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TMI Blog2022 (7) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... 72/JP/2022 has raised the following grounds of appeal: 1. That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining the stamp duty value of the property at Rs. 11,19,40,441/- as deemed consideration u/s. 50C of the I.T. Act as against the actual sale consideration of Rs. 8,81,00,000/- coincides with the fair market value of property prevailing on the date of transfer of property. The ld. CIT(A) ignored the fact that the objection raised by the appellant during the assessment proceedings giving full particulars of the fair market value of the property. 2. That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 without considering the fact that WDV was on date of discontinue of business, the buildings of discontinued business as kept investment for period more than 3 years and since then no depreciation claimed on that building. 3. That on the facts and circumstances of the case and in law the ld. CIT(A) grossly erred in directing to computing notional rent an old unusuable hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be less than Stamp Duty valuation. For charging capital gain in view of Section 45, to be computed as provided in Section 48, this deemed consideration would be applied. As per Para 3.11 of the assessment order, since assessee has not furnished separate consideration received from the sale of land and building, the Assessing Officer requisitioned the Sub-Registrar, Jhanwar, Jodhpur to furnish the details of the DLC value of the land and building separately taken by him for charging the stamp duty on sale of property under reference. In response, the Sub-Registrar, Jhanwar, Jodhpur vide his office letter No. 298 dated 23.12.2019, informed that out of full value of the property at Rs. 11,19,40,441/-, the value of land is Rs. 9,90,99,000/- and that of buildings is Rs. 1,28,41,441/-. Accordingly, value of consideration of the land for the purpose of computation of capital gain is taken at Rs. 9,90,99,000/- in accordance with the provisions of section 50C(1) the Income Tax Act, instead of Rs. 6,55,07,063/- taken by the assessee in his income tax return for computation of capital gain. After deducting transfer expenses of Rs. 6,62,496/- and indexed cost of acquisition of Rs. 1,78,41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to accept the actual sale consideration which coincides with fair market value for the purpose of computing capital gain. 6.1.3 I have carefully perused the submission of the appellant with reference to the facts emanating from the assessment order. The appellant is aggrieved that the stamp duty value has been adopted by the Assessing Officer as sale consideration of the property for the purpose of computing capital gains. In this regard appellant has contended that (i) the actual sale consideration of Rs. 8,81,00,000/- coincides with the fair market value prevailing on the date of transfer of the property, (ii) the rate of Rs. 7000/- per square Meter adopted by the Stamp Duty Valuation Authorities for the said land of the appellant is very much on the higher side when compared to the rate of Rs. 2,500/- of the land in Argo Food park which is adjacent to that of the appellant's land and shares a common boundary and (iii) despite objection raised by the appellant on adopting the stamp duty value, Assessing Officer has not referred the matter to the DVO as required u/s. 50C(2). In support of his contention, appellant placed reliance on the ratio laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28,41,441/- fixed for the buildings by the Stamp Valuation Authority. In this respect, the appellant is right in contending that the Assessing Officer's adaptation of deemed value for land at Rs. 9,90,99,000/- and for building at Rs. 2,18,50,441/- totals to Rs. 12,09,49,441/- which is higher than the stamp duty value of the impugned property, land and building of Rs. 11,19,40,441/-. The Assessing Officer cannot apply double standard in adopting the stamp duty value for land alone and not for the buildings when the Stamp Valuation Authority has specifically fixed the value for buildings at Rs. 1,28,41,441/-. Therefore, the AO is directed to adopt the stamp duty value of Rs. 1,28,41,441/- as the value/sale consideration for the buildings as well. Except as above, in the absence of any documentary proof that the dispute raised by the buyer before the Stamp Valuation Authority has been decided in favour of the buyer thereby lowering the stamp duty value, I sustained the stamp duty value of the property at Rs. 11,19,40,441/as deemed consideration of the impugned property inconformity with the provisions of Section 50C and direct the Assessing Officer to take the value of land at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT Appeal again misconception of fact by stating to be pendency of an appeal under the stamp Act filed before stamp duty authority, making reference to DVO on the same issue is legally unviable. In fact there was no any such appeal pending before such authority. The fact is that only the buyer given notice to Sub Registrar itself (Who made the stamp duty valuation) to intimate the excess stamp duty charged and no any appeal to appellate authority under the Stamp Duty Act. (PB page no 135-138). As such there is no any appeal is pending before stamp duty authority. The Ld. CIT Appeal factually wrong while rejecting ground of appellant. 