BINA SILK MILLS, MUMBAI V. ACIT CIR 23(2), MUMBAI

ITA 1980/MUM/2009

• Counselvise Citation: 198019914 RSA 2009
• Duration Of Justice: 6 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 31-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.1980/M/2009 ASSESSMENT YEAR: 2005-06 M/S. BINA SILK MILLS, BALRAJESHWAR ROAD, MULUND (W), MUMBAI 400 080 PAN: AABFB8748B VS. ACIT- CIRCLE 23(2), PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SATISH MODI, A.R. REVENUE BY : SHRI YOGESH KAMAT, D.R. DATE OF HEARING : 01.10.2015 DATE OF PRONOUNCEMENT : 09.10.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.01.2009 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2005-06. 2. THE ASSESSEE HAS TAKEN THREE GROUNDS OF APPEAL. HOWEVER, AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS STATED AT BAR THAT AS PER THE INSTRUCTIONS THE ASSESSEE DOES NOT PRESS GROUND NO.1 & 2 DUE TO SMAL LNESS OF THE AMOUNT INVOLVED. GROUND NO.1 & 2 ARE THEREFORE DISMISSED AS NOT PRESSED. NOW WE ARE LEFT WITH GROUND NO.3 WHICH READ AS UN DER: 3. WITHOUT PREJUDICE TO GROUND NO.1 AND 2 ABOV E, THE ADDITION OF A SUM OF RS.96,10,000/- AS SHORT TERM CAPITAL GAINS I N PLACE OF LONG TERM CAPITAL LOSS OF RS. 18,14,000/- RETURNED BY THE APP ELLANT, BE DELETED AS IT HAS BEEN MADE WITHOUT APPRECIATING THE FACTS AND CI RCUMSTANCES OF THE CASE AND THE APPLICABLE LAW. ITA NO.1980/M/2009 M/S. BINA SILK MILLS 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD ACQUIRED A PLOT OF LAND ON LONG TERM LEASE SITUATED AT MULUND (WEST), MUMBAI VIDE REGISTERED AGREEMENT OF LEASE WITH MR. ANANT P PANDIT, DATED 2 2/08/1962 FOR A PERIOD OF 99 YEARS AT A QUARTERLY RENT OF RS.1,350/-. THE ASS ESSEE CONSTRUCTED STRUCTURES THEREON AND HAS BEEN IN UNINTERRUPTED POSSESSION OF THE SAID LAND SINCE 1962 AND HAS ALSO SUBLEASED A PART OF THE STRUCTURES THE REON, TO A COUPLE OF PARTIES. THE ASSESSEE HAS EXECUTED A SUPPLEMENTARY LEASE DEE D ON 06/09/2004 WITH THE LEGAL HEIRS OF ANANT P PANDIT (LESSOR) WHEREBY IT W AS AGREED THAT THE LESSEE WOULD PAY A NON-REFUNDABLE PREMIUM OF RS.15 LAKHS F OR THE PURPOSE OF EXTENSION OF THE LEASE PERIOD, AS WELL AS FOR HAVIN G GRANTED THE ADDITIONAL RIGHTS & FACILITIES. THE ASSESSEE SUBSEQUENTLY WIDE DEVEL OPMENT AGREEMENT DATED 09/09/2004 HAD ENTERED INTO AN AGREEMENT WITH MANISHA DEVELOPERS T O DEVELOP THE SAID PLOT OF LAND. AS PER PARA 3 OF THE DEVELOPMENT AGREEMENT, THE DEVELOPER HAD AGREED TO PAY A SUM OF RS. 80 LAC S AND TO PROVIDE A PREMISES ADMEASURING 700 CARPET SQ. FT. ON THE FIRST FLOOR O F THE NEWLY CONSTRUCTED PREMISES TO THE ASSESSEE. THE A.O. HELD THAT THE ASSESSEE HAD ACQUIRED DEVE LOPMENT RIGHT OF THE PROPERTY, VIDE SUPPLEMENTARY LEASE DEED DATED 06/09 /2004 AND IMMEDIATELY WITHIN 3 DAYS ON 09/09/2004 HAD ENTERED INTO A DEVE LOPMENT AGREEMENT AND TRANSFERRED ITS RIGHT OF DEVELOPMENT OF THE PROPERT Y, IN FAVOUR OF THE DEVELOPER. SINCE THE RIGHT WAS ACQUIRED AND SOLD WITHIN 3 DAYS , IT GAVE RISE TO SHORT TERM CAPITAL GAINS AND NOT LONG TERM CAPITAL GAINS AS HA D BEEN CLAIMED BY THE ASSESSEE ON THE BASIS OF ORIGINAL AGREEMENT OF LEAS E. HE WAS OF THE VIEW THAT ON THE EXECUTION OF THE SUBSEQUENT LEASE AGREEMENT, THE ORIGINAL AGREEMENT HAD CEASED TO EXIST. EVEN AS PER ORIGINAL AGREEMENT OF LEASE, ASSESSEE HAD ACQUIRED LEASE RIGHTS OVER THE PROPERTY. HOWEVER, IN THE SU BSEQUENT AGREEMENT, THE ASSESSEE HAD ACQUIRED DEVELOPMENT RIGHTS. THE ASSE SSEE HAD RELINQUISHED HIS RIGHTS IN THE ORIGINAL AGREEMENT AND THE RIGHTS ACQ UIRED IN THE SUBSEQUENT ITA NO.1980/M/2009 M/S. BINA SILK MILLS 3 AGREEMENT WERE TRANSFERRED WITHIN A PERIOD OF THREE DAYS, HENCE IT WAS A CASE OF SHORT TERM CAPITAL GAINS. 