Section 50C not applicable to Cold Storage Building: ITAT [Read Order]

Cold Storage

In Laxmi Ice & Cold Storage and Income Tax Officer (ITO), the Lucknow bench of Income Tax Appellate Tribunal (ITAT) recently held that the provisions of section 50C of the Income Tax Act 1961 are not applicable to a cold storage building.

The return submitted by the assessee was accepted by the AO initially. However, the Principal Commissioner of Income Tax noticed that the Assessee has sold the assets including land and building and machinery. Further, he observed that the assessee has credited only Rs.1.50 crores as the sale value of assets in its accounts and not Rs.3,41,23,200  which is the full value of consideration as per stamp valuation authorities. Thus, the income of Rs.1,91,23,200 not credited by the assessee in its books of account has escaped taxation. Accordingly, notice under section 263 of the Act was issued to the Assessee and by applying the provisions of section 50C of the Income Tax Act.

Aggrieved by the order of the authority the Assessee preferred a further appeal before the Tribunal.

After considering the facts and circumstances of the case, the Tribunal bench consists of Judicial Member Partha Sarathi Chaudhuri and Accountant Member T.S.Kapoor observed that the sole issue in the present case is whether provisions of section 50C are applicable to the depreciable assets or not. Section 50C speaks about the transfer of land or building or both and the adoption of deemed valuation being the valuation of stamp purposes as the full value of consideration and it does not speak of the plant. The cold storage was sold as a whole and constituted plant under section 43(3) of the Act. The term “plant” has been interpreted as including cold storage building.

The division bench further observed that “provisions of section 50C of the Act is not applicable to the cold storage building so to substitute actual sale consideration by deemed sale consideration and the order of the Assessing Officer passed under section 147/143(3) of the Act cannot be a subject matter of section 263. While concluding the issue the bench has allowed the appeal filed by the Assessee.”

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