9911796707
TMI Blog2019 (8) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... m Capital Loss into Long Term Capital Gain and taxing the same because the settled position of law is that the validity of an order of a statutory functionary has to be judged on the basis of material available and legal position prevailing at the time when such an action was taken or an order is framed because subsequent happenings if are put into use and considered, it may validate an order which was otherwise an illegal order in law when was made. This is impermissible in the eye of law. Hence the action of ld. A.O. was erroneous and which was liable to be cancelled, by deleting the addition by the ld.CIT (A), which was not done. Hence she erred. The addition may kindly be deleted. 3. That without prejudice to the ground no. 1 and 2 above, the ld. CIT (A) grossly erred in law and in facts in upholding levy of interest u/s 234B of the Act ignoring the submissions and legal position particularly when the amendment in statute was a retrospective charging amendment and the assessee has been denying completely its liability for such a charge of interest even if action of converting the Short Term Capital Loss into Long Term Capital Gain is upheld. 4. That in the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has been apparently understood by the Coordinate Bench was that the provisions governing cost of acquisition in case of succession, inheritance are already in existence under section 49(1)(iii)(a), the subsequent amendment in section 49(1)(iii)(e), wherein corresponding provisions governing cost of acquisition in case of a transfer as defined in section 47(xiii) were provided by the Finance Act, 2012, was clarificatory in nature. 13. We further note that contentions of the assessee regarding nonlevy of interest u/s 234B due to retrospective amendment, though noted by the Coordinate Bench, has apparently missed its attention and the ground of appeal has been dismissed holding it as consequential in nature in view of deletion of ground relating to cost of acquisition. 14. In light of above discussions, we consider it appropriate that the decision rendered by the Coordinate Bench be recalled in its entirety and the matter be heard afresh. We accordingly recall the order passed by the Coordinate Bench in ITA No. 428/JP/2013. The Registry is directed to fix the matter for hearing in due course. Thus the appeal was again placed before us for hearing and adjudication. Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the fair market value/current realizable value of the property as determined by the Registered Valuer M/s. Bhargawa & Associates as on 21st December, 2006 at Rs. 3,83,48,000/-. The said fair market value was comprising of cost of land at Rs. 3,70,73,520/- + cost of construction of Rs. 12,75,183/-. On such revaluation of the asset, the firm transferred the differential amount to a capital reserve account prior to the business of the firm was taken over by the assessee company. Therefore, the assessee company has recorded the cost of acquisition of the land in question at Rs. 3,70,00,000/- being a part of purchase consideration. Thereafter the said land was sold by the assessee for a consideration of Rs. 2,00,00,000/- on 15.05.2008 and claimed short term capital loss of Rs. 1,81,62,525/-. The ld. A/R has submitted that the ld. CIT (A) has taken the cost of acquisition at Rs. 2,50,000/- being the cost of acquisition in the hands of partnership firm by applying the deeming provisions of section 49(1)(iii)(e) of the Act. He has pointed out that clause (e) to section 49(1)(iii) has been inserted by the Finance Act 2012 though with retrospective effect from 1st April, 1999. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the land. 5. On the other hand, the ld. D/R has submitted that the AO has analyzed the fact under which the partnership firm which was succeeded by the assessee company has revalued the asset and particularly the land in question from Rs. 2,50,000/- to Rs. 3,70,00,000/- and the differential amount was transferred to the capital reserve. Therefore, the entire transaction of revaluation and taken over of the assets and liabilities by the assessee company is only paper transaction and not the real transfer of the land against the consideration. He has relied upon the orders of the authorities below. He has further submitted that when there is no basis of valuation shown in the books, then the original cost of acquisition has to be taken into consideration for the purpose of computing the capital gain arising from the sale of the land in question. There is no dispute that the assessee has taken over the assets and liabilities of the erstwhile partnership firm under succession and, therefore, the deeming provisions of section 49 are applicable in the case of the assessee so far as the cost of acquisition of the land is concerned. He has further submitted that the amendment of sub cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to the facts of the case of the appellant because this amendment with retrospective effect was clarificatory and not substantive in nature. The AR of the appellant has submitted that the cost could not have been determined u/s 49(1)(iii)(a) which has been done by the AO but should have been done u/s 49(1)(iii)(e). First of all, it is a presumption that the cost worked out by the AO is u/s 49(1)(iii)(a) and not u/s 49(1)(iii)(e) because the assessment order is completely silent regarding the section under which the cost of the property has been worked out. Therefore, the AR of the appellant is making a presumption that the cost of the property has been worked out u/s 49(1)(iii)(a). The Hon'ble ITAT in the case of Ishrawati Devi V/s ITO (2008) 298 ITR (AT) 313 (Allahabad) has held that the CIT (A) " has powers coterminous with the Assessing Officer. The Commissioner (Appeals) can direct the Assessing Officer to do what the latter failed to do. Unless there are specific fetters placed upon the powers of the Commissioner (Appeals) by express words, he exercise the same powers as does the original