2.1.2 That the appellant sold the property at fair market value as on the date of transfer. However Stamp duty authority charged higher stamp duty from buyer considering excess value without looking the fact or visit of property. It is also stated that the sold land situated in Industrial Park, Bornada Industrial Area which is just adjacent to the boundary wall of Agro Food Park, Boranada and share common boundary wall. The land in Agro food park has been valued by authority at Rs. 2500/- per square meter whereas this land situated just adjace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer, Ward 15(2) (2), Matru Mandir Tardeo, Mumbai 2011 (2) TMI 1284 - ITAT MUMBAI - TMI - IT APPEAL NO. 343 (MUM.) OF 2010 it held that where assessee has filed the objection before the Assessing Officer in respect of the valuation adopted for payment of the stamp duty for registration of the conveyance, the Assessing Officer should have referred the matter to the DVO as per the provisions of section 50C(2) of the Act * ITAT, Mumbai in Ajmal Fragrances & Fashions (P.) Ltd. Vs ACIT Circle 13(1) [2009] 34 SOT 57 (MUM.) it was held that sec. 50 sub-section (2) makes it very clear that whenever assessee claims before the Assessing Officer that he has not challenged the stamp duty valuation and sale consideration is different because of valid reason, then the Assessing Officer is required to refer the matter to Valuation Officer. Without going into the interpretation of the word "may" whether it should be taken only as mandatory or not the plain logic seems to be that Assessing Officer is not expert on valuation and that is why the Legislature has mandated that if there is strong objection from the assessee's side without challenging the stamp duty valuation, then valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated stamp duty value which is for computing capital gain separately of land and building at stamp duty value as suggested by ld. AO is a clerical work not the declared market value. Also there was no separate consideration of land or building decided in transaction but the stamp duty valuation authority specifically fixed the value of land and building. Considering the fact, the ld. CIT Appeal rightly directed assessing office to adopt the stamp duty value for building of Rs. 12841441 for computing capital gain on building. Your honor is requested to dismiss the ground of department. 7. We have heard both the parties and perused the materials available on record, written submission and orders of the authorities below. We find that the ld. CIT(A) has confirmed the finding of the AO in invoking the provision of Section 50C of the Act, in adopting the Stamp Duty value as sale consideration of the impugned property for computing capital gains u/s. 48. However, the CIT(A) has ignored the fact regarding the objection raised by the appellant during the assessment proceedings giving full particulars of the fair market value of the property which was required to be dealt with as per pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Valuation Officer as per section 50C(2) to ascertain fair Market value. Without doing so, the Assessing Officer had estimated the capital gains tax with taking estimated value, higher from the actual consideration or fair market value. In the various judicial decision, it is very much clear that in such case, the LD A.O. should have adopt the provision of section 50C(2) for applying deeming provision of sale consideration. 9. There, is no dispute that the submissions as referred above raising objection for substituting the value of immovable property on circle rate as per stamp duty authority against real consideration were filed before the Ld. AO during the course of assessment proceedings. Thus, as a matter of fact detailed reasons along with sufficient evidences were filed before the Ld. AO to demonstrate that these were old and un-maintained house property, in bad condition not fit for living being sold as per market rates. Thus, according to the submission of the assessee the property has market price much less the price notified by the Government for payment of Stamp duty. 10. It is considered expedient to have a look over the deeming provisions of section 50C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by law." 12. The ITAT Jaipur Bench 'A', Jaipur in the case of 'Smt. Sharda Devi Alwar Vs ITO 1(4)', Alwar Tax World, May 2013, Vol 49-part 5, has observed that if objection made by the assessee for value taken, A.O. should have adopted provision of sec 50C(2). 13. In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. The AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we hold that the CIT(A) was not justified in confirming the action of the AO in adopting deemed sale consideration in violation of section 50C(2) of the Act. 14. In the above view and legal precedents in these peculiar facts of the case, the failure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in destroyed condition not fit for habitation neither for residence nor commercial unless major renovation is under taken. That there is no electricity and water connection in the said properties till the end of previous year relevant to this assessment year in appeal is not commented upon. There is no material on record to demonstrate falsity in the submission of the appellant that despite appellant's efforts, the houses could not be sold due to which these properties are kept for trading as stock in trade. Therefore, in my considered opinion, the said residential houses cannot be taken as capital asset within the meaning of Section 2(14). Thus, it cannot be held that appellant owned more than c one residential house as on the date of transfer of the impugned property. 6.3.1 As a matter of fact, the AO himself has hailed the aforesaid seven properties as traded properties by computing notional rent based on the maxim laid down by the Hon'ble Delhi High Court in the case of M/s. Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180(2013). By doing so, the AO has accepted the contention of the appellant that the said residential houses are unsold properties of the tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presuming property shown as stock in trade are residential house property as mentioned in para 3.14.3 of his order. The ld. AO has taken this presumption that properties held as stock in trade are holding since long and purchases are not for earning profit but to accumulate house properties only. The ld. A.O further alleged with own presumption stating in said para that ''the assessee has purchases a residential house in the year under reference and claimed the same as a residential house property as stock in trade just to claim deduction u/s. 54F of the IT Act arises on sale of capital asset as discussed in foregoing para of this assessment order''. As against stated by Ld. A.O, we submit fact as under: * The appellant has started to deal in property business since previous year relevant to assessment year 2012-13 and maintaining separate trading account for property business since it's start being part of audited financial statement. The trading activities in properties since that period are as under: A.Y. Opening Stock Purchase &direct expense Sale Closing stock Gross profit/loss 2012-13 0 5,70,43,913 2,91,49,487 2,76,40,171 -2,42,255 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 54f anyway. Further the assessee recorded in his regular books of accounts as purchases of stock in trade. The accounts of assessee were audited and property stock in trade clearly shown in separate trading account are part of audited financial statement. 1.2 The other ground taken by the ld. A.O while disallowing the claim u/s. 54F is that in section 54F of IT Act the word used is residential house and there is no such distinction has been made in this section between the residential house properties held as investment or stock in trade as stated in para 3.14.6 of his order against which we submit as under: * That restriction as per proviso to section 54F" Owns more than one residential house other than new assets on date of transfer of the original asset" refer for in context of capital assets only both in respect of owned and transferred. When we consider the meaning for transfer of assets for capital assets, than at same place owing house property also should be for capital assets only. * The Section 45 to 55 of Income Tax Act is only for Capital Gain on Capital assets hence the provision relates to capital assets. Hence in section 54F the word used for investment in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear from the accounting treatment that all the seven flats were treated as stock-in-trade. The income from these flats is offered to tax under the head 'income from house property' because of the specific provisions of section 22 of the Act read with section 14 of the Act Such treatment of income by the assessee cannot be treated as an Act by which the assessee has considered the seven flats as residential house owned by him. We are, therefore, of the view that denial of the claim of the assessee for deduction u/s. 54F of the Act is unassailable. The AO is, therefore, directed to given the deduction as claimed by the assessee. We, therefore, allow the appeal of the assessee." THE HON HIGH COURT further held in paragraph 10 as under: "10. We may also add that under the heading of Capital Gains, section 45 of the Act provides that any profits or gains arising from the transfer of capital assets can be considered the gain or exclusion from the set off the gain it should be related to the capital assets. When the property was not shown as capital assets but was shown as stock-in-trade, naturally the view taken by the tribunal cannot be said to be erroneous. " As s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of discontinued business treated as short term capital gain in terms of Section 50 without considering the fact that WDV was on date of discontinue of business, as the buildings of discontinued business were kept as an investment for period more than 3 years and since then no depreciation was claimed on that building. 20. The facts as emerges from the assessment order of the AO are as under:- 3.7 I have gone through the submission made by the assessee but the same is not found tenable. It is noted that the assessee had claimed depreciation on the above building for the assessment years 2008-09 to 2012-13. The assessee did not claim depreciation on the building constructed on the a fore mention plots from AY 2013-14. The stoppage of the claim of depreciation will not alter the nature of assets. The property under reference was a business asset and was located at industrial park meant for business activities and the assessee claimed depreciation on the basis that the written down value was also taken on all the building together into a consolidated figure. It is pertinent to mention here that once an asset has been treated as block of asset, then, irrespective of its disposal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof, as may be prescribed, can be claimed. 3.9 Section 50 of the IT Act sets out special provision for computation of capital gains in case of depreciable assets. Section 50 of the IT Act reads as under: Special provision for computation of capital gains in case of depreciable assets. 50. Notwithstanding any thing contained in clause(42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications:- (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transferor transfers; (ii) The written down value of the block of assets at the beginning of the previous year; and (iii) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... block of assets' means a group of assets falling within the assets enumerated in Section 2(11) of the IT Act. That section does not make any distinction between different units or different types of businesses, which may be carried out by the assessee. Only requirement in respect of an asset which forms part of assets is that same percentage of depreciation should be prescribed. The relevant rule has been referred above. Once the law enables claiming of depreciation on the block of assets, then, It is not possible to agree with the assessee that between AY 2013-14 to 2016-17, when building under reference was not being used by him for the purpose of business. After inclusion of the concept of block of assets with effect from 1st April, 1988, assets having same rate of depreciation and nature would part of block of assets. The definition of the term 'block of assets' means a group of assets falling within the class of assets and comprising both - tangible and intangible assets, in respect of which same percentage of depreciation is prescribed. Section 32 of the IT Act which provides for claiming depreciation, enables an assessee to claim it and in the case of any block o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have to be answered on the touchstone that Section 50 of