2014 (3) TMI 62 - AT - Income Tax

Addition made on account of profit on sale of property - Application of section 50C - stamp valuation - Held that - The decision in CIT Allahabad and Anr vs. Chandra Narain Chaudhri 2013 (9) TMI 646 - ALLAHABAD HIGH COURT followed - CIT (A) has correctly observed in his order that the provisions of Section 50 C (2) are essentially to be read in conjunction with the provisions of Section 50 C (1) of the Act - both ingredients of provisions of Section 50 C (2) are present, which made it necessary for the AO to refer the matter for valuation to DVO in accordance with provisions of Section 55-A of the Income Tax Act - The contention of the assessee is upheld that reference should have been made by the Assessing Officer to the Departmental Valuation Officer (DVO) thus, the matter remitted back to the AO with a direction that he refer the same to the DVO Decided in favour of Assessee. Denial of brought forward loss excluding depreciation Held that - The assessee submits that during the financial year 2005-06, there was only re-constitution of the partnership firm by way of admission of partners and that no partner had retired - the assessee is correct in its claim - But as the factual position has not been considered by the Assessing Officer, the matter is remitted back to the Assessing Officer for fresh adjudication decided partly in favour of Assessee. Unabsorbed depreciation u/s 78(1) - change in constitution of firm or on succession Restriction to carry forward losses Held that - Unabsorbed depreciation is carried forward u/s 32(2) and are not brought forward losses which are carried forward u/s 78 - the orders of the first appellate authority upheld Decided against Revenue.

Summary

Issues:
1. Addition of profit on sale of property
2. Denial of brought forward loss excluding depreciation
3. Disallowance of donation

Issue 1: Addition of profit on sale of property
The assessee contested the addition of Rs.62,91,300 made by the Assessing Officer on account of profit on the sale of property. The facts presented by the assessee detailed the history of the property transaction, including agreements, disputes, and eventual resolution. The Tribunal referred to a judgment by the Allahabad High Court emphasizing the rebuttable nature of Section 50-C of the Income Tax Act regarding property valuation for capital gains. It highlighted the need for the Assessing Officer to refer the matter to the Departmental Valuation Officer (DVO) for valuation in such cases. Therefore, the Tribunal set aside the issue to the Assessing Officer for proper valuation by the DVO.

Issue 2: Denial of brought forward loss excluding depreciation
The issue revolved around the denial of brought forward loss excluding depreciation. The assessee argued that only partners who continued in the firm should impact the carry forward of losses. The Tribunal agreed with the assessee's contention but noted that the Assessing Officer had not considered the factual position. Consequently, the Tribunal remanded the issue to the Assessing Officer for fresh consideration in accordance with the law.

Issue 3: Disallowance of donation
Regarding the disallowance of a donation of Rs.4,600, the assessee chose not to press the ground due to the small amount involved. Consequently, the Tribunal dismissed this issue as not pressed.

In conclusion, the Tribunal partially allowed the assessee's appeal, directing a revaluation by the DVO for the property sale profit issue and a fresh consideration by the Assessing Officer for the brought forward loss issue. The revenue's appeal was dismissed concerning the unabsorbed depreciation issue, affirming that it is carried forward under a different provision than brought forward losses.