Bhagawan Das Dhananjaya Das, CHENNAI V. DCIT Non Corporate Circle 10(1), CHENNAI

ITA 1284/CHNY/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5684 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Diversion of income; Cost of acquisition; Fair market value; Capital Gains

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , , $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 1282/CHNY/2018 / ASSESSMENT YEAR : 2012-13 SHRI SHASHABINDU DAS, NEW NO. 222, OLD NO. 867, FLAT NO. 2A, K.G.S. VRUDHI, POONAMALLE HIGH ROAD, KILPAUK, CHENNAI 600 010. [PAN: AASPS 4341L] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 10(1), NEW BLOCK, CHENNAI 600 034. /. I.T.A. NO. 1284/CHNY/2018 / ASSESSMENT YEAR : 2012-13 SHRI BHAGAWAN DAS DHANANJAYA DAS, NEW NO. 222, OLD NO. 867, FLAT NO. 2A, K.G.S. VRUDHI, POONAMALLE HIGH ROAD, KILPAUK, CHENNAI 600 010. [PAN: AAFPD 4477R] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 10(1), NEW BLOCK, CHENNAI 600 034. ( / APPELLANT) ( %&' /RESPONDENT ) ASSESSEE BY : SHRI. D. ANAND, ADVOCATE REVENUE BY : SHRI. |AR V SREENIVASAN, JCIT 0 /DATE OF HEARING : 29.11.2018 0 /DATE OF PRONOUNCEMENT : 29.11.2018 :-2-: ITA NOS. 1282& 1284/CHNY/2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEES, CO-OWNERS, FILED THE ABOVE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 12, CHENNAI IN ITA NOS. 80 & 77/CIT(A)-12/15-16 DATED 20.02.2018 F OR ASSESSMENT YEAR 2012-13. 2. SHRI. SHASHABINDU DAS AND SHRI BHAGWAN DAS DHANA NJAYA DAS, THE CO-OWNERS OF A PROPERTY , ADMITTED 4.14% OF TH E TOTAL CONSIDERATION RECEIVED ON SALE OF PROPERTY AS THEIR RESPECTIVE SHARES IN THEIR RESPECTIVE RETURNS. AGAINST SUCH AMOUNT, EAC H OF THEM CLAIMED 4.14% OF TOTAL EXPENSES ON RS. 10,81,70,554/- IN CO NNECTION WITH THE TRANSFER OF THE PROPERTY. FURTHER, THEY CLAIMED TH E COST OF ACQUISITION OF THE PROPERTY AS ON 01.04.1981 AT CERTAIN VALUES BASED ON A VALUERS REPORT. AT THE TIME OF MAKING THE RESPECTIVE ASSES SMENTS, THE ASSESSING OFFICER HELD THAT THE EXPENDITURES CLAIME D BY EACH OF THEM WERE NOT WHOLLY AND EXCLUSIVELY INCURRED IN CONNECT ION WITH TRANSFER AND HENCE HE DID NOT ALLOWED THE CLAIM. FURTHER, B ASED ON THE RATE DETERMINED BY THE SUB-REGISTRAR FOR THE GUIDE LINE VALUE, THE A O DETERMINED THE COST OF ACQUISITION OF THE PROPERTY AS ON 01.04.1981. AGGRIEVED, THE RESPECTIVE ASSESSEES FILED APPEALS BEFORE THE CIT(A). :-3-: ITA NOS. 1282& 1284/CHNY/2018 THE CIT(A) CONFIRMED THEM. AGGRIEVED, THE ASSESSEE S FILED THESE APPEALS. SINCE, THE SUBJECT MATTER OF APPEALS ARE C OMMON, BOTH OF THEM ARE HEARD TOGETHER AND BEING DISPOSED TOGETHER . 