Rajaiah Ravinder Sayala,, Hyderabad v. ITO-4(1),, Hyderabad

ITA 274/HYD/2013 | 2009-2010
Pronouncement Date: 24-10-2013 | Result: Dismissed

Appeal Details

RSA Number 27422514 RSA 2013
Assessee PAN AEAPS7635B
Bench Hyderabad
Appeal Number ITA 274/HYD/2013
Duration Of Justice 7 month(s) 22 day(s)
Appellant Rajaiah Ravinder Sayala,, Hyderabad
Respondent ITO-4(1),, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 24-10-2013
Assessment Year 2009-2010
Appeal Filed On 04-03-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO. 274/HYD/2013 ASSESSMENT YEAR 2009-10 SRI RAJAIAH RAVINDER SAYALA HYDERABAD PAN: AEAPS7635B VS. INCOME TAX OFFICER WARD-4(1) HYDERABAD APPELLANT RESPONDENT ITA NO. 358/HYD/2013 ASSESSMENT YEAR 2009-10 INCOME TAX OFFICER WARD-4(1) HYDERABAD VS. SRI RAJAIAH RAVINDER SAYALA HYDERABAD PAN: AEAPS7635B APPELLANT RESPONDENT ASSESSEE BY: SRI R.G. SARDA REVENUE BY: SRI M.H.NAIK DATE OF HEARING: 08.10.2013 DATE OF PRONOUNCEMENT: 24.10.2013 O R D E R PER CHANDRA POOJARI AM: THE ABOVE APPEALS ARE CROSS APPEALS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-V HYDERABAD DATED 31.12.2012 FO R ASSESSMENT YEAR 2009-10. ITA NO. 274/HYD/2013 BY ASSESSEE: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED CIT(A) GROSSLY ERRED ON FACTS AND IN LA W IN ADOPTING STAMP DUTY VALUE U/S. 50C AS PREVAILING ON THE DATE OF REGISTRATION OF SALE DEED AS AGAINST AS PREVAILING ON THE DATE OF SALE AGREEMENT. 2. THE LEARNED CIT(A) OUGHT TO HAVE FOLLOWED THE DECISION OF ITAT VISAKHAPATNAM BENCH IN THE CASE ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 2 OF MOOLE RAMI REDDY VS. ITO REPORTED IN 2011- TIOL-135-ITAT-VIZAG WHICH IS BINDING ON HIM. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE A.Y. 2009-10 ADMI TTING INCOME OF RS. 4 85 931 WHICH INCLUDES LONG TERM CAPITAL GAIN OF RS. 5 18 579 AND BUSINESS LOSS OF RS. 32 648. ASSESSMENT U/S. 14 3(3) OF THE ACT WAS COMPLETED DETERMINING THE LONG TERM CAPITAL GAI N AT RS. 2 15 48 190. THE LEADING TO THE ADDITION ARE THAT THE ASSESSEE IS A PARTNER IN M/S. SAI CERAMICS & REFRACTORS AND THE F IRM STOPPED ITS ACTIVITIES IN THE YEAR 2003. ON THE DATE OF CLOSUR E THE FIRM HAS A LAND OF 7676 SQ. YDS AT KUKATPALLY. KEEPING IN VIE W THE SHARE OF LAND WHICH WORKS OUT TO 3454 SQ. YDS. (40%) THE A SSESSEE ENTERED INTO AN AGREEMENT OF SALE WITH M/S. BEEKAY STEEL ASS OCIATES ON 19.11.2003 FOR A CONSIDERATION OF RS. 86.35 LAKHS @ RS. 2 500 PER SQ. YD.. LATER A PARTITION DEED FOR THE ENTIRE POR TION OF LAND STANDING IN THE NAME OF THE FIRM WAS WAS ENTERED INTO AMONG THE PARTNERS OF THE FIRM ON 11.11.2005 AND THE ASSESSEE GOT 40% SHA RE OF LAND. PURSUANT TO THE ABOVE AGREEMENT OF SALE VIDE 9 SAL E DEEDS EXECUTED ON 12.11.2008 THE ASSESSEE SOLD THE LAND TO THE AS SIGNEES OF M/S BEEKAY STEEL ASSOCIATES FOR A CONSIDERATION OF RS. 8 6 35 000. THOUGH THE SALE CONSIDERATION RECEIVED IS MENTIONED AT RS. 86.35 LAKHS @ RS. 2 500/- PER SQ. YD IN THE SAID 9 SALE D EEDS THE MARKET VALUE OF THE SAID LANDS ADOPTED BY THE REGISTERING AUTHORITY AT THE TIME OF SALE IS RS. 3 48 10 000 @ RS. 10 078 PER SQ . YD. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER WHILE ARRIVING AT THE CAPITAL GAINS BY INVOKING THE PROVISIONS OF SECTIO N 50C COMPUTED THE CAPITAL GAINS ADOPTING THE SRO VALUE OF RS. 10 078/- PER SQ. YD. AND THE TOTAL CONSIDERATION WAS ARRIVED AT RS. 3 48 10 000 AGAINST THE CONSIDERATION ADMITTED AT RS. 86 35 000. ON APPEAL THE CIT(A) CONFIRMED THE ORDER OF THE AO ON THIS ISSUE. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 3 4. THE LEARNED AR SUBMITTED THAT AN AGREEMENT OF SALE W AS ENTERED INTO BY THE ASSESSEE WITH THE SELLER ON 19. 11.2003 TO SELL THE LAND PROPERTY MEASURING 3838 SQ. YDS. AT RS. 2000 PE R SQ. YD. AND RECEIVED RS. 3 51 000 AS ADVANCE VIDE CHEQUE NO. 59 3342 DATED 19.11.2003. ACCORDING TO HIM THE VALUE IN THE SALE AGREEMENT DATED 19.11.2003 HAS TO BE CONSIDERED FOR DETERMINING THE SALE CONSIDERATION INSTEAD OF SALE VALUE AS PER SECTION 50C AS ON 12.11.2008 THE DATE ON WHICH THE SALE DEEDS WERE EX ECUTED IN FAVOUR OF PAWAN KUMAR SONTHALIA. 5. FURTHER HE SUBMITTED THAT THE UNDERSTANDING AMONGST THE PARTNERS TO DIVIDE THE PROPERTY WAS ALREADY REACHED BEFORE THE SALE AGREEMENT AND THUS THE ASSESSEE HAD CLEAR LEGAL RIG HTS TO SELL THE NORTHERN HALF PORTION OF PROPERTY (THOUGH THE PROPE RTY WAS STANDING LEGALLY REGISTERED IN THE NAME OF PARTNERS HIP FIRM) AS ON THE DATE OF SALE AGREEMENT I.E. 19.11.03. AS PER TH E INDIAN PARTNERSHIP ACT 1932 ANY PARTNERSHIP AT WILL GET D ISSOLVED THE MOMENT ANY ONE OF THE PARTNERS EXPRESSES HIS INTENT ION TO DISSOLVE THE PARTNERSHIP. IN THE PRESENT CASE THERE WAS ORAL UNDERSTANDING AMONGST THE PARTNERS TO DISSOLVE THE PARTNERSHIP FI RM AND DIVIDE THE PROPERTY AMONGST THE PARTNERS. THUS THE FIRM STOO D DISSOLVED ON THE DATE OF ORAL UNDERSTANDING WHICH IS RECORDED IN THE SALE AGREEMENT AND FURTHER STOOD CONFIRMED BY THE ACT OF PARTNERS. THE LEGAL FORMALITIES OF EXECUTING FORMAL PARTITION DEE D DIVIDING THE PROPERTY AMONGST PARTNERS WAS DELAYED DUE TO VARIOU S REASONS EXPLAINED ABOVE AND BEYOND THE CONTROL OF ASSESSEE. ANY DELAY IN EXECUTION OF PARTITION DEED AMONGST THE PARTNERS AN D SUBSEQUENT DELAY IN REGISTRATION OF SALE DEEDS DO NOT MAKE THE ORIGINAL SALE AGREEMENT LESS TRUST WORTHY MORE PARTICULARLY WHEN THE ADVANCE WAS RECEIVED BY WAY OF CHEQUE AND THE SAME AMOUNT S TOOD ADJUSTED AGAINST SALE CONSIDERATION AND CLEARLY SO REFLECTED IN ONE OF THE SALE DEEDS REGISTERED SUBSEQUENTLY. ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 4 6. THE AR SUBMITTED THAT THE PROCESS OF SALE HAD BEEN I NITIATED ON THE DATE OF SALE AGREEMENT I.E. 19.11.03 AND ON 12.11.2008 BY EXECUTING SALE DEEDS THE ASSESSEE HAD ONLY COMPLETE D THE CONTRACTUAL OBLIGATIONS IMPOSED UPON HIM BY VIRTUE OF SALE AGREEMENT DATED 19.11.2003. THERE WAS DELAY IN EXECU TION OF SALE DEEDS DUE TO ABOVE EXPLAINED UNRESOLVED DISPUTES D EFICIT OF TRUST ETC. BETWEEN BROTHERS AND DELAY IN PROCURING ORIGI NAL TITLE DEEDS TO BE SURRENDERED TO THE BUYERS BY THE ASSESSEE. IT I S VERY COMMON IN INDIA THAT THE STAMP VALUATION RATES ARE INCREASED ALMOST EVERY YEAR BY STATE GOVERNMENT. THE AGREED SALE CONSIDERATION AS ON THE DATE OF SALE AGREEMENT ON 19.11.2003 IS NOT LESS THAN STA MP VALUATION RATES. THERE IS NO UNDERSTATEMENT OF SALE CONSIDERA TION AS ON THE DATE OF SALE AGREEMENT EVEN AS PER THE PROVISIONS OF SECTION 50C. 7. THE AR SUBMITTED THAT THERE IS NO UNDERSTATEMENT OF CONSIDERATION IN RESPECT OF THE TRANSFER ENVISAGED AT THE TIME OF SALE AGREEMENT AND THE TRANSACTION IS PERFECTLY HONEST AN D BONA-FIDE. THE ASSESSEE WAS BOUND TO CARRY OUT HIS CONTRACTUAL OBLIGATIONS TO SELL THE PROPERTY AT THE AGREED PRICE AND HONESTLY CARRIED OUT SUCH A CONTRACTUAL OBLIGATION. THE OBJECT OF LEGISLATURE T O ENACT SECTION 50C IS TO PREVENT UNDERSTATEMENT OF SALE CONSIDERATION IN PROPERTY TRANSACTIONS. THERE MAY BE NUMEROUS REASONS FOR DEL AY IN COMPLETION OF SALE TRANSACTIONS FROM THE TIME OF EN TERING INTO SALE AGREEMENT. IT WAS NEVER THE INTENT OF LEGISLATURE TO PUNISH THE PARTIES WHERE THERE WAS DELAY IN COMPLETION OF SALE TRANSACTION. KEEPING IN VIEW THE SPIRIT OF LEGISLATION THE PRO VISIONS OF SECTION 50C SHALL BE APPLIED AT THE TIME OF ENTERING INTO S ALE AGREEMENT. THE AR RELIED ON THE DECISION OF TRIBUNAL VISAKHAPAT NAM BENCH IN THE CASE OF MOOLE RAMI REDDY VS. ITO WARD-1(2) REPO RTED AS 2011- TIOL-135-ITAT-VIZAG FOR THE PROPOSITION THAT STAMP VAL UATION RATES PREVAILING AS ON DATE OF SALE AGREEMENT SHALL BE AD OPTED FOR THE PURPOSES OF SECTION 50C INSTEAD THE STAMP VALUATION RATES PREVAILING AS ON DATE OF REGISTRATION OF PROPERTY. ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 5 8. THE AR FURTHER SUBMITTED THAT FINANCE ACT 2013 ADDED A NEW SECTION 43CA W.E.F. A.Y. 2014-15 MAKING SPECIAL PROVI SION FOR FULL VALUE OF CONSIDERATION FOR TRANSFER OF ASSETS OTHER THAN CAPITAL ASSETS IN CERTAIN CASES. THIS SECTION WAS INTRODUCED TO BR ING IN THE TRANSACTIONS OF PROPERTIES SOLD BY THE BUILDERS/DEV ELOPERS AS THEY ARE NOT COVERED BY PROVISIONS OF SECTION 50C. SECT ION 43CA(3) & (4) CLEARLY PROVIDE THAT WHERE THE DATE OF AGREEMENT FI XING THE VALUE OF CONSIDERATION FOR TRANSFER OF THE ASSET AND THE DAT E OF REGISTRATION OF SUCH TRANSFER OF ASSET ARE NOT THE SAME THE STAMP VALUE PREVAILING AS ON THE DATE OF AGREEMENT SHALL BE TAKEN PROVIDED THE ADVANCE HAS BEEN RECEIVED BY ANY MODE OTHER THAN IN CASH. 9. THE AR SUBMITTED THAT IN THE INSTANT CASE THE ADVAN CE WAS RECEIVED BY WAY OF CHEQUE AT THE TIME OF AGREEMENT. THOUGH SIMILAR PROVISION IS NOT THERE IN SECTION 50C THE PROVISIO NS OF SECTION 43AC(3) & (4) SHALL BE READ INTO SECTION 50C TO MAKE THE PROVISION WORKABLE AND TO PREVENT THE DISCRIMINATION PRESENT WHEN THE IMMOVABLE PROPERTY IS SOLD BY AN INVESTOR AND BUILD ER/DEVELOPER. 10. ON THE OTHER HAND THE LEARNED DR SUBMITTED THAT TH ERE ARE MANY UNRECIPROCATED QUESTIONS FROM THE VERSION OF T HE ASSESSEE. IT IS THE CLAIM OF THE ASSESSEE THAT IN THE YEAR 2003 THE FIRM STOPPED ITS ACTIVITIES AND THE ASSESSEE ALONG WITH HIS WIF E ENTERED INTO AGREEMENT OF SALE ON 19.11.2003 FOR HIS PORTION OF LAND OF 3454 SQ. YDS WITH M/S. BEEKAY STEEL ASSOCIATES. THE SAID COPY OF AGREEMENT OF SALE WAS FILED BEFORE THE CIT(A) AND IT WAS STATE D THAT THE SAME WAS NOT FILED BEFORE THE ASSESSING OFFICER. IN THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) THE ASSESSEE PO INTED OUT THAT HE WAS UNDER OBLIGATION TO SELL THE LAND AT THE VALUE AGREED UPON AS PER THE SALE AGREEMENT DATED 19.11.2003 AND AS PER THE TERMS AGREED UPON THEREIN. ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 6 11. THE DR SUBMITTED THAT BEFORE MAKING A PARTITION OF THE TOTAL LAND STANDING IN THE NAME OF THE FIRM THE ASSESSEE CLAIMS TO HAVE ENTERED INTO AN AGREEMENT OF SALE FOR SALE OF HIS P ORTION OF LAND ON 19.11.2003. THE PARTITION DEED WAS MADE ON 11.11.20 05 AMONG THE PARTNERS OF THE FIRM AND AS PER THIS PARTITION DEE D THE ASSESSEE GOT 40% OF LAND THE WIFE OF THE ASSESSEE GOT 10% AND T HE BALANCE 50% WAS TO THE SHARE OF BROTHER OF THE ASSESSEE WHO RE SIDES IN USA. IT IS HERE THE ASSESSEE TAKES A PLEA THAT BECAUSE OF S OME CONTENTIOUS ISSUES BETWEEN THE BROTHERS TIME WAS TAKEN TO GET THE PARTITION DEED AND EVEN AFTER THERE GETTING THE ORIGINAL LAN D DOCUMENTS FROM BANKS AND OTHER OBLIGATIONS CAST UPON IN THE PARTIT ION DEED HE COULD BE ABLE TO REGISTER THE SALE DEEDS TRANSFERRING THE LANDS IN THE YEAR 2008 ONLY. THE OBLIGATIONS MENTIONED BY THE ASSESS EE THAT FORCED A GAP OF FIVE YEARS TIME BETWEEN THE SALE OF AGREEMEN T AND THE ACTUAL SALE ARE AS UNDER. 'AS PER CLAUSE 2 OF THE AGREEMENT OF SETTLEMENT THE ASSESSEE WAS MADE RESPONSIBLE TO CLEAR THE FOLLOWIN G LIABILITIES PERTAINING TO M/S SAI CERAMICS & REFRACTORIES:- A) BANK OF INDIA LOAN. ASSESSEE PAID A SUM OF RS. 10 21 000 ON 11.11.2005 TO BANK OF INDIA. B) MUNICIPAL TAX. ASSESSEE PAID A SUM OF RS. 1 44 670 VIDE CHEQUE NO. 068362 DT. 06. 02. 06. C) HALF OF ELECTRICITY CHARGES. ASSESSEE PAID A SUM OF RS. 87 394 ON 03.02.2006 AND A SUM OF RS. 13 500 ON 04.04.06. D) HALF OF SALES TAX. ASSESSEE PAID A SUM OF RS. 2 83 208 DURING FEBRUARY AND MARCH 2006. E) GRATUITY TO LABOUR. ASSESSEE PAID A SUM OF RS. 4 01 307 ON VARIOUS DATES. AS PER CLAUSES 6 & 7 OF THE AGREEMENT OF SETTLEMENT THE ORIGINAL TITLE DEEDS PERTAINING TO INDUSTRIAL L AND AFTER RELEASE BY BANK OF INDIA SHALL BE KEPT WITH O NE MR. RAJAN AND AFTER SHOWING THE ORIGINAL PAPERS TO ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 7 BUYERS THE SAME SHALL BE SURRENDERED TO BROTHER OF ASSESSEE MR. S.R. MADHU. COPIES OF AGREEMENT OF SETTLEMENT AND PARTITION DEED ENCLOSED' 12. THE DR SUBMITTED THAT AS PER THE PARTITION DEED EN TERED ON 30.10.2005 EXECUTED ON 11.11.2005 AND REGISTERED W ITH JOINT SRO RANGA REDDY ON 06.12.2005 THE ESTIMATE OF MARKET V ALUE OF THE SAID LAND & BUILDING OF 3454 SQ. YDS (WHICH THE ASS ESSEE GOT AS HIS SHARE OF 40%) WAS MENTIONED AT RS. 1 05 65 000. IT IS BEYOND HUMAN PROBABILITY THAT THE VALUE OF THE LAND VALUED AT RS. 1 05 65 000 IN THE YEAR 2005 WAS SOLD AT A LESSER R ATE AFTER A PERIOD OF THREE YEARS I.E. IN THE YEAR 2008 FOR RS. 86 3 5 000 JUST GOING BY THE AGREEMENT OF SALE ENTERED INTO IN THE YEAR 2003 . EVEN THIS AGREEMENT OF SALE WAS ALSO ENTERED INTO BY THE ASSE SSEE WHEN HE HAS NO CLEAR TITLE OVER ANY PORTION OF THE LAND AND WHEN THE LAND IN QUESTION WAS STANDING IN THE NAME OF THE FIRM IN W HICH HE IS A PARTNER. WHEN THE ASSESSEE HIMSELF VALUED HIS SHARE OF LAND OF 3454 SQ. YDS. AT A VALUE OF MORE THAN RS. 1 CRORE IN THE YEAR 2005 HOW IT CAN BE BELIEVED THAT HE SOLD THE SAME IN THE YEAR 2 008 FOR A LESSER FIGURE OF RS. 86 35 000. IF IT WAS TO BE BELIEVED THAT THE ASSESSEE IS OBLIGATED BY THE SALE AGREEMENT ENTERED INTO ON 19. 11.2003 TO SELL THE LAND AT THE VALUE AGREED UPON THEREIN IT IS PE RTINENT TO REFER TO THE PURPORTED CONSIDERATION RECEIVED ON THE DATE OF AGREEMENT. THE CONSIDERATION RECEIVED AS ADVANCE IS RS. 3 51 000. JUST BY RECEIVING A PALTRY AMOUNT OF ADVANCE FOR SELLING OVER A PORTI ON OF LAND ON WHICH HE HAS NO CLEAR TITLE ON THE DATE OF SUCH AGR EEMENT CAN IT CREATE A FASTENING LIABILITY ON THE PART OF THE ASS ESSEE TO SELL THAT LAND FOR THE SAME CONSIDERATION AGREED UPON IN THE AGREEMENT EVEN AFTER A GAP OF FIVE YEARS? THE ASSESSEE IS TRYING T O MAKE THE DEPARTMENT BELIEVE THAT THE AGREEMENT ENTERED UPON ON 19.11.2003 CREATED AN OBLIGATION ON HIM TO SELL THE LAND AT TH E SAME RATE THOUGH HE VERY MUCH KNEW THAT THE VALUE OF THE LAND IN QUESTION VALUES MORE THAN A CRORE IN THE YEAR 2005 AND IS RS . 3 48 10 000 ON THE DATE OF ACTUAL SALE IN THE YEAR 2008. ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 8 13. THE DR FURTHER SUBMITTED THAT THERE ARE CASE LAWS I N SUPPORT OF THE ARGUMENT THAT WHEN A PROPERTY WAS TRANSFERRE D BY AGREEMENT ONLY AND NO REGISTRATION WAS MADE BY PAYING STAMP D UTY THEN THE PROVISIONS OF SECTION 50C CANNOT BE INVOKED. HOWEVE R THAT IS NOT THE CASE ON HAND. THE ASSESSEE REGISTERED THE LAND IN FAVOUR OF THE PURCHASER AND WHAT IS TO BE SEEN IS THE DATE OF TRA NSFER OF THE PROPERTY. IN CASES WHERE LAND WAS TRANSFERRED BY M ERE AGREEMENT THE PROVISIONS OF SECTION 50C CANNOT BE INVOKED AS HELD BY THE TRIBUNAL LUCKNOW BENCH IN THE CASE OF CARLTON HOTE L PVT. LTD. VS. ACIT REPORTED IN 122 TTJ 515. IN THE CASE ON HAND THE ASSESSEE TRANSFERRED POSSESSION OF THE LAND IN THE YEAR 2008 VIDE REGISTERED SALE DEEDS DATED 12.11.2008 AND CLAIMED THAT THE RA TE OF LAND SHOULD BE ADOPTED AS PER RATES FOR THE YEAR 2005 B ASED ON THE SALE AGREEMENT DATED 19.11.2003 IGNORING THE PREVAILING MARKET RATE ON THE DATE OF ACTUAL TRANSFER OF LAND AND ALSO THE VA LUE AT WHICH THE LAND IN QUESTION WAS PARTITIONED TO THE ASSESSEE. THE AO HAD RIGHTLY ADOPTED THE VALUE OF THE LAND IN QUESTION AT THE RA TE PREVAILING ON THE DATE OF TRANSFER OF ASSET BY INVOKING THE PROVI SIONS OF SECTION 50C. COMING TO THE RELIANCE PLACED BY THE ASSESSEE ON THE CASE LAW OF ITAT VIZAG BENCH IT CAN BE SEEN THAT THE GAP BE TWEEN THE DATE OF SALE OF AGREEMENT AND DATE OF ACTUAL SALE IS ARO UND FIVE MONTHS AND ON THE DATE OF AGREEMENT THE VALUE AGREED UPON IS MORE THAN THE PREVAILING MARKET RATE. HOWEVER IT IS ON THE D ATE OF ACTUAL SALE THE MARKET VALUE HAS RISEN BEYOND THE AGREED RATE A ND THERE IT WAS HELD THAT THE VALUE MENTIONED IN THE AGREEMENT HAS TO BE CONSIDERED. THE GAP OF FIVE MONTHS BETWEEN AN AGREE MENT OF SALE AND ACTUAL SALE IN PROPERTY TRANSACTIONS IS REASONA BLE. THESE FACTS CANNOT BE EQUATED WITH AN AGREEMENT PURPORTEDLY ENT ERED INTO SOME FIVE YEARS BACK IN THE YEAR 2003 AND ACTUALLY SOLD IN THE YEAR 2008. 