ACIT, Chandigarh V. M/s Punjab Small Industries & Export Corporation Ltd., Chandigarh

ITA 1152/CHANDI/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8541 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-10-2015
• Assessment Year: 1994-1995
• Appeal Filed On: 23-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Question of law; Cost of acquisition; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.1152/CHD/2010 (ASSESSMENT YEAR : 1994-95) THE A.C.I.T. , VS. M/S PUNJAB SMALL INDUSTRIES & CIRCLE 2(1), EXPORT CORPORATION LIMITED, CHANDIGARH. UDYOG BHAWAN, SECTOR 17-B, CHANDIGARH PAN: AABCP1602M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR, DR RESPONDENT BY : SHRI VINEET KRISHAN DATE OF HEARING : 12.01.2016 DATE OF PRONOUNCEMENT : 04.02.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH DATED 2.6.2010 FOR ASSESSMENT YEAR 1994-95. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD ACQUIRED TENANCY RIGHTS OF A SHOWROOM MEASURING 2547 SQ.FT. FOR A TERM OF 60 YEARS VIDE AGREEMENT DATED 5.7.1977. THE BASIC RENT FOR THE 2 SHOWROOM WAS FIXED AT RS.4.111211 PER SQ.MTR. PER M ONTH IN RESPECT OF FIRST FLOOR AND RS.1.943481 PER SQ.MT R. PER MONTH FOR THE FLOOR. THE ASSESSEE WAS REQUIRED TO PAY THE ENTIRE BASIC RENT AND THE PARKING SPACE RENT FOR 60 YEARS IN ADVANCE, WHICH WAS ACCORDINGLY PAID. THE AMOUNT OF RENT PAID BY THE ASSESSEE IN ADVANCE WAS ADJUSTABLE TOWARDS MONTHLY PAYMENT OF RENT AS PER AGREEMENT. VIDE AGREEMENT DATED 30.3.1994 I.E. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE AGREED TO TRANSFER TE NANCY RIGHTS FOR THE REMAINING PERIOD TO STATE BANK OF PA TIALA AND RECEIVED A SUM OF RS.3,96,66,451/- ON ACCOUNT THEREOF. THE ASSESSING OFFICER SOUGHT TO LEVY CAPI TAL GAINS TAX ON THIS RECEIPT, WHICH WAS DISPUTED BY THE ASSE SSEE. THE ASSESSING OFFICER NOTICED THAT BESIDES THE LUMP -SUM PAYMENT OF BASIC RENT MADE BY THE ASSESSEE TO THE L ESSOR FOR THE ENTIRE PERIOD OF 60 YEARS OF LEASE, THE OUT GOING RENT WAS FIXED AT RS.9571 PER MONTH, WHICH WAS PAID BY THE ASSESSEE. RELYING ON THE JUDGMENT OF THE HON'B LE SUPREME COURT, THE ASSESSING OFFICER OPINED THAT TH E LUMP-SUM PAYMENT MADE AT THE TIME OF ACQUISITION OF TENANCY RIGHTS WOULD BE A CONSIDERATION FOR ACQUISI TION OF ASSET AND ACCORDINGLY, THE CONSIDERATION LATER EARN ED BY THE ASSESSEE FOR TRANSFER OF THOSE RIGHTS WOULD BE ASSESSABLE TO CAPITAL GAINS TAX. 3. IN APPEAL BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE FAILED ON THIS GROUND. THE ASSESSEE WENT BEFORE THE I.T.A.T., CHANDIGARH BENCH. THE I.T.A.T. VIDE ITS 3 ORDER IN ITA NO.142/CHD/2003, DATED 3.6.2006 REFER RED THE MATTER BACK TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER AFFORDING OPPORTUNITY TO THE ASS ESSEE TO PRODUCE ANY FURTHER EVIDENCE TO SUBSTANTIATE ITS CL AIM. 4. IN THE SECOND ROUND, THE ASSESSING OFFICER AGAI N MADE AN ADDITION OF RS.23,63,651/- CONSIDERING THE COST OF ACQUISITION BEING RS.65,70,000/- ON THE BASIS OF VALUATION REPORT OF A GOVERNMENT APPROVED VALUER. MEANWHILE THE ASSESSEE WENT IN APPEAL BEFORE THE HO N'BLE HIGH COURT AGAINST THE ORDER OF THE I.T.A.T.. THE HON'BLE HIGH COURT WHILE DECIDING THE ISSUE, HELD HAS UNDER : THE SUBMISSION OF THE LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE IS THAT IN SPITE OF THE F ACT THAT THE TRIBUNAL HAD RECORDED FINDINGS IN THE ORDER THAT THE COST OF ACQUISITION OF ASSET IN THE PRESENT CASE IS NOT DETE RMINABLE, KEEPING IN VIEW THE JUDGMENT OF HON'BLE THE SUPREME COURT IN CIT V. D.P. SANDHU BROS. CHEMBUR (P.) LTD. [2005] 273 ITR 1 THE APPEAL FILED BY THE ASSESSEE DESERVED TO BE ACCEP TED IN TOTO AND THERE WAS NO NEED FOR REMANDING THE CASE. T HE APPREHENSION EXPRESSED BY HIM IS THAT EVEN THOUGH JU DGMENT IN D.P. SANDHU BROS. CHEMBUR (P.) LTD.'S CASE WAS CITED BUT THE TRIBUNAL WITHOUT OPINING ANYTHING REMITTED THE MAT TER TO THE ASSESSING OFFICER, WHO MAY NOT LOOK INTO THE JUDG MENT IN ABSENCE OF ANY FINDINGS ON THAT ISSUE BY THE TRIBUN AL. LEARNED COUNSEL FOR THE REVENUE, HOWEVER, SUBMITTED TH AT THESE FINDINGS ARE PERVERSE IN CASE THE RECORD OF T HE ASSESSING OFFICER IS CONSIDERED, WHERE IT HAS SPECIFICALLY BEEN RECORDED THAT BESIDES LUMP SUM PAYMENT OF BASIC RENT, ADDITIONAL RENT PER MONTH WAS BEING PAID BY THE ASSESSEE. HOWEVER, THE SUBMISSION WAS MADE THAT AS THE MATTER WAS ONLY REM ANDED BACK, THE REVENUE DID NOT CHOSE TO FILE APPEAL BEFORE THIS COURT. 4 WE FIND THE CONTENTION OF LEARNED SENIOR COUNSEL FOR T HE APPELLANT. TO BE TOTALLY MISCONCEIVED. IN THE PRESENT C ASE, THE JUDGMENT HAS BEEN REFERRED TO IN THE ORDER PASSED B Y THE TRIBUNAL. EVEN THOUGH THE TRIBUNAL MAY NOT HAVE DISCUS SED THE SAME IN DETAIL IN THE IMPUGNED ORDER HOWEVER, STILL I N TERMS OF PROVISIONS OF ARTICLE 141 OF THE CONSTITUTIO N OF INDIA, THE LAW LAID DOWN BY HON'BLE THE SUPREME COURT IS BI NDING ON ALL THE COURTS/AUTHORITIES SUBORDINATE TO IT AND NO C OURT OR AUTHORITY IS EXPECTED TO OVERLOOK THE SAME EVEN IF NO JUDGMENT IS CITED IN THE ORDER REMANDING THE CASE TO A LOWER A UTHORITY. IN THE PRESENT CASE, THE JUDGMENT IS REFERRED TO IN THE IMPUGNED ORDER. THERE MAY EVEN BE A CASE WHERE A JUDG MENT ON THE ISSUE MAY BE DELIVERED SUBSEQUENT TO THE