Kanniah Photo Studio, Thanjavur V. ITO (OSD), Kumbakonam

CO 22/CHNY/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8481 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-04-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R SIVARAMAN
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 28/MDS/2011 ASSESSMENT YEAR : 2005-06 & C.O. NO. 22/MDS/2011 [IN I.T.A. NO. 28/MDS/2011] THE INCOME TAX OFFICER (OSD), CIRCLE I, KUMBAKONAM. VS. M/S. KANNAIAH PHOTO STUDIO, 18A, NAGESWARAN NORTH STREET, KUMBAKONAM. [PAN: AAAFK7401E] (APPELLANT) (RESPONDENT/ CROSS OBJECTOR) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI R. SIVARAMAN, ADVOCATE DATE OF HEARING : 16.04.2013 DATE OF PRONOUNCEMENT : 16.04.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE AND CROSS OBJECTIONS AT THE BEHEST OF THE ASSESSEE, EMANATE FROM THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS), TIRUCHIRAPALLI DATED 19.10.2010 IN ITA N O. 213/07-08 FOR ASSESSMENT YEAR 2005-06, IN PROCEEDINGS UNDER SECTI ON 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. IN THE PRESENT APPEAL, THE SOLE SUBSTANTIVE GRI EVANCE OF THE REVENUE IS THAT THE CIT(A) HAS WRONGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER QUA AN AMOUNT OF ` .22,51,220/- BY DISALLOWING ASSESSEES CLAIM THAT I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.28 2828 28/M/ /M/ /M/ /M/1 11 11 11 1 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.22/M/11 22/M/11 22/M/11 22/M/11 2 IN COMPUTING CAPITAL GAINS, THE SUM PAID TO BANK FO R DISCHARGING MORTGAGE HAD TO BE TAKEN AS EXPENSES RELATING TO TRANSFER UN DER SECTION 48(1)(I) OF THE ACT. 3. IN THE COURSE OF HEARING, THE DR REPRESENTING R EVENUE VEHEMENTLY ARGUES THAT THE ADDITION IN QUESTION HAS BEEN WRONG LY DELETED IN LOWER APPELLATE PROCEEDINGS. THEREFORE, BY PLACING RELIAN CE ON THE CASE LAW OF [2000] 241 ITR 560 (MAD.) CIT V. N. VAJRAPANI NAIDU , HE REITERATES THE GROUNDS AND PRAYS FOR ACCEPTANCE OF THE APPEAL. 4. OPPOSING THIS, THE ASSESSEE SUPPORTS THE ORDER UNDER CHALLENGE PASSED BY THE CIT(A) BY WAY OF CROSS OBJECTION AND PRAYS FOR REJECTION OF THE APPEAL. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN THE PHOTOGRAPHY BUSINESS. ON 01.02.2006, IT HAD RETURN ED LOSS OF ` .7,42,240/-. IN PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSME NT YEAR, THE ASSESSEE HAD ADMITTEDLY SOLD THE LAND IN QUESTION W ITH BUILDING RAISED THEREUPON FOR ` .75.00 LAKHS. WHILST COMPUTING CAPITAL GAINS, IT CL AIMED THAT AN AMOUNT OF ` .22,51,220/- WAS PAID TO CITY UNION BANK FOR SATISF YING A MORTGAGE OVER THE PROPERTY WHICH REPRESENTED THE EX PENSES INCURRED IN CONNECTION WITH THE TRANSFER FOR THE PURPOSE OF COM PUTING CAPITAL GAINS UNDER SECTION 48(1)(I) OF THE ACT. WE NOTICE FROM THE A SSESSMENT ORDER DATED 31.12.2007 THAT THE ASSESSING OFFICER RELIED UPON A CATENA OF CASE LAW AND HELD THAT THE LOAN IN QUESTION HAD BEEN OBTAINED BY MORTGAGING THE PROPERTY I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.28 2828 28/M/ /M/ /M/ /M/1 11 11 11 1 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.22/M/11 22/M/11 22/M/11 22/M/11 3 LONG TIME AFTER ACQUIRING THE SAME, THE CLAIM WAS N OT COVERED BY RELEVANT STATUTORY PROVISION OF SECTION 48(1)(I) OF THE ACT . ACCORDINGLY, HE DISALLOWED ASSESSEES CLAIM FOR THE PURPOSE OF COMPUTING CAPIT AL GAINS. 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL. VIDE ORDER UNDER CHALLENGE, THE CIT(A) AFTER PLACING RELIANCE ON CAS E LAW OF GOPEE NATH PAUL AND SONS V. DCIT 278 ITR 240 (CAL), HAS HELD THAT T HE ENTIRE AMOUNT IN QUESTION FOR REMOVING THE ENCUMBRANCE OF MORTGAGE I S LIABLE TO BE DEDUCTED FROM THE SALE PRICE. IN THIS MANNER, ASSESSEES CON TENTIONS IN THE LOWER APPELLATE PROCEEDINGS STAND ACCEPTED. THEREFORE, THE REVENUE IS AGGRIEVED. 7. WE HAVE HEARD BOTH PARTIES IN DETAIL AND PERUSE D THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS CIT(A). THE CAS E LAW SUBMITTED BY THE REVENUE [2000] 241 ITR 560 (MAD) CIT V. N. VAJRAPAN I NAIDU AND THAT RELIED UPON BY THE ASSESSEE GOPEE NATH PAUL AND SONS V. DC IT (SUPRA) HAVE ALSO BEEN GONE THROUGH. WE MAKE IT CLEAR THAT THERE IS N O DISPUTE ON THE FACTS THAT THE ASSESSEE HAD CREATED A MORTGAGE AFTER ACQU ISITION OF THE PROPERTY. THEREFORE, THE ONLY QUESTION WHICH INVITES OUR CONS IDERATION IS TO WHETHER THE AMOUNT IN QUESTION PAID BY THE ASSESSEE TO REMOVE T HE ENCUMBRANCE OF MORTGAGE IS LIABLE TO BE DEDUCTED FROM THE SALE PRI CE UNDER SECTION 48(1)(I) AS CLAIMED BY THE ASSESSEE OR NOT AS AGITATED BY TH E REVENUE. IN THIS BACKDROP, WE NOTICE THAT IN THE CASE LAW RELIED UPO N BY THE REVENUE (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS CATEGORIC ALLY HELD AS FOLLOWS: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.28 2828 28/M/ /M/ /M/ /M/1 11 11 11 1 & && & C.O. C.O. C.O. C.O. NO. NO. NO. NO.22/M/11 22/M/11 22/M/11 22/M/11 4 THAT VIEW OF THE TRIBUNAL IS WHOLLY UNSUSTAINABLE. THE BURDEN HAD BEEN CREATED BY THE VENDOR ON THE PROPERTY SOLD BY HIM. AS THE BURDEN HAD BEEN CREATED FOR HIS OWN BENEFIT BY OFFE RING THE PROPERTY AS SECURITY TO HIS LENDERS, THE AMOUNTS SPENT FOR DISC HARGING THAT BURDEN OF THE VENDOR WHETHER PRIOR TO SALE, OR AT THE TIME OF SALE, BY PAYMENT TO SUCH CREDITORS INCLUDING THE MORTGAGES, DIRECTLY BY THE VENDEE CANNOT BE REGARDED AS EXPENDITURE WHOLLY AND EXCLUSIVELY I N CONNECTION WITH THE TRANSFER. SO FAR AS THE CASE LAW RELIED UPON BY THE ASSESSEE IS CONCERNED, IN OUR VIEW, EVEN IF WE TAKE IT AS SUPPORTIVE OF ASSES SEES CONTENTIONS, STILL, IN VIEW OF THE WELL SETTLED LAW THAT IN CASE OF DIVERG ENT JUDICIAL OPINIONS THE ONE BY THE HONBLE JURISDICTIONAL HIGH COURT PREVAILS O VER THE OTHER, WE ACCEPT THE CONTENTIONS OF THE REVENUE AND RESTORE THE ORDE R OF THE ASSESSING OFFICER. 8. CONSEQUENTLY, THE REVENUES APPEAL IS ALLOWED A ND ASSESSEES CROSS OBJECTION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 16 TH OF APRIL, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 16.04.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.