DATTATRAY N SAWANT HUF, MUMBAI V. ITO 22(1)(1), MUMBAI

ITA 2360/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3509 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: VISHWAS V MEHENDALE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Business income; Search and seizure; Charitable institution; Opportunity of being heard; Principle of natural justice; Additional evidence; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 2(14)

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 2360 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) DATTATRAY N. SAWANT HUF, 103, GHANSHYAM KRIPA, R.B. KADAM MARG, BHATWADI, GHATKOPAR, MUMBAI 400086. / V. THE INCOME TAX OFFICER WARD 22(1), MUMBAI ./ PAN : AAAHD3752N ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI VISHWAS V. MEHENDALE REVENUE BY : SHRI B.S. BIST, SR. DR / DATE OF HEARING : 02-06-2016 / DATE OF PRONOUNCEMENT : 17.08.2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 2 360/MUM/2013, IS DIRECTED AGAINST APPELLATE ORDER DATED 11 TH JANUARY, 2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 33, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2009-10, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 28 TH DECEMBER, 2011 PASSED BY THE LEARNED ASSESSING OFFICER (HEREI NAFTER CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). ITA 2360/MUM/2013 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE I N THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READS AS UNDER:- 1) ON THE BASIS OF CIRCUMSTANCES AND FACTS THE LEARNE D ASSESSING OFFICER HAD ERRED IN HOLDING THE EXCHANGE OF PLOTS BE TWEEN THE APPELLANT AND VATSALABAI DATTATRAY CHARITABLE TRUST WITHOUT ANY MO NETARY CONSIDERATION AS TRANSFER OF CAPITAL ASSET AND CHARGE D TAX ON THE CAPITAL GAIN AS PER STAMP DUTY VALUATION. 3. THE BRIEF FACTS OF THE CASE ARE THAT IT WAS OBS ERVED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) READ W ITH SECTION 143(2) OF THE ACT FROM THE AIR INFORMATION THAT THE ASSESSEE HAD PURCHASED IMMOVABLE PROPERTY OF RS. 1,30,89,000/- ON 3 RD JUNE, 2008 AND SOLD THE SAME FOR RS. 94,51,000/-ON 11 TH JUNE, 2008. THE RETURN OF INCOME FILED BY THE ASS ESSEE WITH THE REVENUE WAS NOT ACCOMPANIED WITH ANY PROFI T AND LOSS ACCOUNT , OR BALANCE SHEET. DETAILS WERE CALLED BY THE AO FROM THE ASSESSEE WHEREBY THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD ACQUIRED A PIECE OF LAND AS STOCK- IN-TRADE IN THE YEAR 2000 FOR AN AMOUNT OF RS. 4,50 ,000/-. THE SAID PLOT WAS EXCHANGED WITH THE PLOT OWNED BY A TRUST NAMELY VAT SALABHAI DATTATRAY CHARITABLE TRUST ON 3 RD JUNE, 2008 AND THERE WAS NO MONETARY CONSIDERATION MOVED FROM EITHER SIDE, HENCE, THERE IS NO PROFIT O R LOSS WHICH CAN BE BROUGHT TO TAX UNDER THE PROVISIONS OF THE ACT. THE A.O. OBSERVED THAT THE FACTS OF THE CASE ARE TH AT THE ASSESSEE HAS CLAIMED TO HAVE ACQUIRED A PIECE OF LAND BEARING PLOT NO.68 , BHATWADI, VILLAGE KIROL , GHATKOPAR (WEST) NOW IN TALUKA KURLA , MUMBAI (SURV EY NO. 24, HISSA NOS 4(PART) AND 6(PART) AND CITY SURVEY NO. 68(PART) ) FOR RS.4,50,000/- IN THE YEAR 2000 ON WHICH SCHOOL IS RUN BY VATSALABHAI DATTATRA Y SAWANT CHARITABLE TRUST ON THIS PLOT OF LAND . THE VATSALABHAI DATTAT RAY SAWANT CHARITABLE TRUST OWNS ANOTHER PLOT BEARING NO.27 , BHATWADI , VILLAGE KIROL, GHATKOPAR NOW IN TALUKA KURLA, MUMBAI( SURVEY NO. 26, HISSA N O.6(PART) AND CITY ITA 2360/MUM/2013 3 SURVEY NO. 27 AND 27/1 TO 20/20) ADMEASURING 500 SQ UARE YARDS EQUIVALENT TO 416.7 SQUARE METERS. THE AO OBSERVED THAT VATSAL ABHAI DATTATRAY SAWANT CHARITABLE TRUST EXCHANGED PLOT NO. 27 WHOSE MARKET VALUE IS RS.94,5L,000/- WITH THE ASSESSEE , AND IN EXCHANGE THE ASSESSEE HA D GIVEN PLOT NO. 68 TO VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST , THE MUNICIPAL VALUATION OF WHICH IS RS. 1,30,89,000/-. THE PLOT RECEIVED IN E XCHANGE BY THE ASSESSEE I.E. PLOT NO 27 IS THEN GIFTED TO HIS SON ON 11 TH JUNE, 2008. THE A.O. ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS THERE WAS EXCHANGE OF PLOTS BETWEEN VATSALABHAI DATTATRAY SAWANT CHARITAB LE TRUST AND THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND AS P ER AO ANY EXCHANGE OF AN ASSET IS A TRANSFER OF CAPITAL ASSET WITHIN THE M EANING OF SECTION 2(47) OF THE ACT. FURTHER AS PER AO THE SAID PLOT OF LAND OWNED BY THE ASSESSEE IS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) O F THE ACT, HENCE GAINS ARISING ON TRANSFER/EXCHANGE OF THE PLOT OWNED BY T HE ASSESSEE WILL GIVE RISE TO CAPITAL GAINS WHICH ARE CHARGEABLE TO TAX U/S 45 (1) OF THE ACT. THE ASSESSEE IN REPLY TO SCN ISSUED BY THE AO, SUBM ITTED THAT THE PLOT WAS NEVER ACQUIRED BY THE ASSESSEE AS CAPITAL ASSET BUT IT WAS CONSIDERED AS STOCK-IN-TRADE BY THE ASSESSEE. IT WAS SUBMITTED TH AT SINCE THERE WAS NO MONETARY CONSIDERATION, THERE WAS NO TAXABLE CAPITA L GAINS AND HENCE, NOTHING WAS OFFERED FOR TAXATION BY THE ASSESSEE IN THE RETURN OF INCOME FILED WITH THE REVENUE. THE ASSESSEE SUBMITTED THAT IT N EVER ACQUIRED THE PLOT AS AN INVESTMENT AND IF IT WOULD HAVE BEEN AN INTENTIO N, IT WOULD NOT HAVE ALLOWED THE CHARITABLE TRUST TO CONSTRUCT A BUILDIN G FOR SCHOOL ACTIVITIES AND ONCE THIS SCHOOL BUILDING IS ERECTED ON THE LAND, I T IS VERY DIFFICULT TO EVICT THE SAID PREMISES FOR VARIOUS SOCIAL AND MORAL REASONS, HENCE, THE INTENTION OF THE ASSESSEE WAS VERY CLEAR THAT THAT THEY DO NOT W ANT TO HOLD THE SAME PIECE OF LAND AS INVESTMENT AND TO EARN CAPITAL GAIN THE REON. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE MARKET VALUE AS PER SECTIO N 50C OF THE ACT ITA 2360/MUM/2013 4 CONSIDERED AT RS. 1,30,89,000/- CONSISTS OF THE LAN D OF 136 SQUARE METERS AND THE STRUCTURE OF 387.55 SQUARE METERS HENCE THE MARKET VALUE OF THE LAND OF 136 SQUARE METERS @ RS. 22,680/- COMES TO R S. 30,84,480/- , AND THE BUILDING OF 387.55 SQUARE METERS@ RS. 25,815/- COME S TO RS. 1,00,04,520/-, WHICH AGGREGATES TO RS.1,30,89,000/- . IT WAS SUBM ITTED THAT THE BUILDING WAS OWNED BY THE TRUST NAMELY VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST WHICH GOT TRANSFERRED TO THE SAME TRUST, THER EFORE, THERE IS NO TRANSFER OF OWNERSHIP OF THE BUILDING AS IT WAS ALREADY OWNE D BY THE SAID TRUST WHICH WAS RUNNING SCHOOL ON THE SAID PLOT. IT WAS ALSO SU BMITTED BY THE ASSESSEE THAT THE LAND WHICH WAS RECEIVED IN EXCHANGE WAS WI TH MANY PROBLEMS SUCH AS ENCROACHMENT OF 20 HUTMENTS, NO APPROACH ROAD ET C. FOR WHICH THE COST NEEDS TO BE INCURRED TO REMOVE THE DEFECTS. THE STA MP DUTY VALUATION DOES NOT NECESSARILY CONSIDERED ALL THESE ASPECTS, HENCE , THE STAMP DUTY VALUATION MIGHT NOT BE GOOD IN LAW. THE ASSESSEE SUBMITTED TH AT IT HAD NOT RECEIVED ANY MONETARY CONSIDERATION, HENCE, THERE IS NO INCOME E ARNED AS PER THE ACT. THE ASSESSEE ALSO SUBMITTED THAT THE ENTIRE ARRANGEMENT WAS ACCEPTED WITH A SOCIAL AND PHILANTHROPIC MOTIVE THAT CHILDREN IN NE AR VICINITY SHOULD NOT BE DEPRIVED OF EDUCATIONAL FACILITY. IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS N OT SUBMITTED ITS BALANCE SHEET FOR THE CURRENT YEAR OR THE PREVIOUS YEARS S HOWING THE SAID PLOT OF LAND AS ITS STOCK-IN-TRADE. NO DOCUMENTS HAVE BEEN SUBM ITTED BY THE ASSESSEE WITH RESPECT TO THE CONSTRUCTION ACTIVITY UNDERTAKE N BY IT DURING THE YEAR OR THE EARLIER YEARS TO SUPPORT ITS STAND THAT THE ASS ESSEE PURCHASED THE PIECE OF LAND FOR CARRYING OUT THE BUSINESS ACTIVITY AND NOT AS AN INVESTMENT THE ASSESSEE HAS MERELY MADE THE STATEMENT THAT THE AS SESSEE HAS ACQUIRED THE LAND AS STOCK-IN-TRADE WHICH IS NOT ENOUGH AS THE A SSESSEE IS NOT TRADER OF LAND. NO EVIDENCE IS GIVEN BY THE ASSESSEE THAT AS SESSEE IS A TRADER OF LAND. THUS, THE CONTENTION OF THE ASSESSEE IS NOT CORRECT AND THE AO OBSERVED THAT THE SAID LAND HAD NEVER BEEN SHOWN BY THE ASSESSEE AS STOCK-IN-TRADE . THE ITA 2360/MUM/2013 5 AO OBSERVED THAT THE LAND ON WHICH SCHOOL STANDS CO ULD NOT BE HELD AS STOCK-IN-TRADE. IT WAS OBSERVED BY THE A.O. THA T THE ASSESSEE HAS NOT ACQUIRED THE PLOT AS STOCK-IN-TRADE BUT AS AN INVES TMENT THAT IS WHY THE ASSESSEE HAD ALLOWED THE CHARITABLE TRUST TO CONSTR UCT A BUILDING FOR SCHOOL ACTIVITIES. THE PLOT WAS HELD AS A CAPITAL ASSET BY THE ASSESSEE U/S 2(14) OF THE ACT. IT WAS ALSO OBSERVED BY THE AO THAT THE EXCHAN GE OF CAPITAL ASSET BY THE ASSESSEE IS COVERED AS TRANSFER U/S 2(47) OF THE ACT AND ANY PROFIT OR GAIN ON TRANSFER OF A CAPITAL ASSET GAVE RISE TO CAPITAL G AIN CHARGEABLE TO TAX U/S 45 OF THE ACT AND THE CAPITAL GAIN HAS TO BE COMPUTED AS PER