IT : For purpose of application of item (b) of sub-clause (iii) of section 2(14) and to measure KMs from radius of Municipal corporation, relevant date would be date of notification and not date of sale of land in question
■■■
[2014] 46 taxmann.com 149 (Jaipur - Trib.)
IN THE ITAT JAIPUR BENCH
Satya Dev Sharma
v.
Income-tax Officer, Ward -5(2), Jaipur*
HARI OM MARATHA, JUDICIAL MEMBER
AND N.K. SAINI, ACCOUNTANT MEMBER
AND N.K. SAINI, ACCOUNTANT MEMBER
IT APPEAL NOS. 25 (JP) OF 2010 & 123 (JP) OF 2012
[ASSESSMENT YEAR 2008-09]
[ASSESSMENT YEAR 2008-09]
JANUARY 30, 2014
Section 2(14) of the Income-tax Act, 1961 - Capital gains - Capital asset (Agricultural land) - Assessment year 2008-09 - Assessee was allotted agricultural land by Government on his retirement from defence services - During year, assessee sold a part of said agricultural land - Assessing Officer having rejected assessee's explanation that land in question was agricultural land, brought capital gain arising from sale of land to tax - Whether for purpose of application of item (b) of sub-clause (iii) of section 2(14) and to measure KMs from radius of Municipal corporation, relevant date would be date of notification and not date of sale of land in question - Held, yes - Whether since land sold by assessee was situated outside limits of Jaipur Municipal Corporation on date of notification and, moreover, it was being cultivated during relevant year as per records of Government, it was to be regarded as agricultural land and thus capital gain arising from sale of land could not be brought to tax - Held, yes [Para 6] [In favour of assessee]
FACTS
| ■ | The assessee was allotted 16 bigha of land by the Government in year 1972 on his retirement from defence services. During the year, the assessee sold 4 bigha of said agricultural land. | |
| ■ | He claimed that said land was agricultural land because it was situated in a village where population was less than 10,000 and it was more than 8 Kms beyond the limits of Jaipur Municipal Corporation as on 6-1-1994 when the notification was issued under sub-clause (b) of clause (iii) of section 2(14). | |
| ■ | The Assessing Officer however, noted that the property was situated within limits of Jaipur Municipal Corporation as per certificate of Tehsildar. Further, property was used for residential/commercial purpose and not for agricultural purpose. She further added that Inspector's report suggested that multi storey project of leading builder was coming up adjacent to land in question. | |
| ■ | The Assessing Officer accordingly brought capital gain arising from sale of land to tax. | |
| ■ | The Commissioner (Appeals) reduced taxable amount of capital gain. | |
| ■ | On second appeal: |
HELD
| ■ | It was found that in the case of Smt. (Dr.) Subha Tripathi v. Dy. CIT [2013] 58 SOT 139/34 taxmann.com 286 (Jp), this Bench has already considered the similar matter in respect of land situated in the same village for the same assessment year. This Bench has found that the land is situated out of the limit of Jaipur Municipal Corporation and therefore, was not covered in sub-clause (a) of section 2(14)(iii). | |
| ■ | It has been held by this Bench that for the purpose of application of sub-clause (b) of clause (iii) of section 2(14) and to measure KMs from the radius of Jaipur Municipal Corporation, the relevant date would be the date of notification, i.e., 6-1-1994 and not the date of sale of land in question. The 4 Bigha land in question was part of total 16 bigha land of the assessee allotted to him by the Government in lieu of his retirement from defence services. | |
| ■ | As per the Government record in form of Girdawari which could be said to be conclusive evidence, land was being cultivated by the assessee during the year under consideration and subsequently also. The assessee has shown agricultural income in the return of income of the previous year and also in the subsequent year which has been accepted. To further support this, assessee has also referred certain electricity bills showing consumption of electricity for agricultural use. These documents clearly suggest that agricultural activities were there on the said land during the relevant year. | |
| ■ | The use of land differently by the buyers on a subsequent date of inspection is not a relevant factor. In this view of the matter, following the order of this Bench in the case of Smt. (Dr.) Subha Tripathi(supra) this ground of the assessee's appeal is allowed. [Para 6] |
CASE REVIEW
Smt. (Dr.) Subha Tripathi v. Dy. CIT [2013] 58 SOT 139/34 taxmann.com 286 (JP) (para 6) followed.
CASES REFERRED TO
Jahanganj Cold Storage v. Asstt. CIT [2011] 45 SOT 74/9 taxmann.com 261 (Agra)(TM) (para 2), CITv. Manilal Somnath [1977] 106 ITR 917 (Guj.) (para 3), M.S. Srinivasa Naicker v. ITO [2007] 292 ITR 481/[2008] 169 Taxman 255 (Mad.) (para 3), Manibhai Motibhai Patel v. CIT [1981] 131 ITR 120/6 Taxman 218 (Guj.) (para 3), Smt. (Dr.) Subha Tripathi v. Dy. CIT [2013] 58 SOT 139/34 taxmann.com 286 (JP) (para 3), Arun Sunny v. Dy. CIT [2009] 30 SOT 534 (Coch.) (para 4), M. Venkatesan v. CIT[1983] 144 ITR 886/[1984] 16 Taxman 240 (Mad.) (para 4), CIT v. Bolla Ramaiah [1988] 1744 ITR 154/39 Taxman 345 (AP) (para 4), CIT v. Gemini Pictures Circuit (P.) Ltd. [1996] 220 ITR 43/85 Taxman 594 (SC) (para 4), Alexander George v. CIT [2003] 262 ITR 367/128 Taxman 851 (Ker.) (para 4), Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446 (Guj.) (para 5), Navneet Kumar Thakkarv. ITO [2008] 110 ITD 525 (Jodh.) (para 10), Smt. Vijay Laxmi Dhaddha v. ITO [IT Appeal No. 90 (JP) of 2008, dated 19-9-2008] (para 10) and Carlton Hotel (P.) Ltd. v. Asstt. CIT [2010] 35 SOT 26 (Luck.) (URO) (para 10).
Sandeep Jhanwar for the Appellant. D.C. Sharma for the Respondent.
ORDER
Hari Om Maratha, Judicial Member - These two cross appeals are filed by the assessee and department respectively against the order of ld CIT(A), Jaipur dated 01-11-2011 for the assessment year 2008-09. The major issue in the two appeals is in respect of taxation of capital gain on part of agricultural land sold by the assessee.
1.1 The brief facts of the issue are that the Assessee possessed 16 bigha of agricultural land at Village Machwa. The Government record in form of Girdawari shows that there were agricultural activities on the said land and various crops like wheat, bajra etc. were grown on the said land as per this record (P.B. Page 17). Samwat 2064 is related with the assessment year under consideration i.e. A Y 2008-09. During the year, the Assessee sold 4 bigha of agricultural land out of total 16 bigha for a consideration of Rs. 1.04 crores i.e. @ 26 lacs per bigha. This land was allotted to him by Govt. in 1972 on his retirement from defence services. Assessee claimed this land to be agricultural land which is out of scope of definition of capital asset u/s 2(14). He claimed that land is covered by exclusions in clause (iii) of section 2(14) and not covered by sub clauses (a) and (b) of this clause as it is situated in village Machwa where population is less than 10,000/-. This village Machwa is also out of Jaipur Municipal Corporation and it was more than 8 kms beyond the limits of Jaipur Municipal Corporation as on 6.01.1994 when the notification (P. B. Page 1) was issued under sub-clause (b), though now the distance is 2-3 kms. only due to extension of limits of Jaipur Municipal Corporation. The sale deed (P.B. page 5-10) was not registered till the end of 31.3.2008. He also purchased bonds eligible u/s 54 EC in Feb. 2008 for a sum of Rs. 50 lacs. The Assessing Officer however, mentioned in her order that the Property is situated within limits of Jaipur Municipal Corporation as per certificate of Tehsildar. Further, property is used for residential/ commercial purpose and not for agricultural purpose. She further added that Inspector's report suggest that multi story project of leading builder is coming up adjacent to this land and the land has not been entered in the name of the purchasers. She has taken Market price of the property as on 1.4.1981 was Rs. 2700 per bigha on the basis of similar property sold. She also observed that the Provisions of section 50C are applicable in this case. After giving the aforesaid findings, the assessing officer computed the capital gain as under :
| - | She applied provisions of section 50C and took circle rate. Accordingly, he applied Rs. 35 lacs per bigha and computed total sale consideration at Rs. 1,40,00,000/-. | |
| - | Purchase price : FMV as on 1.4.1981 on the basis of document dtd. 27.12.1980 @ Rs. 2,700/- per bigha and computed total cost of Rs. 10,800/- & indexed cost Rs.59,508/- (10,800 x 551/100). | |
| - | She accordingly computed Long Term Capital gain at Rs. 1,39,40,492/-. After allowing the deduction u/s 54EC of Rs.50,00,000/-, taxable capital gain has been taken at Rs.89,40,492/-. |
2. Before ld CIT(A) the assessee raised the following plea :
| ♦ | The captioned land is not a Capital Asset within the meaning of section 2(14) as it is an agricultural land under clause (iii) of this section and not covered by exclusions of agricultural land given in sub clauses (a) & (b) of this clause (iii) of section 2(14). Ld CIT(A) has not accepted this plea and assessee has taken ground no. 1 in this respect. | |
| Alternatively | ||
| ♦ | The provisions of section 50C do not apply in assessee's case as the transaction was not registered. The word 'assessable' has been included in section 50C w.e.f. 1.10.2009 only and as per the decision of Hon'ble Jaipur Bench of ITAT itself, the provisions of section 50C would not apply where the transaction of transfer of land is not registered. Ld CIT(A) accepted this plea and directed to alter the sale consideration as received by the assessee. The department has come in appeal before us against the relief so allowed. | |
| ♦ | Regarding Cost of acquisition, the assessee contended that the cases quoted by the AO are not comparable for the following reasons : |
| • | The said land was already in the possession of the buyers. | |
| • | The said transfer was not in respect of one piece of land but it was in respect of 5 pieces of land scattered in area of 2 kms. | |
| • | The said land was very deep (3 to 4 kms.) from the main road and the assessee's land was only 250 mtrs. Further there is a lane approaching the assessee's land. | |
| • | In the immediate vicinity of the assessee's land, multistoried buildings are being constructed. It is not the position of the other land. |
In view of the said reasons, the assessee contended that FMV of the land as on 1.4.1981 should have been taken by computing the same as per principle laid down in Jahanganj Cold Storage v. Asstt. CIT [2011] 45 SOT 74/9 taxmann.com 261 (Agra) (TM). Accordingly, the value comes to Rs.18,87,477/- as per the following calculation below :
| 1,04,00,000 | x 100 = 18,87,477 | |
| 551 |
Ld.CIT(A) however considered Rs. 10,000 per bigha i.e. Rs. 40,000/- as against the assessing officer's valuation of Rs.10,800/- per bigha @ Rs.2,700 per bigha. The assessee has taken ground no. 2 in this respect. Department has also taken ground no. 2 for increasing the price per bigha as on 1.4.1981 to Rs.10,000/-.
3. Let us now come to the grounds of the assessee's appeal. As regards ground no.1, ld. A/R of the assessee Shri Sandeep Jhanwar pointed out a typographical error in drafting of ground and requested to read the same by adding word 'not' in the forth line after the words 'assessee is' and before the words 'covered in' and also to add words '(a) and' after the words 'sub clause' and before the words '(b) of' and accordingly the corrected ground would read as under :—
"Under the facts and circumstances of the case ld. Commissioner of Income Tax (Appeals), Jaipur has erred in confirming the findings of the assessing officer that the agricultural land transferred by the assessee is capital assets within the meaning of section 2(14)(iii) of the Income tax Act, 1961, which according to assessee is not covered in the exclusion under sub-sub clause (a) and (b) of section 2(14)(iii). He has accordingly erred in upholding the chargeability of long term capital gain on the transfer of agricultural land by the assessee."
As far as the findings of the Assessing Officer that the land is covered in JMC, the ld. A/R submitted that the same is wrong. The letter of Tehsildar appended by the AO in her order (AO page 10) itself says that the land is within 8 KMs of the boundaries of the JMC. Further, the notification appended by AO in her order at Page 11 contains the name of the village Machera and not Machwa. Machera has been misunderstood by AO as Manchwa. He submitted that the ld. CIT(A) has, however, given finding that the land is situated at 2 to 3 KMs. from the JMC boundary and it is within 8 kms from the JMC boundaries (Page 13 of the order). He accordingly requested to ignore these findings of AO as the same are absurd. He further submitted that the findings of AO that the land in question is used for residential/ commercial purpose is also wrong for the reasons that the land was used by the assessee for agricultural and as per the Government record, agricultural activities were being carried on the said land during the year under consideration (PB Page 17). He also submitted that this finding of AO is contradictory as far as, the AO herself has said that the buyers of the land have done plotting on the land. The assessee referred certain electricity bills also in support of agricultural activities on the land. The ld. A/R submitted that the land is an agricultural land. The assessee sold it as such charging rate per bigha. He submitted that neither the assessee nor the department should have any concern as to how the land could be used by the buyers. It was not a relevant factor for this section to see that how the buyer intended to use the land as held in the various decisions including CIT v. Manilal Somnath [1977] 106 ITR 917 (Guj.), M.S. Srinivasa Naicker v. ITO [2007] 292 ITR 481/[2008] 169 Taxman 255 (Mad.) and Manibhai Motibhai Patel v. CIT [1981] 131 ITR 120/6 Taxman 218 (Guj.). In such circumstances, the observation that the nearby locations are getting developed as multistory project has no relevance in the present case. He further submitted that the land was situated beyond the boundaries of 8 Kms. of the limits of JMC as on 6.1.1994 (i.e. the date of issuing relevant notification No. 9447/F. No. 164/3/87-ITA-I dated 06/01/1994) as per the certificate on page 11 and trace of the site plan being produced during the course of hearing. The land has now come nearer to the boundaries covered in the jurisdictional limit of JMC due to extensions after 1994. He submitted that the question which is to be decided in this case is whether the said land would be covered by sub clause (b) of clause (iii) of section 2(14). He submitted that Under clause (b) power is given to Government to notify the area from the limit of Municipalities etc. having population of not less than 10,000/. Accordingly, the Government, on 6.1.1994 has notified certain area. He referred the relevant extracts of notification No. 9447/F. No. 164/3/87-ITA-I dated 06/01/1994 at PB Page 1. He submitted that as per this notification, for Jaipur, the area notified was the area of 8 Kms. from the boundaries of Jaipur Municipal Corporation at Entry No. 19.7. The Explanation (2) of the notification clearly indicates that the Municipal Limits as existing on the date of issue of notification are to be referred [PB Page 4]. He submitted that there is no ambiguity in the language of notification. The notification is issued within the powers given to the Government. He submitted that as per the powers given to the government under this clause, it is to notify the extended area under sub-clause (b). The area which is notified as on a particular date has to be frozen or static. It cannot be dynamic. The law also had given the power to include the area within the meaning of capital asset, where, there is a scope of extension of limits in the near future. Had the limits been extended to the land, it would have been covered within clause (a) itself. He stated that otherwise also, the government has specifically given the date of reckoning the limit of 8 Kms. in the explanation (2) to the notification as stated above. He referred his following specific submissions made in the written submissions against each and every observation of the ld. CIT(A) :
| CIT(A)'s findings | Submission | |||||||||||||||
Argument of the assessee that the limits prescribed by notification dtd. 06.01.1994 have been frozen. If this argument is accepted, it would render several decisions of High Courts and Tribunals to nullity. It was not the intention of the legislature to freeze the limits as these would change with increasing urbanization. The assessee has failed to interpret the section 2(14)(iii) in its right perspective. |
| |||||||||||||||
| ||||||||||||||||
| The legislature has used the word "any municipality". When the Legislature used "any municipality", it would be safe to infer that limits of municipality would not remain static and may change with the increasing urbanization. |
| |||||||||||||||
| The Central Government has the authority u/s 507(a) of the Municipal Corporation Act to declare any portion of a rural area as an urban area. The moment the power is exercised u/s 507(a), the need for notification u/s 2(14)(iii)(b) would not arise. Similarly the moment the Central Government feels that a particular area within 8 kms of the limits of municipality has to be treated as an urban area, the need for exercise of power u/s 507(a) would also cease. Thus two provisions are in a way complimentary to each other and at times overlap. |
| |||||||||||||||
| Notifications issued by the Central Government are instances of subordinate legislation and that in the absence of an express or implied provision subordinate legislation could not have overruled the statutory provisions. | The notification is not overruling the provisions of law as the Government is authorized to specify the area under the said clause (b) of section 2(14)(iii). The area has been specified by the government on the basis of boundaries of municipal corporation existing as on the date of notification. | |||||||||||||||
| The onus is on the assessee to show that the character of the lands changed after the acquisition of the capital asset by the assessee and that the lands were agricultural lands at the time of transfer of the asset. |
|
On this basis, he submitted that, the interpretation taken by the ld CIT(A) makes the whole notification as invalid and the decisions of Courts given on that basis becomes nullity. The notification does take few municipal areas of the country and distances in all cases are separately determined. Distance of 8 kms. is only an outer limit and not a benchmark. He accordingly concluded that the claim of the assessee is as per law and this ground of appeal deserves to be allowed. The ld. A/R also drawn our attention towards the decision of Jaipur Bench of ITAT in the case of Smt. (Dr.) Subha Tripathi v. Dy. CIT [2013] 58 SOT 139/34 taxmann.com 286 wherein the same question arose for the same assessment year in respect of land situated in the same village Machwa. The Hon'ble Bench has decided the case in favour of the assessee on the similar basis as argued by ld. A/R. He also drew our attention towards the returns of income filed by the assessee in the subsequent years wherein agricultural income shown by the assessee in respect of the remaining part of land has been accepted by the department.
4. Ld. D/R on the other hand has supported the order of A.O. and ld CIT(A). He submitted that the land in question was capital asset u/s 2(14). He referred the findings given by the ld CIT(A) that 8 kms from the local limits was to be seen on the date of transfer and not on the date on which notification was published in official Gazette. He submitted that issue stands covered in the favour of Revenue by the decision of Hon,ble Cochin Tribunal in the case of Arun Sunny v. Dy. CIT [2009] 30 SOT 534 wherein it was held that the central government had issued the notification for the purpose of changing the character of the asset. The nature of the property had to be examined as on the date of transfer. Further, the transfer deed of the asset was executed during the year under consideration and therefore, the nature of the property whether it was a capital asset or not, had to be examined for the year under consideration. He submitted that ld CIT(A) has correctly held that once the property was found to be a capital asset on the date of transfer, the transaction became liable for capital gains taxation and the date of notification could not be used for any other purpose. He further mentioned that the date of notification was relevant only in deciding the nature of the property. He placed reliance on the decision of Hon'ble Madras High court in the case of M. Venkatesan v. CIT [1983] 144 ITR 886/[1984] 16 Taxman 240 where referring to the scope of section 45, it was held that "taxation or exemption from taxation depends upon the subject of transfer answering or not answering the definition of capital asset at the time of transfer and at no other point of time." He further submitted that normally when the area of the municipality is extended looking to the urbanization on account of pressure of population, then slowly there agricultural lands are converted into urban areas and they form part of such urban areas. It is true that even after forming of municipal areas, there might exist some lands which may be under cultivation, but that becomes an urban area with the passage of time. He submitted that section 2(14)(iii)(b) clearly stipulates that any area within such distance not being more than 8 kms from the local limits of any municipality, has to be treated as capital asset for the purpose of I.T. Act. The legislature has used the word "any municipality". When the legislature used "any municipality", it would be safe to infer that limits of municipality would not remain static and may change with the increasing urbanization. Though the assessee claimed that the agricultural land was beyond 8 kms radius of JMC as on 06.01.94, the AO had found that the land in question was within 2 to 3 kms radius of JMC. For this he placed reliance on the decision of Hon'ble Andhra Pradesh High Court in the case of CIT v. Bolla Ramaiah [1988] 174 ITR 154/39 Taxman 345 wherein it was held that when the land was situated within 8 kms of local limits of municipal corporation, it was liable for capital gain. It was held that it was unnecessary to go into the question whether the land were agricultural lands or not on the date of acquisition, because even if it were agricultural lands, they were not exempt from capital gains tax. It would imply that what is necessary is the position as on date of sale and not the position as on the date of acquisition. Further reliance was made on decision of Hon'ble Apex court inCIT v. Gemini Pictures Circuit (P.) Ltd. [1996] 220 ITR 43/85 Taxman 594 where it was held that mere fact that the land in question was agricultural land could not be a ground to claim exemption u/s 2(14) of IT Act when it was situated within 8 kms of the local limits of Municipal Corporation. Since the land sold by the assessee was a capital asset, therefore, the surplus realized by the assessee on ale of land was assessable as capital gain. He also referred the findings of the ld. CIT(A) that the central government has the authority under section 507(a) of the Municipal Corporation act to declare any portion of a rural area as an urban area. The moment the power is exercised under section 507(a), the need for notification u/s 2(14)(iii)(b) would not arise. Similarly the moment the Central Government feels that a particular area within 8 kms of the limits of the municipality has to be treated as an urban area, the need for exercise of power u/s 507(a) would also cease. Thus two provisions are in a way complimentary to each other and at times overlap. Therefore it is not required that central Government should keep on issuing notification. It has further been submitted that notification cannot override the provisions of law. For this reliance was placed on the decision of Kerala High Court in the case of Alexander George v. CIT [2003] 262 ITR 367/128 Taxman 851 where the question arose whether a particular land could be treated as agricultural land with reference to Notification in 1973 when it was found to be outside notified area on a subsequent notification in1994 then it was held that since at the time of transfer, it was within the notified area, therefore the liability could not be avoided. It was accordingly concluded that the onus was on the assessee to show that the character of the lands changed after the acquisition of the capital asset by the assessee and that the lands were agricultural lands at the time of transfer of the asset. The material date with reference to which the question whether the particular asset which had been sold was agricultural land or not was to be decided was the date of sale. In other words, the assessee should further prove that it was agricultural land at the time of transfer. He further referred the relevant para of the order of ld. CIT(A) wherein he had noticed that the land sold by the assessee was within the distance of 8 kms from the municipal limits of Jaipur Municipal corporation as per the Tehsildar, Jaipur Tehsil vide his letter dated 24.12.2010. Further, the inspector sent by the AO also reported that land in question was located within 2 to 3 kms from the Jaipur Municipality and a large number of residential towers had come up in the adjoining areas. Accordingly, the land sold by the assessee was within 8 kms for Jaipur Municipal Corporation and therefore not an agricultural land but an urban land and the capital gain earned on sale of such land was liable to be taxed. He accordingly submitted that the Ld. CIT(A) had correctly upheld the action of the AO to treat the same as capital asset within the meaning of section 2(14)(iii)(b) of I.T. Act, 1961.
5. In the rejoinder, the ld. A/R referred our attention towards annexure to his written submissions wherein he has already submitted that various case laws referred by the authorities are not relevant in the following manner : —
Arun Sunny (supra)
| Facts | Decision | Relevance in present case | ||||||||||||||||||||||||
|
|
|
Alexander George (supra)
| Facts | Decision | Relevance in present case | |||
| Assessee was the owner of 2.47 acres of land at Thrikkakara Panchayat. Govt. acquired his land by invoking urgency clause. Possession was taken on 29.01.1985 and compensation was paid on 01.04.1986. On the date of transfer, notification dt. 6.02.1973 was prevailing as per which land was capital asset. In 1993, another notification was issued de-notifying the place at which assessee's land was situated and consequently making assessee's land non-capital asset. Assessee contended that since the notification de-notifying such place came into force during the pendency of appeal, so land is not a capital asset |
| In the present case, CIT(A) did not apply this case law in correct manner. In Alexander George (supra) it was held that notification prevailing on the date of transfer will be applicable on the transaction. |
M. Venkatesan (supra)
| Facts | Decision | Relevance in present case | ||||||||||||||||||||||||
|
|
|
Ranchhodbhai Bhaijibhai Patel v. CIT [1971] 81 ITR 446 (GUJ)
| Facts | Decision | Relevance in present case | |||||||||||||||||||||||||||
|
Therefore, land in question was held to be capital asset. |
|
Bolla Ramaiah (supra)
| Facts | Decision | Relevance in present case | ||||||||||||||||||||||||
|
|
|
6. We have heard the rival submission and have carefully perused the available material on record. We find that in the case of Smt. (Dr.) Subha Tripathi (supra), this Bench has already considered the similar matter in respect of land situated in the same village Machwa for the same assessment year. This Bench has found that the land is situated out of the limit of Jaipur Municipal Corporation and therefore, was not covered in sub-clause (a) of section 2(14)(iii). It has been held by this Bench that for the purpose of application of sub-clause (b) of clause (iii) of section 2(14) and to measure 8 KMs from the radius of Jaipur Municipal Corporation, the relevant date would be the date of notification i.e. 6.1.1994 and not the date of sale of land in question. We find that the 4 bigha land in question was part of total 16 bigha land of the assessee allotted to him by the Government in lieu of his retirement from defense services. As per the Government record in form of Girdawari which can be said to be conclusive evidence in this respect, the land was being cultivated by the assessee during the year under consideration and subsequently also. The assessee has shown Agricultural Income in the return of income of the previous year and also in the subsequent years which has been accepted. To further support this, assessee has also referred certain electricity bills showing consumption of electricity for agricultural use. These documents clearly suggest that agricultural activities were there on the said land during the relevant year. The use of land differently by the buyers on a subsequent date of inspection is not a relevant factor for us. In this view of the matter, following the order of this Bench in the case of Smt. (Dr.) Subha Tripathi (supra) we allow this ground of the assessee's appeal.
7. Though the above decisions goes to decide the non-taxability of the entire capital gain, still for the sake of disposing off the ground raised by the both the assessee and department, we are proceeding to decide Ground No. 2 of assessee's appeal and also Ground No. 2 of the departmental appeal. The issue involved is that on what basis Fair Market Value of the assessee's land should be considered as on 01.04.1981 for the purpose of computation of capital gain. The AO quoted an alleged comparable instance wherein the rate has been Rs.2,700/- per bigha and total cost was considered at Rs.10,800/- for 4 bigha of land. It has been taken on the basis of enquiry from Dy. Inspector General, Registrar & Stamps, Jaipur who was called upon by the AO to provide the same. Dy. Inspector General, Registrar & Stamps, Jaipur furnished a copy of sale deed of agricultural land at similar location executed on 27.12.1980. As per this sale deed, the total sale consideration was Rs. 16,000/- for 6 bigha. Accordingly the fair market value of the property as on the date of transaction works out to Rs. 2,666/- per bigha. Considering the same, the fair market value of the land in question as on 1.4.1981 was estimated by the AO at Rs. 2,700/- per bigha resulting total value of land 10,800/-(2700*4). Hence amount of Rs. 10,800/- was adopted as the fair market value of the land in question on 1.04.1981. The assessee raised objections that the comparable case cited by the AO was distinguishable due to the following reasons:
| (a) | The land sold by SH. Panna S/o Sh. Mahadev Jat consisted of Khasra No. 226, 246, 244, 245 & 233. These khasras of land were scattered over an area of 2 kms. on the other hand, the land of appellant was a big single chunk of land and it was compatible for residential use after plotting. | |
| (b) | The land of the appellant was in close proximity to the state highway (nearly 500mt.) whereas in the comparable case cited by the AO, the land was 3 to 4 kms away from the main road. | |
| (c) | The land sold by Sh. Panna S/o Sh. Mahadev Jat was already in possession of the buyers and they were cultivating the land for past many years. |
The assessee submitted that all these factors make a lots of difference in the value of land. There cannot be any basis to make suitable adjustment for the above factors in case of land. According to the assessee when no comparable case is found, the Fair Market Value of the captioned land should be computed on the basis of reverse indexation in the manner approved by Third Member Judgment of ITAT Agra in the case ofJahanganj Cold Storage (supra). Accordingly, the value comes to Rs.18,87,477/-. After considering the objections raised by the assessee, the ld. CIT(A) found that the case sited by ld. AO was not comparable. He however made his own estimation and adopted a rate of Rs.10,000/- per bigha and took the Fair Market Value as on 1.4.1981 of the total land at Rs.40,000/-.
8. We have heard the rival parties and considered the material on record. We find that value of land differs drastically due to its surroundings, distance from road, disputes, possession etc. There is no dispute on the issue that the in the instances quoted by the ld. AO, the buyers were already in the possession of land in question which is major factor which affects the rates of the transaction and attached obligations. Further, there are issues regarding proximity from road and scattered land. We also find that AO has given a finding that multistoried projects have been developed near the assessee's land and the buyer of the assessee's land is also developing some project on this land. No such development of the comparable land has been brought on record by the AO. Ld. CIT(A) also agreed that the instance quoted by the AO is not comparable. However, he has taken a arbitrary value without any basis. In these facts and circumstances, where no comparable case is available, the best way to estimate the cost would be to compute the Fair Market Value on the basis of reverse calculation considering the cost inflation index as held in Third Member Decision of ITAT Agra (Supra) in which one of us was also a party. Accordingly, the estimation made by the assessee in this respect had to be accepted. We thus allow this ground of appeal of the assessee and reject the ground of the departmental appeal.
9. Ground no. 3 of the assessee's appeal is against rejecting the agricultural income of Rs.42,000/-. As already found by us, the assessee has shown evidences of land being cultivated. The agriculture income has been accepted in the previous year and also in the subsequent years. In these facts and circumstances, size of land, government records of crop and the amount of agricultural income shown, we find no reason to reject the assessee's claim. We accordingly allow this ground of the assessee's appeal also.
10. Now we come to the remaining ground no.1 of department's appeal which is against holding that the provision of section 50C would not apply as the land was sold by the assessee through agreement and the sale deed was not registered. The AO had observed that land has been developed and is in the possession of the buyers and sale consideration has been received in toto by the assessee. Further, assessee has claimed that the property has not yet been registered and hence, provisions of section 50C are not applicable. In this regard, AO observed that the registration of sale property has not been made only to evade the stamp duty payments on the sale. Therefore, section 50C would be applicable on the sale of property and accordingly applicable DLC rates i.e. 1,40,00,000/- would be applied on such transfer. Accordingly, the AO took the sale consideration of Rs. 1,40,00,000/- as per section 50C instead of actual sale consideration of Rs. 1,04,00,000/-. In the first appeal, ld CIT(A) made a reliance on the decision of Hon'ble Jodhpur Tribunal in the case of Navneet Kumar Thakkar v. ITO [2008] 110 ITD 525 where it was held that to attract section 50C, the property under transfer from the assessee to another person should have been assessed for stamp valuation purpose at a higher value than that received or accruing to the assessee. Unless the property transferred have been registered by sale deed and for the purpose the value had been assessed and stamp duty have been paid by the parties, section 50C could not come into operation. Further reliance was made on the decision of Hon'ble Jaipur Tribunal in the case of Smt. Vijay Laxmi Dhaddha v. ITO [IT Appeal No. 90 (JP) of 2008, dated 19-9-2008] and Hon'ble Lucknow Tribunal in the case of Carlton Hotel (P.) Ltd. v. Asstt. CIT [2010] 35 SOT 26 (URO) have held that if the property sold is not registered then section 50C would not have any application. Accordingly, Ld. CIT(A) held that in the present case, the sale deeds had not been registered and the buyers had not paid any stamp duty therefore section 50C would not have any application and directed the ld. AO to adopt the sale consideration at Rs. 1,04,00,000/- instead of Rs. 1,40,00,000/-.
11. We have heard the rival parties and perused the material on record. The present case is for A Y 2008-09, i.e. prior to amendment made in the provisions of section 50C to take into consideration the transfers which have not been registered for stamp duty purpose. In view of the various decisions quoted by the ld. CIT(A), we are in agreement with his order and confirm the same. This ground of the departmental appeal is also rejected.
12. In the result, the appeal of the assessee is allowed and the appeal of the revenue is dismissed.
■■2014-TIOL-440-ITAT-DEL
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'D' NEW DELHI
BENCH 'D' NEW DELHI
ITA No.2182/Del/2013
Assessment Year:2002-03
Assessment Year:2002-03
LAXMI PUBLICATION PVT LTD
113, GOLDEN HOUSE, DARYAGANJ, NEW DELHI
PAN:AAACL0375Q
113, GOLDEN HOUSE, DARYAGANJ, NEW DELHI
PAN:AAACL0375Q
VS
ASSTT COMMISSIONER OF INCOME TAX
CIRCLE 4(1), NEW DELHI
CIRCLE 4(1), NEW DELHI
U B S Bedi, JM And S V Mehrotra, AM
Date of Decision: July 11, 2014
Appellant Rep by: Sh V D Aggarwal, Adv.
Respondent Rep by: Shri Vivek Kumar, Sr DR
Respondent Rep by: Shri Vivek Kumar, Sr DR
Income Tax - Sections 133A, 143(1), 143(3), 147, 148, 234B(1) & 245D(iv).
Keyword - SETCOM - advance tax - interest.
Whether when the assessment was made for the first time u/s. 147 read with section 143(3) of the Act, the said assessment is a regular assessment attracting the provisions of sub-section (1) of Section 234B.
The assessee is a privately held publishing company. It has following subsidiaries and imprints through which it caters to different niches of educational and professional books market. The return was filed, declaring income of Rs.11,73,630/-. A survey u/s 133A was conducted on the premises of the assessee and a notice u/s 148 was issued. The assessee had made application u/s 245C before the Settlement Commission and subsequently the assessment was framed. The assessee contended in his appeal before the first appellate authority that the A.O. charged interest u/s 234B(1) whereas, interest should have been charged u/s 234B(3) for the period commencing on the day falling at the date of determination of total income u/s 143(1). During the course of appellate proceedings, the assessee had further submitted that since the order had been passed u/s 147, therefore, the interest should have been charged under the provisions of Section 234B(3) and not u/s 234B(1).
On appeal, before the CIT(A) the assessee further submitted that since the order had been passed u/s 147, therefore, the interest should have been charged under the provisions of Section 234B(3) and not u/s 234B(1). Whereas, the contention of the revenue was that, if the return was accepted and demand was raised by processing the return u/s 143(1), the interest was to be charged u/s 234B(1) and the same was for the period commencing from first day of the financial year following the provisions year during which, advance tax was paid.
Held that,
++ pursuant to survey, notice u/s 148 was issued to the assessee, by virtue of operation of relevant provision, return filed pursuant to the notice under the said provisions will be treated as return filed u/s 139. So much so, the department is entitled to process the return u/s 143(1) and issue of the proceedings which has entitled the A.O. to levy interest in terms of section 234B(1) of the Act. It was further clarified that intimation issued u/s 143(1) is not an assessment and so much so, section 234B(1) to apply even in a case where intimation issued u/s 143(1) pursuant to the return called for on notice u/s 148. Whereas, counsel for the assessee on the other hand, contended before lower authorities that irrespective of notice and proceedings completed pursuant to the return filed in response to notice u/s 148, such assessment is always reassessment or recomputation under relevant provisions. So, the provisions applicable for interest on short/non payment of advanced tax is served by section 234B(3) of the Act and not u/s 234B(1);
++ we find that Section 234B of the Act, when the assessment was made for the first time u/s. 147 read with section 143(3) of the Act, the said assessment is a regular assessment attracting the provisions of sub-section (1) of Section 234B. Given fact that the assessment is a regular assessment, rightly the AO levied interest u/s. 234B(1) and as confirmed by the CIT(A). Therefore, going by clear wording of the relevant portion of section 234B of this order and admitted fact position for assessment is a regular assessment and not a reassessment, we confirm the order of the CIT(A).
Assessee's appeal dismissed
ORDER
Per: U B S Bedi:
This appeal of the assessee is directed against the order passed by Ld. CIT(A) VIII, New Delhi dated 19.02.2013 relevant to assessment year 2002-03 wherein, following two effective grounds have been raised.
"1. Ld. CIT(A) is not justified in law and facts and circumstances of the case in dismissing the appeal on the basis of the judgement of the ITAT and ignoring the judgement of higher court in case of CIT Vs Shri b. Lakshmikanthan and CIT Vs Sego Restaurant & Amp wherein Hon'ble court held specifically that whether assessment is made u/s 143(1) or 143(3) for the purpose of charging interest u/s 234B(3), no difference can be made on the baiss of original assessment completed u/s 143(1) or 143(3).2. Ld. CIT(A) is erred in law and facts and circumstances of the case particularly in the circumstances hewn there is difference of opinion in interpreting the section the view which is favorable to the assessee should be adopted. In this case there is only one case of Bombay ITAT while other 3 cases on which assessee has relied in which one was of the ITAT and two of the High Court was in favour of the assessee, hence dismissal of the appeal is bad in law."
2. In both the above grounds, the only issue involved is regarding the contention of the assessee that the A.O. had wrongly charged interest u/s 234B(1) whereas, it had to be charged u/s 234B(3) of the I. T. Act, 1961. The brief facts of the case are that the original return of income was filed on 28.10.2002 declaring income of Rs.11,73,630/-. A survey u/s 133A was conducted on the premises of the assessee on 26.03.2007 and 27.03.2007. The notice u/s 148 was issued to the assessee and in response thereto, the return of income was filed on 30.03.2007. The assessee had made application u/s 245C before the Hon'ble Settlement Commission and subsequently the assessment was framed on 13.6.2011 u/s 143(3) read with Sections 147 and 245D(iv) in pursuance to the order of Settlement Commission. The A.O. had charged interest u/s 234B(1) whereas, the assessee contended in his appeal before the first appellate authority that interest should have been charged under the provisions of Section 234B(3) for the period commencing on the day falling at the date of determination of total income u/s 143(1). During the course of appellate proceedings, the assessee has further submitted that since the order had been passed u/s 147, therefore, the interest should have been charged under the provisions of Section 234B(3) and not u/s 234B(1). In support of such contention, the assessee had placed reliance on the decisions of Hon'ble Kerala High Court in the case of CIT Vs B Lakshmikanthan, 198 Taxman 485 dated 20.01.2011 and CIT Vs M/s. Sago Restaurant & Others I.T.A. No. 1022 of 2009 dated 14.12.2001.
3. Ld. CIT(A) considered the arguments of the assessee but did not accept the plea of the assessee and relied upon the order of ITAT Mumbai Bench in the case of Barbar Ship Management India (P) Ltd. Vs ITO, - 2009-TIOL-824-ITAT-Del and by reproducing the relevant portion from the said order in his order, has concluded to dismiss the appeal as under:
"Perusal of the above order of the Hon'ble jurisdictional ITAT shows that it has clearly been held that intimation u/s 143(1)(a) is not an assessment and if the assessment for the first time is completed u/s 147 then the case will fall under sub-section (1) of section 234B. In the instant case also, it is observed that assessment for the first time was completed under the provisions of section 147 therefore, the case will fall under the provisions of sub-section (1) of section 234B. The case law relied upon by the appellant are based on different facts. In view of the findings above and in view of the decision of the Hon'ble Delhi ITAT discussed above these grounds of appeal are dismissed."
4. Aggrieved, the assessee has come in further appeal and while reiterating the submissions as made before the lower authorities, relied upon the decisions in the case of Shri B Lakshmikanthan and Sego Restaurant & Amp (supra) and by placing copies of these decisions, it was pleaded for allowing the appeal of the assessee.
5. Ld. D.R. strongly relied upon the order of Ld. CIT(A) and pleaded for its confirmation. Reliance was placed on the decision of Hon'ble Madras High Court in the case of Textile Dye-Chem Corpn. Vs ACIT as reported in (2013) 35 Taxmann.com 467 = 2013-TIOL-487-HC-MAD-IT to plead for confirmation of the order of Ld. CIT(A).
6. None appeared on behalf of the assessee on second occasion when case was fixed for clarification. After hearing the Ld. DR and on perusing the material available on record, we are adjudicating the matter on merits.
