SHAH RUKH KHAN, MUMBAI V. ACIT CEN CIR 29, MUMBAI

ITA 1304/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8627 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Deemed Gift on Purchase of immovable Property below Jantri value; Gift
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTNAT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 1304/MUM/2013 (ASSESSMENT YEAR-2008-09) MR. SHAH RUKH KHAN 44, MANNAT, B.J. ROAD, BANDRA(W), MUMBAI-400050. PAN: AAHPK3293L VS. ACI, CENTRAL CIRCLE-29, ROOM NO. 411, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HIRO RAI (AR) REVENUE BY : SHRI V. JUSTIN (SR. DR) DATE OF HEARING : 02.11.2017 DATE OF PRONOUNCEMENT : 02 .11.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-40, MUMBAI DATED 05.12.2012 FOR ASSESSMENT YEAR (AY) 2008-09. THE ONLY GROUND OF AP PEAL RAISED BY ASSESSEE IS THAT LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2. AT THE OUTSET OF THE HEARING, THE LD. AUTHORIZED RE PRESENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED IN THE APPEAL ARE COVERED IN FAVOUR OF ASSESSEE. IT WAS ARGUED THAT THE ADDIT ION ON THE BASIS OF WHICH PENALTY WAS LEVIED BY THE ASSESSING OFFICER (AO) HA S BEEN DELETED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO. 80/MUM /2012 DATED ITA NO. 1304/M/2013- MR. SHAH RUKH KHAN 2 18.08.2017. ON GOING THROUGH THE ORDER OF TRIBUNAL, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE FAIRLY CONCEDED THAT THE ADDITION ON THE BASIS OF WHICH PENALTY WAS LEVIED IS DELETED BY THE TRIBUNAL. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND PERUSED THE RECORD OF THE CASE. THE ASSESSMENT FOR THE YEAR UND ER CONSIDERATION WAS COMPLETED UNDER SECTION 143(3) ON 27.12.2010. THE A SSESSING OFFICER MADE ADDITION OF RS. 17,84,95,000/- BEING VALUE OF GIFT OF SIGNATURE VILLA PALM JEREMIAH IN DUBAI. THE AO LEVIED THE PENALTY ON ACCOUNT OF DISALLOWANCE OF GIFT OF SIGNATURE VILLA, PAM JEREMIAH IN DUBAI. WE HAVE SEEN THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES APPEAL ON QUANTUM ASSESSMENT PASSED THE FOLLOWING ORDER: 7.2 WE FIND THAT THE WHOLE GENESIS OF THE GIFT IS SULTANS LETTER DATED 16/12/2004 WHICH HAS BEEN REPRODUCED IN ASSESSMENT ORDER AT PAGE NO.14. THE SAME IS EXECUTED ON THE LETTERHEAD OF NAKHEEL BY HE SULTAN AHMED BIN SULAYEM AND THE GIFT IS ACCEPTED BY THE ASSESSEE. A PERUSAL OF THE SAME SHOWS THAT THE VILLA HAS BEEN GIVEN AS A TOKEN OF OUR APPRECIATION. IT FURTHER STATES THAT .. WE WILL DISCUSS THE LOCATION OF THE VILLA AND FURTH ER DETAILS OF THE GIFT IN DUE CONSIDERATION WITH YOU. PURSUANT TO THE SAME, THE ASSESSEE, THROUGH CHARTERED ACCOUNTANT R.M.AJGAONKAR, SOUGHT PERMISSION OF RBI VIDE LETTER DATED 20/12/2004 AS PLACED ON PAGE NO. 12 OF THE PAPER BOOK. THEREAFTER, AFTER A SERIES OF CORRESPONDENCE BETWEEN ASSESSEE / ASSESSEES REP RESENTATIVES AND RBI, THE PERMISSION HAS FINALLY BEEN GIVEN TO THE ASSESSEE V IDE RBI LETTER DATED 20/04/2007 WHICH IS PLACED ON PAGE NO. 23 OF THE PAPER BOOK. THEREAFTER, DEED OF GIFT HAS BEEN EXECUTED IN ASSESSEES FAVOR ON 16 /09/2007 WHICH IS REPRODUCED ON PAGE NOS. 2 TO 4 OF THE ASSESSMENT ORDER. CLAUSE (E) OF THE SAID GIFT DEED STATES THAT THE DONOR IS DESIROUS OF TRANSFERRING BY WAY OF GIF T TO DONEE WHO IS CELEBRITY FROM INDIA AND ALSO A CELEBRITY IN DUBAI U.A.E., IN ORDER TO HONOR THE ITA NO. 1304/M/2013- MR. SHAH RUKH KHAN 3 DONEE AND WITHOUT ANY MONETARY CONSIDERATION THE SA ID PROPERTY BEING. SIMILARLY, AS PER CLAUSE (F), THE DONOR IS DESIROUS OF TRANSFERRING THE SAID PROPERTY TO THE DONEE BY WAY OF GIFT. THE ASSESSEE HAS ACCEPTED THE SAID GIFT AND THE DEED ALSO BEARS A RE FERENCE TO RBI PERMISSION DATED 20/04/2007. WE FIND THAT ALL THESE EVENTS ARE INTERLINKED AND IN TANDEM WITH EACH OTHER. THESE EVENTS ARE, PRIMA FACIE, PART AND PARCEL OF THE SAME TRANSACTION SOLELY AIMED AT FULFILLING SULTANS WISH TO GIFT A VILLA IN ASSESSEES FAVOR. 7.3 THE WHOLE MATERIAL RELIED UPON BY THE R EVENUE IS NEWS ITEMS CONCERNING ASSESSEE AND FEW PHOTOGRAPHS OF ASSESSEE AT NAKHEELS ANNUAL DAY IN THE YEAR 2007 WHICH WAS PLACED ON THE WEBSITE OF THE COMPANY . THIS MATERIAL HAS BEEN REFERRED BY LD. AO AT VARIOUS PLACES IN THE ASSESSM ENT ORDER TO REACH A CONCLUSION THAT THE ASSESSEE UNDERTOOK BRAND ENDORS EMENT FOR THE DONOR IN EXCHANGE OF GIFT. HOWEVER, A PERUSAL OF THE PHOTOGR APH AS PLACED ON PAGE NOS. 8 & 9 OF THE ASSESSMENT ORDER REVEALS THAT THE ASSESS EE FIGURES IN EVENT GALLERY 7 & 9. HOWEVER, THE SAME IN NO WAY SUGGEST STAGE PERFORMAN CE BY THE ASSESSEE, IN ANY MANNER RATHER THE ASSESSEE IS SHOWN WITH A MIKE IN EVENT GALLERY 7 WHICH, IN FACT, CORROBORATES THE ARGUMENTS OF THE LD. AR THAT THE A SSESSEE MERELY ADDRESSED THE EMPLOYEES OF THE COMPANY AT THE SAID GATHERING. 7.4 THE LD. AO HAS PLACED RELIANCE ON AN OTHER PHOTOGRAPH DEPICTING THE EVENT OF ASSESSEES VISIT AT DONORS SALES OFFICE I N THE YEAR 2004 WITH A NEWS- ITEM WHICH GAVE BRIEF ACCOUNT OF ASSESSEES VISIT TO TH E NAKHEEL SALES CENTRE . HOWEVER, IT IS IMPORTANT TO NOTE THE POSITIONING OF THE NEWS-ITEM ON THE WEBSITE OF THE COMPANY AS ENUMERATED BY THE LD. AR AND WHIC H IS REPRODUCED ON PAGE NO 4 OF LD. CIT(A)S APPELLATE ORDER. A PERUSAL OF THE SAME REVEALS THAT THE WEBSITE OF THE DONOR COMPANY CONTAINED NUMBER OF TABS ONE OF WHICH WAS NEWS WHICH CONTAINED CALENDAR WISE NEWS ITEMS. THE INFORMATION OF ASSESSEES VISIT TO THE SALES CENTER WAS ONE AMONGS T THE MANY NEWS ITEMS AND THE LIST ALSO CONTAINED INFORMATION ABOUT VISIT OF SEVE RAL FAMOUS PERSONALITIES WORLDWIDE OVER SEVERAL YEARS TO NAKHEEL AND ITS VARIOUS PROJECTS. THEREFORE, AFTER PERUSAL OF THE SAME, IT IS DIFFICULT TO ACCEP T THE FACT THAT THE SAID NEWS ITEM TANTAMOUNT TO ANY KIND OF ADVERTISEMENT OR BRAND EN DORSEMENT FOR THE DONOR IN EXCHANGE OF GIFT. ITA NO. 1304/M/2013- MR. SHAH RUKH KHAN 4 7.5 THE ABOVE CONCLUSIONS ARE FURTHER SU PPORTED BY THE FACT THAT THE GIFT WAS OFFERED TO THE ASSESSEE IN THE YEAR 2004, WHERE AS, THE ANNUAL DAY TOOK PLACE IN THE YEAR 2007 AND THEREFORE THE ASSESSEE W AS UNDER NO OBLIGATION TO ATTEND THE SAME AND UNDERTAKE ANY SORT OF BRAND END ORSEMENTS FOR DONOR COMPANY. THIS IS FURTHER FORTIFIED BY THE LETTER OF NAKHEEL DATED 17/12/2010 WHERE NAKHEEL HAS STATED THAT: THIS IS TO FURTHER STATE THAT WE HAVE INVITED MR. SHAH RUKH KHAN AS ONE OF THE GUEST OF HONORS AT THE OCCASION OF NAKHE EL DAY HELD ON [2 ND SEPTEMBER, 2007] IN DUBAI. NAKHEEL DAY IS A NON-COM MERCIAL INTERNAL STAFF EVENT OF THE COMPANY. HE GRACED THE OCCASION AS A GESTURE OF GOODWILL AND FRIENDSHIP WITH HE SULTAN AHMED BIN SU LAYEM WHERE HIS PRESENCE AT THIS FUNCTION WAS GRATIS. THE SAID LETTER GIVES STRENGTH TO CONTENTION THAT P RESENCE OF THE ASSESSEE AT THE ANNUAL DAY WAS MERE GOODWILL GESTURE AND THE EVENT WAS INTERNAL STAFF EVENT OF THE COMPANY. 7.6 SO FAR AS THE CAPACITY OF THE CORPORAT E ENTITY TO MAKE A GIFT AND EXECUTION OF GIFT DEED IS CONCERNED, WE FIND THAT T HE ARGUMENT THAT THE CORPORATE HAS SEPARATE LEGAL ENTITY AS DISTINCT FROM ITS MEMB ERS / DIRECTORS, MAY BE TRUE IN INDIAN CONTEXT BUT MAY NOT BE TRUE AS PER CUSTOMS PREVAILING IN DUBAI. THE LD. AR HAS CONTENDED THAT SULTAN HAD THE ULTIMATE CONTROL OVER THE AFFAIRS OF THE DONOR COMPANY AND THE COMPANY WAS UNDER EXCLUSIVE D OMAIN OF THE SULTAN WHICH HAS NOWHERE BEEN CONTROVERTED BY THE REVENUE. EVEN IN INDIAN CONTEXT, MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. KDA ENTERPRISES PRIVATE LIMITED [57 TAXMANN.COM 284] HAS HELD THAT THE COMPANIES ARE COMPETENT TO MAKE GIFT AND THERE IS NO REQUIREMENT OF ANY NATURAL LOVE OR AFFE CTION FOR MAKING OR RECEIVING GIFTS BY COMPANIES. UPON PERUSAL OF CHAIN OF EVENTS LEADING TO EXECUTION OF GIFT AS ENUMERATED IN PARA 7.2, WE HAVE ALREADY REACHED AN INEVITABLE CONCLUSION THAT ALL EVENTS /ACTIONS WERE INTERLINKED AND PART AND P ARCEL OF THE SAME GIFT TRANSACTION AND THEREFORE, GIFT DEED WAS EXECUTED B Y THE NAKHEEL AT THE BEHEST OF SULTAN ONLY IN VIEW OF THE FACT THAT OWNERSHIP WAS VESTED WITH THE COMPANY. 