2019 (8) TMI 177 - AT - Income Tax

Disallowance u/s 14A - HELD THAT - Admittedly, there is a categorical finding by CIT(A) that assessee has not earned any exempt income during the year and therefore we concur with view adopted by Ld.CIT (A) that no disallowance could be made in such circumstances. We draw our support from the decision of Hon ble Delhi High Court in case of Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT . Addition u/s 50C - Revenue alleges that as value of land ascertained by Stamp authorities as on date of registration was higher than value in Agreement to sell, and therefore deeming fiction in section 50 C is to be invoked - HELD THAT - As we analyze law applicable to these peculiar facts, it is observed that, revenue do not have any documents/evidences to establish that assessee received anything over and above the price agreed upon between the parties in agreement to sell dated 21/11/11. Respectfully following decision of Hon ble Supreme Court in case of KP Verghese 1981 (9) TMI 1 - SUPREME COURT and hold that Ld.AO shall verify, whether sale consideration received by assessee received through banking channels in whole or in part, is prior to the date of Sale Deed dated 13/02/2012. In the event it is found that the sale consideration has been received as claimed by assessee by way of account payee cheque, bank draft in part or in whole, on or before the date of Sale Deed dated 13/02/2012, assessee deserves benefit as per law. - decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Validity of the disallowance under Section 14A of the Income Tax Act.
2. Adoption of stamp duty registration value under Section 50C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the disallowance under Section 14A of the Income Tax Act:
The Revenue's appeal challenged the deletion of disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1963. The Revenue argued that the interest-bearing funds were utilized for generating exempt income, and the disallowance should apply even if no exempt income was earned during the year, as clarified by CBDT Circular No.5/2014. However, the Tribunal noted that the assessee had not earned any exempt income during the year under consideration and investments were made in prior years. The Tribunal relied on the Delhi High Court's decision in Cheminvest Ltd., which held that no disallowance could be made under Section 14A in the absence of exempt income. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the disallowance.

2. Adoption of stamp duty registration value under Section 50C of the Income Tax Act:
The Assessee's appeal contested the addition made by the AO under Section 50C by adopting the stamp duty value as on the date of registration rather than the date of the agreement to sell. The Assessee argued that the agreement to sell was entered into on 21/02/2011, and the consideration agreed upon was ?5,78,37,500/-. The increase in market value was due to the conversion of land from agricultural to industrial use, which was a condition for the sale. The Tribunal observed that the Assessee had received the entire sale consideration before the date of registration and that the sale deed registered on 13/02/2012 was a mere formality. The Tribunal noted that the amendment to Section 50C, effective from AY 2017-18, allowed the stamp duty value as on the date of the agreement to be considered if the consideration was received through banking channels before registration. Although the amendment was prospective, the Tribunal applied the Supreme Court's principle from KP Verghese's case, treating the amendment as curative and retrospective. The Tribunal directed the AO to verify if the consideration was received through banking channels before the sale deed date and, if so, to adopt the stamp duty value as on the agreement date. Thus, the Assessee's appeal was allowed for statistical purposes.

Conclusion:
The Tribunal dismissed the Revenue's appeal regarding the disallowance under Section 14A and allowed the Assessee's appeal for statistical purposes concerning the adoption of stamp duty value under Section 50C, directing verification of the consideration received through banking channels before the sale deed date.