BAROON S. GHOSH, MUMBAI V. ACIT 19(3), MUMBAI

ITA 2133/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0403 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K AGARWAL
• Keywords: Capital asset; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI P K BANSAL, VP & SHRI PAWAN SINGH, JM ITA NO.2133/MUM/2014 ASSESSMENT YEAR : 2008-09 SHRI BAROON S GHOSH 8, PANCHSHEEL CHS LTD WATER FIELD ROAD, BANDRA (W), MUMBAI- 400 050 PAN AADPG4027A VS. ACIT 19(3) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH S SHETTY RESPONDENT BY : SHRI V K AGARWAL (CIT-DR) DATE OF HEARING : 01 .0 6 .2017 DATE OF PRONOUNCEMENT : 12 .0 6 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 30, MUMBAI DATED 03.02.2014, FOR A.Y. 2008-09. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHE R THE SUM OF RS.25 LACS RECEIVED BY THE ASSESSEE AS CORPUS FUNDS FROM THE B UILDER M/S. RAJA ESTATES UNDER THE REDEVELOPMENT AGREEMENT TOWARDS THE COMPE NSATION IS A CAPITAL RECEIPT OR REVENUE RECEIPT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE OWNED S HOP NO. 8, IN THE GROUND ITA NO. 2133/MUM/2014 BAROON S GHOSH 2 FLOOR OF BANDRA PANCHSHEEL CO-OP HSG. SOC. LTD., PL OT NO.213, WATER FIELD ROAD, BANDRA(W). WE NOTED THAT THE ASSESSEE HAS ENT ERED INTO A DEVELOPMENT AGREEMENT WITH M/S. RAJA ESTATES ON 21. 05.2007. THE SAID SOCIETY ENTERED INTO A AGREEMENT WITH A DEVELOPER M /S. RAJA ESTATES FOR REDEVELOPMENT ON 21.05.2007. AS PER CLAUSE 4(A) & (B) OF THE AGREEMENT THE DEVELOPER HAD AGREED TO PAY A SUM OF RS. 25 LAC S TO THE MEMBERS OF THE SOCIETY TOWARDS CORPUS FUNDS. THE AO HAS TAKEN THE SAID AMOUNT AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE, WHEREAS THE A SSESSEE CLAIMS IT TO BE CAPITAL RECEIPT. 4. THE LEARNED AR BEFORE US RELIED ON THE DECISION OF THIS TRIBUNAL, VIDE ITS ORDER DATED 31.01.2012 IN ITA NO. 2349/MUM/2011 FOR A.Y. 2007-08, IN THE CASE OF KUSHAL K BANGLA VS. INCOME TAX OFFICER, IN WHICH ON IDENTICAL ISSUE, IT HAS HELD AS UNDER: 4. IN OUR CONSIDERED VIEW, IT IS ONLY ELEMENTARY T HAT THE CONNOTATION OF INCOME HOWSOEVER WIDE AND EXHAUSTIVE , TAKE INTO ACCOUNT ONLY SUCH CAPITAL RECEIPTS ARE SPECIFICALLY TAXABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT. SECTION 2(24)(VI) PROVIDES THAT INCOME INCLUDES ANY CAPITAL GAINS CHARGEABLE UNDER SECTION 45, AND, THUS, IT IS CLEAR THAT A CAPITAL RECEIPT SIMPL ICITOR CANNOT BE TAKEN AS INCOME. HONBLE SUPREME COURT IN THE CASE OF PADMRAJE R. KARDAMBANDE VS CIT (195 ITR 877) HAS OBSERVED THAT ..,, WE HOLD THAT THE AMOUNTS RECEIVE D BY THE ASSESSEE DURING T HE FINANCIAL YEARS IN QUESTION HAVE TO BE REGARDED AS CAPITAL RE CEIPTS, AND, THEREFORE, (EMPHASIS SUPPLIED BY US), ARE NOT INCOM E WITHIN MEANING OF SECTION 2(24) OF THE INCOME TAX ACT.... THIS CLEARLY IMPLIES, AS IS THE SETTLED LEGAL POSITION IN OUR UN DERSTANDING, THAT A CAPITAL RECEIPT IN PRINCIPLE IS OUTSIDE THE SCOPE O F INCOME CHARGEABLE TO TAX AND A RECEIPT CANNOT BE TAXED AS INCOME UNLE SS IT IS IN THE NATURE OF REVENUE RECEIPT OR IS BROUGHT WITHIN THE AMBIT OF INCOME ITA NO. 2133/MUM/2014 BAROON S GHOSH 3 BY WAY OF A SPECIFIC PROVISION IN THE ACT. NO MATTE R HOW WIDE BE THE SCOPE OF INCOME U/S.2(24) IT CANNOT OBLITERATE THE DISTINCTION BETWEEN CAPITAL RECEIPT AND REVENUE RECEIPT. IT IS NOT EVEN THE CASE OF THE ASSESSING OFFICER THAT THE COMPENSATION RECE IVED BY THE ASSESSEE IS IN THE REVENUE FIELD, AND RIGHTLY SO BE CAUSE THE RESIDENTIAL FLAT OWNED BY THE ASSESSEE IN SOCIETY B UILDING IS CERTAINLY A CAPITAL ASSET IN THE HANDS OF THE ASSESSEE AND CO MPENSATION IS REFERABLE TO THE SAME. AS HELD BY HONBLE SUPREME C OURT, IN THE CASE OF DR. GEORGE THOMAS K VS CIT(156 ITR 412), T HE BURDEN IS ON THE REVENUE TO ESTABLISH THAT THE RECEIPT IS OF REVENUE NATURE THOUGH ONCE THE RECEIPT IS FOUND TO BE OF REVENUE CHARACTER, WHETHER IT COMES UNDER EXEMPTION OR NOT, IT IS FOR THE ASSESSEE TO ESTABLISH. THE ONLY DEFENCE PUT UP BY LEARNED DEPA RTMENTAL REPRESENTATIVE IS THAT CASH COMPENSATION RECEIVED B Y THE ASSESSEE IS NOTHING BUT HIS SHARE IN PROFITS EARNED BY THE D EVELOPER WHICH ARE ESSENTIALLY REVENUE ITEMS IN NATURE. THIS ARGUM ENT HOWEVER PROCEEDS ON THE FALLACY THAT THE NATURE OF PAYMENT IN THE HANDS OF PAYER ALSO ENDS UP DETERMINING ITS NATURE IN THE H ANDS OF THE RECIPIENT. AS OBSERVED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. KAMAL BEHARI LAL SINGHA (82 ITR 460), IT IS NO W WELL SETTLED THAT, IN ORDER TO FIND OUT WHETHER IT IS A CAPITAL RECEIPT OR REVENUE RECEIPT, ONE HAS TO SEE WHAT IT IS IN THE HANDS OF THE RECEIVER AND NOT WHAT IT IS IN THE HANDS OF THE PAYER. THE CONS IDERATION FOR WHICH THE AMOUNT HAS BEEN PAID BY THE DEVELOPER ARE , THEREFORE, NOT REALLY RELEVANT IN DETERMINING THE NATURE OF RE CEIPT IN THE HANDS OF THE ASSESSEE. IN VIEW OF THESE DISCUSSION, IN OU R CONSIDERED VIEW, THE RECEIPT OF RS.11,75,000 BY THE ASSESSEE C ANNOT BE SAID TO BE OF REVENUE NATURE, AND, ACCORDINGLY, THE SAME IS OUTSIDE THE AMBIT OF INCOME UNDER SECTION 2(24) OF THE ACT. HOW EVER, IN OUR CONSIDERED OPINION AND AS LEARNED COUNSEL FOR THE A SSESSEE FAIRLY AGREES, THE IMPUGNED RECEIPT ENDS UP REDUCING THE C OST OF ACQUISITION OF THE ASSET, I.E. FLAT, AND, THEREFORE , THE SAME WILL BE TAKEN INTO ACCOUNT AS SUCH, AS AND WHEN OCCASION AR ISES FOR COMPUTING CAPITAL GAINS IN RESPECT OF THE SAID ASSE T. SUBJECT TO THESE OBSERVATIONS, GRIEVANCE OF THE ASSESSEE IS UP HELD. 5. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. ITA NO. 2133/MUM/2014 BAROON S GHOSH 4 5. THE LEARNED DR THOUGH RELIED ON THE ORDER OF THE AO, NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE. WE, THEREFO RE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, SET ASIDE T HE ORDER OF THE CIT(A) AND DIRECT THE AO TO TREAT THE RECEIPT OF RS.25 LACS AS CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DAY OF JUNE, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 12 TH JUNE, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, B BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI