RAJESH PRATAP VED, MUMBAI V. DCIT - 13 (3)(1), MUMBAI

ITA 1103/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5656 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 27-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Share purchase agreement; Cost of acquisition; Revised return; Capital Gains
• Section: 15; 201; 54EC; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH MUMBAI BEFORE : HON BLE JUSTICE P P BHATT, PRESIDENT & SHRI M.BALAGANESH, AM ITA NO. 1103 /MUM/ 201 9 ( ASSESSMENT YEAR : 20 15 - 16 ) SH RI RAJESH PRATAP VED SHOP NO.1, ALKA BUILDING JAMNADS A DUKIA ROAD KANDIVALI (W ) MUMBAI - 40067 VS. DCIT - 13(3)(1) MUMBAI AAYAKAR BHAVAN NEW MARINE LINES MUMBAI - 400 020 PAN /GIR NO. AA C PV2855L (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI RAJESH SHAH REVENUE BY SHRI BHARA T ANDHLE DATE OF HEARING 22 / 02 /202 1 DATE OF PRONOUNCEMENT 27 / 04 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO.1103/MUM/2019 FOR A.Y.2015 - 16 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 21, MUMBAI IN APPEAL NO.CIT(A) - 2 1/DCIT - 13(3)(1)/IT - 145/217 - 18 DATED 10/12/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 11/12/2017 BY THE LD. DY. COMMISSIONER OF INCOME TAX - 13(3)(1), MUMBAI (HEREINAFTER REFER RED TO AS LD. AO). ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 2 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF SALE CONSIDERATION OF PROPERTY AMOUNTING TO RS.44,63,434/ - IN THE FACTS AND CIR CUMSTANCES OF THE CASE. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS AN INDIVIDUAL AND HAD FILED HIS RETURN OF INCOME FOR THE A.Y.2015 - 16 ON 30/09/2015 DECLARING TOTAL INCOME OF RS.12,84,79,720 / - . THE ASSESSEE IS ALSO A DIRECTOR OF REGAL HOTEL PVT. LTD., FURTHER THE ASSESSEE FILED ITS REVISED RETURN OF INCOME ON 30/03/2017 DECLARING REV ISED TOTAL INCOME OF RS.11,67,24,470/ - . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN INCOME FRO M SALARY, LOSS OF HOUSE PROPERTY, INCOME FROM BUSINESS AND PROFESSIONS, INCOME FROM LONG TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. 4. DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE MR. RAJESH PRATAP VED ALONG WITH SHRI PRATAP H VED, SMT. KRISHNA P. VED AND SMT. KRUPA R. VED SOLD THE FOLLOWING PREMISES AS WELL AS RIGHTS IN THE SOCIETY AS PER AGREEMENT DATED 21/01/2015 TO ONE MR. ROHIT MAD AN SHETTY: A ) FLAT NO.701 OF KRISHNA KRUPA BELONGED TO MR. PRATAP H VED. B ) FLAT NO. 801 OF KRISHNA KRUPA ALONG WITH TERRACE BELONGED TO MR. RAJESH P VED - THE ASSESSEE AND C ) THE RIGHTS IN THE SOCIETY THE NUTAN LAXMI CO - OPERAIVE HOUSING SOCIETY ALONG WITH SHARE CERTIFICATE, MEMBERSHIP OF THE SOCIETY AND ALL OTHER BENEFIT AVAILABLE TO THE MEMBER OF THE SOCIETY AND BELONGED T O MR. RAJESH PRATAP VED, SHRI PRATAP H VED, SMT. KRISHN A P. VED AND SMT. KRUPA R. VED JOINTLY. ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 3 5. WE FIND THAT THE NARRATION OF THE FOLLOWING UNDISPUTED FACTS WOULD BE RELEVANT FOR UNDERSTANDING THE ISSUE IN DISPUTE BEFORE US: - A) THE PLOT OF LAND AND STR UCTURE AT JUHU VILE PARLE SCHEME MUMBAI WAS ORIGINALLY PURCHASED ON 18 TH JUNE, 2004 IN THE NAMES OF SHRI PRATAP HIRJI VED, MRS. KRISHNA PRATAP VED, SHRI RAJESH PRATAP VED (THE ASSESSEE) AND MRS. KRUPA R VED FROM MRS. RUPA PRAKASH PANDYA AND OTHERS. ALONG WITH PLOT AND STRUCTURE, ALL THE RIGHTS IN 5 SHARES OF THE NUTAN LAXMI CO - OPERATIVE HOUSING SOCIETY LTD AND ALL LEASE HOLD RIGHTS ALONG WITH TENANTS WERE PART OF THE PURCHASE COST. ON PURCHASE OF THE PLOT, ONE BECOMES A MEMBER OF THE NUTAN LAXMI CO - OPERATI VE HOUSING SOCIETY LTD AND A MEMBER HAS NUMBER OF RIGHT S ATTACHED TO THE PLOT SUCH AS BEING PART OF ASSOCIATION, RIGHTS IN GETTING PRIORITY IN MEMBERSHIP OF VARIOUS ASSOCIATIONS INCLUDING RIGHT OF MEMBERSHIP OF JUHU GYMKHANA, CONCESSIONAL RIGHTS IN HIRING OF PLOTS FOR VARIOUS OCCASIONS ETC. B ) ALL THE PARTIES VI Z., SHRI PRATAP HIRJI VED, MRS. KRISHNA PRATAP VED, SHRI RAJESH PRATAP VED (THE ASSESSEE) AND MRS. KRUPA R. VED HAD ENTERED INTO PARTNERSHIP TO CARRY ON BUSINESS OF DEVELOPMENT IN NAME OF M/S. RADHA EN TERPRISE AS PER PARTNERSHIP DEED DATED 3.12.2002. VIDE AGREEMENT DATED 18.9.2004, THE SAID PLOT WAS ASSIGNED ALONG WITH CERTAIN RIGHTS TO M/S. RADHA ENTERPRISE (PARTNERSHIP FIRM). AS PER THE SAID AGREEMENT, PARTNERS NAMELY PRATAP VED WHO HAD CONTRIBUTED R S.96,23,010 AND RAJESH VED, THE ASSESSEE WHO HAD CONTRI BUTED RS.1,03,00,000 FOR THE PURCHASE OF PLOT, WERE COMPENSATED FULL COST BY CREDITING THE EQUIVALENT AMOUNT TO THEIR CAPITAL ACCOUNT. THEREFORE THE TOTAL AMOUNT CONTRIBUTED BY THEM WERE PAID IN THE FO RM OF CREDITING THE CAPITAL ACCOUNT AND WERE ENTITLED T O THE INTEREST. ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 4 C ) HOWEVER AS PER CLAUSE 12 OF THE SAID AGREEMENT, THE RIGHTS TO BECOME MEMBER, AND OTHER RIGHTS OF FREE MEMBERSHIP OF GYMKHANA ETC., REMAINED WITH THE FOUR PERSONS WHO HAD ORIGINALLY PUR CHASED THE PLOT. THEREFORE THESE RIGHTS REMAINED WITH F OUR PERSONS THOUGH THERE IS NO COST TO IT. D ) ON GETTING THE PLOT BY WAY OF CAPITAL CONTRIBUTION, M/S. RADHA ENTERPRISE DEVELOPED THE PLOT AND SOLD FLATS TO OUTSIDERS FLAT NO.1 TO 6 AND AS PER THE AGREEM ENT 18.9.2004, FLAT NO.7 WAS ALLOTTED TO PRATAP VED AN D FLAT NO.8 WAS ALLOTTED TO RAJESH VED. E ) HOWEVER RIGHTS TO JUHU CLUB AND OTHER RIGHTS OF THE SOCIETY REMAINED WITH ALL THE PARTIES IN THEIR INDIVIDUAL CAPACITY AS PER CLAUSE NO.12 AND CERTAIN OTHER RIG HTS WITH THE PARTNERS INCLUDING MEMBERSHIP RIGHTS IN TH E SOCIETY AS PER AGREEMENT DATED 18.9.2004. F ) IN LIEU OF THE RIGHTS IN INDIVIDUAL CAPACITY, THE VALUABLE RIGHTS WERE ALSO WITH MRS. KRISHNA PRATAP VED AND MRS. KRUPA RAJESH VED. IT WAS IMPERATIVE TO GET THE REQUISITE AND APPROVAL INCLUDING SIGNATURES ON THE ALL DOCUMENTS FOR TRANSFER OF PREMISES, LEASE DEED, TRANSFER OF SHARES AND PAPERS FOR TRANSFER OF MEMBERSHIP RIGHTS IN JUHU GYMKHANA, WHICH ARE VALUABLE RIGHTS, A PORTION OF AMOUNT WAS REQUIRED TO BE PAID TO BOTH THE LADY MEMBERS SINCE IT IS JOINTLY HELD. ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 5 G ) THE PURCHASER OF THE FLATS ALSO INSISTING THAT SINCE BOTH THE PARTIES ARE PARTY TO AGREEMENT, DUE CONSIDERATION IS REQUIRED TO BE PAID TO ENTER A LEGAL AND ENFORCEABLE DOCUMENT. H ) THE MEMBERSHIP RIGHT S OF THE NUTAN LAXMI CO - OPERATIVE SOCIETY ARE A VALUABL E RIGHT AND IT ENJOYS ALL THE FACILITIES LIKE MEMBERSHIP OF JUHU VILE PARLE GYMKHANA CUB ETC AND LEASEHOLD RIGHTS IN PLOT. AS PER THE BYE LAWS OF THE SOCIETY, ONLY MEMBERS OF ONE FAMILY CAN BECOME MEMB ER OF THE SOCIETY AND ALL THE RIGHTS IN THE SOCIETY INC LUDING LEASEHOLD PLOT REMAIN IN THE HANDS OF THE SAID FAMILY. THE OTHER OCCUPANTS OF THE FLATS VIZ. FLAT NO.1 TO 6 ARE NOT ENTITLED TO BECOME A MEMBER OF THE SOCIETY. THESE RIGHTS BELONGED TO ALL THE F OUR MEMBERS OF VED FAMILY. THE FACTS HAVE BEEN CLEARLY STATED IN RECITAL (J) ON PAGE NO. 8 OF THE AGREEMENT FOR SALE AND ASSIGNMENT DATED 20.1.2015. ACCORDINGLY, MRS. KRUPA P. VED AND MRS. KRISHNA P. VED WERE PAID 1.45% OF TOTAL CONSIDERATION I.E. RS.43,16 ,750 EACH AS STATED IN CLAUSE 5 PAGE NO.11 OF THE AGREE MENT. I ) ACCORDINGLY TOTAL CONSIDERATION HAS BEEN DIVIDED AMONG THE SELLERS AS PER THE UNDERSTANDING AMONG THE SELLERS AND ALSO THE PURCHASERS OF THE ABOVE RIGHTS ALONG WITH FLATS AS PER AGREEMENT DATED 20.1.2015. J ) THEREFORE, MRS. KRISHNA P. VED AND MRS. KRUPA R VED HAVE BEEN ENTITLED AND HENCE ACCORDINGLY WERE PAID RS.43,16,750/ - AND RS.43,16,750/ - RESPECTIVELY. K ) THE AMOUNT HAS BEEN PAID ON ACCOUNT OF THOSE RIGHTS IN THE PROPERTY AS PER AGREEMENT DATED 1 8.9.2004. IT ALSO MAY BE NOTED ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 6 THAT THE SHARE CERTIFICATE NO.30 OF NUTAN LAXMI CO - OPERATIVE HOUSING SOCIETY LIMITED WAS ALSO IN THE NAME OF ALL THE FOUR PERSONS. ACCORDINGLY, THE AMOUNTS WERE DISTRIBUTED BE TWEEN THE PARTNERS FOR THEIR RESPECTIVE FLATS A ND EQUAL INTEREST IN THE REMAINDER RIGHTS IN THE PROPERTY, AND ALL OTHER RIGHTS ON BEING A MEMBER OF THE NUTAN LAXMI CO - OPERATIVE HOUSING SOCIETY LIMITED. CONSIDERING THE ABOVE FACTS THE CONSIDERATION RECEIVED BY KRISHNA P. VED AND KRUPA R VED ARE CORRECTL Y APPORTIONED AND PAID. L ) THE LD AR BEFORE US STATED THAT THE SAID INCOME IS DECLARED BY SMT KRISHNA VED AND SMT KRUPA VED IN THEIR RESPECTIVE RETURNS OF INCOME FOR THE A.Y.2015 - 16 WHICH WERE ACCEPTED BY THE DE PARTMENT AS SUCH. 6. WE FIND THAT THE LD AO O BSERVED THAT THE SALE CONSIDERATION WAS DISTRIBUTED AMONG 4 PERSONS , WHEREAS THE COST OF PURCHASE WAS BORNE BY TWO PERSONS ONLY I.E PRATAP VED AND RAJESH VED AND THAT NO PAYMENTS WERE MADE BY SMT KRISHNA VED AND SMT KRUPA VED. ACCORDINGLY, THE LD AO HELD THAT THE SALE CONSIDERATION IS TO BE DIVIDED ONLY BETWEEN TWO PERSONS AS UNDER: - DETAILS PRATAP RAJESH TOTAL SALES CONSIDERATI ON AS PER ITR 131,129,020 157,837,480 288,966,500 SALES CONSIDERAT ION SHOWN IN KRISHNA & KRUPA 4,170,066 4, 463,434 8,633,500 R EVISED SALES CONSIDERATION 135,299,86 162,300,914 297,600,000 ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 7 6.1. THE LD AO OBSERVED THAT SINCE SALE CONSIDERATION IS DIVIDED BETWEEN TWO PERSONS, THE EXPENSES INCURRED TOWARDS COST, BROKERAGE, PROFESSIONAL FEES, ETC ALSO IS TO BE DISTRIBUTED ON LY BETWEEN TWO PERSONS AND ACCORDINGLY , REWORKED THE CAPITAL GAINS CHARGEABLE THEREON AS UNDER: - DETAILS PRATAP RAJESH TOTAL SALES CONSIDERATI ON AS PER ITR 131,129,020 157,837,480 288,966,500 SALES CONSIDERAT ION SHOWN IN KRISHNA & KRUPA 4,170,066 4,46 3,43 4 8,633,500 R EVISED SALES CONSIDERATION 135,299,86 162,300,914 297,600,000 COST OF PUR CHASE 9,623,010 10,300,00 0 19,923,010 RATIO 48.30 5 1.70 100 INDEXED COST OF PURCHASE 20,529,088 21,973,333 42,502,421 BALANCE AMOUNT 114,769,998 140,327,581 2 55, 097, 579 LESS: E XPE NSES INCURRED BROKERAGE & PROF FEES AS PER COI 3,63 1 ,899 4,570,221 8,202,120 KRISHNA & KRUPA SHARE 99,568 1 6,572 206,140 6.2. FROM THE AFORESAID TABLE, IT COULD BE SEEN THAT A SALE CONSIDERATION PERTAINING TO SMT KR ISHNA VED A ND SMT KRUPA VED HAS BEEN INCLUDED IN THE HANDS OF THE ASSESSEE HEREIN SHRI RAJESH PRATAP VED TO THE EXTENT OF RS 44,63,434/ - WHICH IS THE SUBJECT MATTER OF DISPUTE BEFORE US. ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 8 7. WE FIND THAT THE LD CIT(A) HAS CONFIRMED THE ADDITION ON A DIFF ERENT GROUN D BY STATING THAT THE ADDITION SHOULD HAVE BEEN MADE UNDER SECTION 64(1) OF THE ACT BY APPLYING CLUBBING PROVISIONS. 8. WE FIND THAT SHRI PRATAP H VED, SHRI RAJESH VED (ASSESSEE HEREIN BEFORE US), SMT KRISHNA VED AND SMT KRUPA VED, HAD JOINED T HE PARTNERS HIP FIRM M/S RADHE ENTERPRISE. WE FIND FROM THE FACTS NARRATED HEREINABOVE THAT ASSESSEE AND SHRI PRATAP H VED HAD PAID FOR THE COST OF ACQUISITION OF THE PLOT ORIGINALLY AND HENCE WHEN PLOT WAS BROUGHT IN AS CAPITAL CONTRIBUTION TO THE PARTNER SHIP FIRM, THEIR RESPECTIVE CAPITAL ACCOUNTS WERE DULY CREDITED FOR SUCH AMOUNT. WE FIND THAT THE RIGHTS OVER THE LEASEHOLD PROPERTY BELONGED TOA LL THE FOUR MEMBERS OF VED FAMILY WHICH IS EVIDENT FROM SHARE CERTIFICATE NO. 30 OF NUTAN CO - OPERATIVE HOU SING SOCIET Y LIMITED. WE FIND THAT WHEN ORIGINALLY THE PROPERTY WAS ASSIGNED FROM FOUR INDIVIDUALS TO PARTNERSHIP FIRM, THE PARTNERS ACCOUNT WERE CREDITED WITH FULL AMOUNT OF COST INCURRED INDIVIDUALLY AND THEREFORE, THE FULL COST WAS GIVEN TO THEM. THER EFORE THE R IGHTS WHICH HAVE REMAINED WITH FOUR INDIVIDUALS WERE WITHOUT COST AND BELONGED TO ALL THE FOUR PERSONS. THERE IS NO DISPUTE THAT ALL THE FOUR PERSONS HAD COME FORWARD TO SIGN THE AGREEMENT OF SALE DATED 20.1.2015 PURSUANT TO WHICH , CAPITAL GA INS BECAME ASSESSABLE. THERE IS NO DISPUTE THAT THE FLATS WERE ULTIMATELY SOLD TOGETHER WITH THE RIGHTS IN LEASEHOLD PROPERTY , RIGHTS IN MEMBERSHIP ETC WHICH WERE OWNED BY ALL THE FOUR PERSONS AND WHICH REMAINED WITH THE INDIVIDUALS AND WERE NEVER TRANSF ERRED TO TH E FIRM. HENCE WE HOLD THAT LOGICALLY THE SALE CONSIDERATION IS TO BE DISTRIBUTED BETWEEN FOUR PERSONS. IN VIEW OF THAT, A PORTION OF SALE CONSIDERATION IS REQUIRED TO BE ASSIGNED TO THE RIGHTS OF MEMBERSHIP ETC WHICH WERE NOT GIVEN TO THE FIR M. THEREFOR E, THERE IS NO TRANSFER FROM HUSBAND TO WIFE OF ANY RIGHT OR ANY VALUE. IN VIEW OF THAT ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 9 NO VALUE CAN BE ASSIGNED UNDER SECTION 64(1) OF THE ACT BY APPLYING CLUBBING PROVISIONS THEREON. MOREOVER, WE FIND THAT THE LD CITA GROSSLY ERRED IN APPLYING THE CLUBBI NG PROVISIONS U/S 64(1) OF THE ACT EVEN FOR MOTHER. ADMITTEDLY, AS PER LAW, THE SAME COULD BE APPLIED ONLY FOR SPOUSE AND FOR SONS WIFE. HENCE THE ADDITION SUSTAINED BY THE LD CIT(A) DESERVES TO BE DELETED ON THIS COUNT ITSELF. 9. IN ANY CASE, WE FI ND FROM THE INCOME TAX RETURNS OF SMT. KRISHNA VED AND SMT KRUPA VED FOR THE ASST YEAR 2015 - 16, WHICH ARE FORMING PART OF THE PAPER BOOKS FILED BEFORE US, THEY HAD DULY DISCLOSED THE CAPITAL GAINS ATTRIBUTABLE TO THEIR SHARE WITHOUT CLAIMING ANY DEDUCTION TOWARDS COST OF ACQUISITION. WE FIND FROM THE COMPUTATION OF INCOME FOR THE ASST YEAR 2015 - 16 OF BOTH THE LADIES, THAT THEY WERE CONSCIOUS OF THEIR INCOME TAX OBLIGATIONS AND HAD DULY DISCLOSED THE SHARE OF THEIR SALE CONSIDERATION AS LONG TERM CAPITAL GAI NS (WITHOUT ANY COST) AND HAD DULY CLAIMED DEDUCTION U/S 54EC OF THE ACT BY MAKING REINVESTMENT IN ELIGIBLE BONDS. WE FIND THAT THE LD AR SUBMITTED THAT THE RETURNS FILED BY TWO LADIES HAVE BEEN ACCEPTED BY THE DEPARTMENT. HENCE THERE IS NO N EED TO BRIN G TO TAX THE VERY SAME SALE CONSIDERATION IN THE HANDS OF ASSESSEE HEREIN, INCLUSION OF WHICH , WOULD ONLY RESULT IN DOUBLE TAXATION. HENCE WE HOLD THAT THE ENTIRE ADDITION MADE IN THE SUM OF RS 44,63,434/ - IN THE HANDS OF THE ASSESSEE IS HERE BY DIRECTED TO BE DELETED AND GROUNDS 1& 2 RAISED BY THE ASSESSEE ARE ALLOWED. 10. THE GROUNDS 3 & 4 RAISED BY THE ASSESSEE ARE WITH REGARD TO CHARGEABILITY OF INTEREST U/S 234C OF THE ACT WHICH IS CONSEQUENTIAL IN NATURE. NEEDLESS TO MENTION THAT THE SAME WOULD ALW AYS BE ON THE RETURNED INCOME AND NOT ON THE ASSE SSED INCOME. ITA NO . 1103/MUM/2019 SHRI RAJESH PRATAP VED 10 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED ON 27 / 04 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( JUSTICE P P BHATT ) SD/ - (M.BALA GANESH) PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 04 / 2021 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MU MBAI 6. GUARD FILE . //TRUE COPY//