ITO - 9(1)-3, MUMBAI V. M/s. ESTONIA TRADERS P. LTD., MUMBAI

ITA 101/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4029 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 19-10-2010
• Assessment Year: misc
• Appeal Filed On: 04-01-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Share purchase agreement

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI S.V. MEHROTRA (A.M.) AND SMT. ASHA VIJAYRAGHAVAN (J.M.) I.T.A. NO. 101/MUM/2008 ASSESSMENT YEAR : 2002-2003 INCOME TAX OFFICER, 9(1)-3, R.NO.224, AAYAKAR BHAVAN, M.K. ROAD MUMBAI VS. ESTONIA TRADERS P. LTD. 301, GARDEN CREST WEST AVENUE, SANTACRUZ(W), MUMBAI-400 054 P.A.NO: AAACE1953B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. SUMEET KUMAR RESPONDED BY : SHRI. JITENDRA JAIN O R D E R PER S.V. MEHROTRA (A.M.) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER DATED 31.10.2007 OF THE COMMISSIONER OF INCOME TAX (A PPEALS)-IX, MUMBAI FOR THE ASSESSMENT YEAR 2002-03. 2. THE ASSESSEE CARRIED ON THE BUSINESS AS GENERAL MERCHANT A ND TRADER IN GOODS AND COMMODITIES ON THE READY OR FORWARD BASIS, IMPORTERS/EXPORTERS. THE ASSESSING OFFICER NOTICED THAT IN THE BANK STATEMENT THERE WAS A DEPOSIT OF RS.60,00,000/- ON 06.1 2.2001 BY WAY OF CHEQUE NO.106421 AND ALSO A DEPOSIT OF RS.5,000/- IN CASH . THE ASSESSEE FURNISHED A COPY OF PURCHASE AGREEMENT ON 29.04.1992 WH ICH SHOWED THAT THE ASSESSEE HAD PURCHASED FLAT NO.301, 3 RD FLOOR, IN SANTACRUZ GARDEN 2 CREST CO-OP HSG SOCIETY LTD., SITUATED AT PLOT 121, CTS NO.560, WEST AVENUE ROAD, TPS-VII, SANTACRUZ(W), MUMBAI-54 FOR R S.7,00,000/- IN THE NAME OF ASSESSEE-COMPANY. THE ASSESSEE ALSO FURNISHED COPY OF THE SALE DEED BY WHICH THE ASSESSEE HAD SOLD THE FLAT TO M/S. RAJAT PHARMA CHEM LTD., ON 04.12.2001 FOR RS.71,00,000/-. THE ASSESSING O FFICER OBSERVED THAT THESE TRANSACTIONS RESULTED INTO LONG TERM CAPITAL G AIN AND IT WAS TAXABLE IN THE ASSESSMENT YEAR 2002-03. HE ALSO OBSERVE D THAT THE ASSESSEE HAD NOT FURNISHED THE COMPUTATION OF INCOME AND I N THE PROFIT & LOSS A/S. THE IMPUGNED AMOUNT HAD NOT BEEN CREDITED. ACCO RDINGLY, ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE LONG TERM CAPITAL GAIN OF RS.55,39,000/-, COMPUTED AS PER THE PROVISIONS OF THE I NCOME TAX ACT, SHOULD NOT BE BROUGHT TO TAX, IN ASSESSMENT YEAR 2002-0 3. ASSESSEE FURNISHED THE COPY OF THE LETTER DATED 14.01.2002, AD DRESSED TO DIRECTOR OF M/S. RAJAT PHARMA CHEM LTD, THE PURCHASER OF FLAT, STAT ING THAT THE FLAT WAS SOLD FOR THE FULL CONSIDERATION OF RS.71 LAKHS AND O UT OF WHICH THE ASSESSEE COMPANY HAD RECEIVED RS.60 LAKHS FROM STANDARD CHA RTERED BANK ON BEHALF OF M/S. RAJAT PHARMA CHEM LTD. IT WAS FURTHER STATED IN THE SAID LETTER THAT INSPITE OF REPEATED REMINDERS AND LE TTERS ISSUED TO M/S. RAJAT PHARMA CHEM LTD., REGARDING PAYMENT OF THE BA LANCE CONSIDERATION OF RS.11 LAKH, THE M/S. RAJAT PHARMA CHEM LTD. DID NO T PAY THE BALANCE AMOUNT OF RS.11 LAKHS. ACCORDINGLY, THE ASSESSEE COMPANY WAS LEFT WITH NO ALTERNATIVE BUT TO TERMINATE THE DEED OF TRANSFER SIG NED BY BOTH THE PARTIES. THE ASSESSEES REPRESENTATIVE ALSO FURNISHED LETTE R DATED 18.12.2006 FROM SECRETARY OF SANTACRUZ GARDEN CREST CO -OP HSG. SOCIETY STATING THAT SAID FLAT STOOD IN THE NAME OF ASSESSEE COMPAN Y AS ON 31.03.2002 AND FROM 01.04.2002 TILL DATE ALONG WITH COPY OF SHARE CERTIFICATE SHOWING THE NAME OF ASSESSEE COMPANY ON 11.05. 1991 IN THE SHARE CERTIFICATE. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION FOR THE FOLLOWING REASONS:- 3 A) ASSESSEE HAD NOT FURNISHED THE EVIDENCE SHOWING THAT RS.60 LAKH, THE PART SALE CONSIDERATION, RECEIVED BY IT FROM M/S. R AJAT PHARMA CHEM LTD., WAS REPAID. B) THE ALLEGED DEED OF CANCELLATION DATED 01.01.2002 WAS EXECUTED ON RS.20/- STAMP PAPER AND THIS DOCUMENT WAS NEITHER REGISTE RED NOR NOTIFIED. HE, ACCORDINGLY, HELD THAT SALES AGREEMENT DATED 04.12.2 001 WAS STILL OPERATIVE. HE, THEREFORE, BROUGHT RS.55,39,000/- FROM SALE OF FLAT, TO TAX, AS LONG TERM CAPITAL GAIN. 3. THE LEARNED CIT(APPEALS) DELETED THE ADDITION FOR THE FOLLOWING REASONS :- (I) SUBJECT MATTER OF TRANSFER CONTINUED TO REMAIN IN TH E POSSESSION AND IN THE NAME OF THE ASSESSEE AS CONFIRMED BY THE SOCIETY VIDE ITS LETTER DATED 18.12.2006 AND EVIDENCED BY THE SHARE CER TIFICATE OF THE SOCIETY. (II) THE SALE AGREEMENT OF THE PROPERTY EXECUTED ON 04.12. 2001 STANDS TERMINATED BY SUBSEQUENT AGREEMENT OF CANCELLATION DAT ED 01.01.2002. (III)THE BUYER M/S. RAJAT PHARMA CHEM LTD. FAILED T O PAY THE FULL CONSIDERATION. THUS, HE CONCLUDED THAT THERE WAS NO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME TAX ACT AS NEITHER THE POSSESSI ON OF FLAT WAS GIVEN NOR CONDITION FOR SALE, WITH REFERENCE TO THE PA YMENT OF CONSIDERATION, WAS SATISFIED. 4. WE HAVE CONSIDERED BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE FACT THAT THE PROPERTY STILL CONTINUES IN T HE NAME OF ASSESSEE 4 AS PER THE CONFIRMATION DATED 18.12.2006 FROM SECRETAR Y OF SANTACRUZ GARDEN CREST CO-OP HSG. SOCIETY HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. THE MAIN REASON FOR DENYING THE ASSESSEES CL AIM WAS THAT THE DEED OF CANCELLATION DATED 01.01.2002 EXECUTED ON STAMP PAPER OF RS.20/- WAS NOT REGISTERED. HOWEVER, IT IS TO BE SEEN WHE THER BOTH THE PARTIES HAVE ACTED ON THE BASIS OF CANCELLATION DEED OR N OT. IF, BOTH THE PARTIES HAVE ACTED ON THE BASIS OF THE CANCELLATION DEED THEN MERE NON REGISTRATION OF THE SAME WILL BE OF NO CONSEQUENCE. IT IS PERTINENT TO NOTE THAT M/S. RAJAT PHARMA CHEM LTD. HAS NOT FILED ANY SU IT FOR SPECIFIC PERFORMANCE OF THE CONTRACT. 5. FURTHER, THE CONTENTION OF ASSESSEE IS THAT IT HAS PART LY REFUNDED THE AMOUNT RECEIVED FROM M/S. RAJAT PHARMA CHEM LTD. IN T HIS REGARD, WE FIND THAT AT PAGE 24 OF THE PAPER BOOK ASSESSEE HAS FURNISHED THE LEDGER A/C. OF M/S. RAJAT PHARMA CHEM LTD. IN WHICH IT HAS STATED THAT SOME PAYMENTS HAVE DIRECTLY BEEN REFUNDED TO M/S. RAJAT PHARMA CHEM LTD. IN THE YEAR 2000-01 ITSELF, AND SOME PAYMENTS HAVE BEEN REFUNDED O N 01.04.2005 IN THE NAME OF M/S. DOPSON PHARMA INDIA LTD. AS PER THE REQUEST OF THE ASSESSEE. THE LEARNED COUNSEL STATED THAT CHEQUES HAVE BEEN ISSUED IN THE NAME OF M/S. DOPSON PHARMA INDIA LTD. ON BEHALF OF M /S. RAJAT PHARMA CHEM LTD. WE ARE OF THE OPINION THAT THIS FACT NEEDS TO BE VERIFIED FROM THE RECORDS OF THE ASSESSEE COMPANY WITH REFERENCE TO THE R ECORDS OF M/S. RAJAT PHARMA CHEM LTD. & M/S. DOPSON PHARMA INDIA LTD . THEREFORE, WE RESTORE THE MATTER BACK TO THE ASSESSING OFFICER FOR VERI FICATION AND IF HE FINDS THAT THE PAYMENTS MADE ON 01.04.2005 TO M/S. DO PSON PHARMA INDIA LTD. WERE ON BEHALF OF M/S. RAJAT PHARMA CHEM LTD. THEN NO ADDITION IS CALLED FOR ON ACCOUNT OF LONG TERM CAPITAL GAINS AS THE SALE DEED STANDS CANCELLED. 5 5. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATI STICAL PURPOSES, IN TERMS OF AFOREMENTIONED OBSERVATIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 27.10.2010 SD/- SD/- ( ASHA VIJAYRAGHAVAN ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27/10/2010. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR J BENCH //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI