K.R.Muralidhar, CHENNAI V. ITO, CHENNAI

ITA 1097/CHNY/2015

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9893 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1097/MDS/2015 & S.P. NO.338/MDS/2015 (IN I.T.A. NO.1097/MDS/2015) ' (' / ASSESSMENT YEAR : 2009-10 SHRI K.R. MURALIDHAR, OLD NO.120, NEW NO.246, ROOM NO.24 & 25, 1 ST FLOOR, GOVINDAPPA NAICKEN STREET, CHENNAI - 600 001. PAN : AAGPM 9070 N V. THE INCOME TAX OFFICER, NON-CORPORATE CIRCLE 13, CHENNAI - 600 034. ( APPELLANT & PETITIONER) (*+,-/ RESPONDENT) ,- . / / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE *+,- . / / RESPONDENT BY : SH. P. RADHAKRISHNAN, JCIT 0 . 1$ / DATE OF HEARING : 18.06.2015 2!( . 1$ / DATE OF PRONOUNCEMENT : 26.06.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE APPEAL AND STAY PETITION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI, DATED 23.3.2015 AND PERTAIN TO ASSESSMENT YEAR 2009-10. 2 I.T.A. NO.1097/MDS/15 S.P. NO.338/MDS/15 2. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS REGARDING COMPUTATION OF CAPITAL GAIN IN TRANSFER OF LAND. A CCORDING TO THE LD. COUNSEL, DURING THE YEAR UNDER CONSIDERATION, THE A SSESSEE ADMITTED LONG-TERM CAPITAL GAIN OF ` 67,73,345/- ON SALE OF FACTORY LAND AND BUILDING AT 141, KOTTIVAKKAM VILLAGE, NEHR U NAGAR, CHENNAI, KANCHEEPURAM DISTRICT. THE ASSESSEE ALSO CLAIMED EXEMPTION IN RESPECT OF LONG-TERM CAPITAL GAIN IN V IEW OF THE INVESTMENT IN RURAL ELECTRIFICATION CORPORATION LIM ITED BONDS AND INVESTMENT IN RESIDENTIAL HOUSE PROPERTY. THE ASS ESSEE ALSO CLAIMED SHORT-TERM CAPITAL LOSS OF ` 11,35,986/- ON ACCOUNT OF EXTINCTION OF GOODWILL. HOWEVER, THE ASSESSING OFF ICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE AS SESSEE BECAME THE OWNER OF THE LAND IN THE ASSESSMENT YEAR 2007-0 8. THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE LAN D IN QUESTION WAS SOLD WITHIN A PERIOD OF THREE YEARS. HENCE, IT HAS TO BE TREATED AS SHORT-TERM CAPITAL GAIN. ACCORDING TO THE LD. C OUNSEL, THE LAND IN QUESTION STANDS IN THE NAME OF PARTNER AND IT WAS N OT TRANSFERRED TO THE PARTNERSHIP FIRM AT ALL. THE ASSESSEE CONTINUE S TO BE THE OWNER OF THE LAND. ACCORDING TO THE LD. COUNSEL, THE ASS ESSEE HAD TAKEN OVER ONLY THE BUILDING AND OTHER ASSETS AND EXCLUDE D THE LANDED PROPERTIES OF THE PARTNERSHIP FIRM. THE LD.COUNSEL ALSO PLACED HIS 3 I.T.A. NO.1097/MDS/15 S.P. NO.338/MDS/15 RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CI T V. S. RAJAMANI & THANGARAJAN INDUSTRIES (2000) 241 ITR 66 8 AND SUBMITTED THAT FOR TRANSFER OF LANDED PROPERTY, THE DOCUMENT SHALL BE REGISTERED. SINCE THERE IS NO REGISTERED DOCUMENT, ACCORDING TO THE LD. COUNSEL, THERE WAS NO TRANSFER OF PROPERTY TO T HE PARTNERSHIP FIRM, HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE CAPITAL GAIN AS SHORT-TERM CAPITAL GAIN. THE LD.CO UNSEL ALSO PLACED HIS RELIANCE ON THE DECISION OF THIS BENCH IN RAJA FERTILIZERS V. INCOME TAX OFFICER (2013) 21 ITR (TRIB.) 658. 3. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT TRANSFER HAS BEEN DEFINED UNDER SECTION 2(47) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THEREFORE, THOUGH REGISTRATION OF DOCUMENT IS MANDA TORY FOR TRANSFER OF IMMOVABLE PROPERTY UNDER THE COMMON LAW, INCOME- TAX ACT DOES NOT REQUIRE ANY REGISTERED DOCUMENT FOR TRANSFER OF IMMOVABLE PROPERTY. ACCORDING TO THE LD. D.R., INCOME-TAX AC T, BEING A SPECIAL ENACTMENT, FOR ASSESSMENT OF TOTAL INCOME FOR LEVY OF TAX AND COLLECTION THEREOF, IT WOULD PREVAIL OVER THE OTHER ENACTMENTS. THEREFORE, EVEN THOUGH THERE IS NO REGISTERED DOCUM ENT FOR TRANSFER OF PROPERTY FROM THE ASSESSEE TO THE PARTNERSHIP FI RM, IT HAS TO BE TREATED AS TRANSFER IN THE HANDS OF THE PARTNERSHIP FIRM. IN FACT, THE 4 I.T.A. NO.1097/MDS/15 S.P. NO.338/MDS/15 PROPERTY WAS SHOWN AS ASSET IN THE ACCOUNTS OF THE PARTNERSHIP FIRM. THEREFORE, THE ASSESSEE BECAME THE OWNER ON THE DAT E ON WHICH THE FIRM WAS DISSOLVED. THEREFORE, THE ASSESSING O FFICER HAS RIGHTLY TAKEN THE GAIN AS SHORT-TERM CAPITAL GAIN. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ASSESSMENT OF CAPIT AL GAIN EITHER AS LONG-TERM CAPITAL GAIN OR SHORT-TERM CAPITAL GAIN. THE ASSESSEE CLAIMS THAT GAIN ON THE SALE OF THE LAND IS LONG TE RM CAPITAL GAIN ON THE GROUND THAT THE ASSESSEE CONTINUES TO BE THE OW NER OF THE PROPERTY, EVEN THOUGH THE SAME WAS SHOWN AS ASSET I N THE ACCOUNTS OF THE PARTNERSHIP FIRM. THE CLAIM OF THE ASSESSEE APPEARS TO BE THAT THERE IS NO REGISTRATION OF DOCU MENT EXECUTED FOR TRANSFER OF THE PROPERTY TO THE PARTNERSHIP FIRM. THE FACT REMAINS THAT THE LAND WAS TRANSFERRED TO THE ACCOUNT OF THE PARTNERSHIP FIRM AND THE PARTNERSHIP FIRM WAS ENJOYING THE LANDED PR OPERTY AS ITS OWN FOR THE PURPOSE OF CARRYING ON ITS BUSINESS. U NDER THE COMMON LAW, AS RIGHTLY SUBMITTED BY THE LD. D.R., REGISTRA TION OF DOCUMENT IS MANDATORY FOR TRANSFER OF IMMOVABLE PROPERTY. HOWE VER, UNDER THE INCOME-TAX ACT, WHICH IS BEING A SPECIAL ENACTMENT, DEFINITION OF TRANSFER GIVEN IN SECTION 2(47) OF THE ACT WOULD PREVAIL OVER THE 5 I.T.A. NO.1097/MDS/15 S.P. NO.338/MDS/15 DEFINITION GIVEN IN OTHER ENACTMENTS. THEREFORE, W HETHER THERE IS A TRANSFER OR NOT IS TO BE EXAMINED IN THE LIGHT OF S ECTION 2(47) OF THE ACT AND NOT OTHERWISE. IN FACT, THE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. V. CIT (239 ITR 775) EXAMINED THIS IS SUE AND FOUND THAT THE REGISTRATION OF DOCUMENT IS NOT AN ESSENTI AL REQUIREMENT FOR TRANSFER OF PROPERTY UNDER THE INCOME-TAX ACT. THI S JUDGMENT OF THE APEX COURT WAS NOT BROUGHT TO THE NOTICE OF THE MAD RAS HIGH COURT IN S. RAJAMANI & THANGARAJAN INDUSTRIES (SUPRA). TH IS WAS ALSO NOT CONSIDERED BY THIS TRIBUNAL IN RAJA FERTILIZERS (SU PRA). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF MADRAS HIGH COURT IN S. RAJAMANI & THANGARAJAN INDU STRIES (SUPRA) AND THIS TRIBUNALS DECISION IN RAJA FERTILIZERS (S UPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE APEX CO URT IN MYSORE MINERALS LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THEREFORE, WHEN THE PROPERTY WAS SHOWN IN THE ACCOU NTS OF THE PARTNERSHIP FIRM AND THE PARTNERSHIP FIRM WAS ALLOW ED TO ENJOY THE PROPERTY AS ITS OWN, THERE WAS TRANSFER OF PROPERTY TO THE PARTNERSHIP FIRM. 5. WE ARE CONSCIOUS THAT THE PARTNERSHIP FIRM UNDER THE COMMON LAW IS NOT A LEGAL ENTITY. HOWEVER, UNDER I NCOME-TAX ACT, IT 6 I.T.A. NO.1097/MDS/15 S.P. NO.338/MDS/15 IS A SEPARATE AND DISTINCTLY ASSESSABLE UNIT. THIS DISTINCTION HAS TO BE BORN IN MIND AND THE PARTNERSHIP FIRM CARRIED ON ITS BUSINESS THROUGH ITS PARTNERS. THEREFORE, FOR ALL PRACTICAL PURPOSES, UNDER THE PROVISIONS OF INCOME-TAX ACT, THE PARTNERSHIP FIRM IS THE OWNER OF THE PROPERTY AND THE ASSESSEE BECAME THE OWNER ON THE D ATE ON WHICH IT WAS RE-TRANSFERRED FROM THE PARTNERSHIP FIRM. T HEREFORE, THE GAIN, IF ANY, ON TRANSFER OF PROPERTY, HAS TO BE ASSESSED ONLY AS SHORT- TERM CAPITAL GAIN AND NOT AS LONG-TERM CAPITAL GAIN . THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIRMED. 6. NOW THE ASSESSEE ALSO CLAIMS DEDUCTION UNDER SEC TIONS 54EC AND 54 OF THE ACT. WE HAVE CAREFULLY GONE THR OUGH THE PROVISIONS OF SECTIONS 54EC AND 54 OF THE ACT. AS RIGHTLY OBSERVED BY THE CIT(APPEALS), THE PROVISIONS OF SECTIONS 54 AND 54EC OF THE ACT ARE APPLICABLE ONLY IN RESPECT OF GAIN ARISING FROM TRANSFER OF LONG-TERM CAPITAL ASSET. IN THIS CASE, THE GAIN AR OSE FROM THE TRANSFER WAS SHORT-TERM CAPITAL GAIN. THEREFORE, P ROVISIONS OF SECTIONS 54EC AND 54 ARE NOT APPLICABLE AT ALL. 7. NOW COMING TO THE VALUATION, THE ASSESSING OFFIC ER HAS RIGHTLY TAKEN THE VALUE AS REFLECTED IN THE BALANCE SHEET OF THE PARTNERSHIP FIRM AND IT WAS CONFIRMED BY THE CIT(AP PEALS). 7 I.T.A. NO.1097/MDS/15 S.P. NO.338/MDS/15 THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIR MED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. SINCE THE APPEAL IS DISMISSED, THE STAY PETITION OF THE A SSESSEE BEING INFRUCTUOUS, THE SAME IS ALSO DISMISSED. 9. IN THE RESULT, BOTH THE APPEAL AS WELL AS THE ST AY PETITION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 26 TH JUNE, 2015 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 26 TH JUNE, 2015. KRI. . *156 76(1 /COPY TO: 1. ,- /APPELLANT 2. *+,- /RESPONDENT 3. 0 81 () /CIT(A)-13, CHENNAI 4. 0 81 /CIT-10, CHENNAI 5. 69 *1 /DR 6. :' ; /GF.