Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 9203 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 7 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-03-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
04-02-2016
Assessment Year
2008-2009
Appeal Filed On
23-07-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.1601/AHD/2012 / ASSTT. YEAR: 2008-2009 SMT. SHYAMA PRAKASH AGARWAL 509, JAY RADEY MARKET RING ROAD SURAT 395 002. PAN : ABEPA 4467 C VS ITO, WARD - 2(2) SURAT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI MEHUL R. SHAH REVENUE BY : SHRI V.K. SINGH, SR.DR / DATE OF HEARING : 04/02/2016 / DATE OF PRONOUNCEMENT: 17/03/2016 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-II, SURAT DATED 26.6.2012 PASSED FOR THE ASSTT.YEAR 2008-09. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.12,92,568/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HER RETURN OF INCOME ON 25.9.2008 DECLARING TOTAL INCOME AT RS.4, 46,733/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSES SEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESS EE HAS BOUGHT TWO ITA NO.1601/AHD/2012 2 PIECES OF AGRICULTURE LAND ADMEASURING 5059 SQ.METE RS ON 23.12.2000 AND 3.1.2001 IN VILLAGE GAVIER, DIST. SURAT FOR CON SIDERATION OF RS.9.75 LAKHS FROM SHRI HITESH LALITCHANDRA LAIWALA, HUF. THESE LANDS HAVE BEEN SOLD ON 13.3.2008. IN THE SALE DEED THE SALE PRICE OF THE LAND WAS SHOWN AT RS.15 LAKHS, WHEREAS THE SAID PROPERTY WAS VALUED BY THE STAMP VALUATION AUTHORITIES FOR THE PURPOSE OF STAM P DUTY PAYMENT OF RS.27,92,568/-. THE LD.AO HAS CONFRONTED THE ASSES SEE AS TO WHY THE DIFFERENCE OF RS.12,92,568/-SHOULD NOT BE ADOPTED A S PER SECTION 50C OF THE INCOME TAX ACT FOR COMPUTING THE CAPITAL GAIN. IN RESPONSE TO THE QUERY OF THE AO, IT WAS CONTENDED BY THE ASSESSEE T HAT SINCE THE LAND IN DISPUTE WAS AN AGRICULTURE LAND, THE ASSESSEE WAS N OT AN AGRICULTURIST, AND THEREFORE, AS PER THE GUJARAT AGRICULTURE LAND ACT, SHE COULD NOT PURCHASE THE AGRICULTURE LAND. SHE HAD ENTERED INTO AN AGREEMENT TO PURCHASE THE LAND. THE SALE DEED DATED 13.3.2008 W AS SIGNED BY SHRI HITESH LALITCHANDRA LAIWALA, AS A VENDOR. THE ASSE SSEE WAS ONLY A CONFIRMING PARTY. SECTION 50C OF THE INCOME TAX CO NTEMPLATES THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUED, AS A R ESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED BY THE ASSESSEE BY AN AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY, IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED, SHALL, FOR THE PURPOS E OF SECTION 48, TO BE