7. We have heard the Ld. DR and perused the material on record and have gone through the orders of authorities below. We have also gone through the provisions as contained in Section 234B(1) and u/s. 234B(3) as well and the case law as cited by rival sides. There is no dispute about the facts that consequent upon the original return filed, the same was processed u/s 143(1) and intimation was received by the assessee. Subsequently, a survey u/s 133A was conduced on the premises of the assessee and notice u/s 148 was issued. Thereafter, the assessee filed return in response thereto and had also gone before the Settlement Commission, assessment u/s 143(3) read with sections 147 and 245D(iv) in pursuance to order of Settlement Commission, was completed on 13.06.2011. The A.O. has charged interest u/s 234B(1) whereas, the assessee in appeal contended before the first appellate authority that interest should have been charged u/s 234B(3) for the period commencing from the date falling on the day of determination of total income u/s 143(1). The assessee has also taken the plea before the first appellate authority that since, the order has been passed u/s 147, the interest should have been charged under the provisions of Section 234B(3) and not u/s 234B(1). The plea of the assessee was not accepted by Ld. CIT(A) despite relying upon two decisions of Hon'ble Kerala High Court, the assessee has filed further appeal before this bench.
7.1 Now, the question to be considered by us is, as to which of the subsections of section 234B is attracted for levy of interest. In this case, there was determination of total income under sub-section (1) of section 143 before the regular assessment got completed u/s 143(3), the A.O. found that the advance tax paid is less than 90% of the assessed tax so, he levied interest u/s 234B(1) of the Act. Whereas, the assessee's contention is that the provisions of Section 234B(3) was to be applied and not of section 234B(1). So, it would be apt to reproduce the relevant provision of Section 234B(1), Explanation 2 and 234B(3) which are as under:
"[Interest for defaults in payment of advance tax.234B. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year [to the date of determination of total income under subsection (1) of section 143 [and where a regular assessment is made, to the date of such regular assessment, on an amount]] equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.[Explanation 1 ** ** ** **[Explanation 2**.—Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section.][Explanation 3** ** ** **(2)** ** ** ** **(3) Where, as a result of an order of reassessment or recomputation under section 147 [or section 153A], the amount on which interest was payable under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period commencing on the day following [the date of determination of total income under sub-section (1) of section 143 [and where a regular assessment is made as is referred to in subsection (1) following the date of such regular assessment]] and ending on the date of the reassessment or recomputation under section 147 [or section 153A], on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined [under sub-section (1) of section 143 or] on the basis of the regular assessment aforesaid."
7.2 The contention of the revenue is that, if the return is accepted and demand is raised by processing the return u/s 143(1), the interest is to be charged u/s 234B(1) and the same is for the period commencing from first day of the financial year following the previsions year during which, advance tax was paid. According to Ld. D.R., pursuant to survey, notice u/s 148 was issued to the assessee, by virtue of operation of relevant provision, return filed pursuant to the notice under the said provisions will be treated as return filed u/s 139. So much so, the department is entitled to process the return u/s 143(1) and issue of the proceedings which has entitled the A.O. to levy interest in terms of section 234B(1) of the Act. It was further clarified by Ld. D.R. that intimation issued u/s 143(1) is not an assessment and so much so, section 234B(1) to apply even in a case where intimation issued u/s 143(1) pursuant to the return called for on notice u/s 148. Whereas, Ld. counsel for the assessee on the other hand, contended before lower authorities that irrespective of notice and proceedings completed pursuant to the return filed in response to notice u/s 148, such assessment is always reassessment or recomputation under relevant provisions. So, the provisions applicable for interest on short/non payment of advanced tax is served by section 234B(3) of the Act and not u/s 234B(1).
7.3 On careful consideration of arguments of the Ld. DR, in light of the relevant provisions of law and precedents as relied upon, we find that going by the Explanation 2 to Section 234B of the Income Tax Act, when the assessment was made for the first time u/s. 147 read with section 143(3) of the I.T. Act, the said assessment is a regular assessment attracting the provisions of sub-section (1) of Section 234B. Given fact that the assessment is a regular assessment, rightly the AO levied interest u/s. 234B(1) and as confirmed by the Ld. CIT(A). Therefore, going by clear wording of the relevant portion of section 234B as reproduced in para 7.1 of this order and admitted fact position for assessment is a regular assessment and not a reassessment, we confirm the order of the ld. CIT(A) and dismiss the appeal of the assessee being devoid of any merit.
8. As a result, the appeal of the assessee gets dismissed.
9. Order pronounced in the Open Court on 11.7.2014.
Clarification regarding purchase of Air Tickets from Authorized Travel Agents for the purpose of LTC.
F.No. 31011/4/2014-Estt(A.IV)Government of India
Ministry of Personnel, Public Grievances and Pensions
Department of Personnel and Training
….
North Block, New Delhi-110 001
Dated: 19th June, 2014
Dated: 19th June, 2014
OFFICE MEMORANDUM
Subject:- Clarification regarding purchase of Air Tickets from Authorized Travel Agents for the purpose of LTC.
The undersigned is directed to refer to the instructions issued from time to time on the above noted subject and say that the Government employees are required to book their air tickets directly from the airlines (Booking counters, website of airlines) or by utilizing the service of Authorized Travel Agents viz. 'M/s Balmer Lawrie & Company', 'M/s Ashok Travels & Tours' and 'IRCTC' (to the extent IRCTC is authorized as per DoPT O.M. No. 31011/6/2002-Estt.(A) dated 02.12.2009) while undertaking LTC journey(s).
2. In a number of cases, it has been noticed that the aforesaid instructions are not being followed and as a result various Ministries/ Departments continue to make references to DoPT seeking relaxation of the conditions for one reason or the other. The most common reasons given by the employees are unawareness of the rules and non-availability of Authorized Travel Agents viz. M/s Ashok Travels, M/s Balmer Lawrie & Company at places where the tickets have been booked from. Even in such cases, the option of booking directly from the airlines through their website is available. In no case is the booking of tickets through any other agency is permissible.
3. All the Ministries/ Departments of Government of India are advised to ensure that their employees are made aware of the above mentioned guidelines to avoid breach of any of the LTC rules.
4. This issues with the approval of Joint Secretary(E).
(B. Bandyopadhyay)
Under Secretary to the Govt. of India
Under Secretary to the Govt. of India
To,
All Ministries/ Departments of Government of India
All Ministries/ Departments of Government of India
2014-TIOL-435-ITAT-AHM
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' AHMEDABAD
BENCH 'B' AHMEDABAD
ITA Nos.1146 & 1518/Ahd/2011
Assessment Year: 2006-07
Assessment Year: 2006-07
1) CADILA PHARMACEUTICALS LTD
708,SARKHEJ DHOLKA ROAD BHAT
AHMEDABAD-382210
PAN NO:AAACC6251E
708,SARKHEJ DHOLKA ROAD BHAT
AHMEDABAD-382210
PAN NO:AAACC6251E
2) ADDL COMMISSIONER OF INCOME TAX
RANGE-1, AHMEDABAD
RANGE-1, AHMEDABAD
Vs
1) ADDL COMMISSIONER OF INCOME TAX
RANGE-1, AHMEDABAD
RANGE-1, AHMEDABAD
2) CADILA PHARMACEUTICALS LTD
AHMEDABAD
PAN NO:AAACC6251E
AHMEDABAD
PAN NO:AAACC6251E
N S Saini, AM And Kul Bharat, JM
Date of Hearing: June 18, 2014
Date of Decision: July 11, 2014
Date of Decision: July 11, 2014
++ we find that the Coordinate Bench in the case of ACIT vs. Vodafone Essar Gujarat Ltd. relying on the judgement of Karnataka High Court in the case of CIT vs. Yokogawa India Ltd. has decided the issue by observing that it is a fact that the assessee had made provision forbad and doubtful debts and the same has been charged to the profit and loss account for the year ended 31st March 2003. In the Balance sheet as on 31st March 2003 of the assessee, it can be seen that the provision of bad and doubtful debts has been reduced from the gross debtors and the net sundry debtors are shown as asset in the balance sheet. Thus the provision for bad and doubtful debts cannot be termed as a provision for liability but is in the nature of diminution in the value of asset. In view of the aforesaid facts, we are of the view that the facts in the present case are identical to that of the case of Yokogwa India Ltd. We therefore, respectfully following the decision of High Court in the case of CIT vs. Yokogwa India Ltd., we do not find any infirmity in the order of CIT(A). Accordingly the appeal of the Revenue is dismissed. Respectfully following the aforesaid decision of the Hon'ble Coordinate Bench, we delete the addition of Rs.52,59,803/- and allow the ground of assessee's appeal;
IT : Where assessee carried out delivery based share transactions with an investment motive, in view of fact that period of holding in said transactions was less than one year, income arising from those transactions was to be taxed as short-term capital gain
IT : Income earned by assessee from F & O transactions and daily trading in shares carried with business motive mainly through stockbroker registered with NSE and BSE was taxable as business income
■■■
[2014] 46 taxmann.com 242 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-Tax
v.
Om Prakash Suri (No. 1)*
SHANTANU KEMKAR AND PRAKASH SHRIVASTAVA, JJ.
IT APPEAL NO. 4 OF 2011†
NOVEMBER 24, 2011
Section 28(i), read with section 45, of the Income-tax Act, 1961 - Business income - Chargeable as (Share dealings) - Assessment year 2005-06 - Whether it is possible for a taxpayer to have two portfolios, namely, an investment portfolio comprising securities, which are to be treated as capital assets and trading portfolio comprising stock-in-trade, which has to be treated as trade asset - Held, yes - Whether, therefore, where assessee carried out delivery based share transactions with an investment motive, in view of fact that period of holding in said transactions was less than one year, income arising from those transactions was to be taxed as short-term capital gain - Held, yes - Whether, however, income from F & O transactions and daily trading in shares carried with business motive mainly through stockbroker registered with NSE and BSE was taxable as business income - Held, yes [Para 4][In favour of assessee]
R.L. Jain and Ms. Veena Mandlik for the Appellant.
JUDGMENT
1. Shri R.L Jain, learned senior counsel with Ms. Veena Mandlik, learned counsel for the appellant.
2. Heard on the question of admission.
3. By this appeal filed under section 260A of the Income-tax Act, 1961, the appellant-Revenue has challenged the order dated August 4, 2010, passed by the Income-tax Appellate Tribunal Indore Bench (for short, "the Tribunal") in Income Tax Appeal No. 433/IND/2009 for the assessment year 2005-06.
4. Having heard the learned senior counsel for the appellant, we find that the Commissioner of Income-tax (Appeals) as also the Tribunal, after due appreciating all the facts, have correctly recorded the finding that the delivery based transactions were made with an investment motive and as such, the income therefrom was in the nature of short-term capital gains whereas the income from F & O transactions and daily trading in shares were with the business motive,, which were showed as business income only, which were mainly through stockbroker Arihant Capital Market Ltd". registered with the NSC, NSE and BSE. The Commissioner of Income-tax (Appeals) and the Tribunal have considered the Board Circular No. 4 of 2007, dated June 15, 2007, emphasizing that it is possible for a taxpayer to have two portfolios, namely, an investment portfolio comprising the securities, which are to be treated as capital assets and trading portfolio comprising stock-in-trade, which are to be treated as trade asset.. The clarification issued by the Board was also considered, stating therein that no single principle would be decisive and the total proposition is to be considered. The authorities below have taken into consideration that the respondent-assessee had maintained only trade portfolio and claimed that to be an investment portfolio and undisputedly, the period of holding is less than one year. Having regard to the aforesaid, the Commissioner of Income-tax (Appeals) and the Tribunal have held that there is no infirmity in holding that these transactions would be treated as short-term capital gains.
5. In view of the aforesaid finding of fact recorded by the Commissioner of Income-tax (Appeals) affirmed by the Tribunal, we find no ground, much less substantial question of law, in the matter.
6. Accordingly, the appeal fails and is hereby dismissed.
SUNIL*In favour of assessee.
†Arising out of order of Tribunal in IT Appeal No. 433 (Indore) of 2009, dated 4-8-2010.
Section 234E – Odisha High Court Stays Recovery Proceeding
Hon'ble Odisha High Court has granted stay on the recovery of Late fee charged Under Section 234E of the Income Tax Act,1961. In Separate cases Hon'ble Bombay, Rajashthan, Kerala and Karnataka High Court has already stayed the Recovery Proceeding U/s. 234E of the Income Tax Act,1961 till the final verdict in the case.
Hon'ble Odisha High Court has granted stay on the recovery of Late fee charged Under Section 234E of the Income Tax Act,1961. In Separate cases Hon'ble Bombay, Rajashthan, Kerala and Karnataka High Court has already stayed the Recovery Proceeding U/s. 234E of the Income Tax Act,1961 till the final verdict in the case.
Original Judgment attached
2014-TIOL-1133-HC-AHM-IT
IN THE HIGH COURT OF GUJARAT
AT AHMEDABAD
Special Civil Application No. 8754 of 2014
Special Civil Application No. 8755 of 2014
Special Civil Application No. 8757 of 2014
Special Civil Application No. 8755 of 2014
Special Civil Application No. 8757 of 2014
B NANJI CONSTRUCTION PVT LTD
Vs
INCOME TAX OFFICER - WARD 1(2), AHMEDABAD
M R Shah And K J Thaker, JJ
Dated: July 8, 2014
Appellant Rep by: Mr R K Patel, Adv.
Respondent Rep by: Mrs Mauna M Bhatt, Adv.
Respondent Rep by: Mrs Mauna M Bhatt, Adv.
Income Tax - Sections 143(3), 147, 148, 153A(1)(b) - reassessment - Whether in case the reassessment proceedings are initiated merely and solely at the instance of the audit party and there was no independent application of mind by the AO with respect to subjective satisfaction for initiation of the reassessment proceedings, the impugned notices can be sustained.
The assessee, a company, was engaged in the construction business, filed its return of income for the AY 2007-08 declaring 'NIL' income. Thereafter order u/s 143(3) read with Section 153A(1)(b) was passed and the returned income was accepted. A search action was carried out in the case of the assessee and subsequently notice u/s 143 was issued. After the assessment order was passed, AO issued the notice u/s 148 to reopen the assessment proceedings for the AY 2007-08. The assessee asked for the reasons for reopening of the assessment and the AO furnished the reasons recorded for reopening of the assessment. The assessee raised various objections on merits as well as on the ground that the reassessment proceedings had been initiated on the audit objections and, therefore, it was requested to drop the reassessment proceedings. Thereafter, vide separate orders, AO had disposed of the said objections. The assessee was thereafter called upon to show-cause as to why the amount of Rs.3,36,896/- for the AY 2007-08, Rs.38,60,208/- for the AY 2008-09, Rs.71,95,619/- for the AY 2009-10 and Rs.2,50,000/- for the AY 2010-11 should not be added to the total income for the Assessment Years under consideration and the assessee was also informed that in case the assessee fails to comply with the said notices the assessment will be finalized on merits. At that stage, assessee had preferred the present Special Civil Applications challenging the initiation of the reassessment proceedings.
Before HC, the assessee's counsel had submitted that the initiation of the reassessment proceedings for the AYs under consideration was absolutely illegal and bad in law. It was submitted that as such the reassessment proceedings had been initiated solely on the audit objections raised by the audit party and, therefore, the same was a colourable exercise of jurisdiction by AO. It was submitted that as such the reassessment proceedings cannot be initiated merely on the basis of the audit objections, more particularly, when the AO had no subjective satisfaction. Relying upon the decisions of the Division Bench of HC in the case of CIT, Ahmedabad – IV Vs. Shilp Gravures Ltd. 2013-TIOL-875-HC-AHM-IT and in the case of Vodafone West Ltd. Vs. AsCIT reported in [2013] 37 Taxmann 158 (Gujarat), it was requested to allow the present Special Civil Applications and quash and set aside the reassessment proceedings.
