C.T.NARAYANAN V. THE COMMISSIONER OF INCOME TAX (APPEALS)

WP(C)/7556/2014

AI Insights

The case involves CTN Agro & Coir Pvt. Ltd., which faced a substantial capital gains tax liability following the sale of shares and improvements made on a property. The petitioners contested the assessment orders for the years 2009-2010 and 2010-2011, arguing that the improvements made should have been deducted from the capital gains assessed. Initially, the Appellate Authority required the petitioners to pay 25% of the disputed amount to grant an interim stay, which they challenged in this writ petition. The High Court found that the petitioners had not agreed to such a condition and directed a re-evaluation of their case without the disputed condition.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 764794 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 31-03-2014
• Assessment Year: misc
• Other Referred Cases: WPC No. 20509 of 2013
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: M S KIRAN; N KUMAR
• Keywords: Appellate Authority; Capital Gains; Income Tax; Interlocutory Applications; Stay

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON MONDAY, THE 31ST DAY OF MARCH 2014/10TH CHAITHRA, 1936 WP(C).No. 7556 of 2014 (T) -------------------------------------- PETITIONER(S): ---------------------- C.T.NARAYANAN, AGED 81 YEARS, S/O. THUPRAKUTTY, CHAKKARATHU VEEDU, NORTH KULAMAKKAL, M.O. WARD, ALAPPUZHA DISTRICT. BY ADVS.SMT.M.S.KIRAN SRI.N.MANOJ KUMAR RESPONDENT(S): ------------------------- 1. THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHI-682011. 2. THE INCOME TAX OFFICER, WARD NO.3, ALAPUZHA, INCOME TAX OFFICE, AARATTUKULAKKARA COMPLEX, OPP. GENERAL HOSPITAL, AN PURAM, ALAPUZHA-688011. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 31-03-2014, ALONG WITH WPC. 7637/2014 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PJ WP(C).No. 7556 of 2014 (T) -------------------------------------- APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- P1. TRUE COPY OF THE MEMORANDUM OF UNDERSTANDING DT. 2-1-2009 ENTERED INTO BETWEEN CTN AGRO & COIR PVT. LTD. THE CMPANY AND ITS SHARE WITH M/S. TWINKLE HOSPITALITY PVT. LTD. & ORS. P2. TRUE COPY OF THE SALE PURCHASE AGREEMENT DATED 22-12-2009 ENTERED INTO BETWEEN CTN AGRO & COIR PVT. LTD. THE COMPANY AND ITS SHARE WITH M/S. TWINKLE HOSPITATLITY PVT. LTD. AND ORS. P3. TRUE COPY OF NOTICE DATED 11-1-2013 ISSUED BY THE 2ND RESPONDENT P4. TRUE COPY OF REPLY DATED 6-2-2013 SUBMITTED BY THE PETITIONER. P5 TRUE COPY OF THE NOTICE DATED 8-3-2013 OF THE 2ND RESPONDENT. P6. TRUE COPY OF THE REPLY DATED 14-3-2013 SUBMITTED BY THE PETITIONER. P7. TRUE COPY OF NOTICE DATED 14-3-2012 OF THE 2ND RESPONDENT. P8. TRUE COPY OF THE VALUATION REPORT DATED 3-11-2008 DONE BY M/S. N.N. MULE & ASSOCAITES P9. TRUE COPY OF THE REPLY DATED 20-3-2013 SUBMITTED BY THE PETITIONER. P10. TRUE COPY OF LETTER DATED 26-34-2013 M/S. CITRUS RETREATS KERALA PVT. LTD., P11. TRUE COPY OF THE RELEVANT PAGE OF THE ACKNOWLEDGEMENT BOOK EVIDENCING THE RECEIPT OF LETTER FROM M/S. CITRUS LTD. BY THE 2ND RESPONDENT ON 28-3-2013. P12. TRUE COPY OF THE ASSESSMENT ORDER DATED 25-3-2013 PASSED BY THE 2ND RESPONDENT. P12A. TRUE COPY OF THE ASSESSMENT ORDER DATED 27-3-2013 PASSED BY THE 2ND RESPONDENT. P13. TRUE COPY OF THE APPEAL FOR ASSESSMENT YEAR 2009-2010 FILED BEFORE THE 1ST RESPONDENT. P13A. TRUE COPY OF THE APPEAL FOR ASSESSMENT YEAR 2010-2011 FILED BEFORE THE 1ST RESPONDENT. P14. TRUE COPY OF APPLICATION OF STAY FOR ASSESSMENT YEAR 2009-2010 FILED BEFORE THE 1ST RESPONDENT. PJ ....2/- ..2.. WP(C).No. 7556 of 2014 (T) -------------------------------------- P14A. TRUE COPY OF APPLICATION OF STAY FOR ASSESSMENT YEAR 2010-2011 FILED BEFORE THE 1ST RESPONDENT. P15. TRUE COPY OF THE JUDGMENT OF THE HIGH COURT OF KERALA, DATED 20-8-2013 IN WPC NO. 20509 OF 2013. P16. TRUE COPY OF THE ORDER DATED 18-2-2014 OF THE 1ST RESPONDENT. RESPONDENT(S)' EXHIBITS --------------------------------------- NIL. / TRUE COPY / P.S. TO JUDGE PJ P.R. RAMACHANDRA MENON, J. --------------------------------------- W.P.C. Nos.7556, 7637, 7669, 8033, 8066 & 8071 OF 2014 --------------------------------------- Dated this the 31st day of March, 2014. JUDGMENT The petitioners in these cases are mainly aggrieved of the condition imposed by the 1st respondent as per the impugned order, whereby 25% of the disputed liability is directed to be satisfied, so as to avail the benefit of interim stay, during the pendency of appeals. 