggregate disallowances of indexed cost of improvement for Rs. 59,91,687/- from the compu....
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....on of deed between Om Shree Sanat and owners of land from whom appellant purchased land and claimed the same as part of cost of purchase after indexation. The AO has raised following objections: - 1) Cancellation Deed nowhere mentions that appellant has paid the money, 2) No PAN of Om Shree Sanat is mentioned on its confirmation, 3) No proof that Om Shree Sanat has offered Rs. 50,00,000/- for taxation, 4) While land was purchased on 10.8.2009, cancellation deed is dated 1.10.2010 5) As per confirmation of Om Shree Sanat filed, the transaction (Cancellation Deed) is between Om Shree Sanat and Pooja Bulldcon. Out of the above, while the appellant may not be required to file Information at Sr.No.3 above, rest of the Information has to be filed and the objections raised by AO need to be clarified. However, even at the appellate stage, the appellant has falled to clarify the above objections. Further, perusal of the Cancellation Deed showed that it is between Om Shree Sanat Non- Trading Owners' Association and Pooja Bullcon, partnership firm in which the appellant is a partner. When asked to clarify this, the appellant could not ....
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.... total consideration of Rs. 70 Lakh, an amount of Rs. 45 Lakh was already paid in cash to the vender by the co-purchaser and the vendors were pressurizing for remaining consideration to be paid at earliest. Therefore, the assessee has taken short term loan from a relative namely Shri Ghanshayambhai Patel for Rs. 40 Lakh and utilized the same for making payment of Rs. 25 Lakh to the vendor of land and stamp duty charges of Rs. 12,14,000/- only. Further an amount of Rs. 2 lakh was paid to co-purchaser against the cash payment made to vendor on his behalf. Subsequently, he has taken loan from Shri Suresh Patel for Rs. 40 Lakh and utilized the same for repayment of loan taken from Shri Ghanshyambhai Patel. The explanation of the assessee was not accepted by the learned CIT(A) in absence of documentary evidence such as copy of bank statement of the assessee as well copy of bank statement of Shri Ghanshayambhai Patel and his confirmation, ITR etc. Now the learned AR for the assessee before us filed the copy of abovementioned documentary evidence and pleaded to admit the same as additional evidence. At the outset, we find that these additional evidences are crucial evidence in order to de....
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....ldcon. The copy of "Declaration-Indemnity Bond", ledger copy of M/s Pooja Buidcon and bank statement of the party showing amount received are available on record. However, the explanation of the assessee was not accepted by the lower authorities because the cancellation deed not containing the information about payment of compensation and no detail provided by the assessee to show the "Om Shri Sanat Non-Trading Owners Associations" has offered income on Rs. 50 Lakh. Nevertheless, we find that the lower authority failed to point out any infirmity in the evidence made available by the assessee but rejected the claim of the assessee merely on the reasoning that the cancellation deed did not contain the detail of payment and party has not offered income on receipt of such compensation. In our considered opinion, the reasons assigned by the AO and by the learned CIT(A) to reject the claim of the assessee is not justified especially considering the documentary evidence made available by the assessee qualifying the payment of compensation. 18.3 Be that as it may be, we find identical claim of cost of improvement on account of compensation to "Om Shri Sanat Non-Trading Owners Associatio....
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....er having share of 6.25% in the property sold for Rs. 2,00,00,001/- on 19-1-2009 situated at Survey No. 86, Lunsikui, Navsari. Value of property as per stamp duty valuation was determined at Rs. 4,09,01,000/-. The assessee has not declared capitalgain as he has not filed Return of Income for AY 2009-10 . The said property was inherited by the assessee. The assessee has submitted valuation report of the property from Govt. Approved Valuer who has arrived value of property at Rs. 66,61,020 as on 1-4-1981. The value of the assessee's share comes to Rs. 4,16,314. Indexed cost as per section 48 of the Act is worked out at Rs. 24,22,947/-. As per stamp duty authority the assessee's share being 6.25% of sale value in the property comes to Rs. 25,56,310/-. Thus capitalgain comes to Rs. 1,33,363/-, which was taxable in the hands of the assessee. The capitalgain of Rs. 1,33,363 has now been shown by the assessee in the Return of Income filed in response to notice u/s 148 of the Act. However, the assessee has not declared suo moto Long Term CapitalGain as he has not filed return of Income. The assessee has consciously not filed return of income to avoid payment of tax. Therefore, Pena....