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2017 (5) TMI 781 - AT - Income TaxRevision u/s 263 - AO has not correctly applied the provisions of Section 50C accordingly his order was erroneous as well as prejudicial to the interest of the Revenue - Held that - From the record, we found that the assessee company has sold the property and shown sale consideration at ₹ 30 lakh whereas the stamp duty value of the property ₹ 1,42,83,000/- and accordingly the Assessee arrived at loss of ₹ 44,87,519/- on sale of the residential property. While passing the order u/s.143(3), the AO has not uttered a single word with regard to applicability of provisions of Section 50C in respect of building sold by assessee to its Managing Director. The provisions of the Section 50C are applicable in the case of transfer of land and building including depreciable capital asset. In the instant case, the property has been transferred to Mrs. Alka B Birewar, the Managing director of the assessee company for ₹ 30 lakhs against the stamp duty valuation of the property of ₹ 1,42,83,000/ -. The Hon ble Bombay High court in the case of Bhatia Nagar Premises Co-Operative society Ltd. 2010 (3) TMI 813 - Bombay High Court had an occasion to consider the scope of on 50 C and it is held by their Lordships that Section 50C is a measure provided to bridge the gap as it was found that the assessee were not correctly declaring the full value of consideration or in other words resorting to the practice of under valuation. We can safely conclude that not applying the provisions of Section 50C to the facts of the instant case has rendered the order of the AO not only erroneous but also prejudicial to the interest of Revenue, accordingly, CIT has correctly invoked the provisions of Section 263. It is pertinent to mention here that nowhere CIT has disturbed the order of the AO with regard to exemption allowed u/s 54 EC of the IT Act. Accordingly, the argument of learned AR is of no relevance in so far as the assessee will continue to enjoy the exemption u/s.54EC of the IT Act. - Decided against assessee.
Issues:
1. Application of Section 50C of the Income Tax Act to depreciable assets. 2. Eligibility for exemption under Section 54 EC of the Act in relation to short term capital gains. Analysis: Issue 1: Application of Section 50C to depreciable assets The appeal was filed against the Principal Commissioner of Income Tax's order under Section 263 of the Income Tax Act, 1961, revising the assessment order passed by the Assessing Officer. The Principal Commissioner observed that the Assessing Officer failed to adopt the value of the property as per stamp duty valuation while computing short term capital loss on a residential property. The Assessing Officer did not apply Section 50C correctly, which requires the sale consideration to be taken at the stamp duty valuation. The order was deemed erroneous and prejudicial to the interest of revenue as per judicial pronouncements, including the Supreme Court's decision in M/s Malabar Industrial Co. Ltd. 243 ITR 83 (SC). Issue 2: Eligibility for exemption under Section 54 EC The Principal Commissioner noted that the Assessing Officer did not address the Assessee's submissions regarding eligibility for exemption under Section 54 EC in relation to short term capital gains. The Assessee argued that the Assessing Officer had considered and accepted the submissions while passing the assessment order, granting the benefit of Section 54 EC. The Assessee cited relevant judicial decisions, including the Bombay High Court's decision in ACE Builders Pvt. Ltd. 281 ITR 210, supporting the Assessee's claim for exemption under Section 54 EC for long term capital assets. Judicial Analysis: The Tribunal analyzed the contentions of both parties and reviewed the orders of the authorities below. It was observed that the Assessing Officer did not address the applicability of Section 50C to the transfer of a depreciable asset, leading to an erroneous and prejudicial order. The Tribunal referenced judicial decisions, such as the Bombay High Court's decision in Bhatia Nagar Premises Co-Operative Society Ltd., and the ITAT Mumbai Special Bench's ruling in ITO vs. United Marine Academy, affirming the applicability of Section 50C to depreciable assets. The Tribunal concluded that the failure to apply Section 50C rendered the Assessing Officer's order erroneous and prejudicial to revenue. Conclusion: The Tribunal upheld the Principal Commissioner's decision to invoke Section 263, emphasizing the incorrect application of Section 50C by the Assessing Officer. The Tribunal clarified that the exemption allowed under Section 54 EC remained unaffected by the revision. Ultimately, the appeal of the Assessee was dismissed, affirming the Principal Commissioner's order under Section 263. Note: The judgment was delivered by Shri R. C. Sharma, AM, and Shri Ravish Sood, JM, on 15/05/2017.
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