Smt. Radha Devi, Mandi V. ITO, Mandi

ITA 1095/CHANDI/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6784 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition; Capital receipt; Reason to believe
• Section: 54F; 2(14); 32; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1095/CHD/2014 (ASSESSMENT YEAR : 2008-09) SMT.RADHA DEVI VS. THE INCOME TAX OFFICER, W/O SH.KESAR SINGH, SUNDER NAGAR, DISTT. MANDI, VPO TATTAPANI, TEHSIL KARSOG, HIMACHAL PRADESH. DISTT. MANDI, HIMACHAL PRADESH. PAN: ANXPD9019J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH, RESPONDENT BY : SMT. MEENAKSHI VOHRA, DR DATE OF HEARING : 04.09.2017 DATE OF PRONOUNCEMENT : 13.10.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(APPEALS), SHIMLA DATED 29.9.2014, RELATING TO ASSESSMENT YEAR 2008-09. 2. BRIEF BACKGROUND OF THE CASE IS THAT THE ASSESS EE HAD FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 CLAIMING REFUND OF RS.6,80,233/- ON ACCOUNT OF TDS ON COMPEN SATION RECEIVED FROM LAO OF RS.66,04,202/-. THE CASE WAS S ELECTED FOR SCRUTINY DURING THE COURSE OF WHICH THE ASSESSE E CONTENDED THAT THE COMPENSATION WAS RECEIVED ON 29. 3.2008 AND WAS LIABLE TO BE TAXED IN ASSESSMENT YEAR 2008- 09 INSTEAD OF ASSESSMENT YEAR 2009-10. ARMED WITH THI S INFORMATION, NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 (IN 2 SHORT THE ACT) WAS ISSUED TO THE ASSESSEE FOR ASS ESSMENT YEAR 2008-09 AND ASSESSMENT U/S 143(3)/148 OF THE A CT WAS COMPLETED AT A TOTAL INCOME OF RS.67,49,290 WHI CH INCLUDED THE COMPENSATION RECEIVED BY THE ASSESSEE TAXED AS SHORT TERM CAPITAL GAIN AMOUNTING TO RS.56,54,29 0/- AFTER NETTING OFF THE COST OF ACQUISITION OF THE AS SET FROM COMPENSATION RECEIVED, AND RS.11,25,000/- RECEIVED AS COMPENSATION FOR LOSS OF INCOME ASSESSED AS THE NOR MAL BUSINESS INCOME OF THE ASSESSEE. 3. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WHERE THE ASSESSEE CHALLENGED BOTH THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT AS WE LL AS THE ADDITIONS MADE ON MERITS. THE LD.CIT(APPEALS) VIDE HER ORDER DATED 29.9.2014 DISMISSED ALL THE GROUNDS RAI SED BY THE ASSESSEE. 4. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 5. GROUND NO.1 RAISED BY THE ASSESSEE IS A LEGAL GR OUND CHALLENGING THE VALIDITY OF THE ASSESSMENT FRAMED U /S 147 OF THE ACT AND READS AS UNDER: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE REOPENING THE CASE OF THE APPELLANT UNDER SECTION 147 READ WITH SECTION 148 OF THE INCOM E TAX ACT 1961. 6. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEES PROPERTY HAD BEEN ACQUIRED FOR CONSTRUCTION OF COAL DAM IN 3 TATTAPANI AND AWARD WAS PASSED BY THE LAO, SUNDER NAGAR ALLOWING THE FOLLOWING AMOUNTS AS COMPENSATION: A) STRUCTURE VALUE = RS.30,51,386/- B) SOLATIUM = RS. 9,15,415/- C) ADDITIONAL AMOUNT = RS.26,37,400.70 TOTAL = RS.66,04,202/- 7. THE TDS CERTIFICATE WAS ISSUED BY THE LAO FOR TH E ASSESSMENT YEAR 2009-10. THE ASSESSEE FILED HER RE TURN FOR THE SAID YEAR CLAIMING ENTIRE RECEIPT AS TAX FREE A ND THE REFUND OF THE TAX DEDUCTED AT SOURCE AMOUNTING TO RS.6,80,223/-. THE CASE WAS SELECTED FOR SCRUTINY FOR A.Y 2009-10 DURING THE COURSE OF WHICH THE ASSESSEE CON TENDED THAT THE SAID COMPENSATION HAVING BEEN RECEIVED IN THE FINANCIAL YEAR ENDING ON 31.3.2008 I.E. ON 29.3.200 8,AND THUS WAS TAXABLE IN ASSESSMENT YEAR 2008-09. ACCOR DINGLY, THE ASSESSING OFFICER, ACCEPTING THE ASSESSEES CON TENTION, HELD THAT THE SAID SUM WAS ASSESSABLE IN ASSESSMENT YEAR 2008-09 AND NOT IN ASSESSMENT YEAR 2009-10. CONSEQUENTLY, THE CASE WAS REOPENED FOR ASSESSMENT YEAR 2008-09, IN WHICH, AS PER THE ASSESSING OFFICER HE HAD REASON TO BELIEVE THAT THE INCOME TO THE TUNE OF RS.66,04,202/- HAD ESCAPED ASSESSMENT. THE ASSESSE E ON RECEIPT OF THE COPY OF REASONS FOR REOPENING FILED OBJECTION IN RESPECT TO THE SAME WHICH WAS CONSIDERED AND DIS POSED OFF BY THE ASSESSING OFFICER. 8. BEFORE THE LD.CIT(APPEALS) THE ASSESSEE CHALLEN GED THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS STATI NG THAT THERE WAS NO REASON WHICH COULD HAVE LED TO THE BEL IEF THAT 4 THE INCOME HAD ESCAPED ASSESSMENT. THE ASSESSEE PL EADED THAT THE ASSESSING OFFICER HAD COMPLETE INFORMATION ABOUT THE COST OF CONSTRUCTION OF THE PROPERTY WHICH HAD BEEN ACQUIRED AND AFTER APPLYING INDEXED COST METHOD TO IT THE CAPITAL GAIN IN ANY CASE COULD NOT HAVE WORKED OUT AT RS.66 LACS AND, THEREFORE, THE REASON RECORDED BY THE ASS ESSING OFFICER THAT THE INCOME TO THIS EXTENT HAD ESCAPED ASSESSMENT WAS WRONG. THE ASSESSEE ALSO CONTENDED THAT THE ASSESSING OFFICER WAS AWARE THAT THE ASSESSEE H AD INVESTED IN NEW PROPERTY AND WAS ENTITLED TO DEDUCT ION ON THE SAME, THEREFORE, AS PER THE INFORMATION AVAIL ABLE WITH THE ASSESSING OFFICER IT COULD NOT HAVE LED TO THE BELIEF OF ESCAPEMENT OF INCOME AND AS SUCH THE CASE HAD BEEN ILLEGAL REOPENED BY THE ASSESSING OFFICER. THE LD.CIT(APPEA LS) REJECTED THE CONTENTION OF THE ASSESSEE HOLDING THA T THE ASSESSING OFFICER HAVING CLEAR INFORMATION REGARDIN G COMPENSATION RECEIVED BY THE ASSESSEE DURING THE YE AR, THE REOPENING WAS VALID. 9. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERAT ED THE CONTENTIONS RAISED BEFORE THE LD.CIT(APPEALS) AND VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER HAD NO INFORMATION IN HIS POSSESSION OF ESCAPEMENT OF INCO ME AND, THEREFORE, THE REOPENING WAS INVALID. 10. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(APPEALS) AND STATED THAT THE REOPENIN G WAS VALID SINCE THE ASSESSING OFFICER HAD INFORMATION O F 5 COMPENSATION RECEIVED BY THE ASSESSEE PERTAINING TO THE IMPUGNED YEAR HAVING NOT BEEN BROUGHT TO TAX. 11. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALS O THE DOCUMENTS PRODUCED BEFORE US. WE FIND NO MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. IT IS N OT DISPUTED THAT THE ASSESSING OFFICER HAD INFORMATION THAT THE COMPENSATION RECEIVED BY THE ASSESSEE OF RS.66,04,2 02/- ON ACCOUNT OF ACQUISITION OF HER PROPERTY PERTAINED TO THE IMPUGNED ASSESSMENT YEAR AND HAD NOT BEEN RETURNED FOR INCOME TAX BY THE ASSESSEE FOR THE IMPUGNED YEAR. T HE SAID INFORMATION HAD BEEN PROVIDED BY THE ASSESSEE HERSE LF DURING THE COURSE OF PROCEEDINGS FOR ASSESSMENT YEA R 2009- 10.THIS INFORMATION WAS SUFFICIENT FOR THE ASSESSIN G OFFICER TO FORM BELIEF OF ESCAPEMENT OF INCOME. THE CONTEN TION OF THE LD. COUNSEL FOR ASSESSEE THAT THE ASSESSING OFF ICER WAS AWARE OF THE COST OF THE CONSTRUCTION OF THE HOUSE PROPERTY AND, THEREFORE, AFTER INDEXING THE SAME HE COULD NO T HAVE FORMED A BELIEF OF ESCAPEMENT OF INCOME TO THE EXTE NT OF COMPENSATION RECEIVED OF RS.66 LACS, WE FIND HAS NO MERIT. FIRSTLY IT HAS NOT BEEN SHOWN AS TO HOW THE ASSESSI NG OFFICER WAS AWARE OF ALL THESE FACTS, AND EVEN OTHE RWISE, IT IS SETTLED LAW THAT AT THE STAGE OF ISSUANCE OF NOT ICE THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIA L ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUI SITE BELIEF OF ESCAPEMENT OF INCOME. THIS BELIEF BEING W ITHIN THE REALM OF SUBJECTIVE SATISFACTION, ESCAPEMENT