Case Law Details
Nareshbhai Ishwardas Patel Vs I.T.O (ITAT Ahmedabad)
ITAT Ahmedabad held that the provision of section 50C of Act cannot be made applicable to transaction of capital assets transferred by assessee to a partnership firm by way capital contribution. Such transaction falls under the provision of section 45(3) of the Income Tax Act.
Facts- The assessee in the present is an individual and engaged in the proprietary business of processing of plastic raw materials into articles under the name and style of “M/s Gokul Plastic”. The assessee is also a partner in the firm namely “M/s Pooja Buicon”. The assessee in the F.Y. 2009-10 along with other person acquired an immovable property for Rs. 70 Lakh in which his share was 50% only. During the year under consideration i.e. F.Y. 2013-14,the assessee along with co-owner so 5% of impugned property for a consideration of Rs. 18,35,000/- and the remaining 95%of property was transferred to partnership firm “M/s Pooja Buicon” as partner’s capital contribution at Rs. 1,47,01,250/- (assessee share). The AO, considering the market value of 5% of impugned property, believed that the remaining property should have been transferred to partnership firm at Rs. 3,48,65,000/- in which assessee share comes at Rs. 1,74,32,500/- only instead of at Rs. 1,47,01,250/-only. Therefore, the AO purposed to invoke the provision of section50Cof the Act and treat the consideration in hand of the assessee at Rs. 1,74,32,500/-instead of Rs. 1,47,01,250/- only.
AO disagreed with the contention of the assessee and held that provision under section 50C of the Act is a special provision with respect to capital assets, being land or building. As per section 50C of the Act, the full value of consideration on transfer of land or building shall be the value at which stamp duty is assessed or assessable and in the case of assessee, such value comes at Rs. 1,74,32,500/- (50%) only. Thus, the AO added an amount of Rs. 27,31,250/-(1,74,32,500 – 1,47,01,250) to the total income of the assessee.
CIT(A) confirmed the findings of the AO. Aggrieved, the assessee appealed before the tribunal.
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