HEERA HOLDINGS & LEASING P.LTD, MUMBAI V. ASST CIT 2(1), MUMBAI

CO 11/MUM/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7247 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRAVIN VARMA
• Keywords: Capital asset; Gift; Business income; Business expenditure; Salary income; Charitable institution; Earning of tax free income; Source of fund; Proportionate interest; Question of law; Cost of acquisition; Capital receipt; Revised return; Reason to believe
• Section: 54F; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE PRESIDENT AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.7847/MUM/2011 ASSESSMENT YEAR: 2004-2005 DCIT, CIR 2(2), MUMBAI-20 NIDHIV AN INVESTMENT & TRADING CO. P. LTD. NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE MUMBAI-400001 PAN NO AAACN7442A APPELLANT VS. RESPONDENT AND C.O.NO.05/MUM/2012 ASSESSMENT YEAR: 2004-2005 NIDHIVAN INVESTMENT & TRADING CO. P. LTD. NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE MUMBAI-400001 PAN NO AAACN7442A ACIT (OSD), 2(2), MUMBAI-20 APPELLANT VS. RESPONDENT AND ITA NO.7848/MUM/2011 ASSESSMENT YEAR: 2005-2006 DCIT, CIR 2(2), MUMBAI-20 NIDHI VAN INVESTMENT & TRADING CO. P. LTD. NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE MUMBAI-400001 PAN NO AAACN7442A APPELLANT VS. RESPONDENT AND C.O.NO.06/MUM/2012 ASSESSMENT YEAR: 2005-2006 NIDHIVAN INVESTMENT & TRADING CO. P. LTD. NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE MUMBAI-400001 PAN NO AAACN7442A ACIT (OSD), 2(2), MUMBAI-20 APPELLANT VS. RESPONDENT AND ITA NO.3004/MUM/2009 ASSESSMENT YEAR: 2005-2006 ACIT, 2(3), MUMBAI-20 M/S SAHARA INVESTMENT PVT. LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAECS6355B APPELLANT VS. RESPONDENT AND ITA.NO.2544/MUM/2009 ASSESSMENT YEAR: 2004-2005 ACIT, 2(3), MUMBAI-20 M/S SAHARA INVESTMENT PVT. LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAECS6355B APPELLANT VS. RESPONDENT ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 2 AND ITA.NO.2204/MUM/2009 ASSESSMENT YEAR: 2004-2005 M/S SAHARA INVESTMENT PVT. LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-01 PAN NO AAECS6355B ACIT, CIR 2(3), MUMBAI-20 APPELLANT VS. RESPONDENT AND ITA.NO.2205/MUM/2009 ASSESSMENT YEAR: 2005-2006 M/S SAHARA INVESTMENT PVT. LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-01 PAN NO AAECS6355B ACIT, 2(3), MUMBAI-20 APPELLANT VS. RESPONDENT AND ITA.NO.1883/MUM/2011 ASSESSMENT YEAR: 2004-2005 ACIT, 2(1), MUMBAI M/S H EERA HOLDING & LEASING P.LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAAC47902B APPELLANT VS. RESPONDENT AND CO.NO.03/MUM/2012 ASSESSMENT YEAR: 2004-2005 M/S HEERA HOLDING & LEASING P.LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAAC47902B ACIT, 2(1), MUMBAI APPELLANT VS. RESPONDENT AND ITA.NO.1888/MUM/2011 ASSESSMENT YEAR: 2006-2007 ACIT, 2(1), MUMBAI-20 NUSLI NEVILE WADIA, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-01 PAN NO.AAAPW0990M APPELLANT VS. RESPONDENT AND CO.NO.10/MUM/2012 ASSESSMENT YEAR: 2006-2007 NUSLI NEVILE WADIA, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-01 PAN NO.AAAPW0990M DCIT, 2(1), MUMBAI APPELLANT VS. RESPONDENT ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 3 AND ITA.NO.1889/MUM/2011 ASSESSMENT YEAR: 2005-2006 ACIT, 2(1), MUMBAI M/S H EERA HOLDING & LEASING P.LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAAC47902B APPELLANT VS. RESPONDENT AND C.O.NO.04/MUM/2012 ASSESSMENT YEAR: 2005-2006 M/S HEERA HOLDING & LEASING P.LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAAC47902B DCIT, 2(1), MUMBAI APPELLANT VS. RESPONDENT AND ITA NO.4405/MUM/2011 ASSESSMENT YEAR: 2007-2008 NUSLI N. WADIA, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-01 PAN NO.AAAPW0990M ACIT, (OSD), CIR 2(1), MUMBAI APPELLANT VS. RESPONDENT AND ITA.NO.4505/MUM/2011 ASSESSMENT YEAR: 2007-2008 ACIT, 2(1), MUMBAI-20 NUSLI N. WADIA, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-01 PAN NO.AAAPW0990M APPELLANT VS. RESPONDENT AND ITA.NO.4506/MUM/2011 ASSESSMENT YEAR: 2007-2008 ACIT, 2(1), MUMBAI-20 M/S HEERA HOLDING & LEASING P.LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAAC47902B APPELLANT VS. RESPONDENT AND C.O.NO.11/MUM/2012 ASSESSMENT YEAR: 2007-2008 M/S HEERA HOLDING & LEASING P.LTD., NEVILLE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE MUMBAI-400 001 PAN NO AAAC47902B ACIT, 2(1), MUMBAI APPELLANT VS. RESPONDENT ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 4 APPELLANT BY : MR. PRAVIN VARMA RESPONDENT BY : MR. DILIP S. PANLE DATE OF HEARING : 11 TH APRIL 2012 DATE OF PRONOUNCEMENT : 30 TH MAY 2012 O R D E R PER BENCH : THESE ARE THE BUNCH OF APPEALS FILED BY THE REVENUE AND ASSESSEE HAS FILED CROSS APPEALS/CROSS OBJECTIONS. ONE COMMON ISSUE IS PERMEATING THROUGH ALL THE APPEALS WHICH MAINLY IS IN THE DEPARTMENTS APPEALS AND, THEREFORE, FO R THE SAKE OF CONVENIENCE, ALL THE AFORESAID BUNCH OF APPEALS ARE BEING DISPOSED OF BY A CONSOLIDATED ORDER. BEFORE COMING TO THE ISSUES INVOLVED, THE FACTS OF THE CASE AS ARE RELEVANT FOR ADJUDI CATION IN ALL THE CASES ARE DISCUSSED HEREIN BELOW. 2. ONE MR. EDULJI FRAMROZE DINSHAW (IN SHORT EFD), RESIDENT OF USA EXECUTED HIS WILL TESTAMENT ON 4-2-1970. IMMEDIATELY AFTER THE WILL, HE EXPIRED ON 14-3-1970. ACCORDING TO THE WILL, THE MOVABLE PROPERTIES SITUATED ANYWHERE AND IMMOVABLE PROPERTIES SITUATED IN INDIA WERE BEQUEATHED TO MRS. BACHOOBAI WORONZOW (IN SHORT MRS. WORONZOW), THE SISTER OF THE DEC EASED. SHE WAS ALSO APPOINTED AS EXECUTRIX OF THE WILL AND WAS ALSO THE BENEFICIARY OF EFD ESTATE. SHE WAS ALSO MADE AS A RESIDUARY LEGATEE OF EFD. THEREAFTER MRS. WORONZOW OBTAINED A PROBATE OF THE WILL AND APPOINTED MR. JAHANGIR BEHRAM DUBASH (IN SHORT MR. JBD) AS AN ADMINISTRATOR OF THE ESTATE OF ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 5 THE DECEASED EFD AND HIS APPOINTMENT WAS CONFIRMED BY THE HONBLE BOMBAY HIGH COURT AND ACCORDINGLY LETTERS OF ADMINISTRATION WERE ISSUED ON 12-11-1971. AS PER THE WILL, THE INCOME OF THE ESTATE OF EFD WAS TO BE PAID TO HIS SISTER MRS. WORONZOW DURING HER LIFETIME AND AFTER HER DEATH, THE CORPUS INCL UDING IMMOVABLE PROPERTIES SHOULD BE PAID TO TWO AMERICAN CHARITABLE ORGANISATIONS. MR. JBD LATER ON REQUESTED TO BE RELEASED AS AN ADMINISTR ATOR OF THE ESTATE. IN HIS PLACE MR. NUSLI NEVILLE WADIA (IN SHORT MR. WADIA) WAS APPOINTED AS THE ADMINISTRATOR AND HIS APPOINTMENT WAS ALSO CONFIRMED BY THE HONBLE BOMBAY HIGH COURT ON 21-12-1972. THUS, ALL THE PROPERTIES OF THE ESTATE VESTED HIM AS AN ADMINISTRAT OR. HE CONTINUES TO ACT AS AN ADMINISTRATOR. MR. WADIA AS AN ADMINISTRATOR OF THE ESTATE ENTERED INTO AN AGREEMENT DATED 2-1-1995 WITH CERTAIN REAL ESTATE DEVELOPMENT COMPANIES FOR DEVELOPING THE IMMOVABLE PROPERTIES OF THE ESTATES. IN THESE AGREEMENT MRS. WORONZOW ALSO SIGNED AS CONFIRMED PARTY. THE DEVELOPERS WERE REQUIRED TO DEVELOP THE PROPERTIES AFTER REMOVING THE ENCROACHMENT, THE ESTATE WAS TO RECEIVE 12% OF THE GROSS SALE PROCEEDS. PURSUANT TO THESE AGREEMEN TS, THE ESTATE STARTED RECEIVING ADVANCES FROM THE PURCHASERS OF THE CONSTRUCTED UNIT. THE ESTATE FILED INCOME-TAX RETURN AS WELL AS WEALTH TAX RETURN ON THE INCOME ON THE TRANSFER OF PROPORTIONATE INTEREST IN THE IMMOVABLE PROPERTIES. THE INCOME WAS ACCORDINGLY BEING CHARGED AS CAPITAL GAINS IN THE HANDS OF THE ESTATE. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 6 2.1 AS TRANSPIRED LATER ON, THE ADMINI STRATOR REALIZED THAT IN VIEW OF SECTION 118 OF THE INDIAN SUCCESS IONS ACT, NO MAN HAVING A NEPHEW OR NIECE OR NEARER RELATIVE HAD THE POWER TO BEQUEATH ANY PROPERTY TO RELIGIOUS OR CHARITABLE PURPOSES, UNLESS CERTAIN CONDITIONS WERE SATISFIED. IN THE CASE OF WILL OF MR. EFD, THESE CONDITIONS WERE NOT SATISFIED. ACCORDINGLY, THE ADMINISTRATOR FILED A SUIT BEFORE THE BOMBAY HIGH COURT IN THE YEAR 2000, CHALLENGING THE VALIDITY OF THE WILL OF EFD BEQUEATHING HIS PROPERTIES TO THE TWO AMERICAN CHARITABLE ORGANISATIONS. DURING THE PENDENCY OF THE SUIT, BY AN INDENTURE DATED 26-9-2001, MRS. WORONZOW TRANSFERRED AND CONVEYED ALL HER RIGHTS AND INTEREST OVER THE SALE PROCEEDS AND/OR DISPOSAL OF THE CORPUS OF THE ESTATE IN INDIA (TO THE EXTENT OF IMMOVABLE PROPERTY) TO MR. WADIA AND FOUR OF HIS ASSOCIATE COMPANIES, CONTINGENT UPON THE HIGH COURT HOLDING THAT THE SAME IS VESTED IN MRS. WORONZOW. IN ORDER TO ACQUIRE THE ABOVE RIGHT, MR. WADIA APART FROM PAYING A CONSIDERATION OF ` .20,00,000/- TO MRS. WORONZOW, AGREED TO CERTAIN OTHER COVENANTS LIKE ALLOWING MRS. WORONZOW TO RETAIN INTEREST IN THE INCOME OF THE ESTATE DURING HER LIFETIME. IT WAS FURTHER AGREED THAT THE ADMINISTRATOR OF THE ESTATE I.E. MR. WADIA WILL PAY AN AMOUNT OF ` .10,00,00,000/- (10 LAKHS) TO F.E. DINSHAW TRUST OUT OF PROCEEDS OF SALE AND ON DISPOSAL OF THE IMMOVABLE PROPERTY OF THE ESTATE. BESIDES THIS, CERTAIN COVENANTS WERE ALSO AGREED UPON AS INDICATED IN THE INDENTURE. HOWEVER, TRANSFER OF MRS. WORONZOW RIGHT WAS SUBJECT TO OUTCOME OF THE DECISION OF THE BOMBAY HIGH C OURT IN THE SUIT FILED BY THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 7 ADMINISTRATOR CHALLENGING THE WILL OF EFD. ON 22-10-2001, THE HONBLE HIGH COURT VIDE ITS ORDER HELD THAT BEQUEST MADE BY EFD TO THE TWO AMERICAN CHARITABLE ORGANISATIONS WAS INVALID IN VIEW OF SECTION 118 OF THE INDIAN SUCCESSION ACT, 1925. THE COURT ALSO AFFIRMED THE POSITION OF MRS. WORONZOW BEI NG THE RESIDUARY LEGATEE AND WAS ENTITLED TO THE PROCEEDS OF REALIS ATION OF THE IMMOVABLE PROPERTY FORMING PART OF THE ESTATE. 2.2 IN THE MEANTIME ON 17-10-2001 MR S. WORONZOW ALSO EXECUTED HER WILL, WHEREIN MR. WADIA WAS APPOINTED AS THE SOLE ADMINISTRATOR AND THROUGH HER WILL SHE BEQUEATHED ALL HER MOVABLE PROPERTIES TO MISS RUTLY CP WADIA AND MISS MARRY CP WADIA AND ALL HER RIGHTS AND TITLES IN THE IMMOVABLE PROPERTIES INCLUDING THE SHARE IN THE JOINTLY OWNED PROPERTIES OF HER LATE BROTHER MR. EFD, SHE BEQUEATHED THE SAME TO MR. N. WADIA AND MR. J.N. W ADIA, SONS OF MR. NUSLI WADIA. ON 12-8-2003, MRS. WORONZOW ALSO EXPIRED. ON HER DEATH MR. WADIA FILED AN APPLICATION BEFORE THE HON BLE HIGH COURT SEEKING APPROVAL FOR HIS CONTINUANCE AS AN ADMINISTRATOR OF THE ESTATE OF EFD. THE COURT VIDE ORDER DATED 20-11-2003 PERMITTED MR. WADIA TO CONTINUE AND ACT AS AN ADMINISTRATOR OF T HE ESTATE. IN THE CAPACITY AS AN ADMINISTRATOR OF THE ESTATE, HE RECEIVED MONEY FR OM THE SALE/DISPOSAL OF THE IMMOVABLE PROPERTIES OF THE ESTATE. THE AMOUNT RECEIVED FELL INTO TWO CATEGORIES VIZ., MONEY RECEIVED IN RESPECT OF THOSE IMMOVABLE PROPERTIES FOR WHICH THE CONVEYANC E HAS BEEN EXECUTED AND SECONDLY, ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 8 ADVANCES RECEIVED IN RESPECT OF THOSE IMMOVABLE PROPERTIES WHERE CONVEYANCE DEED HAS NOT BEEN EXEC UTED. THE AFORESAID AMOUNTS WERE RECEIVED BY THE ADMINISTRATOR OVER A PERIOD OF TIME WHICH WAS DISTRIBUTED IN THE RATIO OF 60% TO THE ADMINISTRATOR AND 10% EACH TO THE FOUR COMPANIES, NAMELY, NI DHIVAN INVESTMENT AND TRADING CO.PVT.LTD., M/S SAHARA INVESTMENT PVT. LTD., M/S HEERA HOLDING AND LEASING PVT. LTD. AND GO INVESTMENT & TRADING PVT. LTD. AS PER TERMS OF INDENTURE DATED 26-9-2001. 2.3 NOW, SUCH A DISTRIBUTION OF MONEY IN THE HANDS OF VARIOUS ASSESSEES I.E. MR. N. WADIA AND F OUR OTHER COMPANIES AS MENTIONED ABOVE, IS THE SUBJECT MATT ER OF THE DISPUTE BEFORE US, WHETHER IT SHOULD BE TAXED AS CAPITAL GAIN BEING CONSID ERATION RECEIVED ON TRANSFER OF ASSET OR NOT. 3. IN ALL THESE CASES, THE ASSESS ING OFFICER HAS TAXED THE AMOUNT RECEIVED BY WAY OF DISTRIBUTION FROM THE ADMINISTRATOR AS CAPITAL GAIN OR BUSINESS INCOME. EXCEPT FOR THE FIGUR ES OF RECEIPTS, OTHER MATTERS ARE COMMON. HENCE, WE PROCEED TO DECIDE ALL THE MATTER ALTOGETHER EXCEPT THAT THERE ARE CERTAIN M ODIFICATION IN THE GROUNDS OF APPEAL, WHICH WOULD BE DEALT WITH SEPARATELY. 4. AT THE VERY OUTSET, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT EXACTLY SIMILAR ISSUE HAS BEEN DEAL T WITH AND DECIDED BY THE ITAT MUMBAI BENCH IN I.T.A.NO.4573&4424/M/2008 FOR THE ASSESSMENT YEAR 2004-2005 IN THE CASE OF SHRI NUSLI NEVILLE WADIA, ONE OF THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 9 MAIN RECIPIENT. THE FACTS WHICH HAVE BEEN INCORPORATED ABOVE ARE INFACT SAME, WHICH HAVE BEEN DEALT WITH IN PARA 3 TO 10 OF THE SAID ORDER. 