The Pr Commissioner Of Income Tax -2 Chandigarh v. M/S Quark Media India Pvt Ltd Ph-Viii-B Mohali
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
DATE OF DECISION: 24.01.2017 The Pr. Commissioner of Income Tax-2, Chandigarh. .....Appellant versus M/s Quark Media House India Pvt. Ltd. Mohali. .....Respondent CORAM:- HON'BLE MR.JUSTICE S.J. VAZIFDAR, CHIEF JUSTICE HON'BLE MR. JUSTICE DEEPAK SIBAL, JUDGE.
Present: Ms. Urvashi Dugga, Advocate for the appellant Mrs. Radhika Suri, Senior Advocate with Ms. Rinku Dahiya, Advocate, for the respondent ..
S.J. VAZIFDAR, CHIEF JUSTICE:
This is an appeal against the order of the Income Tax Appellate Tribunal dismissing the appeal against the order of the Commissioner of Income Tax (Appeals) allowing the assessee's appeal against the order of the Assessing Officer. The matter pertains to the assessment year 2006-07. 2.
According to the appellant, the following substantial questions of law arise:- i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in deleting the addition by holding that the transaction with a related party was not in terms of provisions of Section 40A(2)(b) of the Income Tax Act whereas the provisions of this Section were clearly applicable to the facts of the case?
ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in holding that reference made under section 55A of the Income Tax Act was bad in law whereas the Assessing Officer in the surrounding circumstances, had rightly invoked the
provisions of this section to determine the fair market value of the capital asset sold?
iii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in holding that the Hon'ble Supreme Court's decision rendered in the case of McDowell & Co. Ltd. v. CTO 154 ITR 148 is not applicable on the facts of the case?
iv) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is perverse in not deciding the specific ground of appeal taken by the appellant at Ground No.2 which is regarding passing of appellate order by the learned CIT(A) without affording an opportunity of being heard to the Assessing Officer which was specifically requested for in the ITNS-51 submitted to the CIT(A)?
However, only questions-2 and 3 were argued before us. The appeal is accordingly admitted in respect of questions No.2 and 3.
3.
The respondent-assessee filed its return of income declaring income from other sources at 37,13,113/- after claiming exemptions in the sum of about 13.50 crores under section 10-B of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The case was selected for compulsory scrutiny pursuant to which notices under section 143(2) and 142(1) of the Act were issued. A reference was made to the Transfer Pricing Officer (TPO) in view of an international transaction between the assessee and one of its associate enterprises which exceeded 5 crores. During the course of the assessment proceedings the Assessing Officer noticed that M/s Quark Media House (India) Pvt. Ltd. i.e. the assessee by a sale deed dated 29.04.2005 transferred to M/s Quark City India Pvt. Ltd. land admeasuring 24000 sq. yards in the industrial area of Mohali together with the building constructed thereon for a consideration of 25.10 crores. The building comprised of a built up area of 13520.27 sq. meters complete with infrastructure and modern facilities permanently embedded
including HVAC system, electrical installation, networking equipment, office equipment, drinking water plant, water treatment plant and a swimming pool.
4.
It is not necessary to consider two aspects which the Assessing Officer dealt with in detail, namely, the valuation of the land and the building and the relationship between the assessee and the purchaser thereof viz. M/s Quark Media House (India) Ltd. These aspects were not questioned on behalf of the assessee. We have for the purpose of this appeal proceeded on the basis that the market value of the property sold by the assessee to M/s Quark City India Pvt. Ltd. is about 70 crores and that the assessee and the vendee M/s Quark City India Pvt. Ltd. are inter-connected group companies.
In this regard, it is sufficient, therefore to note two things. By a letter dated 22.10.2009 the Assessing Officer made a reference to the District Valuation Officer (DVO) under section 55-A of the Act to ascertain the fair market value of the land and the building. The D.V.O. by his report forwarded under cover of a letter dated 31.12.2009 estimated the value of the property at 70.08 crores. Secondly, the Assessing Officer accordingly for the purpose of capital gains valued the property at 70,08,70,000/- after considering in detail the nature of the property and other expenses of sale. The Assessing Officer also dealt with the issue of the two entities being closely related in detail. For the purpose of this appeal it is sufficient to note that the assessee is a fully owned subsidiary of M/s Quark Media House SARL, Switzerland and M/s Quark City India Pvt. Ltd. i.e. the vendee is a 100%
subsidiary of another foreign company, namely, F.E. Holdings Mauritius Ltd. The two foreign companies are part of Quark group, the holding company of which is Quark Inc. USA. 5.