the I.T. Act was attracted and the Tribunal was right in law in the view it took. Income Tax Reference is disposed of accordingly. (ii) Hon'ble Kerala High Court Decision in case of Commissioner of Income Tax Vs. Sakthi Metal Depot reported in (2011)-333-ITR- 492 (Ker). In this case, the Hon'ble Court held that: "4. While the contention of the Revenue is that the asset in respect of which depreciation has been claimed when sold should always be assessed as short-term capital gains, the contention of the assessee is that unless the asset sold forms part of the block asset in the previous year in which sale took place, it cannot be assessed to short-term capital gains under section 50 of the Act. In our view section 50 has to be understood with reference to the general scheme of assessment on sale of capital assets. The scheme of the Act is to categories assets between short-term capital assets and long-term capital assets. Section 2(42A) defines short-term capital asset as an asset held for not more than 36 months. The non obstante clause with which section 50 opens makes it clear that it is an exception to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in 1974 and in respect of which depreciation was allowed to 15 of 22 ITR. 9.6.2000 it as a business asset for 21 years, that is up to the assessment year 1995-96, still continued to be part of the business asset and depreciable asset, no matter the non- user disentitles the assessee for depreciation for two years prior to the date of sale. We do not know how a depreciable asset forming part of a block of assets within the meaning of section 2(11) of the Act can cease to be part of the block of assets. The description of the asset by the assessee in the balance-sheet as an investment asset in our view is meaningless and is only to avoid payment of tax on short-term capital gains on sale of the building. So long as the assessee continued business, the building forming part of the block of assets will retain its character as such, no matter one or two of the assets in one or two years not used for business purposes disentitles the assessee for depreciation for those years. In our view, instead of selling the building, if the assessee started using the building after two years for business purposes the assessee can continue to claim depreciation based on the written down value availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee) 3.1 The appellant have capital gain on sale of land and building at SEZ Jodhpur on combined consideration. The ld. A.O assessed capital gain on land as long term and on building as short term as per provision of section 50 ignoring the fact in the case. In fact the cost of building included in block of assets in 2006-07 but from 1st April 2012 due to building was not used for the purpose of assessee's business the said building at Jodhpur was considered to be incapable of being termed as depreciable assets and WDV as on 01-04-2012 i.e. Rs. 70,12,622 excluded from block of asses and separately shown in balance sheet. No depreciation has charged on such WDV of building from AY 2013-14 being the building kept as investment only. The fact is verifiable form return filed for AY 2012-13 and 2013-14. Copy of full return as filed and available at portal is submitted(PBPage174-246) where the closing WDV of block of building in schedule DOA of return AY 2012-13 (PB page 186) of was Rs. 1,42,26,368 but in return of AY 2013-14 schedule DOA (PB page 210) opening WDV of block taken Rs. 72,13,746 by excluding WDV of this building Rs. 70,12,622 in compliance of section 50. After c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land & buildings at SEZ Jodhpur which was used for business upto the period relevant to assessment year 2012-13. The business of the assessee was discontinued from 01-04-2012. The assessee had kept the land and building as investment assets. However, the assessee had excluded the WDV from block of assess and separately shown in balance sheet in order to comply with the Section 50 of the Act in the year of assets discarded as business assets. It is also noted from the record that the assessee had not charged depreciation from A.Y. 2013-14 on such value of building. To this effect, the assessee has filed the copy of return for the assessment year 2012-13 and 2013-14. It is seen that the assessee has treated the value of building as investment assets from the A.Y. 2013-14 which has become as incapable depreciable asset meaning thereby it has become as part of block of asset u/s. 32 (1) of the Act and the assessee had sold the asset after a period of 3 years treating it as Long Term Capital Asset. It is also noted that the ld. CIT(A) has confirmed the action of the AO holding that the provisions of Section 50C is applicable on depreciable assets. However, authorities below have ignore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR argued that the ld. CIT(A) has not appreciated the facts as submitted by the assessee that the seven house properties forming stock-in-trade are old and damaged/dilapidated condition with no electricity and water supply and also not habitable. However, the ld. CIT(A) directed the AO to ascertain the ALV of building for which the property might reasonably be expected to let from year to year without bringing on record any corroborative supporting documentary evidences or rebuttal to the evidences filed before him by the appellant assessee. Such a decision of the ld. CIT(A) passed in mechanical manner mentioned that the AO should consider the municipal value, Standard Rent and Fair Rent receivable of houses is not justified in the eyes of law. 28. The Ld. AR argued that the decision of Ansal Housing Finance & Leasing Co. Ltd. is distinguishable on peculiar fats of the instant case. In that case, there were ready built Flats in the building for trading purposes, however, in the present case, the property was old, dilapidated condition and not fit for habitable purposes. In this situation, the building cannot be let out unless major renovation take place. Thus, Hon'ble Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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