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TMI Blog2011 (1) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax payers relatives or associate concerns is liable to be disallowed to the extent it is found to be excessive. 3. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in not considering the fact that the provision of section 92 & 93 of the I.T.Act, 1961 is clearly applicable in the case of assessee company since the assessee has brought the properties at excessive price generating exempt income in the hands of Group company. Further the assessee company was also claiming the interest expenses which was not available to the group company Hence, it was clear that the properties bought at the excessive price attracts the provisions of Chapter X of the I.T.Act though the transaction is not an international transaction but the modus operandi of the assessee company is the same to whom the provision of chapter X is applicable. 4. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in deleting the disallowance made on account of property tax without considering the fact that the payment was made by the HDFC Ltd to THDC Ltd towards maintenance and property tax and further in the certificate issued by THDC Ltd, nowhere the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debentures issued by the assessee company to the HDFC Property Fund. The same amount has been claimed by the assessee company as a deduction while computing income from house property. Since the assessee has paid excess consideration to the extent of ₹ 65,27,61,019, the proportionate interest component of ₹ 3,25,33,488 on the excess consideration amount paid is disallowed and added to the income from house property. The working of excess consideration paid & interest disallowance is given below: Registration Receipt No.& dt. Market value (Rs.) Amount paid as per agreement(Rs.) Excess amount(Rs.) % of excess amount paid to market value 7136 dt.12.7.05 15,63,76,000 41,48,25,012 25,84,49,012 165% 7135 dt. 12.7.05 20,30,35,560 59,73,47,567 39,43,12,007 194% Total 35,93,11,560 101,21,72,579 65,27,61,019 182% Interest expenses on debentures x excess value paid on properties acquired Total value of debenture issued Rs.50462813 x ₹ 652761-19 = ₹ 3,25,33,488" Rs.1012500000 5. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter in appeal before the CIT(A). Learned CIT (A) upheld the grievance of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value as fixed by the state government for the purpose of payment of stamp duty, is open to be adopted by the AO only in situation, whenever in the computation of income under the head "capital Gain", it is found that when there is transfer of land or building or both, the sale consideration shown is less than value adopted for payment of stamp duty. There is no enabling provision permitting the AO to substitute the actual consideration paid with the stamp duty valuation so as to limit or restrict the interest paid on capital borrowed for the purpose of the declared investment in impugned properties. The prevailing prices of properties are factored in by various economic and other factors and it also the result of negotiation between the interested parties, hedged in by the principle of commercial expediency. It is merely based on the touchstone of valuation for stamp duty purposes that the AO states that the consideration paid is excessive. In fact the stamp duty valuation is limited to the determination of stamp duty , the market price can indeed be higher than the stamp duty valuation since the same is determined by market fares and other factors such as location, convenienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of purchase of the property. There is also no dispute that there is no specific legal provision enabling disallowance of interest in respect of excess consideration, even if that be so, paid for purchase of property. In any event, neither stamp duty valuation is a conclusive proof of value of property, nor a valuer's report, as is submitted by the assessee in support of the purchase price, can be simply brushed aside. We are unable to see any merits in the action of the Assessing Officer. The transfer pricing regulations and the provisions under section 40A(2), which have been referred to in the grounds of appeal, have no application to the facts of this case either. In our considered view, learned CIT (A) was fully justified in deleting the impugned disallowance of interest, and his order does not call for any interference. 9. Ground Nos.1 to 3 is thus dismissed. 10. So far as Ground No.4 is concerned, the material facts are like this. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed deduction of ₹ 69,40,217 in respect of municipal taxes. This amount is paid to THDC Ltd, which in turn, had paid the money for munic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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