Appeal details
Counselvise Citation
234919914 RSA 2011
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-01-2012
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
23-03-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, MUMBAI. BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.2349/ MUM/2011 ASSESSMENT YEAR: 2007-08 KUSHAL K BANGIA, .. APPELLANT 7, RITHIKA APARTMENTS, OPP RAM KRISHNA SOCIETY, JUHU, MUMBAI-49 PA NO.AAFPB 0206 Q VS INCOME TAX OFFICER 21(1)(2) .. RESPONDEN T C-10, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, B.K.C. BANDRA (E), MUMBAI-51 APPEARANCES: GAJENDRA GOLCHHA, FOR THE APPELLANT P.K.B.MENON , FOR THE RESPONDENT DATE OF HEARING : 12.1.2012 DATE OF PRONOUNCEMENT : 31 .1.2012 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 9 TH DECEMBER, 2010, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS: 1. THE LD CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION AT RS.11,75,000 RECEIVED BY THE ASSESSEE AS CASH COMPENSATION. HE HAS FURTHER ERRED IN CONFIRMING THE SAID ADDITION TO THE INCOME UNDER TH E HEAD INCOME FROM OTHER SOURCE. THE REASONS ASSIGNED BY HIM DOING TH E SAME ARE WRONG AND INSUFFICIENT. PROVISIONS OF THE ACT OUGHT TO H AVE BEEN PROPERLY I.T.A NO.2349/ MUM/2011 ASSESSMENT YEAR: 2007-08 2 CONSTRUED AND APPLIED. REGARD BEING HAD TO THE FAC TS AND THE CIRCUMSTANCES OF THE CASE, THE SAID ADDITION OUGHT TO HAVE BEEN DELETED, BEING IN THE NATURE OF CAPITAL RECEIPT. 2. WITHOUT PREJUDICE TO GROUND NO.1, AND AS AN ALTE RNATIVE GROUND OF APPEAL, THE LD CIT(A) HAS ERRED IN CONFIRMING THE A DDITION OF RS.11,75,000 RECEIVED BY THE ASSESSEE AS CASH COMPENSATION UNDER THE HEAD INCOME FROM OTHER SOURCES, INSTEAD OF LONG TERM CAPITAL GA IN. THE REASONS ASSIGNED BY HIM DOING THE SAME ARE WRONG AND INSUFF ICIENT. PROVISIONS OF THE ACT OUGHT TO HAVE BEEN PROPERLY CONSTRUED AN D APPLIED. REGARD BEING HAD TO THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE SAID ADDITION OUGHT TO HAVE BEEN ASSESSED AS CAPITAL GAI NS. 2. THE ISSUE IN APPEAL LIES IN A NARROW COMPASS OF UNDISP UTED FACTS. THE ASSESSEE BEFORE US IS AN INDIVIDUAL AND HE HAD RECEIVED A SUM OF RS.11,75,000 ON ACCOUNT OF WHAT HE NOW TERMS AS, CASH COMPENSATION. IT IS TAXABILITY OF THIS AMOUNT OF RS.11,75,000 WHICH IS IN DISPUTE BEFORE US, AND IT I S, THEREFORE, NECESSARY TO UNDERSTAND THE BACK GROUND IN WHICH THIS AMOUNT WAS RE CEIVED. THE ASSESSEE WAS MEMBER OF A HOUSING SOCIETY BY THE NAME OF VILE PARLE RAMESH CHS LTD. THIS HOUSING SOCIETY, ALONGWITH ITS MEMBERS, ENTERED INTO A N AGREEMENT WITH A DEVELOPER, AND, UNDER THE SAID AGREEMENT, THE DEVELO PER WAS TO DEMOLISH THE RESIDENTIAL BUILDING OWNED BY THE HOUSING SOCIETY, AND RECONSTRUCT A NEW MULTISTORIED BUILDING BY USING THE FSI ARISING OUT OF THE PROPERTY, AND BY UTILIZING OUTSIDE TDR UNDER DEVELOPMENT CONTROL REGULATIONS. UN DER THIS ARRANGEMENT, THE ASSESSEE, AS A MEMBER OF THE HOUSING SOCIETY, RECEIVED A SLIGHTLY LARGER FLAT IN THE NEW BUILDING, WHICH HAD AN ADDITIONAL AREA OF 173 S Q. FT, A DISPLACEMENT COMPENSATION OF RS.6,12,000, WHICH WAS COMPUTED @ RS.34 ,000 P.M. FOR THE PERIOD OF CONSTRUCTION OF THE NEW BUILDING, AND AN ADDITION AL COMPENSATION OF RS.11,75,000. ON THESE UNDISPUTED FACTS, THE ASSESSING OFF ICER WAS OF THE OPINION THAT THE CASH COMPENSATION OF RS.11,75,000 IS REQUIRED TO BE TREATED AS CASUAL INCOME, AND, ACCORDINGLY, TAXABLE IN THE HANDS OF T HE ASSESSEE. THE ASSESSING OFFICER ALSO BROUGHT TO TAX ESTIMATED VALUE OF ADDITI ONAL AREA IN THE NEW FLAT, BUT SINCE CIT(A) HAS DELETED THE SAME AND REVENUE IS STATED TO BE NOT IN APPEAL AGAINST THE SAME, WE ARE NOT REALLY CONCERNED WITH THE SAME. AGGRIEVED, INTER ALIA, BY THIS ADDITION OF RS.11,75,000 ON ACCOUNT OF CASH COMPENSATI ON, ASSESSEE CARRIED THE I.T.A NO.2349/ MUM/2011 ASSESSMENT YEAR: 2007-08 3 MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 4. IN OUR CONSIDERED VIEW, IT IS ONLY ELEMENTARY THAT THE CONNOTATION OF INCOME HOWSOEVER WIDE AND EXHAUSTIVE, TAKE INTO ACCOUNT ONLY SUCH CAPITAL RECEIPTS ARE SPECIFICALLY TAXABLE UNDER THE PROVISIONS OF THE INCOM E TAX ACT. SECTION 2(24)(VI) PROVIDES THAT INCOME INCLUDES ANY CAPITAL GAINS CHARG EABLE UNDER SECTION 45, AND, THUS, IT IS CLEAR THAT A CAPITAL RECEIPT SIMPLICITOR C ANNOT 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 THE FINANCIAL YEARS IN QUESTION HAVE TO BE REGARDED AS CA PITAL RECEIPTS, AND, THEREFORE , (EMPHASIS SUPPLIED BY US), ARE NOT INCOME WITHIN MEANIN G OF SECTION 2(24) OF THE INCOME TAX ACT. THIS CLEARLY IMPLIES, AS IS THE SET TLED LEGAL POSITION IN OUR UNDERSTANDING, THAT A CAPITAL RECEIPT IN PRINCIPLE I S OUTSIDE THE SCOPE OF INCOME CHARGEABLE TO TAX AND A RECEIPT CANNOT BE TAXED AS I NCOME UNLESS IT IS IN THE NATURE OF REVENUE RECEIPT OR IS BROUGHT WITHIN THE AMBIT OF IN COME BY WAY OF A SPECIFIC PROVISION IN THE ACT. NO MATTER HOW WIDE BE THE SCOP E 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 COMPENSAT ION RECEIVED BY THE ASSESSEE IS IN THE REVENUE FIELD, AND RIGHTLY SO BECAUSE T HE RESIDENTIAL FLAT OWNED BY THE ASSESSEE IN SOCIETY BUILDING IS CERTAINLY A CAPITAL A SSET IN THE HANDS OF THE ASSESSEE AND COMPENSATION IS REFERABLE TO THE SAME. AS H ELD BY HONBLE SUPREME COURT, IN THE CASE OF DR. GEORGE THOMAS K VS CIT(156 ITR 412), THE BURDEN IS ON THE REVENUE TO ESTABLISH THAT THE RECEIPT IS OF REVENUE NA TURE THOUGH ONCE THE RECEIPT IS FOUND TO BE OF REVENUE CHARACTER, WHETHER IT COME S UNDER EXEMPTION OR NOT, IT IS FOR THE ASSESSEE TO ESTABLISH. THE ONLY DEFENCE PUT UP BY LEARNED DEPARTMENTAL REPRESENTATIVE IS THAT CASH COMPENSATION RECEIVED BY T HE ASSESSEE IS NOTHING BUT HIS SHARE IN PROFITS EARNED BY THE DEVELOPER WHICH ARE ESSE NTIALLY REVENUE ITEMS IN NATURE. THIS ARGUMENT HOWEVER PROCEEDS ON THE FALLAC Y THAT THE NATURE OF PAYMENT IN THE HANDS OF PAYER ALSO ENDS UP DETERMINING ITS NAT URE IN THE HANDS OF THE I.T.A NO.2349/ MUM/2011 ASSESSMENT YEAR: 2007-08 4 RECIPIENT. AS OBSERVED BY HONBLE SUPREME COURT IN T HE CASE OF CIT VS. KAMAL BEHARI LAL SINGHA (82 ITR 460), IT IS NOW 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 CONSIDERATION FOR WHICH THE AMOUNT HAS BEEN PAID BY THE DEVELOPER ARE, THERE FORE, NOT REALLY RELEVANT IN DETERMINING THE NATURE OF RECEIPT IN THE HANDS OF TH E ASSESSEE. IN VIEW OF THESE DISCUSSION, IN OUR CONSIDERED VIEW, THE RECEIPT OF RS.11 ,75,000 BY THE ASSESSEE CANNOT BE SAID TO BE OF REVENUE NATURE, AND, ACCORDI NGLY, 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 ASSESSEE FAIRLY AG REES, THE IMPUGNED RECEIPT ENDS UP REDUCING THE COST OF ACQUISITION OF THE ASSET, I .E. FLAT, AND, THEREFORE, THE SAME WILL BE TAKEN INTO ACCOUNT AS SUCH, AS AND WHEN OCCASI ON ARISES FOR COMPUTING CAPITAL GAINS IN RESPECT OF THE SAID ASSET. SUBJECT TO THESE OBSERVATIONS, GRIEVANCE OF THE ASSESSEE IS UPHELD. 5. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS I NDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2012 SD/- (B.R.MITTAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 31 ST JANUARY, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),32, MUMBAI 4. COMMISSIONER OF INCOME TAX,CITY-21 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI
Mehul