Smt. Gayathri Rao, Bangalore V. ACIT, Bangalore

ITA 1174/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2264 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR D V PRADEEP KUMAR SR DRI
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1174/BANG/2012 ASSESSMENT YEAR : 2008-09 SMT. GAYATHRI RAO, NO.40, LUMBINI APARTMENTS, NO.5, REST HOUSE ROAD, BANGALORE. PAN : AALPR 5424L VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMASUBRAMANIAN, C.A. RESPONDENT BY : DR. D.V. PRADEEP KUMAR, SR.DR-I DATE OF HEARING : 09.07.2013 DATE OF PRONOUNCEMENT : 12.07.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 15.06.2012 OF THE CIT(APPEALS)-I, BANGALORE RELATING TO ASSESS MENT YEAR 2008-09. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN R EJECTING THE CLAIM OF THE ITA NO.1174/BANG/2012 PAGE 2 OF 5 ASSESSEE FOR A DEDUCTION OF RS.7,05,763 BEING COMM ISSION PAID TO ONE, MR. R. SANJAY REDDY WHILE COMPUTING CAPITAL GAINS. 3. THE ASSESSEE IS AN INDIVIDUAL. SHE FILED RETURN OF INCOME FOR THE A.Y. 2008-09 DECLARING AMONG OTHER THINGS, INCOME U NDER THE HEAD CAPITAL GAINS. DURING THE PREVIOUS YEAR, THE ASSESSEE SOL D 2700 SHARES HELD BY HER IN A COMPANY BY NAME, M/S. LUMBINI STUD & AGRI CULTURAL FARM PVT. LTD. (HEREINAFTER REFERRED TO AS LSAFPL ). WHILE COMPUTING CAPITAL GAIN ON SALE OF THE AFORESAID SHARES, THE ASSESSEE CLAIMED DEDUCTION OF A SUM OF RS.7,05,763 AS EXPENDITURE INCURRED IN CONNECTION W ITH TRANSFER OF SHARES BEING COMMISSION PAID TO SHRI R. SANJAY REDDY FOR F INDING A BUYER OF THE SHARES OF LSAFPL HELD BY THE ASSESSEE. MR.R.SANJAY REDDY WAS ALSO THE MANAGING DIRECTOR OF LSAFPL. THE PLEA OF THE ASSES SEE WAS THAT LSAFPL WAS NOT FUNCTIONING WELL AND THEREFORE ALL THE SHAR EHOLDERS INCLUDING THE ASSESSEE AND SHRI SANJAY REDDY WERE LOOKING FOR PRO SPECTIVE BUYERS. IT TURNED OUT THAT SHRI SANJAY REDDY WAS SUCCESSFUL IN FINDING A BUYER FOR THE SHARES HELD NOT ONLY BY HIM BUT ALSO BY THE ASSESSE E. 4. THE ASSESSING OFFICER WAS OF THE VIEW THAT JOINT EFFORTS HAD BEEN MADE FOR FINDING A PURCHASER OF SHARES OF LSAFPL. IT WAS ONLY A CO- INCIDENCE THAT SHRI SANJAY REDDY WAS SUCCESSFUL IN FINDING A PARTY. THE AO WAS THEREFORE OF THE VIEW THAT THE COMMISSION PA ID CANNOT BE CONSIDERED AS EXPENDITURE INCURRED WHOLLY AND EXCLU SIVELY IN CONNECTION ITA NO.1174/BANG/2012 PAGE 3 OF 5 WITH THE TRANSFER OF THE CAPITAL ASSET ENVISAGED U/ S. 48 OF THE ACT AND ACCORDINGLY DEDUCTION CLAIMED WAS NOT ALLOWED BY TH E AO. 5. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ORDER OF THE AO, BUT FOR A DIFFERENT REASON VIZ., THE ASSESS EE FAILED TO SHOW WITH EVIDENCE AS TO HOW THE PAYMENT WAS RELATED TO SALE OF SHARES AND ALSO THE FAILURE OF THE ASSESSEE TO ESTABLISH THE NATURE OF SERVICES RENDERED BY SHRI SANJAY REDDY. THE CIT(APPEALS) DID NOT DISPUTE THE FACT THAT THERE WAS AN ACKNOWLEDGEMENT BY SHRI SANJAY REDDY THAT HE HAD RE CEIVED THE PAYMENT IN QUESTION AS COMMISSION FOR THE TRANSACTION OF SA LE OF SHARES BY THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE, WHO BROUGHT TO OUR NOTICE THAT BEFORE THE AO, THE A SSESSEE FILED CERTIFICATE FROM SHRI SANJAY REDDY REGARDING RECEIPT OF COMMISS ION AND THE FACT THAT THE SAID RECEIPT HAD BEEN DECLARED AS INCOME IN THE RETURN OF INCOME FILED BY SANJAY REDDY. THE INCOME TAX PARTICULARS OF SAN JAY REDDY HAD ALSO BEEN GIVEN IN THE CONFIRMED FILED BEFORE THE AO. B EFORE THE CIT(A), ANOTHER LETTER WAS FILED BY SANJAY REDDY THAT THE P AYMENT OF RS.7,05,763 WAS COMMISSION FOR IDENTIFYING PURCHASER FOR SHARES HELD BY THE ASSESSEE. THE NAME OF THE PURCHASER WAS ALSO GIVEN VIZ., M/S. RENAISSANCE DEVELOPERS & HOLDING PVT. LTD. IT WAS SUBMITTED B Y HIM THAT THE AO DID ITA NO.1174/BANG/2012 PAGE 4 OF 5 NOT DISPUTE THE FACT THAT THE PAYMENT OF COMMISSION WAS FOR SERVICES RENDERED BY SANJAY REDDY IN IDENTIFYING A PURCHASER FOR SALE OF SHARES HELD BY THE ASSESSEE. IT WAS SUBMITTED THAT THE CIT(A) FELL INTO AN ERROR IN SUSTAINING THE ADDITION MADE BY THE AO ON A TOTALLY DIFFERENT BASIS. IT WAS HIS SUBMISSION THAT THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE AND THE CLAIM FOR DEDUCTION MADE BY THE ASSESSEE SHOULD BE ALLOWED. 8. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEAL S). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT A CONFIRMATION FILED BY SANJAY REDDY BEFORE THE AO IN WHICH IT WAS AFFIRMED THAT A SUM OF RS.7,05,763 WAS RECEIVED FROM THE ASS ESSEE AS COMMISSION AND THAT THE SAID COMMISSION HAS BEEN SHOWN BY HIM AS INCOME IN HIS RETURN OF INCOME FOR THE A.Y. 2008-09. THE ASSESSM ENT PARTICULARS OF SANJAY REDDY HAD ALSO BEEN FURNISHED. BEFORE THE C IT(A), IT WAS AGAIN CONFIRMED BY SANJAY REDDY THAT THE SUM OF RS.7,05,7 63 WAS 1% COMMISSION FOR IDENTIFYING A PURCHASER FOR SHARES O F LSAFPL HELD BY THE ASSESSEE. THE DETAIL OF THE CHEQUES BY WHICH THE P AYMENT WAS MADE WAS ALSO GIVEN. THE PARTICULARS OF THE PURCHASER OF SH ARES HELD BY THE ASSESSEE, HAS ALSO BEEN GIVEN. DESPITE THE ABOVE, THE CIT(A) HAS TAKEN A VIEW THAT THERE IS NO EVIDENCE TO SHOW THAT THE PAY MENT IS RELATED TO SALE OF SHARES AND THE NATURE OF SERVICES RENDERED BY SANJA Y REDDY. IN FACT THE AO DID NOT DISPUTE THE FACT THAT IT WAS MR.SANJAY R EDDY WHO LOCATED THE PURCHASER AND THAT FOR SUCH SERVICES THE COMMISSION WAS PAID. IN OUR ITA NO.1174/BANG/2012 PAGE 5 OF 5 VIEW, THE EVIDENCE FILED BY THE ASSESSEE WAS SUFFIC IENT TO DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE. THE REVENUE HAS NOT BROUGHT OUT ANYTHING ON RECORD TO SHOW HOW THE PAYMENT IN QUESTION CANNO T BE CONSIDERED AS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED IN CONN ECTION WITH THE TRANSFER OF THE CAPITAL ASSET. WE ARE THEREFORE OF THE VIEW THAT THE DEDUCTION CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED. THE APP EAL OF THE ASSESSEE IS ALLOWED AND THE AO IS DIRECTED TO ALLOW THE CLAIM F OR DEDUCTION ON ACCOUNT OF COMMISSION WHILE COMPUTING CAPITAL GAINS. 10. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JULY, 2013. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 12 TH JULY, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.