REM AND OF THE CASE, EVEN THAT WOULD BE BINDING ON THE LOWER AUTH ORITY. STILL FURTHER THE MATTER HAS ONLY BEEN REMANDED BACK TO THE ASSESSING OFFICER FOR FRESH DETERMINATION WITH LIBER TY TO THE ASSESSEE TO LEAD ANY FURTHER EVIDENCE IF REQUIRES. TH E ISSUE HAS NOT BEEN FINALLY DETERMINED. IN CASE STILL THE ISSU E IS DETERMINED AGAINST THE ASSESSEE, IT HAVE ITS REMEDIES IN ACCORDANCE WITH LAW. IN NEW CAWNPORE FLOUR MILLS V. CIT [2005] 275 ITR 45 (ALL.) IT HAS BEEN OPINED THAT REFERENCE CANNOT BE MADE IN A CASE WHERE IN APPEAL THE TRIBUNAL WITHOUT DECIDING ANY ISSUE ONLY REMANDS THE MATTER BACK. IN VIEW OF OUR ABOVE DISCUSSION, WE DO NOT FIND THA T ANY SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT APPE AL. ACCORDINGLY, THE SAME IS DISMISSED. 5. AGAINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT (APP EALS). THE LEARNED CIT (APPEALS) AFTER CONSIDERING ALL THE RELEVANT JUDGMENTS AND SUBMISSIONS OF THE ASSESSEE ALLOWED THE APPEAL OF THE ASSESSEE. 5 6. AGGRIEVED BY THIS, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US, RAISING THE FOLLOWING EFFECTIV E GROUND OF APPEAL : 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,36,35,351/- ON ACCOUNT OF CAPITAL GAIN ON TENANCY RIGHTS. 7. THE LEARNED D.R. WHILE ARGUING BEFORE US RELIED ON THE ORDER OF THE ASSESSING OFFICER. HIS MAIN AR GUMENT WAS THAT SINCE THE ASSESSING OFFICER HAS ASCERTAINE D THE COST OF ACQUISITION OF TENANCY RIGHTS EVEN BEFORE T HE AMENDMENT BROUGHT OUT IN SECTION 55 BY FINANCE ACT, 1994, THE CAPITAL GAIN ARISING ON ACCOUNT OF TRANSF ER OF TENANCY RIGHTS IS EXIGIBLE TO TAX. HE VEHEMENTLY A RGUED THAT ONLY IN THOSE CASES WHERE NO COST OF ACQUISITI ON CAN BE ATTRIBUTED TO AN ASSET, THE SAME IS NOT TAXABLE IN THE PRE-AMENDED PERIOD. HE RELIED ON THE ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. D.P.SANDHU BR OS. CHEMBUR PVT. LTD., 273 ITR 1(SC). HE ALSO RELIED O N THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAJA MALWINDER SINGH (2011) 334 IT R 48 (P&H (FB). 8. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THA T EVEN IN THE FIRST ROUND, THE HON'BLE I.T.A.T. HAS H ELD THAT THE COST OF ACQUISITION IS NOT ASCERTAINABLE IN THI S CASE. THEREFORE, NO CAPITAL GAINS TAX IS LEVIED ON THE SA ME. IT WAS FURTHER ARGUED THAT NO SALAMI OR ANY SUCH PAYME NT HAS BEEN MADE AT THE TIME OF ACQUIRING TENANCY RIGH TS. 6 WHAT THE ASSESSEE PAID AT THAT TIME WAS ONLY THE AD VANCE RENT FOR ENJOYMENT OF PROPERTY FOR 60 YEARS WHICH B Y NO STRETCH OF IMAGINATION CAN BE TERMED AS COST OF ACQUISITION. IN THIS WAY, IT WAS PRAYED THAT THE O RDER OF THE LEARNED CIT (APPEALS) BE CONFIRMED. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ), WE OBSERVE THAT BESIDES ANALYZING THE TWO CASES OF CIT VS. B.C. SRINIVASA SETTY, 128 ITR 294 (SC) AND D.P.SAND HU BROS. CHEMBUR PVT. LTD. (SUPRA), HIS FINDINGS ARE M AINLY BASED ON THE FACT THAT THE PAYMENT MADE BY THE ASSE SSEE AS LESSEE TO LESSOR AT BOMBAY IS RENT FOR ENJOYMENT OF PROPERTY FOR 60 YEARS. THERE IS NOTHING ON RECORD TO PROVE THAT THE ASSESSEE ACQUIRED THIS TENANCY RIGHT. AS SUCH, THE COST OF ACQUIRING TENANCY RIGHTS IS NIL. HE AL SO HELD THAT THE ASSESSING OFFICERS PRESUMPTION THAT 60 YE ARS RENT PAID IN ADVANCE MAY BE CONSIDERED AS PAYMENT F OR ACQUIRING TENANCY RIGHTS IS NOT CORRECT SINCE AS PE R LEASE DEED, THE PAYMENT MADE IN ADVANCE WAS FOR ENJOYMENT OF PROPERTY FOR 60 YEARS AND NOT FOR ACQUIRING THE TEN ANCY RIGHTS. 10. WE ARE NOT IN AGREEMENT WITH THE ARGUMENT OF THE LEARNED D.R. THAT SINCE SOME COST OF ACQUISITIO N HAS BEEN ATTRIBUTED TO THE TENANCY RIGHTS BY THE ASSESS ING OFFICER, IT CANNOT BE SAID THAT THE COST OF ACQUISI TION IS 7 NOT ASCERTAINABLE. SINCE THE QUESTION IS NOT OF GI VING A NUMERIC VALUE TO THE COST OF ACQUISITION, BUT WHETH ER IN PRINCIPLE A COST OF ACQUISITION CAN BE SAID TO BE A TTRIBUTED TO THE ASSET CONCERNED. IF WE AGREE TO THIS PROPO SITION, THE ONLY EXERCISE IN SUCH CASES TO BE DONE BY THE DEPARTMENT WOULD BE TO GIVEN SOME RUPEE VALUE TO TH E COST OF ACQUISITION OF ASSET CONCERNED, HOWEVER, ARBITRA RY THAT MAY BE. HOWEVER, THIS IS NOT CERTAINLY THE INTENT ION OF THE LEGISLATURE. THE POINT IS WHETHER THE COST OF ACQUISITION INCURRED BY THE ASSESSEE AT THE TIME OF ACQUIRING THE ASSET IS ASCERTAINABLE OR NOT. 11. THE CASE OF CIT VS.. RAJA MALWINDER SINGH (SUPRA) RELIED ON BY THE LEARNED D.R. IS NOT APPLIC ABLE TO THE FACTS OF THE PRESENT CASE, SINCE IN THAT CASE ISSUE WAS THAT OF COST OF ACQUISITION OF A LAND. THE COURT H ELD THAT THE COST OF AN ASSET LIKE LAND CANNOT BE SAID TO BE NOT ASCERTAINABLE, PRACTICALLY, HOWEVER, DIFFICULT IT M AY BE TO QUANTIFY THE SAME. IN THE PRESENT CASE, THE ISSUE IS NOT THE DIFFICULTY OF ASCERTAINING THE COST OF ACQUISIT ION, BUT WHETHER THE SAME IS ASCERTAINABLE OR NOT. IT HAS B EEN VERY BEAUTIFULLY DESCRIBED BY THE HON'BLE APEX COUR T IN THE CASE OF B.C. SRINIVASA SETTY (SUPRA) WHERE THE COURT HELD THAT THE INTENT OF LEVYING CAPITAL GAINS TAX G OES TO THE NATURE AND CHARACTER OF THE ASSET, THAT IT IS A N ASSET WHICH POSSESSES THE INHERENT QUALITY OF BEING AVAIL ABLE ON EXPENDITURE OF MONEY TO A PERSON SEEKING TO ACQUIRE IT. NONE OF THE PROVISIONS PERTAINING TO THE HEAD