ACIT, CHENNAI v. M/s. Essor Hotels Pvt Ltd., CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE SHRI U.B.S BEDI JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTA NT MEMBER I.T.A. NO. 1243/MDS/2010 [ASSESSMENT YEAR 2005-06] ESSOR HOTELS PVT. LTD NO. 34 FLAT NO. 1 RADHA VIHAR MCNICHOLS ROAD CHETPET CHENNAI 600 031. VS. THE A.C.I.T COMPANY CIRCLE (II)1 CHENNAI PAN: AAACE 7242 F (APPELLANT) (RESPONDENT) I.T.A. NO. 1336/MDS/2010 [ASSESSMENT YEAR 2005-06] THE A.C.I.T COMPANY CIRCLE (II)1 CHENNAI VS. ESSOR HOTELS PVT. LTD NO. 34 FLAT NO. 1 RADHA VIHAR MCNICHOLS ROAD CHETPET CHENNAI 600 031. PAN: AAACE 7242 F (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI K.E .B. RENGARAJAN ASSESSEE BY : SHRI S. VENUGOPALAN ITA NOS.1243 &1336/MDS/2010 :- 2 -: O R D E R PER B. RAMAKOTAIAH A.M.:- THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND RE VENUE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) III CHENNAI DATED 21.5.2008 FOR ASSESSMENT YEAR 2005-06. 2. THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. D.R. WERE HEARD AND THE LD. COUNSEL FOR ASSESSEE PLACED ON RE CORD A PAPER BOOK CONTAINING 69 PAGES AND IN ADDITION WRITTEN SU BMISSIONS AND THE SCHEDULE OF ASSETS AS ON 1.4.1985. THE LD. D.R. ALSO PLACED ON RECORD A PAPER BOOK CONTAINING FIVE PAGES INDICATING SUB-REGISTRARS VALUATION AND SCHEDULE OF ASSETS AS PER RECORD OF THE DEPARTMENT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY FILED RETURN OF INCOME FOR THE A.Y. 2005-06 DECLARING LOSS OF RS. 46 22 530/-. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE COMPANY THROUGH AN AGREEMENT MEMORANDUM OF UNDERSTANDING AND POWER OF ATTORNEY TRANSFERRED THE ASSETS BELONGING TO THE HOTEL TO M/ S SHRI JAIN JINENDRA CONSTRUCTION LIMITED FOR A TOTAL CONSIDERA TION OF RS. 16 39 00 000/- INCLUDING LAND AND BUILDING. THE ASS ESSEE COMPUTED THE LONG TERM CAPITAL GAIN ON THE LAND BI FURCATING THE VALUE OF TOTAL SALE CONSIDERATION FOR LAND AND BUIL DING. WHILE ITA NOS.1243 &1336/MDS/2010 :- 3 -: COMPUTING THE ASSESSEE HAD ADOPTED THE VALUE OF TH E PROPERTY AT RS. 3 86 580/- PER GROUND ON THE TOTAL 3636 SQ. FT OF THE LAND. ACCORDINGLY IT WORKED OUT THE LONG TERM CAPITAL GA INS AFTER CLAIMING BROKERAGE COMPENSATION ETC AND ARRIVED AT THE LONG TERM CAPITAL GAIN OF RS. 2.98 CRORES. THIS AMOUNT WAS CLAIMED AS EXEMPT AS ASSESSEE INVESTED IN CAPITAL GAIN BOND S. THE ASSESSEE ALSO TOOK SALE CONSIDERATION ON BUILDING A T RS. 5.59 CRORES AND REDUCED THE WDV AS PER BOOKS AS ON 1.4.2 004 AND ARRIVED AT A SHORT TERM CAPITAL GAIN OF RS. 3.84 CR ORES. THIS AMOUNT WAS SET OFF TO THE UNABSORBED LOSS AND DEPRE CIATION AND COMPUTED THE INCOME. 4. IN THE SCRUTINY PROCEEDINGS THE ASSESSING OFFIC ER NOTICED THAT THE BUILDING WHICH WAS ALSO CONSIDERED AS SOL D WAS DEMOLISHED BY THE BUYER AND WHAT WAS SOLD BY THE AS SESSEE WAS ONLY LAND. FURTHER NOTICING THAT THERE WAS NO BASIS FOR BIFURCATING THE SALE CONSIDERATION BETWEEN THE LAND AND BUILDING CONSIDERED THE ENTIRE SALE CONSIDERATION TO BE TOWARDS SALE OF LAND ONLY AND ACCORDINGLY WORKED OUT THE LO NG TERM CAPITAL GAINS ALONE. IN ADDITION TO THAT THE ASSE SSING OFFICER ALSO INVOKED THE PROVISIONS OF SECTION 50C OF THE I NCOME-TAX ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT FOR SHOR T] AND ADOPTED SUB-REGISTRARS VALUE TOWARDS SALE CONSIDERATION TH EREBY ADOPTING THE AMOUNT OF RS. 23.68 CRORES AS AGAINST RS. 16.39 CRORES OFFERED BY THE ASSESSEE. WHILE COMPUTING TH E LONG TERM CAPITAL GAINS THE ASSESSING OFFICER ALSO RESTRICTE D THE VALUATION AS ON 1.4.1981 TO RS. 50 000/- PER GROUND AS AGAINST RS. ITA NOS.1243 &1336/MDS/2010 :- 4 -: 3 86 580/- PER GROUND CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER OBTAINED THE GUIDELINE VALUE FROM THE SUB-RE GISTRARS OFFICE AND ADOPTED THE SAME. IN ADDITION TO THE AB OVE ISSUE THE ASSESSING OFFICER ALSO DENIED THE CLAIM OF RS. 1.8 CRORES STATED TO BE PAYABLE TO THE ERSTWHILE MANAGEMENT OF THE COMPANY WITH WHOM THE PRESENT MANAGEMENT HAS DISPUT ES AND FURTHER THE CLAIM OF GOODWILL WRITTEN OFF TO THE EX TENT OF RS. 56 91 900/-. THESE ISSUES WERE SHOW CAUSED BY THE ASSESSING OFFICER AND AFTER OBTAINING THE REPLIES FROM THE AS SESSEE THE ASSESSING OFFICER MADE THE ABOVE ADDITIONS/ DISALLO WANCES. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DELETED THE ADOPTION OF THE SUB-REGISTRAR S VALUE U/S 50C OF THE ACT WHILE UPHOLDING THE TREATMENT OF SAL E CONSIDERATION AS THAT OF SALE OF LAND ONLY AND NOT OF BUILDING BY RELYING ON THE DECISION OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. UNION COMPANY [MOTORS] LTD 2 83 ITR 445 [MAD]. ON THE ISSUE OF ADOPTION OF MARKET VALUE AS ON 1.4.1981 THE LD. CIT(A) REDETERMINED THE VALUE AT RS. 2 50 0 00/- PER GROUND CONSIDERING THE ASSESSEES RELIANCE ON THE C ASE OF M/S KEYARAM HOTELS PVT. LTD VS. ACIT REPORTED IN 300 IT R 118 [MAD] WHOSE PROPERTY WAS ALSO SOLD WHEREIN A SIMILAR ISS UE WAS CARRIED UPTO THE HONBLE HIGH COURT. HE ALSO DID N OT ALLOW THE CLAIM OF PAYMENT TO THE ERSTWHILE MANAGEMENT AND CL AIM OF LOSS AND DEPRECIATION WHICH AROSE OUT OF THE ASSESSING O FFICERS ORDER. ACCORDINGLY BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE AGGRIEVED AND ARE IN APPEAL BEFORE US. ITA NOS.1243 &1336/MDS/2010 :- 5 -: ITA NO. 1243/MDS/2010 6. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FIXING THE VALUE AS ON 01.04.1981 AT RS.2 50 000/- PER GROUND AS AGAINST RS.3 86 580/- PER GROUND CLAIMED BY THE APPELLANT EVEN AFTER PROVIDIN G SUFFICIENT COMPARABLE FIGURES VERY NEAR TO THAT LOC ALITY ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT EVEN AS PER THE FINANCIAL STATEMENTS OF 1983-84 WHICH ARE AVAILABLE WITH THE DEPARTMENT AS PER THE RETURNS FILED THE VALUE IS MU CH MORE THAN ADOPTED BY THE ASSESSING OFFICER AND DIRECTED BY THE CIT APPEALS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE COMPENSATION DUE TO T HE OLD MANAGEMENT IS TO BE PAID COMPULSORILY AND WITHO UT WHICH THE TRANSACTION WOULDNT HAVE RESULTED AND TH E APPELLANT COMPANY HAS DEPOSITED 2 CRORES IN SEPARAT E ACCOUNT TO SETTLE THE OLD MANAGEMENT AS PER COURTS DIRECTION AND AT LEAST THE SAME AMOUNT HAS TO BE ITA NOS.1243 &1336/MDS/2010 :- 6 -: SETTLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THIS IS AN EXPENSE ALLOWABLE UND ER LONG TERM CAPITAL GAINS AND EVEN IF ALLOWED AND THE LIABILITY HAS NOT MATERIALIZED IN FUTURE THE SAME C AN BE ASSESSED TO INCOME TAX IN THE YEAR OF RECEIPT AS A CESSATION OF LIABILITY. THE NON ALLOWABILITY OF TH IS WILL RESULT IN CALCULATION OF LONG TERM CAPITAL GAINS AT A HIGHER FIGURE AS THIS CANNOT BE CLAIMED IN FUTURE A S LONG TERM CAPITAL GAINS ARISES ONLY FOR THIS YEAR O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF GOODWILL WRITTEN OFF TO THE EXTENT OF RS.56 91 900/- WHILE CALCULATING THE LONG TERM CAPITAL GAINS ON THE FACT S AND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE NON INCLUSION OF THE VALUE OF THE BUILDING UNDER CONSTRUCTION FOR CALCULATION OF LONG TERM/SHORT TERM CAPITAL GAINS AS THIS APPEARS IN TH E FINANCIAL STATEMENTS SINCE 1983-84 ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.1243 &1336/MDS/2010 :- 7 -: 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES AN D CURRENT YEARS LOSSES ON THE FACTS AND CIRCUMSTANCE S OF THE CASE. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B A S THE TAX LIABILITY HAS COME ON ACCOUNT OF UNWANTED ADDIT IONS AND DISALLOWANCES BY THE ASSESSING OFFICER ON THE F ACTS AND CIRCUMSTANCES OF THE CASE. 7. GROUND NO. 4 HAS NOT BEEN PRESSED BY THE LD. A.R . 8. GROUND NO. 7 REGARDING LEVY OF INTEREST U/S 234B OF THE ACT IS CONSEQUENTIAL AND DOES NOT REQUIRE ANY ADJUDICAT ION FROM OUR SIDE. 9. GROUND NOS. 1 AND 2 ARE WITH REFERENCE TO ADOPTI ON OF MARKET VALUE AS ON 1.4.1981 CONFIRMED BY THE LD. C IT(A) AT RS. 2 50 000/- PER GROUND AS AGAINST RS. 3 86 580/- PER GROUND CLAIMED BY THE ASSESSEE. 10. THE ASSESSEE HAD ADOPTED THE ABOVE VALUE NOT ON THE BASIS OF ANY REGISTERED VALUERS REPORT NOR ON ANY SPECIF IC METHOD BUT ON THE BASIS OF THE VALUE ADOPTED BY THE LD. CIT(A) -IX IN THE CASE OF M/S KEYARAM HOTELS PVT. LTD SITUATED IN HARRING TON ROAD WHEREIN THE PROPERTY VALUE WAS DETERMINED AT RS. 3 4 3 485/- ITA NOS.1243 &1336/MDS/2010 :- 8 -: PER GROUND WHICH WAS AFFIRMED BY THE LD. CIT(A) I TAT AND THE HONBLE HIGH COURT. THE ASSESSEE CONTESTED BEFORE THE LD. CIT(A) AND FILED NECESSARY ORDERS INDICATING THAT T HE PROPERTY WAS IN THE VICINITY OF ASSESSEES PROPERTY BUT THE PROPERTY WAS MORE ON THE MAIN ROAD AND ACCORDINGLY VALUED AT RS. 3 85 580/- PER GROUND IS REASONABLE AND APPROPRIATE. THE LD. CIT(A) AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF THE M/S KEYARAM HOTELS P. LTD. [SUPRA] F IXED THE VALUE AT RS. 2 50 000/- PER GROUND STATING THAT THE