The question that falls for consideration is whether for the purpose of calculating the capital gains arising on account of the said transaction, the sale price ought to be taken as 25 crores as mentioned in the sale deed or 70 crores which is the value of the property arrived at by the Assessing Officer. The answer to this question also requires a consideration as to whether the Assessing Officer rightly made a reference to the D.V.O. under section 55A to ascertain the fair market value of the property.
6.
The Assessing Officer after noting the contentions on behalf of the assessee observed that a good case had been made out on behalf of the assessee that the full consideration received by the assessee for the sale of the property is the value stated in the sale deed. He, however, observed that the assessee had failed to address the real issue that because the assessee and the purchaser are related parties with common Directors and management, the sale transaction was not carried out at the market price. In other words according to him the price mentioned in the sale deed was not the market value and this was in view of the relationship between the parties. He disbelieved the assessee's contention that the transaction was a bona fide one having been entered into as per the bargain negotiated keeping in view all the market circumstances prevalent at the relevant time. According to him, this is a case where the business substance of the matter should be considered over
the form. He held that the transaction was not entered into at the market rate but was so arranged and structured that the assessee had no tax liability on account thereof and was therefore a colourable device to avoid the tax liability. 7.
The Commissioner of Income Tax (Appeals) held that the expression "full value of consideration" used in Section 48 cannot be construed as having a reference to the market value of the asset transferred; that the question of market value does not arise; that what is to be seen is the consideration actually arrived at between the parties for the transaction and that the adequacy or inadequacy of the price bargained between the parties is not relevant. The CIT(A) concluded that the Assessing Officer had erred in considering the fair market value for the purpose of computing the capital gain and that the Assessing Officer had not shown that the assessee had received any consideration other than that mentioned in the sale deed.
The CIT(A) further held that the Assessing Officer had unnecessarily emphasized that the price was below the market price as the vendee and the assessee were closely related as this issue is not relevant for the purpose of computing the capital gain. The CIT(A) further held as follows: The only factor on the basis of which the Assessing Officer made the assessment was that the assessee sold the assets below the market price and that this factor was inapplicable for the purpose of computation of capital gain under section 48 of the Act. The Assessing Officer failed to establish that the assessee had received any consideration other than that stated in the sale deed.
to avoid income tax or to minimize it is without basis and justification. It is not necessary for us to consider the findings of the CIT(A) regarding the mode of computation for that issue as already mentioned was not raised before us. Section 55A does not entitle the Assessing Officer to disturb the sale consideration as stated in the sale deed. It was not necessary to compute the fair market value and therefore, the Assessing Officer could not have referred the matter to the D.V.O.
8.
The Tribunal agreeing with the CIT(A) observed as follows: The full value of consideration is the full sale price actually paid and cannot be construed as having a reference to the market value of the asset/property transferred. What is to be determined is the consideration bargained for and not the market value in the case of sale while computing the capital gains. The Assessing Officer has no authority to substitute the fair market value of consideration actually paid unless it is demonstrated that the assessee had received more than what was declared by him. In the present case it was not the case of the Assessing Officer that the assessee had received any consideration more than what was mentioned in the sale deed. Therefore, there was no necessity for computing the fair market value and the Assessing Officer accordingly could not have referred the matter to the D.V.O.
9.
Ms. Dugga, the learned counsel appearing on behalf of the appellant-revenue, contended that for the purpose of computing the capital gains the Assessing Officer is entitled to ignore the consideration stated in the sale deed if he is satisfied that the same is far less than the fair value or
the market value thereof. She further submitted that for the purpose of determining the actual consideration it was always open to the Assessing Officer to refer the matter under section 55A to the D.V.O. She further submitted that even if section 48 does not permit the reference to the D.V.O. under section 55A, the respondent's case is covered by Section 50C. The Assessing Officer could have arrived at the true valuation of the property under section 50C. The submission that the Stamp Authority is bound by the circle rate is erroneous. The circle rates are only indicative and not determinative.
10.
Mrs. Suri, the learned senior counsel appearing on behalf of the respondent on the other hand submitted as follows:- i) The reference to the D.V.O. under section 55A in the present case was without jurisdiction. It is only where the provisions of Chapter-IV require determination of the fair market value, can the reference be made to the D.V.O. Section 48 requires determination of the full value of the consideration received or accruing and not the determination of the fair market value.
ii) The full value of consideration received or accruing is the actual amount bargained for between the parties and not the fair market value of the asset that is transferred.
iii) The value of the asset/transaction can be computed under section 50C only at the instance of the assessee by the authorities under the Indian Stamp Act. If the valuation under the Indian Stamp Act is higher then that would be the valuation under section 50C. In the case before us the transaction
value is more than the circle rate and the rate assessed by the Stamp Valuation Authority.
iv) In any event there is no finding in the present case that the assessee received any consideration than that shown in the sale deed.
11.
Sections 48, 50C and 55A of the Act in so far as they are relevant and applicable to the assessment years 2006-07 read as under:-
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The first and the main question concerns the ambit and the meaning of the words "full value of the consideration received or accruing as a result of the transfer of the capital asset". On behalf of the assessee it is contended that these words and especially the words "full value of the consideration received or accruing"
refer to the consideration arrived at between the parties and not the fair market value thereof. On behalf of the revenue it was contended otherwise.
13.
Mrs. Suri, firstly relied upon the judgment of the Supreme Court in Commissioner of Income Tax, West v. George Henderson and Co. Ltd. (1967) 66 ITR 622 where section 12B of the 1922 Act fell for consideration. Section 12B of the 1922 Act as it was in force on April, 1, 1947 read as under:-
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Sub section (2) provided that the amount of the capital gain shall be computed after making deductions mentioned therein from the full value of the consideration for which the sale, exchange or transfer of the capital asset is made. The words though not identical to those in Section 48 of the Act are similar.
In that case prior to 01.01.1939, the respondent purchased 1500 shares of a company during the accounting year ending 31.03.1937. On 01.04.1946, the respondent transferred these shares to one Girdhari Lal Mehta at the rate of 136/- per share although the market value on that date was 620/- per share. On the same day, Girdhari Lal Mehta in turn sold the shares to Jardine Skinner & Co. at the rate of 100/- per share but retained the share scrips with blank transfer forms until May, 1946 when the shares were registered in the name of Jardine Skinner & Co. In March, 1947, Jardine Skinner & Company transferred the shares to Jardine Henderson & Co. at the rate of 493-10-0 per share. The Assessing Officer while assessing the respondent to tax for the assessment year 1947-48 held the capital gain to be 484/- per share being the difference between the market price of 620/- per share and the sale price of 136/- per share. The Appellate Assistant Commissioner affirmed the order but varied the quantum of capital gain holding that on the date of
acquisition of the shares by the respondent i.e. 1.1.1939 the market value of the share was 153/- per share and that this figure should be taken as the actual cost in view of the third proviso to Section 12B(2). The Appellate Assistant Commissioner also held that the sale was effected with the object of avoidance of tax. The Tribunal dismissed the appeal but on the ground adopted by the Appellate Assistant Commissioner, a reference was made to the High Court. A majority of the Judges of the High Court answered in favour of the assessee-respondent.
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Considering the language of sub section (2) of Section 12B of the 1922 Act, we are of the opinion that the judgment applies to Section 48 of the 1961 Act. The language of sub section (2) in this regard is similar to the language of the opening part of Section 48 of the Act. 15.
The judgment undoubtedly holds that the expression "full value of the consideration" cannot be construed as the market value but as the price bargained for by the parties to the sale. It is necessary for the Assessing Officer to
ascertain as to what was the price bargained for by the parties to the sale.
16.
The judgment, however, does not support Mrs.
Suri's further submission that the price stated in the sale-deed must irrespective of anything also be considered to be the sale price for the purpose of computing the capital gain. In our view this absolute proposition is not well founded. The Assessing Officer must determine whether the price stated in the agreement for sale is infact the price bargained for by the parties thereto. In other words, the full value of the consideration is neither the market value nor necessarily the price stated in the document for sale but the price actually arrived at between the parties to the transaction.
