S. Palaniappan, Salem V. Additional CIT, Salem

ITA 1817/CHNY/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8794 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 17-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 08-10-2013
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Capital asset; Gift; Cost of acquisition; Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : CHENNAI . . . , [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER ] ./ I.T.A.NO.1817/MDS/2013 / ASSESSMENT YEAR : 2004-05 SHRI S. PALANIAPPAN B-10, FAIRLANDS SALEM VS. THE ADDL. COMMISSIONER OF INCOME-TAX RANGE 1, SALEM [PAN AEAPP 2572 G] ( !' / APPELLANT) ( #$!' /RESPONDENT) ./ I.T.A.NO.1818/MDS/2013 / ASSESSMENT YEAR : 2004-05 SHRI S. MANICKAVASAGAM B-10, FAIRLANDS SALEM VS. THE ADDL. COMMISSIONER OF INCOME-TAX RANGE 1, SALEM [PAN ADRPM 8356 K] ( !' / APPELLANT) ( # $!' /RESPONDENT) / APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT / DATE OF HEARING : 17 - 0 6 - 2016 / DATE OF PRONOUNCEMENT : 15 - 0 7 - 2016 / O R D E R THESE APPEALS OF TWO INDEPENDENT ASSESSEES ARE DIRECTED AGAINST SEPARATE THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SALEM, DATED 29.7.2013 FOR ASSESSMENT YE AR 2004-05. SINCE ITA NO.1817 & 1818/13 :- 2 -: COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS, I HEARD THEM TOGETHER AND DISPOSING OF THE SAME BY THIS CO MMON ORDER. 2. SHRI SAROJ KUMAR PARIDA, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF MONEY LENDING. THE ASSESSEE ENTERED INTO A PURCHASE AGR EEMENT WITH M/S MANTRI DEVELOPERS PVT. LTD. ON 24.3.2003 AND THIS P URCHASE AGREEMENT WAS CANCELLED ON 15.3.2004. THE ASSESSEE WAS NOT HOLDING ANY ASSET AND THERE WAS NO COST OF ACQUISITION, THEREFORE, TH E COMPENSATION RECEIVED BY THE ASSESSEE IS NOT CHARGEABLE TO INCO ME TAX IN THE HANDS OF THE ASSESSEE. ON A QUERY FROM THE BENCH, THE LD . COUNSEL SUBMITTED THAT THE ASSESSEE IS NOT OWNER OF THE LA ND. THE ASSESSEE ENTERED INTO AN AGREEMENT FOR TRANSFER OF THE LAND EVEN THOUGH HE IS NOT OWNER OF THE LAND. THE LD. COUNSEL, HOWEVER, C OULD NOT CLARIFY HOW THE ASSESSEE WAS ABLE TO RECEIVE MONEY WHEN HE IS NOT THE OWNER OF THE LAND. THE LD. COUNSEL ALSO COULD NOT CLARIFY O N WHAT CAPACITY THE ASSESSEE RECEIVED THE MONEY. THE FACT REMAINS THAT THE ASSESSEE HAS RECEIVED COMPENSATION. THE ASSESSEE CLAIMED BEFOR E THE ASSESSING OFFICER THAT THIS WAS FOR EXTINGUISHMENT OF RIGHT, THEREFORE, THE TRANSACTION BETWEEN THE ASSESSEE AND M/S MANTRI DE VELOPERS PVT. LTD. WAS FOR TRANSFER OF CAPITAL ASSET, THEREFORE, THE A MOUNT RECEIVED BY THE ASSESSEE HAS TO BE TREATED AS CAPITAL ASSET. ITA NO.1817 & 1818/13 :- 3 -: 3. ON THE CONTRARY, SHRI SUPRIYO PAL, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ADMITTEDLY, THE ASSE SSEE IS NOT OWNER OF THE LAND. THE ASSESSEE ENTERED INTO AN AGREEME NT AND SUBSEQUENTLY THE SAME WAS CANCELLED. FOR CANCELLIN G THE AGREEMENT THE ASSESSEE RECEIVED COMPENSATION. THE COMPENSAT ION AMOUNT RECEIVED BY THE ASSESSEE WAS CLAIMED TO BE A CAPIT AL RECEIPT IN THE HANDS OF THE ASSESSEE. ACCORDING TO THE LD. DR, S INCE THE ASSESSEE IS NEITHER THE OWNER OF THE PROPERTY NOR IN POSSESSION OF THE PROPERTY, THE AMOUNT RECEIVED BY THE ASSESSEE AS ADDITIONAL COMPENSATION CANNOT BE CONSTRUED AS CAPITAL RECEIPT, THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSIN G OFFICER. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THERE WAS AN INITIAL AGREEMENT DATED 30. 10.2000 BETWEEN SHRI P.L.ANNAMALAI, SHRI P.L.VIVEKANANDAN AND SHRI AMPA PALANIAPPAN ON ONE PART AS VENDORS AND M/S ABHISHEK DEVELOPERS, A PARTNERSHIP FIRM ON THE OTHER PART. SUBSEQUENTLY, ANOTHER AGRE EMENT WAS ENTERED INTO ON 9.1.2003 IN WHICH ASSESSEE WAS ONE OF THE PARTY ALONGWITH SHRI AMPA PALANIAPPAN, SHRI V.PALANIAPPAN AND SHRI S. MANICKAVASAGAM AS VENDORS AND THE PURCHASER IS SHOW N AS M/S ABHISHEK DEVELOPERS. AS PER THE SUBSEQUENT AGREEME NT, SHRI P.L. ANNAMALAI GIFTED HIS SHARE TO ASSESSEE AND S HRI S. ITA NO.1817 & 1818/13 :- 4 -: MANICKAVASAGAM(ASSESSEE INI.T.A.NO.1818/MDS/2013). SUBSEQUENTLY, ANOTHER AGREEMENT WAS ENTERED INTO WITH M/S MANTRI DEVELOPERS PVT. LTD ON 24.3.2003 AND THIS AGREEMENT WAS CANCELLED O N 15.3.2004. THE ASSESSEE CLAIMS THAT THE ADDITIONAL COMPENSATI ON RECEIVED SUBSEQUENT TO THE CANCELLATION AGREEMENT DATED 15. 3.204 IS A CAPITAL RECEIPT SINCE NO COST WAS INVOLVED TO THE ASSESSEE FOR ACQUISITION OF THE ASSET. 5. I HAVE ALSO GONE THROUGH THE ORDER OF THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE CLAIMS THAT FOR STERILIZAT ION OF PROFIT MAKING APPARATUS THE ASSESSEE HAS RECEIVED THE COMPENSATI ON, THEREFORE, IT IS A CAPITAL RECEIPT. THE FACT REMAINS THAT THE ASSE SSEE AND SHRI S. MANICKAVASAGAM RECEIVED GIFT FROM SHRI P.L.ANNAMAL AI. THE COPY OF THE GIFT DEED IS NOT AVAILABLE ON RECORD. THEREFOR E, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IF THE PAYMENT RECEIVED BY THE ASSESSEE IS IN THE PROCESS OF TRANSFER OF A CAPITAL ASSET BY SA LE OR OTHERWISE, IT WOULD GO TO REDUCE THE COST OF THE ASSET WHEN IT WA S ACTUALLY TRANSFERRED. IF THE PAYMENT WAS RECEIVED CONSEQUEN T TO THE ACQUISITION OF THE CAPITAL ASSET THEN THE COMPENSAT ION RECEIVED MAY BE TREATED AS CAPITAL RECEIPT. IN THE CASE BEFORE US, THE ASSESSEE CLAIMS THAT THERE WAS A GIFT BY SHRI P.L.ANNAMALAI. IT IS NOT KNOWN THE CIRCUMSTANCES UNDER WHICH SHRI P.L.ANNAMALAI GIFTED HIS SHARE TO THE ASSESSEE AND SHRI S. MANICKAVASAGAM. IN THE ABSENC E OF COPY OF THE ITA NO.1817 & 1818/13 :- 5 -: GIFT DEED, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE CLAIM OF THE ASSESSEE IS REMITTED BACK TO THE FILE OF THE ASSESS ING OFFICER. THE ASSESSING OFFICER SHALL REEXAMINE THE ISSUE IN THE LIGHT OF THE GIFT DEED THAT MAY BE FILED BY THE ASSESSEE AND THEREAFTER D ECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEES A RE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2016, AT CHENNAI. SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER '# / CHENNAI $% / DATED: 15 TH JULY, 2016 RD %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 4. ' + / CIT 2. / RESPONDENT 5. ),-' . / DR 3. ' +'/! / CIT(A) 6. -0'1 / GF