5 . LEARNED CIT DR EVEN THOUGH ADMITTED THAT THE ENTIRE MATTER HAS BEEN CONSIDERED BY THE ITAT, HOWEV ER, PROCEEDED TO ARGUE THE MATTER ON MERITS STATING THAT ONCE THE ITAT HAS ACCEPTED THAT THE RIGHT TO RECEIVE IS A CAPITAL ASSET THEN IT HAS TO BE TAXED AS A CAPITAL GAIN AND FINDING TO THIS EFFECT GIVEN BY THE IT AT THAT IT IS NOT CHARGEABLE TO BE TAXED UNDER THE HEAD CAPITAL GAIN AS THERE IS NO TRANSFER, IS ERRONEOUS. HE INVITED OUR ATTENTION TO VARIOUS PARAGRAPHS OF THE ORDER OF THE ITAT AND MADE HIS ELABORATE SUBMISSIONS. 6. PER CONTRA , LEARNED AR SUBMITTED THAT THE LEARNED CIT DR HAS NOT BEEN ABLE TO POINT OUT ANY INFIRMITY IN THE ORDER OF THE ITAT AND THE HONBLE ITAT HAS CONSIDERED EACH AND EVERY ASPECT TAKING INTO CONSIDERATION AND ARGUMENTS OF BOT H THE PARTIES AND THE REASONING GIVEN BY THE ASSESSING OFFICER AS WELL AS THE CIT(A), WHICH IS APPLICABLE FOR ALL THESE APPEALS. HE, THEREFORE, STRONGLY RELIED UPON THE FINDING OF THE TRIBUNAL IN THE CASE OF NUSLI NEVILLE WADIA (SUPRA). 7 . WE HAVE HEARD THE RIVAL CONTENT ION OF THE PARTIES AND ALSO PERUSED THE MATERIAL ON RECORD AND THE FINDINGS GIVEN BY THE ITAT. IT IS NOTED THAT THE REASONING GIVEN BY THE ASSESSING OFFICER IS EXACTLY THE SAME AS WAS GIVEN IN THE CASE OF NUSLI NEVILLE WADIA (SUPRA), WHICH HAS BEEN DEALT WITH EXTENSIVELY BY THE TRIBUNAL ALONG WITH COUNTER ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 10 ARGUMENTS FROM BOTH THE SIDES WHICH ARE RUNNING FROM PARAGRAPHS 12 TO 39 OF THE ORDER. THE ENTIRE FINDINGS AFTER CONSIDERING THE ENTIRE GAMUT OF ARGUMENTS AND THE FINDINGS OF THE CIT(A) AND ASSESSING OFFICER ARE REPRODUCED HEREIN BELOW FOR THE SAKE OF READY REFERENCE AND APPRECIATION :- THUS, IN THIS BACKGROUND REVENUE HAS RAISED TWO DISPUTES, [I] THAT THE LD. CIT(A) ERRED IN HOLDING T HAT RECEIPT OF RS.71.63 CRORES ON TRANSFER OF LAND IS NOT TAXABLE AND [II] THE ASSESSEE IS NOT THE RESIDUARY LEGATEE OF EFD, AS CONTROL, MANAGEMENT AND OWNERSHIP OF THE PROPERTIES OF EFD VESTED TOTALLY WITH THE ASSESSEE. WE ARE OF THE VIEW THAT FIRST PART OF THE GROUND IS TOTALLY MISCONCEIVED BECAUSE REVENUE IS GOING ON THE ASSUMPTION THAT ASSESSEE HAS TRANSFERRED SOME LAND. THE FACTS SHOW OTHERWISE. EFD EXECUTED A WILL IN 1970 BY WHICH HIS SISTER BW BECAME BENEFICIARY OF THE INCOME FROM THE ESTATES OF EF D AND UPON HER DEATH THE PROPERTIES WERE TO GO TO THE TWO AMER ICAN CHARITIES. THE BEQUEATHAL OF THE PROPERTIES TWO AMERICAN CHARITIE S WAS HELD TO BE INVALID BY THE BOMBAY HIGH COURT. IN THE MEANTIME, BW SOLD HER RIGHTS TO RECEIVE THE DISTRIBUTION OF SALE PROCEEDS AFTER HER DEATH TO THE ASSESSEE. IN FACT, ASSESSEE HAS RECEIVED THE MONEY OUT OF SUCH DISTRIBUTION. THE ESTATE HAD RECEIVED MONIES EITHER BY WAY OF ADVANCES OR BY SALE PROCEEDS AGAI NST SALE OF PROPERTIES. HERE AGAIN, WE HAVE TO REMEMBER THAT THE PROPER TIES HAVE ALREADY BEEN GIVEN FOR DEVELOPMENT TO CE RTAIN DEVELOPERS AND ESTATE WAS ENTITLED ONLY TO 12% OF THE SALE PROCEEDS AND T HE BALANCE OF 88% WAS TO GO TO DEVELOPERS BECAUSE THEY WERE NOT ONLY REQUIRED TO DEVELOP THE PROPERTIES, BUT WERE AL SO REQUIRED TO REMOVE THE ENCROACHMENTS AND OTHER LEGAL IMPEDIMENTS. WHENEVER ANY ADVANCE WAS RECEIVED THE SAME WA S TREATED AS LIABILITY IN THE HANDS OF THE ESTATE AND WHENEVER A CONVEYANCE WAS EXECUTED THE SAME WAS TREAT ED AS RECEIPTS OF SALE CONSIDERATION AND EVEN PROPER TAXES ARISING OUT OF TRANSFER WERE PAID BY THE ESTATE. SUCH SALE PROCEEDS AND ADVANCES WERE ACCUMULATED OVER THE YEARS AND DUR ING THE RELEVANT YEAR ASSESSEE RECEIVED CERTAIN SUMS OUT OF DISTRI BUTION OF SUCH SALE PROCEEDS AS WELL AS ADVANCES. THE ASSESSEE HAD NOT SOLD ANY PARTICULAR PIECE OF LAND DURING THE YEAR AND, THEREFORE, LD. CIT( A) HAS CORRECTLY HELD THAT THE RECEIPTS WOULD NOT BE C HARGEABLE TO INCOME TAX. IN THE ABSENCE OF SALE OF A PARTICULAR ASSET, REVENUE CANNOT ASSUME THAT THE SUMS ARE TAXABLE ON TRANSFER OF LAND. THE SECOND PART OF THE GROUND RAISES AN OBJECTION AGAINST T HE FINDING OF THE LD. CIT(A) THAT ASSESSEE WAS NOT A RESIDUARY LEGATEE OF THE EFD BECAUSE THE CONTROL, MANAGEMENT AND OWNERSHI P OF THE PROPERTIES BELONGING TO THE ESTATE WERE TOTALLY VESTED IN THE ASSESSEE. AS NOTED EARLIER, BW HAD ONLY THE BENEFICIARY INTERE ST FROM THE PROPERTIES WHICH WERE VESTED IN THE TRUST AND WAS ALSO THE SOLE EXECUTRIX OF THE WILL. THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 11 ASSESSEE, I.E. MR. NUSLI N. WADIA WAS APPOINTED AS AN ADMINISTRATOR IN PLACE OF MR. JEHANGIR BEHRAM DUBASH WHO HAD SHOWN HIS INABILITY TO CONTINUE AS ADMINISTRATOR BY THE ORDER OF THE HIGH COURT DATED 21-12-1972. THEREF ORE, THE PROPERTIES WERE VESTED IN THE ADMINISTRATOR I.E. MR. NUSLI N. W ADIA IN HIS CAPACITY AS ADMINISTRATOR. THE ADMINISTRATO R WAS REQUIRED TO PAY INCOME OF THE PROPERTIES TO BW BUT BEFORE DO ING THAT ASSESS EE UNDER THE LAW I.E. SEC.168 OF THE I.T.ACT WAS REQUIR ED TO PAY TAXES ON BEHALF OF THE ESTATE. EVEN AFTER THE DEATH OF BW ASSESSEE MADE AN APPLICATION BEFORE THE HON'BLE HIGH COURT FOR C ONTINUING AS ADMINISTRATOR. A COPY OF THE ORDER OF THE HIGH COURT IS AVAILABLE AT PAGES 79 TO 96 OF THE PAPER BOOK. THE REASONS FO R CONTINUANCE OF MR. NUSLI N. WADIA AS AN ADMINISTRATOR HAVE BEEN GIVEN AT PARA-16 OF THE PETITION WHICH ARE AS UNDER: X X X X X THUS, FROM THE ABOVE, IT IS CLEAR T HAT THERE WERE VARIOUS REASONS FOR THE CONTINUANCE FOR THE EXISTENCE OF THE ESTATE, PARTICULARLY, THE REASON THAT A SUM OF RS .10 CRORES WAS RESERVED FOR CHARITY. IN FACT, THE FACT THAT THE SUM OF RS.10 CR ORES WAS REQUIRED TO BE PAID TO CHARITY WAS MADE CLEAR EVEN IN THE INDENTURE DATED 26-9-2001 VIDE CLAUSE 3[A] WHICH READS AS UNDER: X X X X X FROM THE ABOVE, IT IS CLEAR THAT THE ESTATE WA S REQUIRED TO CONTINUE BECAUSE OF VARIOUS REASONS LIKE PENDENCY OF VARIOUS LITIGATIONS AND THE REQUIREMENT TO DONATE CERTAIN MONEY TO THE CHARITY. SINCE THE ESTATE WAS CONTINUING, THEREFORE, THERE WAS NO POSSIBILITY OF THE ASSESSEE ACQUIRING OF THE RIGHTS OF THE PROPERTIES OF THE ESTATE OF EFD. THE ASSESSE E ONLY ACQUIRED THE RIGHTS TO SALE PROCEEDS AND THE ESTATE STILL CONTI NUED BECAUSE THE HON'BLE HIGH COURT IN ITS ORDER DATED 20- 11-2003 ALLOWED THE ASSESSEE TO CONTINUE AS ADMINISTRATOR. THEREAFTER, ASSESSEE KEPT ON ADMINISTERING THE ESTATE AND ALSO FIL ED INCOME TAX AS THE INCOME TAX AND WEALTH TAX RETURNS WERE NOT MADE PART OF THE ORIGINAL PAPER BOOK AND ON THE DIRECTION OF THE BENCH SAME HAVE BEEN FILED VIDE LETTER DATED 16-6-2011. A PERUSAL OF THESE DOCUMENTS CLEARLY SHOWS THAT THE ASSESS EE IN THE CAPACITY OF ADMINISTRATOR HAS FILED INCOME TAX AND WEALTH TAX RETURNS ON BEHALF OF THE ESTATE OF EFD FOR A.YRS. 2004-05 TO 2010-2011. FOR A.YRS. 2005-06, 2006-07 AND 2008-09 THE ASSESSMENT ORDERS HAVE BEEN PASSED U/S.143[3] IN THE NAME OF THE ADMINISTRATOR OF THE ESTATE OF LATE MR. E. F. DINSHAW. THIS CLEARLY SHOWS THAT T HE EXISTENCE OF THE ESTATE OF EFD WAS ACCEPTED EVEN BY THE DEPARTMEN T. WE FURTHER FIND THAT THE LD. CIT(A) HAS DEALT WITH THIS ASPECT AT PARAS 45 TO 59 BY REFERRING TO VARIOUS PROVISIONS OF INDIAN SUCCESSION ACT, 1925 AND VARIOUS CASE LAWS AS TO HOW THE ESTATE WAS REQUIRED TO BE ADMINISTERED AND IN WHOM SUCH PROPERTIES WOULD VEST. WE ARE OF THE VIEW THAT THERE IS NO NEED TO DEAL WITH SUCH PROVISIONS IN DETAIL AGAIN, BUT ALL THESE FACTS CLEARLY SHOW THAT ESTATE OF EFD WAS IN EXISTENCE UNDER THE ADMINISTRATION OF THE ASSESSEE IN T HE CAPACITY OF ADMINISTRATOR. THE LD. SR. STANDING COUNSEL OF THE REVENUE HAS NOT MADE ANY SUBMISSION OR BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THE FINDING OF THE CIT(A) IN THIS RESPEC T ARE WRONG. FURTHER, IT IS ALSO ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 12 NOTED THAT EVEN AS PER CLAUSE 4[B] OF THE IN DENTURE TRANSFEREES DID NOT HAVE ANY RIGHT TO GET THE PROPERTIES TRANSFERRED IN THEIR NAME. THE RELEVANT CLAUSE READS AS UNDER: CLAUSE 4[B]: NONE OF THE TRANSFEREES SHALL CALL UPON THE ADMINISTRATOR TO TR ANSFER TO HIM, HER THEM OR IT THE IMMOVABLE PROPERTIES LOCATED IN INDIA AND FORMING PART OF THE DECEASEDS ESTATE IN INDIA. IN VIEW OF THESE FACTS AND DISCUSSION, WE ARE OF THE VIEW, THAT EVEN SECOND PART OF THE FIRST GROUND RAISED BY THE REVENUE IS NOT MAINTAINABLE AND, THEREFORE, WE REJECT GROUND NO.1 OF THE APPEAL OF THE REVENUE. 41. GROUND NO.2 RAISED BY THE REVENUE IS AS UNDER: THE LEARNED CIT(A) OUGHT TO HAVE TREATED THE RECEIPTS EITHER AS SHORT TERM CAPITAL GAIN OR ADVENTURE IN THE NATURE OF TRADE. 42. FOR DECIDING THIS GROUND LET US RECAPITULATE THE FACTS AGAIN WHICH WOULD CLEARLY SHOW THE NATURE OF RECEIPTS. THE RECEIPT OF SUM OF RS.71.63 CROR ES CONSISTED OF FOLLOWING: 1. PAYMENTS MADE RS.27,13,36,000/- 2. 7% GOVERNMENT OF INDIA BONDS-2003 RS.36,00,00,000/- 3. 6.5% GOVERNMENT OF INDIA BONDS-2003 RS. 8,50,00,000/- EFD WHO WAS RESIDENT OF U.S. WAS THE OWNER OF VARIOUS IMMOVABLE PROPERTIES IN INDIA. HE EXECUTED A WILL IN 1970 THR OUGH WHICH A TRUST WAS CREATED AND BW WAS APPOINTED AS SOLE EXECUTRIX. BW WAS THE SISTER OF EFD AND WAS AL SO MADE SOLE BENEFICIARY OF THE INCOMES OF THE TRUST PROPERTIES. ON THE DEATH OF BW THE PROPERTIES WERE TO GO TO TWO AMERICAN CHARITIES AS PER THE WILL. SI NCE BW WAS LIVING IN USA SHE APPOINTED MR. JEHANGI R B. DUBASH AS ADMINISTRATOR OF THE PROPERTIES, HOWEVER, HE SHOWED A RELUCTANCE TO CONTINUE AS ADMINISTRATOR OF THE ESTATES, THER EFORE, ASSESSEE I. E. MR. NUSLI N. WADIA WAS APPOINTED AS ADMINISTRA TOR AT THE REQUEST OF BW AND HIS APPOINTMENT WAS CONFIRMED BY THE BOMBAY HIGH COURT VIDE ITS ORDER DATED 21-12-1972. IN AND AROUND 1995 THE ADMINISTRATOR OF THE ESTATE ENTERED INTO VARIOUS DEVELOPMENT AGREEMENTS WITH CERTAIN DEVELOPERS FOR DEVELOPMENT OF THE IMMOVABLE PROPERTIES. THE DEVELOPERS WERE REQUIRED TO RE MOVE ALL ENCROACHMENTS AS WELL AS OTHER LEGAL IMPEDI MENTS. BW WHO HAD LIFE INTEREST IN THE PROPERTIES WAS CONFIRMING PARTY TO THESE AGREEMENTS. IN CONSIDERATION, ESTATE OF EFD WA S TO RECEIVE 12% OF THE SALE PROCEEDS RECEIVED FROM THE CUSTOM ERS FOR THE BUILT UP AREA AND 88% OF THE SALE PROCEEDS WERE TO GO TO THE DEVELOPERS AS THEIR SHARE. CONSEQUENT TO THESE DEVELOPM ENT AGREEMENTS, THE ESTATE STARTED RECEIVING CERTAIN ADVANC ES AS WELL AS SALE CONSIDERATION. NOW BEFORE THES E AMOUNTS COULD BE DISTRIBUTED THE ESTATE WAS REQUIRED TO FILE SEPARATE INCOME TAX RETURNS IN TERMS OF SEC.168 OF THE I.T.ACT. FROM T HE COPIES OF THE RETURNS MADE AVAILABLE BEFORE US, IT BECOMES CLEAR THAT ESTATE OF EFD HAD REGULARLY FILED INCOME TAX RETURNS UPTO A.Y 2010-2011, SOME OF WHICH HAVE BEEN SCRUTINIZED AND A SSESSMENT ORDERS HAVE BEEN PASSED U/S.143[3]. THE RETURNS HAVE B EEN FILED IN THE NAME OF THE ADMINISTRATOR OF ESTATE OF LATE EFD AND ASSESSMENT ORDERS ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 13 HAVE ALSO BEEN MADE IN THAT NAME. IN ITIALLY THE INCOME RECEIVED BY THE ESTATE WERE ASSESSED AS BUSI NESS INCOME IN THE HANDS OF THE ESTATE, BUT THE LD. SR. ADVOCATE OF THE ASSESSEE POINTED OUT THAT THE ESTATE CHALLENGED THESE ASSESSM ENTS AND THE TRIBUNAL HELD THAT INCOME OF THE ESTATE FROM SALE PROCEEDS OF THE PROPERTIES SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND ACCORDINGLY REVENUE HAS ASSESSED THE SAME UNDER THE HEAD CAPITAL GAINS. WHENEVER A SA LE WAS EXECUTED SUCH RECEIPTS WERE TREATED AS SALE PROCEEDS AND OFFERED TO TAX UNDER THE HEAD CAPITAL GAINS. BUT WHENEVER ONLY ADVANCES WERE RECEIVED BY THE ESTATE, SAME WERE TREATED AS LIABILI TIES IN THE BOOKS OF ESTATE AND WHEN ACTUAL CONVEYANCE WAS EXECUT ED IN FAVOUR OF THE CUSTOMERS WHO HAD PAID THE ADVANCES, THEN SUCH RECEIPTS WERE TRANSFERRED TO SALE RECEIPTS AND THE SAME WERE OFFERED FOR TAXATION AT THE TIME OF EXECUTION OF CONVEYANCE. BEFORE MAKING AN Y DISTRIBUTION OF INCOME AS PER THE PROVISIONS OF SE C.168 OF THE I.T.ACT, THE ADMINISTRATOR WAS LIABLE TO PAY TAXES AND ONLY THEREAFTER ANY DISTRIBUTION COULD HAVE BEEN MADE IN FAVOUR OF THE BENEFICIARY OF THE WILL. THEREFORE, ONC E THE TAXES ARE PAID BY THE ESTATE, NATURALLY, THE BENEFICIARY RECEIVI NG ANY DISTRIBUTION OF SUCH SALE RECEIPTS COULD NOT HAVE BEEN TAXED AGAIN BY THE REVENUE. 43. DURING THE COURSE OF HEARING, LD. SR. ADVOCATE OF THE ASSESSEE FURTHER POINTED OUT THAT OUT OF T HE TOTAL SUM OF RS.27,13,36,000/- BY BANK TRANSFERS, ONLY A SUM OF RS. 13.47 CRORES WAS DISTRIBUTED BY THE ADMINISTRATOR OUT OF THE INCOME WHICH WAS ACCUMULATED OVER THE PERIOD OF YEARS BY THE ES TATE OF EFD. HE HAD ALSO ARGUED THAT ONCE THE ESTATE HAD SUFFERED THE TAX, THEN THE SAME AMOUNT COULD NOT BE TAXED AGAIN IN THE HANDS OF THE TRANSFEREES. WE FIND MERIT IN THIS ARGUMENT THAT SAME ITEM OF INCOME CANNOT BE TAXED TWICE BECAUSE THIS RECEIPT COULD NOT HAVE BEEN TREATED AS TAXABLE ITEM IN THE HANDS OF BW. MERELY BECAUSE ASSESSEE HAS ENTERED INTO AN INDENTUR E DATED 26-9-2001 BY WHICH ASSESSEE BECAME ENTITLED TO RECEIPT OF DISTRIBUTION OF SALE PROCEEDS FROM THE ADMINISTRATOR IN PLACE OF BW, WOULD NOT CHANGE THE BASIC PRINCIPAL THAT NO ITEM OF INCOME CAN BE TAXED TWICE. IN FACT, SAME VIEW HAS BEEN TAKEN BY THE DEPARTM ENT ITSELF IN THE CASE OF M/S SEVAKUNJ INVESTMENTS & CO. PV T. LTD. [WHICH HAS NOW BEEN RENAMED AS GO INVESTMENTS & TR ADING PVT. LTD]. THIS FACT BECAME CLEAR BECAUSE APPEALS OF FOUR ASSOCIATE COMPANIES WERE ALSO HEARD TOGETHER AND IN I.T.A.N O.1646/M/09 PERTAINING TO M/S SEVAKUNJ INVESTMENTS & CO. PVT. AL SO SIMILAR ISSUES RAISED IN THE REVENUES APPEAL ALSO ARISE AS RAIS ED IN THE CASE OF THE ASSESSEE. IN CASE OF THIS COMPANY THE A SSESSMENT WAS REOPENED ON THE BASIS THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF THE SUM OF RS.11,93,88,000/- WHICH WAS CREDITED TO THE CAPITAL RESERVE ACCOUNT, BUT NOT OFFERED FOR TAXATION. AS OBSERVED RIGHT AT THE BEGINNING OF THIS ORDER THAT ASSESSEE HAD ENTERED INTO THE INDENTURE DATED 26-9-01 ALONG WITH FOUR ASSOCIATE COMPANIES AND ASSESSEE ALONG WITH THESE FOUR COMPANIES HAD PAID A CONSIDERATION OF RS.20 LAKHS TO BW FOR GETTING THE RIGHT TO RECEIVE THE SALE PROCEEDS FROM THE ADMINIST RATOR OF THE ESTATE. 60% OF THE RIGHTS WERE TO GO TO THE ASSESSEE AND 10% EACH OF THE RIGHTS WERE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 14 TO GO TO EACH OF THESE ASSOCI ATE COMPANIES. THEREFORE, M/S SEVAKUNJ INVESTMENTS & CO. PVT. ALSO BECAME ENTITLED TO RECEIVE 10% OF THE SALE PROCEEDS BY WAY OF DISTRIBUTION. IN THE CASE OF THE ASSESSEE THE ARGUMENT THAT THIS INCOME HAD SUFFERED TAX IN THE HANDS OF THE ESTATE WAS REJECTED BY THE AO BECAUSE DETAILS WERE NOT AVAILABLE. HOWEVER, LD. CIT(A) HAS ACCEPTED THIS POSITION WHO AFTER DETAILED DISCUSSION HELD THAT SAME ITEM OF INCOME CANNOT BE TAXED TWICE. WHILE DEALING WIT H THIS ARGUMENT AT PAGE 10 CLAUSE [VII] OF THE ASSESSMENT ORDER IN THE CASE OF M/S SEVAKUNJ INVESTMENTS & CO. PVT. IT HAS BEEN OBSERVED AS UNDER: (VII) THE SUBMISSION OF THE AS SESSEE, WITHOUT PREJUDICE TO HIS STAND THAT NO TAX LIABILITY ARISES IN HIS HAND, THAT IN ANY CASE SUM OF RS.13.47 CRORES, BEING THE CONSIDERATION ON WHICH ESTATE HAS ALREADY PA ID APPROPRIATE CAPITAL GAINS TAX IN THE RELEVANT YEARS NOT BEING THE CURR ENT YEAR HAS BEEN CONSIDERED. IT HAS BEEN BROUGHT OUT BY THE ASSESSEE THAT SIMILAR REQUE ST WAS MADE IN THE ASSESSMENT OF MR. NUSLI. WADIA BUT THE SAME WAS NOT CONSIDERED BY THE ASSESSING OFFICER FOR WANT OF DETAILS. NOW THE ASSESSEE HAS PRO DUCED THE NECESSARY DETAILS IN THIS REGARD. ACCORDINGLY SINCE THERE ARE FOUR COMPANIES AS BENEFICIARIES EACH HAVING A DIST INCT AND IDENTIF IED SHARE, 10% OF RS.13.47 CRS WHICH WORKS OUT TO RS.1.35 CRS IS EXCLUDED FROM THE TAXABLE INCOME. AFTER THIS OBSERVATION, THE INCOME WAS FINALLY COMPUTED AS UNDER: TOTAL RECEIPTS ON ACCOUNT OF RS.11,93,88,000 SALE OF PROPERTIES LESS: COST ATTRIBUTABLE TO ASSESSEES SHARE AS DISCUSSED RS. 19,000 LESS: PORTION OF CAPITAL GAINS WH ICH HAD RS. 1,37,00,000 ALREADY BEEN SUBJECT TO CAPITAL GAINS TAX IN THE HANDS OF THE ESTATE --- ------------------ SHORT TERM CAPITAL GAINS RS.10,56,78,000 =========== THUS, FROM THE ABOVE, IT IS CLEAR THAT SALE RECEIPT AGAINST WHICH CONVEYANCE DEED WAS ALREADY EXECUTED AND WHICH WERE ASSESSED IN THE HANDS OF ESTATE OF EFD, WERE NOT SUBJECTED TO TAX AGAIN. 44. NOW LET US EXAMI NE THE OTHER PORTION OF THE RECEIPTS. IT WAS POINTED OUT THAT IN THE CASE OF THE ASSESSEE ALSO OUT OF THE TOTAL RECEIPTS OF RS.71.63 CRORES, A SUM OF RS.63.5 CRORES DISTRIBUTED BY THE ADMINISTRATOR WAS OUT OF THE ADVANCES RECEIVED FROM THE PURCHASERS AND DEVELOPERS. SUCH ADVANCES WERE PAID BY THE PROSPECTIVE CUSTOMERS AGAINST THE PURCHASES. IT IS NOT DENIED BY THE REVENUE THAT T HESE AMOUNTS REPRESENTED ADVANCES BECAUSE AS AND WHEN SAME WERE C ONVERTED INTO SALE, SAME WERE OFFERED TO TAX IN THE HANDS OF ESTATE OF EFD. NOW, IF THE RECEIPTS ON WHICH TAXES HAVE BEEN PAID WERE NOT TAXED BY THE REVENUE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 15 IN THE CASE OF M/S SEVAKUNJ INVESTMENTS & CO. PVT., THEN THE RECEIPTS WHICH NEVER HAD THE CHARACTE R OF INCOME, CAN ALSO NOT BE TAXED, BECAUSE, SUCH ADVANCES W OULD REPRESENT ONLY LIABILITY AS AND WHEN THEY WOULD BE CONVERTED INTO SALE PROCEEDS AND TAXES WOULD BE PAYABLE BY THE ESTATE AND, IN FACT, HAS ALREADY BEEN OFFERED FOR TAXATION IN THE HANDS OF ESTATE OF EFD. EVEN IF SUCH ADVANCES HAVE BEEN DISTRIBUTED BY THE ADMINISTRATOR TO THE TRANSFEREES WHICH INCL UDED THE ASSESSEE ALSO, WOULD NOT CHANGE THE BASIC CHARACTER OF T HE RECEIPTS. AS POINTED OUT EARLIER, THE ESTATE OF EFD CONTINUED TO BE THE OWNER OF THE PROPERTIES IN QUESTION AT LEAST FO R INCOME TAX PURPOSES BECAUSE AS PER SEC.168 OF THE I.T.ACT IT IS THE ADMINISTRATOR WHO HAS TO PAY TAXES ON THE INCOME OF SUCH ESTATE. 45. SECTION 168 READS AS UNDER: X X X X X EXPLANATION TO ABOVE SECTION VERY CLEARLY PROVIDES THAT EXECUTOR WOULD INCLUDE THE ADMINISTRATOR. FURTHER, AS OBSERVED BY THE LD. CIT(A) THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MRS. USHA D. SHAH [SUPRA] HAS CLEARLY HELD THAT IN THE CASE OF ESTATE THE TAXES HAVE TO BE PAID BY THE EXECUTOR. IN THIS CASE ASSESSEE WAS A WIDOW OF OTHER DECEASED MEMBER OF AN HUF. FOR A.YRS. 1961-62 TO 1963-64, THE AO INCLUDED THE INCOME OF THE ASSESSEES 1/6 TH SHARE OF INCOME ARISING FROM THE HUF PROPERTY, REJECTING THE ASSESSEES CONTENTIONS THAT AS THE INCOME FROM THE ESTATE OF THE PROPERTY IN QUESTION HAS REMAINED UNDISTRIBUTED, SHE HAD NOT RECEIVED ANY PORTION OF THE INCOME AND THE WHOLE OF WHICH HAD BEEN RECE IVED BY HER MOTHER-IN-LAW WHO ADMINISTERED THE ESTATE. ON APPEAL, AAC UPHELD THE ASSESSEES CLAIM WHICH WAS FURTHER CONFIRMED BY THE AP PELLATE TRIBUNAL. ON A REFERENCE, THE HON'BLE HIGH COURT HELD AS UNDER: HELD, THAT THOUGH THE DECEASED NOT LEFT ANY WILL, THERE WAS NO EXECUTOR IN THAT SENSE NOR WERE ANY LETTERS OF ADMINISTRATION OBTAINED, THE MOTHER OF DECEASED WAS IN FACT IN MANAGEMENT OF THE ESTATE AFTER HIS DEATH. IN VIEW OF THE WIDE DEFINITION OF 'EXECUTOR' IN THE EX PLN. TO S. 168[1] OF THE ACT, SHE WOULD BE COVERED BY THE DEFINITION AND, SINCE THERE WAS NO DISCRETION LEFT WITH THE TAX AUTHORITIES, THE INCOME FROM THE ESTATE OF THE DECEASED COULD BE CHARGED TO TAX ONLY IN THE HANDS OF HIS MOTHER OF THE DECEASED. THE ASSESSEE WAS NOT, THEREFORE, LIABLE TO BE TAXED ON THE INCOME FROM THE UNDISTRIBUTED PERSONAL ESTATE OF THE DECEASED OR THE INCOME FROM THE UNDISTRIBUTED SHARE OF THE INTEREST OF THE DECEASED IN THE HUF. THUS, IT IS CLEAR FROM THE ABOVE THAT WHENEVER AN ESTATE IS IN EXISTENCE, WHICH IN THE CASE BEFORE US IS DEFINITELY THERE, THEN TAXES ON THE INCOME OF THE ESTATE ARE REQUIRED TO BE PAID ONLY BY THE EXECUTOR WHICH WOULD INCLUDE ADMINISTRATOR ALSO AND IN THE CASE BEFORE US THE ADMINISTRATOR HAD ALREADY FILED INCOME TAX RETURNS WHICH HAD ASSESSED ALSO, WHICH MEANS, REVENUE HAS ACCEPTED THAT INCOME ARISING FROM THE ESTATE BELONGED TO THE ESTATE. IN THESE CIRCUMSTANCES, ADVANCES RECEIVED BY THE ESTATE CANNOT BE TREATED AS INCOME UNLESS THE SAME HAVE BEEN CONVERTED INTO THE SALE PROCEEDS BY EXECUTION OF THE CONVEYANCE DEED. IN FACT, SUCH ADVANCES HAVE BEEN TREATED AS LIABILITIES AND WHENEVER SALES HAVE BEEN AFFECTED, THEY HAVE BEEN TRANSFERRED TO THE SALES ACCOUNT AND OFFERED FOR TAX ACCORDINGLY BY THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 16 ESTATE. THEREFORE, SUCH ADVANCES IF CANNOT BE TREATED AS INCOME IN THE HANDS OF THE ESTATE, THEN IN TURN, THE SAME CANNOT BE TREATED AS INCOME IN THE HANDS OF THE BENEFICIARY, PARTICULARLY BECAUSE THE LIABILITY OF THE ESTATE EXISTED TO PAY THE TAXES WHENEVER SUCH ADVANCES WERE CONVERTED INTO SALE. THUS, IF THE DISTRIBUTION MADE BY THE ADMINISTRATOR COULD NOT BE TREATED AS INCOME IN THE HANDS OF BW, THEN SIMILARLY SAME CANNOT BE TREATED AS INCOME IN TH E HANDS OF THE ASSESSEE ALSO. IN OUR OPINION, THE SUM OF RS.71.63 CRORES COUNT NOT HAVE BEEN TREATED AS INCOME IN THE HANDS OF THE ASSESSEE. 46. WE WOULD ALSO LIKE TO OBSERVE THAT THE SUM OF RS.71.63 CRORES RECEIVED BY THE ASSESSEE INCLUDED A SUM OF RS.44.50 CRORES BEING THE VALUE OF TAX FREE GOVERNMENT OF INDIA BONDS WAS ALSO TRANSFERRED ONLY BY WAY OF MERE ACCOUNTING ENTRY. AS POINTED OUT BY THE LD. SR. ADVOCATE OF THE ASSESSEE AS PER THE NOTIFICATION OF GOVERNMENT OF INDIA, MINISTRY OF FINANCE & COMPANY AFFAIRS DATED 13 TH MARCH, 2003 [COPIES OF THE RELEVANT DOCUMENTS ARE PLACED AT PAGES 97 TO 159 OF THE PAPER BOOK] THE BONDS COULD HAVE BEEN APPLIED ONLY IN THE NAME OF AN INDIVIDUAL AND THERE WAS NO PROVISIO N FOR MAKING AN APPLICATION IN THE NAME OF THE ESTATE. THE BONDS WERE APPLIED IN THE NAME OF ADMINISTRATOR IN HIS INDIVIDUAL NAME AND EVEN P.A.NO. OF ESTATE WAS GIVEN WHICH BECOMES CLEAR FROM THE COPY OF THE APPLICATION, PARTICULARLY PAGE 122 WHERE THE P.A.NO. HAS BEEN GIVEN AS AAEPD8394A WHICH WE HAVE VERIFIED FROM THE ASSESSMENT ORDER OF THE ESTATE AND SAME BELONGS TO THE ESTATE OF EFD. FURTHER, THESE BONDS WERE NOT TRANSFERABLE AND ASSESSEE MIGHT HAVE TRANSFERRED THE BONDS BY WAY OF DISTRIBUTION UNDER A WRONG NOTION. IT WAS STATED THAT EVEN SUCH ENTRIES HAVE BEEN REVERSED. MOREOVER, THESE BONDS HAVE BEEN DISTRIBUTED OUT OF THE ADVANCE RECEIPTS AND, THEREFORE, COULD NOT HAVE BEEN INCLUDED IN THE INCOME OF THE ASSESSEE AS OBSERVED IN THE ABOVE PARA. 47. COMING SPECIFICALLY TO THE TWO ISSUES RAISED BY THE REVENUE IN THE SECOND GROUND, LET US FIRST DEAL WITH THE ISSUE WHETHER THE RECEIPTS CONSTITUTE INCOME FROM AN ADVENTURE IN THE NATURE OF TRADE OR NOT. THE AO HAS ORIGINALLY MADE THE WHOLE DISCU SSION AS IF THE RECEIPTS WERE TO BE TAXED AS SHORT TERM CAPITAL GAINS, BUT LATER ON, AS AN ALTERNATIVE HE ALSO OBSERVED THAT ALTERNATIVELY THESE RECEIPTS CAN BE TREATED AS BUSINESS RECEIPTS OUT OF THE ADVENTURE IN THE NATURE OF TRADE. THE MAIN REASON AO HAS GIVEN FOR THIS IS TH AT SINCE ASSESSEE WAS ACTING AS THE ADMINISTRATOR FOR ALMOST 30 YEARS AND HE KNEW THAT BEQUEATHAL OF THE PROPERTIES TO TWO AMERICAN CHARITIES MAY BE HELD INVALID IN VIEW OF SEC.118 OF INDIAN SUCCESSION ACT, 1925 THEREFORE, BY INVESTING A SMALL SUM ASSESSEE COULD MAKE A BIG FORTUNE IF ULTIMATELY THE BEQUEATHAL TO THE TWO AMERICAN CHARITIES WAS HELD TO BE INVALID. THE LD. SR. STANDING COUNSEL HAS ALSO LAID LOT OF STRESS ON THIS FACT AND POINTED OUT THAT ASSESSEE WOULD NOT HAVE RECEIVED AN YTHING BUT FOR THE INDENTURE DATED 26-9-2001 ENTERED INTO BY THE ASSE SSEE WITH BW. HE HAD ALSO LAID EMPHASIS ON THE FACT THAT THE INDENTURE WAS SUBJECT TO THE ORDER OF THE BOMBAY HIGH COURT WHEREIN BEQUEATHAL OF THE PROPERTIES TO TWO AMERICAN CHARITIES WAS CHALLENGED AND, THEREFORE, THIS CLEARLY SHOWS THAT ASSESSEE HAD PROTECTED HIMSELF BY MAKING THE INDENTURE SUBJECT TO THE OUT COME OF THE ORDER OF THE HIGH COURT. THUS, BY TAKING PRACTICALLY NO RISK ASSESSEE HAD INVEST ED THE TOTAL SUM OF RS.20 LACS ALONG WITH FOUR ASSOCIATE COMPANIES AND HAS OBTAINED 60% RIGHTS FOR RECEIVING THE SALE PROCEEDS FROM THE IMMOVABLE PROPERTIES FOR HIS PERSONAL ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 17 CONSIDERATION OF RS.12 LACS. BUT AFTER EXAMINING ALL THE FA CTS, WE ARE OF THE OPINION THAT FACTS DO NOT SUPPORT THE CASE OF REVENUE. IT CANNOT BE SAID THAT THE ASSESSEE HAD ENTERED IN TO TRANSACTIONS WHICH CAN BE CALLED AS ADVENTURE IN THE NATURE OF TRADE. FIRST OF ALL, THERE WAS A CLOSE RELATIONSHIP BETWEEN THE ASSESSEE AND BW AND THIS FACT IS BORNE OUT FROM THE FACT THAT ASSESSEE WAS APPOINTED AS ADMINISTRATOR WAY BACK IN 1972. THERE IS NO ALLEGATION BY THE REVENUE THAT TILL THE DATE OF ENTERING INTO AN INDENTURE, ASSESSEE HA D RECEIVED ANY BENEFIT OUT OF THE ESTATE OF EFD. IT SEEMS THAT BW HAD DEVELOPED A CLOSE RELATIONSHIP WITH THE ASSESSEE. FURTHE R, AS MENTIONED CLAUSE [L] OF THE INDENTURE DATED 26-9-01 BW HAD ENTERED INTO THE INDENTURE IN VIEW OF HER ADVANCED AGE AND WAS DESIROUS OF SETTLING HER AFFAIRS IN HER OWN LIFE TIME. IT WAS ALSO MENTIONED IN PARA-16 IN PETITION BEFORE THE HIGH COURT FOR CONTINUING THE APPOINTMENT OF THE ASSESSEE AS ADMINISTRATOR THAT BW HAD TOTAL