3. THE LD. AR SUBMITTED THAT MR. K. SEETHARAMA RAO, THE FOUNDER OF THE DASAPRAKASH GROUP OF HOTELS HAD, INTER AL IA, ACQUIRED THE PROPERTIES AT POONAMALLEE HIGH ROAD AND WAS RUNNING HOTEL DASAPRAKASH IN THEM. VIDE HIS LAST WILL DATED 7TH JANUARY 1968, HE HAD BEQUEATHED THE SAID PROPERTIES ABSOLUTELY TO HI S SONS. HOWEVER, SINCE THERE EXISTED CERTAIN LIABILITIES, THE PROPER TIES WERE VESTED IN CERTAIN TRUSTEES, WHO WERE ENTRUSTED WITH THE JOB OF CONDUCTING THE BUSINESS, CLEAR THE LIABILITIES AND THEN DISTRIBUTE THE PROPERTY AMONG THE CHILDREN. SHRI K. SEETHARAMA RAO DIED ON 15TH J ANUARY 1968. THE WILL WAS DULY PROBATED ON 18TH MARCH 1969. 3.1 CERTAIN DISPUTES AROSE AMONG THE FAMILY MEMBERS AND THE MATTER WAS TAKEN TO COURT. VIDE MEMORANDUM DATED 22 ND DECEMBER 1988, VARIOUS PROPERTIES WERE SPLIT AMONG THE SONS OF MR K. SEETHARAMA RAO. THE PROPERTIES OUT OF WHICH HOTEL D ASAPRAKASH MADRAS WAS OPERATED WAS ALLOTTED TO FOUR BROTHERS V IZ. K. BALARAMDAS, K. BHAGAVANDAS, K. RAMADAS AND K. NARAYANADAS , WHI CH WAS APPROVED BY THE HIGH COURT AND ACTED UPON. HOWEVER, A FURTHER :-4-: ITA NOS. 1282& 1284/CHNY/2018 DISPUTE AS TO THE WAY OF CONDUCTING BUSINESS HAD RE SULTED IN THE BUSINESS BEING CONDUCTED BY A RECEIVER APPOINTED BY THE COURT. 3.2 THE DISPUTING PARTIES AGREED TO THE COURT AUCTI ONING THE PROPERTIES AND SETTLE THEIR DISPUTES. THE RECEIVER, WHO WAS RUNNING THE BUSINESS TILL THEN, HAD PRESENTED A LIST OF LIA BILITIES TO THE COURT, INCLUDING COMMERCIAL TAXES, PROPERTY TAXES, EPF ,E SI ETC. THE VARIOUS STATUTORY AUTHORITIES HAD ISSUED ORDERS OF ATTACHMENT ON THE IMPUGNED PROPERTY. THE COURT DIRECTED THAT THE INTE NDING PURCHASER WAS TO DEPOSIT A SUM OF RS.20 CRORES WITH THE COURT TOWARDS SETTLEMENT OF THESE DUES AS ALSO SETTLING THE STAFF AND VACATING THE TENANTS. THE RECEIVER HAD TO OBTAIN A NO DUES CERTI FICATE FROM THE VARIOUS STATUTORY AUTHORITIES FOR THE COURT TO APPR OVE THE SALE. ON COMPLYING WITH THAT ORDER, THE COURT APPROVED SALE OF THE PROPERTIES AND THE SALEWAS COMPLETED ON 27TH APRIL 2011. 3.3 THE ASSESSEES ALONG WITH 14 OTHER CO-OWNERS HA D SOLD THE PROPERTY,POPULARLY KNOWN AS HOTEL DASAPRAKASH LOC ATED AT POONAMALLEE HIGH ROAD, FOR A TOTAL CONSIDERATION OF RS.165 CRORES. FOR THEIR PROPORTIONATE SHARE IN THE SALE CONSIDERA TION AT 4.20%, THE ASSESSEES COMPUTED THE LONG TERM CAPITAL GAINS, CL AIMED , INTER ALIA, THE EXPENSES ADJUSTED BY THE COURT APPOINTED RECEIV ER AGAINST THE SALE PROCEEDS AS DIVERSION OF INCOME BY OVERRIDING TITL E OR IN THE ALTERNATIVE :-5-: ITA NOS. 1282& 1284/CHNY/2018 EXPENSES INCURRED IN RELATION TO THE SALE.THE ASSES SING OFFICER HAD DISALLOWED THE CLAIM. FURTHER, THE ASSESSING OFFIC ER WHILE COMPUTING THE LONG TERM CAPITAL GAINS HAD TAKEN THE GUIDELINE VALUE OF THE LAND AS ON 1.4.1981 TO BE THE FAIR MARKET VALUE AS ON TH AT DATE AND CONSEQUENTLY COMPUTED/RESTRICTED THE INDEXED COST/C OST OF ACQUISITION. AGAINST SUCH ACTION, THE ASSESSEES FILED APPEALS AND THE LD CIT(A) DISMISSED THEM. 3.4. THE AR FURTHER SUBMITTED THAT THE LD. CIT(A) O UGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEES BECAME THE OWNER OF THE PREMISES SUBJECT TO MEETING THE LEGAL EXPENSES CONN ECTED WITHIN AND IT WAS NOT A CASE WHERE THE ASSESSEES HAVE OBTAIN ED THE PROPERTY FREE FROM ALL THE ATTENDANT LIABILITIES. WHILE SEL LING THE SAID PROPERTY, SUCH COSTS HAVE TO BE INCURRED BY THE ASSESSEES AN D OTHER CO-SELLERS AS PER DIRECTIONS OF THE COURT ORDER, THROUGH COURT RECEIVER DUTY APPOINTED BY THE COURT. IN THE CIRCUMSTANCES, THE LD. CIT(A) OUGHT NOT TO HAVE DISMISSED THESE COSTS AS NOT RELATABLE TO THE TRANSFER. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE E XPENDITURE FOR TRANSFER OF THE SUBJECT MATTER WAS EARLIER THAN THE TRANSFER AND NOT AFTER THE TRANSFER AND HENCE HE OUGHT TO HAVE ACCEP TED THE ASSESSEES VERSION. :-6-: ITA NOS. 1282& 1284/CHNY/2018 3.5. THE AR SUBMITTED THAT THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE COST OF ACQUISITION OF LAND AT RS. 1.95 LAKHS PER G ROUND AS ON 01.04.1981 AS AGAINST RS. 50,000/- ADOPTED BY THE S UB-REGISTRAR FOR THE MAIN BUILDING AND RS. 1.5 LAKHS PER GROUND AS A GAINST RS. 30,000/- PER GROUND FOR THE STAFF QUARTERS. THE LD. AR SUBM ITTED THAT THE PROPERTY OF DASAPRAKASH WAS A LANDMARK BY ITSELF AND IT WAS IN A VERY PROMINENT LOCALITY CLOSE TO CENTRAL STATION. V ALUING AT RS. 1.95 LAKHS PER GROUND FOR THE MAIN BUILDING AND RS. 1.59 LAKHS FOR STAFF QUARTERS WAS VERY FAIR AND REASONABLE AND OUGHT TO HAVE ACCEPTED THESE VALUES FOR WORKING OF THE CAPITAL GAINS. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE VALUATION WAS DO NE BY AN APPROVED VALUER AND OUGHT NOT TO HAVE IGNORED HIS VALUATION ESPECIALLY WHERE A PROPERTY WHICH WAS 5 KMS AWAY FROM THE SAID DASAPR AKASH PROPERTY WAS VALUED AT RS. 3.43 LAKHS PER GROUND AS ON 01.04 .1981 IN CASE OF M/S. KEYARAM HOTEL (P) LTD., AND ACCEPTED BY HIGH C OURT. THE IMPUGNED PROPERTY WAS VERY MUCH CLOSER TO THE CENTR AL STATION AND THE MARKET VALUE AS ON 01.04.1981 WOULD HAVE BEEN HIGHER THAN THE PROPERTY WHICH WAS SOLD BY M/S. KEYARAM HOTEL (P) L TD., ETC. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE LOWE R AUTHORITIES. 4. WE HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FRO M THE ORDERS OF THE LOWER AUTHORITIES THAT THEY HAVE NOT EXAMINED A S TO WHETHER THE :-7-: ITA NOS. 1282& 1284/CHNY/2018 IMPUGNED EXPENDITURE CLAIMED BY THE ASSESSEES, AR OSE OUT OF A OVER- RIDING TITLE THERE UNDER. IF THE ASSESSEES FULL OWNERSHIP OF A UNQUALIFIED RIGHT TO ENJOY THE PROPERTY GETS RESTR ICTED IN THE PARENTAL DEED, THEN IT WOULD CREATE A OVER-RIDING TITLE ON THE BENEFICIARIES. THESE ASPECTS REQUIRE DETAILED EXAMINATION AND HENC E WE DEEM IT FIT TO REMIT THIS ISSUE BACK TO THE AO FOR A FRESH EXAM INATION. THE ASSESSEE SHALL LAY RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTION BEFORE THE AO AND COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDANCE WITH LAW. THE AO SHALL FURNISH ADEQUATE OPPORTUNITY TO THE ASSESSSEE AND DECIDE THE MATTER IN ACCORDANCE WITH LAW. 5. WITH REGARD TO THE COST OF ACQUISITION AS ON 01. 04.1981, VARIOUS FACTORS HAVE TO BE EVALUATED FOR DETERMININ G THE FAIR MARKET VALUE AS ON A PARTICULAR DATE VIZ., LOCATION OF LAN D, ITS POTENTIALITY, SURROUNDINGS, RATE OF THE ADJACENT LAND DETERMINED BY THE COURTS, IF ANY, THE CONDITION OF THE LANDS, THE EXPENDITURE RE QUIRED TO DEVELOP THE LAND, THE LIMITATIONS, IF ANY VIZ., LEGAL DISPU TES AS HAS HAPPENED IN THIS CASE, EVICTION OF UNAUTHORIZED PERSONS ETC. I N THE VERY NATURE OF THINGS, THE PRICES ARE BOUND TO VARY ACCORDING TO T HE CONTEMPORANEOUS ECONOMIC ENVIRONMENT, FROM LAND TO LAND,DEPENDS UPO N BUYER TO BUYER AND SELLER TO SELLER WHICH INCLUDES EVEN THE REASONS FOR WHICH THE SELLERSARE SELLING THE LANDS, THE GUIDELINE VAL UE ETC. THUS, THE AO CANNOT DETERMINE THE FAIR MARKET VALUE AS ON 01.04. 1981 SOLELY BASED :-8-: ITA NOS. 1282& 1284/CHNY/2018 ON THE GUIDELINE VALUE. IN THE FACTS AND CIRCUMSTA NCES, WE DEEM IT FIT TO REMIT THIS ISSUE BACK TO THE AO FOR A FRESH EXAM INATION. THE ASSESSEE SHALL LAY RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTION BEFORE THE AO AND COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDANCE WITH LAW. THE AO IS FREE TO CONDUCT APPR OPRIATE ENQUIRY AS DEEMED FIT, BUT HE SHALL FURNISH ADEQUATE OPPORTUN ITY TO THE ASSESSSEE ON THE MATERIAL ETC TO BE USED AGAINST IT AND DECI DE THE MATTER IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE ASSESSEES APPEALS ARE TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 29 TH NOVEMBER, 2018 JPV 0%7898 /COPY TO: 1. '/ APPELLANT 2. %&' /RESPONDENT 3. ; ) (/CIT(A) 4. ; /CIT 5. 8% /DR 6. /GF