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2023 (6) TMI 925 - AT - Income TaxComputation of LTCG - CIT(A) determining FMV of the land in question @ 150 per sq. yard in place of Rs. 60 as adopted by the AO, for working out the capital gain - HELD THAT - Commissioner before coming to conclusion not only thoroughly considered the peculiar facts and circumstances of the case but also taken into account the rival claims of the Assessee and the AO qua Valuation Reports of Joint Sub-Registrar, Hyderabad (South) and therefore, determined the FMV @ Rs. 150 per sq. yard, which in our consideration opinion is justifiable and thus cannot be faulted with. Resultantly, we do not find any perversity, impropriety and/or illegality in determining the FMV @ Rs. 150/- by the Ld. Commissioner and consequently deleting the addition and therefore Ground no.1 of the appeal stands dismissed. Disallowance of service tax - Assessee offered the aforesaid amount of service tax on the developers qua consultancy/ advisory services rendered as the revenue receipt - entitled to get deduction of such amount while computing capital gains on the transfer of subject land under section 45 r.w.s 2(47) (v) or not? - HELD THAT - The nomenclature of the service tax paid in this case may not be correct but its germane of sale consideration which was later on offered as part of total capital gain, therefore, if will not allow the deduction of said amount which is otherwise deposited in Govt. Account, then the same shall not only amounts to double jeopardy but shall also cause injustice. Consequently Assessee s claim qua expenditure is allowable, not being service tax paid for rendering the consultancy services as claimed but not substantiated, but infact being originated from the sale consideration which was ultimately offered to tax as LTCG by the Assessee and therefore can be construed part of total sale consideration and is allowable as deduction under section 48(i) - Ground raised by the Revenue Department is also dismissed.
Issues Involved:
1. Determination of Fair Market Value (FMV) of land for Long Term Capital Gain (LTCG) calculation. 2. Deduction of service tax while computing capital gains. Summary: Issue 1: Determination of FMV of Land for LTCG Calculation The Assessee, engaged in manufacturing equipment for power transmission and distribution, declared an income of Rs. 25,21,57,813/- for AY 2008-09. A search operation revealed an Agreement-cum-GPA dated 21.09.2007, indicating the Assessee's transfer of a plot of land to two companies for Rs. 30,50,36,525/-. The AO treated this amount as sale consideration and computed LTCG, adopting an FMV of Rs. 60 per sq. yard based on a report from the Joint Sub-Registrar, Hyderabad. The Assessee contested this FMV, presenting another report indicating an FMV of Rs. 150 per sq. yard. The Ld. Commissioner found that the AO did not confront the Assessee with the report used and did not refer the matter to a Valuation Officer as per section 55A of the Act. Consequently, the Ld. Commissioner adopted the FMV of Rs. 150 per sq. yard, resulting in a reduced capital gain of Rs. 23,04,03,464/-. The Tribunal upheld the Ld. Commissioner's decision, stating that the AO failed to provide evidence against the Assessee's valuation and did not follow proper procedures for determining FMV. Issue 2: Deduction of Service Tax While Computing Capital Gains The Assessee claimed a deduction of Rs. 1,87,40,000/- paid as service tax on consultancy services rendered to the developers. The AO rejected this claim, stating that the service tax was not an expenditure incurred in connection with the transfer of the capital asset as per section 48 of the Act. The Ld. Commissioner allowed the deduction, considering the service tax as an expense related to the transfer of property. The Tribunal noted that the Assessee had agreed to consider the entire amount of Rs. 30,50,36,525/- as LTCG, including the Rs. 15 Crore initially shown as consultancy services. The Tribunal concluded that denying the deduction would result in double jeopardy and allowed the deduction under section 48(i) of the Act, thus dismissing the Revenue Department's appeal. Conclusion: The appeal filed by the Revenue Department was dismissed, with the Tribunal upholding the Ld. Commissioner's decisions on both the determination of FMV and the deduction of service tax.
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