CONFIDENCE IN THE ASSESSEE AN D TREATED HIM LIKE HER SON. THIS ASSERTION IS SUPPORTED BY BWS PE RSONAL WILL WHICH WAS EXECUTED ON 21-10-2001 I.E. ALMOST WITHIN A MONTHS TIME FROM THE DATE OF INDENTURE [COPY OF THE SAID WILL HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 41 TO 54]. THROUGH THIS WILL BW HAD BEQUEATHED HER MOVABLE PROPERTIES TO HER TWO COUSINS, NAMELY, MS. RUTTY C.P.WADIA AND MS. MARY C.P.WADIA AND ALL THE IMMOVABLE PROPERTIES HAVE BEEN BEQUEATHED TO MR. NESS N. WADIA AND MR. JEH N. WADIA, WHO WERE THE SONS OF THE ASSESSEE. THIS CLEARLY SHOWS THAT BW HAD A VERY CLOSE RELATIONSHIP WITH THE ASSESSEE AND HIS SONS. NATURA LLY, BEFORE WRITING THE WILL SHE MUST HAVE EXPRESSED HER DESIRE TO GIVE THE PROPERTIES TO ASSESSEES SONS AND IF THAT IS SO THERE WAS NO NEED FOR TH E ASSESSEE TO DO ANY BUSINESS WITH BW BECAUSE IN ANY CASE ASSESSEES FAM ILY WOULD HAVE GOT THOSE ASSETS THROUGH THE WILL OF BW. 48. WE ALSO FIND THAT FOR CONSTITUTING THE TRANSACTION AS ADVENTURE IN THE NATURE OF TRADE THERE HAS TO BE SO ME BUSINESS RELATIONSHIP OR SOME COMMERCIAL FEATURES IN THE TRANSACTIONS, BUT, APART FROM TRANSACTION NOTHING HAS BEEN BROUGHT FORWARD BY THE AO OR LD. SR. STANDING COUNSEL EVEN BEFORE US. CLEARLY ASSESSEE WAS HAVING A CLOSE RELATIONSHIP AND BW WAS IN ADVANCED AGE AND WITH A DESIRE TO SETTLE HER AFFAIRS SHE MADE THESE ARRANGEMENTS . HOWEVER, IF ASSESSEE WAS AWARE OF THE HUGE GAIN TO BE MADE OUT OF THIS INDENTURE, THEN IT CANNOT BE SAID THAT BW WAS NOT AWARE OF THIS FACT BECAUSE AFTER ALL SHE WAS ALSO THE OWNER OF THE OTHER HALF SHARE OF THE PROPERTIES WHICH HAD BEEN INHERITED BY HER AS WELL AS EFD FROM THEIR LATE FATHER. MOREOVER, THE RIGHT TO RECEIVE SALE CONSIDERATION WAS TO COMMENCE AS PER THE INDENTURE DATED 26-9-2001 ONLY AFTER THE DEATH OF BW. THESE FACTS DO NOT INDICATE ANY COMMERCIAL RELATIONSHIP. 49. IN ANY CASE, THE ISSUE ALSO ST ANDS COVERED BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF MOTHAY GANGA RAJU VS. CIT [SUPRA]. IN THAT CASE ASSESSEE WAS A LAND OWNER AND MONEY LENDER AND ALSO HAD INTEREST IN CERTAIN COTTON MILLS. THE ASSESSEE PURCHASED ON 22-3- 1926 RIGHT, TITLE AND INTEREST OF ONE SHRI PARTHASARTHY APPA RAO IN THE LEGACY LEFT BY ONE SHRI VENKAYAMMA THROUGH THE COURT AUCTION. THE PURCHASE PRICE WAS RS.39,800/-. THERE WAS SOME PROTRACTED LITIGATIONS BETWEEN THE DATE OF PURCHA SE AND THE DATE OF REALISATION OF MONEY ALONG WITH THE PURCHASE COST THE TOTAL EXPENDITURE CAME TO RS.46625-15-0. THE ASSESSEE ULTIMATELY REALISED A SUM OF RS.1,97,025/- FROM THE REVERSIONS OF THE ESTATE IN QUESTION TOWARDS THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 18 AMOUNT DUE TO HIM UNDER THE DECREE. THUS, ASSESSEE REALISED A SURPLUS OF RS.1,50,399/-. THE ITO HELD THIS EXCESS RECEIPT AS ASSESSABLE TO INCOME TAX AND THE MATTER TRAVELED UPTO THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT OBSERVED AS UNDER: IN OUR VIEW, THIS CANNOT BE DESCRIBED AS AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE. THE TRADING ACTIVITIES OF THE ASSESSEE WERE LIMITED TO LENDING MONEY, OWNING LAND, IF THAT CAN BE CALLED A TRADE, AND HAVING AN INTEREST IN COTTON MILLS AND THIS IS IN NO SENSE A TRANSACTION RELATED TO ANY OF THOSE ACTIVITIES. IN THIS CASE, THE INTEREST IN THE LEGACIES WAS NOT EVEN PURCHASED FROM ANYBODY WHO WAS INDEBTED TO THE ASSESSEE IN HIS MONEY LENDING BUSINESS. IT WAS AN ISOLATED TRANSACTION, ALTHOUGH PROBABLY ENTERE D INTO BY HIM AS A SPECULATION, AS HE HAPPENED TO MAKE A GOOD PROFIT OUT OF IT. WE ARE QUITE UNABLE TO SEE THAT IT HAS ANY CONNECTION WHATEVER WITH ANY OTHER TRADES OR BUSINESSES CARRIED ON BY THE ASSESSEE. BY ITSELF, TH E PURCHASE OF AN INTEREST IN LEGACIES, THE SUBJECT OF LITIGATION, CANNOT CERTAINLY BE DESCRIBED AS A TRADE OR BUSINESS. REFERENCE HAS BEEN MADE TO THE CASE OF RUTLEDGE VS. IRC (1929) 14 TAX CASES 490 (C. SESS.) : TC12R.572 BY MR. PATANJALI SASTRI IN SUPPORT OF HIS ARGUMENT. IN THAT CASE, THE APPELLANT WAS A MONEY LENDER WHO WAS ALSO IN 1920 INTERESTED IN A CINEMA COMPANY. HE HAD SINCE THAT TIME BEEN INTERESTED IN VARIOUS BUSINESSES. BEING IN BERLIN IN 1920 ON BUSINESS CONNECTED WITH THE CINEMA COMPANY HE WAS OFFERED AN OPPORTUNITY OF PURCHASING VERY CHEAPLY A LARGE QUANTITY OF PAPER. HE EFFECTED THE PURCHASE AND, WITHIN A SHORT TIME AFTER HIS RETURN TO ENGLAND, SOLD THE WHOLE CONSIGNMENT TO ONE PERSON AT A CONSIDERABLE PROFIT AND IT WAS HELD THAT THE PROFITS IN QUESTION WERE LIABLE TO ASSESSMENT TO INCOME-TAX AND TO EXCESS PROFITS DUTY AS BEING PROFITS OF AN ADVENTURE IN THE NATURE OF TRADE. THE FACTS OF THAT CASE ARE QUITE DISSIMILAR TO THOSE HERE. THERE, WHAT WAS PURCHASED WAS A QUANTITY OF TOILET PAPER AND IT WAS A VERY LARGE QUANTITY, NOT A QUANTITY WHICH AN ORDINARY PERSON WOULD BUY FOR PRIVATE USE. IT WAS OF SUCH A LARGE QUANTITY AS CLEARLY TO MAKE IT A BUSINESS TRANSACTION; AND, OBVIOUSLY, THE INTENTION WITH WHICH THIS LARGE QUANTITY WAS BOUGHT AT AN EXCEEDINGLY LOW PRICE WAS WITH THE OBJECT OF SELLING IT LATER ON AT A FAVOURABLE OPPORTUNITY AT AN ENHANCED PRICE AND GETTING THE BENEFIT OF THE PROFIT THEREFROM. THIS IS QUITE CLEAR, I THINK, FROM THE JUDGMENT OF LORD SANDS WHO SAYS AT P. 497 : 'THE NATURE AND QUANTITY OF THE SUBJECT DEALT WITH EXCLUDE THE SUGGESTION THAT IT WOULD HAVE BEEN DISPOSED OF OTHERWISE THAN AS A TRADE TRANSACTION. NEITHER THE PURCHASER NO R ANY PURCHASER FROM HIM WAS LIKELY TO REQUIRE SUCH A QUANTITY FOR HIS PRIVATE USE.' THE VIEW WE TAKE OF THE MATTER IS THAT THAT CASE IS CERTAINLY OF NO ASSISTANCE TO US, AND THAT, WITH REGARD TO THIS CASE, THIS WAS AN ISOLATED TRANSACTION IN NO WAY CONNECTED WITH ANY OTHER TRADE OR BUSINESS ACTIVITIES OF THE ASSESSEE. THAT BEING SO, WE ARE UNABLE TO HOLD THAT IT WAS AN ADVENTURE IN THE NATURE OF TRADE AND, IF THAT IS SO, THEN THE SUM IN QUESTION WAS NOT CLEARLY ASSESSABLE TO INCOME-TAX. IN TH E CASE BEFORE US ALSO ASSESSEE IS AN INDUSTRIALIST BUT HIS MAIN SOURCE OF INCOME IS ONLY SALARY. HE IS NOT DOING ANY BUSINESS DIRECTLY. IN NO OTHER CASE HE HAS ENTERED INTO ANY OTHER TRANSACTION OF PURCHASING RESIDUARY LEGACY. THEREFORE, IN VIEW OF THE ABOVE DECISION, THE TRANSACTION ENTERED INTO BY THE ASSESSEE FOR PURCHASING THE RIGHT TO RECEIVE THE SALE PROCEEDS CANNOT BE CONSTRUED AS A TRANSACTION WHICH CAN BE CALLED AN ADVENTURE IN THE NATURE OF TRADE. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 19 HERE WE WOULD LIKE TO MENTION THAT SO METIMES IF FACTS SO WARRANT EVEN A SINGLE TRANSACTION CAN CONSTITUTE THE BUSINESS TRANSACTION WHICH MAY BE CALLED AN ADVENTURE IN THE NATURE OF TRADE BUT THEN SAME MUST HAVE SOME COMMERCIAL FEATURES. AS POINTED OUT ABOVE, IN THIS TRANSACTION THE RELATIONSHIP THE ASSESSEE HAD WITH BW WAS OF CLOSE PROXIMITY BASED ON MUTUAL FAITH AND TRUST, BUT DID NOT INVOLVE ANY ELEMENT OF COMMERCIALITY. THE OTHER CIRCUMSTANCE LIKE BW BEQUEATHING HER PERSONAL PROPERTIES TO THE SONS OF THE ASSESSEE ALSO SHOWS THAT NO COMMERCIAL AN GLE WAS INVOLVED. THEREFORE, IN VIEW OF THIS TRANSACTION, IT CANNOT BE TREATED AS AN ADVENTURE IN THE NATURE OF TRADE. 50. COMING TO THE SECOND ASPECT REGARDING TAXABILITY OF THE RECEIPT AS CAPITAL GAINS, THE LD. SR. STANDING COUNSEL IN THE ALTERNATIVE HAD ARGUED THAT, IN ANY CASE, AFTER THE ORDER OF THE HIGH COURT DATED 22-10-2001 DECLARING BW AS HAVING ABSOLUTE RIGHT OVER THE PROPERTIES AFTER DECLARING BEQUEATHAL IN FAVOUR OF TH E TWO AMERICAN CHARITIES AS INVALID, THEREFORE, IN TERMS OF AN INDENTURE DATED 26-9-01 ASSESSEE GOT THE RIGHTS OVER THE PROPERTIES WHICH HAVE BEEN TRANSFERRED AND THE AMOUNTS RECEIVED BY THE ASSESSEE ARE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. IN ANY CASE, THE RIGHT TO RECEIVE SALE PROCEEDS WOULD DEFINITELY CONSTITUTE A CAPITAL ASSET AND EVEN THE LD. CIT(A) HAS ALSO HELD THAT RIGHT TO RECEIVE THE PR OCEEDS WOULD DEFINITELY CONSTITUTE A CAPITAL ASSET AND THIS FACT WAS NOT DISPUTED BY THE ASSESSEE, THEREFORE, ATLEAST TRANSFER OF THESE RIGHTS IN TERMS OF EXTINGUISHMENT WOULD CONSTITUTE TRANSFER AND SAME IS TAXABLE UNDER THE HEAD GAINS. IN THIS REGARD HE HAD STRONGLY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KARTIKEYA V. SARABHAI [SUPRA]. HOWEVER, THESE SUBMISSIONS SEEM QUITE ATTRACTIVE ON THE FACE OF IT BUT A CLOSURE SCRUTINY OF THE FACTS WOULD SHOW THINGS OTHERWISE. FIRST OF ALL, THROUGH AN INDENTURE DATED 26-9-2001 ONLY RIGHT TO RECEIVE THE SALE PROCEEDS WAS GIVEN TO THE ASSESSEE ALONG WITH HIS FOUR ASSOCIATE COMPANIES WHO WERE DESCRIBED AS TRANSFEREES. IN FACT, THERE WAS NO TRANSFER OF THE PROPERTIES THROUGH THE INDENTURE DA TED 26-9-01. CLAUSE 4[B] OF THE INDENTURE SPECIFICALLY MADE IT CLEAR TH AT TRANSFEREES SHOULD NOT DEMAND FROM THE ADMINISTRATOR FOR TRANSFER OF IMMOVABLE PROPERTIES. CLAUSE 4[B] READS AS UNDER: NONE OF THE TRANSFEREES SHALL CALL UPON THE ADMINISTRATOR TO TRANSFER TO HIM, HER THEM OR IT THE IMMOVABLE PROPERTIES LOCATED IN INDIA AND FORMING PART OF THE DECEASEDS ESTATE IN INDIA. THIS CLEARLY SHOWS THAT ESTATE OF EFD CONTINUED TO BE THE OWNER OF THE PROPERTIES AND THAT FACT HAS BEEN ACCEPTED BY THE REVENUE BY ASSESSING THE ESTATE IN THE HANDS OF THE ADMINISTRATOR BECAUSE INCOME TAX AS WELL AS WEALTH TAX RETURNS HAVE BEEN ACCEPTED BY THE REVENUE. IN FACT, ASSESSEES RIGHT WAS RESTRICTED ONLY FOR RECEIVING OF SALE PROCEEDS FROM THE PROPERTIES. SINCE ASSESSEE WAS NOT OWNER OF THE PROPERTIES, THERE IS NO QUESTION OF TRANSFERRING ANY RIGHTS IN SUCH PROPERTIES. FURTHER, THE ADMI NISTRATOR COULD NOT DISTRIBUTE THE PROCEEDS FROM SALE OF THE PROPERTIES UNLESS THE ADMINISTRATION WAS COMPLETE I.E. EXPENSES AND TAXES OF THE ESTATE WERE PAID. THEN THERE WAS A FURTHER CONDITION FOR PAYMENT OF DONATION OF RS.10 CRORES TO A TRUST. AFTER PAYMENT OF SUCH TA XES ETC., SOME SALE PROCEEDS AND ADVANCES WERE DISTRIBUTED BY THE ADMINISTRATOR ON WHICH TAXES WERE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 20 PAID BY THE ESTATE, THEREFORE, THERE WAS NO QUESTION OF ASSESSMENT OF CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AS NO CAPITAL ASSET WAS TRANSFERRED. EVEN THE HIGH COURTS ORDER DATED 22-10-01 DECLARING BW AS HAVING ABSOLUTE RIGHTS OF THE PROPERTIES WOULD NOT RESULT IN GIVING ANY FURTHER RIGHTS TO THE ASSESSEE, BECAUS E ASSESSEES RIGHTS WERE LIMITED TO THE RIGHTS PROVIDED IN THE INDENTURE DATED 26-9-01. 51. HOWEVER, AS FAR AS THE CONTENTIONS OF THE LD. SR. STANDING COUNSEL THAT ATLEAST THE RIGHT TO RECEIVE THE SALE PROCEEDS WOULD CONSTITUTE A CAPITAL ASSET IS ACCEPTABLE TO US. FIRSTLY, BECAUSE THIS SUBMISSION WAS NOT SERIOUSLY CHALLENG ED BY THE LD. SR. ADVOCATE OF THE ASSESSEE. SECONDLY, EVEN ANY RIGHT IN A PROPERTY HAS TO BE CONSTRUED AS A CAPITAL ASSET. HOWEVER, FOR CHARGING ANY AMOUNT UNDER THE HEAD CAPITAL GAINS, THE SAME HAS TO BE COVERED BY SEC.45 OF THE I.T.ACT. SECTION 45 READS AS UNDER: 45. [(1)] ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHERWISE PROVIDED IN SECTIONS [***] [54, 54B, [***] [54D, [54E, [54EA, 54EB,] 54F [, 54G AND 54H]]]]], BE CHARGEABLE TO INCOME-T AX UNDER THE HEAD CAPITAL GAINS, AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE. THE ABOVE CLEARLY SHOWS THAT FOR ANY CAPITAL RECEIPT WHICH CAN BE BROUGHT UNDER THE PROVISIONS OF SEC.45 THERE HAS TO BE DISPOSAL OF AN ASSET BY ANY OF THE MODE REFERRED TO THE DEFINITION OF TRANSFER U/S.2[47]. UNLESS AND UNTIL THERE IS A TRANSFER OF AN ASSET AS ENVISAGED IN SEC.2[47], NO CAPITAL GAIN OR LOSS CAN BE COMPUTED UNDER THESE PROVISIONS, WHICH MEAN THAT IF THERE IS ANY GAIN OR LOSS ON ACCOUNT OF ANY RECEIPT BUT TRANSFER OF ASSET IS NOT INVOLVED THEN PROVISIONS OF SEC.45 CANNOT BE APPLIED. THUS, IT IS CLEAR FROM THE PROVISION ITSELF THAT TRANSFER OF AN ASSET IS THE PRIMAR Y CONDITION WHICH MUST BE SATISFIED BEFORE A RECEIPT CAN BE CALLED AS CAPITAL GAIN AND/OR CAPITAL LOSS U/S.45. THE SINE QUA NON OF THE CAPITAL GAIN OR LOSS IS THAT RECEIPT OR ACCRUAL THEREOF MUST HAVE ORIGINATED IN THE TRANSFER OF THE CAPITAL ASSET WITHIN THE MEANING OF SEC.45[1] R.W.S. 2[47] . SECTION 2[47] READS AS UNDER: FROM THE ABOVE IT IS CLEAR THAT ONE OF THE MODES PRESCRIBED FOR DISPOSAL OF AN ASSET WHICH CAN BE COVERED BY THE DEFINITION OF TRANSFER IS EXTINGUISHMENT. NOW IN THE CASE BEFORE US, ASSESSEE OBTAINED THE RIGHT TO RECEIVE SALE PROCEEDS ALONG WIT H FOUR COMPANIES THROUGH INDENTURE DATED 26-9-01 WHICH WE HAVE ALREADY OBSERVED WOULD CONSTITUTE A CAPITAL ASSET. NOW