ITO, CHENNAI V. S.M.K.Mohamed Ali Jinnah, CHENNAI

ITA 1513/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7856 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2016
• Court: TRIBUNAL
• Assessee Lawyers: MRS S VIDYAC A
• Keywords: Capital asset; Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1513/MDS./2016 / ASSESSMENT YEAR : 2006-07 THE ITO, NON-CORPORATE WARD 9(2), CHENNAI -34 VS. SHRI S.M.K.MOHAMED ALI JINNAH, 336,TRIPLICANE HIGH ROAD, TRIPLICANE,CHENNAI. [PAN AAMPM 8222 A ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.SHIVAS SRINIVAS, JCIT, DEPARTMENTAL REPRESENTATIVE. /RESPONDENT BY : MRS.S.VIDYA,C.A / DATE OF HEARING : 15 - 11 - 201 6 / DATE OF PRONOUNCEMENT : 08 - 12 - 2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-10, CHENNA I DATED 15.02.2016 PERTAINING TO ASSESSMENT YEAR 2006-07. ITA NO.1513/MDS./15 :- 2 -: 2. THE MAIN GRIEVANCE OF THE REVENUE IS WITH REGAR D TO DELETION OF ADDITION OF LONG TERM CAPITAL GAINS AND SHORT TE RM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE ON TRANSFER OF THE ASSET HOLDING THAT THE ASSET BELONGS TO THE M/S.MOHAMMED ALIJINNAH TRUST. 3. THE FACTS OF THE ISSUE ARE THAT AS PER THE AIR INFORMATION, THE ASSESSEE BEING THE MANAGING TRUSTEE OF M/ S. S.M.K. MOHAMED ALL JINNAH TRUST, HAD TRANSFERRED THE PROPERTY OF THE T RUST TO THE SOCIETY OF DAUGHTERS OF MARY IMMACULATE (DM1) ON 04.04.2005 VA LUED FOR ` 99,12,644/- DURING THE FY 2005-06 BUT HAD NOT OFFER ED ANY CAPITAL GAINS ON THE TRANSFER OF PROPERTY. THE AO FOUND THA T THE ASSESSEE HAD TRANSFERRED 39.86 ACRES VACANT LAND FOR ` 27,25,500/- AND 0.82 ACRES LAND WITH BUILDING FOR ` 37,74,500/- WHICH WERE VALUED BY THE STAMP VALUING AUTHORITY AT RS.27,30,500/- AND RS.99,12,64 4/- (VACANT LAND ` 53,300/- AND BUILDINGS AT ` 98,59,340/-) RESPECTIVELY. THE TOTAL EXTENT OF VACANT LAND IS 40.68 ACRES. FROM THE DETAILS FUR NISHED BY THE ASSESSEE, THE AO FOUND THAT OUT OF THE TOTAL EXTENT OF 40.68 ACRES OF LAND, 11.88 ACRES OF VACANT LAND WITH BUILDING WAS HELD BY THE ASSESSEE NOT MORE THAN 3 YEARS AND HENCE TREATED TH E GAINS ON TRANSFER OF THE SAME AS SHORT TERM CAPITAL GAINS AN D THE REMAINING 28.89 ACRES OF LAND WAS HELD BY THE ASSESSEE MORE T HAN 3 YEARS AND HENCE TREATED THE GAINS ON TRANSFER OF THE SAME AS LONG TERM CAPITAL GAINS. THE AO FURTHER FOUND THAT THE BOOK VALUE OF MOVEABLE PROPERTY ITA NO.1513/MDS./15 :- 3 -: OF THE TRUST AT ` 35,05,317/- WHICH WAS TRANSFERRED FOR ` 10,00,000/-. HENCE, THE AO COMPUTED THE SHORT TERM CAPITAL GAIN S ON BUILDING (DEPRECIABLE ASSET) AT ` 73,47,035/- AND LAND AT ` 4,30,170/- AS BEING HELD FOR LESS THAN 3 YEARS, SHORT TERM CAPITAL LOSS ON MOVEABLE PROPERTY AT ` 25,04,3 17/-. AND LONG TERM CAPITAL GAINS ON LAND H ELD FOR MORE THAN 3 YEARS AT ` 16,66,353/-. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE CLAIMED THAT THE SALE OF THE ABOVE PROPERTIES WOULD FALL U/S 50B WHICH DEALS WITH SPECIAL PROVISION FOR COMPUTATION OF CA PITAL GAINS IN CASE OF SLUMP SALE. ON PERUSAL OF THE SALE DEEDS, DECLARAT ION DEED DATED 04.04.2005 FOR TRANSFER OF ENDOWMENT FUND AND DOCUM ENT FOR SALE OF MOVEABLE PROPERTY, THE AO OBSERVED THAT THE SALE OF THE ABOVE PROPERTIES WAS NOT FOR A LUMP SUM CONSIDERATION AS THE PROPERTIES WERE BIFURCATED AS TRANSFER OF VACANT LAND, TRANSFE R OF LAND ALONG WITH BUILDING CONSTRUCTED IN IT, TRANSFER OF ENDOWMENT F UND AND TRANSFER OF MOVEABLE PROPERTY AND EACH OF THESE ASSETS WERE VAL UED INDIVIDUALLY. THE AO CONCLUDED THAT THE TRANSFER OF THE ABOVE PRO PERTIES COULD NOT BE CONSIDERED AS SLUMP SALE AS ONLY THE ASSETS ID ENTIFIED WERE TRANSFERRED AND NONE OF THE LIABILITIES OR OTHER AS SETS LIKE FIXED DEPOSITS OTHER THAN THE ENDOWMENT FUND WERE TRANSFERRED. THE AO FURTHER OBSERVED THAT EVEN IF THE TRANSFER OF THE PROPERTIE S WERE CONSIDERED ITA NO.1513/MDS./15 :- 4 -: U/S 50B, THE NET WORTH WOULD BE ` 1,24,99,998/- AND THE FORM 3CEA WAS NOT FILED ALONG WITH THE RETURN. 3.3 IN VIEW OF HIS FINDINGS, THE AO ASSESSED THE S HORT TERM CAPITAL GAINS AT ` 52,72,888/- AND LONG TERM CAPITAL GAINS AT ` 16,66,353/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIE VED, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A) . 3.4. ON APPEAL, LD.CIT(A) OBSERVED THAT THE AO HAS BROUGHT THE TRANSFER OF LAND AND BUILDING PERTAINING TO S.M.K. MOGAMED A U JINNAH TRUST IN THE HANDS OF THE APPELLANT JUST BECAUSE THE APPELLANTS PAN WAS MENTIONED IN THE REGISTERED SALE DOCUMENT. IT IS CLEAR FROM THE AOS OBSERVATION AND THE APPELLANTS SUBMISSION THAT THE APPELLANT SHRI. S.M .K. MOGAMED AU JINNAH REGISTERED THE SALE OF LAND AND BUILDING PERTAINING TO THE AFORESAID TRUST IN THE CAPACITY OF MANAGING TRUSTEE AND NOT IN HIS IND IVIDUAL CAPACITY. THE LAND AND BUILDING OF THE COLLEGE RUN BY THE AFORESAID TR UST WERE ONLY IN THE NAME OF THE TRUST AND NOT IN THE NAME OF THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT HIS PAN WAS INADVERTENTLY MENTIONED IN THE SALE DEED RELATING TO THE TRANSFER OF LAND AND BUILDING BELONGING TO S .M.K. MOGAMED AU JINNAH TRUST. ALTHOUGH THE APPELLANT FURNISHED THE COPIES BF FINANCIAL STATEMENTS AND THE AUDITORS REPORT OF THE TRUST TO SUBSTANTIA TE HIS CLAIM, THE AO DID NOT CONSIDER THE SAME IN THE ASSESSMENT ORDER. NEEDLESS TO SAY THAT THE TRUST IS A DIFFERENT LEGAL ENTITY AND THE TRANSFER OF THE TR USTS ASSETS CANNOT BE CONSTRUED AS THE TRANSFER OF THE