OF INC OME IS 6 NOT TO BE CONCLUSIVELY PROVED. THE HON'BLE APEX CO URT IN THE CASE OF RAYMOND WOOLLEN MILLS VS ITO (1999) 236 ITR 34(SC) HAS HELD AS UNDER: WE HAVE ONLY TO SEE WHETHER THERE WAS PRIMA FACIE S OME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REO PEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATE RIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. WE ARE OF THE VIEW THAT THE COURT CANNOT STRIKE DOWN THE REOPENING OF THE CAS E IN THE FACTS OF THIS CASE. IT WILL BE OPEN TO THE ASSESSEE TO PROVE THAT THE ASSUMPTION OF FACTS MADE IN THE NOTICE WAS ERRONEO US. THE ASSESSEE MAY ALSO PROVE THAT NO NEW FACTS CAME TO TH E KNOWLEDGE OF THE ITO AFTER COMPLETION OF THE ASSESSME NT PROCEEDING. WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THE CASE. THE QUESTIONS OF FACT AND LAW ARE LEFT O PEN TO BE INVESTIGATED AND DECIDED BY THE ASSESSING AUTHORITY. THE APPELLANT WILL BE ENTITLED TO TAKE ALL THE POINTS BEFORE THE ASSESSING AUTHORITY. 12. THE FACT THAT THE COMPENSATION RECEIVED BY THE ASSESSEE HAS NOT BEEN RETURNED FOR TAXATION N PURPO SE IS ENOUGH TO ARRIVE AT THE BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT. THAT LATER ON, DURING THE COURSE OF AS SESSMENT PROCEEDINGS IT MAY TURN OUT THAT THE ASSESSEE HAD I NFACT, INCURRED LOSS OR THE QUANTUM OF THE CAPITAL GAIN EA RNED MAY BE LESS THAN THE AMOUNT OF COMPENSATION RECEIVED MA KES NO DIFFERENCE TO THE SITUATION. THE ASSESSING OFFICER IS NOT REQUIRED TO QUANTIFY EXACTLY THE AMOUNT OF INCOME W HICH HAS ESCAPED ASSESSMENT. THIS EXERCISE CAN AND SHOUL D BE DONE DURING THE ASSESSMENT PROCEEDINGS WHILE AT THE STAGE OF RECORDING REASONS TO ASSUME JURISDICTION TO REOP EN THE CASE, THE ASSESSING OFFICER IS ONLY REQUIRED TO FOR M A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT FOR THE IMPUGNE D YEAR. 7 13. IN VIEW OF THE ABOVE, WE HOLD THAT THE RE-ASSES SMENT PROCEEDINGS WERE VALIDLY INITIATED AND DISMISS GRO UND NO.1 RAISED BY THE ASSESSEE. 14. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UND ER: 2. THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIE D IN UPHOLDING THE TAXING OF A SUM OF RS11,25,000/- ON ACCOUNT OF LOSS OF EARNING RECEIVED ON ACCOUNT OF ACQUISITION OF THE PROPERTY OF THE MATTER. 15. THE FACTS RELATING TO THE ISSUE ARE THAT DURING THE RE- ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THAT APART FROM THE COMPENSATION AMOUNTING TO RS.66,04,202/- I T HAD ALSO RECEIVED A SUM OF RS.11,25,000/- FROM THE LAO, BILASPUR ON ACCOUNT OF LOSS OF GOODWILL. THE ASSES SEE SUBMITTED THAT THE SAID AMOUNT RECEIVED COULD NOT B E SUBJECTED TO TAX SINCE IT COULD AT BEST BE SAID TO HAVE BEEN RECEIVED ON ACCOUNT OF A PERSONAL EFFECT NOT FALLIN G WITHIN THE DEFINITION OF CAPITAL ASSET U/S 2(14) OF THE AC T AND FURTHER SINCE IT WAS A SELF ACQUIRED GOODWILL WHICH WAS NOT TAXABLE AS PER LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. B.C. SRIVASA SETTY, 128 ITR 294. THE ASSESSING OFFICER ON PERUSING THE DOCUMENTS SUBMITT ED BY THE ASSESSEE FOUND THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.11,25,000/- FROM THE LAO, BILASPUR ON ACCOUNT OF LOSS OF INCOME WHICH WAS EARNING FROM RUNNING A GUEST HOUSE NAMED RAINBOW GUEST HOUSE WHICH WAS SITUATED AT DHARMIK STHAL. THEREAFTER THE ASSESSING OFFICER CO LLECTED INFORMATION FROM THE LAO TO KNOW EXACTLY WHAT KIND OF APPLICATION WAS MOVED BY THE ASSESSEE TO GET THE AM OUNT OF 8 RS.11,25,000/-. FROM THE DOCUMENTS SENT BY THE LAO , BILASPUR, THE ASSESSING OFFICER NOTED THAT THE