WHETHER THE RECE IPT OF PROCEEDS WHICH CONSISTED OF WOULD CONSTITUTE EXTINGUISHMENT. THESE RIGHTS WERE PURCHASED BY THE ASSESSEE ALONG WITH THE FOUR ASSOCIATE COMPANIES AND ASSESSEE BECAME ENTITLED TO RECEIVE 60% OF SALE PROCEEDS OF THE IMMOVABLE PROPERTIES FROM THE ADMINISTRATOR. THESE RIGHTS WERE ACQUIRED BY THE ASSESSEE IN F.Y 01-02 AND RIGHTS WERE TO COME INTO EFFECT ONLY AFTER THE DEATH OF BW WHO EXPIRED IN AUGUST, 2003. IN THE MEANTIME, AFTER TAKING UP THE ACCOUNTS ADMINISTRATOR CHOSE TO MAKE DISTRIBUTION OF CERTAIN MONEY AND IN THAT PROCESS ASSESSEE RECEIVED THE IMPUGNED SUM IN F.Y 03-04 I.E. A.Y 04-05 WHICH WE ARE ADJUDICATING. NOW, EVEN AFTER SUCH DISTRIBUTION THE RIGHT TO RECEIVE THE SALE PROCEEDS CONTINUED, THEREFORE, THIS RIGHT HAS NOT EXTINGUISHED. THE LD. SR. ADVOCATE HAD ARGUED THAT AT BEST THIS CAN BE TERMED AS WORKING OUT OF RIGHTS AS HELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MOHANBHAI PAMAHAI ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 21 [SUPRA] WHICH HAS BEEN CONFIRMED IN TURN BY THE HON'BLE SUPREME COURT IN THE CASE OF ADDL. CIT VS. MOHANBHAI PAMABHA [165 ITR 163]. THOUGH THIS CASE PERTAINED TO A PARTNER AND THE ISSUE INVOLVED WAS WHETHER RELINQUISHMENT OF INTEREST IN PARTNERSHIP UPON RETIREMENT WOULD AMOUNT TO TRANSFER OR NOT AND THE RATIO OF THIS DECISION MAY NOT BE STRICTLY APPLICABLE TO THE CASE OF THE ASSESSEE, BUT THE CONCEPT OF WORKING OUT OF THE RIGHTS IN OUR VIEW, CAN BE APPLIED TO THE FACTS OF THE CASE, BECAUSE, ASSESSEE HAD ACQUIRED THE RIGHTS TO RECEIVE THE SALE PROCEEDS IN TERMS OF INDENTURE DATED 29-6-01 WHICH WOULD COME INTO OPERATION AFTER THE DEATH OF BW. BU T THIS RIGHT WILL NOT VANISH JUST BECAUSE SOME PAYMENT HAS BEEN RECEIVED. ASSESSEES RIGHT ON RECEIPT OF SUCH PAYMENT DOES NOT SUFFER ANY DIMINUTION CONSEQUENT TO THE RECEIPT OF THE IMPUGNED SUM. THE AO AS WELL AS THE LD. SR. STANDING COUNSEL HAVE STRONGLY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KARTIKEYA V. SARABHAI [SUPRA]. IN THAT CASE ASSESSEE HAD PURCHASED CERTAIN NON CUMULATIVE PREFERENCE SHARES AND SOME MONEY WAS PAID TO THE ASSESSEE BY REDUCING THE FACE VALUE OF THE PREFERENCE SHARES. THE REVENUE WAS OF THE VIEW THAT RECEIPT OF THIS MONEY WAS TAXABLE UNDER THE HEAD CAPITAL GAINS. THE HON'BLE APEX COURT HELD THAT SINCE UPON PART REDEMPTION AND REDUCTION IN THE PAID UP VALUE OF PREFERENCE SHARES, THE RIGHT OF THE ASSESSEE AS A SHAREHOLDER AGAINST THE COMPANY AS WELL AS OTHER SHAREHOLDERS WAS PARTLY EXTINGUISHED AND, THEREFORE, TRANSFER TOOK PLACE WITHIN THE MEANING OF SEC.2[47] OF THE I.T.ACT AND ASSESSEE WAS LIABLE TO PAY CAPITAL GAINS TAX. THE HEAD NOTE READS AS UNDER: SECTION 2[47] OF THE INCOME-TAX ACT, 1961, DEFINES TRANSFER IN RELATION TO A CAPITAL ASSET. IT IS AN INCLUSIVE DEFINITION WHICH, INTER ALIA, PROVIDES THAT RELINQUISHMENT OF AN ASSET OR EXTINGUISHMENT OF ANY RIGHT THEREIN AMOUNTS TO A TRANSFER OF A CAPITAL ASSET. IT IS NOT NECESSARY FOR A CAPITAL GAIN TO ARISE, THAT THERE MUST BE A SALE OF CAPITAL ASSET. SALE IS ONLY ONE OF THE MODES OF TRANSFER ENVISAGED BY S. 2(47) OF THE ACT. RELINQUISHMENT OF THE ASSET OR THE EXTINGUISHMENT OF ANY RIGHT IN IT, WHICH MAY NOT AMOUNT TO SALE, CAN ALSO BE CONSIDERED AS A TRANSFER AND ANY PROFIT OR GAIN WHICH ARISES FROM THE TRANSFER OF A CAPITAL ASSET IS LIABLE TO BE TAXED UNDER S. 45. A COMPANY UNDER S. 100(1)(C) OF THE COMPANIES ACT HAS A RIGHT TO REDUCE THE SHARE CAPITAL AND ONE OF THE MODES, WHICH CAN BE ADOPTED, IS TO REDUCE THE FACE VALUE OF THE PREFERENCE SHARES. SECTION 87(2)(C) OF THE COMPANIES ACT, INTER ALIA, PROVIDES THAT 'WHE RE THE HOLDER OF ANY PREFERENCE SHARE HAS A RIGHT TO VOTE ON ANY RESOLUTION IN ACCORDANCE WITH THE PROVISIONS OF THIS SUB-SECTION, HIS VOTING RIGHT ON A POLL, AS THE HOLDER OF SUCH SHARE, SHALL, SUBJECT TO THE PROVISIONS OF S. 89 AND SUB-S. (2) OF S. 92, BE IN THE SAME PROPORTION AS THE CAPITAL PAID UP IN RESPECT OF THE PREFERENCE SHARE BEARS TO THE TOTAL PAID-UP EQUITY CAPITAL OF THE COMPANY'. HENCE WHEN AS A RESULT OF THE REDUCING OF THE FACE VALUE OF THE SHARE, THE SHARE CAPITAL IS REDUCED, THE RIGHT OF THE PREFERENCE SHARE HOLDER TO THE DIVIDEND OR HIS SHARE CAPITAL AND THE RIGHT TO SHARE IN THE DISTRIBUTION OF THE NET ASSETS UPON LIQUIDATION IS EXTINGUISHED PROPORTIONATELY TO THE EXTENT OF REDUCTION IN THE CAPITAL. SUCH REDUCTION OF THE RIGHT IN THE CAPITAL ASSET WOULD ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 22 CLEARLY AMOUNT TO A TRANSFER WITHIN THE MEANING OF THAT EXPRESSION IN S. 2(47) OF THE INCOME-TAX ACT, 1961. THUS, FROM THE ABOVE, IT IS CLEAR THAT REDUCTION IN THE FACE VALUE OF THE PREFERENCE SHARES WAS HELD TO BE AN EXTINGUISHMENT BECAUSE CERTAIN RIGHTS IN TERMS OF CERTAIN PROVISIONS OF COMPANIES ACT, 1956 ALSO STOOD REDUCED. HOWEVER, IN THE CASE BEFORE US, THE RIGHT OF THE ASSESSEE TO RECEIVE THE SALE CONSIDERATION HAS CONTINUED. THE LD. SR. STANDING COUNSEL DID NOT ELABORATE AS TO HOW THE ASSESSEES RIGHT ACQUIRED UNDER THE INDENTURE DATED 26-9-01 GOT EXTINGUISHED OR DIMINISHED. IN FACT, AS OBSERVED ABOVE SUCH RIGHTS WHICH WERE ACQUIRED IN THE F.Y 01-02 AND BECAME ENFORCEABLE ONLY ON THE DEATH OF BW AND ADMINISTRATOR PAID THE AMOUNTS ON THE PRE EXISTING RIGHTS IN THE PROPORTION IN WHICH THE RIGHTS WERE ACQUIRED BY THE ASSESSEE AND HIS FOUR ASSOCIATE COMPANIES, THE PAYMENT OF MONEY BY THE ADMINISTRATOR IN PART SATISFACTION OR IN SETTLEMENT OF THE PRE EXISTING RIGHTS CANNOT BE CONSIDERED AS EXTINGUISHMENT OF ANY RIGHTS. THIS SITUATION CAN BE EASILY UNDERSTOOD BY WAY OF A SIMPLE EXAMPLE. LET US SAY ONE MR. A ACQUIRED RIGHTS TO TAKE OUT WATER FROM A WELL BELONGING TO X. NOW WHENEVER SOME WATER IS EXTRACTED, CAN WE SAY THAT RIGHT TO TAKE OUT WATER IS EXTINGUISHED? IN OUR OPINION, IT CANNOT BE SAID THAT RIGHT TO EXTRACT THE WATER COMES TO AN END THE MOMENT FEW BUCKETS OF WATER ARE TAKEN OUT. THIS RIGHT MAY COME TO AN EXTINGUISHMENT WHEN MR.A GIVES FURTHER RIGHTS TO SAY MR.B TO TAKE OUT THE WATER FROM 5 P.M. TO 8 P.M. OR ANY OTHER HOUR, THEN IT CAN BE SAID THAT RIGHT OF MR. A IS CURTAILED OR PARTLY EXTINGUISHED TO THAT EXTENT. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW, THAT SINCE THERE WAS NO TRANSFER OF ANY CAPITAL ASSET DURING THE PREVIOUS YEAR, THEREFORE, NO CAPITAL GAIN TAX CAN BE CHARGED ON THE IMPUGNED SUM. 52. BOTH THE PARTIES HAVE ALSO MADE SUBMISSIONS ON THE APPLICABILITY OF SEC.47(III) AND ACCORDING TO THE LD. SR. STANDING COUNSEL THESE PROVISIONS COULD NOT APPLY IN THE AS SESSEES CASE BECAUSE ASSESSEE IS NOT A BENEFICIARY UNDER THE WILL. ON THE OTHER HAND, LD. SR. ADVOCATE FOR THE ASSESSEE HAD ARGUED MAINLY THAT THIS PROVISION CAN BE APPLIED IN EVERY CASE WHERE AN ASSET WAS TRANSFERRED UNDER A WILL WHETHER DISTRIBUTION IS MADE TO A BENEFICIARY OR TO ANY OTHER PERSON. HOWEVER, AFTER CONSIDERING THE SUBMISSIONS, WE ARE OF THE VIEW THAT RELEVANT PORTION OF SEC.47[III] READS AS UNDER: X X X X X THUS, IT IS CLEAR THAT THE ABOVE PROV ISION BASICALLY RELATES TO A SITUATION WHERE SOME TRANSFERS SHALL NOT BE CONSIDERED AS TRANSFER. AS OBSERVED BY US EARLIER THE TRANSFER IS SINE QUA NON FOR ATTRACTING THE PROVISIONS RELATING TO CAPITAL GAINS. SINCE IN ABOVE DETAILED DISCUSSION WE HAVE ALREADY HELD THAT MERE RECEIPT OF SALE PROCEEDS BY THE ASSESSEE FROM THE ESTATE OF EFD WOULD NOT AMOUNT TO ANY EXTINGUISHMENT OF HIS RIGHTS AND, ACCORDINGLY, THE RECEIPT OF THE SUM CANNOT BE TAXED UNDER THE HEAD CAPITAL GAINS. THER EFORE THE ISSUE REGARD ING APPLICABILITY OF SEC.47[III] IS ONLY OF AN ACADEMIC IMPORTANCE AND, ACCORDINGLY, WE DECLINE TO GO IN FURTHER DISCUSSION AND INTERPRETATION OF THIS PROVISION. IN VIEW OF THE ABOVE DETAILED DISCUSSION, WE ARE OF THE OPINION, THAT THERE IS NO NEED TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) AND HOLD THAT RECEIPT OF ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 23 RS.71.63 CRORES IS NOT TAXABLE AS BU SINESS PROFITS OR SHORT TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 9. FROM THE PERUSAL OF THE ABOVE FINDINGS, IT IS SEEN THAT ALL THE ASPECTS RELATING TO TAXABILITY AND NON-TA XABILITY OF RECEIPTS IN QUESTION HAVE BEEN DEALT WITH BY THE ITAT VERY ELABORATELY AND SAME APPLIES MUTATIS MUTANDIS HEREIN THESE APPEALS ALSO. EVEN THE CIT(A) HAS HELD SO IN PARA 9, 9.1 & 9.2 OF THE APPELLA TE ORDER IN THE CASE OF NIDHIVAN INVESTMENT & TRADING CO. (P) LTD. FOR THE ASSESSMENT YEAR 2004- 2005. IN VIEW OF THIS, WE DO NOT FEEL NECESSARY TO GIVE ANY SEPARATE FINDING. THEREFORE, RESPECTFULLY FOLLO WING THE SAME, WE HOLD THAT ISSUES INVOLVED IN ALL THESE APPEALS TO THE EXTENT OF ISSUES RAISED IN THE DEPARTMENT APPEALS ARE COVERED BY THE DECISION OF THE ITAT IN THE AFORESAID CASE. NOW, WE COME TO GROUNDS AS HAVE BEEN RAISED IN VARIOUS APPEALS. 10 . ITA NO.7847/MUM/2011(AY2004- 05) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FO LLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREAT ING THE INCOME FROM TRANSFER OF THE RIGHTS ENJOYED BY THE ASSESSEE AS CAPITAL RECEIPT CONTRARY TO THE FACTS BROUGHT OUT BY THE AO THAT THE SAID INCOME SHOULD BE TAXED UNDER THE HEAD CAPITAL GAIN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING HONBLE BOMBAY HIGH COURTS ORDER DATED 22.10.200 1 AND INDENTURE DATED 26.9.2001 BY WHICH RIGHT OF DEVELOPMENT OF T HE PROPERTIES OF THE ESTATE OF LATE SHRI E.F.DINSHAW AND MRS. BACHHOOBHAI WORONZOW GOT TRANSFERRED IN THE HAND OF THE ASSESSEE AND ANY SUBSEQUENT TRANSFER NEEDED TO BE TAXED UNDER CAPITAL GAIN. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 24 THE ISSUES RAISED HEREIN, AS STATED IN FOREGOING PARAS, ARE SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT PASSED IN ITA NO.4573/M/2008 (SUPRA) AS HAVE BEEN REPRODUCED ABOVE. ACCORDINGLY, THE GROUNDS TAKEN BY THE DEPARTMENT HAVE NO MERITS AND ARE DISMISSED . 11 . C.O.NO.05/MUM/2012 (A Y2004-05) (BY ASSESSEE) :- IN THIS CROSS OBJECTION, LEARNED AR HAS NOT PRESSED GROUND NO.1 AND GROUNDS NO.2, 3 & 4 HAVE BEEN ACCEPTED BY BOT H THE PARTIES THAT THEY HAD BEEN HELD TO BE ACADEMIC BY THE ITAT, WHEREAS THE GROUND NO.5 RELATES TO INITIATION OF PENALTY UNDER SECTION 271(1)(C), WHICH IS ALSO NOT MAINTAINABLE. IN VIEW OF THE ABOVE, THE CROSS OBJECTION FILED BY THE ASSESSEE IS TREATED AS DISMISSED . 12. ITA NO.7848/MUM/2011(AY2005- 06) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FO LLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREAT ING THE INCOME FROM TRANSFER OF THE RIGHTS ENJOYED BY THE ASSESSEE AS CAPITAL RECEIPT CONTRARY TO THE FACTS BROUGHT OUT BY THE AO THAT THE SAID INCOME SHOULD BE TAXED UNDER THE HEAD CAPITAL GAIN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING HONBLE BOMBAY HIGH COURTS ORDER DATED 22.10.200 1 AND INDENTURE DATED 26.9.2001 BY WHICH RIGHT OF DEVELOPMENT OF T HE PROPERTIES OF THE ESTATE OF LATE SHRI E.F.DINSHAW AND MRS. BACHHOOBHAI WORONZOW GOT TRANSFERRED IN THE HAND OF THE ASSESSEE AND ANY SUBSEQUENT TRANSFER NEEDED TO BE TAXED UNDER CAPITAL GAIN. THUS, THE GROUNDS RAISED BY THE DEPAR TMENT ARE SAME AS IT HAS BEEN RAISED IN ITA NO.7847//MUM/2011 FO R THE ASSESSMENT YEAR 2004-2005, ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 25 WHICH ARE SIMILAR IN NATURE. IN VIEW OF THE FINDING GIVEN ABOVE, THE GROUNDS TAKEN BY THE DEPARTMENT IN THIS APPEAL ARE TREATED AS DISMISSED. 13. C.O.NO.06/MUM/2012 (A Y2005-06) (BY ASSESSEE) :- SINCE IN THIS YEAR ALSO THE GROUNDS OF CROS S OBJECTION ARE SAME, THEREFORE, IN VIEW OF THE FINDING GIVEN IN CONO .05/MUM/2012 FOR THE ASSESSMENT YEAR 2004-2005, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 14 . ITA NO.3004/MUM/2009 (AY2005-06) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF ` .4,50,0000/- WHICH THE ASSESSEE HAD RECEIVED FROM THE ESTATE OF E.F. DINSHAW AND ASSESSEE HAD NOT OFFERED THIS AMOUNT TO TAX. 2. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ABOVE AMOUNT IS REVENUE RECEIPT. AS THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED ABOVE IN ITA NO.7847/MUM/2011, HENCE, FOR THE REASONS STATED ABOVE THAT IT IS COVERED BY THE DECISION OF ITAT (S UPRA) AS REFERRED TO ABOVE IN THE AFORESAID APPEAL, THE PRESENT APPEAL F ILED BY THE DEPARTMENT IS HEREBY DISMISSED. 15 . ITA NO.2544/MUM/2009 (AY2004-05) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF ` .11,93,90,500/- WHICH THE ASSESSEE HAD RECEIVED FROM THE ESTATE OF E.F. DINSHAW AND ASSESSEE HAD NOT OFFERED THIS AMOUNT TO TAX. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 26 2. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ABOVE AMOUNT IS REVENUE RECEIPT. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ABOVE AMOUNT OF RECEIPT IS LIABLE TO TAX THE GROUNDS RAISED BY THE DEPARTM ENT ARE SIMILAR TO THE ABOVE APPEALS. THEREFORE, IN VIEW OF THE ABOVE FINDINGS AND ITATS ORDER (SUPRA), THE APPEAL FILED BY THE DEPARTMENT IS HEREBY DISMISSED . 16 . ITA NO.2204/MUM/2009 (A Y2004-05) (BY ASSESSEE) :- IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD THE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IN THE HANDS OF THE APPELLANT AND ACCORDINGLY UPHOLDING THE ACTION OF THE ASSESSING OFFICER WITH REFERENCE TO THE RE-OPENING PROCEEDINGS U/S.147 OF THE INCOME- TAX ACT, 1961. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT CONSIDERING THE ALTERNATIVE PLEA OF THE APPELLANT THAT AS THE AMOUNTS RECEIVED BY THE APPELLANT COULD NOT HAVE BEEN DISTRIBUTED BY THE ESTATE OF MR. E.F. DINSHAW, THE QUESTION OF ANY AMOUNT BEING TAXED IN THE HANDS OF THE APPELLANT DOES NOT ARISE, SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING THAT THE AMOUNTS DISTRIBUTED WERE OUT OF ADVANCES AND NOT PROCEEDS OF SA LE AND/OR DISPOSAL OF THE CORPUS OF THE ESTATE OF MR. E.F.DINSHAW IN INDIA TO THE EXTENT TO WHICH THE SAME CONSISTS OF IMMOVABLE PROPERTIES AND ACCORDINGLY TO THAT EXTENT, T HE SAME OURHGT TO BE EXCLUDED IN COMPUTING IF AT ALL THE QUANTUM RECEIVED BY THE APPELLANT IN TERMS OF THE INDENTURE, SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING AS TO THE APPELLANTS CONTENTION THAT THE ASSESSING OFFICER ERRED IN NOT CORRE CTLY COMPUTING THE COST OF ACQUISITION IN THE HANDS OF THE APPE LLANT, SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ADJUDICATING ON THE APPELLANTS CONTENTION THAT THE ASSESSING OFFICER ERRED IN INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 27 GROUNDS NO.1 AND 5 ARE NOT PRESS ED. THE OTHER GROUNDS HAVE BECOME ACADEMIC IN VIEW OF THE FINDINGS GIVEN IN THE DEPARTMENTAL APPEAL IN ITA NO.2544/M/2009, WHEREIN THE DEPARTMENTAL APPEAL HAS BEEN DISMISSED AND THESE BEING ALTERNAT IVE PLEA, DOES NOT SURVIVE. HENCE, THE ASSESSEES APPEAL IS TREATED AS DISMISSED. 17. ITA NO.2205/MUM/2009 (A Y2005-06) (BY ASSESSEE) :- IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT CONSIDERING THE ALTERNATIVE PLEA OF THE APPELLANT THAT AS THE AMOUNTS RECEIVED BY THE APPELLANT COULD NOT HAVE BEEN DISTRIBUTED BY THE ESTATE OF MR. E.F. DINSHAW, THE QUESTION OF ANY AMOUNT BEING TAXED IN THE HANDS OF THE APPELLANT DOES NOT ARISE, SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING THAT THE AMOUNTS DISTRIBUTED WERE OUT OF ADVANCES AND NOT PROCEEDS OF SA LE AND/OR DISPOSAL OF THE CORPUS OF THE ESTATE OF MR. E.F.DINSHAW IN INDIA TO THE EXTENT TO WHICH THE SAME CONSISTS OF IMMOVABLE PROPERTIES AND ACCORDINGLY TO THAT EXTENT, T HE SAME OURHGT TO BE EXCLUDED IN COMPUTING IF AT ALL THE QUANTUM RECEIVED BY THE APPELLANT IN TERMS OF THE INDENTURE, SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING AS TO THE APPELLANTS CONTENTION THAT THE ASSESSING OFFICER ERRED IN NOT CORRE CTLY COMPUTING THE COST OF ACQUISITION IN THE HANDS OF THE APPE LLANT, SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ADJUDICATING ON THE APPELLANTS CONTENTION THAT THE ASSESSING OFFICER ERRED IN INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961. THESE GROUNDS AS STATED EARLIER AR E ONLY ACADEMIC AND AS SUCH THIS APPEAL HAS BECOME INFRUCTUOUS AND IT IS DISMISSED ACCORDINGLY. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 28 18. ITA NO.1883/MUM/2011(AY2004-05) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FO LLOWING GROUNDS OF APPEAL :- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF ` .4.50 CRS. RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR TRANSFER OF PROPERTY IS IN THE NATURE OF ADV ANCES AND NOT CHARGEABLE TO TAX WITHOUT APPRECIATING THAT - (I) MRS. BACHOOBAI WORONZOW WAS THE RESIDUARY LEGATEE AND NOT THE ASSESSEE. THERE WAS NO BEQUEST OR GIFT BY WILL OR LTESTAMENT OF LATE SHRI E.F.DIDNSHAW TO THE ASSESSEE SHRI NUSLI WADIA AND HE WAS NOT THE LEGATEE OR THE RESIDUARY LEGATEE. (II) IN FACT AND IN REALITY, THE CONTROL, MANAGEMENT AND OWNERSHIP OF THE PROPERTIES CONS ISTING OF THE ESTATE OF SHRI E.F. DINSHAW VESTS TOTALLY WITH THE ASSESSEE SHRI NUSLI WADIA WHO IS IN ENJOYMENT OF THE FRUITS OF THE SAME AND HAS TO BE HELD AS THE OWNER OF THESE PROPERTIES AS THERE IS NO OTHER CLAIMANT TO THESE PROPERTIES. (III) THAT THE ASSESSEE AS THE HOLDE R OF THE POWER OF ATTORNEY OF LATE MRS. BACHOOBAI WORONZOW HAD POSSESSION AND MANAGEMENT CONTROL OVER THE IMMOVABLE PROPERTIES AND WAS IN A POSITION AS OWNER TO HAND OVER THE POSSESSION OF THE PROPERTIES BY RECEIVING CONSIDERATION. (IV) THE HON HIGH COURT HAD C ONFERRED ;ABSOLUTE OWNERSHIP RIGHTS TO MRS. BACHOOBAI WOR ONZOW, OVER THE IMMOVABLE PROPERTIES OF HER LATE BROTHER AND THE ASSESSEE HAD, BY VIRTUE OF HIS AGREEMENT WITH MRS. BACHOOBAI WORONZOW, OBTAINED OWNERSHIP OVER THE SAID PROPERTIES IN RETURN FOR THE CONSIDERATION OF ` .20 LAKHS (JOINTLY WITH FOUR COMPANIES PRINCIPALLY HELD AND CONTROLLED BY HIM). II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) OTHERWISE ALSO ERRED IN NOT TREATING THE AMOUNT OF ` .11.94 CRS RECEIVED BY THE ASSESSEE AS A RECEIPT FROM ADVENTURE IN NATURE OF TRADE. THIS ISSUE IS ALSO SQUARELY COVE RED BY THE EARLIER DECISION OF THE HONBLE ITAT AS OBSERVED BY US IN ITA NO.4573/M/2008 (SUPRA) WHICH HAVE BEEN REPRODUCED ABOVE. ACCORDINGLY, THE GROUNDS TAKEN BY THE DEPARTMENT ARE DISMISSED . ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 29 19. CONO.03/MUM/2012(AY 2004-05) (BY ASSESSEE) :- THIS CROSS OBJECTION IS ARISING IN ITA NO. 1883/MUM/2011. THE GROUNDS RAISED IN CROSS OBJECTION HAVE BEEN RENDERED ACADEMIC AND THEREFORE, THE CROSS OBJECTION HAS BECOME INFRU CTUOUS AND IT IS TREATED AS DISMISSED. 20. ITA NO.1888/MUM/2011(AY2006-07) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FO LLOWING GROUNDS OF APPEAL :- 1) ON THE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF ` .26.25 CRS RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR TRANSFER OF PROPERTY IS IN THE NATURE OF ADVANCES AND NOT CHARGEABLE TO TAX WITHOUT APPRECIATING THAT (I) MRS. BACHOOBAI WORONZOW WAS THE RESIDUARY LEGATEE AND NOT THE ASSESSEE. THERE WAS NO BEQUEST OR GIFT BY WILL OR LTESTAMENT OF LATE SHRI E.F.DIDNSHAW TO THE ASSESSEE SHRI NUSLI WADIA AND HE WAS NOT THE LEGATEE OR THE RESIDUARY LEGATEE. (II) IN FACT AND IN REALITY, THE CONTROL, MANAGEMENT AND OWNERSHIP OF THE PROPERTIES CONS ISTING OF THE ESTATE OF SHRI E.F. DINSHAW VESTS TOTALLY WITH THE ASSESSEE SHRI NUSLI WADIA WHO IS IN ENJOYMENT OF THE FRUITS OF THE SAME AND HAS TO BE HELD AS THE OWNER OF THESE PROPERTIES AS THERE IS NO OTHER CLAIMANT TO THESE PROPERTIES. (III) THE ASSESSEE HAD NO LOCUS ST ANDI IN THE WILL OF MR. E.F. DINSHAW, HE AND HIS 4 COMPANIES COMES INTO THE PICTURE ONLY BY PURCHASING THE RIGHT OF MRS. BACHOOBAI WORONZOW FOR A COST OF ` .20 LAKHS IN THE YEAR. (IV) THAT THE ASSESSEE AS THE HOLDE R OF THE POWER OF ATTORNEY OF LATE MRS. BACHOOBAI WORONZOW HAD POSSESSION AND MANAGEMENT CONTROL OVER THE IMMOVABLE PROPERTIES AND WAS IN A POSITION AS OWNER TO HAND OVER THE POSSESSION OF THE PROPERTIES BY RECEIVING CONSIDERATION. (IV) THE HON HIGH COURT HAD C ONFERRED ;ABSOLUTE OWNERSHIP RIGHTS TO MRS. BACHOOBAI WOR ONZOW, OVER THE IMMOVABLE PROPERTIES OF HER LATE BROTHER AND THE ASSESSEE HAD, BY VIRTUE OF HIS AGREEMENT WITH MRS. BACHOOBAI WORONZOW, OBTAINED OWNERSHIP OVER THE SAID PROPERTIES IN RETURN FOR THE CONSIDERATION OF ` .20 LAKHS (JOINTLY WITH FOUR COMPANIES PRINCIPALLY HELD AND CONTROLLED BY HIM). 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT INCOME DERIVED FROM TRANSACTIONS IN SHARE WAS CAPITAL GAIN AND NOT CHARGEABLE AS BUSINESS INCOME WITHOUT APPRECIATING THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 30 FREQUENCY AND NATURE OF TRANSACTIONS OF THE ASSESSEE IN SHARES AND SECURITIES. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT NO EXPENDITURE WAS TO BE DISALLOWED U/S 14A AS THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AGAINST THE DIVIDEND INCOME WITHOUT APPRECIATING THAT ASSESSEE HAS INCURRED AND CLAIMED INTEREST EXPENDITURE. 4) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. GROUND NO.1 IS SIMILAR TO OTHER APPEALS, WHICH IS THUS BEING DISMISSED. IN GROUND NO.2, I T HAS BEEN ADMITTED BY BOT H THE PARTIES THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS COVERED BY THE DECISION OF THE ITAT IN FAVOUR OF THE ASSESSEE IN THE ASSESSMENT YEAR 2005-2006 PASSED IN ITA NO.3119/M/2010 & 3122/M/2010, VIDE ORDER DATED 30-8-2011 . THE RELEVANT FINDINGS OF THE ITAT ARE REPRODUCED HEREIN BELOW:- 10. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAPERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE FIND THAT THIS IS A FACTUAL MATTER AND REFERENCE TO NUMEROUS CASE LAWS BY BOTH THE PARTIES IS NOT REQUIRED. THIS IS A CASE WHERE THE ASSESSEE HAS INVESTED LARGE AMOUNT OF MONEY BOTH IN SHARES, AS WELL AS IN MUTUAL FUNDS. THE INVESTMENTS WERE MADE MOSTLY THROUGH PORTFOLIO MANAGERS. THE FIRST APPELLATE AUTHORITY S FINDING OF FACT IS THAT, THE ASSESSEE HAS TRANSACTED SALES ON HI S OWN, ONLY ON EIGHT OCCASIONS DURING THE YEAR. IN CONTRAST, T HE ASSESSEE HAD INVESTED IN 55 COMPANIES DURING THE YEAR. THESE FIGURES, BY NO STRETCH OF IMAGINATION, WOULD LEAD US TO A C ONCLUSION THAT THE ASSESSEE IS NOT THE INVESTOR BUT A TRADER IN SHARES. THERE IS HARDLY ANY TURNOVER DONE BY THE ASSESSEE IN THESE SHARES . THE OTHER PERTINENT POINT TO BE NOTED IS THAT THE ASSESSEE HAS BEEN DISCLOSING THIS ITEM AS INVESTMENTS IN THE ACCOUNTS YEAR-AFTER-YEAR. AND THIS HAS BEEN ACCEPTED BY THE REVENUE. IT IS NOT A CASE OF THE REVENUE THAT THE ASSESSEE IS VALUING THE INVESTM ENTS AT COST OR MARKET PRICE WHICHEVER IS LOWER. THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR MAKING THESE INVESTMENTS. MOST OF THE INVESTMENTS WERE MADE THROUGH THREE PORTFOLIO MANAGEMENT SCHEMES. THE TRIBUNAL IN ARA TRADING AND INVESTMENT P. LTD., ITA NO.499/PN./2008, PUNE BENCH B, ORDER DATED 31 ST AUGUST 2009, HELD AS FOLLOWS:- ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 31 25. IN THE BACKDROP OF ABOVE DECISIONS, THE FACTS OF THE CASE INDICATE THAT IT WAS AN ACTIVITY OF WEALTH MAXIMIZATION RATHER THAN PROFIT MAXIMIZATION. TO ARRIVE AT THE RIGHT CONCLUSION IN SUCH TYPE OF CASES AND CONSIDERING THE PECULIARITY OF THE FACTS WE HAVE TO TAKE SHELTER OF A LANDMARK JUDGMENT IN THE CASE OF H. HOLCK LARSEN, 160 ITR 67 (SC) (SUPRA) WHEREIN THE OBSERVATION WAS THAT THE HIGH COURT MADE A MISTAKE IN OBSERVING WHETHER TRANSACTION OF SALE AND PURCHASE OF SHARES WERE TRADI NG ACTIVITY OR WHETHER THOSE WERE IN THE NATURE OF INVESTMENT. THE COURT HAS SAID THAT SUCH A QUESTION WAS NOT QUESTION OF LAW BUT MIXED QUESTION OF LAW AND FACT. THEREFORE, ON DUE CONSIDERATION OF THE RELEVANT FACTS, THE RESULT WAS THAT THE ASSESSEE WAS A PRUDENT INVESTOR AND NOT OF A PLUNGER IN THE WATERS OF TRADE. THE INTENTION OF THE ASSESSEE WAS CONSIDERED AS THAT OF NURSING OF THE INVESTMENT. 26. BEFORE WE CONCLUDE SIGNIFICANT FACT DOES NEED SOME DELIBERATION AND THAT IS ABOUT THE METHOD OF VALUATION OF STOCK OF SHARES REFLECTED IN THE BALANCE SHEET. THE ADMITTED POSITION IS THAT THE ASSESSEE HAS NOT ADOPTED THE METHOD OF VALUATION AS BEING GENERALLY ADOPTED BY A BUSINESS CONCERN. A BUSINESS ASSET IS VALUED AT THE COST OR MARKET PRICE WHICHEVER IS LESS BUT IN THE APPLICANT CASE IT WAS NOT SO. THE APPELLANT HAD NOT ADOPTED THIS PREVALENT METHOD. RATHER THE ASSESSEE HAD OPTED TO VALUE THE SHARES HOLDING AT COST PRICE ONLY. SINCE IT WAS NOT, THEN THE LAW SUBSCRIBED TO TREAT SUCH AN ASSET AS AN INVESTMENT, GENERALLY BEING VALUED BY AN INVESTOR. 27. TO CONCLUDE, THE CIRCUMSTANCES AND THE PLETHORA OF PRCEDENTS UNMISTAKABLY POINTS OUT THAT THE ASSESSEE WAS NOT DIRECTLY INVOLVED IN THE TRADING AC TIVITY. THEREFORE, ITS HOLDING WAS NOTHING BUT AN INVESTMENT. WHAT IS DECISIVE IS THE CONDUCT AND THE INTENTION OF AN INVESTOR WHICH HAS BEEN ESTABLISHED IN THE PRESENT APPEAL THAT THE APPELLANT HAD SIMPLY ACTED IN THE FASHION TO MAXIMIZE THE VALUE OF ITS WEALTH HOLDING, IN THE SHAPE OF SHARES. SUCH AN ACTIVITY CANNOT BE HELD A PROFIT MAKING ACTIVITY OF A BUSINESS CONCERN BUT SAFELY IT CAN BE HOLD AS A PROFIT SOCKING ACTIVITY OF AN INVESTOR. RESULTANTLY, OUR VIEW GOES IN FAVOUR OF THE ASSESSEE, THUS THE GROUNDS ARE ALLOWED. 