2014 (1) TMI 1895 - AT - Income Tax

Capital gains from the sale of flats - Application of section 50C - property in this case is a lease hold property and has not been registered - HELD THAT - The extant provision of section 50C were applicable to those properties which are registered. The properties which are not registered do not come under the ambit of section 50C. This position was changed by insertion of Finance Act, 2009 w.e.f. 1.10.2009 by which the word assessable was inserted in those cases where property has not been registered. Thus we find that provisions of section 50C are not applicable in the impugned assessment year. Furthermore, in the case of lease hold property which has not been registered, section 50C cannot be invoked. Furthermore, we note that Ld. CIT(A) has given a finding that the prevailing circle rate on the date of sale was ₹ 3000/- per sqft. Against this the assessee has adopted ₹ 3500 per sqft. Thus, AO has wrongly taken circle rate @ ₹ 4000/- per sqft. Which was applicable from the subsequent date. Accordingly, in the background of the aforesaid discussions and precedents, we do not find any infirmity in the order of Ld. CIT(A), hence, we uphold the same. Disallowance of maintenance charges receipt - CIT(A) noted that these maintenance receipts have been treated as business income from Asstt. Year 2001-02 as approved by ITAT - HELD THAT - Assessee s income from business in relationship to the maintenance and other service receipts as detailed above has not been disputed by the Revenue in earlier periods. The contracts are same which were there for earlier assessment years as well as for the impugned assessment year. In such circumstances, in our considered opinion, there is no change in the facts and law and hence, departure from earlier practice by the Revenue is not sustainable. This proposition is supported by the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Dalmia Promoters Developers P Ltd. 2006 (1) TMI 57 - DELHI HIGH COURT . In this case it was expounded that for rejecting the view taken for earlier years, there must be change in facts, situation or law. We further place reliance upon the decision in the case of CIT vs. Excel Industries Ltd. 2013 (10) TMI 324 - SUPREME COURT held that when the Department has accepted the verdict of the Tribunal in some years, it cannot be allowed to challenge the verdict in other years. Thus, in our considered opinion in the background of the aforesaid discussion and precedents, there is no infirmity in the order of the Ld. CIT(A). Accordingly, we uphold the same. Appeals filed by the Revenue stand dismissed.

Summary

Issues Involved:
1. Calculation of capital gains from the sale of flats.
2. Disallowance of maintenance charges receipt.

Issue-wise Detailed Analysis:

1. Calculation of Capital Gains from the Sale of Flats:

The Revenue appealed against the decision of the Ld. Commissioner of Income Tax (Appeals-IX), New Delhi, regarding the calculation of capital gains from the sale of flats. The Assessing Officer (AO) calculated the capital gains at Rs. 52,59,685/- based on a circle rate of Rs. 4000 per sqft, while the assessee declared Rs. 19,22,065/- using a rate of Rs. 1600 per sqft. The AO applied the higher circle rate, arguing that the property was a commercial building and should be valued accordingly.

Upon appeal, the Ld. CIT(A) noted that the circle rate as on the sale date (9.4.2007) was Rs. 3000 per sqft, not Rs. 4000, which was effective from 4.7.2007. The Ld. CIT(A) also recognized the property as leasehold, which justified a lower rate than freehold properties. Consequently, the Ld. CIT(A) concluded that the declared sale price of Rs. 3500 per sqft exceeded the prevailing circle rate of Rs. 3000 per sqft, making the provisions of section 50C inapplicable.

The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that section 50C applied only to registered properties, which was not the case here. The Tribunal confirmed that the AO erroneously applied a higher rate effective from a later date and affirmed the Ld. CIT(A)'s deletion of the addition.

2. Disallowance of Maintenance Charges Receipt:

The AO disallowed Rs. 78,84,115/- for the assessment year 2008-09 (Rs. 65,43,266/- for 2009-10) related to maintenance charges, arguing that the income from maintenance and reimbursements should be treated as rental income under "Income from House Property," allowing only a 30% deduction under section 24.

The Ld. CIT(A) overturned the AO's decision, noting that maintenance receipts had consistently been treated as business income since 2001-02, a position upheld by the ITAT. The Ld. CIT(A) emphasized the rule of consistency, stating that without a change in facts or law, the AO's bifurcation of maintenance receipts lacked legal basis.

The Tribunal agreed with the Ld. CIT(A), noting that the assessee provided distinct maintenance services separate from rental agreements, supported by longstanding contracts. The Tribunal found the AO's theoretical bifurcation of receipts and subsequent disallowance unsustainable. It cited precedents emphasizing consistency in tax treatment and rejected the AO's departure from established practice without a change in facts or law.

Conclusion:

The Tribunal dismissed both appeals by the Revenue, upholding the Ld. CIT(A)'s decisions on both issues. The Tribunal confirmed that the AO's application of section 50C was erroneous and that maintenance receipts should be treated as business income, consistent with prior years.