ASSE SSEE HAD SUBMITTED AN APPLICATION BEFORE THE LAO STATING THA T SHE WAS THE PROPRIETOR OF RAINBOW GUEST HOUSE WHICH WAS SITUATED IN TATTAPANI AND THE SAME WAS TAKEN ON LEA SE FOR A PERIOD OF 20 YEARS FROM SHRI KESAR SINGH ,WHO WAS THE OWNER OF THE GUEST HOUSE, FROM THE YEAR 1998. SHE HAD ALSO FILED BALANCE SHEET FOR THE YEAR ENDING 31.3.2004, 31.3.2005 AND 31.3.2006 SHOWING THE SAID BUILDING A S FIXED ASSET AND CLAIMING DEPRECIATION ON THE SAME. THE ASSESSING OFFICER BASED ON THIS INFORMATION ASKED T HE ASSESSEE AS TO WHY THE COMPENSATION RECEIVED FOR TH E LOSS OF INCOME FOR THE COMING 15 YEARS COMPUTED ON THE BASI S OF EARNING VALUE OF RS.75,000/- PER ANNUM FOR 15 YEARS BE NOT TREATED AS INCOME RECEIVED IN ADVANCE AND NOT CAPIT AL RECEIPT. THE ASSESSEE IN RESPONSE STATED THAT THE AMOUNT HAD BEEN RECEIVED ON ACCOUNT OF GOODWILL WHICH COUL D NOT BE SUBJECTED TO TAX AS PER THE DECISION OF THE HON' BLE APEX COURT IN THE CASE OF B.C. SRIVASA SETTY (SUPRA) AND THE MONEY HAVING BEEN COMPUTED FOR THE LOSS OF EARNING FOR 15 YEARS THE SAME COULD NOT BE SUBJECTED TO TAXATION I N ONE PARTICULAR YEAR. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE STATING THAT THE ACT HAS BEEN AMENDED AND CAPITAL GAIN IS CHARGEABLE EVEN ON THE TRANSFER OF GOODWILL OR BUSINESS OR TENANCY RIGHT IF THEY AR E SELF GENERATED. THE ASSESSING OFFICER FURTHER HELD THAT IT IS A CASE OF COMPENSATION AGAINST LOSS OF EARNING AND NO T OF SALE OR TRANSFER OF GOODWILL. HE, THEREFORE, TREATED THE RECEIPT OF 9 RS.11,25,000/- AS HER NORMAL BUSINESS INCOME AND AD DED THE SAME TO THE INCOME OF THE ASSESSEE. 16. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE REITER ATED THE CONTENTION MADE BEFORE THE ASSESSING OFFICER. THE LD.CIT(APPEALS) IN TURN HELD THAT THE COMPENSATION RECEIVED WAS ON ACCOUNT OF TRANSFER OF ASSET AND THUS MODIFI ED HE ORDER OF THE ASSESSING OFFICER TO TAX THE ADDITIONA L COMPENSATION AS PART OF CAPITAL GAIN INSTEAD OF BUS INESS INCOME. 17. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERA TED THE CONTENTION MADE BEFORE THE LOWER AUTHORITIES, WHILE THE LD. DR RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 18. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. THE ISSUE BEFORE US PERTAINS TO DETERMINING THE NAT URE OF THE COMPENSATION RECEIVED OF RS.11,25,000/- WHETHER IT WAS IN THE NATURE OF COMPENSATION RECEIVED FOR ACQUISIT ION OF THE ASSESSEES PROPERTY AS HELD BY THE CIT(A) CAPITA L OR WAS OTHERWISE CAPITAL IN NATURE NOT LIABLE TO BE TAXED AS PLEADED BY THE LD.COUNSEL FOR THE ASSESSEE. 19. THE FACTS WHICH ARE NOT DISPUTED ARE THAT THE A SSESSEE WAS THE OWNER OF A PROPERTY BUILT ON LAND TAKEN ON LEASE BY HER FROM HER HUSBAND FOR A PERIOD OF 20 YEARS AND W AS RUNNING A GUEST HOUSE ON THE SAME. THE PERIOD OF L EASE REMAINING WHEN THE SAID PROPERTY WAS ACQUIRED BY TH E GOVERNMENT WAS 15 YEARS. THE ASSESSEE HAD BEEN COMPENSATED FOR THE ACQUISITION OF PROPERTY TO THE TUNE OF 10 RS.66,04,202/- AND THEREAFTER THE ASSESSEE HAD REQU ESTED THE LAO TO COMPENSATE HER FURTHER FOR GOODWILL ON A CCOUNT OF DISCONTINUATION OF HER BUSINESS, IN RESPONSE TO WHICH THE ASSESSEE HAD FILED COPIES OF HER BALANCE SHEET TO T HE LAO TO PROVE THAT SHE HAD BEEN RUNNING A GUEST HOUSE ON TH E SAID PROPERTY AND EARNING INCOME OF APPROXIMATELY RS.75, 000/- PER YEAR. THE LAO HAD ACCEPTED THE CONTENTIONS OF T HE ASSESSEE AND DIRECTED THAT THE ASSESSEE BE COMPENSA TED FOR HER LOSS OF YEARLY INCOME WHICH AMOUNTED IN ALL TO RS.11,25,000/-. THE RELEVANT APPLICATION OF THE AS SESSEE AND THE ORDER OF THE LAO FORMED PART OF THE PAPER B OOK PLACED AT PAGES 36 TO 38. 