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TMI Blog2021 (8) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. This working would result in a loss but not a gain. This simple arithmetic calculation was missed by the A.O and he ma de the addition under section 45 (3) which does not permit him to substitute the full value of consideration other than the amount recorded in the books of account of the joint venture. As the Assessing Officer's action is not according to the provisions of Sec 45 (3) , there is no justification or upholding the contentions of Revenue CIT(A) had rightly vacated the addition that was made by the A.O by substituting the market value of the property as per the ready reckoner rates u/s 50C, as against the amount recorded in the books of accounts‟ of the respective firms, which was adopted by the assessee as the full value of consideration received or accruing as a result of the transfer. - Decided in favour of assessee. - ITA No. 598/Mum/2020 - - - Dated:- 16-8-2021 - SHRI VIKAS AWASTHY, JUDICIAL MEMBER And SHRI M.BALAGANESH, ACCOUNTANT MEMBER Revenue by : Ms. Shreekala Pardeshi Assessee by : Ms. Neha Paranjpe ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.598/Mum/2020 for A.Y.2011-12 arises out of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r A.Y. 2012-13 which was the basis for reopening for year under consideration. Appellant filed an appeal against the order of the AO before Ld. CIT(A). The Ld. CIT(A)-4, Mumbai vide order no. CIT(A)-4/IT-41/ACIT-16(1)/2015-16 dated 08.09.2016 decided the appeal of the assessee. The relevant part of the order is reproduced as under: 3.4. I have considered the findings of the Assessing Officer, rival submission of the appellant and background of the case, carefully. During the year, the Appellant has shown contribution of capital in the firm namely, M/s. Mansagar Infrastructure and Maa Shakti Infrastructure of ₹ 2,33,81,603/- being value of plot of land. The value of the plot of land has been credited in the books of firms on which capita! gain has been calculated and paid. The Id. Assessing Officer has not accepted the value of plot of land and has estimated by invoking Sec.500 of the I.T. Act, 1961 for taking circle rate prescribed by local authority. This approach of the Assessing Officer is not tenable because there is a specific provision of law u/s.45(3) of the I.T. Act, 1961 which provides that for the purpose of Sec,48, the amount recorded in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g would result in a loss but not a gain. This simple arithmetic calculation was missed by the A. O. and he made the addition under section 45(3) which does not permit him to substitute the full value of consideration other than the amount recorded in the books of account of the joint venture. As the Assessing Officer's action is not according to the provisions of Sec 45(3), there is no justification for upholding the contentions of Revenue. We uphold the order of the CIT(A) and reject the ground of appeal. Respectfully, following the decision of jurisdictional ITAT, the Assessing Officer is directed to adopt the value of consideration of ₹ 2,48,84,277/- as shown by the Appellant. 3.5. In the result, Ground No.1 is allowed. 3.2. The relevant operative portion of the Tribunal order in assessee s own case for A.Y.2012-13 are as under:- 2. During the course of the assessment proceedings it was observed by the A.O that the assessee had transferred certain ancestral plot of land by way of his capital contribution as a partner in two partnership firms viz. (i). M/s Mansagar Infrastructure; and (ii). M/s MaaShaki Infrastructure, and had worked out the Long Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worked out the LTCG‟ on the aforesaid transfer transaction at ₹ 6,43,56,086/-. As the assessee had already offered to tax LTCG of ₹ 2,22,53,129/- in his return of income, therefore, the A.O made a consequential addition of ₹ 4,21,02,957/- [₹ 6,43,56,086/- (-) ₹ 2,22,53,129/-]. Further, it was noticed by the A.O, that in the course of the assessment proceedings in the case of M/s Gayatri Films Music Pvt. Ltd., it was observed that the said company had received substantial advances of ₹ 5,37,46,284/- from M/s Sagar Entertainment Ltd. (now known as M/s Sagar Entertainment Pvt. Ltd.), i.e a related party, which was prima facie covered by Sec. 2(22)(e) of the Act. 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 assessee was called upon to explain as to why the aforesaid amount of advances may not be treated as deemed dividend‟ in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of LTCG of ₹ 4,21,02,957/- made by the A.O u/s50Cof the Act; and (ii). that, the CIT(A) had wrongly vacated the addition of ₹ 5,37,46,284/- made by the A.O u/s 2(22)(e) of the Act. 6. We shall first advert to the grievance of the revenue that the CIT(A) had erred in dislodging the well founded LTCG addition of ₹ 4,21,02,957/- that was made by the A.O u/s 50C of the Act. As observed by us here in above, the assessee had transferred certain ancestral plot of land by way of his capital contribution‟ as a partner in two partnership firms viz. (i). M/s Mansagar Infrastructure; and (ii). M/s Maa Shakti Infrastructure. Amount recorded in the capital account, of the assessee with the said respective firms, was as under: Particulars Amount Credited in the Capital account‟ of the assessee. M/s Mansagar Infrastructure ₹ 1,28,62,887/- M/s Maa Shakti Infrastructure ₹ 1,05,18,716/- As per the mandate of Sec. 45(3) of the Act, the assessee had adopted the amount recorded in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to insertion of Sec. 45(3) on the statute w.e.f 01.04.1988. As can be gathered from a perusal of CBDT Circular No. 495, dated 22.09.1987 (para 24.1), Sec. 45(3) was made available on the statute in order to overcome the problem of income going untaxed due to the decision of the Hon ble Supreme Court in the case of Kartikeya V. Sarabhai Vs. CIT (1997) 94 Taxman 164 (SC). As per the Hon ble Apex Court, the capital gain could not be computed in respect of a transaction of contribution of capital asset by a partner in the firm since the value of consideration could not be determined. It was observed by the Hon ble Apex Court, that the amount credited in the partners capital account in the books of the partnership firm did not represent the true value of consideration, as it was only a notional value intended to be taken into account at the time of determining the value of the partners share in the net partnership assets on the date of dissolution or his retirement. Accordingly, it was only with the introduction of Sec. 45(3), the notional value of the asset recorded in the books of account‟ was deemed as the full value of consideration for the purpose of computing the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 dissected and the charging provision 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 fact, the Hon ble Supreme Court in the case of D.R Yadav Vs. R.K Singh (2003) 7 SCC 110, had observed, that where there are two conflicting provisions of law in operation in the same field, the rule that specifically operates in that field would apply over the general rule. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration is taken as the amount recorded in the books of the joint venture, the capital gain can be worked out by reducing the cost of purchase as per the books of assessee. In case the A. O. substitutes the cost of purchase, by whatever means, then that cost price has to be adjusted in the capital gains. This may result in a loss of equal amount as the books of joint venture show the book value as consideration and substituted cost price (value determined by AO in the order) as a deduction. This working would result in a loss but not a gain. This simple arithmetic calculation was missed by the A.O and he ma de the addition under section 45 (3) which does not permit him to substitute the full value of consideration other than the amount recorded in the books of account of the joint venture. As the Assessing Officer's action is not according to the provisions of Sec 45 (3) , there is no justification or upholding the contentions of Revenue. We uphold the order of the CIT(A) and reject the ground of appeal. We thus, in terms of our aforesaid observations, and also finding ourselves to be in agreement with the view taken by the aforesaid coordinate benches of the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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