DEEMED TO THE FULL VALUE OF CONSIDERATIONS RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. ACCORDING TO THE ASSESSE E, THE RIGHTS ACCRUED TO HER, BY VIRTUE OF PURCHASE AGREEMENT, WERE CAPITAL IN NATURE BUT NOT AKIN TO A CAPITAL ASSET BEING LAND OR BUILDING. SHE EMP HASIZED THAT THOUGH SHE HAS RELINQUISHED HER RIGHTS IN THE NATURE OF CAPITA L ASSET, BUT THESE RIGHTS WERE NOT EQUIVALENT TO LAND OR BUILDING, THEREFORE, ON THE STRENGTH OF ITA NO.1601/AHD/2012 3 SECTION 50C, THE SALE CONSIDERATION CANNOT BE CHANG ED EQUIVALENT TO THE SALE CONSIDERATION DETERMINED FOR THE PURPOSE OF PA YMENT OF STAMP DUTY. THE LD.AO HAS REJECTED THIS CONTENTION OF THE ASSES SEE AND MADE ADDITION. 4. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. 6. THE LD.COUNSEL FOR THE ASSESSEE MADE REFERENCE T O THE FOLLOWING DECISIONS IN ORDER TO BRING HIS POINT AT HOME THAT CAPITAL ASSETS CAN BE OF DIFFERENT KINDS. THE SECTION 50C IS NOT APPLICABLE ON EVERY KIND OF CAPITAL ASSET. I) DCIT VS. TEJINDER SINGH, 19 TAXMANN.COM 4 (KOL TRIB ) II) ATUL G. PURANIK VS. ITO, 132 ITD 499 (MUM TRIB) III) SMT. KISHORI SHARAD GAITONDE VS. ITO, ITA NO.1561/MUM/09 (MUM TRIB) IV) ITO VS. YASIN MOOSE GODIL, ITA NO.2519/AHD/2009 (AH D TRIB) 7. IN ORDER TO RESOLVE THIS ISSUE, WE WOULD LIKE TO FIRST REFER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. TATA SERVICES LTD., 122 ITR 0594 (BOM). IN THIS CASE, THE FACTS ARE THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH ONE SET H ANANDJI HARIDAS TO PURCHASE A RESIDENTIAL PLOT AT 29D, DOONGARSEY ROAD , MALABAR HILL, BOMBAY AND PAID RS.90,000/- AS EARNEST MONEY. THE AGREEME NT WAS IN RESPECT OF 5,000 SQ.YARDS OUT OF A LARGER PLOT AND PRICE FIXE D WAS AT THE RATE OF RS.175 PER SQ.YARD. THE PURCHASE WAS TO BE COMPLETED WITHIN SIX MONTHS FROM THE DATE OF THE AGREEMENT AND AFTER EXPIRATION OF THE S AID PERIOD OF SIX MONTHS BY A 15 DAYS NOTICE TO BE GIVEN IN WRITING. THE TIME COULD BE MADE THE ESSENCE OF THE CONTRACT. THE AGREEMENT WAS EXECUTED ON JUL Y 31, 1961. IT WAS THE ITA NO.1601/AHD/2012 4 RESPONSIBILITY OF VENDOR TO OBTAIN NECESSARY PERMIS SION FROM THE MUNICIPAL AND OTHER AUTHORITIES, FOR THE SUBDIVISION OF THE M AIN PLOT, ADMEASURING 7,012. ULTIMATELY HE ENTERED INTO AN AGREEMENT TO SELL THE PROPERTY TO M/S.ADVANI AND BATRA. THE ASSESSEE THREATENED TO FILE A SUIT FOR SPECIFIC PERFORMANCE. A SETTLEMENT WAS ARRIVED VIDE WHICH THE VENDOR HAS RE TURNED RS.90,000/- PAID BY THE ASSESSEE AS ADVANCE AND COMPENSATION OF RS.5 ,00,000/-. THUS, THE ASSESSEE GOT A SUM OF RS.5,90,000/-. IN THE CANCEL