Chawla Techno Construct Ltd. vs ACIT

This appeal by the Revenue is directed against the order of the ld. CIT (Appeals)-2, New Delhi dated 16.07.2018 for the assessment year 2014-15.

The ground of appeal taken by the Revenue reads as under :-

“(A) That on the facts & circumstances of the case the learned ACIT U/s 143(3) and Learned CIT (A)-2 U/s 250 erred in:

(i) Making disallowance of carry forward Long Term Capital Loss of Rs.82,96,820/- by making an additions U/s. 50C of the Income Tax Act, 1961 on account of difference in the circle rate between the date of registration of Agreement to Sell (16.07.2012) and date on which sale deed was registered (13.05.2013) and not including stamp duty on purchase in cost and not adding transfer charges and other expenses on Purchase/ Sale.

(ii) Adding a sum of Rs.8296820/- as Income from Other Sources.

(iii) Stating in Para7.3 of the CIT (A) order that "I find that the Assessing Officer has reduced the loss from sale of the property." This statement is incorrect and contrary to the facts.

(iv) Not appreciating the intention of bringing the beneficial Amendment (i.e. First Proviso to Sec. SOC), to provide statutory recognition to a principle which had been clearly adumbrated in Commercial Parlance i.e. a clarificatory beneficial amendment is applicable to all proceedings.”

Brief facts of the case are that the assessee company sold an industrial lease hold property vide sale deed dated 13.05.2013 at a total sale consideration of Rs.1,60,00,000/-. The assessee claimed that it had entered into a registered agreement to sell with the vendee on 16.07.2012 and received the substantial part of sale consideration, that was Rs.1,10,00,000/- out of Rs.1,60,00,000/-. During the FY 2013-14 when the sale deed was executed the value as per stamp duty authority was Rs.2,01,92,400/- whereas in the immediately preceding year the value of the land as per the stamp duty authority was Rs.1,58,05,200/-. The assessee claimed that since it had entered into the agreement with the vendee in FY 2012-13, when the value as per the stamp duty authority was Rs.1,58,05,200/- and payments amounting to Rs.1,10,00,000/- had been made by cheque, the sale value should be taken only at Rs.1,60,00,000/-. However, ld. CIT (A) was not convinced. He referred to the amendment by Finance Act, 2016 and opined that this does not act retrospectively and held as under :-

“7.2 I have considered the facts of the case and the submission of the Appellant. I find that the following proviso enabling the Assessee to take the stamp valuation in accordance with the agreement fixing the amount of consideration has been inserted by the Finance Act, 2016, w.e.f. 01.04.2017.

Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer.

7.3 It may be seen that the insertion of the above proviso is only w.e.f. 01.04.2017, meaning thereby the Assessee shall not get the benefit of its agreement fixing the amount of consideration in previous financial year, that was 2012-13. Therefore, the provisions of 50C of the IT Act are squarely applicable in the case of the Assessee. I hold that the Assessing Officer has rightly taken the value of the property at Rs.2,01,92,400/-. The Appellant has claimed transfer expenses at the time of the purchase of the property and at the time of the sale of the property. The Assessing Officer, in the Assessment Order, has stated that the Assessee could not furnish evidences that the expenses were incurred by it. The facts remain the same even at the time of appellate proceedings before me. Therefore, the computation of capital gain made by the Assessing Officer is held to be correct. The Appellant has stated that the Assessing Officer has added Rs.82,96,820/- as income from other sources, whereas I find that the Assessing Officer has reduced the loss shown from the sale of the property. Accordingly, this ground is also liable to be dismissed.”

Against this order, Revenue is in appeal before us. We have heard both the parties and perused the record.

Ld. Counsel of the assessee pleaded that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Sanjeev Lal vs. CIT (2014) 365 ITR 389 (SC). Hon’ble Supreme Court had held that for the purpose of capital gains, an agreement to sell with part payment thereof transfers the ownership in this regard for the purpose of necessary computation in this regard. Though the amendment in Finance Act, 2016 was made from the date referred by the ld. CIT (A) but the decision of Hon’ble Supreme Court was prior also wherein it was held that for the purpose of transfer of property/sale of property for the purposes of capital gains, agreement to sell with part payment thereof is sufficient compliance. In this case as already noted, out of consideration of Rs.1.6 crores, assessee had already paid a substantial sum of Rs.1.10 crore at that time. Hence, in our considered opinion, the authorities below action to take circle rate of the year of registration is not sustainable and accordingly set aside the same.

Another ground in this ground is that assessee has claimed certain expenses relating to registration expenses as cost of improvement. AO had not allowed the same on the ground that no details were furnished before him. The noting of AO in this regard read as under :-

“In addition to this, the assessee has also claimed expenses for transfer charges for both sale and purchase of property. However, the assessee has not provided any proof to justify this expense. Vide order sheet entry 21.12.2016 the assessee was asked to explain why these expense may not be disallowed. The assessee failed to give a satisfactory reply. In view of this, the capital gain was calculated by the assessee.”

Ld. CIT (A) has also confirmed the same on the ground that assessee has not furnished sufficient details.

However, ld. Counsel of the assessee referred to his letter in the paper book to the AO wherein all the necessary details were furnished.

In view of the above and in our considered opinion, interest of justice will be served if this issue is re-examined by the AO afresh and decide as per law. We order accordingly. Needless to add assessee should be provided an opportunity of being heard.

In the result, the appeal of the assessee is partly allowed.