CAPI TAL 8 GAINS SUGGESTS THAT CAPITAL ASSET INCLUDE AN ASS ET IN THE ACQUISITION OF WHICH NO COST AT ALL CAN BE CONC EIVED. IN FACT, THIS INTERPRETATION WAS THE MAIN REASON BE HIND THE AMENDMENT BROUGHT OUT BY THE FINANCE ACT, 1994, W.E.F. 1.4.1995 TO SECTION 55(2)(A), WHEREBY THE CO ST IN SUCH CASES WAS TO BE TAKEN AS NIL. HOWEVER, WE MAY CLARIFY THAT THE AMENDMENT WAS APPLICABLE W.E.F. 1. 4.1995 I.E. ASSESSMENT YEAR 1995-96 AND IS NOT APPLICABLE TO THE PRESENT CASE AS THE SAME PERTAINS TO ASSESSMENT YEA R 1994-95. 12. IN VIEW OF THE ABOVE AND IN THE BACKGROUND OF THE HON'BLE SUPREME COURT IN THE CASE OF D.P.SANDH U BROS. CHEMBUR PVT. LTD. (SUPRA), WE DO NOT HESITATE IN CONCLUDING THAT BEFORE THE ASSESSMENT YEAR 1995-96, I.E. THE PRE-AMENDMENT YEAR, THE ASSETS, THE COST OF ACQUISITION OF WHICH IS NOT ASCERTAINABLE ARE NOT E XIGIBLE TO CAPITAL GAINS TAX. 13. IN THIS BACKGROUND, NOW WE ANALYZE THE FACTS O F THE PRESENT CASE. WE HAVE VERY CAREFULLY PERUSED T HE DOCUMENT CALLED AGREEMENT IN RESPECT OF SPACE IN T HE TRADE CENTRE, BLOCK V BACKBAY RECLAMATION AREA, COL ABA, BOMBAY, DATED 5.7.1977 PLACED IN THE PAPER BOOK, W HICH IS A COPY OF ORIGINAL LEASE AGREEMENT. WE SEE THAT THERE IS NOWHERE ANY MENTION OF ANY SALAMI, OR ANY COST OF ACQUISITION TO BE PAID BY THE ASSESSEE. THERE IS A CLAUSE (VI) WHICH TALKS ABOUT THE PAYMENT OF BASIC RENT AN D PARKING SPACE RENT, WHICH THOUGH GETS DUE ON 1 ST DAY OF 9 EVERY MONTH, BUT WAS TO BE PAID IN ADVANCE FOR THE ENTIRE LEASE PERIOD I.E. 60 YEARS. THERE CANNOT BE ANY QU ARREL REGARDING THE FACT THAT RENT FOR A LONG PERIOD CAN BE PAID IN ADVANCE AND THE MAGNITUDE OF SUCH RENT PAID CANN OT CHANGE ITS CHARACTER FROM RENT TO THE COST OF ACQUI SITION. 14. THERE IS ANOTHER REASON, WHY WE CONCLUDE THAT THE COST OF ACQUISITION IS NOT ASCERTAINABLE IN THE CASE OF TENANCY RIGHTS. THE CIRCULAR EXPLAINING THE AMENDM ENT BROUGHT OUT BY THE FINANCE ACT, 1994, IN SECTION 55 (2)(A) VERY CLEARLY MENTIONS THAT THE AMENDMENT WAS BEING BROUGHT OUT IN ORDER TO OVERCOME THE JUDICIAL INTERPRETATION REGARDING THE CAPITAL GAIN ARISING O N TRANSFER OF ASSETS WHERE COST OF ACQUISITION IS NOT ASCERTAINABLE. THERE IS A SPECIFIC MENTION OF THE ASSET IN THE NATURE OF TENANCY RIGHTS, WHICH CLEARLY BRING S HOME THE FACT THAT EVEN THE LEGISLATURE ITSELF SUPPOSE T HAT THE COST OF ACQUISITION IN CASE OF TENANCY RIGHTS IS NO T ASCERTAINABLE. 15. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF FEBRUARY, 2016. SD/- SD/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 4 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH