2018 (11) TMI 540 - AT - Income Tax

Determination of Long term capital gains - addition by invoking Section 50C in proceedings u/s. 143(3) - Valuation - restriction on use of property - Application of section 50C to the trust already assessed under a special provision u/s.11 - Held that - The Revenue fails to dispute that the assessee Trust is bound by such an approval order passed by the statutory authority. We further find in Om Shri Jigar Association Vs. Union of India 1994 (5) TMI 24 - GUJARAT HIGH COURT as followed in Virendra vs. Appropriate authority & Ors. 2008 (9) TMI 515 - BOMBAY HIGH COURT holds that there is no inference of understatement of consideration in such a case involving an approval accorded by the Charity Commissioner under the Bombay Trusts Act. Mr. Kabra seeks to distinguish the same by pleading that the said case law pertains to the proceedings u/s.269UD instead of Section 50C of the Act. We observe that this distinction fails to rebut the fact that the above hon ble high courts have considered the relevant provisions enshrined in Bombay Trust Law vis- -vis understatement of sale considerations of the relevant capital assets therein. We conclude in this factual backdrop that whatever sale price Charity Commissioner had approved had to be followed in assessee s impugned sale deed. Couple with this the lower appellate authority has already observed that there are various restrictions on usage of the capital asset. All this findings have gone un-controverted from Revenue side.- decided against revenue

Summary

Issues:
1. Appeal against CIT(A)'s order reversing long term capital gains addition under Section 50C of the Income Tax Act.
2. Cross objection by the assessee claiming inapplicability of Section 50C due to being a charitable trust assessed under a special provision u/s.11 of the Act.

Analysis:
1. The Revenue's appeal challenged the deletion of long term capital gains addition of &8377; 70,34,635/- by invoking Section 50C of the Act. The CIT(A) reversed the Assessing Officer's action, emphasizing that the sale of the property was approved by the Charity Commissioner, and the fair market value was estimated at &8377; 12,41,000/- by a Registered-Valuer. The Charity Commissioner's approval was considered binding on the trust, and the lower appellate authority noted restrictions on the property's usage, leading to the deletion of the addition. The Revenue's argument regarding violation of Rule 46A of the Income Tax Rules was dismissed, citing precedents that upheld approvals by statutory authorities under the Bombay Trusts Act. The Tribunal upheld the CIT(A)'s decision, rejecting the Revenue's substantive ground and dismissing the appeal.

2. The assessee's cross objection contended that Section 50C was not applicable due to being a charitable trust assessed under a special provision u/s.11 of the Act. The cross objection was based on the approval of the property sale by the Charity Commissioner and the valuation by a Registered-Valuer. However, in light of the Tribunal's decision on the Revenue's appeal, the assessee chose not to press the cross objection, leading to its dismissal. The Tribunal dismissed the Revenue's appeal and the assessee's cross objection accordingly on March 16, 2018.

This detailed analysis outlines the key arguments, findings, and decisions in the legal judgment concerning the Revenue's appeal and the assessee's cross objection related to long term capital gains addition and the applicability of Section 50C to a charitable trust under special provisions of the Income Tax Act.