ACIT Corporate Circle 4(1), CHENNAI V. Deepa Vijay, CHENNAI

ITA 1929/CHNY/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2509 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Assessee Lawyers: BHARATHI KRISHNAPRASAD
• Keywords: Capital asset; Gift; Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . , .. ', BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO.1929/CHNY/2018 $% % /ASSESSMENT YEAR: 2012-13 THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-4(1), CHENNAI. VS. SMT.DEEPA VIJAY, C-4, GOLDEN SCHONBURN APARTMENTS, NO.29, CENOTAPH ROAD, 2 ND LANE, CHENNAI-600 028. [PAN: ACJPV 8425 H ] ( ( /APPELLANT) ( )*( /RESPONDENT) DEPARTMENT BY : MR.S.BHARATH, CIT ASSESSEE BY : MS.BHARATHI KRISHNAPRASAD, CA 3 /DATE OF HEARING : 30.10.2018 3 /DATE OF PRONOUNCEMENT : 31.10.2018 / O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE WITH DEL AY OF 3 DAYS. CONDONATION PETITION IS ON RECORD. REASONS SHOWN A RE ACCEPTABLE. DELAY IS CONDONED. APPEAL IS ADMITTED. ITA NO.1929/CHNY/2018 :- 2 -: 2. GROUNDS RAISED ARE AS FOLLOWS: 1. THE ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE LD.CIT(A) ERRED IN TREATING THE RECEIPT OF RS . 16.49 CRORES BY THE ASSESSEE BY WAY OF SETTLEMENT DEED FOR TRANSFERRING THE INTANGIBLE ASS ET-TRADE MARK- AS LONG TERM CAPITAL GAIN. 2.1 THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION U/S.54F OF RS.3.50 CRORES WHEN THE CAPITAL ASSET TRANSFERRED WAS NOT A LONG TERM CAPITAL ASSET . 2.2 THE LD.CJT(A) ERRED IN HOLDING THAT THERE IS NO LEGAL DIFFERENCE BETWEEN THE SETTLEMENT & GIFT. 2.3 THE LD.CIT(A) ERRED IN HOLDING THAT EXPLANATION 1(B) BELOW SECTION 2(42A) IS APPLICABLE AND THE PERIOD OF HOLDING OF THE ASSET BY THE PREVI OUS OWNER ALSO NEEDS TO BE CONSIDERED EVEN THOUGH THE ASSESSEE DID NOT RECEIVE THE ASSET THROUGH GIFT OR WILL AS MENTIONED IN SECTION 49(1)(II) BUT BY SETTLEMENT DEED. 2.4 IT IS SUBMITTED THAT THE ORDER OF THE ITAT IN I TA NO. 2074 & 2075/MDS/2015 DATED 11.05.2016 RELIED ON BY THE CIT(A) WAS NOT ACCEPTED BY THE DEPARTMENT AND APPEAL FILED BEFORE THE HONBLE HIGH COURT OF MADRAS AND THUS TH E ISSUE HAS NOT REACHED A FINALITY. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASID E AND THAT OF THE ASSESSING OFFICER RESTORED. 3. LD.COUNSEL FOR THE ASSESSEE, AT THE OUTSET, POIN TED OUT THAT THE NATURE OF RECEIPT ON TRANSFER OF INTANGIBLE ASSET, NAMELY TRADE MARK, STOOD ALREADY DECIDED BY THIS TRIBUNAL IN ITS ORDER DATED 11.05.2016 IN ITA NOS.2704 & 2705/MDS/2015, WHICH RELATED TO THE OTHE R CO-OWNERS OF THE VERY SAME TRADE MARK. LD.DR FAIRLY AGREED WITH THIS . HOWEVER, AS PER THE LD.DR, THE QUESTION OF DEDUCTION CLAIMED BY THE ASS ESSEE U/S.54F OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS NOT C OVERED BY THE ABOVE ORDER AND THEREFORE, REQUIRED ADJUDICATION. AS PER THE LD.DR, ASSESSEE OWNED MORE THAN ONE RESIDENTIAL PROPERTY AND THEREF ORE, COULD NOT HAVE BEEN ALLOWED THE CLAIM FOR DEDUCTION MADE U/S.54F O F THE ACT. CONTENTION OF THE LD.DR WAS THAT ONE OF THESE PROPERTIES WAS C ONSIDERED BY THE LD.CIT(A) TO BE A COMMERCIAL ONE, THOUGH, IT WAS SP ECIFICALLY MENTIONED IN THE CONVEYANCE DEED AS A RESIDENTIAL FLAT. AS PER THE LD.DR, JUST ITA NO.1929/CHNY/2018 :- 3 -: BECAUSE, A FLAT WAS GIVEN FOR RENTAL TO A COMPANY W OULD NOT MEAN THAT IT WAS A COMMERCIAL PROPERTY. ON THE OTHER HAND, LD.A R SUPPORTING THE ORDER OF THE LD.CIT(A) SUBMITTED THAT THE LATTER AU THORITIES HAD VERIFIED THE PURCHASE DOCUMENT OF THE FLAT AND FOUND IT TO B E A COMMERCIAL PROPERTY AND NOT A RESIDENTIAL PROPERTY. THUS, ACCO RDING TO HIM, THE LD.CIT(A) HAS JUSTIFIED IN ALLOWING THE CLAIM MADE BY THE ASSESSEE U/S.54F OF THE ACT, HOLDING THAT ASSESSEE WAS NOT HAVING MO RE THAN ONE RESIDENTIAL PROPERTY ON THE DATE OF SALE OF THE TRADE MARK, GIV ING RISE TO THE CAPITAL GAINS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW CAREFULLY. THE ISSUE WHETHER THE GAINS ARISING ON TRANSFER OF TRADE MARK WAS LONG TERM OR SHORT TERM HAD COME UP BEFORE THIS TRIBUNAL IN THE CASE OF SHRI T.T.SIDDHARATH A ND SMT.MAYA VARADARAJAN (IN ITA NOS.2074 & 2075/MDS/2015). ASSE SSEE HAD BECOME ONE OF THE CO-OWNERS OF THE TRADE MARK THROUGH A SE TTLEMENT DONE BY ONE SMT.MALATHY RANGASWAMI & ONE SHRI T.T.ASHOK. THE O THER CO-OWNERS WERE SHRI T.T.SIDDHARATH AND SMT.MAYA VARADARAJAN. THE AO HAD CONSIDERED THE GAINS ARISING ON TRANSFER OF THE TRA DE MARK TO BE SHORT TERM IN NATURE, WHEREAS THE TRIBUNAL FOUND IT OTHERWISE. IN ITS ORDER DATED 11.05.2016 IN THE CASE OF SHRI T.T.SIDDHARATH AND S MT.MAYA VARADARAJAN (SUPRA), IT WAS HELD BY THE TRIBUNAL AT PARA NOS.4. 1 TO 4.2 AS UNDER: ITA NO.1929/CHNY/2018 :- 4 -: 4.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD.A.R IS THAT THERE IS NO DIFFER ENCE BETWEEN GIFT AND SETTLEMENT AND THE EXPLANATION-1(I)(B) TO SEC.2(42A) R.W.S.49(1)(II) OF THE ACT IS APPLICABLE. AS SUCH WHILE COMPUTING THE PERIOD OF HOLDING CAPITAL ASSETS, THE PERIOD OF HOLDING ALL THAT ASSET BY THE PREVIOUS OWNER TO BE CONSIDERED. ACCORDING TO HIM, ONCE WE CONSIDER THE THE PERIOD OF HOLDING OF PREVIOUS OWNER OF THE IMPUGNED CAPITAL A SSET, THEN THE HOLDING PERIOD BYTE PRESENT ASSESSEE IS MORE THAN THREE YEARS AND WHICH RESULTED IN COMPUTATION OF LONG TERM CAPITAL GAINS AND CONSEQUENTLY, THE ASSESSEE IS ENT ITLED FOR DEDUCTION U/S.54F OF THE ACT. FOR THIS PURPOSE HE HAS RELIED ON THE ORDER OF TRIB UNAL IN THE CASE OF ITO VS. SHRI ABDUL HAMEED KHAN MOHAMMED,CHENNAI IN ITA NO.1782/MDS./201 5 FOR ASSESSMENT YEAR 2011- 12 VIDE ORDER DATED 29.12.2015. WE FIND FORCE IN TH E ARGUMENT OF THE LD.A.R. IN THESE TWO CASES, THE ASSETS GOT THE RIGHT, TITLE AND INTEREST IN THE REGISTERED TRADE MARK , NAMELY PREETT THROUGH SETTLEMENT DEED DATED 19/12/2010 FR OM SETTLOR NAMELY MRS.MALATHY RANGASWAMI & MR.T.T.ASHOK. ACCORDING TO AO, DATE OF ACQUISITION OF THE RIGHT / TITLE/ INTEREST OVER THE SAID REGISTERED TRADE MARK IS ONL Y FROM 19/12/2010, AS THIS IS A SETTLEMENT DEED AND NOT IT IS A GIFT OR WILL AS MEN TIONED IN SEC.49(1)(II) OF THE ACT. 4.2 IN OUR OPINION, THE DISTINCTION MADE BY THE LOW ER AUTHORITIES IS NOT CORRECT. THE TRIBUNAL IN THE CASE OF SHRI S.KRISHNAN VS. DCIT IN ITA NO.2 075/MDS./2014 VIDE ORDER DATED 15.05.2015 OBSERVED THAT THOUGH THE ASSESSEE GOT TH E LANDED PROPERTY WHILE SETTLEMENT DATED 23.01.2004 FROM HIS MOTHER FOR THE PURPOSE OF COMPUTATION OF INDEXED COST OF ACQUISITION FROM 01.04.1981 BY FOLLOWING THE JUDGME NT OF BOMBAY HIGH COURT IN THE CASE OF MANJULA J. SHAH REPORTED IN (2012) 204 TAXMAN 691. F URTHER THE CO-ORDINATE BENCH IN THE CASE OF MR.ABDUL HAMEED KHAN MOHAMMED (SUPRA), IT I S CATEGORICALLY HELD THAT TRANSFER OF PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION BY WAY OF SETTLEMENT DEED, ALL WITHIN THE DEFINITION OF GIFT AND THERE IS NO DIFFERENCE B ETWEEN THE GIFT AND SETTLEMENT U/S.49(1)(II) OF THE ACT. WHILE ADJUDICATING THIS, THE TRIBUNAL PLACED RELIANCE ON SEC.122 OF THE TRANSFER OF PROPERTY ACT, 1882 AND ALSO FROM TH E COCHIN BENCH OF TRIBUNAL IN THE CASE OF ACIT VS. ANJANA MOHAN (2013) 36 CCH 0008(COCHIN) A ND ALSO REDINGTON (INDIA) LTD. VS. JCIT REPORTED IN 40 CCH 527 (CHENNAI). LD.CIT(A) HAD FOLLOWED THE ABOVE ORDER WHILE ALLO WING THE CLAIM OF THE ASSESSEE THAT THE GAINS ARISING ON TRANSFER OF THE TRADE MARK WAS LONG TERM IN NATURE. WE DO NOT FIND ANY REASON TO INTER FERE WITH THE ORDER OF THE LD.CIT(A) IN THIS REGARD. 5. VIS--VIS THE QUESTION WHETHER ASSESSEE WAS ELIG IBLE FOR DEDUCTION U/S.54F OF THE ACT, WE FIND THAT SUCH CLAIM WAS DEN IED BY THE AO, CONSIDERING THE ASSESSEE TO BE OWNING MORE THAN ONE RESIDENTIAL PROPERTY, WHEN HE TRANSFERRED THE TRADE MARK. THE LD.CIT(A) HAD, ON THE OTHER HAND, FOUND THAT ONE OF THE TWO PROPERTIES WAS A CO MMERCIAL ONE AND HENCE ASSESSEE WAS JUSTIFIED IN CLAIMING DEDUCTION U/S.54F OF THE ACT. AS ITA NO.1929/CHNY/2018 :- 5 -: PER THE LD.CIT(A) THOUGH THIS PROPERTY WAS A FLAT, IT HAD TO BE CONSTRUED AS COMMERCIAL FLAT. LD.CIT(A) HAS RELIED ON THE FO LLOWING PREAMBLE APPEARING IN THE SALE DEED DATED 24.03.2015, THROUG H WHICH THE SAID FLAT WAS ACQUIRED BY THE ASSESSEE. WHEREAS, THE VENDOR NOS. 1 AND 2, HAVE OBTAINED PER MISSION FROM CONSTRUCTION OF GROUND + 3 FLOORS, FROM THE COMMISSIONER, MUNICIPAL CORPOR ATION OF HYDERABAD, HYDERABAD VIDE ITS PERMIT NO.239/I, LETTER NO.214/TP5/SD/88, DATED. 12 -9-1989. WHEREAS, THE VENDORS NO.1 & 2, HAVE ENTERED INTO AN CONSTRUCTION AGREEMENT DATED.3-7- 1989, WITH VENDOR NO.3, I.E., BUILDER TO DEVELOP AN D CONSTRUCTION OF COMMERCIAL APARTMENTS, IN THE ABOVE SAID PROPERTY. WHEREAS, THE BUILDER HAVE CONSTRUCTED A COMMERCIAL COMPLEX, ON THE ABOVE SAID PROPERTY KNOWN AS DIAMOND TOWRS APARTMENTS. AND WHEREAS, THE VENDORS HEREIN OFFERED TO SELL A S HOP/OFFICE NO.201/PART, ON IIND FLOOR, PLINTH AREA 343 SFT., WITH UNDIVIDED SHARE O F LAND ADMEASURING 15.51 SQ.YARDS. OR 12.96 SQ.MTS., (OUT OF 2050 SQ.YARDS.) (BUILT UP ARE A 343 SFT), WITH PART OF PREMISES BEARING NOS.1-1-37 & 1-1-38, SITUATED AT S AROJINI DEVI ROAD, SECUNDERABAD, MORE PARTICULARLY DESCRIBED IN THE SCHEDULE HEREUND ER AND SPECIFICALLY DELINEATED IN THE PLAN ANNEXED HERETO, HEREINAFTER REFERRED TO AS THE SCHEDULE PROPERTY, FOR A TOTAL SALE CONSIDERATION OF RS.1,41,000/- (RUPEES ONE LAKH FORT Y ONE THOUSAND ONLY) TO THE VENDEE(S) AND THE VENDEE(S) HEREIN HAS AGREED TO PURC HASE THE SCHEDULE MENTIONED PROPERTY FOR THE SAID SUM. 6. WHAT WE FIND IS THAT NEITHER THE LD.AO NOR THE L D.CIT(A) HAD CAREFULLY NOT GONE THROUGH THE CONVEYANCE DEEDS THR OUGH WHICH THE ASSESSEE HAD ACQUIRED THE RESIDENTIAL HOUSES. AO H AD SIMPLY STATED THAT LETTING OUT OF A FLAT TO A COMPANY FOR CONDUCTING I TS BUSINESS DID NOT CHANGE THE NATURE OF THE FLAT. LD.CIT(A) ON THE OTH ER HAND, WENT BY THE PRE-AMBLE OF THE CONVEYANCE DEED. WE ARE, THEREFORE , OF THE OPINION THAT THE QUESTION WHETHER THE ASSESSEE OWNED MORE THAN T WO RESIDENTIAL PROPERTIES AND WHETHER ONE OF SUCH PROPERTY COULD B E CONSIDERED AS COMMERCIAL FLAT AND COULD BE EXCLUDED, FOR APPLICAT ION OF SEC.54F OF THE ACT, REQUIRES A FRESH LOOK BY THE AO. WE SET-ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMIT THE QUESTION WHETHER ASSESSEE WAS ELIGIBLE TO CLAIM ITA NO.1929/CHNY/2018 :- 6 -: DEDUCTION U/S.54F OF THE ACT, BACK TO THE FILE OF T HE AO FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 31 ST DAY OF OCTOBER, 2018, IN CHENNAI. SD/- SD/- ( . . ' ) ( DUVVURU R.L. REDDY ) $ /JUDICIAL MEMBER ( . ) ( ABRAHAM P.GEORGE ) /ACCOUNTANT MEMBER /CHENNAI, 8 /DATED: OCTOBER 31, 2018. TLN 3 )$9: ;: /COPY TO: 1. ( /APPELLANT 4. < /CIT 2. )*( /RESPONDENT 5. : )$$ /DR 3. < ( ) /CIT(A) 6. % /GF