If therefore it is found that the price actually arrived upon between the parties is not the price reflected in the document, it is the price bargained for by the parties to sale that must be considered for determining the capital gain under section 48. The Supreme Court did not hold that inferences cannot be drawn by the Assessing Officer from the facts established. In fact in paragraph-5 the Supreme Court observed that there was no inferential finding that the shares were sold at the market price of 620/- per share. This read with the operative part of the order in paragraph-6 remanding the matter to record a finding as to the actual price received makes it clear that the finding can be based on inferences as well. In paragraph-6 the assessee is given an opportunity to explain the unusual nature of the transaction.
It cannot be suggested that even if there was no explanation by the assessee, the Assessing Officer was bound not to draw an adverse inference.
17.
Even on principle we see no reason to denude the Assessing Officer the right to draw an inference especially an irresistible inference. Take for instance a case where the property worth crores of rupees is sold for merely 1 lakh and there is no explanation for the same despite the parties being at arms length. The Assessing Officer is not bound to accept the statement in the sale deed unless he can prove that additional consideration was paid. The initial burden to prove the same is undoubtedly on the Department. But in such a case the onus clearly shift upon the assessee. If the assessee is unable to offer an explanation, the Department must be taken to have discharged the burden.
The judgment certainly does not hold that the price mentioned in the document is sacrosanct and that the same must be considered to be the price bargained between the parties to the transaction. That would indeed result in an absurdity for the parties could then by merely stating an incorrect price in the sale deed avoid the tax on capital gains altogether.
18.
Mrs. Suri then relied upon the judgment of the Supreme Court in Commissioner of Income Tax, Calcutta v. Gillanders Arbuthnot & Co. (1973)87 ITR 407 where the Supreme Court held:- B (
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19.
Mrs. Suri relied upon a judgment of the Delhi High Court in Commissioner of Income Tax v. Smt. Nilofer I.Singh 2008 SCC (Delhi) 1522. This was a case under the 1961 Act. In that case the assessee sold two properties, one being a residential flat in Mumbai for 10 lacs and the other a building in New Delhi for 23.50 lacs. The Assessing Officer was of the view that the sale consideration did not reflect the fair market value and therefore, referred the matter to the Valuation Officer. The fair market value arrived at by the Valuation Officer was far higher than the prices declared by the assessee. The dispute centred upon the expression "full value of consideration". The revenue contended that the expression refers to the full market value whereas the assessee contended that the expression cannot have any reference to the fair market value. The Division Bench held:- /" ' ' & &' ( *( * " ;+ D *" H " I
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20. We do not read the observations in paragraph-7 to mean that the consideration referred to in the sale deed cannot be questioned at all. The judgment if read as a whole does not indicate such an absolute or blanket rule. There is nothing in the judgment to indicate that the revenue had contended that the full value of consideration received or accruing was other than what was mentioned in the sale deed. It is probably in that view of the matter that the Division Bench held that the expression "full value of consideration" refers only to the consideration referred to in the sale deed. If, however, that is what was meant, we respectfully disagree.
The full value of consideration referred to in Sections 45 and 48 of the Act refers to the full value actually received or accruing and not what the parties merely state or declare in the sale deed as was paid or payable and received or accruing.
asset. That could not have been the intention of the legislature.
21.
In Dev Kumar Jain v. Income Tax Officer and another (2009) 309 ITR 240 (Delhi), the Assessing Officer considered the sale price disclosed in the agreement to be low and made a reference to the District Valuation Officer for the purpose of determining the fair market value of the property on the date of sale. The District Valuation Officer determined the value to be much higher. It was contended on behalf of the revenue that the assessee was given several opportunities to file objections and to produce evidence. After referring to the judgments, which we have already referred to, the Division Bench held :- "9. Before us the learned counsel for the Revenue submitted that this was a case where the assessee had not supplied documents, therefore, the ratio of the judgment in the case of the Smt. Nilofer I.
Singh, [2009] 309 ITR 233 (Delhi) was not applicable. We are not in agreement with the submission made by the learned counsel for the Revenue for the reasons that there is nothing on record to show that the assessee received a consideration for the sale of the said property in excess of that which was shown in the agreement to sell. That being the case the decision in the case of Smt. Nilofer I. Singh, [2009] 309 ITR 233 (Delhi) would bind the Revenue. The Tribunal, in our view erred in accepting the stand of the Revenue that actual sale consideration recorded in the agreement to sell would be substituted by the value arrived at by the DVO under section 55A of the Act. The question of law as framed is answered in favour of the assessee and against the Revenue."