LATION DEED A SUM OF RS.5,00,000/- WAS MENTIONED AS AMOUNT OF CONSIDERAT ION FOR TRANSFER AND ASSIGN THE ASSESSEES RIGHT, TITLE AND INTEREST UND ER THE AGREEMENT ENTERED INTO WITH ANANDJI HARIDAS FOR PURCHASE OF THIS PROPERTY AND RS.90,000/- BEING THE AMOUNT OF MONEY DEPOSITED WITH M/S.KANGA AND CO., W HICH WAS RECEIVED AS RETURN OF THE ADVANCE MONEY. THE DISPUTE AROSE WHE THER THE SUM OF RS.5,00,000/- RECEIVED BY THE ASSESSEE REPRESENTS T HE MONEY RECEIVED ON TRANSFER OF A CAPITAL ASSET AND REQUIRED TO BE ASSE SSED UNDER THE HEAD CAPITAL GAINS. THE HONBLE BOMBAY HIGH COURT HAS MADE AN ELABORATE DISCUSSION ON THE ISSUE AND ULTIMATELY HELD THAT THE MONEY REC EIVED BY THE ASSESSEE FOR ASSIGNING OF ITS RIGHTS ACQUIRED UNDER THE AGREEMEN T FOR OBTAINING A SALE DEED IS FOR TRANSFER OF CAPITAL ASSET AND ASSESSABLE UND ER THE HEAD CAPITAL GAIN. THE FOLLOWING OBSERVATIONS OF THE HONBLE BOMBAY HIGH C OURT ARE WORTH TO NOTE: WHATEVER MAY HAVE BEEN THE CONTROVERSY BETWEEN ANAN DJI HARIDAS AND THE ASSESSEE PRIOR TO SEPTEMBER 23, 1963, WHEN THE ASSESSEE EXECUTED THE RECEIPT FOR RS. 5,90,000, THE POSITION ON THAT DAY WAS NOT ONLY THAT THE ORIGINAL AGREEMENT OF SAID BETWEEN TH E ASSESSEE AND ANANDJI HARIDAS WAS TO BE TREATED AS SUBSISTING BUT ALSO THAT THE TRIPARTITE AGREEMENT BETWEEN THE ASSESSEE, ANANDJI HARIDAS AND M/S. ADVANI AND BATRA THAT THE MONEY PAID BY THE ASSESSE E TO ANANDJI HARIDAS WAS TO BE RETURNED BY M/S. ADVANI AND BATRA AND AN ADDITIONAL SUM OF RS. 5,00,000 WAS ALSO TO BE PAID TO THE ASSESSEE BY M/S. ADVANI AND BATRA WAS GIVEN EFFECT TO. UNDER TH IS TRIPARTITE AGREEMENT, THE ASSESSEE WAS TO TRANSFER AND ASSIGN IN FAVOUR OF M/S. ADVANI AND BATRA THE RIGHT, TITLE AND INTEREST WHIC H THE ASSESSEE HAD UNDER THE AGREEMENT ENTERED INTO WITH ANANDJI HARID AS. ONCE THE PARTIES HAD DECIDED THAT THE RIGHTS UNDER THE AGREE MENT OF SALE WERE TO ITA NO.1601/AHD/2012 5 BE ASSIGNED IN FAVOUR OF MESSRS. ADVANI AND BATRA, IF IS DIFFICULT TO SEE HOW THE SUM OF RS. 5,00,000 RECEIVED BY THE ASSESSE E FROM M/S. ADVANI AND BATRA COULD BE CLAIMED TO HAVE BEEN RECEIVED BY WAS OF COMPENSATION OR DAMAGES FOR BREACH OF THE AGREEMENT OF SALE. THE POSITION ON SEPTEMBER 23, 1963, WHEN THE RECEIPT (A NNEX. 'H') WAS EXECUTED BY THE ASSESSEE WAS THAT RS. 5,90,000 WERE RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR ASSIGNING ITS RIGHTS UNDER THE AGREEMENT WITH ANANDJI HARIDAS IN FAVOUR OF M/S. ADVANI AND B ATRA. THESE RIGHTS, WHICH HAD BEEN ASSIGNED IN FAVOUR OF M/S. ADVANI AN D BATRA, CLEARLY FELL WITHIN THE WIDE DEFINITION OF CAPITAL ASSET IN CLAUSE (14) OF S. 2 OF THE I.T. ACT, 1961. 