14. THE DR SUBMITTED THAT THE ASSESSING OFFICER HAD RIGH TLY ADOPTED THE MARKET VALUE OF THE LAND IN QUESTION AS PER THE ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 9 PREVAILING RATES AND THE QUESTION OF REFERRING THE MATTER TO VALUATION DOES NOT ARISE AS THE TIME GAP BETWEEN THE PURPORT ED DATE OF AGREEMENT AND ACTUAL DATE OF SALE IS AROUND FIVE YE ARS. THIS GAP OF FIVE YEARS ANY WAY GIVES RISE TO INCREASE IN VALUE OF AN INDUSTRIAL LAND SITUATED AT A PROMINENT PLACE LIKE KUKATPALLY AND ALSO CONSIDERING THE BOOM PERIOD FOR THE VALUE OF LANDS IN AND AROUND HYDERABAD DURING THE YEARS 2007 AND 2008 THE INCRE ASE IN MARKET VALUE OF THE LAND FROM RS. 2 500 PER SQ. YD TO RS. RS. 10 078 IN THE YEAR 2008 IS PHENOMENAL. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE ARGUMENT OF THE ASSESSEE'S COUNSEL IS TOTALLY MISCONCEIVED. IN THIS CASE THE SALE DEEDS WERE EX ECUTED ON 12.11.2008. THE VALUE ADOPTED FOR REGISTRATION PUR POSE IS RS. 3 48 10 000. ACCORDING TO THE ASSESSEE'S COUNSEL TH E ASSESSEE HAS ENTERED INTO SALE AGREEMENT WITH M/S. BEEKAY STEEL ASSOCIATES FOR A CONSIDERATION OF RS. 86 35 000 ON 19.11.2003. ACCOR DING TO THE AR THE VALUE OF THE PROPERTY MENTIONED IN THIS SALE AG REEMENT DATED 19.11.2003 IS AT RS. 86 35 000 IS TO BE CONSIDERED FOR DETERMINING THE CAPITAL GAIN. IT IS SEEN FROM RECORD THAT ON T HE DATE ON WHICH THE ASSESSEE IS SAID TO HAVE ENTERED INTO AGREEMENT I.E . 19.11.2003 THE ASSESSEE IS NOT AT ALL OWNER OF THE PROPERTY. THE ASSESSEE HAS GOT OWNERSHIP OF THIS IMPUGNED PROPERTY THROUGH PARTITI ON DEED WITH OTHER PARTNERS ON 11.11.2005. THE ASSESSEE NOT BEI NG THE OWNER OF THE IMPUGNED PROPERTY CANNOT ENTER INTO SALE AGREE MENT. THE FACTS BROUGHT ON RECORD AS ARGUED BY THE DR CLEARLY SHO W THAT THE ASSESSEE TRIED TO MISLEAD THE BENCH THAT THE ASSESS EE WAS OWNER OF THE PROPERTY AS HE ENTERED INTO SALE AGREEMENT ACT UALLY IT IS NOT SO. FURTHER IT IS ALSO AN ADMITTED FACT THAT THE SALE DEEDS WERE EXECUTED BY THE ASSESSEE ON 12.11.2008 AND VALUE ADOPTED FOR REGISTRATION IS RS. 3 48 10 000 AS SUCH THE PROVISIONS OF S. 50C A RE APPLICABLE TO THE FACTS OF THE CASE. BEING SO WE FIND NO FORCE IN THE ARGUMENT OF THE ASSESSEE'S COUNSEL AND THE SAME IS REJECTED. T HE CASE LAW RELIED ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 10 ON BY THE LEARNED AR IS CLEARLY DISTINGUISHED BY TH E DR IN HIS ARGUMENTS AND DO NOT REQUIRE FURTHER ELABORATION ON THIS AND WE ARE FULLY IN AGREEMENT WITH THE DR'S ARGUMENTS. ACCORDI NGLY THIS GROUND TAKEN BY THE ASSESSEE IS REJECTED. ASSESSEE' S APPEAL IN ITA NO. 274/HYD/2013 IS DISMISSED. ITA NO. 358/HYD/2013 BY REVENUE: 16. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) THE LEARNED CIT(A)'S ORDER IS ERRONEOUS BOTH IN LAW AND ON FACTS OF THE CASE. (2) THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. (3) THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS THE FIRMS' LIABILITY OF RS. 19 51 079 SHOULD BE CONSIDE RED IN THE FIRM'S HAND WHILE COMPUTING THE CAPITAL GAIN S IN THE HANDS OF THE FIRM INSTEAD OF THE PARTNER'S ASSESSMENT I.E. RAJAIAH RAVINDER SAYALA. (4) THE ASSETS AS WELL AS THE LIABILITIES OF THE FIRM W ERE DISTRIBUTED AMONG THE PARTNERS AS PER THE PARTITION DEED DATED 11.11.2005 AND THE PROFIT/GAINS DERIVED THEREON IS CHARGEABLE TO TAX U/S. 45(5) OF THE IT AC T UNDER THE HEAD CAPITAL GAINS IN THE HANDS OF THE FIRM. HENCE THE OUTSTANDING LIABILITY OF THE FIRM OF RS. 19 51 079 SHOULD BE CONSIDERED WHILE ASSESSING THE CAPITAL GAINS U/S. 45(5) OF THE IT ACT IN THE HA NDS OF THE FIRM. 17. FACTS OF THE ISSUE ARE THAT THE ASSESSEE CLAIMED AN AMOUNT OF RS. 19 51 079 TOWARDS BANK LOAN MUNICIPAL TAX ELE CTRICITY CHARGES SALES TAX GRATUITY TO WORKERS AND OTHER LIABILITIE S OUT OF SALE CONSIDERATION RECEIVED ON SALE OF THE PROPERTY. AS THIS LIABILITY IS NOT RELATING TO THE PROPERTY RECEIVED FROM THE DISSOLVE D FIRM THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE . HOWEVER THE CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE TH AT IT IS RELATED ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 11 TO THE PROPERTY SOLD. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 18. THE DR SUBMITTED THAT WHATEVER EXPENDITURE INCURRED TOWARDS REPAYMENT OF BANK LOAN MUNICIPAL TAX ELEC TRICITY CHARGES SALES TAX GRATUITY TO WORKERS CANNOT BE SAID TO B E THE EXPENDITURE RELATING TO THE ASSESSEE AND IT IS RELATING TO THE ERSTWHILE FIRM AND THE ASSESSEE CANNOT CLAIM ANY EXPENDITURE ON THIS C OUNT. HE RELIED ON THE ORDER OF THE AO. 19. THE LEARNED DR SUBMITTED THAT THE CIT(A) OUGHT TO HA VE CONSIDERED THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS THE FIRM'S LIABILITY OF RS. 19 51 079 SHOULD BE CONSIDE RED IN THE FIRM'S HAND WHILE COMPUTING THE CAPITAL GAINS IN THE HANDS OF THE FIRM INSTEAD OF THE PARTNER'S ASSESSMENT I.E. RAJAIAH RAVINDER SAYALA. THE DR ALSO SUBMITTED THAT THE ASSETS AS WELL AS TH E LIABILITIES OF THE FIRM WERE DISTRIBUTED AMONG THE PARTNERS AS PER THE PARTITION DEED DATED 11.11.2005 AND THE PROFIT/GAINS DERIVED THERE ON IS CHARGEABLE TO TAX U/S. 45(5) OF THE IT ACT UNDER THE HEAD CAPIT AL GAINS IN THE HANDS OF THE FIRM. HENCE THE OUTSTANDING LIABILIT Y OF THE FIRM OF RS. 19 51 079 SHOULD BE CONSIDERED WHILE ASSESSING THE CAPITAL GAINS U/S. 45(5) OF THE IT ACT IN THE HANDS OF THE FIRM. 20. THE AR SUBMITTED THAT THE ONLY ISSUE RAISED BY THE DEPARTMENT IN THIS APPEAL IS REGARDING DEDUCTION OF AMOUNTS PAID BY THE ASSESSEE TOWARDS DISCHARGE OF FIRM'S LIABILITIE S TAKEN OVER BY THE ASSESSEE ALONG WITH NORTHERN HALF PORTION OF PROPER TY. AS PER CLAUSE 2 OF THE AGREEMENT OF SETTLEMENT THE ASSESSEE WAS MADE RESPONSIBLE TO CLEAR THE FOLLOWING LIABILITIES PERT AINING TO PARTNERSHIP FIRM M/S. SAI CERAMICS & REFRACTORIES:- A) BANK OF INDIA LOAN. ASSESSEE PAID A SUM OF RS. L 0 21 000 ON 11.11.2005 TO BANK OF INDIA. B) MUNICIPAL TAX. THE ASSESSEE PAID A SUM OF RS. 1 44 670 VIDE CHEQUE NO. 068362 DATED 06.02.2006. ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 12 C) HALF OF ELECTRICITY CHARGES. ASSESSEE PAID A SUM OF RS. 87 394 ON 03.02.2006 AND A SUM OF RS. 13 500 ON 04.04.06. D) HALF OF SALES TAX. ASSESSEE PAID A SUM OF RS. 2 83 2 08 DURING FEBRUARY AND MARCH 2006. E) GRATUITY TO LABOUR. ASSESSEE PAID A SUM OF RS. 4 01 307 ON VARIOUS DATES. 21. THE AR SUBMITTED THAT THE ASSESSEE DISCHARGED THE AB OVE LIABILITIES AGGREGATING TO RS 19 51 0791 AND PRODUC ED EVIDENCE IN SUPPORT. THE AO ACCEPTS THE DEDUCTIBILITY OF THESE D ISCHARGED LIABILITIES IN THE HANDS OF PARTNERSHIP FIRM AND NO T IN THE HANDS OF THE ASSESSEE. THE CIT (APPEALS) RIGHTLY OVER RULED THIS CONTENTION OF THE AO ON THE GROUND THAT THE SAME WERE TAKEN OVER B Y THE ASSESSEE ALONG WITH THE ASSET. HE SUBMITTED THAT IN ANY CASE AS THE FULL CAPITAL GAINS ARE BEING TAXED IN THE HANDS OF THE A SSESSEE (WITHOUT APPLICATION OF SECTION 45(4) IN THE HANDS OF PARTNE RSHIP FIRM) THESE LIABILITIES HAVE NECESSARILY TO BE ALLOWED IN THE H ANDS OF THE ASSESSEE ONLY AS THE ASSESSEE HAS ADOPTED ACTUAL COST FOR TH E PURPOSES OF CALCULATION OF CAPITAL GAINS WITHOUT ADOPTING THE N OTIONAL VALUE PREVAILING AS ON THE DATE OF DISSOLUTION OF FIRM. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THIS ARGUMENT OF THE ASSESSEE'S COUNSEL IS DEVOID OF MERIT. WE HAVE CAREFULLY GONE THROUGH THE PARTITION DEED D ATED 11.11.2005 EXECUTED BETWEEN THE ASSESSEE AND TWO OTHER PARTNER S THROUGH WHICH THE ASSESSEE GOT TITLE OVER THE IMPUGNED PROP ERTY. THERE IS NO MENTIONING OF ANY LIABILITY ATTACHED TO THIS IMP UGNED LIABILITIES. BEING SO WHEN THE ASSESSEE SOLD THE PROPERTY THE ASSESSEE CANNOT SAY THAT CERTAIN LIABILITIES ARE ATTACHED TO THE PR OPERTY. THE ASSESSEE IS NOT ABLE TO DEMONSTRATE HOW THE LIABILI TY HAD ARISEN IN RELATION TO THE PROPERTY SOLD BY THE ASSESSEE SO AS TO CLAIM IT AS AN EXPENDITURE ALLOWABLE WHILE COMPUTING CAPITAL GAIN. IN THE ABSENCE OF BONA-FIDE EXPLANATION FROM THE ASSESSEE RELATING TO THE LIABILITY ITA NO. 274/HYD/2013 & ANR. SRI RAJAIAH RAVINDER SAYALA ======================= 13 WE ARE NOT IN A POSITION TO UPHOLD THE ORDER OF THE CIT(A). FURTHER NON-APPLICATION OF PROVISIONS OF S. 45(4) CANNOT BE A REASON TO ALLOW THIS EXPENDITURE IN THE HANDS OF THE ASSESSEE. ACCO RDINGLY WE REVERSE THE ORDER OF THE CIT(A) AND RESTORE THE ORDE R OF THE ASSESSING OFFICER. THE GROUNDS TAKEN BY THE REVENUE ARE ALLOWED. 23. IN THE RESULT ASSESSEE'S APPEAL IN ITA NO. 274/HYD/ 2013 IS DISMISSED AND REVENUE'S APPEAL IN ITA NO. 358/HYD/20 13 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH OCTOBER 2013. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED 24 TH OCTOBER 2013 TPRAO COPY FORWARDED TO: 1. SRI RAJAIAH RAVINDER SAYALA C/O. M/S. RG SARDA & AS SOCIATES CHARTERED ACCOUNTANTS 214 PARAS CHAMBERS 3-5-890 HIMAYATNAGAR HYDERABAD-500 029. 2. THE INCOME TAX OFFICER WARD - 4(1) 5 TH FLOOR AAYAKAR BHAVAN BASHEERBAGH HYDERABAD. 3. THE CIT(A) - V HYDERABAD. 4. THE CIT - IV HYDERABAD 5. THE DR 'B' BENCH ITAT HYDERABAD