Rallis India Ltd v Additional CIT [IT APPEAL NO. 2464 (MUM.) OF 2010] (Mumbai ITAT)

Background:

The assessee-company declared short term capital gains on sale of flats u/s. 50 of the Act. Out of the flats sold, a flat was sold for a consideration of Rs. 1,65,00,000. The AO addressed a letter, u/s. 50C of the Income Tax Act, to Joint Sub-Registrar, Department of Stamp and Registration, Worli to furnish the value adopted by the Stamp Valuation Authority. The Joint Sub-Registrar informed that the stamp value of the said property was Rs. 1,86,01,380/-. Since section 50C of the Act speaks of the value adopted for stamp duty purposes, the addition of Rs. 21,01,380/- was made by the AO and the same was confirmed by learned CIT(A).

Assessee’s contentions:

• In respect of depreciable assets provisions of section 50 are applicable in which event method prescribed under 50C cannot be invoked.
• There is deemed short term capital gains by virtue of the fact that block of assets were exhausted upon sale of the flat but the fact remains that it is depreciable asset and hence valuation adopted by stamp valuation authority should not be taken into consideration.

HELD:

• With regard to applicability of provisions of section 50C, in the case of depreciable assets, the issue now stands squarely covered by the ITAT, Mumbai Special Bench in the case of ITO v. United Marine Academy [2011] 130 ITD 113, wherein the Special Bench observed that sections 50 & 50C operate in two different fields and if the value adopted by the stamp valuation authority is accepted by the purchaser/seller there cannot be any variation for limited purposes of computing the consideration received, under section 50C of the Income Tax Act, 1961.
• In the light of the decision cited (supra), we do not find any infirmity in the order passed by learned CIT(A). We therefore uphold the order of learned CIT(A).

With regard to applicability of provisions of section 50C, in the case of depreciable assets, the issue now stands squarely covered by the ITAT, Mumbai Special Bench in the case of ITO v. United Marine Academy [2011] 130 ITD 113/10 taxmann.com 320 wherein the Special Bench observed that sections 50 & 50C operate in two different fields and if the value adopted by the stamp valuation authority is accepted by the purchaser/seller there cannot be any variation for limited purposes of computing the consideration received, under section 50C of the Income Tax Act, 1961. In the light of the decision cited (supra), we do not find any infirmity in the order passed by learned CIT(A). We therefore uphold the order of learned CIT(A) and reject ground No. 4 of the assessee.