Held that,
++ to satisfy ourselves whether the reassessment proceedings have been initiated solely at the instance of the audit part and solely on the audit objections, we called for the original file from the office of the Assessing Officer. Ms. Bhatt, advocate appearing on behalf of the revenue has produced the relevant files from the office of the Assessing Officer. On perusal of the files and the notings and the relevant documents, it appears that the reassessment proceedings have been initiated at the instance of the audit party solely on audit objections. Under such factual aspects, the present petitions are required to be considered. The issue involved in the present Special Civil Applications is squarely covered by the decision of the Division Bench of this Court in the case of Shilp Gravures Ltd. and in the case of Vodafone West Ltd. by which a view is taken that if the reassessment proceedings are initiated merely and solely at the instance of the audit party and there was no independent application of mind by the Assessing Officer with respect to subjective satisfaction for initiation of the reassessment proceedings, the impugned notices cannot be sustained and the same deserves to be quashed and set aside. In view of the above and for the reasons stated hereinabove, all these petitions succeed and the impugned notices in each of the petitions are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs.
Assessee's appeal allowed
Cases followed:
CIT, Ahmedabad – IV Vs. Shilp Gravures Ltd. 2013-TIOL-875-HC-AHM-IT
Vodafone West Ltd. Vs. ACIT
JUDGEMENT
Per: M R Shah:
1. RULE. Ms. Mauna Bhatt, learned advocate waives service of notice of rule on behalf of the respondents in each of the petitions.
2. In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the present petitions are taken up for final hearing today.
3. As common question of law and facts arise in these group of petitions and as such are between the same parties but with respect to different Assessment Years and different notices are issued for reassessment, all these petitions are decided and disposed of by this common judgment and order.
3.1. Special Civil Application No.8754/2014 has been preferred by the petitioner-assessee to quash and set aside the impugned notice dated 30/03/2014 issued under Section 148 of the Income Tax Act alongwith preliminary order dated 10/06/2014 for the Assessment Year 2007-08.
3.2. Special Civil Application No.8755/2014 has been preferred by the petitioner-assessee to quash and set aside the impugned notice dated 30/03/2014 issued under Section 148 of the Income Tax Act alongwith preliminary order dated 10/06/2014 for the Assessment Year 2008-09.
3.3. Special Civil Application No.8756/2014 has been preferred by the petitioner-assessee to quash and set aside the impugned notice dated 20/02/2014 issued under Section 148 of the Income Tax Act alongwith preliminary order dated 10/06/2014 for the Assessment Year 2009-10.
3.4. Special Civil Application No.8757/2014 has been preferred by the petitioner-assessee to quash and set aside the impugned notice dated 18/03/2014 issued under Section 148 of the Income Tax Act alongwith preliminary order dated 10/06/2014 for the Assessment Year 2010-11.
4. As the original Assessment Orders were sought to be reopened under Sections 147 and 148 of the Income Tax Act (hereinafter referred to as 'the Act') with respect to different Assessment Years on the very ground, the facts with respect to the Assessment Year 2007-08 in Special Civil Application No.8754/2014 are considered.
4.1. The assessee, who was engaged in the construction business filed his return of income for the Assessment year 2007-08 on 05/05/2011 declaring 'NIL' income. Thereafter order under Section 143(3) read with Section 153A(1)(b) of the Act was passed on 30/12/2011 and the returned income was accepted. It appears that search action was carried out in the case of the assessee on 04/03/2010 and subsequently notice under Section 143 of the Act was issued. After the assessment order was passed, the Assessing Officer issued the notice under Section 148 of the Act to reopen the assessment proceedings for the Assessment Year 2007-08. The petitioner asked for the reasons for reopening of the assessment and the Assessing Officer furnished the reasons recorded for reopening of the assessment, which reads as under;
"The assessee Company has filed its return of income for above assessment year on 05/05/2011 declaring 'NIL' income and order under Section 143(3) read with Section 153A(1)(b) of the Income Tax Act was passed on 30/12/2011 and returned income was accepted. The assessee is engaged in construction business. A search action was carried out in the case of assessee on 04/03/2010 and subsequently notices under Section 153A was issued and served on 07/03/2010 for the Assessment year 2007-08. In response to the notice, the assessee filed its return of income on 05/05/2011 declaring 'NIL' income. The same was assessed under Section 143(3) read with Section 153(1)(b) of the Act on 30/12/2011 accepting the returned income. Scrutiny of computation of income exhibited in return of income, assessments order and P/L attached with auditor's report revealed that the assessee had taken operating gloss figure at Rs.8,07,104/- in computation of income. It was further noticed that there was credit of prior period income of Rs.11,44,000/- which was included in income of assessee. As such, the assessee had current year income of Rs.3,36,896/-. This amount was adjudged against carried forward book losses of earlier year. It was however noticed from return of this year and earlier year that there was no carry forward of earlier year losses under the Income Tax Act. As such set off of item of income account in this year against non available carry forward of losses of proviso year was irregular. This has resulted in user assessment of income of Rs.3,36,396/-.In view of the above, I have as above reasons to believe that the income of the assessee company to the above extent of Rs.3,36,396/- has escaped assessment and the case is therefore, required to be reopened under Section 147 of the Income Tax Act by way of issuing notice under Section 148 of the Income Tax Act."
4.2. The assessee raised various objections on merits as well as on the ground that the reassessment proceedings have been initiated on the audit objections and, therefore, it was requested to drop the reassessment proceedings. Thereafter, vide separate orders dated 10/06/2014 the Assessing Officer has disposed of the said objections. The petitioner was thereafter called upon to show-cause as to why the amount of Rs.3,36,896/- for the Assessment Year 2007-08, Rs.38,60,208/- for the Assessment Year 2008-09, Rs.71,95,619/- for the Assessment Year 2009-10 and Rs.2,50,000/- for the Assessment Year 2010-11 should not be added to the total income for the Assessment Years under consideration and the petitioner was also informed that if the petitioner fails to comply with the said notices the assessment will be finalized on merits. At that stage, the common petitioner has preferred the present Special Civil Applications under Article 226 of the Constitution of India challenging the initiation of the reassessment proceedings for the Assessment Years under consideration.
5. Shri Patel, learned advocate appearing on behalf of the petitioner has vehemently submitted that the initiation of the reassessment proceedings for the Assessment Years under consideration is absolutely illegal and bad in law. It is submitted that as such the reassessment proceedings have been initiated solely on the audit objections raised by the audit party and, therefore, the same is colourable exercise of jurisdiction by the Assessing Officer. It is submitted that as such the reassessment proceedings cannot be initiated merely on the basis of the audit objections, more particularly, when the Assessing Officer has no subjective satisfaction. Relying upon the decisions of the Division Bench of this Court in the case of Commissioner of Income-tax, Ahmedabad – IV Vs. Shilp Gravures Ltd. reported in [2013] 40 Taxmann 309 (Gujarat) = 2013-TIOL-875-HC-AHM-IT and in the case of Vodafone West Ltd. Vs. Assistant Commissioner of Income-tax reported in [2013] 37 Taxmann 158 (Gujarat), it is requested to allow the present Special Civil Applications and quash and set aside the reassessment proceedings.
6. To satisfy ourselves whether the reassessment proceedings have been initiated solely at the instance of the audit part and solely on the audit objections, we called for the original file from the office of the Assessing Officer. Ms. Bhatt, learned advocate appearing on behalf of the revenue has produced the relevant files from the office of the Assessing Officer. On perusal of the files and the notings and the relevant documents, it appears that the reassessment proceedings have been initiated at the instance of the audit party solely on audit objections. Under such factual aspects, the present petitions are required to be considered.
8. The issue involved in the present Special Civil Applications is squarely covered by the decision of the Division Bench of this Court in the case of Shilp Gravures Ltd. (Supra) and in the case of Vodafone West Ltd. (Supra) by which a view is taken that if the reassessment proceedings are initiated merely and solely at the instance of the audit party and there was no independent application of mind by the Assessing Officer with respect to subjective satisfaction for initiation of the reassessment proceedings, the impugned notices cannot be sustained and the same deserves to be quashed and set aside.
7. In view of the above and for the reasons stated hereinabove, all these petitions succeed and the impugned notices in each of the petitions are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs.
Regards,
Pawan Singla , LLB
M. No. 9825829075Please find attached the same circular.
C A Shah D J
USA
__._,_.___
This comment has been removed by the author.
ReplyDelete