4. IN APPEAL, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO OBSERVING THAT THE SUPPLEMENTARY DEED DATED 06.09.04 HAD BROU GHT TO LIFE AN ENTIRELY NEW RIGHTS I.E. DEVELOPMENT RIGHTS. HE, THEREFORE, UPHELD THE FINDINGS OF THE AO THAT THE CAPITAL GAINS ACQUIRED BY THE ASSES SEE BY WAY OF TRANSFER OF RIGHTS IN THE LAND IN QUESTION WERE TO BE ASSESSED AS SHORT TERM CAPITAL GAINS. 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS MADE A LIMITED CONTENTION THAT THE ASSESSEE HAD ACQUIRED THE RIGHT S IN THE LAND IN QUESTION IN THE YEAR 1962 VIDE LEASE DATED 22.08.1962. IN T HE SUPPLEMENTARY LEASE DEED, THE ORIGINAL RIGHTS WERE RECOGNIZED AND THE L EASE DEED WAS FURTHER EXTENDED UP TO THE PERIOD OF 99 YEARS FROM THE DATE OF EXECUTION OF SUPPLEMENTARY LEASE DEED. NO DOUBT CERTAIN NEW RIG HTS WERE ACQUIRED IN THE SUBSEQUENT LEASE DEED, HOWEVER, THE RIGHTS ALRE ADY ACQUIRING IN THE ORIGINAL LEASE DEED OF 1962 WERE NEVER TAKEN AWAY, CANCELLED OR RELINQUISHED BY THE ASSESSEE. HE HAS INVITED OUR A TTENTION TO CLAUSE (I) OF THE SUBSEQUENT LEASE DEED DATED 06.09.04, WHEREIN I T HAS BEEN CATEGORICALLY MENTIONED THAT THE ORIGINAL LEASE DEED DATED 22.08. 1962 IS VALID AND SUBSISTING AND THE SAME SHALL BE DEEMED TO BE IN CO NTINUATION FROM THE DATE OF HIRE FOR FURTHER 99 YEARS. VIDE CLAUSE NO.(II), IT HAS BEEN AGAIN MENTIONED THAT THE ORIGINAL LEASE DEED SHALL BE DEE MED TO BE EXTENDED FOR ADDITIONAL TERM OF 99 YEARS. HOWEVER, THE MONTHLY LEASE RENT HAS BEEN INCREASED. THE LD. A.R., HOWEVER, FAIRLY ADMITTED THAT THE CERTAIN NEW RIGHTS WERE ACQUIRED BY THE ASSESSEE VIDE SUBSEQUEN T LEASE DEED DATED 06.09.04. HE, HOWEVER, HAS CONTENDED THAT THE ENTI RE GAINS EARNED BY THE ASSESSEE CANNOT BE TREATED AS SHORT TERM CAPITAL GA INS. THE AMOUNT OF ITA NO.1980/M/2009 M/S. BINA SILK MILLS 4 CAPITAL GAINS RECEIVED BY THE ASSESSEE SHOULD BE BI FURCATED IN RELATION TO THE RIGHTS WHICH WERE ALREADY ACQUIRED BY THE ASSESSEE VIDE LEASE DEED OF 1962 AND IN RELATION TO THE NEWLY ACQUIRED RIGHTS VIDE L EASE DEED OF 06.09.04. HE, THEREFORE, HAS CONTENDED THAT THE AMOUNT OF CAP ITAL GAINS SHOULD BE PROPORTIONATELY ALLOCATED TOWARDS LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS. WE FIND FORCE IN THE CONTENTION OF THE LD. A.R. IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS HAVING LEASE HO LD RIGHTS SINCE 1962 IN THE LAND IN QUESTION. THE SAID RIGHTS WERE RECOGNI ZED IN THE SUBSEQUENT LEASE DEED ALSO. THE RIGHTS TRANSFERRED VIDE AGREE MENT DATED 06.09.04 TO THE DEVELOPER ALSO INCLUDED THE RIGHTS ACQUIRED BY THE ASSESSEE VIDE LEASE DEED DATED 22.08.1962. THE SAID RIGHTS WERE DULY R ECOGNIZED IN THE SUBSEQUENT LEASE DEED ALSO. THEREFORE, THE AO IS D IRECTED TO PROPORTIONATELY ALLOCATE THE CAPITAL GAINS TOWARDS THE RIGHTS TRANSFERRED BY THE ASSESSEE WHICH WERE ACQUIRED BY THE ASSESSEE VI DE LEASE DEED OF THE YEAR 1962 AND THE SUCH RIGHTS ACQUIRED VIDE SUBSEQU ENT LEASE DEED OF 2004 AND ACCORDINGLY PROPORTIONATELY ASSESS THE CAPITAL GAINS AS LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE ASS ESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 08.06.2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 09.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO.1980/M/2009 M/S. BINA SILK MILLS 5 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.