Radhe Shyam Saraf (HUF), Kolkata V. DCIT, C.C. XXVII, Kolkata, Kolkata

ITA 2115/KOL/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6656 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANICK
• Assessee Lawyers: R SALARPURIA
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () , , , !' ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I AKBER BASHA, AM] # # # # / I.T.A NO. 2115/KOL/2009 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2007-08 RADHE SHYAM SARAF (HUF) VS. DEPUTY COMMISSIONER OF INCOME-TAX (PAN-AADHR 2616 A) CENTRAL CIRCLE-XXVII, KOLKATA . ()* /APPELLANT ) (+,)*/ RESPONDENT ) FOR THE APPELLANT: SHRI R. SALARPURIA FOR THE RESPONDENT: SHRI A. K. PRAMANICK ! / ORDER PER SHRI MAHAVIR SINGH/ : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A), CENTRAL-II, KOLKATA IN APPEAL NO. 8/CC-XXVII/CIT(A)-C-II/KOL/09-10 DATED 1 5.10.2009. THE ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE-XXVII, KOLKATA, U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2007-08 VIDE HIS ORDER DATED 20.03.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN NOT ALLOWING EXPENSES FOR TRANSFER/SALE OF FLAT AT MUMB AI I.E. TRANSFER FEE PAID BY THE ASSESSEE. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1: 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES THE ASSESSING OFFICER WAS WHOLLY UNJUSTIFIED IN NOT ALLOWING A SUM OF RS.4,00 ,000/- BEING THE EXPENSES INCIDENTAL TO THE TRANSFER/SALE OF FLAT AT MUMBAI A ND THE CIT(A) WAS WHOLLY UNJUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSI NG OFFICER. THE SAID AMOUNT WAS ALLOWABLE AS DEDUCTION WHILE COMPUTING THE CAPITAL GAIN. EVEN OTHERWISE THE DISALLOWANCE WAS MADE WAS HIGHLY EXCESSIVE AND WHOL LY UNREASONABLE. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSING OFFICER OBSERVED IN ASSESSMENT ORDER THAT THE ASSESSEE HAS SOLD FLAT OF MUMBAI AT RS.2.07 CR. ON 24.5.2006 AND CLAIMED EXPENDITURE IN CONNECTION WITH THE SALE OF THE SAID FLAT I.E. RS. 4,00,000/- PAID AS DONATION AND ACCORDING TO ASSESSING OFFICER SAME IS NOT ALLOWABLE EXPENDITURE BEING NOT INCIDENTAL TO TRANSFER OF FLAT. HENCE, HE DISALLOW ED THIS EXPENDITURE AND ADDED TO THE TOTAL 2 ITA 2115/K/20 0 9 RADHE SHYAM SARAF (HUF) A.Y. 07-08 INCOME OF THE ASSESSEE. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY GIVING FOLLOWING FINDING IN PARA 4, WHICH READS AS UNDER: 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SU BMISSIONS OF APPELLANT. APPELLANT HAS SUBMITTED THE LETTER OF FAIRFIELD COOP HSG. SOC. LT D. DATED 26.4.2006, ADDRESSED TO APPELLANT STATING AS UNDER: WE HAVE NO OBJECTION TO THE PROPOSED SALE OF YOUR FLAT AS PER THE ABOVE NOTICE OF INTENTION DATED 19.04.2006, SUBJECT TO YOUR CO MPLIANCE WITH THE BYE-LAWS OF THE SOCIETY RESOLUTION PASSED BY THE GENERAL BODY/ MANAGING COMMITTEE MEETINGS OF THE SOCIETY TIME TO TIME AND MAHARASH TRA CO-OPERATIVE ACT, 1960 MADE THEREUNDER. APPELLANT HAS FURTHER SUBMITTED A NEWSPAPER CUTTING IN THE PAPER BOOK WHERE IT IS MENTIONED THAT MAHARASHTRA STATE HAS LAID DOWN A NO MINAL TRANSFER FEE OF RS.25,000 WHEN AN APARTMENT IS SOLD TO ANOTHER BUYER. THEREFORE, IT APPEARS THAT THE PAYMENT OF RS.4 LAKH BY APPELLANT TO THE FAIRFIELD COOP HSG. SOC. LTD. I S IN EXCESS OF LEGAL PROVISIONS IN RESPECT OF NOMINAL FEE CHARGEABLE AT THE TIME OF TRANSFER O F APARTMENT BY APPELLANT TO THE PURCHASER. IN THE SAME PAPER CUTTING WHICH THE APPE LLANT HAS SUBMITTED WITH THE PAPER BOOK IT IS MENTIONED THAT HONBLE MUMBAI HIGH COURT HAS HELD THAT THE RECEIPT IN THE HANDS OF THE SOCIETY IS IN THE NATURE OF MAINTENAN CE CHARGE OF THE BUILDING AND FOR THE WELFARE OF THE NEW MEMBER. THEREFORE THE AMOUNT PAI D TO SOCIETY IN EXCESS OF RS.25,000/- CANNOT BE CONSIDERED AS A PAYMENT WHOLLY AND EXCLUS IVELY IN CONNECTION WITH THE TRANSFER OF THE APARTMENT IN 112, CHURCHGATE RECLAMATION , M UMBAI BY THE APPELLANT. PAYMENT OF MAINTENANCE CHARGE FOR THE WELFARE OF THE NEW MEMBE R MAY BE CONSIDERED AS A DONATION BUT IT CANNOT BE CONSIDERED AS EXPENDITURE WHOLLY A ND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER AND IT CANNOT BE CONSIDERED AS ENCUMBRANCE . IN FACT IT IS EVIDENT FROM THE ASSESSMENT RECORDS THAT APPELLANT ITSELF HAS SHOWN THIS AMOUNT OF RS.4,00,000/- AS DONATION IN HIS PROFIT AND LOSS ACCOUNT. THE COMPU TATION OF LONG TERM CAPITAL GAIN FOR THE SALE OF FLAT IS MADE BY APPELLANT AS UNDER IN T HE RETURN OF INCOME: FLAT SALE 2,07,00,000/- LESS: [CLAIMED U/S. 48(I)] DONATION TO SOCIETY FOR 4,00,000/- ISSUE OF NO OBJECTION TRANSFER FEE TO SOCIETY 25,000/- BROKERAGE, COLLECTOR NOC 4,11,487 8,36,487/- CHARGES, OTHER EXPENSES (NET SALE PROCEEDS) : 1,98,63,513/- AS FAR AS THE TRANSFER FEE TO SOCIETY IS CONCERNE D, THE AMOUNT OF RS.25,000/- IS ALREADY ALLOWED BY ASSESSING OFFICER AS PART OF THE EXPENDI TURE OF RS.4,36,487/-. THEREFORE, I HOLD THAT PAYMENT OF DONATION OF RS.4,00,000/- OVER AND ABOVE THIS AMOUNT OF RS.25,000/- IS REQUIRED TO BE DISALLOWED AS AN EXPENDITURE NOT INC URRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF FLAT. THE DECISION S CITED BY APPELLANT HAVE NO APPLICATION IN THIS CASE AS THE FACTS ARE DIFFERENT. THE ADDIT ION OF RS.4,00,000/- MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME IS CONFIRMED. 3 ITA 2115/K/20 0 9 RADHE SHYAM SARAF (HUF) A.Y. 07-08 4. WE, AFTER HEARING BOTH THE SIDES AND GOING THROU GH FACTS AND CIRCUMSTANCES OF THE CASE, FIND THAT THE ASSESSEE HAS SOLD HIS FLAT OWNED IN A COOPERATIVE HOUSING SOCIETY IN MUMBAI AT RS.2,07 CRORES AND CLAIMED DEDUCTION U/S. 48(I) OF THE ACT AMOUNTING TO RS.8,36,487/-, BEING EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH THE SALE. OUT OF THIS EXPENDITURE, EXPENDITURE FOR AN AMOUNT OF RS.4,00,0 00/- PAID TO SOCIETY FOR ISSUANCE OF NO OBJECTION CERTIFICATE, WHICH IS A PRE-CONDITION FOR THE SALE OF THE FLAT AND GENERAL PRACTICE FOLLOWED BY ALL COOPERATIVE HOUSING SOCIETIES IN MU MBAI. WE FIND FROM THE RECORDS THAT THE ASSESSEE HAS PAID A SUM OFRS.4,00,000/- BY WAY OF D RAFT DRAWN ON HONGKONG & SHANGHAI BANKING CORPORATION LTD. DATED 18.5.2006 AND IN LIE U OF THAT SOCIETY HAS GIVEN PERMISSION VIDE LETTER DATED 26.4.2006 PERMITTING THE ASSESSEE TO S ELL THE FLAT AS UNDER: WE HAVE NO OBJECTION TO THE PROPOSED SALE OF YOUR FLAT AS PER THE ABOVE NOTICE OF INTENTION DATED 19.4.2006, SUBJECT TO YOUR COMPLIAN CE WITH THE BYE LAWS OF THE SOCIETY, RESOLUTION PASSED BY THE GENERAL BODY/MANAGING COMM ITTEE MEETINGS OF THE SOCIETY FROM TIME TO TIME AND THE MAHARASHTRA CO-OPERATIVE ACT, 1960 MADE THERE UNDER. 5. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US RELIE D ON THE IDENTICAL DECISION ON IDENTICAL FACTS OF ITAT, MUMBAI BENCH IN THE CASE OF DAMODAR G. NAGALIA VS. ACIT, ITA NO.7113/MUM/2002 DATED 17 TH MARCH, 2006, REPORTED IN (2007) 12 SOT 599 (MUM.), WHEREIN THE TRIBUNAL HAS HELD AS UNDER: CLAUSE NO. 8 OF THE MOU BETWEEN ASSESSEE AND THE B UYER PROVIDED A CONDITION THAT ASSESSEE HAS TO MAKE THE PAYMENT OF RS. 4,00,000 AS TRANSFER CHARGES TO THE SOCIETY. THE LETTER DT. 25TH AUG., 1997 WRITTEN BY THE ASSESSEE TO THE SECRETARY OF HOUSING CO-OPERATIVE SOCIETY, INDICATED THAT A CHEQUE OF RS. 4,00,000 WA S SENT TO THE SOCIETY FOR TAKING NOC FOR THE SALE OF THE FLAT. THE CHEQUE SEEMS TO HAVE BEEN RETURNED UNPAID. THE SOCIETY WROTE A LETTER TO THE ASSESSEE ON 20TH DEC., 1997, INDICATI NG THAT ON NON-RECEIPT OF RS. 4,00,000 WITHIN SEVEN DAYS, NOC WILL BE WITHDRAWN. THERE WAS ANOTHER LETTER FROM THE SOCIETY DT. 25TH DEC., 1997 DIRECTING THE ASSESSEE TO MAKE THE PAYMENT OF RS. 4,00,000 IMMEDIATELY ON THE RECEIPT OF SALE PROCEEDS OF THE FLAT. THE AS SESSEE VIDE HIS LETTER DT. 2ND JAN., 1998 ENCLOSED A DD FOR RS. 4,00,000 STATING THAT IT IS T RANSFER CHARGES AGAINST SALE OF FLAT. ALL THESE EVIDENCES SHOW THAT SOCIETY IS DEMANDING A SU M OF RS. 4,00,000 FOR TRANSFER CHARGES FOR INSTANCE OF NOC. THE AO AND CIT(A) DID NOT EXAM INE THE SOCIETY, SO AS TO FIND OUT AS TO WHETHER DEMAND OF RS. 4,00,000 IS NOT IN RELATIO N TO THE TRANSFER OF FLAT. IN FACT, THE AUTHORITIES DID NOT CHOOSE TO CONFRONT THE SOCIETY BUT MERELY RELIED ON THE ACCOUNTING ENTRY AS PASSED BY IT TO ADJUST RS. 4,00,000 IN ITS BOOKS OF ACCOUNT. SO FAR AS ASSESSEE IS CONCERNED, IT IS A CONSIDERATION FOR OBTAINING NOC FROM THE SOCIETY. CLAIM OF THE DEDUCTION UNDER S. 48 DEPENDS ON WHAT IS THE NATURE OF THE TRANSACTION BETWEEN ASSESSEE AND THE SOCIETY AND NOT IN WHAT MANNER THE SOCIETY FINALLY ADJUSTED THE SUM IN ITS BOOKS OF ACCOUNT. AS A RESULT, THIS SUM AS A NECESSARY EXPEN DITURE FOR TRANSFER OF FLAT AND THEREFORE, ALLOWABLE UNDER S. 48. 6. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE AND EVEN OTHERWISE WE ARE OF THE CONSIDERED VIEW THAT THIS EXPENDITURE IS NOT A DONATION RATHER IT IS INCIDENTAL TO TRANSFER OF FLAT AND INCIDENTAL EXPENDITURE IN LIEU OF TRANSFER OF FLAT IS ALLOWABLE EXPENDITURE. 4 ITA 2115/K/20 0 9 RADHE SHYAM SARAF (HUF) A.Y. 07-08 ACCORDINGLY, WE ALLOW THE CLAIM OF ASSESSEE AND REV ERSE THE ORDERS OF THE LOWER AUTHORITIES. APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , !' , (AKBER BASHA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( -' -' -' -') )) ) DATED 29 TH APRIL, 2011 ./ $01 2 JD.(SR.P.S.) ! 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT RADHE SHYAM SARAF (HUF), C/O SALARPURI A JAJODIA & CO., 7, C. R. AVENUE, KOLKATA-700 072. 2 +,)* / RESPONDENT DCIT, CENTRAL CIRCLE-XXVII, KOLKATA. 3 . $ ( )/ THE CIT(A), KOLKATA 4. 5. $ / CIT KOLKATA 4<= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, ! $>/ BY ORDER, 1 /ASSTT. REGISTRAR .