20. WHAT EMERGES FROM THESE FACTS IS THAT THE LAO H AD AWARDED THE SUM OF RS.11,25,000/- TO THE ASSESSEE A S COMPENSATION FOR THE LOSS OF THE INCOME EARNING APP ARATUS OF THE ASSESSEE. THE GOVERNMENT HAVING TAKEN OVER/ACQUIRED THE PREMISES AND THE LAND ON WHICH TH E ASSESSEE WAS RUNNING HER GUEST HOUSE, THE ASSESSEE HAD BEEN DEPRIVED OF HER INCOME EARNING SOURCE AND SINC E THE REMAINING LEASE FOR THE GUEST HOUSE WAS 15 YEARS, S HE HAD BEEN DEPRIVED OF HER INCOME EARNING APPARATUS FOR T HE NEXT 15 YEARS. CONSIDERING THESE FACTS THE LAO HAD COMPE NSATED HER FOR THE LOSS OF HER INCOME EARNING APPARATUS. S UCH COMPENSATIONS RECEIVED FOR LOSS OF BUSINESS ON ACCO UNT OF COMPULSORY REQUISITION OF BUSINESS ASSETS HAS BEEN HELD TO BE CAPITAL RECEIPTS BY THE HONBLE APEX COURT IN TH E CASE OF SENAIRAM VS CIT (1961) 42 ITR 392. THE SAID RECEIP T, 11 THEREFORE, IS CAPITAL IN NATURE AND CANNOT BE BROUG HT TO TAX IN THE HANDS OF THE ASSESSEE. 21. THE CONTENTION OF THE REVENUE THAT THE SAME FOR MED PART OF THE CONSIDERATION FOR THE ASSET IS TOTALLY OFF THE MARK. THE COMPENSATION RECEIVED BY THE ASSESSEE ON ACCOUNT OF THE ACQUISITION OF THE BUILDING FORMED PART AND WAS INCLUDED IN THE AWARD GRANTED TO THE ASSESSEE, THE AMOUNT OF WHICH WAS RS.66,04,202/- ONLY, AS PER TH E SAID SHEET PLACED AT PAPER BOOK PAGE NO.26. THE FIGURE O F RS.11,25,000/- DOES NOT FORM PART OF THE SAID SHEET . IN FACT, AS POINTED OUT ABOVE, THE LAO HAD AWARDED THE SUM AS COMPENSATION FOR LOSS OF INCOME AND, THEREFORE, BY NO STRETCH OF IMAGINATION THE SAID AMOUNT CAN BE SAID TO BE PART OF THE COMPENSATION OF ACQUISITION OF ASSET. 22. IN VIEW OF THE ABOVE WE HOLD THAT THE AMOUNT RE CEIVED AMOUNTING TO RS.11,25,000/-AS COMPENSATION FOR LOSS OF BUSINESS WAS A CAPITAL RECEIPT DISTINCT FROM THE COMPENSATION RECEIVED FOR ACQUISITION OF LAND AND T HUS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. GROUND NO.2 RAISED BY THE ASSESSEE THEREFORE STANDS ALLOWED. 23. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UND ER: 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD ASSESSING OFFICER IS NOT JUSTIFIED IN UPHOLDING THE TAXING OF A SUM OF RS 56,54,290/- AS SHOT TERM CAPITAL GAINS . THE SAME SHOULD HAVE BEEN HELD TO BE ASSESSABLE AS A LONG TERM CAPITAL GAIN. 12 24. IN THE AFORESAID GROUND, THE ASSESSEE HAS CHALL ENGED THE TREATMENT OF THE AMOUNT RECEIVED AS COMPENSATIO N ON ACCOUNT OF ACQUISITION OF ITS PROPERTY AS SHORT TER M CAPITAL GAIN BY TREATING THE ASSET ACQUIRED AS THE BUSINESS ASSET OF THE ASSESSEE AS AGAINST LONG TERM CAPITAL GAINS RET URNED BY THE ASSESSEE TREATING THE SAME AS TRANSFER OF A PERSONAL CAPITAL ASSET. 25. BRIEFLY STATED, THE ASSESSEE HAD COMPUTED THE C APITAL GAIN EARNED ON TRANSFER OF THE ASSET COMPULSORILY A CQUIRED BY SETTING OFF FROM THE CONSIDERATION RECEIVED OF RS.66,04,202/-, THE INDEXED COST OF ACQUISITION OF THE ASSET WHICH WAS COMPUTED AT RS.50,56,998/- AND AGAINST TH E RESULTANT CAPITAL GAIN OF RS.15,47,203/- THE ASSESS EE HAD CLAIMED DEDUCTION U/S 54F OF THE ACT. THE COMPUTAT ION FILED BY THE ASSESSEE REPRODUCED AT PAGES 3 AND 4 O F THE ASSESSMENT ORDER AS UNDER: COMPUTATION OF CAPITAL GAIN CONSIDERATION 6604202 (TAKEN THE ENTIRE COMPENSATION AS DEDUCTION AS PER MANDATE OF THE SUPREME COURT IN 315 ITR 1 PAGE) LESS COST OF CONSTRUCTION 1989-90 77728 X 551 249000.74 172 + 1990-91 5830 X 551 17650.16 182 ---------- ---- 266650. 90 H.NO.53 KOTHI NO.321/322 1998-99 2527595X551 3967820.07 351 + 1998-99 319749X551 501942.16 351 + 1999-00 189600X551 268559.38 389 ---------- -------- 4738321.61 + H.NO. 52 KOTHI NO. 322 1992-93 21056X551 52026.00 13 223 --------------- 5056998.51 CAPITAL GAIN 1547203.49 LESS; DEDUCTION UNDER SECTION 54F 1547203.49 TAX PAYABLE NIL TDS 680233.00 REFUNDABLE 680233.00 REGARDING THE AMOUNT RECEIVED IN RESPECT OF LOSS OF GOODWILL CAN AT BEST BE TERMED AS A PERSONAL EFFECT NOT FALLING WITH IN THE DEFINITION OF CAPITAL ASSET U/S 2(14) OF THE I.T. ACT, 1961. FURTHER EVEN IN THE CASE OF SALE/TRANSFER OF SELF ACQUIRED GOODWILL THE SAME IS NOT TAXABLE AS PER THE LAW LAID DOWN BY THE HONBLE SC OF INDIA IN THE CASE OF CIT BANGLORE VS. B.C.SRIVASA SETTY REPORTED AS 128 ITR 294.FURTH ER THE ASSESSEE HAD SPENT IN HUGE CHUNK OF MONEY IN THE CONSTRUCTION OF NEW HOUSE IN WHICH A BUSINESS VENTURE STANDS COMMENCED W.E.F. 2013 AND THE SAME IS ALLOWABLE AS DEDUCTION AS PER THE MANDATE OF SECTION 54F/54D OF THE I.T.ACT, 1961 AND IT IS PRAY ED THE SAME MAY KINDLY BE ALLOWED TO THE ASSESSEE. 26. THE ASSESSING OFFICER CONDUCTED ENQUIRIES FROM THE LAO AND FOUND THAT THE ASSESSEE WHILE STAKING ITS C LAIM FOR COMPENSATION ON ACCOUNT OF LOSS OF INCOME/GOODWILL HAD STATED THAT SHE WAS THE PROPRIETOR OF M/S RAINBOW G UEST HOUSE WHICH WAS ACQUIRED BY THE GOVERNMENT AND HAD ALSO FILED BALANCE SHEETS FOR THE PERIOD ENDING 31.3.201 4, 31.3.2015 AND 31.3.2016 SHOWING THE BUILDING THEREI N AS HER FIXED ASSET AND CLAIMING DEPRECIATION THEREON. ON THE BASIS OF THIS INFORMATION THE ASSESSING OFFICER HEL D THAT THE ASSET WAS THE BUSINESS ASSET OF THE ASSESSEE AND TH E CAPITAL GAIN EARNED THEREON WAS TAXABLE U/S 50 OF THE ACT A S SHORT TERM CAPITAL GAIN ON WHICH NO INDEXATION WAS ALLOWA BLE. THE ASSESSEE CONTENDED DURING ASSESSMENT PROCEEDING S THAT NO BUSINESS WAS CARRIED OUT ON THE SAID PROPERTY AN D THE BALANCE SHEET HAD NEVER BEEN FILED TO THE INCOME-TA X AUTHORITIES AND NO DEPRECIATION CLAIMED THEREON, WH ICH WAS BRUSHED ASIDE BY THE ASSESSING OFFICER FOR THE REAS ON THAT EVEN IF THE ITRS WERE NOT FILED, IT WOULD NOT TAKE AWAY THE FACT THAT THE ASSESSEE WAS RUNNING A GUEST HOUSE ON THE 14 SAME AND THE DEPRECIATION AND OTHER EXPENSES WOULD BE DEEMED TO HAVE BEEN ALLOWED TO THE ASSESSEE. THE AS SESSING OFFICER THEREAFTER CALCULATED THE WRITTEN DOWN VALU E OF THE GUEST HOUSE BUILDING AS ON 1.4.2007 WHEN THE ASSET WAS COMPULSORILY ACQUIRED AND REDUCED THE SAME FROM THE COMPENSATION RECEIVED, THUS WORKING OUT THE NET SHO RT TERM CAPITAL GAIN AT RS.56,54,290/-, THE CALCULATIO N OF THE WRITTEN DOWN VALUE AND SHORT TERM CAPITAL GAIN IS REPRODUCED AT PAGES 9 AND 10 OF THE ASSESSMENT ORDE R AS UNDER: FINANCIAL YEAR OPENING BALANCE/ WRITTEN DOWN VALUE RATE OF DEPRECIATION DEPRECIATION AMOUNT WRITTEN DOWN VALUE AT THE END OF YEAR 1998-99 3037344 + 21056 + 83558 NO DEPRECIATION AS THE GUEST HOUSE WAS NOT COMPLETE AND COULD NOT HAVE BEEN PUT TO USE 1999-00 3141958 20% 628392 2513566 2000-01 2513566 20% 502713 2010853 2001-02 2010853 20% 402170 1608683 2002-03 1608683 10% 160868 1447815 2003-04 1447815 10% 144781 1303034 2004-05 1303034 10% 130303 1172731 2005-06 1172731 10% 117273 1055458 2006-07 1055458 10% 105546 949912 FROM THE ABOVE CHART IT IS CLEAR THAT THE WRITTEN DOWN VALUE OF THE PROPERTY AS ON 01/04/2007 WAS R.949912/-. SI NCE, THE ASSESSEE HAS RECEIVED TOTAL COMPENSATION AT RS.6604 202/- ON 29.02.2008 THE SHORT TERM CAPITAL GAIN IS COMPUTED AS UNDER: GROSS AMOUNT OF COMPENSATION RECEIVED RS.6604202/ - LESS W.D.V. OF THE BUILDING AS ON 01/04/2007 RS.949912/- NET SHORT TERM CAPITAL GAIN RS.5654290/- 27. BEFORE THE LD.CIT(APPEALS) THE LD. COUNSEL FOR ASSESSEE REITERATED HER CONTENTIONS WHICH WAS REJECTED BY TH E 15 LD.CIT(APPEALS) WHO UPHELD THE FINDINGS OF THE ASSE SSING OFFICER ON THIS ISSUE. 28. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERA TED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES I.E. THE SAID CAPITAL GAIN WAS NOT ON ACCOUNT OF SALE OF BUSINESS ASSET SINCE NO BUSINESS WAS CARRIED OUT BY THE ASSESSEE A ND NO DEPRECIATION EVER CLAIMED ON THE SAME AS EVIDENCE. THE LD. COUNSEL FOR ASSESSEE SUPPORTED HIS CONTENTION BY ST ATING THAT THE ASSESSEE HAD NEVER FILED RETURNS IN EARLIE R YEARS AND THUS HAD NEVER CLAIMED THE INCOME EARNED THEREO N AS BUSINESS INCOME, NOR HAD NEVER CLAIMED DEPRECIATION ON THE SAID ASSET. THE LD. COUNSEL FOR ASSESSEE ALSO STAT ED THAT MERELY ON THE BASIS OF DOCUMENTS SUBMITTED TO THE L AO THE ASSESSING OFFICER ARRIVED AT THE SAID CONCLUSION WH ILE THE FACT WAS THAT THE ASSESSEE HAD NEVER FILED RETURNS CLAIMING THE INCOME EARNED FROM THE ASSET AS BUSINESS INCOME OR TREATING THE ASSET AS ITS BUSINESS ASSET CLAIMING DEPRECIATION THEREON. 29. THE LD. DR, ON THE OTHER HAND, COUNTERED BY STA TING THAT THE ASSESSEE HAD STAKED ITS CLAIM FOR COMPENS ATION FOR LOSS OF INCOME BEFORE THE LAO BY FILING HER BALANCE SHEETS REFLECTING THE FACT THAT SHE HAD EARNED BUSINESS IN COME FROM THE SAID ASSET AND ALSO CLEARLY REFLECTING THE SAID ASSET AS BUSINESS ASSET CLAIMING DEPRECIATION THEREON. T HE LD. DR STATED THAT THE ASSESSEE WAS NOW ESTOPPED FROM CLAIMING OTHERWISE BEFORE ANOTHER GOVERNMENT REVENU E AUTHORITY. THE LD. DR STATED THAT HAVING ACCEPTED A SSESSEES 16 CLAIM FOR COMPENSATION ON ACCOUNT OF LOSS OF INCOME AND THE ASSESSEE HAVING APPLIED AND ACCEPTED THE SAME A LSO FOR THE SAME REASON THE ASSESSEE CANNOT NOW MAKE A U TURN AND STATE THAT WHAT WAS CLAIMED BEFORE THE LAO BY T HE ASSESSEE WAS INCORRECT. THE LD. DR FURTHER STATED THAT NON-FILING OF RETURN CANNOT HELP THE ASSESSEES CAS E SINCE THE SAID ACT HAS NO BEARING ON THE ACTIVITY CARRIE D OUT BY THE ASSESSEE. THE LD. DR FURTHER POINTED OUT THAT THE DEPRECIATION CALCULATED AND REDUCED FORM THE COST O F THE ASSET WAS PICKED FROM THE FIGURE SUPPLIED BY THE AS SESSEE IN THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT FILED B EFORE THE LAO. THE LD. DR, THEREFORE, STATED THAT IT WAS BAS ED ON INFORMATION PROVIDED BY THE ASSESSEE TO THE LAO WHI CH HAS NOT BEEN DENIED BY THE ASSESSEE, THAT THE ASSESSING OFFICER ARRIVED AT THE CORRECT CONCLUSION THAT THE SAID ASS ET WAS THE BUSINESS ASSET OF THE ASSESSEE AND THE CAPITAL GAIN EARNED THEREON, THEREFORE, WAS SHORT TERM CAPITAL GAIN AND THE ASSESSEE WAS NOT ENTITLED TO ANY INDEXATION OF THE COST OF THE ACQUISITION OF THE SAME. 30. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE DOCUMENTS FILED BEFORE US. WE FIND NO MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. IT IS AN ADMITTED FACT THAT BEFORE THE LAO THE ASSESSEE HAD STAKED CLAIM TO BE COMPENSATED FOR LOSS OF ITS BUSINESS IN COME AND AS EVIDENCE OF THE SAME HAD FILED BALANCE SHEET BEF ORE THE LAO SHOWING THAT THE IMPUGNED ASSET WAS ITS BUSINES S ASSET AND WAS BEING DEPRECIATED ACCORDINGLY. THE A SSESSEE 17 IN HER APPLICATION BEFORE THE LAO HAD SUBMITTED THA T SHE WAS RUNNING A GUEST HOUSE IN THE SAID PROPERTY AND WAS EARNING INCOME THEREON. EVEN THE LAO AWARDED COMPENSATION TO THE ASSESSEE OF RS.11,25,000/- FOR LOSS OF BUSINESS INCOME. ALL THESE FACTS,WHICH HAVE NOT BEE N CONTROVERTED BY THE ASSESSEE LEAD ONLY TO ONE LOGIC AL CONCLUSION, THAT THE ASSET WAS THE BUSINESS ASSET O F THE ASSESSEE. THE REVENUE, THEREFORE, HAS RIGHTLY HELD THE CAPITAL GAIN EARNED THEREON AS SHORT TERM CAPITAL G AIN EARNED ON SALE OF BUSINESS ASSET AS PER THE PROVISI ONS OF SECTION 50 OF THE ACT AND DENIED THE ASSESSEE INDEX ATION ON THE COST OF ACQUISITION OF THE ASSET THEREON. 