11. IN THE INSTANT CASE, FROM THE FACTS, IT IS CLEAR THAT THE ASSESSEE, AT THE TIME OF PURCHASE OF SHARES, HAD NO INTENTION OF DOING BUSINESS. THE INTENTION, AT THE TIME OF PURCHASE OF SHARES, IS THAT OF AN INVESTOR. NO BORROWED FUNDS WERE USED AND THERE WAS NO SUBSEQUENT PURCHASE AND SALE OF SHARES. THUS, ON THESE FACTUAL MATRIX, WE UPHOLD THE FI NDINGS OF THE COMMISSIONER (APPEALS) THAT THE INCOME IN QUESTION SHOULD BE ASSESSED UNDER THE HEAD CAPITAL GAINS AND NOT UNDER THE HEAD INCOME FROM ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 32 BUSINESS. THUS, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. IN VIEW OF THE ABOVE, THE GR OUND NO.2 RAISED BY THE DEPARTMENT IS TREATED AS DISMISSED. IN GROUND NO.3 THE DEPARTMENT HAS CHALLENGED THE DISALLOWANCE MADE UNDER SECTION 14A. IN THIS REGARD, THE RELEVANT FINDING OF THE LEARNED CIT(A) ARE AS UNDER :- 6.1 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A.R. AND THE FACTS OF THE CASE. I FIND THAT THE APPELLANT HAS FOLLOWING SOURCES OF INCOME : I) INCOME FROM SALARY II) INCOME FROM CAPITAL GAIN III) INCOME FROM OTHER SOURCES. IT IS APPARENT THAT THE ASSESSEE HAS NO BUSINESS INCOME ALTHOUGH THE A.O. HAS TREATED T HE ADVANCES RECEIVED BY THE APPELLANT AS BUSINESS INCOME. IN EARLIER PART OF THIS ORDER I HAVE ALREADY DIRECTED THE A.O. TO DELETE THIS ADDITION ON ACCOUNT OF BUSINESS INCOME. THEREFORE, IT IS EVIDENT THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR EARNING THE EXEMPT DIVIDEND INCOME. SINCE THERE IS NO CLAIM OF EXPENDITURE NO DISALLOWANCE CAN BE MADE U/S. 14A READ WITH RULE 8 D. EVEN THE A.O. HAS NOT DISALLOWED ANY EXPENDITURE TOWARDS DIRECT OR INDIRECT INTEREST EXPENDITURE. HE HAS ONLY DISALLOWED 0.5% OF THE AVERAGE INVESTMENT YIELDING EXEMPT INCO ME. SINCE THERE IS NO CLAIM FOR ANY EXPENDITURE TOWARDS EARNING OF EXEMPT INCOME NO DISALLOWANCE IS CALLED FOR. THE A.O. IS DIRECTED TO DELETE THIS ADDITION. AFTER CONSIDERING THE SUBMISSIONS AN D THE FINDINGS OF THE CIT(A), WE FIND THAT THERE IS NO INFIRMITY IN T HE CONCLUSION DRAWN BY THE CIT(A) AS ADMITTEDLY THE ASSESSEE IS RECEIVING INCOME FROM SALARY, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. THERE IS NO CLAIM FOR EXPENDITURE ON WHICH DISALLOWANCE UNDER SECTION 14A CAN BE MADE. THUS, GROUND RAISED BY THE DEPARTMENT DOES NOT HAVE ANY MERITS AND, THEREFORE, IS DISMISSED. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 33 21. CONO.10/MUM/2012(AY 2006-07) (BY ASSESSEE) :- THIS CROSS OBJECTION HAS BEEN FILED BY THE ASSE SSEE, WHICH IS ARISING OUT OF ITA NO.1888/M/2011. IT IS ADMITTED BY T HE LEARNED COUNSEL THAT THE CROSS OBJECTION HAS BEEN RENDERED ACADEM IC AND, THEREFORE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND SAME IS DISMISSED. 22. ITA NO.1889/MUM/2011(AY2005-06) (BY DEPARTMENT) :- IN THIS APPEAL, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF ` .4.50 CRS. RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR TRANSFER OF PROPERTY IS IN THE NATURE OF ADV ANCES AND NOT CHARGEABLE TO TAX WITHOUT APPRECIATING THAT - (I) MRS. BACHOOBAI WORONZOW WAS THE RESIDUARY LEGATEE AND NOT THE ASSESSEE. THERE WAS NO BEQUEST OR GIFT BY WILL OR LTESTAMENT OF LATE SHRI E.F.DIDNSHAW TO THE ASSESSEE SHRI NUSLI WADIA AND HE WAS NOT THE LEGATEE OR THE RESIDUARY LEGATEE. (II) IN FACT AND IN REALITY, THE CONTROL, MANAGEMENT AND OWNERSHIP OF THE PROPERTIES CONS ISTING OF THE ESTATE OF SHRI E.F. DINSHAW VESTS TOTALLY WITH THE ASSESSEE SHRI NUSLI WADIA WHO IS IN ENJOYMENT OF THE FRUITS OF THE SAME AND HAS TO BE HELD AS THE OWNER OF THESE PROPERTIES AS THERE IS NO OTHER CLAIMANT TO THESE PROPERTIES. (III) THAT THE ASSESSEE AS THE HOLDE R OF THE POWER OF ATTORNEY OF LATE MRS. BACHOOBAI WORONZOW HAD POSSESSION AND MANAGEMENT CONTROL OVER THE IMMOVABLE PROPERTIES AND WAS IN A POSITION AS OWNER TO HAND OVER THE POSSESSION OF THE PROPERTIES BY RECEIVING CONSIDERATION. (IV) THE HON HIGH COURT HAD C ONFERRED ;ABSOLUTE OWNERSHIP RIGHTS TO MRS. BACHOOBAI WOR ONZOW, OVER THE IMMOVABLE PROPERTIES OF HER LATE BROTHER AND THE ASSESSEE HAD, BY VIRTUE OF HIS AGREEMENT WITH MRS. BACHOOBAI WORONZOW, OBTAINED OWNERSHIP OVER THE SAID PROPERTIES IN RETURN FOR THE CONSIDERATION OF ` .20 LAKHS (JOINTLY WITH FOUR COMPANIES PRINCIPALLY HELD AND CONTROLLED BY HIM). II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) OTHERWISE ALSO ERRED IN NOT TREATING THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 34 AMOUNT OF ` .11.94 CRS RECEIVED BY THE ASSESSEE AS A RECEIPT FROM ADVENTURE IN NATURE OF TRADE. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) OTHERWISE ALSO ERRED IN NOT TREATING THE AMOUNT OF ` .4.50 CRORES RECEIVED BY THE ASSESSEE AS A RECEIPT FROM ADVENTURE IN NATURE OF TRADE OR SHORT TERM CAPITAL GAIN. HEREIN THIS CASE ALSO THE GROUNDS NO.1 & 2 ARE SIMILAR AND THE ISSUE INVOLVED IN GROUND NO.3 HAS BEEN DECIDED BY US IN ITA NO.1888/MUM/2011 FOLLOWING THE ORDER OF THE ITAT FOR THE ASSESSMENT YEAR 2005-2006. ACCORDINGLY, ALL THE GROUNDS TAKEN BY THE DEPARTMENT ARE TREATED AS DISMISSED . 23. CONO.04/MUM/2012(AY2005 -06) (BY ASSESSEE) :- THE GROUNDS TAKEN IN THIS CROSS OBJECTI ON ARE SIMILAR TO EARLIER ASSESSMENT YEARS WHEREIN IT HAS BEEN HELD TO BE ACADEMIC. THEREFORE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND THE SAME IS TREATED AS DISMISSED . 24. ITA NO.4405/MUM/2011(AY2007-08) (BY ASSESSEE) :- IN THIS APPEAL, THE ASSESSEE HAS RAISED THE GROUND OF DISALLOWABILITY ON PMS EXPENSES AS DEDUCTED FROM CAPITAL GAINS. LEARNED AR HAS RELIED UPON THE DECISION OF THE ITAT PU NE BENCH IN THE CASE OF KRA HOLDING & TRADING P. LTD. VS. DCIT PASSED IN ITA NO.500/PN/08 AND IN THE CASE OF ARA TRADING & INVESTMENTS P. LTD. VS. DCIT, PASSED IN ITA NO.499/PN/08 . ON THE OTHER HAND, LEARNED CIT DR HAS RELIED UPON THE DECISION OF ITAT MUM BAI BENCH IN THE CASE OF PRADEEP KUMAR HARLALKA VS. ACIT, PASSED IN ITA NO.4501/M/2010 , WHEREIN ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 35 THE DECISION OF PUNE BENCH HAS BEEN CONSIDERED AND THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE. THE RELEVANT FINDINGS OF THE ITAT IN ITA NO.4501/M/2010 ARE REPRODUCED HEREINBELOW FOR THE SAKE OF READY REFERENCE :- 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS DECISIONS CITED BY THE PARTIES. THE LD. COUNSEL OF THE ASSESSEE HAS NOT REBUTTED THE ARGUMENT OF THE LD. DR THAT PORTFOLIO ADVISORY FEE HAS BEEN CLAIMED UNDER THE HEAD CAPITAL GAINS, THEREFORE, THE ALTERNATE CONTENTION CANNOT BE ENTERTAINED AND FURTHER TO EXAMINE THE ALLOWABILITY WE NEED TO CONCENTRATE ONLY ON SEC.48 AND THE SAME CANNOT BE ALLOWED U/S.37 BECAUSE ONLY EXPENDITURE INCURRED IN RELATION TO BUSINESS AND PROFESSION CAN BE C ONSIDERED U/S.37. SECTION 48 WHICH IS THE COMPUTING SECTIO N FOR DETERMINATION OF CAPITAL GAINS READS AS UNDER: SEC.48. T HE INCOME CHARGEABL E UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCR UING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY : (I) EXPENDITURE INCURRED WHOL LY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITI ON OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO: FROM THE ABOVE IT IS CL EAR THAT WHILE COMPUTING THE CAPITAL GAINS ONLY TWO KINDS OF EXPENDITURE CAN BE DEDUCTED FROM FULL VALUE OF CONSIDERATION, VIZ., [I] EX PENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND [II] THE COST OF ACQUISITION OR ANY IMPROVEMENT THERETO. THE THRUST OF THE ARGUMENT OF LD. COUNSEL OF THE A SSESSEE IS THAT PORTFOLIO ADVISORY FEE WOULD CONSTITUTE AN EXPENDITURE WH ICH HAS BEEN INCURRED IN CONNECTION WITH THE TRANSFER, BECAUSE OBVIOUSLY IT CANNOT BE ARGUED THAT SUCH EXPENDITURE WAS IN THE NATURE OF COST OF ACQUISITION OR IMPROVEMENT OF THE ASSET. THE LD. DR HAS SPECIFICALLY CONTENDED T HAT PORTFOLIO ADVISORY FEE HAS NOTHING TO DO WITH THE TRANSFER AND SUCH FEE WAS PAYABLE EVEN IF NO SHARES WERE TRANSFERRED OR ANY PURCHASE OF SHARES WERE MADE. THE LD. COUNSEL OF THE ASSESSEE DID NOT R EBUT THESE ARGUMENTS. NO DETAILS HAVE BEEN FILED BEFOR E US TO SHOW HOW THIS EXPENDITURE HAS DIRECT NEXUS WITH THE PURCHASE OF SHARES OR TRANSFER OF THE SHARES. THEREFORE, THIS EXPENDITURE CANNOT BE CALLED TO BE AN EXPENDITURE WHICH HAS BEEN INCURRED IN CONNECTION WITH SUCH TRANSACTION. WE FIND THAT THIS AS PECT WAS HIGHLIGHTED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DEVENDRA MOTILAL KOTHARI VS. DCIT [SUPRA] WHILE DECIDING THE IDENTICAL ISSUE AGAINST THE ASSESSEE. THE HELD COLUMN OF T HE DECISION READS AS UNDER: THE DEDUCTION ON ACCOUNT OF FEES PAID FOR PMS HAS BEEN CLAIMED BY THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 36 ASSESSEE AS DEDUCTION IN COMPUTING CAPITAL GAINS ARISING FROM SALE OF SHARES AND SECURITIES. HE HOWE VER HAS FAILED TO EXPLAIN AS TO HOW THE SAID FEES COULD BE CONSIDER ED AS COST OF ACQUISITION OF THE SHARES AND SECURITIES OR THE COST OF ANY IMPR OVEMENT THERETO. HE HAS ALSO FAILED TO EXPLAIN AS TO HOW THE SAID FEES COULD BE TREATED AS EXPENDITURE INCU RRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SALE OF SHARES AND SECURITIES. ON THE OTHER HAND, THE BASIS ON WHICH THE SAID FEES WAS PAID BY THE ASSESSEE SHOWS THAT IT HAD NO DIRECT NEXUS WITH THE PURCHASE AND SALE OF SHARES AND AS RIGHTLY CONTENDED BY T HE DEPARTMENTAL REPRESENTATIVE, THE SAID FEES WAS PAYABLE BY THE ASSESSEE GOING BY THE BASIS THEREOF EVEN WIT HOUT THERE BEING AN Y PURCHASE OR SALE OF SHARES IN A PARTICULAR PERIOD. AS A MATTER OF FACT, WHEN THE CIT(A) REQUIRED THE ASSESSEE TO ALLOCATE T HE FEES PAID FOR PMS IN RELATION TO PURCHASE AND SALE OF SHARES AS WE LL AS IN RELATION TO THE SHARES HELD AS INVESTMENT ON THE LAST DATE OF THE PREVIOUS YEAR, THE ASSESSEE COULD NOT FURNISH SUCH DETAILS NOR COULD HE GIVE ANY DEFINITE BASIS ON WHICH SU CH ALLOCATION WAS POSSI BLE. THE FEES PAID BY THE ASSESSEE FOR PMS WAS NOT INEXTRICABLY LINKED WITH THE PARTICULAR INSTANCE OF PURCHASE AND SA LE OF SHARES AND SECURITIES SO AS TO TREAT THE SAME AS EXPENDITU RE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH SALE OR THE COST OF ACQUISITION/IMPROVEMENT OF THE SHARES AND SECU RITIES SO AS TO BE ELIGIBLE FOR DEDUCTION IN COMPUTI NG CAPITAL GAINS UNDER S.48. 13. COMING TO THE DEC ISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KRA HOLDING & TR ADING PVT. LTD. [SUPRA], AFTER PERUSING THE JUDGMENT VERY CAREFULLY WE FIND THAT IN THAT DECISION THE DECISION OF CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF OF DEVENDRA MOTILAL KOTHARI VS. DCI T [SUPRA] WAS DISTINGUISHED MAINLY ON THE BASIS OF DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHAKUNTALA KANTILAL [SUPRA]. THE PUNE BENCH REFERRED TO VARIOUS PARAS OF HON'BLE BOMBAY HIGH COURTS DECISION IN PARA-22 AND ULTIMATELY CONCLUDED IN PARA-23 THAT WHAT WAS REQUIRED WAS THAT THE CLAIM SHOULD BE BONA FIDE AND CLAIM FOR SUCH GENUINE EXPENDITURE HAS TO BE ALLO WED SO LONG AS INCURRING OF THE EXPENDITURE IS A MATTER OF FACT AND NECESSITY. HOWEVER, AS POINTED OUT BY THE LD. DR THIS DECISION WAS SPECIFICALLY OVER RULED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ROSHANBABU MOHD. HUSSEIN MERCHANT [SUPRA] AND AT PLACITUM 18 IT HAS BEEN OBSERVED AS UNDER: AS REGARDS THE DECISIONS OF THIS COURT IN THE CASE OF CIT VS. SHAKUNTALA KANTILAL [1991] 190 ITR 56 FOLLOWED IN THE CASE OF ABRAR ALVI [2001] 247 ITR 312] AND THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF SM T. THRESSIAMMA ABRAHAM (NO.1) [2001] 227 ITR 802 WHICH ARE STRONGLY RELIED UPON BY THE COUNSEL FOR THE ASSESSEE, WE ARE OF THE OPINION THAT THE SAID DECISIONS ARE NO LONGER GOOD LAW IN THE LIGHT OF THE SUBSEQUENT DECISIONS OF TH E APEX COURT REFERRED TO HEREINABOVE. THUS, WITHOUT GOING INTO FURTHER DETAILS WE WOULD ONLY LIKE TO OBSERVE THAT THE DECISION IN THE CA SE OF CIT VS. SHAKUNTALA KANTILAL ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 37 [SUPRA] IS NO MORE A GOOD LAW IN VI EW OF THE LATEST DECISION AND THEREFORE THAT DECISION C ANNOT BE RELIED FOR T HE PROPOSITION THAT NECESSITY OF EXPENDITURE WOULD MAKE THE SAME ALLOWABLE. 14. WE WOULD ALSO LIKE TO OBSER VE THAT INCOME OF AN ASSESSEE HAS TO BE CHARGED IN VIEW OF THE FIVE HEADS GIVEN UNDER THE I.T.ACT. EACH HEAD OF INCOME GIVES DETAILED PROCEDURE TO DETERMINE THE RECEIPTS AS WELL AS OUT GOINGS AND ON LY THOSE ITEMS CAN BE DEDUCTED WHICH HAVE BEEN SPEC IFICALLY PROVIDED UNDER THE RESPECTIVE HEADS. THIS POSITION WAS MADE CLEAR BY THE HON'BLE SUPREME COURT IN THE CA SE OF CIT VS. UDAYAN CHINUBHAI AND ORS. [222 ITR 456]. AGAIN T HE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DR. V. P. G OPINATHAN [248 ITR 449] WHERE THE ISSUE WAS WHETHER INTEREST PAID BY THE ASSESSEE TO THE BANK AGAINST LOAN TAKEN ON FDR C OULD BE ALLOWED AGAINST THE INTEREST INCOME, THE APEX COURT CLEAR LY HELD THAT SUCH CLAIM WAS NOT ALLOWABLE BECAUSE INTEREST THAT ASSESSEE RECEIVED FROM THE BANK WAS INCOME IN HIS HAND AND IT COUL D BE DIMINISHED ONLY IF THERE WAS A PROVISION IN LAW WHICH PERMITS SUCH DIMINUTION. IN OTHER WORDS, A DEDUCTION CAN BE ALLO WED UNDER A PARTICULAR HEAD ONLY WHEN THERE IS A PROVISION FOR THE SAME. THIS CAN BE EASILY UNDERSTOOD BY A SIMPLE EXAMPLE. LET US SAY THERE IS ONE MR. X WHO IS A SALARIED EMPLOYEE. HE MAY INCUR SOME EXPENSES IN CONNECTION WITH HIS EMPLOYMENT SAY ON PURCHASE OF BOOKS NECESSARY TO DISCHARGE HIS DUTIE S AS AN EMPLOYEE. EARLIER THERE WAS A PROVISION U/S.16[1][A] FO R STANDARD DEDUCTION AND HE COULD BE ALLOWED SUCH STANDARD DEDUCTION SUBJ ECT TO LIMITS PRESCRIBED. NOW, THAT PROVISION HAS BEEN REMOVED AND THUS WHATSOEVER EXPENDITURE IS INCU RRED MAY BE HAVING CLOSE CONNECTION WITH HIS EMPLOYMENT, BUT THE SAME CANNOT BE ALLOWED IN THE ABSENCE OF ANY SUCH PROVISION. THE SITUATI ON WOULD BE DIFFERENT IF THE SAME PERSON WAS RECEIVING THE INCOME AS COMMISSION BECAUSE IN THAT CASE THE INCOME WOULD BE ASSESSABLE UNDER THE HEAD BUSINESS INCOME AND PUR CHASE OF BOOKS FOR RENDERING SUCH SERVICES WOULD CONSTITUTE BUSINESS EXPENDITURE. THIS MEANS THE ALLOWABILITY OF EX PENDITURE IS NOT DEPENDANT ON THE NECESSITY OF THE EXPENDITURE BUT IT IS BASED ON THE PROVISION OF THE ACT UNDER A PARTICULAR HEAD UNDER WHICH INCOME HAS TO BE ASSESSED. ANOTHER EXAMPLE IS BR OKERAGE INCURRED BY A PERSON WHILE GIVING HIS PROPERTY ON RE NT. THOUGH THIS EXPENDITURE IS NECESSARY FOR EARNING RENTAL IN COME BUT IN THE ABSENCE OF ANY PROVISION, THIS EXPENDITURE IS NOT ALLOWABLE. SEE THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. S. G. GUPTA & SONS [149 ITR 253]. THEREFORE, IN CASE BEFORE US AS OBSERVED EARLIER THE ALLOWABILITY OF PORTFOLIO ADVISOR Y FEE HAS TO BE TESTED UNDER THE PROVISIONS OF SEC.48. AS OBSERV ED ABOVE, THE LD. COUNSEL OF THE ASSESSEE DESPITE SPECIFIC ARGUMENT OF LD. DR DID NOT SHOW US AS TO HOW THE PORTFOLIO FEE HAS ANY CONNECTION WITH THE TRANSFER OF ASSET AND THE SAME CANNOT BE ALLOWED. THEREFORE THE THEORY THAT A PARTICULAR EXPENDITURE IS GENUINE AND IT IS NOT DISPUTED THAT SAME HAS BEEN INCURRED AND SAME WAS NECESSARY FOR A PARTICULAR PURPOSE, THE EXPENDITUR E DOES NOT BECOME ALLOWABLE IF THERE IS NO SPECIFIC PROVIS ION FOR THE SAME. THEREFORE, IN OUR VIEW THE EXPENDITURE INCURRED IN CONNECTION WITH FEE OF PORTFOLIO ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 38 MANAGEMENT HAS NOTHING TO DO WITH THE COST OF ACQUISITION OF SHARES OR TRANSACTION OF SHARES AND, THEREFORE, IS HELD TO BE NOT ALLOWABLE. WE FIND NO FORCE IN T HE ALTERNATE SUBMISSIONS ALSO BECAUSE EXPENDITURE HAS BEEN CL AIMED UNDER THE HEAD CAPITAL GAINS AND NOW ASSESSEE CANNOT MAKE A NEW CASE THAT SUCH EXPENDITURE MAY BE ALLOWED FU LLY OR PROPORTI ONATELY U/S.37 WITHOUT SHOWING US THAT HOW THIS EXPENDITURE PERTAINED TO THE INCOME ASSESSABLE UNDER THE HEAD BUSINESS AND ACCORDINGLY WE REJECT THE ALTERNATE CLAIM. THE ABOVE VIEW IS FURTHER SUPPORTED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RADIO TALKIES [238 ITR 872]. IN THIS CASE THE ISSUE WAS ALLOWABILITY OF EXPENDITURE ON PAYMENT OF RETRENCHMENT COMPENSATION TO THE EX-EMPLO YEES. IT WAS ONE OF THE CONDITIONS PRECEDENT TO THE SALE OF PROPERTY THAT THE EX- EMPLOYEES MUST BE PAID RE TRENCHMENT COMPENSATION. THE HON'BLE HIGH COURT WHILE REVERSING THE ORDER OF THE TRIBUNAL HELD THAT SUCH EXPENDITURE WAS NOT ALLOWABLE. IN FACT AFTER QUOTING THE PROVISION OF SEC.48 IT WAS OBSERVED AS UNDER: THIS SECTION LAYS DOWN THE M ODE OF COMPUTATION OF CAPITAL GAINS. TWO ITEMS ARE ALLOWED AS DEDUCTIONS FROM THE FULL VALUE OF THE CONSIDERATION FOR WHICH THE TRANSFER IS MADE FOR ARRIVING AT CAPITAL GAINS. THE FIRST ITEM IS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. THE SECOND ITEM IS T HE COST OF ACQUISITION OF THE CAPITAL ASSET AND THE COST OF ANY IMPROVEMENT THERETO. IN THIS CASE, WE ARE CONCERNED ONLY WITH THE FIRST ITEM. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE RETRENCHMENT COMPENSATION PAID BY THE ASSESSEE TO ITS FORMER EMPLOYEES CAN BE REGARDED AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVEL Y IN CONNECTION WITH THE TRANSFER OF LAND AND BUILDING BY THE ASSE SSEE TO THE PURCHASER. THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIV ELY IN CONNECTION WITH THE TRANSFER CAN BE EXPENDITU RE LIKE COMMISSION PAID TO THE BROKER AND/OR SIMILAR OTHER EXPENDITURE. THE RETRENCHMENT COMPENSATION PAID BY THE ASSESS EE TO ITS EMPLOYEES, IN OUR OPINION, HAS NO CONNECTION WHATS OEVER WITH THE TRANSACTION OF SALE OF THE LAND AND BUILDING. IT IS CONNECTED ONLY WITH THE CLOSURE OF THE BUSINESS OF THE ASSESSEE IN MARCH, 1972. SUCH EXPENDITURE BY NO ST RETCH OF IMAGINATION CAN BE REGARDED AS EXPENDIT URE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE TRANSACTION OF SALE OF THE PROPERTY. THE RETRENCHMENT COMPENSATION HAS NO CONNECTION WHATSOEVER WITH THE TRANSFER OF PROPERTY IN QUEST ION. THE STIPULATION IN THE AGREEMENT MERELY REQUIRES THE OWNER TO CLEAR ALL ITS LIABILITIES ON CERTAIN ACCOUNT S AND TO KEEP THE TRANSFEREE INDEMNIFIED. THIS STIPULATIO N CANNOT CHANGE THE CHARACTER OF THE RETRENCHMENT COMPENSATION FROM A LIABILITY ARISING OUT OF THE CLOSURE OF THE BUSINESS TO EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE ASSET IN QUESTION. FROM THE ABOVE IT IS CLEAR THAT DESPITE THERE BEING A CONDITION FOR PAYMENT OF RETREN CHMENT COMPENSATIO N BEFORE THE ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 39 TRANSFER OF THE PROPERTY I.E. THERE WAS A NECESSITY FOR SUCH EXPENDITURE TILL THE SAME WAS HELD TO BE NOT ALLOWABLE. SIMILARLY, HON'BLE DELHI HIGH COURT IN THE CA SE OF SMT. SITA NANDA VS. CIT [251 ITR 575] WAS CONCERNED WITH THE I SSUE REGARDING A CLAIM OF EXPENDITURE IN RESPECT OF PAYM ENT OF UNEARNED INCREASE TO THE GOVERNMENT FOR EFFECTING THE TRANSFER OF LEASE-HOLD RIGHTS. AGAIN THE HON'BLE HIGH COURT AFTER QUOTING SEC.48 OBSERVED AS UNDER: A BARE READING OF THE PROVISI ON MAKES IT CLEAR THAT WHAT CAN BE DEDUCTED UNDER SECTION 48(I) IS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY IN CONNE CTION WITH THE TRANSFER. THE AMOUNT WHICH THE ASSESSEE CLAIMED TO BE COVERED WAS NOT REALLY A PART OF THE UNEARNED INCREASE. ON THE CONTRARY IT WAS THE AMOUNT PAID FOR MAKING THE PAYMENT DEMANDED BY THE LDO BELATEDLY. THE INTEREST, AS WAS NOTED BY THE TRIBUNAL, HAD TO BE PAID BY THE ASSESSEE AS SHE MADE THE PAYMENT OF UNEARNED INCREASE BELATEDLY. THE CRUCIAL WORDS IN THE PROVISIONS ARE 'IN CONNECTION WITH SUCH TRANSFER'. THE EXPRESSION MEANS INTRINSICALLY LINKED WITH THE TRANSFER. SUCH EXPENDITURE HAS TO BE WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. EVEN IF SUCH EXPENDITURE HAS SOME NEXUS WITH THE TRANSFER IT DOES NOT QUALIFY FOR DEDUCTI ON UNLESS IT IS WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. THE TRIBUNAL WAS, THEREFORE, RIGHT IN ITS CONCLUSION THAT THE PAYMENT OF INTEREST WAS IN THE SHAPE OF DAMAGES FOR LATE PAYMENT OF UNEARNED INCREASE. THAT BEING SO, THE INTEREST PAID CANNOT BE TREATED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER. THE ANSWER TO THE QUESTION IS IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THUS IT IS CLEAR THAT UNLESS AND UNTIL EXPENDIT URE IS INCURRED IN CONNECTION WITH SUCH TRANSFER THE SAME CANNOT BE ALLOWED AND AS OBSERVED BY US THE EXPENDITURE FOR PAYMENT OF PORTFOLIO MANAGEMENT FEE HAS NOTHING TO DO WI TH THE TRANSFER OF SHARES AND THIS WAS TAKEN AS A SPECIFIC AR GUMENT BY THE LD. DR AGAINST WHICH NO SUBMISSIONS WERE MADE BY THE LD. COUNSEL OF THE ASSESSEE. THEREFORE, IN OUR VIEW SUCH EXPE NDITURE CANNOT BE ALLOWED. SIMILAR VIEW WAS TAKEN IN THE CASE OF DEVENDRA MOTILAL KOTHARI VS. DCIT [SUPRA]. IN VIEW OF THIS DISCUSSI ON, WE FIND NOTHING WRONG WITH THE ORDER OF THE LD. CIT( A) AND CONFIRM THE SAME. 15. HOWEVER, AS FAR AS SHARE TRANSACTION CHARGES ARE CONCERNED THEY WOULD BE AL LOWABLE IF THEY ARE IN THE NATURE OF SHARE BROKERAGE OR ANY OTHER CHARGES CHARGED BY T HE BROKER, BUT AT THE SAME TIME LD. COUNSEL OF THE ASSESSEE COULD NOT GIVE THE EXACT NATURE OF THE CHAR GES AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE EXACT NATURE OF THE CHARGES AND THEN ADJUDICATE THIS ISSUE. ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 40 16. ISSUE NO.3: AFTER HEARING BOTH THE PARTIES WE FIND THAT ASSESSEE HAD INVESTED A SUM OF RS.30,000/- IN TAX SAVING SCHEME OF MUTUAL FUNDS AND DEDUC TION FOR THE SAME U/S.80C WAS NOT CLAIMED IN THE ORIGINAL RETURN. IN FACT, IT WAS SUBMITTED BEFORE US THAT THE CLAIM WAS MADE BY WAY OF A LETTER WITHOUT REVISING THE RETURN. AO HAS NOT DEALT WITH THIS ISSUE. THE LD. CIT(A) ON APPEAL RE JECTED THE CLAIM ON THE BASIS THAT THE CLAIM COULD NOT BE A LLOWED IN THE ABSENCE OF REVISED RETURN BY FOLLOWING THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF GOETZE [INDIA] LTD. VS. CIT [284 ITR 323]. 17. BEFORE US, LD. COUNSEL OF THE ASSESS EE ARGUED THAT ASSESSEE HAD MADE INVESTMENT OF RS.30,000/- WHICH WAS ALLOWABLE AS DEDUCTION U/S.80-C. THIS ISS UE WAS TAKEN UP BEFORE THE LD. CIT(A) WHO DISMISSED THE SAME IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE [INDIA] LTD. VS. CIT [SUPRA]. HE SUBMITTED THAT WHEN CL AIM IS MADE FOR THE FIRST TIME BEFORE THE APPELLATE AUTHORITIES, THEN SA ME SHOULD HAVE BEEN ALLOWED. HE RELIED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF CHICAGO PNEUMAT ICS INDIA LTD. VS. DCIT [15 SOT 252]. 18. ON THE OTHER HAND, LD. DR SUBM ITTED THAT AO HAS NO RIGHT TO ALLOW ANY CLAIM IN THE ABSENC E OF REVISED RETURN AND, THEREFORE, LD. CIT(A) WAS CORRECT IN DISMISSING THE CLAIM PARTICULARLY IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT. 19. WE HAVE CONSIDERED THE RIVA L SUBMISSIONS CAREFULLY AND FIND THAT NO DOUBT THAT A CL AIM CANNOT BE ALLOWED WIT HOUT REVISED RETURN IN THE LIGHT OF THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF GOETZE [I NDIA] LTD. VS. CIT [SUPRA]. HOWEVER, THE HON'BLE SUPREME COURT ITSELF HAS OBSERVED IN THE CASE OF GOETZE [INDIA] LTD. VS. CIT [SUPRA] THAT THIS RESTRICTION IS NOT APPLICABLE IF THE ISSUE IS RAIS ED BEFORE THE APPELLATE AUTHORITY. THEREFORE, THE POWER OF THE APPELLATE AUTHORITY TO ENTERTAIN SUCH CLAIM IS STILL THERE. THEREFORE, IN THE INTE RESTS OF JUSTICE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO CONSIDER THIS CLAIM. THUS, RESPECTFULLY FOLLOWING THE DECISI ON OF THE COORDINATE BENCH, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . 25. ITA NO.4505/MUM/2011(AY2007-08) (BY DEPARTMENT) :- THE ISSUE INVOLVED IN THE PRESENT APPEAL, IS SIMILAR TO THE EARLIER YEARS AND IS THEREFORE, SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 41 PASSED IN ITA NO.4573/M/2008 (SUPRA) AS HAVE BEEN HELD IN OTHER APPEALS ABOVE. ACCORDINGLY, THE GROUNDS TAKEN BY THE DEPARTMENT ARE DISMISSED . 26. ITA NO.4506/MUM/2011(AY2007-08) (BY DEPARTMENT) :- THE ISSUE INVOLVED IN THE PRESENT APPEAL IS AGAIN SIMILAR TO EARLIER YEARS AND IS SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT PASSED IN ITA NO.4573/M/2008 (SUPRA). ACCORDINGLY, THE GROUNDS TAKEN BY THE DEPARTMENT ARE DISMISSED . 27. CONO.11/MUM/2012(AY 2007-08) (BY ASSESSEE) :- THIS CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE, ARISING IN ITA NO.4506/M/2011 WHICH IS SIMILAR TO EARLIER YEARS WHEREIN IT HAS BEEN ADMITTED BY THE LEARNED COUNSEL TO BE ACADEMIC. THUS, THE CROSS OBJECTION FILED BY TH E ASSESSEE IS TREATED AS DISMISSED. 28 . IN THE RESULT ALL THE APPEALS FILED BY THE DEPARTMENT ARE DISMISSED AND ALL THE CROSS OBJECT IONS AND CROSS APPEALS FILED BY THE ASSESSEE ARE ALSO DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MAY, 2012. SD/- SD/- ( G.E. VEERABHADRAPPA ) ( AMIT SHUKLA ) PRESIDENT JUDICIAL MEMBER MUMBAI, DT: 30 TH MAY, 2012 ITA NO :7847/MUM/2011 & OTHER CONNECTED CASES 42 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PKM