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TMI Blog2019 (10) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision therein provided be allowed to subsist in isolation. As such, we are of a strong conviction, that the deeming of the amount recorded in the books of accounts of the firm or other association of persons or body of individuals, as the full value of consideration received or accruing as a result of the transfer of the capital asset in Sec. 45(3), cannot be substituted by the deemed sale consideration contemplated in Sec. 50C of the Act. Apart there from, we find that as per the Latin maxim generallia speciali bus non derogant , which is a rule of construction, the special provisions prevail over the general provisions. In the backdrop of our aforesaid observations, we are of a strong conviction that in case the legislature in all its wisdom would had intended to apply the deeming provisions of Sec. 50C to the transactions contemplated in Sec. 45(3) of the Act, then it would have removed Sec. 45(3) from the Act. Having not so done, we are of the considered view, that the deeming provisions of Sec. 50C cannot be transposed and therein be read into Sec. 45(3) of the Act, as the same would frustrate the very chargeability to tax of the transactions therein provided. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), which clearly states that Provisions of section 50 C being special provisions, would override provisions of Section 45(3) of the Act. 2. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in not appreciating the importance of the insertion of word assessable in Section 50C, which makes it even more clear that even in the absence of registration of the deed, the stamp duty value/market value has to be adopted as deemed full value of consideration in Section 48 of the Act. 3. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the addition of deemed dividend made u/s. 2(22)(e) of the Income-tax Act, 1961 in the hands of the assessee in respect of advance of ₹ 5,37,46,284/- received by M/s. Gayatri Films Music Pvt. Ltd., (for sake of brevity, GFMPL) from M/s Sagar Entertainment Pvt. Ltd., (for the sake brevity, SEPL) was perverse, since the finding of fact given in the order in the order of Ld. CIT(A) are inconsistent with the material on record? 4. Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sagar Entertainment Pvt. Ltd. (granting NOC) under declaration 15,02,674 Total consideration 2,48,84,277 Indexed cost of the land (cost of plot no 33 ₹ 1949297/- + cost of plot no. 19 ₹ 2323061/- = total cost ₹ 4272358/- [as per original deed of purchase dt. 7.03.1998] [applicable index 331 x 785] assesses shae in property 20.04% hence indexed cost ₹ 2030078/- - copy of purchase deed already placed on your record 20,30,078 Cost of transfer/ cost of improvement - Amount payable to SEL for reimbursing capital expenditure by SEL incurred on plot no. 33 ₹ 200357/- and plot no. 19 ₹ 400713/- copy of MOU enclosed 6,01,070 Long Term Capital Gain 2,22,53,129 Being of the view, that the LTCG on the transfer of the aforesaid property was to be supposedly worked out as per Sec. 50C of the Act, the A.O called upon the assessee to put forth his explanation as regards the same. In reply, the assessee tried to impress upon the A.O that the provisions of Sec. 50C were not attrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the full value of consideration received or accruing on the transfer of the capital asset was concerned, the same did find favour with the CIT(A). It was observed by the CIT(A), that as it was specifically provided u/s 45(3), that for the purpose of Sec. 48 the amount recorded in the books of accounts of the firm shall be deemed to be the full value of consideration, therefore, the provisions of Sec. 50C would not be applicable to such transaction. As regards the addition of ₹ 5,37,46,284/- that was made by the A.O u/s 2(22)(e) of the Act, it was observed by the CIT(A), that none of the shareholder of M/s Gayatri Films Music Pvt. Ltd. was having more than 20% of equity capital and was simultaneously having more than 10% shareholding in the lending company. Also, it was observed by the CIT(A), that as Sec. 2(22)(e) referred to the beneficial ownership of the shareholder, therefore, the holding of the assessee in his individual capacity could not be clubbed with the holding of his HUF. On a similar footing, it was observed by him, that the holding of the other shareholder i.e Sh. Jyoti Sagar in his individual capacity could also not be combined with his shareholding in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable in the eyes of law, or not. On a perusal of Sec. 45(3), we find that the same provides that for the purpose of Sec. 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. On the other hand, Sec. 50C provides, that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a state government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. As observed by us hereinabove, both of the aforesaid statutory provisions i.e Sec. 45(3) and Sec. 50C envisages a deeming provision for the purpose of adopting the full value of consideration received or accruing as a result of transfer of the capital asset , in order to work out the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision for the purpose of assuming the existence of a fact which does not even exist. On the basis of our aforesaid observations, it can safely be concluded that the provisions of Sec. 45(3) deem the value recorded in the books of accounts as the full value of consideration (which is otherwise not), in order to make the transaction taxable. As observed by us hereinabove, Sec. 45(3) comprises of two limbs, viz. (i). the first limb, is the charging section which enables the levy of capital gains tax on the profits or gains arising on the transfer of a capital asset by a partner as its capital contribution in a firm or other association of persons or body of individuals; and (ii). the second limb, is a deeming fiction which enables adoption of the amount recorded in the books of accounts of the firm or other association of persons or body of individuals, as the full value of consideration received or accruing as a result of the transfer of the capital asset. As can be gathered from a perusal of Sec. 45(3), the charging of the transaction therein envisaged to levy of capital gain tax and quantification of such tax, both go hand in hand for facilitating quantification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, Chennai in the case of Shri SarrangamAshok Vs. the Income-Tax Officer, Chennai [ITA No. 544/Chhny/2019]. In the case of ITO- 21(2), Mumbai Vs. M/s Chirayu Estate Developer Pvt. Ltd., it was observed by the Tribunal, that once the price recorded in the joint venture‟s books was treated as full value of consideration, the substitution of any value so as to make addition under section 45(3) would not be permissible. It was observed by the Tribunal, as under: 14. A plain reading of the said provision would reveal that the profits or gains arising from the transfer of a capital asset to another entity by way of capital contribution or otherwise shall be chargeable to tax. The profit or gain would arise only when the transfer has been made at a price which is more than the cost price and the difference between the cost price and amount at which transfer has taken place can be charged under section 45(3). In the instant case the purchase price of land as recorded in the transferor's book and recorded in the books of the joint venture are the same. As per provisions of section 45(3) price of land recorded in the books of joint venture is required to be considered as rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le framing the assessment observed, that M/s Gayatri Films Music Pvt.Ltd. had received substantial advances of ₹ 5,37,46,284/- from M/s Sagar Entertainment Ltd. (now known as M/s Sagar Entertainment Pvt. Ltd.). Observing, that two of the substantial shareholders of M/s Sagar Entertainment Pvt. Ltd., viz. (i). Sh. Jyoti Sagar (26.17%); and (ii). Sh. Prem Sagar i.e the assessee (18.40%), were also holding substantial shareholding in M/s Gayatri Films Music Pvt. Ltd., viz. (i). Sh. Jyoti Sagar (32.40%); and (ii). Sh. Prem Sagar i.e the assessee (25.34%), the A.O had brought the entire amount of ₹ 5,37,46,284/- to tax as deemed dividend u/s 2(22)(e) in the hands of the assessee. On appeal, the CIT(A) observed that none of the shareholders of M/s Gayatri Films Music Pvt. Ltd. was having more than 20% of equity capital and was simultaneously having more than 10% shareholding in the lending company. Also, it was observed by the CIT(A), that as Sec. 2(22)(e) referred to the beneficial ownership of the shareholder, therefore, the shareholding of the assessee in his individual capacity could not be clubbed with the holding of his HUF. On a similar footing, it was observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern ), had been looked into by the tribunal in the case of the aforesaid sister concern viz. ACIT-16(1), Mumbai Vs. M/s Sagar Arts Pvt. Ltd [ITA No. 7444/Mum/2016; dated 18.09.2019] for A.Y 2013-14. In the said case, the A.O for the purpose of working out the shareholding of Sh. Jyoti Sagar in the aforesaid companies for the purpose of Sec. 2(22)(e) had clubbed his individual shareholding with that which was held by him in his capacity as that of the Executor of the Estate of Shri. Subhash Sagar. On appeal, it was concluded by the tribunal that the shareholding of the estate of Late Shri. Subhash Sagar, which was held by Sh. Jyoti Sagar in his capacity as that of an Executor of the Estate of Shri. Subhash Sagar, could not have been clubbed for working out his individual shareholding in M/s Sagar Arts Pvt. Ltd and M/s Gayatri Films Music Pvt. Ltd. The tribunal while concluding as hereinabove, had observed as under : 6. We have given a thoughtful consideration to the issue before us and are unable to persuade ourselves to subscribe to the claim of the ld. Departmental representative (for short D.R ). Admittedly, as is borne from the records, the assessee company is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o place on record any irrefutable material which would evidence that the holding of Shri. Jyoti Sagar in M/s Gayatri Films Music Pvt. Ltd. and the assessee company, was not less than 10% and 20%, respectively. Apart there from, we are in concurrence with the view taken by the CIT(A), that the amount received by the assessee company from M/s Gayatri Films Music Pvt. Ltd, being in the nature of an intercorporate deposit could not have been brought within the realm of the definition of deemed dividend under Sec. 2(22)(e) of the Act. In fact, we find that the Tribunal while disposing off the appeal of the assessee for the immediately preceding year viz. A.Y 2012-13 had deleted the addition which was made by the A.O by treating the amount received by the assessee from M/s Gayatri Films Music Pvt. Ltd. as deemed dividend u/s 2(22)(e) of the Act ,for the reason, that, none of the shareholders of the assessee company holding more than 20% of its shareholding were simultaneously holding more than 10% interest in M/s Gayatri Films Music Pvt. Ltd. The Tribunal while concluding as hereinabove, had observed as under: 8. We notice that the Ld. CIT(A) had rightly pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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