ABOVE SAID PROPERTY WAS INSPECTED BY THE LD. CIT AND ON THAT B ASIS RATE WAS ADOPTED WHEREAS THE PROPERTY OF THE ASSESSEE IS AT A DIFFERENT LOCATION AND IS STRICTLY NOT COMPARABLE T O THE PROPERTY OF THAT ASSESSEE AS THIS PROPERTY WAS ATTACHED TO A BANK AND WAS UNDER THE CONTROL OF THE COURT RECEIVER. MOREO VER THE PROPERTY WAS ALSO CLOSED FOR MORE THAN A DECADE WIT HOUT WATER AND SEWERAGE CONNECTIONS ARREARS OF PROPERTY AND W ATER TAXES AND ELECTRICITY CHARGES ETC. IN VIEW OF THAT VALU E FIXED AT RS. 3 40 000/- PER GROUND CANNOT BE ADOPTED TO THE CASE OF THE ASSESSEE. HE FIXED THE VALUE AT RS. 2 50 000/- PER GROUND CONSIDERING THE RIVAL CONTENTIONS. 11. THE LD. COUNSEL IN HIS ARGUMENTS REITERATED T HE SAME SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO REF ERRED TO THE STATEMENT OF SCHEDULE AS ON 31.3.2002 TO INDICATE THAT THE LAND VALUE WAS REVALUED AT RS. 88 41 965/- IN THE BOOKS OF ACCOUNT AND THE ASSESSING OFFICER SHOULD HAVE AT LEAST ADOP TED THAT VALUE AS CONTESTED IN GROUND NO. 2. ITA NOS.1243 &1336/MDS/2010 :- 9 -: 12. THE LD. D.R HOWEVER SUBMITTED THAT THE REVENUE IS ALSO CONTESTING THE SAME ISSUE IN THE GROUNDS RAISED BY THE REVENUE AND THE ASSESSING OFFICER ADOPTED THE VALUE ON THE BASIS OF SUB- REGISTRARS GUIDELINE VALUE AND ALSO RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. J.V.K. RAO REPORTED IN 258 ITR 90 [MAD]. IT WAS HIS SUBMISSI ON THAT THE LD. CIT(A) HAS DEVIATED FROM THE GUIDELINE VALUE. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS SEEN FROM THE ORDE RS OF THE AUTHORITIES BELOW THERE IS NO DISPUTE THAT THE ASS ESSEE HAS PURCHASED THE PROPERTY WAY BACK IN 1970 FROM M/S ME CCANO FLORINGS PVT. LTD. VIDE SALE DEED DATED 02.09.1971 FOR A COST OF RS. 5 07 214/- WHICH WAS SHOWN AT THE SAME VALUE IN THE BOOKS UP TO 31.3.1984. AS PER THE PROVISIONS OF THE ACT THE ASSESSEE WAS ENTITLED TO CLAIM FAIR MARKET VALUE AS ON 1.4.1 981. ACCORDINGLY IT HAD ADOPTED THE VALUE OF RS. 3 86 58 0/-PER GROUND BUT WITHOUT ANY BASIS. THE ASSESSING OFFIC ER CONSIDERED THE SUB-REGISTRARS GUIDE LINE VALUES OBTAINED BY H IM DURING THE COURSE OF ASSESSMENT PROCEEDINGS AT RS. 50 000/-. T HE LD. CIT(A) CONSIDERING THE VALUATION ADOPTED BY THE LD. CIT(A) IN ANOTHER CASE OF KEYARAM HOTELS PVT. LTD. HAVING CONSIDERED THE LOCATION OF THE PROPERTY AND THE FACT THAT IT WAS PLACED UND ER A RECEIVER DETERMINED THE VALUE AT RS. 2 50 000/- PER GROUND AS ON 1.4.1981. THIS VALUE FOR 27 GROUNDS 350 SQ. FT. CO MES TO A VALUATION OF RS. 67 87 500/-AS ON 01-04-81 WHEREAS THE ASSESSEE ITA NOS.1243 &1336/MDS/2010 :- 10 -: ITSELF HAS AGREED FOR VALUE ADOPTED IN THE FINANCIA L STATEMENT FOR ASSESSMENT YEAR 1984-85 AT RS. 88 41 695/-. IF THIS VALUE IS INDEXED BACKWARDS AS PER THE COST INDEX VALUE ADOP TED BY THE LD. CIT(A) IS MORE OR LESS TALLYING WITH THE VALUE ADOPTED IN THE BOOKS OF ASSESSEE AS ON 31.3.1985 BUT WITH A SMALL VARIATION. IN VIEW OF THIS SINCE THERE IS EVIDENCE ON RECORD THA T THE ASSESSEE HAS REVALUED THE LAND VALUE AT RS. 88 41 695/- AS ON 31.3.1985 IN THE FINANCIAL YEAR 1984-85 IT CAN BE SAFELY ASS UMED THAT IT IS THE MARKET VALUE AS ON THAT DATE AND BENEFIT OF IND EXATION CAN BE GIVEN ON THAT VALUE. ACCORDINGLY ASSESSEES GR OUNDS ARE PARTLY CONSIDERED WITH THE DIRECTION TO THE ASSESSI NG OFFICER TO ADOPT THE ABOVE VALUE RS. 88 41 695/- AS ON 31.3.198 5 ACCORDINGLY BACK WARD INDEXED TO 1.4.1981 (OR TAKE NECESSARY INDEXATION VALUES TAKING BASE FIGURE AS YEAR 1984- 85 ON THE ABOVE AMOUNT WHICH RESULTS IN COST OF INDEXATION TO SAME VALUE). ACCORDINGLY ORDER OF THE LD. CIT(A) TO THA T EXTENT STANDS MODIFIED. 14. THE REVENUES OBJECTION IS WITH REFERENCE TO TH E ADOPTION OF SUB-REGISTRAR VALUATION WAS NOT ACCEPTED BY THE LD. CIT(A) AND LD. D.R. RELIED ON THE DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF J.V.K. RAO [SUPRA]. FACTS IN THAT CASE INDICATE THAT THE FAIR MARKET VALUE OF THE PROPERTY HAD TO BE DETERMINED AS ON 1.4.1961 WHEN THE ASSESSEE SOLD TH E PROPERTY IN THE YEAR 1984-85. THE ASSESSING OFFICER FIXED T HE FAIR MARKET VALUE AT RS. 30 000/- WHEREAS THE ASSESSEE RELIED ON THE CERTIFICATE OBTAINED BY THE SUB-REGISTRAR MADRAS SH OWING VALUE ITA NOS.1243 &1336/MDS/2010 :- 11 -: AT RS. 1 80 000/-. THIS VALUE WAS ACCEPTED AFTER C ONSIDERING VARIOUS OBJECTIONS AND PARAMETERS. FINDING OF THE H ONBLE HIGH COURT IS AS UNDER: THEREFORE THE CALCULATION BEING BASED ON THE CERT IFICATE FROM THE SUB-REGISTRAR AND FAIR ASSESSMENT ON THE B ASIS OF MUNICIPAL TAX AND THERE BEING NO OTHER CONFLICTING MATERIALS OR DATA WE DO NOT FIND ANY REASON TO INT ERFERE WITH THE ORDER OF THE TRIBUNAL. 15. AS CAN BE SEEN FROM THE ABOVE NOT ONLY THE SUB - REGISTRARS VALUE THE TRIBUNAL ALSO CONSIDERED THE FAIR ASSESSMENT AND OTHER CIRCUMSTANCES INCLUDING MUNICI PAL TAX VALUATION IN ARRIVING AT THE VALUE AS ON 1.1.1964 A ND THERE IS NO CONFLICTING MATERIAL OR DATA. IN THIS CASE THERE IS MATERIAL IN THE FORM OF SIMILARLY VALUED PROPERTY IN HARRINGTON ROAD AND ASSESSEE OWN VALUATION IN 1984-85. SINCE THERE IS MATERIAL AVAILABLE ON RECORD ABOUT THE FAIR MARKET VALUE IN ASSESSEES OWN CASE OF A LATER YEAR ADOPTION OF SUB-REGISTRAR S VALUE AT A LESSER PRICE IS NOT CORRECT. ACCORDINGLY THE CONT ENTION THAT THE SUB-REGISTRARS VALUE SHOULD ALONE BE CONSIDERED HAS TO BE REJECTED. SINCE THE ASSESSEES OWN RECORD INDICATE S SLIGHTLY HIGHER VALUE THAN WHAT WAS DETERMINED BY THE LD. CI T(A) WE ARE OF THE OPINION THAT THE VALUE AS PER REVALUED IN 1984-85 SHOULD BE ADOPTED FOR ARRIVING AT THE COST OF INDEX ATION. THIS GROUND IS PARTLY ALLOWED. ITA NOS.1243 &1336/MDS/2010 :- 12 -: 16. GROUND NO. 3 PERTAINS TO ISSUE OF COMPENSATION PAID TO OLD MANAGEMENT. GROUND ITSELF IS VERY ELABORATE IN ITS SUBMISSIONS. THE ISSUE AROSE BECAUSE THE ASSESSEES HOTEL WAS AT TACHED BY GRINDLAYS BANK DURING THE PERIOD OF THE ERSTWHILE M ANAGEMENT. THE PRESENT MANAGEMENT HAD ACQUIRED THE MANAGEMENT OF THE HOTEL BY PAYING THE AMOUNTS DUE TO GRINDLAYS BANK A ND THERE WERE DISPUTES BETWEEN THE OLD MANAGEMENT AND NEW MANAGEMENT AGAINST THE COMPENSATION RECEIVABLE DUE TO CHANGE OF MANAGEMENT. EVEN DURING THE PRESENT MANAGEMENT HOTEL WENT INTO FURTHER PROBLEMS AND WAS UNDER THE CONTRO L OF THE RECEIVER OF THE HONBLE HIGH COURT WITH LOT OF DUES TO THE BANK. THE ASSESSEE SETTLED THE MATTER WITH THE BANK AND A CCORDINGLY SALE WAS DETERMINED AS ADMITTED BY THE ASSESSEE SE TTLING THE AMOUNT TO THE BANK AND PAYING ARREARS OF TAX ETC. THE ASSESSEE CLAIMED COMPENSATION PAYABLE TO THE OLD MANAGEMENT AS DEDUCTION AS THERE WERE OBJECTIONS TO THE TRANSFER OF PROPERTY BY THE PRESENT MANAGEMENT AND ACCORDINGLY AMOUNT OF RS. 2 CRORES WAS DEPOSITED WITH THE BANK AS PER THE COURT DIRECTIONS. ASSESSEE CLAIMED ONLY ABOUT RS. 1.8 CRORES AS IT SE EMS TO BE THE AMOUNT WHICH COULD BE SETTLED WITH THE OLD MANAGEME NT. THE ASSESSING OFFICER REJECTED THE CLAIM STATING THAT T HE CLAIM IS CONTINGENT IN NATURE. THE LD. CIT(A) AFTER CONSID ERING THE ASSESSEES SUBMISSIONS REJECTED THE SAME STATING A S UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS BY THE LD. A.R. I FIND THAT APART FROM REITERATING THE EXPLANATION GIVEN BEFORE THE ASSESS ING ITA NOS.1243 &1336/MDS/2010 :- 13 -: OFFICER THE APPELLANT HAD NOT BEEN IN A POSITION T O OFFER ANY FURTHER EVIDENCE TO PROVE THAT THE AMOUNT DEPOS ITED WITH THE BANK PURSUANT TO THE ORDER OF THE COURT WI LL BE THE MINIMUM CONSIDERATION PAYABLE. THE APPELLANT H AD NOT PRODUCED ANY DOCUMENTARY PROOF IN SUPPORT OF IT S CLAIM NOR HAS GIVEN THE ORDER OF THE COURT BASED ON WHICH THE DEPOSIT WAS MADE. IN THE ABSENCE OF ANY EVIDEN CE PRODUCED BEFORE ME I AM UNABLE TO ACCEPT THE CONTE NTION OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH THE TRANSFER OF THE LAND. IT HAS ALSO NOT EST ABLISHED THAT THE PAYMENT CONSTITUTES COST OF ACQUISITION OF THE ASSET OR THE COST OF IMPROVEMENT THERETO. THIS GRO UND OF APPEAL IS ACCORDINGLY DISMISSED. 17. AFTER HEARING THE RIVAL SUBMISSIONS WE ARE OF THE CONSIDERED OPINION THAT THE COMPENSATION PAYABLE IS WITH REFERENCE TO CHANGE OF MANAGEMENT IN 1984-85 AND IN NO WAY CONNECTED WITH THE TRANSFER OF PROPERTY AT PRESENT. THE ERSTWHILE MANAGEMENT WOULD HAVE OBJECTED TO THE TRA NSFER OF THE PROPERTY WITHOUT SETTLING THE EARLIER OBJECTION S. AS RIGHTLY HELD BY THE LD. CIT(A) THE SAID AMOUNT CANNOT BE S AID TO BE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION OF TR ANSFER OF LAND. ACCORDINGLY THE CLAIM OF PAYMENT TO ERSTWHI LE MANAGEMENT WAS RIGHTLY REJECTED BY THE ASSESSING OF FICER AND THE LD. CIT(A). THIS GROUND IS ACCORDINGLY REJECTE D. ITA NOS.1243 &1336/MDS/2010 :- 14 -: 18. GROUND NO. 5 IS WITH REFERENCE TO EXCLUSION OF THE VALUE OF THE BUILDING UNDER CONSTRUCTION FOR CALCULATION OF LONG TERM CAPITAL GAIN / SHORT TERM CAPITAL GAIN. IT WAS THE CLAIM OF THE ASSESSEE THAT THE LAND ALONG WITH THE BUILDING WAS TRANSFERRED AND COST VALUE TAKEN INTO CONSIDERATION FOR LAND AL ONE IS NOT CORRECT AS VALUE OF BUILDING WAS ALSO REQUIRED CONS IDERATION WHILE CALCULATING CAPITAL GAINS. THE ASSESSING OFF ICER ON EXAMINATION OF THE ISSUE HELD THAT WHAT IS TRANSFE RRED BY THE ASSESSEE WAS ONLY LAND AND HAS GIVEN POWER OF ATTOR NEY FOR DEMOLISHING THE BUILDING AND TAKING NECESSARY APPRO VAL FROM THE CMDA. THE CIT(A) WAS OF THE OPINION THAT THE ENTIR E SALE WAS TOWARDS LAND ONLY AND NO VALUE CAN BE ADOPTED FOR B UILDING. HIS FINDING IN THIS REGARD IS GIVEN IN PARA 4.2 OF HIS ORDER AS REPRODUCED BELOW: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS BY THE LD. A.R. I AM OF THE OPINION TH AT THE ASSESSING OFFICER HAS COME TO THE CORRECT CONCLUSIO NS BY TAKING THE ENTIRE CONSIDERATION OF RS. 16 39 00 000/ - TOWARDS LAND. THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. UNION COMPANY [MOTORS] LTD 283 ITR 445 [MAD] UNDER SIMILAR SET OF FACTS HELD THAT THE SALE CONSIDERATION PAID BY THE PURCHASER WAS ONLY FOR LA ND SINCE THE BUILDING HAD NO VALUE AND GOT DEMOLISHED. THE GAINS WERE ASSESSABLE AS LONG TERM CAPITAL GAINS. RESPECTFULLY FOLLOWING THE ABOVE DECISION THE ACTIO N OF ITA NOS.1243 &1336/MDS/2010 :- 15 -: THE ASSESSING OFFICER IS CONFIRMED AND THE GROUND I S DISMISSED. 19. SINCE THE LD. CIT(A) FOLLOWED THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF UNION COMP ANY MOTOR [SUPRA] WE AGREE WITH THE FINDING OF THE LD. CIT( A). THE FACTS ARE SIMILAR TO THE ABOVE CASE. THE HONBLE JURISDI CTIONAL HIGH COURT HAS HELD AS UNDER: IT IS THEREFORE A SETTLED LAW THAT EVEN THOUGH TH E TRANSACTION INVOLVED LAND AND BUILDING ONCE THE LA ND FORMS THE ASSETS OF THE UNDERTAKING THE TRANSFER I S OF THE ENTIRE UNDERTAKING AS A WHOLE AND IT IS NOT POSSIBL E TO BIFURCATE THE SAME. THE SALE CONSIDERATION MADE BY THE PURCHASER IS ONLY FOR THE LAND SINCE THE BUILDING HAD NO VALUE AND THEREFORE GOT DEMOLISHED. 20. IN THE PRESENT CASE ALSO THERE IS FINDING BY T HE ASSESSING OFFICER THAT THE BUILDING WAS DEMOLISHED AND AS FAR AS VALUATION OF BUILDING WAS CONCERNED THE LD. CIT(A) ALSO GAVE FACTUAL FINDING AT PARA 9.3 OF HIS ORDER AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS BY THE LD. A.R. AND OBSERVATIONS MADE BY THE ASSESSING OFFICER. THE APPELLANTS CLAIM FOR INDEX ATION BENEFIT ON DEPRECIABLE ASSET CANNOT BE CONSIDERED. REGARDING THE CLAIM FOR TAKING THE VALUE SHOWN AS PE R ITA NOS.1243 &1336/MDS/2010 :- 16 -: FINANCIAL STATEMENTS I AM OF THE OPINION THAT THER E IS NOTHING WRONG IN ALLOWING THE SAME FOR CALCULATING THE SHORT TERM CAPITAL GAIN/LOSS AS THE BUILDING UNDER CONSTRUCTION IS SHOWN IN THE FINANCIAL STATEMENTS O F THE EARLIER YEARS. HOWEVER THE ASSESSEE HAS TO PROVE THAT THE VALUE SHOWN IN THE BALANCE SHEET IS CORRECT AND PROVE IT BY PRODUCING EVIDENCE REGARDING ACQUISITION OF T HE ASSET. IT IS WELL SETTLED THAT THE BURDEN OF PROOF IS ON THE ASSESSEE [CIT VS. CALCUTTA AGENCY LTD 19 ITR 191 [S C] LAXMINARAYAN MILLS CO LTD. VS. CIT 731 ITR 634 [SC]. THE ASSESSEE IS REQUIRED TO PROVE THE EXPENDITURE WITH DOCUMENTARY EVIDENCE. IN THIS CASE IT IS ONLY ARG UING THAT THE DOCUMENTS AND VOUCHERS MAY BE LYING WITH THE BA NK. IT WAS THE DUTY OF THE APPELLANT TO KEEP AT LEAST C ERTIFIED COPIES OR ATTESTED COPIES OF SUCH DOCUMENTS TO PROV E ITS CLAIM THAT THE ASSETS WERE BROUGHT INTO EXISTENCE A ND THEIR VALUE MATCHES THE VALUE SHOWN IN THE BALANCE SHEET. IN THE ABSENCE OF SUCH DETAILS THE ASSESSING OFFIC ER WAS RIGHT IN TAKING THE VALUE OF THE BUILDING UNDER CONSTRUCTION AT RS. NIL. I HAVE ALREADY DISCUSSED IN EARLIER PARAGRAPHS THAT THE REALIZATION TOWARDS BUILDING IS TO BE TAKEN AS NIL. IN VIEW OF THE ABOVE NO INTERFERENC E IS CALLED FOR IN THE COMPUTATION OF THE SHORT TERM CAP ITAL LOSS DETERMINED BY THE ASSESSING OFFICER. THIS GRO UND IS ACCORDINGLY DISMISSED. ITA NOS.1243 &1336/MDS/2010 :- 17 -: 21. SINCE THE ASSESSEE HAS NOT FURNISHED ANY EVIDEN CE WITH REGARD TO THE VALUE OF THE BUILDING UNDER CONSTRUCT ION NOR CLAIMED DEPRECIATION ON THE INCOMPLETE BUILDING WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WAS RIGHT IN NOT ALLOWING CAPITAL LOSS/ADJUSTMENTS IN THE WDV /CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. THIS GROUND IS THEREFORE REJECTED. 22. GROUND NO. 6 PERTAINS TO THE ISSUE OF DISALLOWA NCE OF EXPENSES AND CURRENT YEARS LOSSES. ASSESSEE HAS CL AIMED INTEREST EXPENDITURE PAID TO THE BANKS AND BANK CHA RGES IN ADDITION TO THE MISCELLANEOUS EXPENSES. THE ASSESS ING OFFICER REJECTED THE CLAIM STATING THAT THE ASSESSEE HAS NO T DONE ANY BUSINESS. HENCE THE CLAIM CANNOT BE ALLOWED. THE LD. CIT(A) ALSO REJECTED THE SAME VIDE PARA 10.2 OF HIS ORDER HOLDING THAT EXPENDITURE MUST BE DIRECTLY AND INTIMATELY CONNECT ED WITH THE CHARACTER OF THE ASSESSEE AS A TRADER AND NOT AS ON E OF THE ASSETS. TO BE A PERMISSIBLE ALLOWANCE EXPENDITURE MUST BE FOR THE PURPOSE OF CARRYING ON THE BUSINESS. SINCE NO BUSINESS WAS CARRIED ON DURING THE YEAR THE LD. CIT(A) DISMISSE D THE GROUND. 24. AFTER HEARING THE RIVAL SUBMISSIONS WE ARE OF THE OPINION THAT THE STAND OF THE REVENUE IS NOT CORRECT. THE P AYMENT OF INTEREST TO THE BANKS IS COVERED BY THE PROVISIONS OF SECTION 43B OF THE ACT WHICH ALLOWS IT ONLY ON PAYMENT BASIS. SINCE THE INTEREST EXPENDITURE PERTAINS TO THE EARLIER YEARS WHEN THE ASSESSEES BUSINESS WAS UNDER PRESENT MANAGEMENT / THE RECEIVER AND THERE WAS NO FINDING THAT THERE WAS NO BUSINESS IN ITA NOS.1243 &1336/MDS/2010 :- 18 -: THOSE YEARS INTEREST PAYABLE IN THOSE YEARS CANNO T BE CLAIMED AS PROVISIONS OF SECTION 43B OF THE ACT ARE APPLICA BLE. SINCE THE ASSESSEE PAID INTEREST ON THE LOANS TO THE BANK DUR ING THIS YEAR THE INTEREST PAYMENTS ARE ELIGIBLE FOR DEDUCTION U/ S 43B OF THE ACT WHETHER THERE IS RECEIPT OF INCOME OR NOT. NOT ONLY THAT THE DEPRECIATION IS ALSO BEING DISALLOWED. THE ASS ESSEE WAS IN THE BUSINESS AND SOLD THE LAND AND OTHER ASSETS DUR ING THE YEAR ALSO EARNED SOME INTEREST WHICH WAS CLAIMED UNDER OTHER SOURCES. MINIMUM EXPENDITURE FOR MAINTAINING CORPO RATE IDENTITY IS ALSO ALLOWABLE TO THE ASSESSEE AS PER J UDICIAL PRINCIPLES ESTABLISHED IN THIS REGARD. IN VIEW OF THIS WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLE D FOR CLAIM OF INTEREST AND EXPENDITURE. HOWEVER THE QUANTUM OF AMOUNT TO BE ALLOWED IS TO BE DETERMINED BY THE ASSESSING OFF ICER ON EXAMINING THE FACTS. FOR THIS PURPOSE THE ISSUE T O THE EXTENT OF VERIFICATION AND QUANTIFYING THE EXPENDITURE / LOSS IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE AND ALLOW AS PER FACTS AND LAW. THIS GROUND IS PARTLY ALLOWED. 25. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1336/MDS/2010 26. THE REVENUE HAS RAISED THE FOLLOWING TWO EFFECT IVE ISSUES IN ITS APPEAL: ITA NOS.1243 &1336/MDS/2010 :- 19 -: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN DIRECTED THE ASSESSING OFFICER TO ADOPT THE GUIDELINE VALUE OF THE SOLD PROPERTY AS ON 01.04.1981 AT RS.2 50 000 PER GROUND AS AGAINST RS.50 000 ADOPTED IN THE ASSESSMENT ORDER. 2.1 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT ON THE ISSUE OF GUIDELINE VALUE OF THE PROPERTY AS ON 01.04.1981 THE ASSESSING OFFICER HAS GIVEN A CLEAR FINDING AND REASONING IN THE ASSESSMENT ORDER AS TO WHY THE VALUE OF RS.50 000 PER GROUND WAS ADOPTED. THIS IS THE OFFICIAL FIGURE OBTAINED FROM SRO PURASAWALKAM AND SRO PERIAMET. IN FACT THE VALUE OF THE ENTIRE PROPERTY (27 GROUNDS AND 350 SFT) WAS SHOWN IN THE BOOKS OF THE ASSESSEE AT ONLY RS.5 07 214 FROM ASSESSMENT YEAR 1972-73 TO 1984-85. HENCE THE VALUE OF RS.50 000 PER GROUND ADOPTED BY THE ASSESSING OFFICER AS ON 01-04-1981 IS MUCH HIGHER THAN WHAT WAS ADOPTED BY THE ASSESSEE IN ITS BOOKS. 2.2 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT ONLY WHEN THE ''NEW MANAGEMENT TOOK OVER THE ITA NOS.1243 &1336/MDS/2010 :- 20 -: BUSINESS IN ASSESSMENT YEAR 198586 THE VALUE OF THE PROPERTY WAS REVALUED AT RS.88 41 695/- BUT THE ASSESSEE COULD NOT SUBSTANTIATE THE REVALUATION WITH ANY DOCUMENTARY EVIDENCE. 3. THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ADOPT THE AMOUNT OF RS.16 39 00 000 AS THE CONSIDERATION RECEIVED TOWARDS SALE OF LAND (AS AGAINST RS.23 68 85 400 ADOPTED B THE ASSESSING OFFICER) AND NOT TO INVOKE THE PROVISIONS OF SEC.50C OF THE ACT. 3.1 THE CIT(A) HAS FAILED TO APPRECIATE THAT EXPLANATION 2 TO SEC.50C HAS NULLIFIED THE ORDER OF THE ITAT JODHPUR AND HENCE THE TRIBUNAL'S DECISION IS NO MORE GOOD LAW. THE CIT(A) OUGHT TO HAVE SEEN THAT EXPLANATION ADDED TO A PROVISION WILL HAVE EFFECT FROM THE DATE ON WHICH THE SUBSTANTIVE LAW CAME INTO FORCE/ SINCE/ IT IS SETTLED LAW THAT INTRODUCTION OF AN EXPLANATION IS ONLY CLARIFICATORY IN NATURE AND MAKES CLEAR THE APPLICABILITY OF THE RELEVANT PROVISION. 3.2 IT IS SUBMITTED THAT REFERENCE MAY BE HAD TO THE SUPREME COURT'S DECISION IN THE CASE OF S. SUNDARAM PILLAI V. R. PATTABIRAMAN (AIR 1985 SC 582)/ WHEREIN/ IT HAS BEEN HELD THAT AN EXPLANATION ADDED TO. A STATUTORY PROVISION IS NOT ITA NOS.1243 &1336/MDS/2010 :- 21 -: A SUBSTANTIAL PROVISION IN ANY SENSE OF THE TERM BUT AS THE PLAIN MEANING OF THE WORD ITSELF SHOWS/ IT IS MERELY MEANT TO EXPLAIN OR CLARIFY CE RTAIN AMBIGUITIES WHICH MAY HAVE CREPT IN THE STATUTORY PROVISION. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAME COURT IN THE CASE OF CIT V. DORAISWAMY CHETTY (183 ITR 559) HELD THAT SUBSEQUENT INSERTION OF EXPLANATION SERVES AS A LEGISLATIVE EXPOSITION. IN VIEW OF THE FOREGOING/ IT MAY BE SEEN THAT THE LEARNED CIT(A) HAS CLEARLY ERRED IN NOT TAKING COGNIZANCE OF THE APEX COURT'S DECISIONS QUOTED ABOVE 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING/ IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 27. GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE AND N EED NO ADJUDICATION. 28. GROUND NO. 2 PERTAINS TO THE ISSUE OF TAKING TH E FAIR MARKET VALUE AS ON 1.4.1981. THIS ISSUE HAS ALREAD Y BEEN DEALT WITH BY US IN ASSESSEES APPEAL ABOVE IN GROUND NOS . 1 AND 2. TO BE CONSISTENT WITH THOSE FINDINGS THE REVENUES GROUNDS ARE TO BE REJECTED AND ACCORDINGLY THE SAME ARE REJECTE D. ITA NOS.1243 &1336/MDS/2010 :- 22 -: 29. GROUND NO. 3 PERTAINS TO THE ISSUE OF LD. CIT(A )S DIRECTION IN NOT INVOKING PROVISIONS OF SECTION 50C OF THE AC T. 30. THE ASSESSING OFFICER WHILE COMPUTING THE LONG TERM CAPITAL GAINS ADOPTED SALE VALUE AT RS. 23 68 85 40 0/- AS AGAINST ACTUAL RECEIPT OF RS. 16 39 00 000/- BY INV OKING THE PROVISIONS OF SECTION 50C OF THE ACT. THE LD. CIT( A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWE D THE ASSESSEES CONTENTION BY STATING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE ARGUMENT PUT FORTH BY THE ID. AR. I HAVE ALSO GO NE THROUGH THE DECISION RELIED ON BY HIM AND THE AMEND MENT MADE BY THE FINANCE (NO.2) ACT 2009. I A'' OF THE OPINION THAT THE PROVISIONS OF SECTION 50C CANNOT BE APPLIE D TO THIS CASE AS NO VALUE FOR STAMP DUTY PURPOSE HAS BEEN FI XED BY ANY AUTHORITY. IN THIS CASE NO SALE DEED HAS BEEN EXECUTED. ONLY A GENERAL POWER OF ATTORNEY HAS BEEN GIVEN TO THE BUYER ALONG WITH INDEMNITY BOND FOR THE TOTAL CONSIDERATION. THE PROPERTY WAS UNDER ATTACHMENT OF THE BANK AND HENCE COULD NOT BE SOLD WITHOUT SETTLEMENT 6F THE BANK DOES. THE DECISION OF NAVNEET KUMAR THAKKAR (S UPRA) IS DIRECTLY ON THIS ISSUE. THE HON'BLE ITAT HELD AS UNDER: UNLESS THE PROPERTY TRANSFERRED HAD BEEN REGISTERED BY SALE DEED AND FOR THAT PURPOSE THE VALUE HAD BEEN ASSESSED AND STAMP DUTY HAD BEEN PAID BY THE PARTIES SECTION 5OC COULD NOT COME ITA NOS.1243 &1336/MDS/2010 :- 23 -: INTO OPERATION. THE ASSESSEE TRANSFERRED THE PROPERTY BY EXECUTING AN AGREEMENT WHICH WAS NOT REGISTERED WITH THE REGISTERING AUTHORITY. IN SUCH A CASE SECTION 5OC COULD NOT HAVE COME INTO OPERATION AND THE RESULTANT APPLICATION OF SECTION 55A BY WHICH THE ASSESSING OFFICER GOT THE PROPERTY VALUED AND ADDUCED THE REPORT OF THE VALUATION OFFICER AS THE SOLE BASIS FOR MAKING THE ADDITION WAS WHOLLY INVALID. THE ONUS WOULD BE UPON THE REVENUE TO ESTABLISH WITH SOME CLINCHING EVIDENCE THAT SALE CONSIDERATION DECLARED BY THE ASSESSEE WAS UNDERSTATED. AS THE ASSESSING OFFICER HAD NOT MADE ENQUIRIES FROM THE PURCHASER ABOUT THE ACTUAL SALE CONSIDERATION AND HAD NOT BROUGHT ON RECORD ANY OTHER MATERIAL TO SHOW THAT THE SALE CONSIDERATION DECLARED BY THE ASSESSEE WAS UNDERSTATED THE ADDITION WAS WRONGLY MADE AND THEREFORE THE ORDER OF ADDITION WAS TO BE DELETED'. FURTHER THE AMENDMENT TO SECTION 50C BY FINANCE (N O.2) ACT 2009 INSERTING THE WORD 'OR ASSESSABLE' IS EFF ECTIVE ONLY FROM 1.10.2009 AND HENCE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE TO THE PRESENT CASE. ACCORDINGLY THE AO IS DIRECTED TO CONSIDER THE ACTUAL CONSIDERATION RECEI VED BY THE APPLICANT IN PLACE OF THE VALUE AS PER SECTION 50C. THIS GROUND IS ALLOWED. ITA NOS.1243 &1336/MDS/2010 :- 24 -: 31. THE LD. D.R. RELIED ON THE GROUNDS OF APPEAL WHI CH ARE IN DETAIL AND SUBMITTED THAT THE INSERTION OF EXPLANAT ION TO PROVISIONS OF SECTION 50C OF THE ACT IS CLARIFICATO RY IN NATURE AND ACCORDINGLY EVEN THOUGH THE PROPERTY IS NOT SUBMITT ED FOR REGISTRATION THE SUB-REGISTRARS VALUE AS ASSESSAB LE CAN BE INVOKED AND SUPPORTED THE ORDER OF THE ASSESSING OF FICER. 