2. The case of the petitioners is that, CTN Agro & Coir Pvt. Ltd. was floated with forty thousand paid up shares of the value of Rs.10/- per share. According to the petitioners, who are having the specified extent of shares, the Company purchased nearly 5.6 Acres of land as per the Sale Deed dated 11.05.2006 for a total consideration of Rupees Twelve lakhs. It is stated that, quite a huge expenditure was incurred for development of the plot, to the tune of nearly Rs.3.49 Crores as on 31.03.2008. It was thereafter, that a 'Memorandum of Understanding' was executed W.P.C. Nos.7556, 7637, 7669, 8033, 8066 & 8071 OF 2014 2 with one M/s. Twinkle Hospitality Pvt. Ltd. & others for transfer of 40,000 shares on 02.01.2009, as per which, the shares were agreed to be purchased for a value of Rs.1,837.50 per share, thus for a total consideration of Rs.7,35,00,000/- (for 40000 shares), which includes the liability of Rs.2,40,00,000/- to be cleared towards the secured loan. According to the petitioners, it is a pre-requisite, to have satisfied the specified conditions, for facilitating such transfer of shares and hence the petitioners had to effect various improvements, particularly as enumerated in items 'n' to 'z' under Clause 5 of the 'MOU'. Various constructions were effected, also providing the necessary infrastructure and improvements and thereafter, a 'Share Purchase Agreement' was executed between the petitioners' Company and the proposed purchaser on 22.12.2009, fixing the sale price of the shares @ Rs.1,362.50 per share. 3. The learned counsel for the petitioners points out that, it was thereafter that the works were completed and the last payment was received on 15.03.2010, on completion of the W.P.C. Nos.7556, 7637, 7669, 8033, 8066 & 8071 OF 2014 3 works. However, it is added that, since the obligation could not be satisfied in toto, a sum of Rupees Twenty five lakhs was deducted and only the balance was taken up for fixation of the final figures. 4. The dispute is mainly with regard to the 'Capital gains' sustained and the petitioners have been mulcted with a huge liability, without giving any deduction in respect of the various improvements effected as mentioned above. Being aggrieved of Exts.P12 & P12(a) orders for the assessment years 2009-2010 and 2010-2011, the petitioners approached the Appellate Authority by filing Exts.P13 & P13(a) appeals, along with Interlocutory Applications for stay as borne by Exts.P14 & P14(a). In view of the coercive proceedings taken in the meanwhile, the petitioners approached this Court by filing WP(c) No.20509 of 2013, which was disposed of as per Ext.P15 judgment dated 20.08.2013, directing the Appellate Authority to consider and pass appropriate orders in the Interlocutory Applications for stay. This led to Ext.P16 order, whereby the claim of the petitioners W.P.C. Nos.7556, 7637, 7669, 8033, 8066 & 8071 OF 2014 4 has been rejected in toto, and hence under challenge in these writ petitions. 5. A statement has been filed on behalf of the 2nd respondent, seeking to sustain the course and events, particularly with regard to the fixation of the share value and the capital gains resulted in the hands of the petitioners. It is also pointed out that absolutely no objection was raised from the part of the petitioners when the proceedings were considered and finalised by passing Ext.P16 order, recording that the petitioners had conceded to satisfy 25% of the liability for availing the benefit of interim stay, during the pendency of the appeal. The said version has been sought to be specifically rebutted by the petitioners as stated in 'paragraph 15' of the writ petitions, pointing out that the Authorised Representative had not agreed to any such condition and in fact, by virtue of the actual facts and figures involving construction of various improvements/ arrangements of the agreed infrastructure, the entire amount had to be reduced and as such, there was no need, necessity or W.P.C. Nos.7556, 7637, 7669, 8033, 8066 & 8071 OF 2014 5 occasion to have conceded to satisfy 25% of the disputed liability. The said assertion in the writ petition has not been rebutted from the part of the respondents. This being the position, this Court finds that the matter requires to be reconsidered by the 1st respondent. 6. Accordingly, the impugned orders (Ext.P16), fixing the condition upon the petitioners, are set aside and the Appellate Authority is directed to reconsider the matter, after hearing the petitioners and pass a 'speaking order' with reference to the specific nature of contentions raised from the part of the petitioners. This shall be done at the earliest, at any rate, within 'one month' from the date of receipt of a copy of this judgment. It is open for the Appellate Authority to consider and finalise the appeals preferred by the petitioners and to have passed appropriate orders in this regard as well. Coercive proceedings shall be kept in abeyance till such time. The petitioners shall produce a copy of this judgment, along with a copy of the writ petitions, before the Appellate Authority, W.P.C. Nos.7556, 7637, 7669, 8033, 8066 & 8071 OF 2014 6 for further steps. All these writ petitions are disposed of. P.R. RAMACHANDRA MENON, JUDGE sp "