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TMI Blog2018 (1) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that the said valuation furnished by the assessee was required to be verified and could not have been accepted on the very face of it. We thus in all fairness restore the matter to the file of A.O, and therein direct that the Fair market value of the property be got determined as per the Rent Capitalization Method - Decided in favour of assessee for statistical purposes. Not allowing set-off of the Short Term Capital Loss against the capital gains - Held that:- As perused the order of the A.O in context of the issue under consideration and are of the considered view that he had conclusively proved that the transaction carried out by the assessee was merely a sham transaction with a purpose of evading the tax liability. We have deliberated at length on the orders of the lower authorities as regards the issue under consideration and find ourselves to be in agreement with the view taken by the lower authorities. Before parting, we may herein observe that nothing was brought to our notice which could prove that the observations of the lower authorities were perverse or incorrect. The Ground of appeal No. 1 raised by the assessee is dismissed - ITA (s) Nos. 5710/Mum/2012, ITA (s) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company which is engaged in property business had e-filed its return of income for A.Y. 2006-07 on 28.11.2006, declaring income of ₹ 27,093/-. The return of income of the assessee was processed as such under Sec. 143(1) of the Act. The case of the assessee was thereafter selected for scrutiny assessment under Sec. 143(2). 3. That during the course of the assessment proceedings the A.O obtained the details of the Sundry creditors of ₹ 2,00,18,823/- reflected in the balance sheet of the assessee for the year under consideration, viz. A.Y. 2006-07. The A.O deliberating on the details of the creditors observed that the same comprised of an amount of ₹ 1,81,21,800/- shown under the head Ownership of Gala . The assessee submitted before the A.O that the amount of ₹ 1,81,21,800/- was the advance received from its tenants of the galas in its premises at Universal Estate for converting their tenancy rights into ownership. The A.O observed that the assessee had total 31 tenants in its premises at Universal Estate . That a perusal of the facts revealed that the assessee had during the year under consideration, viz. A.Y. 2006-07 had entered into agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as per the agreement to sell was more than the fair market value, while for in the remaining 26 properties the fair market value determined by the AVO was found to be more than the sale consideration received by the assessee as per the agreement to sell. 6. The assessee during the course of the appellate proceedings objected to the valuation done by the AVO. It was submitted by the assessee that though the AVO had claimed in the valuation report that the combination of physical method of valuation using appropriate sale instance and rent capitalisation was adopted for valuation of property, but however , the properties were valued by him by adopting only the physical method of valuation using appropriate sale instance in respect of all the 26 properties. The assessee submitted before the CIT(A) that the valuation of the properties by the AVO by using appropriate sale instance was contrary to the provisions of law. The assessee submitted that as all the 26 galas/properties sold by the assessee were let out to various persons over the years, therefore, as per Schedule III- Part B of the Wealth Tax Act, 1957, the said properties should have been valued by using rent capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, then the value of the properties would be more or less than that shown in the respective agreements to sell. The assessee thus submitted before the CIT(A) that as the fair market value of the galas/building after considering the aforesaid facts would be found to be in conformity with the sale consideration received as per the respective agreements to sell, therefore, the provisions of Sec. 50C would clearly be ousted. 8. The CIT(A) after considering the objections of the assessee to the valuation of the AVO, therefore, remanded the matter to the A.O for obtaining the report of the AVO. The AVO meeting out the objections of the assessee submitted that the rent capitalization method was not followed in the case of the assessee, because the rent fetched was not reasonable. The AVO submitted that the rent capitalization method could be adopted only when the rent is fair, therefore, in the case of the assessee as the rent paid by the tenant was found to be arbitrary, ranging from ₹ 0.50 per Sq. ft to ₹ 2.50 per Sq. ft, which was substantially less than the reasonable rent, therefore, the rent capitalisation method was not followed. 9. The assessee on receipt of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus would be liable to be assessed as Long term Capital Gain (LTCG) and Short Term Capital Gain (STCG), respectively. The ld. A.R taking us through the facts of the case submitted that the CIT(A) had rightly concluded that the valuation of the property under consideration was to be valued as per the rent capitalization method. The ld. A.R took us through the value of the 31 galas/buildings of the assessee in Universal Foundry , as determined on the basis of Rent Capitalization Method provided in Schedule III Part B of the Wealth tax Act, 1957 (Page 6 of APB ). 12. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We are of the considered view that the revenue misdirecting itself and misconstruing the observations of the CIT(A) that the provisions of Sec. 50C would not be applicable to the case of the assessee, had assailed the same before us. We find that the CIT(A) had concluded that the provisions of Sec. 50C would not be attracted in the case of the assessee, not for the reason that the same were not applicable in the case of depreciable assets, but rather, for the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not approve of the summary acceptance by him of the claim of the assessee that as the sale price of the galas/buildings received by the assessee was more than the value determined as per the Rent Capitalisation Method, therefore, no addition was called for in the hands of the assessee. We though are not oblivious of the fact that the assessee had placed on record the valuation of the 31 galas/building as per the Schedule III Part B of the Wealth tax Act, 1957, but then, we are of the considered view that the said valuation furnished by the assessee was required to be verified and could not have been accepted on the very face of it. We thus in all fairness restore the matter to the file of A.O, and therein direct that the Fair market value of the property be got determined as per the Rent Capitalization Method. Needless to say, during the course of the set aside proceedings the assessee shall be afforded sufficient opportunity of being heard by the lower authorities, and shall further remain at a liberty to support its claim on other grounds as regards the issue under consideration. 13. The appeal of the assessee is allowed for statistical purposes. ITA NO. 5657/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the tenancy rights into ownership were liable to be brought to tax during the year under consideration. 17. That as the value that was adopted by the Stamp valuation authority at ₹ 59,55,952/- while registering the respective sale deeds of the aforesaid 10 galas was more than the sale consideration of ₹ 33,44,000/- received by the assessee, therefore, the A.O taking recourse to the provisions of Sec. 50C of the Act computed the income of the assessee under the head Capital gain by adopting the value of ₹ 59,55,952/- as the sale consideration. 18. Aggrieved, the assessee assailed the order of the A.O before the CIT(A). The CIT(A) by referring to the observations as were recorded by him while disposing of the appeal of the assessee for the immediately preceding year, viz. A.Y. 2006-07, observed that as the property of the assessee was an old tenanted property, therefore, the most appropriate method for valuation was the Rent Capitalization Method. The CIT(A) thus being of the view that as the consideration/sale price shown by the assessee was more than the value as per Rent Capitalization Method, therefore, directed the A.O to consider the sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, viz. M/s Instamac P. Ltd having developed a new product, i.e Herbal ready mix tea coffee powder, which was approved by M/s Hindustan Unilever Limited (for short HLL ), was to get an estimated order of ₹ 15 crores every year for supply of the said product from HLL. The assessee submitted that the aforesaid issue was discussed at the boards meeting of the assessee company on 02.03.2006, and it was resolved to acquire 4500 shares of ₹ 100/- each of M/s Instamac P. Ltd at a premium of ₹ 1800/- per share, that is for a total consideration of ₹ 81 lac. However, as the bank declined to give loan to M/s Instamac P. Ltd for purchasing new machines as well as the new venture capitalist who had earlier agreed to back the payment took a negative stand, therefore, in the backdrop of the aforesaid change in circumstances, the entire project had to be scrapped. It was submitted by the assessee that at the said time one Mr. Shrikant Shah was ready to purchase the shares of M/s Instamac P. Ltd so held by the assessee, but for a consideration of ₹ 4,50,000/-. It was submitted by the assessee that it was under the aforesaid compelling circumstances that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA NO. 5658/Mum/2012 A.Y. 2008-09 28. We shall now advert to the appeal of the revenue for A.Y. 2008- 09, wherein the order of the CIT(A) had been assailed before us on the following grounds of appeal: On the facts and in the circumstances of the case and in law, the CT(A) erred in not upholding the application of sec. 50C of the Act, which was rightly invoked by the AO On the facts and in the circumstances of the case and in law, the CT(A) erred in directing the AO to accept the sale consideration as per the sale agreements which is in contravention of the provisions of section 50C of the Act On the facts and in the circumstances of the case and in law, the CT(A) erred in relying y\upon various decisions of High Courts which were rendered in 1979, 1980 and 1993, i.e prior to the insertion of sec. 50C in the Act by Finance Act, 2002, w.e.f 01.04.2003 On the facts and in the circumstances of the case and in law, the CT(A) erred in not appreciating that the ITAT, Mumbai F Special bench in the case of ITO vs. United Marine Academy, 138 TTJ (Mumbai)(SB) 129 has held that the provisions of sec. 50C are applicable to transfer of depreciable assets covere ..... 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