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TMI Blog2016 (11) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... st of revenue. Thus, in the given facts of the case, it can be undoubtedly said that the impugned assessment order was erroneous and prejudicial to the interest of revenue. The assessee is having few objections with regard to value to be adopted viz the stamp value at the date of aforesaid MOU shall be taken or stamp value as on the date of conveyance deed shall be adopted and one more objection that since the plot was received for police quarters, therefore, it is FMV cannot be taken as per free market value and only discounted value could have been taken as its FMV. We agree with the assessee on this aspect to this extent that these objections need to be dealt with as per law before finally adopting appropriate value u/s 50C. But, as stated by us earlier also that all these objections or any other objection with regard to the manner in which section 50C has to be applied can be dealt with in accordance with law and procedure as has been laid down u/s 50C itself. But that would be possible only when the provisions of section 50C are applied and the impugned transaction is tested through the prism of these provisions. Under these circumstances, we uphold the revision order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are that the assessee society along with 13 other housing societies (in all 14 societies) were owning a plot at Juhu, Mumbai under Juhu Vi le Parle Development Scheme. The said plot was managed by the Association (M/s Juhu Vile Parle Development Cooperative Housing Association Ltd.), which was formed by aforesaid 14 Societies to provide suitable utilities and amenities for their common benefits. Originally, the Income Tax Department had assessed income on sale of plot in the hands of Association which had sold the plot to a cooperative society formed for the benefit of Indian Police Service Officers. The matter went to the Commissioner of Income Tax-(Appeals) and he held that the impugned transaction resulted into capital loss on sale of the property and therefore the question of making an addition does not arise. Thereafter, the matter reached before the Income Tax Appellate Tribunal and the Tribunal held that since the plot did not belong to the Association, the question of any transfer by the Association does not arise and hence no capital gain can be assessed in the hands of Association. In pursuance to the above order, the Assessing Officer reopened the assessment of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plot for its own or the society, members' use. Please find enclosed letter dt.21.04.2003 of the Chief Engineer (9 Dev. Plan), Municipal Corporation of Greater Mumbai confirming reservation of plot for public purpose, inter alia, Police Quarters. Further, the Home Dept. of the Government of Maharashtra had taken the possession of this plot in 1975 issued by the Public Works and Housing Department of the Govt. of Maharashtra. It is submitted that the provision of Section 50C cannot apply to sale of plot of land to the Government or where the Plot is reserved for a particular purpose by the Government and possession thereof taken by the Govt. of Maharashtra. The Officers of the Police Department proposed to form a Cooperative Housing Society. The proposed society entered into a memorandum of understanding on 2510112000 with 14 societies. As per this MOU, a sum of ₹ 14,19,670/- was paid as an advance by the proposed society. The conveyance deed was executed between the said proposed society of the Police Official and the 14 Societies on 14.05.2003 for a total consideration of ₹ 77,14,920/- as against the consideration of ₹ 70,98,350/ - proposed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovt. of Maharashtra in 1975. Under the circumstances, we have to request you to kindly refer the valuation of the plot to under the provisions of Section 50C (2) of the Act. The assessee also places reliance on the Order dated 03.03.2009 bearing reference CIT (A)XXI/DCIT-21(1)/IT- 359/06-07 passed by the CIT(A)-XXI wherein respect of the same transaction it has been held that the provisions of Section 50C are not applicable under the facts and circumstances of the case. The same was passed when protective assessment was made in case of JVPD, Association. It may be noted that the Department has not gone in further appeal against the said order of the CIT(A) but not on the issue of applicability of the provision of Section 50C; (copy of ITAT order in ITA 3132/MUM. 2009- 10 enclosed). Hence, the assessee stand on the applicability of Scheme 50C to the above transactions has already been accepted by the department. 6. We therefore, humbly submit that proceedings u/s 263 of the IT Act be dropped in the above matter. 3.4. Ld. CIT considered submissions of the assessee but was not satisfied with the submissions of the assessee and it was held by him that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further contended that even in the proceedings before the AO the question of computation of capital gain was involved and complete facts were there before the AO. Further, when the assessee had filed an appeal before the concerned Commissioner of Income Tax-(Appeals) against the assessment order, the issue of computation of capital gain was open before the Commissioner of Income Tax-(Appeals). It was further submitted that the Commissioner of Income Tax-(Appeals) had power of enhancement and therefore, even if no ground was raised with regard to section 50C, but still the issue was well within the jurisdiction of the Commissioner of Income Tax- (Appeals). Reliance in this regard was placed on the judgments in the case of CIT vs. Nirma Chemicals Works P. Ltd. 309 ITR 67 (Gujarat High Court), Ms. Pushpa Devi Tibrewala v. ITO (Hyd)( order dated 7th June, 2013), Sonal Garments vs. JCIT 95 ITD 363(ITAT, Mumbai) and Merico Industries Ltd. vs. ACIT 115 TTJ 497(ITAT, Mumbai). (ii). It has been argued by the Ld. Counsel that section 50C is not applicable upon the impugned transaction. It was submitted that in this case possession was handed over on 29th July, 1975, to the Public Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order was with regard to determination of cost of the impugned property. The Society had claimed total cost of acquisition of the impugned plot of land at ₹ 60,01,030/- whereas, the AO determined the same at nil value. Thus, when assessee filed appeal before the concerned Commissioner of Income Tax-(Appeals), it was aggrieved only with regard to aspect of taking cost of acquisition at nil and therefore only this issue was raised before the Commissioner of Income Tax-(Appeals). Our attention has been drawn on the grounds raised before the Commissioner of Income Tax- (Appeals) in the first appeal filed by the assessee against the original assessment order dated 29.12.2011 as well as statement of facts therein with a view of emphasize upon the point that no other issue was raised before the Commissioner of Income Tax-(Appeals). Our attention was also drawn upon the appeal order passed by the Commissioner of Income Tax- (Appeals) to show that no such issue has been dealt by him. Thus, it was argued that neither the issue was raised in the assessment proceedings nor in the assessment order nor in the grounds of appeal nor written submissions filed by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r attention was drawn more specifically upon certain clauses of the said MOU wherein numerous conditions have been described. It was submitted that it was clearly stipulated in the said agreement that transfer of the impugned plot of land shall take place only subject to fulfillment of these conditions as well as payment of total consideration. It was submitted that fulfillment of these conditions were dependent upon various other agencies and therefore, unless these conditions were fulfilled or complied with, the assessee was not in a position to affect the transfer. It was further submitted that the purchaser was also not in a position to use on this plot in its own right until and unless these conditions were fulfilled and transfer was affected. It was further submitted that in case of non-fulfillment of these conditions, the amount of sale consideration was to be refunded. It was further submitted that as per the MOU (agreement), total amount of consideration agreed was for ₹ 70,98,350/- whereas in the conveyance deed entered on 14.05.2003, the amount of sales consideration was revised to a sum of ₹ 77,14,920/- which clearly shows that there was some kind of revisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the order of Ld. CIT. 3.9. We have gone through the orders passed by the lower authorities as well as submissions made by both the sides before us. For the sake of brevity and to avoid repetition, we are not again discussing here the background and facts of the case which we have already discussed in the initial part of our order. Thus, proceeding further, we shall decide the issues raised by both the sides on the validity of impugned order passed u/s 263 by the Ld. CIT. The primary argument of the Ld. Counsels appearing on behalf of the assessee society was that Ld. CIT was precluded from exercising his jurisdiction u/s 263 for the reason that in view of Doctrine of Merger , the assessment order had got merged into order of the Commissioner of Income Tax-(Appeals) on the aspect of taxability of capital gains earned on transfer of impugned plot of land. We have examined this argument very carefully. The brief facts in this regard are that in consequence to the order passed by the Tribunal in the case of M/s The Juhu Vile Parle Development Cooperative Housing Association Ltd Dt 4th November, 2010 in ITA No 3132/M/2009, the AO reopened/opened the assessment of these 14 societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enities and public utilities were conveyed to the societies by the Bombay Housing Board vide indenture dated 261h day of April 1960. We would like to draw yourkind attention to the recital at Page Nos. 4 and 5 of the Indenture conveying the said plot: AND WHEREAS on the basis of the total cost of completing the scheme on the left bank of the Irla Nalla including the cost of earth filling and construction for roads and canalization the cost payable by each Society works out to about ₹ 10.00 per square yard of the building plots to be allotted to each Society including the proportionate cost of acquisition and development of common amenity and utility plots roads and canalization AND WHEREAS all the fourteen Societies have paid the proportionate costs payable by them amounting in all to ₹ 60,01,030, which is the total estimate cost of acquisition and development of the whole area (emphasis supplied). The assessee places reliance on the Supreme Court' judgement in case of B.C. Srinivasa Shetty 1981 128 ITR 294 and humbly submits that if the Cost of acquisition of the above mentioned asset is taken as 'NIL' then the receipt of money in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing societies which had agreed to pay the cost of acquisition and development of the said land and the conveyance was executed in favour of societies subject to payment of balance cost and liabilities. Page 4 5 of the said indenture reads as under: AND WHEREAS on the basis of the total cost of completing the scheme on the left bank of the Irla Nalla including the cost of earth filling and construction of roads and canalization the cost payable by each Society works out to about ₹ 10.00 per square ! , a1 d of the building plots to be al lot ted to each Society including the proportionate cost of acquisition and development of common amenity and utility plots roads and canalization AND. WHEREAS all the fourteen Societies have paid the proportionate costs payable by them amounting in all to ₹ 60,01,030.00 which is the total estimated cost of acquisition and development of the whole area . (emphasis supplied) This clearly shows that the societies were allotted the land in 1960 on payment of cost and hence the cost of acquisition cannot be Nil. It does not make any difference whether the cost is paid towards the earth filling or road or canalization work, if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted aspect involved in the proceedings before the Ld. CIT(A) was confined to determination of cost of acquisition and computation of long term capital gain, accordingly. Thus, determination of the sale consideration in the light of mandatory provisions of section 50C has never been subject matter of inquiry or discussion. Thus, admitted fact on record are that issue with regard to application of section 50C and adoption of appropriate amount of sales consideration as per law had neither been raised nor adjudicated by the Commissioner of Income Tax-(Appeals). 