The judgment, therefore, proceeded on the basis that there was nothing on record to show that the assessee received a consideration for the sale of the property in
excess of that which was shown in the sale-deed. The Division Bench did not take into consideration the effect of the District Valuation Officer having valued the market price at ten times the amount stated in the document. Inferences on that basis were not even suggested. We do not read the judgment as having held that the amount mentioned in the sale document is sacrosanct and is the only basis on which the capital gain is to be computed.
22.
A Division Bench of this Court by a judgment dated 05.03.2014 in Commissioner of Income Tax-III, Ludhiana v. Shri Dharam Pal Aggarwal ITA NO. 462 of 2010 framed the following questions of law:- i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in ignoring the provisions contained in Section 55A of the IT Act which specifically empower the Assessing Officer to ascertain the fair market value of capital asset for the purposes of computation of capital gains?
ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in law in ignoring the findings of the Assessing Officer that at the time of sale of capital asset in question there was no notification of circle rates of Delhi Government and hence, reference to the DVO was necessary in the circumstances?
The assessee had sold the immovable property by two sale-deeds and invested the sale proceeds in National Housing Bank Bonds which were eligible for deduction under section 54EC of the Act. The Assessing Officer made a reference to the Departmental Valuation Officer under section
55A who determined the fair market value to be much higher than the price shown in the documents. The question before the Court was whether the Assessing Officer was justified in making the reference to the DVO under section 55A for ascertaining the market value of the capital assets which were transferred. The Division Bench referred to the judgments which we already noted and held:- "10. The Hon'ble Supreme Court reiterated the aforesaid view in CIT v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407. Thus, it emerges that the expression "full value of consideration" appearing in section 48 of the Act does not have any reference to the fair market value but to the consideration referred to in the sale deeds as the sale price of the assets which have been transferred."
What we observed in respect of paragraph-7 of the judgment of Delhi High Court in Commissioner of Income Tax v. Smt. Nilofer I.Singh (2009) 309 ITR 233 (Delhi) applies equally to paragraph-10 of the judgment in this case. It is obvious that the Division Bench considered the consideration referred to in the sale deeds to be the actual amount received by or accruing to the assessee. The Division Bench did not hold that where it is established that the price mentioned in the sale deed is not the amount actually received by or accruing to the assessee it must nevertheless be the basis of computing the capital gains. Such a contention was neither raised before nor decided by the Division Bench.
referred to in the sale deeds as the sale price of the assets which have been transferred".
The price to be considered is the consideration received or accruing as a result of the transfer and not necessarily the price that the assessee states that it received or which has accrued to it. At the cost of repetition a view to the contrary would lead to the absurdity of enabling an assessee to avoid capital gains merely by stating that an incorrect price as having been received by it or accruing to it.
23.
The matter, however, does not end there. In view of the facts of this case the assessee must succeed. Mrs. Suri submitted that there was no finding that the assessee received any consideration other than that shown in the sale agreement. This is correct. The assessment order does not proceed on the basis that the assessee received any amount in addition to what is stated in the sale deed. It proceeds only on the basis that the assessee and the purchaser being related parties, the property was sold at a very low price. The CIT(A) also noted that the Assessing Officer had not shown that the assessee had received any consideration other than the consideration mentioned in the sale agreement.
The CIT(A) further noted that the Assessing Officer had unnecessarily emphasized that the assessee and the purchaser were related parties and therefore, the vendee was in a position to exercise influence in the decision of the assessee and hence the assessee sold the property at the price below the market price. The Tribunal also noted this aspect in paragraph-9.
and that the Assessing Officer had therefore, erred in considering the fair market value.
24.
In the case of related parties, there is yet another aspect. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. Their relationship is a factor which could justify a price lower than the market price. Where parties are strangers there must be some explanation for an undervaluation.
25.
We must, therefore, proceed on the basis that it is not the case of the revenue that the assessee received any amount other than what was mentioned in the sale agreement. In this view of the matter and in view of the judgments referred to earlier especially the judgments of the Supreme Court it must follow that there was no occasion for the Assessing Officer to determine the fair market value. The Assessing Officer was only concerned with the amounts actually received by the assessee. The amount actually received was admittedly the amount mentioned in the sale agreement.
26.
It follows then that the reference to the DVO under section 55A was without jurisdiction. Section 55A opens with the words "with a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer". However, in view of the judgments of the Supreme Court, what falls for determination under section 48 is not the fair market value of the capital asset but the full value of the consideration received or accruing as a result of the transfer of the capital asset.
27.
Section 55A is not redundant on account of this view. It would apply to the provisions of Chapter IV which require the determination of the fair market value of capital assets. Some of these provisions have been noted by the Delhi High Court in Smt. Nilofer I.Singh case (see paragraph-8 quoted above).
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In Commissioner of Income Tax, Madras v. Shivakami Co. P. Ltd. (1986) 159 ITR 71, the Supreme Court held that the assessee's sold the shares to two persons who were directly or indirectly connected with them at prices considerably less than their break-up value. The Supreme Court then held as follows:- ' & <
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Thus the Assessing Officer proceeded on the erroneous basis that as the assessee and the purchaser are interconnected and the property was sold at an undervalue he had the jurisdiction to invoke the provisions of section 55A or even otherwise to determine the fair market value. As held by the Supreme Court it then is a distinction between undervaluation and understatement of the value. The Assessing Officer did not find the consideration to have been understated. He, therefore, was not entitled to determine the fair market value.
29.
The judgment relied upon in Commissioner of Income Tax, Bangalore v. B.C.Srinivasa Setty AIR 1981 Supreme Court 972, is of no assistance in the determination of the issues that fall for our consideration as they were neither raised before us nor decided by the Supreme Court. The question, therefore, essentially was whether the goodwill falls within Section 48 of the Act. The Supreme Court held that the character of the computation provisions in each case bears a relationship to the nature of the charge. Thus the charging section and the computation provisions together constitute an integrated code. It was held that when there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. The Supreme Court observed that the goodwill generated in a newly commenced business cannot be described as an 'asset' within the terms of Section 45 and therefore, its transfer is not subject to income-tax under the head "capital gains".
30.
Ms. Dugga relied upon a judgment of the Andhra Pradesh High Court in case Daulat Ram and others v. Income Tax Officer and another (1990) 181 ITR 119. In that case the Income Tax Officer made a reference to the Valuation Officer in respect of a building owned by Daulat Ram, Ashok Kumar and Smt. Vanita Daulat Ram. The Valuation Officer submitted a report. The second reference by the Income Tax Officer was made to the Valuation Officer which was objected to. It is this notice which was challenged. However, from paragraph-3 of the judgment, it is evident that the power of the Income Tax Officer to make any reference to the Valuation Officer was challenged. Ms. Dugga relied upon paragraphs-9 to 15 of the judgment which read as under:- "9. Point No. 1.-It is quite manifest from section 55A of the Act that it enables the Income-tax Officer to have the fair market value of a capital asset ascertained through the agency of a Valuation Officer.
10. The crucial provision is that this section is provided by the Taxation Laws (Amendment) Act, 1972, to be effective from January 1, 1973, with a deliberate object of empowering the Income-tax Officer to find out the market value of a capital asset for the purpose of Chapter IV which is titled "Computation of total income".
It comprises sections 14 to 59. The said Chapter is divided into six sub-chapters. They are:
A. Salaries.
B. Interest on securities.
C. Income from house property.
D. Profits and gains of business or profession. E. Capital gains.
F. Income from other sources.
11. Bearing the frame of the Chapter in mind, wherein resides section 55A which, though falls within the sub-chapter "Capital gains", if we make a careful analysis, the intention of the Legislature becomes pretty obvious, as the words that have been employed are "for the purpose of this chapter"
denoting thereby that while computing the income, various factors might fall for determination and, therefore, whenever such contingency does arise, the Income-tax Officer who is, as stated earlier, invested with the power, can as well ascertain through the agency of a Valuation Officer. Learned counsel for the
petitioners, Sri Ranganathachari, argued with great vehemence that this power could be exercised vis-a-vis the ascertainment of the value of a capital asset in relation to capital gains only and nothing else. We apprehend, we are not persuaded to accede to this submission as it would be causing violence to the very explicit language used in the very section apart from the contextual interpretation. The mere residence of the section within the sub-chapter "capital gains" cannot be a guidance to hold that it pertains to that sub-chapter alone inasmuch as, as pointed out earlier, the word "Chapter"
occurring in the section, is crucial in coming to this conclusion. The word employed is "Chapter" and not "Capital gains", which amply and unambiguously demonstrates the intention of the Legislature.
