ITO WD 19(3(2), MUMBAI V. KISHORE B LAUNGANI, MUMBAI

ITA 174/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83881 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Capital asset; Capital receipt; Revised return
• Section: 54F; 10

Judgement Text

, , , , F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.424/MUM/2013 (A.Y. 2009-10) ITO WARD-19(3)(4) PIRAMAL CHAMBERS, R.NO.304, LALBAUG MUMBAI-400 012. / VS. MS. VEENA B. LAUNGANI 19, SANTOSH NAGAR HILL ROAD, BANDRA(W) MUMBAI-400 050. ( !' / // / APPELLANT) ( #$!' / RESPONDENT) P.A. NO.ABKPL 7442 E ITA NO.428/MUM/2013 (A.Y. 2009-10) ITO WARD-19(3)(4) PIRAMAL CHAMBERS, R.NO.304, LALBAUG MUMBAI-400 012. / VS. MR. VISHNU B. LAUNGANI 19-A, SANTOSH NAGAR HILL ROAD, BANDRA(W) MUMBAI-400 050. ( !' / // / APPELLANT) ( #$!' / RESPONDENT) P.A. NO.AAPPL 1484 L ITA NO.174/MUM/2013 (A.Y. 2009-10) ITO WARD-19(3)(2) 3 RD FLOOR,PIRAMAL CHAMBERS, R.NO.306, LALBAUG MUMBAI-400 012. / VS. SHRI KISHORE B. LAUNGANI 19A, SANTOSH NAGAR HILL ROAD, BANDRA(W) MUMBAI-400 050. ( !' / // / APPELLANT) ( #$!' / RESPONDENT) P.A. NO.AAJPL 4820 C ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 2 ITA NO.423/MUM/2013 (A.Y. 2009-10) ITO WARD-19(3)(4) PIRAMAL CHAMBERS, R.NO.304, LALBAUG MUMBAI-400 012. / VS. MS. SANGEETA B. LAUNGANI 19, SANTOSH NAGAR HILL ROAD, BANDRA(W) MUMBAI-400 050. ( !' / // / APPELLANT) ( #$!' / RESPONDENT) P.A. NO.AACPL 5607 N !' % & % & % & % & /APPELLANT BY : SHRI JEETENDRA KUMAR #$!' % & % & % & % & /RESPONDENT BY : SHRI K. GOPAL % '( / / / / DATE OF HEARING : 25.09.2014 )*+ % '( / DATE OF PRONOUNCEMENT : 25 .09.2014 , , , , / / / / O R D E R PER JOGINDER SINGH (JM) : THIS BUNCH OF APPEAL IS BY DIFFERENT ASSESSEES HA VING COMMON ISSUE IN WHICH THE REVENUE IS AGGRIEVED BY T HE IMPUGNED ORDERS OF THE LD. CIT(A) ALL DATED 8/10/2012 . THE GROUND RAISED PERTAINS TO LONG TERM CAPITAL GAIN OPINING ENTITLEM ENT OF DEDUCTION U/S. 54F AND 54EC OF THE INCOME TAX ACT, 1961(THE ACT). 2. DURING HEARING OF THESE APPEALS THE LD. DR SHRI JEETENDRA KUMAR CONTENDED THAT THE LD. CIT(A) MERELY ARRIVED AT A PARTICULAR CONCLUSION MERELY ACCEPTING THE SUBMISSIONS OF THE ASSESSEE IGNORING THE FACTS MENTIONED IN THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE ASSESSEE MADE APPLICATIONS U/S. 171 OF THE ACT ON 3 0/11/2011 WHEREAS ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 3 THE SALE TRANSACTION PERTAINS TO THE PERIOD OF FY 2 007-08 ESTABLISHING THAT THE PARTITION OF HUF HAD NOT TAKEN PLACE ON OR BEFORE THE SALE OF PROPERTY, THUS, ON THE DATE OF SALE THE PROPERTY WA S OWNED BY HUF AND NOT BY THE ASSESSEES. IT WAS ALSO ASSERTED THAT TH ESE ASSESSEES NEVER FULFILLED THE CONDITIONS AS CONTAINED IN SEC.49(1)( I) SINCE NO PARTITION OF HUF HAD TAKEN PLACE. PLEA WAS ALSO RAISED THAT THE LD. CIT(A) FURTHER ERRED IN ALLOWING THE CLAIM OF DEDUCTION MADE IN TH E COMPUTATION AND NOT BY FILING A REVISED RETURN. 2.1 ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE SHRI K. GOPAL BROADLY DEFENDED THE CONCLUSION ARRIVED AT BY THE LD. FIRST APPELLATE AUTHORITY BY SUBMITTING THAT THE APPLICAT ION U/S.171 WAS MADE BY THESE ASSESSEES ON 30/11/2011 BEFORE THE A O. IT WAS EXPLAINED THAT THE PROPERTY WAS SOLD BY HUF FOR A T OTAL CONSIDERATION OF RS.4,85,00,000/- VIDE AGREEMENT DATED 8/7/2008 AND BY DEED OF ASSIGNMENT EXECUTED IN JULY 2008. EACH OF THE CO-AS SIGNERS WERE ASSIGNED THEIR 1/7 TH SHARE EACH IN THE IMMOVABLE PROPERTY. BROADLY IT WAS CONTENDED THAT THE SAID PROPERTY NO LONGER REMA INED THE PROPERTY OF THE HUF WHICH LOST ITS EXISTENCE AT THE TIME OF PAR TITION. THE AMOUNT WAS CLAIMED TO BE RECEIVED FROM THE PURCHASER OF TH E PROPERTY I.E. INDIA BELT CO. UNDER A DEED OF ASSIGNMENT EXECUTED ON 11/ 7/2008. ALTERNATIVELY, IT WAS ARGUED THAT EVEN IF IT IS ASS UMED, WITHOUT ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 4 ADMITTING, THAT THE ASSESSEE RECEIVED MONEY FROM HU F THE SAID AMOUNT IS EXEMPT FROM TAX U/S. 10(2) OF THE INCOME TAX ACT . 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF AR E THAT THE PRESENT ASSESSEES ARE COPARCENER OF AN HUF OF BASUMAL LAUN GANI, WHICH WAS PARTITIONED ON 14/3/2008 AS A RESULT OF WHICH THE P RESENT ASSESSEES CLAIMED TO BECOME CO-OWNER OF THE IMMOVABLE PROPE RTY OF THE ERSTWHILE HUF. THE ASSESSEES RECEIVED THEIR 1/7 TH SHARE AS A CO-OWNER AND RECEIVED THE AMOUNT FROM INDIA BELT CO. THE IMMOVAB LE PROPERTY WAS PURCHASED BY THE HUF WAY BACK ON 6/7/1972. THE COPY OF THE PURCHASE DEED AND THE AGREEMENT OF SALE ARE AVAILAB LE ON RECORD. ALL THE SEVEN PERSONS/ASSESSEES ASSIGNED THEIR RIGHT, TITL E, INTEREST IN THE SAID PROPERTY IN FAVOUR OF INDIA BELT CO. BY DEED OF ASS IGNMENT FOR A CONSIDERATION OF RS.4,85,00,000/- ON 11/7/2008. AF TER DEDUCTING EXPENSES AND OTHER INCIDENTAL EXPENSES, THE REMAINI NG AMOUNT OF RS.4,76,000/- WAS DIVIDED AMONG THE SEVEN CO-ASSIGN ERS WHO GOT INDIVIDUALLY RS.68.00 LACS EACH. THE LD. AO DISALLO WED THE CLAIMED DEDUCTION U/S. 54F/54EC OF THE ACT BY PLACING RELIA NCE UPON THE DECISION IN M/S. GOETZE INDIA LTD. VS. CIT (284 ITR 323)(SC) . THE ASSESSEE CHALLENGED THE APPLICATION OF THIS DECISIO N. THE ASSESSEE ALSO ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 5 FILED APPLICATION U/S. 171 OF THE ACT ON 30/11/2011 ON WHICH NO ORDER WAS PASSED BY THE AO. 3.1 THE ASSESSEES CARRIED THE ASSESSMENT ORDERS IN APPEAL BEFORE THE LD. CIT(A) WHEREIN BY IMPUGNED ORDERS, THE ASSE SSEE WERE HELD TO BE ENTITLED FOR DEDUCTION U/S. 54F AND 54EC. THE AO WA S DIRECTED TO SATISFY HIMSELF REGARDING FULFILLMENT OF CONDITIONS BY THE ASSESSEE BEFORE GRANTING THE CLAIMED DEDUCTION . 3.2 THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFOR E THIS TRIBUNAL. BEFORE COMING TO ANY CONCLUSION IT IS NOT E WORTHY THAT THE ASSESSEES DULY FILED APPLICATION U/S. 171 INFORMIN G PARTITION OF HUF ON 30/11/2011 WHEREAS THE ASSESSMENT ORDER WAS PASSED ON 15/12/2011, MEANING THEREBY THESE ASSESSEES DULY FULFILLED THE CONDITION OF INFORMING THE AO. THAT APPLICATION WAS PENDING BEFO RE HIM AS NO DECISION WAS TAKEN. HOWEVER, THE AO IN HIS ORDER ST ATED THAT THERE IS NO PARTITION OF HUF. HE OPINED THAT SINCE THE ASSESSEE RECEIVED THE AMOUNT FROM HUF, THEREFORE, HE DID NOT TREAT THE AMOUNTS A S LONG TERM CAPITAL RECEIPTS. WITHOUT GOING INTO MUCH DELIBERATION WE A RE OF THE CONSIDERED OPINION THAT THE AO WAS EXPECTED TO TAKE A DECISION ON THE APPLICATION FILED U/S.171 DURING ASSESSMENT PROCEEDINGS WELL BE FORE PASSING THE ASSESSMENT ORDER. THE DEED OF ASSIGNMENT EXECUTED I N JULY 2008 CLEARLY MENTIONS THAT EACH OF CO-ASSIGNER WERE ASS IGNED RESPECTIVE 1/7 TH ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 6 SHARE EACH IN THE IMMOVABLE PROPERTY. THE TOTALITY OF FACTS CLEARLY INDICATES THAT THE PROPERTY IN QUESTION NO LONGER R EMAINED THE PROPERTY OF HUF WHICH LOST ITS EXISTENCE ON ACCOUNT OF PARTI TION. AS MENTIONED EARLIER EACH OF THE ASSIGNERS RECEIVED THE RESPECTI VE SHARE FROM THE PURCHASER I.E. INDIA BELT CO. DIRECTLY. IN SUCH A S ITUATION WHEN NECESSARY INTIMATION OF PROPERTY WAS GIVEN TO THE A O, REGARDING PARTITION, BY FILING AN APPLICATION U/S. 171, THE O RDERS ON SUCH APPLICATION COULD HAVE BEEN PASSED BY THE AO. FOR T HE DELAY ON THE PART OF THE AO THE PRESENT ASSESSEES CANNOT BE EXPECTED TO SUFFER. EVEN IF WE PRESUME, THAT THERE WAS NO PARTITION OF HUF, AS CLA IMED BY THE AO, STILL THE ASSESSEES CANNOT BE PENALIZED BECAUSE CHAPTER- III SPEAKS ABOUT INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME/ NO T TO BE INCLUDED IN TOTAL INCOME. SECTION-10 SAYS THAT WHILE COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, ANY INCOME FALLING WIT HIN ANY OF THE EXEMPTED CLAUSES SHALL NOT BE INCLUDED. S/S. (2) OF SECTION 10, INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1970 W.E.F. 1 .4.1971, STIPULATES THAT (SUBJECT TO THE PROVISIONS OF S/S. (2) OF SEC .64) ANY SUM RECEIVED BY AN INDIVIDUAL AS A MEMBER OF HINDU UNDIVIDED FAMILY , WHERE SUCH SUM HAS BEEN PAID OUT OF THE INCOME OF THE FAMILY OR IN THE CASE OF ANY IMPARTIBLE ESTATE, WHERE SUCH SUM HAS BEEN PAID OUT OF THE INCOME OF THE ESTATE ALL THAT WAS REQUIRED TO BE PROVED BY TH E ASSESSEE AT THE TIME OF ASSESSMENT, IN ORDER TO CLAIM EXEMPTION U/S. 10 IS THAT THE ASSESSEE ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 7 RECEIVED THE SUM IN QUESTION IN THE CAPACITY OF A C OPARCENER OF AN HUF. IF IT IS PROVED THAT THE SUM WAS RECEIVED IN THAT C APACITY/STATUS, THEN SUCH PERSON IS ENTITLED TO EXEMPTION UNDER THE SECT ION. THE RATIO LAID DOWN IN CIT VS. MUSAMMAT BHAGWATI (1947) 15 ITR 409 (PC) SUPPORTS OUR VIEW. THE UNFAILING TEST FOR THE APPLICABILITY OF SEC.10(2) OF THE ACT (CORRESPONDING TO SEC.14(1) OF 1922 ACT) IS TO DETE RMINE WHETHER THE ALLOWANCE WOULD CEASE IF THE ASSESSEE CEASED TO BE A MEMBER OF THE UNDIVIDED FAMILY. WE ARE AWARE THAT, THE ONUS OF SH OWING THAT, THE ASSESSEE IS EXEMPT FROM TAXATION, LIES ON THE ASSES SEE . TO EARN THE EXEMPTION, THE ASSESSEE HAS TO ESTABLISH THAT HIS C ASE CLEARLY AND SQUARELY FALLS WITHIN THE AMBIT OF SAID PROVISIONS OF THE ACT, AS WAS HELD IN H.E.H NIZAMS RELIGIOUS ENDOWMENT TRUST VS. CIT (69 ITR 582)(SC), PARIMISETTI SEETHARAMAMMA VS. CIT (50 ITR 450) (AP) A ND CIT VS. S.R.M THIRUPALLY TRUST (134 ITR 555)(MAD.) AND ALSO CIT VS . RAMKRISHNA DEO (35 ITR 312)(SC) . FOR CLAIMING EXEMPTION U/S. 10(2) OF THE ACT, AMO UNT SHOULD BE RECEIVED IN THE CAPACITY AS A MEMBER OF H UF. UNDER THE PRESENT FACT THERE IS NO DISPUTE THAT ALL THE ASSES SEES ARE MEMBERS OF HUF, THEREFORE, ON ITS PARTITION THEY ARE ENTITLED FOR THEIR SHARE. IT IS CLEAR THAT THE PRESENT ASSESSEES RECEIVED THE RESPE CTIVE AMOUNT, BEING THEIR SHARE, FROM THE SALE PROCEEDS AS A CO-OWNER O F THE FACTORY PROPERTY (HUF PROPERTY) SOLD TO INDIA BELT CO. THIS WOULD AL SO OPERATE TO PRECLUDE THE APPLICATION OF SECTION 56(2)(V)/(VI), AS EMPHAS IZED BY THE TRIBUNAL IN ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 8 SUDHA V. IYER VS. ITO IN ITA NO.4886/MUM(E)/2011 DA TED 14/09/2011 (COPY ON RECORD), RELIED UPON BY THE ASSESSEE/S. T HE CONTENTS OF THE ASSIGNMENT DEED ARE VERY CLEAR. ON PARTITION OF THE HUF PROPERTY, THE INDIVIDUAL ASSESSEES BECAME CO-OWNER OF THE ERSTWH ILE HUF. THE IMMOVABLE PROPERTY WAS OTHERWISE LONG TERM CAPITAL ASSET OF THE ERSTWHILE HUF. SINCE THE PROPERTY WAS ACQUIRED BY T HE HUF WAY BACK IN JULY 1972, THEREFORE, EACH ASSESSEE BECAME DEEMED C O-SHARER IN THE PROPERTY IN QUESTION FROM THAT DAY ONWARDS. THEREFO RE, IN VIEW OF SEC.45 (I) LONG TERM CAPITAL NATURE OF ASSET (II) TRANSFER OF SUCH ASSET (III) RECEIPT OF SALE CONSIDERATION ON ACCOUNT OF TRANSFER OF SUC H CAPITAL ASSET ARE SATISFIED, CONSEQUENTLY, THE ASSESSEES ARE ENTITLED TO DEDUCTION U/S. 54F/54EC OF THE ACT. IT IS FURTHER NOTED THAT SO FA R AS SATISFACTION OF THE AO REGARDING FULFILLMENT OF OTHER CONDITIONS, IF AN Y, IS CONCERNED IN PARA 4.11 OF THE IMPUGNED ORDER, THERE IS ALREADY A DIRE CTION. THEREFORE, WE AFFIRM THE ORDER OF THE LD. CIT(A). 4. FINALLY THE APPEALS FILED BY THE REVENUE ARE DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION O F THE HEARING ON 25 TH DAY OF SEPTEMBER, 2014 . SD/- SD/- (SANJAY ARORA) (JOGINDER SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; - DATED : 30 TH SEPT. 2014. JV. ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 9 , % #'. /.+' , % #'. /.+' , % #'. /.+' , % #'. /.+'/ COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT. 3. 0 ( ) / THE CIT, MUMBAI. 4. 0 / CIT(A)-13, MUMBAI 5. .34 #' , , / DR, ITAT, MUMBAI 6. 456 7 / GUARD FILE. , , , , / BY ORDER, $.' #' //TRUE COPY// 8 88 8/ // /9 : 9 : 9 : 9 : (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI ITA NO. 423,174,428,424 /MUM/2013 LAUNGANI GROUP CASE 10 DATE INITIAL 1. DRAFT DICTATED ON 25.9.2014 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 25.9.2014 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 25/9/14 SR.PS 7. FILE SENT TO THE BENC H CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DRAFT DICTATION SHEETS ARE ATTACHED/DIRECT DICTATION ON PC 10.09.14 SR.PS