31. THE CLAIM OF THE LD. COUNSEL FOR ASSESSEE THAT THE SAID ASSET WAS NOT ITS BUSINESS ASSET IS BASED SOLELY ON THE FACT THAT IT HAD NEVER FILED RETURNS BEFORE THE INCOME-T AX AUTHORITIES CLAIMING SO. WE FIND NO SUBSTANCE IN TH IS ARGUMENT OF THE LD. COUNSEL FOR ASSESSEE. NON FILI NG OF INCOME TAX RETURN DOES NOT PROVE THAT THE ASSET WAS NOT THE BUSINESS ASSET OF THE ASSESSEE. THE NON-FILING OF INCOME TAX RETURN IS IN FACT A DEFAULT ON THE PART OF THE ASSESSEE WHICH HAS ITS OWN CONSEQUENCES BUT MERELY BECAUSE T HE ASSESSEE DOES NOT FILE HER INCOME TAX RETURN DOES N OT MEAN THAT SHE HAS EARNED NO TAXABLE INCOME AT ALL. THE N ON FILING OF INCOME TAX RETURN DOES NOT PROVE ANYTHING AT ALL . 32. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO CONTE NDED THAT AS PER SECTION 50 OF THE ACT ,WHICH TREATS CAP ITAL GAINS EARNED IN CASE OF DEPRECIABLE ASSETS AS SHORT TERM CAPITAL 18 GAINS, THE CAPITAL ASSET SHOULD FORM BLOCK OF CAPIT AL ASSETS ON WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THE ACT. THE CONTENTION OF THE LD.COUNSEL IS THAT SINCE NO R ETURN HAS BEEN FILED BY THE ASSESSEE, THE ASSESSEE HAS NO T CLAIMED DEPRECIATION ALSO AND HAVING NOT CLAIMED DEPRECIATION, THE SAME CANNOT BE SAID TO HAVE BEEN ALLOWED TO IT ALSO. 33. WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE ASSESSEE ALSO. FIRSTLY AS PER THE ASSESSEES OWN CLA IM BEFORE THE LAO, THE IMPUGNED ASSET I.E. THE BUILDING ,IS I TS BUSINESS ASSET WHICH IS BEING DEPRECIATED YEAR TO Y EAR AS REFLECTED IN THE BALANCE SHEET FILED BEFORE THE LAO . MERELY BECAUSE NO RETURN HAS BEEN FILED BY THE ASSESSEE WI LL NOT TAKE AWAY THE ADMITTED FACT THAT THE ASSET IS A BUS INESS ASSET OF THE ASSESSEE FORMING PART OF BLOCK OF ASSE T I.E. BUILDING. MOREOVER DEPRECIATION ALLOWED TO THE AS SESSEE CANNOT BE READ SO AS TO MEAN THAT ALLOWED AFTER HAV ING BEEN CLAIMED BY THE ASSESSEE. EXPLANATION 5 TO SECTION 3 2(1) ,WHICH DEALS WITH ALLOWABILITY OF DEPRECIATION ,STA TES DEPRECIATION WILL BE ALLOWED AS PER THE PROVISION O F SECTION 32 WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDU CTION WHILE COMPUTING ITS INCOME. THEREFORE ACTUAL CLAIM BY THE ASSESSEE IS NOT REQUIRED EVEN BY STATUTE FOR ALLOWI NG IT. 34. WE, THEREFORE, HOLD THAT THE CAPITAL GAIN EARNE D ON COMPULSORY ACQUISITION OF THE PROPERTY HAS BEEN RIG HTLY HELD TO BE SHORT TERM CAPITAL GAIN AND HAS BEEN COR RECTLY 19 COMPUTED AT RS.56,50,290/- AFTER DENYING THE INDEXA TION ON THE COST OF THE ACQUISITION. GROUND NO.3 RAISED BY THE ASSESSEE IS, THEREFORE, DISMISSED. 35. GROUND NO.4 RAISED BY THE ASSESSEE READS AS UN DER: 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD COMMISSIONER OF INCOME TAX (APPEALS) IN NOT ALLOWING DEDUCTION UNDER SECTION 54F/54D OF THE INCOME TAX A CT, 1961. THE SAME IS VERY MUCH ALLOWABLE IN THE EYES OF LAW. 36. THE ABOVE GROUND WAS NOT PRESSED BEFORE US AND IS, THEREFORE, DISMISSED AS NOT PRESSED. IN EFFECT, TH E APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 37. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH