ADMINISTRATOR OF THE ESTATE OF LATE MR. E.F. DINSHAW, MUMBAI V. ITO (IT) 1(1), MUMBAI

ITA 2327/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75586 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Sale consideration of property below Jantri Value; Business income; Opportunity of being heard; Question of law
• Section: 50C

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANJAY GARG, JM ./I.T.A. NO.4733/M/2011 ( / ASSESSMENT YEAR: 2008 - 200 9 ) ITO (IT) - 1(1), R.NO.15, SCINDIA HOUSE, BALLARD PIE, MUMBAI 400 038. / VS. ADMN. OF THE ESTATE OF LATE MR. E.F. DINSHAW, 412, CHURCHGATE CHAMBERS, 5, SIR. V.T. MARG, MUMBAI 20. ./ PAN : ACCPC 6836 A ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO.2327/M/2011 ( / ASSESSMENT YEAR: 2008 - 2009 ) ADMINISTRATOR OF THE ESTATE OF LATE MR. E.F. DINSHAW, 412, CHURCHGATE CHAMBERS, 5, SIR. V.T. MARG, MUMBAI 20. / VS. ITO (IT) - 1(1), R.NO.15, SCINDIA HOUSE, BALLARD PIE, MUMBAI 400038. ./ PAN : ACCPC 6836 A ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI MADHUR AGARWAL / REVENUE BY : SHRI M.L. PERUMAL, DR / DATE OF HEARING : 23 .1.2014 / DATE OF PRONOUNCEMENT : .2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS. THESE TWO APPEALS ARE FILED AGAINST THE ORDER OF THE CIT (A) - 10 , MUMBAI DATED 4.3.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. SINCE, THE ISSUES INVOLVED I N BOTH THE APPEALS ARE CONNECTED , THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE TWO APPEALS ARE CLUBBED, HEARD COMB INEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 2 2. FIRSTLY WE SHALL TAKE UP THE APPEAL ITA NO.4733/M/2011 FILED BY THE REVENUE ON 13.6.2011. IN THIS APPEAL, THE REVENUE RAI SED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) WAS CORRECT IN HOLDING THE SURPLUS AS CAPITAL GAINS IGNORING THE FACT THAT THE ASESSEE IS THE OWNER CONSTITUTED REAL ESTATE BUSINESS HENCE, THE SURPLUS REALIZED ON SALE OF LAND WAS BUSINESS INCOME. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) BE SET ASIDE ON THE ABOVE GROUNDS AND THAT OF THE AO BE RESTORED. 3. AT THE OUTSET, SHRI MADHUR AGARWAL, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS MENTIONED ABOVE AND STATED THAT CIT (A) GRANTED RELIEF TO THE ASSESSEE VIDE THE DISCUSSION GIVEN IN PARA 2.3 OF THE IMPUGNED ORDER AND THE SAME READS AS UNDER: 2.3. I HAVE CONSIDERED THE FACTS AND PERUSED THE MATERIAL ON RECORD. I FIND THA THE APPELLANT HAS VERY OLD LAND PROPERTIES, WHICH WAS AGREED TO BE SALE IN EARLIER YEARS BUT THE CONVENIENCE DEED WAS ONLY EXECUTED DURING THE YEAR DUE TO ADMINISTRATIVE DELAY NOT DOING ANY BUSINESS. FURTHER, THE ISSUE HAS BEEN EXAMINED IN DETAIL BY HONBLE TRIBUNAL AY 87 - 88 TO 89 - 90 IN THE CASE OF APPELLANT REPORTED IN (1993) 47 ITD 232 (MUM) HOLDING THAT SALE PROCEEDS SHOULD BE ASSESSED AS CAPITAL GAIN S AND NOT AS BUSINESS INCOME. THIS STAND IS BEING FOLLOWED BY THE TRIBUNAL IN SUBSEQUENT ASSESSMENT YEARS. THEREFORE, RESPECTFULLY FOLLOWING THE TRIBUNAL ORDERS ON THE ISSUE, THE AO IS DIRECTED TO CONSIDER THE SURPLUS AS CAPITAL GAINS AND NOT AS BUSINESS INCOME . THIS PART OF THE GROUND IS, THEREFORE, ALLOWED . 4. FURTHER, LD COUNSEL MENTIONED THAT THE SAID ISSUE RAISED IN THE GROUND MENTIONED ABOVE HAS TRAVELLED TO THE HONBLE HIGH COURT OF BOMBAY WITH THE FOLLOWING REFERENCE. WHETHER ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT SURPLUS REALIZED ON SALE OF LAND WAS IN THE NATURE OF CAPITAL GAIN AND THAT THE ASSESSEE WAS NOT A TRADER IN LAND. 5. THE HONBLE HIGH COURT AFFIRMED THE ABOVE AS PER THE DISCUSSION GIVEN IN PARA 14 OF THE JUDGMENT WHICH READ AS UNDER: 14. WE ACCORDINGLY ANSWER THE QUESTION OF LAW REFERRED IN THE AFFIRMATIVE. THE REFERENCE SHALL ACCORDINGLY STAND DISPOSED OF. THERE SHALL BE NO ORDER AS TO COSTS. 6. ON PERUSAL OF TH E SAID JUDGMENT OF THE HONBLE HIGH COURT AND THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE CIT (A) HAS FAIRLY DECIDED THE ISSUES IN FAVOUR OF THE ASSESSEE AND THE SAME DOES NOT CALL ANY INTER FERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 3 ./I.T.A. NO.2327/M/2011 ( AY : 2008 - 2009) (BY ASSESSEE) 8. THIS APPEAL FILED BY THE ASSESSEE ON 22.3.2011 IS AGAINST THE ORDER OF THE CIT (A) - 10, MUMBAI DATED 4.3.2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: GROUND I 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO OF DETERMINING THE FULL VALUE OF CONSIDER ATION OF SALE OF LAND BY APPLYING THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 1961. 2. THE CIT (A) FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT AS THE AGREEMENT OF SALE WAS ENTERED INTO A CONSIDERABLE TIME BEFORE APRIL 1, 2003 AND SINCE THE PR OVISIONS OF SECTION 50C ARE APPLICABLE ONLY FROM APRIL 1, 2003 AND THEREFORE, THESE PROVISIONS WOULD NOT BE APPLICABLE TO THE APPELLANTS CASE. 3. THE APPELLANT THEREFORE PRAYS THAT THE SALE CONSIDERATION RECEIVED BY THE APPELLANT, BE ACCEPTED AS THE FULL VALUE OF THE SALE CONSIDERATION RECEIVED AS A RESULT OF SALE OF LAND AND THAT THE PROVISIONS OF SECTION 50C HELD TO BE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. GROUND II 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DIRECTING THE AO TO RECOMPUTED THE DISALLOWANCE OF EXPENSES IN PROPORTION OF EXPENDITURE AND INCOME UNDER VARIOUS HEADS. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT, SIMILAR ISSUES WERE CONSIDERED BY THE TRIBUNAL IN THE APPELLAN TS OWN CASE FOR THE AY 1991 - 92 AND IT WAS HELD THAT 50% OF THE EXPENSES WERE ALLOWABLE AS A DEDUCTION FROM INCOME FROM OTHER SOURCES. 3. THE APPELLANT THEREFORE PRAYS THAT THE DISALLOWANCE BE RESTRICTED TO 50% OF THE EXPENSES INCURRED. 9. REFERRING TO T HE ABOVE MENTIONED GROUNDS, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE HAS RAISED TWO ISSUES BEFORE THE TRIBUNAL AND THE FIRST ISSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005 - 2006 VIDE ITA NO.3019/M/2008 DATED 14.8.2013. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 9 AND 10 OF THE ORDER OF THE TRIBUNAL DATED 14.8.2013 (SUPRA) AND MENTIONED THAT THE PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE TO THE AGREEMENT UNDER CONSIDERATION WHICH HAPPENED IN THE YEAR 1967. THE SAID PROVISIONS OF SECTION 50C APPLY ONLY FROM THE AY 2003 - 2004 ONWARDS. 10. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL DATED 14.8.2013, WE FIND THAT THE FACTS ARE SAME WITH THAT OF THE INSTANT CASE. THEREFORE, WE ARE OF THE OPINION THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE . ACCORDINGLY, WE DIRECT THE AO TO EXAMINE THE APPLICABILITY OF THE SAID ORDER OF THE TRIBUNAL DATED 14.8.2013 AND GRANT RELIEF TO THE ASSESSEE AFTER GRA NTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, THE FIRST ISSUE IS DECIDED IN THE ABOVE MENTIONED MANNER. 4 11. REGARDING GROUND NO.2, LD COUNSEL FOR THE ASSESSEE FILED A COPY OF THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 1991 - 92 VIDE ITA NO.4892/M/1995 AND MENTIONED THAT THE GROUND NO.4 OF THE SAID APPEAL DECIDED BY THE TRIBUNAL IS RELEVANT TO THE GROUND NO. 2 OF THE PRESENT APPEAL. BRINGING OUR ATTENTION TO PARA 7 OF THE SAID ORDER OF THE TRIBUNAL, LD COUNSEL MENTIONED THAT THE ISSUE STANDS COVERED TO THE TUNE OF 50% OF THE CLAIM OF THE ASSESSEE. RELEVANT PARA 7 OF THE SAID TRIBUNALS ORDER (SUPRA) READS AS UNDER: 7. WE HAVE HEAR D THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS PER THE FIGURES GIVEN ON PAGES 8 & 9 OF THE ASSESSMENT ORDER, THE ASSESSEES OVERALL INCOME EARNING ACTIVITIES CONSTITUTE NUMBER OF TRANSACTIONS I.E., CAPITAL GAINS, INTEREST FROM DEPOSITS MADE IN THE CAPITAL GAINS SCHEME ETC. IN FACT, THE ASSESSEE HAS NOT FURNISHED SEPARATE ACTIVITY - WISE DETAILS OF EXPENDITURE. THE EXPENDITURE INCURRED AGAINST THE CAPITAL GAINS IMPLIEDLY WILL NOT BE ADMISSIBLE. THE CIT (A) HAS NOT CONSIDERED THIS ASPECT. BEFORE THE AO NO SUCH BREAD - UP WAS FILED. UNDER THESE CIRCUMSTANCES, THE INESCAPABLE CONCLUSION WHICH EMERGES IS THAT THE EXPENDITURE OF RS. 2,76,334/ - COMPRISES OF EXPENSES PERTAINING TO CAPITAL GAINS AS WELL AS INCOME FR OM OTHER SOURCES. THOUGH THE DETAILS ARE NOT AVAILABLE, SETTING ASIDE AT THIS LEVEL WILL AGAIN BE A REPETITION OF THE SAME EXERCISE. CONSEQUENTLY, WE DEEM IT EXPEDIENT TO ESTIMATE, TO THE INTEREST OF JUSTICE, AND DIRECT THAT ONE HALF OF THE EXPENDITURE O UT OF THESE SHOULD BE HELD TO BE ATTRIBUTABLE TO INCOME FROM OTHER SOURCES . CONSEQUENTLY, THE RELIEF GIVEN BY THE CIT (A) ON THIS ISSUE SHOULD BE REDUCED BY HALF. THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 12. ON PERUSAL OF THE SAID ORDER OF THE TRIB UNAL AND THE FACTS OF THE PRESENT APPEAL FOR THE 2008 - 2009 UNDER CONSIDERATION, WE ARE OF THE OPINION THAT THE ASSESSEE WILL SUCCEED PARTLY ON THIS ISSUE. ACCORDINGLY, WE DIRECT THE AO TO EXAMINE THE FACTS OF THE PRESENT CASE WITH THAT OF THE APPEAL DECID ED BY THE TRIBUNAL AND GRANT RELIEF IN ACCORDANCE WITH THE ORDER OF THE TRIBUNAL DATED 28.5.2002. ACCORDINGLY, GROUND NO.2 IS DECIDED IN THE ABOVE MENTIONED MANNER. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC E D IN THE OPEN COURT ON 1 9 T H DAY OF FEBRUARY, 2014. S D / - S D / - (SANJAY GARG ) (D. KARUNAKARA RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 9 .2.2014 . . ./ OKK , SR. PS 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI