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

ITA 1785/MUM/2013

• Counselvise Citation: 178519914 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: ASHOK UNADKAT
• Keywords: Business income; Question of law; Capital receipt
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.1785/M/2013 ASSESSMENT YEAR: 2007-08 ACIT(OSD) - 2(3), R.NO.556, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. SAHARA INVESTMENTS PVT. LTD., NEVILE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE, FORT, MUMBAI 400 001 PAN: AAECS 6355B (APPELLANT) (RESPONDENT) ITA NO.93/M/2013 ASSESSMENT YEAR: 2007-08 M/S. SAHARA INVESTMENTS PVT. LTD., NEVILE HOUSE, J.N. HEREDIA MARG, BALLARD ESTATE, MUMBAI 400 001 PAN: AAECS 6355B VS. ACIT(OSD) - 2(3), R.NO.556, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ASHOK UNADKAT, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 16.06.2015 DATE OF PRONOUNCEMENT : 30.06.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TILTED TWO APPEALS ONE BY THE REVENUE AN D THE OTHER BY THE ASSESSEE HAVE BEEN DIRECTED AGAINST THE ORDER DATED 17.12.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007-08. FIRST WE TAKE UP THE APPEAL OF THE REVENUE. ITA NO.1785/M/2013 & ITA NO.93/M/2013 M/S. SAHARA INVESTMENTS PVT. LTD. 2 ITA NO.1785/M/2013 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE SUM OF RS. 85 LAKHS RECEIVED AS SALE PROCEEDS BY THE ASSESSEE COMPANY AS RESULT OF INDENTURE DATED 2 6.09.2001 SIGNED BY LATE SMT. BACHOOBAI WARONZOW, TRANSFERRING HER RIGHTS AR ISING OUT OF AGREEMENT OF 02.0 1 .1995 WITH DEVELOPERS, NEITHER RESULT IN CAPITAL GAIN NOR IS IN THE FORM OF ADVENTURE IN THE NATURE OF TRADE. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE SUM OF RS. 85 LAKHS RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT OVERLOOKING THE CRUCIAL FACT T HAT THE AMOUNT WAS RECEIVED AS A RESULT OF AN AGREEMENT THE ASSESSEE HAD ENTERE D INTO WITH MRS. BACHOOBAI WARANZOW CREATING AN INTEREST IN THE ESTA TE AND THEREFORE TAXABLE AS BUSINESS INCOME. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE SUM OF RS. 85 LAKHS RE CEIVED BY THE ASSESSEE REPRESENTS THE SALE PROCEEDS OF THE PROPERTIES IN P ARA 1.2 OF THE ORDER AND AT THE SAME TIME, HOLDING THAT THE AMOUNTS RECEIVED AR E CAPITAL RECEIPTS IN PARA 1.3 OF THE ORDER THEREBY CONTRADICTING HIMSELF . IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN RELYING ON THE DECISION OF ITAT IN THE ASS ESSEE'S CASE FOR A.Y. 2004-05 AND 2005-06 IGNORING THE FACT THAT THE DECISION OF ITAT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL U/S.260A HAS BEEN FILED. 2 . I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE U/S.14A BY RE LYING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. LTD. VS. DCIT 328 ITR 81 (BORN), IGNORING THAT THE DEPARTMEN T HAS NOT ACCEPTED THE SAID DECISION AND SLP NO. 12872 OF 2011 HAS BEEN FI LED AGAINST THAT DECISION. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE U/S.L4A READ WITH RULE 8D WHEN THIS METHOD OF WORKING OF DISALLOWANCE IS HELD AS REASON ABLE METHOD BY JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. LTD. VS. DCIT 328 ITR 81 (BOM). 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. GROUND NO.1 3. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT IN RELATION TO THE ISSUE INVOLVED/RAISED THROUGH GROUND NO.1, T HE DEPARTMENT HAS ALREADY ITA NO.1785/M/2013 & ITA NO.93/M/2013 M/S. SAHARA INVESTMENTS PVT. LTD. 3 FILED APPEALS FOR A.Y. 2004-05 AND 2005-06 BEFORE THE HONBLE BOMBAY HIGH COURT AND THE HONBLE HIGH COURT HAS ADMITTED THE F OLLOWING QUESTION OF LAW. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN COINING TO THE CONCLUSION THAT THE AMOUNT RECEIVED BY THE ASSESSEE, AS A RESULT OF INDENTURE DATED 26 11 SEPTEMBER, 2001 SIGNED BY LATE SINT. BACHOOBAI WORONZOW, TRANSFERRING HER RIGHTS A RISING OUT OF AN AGREEMENT OF 2' JANUARY, 1995 WITH DEVELOPERS, DOES NOT RESUL T IN CAPITAL GAIN IN THE HANDS OF THE ASSESSEE ? 4. THE LD. A.R. HAS FURTHER STATED THAT THE SAID QU ESTION OF LAW ARISING FROM THE AFORESAID RECEIPTS IS IDENTICAL WITH THE QUESTI ON OF LAW ARISING OUT IN THE PRESENT APPEAL BEFORE THIS TRIBUNAL FOR A.Y. 2007-0 8. THE LD. A.R. HAS FURTHER BROUGHT OUR ATTENTION TO THE DECLARATION OF THE ASS ESSEE UNDER SECTION 158A SUBMITTED VIDE LETTER DATED 26.11.2014 TO THE EFFEC T THAT ASSESSEE WOULD ABIDE BY THE ORDER OF THE HONBLE HIGH COURT DELIVERED IN THE APPEAL AS REFERRED TO ABOVE AND THAT IT SHALL NOT RAISE THE SAID QUESTION S OF LAW IN THE PRESENT CASE BEFORE ANY APPELLATE AUTHORITY OR FOR REFERENCE BEF ORE THE HONBLE HIGH COURT UNDER SECTION 256. IT HAS THEREFORE BEEN REQUESTED TO KEEP THE PRESENT APPEAL BY THE DEPARTMENT FOR A.Y. 2007-08 IN ABEYANCE TILL THE DECISION OF THE QUESTION OF LAW FRAMED BY THE HONBLE HIGH COURT. THE LD. A.R. HAS FURTHER BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL PASSED IN THE OWN CASE OF THE ASSESSEE FOR A.Y. 2006-07 WHEREIN ALSO THE ASSESSEE HAS FILED A DECLARATION UNDER SECTION 158A OF THE ACT. THE TRIBUNAL IN PUR SUANCE OF THE PROVISIONS OF SECTION 158A OF THE ACT HAD INVITED THE COMMENTS OF THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO). AFTER CONSIDER ING THE COMMENTS OF THE AO, THE TRIBUNAL HELD THAT THE PROPOSAL MADE BY THE ASS ESSEE WAS JUSTIFIED AND NO HARM WOULD BE CAUSED TO THE AO IF THE ISSUE IS KEPT IN ABEYANCE TILL THE FINAL DECISION OF THE HONBLE BOMBAY HIGH COURT IS DELIVE RED. THE TRIBUNAL ADMITTING THE DECLARATION MADE BY THE ASSESSEE HAS DIRECTED THAT THE ISSUE OF NATURE OF ADVANCE RECEIVED BY THE ASSESSEE IS TO BE KEPT IN ABEYANCE AND HAS TO BE DECIDED AFTER RECEIVING THE ORDERS OF THE HONBL E BOMBAY HIGH COURT FOR ITA NO.1785/M/2013 & ITA NO.93/M/2013 M/S. SAHARA INVESTMENTS PVT. LTD. 4 EARLIER TWO ASSESSMENT YEARS. THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL FOR THE SAKE OF CONVENIENCE IS REPRODUCED AS UNDER: 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 HON'BLE COURT DELIVERED IN THE APPEAL FOR THE AY.S FILED BY THE AO, THAT THE ISSUE WAS IDENTICAL TO THE ISSUE RAISED IN THE APPE AL FOR THE YEAR UNDER APPEAL. IN PURSUANCE OF THE PROVISIONS OF SECTION 1 58A OF THE ACT COMMENTS OF THE AO WERE INVITED ABOUT THE DECLARATION MADE BY T HE ASSESSEE. THE AO AFTER NARRATING THE FACTS STATED THAT THE FAA HAD HELD TH AT THE DISPUTED AMOUNTS WERE SALE PROCEEDS OF PROPERTIES OWNED BY THE TRUST , THAT SAME HAD TO TREATED AS CAPITAL RECEIPT, THAT HE WAS NOT IN AGRE EMENT WITH THE ASSESSEE THAT REVENUE'S APPEAL FOR THE YEAR UNDER A PPEAL SHOULD BE KEPT IN ABEYANCE ON THE ABOVE SAID SUBSTANTIAL QUESTION OF LAW, THAT THE TRIBUNAL COULD DECIDE THE CASE ON MERIT. DEPARTMENT AL REPRESENTATIVE (DR),AFTER HANDING OVER THE REPORT OF THE AO, LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL BEFORE US.WE FIND THAT THE HON'BLE JURISDICTIONAL HIGH COU RT HAS ADMITTED FOLLOWING QUESTION OF LAW: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN COINING TO THE CONCLUSION THAT THE AMOUNT RECEIVED BY THE ASSESSEE, AS A RESULT OF INDENTURE DATED 26 11 SEPTEMBER, 2001 SIGNED BY LATE SINT. BACHOOBAI WORONZOW, TRANSFERRI NG HER RIGHTS ARISING OUT OF AN AGREEMENT OF 2' JANUARY, 1995 WITH DEVELO PERS, DOES NOT RESULT IN CAPITAL 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 ADJUDICAT ED BY THE HON'BLE BOMBAY HI G H COURT. IN OUR OPINION, THE PROVISIONS OF SECTION 158A OF THE ACT CAST A DUTY UPON THE AO AND THE APPELLATE AUTHORITI ES PASS A REASONED ORDER. A REASONED ORDER PRESUPPOSES APPLICATION OF MIND BY THE AUTHORITY CONCERNED I.E.A0/APPELLATE AUTHORITY. THEY ARE REQU IRED TO ELABORATE THE REASONS AS TO WHY THEY OPPOSE OR ACCEPT THE PROPOSA L SUBMITTED BY THE ASSESSEE.A ONE LINER SUBMISSION-' I AGREE/I DO NOT AGREE' IS A BALD STATEMENT AND IS OF NO JUDICIAL VALUE. AS STATED EARLIER SUCH AN ORDER IS NOT SUBJECT TO APPEAL OR REVISION. THEREFORE, IT BECOMES MORE IMPO RTANT THAT THE AUTHORITY HANDLING SUCH APPLICATION DEVOTE SOME TIM E 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 DISCU SSION OF THOU G HT PROCESS OF THAT AUTHORITY, IS NO ORDER IN THE EYES OF LAW. IN OUR OPINION THE COMMENT OF THE AO OPPOSING THE PROPOSAL OF THE ASSESSEE FALLS UNDER THAT CATEGORY. IT IS TO ITA NO.1785/M/2013 & ITA NO.93/M/2013 M/S. SAHARA INVESTMENTS PVT. LTD. 5 REMEMBERED THAT THE CENTRAL BOARD OF DIRECT TAXES H AVE ADVISED THE OFFICERS OF THE DEPARTMENT TO AVOID UNNECESSARY LITIGATION. IN OUR 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 DECISI ON OF THE HON'BLE COURT IS DELIVERED. AS A RESULT, WE ADMIT THE DECLARATION MA DE BY THE ASSESSEE. ISSUE OF NATURE OF ADVANCE RECEIVED BY THE ASSESSEE IS TO BE KEPT IN ABEYANCE AND HAS TO BE DECIDED AFTER RECEIVIN G THE ORDER OF THE HON'BLE BOMBAY HI G H COURT FOR THE EARLIER TWO AY.S. GROUNDS NO. 1-4 O F THE APPEAL FILED BY THE AO ARE KEPT IN ABEYANCE, AS PER THE PROVISIONS OF SECTION 158 A OF THE ACT. 5. SINCE THE IDENTICAL ISSUE IS INVOLVED IN THE PRE SENT APPEAL AND THE ASSESSEE HAS FILED A SIMILAR DECLARATION UNDER SECT ION 158A OF THE ACT, HENCE IN VIEW OF THE FINDINGS OF THE TRIBUNAL GIVEN ON THE C OMMENTS OF THE AO ON THE DECLARATION OF THE ASSESSEE, IN OUR VIEW, NO USEFUL PURPOSE WILL BE SERVED IN CALLING THE COMMENTS OF THE AO ON IDENTICAL DECLARA TION FILED BY THE ASSESSEE U/S 158A FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. HENCE WE DISPENSE WITH THE FORMALITY OF SEEKING AGAIN THE COMMENT OF THE A O IN VIEW OF THE OBSERVATIONS MADE BY THE TRIBUNAL ON SIMILAR DECLAR ATION FILED UNDER SECTION 158A IN RELATION TO A.Y. 2006-07. WE ADMIT THE DEC LARATION FILED BY THE ASSESSEE AND DISPOSE OFF THIS GROUND OF APPEAL WITH THE DIRECTION THE AO WILL DECIDE/ APPLY THE FINDINGS/DIRECTIONS AS WILL BE GI VEN IN THE ORDER OF THE HONBLE BOMBAY HIGH COURT ON THE QUESTION OF LAW FR AMED BY THE HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 10.10.2014 IN RE VENUES APPEAL BEARING ITA NO.1261/M/2013 FOR A.Y. 2004-05 AND FURTHER VID E ORDER DATED 09.10.2014 IN ITA NO.1260/M/2013 FOR A.Y. 2005-06. GROUND NO.2 6. THE GROUND NO.2 RAISED BY THE REVENUE IS RELATIN G TO THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTEN T OF EXPENDITURE CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT. THE LD. CIT(A) HAS OBSERVED THAT THE TOTAL EXPENSES DEBITED IN THE P & L ACCOUNT IS AT RS.57,4 92/-. THE AO HIMSELF HAS ITA NO.1785/M/2013 & ITA NO.93/M/2013 M/S. SAHARA INVESTMENTS PVT. LTD. 6 RESTRICTED THE AMOUNT OF DISALLOWANCE TO THAT EXTEN T. AS PER LAW, THE DISALLOWANCE OF EXPENDITURE CANNOT GO BEYOND THE TO TAL EXPENDITURE CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT. UNDER SUCH CIRC UMSTANCES, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN RESTRIC TING THE TOTAL DISALLOWANCE UNDER SECTION 14A TO THE EXTENT OF TOTAL EXPENDITUR E DEBITED IN THE P & L ACCOUNT. THIS GROUND OF THE APPEAL OF THE REVENUE IS THEREFORE DISMISSED. 7. NOW WE TAKE UP THE ASSESSEES CROSS OBJECTIONS C.O. NO.93/M/2013 8. THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJE CTIONS: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOL DING THAT THE AMOUNTS RECEIVED BY THE COMPANY FROM THE ESTATE OF EFD WERE NOT ADVANCES BUT SALE PROCEEDS OF THE PROPERTIES OF THE EFD TRUST, WITHOUT PREJUDICE TO HIS DECISION FOR NOT TAXING THE SAME, AS THE NATURE OF THE AMOUNTS RECEIVED WAS COVERED IN THE FAVOUR OF THE A PPELLANT BY THE ORDERS OF THE CIT (A) AND ITAT, WHERE IT WAS HELD THAT THE AMOUNTS RECEIVED ARE CAPITAL RECEIPTS AND IS THEREFORE NOT TAXABLE. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN DISP OSING 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 P REJUDICE TO THE OTHER. 4. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY OF THE ABOVE GROUNDS OF APPEAL. 9. IN VIEW OF THE DECLARATION MADE BY THE ASSESSEE UNDER SECTION 158A OF THE ACT, THE GROUNDS RAISED BY THE ASSESSEE VIDE CR OSS OBJECTION HAVE BECOME INFRUCTUOUS AND THE SAME ARE ACCORDINGLY DISMISSED. 10. IN THE RESULT, AS PER OBSERVATIONS MADE ABOVE, THE APPEAL OF THE REVENUE IN RELATION TO GROUND NO.1 IS DISPOSED OFF AS PER D IRECTIONS GIVEN ABOVE ITA NO.1785/M/2013 & ITA NO.93/M/2013 M/S. SAHARA INVESTMENTS PVT. LTD. 7 WHEREAS GROUND NO. 2 OF REVENUES APPEAL IS DISMISS ED. THE CROSS OBJECTION OF THE ASSESSEE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.06.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.