ASSETS OF THE MANA GING TRUSTEE IN HIS INDIVIDUAL CAPACITY. THE AO HAS MISCONSTRUED THE TR ANSFER OF ASSETS ITA NO.1513/MDS./15 :- 5 -: PERTAINING TO THE TRUST AS IF IT WAS A TRANSFER OF ASSETS OF THE MANAGING TRUSTEE IN HIS INDIVIDUAL CAPACITY. IN ORDER TO SUP PORT THE APPELLANTS CLAIM, THE APPELLANTS AR HAS SUBMITTED THE INCOME TAX RET URN PERTAINING TO S.M.K.MOHAMED AU JINNAH TRUST FOR THE RELEVANT AY 2 006-07 ALONG WITH ITS FINANCIALS. IN THE FINANCIALS OF THE SAID TRUST, TH E SALE OF COLLEGE IS REFLECTED. BESIDES, THE INCOME AND EXPENDITURE STATEMENT OF TH E COLLEGE IS ALSO REFLECTED IN THE FINANCIALS OF THE SAID TRUST. THE APPELLANTS AR HAS ALSO DRAWN MY ATTENTION TO FORM NO.3CEA WHICH CONTAINS T HE REPORT OF AN ACCOUNTANT TO BE FURNISHED BY AN ASSESSEE U/S 50B(3 ) OF THE IT ACT RELATING TO COMPUTATION OF CAPITAL GAINS IN CASE OF A SLUMP SALE WHEREIN IT IS CLEARLY MENTIONED THAT THE SAID TRANSFER PERTAINS TO THE AF ORESAID TRUST. THE AR HAS FURTHER FURNISHED THE DEPRECIATION CHART PERTAINING TO THE FIXED ASSETS AS ON 31.03.2005 AS WELL AS ON 31.03.2006 WHICH CLEARLY I NDICATE THAT TRANSFER OF ASSETS IN THE HANDS OF THE AFORESAID TRUST ARE DULY REFLECTED IN THE STATEMENT OF FIXED ASSETS PERTAINING TO THE SAID TRUST. 3.5 ACCORDING TO LD.CIT(A), THE AO HAS GROSSLY ERRED IN TREATING THE TRANSFER OF TRUSTS ASSETS IN THE HANDS OF THE MANA GING TRUSTEE OF THE TRUST ALTHOUGH TRUST AND THE MANAGING TRUSTEE ARE TWO DIF FERENT LEGAL ENTITIES. JUST BECAUSE THE MANAGING TRUSTEES PAN OBTAINED IN HIS INDIVIDUAL CAPACITY WAS ERRONEOUSLY MENTIONED IN THE SALE DEED PERTAINING T O THE TRANSFER OF ASSETS OF THE TRUST, THE CAPITAL GAINS CANNOT BE ASSESSED IN THE HANDS OF THE APPELLANT BEING AN INDIVIDUAL AND THE MANAGING TRUS TEE OF THE TRUST. HENCE, LD.CIT(A) DELTED THE AOS ADDITION OF SHORT TERM A ND LONG TERM CAPITAL GAINS ON TRANSFER OF LAND AND BUILDING PERTAINING T O S.M.K. MOGAMED AU ITA NO.1513/MDS./15 :- 6 -: JINNAH TRUST. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE BALANCE SHEET OF THE TRUST WHEREIN THE IMPUGNED LAND AND BUILDINGS WAS REFLECTED AND ON TH E SALE, IT WAS REDUCED FROM THE BLOCK OF ASSETS. BEING SO, IT CANNOT BE S AID THAT IT IS NOT REFLECTED IN THE TRUSTS BALANCE SHEET, THE PROPERTY BEING OWNED BY THE TRUST AND IT SHOULD BE TAXABLE IN THE HANDS OF THE TRUST ONLY. I N OUR OPINION, CIT(A) TOOK A CORRECT VIEW OF THE FACTS AND CIRCUMSTANCES OF TH E CASE IN HAND IN DELETING THE ADDITION IN THE HANDS OF THE PRESENT ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 08 TH DECEMBER, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 08 TH DECEMBER, 2016. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF