2020 (2) TMI 1723 - AT - Income Tax

Applicability of Section 50C - multiplicative factor of '3' applied by the AO - as per AO appellant misusing the agricultural lands owned by it for other than agricultural purposes for which no permission or sanction of or notice to the appropriate authority was given - property comes in category type-1 i.e. for agricultural / residential or for commercial type-3 - CIT(A) deleted addition - HELD THAT - CIT(A) has decided the issues and deleted the additions, after elaborately discussing the detailed evidences as held contention of the appellant that where the property could not be registered due to any reason (here being in extended lal-doora) the transaction in relation thereto was outside the scope of Sec. 50 C stands rejected. Multiplicative factor of '3' applied by the AO was misdirected as the same was done by the AO on the basis of the factor of abuse of the land by the appellant which was not envisaged by the Delhi Government while laying down the different multiplicative factors as 1,2 and 3 for permissible uses of lands. Since such a situation was not envisaged by the Delhi stamp Rules, the factor of 3 is held to be invalid. Therefore, we are fully agree with the findings of the Ld. CIT(A) passed in his impugned order and we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A). Assessee appeal allowed.

Summary

Issues Involved:
1. Applicability of Section 50C.
2. Classification of property category.
3. Disallowance of packing expenses under Section 40(a)(ia).
4. Ad-hoc disallowance of various expenses including loading and unloading, cartage outward, general expenses, staff welfare, business promotion, and printing and stationery.

Issue-wise Detailed Analysis:

1. Applicability of Section 50C:
The first issue was whether Section 50C was applicable to the property in question. The appellant argued that Section 50C was not applicable because the property fell in 'extended lal dora' and non-conforming clusters of industrial concentration. However, the Tribunal upheld the CIT(A)'s finding that Section 50C was applicable. The Tribunal noted that the term "assessable" was added to Section 50C(1) by the Finance (No.2) Act, 2009, effective from 01.10.2009, which meant that even if the property was not registered or assessed by the stamp valuation authorities, it was still covered under Section 50C for valuation purposes. Consequently, the appellant's contention that the property transaction was outside the scope of Section 50C was rejected.

2. Classification of Property Category:
The second issue was the classification of the property category as either 'G' or 'H'. The AO classified the property under 'G' category, while the appellant contended it was under 'H' category. The Tribunal sided with the AO, agreeing that the property fell in 'G' category based on the "stamp law in Delhi" authored by Shri K.K.Gupta. The Tribunal also addressed the multiplicative factor applied by the AO, concluding that the factor of '3' was misdirected and should be '1', as the property was agricultural/residential, not commercial. Therefore, the AO was directed to work out the value of the land by applying the factor of '1'.

3. Disallowance of Packing Expenses under Section 40(a)(ia):
The AO disallowed Rs. 95,75,917/- of packing expenses, claiming they were contractual payments requiring TDS under Section 194C. The appellant argued that these were payments for the purchase of packing material from unorganized vendors, not contractual payments. The Tribunal found that the AO had not provided contrary evidence to support the disallowance. However, recognizing the potential for inflation of cash expenses, the Tribunal sustained an addition of Rs. 6,00,000/- out of the disallowed amount.

4. Ad-hoc Disallowance of Various Expenses:
The AO made an ad-hoc disallowance of 10% (Rs. 10,66,284/-) of expenses on loading and unloading, cartage outward, general expenses, staff welfare, business promotion, and printing and stationery, citing non-submission of bills and vouchers. The appellant argued that all expenses were fully vouched and comparable to previous years. The Tribunal found that the AO's basis for disallowance was unsustainable and unsupported by evidence. However, acknowledging the potential for inflation of cash expenses, the Tribunal sustained an addition of Rs. 1,00,000/- out of the disallowed amount.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, rejecting the Revenue's appeal and dismissing the Assessee's Cross Objection and Appeal as infructuous. The Tribunal concluded that the CIT(A) had elaborately discussed and decided the issues based on detailed evidence, and no interference was warranted in the well-reasoned order of the CIT(A). The Revenue's appeal was dismissed, and the Assessee's Cross Objection and Appeal also stood dismissed.