3.14. Thus, in view of the aforesaid fact, we shall now deal with the arguments made by both the sides. We shall first like to refer to explanation 1(c) of section 263(1) which reads as under: (c) Where any order referred to in this sub-section and passed by the Assessing officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. 3.15. The perusal of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole issue of capital gain arising out of development agreement as well as sale invoking of plot was not only considered by the AO while completing the assessment u/s 143(3) of the Act, but was also subject matter of appeal before the CIT(A) and it was quite evident from the assessment order passed that the AO had not only inquired into the issue and applied his mind to the facts and materials on record but also dealt with the issue of capital gain in the assessment order. In view of the totality of the facts, it was held by the bench that whole issue of capital gain was subject matter of appeal before the CIT(A) he had decided the issue much prior to issuance of notice u/s 263 of the Act. Thus, facts of the said case are not comparable with the facts of the case before us. 3.16. On the other hand, we find that judgments relied upon by Ld. CIT-DR, appear to be applicable on the facts of this case. He relied upon heavily on the judgment of Hon ble Supreme Court in the case of CIT v. Shri Arbuda Mills Ltd. 231 ITR 50 wherein it was held that powers u/s 263 of the Act, shall extend to such matters as had not been considered and decided in any appeal. He also drew our attention upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these two questions held as under: Notice on the special leave petition has been served upon the respondent but he has not chosen to appear. The notice stated that the matter might be disposed of at the special leave petition stage in view of the judgment of this court dated January 23, 1996, in TRC No.11 of 1983 CIT v. Shri Arbuda Mills Ltd. (1998) 231 ITR 50. That judgment covers the two questions that were sought to be raised they were questions of law and the High Court ought to have called for a reference thereof, but, having regard to the fact that this court has in the aforementioned case squarely dealt therewith we shall deem this to be a reference of the questions to ourselves and, following the aforementioned case, answer the questions thus: in the negative and in favour of the Revenue. The appeal is allowed accordingly, with no order as to costs. 3.19. It may be noted from the perusal of above judgment of Hon ble Supreme Court that the ratio decidendi in the case of Shri Arbuda Mills Ltd (supra) has been followed and these questions have been decided in favour of the Revenue. In other words, Hon ble Supreme Court held that the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt up held the notice issued under Section 263 and held that such notice can be issued. 30. The decision in CIT Vs. Abuda Mills Ltd. (Supra) has also been followed by this Court in CIT Vs. Dhampur Sugar Mills Co. Ltd. [(2004) 270 ITR 576 (All)], CIT Vs. Indo Persian Rugs [(2008) 299 ITR 300 (All)] and CIT Vs. Span International [(2004) 270 ITR 538 (All)]. 31. In CIT Vs. Amrit Banaspati Co. Ltd. [(2005) 277 ITR 559 (All)], Court held that in respect of items which have not been considered in appeal, power of Commissioner under Section 263(1) shall be extended to that extent. 32. Now looking to the facts of present case, in the light of exposition of law discussed above, we find that claim of assessee seeking exemption under Section 10B of Act, 1961 for assessment year 2011-12, was not doubted by Assessing Officer. Applicability of Section 10B of Act, 1961 for assessment year 2011-12, as claimed by assessee, was accepted by him. Thus, this aspect was not in appeal at any stage. It is only on the question of quantum of profit for which exemption was claimed that the appeal was filed. The Assessing Officer discussed the matter and found that instead of ₹ 4,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve analysis it is noted that Hon ble Allahabad High Court took note of judgment of Hon ble Bombay High Court in the case of CIT Vs. Ratilal Bacharilal and Sons, (supra) wherein it was held that Doctrine of Merger could not have been applied by the Tribunal to that part of the order which was not a subject matter of appeal so as to exclude revisional jurisdiction of the Commissioner of Income Tax under section 263 of the Act. In the given facts of the said case, it was held that since at no stage the issue whether assessee was entitled to claim exemption u/s 10B at all or not, was subject matter of consideration before the appellate authorities, therefore, this question was open to be looked into by the Commissioner, because it is only on the question of quantum of profit upon which exemption was claimed, an appeal was filed and only to that extent allowbility of exemption u/s 10B was subject matter of appeal and NOT in its entirety. On the similar lines, judgment relied upon by Ld. Counsel in the case of CIT vs Forteleza Developers 374 ITR 510 (Bom) is not applicable on the facts of the case before us. In the said case also, issue involved before the AO as well as Ld CIT(A) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the issue of application of section 50C. In our opinion, according to the Doctrine