7.7 FINALLY, IT IS WELL SETTLED LAW THAT NO ADDITI ON COULD BE MADE MERELY ON THE BASIS OF MERE SUSPICION, CONJECTURES OR SURM ISES. THE ASSESSEE HAS THEREFORE, IN OUR OPINION, DISCHARGED THE ONUS OF P ROVING THE GIFT TRANSACTION ITA NO. 1304/M/2013- MR. SHAH RUKH KHAN 5 BEING UNILATERAL GRATUITOUS ACT OF THE DONOR COMPAN Y AND THE ONUS WAS ON REVENUE TO ESTABLISH THE CONTRARY, WHICH, IN OUR OP INION, HAS REMAINED UNDISCHARGED. 7.8 LASTLY, SO FAR AS TAXABILITY OF GIFT IN KIND IS CONCERNED, WE FIND THAT THE GIFT OF IMMOVABLE PROPERTY ON OR AFTER 01/10/2009 H AS BEEN BROUGHT TO TAX BY FINANCE ACT, 2009 VIDE AMENDMENT TO SECTION 56(2)(V II)(B). BEFORE THIS AMENDMENT, ANY SUM OF MONEY EXCEEDING RS.50,000/- RECEIVED BY AN INDIVIDUAL / HUF WITHOUT CONSIDERATION COULD BE BROUGHT TO TAX VIDE SECTION 56(2)(VII)(A). SINCE WE ARE DEALING WITH AY 2008-09 ABOUT TAXABILI TY OF AN IMMOVABLE PROPERTY, THE SAID AMENDMENT DOES NOT APPLY TO THE CASE OF THE ASSESSEE AND THEREFORE COULD NOT HELP THE REVENUE IN ANY MANNER. 7.9 IN VIEW OF THE ABOVE FACTS / CIRCUMS TANCES AND OUR OBSERVATIONS, WE FIND THAT THE CONTENTION / CONDUCT OF THE ASSESSEE OUTWEIGH THE REVENUES CONTENTION. THEREFORE, WE ARE INCLINED TO HOLD THAT THE SAID VILLA WAS RECEIVED IN GIFT BY THE ASSESSEE AND NOT OUT OF EXERCISE OF PRO FESSION AND THEREFORE, NOT TAXABLE IN ASSESSEES HANDS. RESULTANTLY, GROUND NO . 1 & 2 OF ASSESSEES APPEAL ITA NO. 80/MUM/2012 STANDS ALLOWED. 4. CONSIDERING THE FACT THAT THE ADDITION/DISALLOWANCE OF GIFT ON THE BASIS OF WHICH THE PENALTY WAS LEVIED BY AO HAS BEEN DELETED BY CO-ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER DATED 18.08.2017. IN OU R VIEW AFTER DELETING THE ADDITION IN QUANTUM ASSESSMENT THE PENALTY ORDER WI LL NOT SURVIVE. HENCE, THE ORDER OF PENALTY IS ALSO SET-ASIDE. IN T HE RESULT THE GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DAY OF NOVEMBER 2017. SD/- SD/- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTNAT MEMBER JUDICIAL MEMBER MUMBAI; DATED 02/11/2017 S.K.PS ITA NO. 1304/M/2013- MR. SHAH RUKH KHAN 6 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, MUMBAI 6. GUARD FILE. //TRUE COPY/