DCIT 2(3), MUMBAI V. SAHARA INVESTMENT P.LTD, MUMBAI

ITA 1717/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88223 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Business income; Question of law; Capital receipt

Judgement Text

, BZ BZBZ BZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , !' , ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1717/MUM/2013, # # # # $ $ $ $ / ASSESSMENT YEAR-2006-07 DCIT(OSD)-2, R.NO.552, 5TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD,MUMBAI-400020 # VS. M/S SAHARA INVESTMENT PVT. LTD. 4TH FLOOR, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-400001 PAN:AAECS6355B ( %& / APPELLANT) ( '(%& / RESPONDENT) '()! '()! '()! '()! . /. C.O.NO.86/MUM/2014(ARISING OUT OF ITA NO.1717/M/13) , # ## # . . / A.Y.2006-07 M/S SAHARA INVESTMENT PVT. LTD. 4TH FLOOR, NEVILLE HOUSE, J.N.HEREDIA MARG, BALLARD ESTATE, MUMBAI-400001 PAN:AAECS6355B # VS. DCIT 2(3), R.NO.556, 5TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD,MUMBAI-400020 ( %& / APPELLANT) ( '(%& / RESPONDENT) #*+ #*+ #*+ #*+ , , , , ! !! ! / ASSESSEE BY :SHRI NIRAJ SHETH - , ! / REVENUE BY :SHRI NEIL PHILIP # # # # - -- - +. +. +. +. / DATE OF HEARING : 10 -02-2015 /$ - +. / DATE OF PRONOUNCEMENT : 10 -02-2015 # # # # 1961 - - - - 158 158 158 158( (( (3 33 3) )) )7+ 7+ 7+ 7+ 254 254 254 254( (( (1 11 1) ) ) ) ! ++ !: ! ++ !: ! ++ !: ! ++ !: ORDER U/S. 158(3) R.W.S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. ! !' ! # : CHALLENGING THE ORDER DT.12.12.2012OF THE CIT(A)-6, MUMBAI,ASSESSEE-COMPANY AS WELL AS THE ASSESSING OFFICER(AO) HAS FILED APPEAL/CROSS OBJECT ION(CO) FOR THE YEAR UNDER CONSIDERATION. GROUNDS OF APPEAL,FILED BY THE AO READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUG NED IN THE GROUNDS ENUMERATED BELOW: THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CA SE. 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE SUM OF RS. 437.50 LACS RECEIVED AS SALE PROCEEDS BY THE ASSESSEE COMPANY AS RESULT OF INDENTURE DATED 26.09.2001 SIGNED BY LATE SINT. BACHOOBAI WAR ONZOW, TRANSFERRING HER RIGHTS ARISING OUT OF AGREEMENT OF 02.01.1995 WITH DEVELOPERS, NEITHER RE SULT IN CAPITAL GAIN NOR IS IN THE FORM OF ADVENTUR E IN THE NATURE OF TRADE 2.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE SUM OF RS. 437.50 LAKH RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT OVERLOOKING THE CRUCIAL FACT THAT THE AMOUNT WAS RECEIVED AS A RESULT OF AN AGRE EMENT THE ASSESSEE HAD ENTERED INTO WITH MRS. ITA/1717/MUM/13 AY-06-07 & CO-86/SAHARA 2 BACHOOBAI WARANZOW CREATING AN INTEREST IN THE ESTA TE AND THEREFORE TAXABLE AS BUSINESS INCOME. 3.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE SUM OF RS. 437.50 LAKH RECEIVED BY THE ASSESSEE REPRESENTS THE SALE PROCEEDS OF THE PROPERTIES IN PARA 1.2 OF THE ORDER AND AT THE SAME TIME, HOLDING THAT THE AMOUNTS RECEIVED ARE CAPITAL RECEIPTS IN PARA 1.3 OF THE ORDER THEREBY CONTRADICTING HIMSELF . 4.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RELYING ON THE DECISION OF ITAT IN THE ASSESSEE'S CASE FOR A.Y. 20 04-05 AND 2005-06 IGNORING THE FACT THAT THE DECISION OF ITAT HAS NOT BEEN ACCEPTED BY THE DEPAR TMENT AND APPEAL ULS.260A HAS BEEN FILED. 5.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE ULS.14A BY RELYING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. LTD. VS. DCIT 328 ITR 81 (BORN) , IGNORING THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION AND SLP NO. 12872 OF 201 1 HAS BEEN FILED AGAINST THAT DECISION. 6.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE ULS.14A READ WITH RULE 8D WHEN THIS ME THOD OF WORKING OF DISALLOWANCE IS HELD AS REASONABLE METHOD BY JURISDICTIONAL HIGH COURT IN T HE CASE OF GODREJ & BOYCE MFG. LTD. VS. DCIT 328 ITR 81 (BOM). FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. CO/86/M/2014: THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L IN ITS CO: THE APPELLANT OBJECTS TO THE ORDER DATED 12TH DECEMBER, 2012 PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-6 MUMBAI['COMMISSIONER (APPEALS )'] IN RESPECT OF THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUNDS: THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE AMOUNTS RECEIVED BY THE COMPANY FROM THE ESTATE OF EFD WERE NOT ADVANCES BU T SALE PROCEEDS OF THE PROPERTIES OF THE EFD TRUST, WITHOUT PREJUDICE TO HIS DECISION FOR NO T TAXING THE SAME, AS THE NATURE OF THE AMOUNTS RECEIVED WAS COVERED IN THE FAVOUR OF THE APPELLANT BY THE ORDERS OF THE CIT (A) AND ITAT, WHERE IT WAS HELD THAT THE AMOUNTS RECEIVED ARE CAPITAL R ECEIPTS AND IS THEREFORE NOT TAXABLE. 2.THE LEARNED COMMISSIONER (APPEALS) ERRED IN DISPO SING OFF THE APPELLANTS APPEAL AGAINST THE PENALTY PROCEEDINGS U/S.271 (1) (C) ON THE GROUNDS THAT IT WAS NOT APPEALABLE U/S.246A OF THE INCOME-TAX ACT, 1961. 3.EACH OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PR EJUDICE TO THE OTHER. 4.THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY OF THE ABOVE GROUNDS OF APPEAL. 2. ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 30.1 1.2006 DECLARING TOTAL INCOME OF RS.(-)13, 55,189/-.THE AO FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT,ON 26.12.2008,DETERMINING THE TOTAL INCOME AT RS.4,50,70,685/-.DURING THE ASSESSM ENT PROCEEDINGS,THE AO HELD THAT ADVANCES, AMOUNTING TO RS.4.37 CRORES,RECEIVED BY THE ASSESSE E FROM THE ESTATE OF E F DINSHAW(EFD) WERE TO BE TAXED UNDER THE HEAD BUSINESS INCOME.HE FURTH ER MADE DISALLOWANCE OF RS.10.07 LAKHS U/S.14A OF THE ACT R.W.RUEL 8D OF THE INCOME TAX RU LES,1962 (RULES). 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE ASSESSMENT ORDER WITH REGARD TO ADVANCES RECEIVED FROM EFD,HE HELD THAT D URING THE AY.S.2004-05 AND 2005-06, THE ASSESSEE HAD TREATED THE ADVANCES AS CAPITAL RECEIP T,THAT THE AO HAD TAXED THE SAME AS BUSINESS INCOME,THAT THE THEN FAA REVERSED THE ORDER OF THE AO,THAT TRIBUNAL VIDE ITS ORDER 30.05.2012 DISMISSED THE APPEAL FILED BY THE AO HOLDING THAT T HE AMOUNT RECEIVED BY THE ASSESSEE FROM FED TRUST WAS CAPITAL RECEIPT,THAT THE AO RIGHTLY HELD THAT AMOUNTS RECEIVED DURING THE YEAR WERE NOT ADVANCE BUT WERE SALE PROCEEDS OF THE PROPERTIES WH ICH WERE DISPOSED OFF OR WERE BEING DISPOSED OFF BY THE EFD TRUST.WITH REGARD TO NATURE OF AMOUN TS RECEIVED BY THE ASSESSEE,THE FAA HELD THAT SAME WERE CAPITAL RECEIPT AND NOT TAXABLE. 3.A. SECOND ISSUE BEFORE THE FAA WAS ABOUT DISALLOWANCE MADE AS PER THE PROVISIONS OF RULE 8D OF THE RULES R.W.S.14A OF THE ACT.THE FAA IN THE AP PELLATE PROCEEDING HELD THAT THE HONBLE ITA/1717/MUM/13 AY-06-07 & CO-86/SAHARA 3 BOMBAY HIGH COURT HAD HELD THAT THE PROVISIONS OF R ULE 8 D WERE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION,THAT THE ASSESSEE HAD CLAIMED E XPENSES OF RS.34,504/- ONLY,THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING RS.10,07,339/-.FINALLY ,THE FAA RESTRICTED THE DISALLOWANCE TO RS.34, 504/-. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR) STATED THAT THE ASSESSEE HAD FILED DECLARATION U/S.158 OF THE ACT,THAT IT WOULD ABIDE BY THE ORDER OF THE HONBLE COURT DELIVERED IN THE APPEAL FOR THE AY.S FILED BY THE AO,THAT THE ISSUE WAS IDENTICAL T O THE ISSUE RAISED IN THE APPEAL FOR THE YEAR UNDER APPEAL.IN PURSUANCE OF THE PROVISIONS OF SECT ION 158A OF THE ACT COMMENTS OF THE AO WERE INVITED ABOUT THE DECLARATION MADE BY THE ASSESSEE. THE AO AFTER NARRATING THE FACTS STATED THAT THE FAA HAD HELD THAT THE DISPUTED AMOUNTS WERE SALE PR OCEEDS OF PROPERTIES OWNED BY THE TRUST,THAT SAME HAD TO TREATED AS CAPITAL RECEIPT,THAT HE WAS NOT IN AGREEMENT WITH THE ASSESSEE THAT REVENUES APPEAL FOR THE YEAR UNDER APPEAL SHOULD B E KEPT IN ABEYANCE ON THE ABOVE SAID SUBSTANTIAL QUESTION OF LAW,THAT THE TRIBUNAL COULD DECIDE THE CASE ON MERIT. DEPARTMENTAL REPRESENTATIVE (DR),AFTER HANDING OVER THE REPORT O F THE AO,LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS ADMITTED FOLL OWING QUESTION OF LAW: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN COMING TO THE CONCLUSION THAT THE AMOUNT RECEIVED B Y THE ASSESSEE, AS A RESULT OF INDENTURE DATED 26 TH SEPTEMBER, 2001 SIGNED BY LATE SMT. BACHOOBAI WORO NZOW, TRANSFERRING HER RIGHTS ARISING OUT OF AN AGREEMENT OF 2 ND JANUARY, 1995 WITH DEVELOPERS, DOES NOT RESULT IN C APITAL GAIN IN THE HANDS OF THE ASSESSEE ? WE FIND THAT THE ISSUE INVOLVED IN THE YEAR UNDER C ONSIDERATION ARE IDENTICAL TO THE ISSUE OF EARLIER TWO AY.S.,THAT THE AO HAS NOT GIVEN ANY REASON FOR NOT AGREEING WITH THE PROPOSAL OF THE ASSESSEE TO KEEP THE ISSUE IN ABEYANCE TILL THE APPEAL FILED BY THE DEPARTMENT IS NOT ADJUDICATED BY THE HONBLE BOMBAY HIGH COURT.IN OUR OPINION,THE PROVIS IONS OF SECTION 158A OF THE ACT CAST A DUTY UPON THE AO AND THE APPELLATE AUTHORITIES PASS A RE ASONED ORDER.A REASONED ORDER PRESUPPOSES APPLICATION OF MIND BY THE AUTHORITY CONCERNED I.E. AO/APPELLATE AUTHORITY.THEY ARE REQUIRED TO ELABORATE THE REASONS AS TO WHY THEY OPPOSE OR ACCE PT THE PROPOSAL SUBMITTED BY THE ASSESSEE.A ONE LINER SUBMISSION- I AGREE/I DO NOT AGREEIS A BALD STATEMENT AND IS OF NO JUDICIAL VALUE.AS STATED EARLIER SUCH AN ORDER IS NOT SUBJECT TO APPE AL OR REVISION.THEREFORE,IT BECOMES MORE IMPORTANT THAT THE AUTHORITY HANDLING SUCH APPLICAT ION DEVOTE SOME TIME AND PASS AN ORDER THAT COULD SHOW AS TO HOW AND WHY IT ARRIVED AT A PARTIC ULAR CONCLUSION.IN OTHER WORDS IN ABSENCE OF SUCH AN ORDER,CONTAINING DISCUSSION OF THOUGHT PROC ESS OF THAT AUTHORITY,IS NO ORDER IN THE EYES OF LAW.IN OUR OPINION THE COMMENT OF THE AO OPPOSING T HE PROPOSAL OF THE ASSESSEE FALLS UNDER THAT CATEGORY.IT IS TO REMEMBERED THAT THE CENTRAL BOARD OF DIRECT TAXES HAVE ADVISED THE OFFICERS OF THE DEPARTMENT TO AVOID UNNECESSARY LITIGATION.IN O UR OPINION,THE PROPOSAL MADE BY THE ASSESSEE IS JUSTIFIED AND NO HARM WOULD BE CAUSED TO THE AO IF THE ISSUE IS KEPT IN ABEYANCE TILL THE FINAL DECISION OF THE HONBLE COURT IS DELIVERED.AS A RES ULT,WE ADMIT THE DECLARATION MADE BY THE ASSESSEE.ISSUE OF NATURE OF ADVANCE RECEIVED BY THE ASSESSEE IS TO BE KEPT IN ABEYANCE AND HAS TO BE DECIDED AFTER RECEIVING THE ORDER OF THE HONBLE BOMBAY HIGH COURT FOR THE EARLIER TWO AY.S.GROUNDS NO.1-4 OF THE APPEAL FILED BY THE AO A RE KEPT IN ABEYANCE,AS PER THE PROVISIONS OF SECTION 158 A OF THE ACT. 6. NEXT EFFECTIVE GROUND (GSOA NO.5-6 )DEAL WITH DISA LLOWANCE MADE AS PER THE PROVISIONS OF SECTION 14 A.WE FIND THAT THE FAA HAD RELIED UPON T HE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF GODREJ AND BOYCE MFG . CO.LTD. (328 ITR 81),THAT HE HAD UPHELD THE DISALLOWANCE OF RS.34,504/-.AS THE ASSESSEE ITS ELF HAD DISALLOWED EXPENDITURE OF RS.41.25 LAKHS AND THE FAA HAD DISALLOWED THE REMAINING AMOU NT,SO,IN OUR OPINION HIS ORDER DOES NOT ITA/1717/MUM/13 AY-06-07 & CO-86/SAHARA 4 SUFFER FROM ANY LEGAL INFIRMITY.GROUNDS NO.5 & 6 AR E DECIDED AGAINST THE AO. CO/86/M/2014: 7. AS FAR AS THE GROUNDS OF APPEAL OF THE CO ARE CONCE RNED WE ARE OF THE OPINION SAME HAVE BECOME INFRUCTUOUS AS WE HAVE DECIDED TO ADMIT THE DECLARATION MADE BY IT UNDER SECTION 158A OF THE ACT.THEREFORE,GROUNDS RAISED BY IT STAND DISMIS SED. AS A RESULT,APPEAL FILED BY THE AO AND THE CO FILED BY THE ASSESSEE STAND DISMISSED. ;+< #*+ . - = #*+ ! '()! # > 7 + ? . ORDER PRONOUNCED IN THE O PEN COURT ON 10TH,FEBRUARY,2015. !: - /$ ! @ 7# 10 ;A. , 201 5 - B SD/- SD/- ( /JOGINDER SINGH) ( !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 7# /DATE: 10.02.2015 SK !: !: !: !: - -- - '+C '+C '+C '+C D!C$+ D!C$+ D!C$+ D!C$+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ E F , 4. THE CONCERNED CIT / E F 5. DR E BENCH, ITAT, MUMBAI / CG '+# BZ BZBZ BZ , . . . 6. GUARD FILE/ ; (C+ '+ //TRUE COPY// !:# / BY ORDER, H / DY./ASST. REGISTRAR , /ITAT, MUMBAI