of Merger , judgments of lower courts merge into judgments of higher court and after the merger there remains no judgment of the lower courts and therefore, obviously and admittedly, there can be no revision of the judgment which does not even exist. However, in tax statutes like Income Tax Act, 1961, the legislature has not thought it fit to apply Doctrine of Merger , but Doctrine of Partial Merger has been adopted. Thus, once the issue of merger is governed by the provisions of the statute, then, obviously under the income tax proceedings it is the statute which shall prevail over general Doctrine of Merger . The Doctrine of Partial Merger would apply for the purpose of section 263 of the Act, to the extent as explained under the relevant provisions contained in clause (c) of explanation 1 of section 263(1) of the Income Tax Act 1961. This provision has already been discussed in earlier part of our order which clearly provide that powers of the Commissioner under this section shall extend to such matters as had not been considered and decided in the appeal. Thus, going by common sense appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of the assessee with regard to its objections about applicability of provisions of section 50C and more specifically about substitution of amount of sales consideration with the value adopted by the stamp valuation authority for effecting the transfer of impugned plot of land. The objections of the assessee in this regard are twofold. The primary objection of the assessee is that the provisions of section 50C could not have been applied in the year under consideration, since the transaction had already taken place and the second objection is that value adopted by the stamp valuation authority at the time of registration of the conveyance deed could not have been adopted in the year under consideration. 3.24. We have considered all the objections very carefully. It has been contended that impugned plot was not in the exclusive possession of the assessee and that the assessee was not enjoying the usage of the plot for its own purposes for the reasons that its possession was handed over to the Public Works and Housing Department, Government of Maharashtra on 29th of July, 1975. In this regard, it is observed by us that it is admitted case of the assessee that the assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of working out the capital gains, but held that if the 1.4.1981 value was adopted as the cost of acquisition in terms of section 48, and indexation benefit is also allowed, there would be net capital loss of ₹ 57,65,385/-. In this view of the matter, he deleted the addition of capital gains on protective basis in the assessment of the assessee. 5. The revenue is in appeal to contend that the assessee is practically the owner of the plot and since the monies are still lying with it, not having been handed over to the 14 societies, the Assessing Officer was right in holding that the assessee should be protectively assessed in respect of the capital gains. On the other hand, the learned counsel for the assessee submitted that the assessee was merely holding possession of the plot, that it was not the owner of the plot and there was no transfer of the plot by the assessee and therefore there was no question of any capital gains being assessed in the hands of the assessee on protective basis. 6. On a careful consideration of the facts and the rival contentions, we are inclined to uphold the decision of the CIT(A). It is not the case of the department that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the plot but merely holding possession thereof on behalf of the 14 co-operative societies and managing the same for the common benefit of the member societies cannot be considered as the owner of the property in order to bring the sale price to tax in its hands as capital gains. This is also supported by the accounting entries which show that the respective shares of the 14 housing societies in the sale consideration, after deducting the common expenses, has been divided in proportion to their respective shares in the property and credited to their accounts and shown as deposits in the assessee s balance sheet. In the absence of any transfer by the assessee, no capital gains can be assessed in its hands even on protective basis. 7. We thus affirm the decision of the CIT(A) but for different reasons and dismiss the appeal filed by the revenue with no order as to costs. 3.25. Thus, it is noted from the observations of the Tribunal that impugned plot of land was owned by these 14 society members (present assessee being one of them) with specific shares and said JVPD Association was formed merely for the purpose of common management of the subject property. Subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order was erroneous and prejudicial to the interest of revenue. 3.27. Further, various objections have been raised by the assessee with regard to the value to be adopted for the purpose of section 50C. In our opinion, these objections are to be examined in the light of merits of the objections and keeping in view of facts of this case and law applicable in this regard. But that exercise can be done only when the impugned transaction is examined through the prism of mandatory provisions of section 50C. It is also worth noting that the case of the assessee did not fall in any of the exception also. 3.28. The assessee had relied upon in this regard upon the judgment of Hon ble Allahabad High Court in the case of CIT v. Shimbu Mehra (Supra) in its support. We have gone through the said judgment and find that in the said case, the said assessee had disputed the factum of transfer of the property in the year under consideration. Therefore, the applicability of provisions of section 50C was challenged in the year under dispute. On the other hand, the facts of the case before us are that year of the transfer of the plot and taxability of the resultant capital gain has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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