2016 (10) TMI 218 - AT - Income Tax

Slump sale - valuation of property - capital gains on building and rental income - uideline value adopted by the Stamp Valuation Authority for the purpose of Stamp Duty - Held that - In the present case, the assessee shows the sale consideration through valid sale deed executed on 9.11.2011 at ₹ 20,74,60,400/-. However, after a long period of around three years, n 17.12.2014, the assessee said to be rectified the sale deed through registered rectification deed and lowered the sale consideration to ₹ 2,27,386/-. The valuation by DVO was under sec. 50C was at ₹ 20,48,38,430/-. The Assessing Officer considered the original sale deed value reflected in the original sale deed dated 9.11.2011 at ₹ 20,74,60,400/- which is higher than the value determined by the DVO at ₹ 20,48,38,430/- and accordingly, calculated the capital gains. In our opinion, DVO s valuation to be considered for calculating the capital gains. The sale deed is executed on a stamp paper and signed by both the parties to the sale deed, witnessed by appropriate witnesses. Being so, any apparent error noticed after the execution of the sale deed could be rectified by rectification deed. In the present case, the assessee wants to rectify the total consideration paid and received by other parties which is clearly mentioned in the sale deed by substituting the sale consideration at ₹ 2,27,386/- in place of original sale consideration of ₹ 20,74,64,400/-. This is not a factual error pertaining to this transaction and the reason submitted by the ld.AR for rectification is shocking to the conscious of the Bench. In our opinion, such rectification cannot be given any credence and it cannot be said that it is bona fide. The assessee s contention is that the purchaser also agreed that the consideration passed was only ₹ 2,27,386/- and actually the consideration of ₹ 20.74,64,400/- is not at all passed to the other party. We cannot appreciate this argument of the assessee s ld. AR. We do not say that there cannot be chances of occurring some mistakes. It may happen in the process of execution of documents and that mistake cannot be to such exent of changing the consideration in such a manner. There can be typing errors in mentioning the sale value at figures as compared to in words and this type of errors can be said that typographical errors happened in the normal course. The assessee with the malafide intention, after a period of three years, changed the consideration which cannot be appreciated by this Tribunal. Accordingly, we are of the opinion that the consideration shown in the original sale deed dated 9.11.2011 i.e ₹ 20,74,64,400/- has to be considered for determination of the capital gain arising out of the transfer of the capital asset in this case. We therefore, do not find any reason to interfere with the order of the Assessing Officer on this issue. - Decided in favour of revenue

Summary

Issues Involved:
1. Taxability of Capital Gains.
2. Classification of the transaction as a Slump Sale.
3. Valuation of the property.
4. Enhancement of assessment of capital gains on building.
5. Enhancement of rental income.

Issue-Wise Detailed Analysis:

1. Taxability of Capital Gains:
The Revenue contested that the assessee company received ?20,74,60,400, equivalent to the guideline value adopted by the Stamp Valuation Authority. The CIT(A) erred in not considering this amount for capital gains tax. The assessee argued that the original sale deed contained mistakes, and the actual consideration was ?2,27,386, as corrected in a rectification deed. The Tribunal upheld the Assessing Officer's decision to consider the original sale deed value of ?20,74,60,400, rejecting the rectification deed's lower consideration due to its lack of credibility and delayed execution.

2. Classification of the Transaction as a Slump Sale:
The CIT(A) observed that the transaction did not qualify as a slump sale under Section 2(42C) of the Act, as there was no transfer of an entire business or undertaking. The assessee had ceased business activities since AY 2002-03 and had separately sold plant and machinery in FY 2005-06. Additionally, specific values were assigned to the assets in the rectification deed. The Tribunal agreed with the CIT(A) that the transaction was not a slump sale and was liable for capital gains tax.

3. Valuation of the Property:
The CIT(A) directed the Assessing Officer to use the higher guideline value of ?800 per sq ft for Pillaiyar Koil Street as the base rate for estimating the fair market value. The Revenue argued that the assessee received ?20,74,60,400, as per the registered sale deed, and the CIT(A) erred in accepting the rectification deed's lower value. The Tribunal found no merit in the assessee's argument and upheld the Assessing Officer's valuation based on the original sale deed and the DVO's report, which valued the property at ?20,48,38,430.

4. Enhancement of Assessment of Capital Gains on Building:
The CIT(A) observed that the building sold was a depreciable asset, and the difference between its market value and WDV should be treated as short-term capital gains. The CIT(A) directed the Assessing Officer to compute the capital gains of ?46,79,332 as short-term capital gains and tax it at 30%. The Tribunal found no infirmity in this enhancement and upheld the CIT(A)'s decision.

5. Enhancement of Rental Income:
The CIT(A) noted that the Managing Director of the assessee had admitted to receiving rental income of ?2,50,000 from M/s Fabrics India. The assessee failed to provide evidence to the contrary. The CIT(A) directed the Assessing Officer to bring this rental income to tax after giving the assessee one final opportunity to provide evidence. The Tribunal upheld the CIT(A)'s decision to enhance the assessment by including the rental income.

Conclusion:
The Tribunal partly allowed the Revenue's appeal, affirming the original sale deed's consideration for capital gains calculation and rejecting the slump sale classification. The cross-objection by the assessee was dismissed, upholding the enhancements in capital gains and rental income assessments. The order was pronounced on 18th August 2016, at Chennai.