32. THE LD. A.R. FURNISHED DETAILED WRITTEN SUBMISS IONS IN THIS REGARD AND SUPPORTED THE ORDERS OF THE LD. CIT(A). 33. WE HAVE CONSIDERED THE ISSUE. AS THE FACTS IND ICATE PROPERTY WAS TRANSFERRED TO THE BUYER BY WAY OF AGR EEMENT OF SALE MEMORANDUM AND POWER OF ATTORNEY. THE PROPER TY WAS NOT REGISTERED AS THERE WERE PROLONGED LITIGATIONS ATTACHMENT BY BANKERS AND DISPUTE WAS ALSO PENDING BEFORE THE DEBT RECOVERY TRIBUNAL. IT WAS SUBMITTED THAT EVEN THOUG H THE PROPERTY HAS BEEN TRANSFERRED WITH THE CONSENT OF B ANKERS AS SUITS WERE PENDING THE COMPANY OPTED FOR ONE TIME SETTLEMENT NECESSITATING THE TRANSFER. ACCORDINGLY PROPERTY HAS BEEN TRANSFERRED THROUGH AN AGREEMENT OF SALE AND POWER OF ATTORNEY AFTER FIXING THE TOTAL SALE CONSIDERATION AT RS. 16. 39 CRORES. 34. PROVISIONS OF SECTION 50C OF THE ACT CANNOT BE APPLIED TO THIS CASE AS NO VALUE FOR STAMP DUTY PURPOSES WAS F IXED BY ANY AUTHORITY. IN THIS CASE NO SALE DEED HAS BEEN EXECU TED AND ONLY POWER OF ATTORNEY HAS BEEN GIVEN TO THE BUYER ALONG WITH AN INDEMNITY BOND FOR TOTAL CONSIDERATION. THE PROPERT Y WAS UNDER ATTACHMENT WITH THE BANK AND HENCE COULD NOT BE SOL D WITHOUT ITA NOS.1243 &1336/MDS/2010 :- 25 -: SETTLEMENT OF BANK DUES. THE DECISION OF NAVANEETH KUMAR THAKKAR (SUPRA) DIRECTLY ON THIS ISSUE. THE INCOME TAX APPELLATE TRIBUNAL HELD AS UNDER: ' UNLESS THE PROPERTY HAD BEEN REGISTERED BY SALE DEE D AND FOR THAT PURPOSE THE VALUE HAD BEEN ASSESSED AND ST AMP DUTY HAD BEEN PAID BY THE PARTIES SECTION 50C COUL D NOT COME INTO OPERATION. THE ASSESSEE TRANSFERRED THE PROPERTY BY EXECUTING AN AGREEMENT WHICH WAS NOT REGISTERED WITH THE REGISTERING AUTHORITY. IN SUCH A CASE SECTION 50C COULD NOT HAVE COME INTO OPERATION AND THE RESULTANT APPLICATION OF SECTION 55A BY WHICH THE ASSESSING OFFICER GOT THE PROPERTY VALUED AND ADDUC ED THE REPORT OF THE VALUATION OFFICER AS THE SOLE BASIS F OR MAKING THE ADDITION WAS WHOLLY INVALID. THE ONUS WOULD BE UPON THE REVENUE TO ESTABLISH WITH SOME CLINCHING EVIDEN CE THAT SALE CONSIDERATION DECLARED BY THE ASSESSEE WA S UNDERSTATED. AS THE ASSESSING OFFICER HAD NOT MADE ENQUIRIES FROM THE PURCHASER ABOUT THE ACTUAL SALE CONSIDERATION AND HAD NOT BROUGHT ON RECORD ANY OT HER MATERIAL TO SHOW THAT THE SALE CONSIDERATION DECLAR ED BY THE ASSESSEE WAS UNDERSTATED THE ADDITION WAS WRON GLY MADE AND THEREFORE THE ORDER OF ADDITION WAS TO BE DELETED. FURTHER THE AMENDMENT TO SECTION 50C BY FINANCE (N O.2) ACT 2009 INSERTING THE WORD 'OR ASSESSABLE' IS EFFE CTIVE ONLY FROM 1.10.2009 AND HENCE PROVISIONS OF SECTION 50C OF TH E ACT ARE NOT ITA NOS.1243 &1336/MDS/2010 :- 26 -: APPLICABLE TO THE PRESENT CASE. AMENDMENT TO SEC.50 C OF THE ACT IS NOT OF CLARIFICATORY IN NATURE AND HAS BEEN INTRODUCED WITH EFFECT FROM 1.10.2009 ONLY AND NOT WITH RETRO SPECTIVE EFFECT. 35. THE LD. D.R.S ARGUMENT THAT INTRODUCTION OF EX PLANATION IS ONLY CLARIFICATORY IN NATURE ALSO CANNOT BE ACCEPTE D AS THE WORD ASSESSABLE WAS INTRODUCED IN THE MAIN PROVISION W .E.F. 1.10.2009 ONLY AND ALONG WITH THAT EXPLANATION WAS ALSO INTRODUCED SIMULTANEOUSLY. IN VIEW OF THIS IT CAN NOT BE STATED THAT THE EXPLANATION IS RETROSPECTIVE IN NATURE. I F THE EXPLANATION WAS INTRODUCED TO CLARIFY THE EXISTING PROVISION WHEN THERE IS A DISPUTE THEN IT CAN BE EXAMINED WH ETHER THE EXPLANATION IS PROSPECTIVE OR RETROSPECTIVE IN OPER ATION. IN THIS CASE THE PROVISION ITSELF WAS AMENDED W.E.F. 1.10. 2009 BY INTRODUCING THE WORD OR ASSESSABLE SO AS TO CONSI DER THE TRANSACTIONS WHERE REGISTRATION WAS NOT DONE. SINC E THE MAIN PROVISION ITSELF WAS INTRODUCED W.E.F. 1.10.2009 A LONG WITH THE EXPLANATION THE EXPLANATION ALONE CAN NOT TAKEN IN RETROSPECTIVE IN NATURE. HENCE THE DECISION OF LD. CIT(A) IS JUSTIFIABLE ACCORDING TO LAW. THIS GROUND IS ACCORD INGLY REJECTED 36. THE APPEAL OF THE REVENUE STANDS DISMISSED. ITA NOS.1243 &1336/MDS/2010 :- 27 -: 37. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED WHEREAS THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10 TH FEBRUARY 2011 AT CHENNAI. SD/- (U.B.S. BEDI) JUDICIAL MEMBER SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER CHENNAI : 10 TH FEBRUARY 2011 VL/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5 DR