court or authority. In fact, the entire assessment is thrown open before him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cope of section 49 which deals with cost with reference to certain modes of acquisition. This amendment will take effect retrospectively from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999- 2000 and subsequent assessment years." Thus it is clear that since the transfer of capital asset by a firm to the company as a result of succession of the firm by the company falls under section 47(xiii) was not covered by the pre amended provisions of section 49 of the Act, and therefore, to bring the nature of transfer as provided under section 47(xiii), the amendment was brought into Statute whereby sub-clause (e) to section 49(1)(iii) was inserted. In the absence of this amendment, the case of transfer falling under section 47(xiii) was outside the ambit of mischief of deeming fiction of section 49 of the Act. Therefore, the purpose of the amendment was to bring all these cases in the ambit of deeming fiction as provided under section 49 of the Act. It is also not in dispute that at the time of filing the return of income on 30th September, 2009 the law which was amended by Finance Act, 2012 was not in the Statute. The Hon'ble Supreme Court in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the revenue with administering the provisions of the Act with 'an evil eye and unequal hand'." 12. We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid down by this Court it has to be held that in the circumstances of the present case, levy of additional tax taking into account the income by way of cash compensatory support is not warranted. The question is answered in the affirmative, i.e., in favour of the assessee and against the revenue. The appeal is, accordingly, dismissed with costs." Thus the Hon'ble Supreme Court has held that the law prevailing at the time of filing of the return has to be applied and the amendment which could not have been known before the Finance Act came into force cannot be applied for additional tax liability to be levied. It will amount to punishing the assessee for no fault of his. A similar view was taken by the Hon'ble Supreme Court in the case of Sedco Forex International Drill Inc and Others vs. CIT and Another (supra) regarding the applicability of a subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to decide the issue as we are satisfied that the 1999 Explanation would not apply to the assessment years in question." It is clear from the amendment brought into Statute that this amendment was not brought to clarify the existing provision but a new clause is added which creates a tax liability by itself. Further, the assessee has filed the return of income as per the provisions of Act prevailing at that time and, therefore, the subsequent amendment by Finance Act 2012 cannot be applied on the return of income filed prior to the said amendment. When the said amended provision was not in the Statue at the time of filing of return by the assessee, then this amendment in provisions of section 49(1)(iii)(e) though with retrospective effect cannot be applied in this case. The assessee cannot be asked to perform an impossible act to comply with a provision not in force at the time of filing of return of income but introduced later with retrospective amendment. The Hon'ble Supreme Court in case of CIT vs. Vatika Township Pvt. Ltd. 367 ITR 466 (SC) has again reiterated its view in para 36 to 38 as under :- "36. It would also be pertinent to mention that assessment creates a veste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. There are various reasons for coming to this conclusion which we enumerate herein below:" Therefore, retrospective operation of a law should not be given so as to effect, alter or destroy an existing right and to create a new liability or obligation. The Hon'ble Supreme Court again in case of CIT vs. Walfort Share & Stock Brokers (P) Ltd., 326 ITR 1 has dealt with this issue of retrospective amendment in para 20 as under :- "20. The real objection of the Department appears to be that the assessee is getting tax-free dividend; that at the same time it is claiming loss on the sale of the units; that the assessee had purposely and in a planned manner entered into a pre-meditated transaction of buying and selling units yielding exempted dividends with full knowledge about the fall in the NAV after the record date and the payment of tax-free dividend and, therefore, loss on sale was not genuine. We find no merit in the above argument of the Department. At the outset, we may state that we have two sets of cases before us. The lead matter covers assessment years before insertion of section 94(7) vide Finance Act, 2001 with effect from 1-4-2002. With regard to such cases we may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas section 94(7) was inserted with effect from 1-4-2002. The reason is obvious. Parliament realized that several public sector undertakings and public sector enterprises had invested huge amounts over last couple of years in the impugned dividend stripping transactions so also declaration of dividends by mutual fund are being vetted and regulated by SEBI for last couple of years. If section 94(7) would have been brought into effect from 1-4-1962, as in the case of section 14A, it would have resulted in reversal of large number of transactions. This could be one reason why the Parliament intended to give effect to section 94(7) only with effect from 1-4-2002. It is important to clarify that this last reasoning has nothing to do with the interpretations given by us to sections 14A and 94(7). However, it is the duty of the court to examine the circumstances and reasons why section 14A inserted by the Finance Act, 2001 stood inserted with effect from 1-4-1962 while section 94(7) inserted by the same Finance Act as brought into force with effect from 1-4-2002." Thus it is a cardinal principle of tax law as propounded by the Courts that law to be applied which is in force in the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