12. Hence, we have no hesitation in holding that section 55A of the Act empowers the Income-tax Officer to have the fair market value of a capital asset determined by referring the same to a Valuation Officer. On such reference, the provisions, inter alia, of sub-sections (2) to
(6) of section 16A and sub-sections (3) and (4) of section 23 of the Wealth-tax Act, 1957, are ipso facto applicable by extension, as laid down under section 55A of the Act itself. So also, the "Valuation Officer" in section 55A of the Act has the same meaning as in clause (r) of section 2 of the Wealth-tax Act. Consequently, it is not in dispute that the Rules framed under the Wealthtax Act will also apply in this behalf.
13. Before the said amended section 55A was enacted, though no specific provision existed, the authority concerned was taking shelter under section 142(2) of the Act, which reads: "For the purpose of obtaining full information in respect of the income or loss of any person, the Incometax Officer may make such inquiry as he considers necessary", and trying to achieve the object as is now explicitly enacted in section 55 A.
14. Though in the counter, the stand taken by the Revenue is that it is not section 55A but section 136 that governs the situation in this behalf, most part of the argument was devoted by learned standing counsel for the Revenue stating that the relevant provision is section 55A, section 136 being only incidental to the main. Be that as it may, a mere wrong reference to a particular provision in the Act cannot demolish the case of the respondent if it could be traceable to a correct statutory provision which the Revenue, at any rate at the time of argument, has, very rightly, realized that it was indeed traceable to section 55A of the Act.
15. From the foregoing, therefore, it is quite manifest that section 55A is the provision that holds the field in answering the first point framed in this behalf. Therefore, the answer is that the reference to the Valuation Officer under section 55A is valid."
Mrs. Suri rightly submitted that this judgment is contrary to the judgments already referred to by us and that the Andhra Pradesh High Court had not even referred to these judgments. We are, therefore, not inclined to and cannot follow the judgment.
31.
For the same reason we are, with respect unable to agree with the judgment of the Madras High Court in C.T.Laxmandas v. Assistant Commissioner of Income Tax (1994) 208 ITR 859 which following the above judgment of the Andhra Pradesh High Court.
32.
The reliance upon Section 50C is of no assistance to the Revenue either. Mrs. Dugga's submission that the Assessing Officer's can be supported under section 50C is not well founded. Even assuming that the Assessing Officer was entitled to invoke Section 50C to have the fair market value determined, it would make no difference. In view of sub section (3) the rate adopted, assessed or assessable by the Stamp authority would prevail. It is common ground that in this case the consideration stated in the sale document is even higher than the valuation by the Stamp authority. 33.
In the circumstances, question (ii) is answered in the affirmative in favour of the assessee.
Re: Question (iii) 34.
The judgment of the Supreme Court in Ms. McDowell & Co. Ltd. v. Commercial Tax Officer, (1985) 154 ITR 148 does not warrant a different view of the matter. The view that we have taken in respect of question (ii) cannot be altered in view of the judgment in McDowell's case (supra). The ratio of
the judgment of the Supreme Court referred to earlier is that for the purpose of Section 48, the full value of the consideration received by or accruing to the assessee must be taken into consideration for the purpose of computing the capital gain and that the market price of the property is not relevant for this purpose. The authorities under the Act cannot possibly take a different view of the matter. 35.
In Commissioner of Income Tax v. Walfort Share and Stock Brokers P. Ltd. (2010) 326 ITR 1, the Supreme Court observed:- 4"
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As we noted earlier it is not the case of the Revenue that the actual consideration is higher than that stated in the sale deed. The Assessing Officer was, therefore, bound to consider the actual consideration. He was not entitled to take the market value of the property on the
basis of the judgment in McDowell's case for that would be contrary to the judgment which specifically dealt with question (ii).
Question (iii) is, therefore, also answered in the affirmative in favour of the assessee and against the appellant.
37.
In the circumstances, the appeal is dismissed. (S.J. VAZIFDAR) CHIEF JUSTICE 24.01.2017 (DEEPAK SIBAL) ravinder sharma JUDGE NOTE:
Whether speaking/non-speaking: Speaking√ Whether reportable:
Yes√