8. NEXT DECISION ON THIS ISSUE IS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIJAY FLEXIBLE CONTAINERS, 186 ITR 0693 (BOM). IN THIS CASE, THE FACTS ARE THAT THE ASSESSEE-FIRM ENTERED INTO A N AGREEMENT WITH CAPTAIN B.V. DHURU ON 10.11.1959 WHEREUNDER, THE ASSESSEE H AS AGREED TO PURCHASE FROM THE SAID DHURU AND OTHERS IMMOVABLE PROPERTY D ESCRIBED IN SCHEDULE THERETO AT THE RATE OF RS.35 PER SQ.YARD TO BE PAID IN THE MANNER SET OUT. UPON EXECUTION OF THE SAID AGREEMENT FOR SALE, THE ASSES SEE PAID TO THE VENDOR, AS REQUIRED BY THE SAID AGREEMENT FOR SALE, A SUM OF R S.17,500 AS EARNEST MONEY. THE ASSESSEE WAS PERSUADED TO FILE SUIT FOR SPECIFI C PERFORMANCE OF THE SAID AGREEMENT FOR SALE OR, IN THE ALTERNATIVE, FOR DAMA GES FOR ITS BREACH. THE DISPUTE WAS SETTLED AND A SUM OF RS.1,17,500/- WAS PAID TO THE ASSESSEE. THIS SUM WAS RECEIVED BY THE ASSESSEE IN ACCOUNTING YEAR RELEVANT TO THE ASSTT.YEAR 1972-73. THE ITO HELD THAT THE ASSESSEE HAS ACQUIR ED UNDER THE SAID AGREEMENT FOR SALE WAS CAPITAL ASSET. UPON EXTINGU ISHMENT OF THAT RIGHT, THE ASSESSEE HAS RECEIVED A SUM OF RS.1,17,500/-. AFTE R DEDUCTING THE COST OF ACQUISITION OF THE CAPITAL ASSET IN THE AMOUNT OF R S.17,5000/- AND EXPENSES AND LEGAL CHARGES IN THE SUM OF RS.17,904/-, THE IT O FOUND THE CAPITAL GAIN TO BE RS.82,086/-. THE HONBLE BOMBAY HIGH COURT UPHE LD THE CONCLUSION OF THE AO AND HELD THAT THE ASSESSEE HAD ACQUIRED RIGH T OF THAT CAPITAL ASSET NATURE, UNDER THE AGREEMENT FOR PURCHASE OF PROPERT Y. ON EXTINGUISHMENT OF SUCH RIGHTS, GAIN ARISEN TO THE ASSESSEE IS TO BE A SSESSED AS A CAPITAL GAIN. THE ITA NO.1601/AHD/2012 6 HONBLE COURT HAS UPHELD THE CONCLUSION OF THE AO T HAT THE ASSESSEE HAD EARNED CAPITAL GAIN OF RS.82,086/-. 9. THE NEXT DECISION ON THIS ISSUE IS OF HONBLE MA DHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. SMT. LAXMIDEVI RATANI, 17 TAXMAN 642 (MP). IN THIS CASE, SMT. LAXMIDEVI RATANI AND ONE SHRI MU RLIDHAR TOTLA WERE PARTNERS OF ONE FIRM M/S.INDIAN PHARMACEUTICALS. T HE FIRM HAD ENTERED INTO A CONTRACT TO PURCHASE CERTAIN IMMOVABLE PROPERTY FRO M SMT.RATAN BAI TONGIA FOR RS.1,05,000/-. AN AGREEMENT TO THAT EFFECT WA S ENTERED INTO BETWEEN THE PARTIES ON 25.9.1970. THE AGREEMENT WAS NOT CARRIE D OUT BY THE SELLER AND HENCE, THE ASSESSEE-FIRM WAS COMPELLED TO FILE A SU IT FOR SPECIFIC PERFORMANCE OF THE CONTRACT AGAINST THE OWNER OF THE PROPERTY I N CIVIL COURT. ULTIMATELY, THE DISPUTE WAS RESOLVED BY A COMPROMISE WHEN THE LITIG ATION WAS PENDING BEFORE THE HONBLE HIGH COURT. THE VENDEE RECEIVED A SUM OF RS.14,85,000/-. THIS AMOUNT WAS RECEIVED IN THE ACCOUNTING YEAR RELEVANT TO THE ASSTT.YEAR 1987- 88. THE AO HAS TREATED THE RECEIPT OF RS.14,85,001 /- TO BE IN THE NATURE OF CAPITAL GAINS IN THE HANDS OF THE ASSESSEE, AND ACC ORDINGLY TAXED IT. 10. NO DOUBT SECTION 50C CONTEMPLATES REPLACEMENT O F FULL VALUE OF CONSIDERATION RECEIVED AS A RESULT OF SUCH TRANSFER . BUT A TRANSFER OF CAPITAL ASSET SHOULD BE EITHER LAND OR BUILDING. I T DOES NOT AUTHORIZE THE AO TO REPLACE THE FULL VALUE OF THE CONSIDERATION I N EACH AND EVERY CASE, WHERE CAPITAL GAIN IS TO BE COMPUTED. THIS DEEMING FICTION IS APPLICABLE ONLY WHEN THE LAND OR BUILDING IS BEING TRANSFERRED . THE SITUATION IN THE PRESENT CASE CAN BE EXPLAINED BY AN EXAMPLE, NAMELY , A ENTER INTO AN AGREEMENT WITH B FOR SALE OF A LAND FOR RS.100/-. A INSTEAD OF EXECUTING SALE DEED IN FAVOUR OF B ENTERS INTO A SECOND AGREEMENT WITH C FOR RS.500/-. B FILES A SUIT FOR SPECIFIC PE RFORMANCE FOR ENFORCING THE CONTRACT BETWEEN HIM AND A. SINCE, A WAS G ETTING RS.500/- ITA NO.1601/AHD/2012 7 MORE ON THIS SALE TRANSACTION, HE SETTLES THE DISPU TE WITH B AMICABLY AND AGREES TO RETURN HIS INITIAL PAYMENT ALONG WITH COMPENSATION OF RS.100/-. THUS AN AMOUNT OF RS.100/- RECEIVED BY B WOULD BE IN LIEU OF RELINQUISHMENT OF A CAPITAL ASSET, I.E. FOR FORE GOING HIS RIGHT OF OBTAINING A SALE DEED WITH RESPECT TO THAT LAND. T HE CAPITAL GAIN ON THIS RS.100/- WOULD BE ASSESSABLE IN THE HANDS OF B. A ULTIMATELY TRANSFERS THE LAND TO C AND THE CAPITAL GAIN FOR TRANSFER OF THE LAND WOULD BE ASSESSED IN THE HANDS OF A. IN THAT CAS E, IT IS TO BE DETERMINED WHETHER THIS RS.500/- RECEIVED BY A IS IN CONSONANCE WITH THE VALUE ASSESSED FOR THE PURPOSE OF STAMP DUTY. IF IT IS MORE, THEN, NO ADDITION SHOULD BE MADE UNDER SECTION 50C EVEN IN T HE CASE OF A; IF IT IS LESS, THEN THE ADDITION COULD BE MADE IN THE HAN DS OF A BECAUSE, ULTIMATELY, IT IS THE A WHO SOLD THE LAND TO C. WHATEVER COMPENSATION RECEIVED BY B WOULD BE FOR RELINQUIS HMENT OF HIS RIGHT TO OBTAIN A SALE DEED, WHICH IS ALSO A CAPITAL ASS ET WITHIN THE MEANING OF SECTION 2(14) OF THE INCOME TAX ACT, AS DISCUSSE D IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT EXTRACTED SUPRA BUT N OT AKIN TO LAND OR BUILDING. THEREFORE, IN THIS CASE, NO ADDITION CAN BE MADE WITH THE AID OF SECTION 50C IN THE HANDS OF THE ASSESSEE. WE AL LOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 17 TH MARCH, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 17/03/2016
Mehul