PROVISIONS OF SECTION 48 TO 55 OF THE ACT. IT WAS OBSERVED BY THE A.O. T HAT IN EXCHANGE FOR TRANSFER OF PROPERTY BEARING NO. 68, THE ASSESSEE HAD RECEIV ED PROPERTY BEARING NO. 27 WHICH HAS MARKET VALUE OF RS. 94,51,000/- . BUT AS PER PROVISIONS OF SECTION 50C OF THE ACT THE MARKET VALUE OF THE PROPERTY TRA NSFERRED SHOULD BE TAKEN AS THE SALE VALUE CONSIDERATION . THE MARKET VALUE OF THE SAID PROPERTY IS RS. 1,30,89,000/-. THE A.O. OBSERVED THAT THE ASSESSEE S BIFURCATION WAS THE MARKET VALUE OF THE LAND OF 136 SQUARE METERS @ RS. 22,680/- PER SQUARE METERS WHICH COMES TO RS. 30,84,480/- AND THE BUILD ING OF 387.55 SQUARE METERS @ RS. 25,815/- PER SQUARE METERS WHICH COME S TO RS. 1,00,04,520/-, AGGREGATING TO RS.1,30,89,000/- , WHICH IS NOT ACCE PTABLE . IT WAS OBSERVED BY THE AO THAT THE BASIS OF COMPUTATION OF THE COST OF LAND AND BUILDING WAS NOT KNOWN. THE ENTIRE PROPERTY HAS BEEN TRANSFERRE D TO VATSALABAI DATTATRAY CHARITABLE TRUST. IT WAS OBSERVED THAT EVEN IF IT IS ASSUMED THAT ONLY LAND IS VALUED AT RS 30,84,480/- BY THE ASSESSEE, IS TRANSF ERRED THEN IN EXCHANGE THE ASSESSEE HAS GOT PROPERTY WORTH RS 94,51,000/-, WHI CH IS HIGHLY IMPROBABLE. FURTHER, THE CONTENTION OF THE ASSESSEE THAT THE LA ND RECEIVED IN EXCHANGE HAS ENCROACHMENTS IS NOT SUPPORTED BY ANY EVIDENCE. HEN CE, THE A.O. TREATED THE SALE VALUE CONSIDERATION AT RS 1,30,89,00/- AS PER THE PROVISIONS OF SECTION 5OC OF THE ACT AS LONG TERM CAPITAL GAIN AND BROUGH T TO TAX BY THE AO VIDE ASSESSMENT ORDER DATED 28.12.2011 PASSED BY THE AO U/S 143(3) OF THE ACT. WITHOUT PREJUDICE, IT WAS HELD BY THE AO THAT THE T RANSFER HAS BEEN AN ITA 2360/MUM/2013 6 ARRANGEMENT WITH THE SOLE PURPOSE OF AVOIDING TAX P AYMENT. THE ASSESSEE IS MAIN TRUSTEE OF THE VATSALABAI DATTATRAY CHARITABLE TRUST. THE PROPERTY RECEIVED BY THE ASSESSEE IN EXCHANGE IS GIFTED TO H IS SON WHO IS BUILDER AND IS DEVELOPING THE PROPERTY FOR WHICH A GIFT DEED IS R EGISTERED . THE AO PASSED THE ASSESSMENT ORDER DATED 28.12.2011 U/S 143(3) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 28.12.20 11 PASSED BY THE AO U/S 143(3) OF THE ACT, THE ASSESSEE FILED ITS FIRST AP PEAL BEFORE THE LEARNED CIT(A). 5. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D THE FOLLOWING WRITTEN SUBMISSIONS :- FACTS THE ASSESSEE IS HINDU UNDIVIDED FAMILY (HUF) WHERE MR. DATTATRAY NAMDEO SAWANT IS A KARTA OF HUF. THE SAID HUF HAD AGREED TO PURCHASE A PIECE OF LAND IN THE YEAR 1996 FROM BAI ZAVERBAI PURSHOTTAM NATHU CHARITABLE TRUST .THE ASS ESSEE HAD INITIALLY PAID AN AMOUNT OF RS. 1,00,000 AND THE BA LANCE AMOUNT OF RS.3,50,000 WAS PAID IN THE YEAR 2001. SINCE THE SE LLER WAS A TRUST THE PERMISSION FROM THE OFFICE OF THE CHARITY COMMISSIONER WAS REQUIRED. THEREFORE THE PROCESS OF SALE TOOK A LONG TIME TO REDUCE TO REGISTRATION OF THE AGREEMENT TILL 2006. SUBSEQUENTLY THE PURCHASE AGREEMENT FOR THE LAND WAS REGISTERED IN T HE SAME YEAR. THE SAID PLOT WAS IN THE POSSESSION OF THE ASSESSEE . JANAKALYAN SEVA SANTHA WAS A REGISTERED TRUST CAR RYING OUT CHARITABLE ACTIVITY. THE TRUST HAD PURCHASED A PIEC E OF LAND MEASURING 416.70 SQ. MTR. IN THE YEAR 1992.THE SAID TRUST WAS SUBSEQUENTLY MERGED WITH VATSALABAI DATTATRAY CHARI TABLE TRUST IN 2004. THE TRUST IS CARRYING ACTIVITY OF RUNNING A SCHOOL. THE LAND ITA 2360/MUM/2013 7 PURCHASED BY THE TRUST WAS ENCROACHED BY SOME OF TH E HUTMENTS. THE PIECE OF LAND WAS NOT HAVING PROPER APPROACH RO AD. HENCE THE TRUST FOUND IT DIFFICULT TO DEVELOP THE PLACE AND C ARRY OUT ITS SCHOOL ACTIVITIES. MR. D. N. SAWANT (KARTA) IS A PERSON WHO HAS A GO OD SOCIAL STANDING AND HE WAS FOND OF CARRYING OUT SOCIAL SER VICES IN NEARBY VICINITY. HE STAYS AT BHATWADI - GHATKOPAR (WEST), MUMBAI WHERE THERE WAS AN ACUTE NEED OF AVAILABILITY OF EDUCATIO NAL FACILITY TO GROWING CHILDREN. HENCE INITIALLY HE ALLOWED THE TE ACHING TO BE CARRIED OUT IN THE PLOT OWNED BY HIS HUF. A STRUCTU RE WAS ERECTED AND THE SCHOOL WAS RUNNING FROM THE SAME PLACE. (TH E REFERENCE TO THE STRUCTURE IS MADE ON PAGE NO 2 OF THE AGREEMENT .) INITIALLY THE STRUCTURE WAS FOR GROUND PLUS ONE UPPER FLOOR WHICH WAS SUBSEQUENTLY IMPROVISED BY THE TRUST AS THE PLACE W AS INSUFFICIENT TO ACCOMMODATE THE STUDENTS OF THE SCHOOL. THUS THE RE WAS A SCHOOL BUILDING ON THE PLOT OF HUF. THUS THE TRUST WAS OWNING A PLOT WHICH IT COULD N OT DEVELOP FOR SCHOOL ACTIVITIES DUE TO ENCROACHMENT AND OTHER PRO BLEMS. AND HUF WAS OWNING A PLOT WHERE THE TRUST WAS CARRYING ITS SCHOOL. MR. SAWANT AND HIS FAMILY MEMBERS WERE IN THE BUSIN ESS OF THE BUILDING AND DEVELOPMENT. TAKING INTO CONSIDERATION THESE SITUATIONS IT WAS FELT APPROPRIATE TO EXCHANGE THE PLOTS BETWEEN THE TRUST AND THE HUF. MR. D. N. SAWANT, KARTA OF HUF B EING A PHILANTHROPIC PERSON EXTENDED HIS KIND CONSENT FOR THE SAME. THE PLOTS WERE EXCHANGED WITHOUT ANY MONETARY CONSIDERA TION. SINCE THE HUF HAD ACQUIRED THE PLOT FOR DEVELOPMENT PURPO SE, (PLEASE REFER PAGE NO.4 OF THE AGREEMENT WHERE IT WAS SPECI FICALLY MENTIONED THAT THE PLOT WAS ACQUIRED FOR THE DEVELO PMENT ITA 2360/MUM/2013 8 PURPOSE.) IT WAS A STOCK IN TRADE. AS THERE WAS NO MONETARY CONSIDERATION, THERE WAS NO BUSINESS PROFIT WHICH C OULD HAVE OFFERED FOR TAXATION. THE FACT THAT THE HUF HAD NOT ACQUIRED THE PLOT A S AN INVESTMENT. HENCE THERE WAS NO CAPITAL GAIN. HENCE SECTION 50C OF THE INCOME TAX ACT IS NOT APPLICABLE. THE ASSESSING OFFICER ERRED IN APPLYING SECTION 5 OC FOR THE ABOVE TRANSACTION AND CONSIDERING THE MARKET VALUE AS THE SALES VALUE. THE MARKET VALUE SPECIFIED IN THE EXCHANGE DEED OF RS. 1,30,89.000 WAS CONSIDERED AS SALES VALUE AND LONG TERM CAPITAL GAINS OF RS. 1,24,43.926.00 WERE COMPUTED BY THE AS SESSING OFFICER AND DEMAND OF RS.38,18,700/- WAS RAISED. SUBMISSION WHETHER THE PLOT WAS PURCHASED WITH THE INTENTION O F BUSINESS OR INVESTMENT? THE ASSESSEE HAD PURCHASED THE PIECE OF LAND FOR BU SINESS PURPOSE .THE LAND WAS CONSIDERED AS STOCK IN TRADE BY THE ASSESSEE AND NOT AS AN INVESTMENT. HENCE SECTION 5O C WOULD NOT BE APPLICABLE. THE FOLLOWING POINTS GIVEN BELOW SUP PORT THIS POINT OF VIEW: (A) PURCHASE AGREEMENT FOR LAND STATES FOR DEVELOPM ENT PURPOSE THE AGREEMENT WAS REGISTERED BY THE HUF IN THE YEAR 2006 .THE PARAGRAPH 4 OF PAGE 4 OF THE PURCHASE AGREEMENT CLE ARLY STATES ITA 2360/MUM/2013 9 THAT THIS ADDITIONAL PIECE OF LAND WAS PURCHASED FO R THE PURPOSE OF DEVELOPING THE PLOT. A COPY OF THE AGREEMENT HAS BE EN SUBMITTED FOR YOUR REFERENCE. THUS THE INTENTION OF THE ASSES SEE TO PURCHASE THE LAND FOR THE PURPOSE OF BUSINESS IS CLEAR. (8) FAMILY BACKGROUND MR. D.N. SAWANT, KARTA OF HUF IS IN THE BUSINESS OF CONSTRUCTION IS IN THE ACTIVITY OF CONSTRUCTION AND DEVELOPMENT SIN CE 198I. MR. DATTATRAY SAWANT IS A SENIOR CITIZEN , AT HIS AGE O F 69 YEARS. HIS SON MR. RAJENDRA SAWANT IS ALSO IN THE SIMILAR BUSI NESS OF BUILDERS AND DEVELOPERS. THUS THE FAMILY IS IN THE BUSINESS OF BUILDERS AND DEVELOPERS. WHEN THE HUF INITIATED THE PURCHASE OF THE PLOT KARTA, MR. DATTATRAY SAWANT WAS IN THE SAME BUSINESS. HENC E THE FAMILY BACKGROUND ALSO SUPPORTS THE FACT THAT THE PLOT WAS PURCHASED WITH THE INTENTION TO DEVELOP THE SAME FOR THE PURP OSE OF BUSINESS. (C) HUF NOT CARRYING EDUCATION OR CHARITABLE ACTI VITY THE HUF WAS NOT INVOLVED IN EDUCATION OR ANY CHARIT ABLE ACTIVITIES. THE LAND WAS PURCHASED BY THE HUF ONLY FOR DEVELOPM ENT PURPOSE AND NOT WITH THE INTENTION OF CARRYING OUT THE SCHO OL. VALUATION OF PROPERTY AS MENTIONED IN THE ASSESSMENT ORDER U/S.143(3) THE MARKET VALUE OF THE LAND HELD BY THE TRUST WAS RS.94,51,00 0 (RS.22,680.59*416.70 SQ MTR). HOWEVER THE LAND WAS WITH MANY PROBLEMS SUCH AS ENCROACHMENT OF 20 HUTMENTS, NO AP PROACH ROAD. ETC FOR WHICH COST REQUIRED TO BE INCURRED TO REMOV E THE DEFECTS. THE ITA 2360/MUM/2013 10 MARKET VALUE FOR STAMP DUTY PURPOSE IS DECIDED ON T HE PREDETERMINED STANDARD RATE AND DOES NOT NECESSARIL Y CONSIDER ALL THESE ASPECTS. THE EXCHANGE DEED TAKES A VALUE OF TOTAL PROPERTY T O BE TRANSFERRED AS RS. 1,30,89,000 AS DETAILED BELOW- 1. LAND 136 SQR. MTR. AND 2. STRUCTURE 387.55 SQR. MTR THUS YOU WILL FIND THAT THE AREA OF THE LAND IS ONL Y 136 SQ MTR WHICH WAS OWNED BY THE HUF. CONSIDERING THE RATE RS . 22680 PER SQ. MTR. STATED ABOVE THE VALUATION WORKS OUT TO BE RS. 30,84,480/. THEREFORE WITHOUT PREJUDICE TO THE FACT THAT THE LA ND WAS A BUSINESS ASSET OF HUF, IN CASE THE CAPITAL GAIN IS TO BE WORKED OUT, IT SHOULD BE ON THE VALUE OF THE LAND TAKING INTO C ONSIDERATION THE VALUE AS RS. 30,84,480/-. EVEN THE PROCESS OF PURCHASE HAS INITIATED IN 1996 AND THE ENTIRE CONSIDERATION WAS PAID IN 2001. DUE TO SOME TECHNIC AL FORMALITIES THE AGREEMENT WAS REGISTERED IN 2006. THEREFORE WHI LE APPLYING THE INDEXATION FOR CAPITAL GAIN THE ASSESSING OFFIC ER HAS ERRED IN TAKING INDEXATION OF 2006.' THE LEARNED CIT(A) AFTER GOING THROUGH THE ORDER OF THE A.O. AND THE SUBMISSIONS MADE BY THE ASSESSEE OBSERVED FROM THE COPY OF PURCHASE DEED DATED 26 TH APRIL, 1993 OF THE LAND , THAT THE JANKALYAN SEVA SANSTHA SUBSEQUENTLY GOT MERGED WITH VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST WHEREIN THE ASSESSEE WAS ONE OF THE TRUSTEE ALONG W ITH 18 OTHER INDIVIDUALS ITA 2360/MUM/2013 11 AND APPLICATION WAS MADE U/S.36(1)(A) OF BOMBAY PUB LIC TRUSTS ACT, 1950 VIDE APPLICATION NO. 60 OF 2009 BY BAI ZAVERHAI PUR USHOTTAM NATHU CHARITABLE TRUST ASKING FOR SANCTION ORDER TO SELL IMMOVABLE PROPERTY I.E. SURVEY NO.24, HISSA NO 4&6, ADMEASURING 136 SQ.MTR AND RIGHT OF USING F.S.I OF 54 SQUARE METERS FOR CONSIDERATION OF RS. 4,50,0 00/- TO SHRI DATTATRAY NAMDEO SAWANT, THE APPELLANT OF THE SAME LAND BEARI NG SURVEY NO. 24, HISSA NO. 4, CITY SURVEY NO. 68, ADMEASURING (PART) OF VI LLAGE KIROL, GHATKOPAR (W) ADMEASURING 100 SQUARE YARDS AND THEN ANOTHER PIECE OF LAND WITH THE SAME SURVEY NUMBER,HISSA NO. AND CITY SURVEY NO., ADMEAS URING 52.39 SQUARE METERS PURCHASED BY THE ASSESSEE ALONGWITH A COPY O F ORDER PASSED U/S.36(1)(A) OF BOMBAY PUBLIC TRUSTS ACT, 1950 ON A PPLICATION NO. J-4/91 OF 2002 PASSED BY JOINT CHARITY COMMISSIONER PERMITTIN G TO ALIENATE THE LAND WHICH WAS PROPERTY OF THE TRUST IN SAID APPLICATION I.E. BAI ZAVERBAI PURSHOTTAM NATHU CHARITABLE TRUST ALONGWITH SUBSEQ UENT SALE DEED DATED 27.03.2006. IT WAS OBSERVED BY THE LEARNED CIT(A) FROM OLD PURC HASE DEED DATED 26.04.1993 OF LAND THAT THE ASSESSEE ALONG WITH OTH ER 18 INDIVIDUALS , IN THE CAPACITY OF TRUSTEES OF JANAKALYAN SEVA SANSTHA(REG D.) PUBLIC TRUST ; PURCHASED LAND BEARING SURVEY NO. 26 , HISSA NO. 6 , CITY SURVEY NO. 27(PART) FROM VENDORS WHO ARE INDIVIDUALS. THIS LAND WAS TAK EN BY THE ASSESSEE IN EXCHANGE OF LAND BEARING SURVEY NO. 68. THEN BY ORD ER DATED 06.05.2004 PASSED BY JOINT CHARITY COMMISSIONER WHEREIN IT ALS O CONFIRMS THE FACT THAT THE ASSESSEE HAD CONSTRUCTED STRUCTURE CONSISTING O F GROUND AND ONE UPPER FLOOR ON THE LAND BELONGING TO ANOTHER TRUST I.E. B AI ZAVERBAI PURSHOTTAM NATHU CHARITABLE TRUST AND CLAIMS TO BE IN EXCLUSI VE POSSESSION THEREOF AND THE ASSESSEE HAS SINCE THE YEAR 1990 PERMITTED THE SAID STRUCTURE TO BE USED BY A PRIMARY SCHOOL KNOWN AS DNYAN PRAKASH VIDYALA YA RUN BY THE TRUST JANAKALYAN SEVA SANSTHA, A PUBLIC CHARITABLE TRUST WHERE THE ASSESSEE IS ONE OF THE TRUSTEE . IN ORDER TO ALIENATE , THE PROPERT Y OFFER WAS INVITED BY BAI ITA 2360/MUM/2013 12 ZAVERBAI PURSHOTTAM NATHU CHARITABLE TRUST , WHERE BY ONLY OFFER RECEIVED WAS FROM THE SAID SCHOOL RUN BY JANAKALYAN SEVA SAN STHA CHARITABLE TRUST . THE ORDER OF CHARITY COMMISSIONER STATES THAT THE O FFER GIVEN BY JANAKALYAN SEVA SANSTHA CHARITABLE TRUST BEING REASONABLE WAS BENEFICIAL TO THE TRUST WAS ACCEPTED AND SANCTIONED BY THE JT. CHARITY COMM ISSIONER. THE ORDER OF JT. CHARITY COMMISSIONER RELIED UPON VALUATION REPO RT ISSUED BY REGISTERED VALUER FIXING THE VALUE AT RS.3,58,350/- AND SINCE THE ASSESSEE HAS AGREED TO PAY TOTAL AMOUNT OF RS. 4,50,000/- , THE JOINT CHAR ITY COMMISSIONER SANCTIONED THE BAI ZAVERBAI PURSHOTTAM NATHU CHARIT ABLE TRUST WITH THE PERMISSION TO ALIENATE THE TRUST PROPERTY TO SELL I T TO JANAKALYAN SEVA SANSTHA CHARITABLE TRUST. THE ASSESSEE HAS SOLD THE PLOT WITH SCHOOL BUILDING CONSTRUCTED BY IT ONLY IN THIS PLOT NO 68 TO VATSAL ABAI DATTARAY CHATITABLE TRUST. THE LD. CIT(A) OBSERVED THAT THE SAID EXCHANGE IS A TRANSFER OF LAND WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AND GAINS ARISI NG ON EXCHANGE OF LAND IS CHARGEABLE TO TAX U/S 45 OF THE ACT. THE LD. CIT(A ) ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE PURCHA SED THE LAND FOR THE BENEFIT OF CONSUMPTION OF SAID LAND EARMARKED FOR T HE THEN SAID PROPOSED DEVELOPMENTAL PLAN FOR THE USE AND BENEFIT OF THE S CHOOL ALREADY EXISTING ON THE SAID ORIGINAL PLOT. THE EXISTING SCHOOL DNYAN P RAKASH VIDYALAYA WAS RUN BY A JANAKALYAN SEVA SANSTHA, A PUBLIC CHARITABLE T RUST SINCE 1990. IT IS ALSO SPECIFIED IN THE AGREEMENT DATED 27-03-2006 TH AT VENDORS I.E. BAI ZAVERBAI PURUSHOTTAM CHARITABLE TRUST HAD DIFFICULT Y IN RECOVERING POSSESSION AND HENCE MADE APPLICATION BEFORE JOINT CHARITY COMMISSIONER TO GET THE SANCTION FOR ALIENATION OF PROPERTY AND ALS O PERMISSION TO SELL FOR THE CONSIDERATION AMOUNT BASED ON REGISTERED VALUER'S R EPORT FOR THE SAID PROPERTY. THE SAID MR DATTARAY NAMDEV SAWANT HAD WI THOUT PERMISSION AND / OR AUTHORITY OF THE VENDOR I.E. BAI ZAVERBAI PURU SHOTTAM CHARITABLE TRUST HAD CONSTRUCTED A STRUCTURE CONSISTING OF GROUND AN D ONE UPPER FLOOR ON THE ITA 2360/MUM/2013 13 SAID LAND , WHICH SAID MR DATTARAY NAMDEV SAWANT SI NCE THE YEAR 1990 PERMITTED THE SAID STRUCTURE CONSTRUCTED BY HIM ON THE ORIGINAL PLOT TO BE USED BY PRIMARY SCHOOL KNOWN AS DNYAN PRAKASH VIDAL AYA THEN RUN BY JANAKALYAN SEVA SANSTHA . THE SAID PLOT OF LAND WA S THEN SOLD BY THE SAID BAI ZAVERIBAI PURSHOTTAM NATHU CHARITABLE TRUST FOR LUMPSUM CONSIDERATION OF RS.1,00,000/- WHEREBY FIRST AGREEMENT TO SALE W AS EXECUTED ON 30-07- 1996 BY THE SAID BAI ZAVERIBAI PURSHOTTAM NATHU CHA RITABLE TRUST IN FAVOUR OF THE ASSESSEE. THE SAID BAI ZAVERBAI PURUSHOTTAM CHARITABLE TRUST THEN EXECUTED IRREVOCABLE GENERAL POWER OF ATTORNEY IN F AVOUR OF MR DATTATRAY NAMDEV SAWANT AND HIS SON MR RAJENDRA DATTATRAY SAW ANT ON 31-07-1996 WITH INTER-ALIA POWER AND AUTHORITIES TO EXECUTE A DEED OF CONVEYANCE IN RESPECT OF ORIGINAL PLOT OF 83.61 SQUARE METERS IN FAVOUR OF THE ASSESSEE BEING PURCHASER FOR TOTAL VALUE OF RS.1,00,000/-, WHILE FURTHER FOR RS.3,50,000/- SAID BAI ZAVERBAI PURUSHOTTAM CHARITABLE TRUST FURT HER AGREED TO SELL ADDITIONAL 52.39 SQUARE METERS ALONG WITH BENEFIT O F CONSUMPTION OF FSI OF 54 SQUARE METERS FOR USE AND BENEFIT OF SCHOOL RECORDE D IN SUPPLEMENTARY AGREEMENT DATED 24-01-2001 . THE INTENTION OF THE A SSESSEE AS PER THE DEED IS TO CONTINUE THE EDUCATIONAL CLASSES AND DEVELOPMENT OF EDUCATIONAL PURPOSE THROUGH THIS SCHOOL, HENCE, IT CANNOT BE TREATED AS STOCK-IN-TRADE WAS THE OBSERVATION OF THE LEARNED CIT(A) AS THE ASSESSEE I S NOT FOUND TO BE IN BUSINESS OF ANY CONSTRUCTION AND BUILDING OR REAL E STATE. THUS, THE LEARNED CIT(A) HELD THAT THE LAND HAS TO BE TAKEN AS CAPITA L ASSET OF THE ASSESSEE. WITH REGARD TO THE TAXATION OF SURPLUS AMOUNT, IT W AS OBSERVED BY THE LEARNED CIT(A) THAT THE ASSESSEE HAS NOT GIVEN THE BASIS OF HIS WORKING , WHEN THE STAMP DUTY VALUATION OF RS. 1,30,89,000/- WAS NOT O BJECTED BY THE ASSESSEE ON WHICH STAMP DUTY WAS PAID AND THE WHOLE PROPERTY CONSISTING OF LAND AND STRUCTURE WAS SOLD AS AN ASSET OF THE ASSESSEE ONLY AND THE LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE TO BIFURCA TE THE SAME IN TWO COMPONENTS I.E. LAND AND BUILDING. HENCE, THE A.O. S STAND WAS UPHELD BY ITA 2360/MUM/2013 14 THE LD. CIT(A) VIDE APPELLATE ORDERS DATED 11.01.20 13 PASSED BY LEARNED CIT(A). WITH RESPECT TO THE GRIEVANCE OF THE ASSESSEE WITH RESPECT TO ALLOWING DATE OF ACQUISITION TO BE TREATED IN THE YEAR 2001 AS THE E NTIRE SALE CONSIDERATION WAS GIVEN IN THE YEAR 2001 WHILE THE AO TOOK THE DATE O F ACQUISITION TO BE THE YEAR 2006, WHILE THE LEARNED CIT(A) HELD THAT THE JOINT CHARITY COMMISSIONER GRANTED APPROVAL TO SELL LAND TO THE ASSESSEE ON 06 -05-2004 AND HENCE THE COST INFLATION INDEX IS TO BE ALLOWED W.E.F. 2004 I .E. FROM ASSESSMENT YEAR 2005-06 AND NOT FROM THE YEAR 2001 AS HELD BY THE A O , AS THE VENDORS DID NOT HAD RIGHT TO SELL THE LAND PRIOR TO APPROVAL OF THE CHARITY COMMISSIONER IN THE YEAR 2004 AND THIS PLEA OF THE ASSESSEE WAS ACC EPTED BY THE LEARNED CIT(A) . THUS, IN NUT-SHELL THE LEARNED CIT(A) HELD THAT THE EXCHANGE OF PROPERTY BY THE ASSESSEE WAS TRANSFER LIABLE TO CAP ITAL GAINS TAX U/S 45 OF THE ACT AS THE SAID ASSET WAS CAPITAL ASSET HELD BY THE ASSESSEE AS DEFINED U/S 2(14) OF THE ACT AND THE EXCHANGE CONSTITUTE TRANSF ER WITHIN THE MEANING OF PROVISIONS OF SECTION 2(47) OF THE ACT. THE INDEXAT ION IS TO BE ALLOWED W.E.F. THE YEAR 2004 I.E. FROM ASSESSMENT YEAR 2005-06 ON COST OF ACQUISITION OF RS.4,50,000/- FOR COMPUTING LONG TERM CAPITAL GAINS ON SALE CONSIDERATION OF RS.1,30,89,000/- , VIDE APPELLATE ORDER PASSED BY T HE LEARNED CIT(A) VIDE ORDERS DATED 11.01.2013. 6. AGGRIEVED BY THE APPELLATE ORDERS DATED 11.0.20 13 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS A TRANSACTION OF EXCHANGE OF PROPERTY BETWEEN THE ASSESSEE AND THE V ATSALABHAI DATTATRAY CHARITABLE TRUST IN JUNE, 2008 VIDE DEED OF EXCHANG E EXECUTED ON 03-06- 2008 AND THE ISSUE IS TO DEAL WITH WHETHER THE EXCH ANGE OF THESE PROPERTIES HAS TO BE TREATED AS TRANSFER FOR THE PURPOSE OF CO MPUTING CAPITAL GAINS ITA 2360/MUM/2013 15 CHARGEABLE TO TAX U/S 45 OF THE ACT READ WITH SECTI ON2(14) AND SECTION 2(47) OF THE ACT OR NOT. THE AO AS WELL LD. CIT(A) REJEC TED THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT THE EXCHANGE OF PLOTS DONE BY THE ASSESSEE CONSTITUTES TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT EXIGIBLE TO TAX U/S 45 OF THE ACT. IT IS SUBMITTED THAT JANAKA LYAN SEVA SANSTHA WAS A REGISTERED TRUST CARRYING OUT CHARITABLE ACTIVITY. THE TRUST JANAKALYAN SEVA SANSTHA HAD PURCHASED A PIECE OF LAND IN THE YEAR 1 992 ADMEASURING 416.70 SQUARE METERS. THE SAID PLOT OF LAND WAS ENCROACHED BY 20 HUTMENTS. THE SAID TRUST WAS SUBSEQUENTLY MERGED WITH VATSALABAI DATTATRAY CHARITABLE TRUST IN THE YEAR 2004. IT IS SUBMITTED THAT IT IS FAMILY TRUST WHEREBY CO- PARCENERS BEING FAMILY MEMBERS ARE TRUSTEE. THE TR UST IS CARRYING ON ACTIVITY OF RUNNING A SCHOOL ON THE PLOT OF LAND OWNED BY TH E ASSESSEE WHICH WAS ACQUIRED BY THE ASSESSEE FROM BAI ZAVERBAI PURUSHOT TAM CHARITABLE TRUST AS SET OUT ABOVE IN PRECEDING PARAS. THERE IS A FAMIL Y ARRANGEMENT IN JUNE 2008 TO EXCHANGE THE PLOT OWNED BY THE ASSESSEE WITH THE PLOT OWNED BY THE VATSALABAI DATTATRAY CHARITABLE TRUST. IT WAS SUBMI TTED THAT THE SAID PLOT OF LAND WHICH WAS EXCHANGED BY THE ASSESSEE WITH THE P LOT OWNED BY THE TRUST, WAS OWNED BY THE ASSESSEE AS STOCK-IN-TRADE.SINCE T HE SAME WAS HELD AS BUSINESS ASSET BEING STOCK-IN-TRADE ,SECTION 50C OF THE ACT IS NOT APPLICABLE AND THE STAMP DUTY VALUE AS DETERMINED BY STAMP DUT Y AUTHORITIES CANNOT BE ADOPTED THE VALUATION WAS DONE BY THE REGISTERED V ALUER AND THE APPROVAL OF CHARITY COMMISSIONER WAS OBTAINED TO EXCHANGE THE P LOTS. THE ASSESSEE HAS ALLOWED THE TRUST TO RUN SCHOOL ON THE SAID PROPERT Y OWNED BY THE ASSESSEE WHICH IS NOW TRANSFERRED TO THE VATSALABAI DATTATRA Y CHARITABLE TRUST UNDER EXCHANGE WITHOUT ANY MONETARY CONSIDERATION. THE PL OT OWNED BY THE TRUST WHICH IS NOW TAKEN BY THE ASSESSEE UNDER EXCHANGE W AS ENCROACHED BY SOME 20 HUTMENTS. THIS IS A FAMILY ARRANGEMENT AND THE FAMILY MEMBERS ARE COPARCENERS OF HUF. HE SUBMITTED THAT THE ON 3 RD JUNE, 2008 THE VALUE OF THE PROPERTY WAS RS. 1,30,89,000/- BEING STAMP DUTY VALUATION AS DETERMINED BY STAMP DUTY AUTHORITIES WAS NOT OBJECT ED BY THE ASSESSEE AS IT ITA 2360/MUM/2013 16 CONSTITUTED LAND AND BUILDING . IF AT ALL INCOME IS TO BE ASSESSED THE SAME CAN BE BROUGHT TO TAX AS BUSINESS INCOME ON SALE OF THE PLOT . NO BALANCE SHEET WAS FILED BY THE ASSESSEE BUT THIS IS THE ONLY ASSE T OWNED BY THE ASSESSEE WHICH IS NOW TRANSFERRED UNDER EXCHANGE WAS THE CON TENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. NO INCOME HAS BEEN EARNE D FROM LETTING OF THIS PROPERTY AS SCHOOL WAS RUNNING ON THIS PROPERTY BY THE VATSALABAI DATTATRAY CHARITABLE TRUST. IT IS SUBMITTED THAT SECTION 2(4 7) IS NOT APPLICABLE AS IT DID NOT CONSTITUTE TRANSFER AS CONTEMPLATED U/S 2(47) O F THE ACT IS IT IS FAMILY SETTLEMENT WHICH IS A GENUINE AND BONAFIDE SETTLEME NT ENTERED INTO TO EXCHANGE THE PLOTS. AS PER THE EXCHANGE DEED DATED 3 RD JUNE, 2008 TOTAL MARKET VALUE WAS CONSIDERED AS RS. 1,30,89,000/- WH ICH CONSISTS OF THE LAND OF 136 SQ. METERS AND STRUCTURE OF 387.55 METERS . IT IS SUBMITTED THAT VALUATION IS EXCESSIVE AS IN 2006, THE VALUE WAS RS 17 LACS WHILE IN 2008 , THE VALUE IS COMPUTED AT RS. 130.90 LACS. THE LD. COUNS EL RELIED UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT V. R. PONNAMMAL, (1986) 54 CCH 0058(MAD.HC) AND IN THE CASE OF CIT V. M/S THIRUVENGADAM INVESTMENTS PVT. LTD. [2010]320 ITR 345 (MAD.) . T HE LD. COUNSEL ALSO SUBMITTED IF SECTION 50C OF THE ACT IS INVOKED, THE N THE VALUE AS PER STAMP DUTY AUTHORITIES IS HIGHER AND THE ISSUE CAN BE SET ASIDE TO THE FILE OF THE AO FOR GETTING THE PROPERTY VALUED BY DVO AS STIPULAT ED U/S 50C(2) OF THE ACT. THE ASSESSEE ALSO RELIED UPON DECISION OF ITAT, AGR A IN THE CASE OF RAJ KUMARI AGARWAL V. DCIT IN ITA NO. 176/AGRA/2013 ORDERS DAT ED 18-07-2014 REPORTED IN (2014) 150 ITD 0597(AGRA TRIB.). IT WAS SUBMITTE D THAT CONSTRUCTION WAS COMPLETED BEFORE 1-10-2002 WHICH IS CERTIFIED BY BM C WHICH IS AN ADDITIONAL EVIDENCE PLACED IN PAPER BOOK AT PAGE 34 OF ADDITIO NAL EVIDENCE TO SUBMIT THAT THE VALUATION HAS TO BE SPLIT BETWEEN BUILDING AND LAND. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT BONAFIDE F AMILY ARRANGEMENT TOOK PLACE AND NO TAX CAN BE LEVIED . THE ASSESSEE RELIE D UPON DECISION OF ITAT, CHENNAI IN THE CASE OF KAY ARR ENTERPRISES V. JCIT REPORTED IN (2005) 24CCH 0487(CHEN TRIB.) AND SUBMITTED THAT IT IS NOT NECES SARY TO REDUCE FAMILY ITA 2360/MUM/2013 17 ARRANGEMENT IN WRITING. IT WAS SUBMITTED THAT THE P ROPERTY OWNED BY THE ASSESSEE WAS HAVING SCHOOL RUN BY THE TRUST AND THE SAME COULD NEVER BE USED BY THE ASSESSEE AND HENCE UNDER FAMILY ARRANGE MENT, THE PLOTS WERE EXCHANGED AND THE TRUST PLOT ALTHOUGH ENCROACHED BY 20 HUTMENTS WAS TAKEN BY THE ASSESSEE SO THAT THE SAME CAN BE DEVEL OPED , THUS THIS FAMILY ARRANGEMENT CANNOT BE BROUGHT WITHIN THE AMBIT OF T AXABILITY UNDER THE ACT. IT WAS SUBMITTED THAT KARTA SH. DATTARAY NAMDEV SAW ANT WAS ENGAGED IN BUSINESS WHICH IS EVIDENT BY COPY OF ACKNOWLEDGEMEN T OF RETURN OF INCOME FOR ASSESSMENT YEAR 2001-02 WHICH IS PLACED AT PAGE 132 -133 OF PAPER BOOK FILED WITH THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSE SSEE ALSO DREW OUR ATTENTION TO THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 08-03-2004 PASSED IN THE CASE OF SH. DATTARAY N. SAWANT FOR TH E ASSESSMENT YEAR 2002- 03 TO CONTEND THAT THE SAID SH. DATTARAY N. SAWANT WAS ENGAGED IN BUSINESS WHICH IS PLACED IN PAPER BOOK PAGE 134-135. SIMILAR LY ASSESSMENT ORDERS DATED 27-12-2012 U/S 143(3) OF THE ACT PASSED BY TH E AO IN CASE OF M/S RAJENDRA DATTARAY SAWANT , PARTNERSHIP FIRM FOR ASS ESSMENT YEAR 2010-11 IS PLACED ON RECORD TO SHOW THAT THE SAID FIRM IS IN C ONSTRUCTION OF RESIDENTIAL PROJECTS AND HENCE THE KARTA OF THE ASSESSEE IS IN BUSINESS OF LAND DEVELOPMENT AND BUILDERS. THUS, IT WAS CONTENDED TH AT IT IS GENUINE AND BONA-FIDE FAMILY SETTLEMENT AND NO INCOME CAN BE BR OUGHT TO TAX ON ACCOUNT OF EXCHANGE OF PLOTS BETWEEN THE ASSESSEE AND THE T RUST . THE PLOT OF LAND BEING BUSINESS ASSET HELD AS STOCK-IN-TRADE CANNOT BE TREATED AS CAPITAL ASSET U/S 2(14) OF THE ACT AND SECTION 50C OF THE ACT HAS NO APPLICATION AND IT CANNOT BE INVOKED.THE LEARNED COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS WHICH WERE MADE BEFORE THE AUTHORITIES BELOW. 8. THE LD. D.R. RELIED UPON THE ORDERS OF THE LEARN ED CIT(A) AND SUBMITTED THAT IT IS NOT A BONA FIDE FAMILY ARRANGEMENT/ SETT LEMENT . HE SUBMITTED THAT THE PLEA THAT THIS EXCHANGE OF PROPERTIES IS A FA MILY SETTLEMENT HAS NOT BEEN TAKEN BEFORE THE AUTHORITIES BELOW AND THIS PLEA IS TAKEN FOR THE FIRST TIME ITA 2360/MUM/2013 18 BEFORE THE TRIBUNAL. THIS PLEA IS MIXED QUESTION O F FACT AND LAW AND REQUIRES INVESTIGATION OF FACTS BY THE AO. THE LIST OF TRUST EES OF VATSALABAI DATTATRAY CHARITABLE TRUST HAS NEVER BEEN SUBMITTED BEFORE T HE AUTHORITIES BELOW AND THE PLEA THAT ALL THE COPARCENERS OF THE ASSESSEE A RE TRUSTEES OF THE VATSALABAI DATTATRAY CHARITABLE TRUST WAS NEVER VER IFIED BY THE AO . THE COPY OF BALANCE SHEET WERE NOT SUBMITTED BEFORE THE AUTHORITIES BELOW TO PROVE THAT THE ASSESSEE IS HOLDING THE SAID PROPERT Y AS BUSINESS ASSET AS STOCK-IN-TRADE. THERE IS NO EVIDENCE ON RECORD THAT THE SAID PLOT OF LAND AND STRUCTURES WERE HELD BY THE ASSESSEE AS STOCK-IN-TR ADE. THERE IS NO EVIDENCE THAT THE ASSESSEE IS A BUILDER OR IN LAND DEVELOPME NT ACTIVITIES. THERE IS NO EVIDENCE ON RECORD THAT THE TRUST SPENT MONEY FOR C ONSTRUCTION OF BUILDING. IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE, THERE IS NO MENTION OF ANY INCOME EARNED BY THE ASSESSEE FROM BUSINESS AND IT IS ONLY INCOME FROM OTHER SOURCES DECLARED BY THE ASSESSEE WHICH MAINLY COMPR ISES OF RENTAL INCOME. THE ASSESSEE HAS ALSO NOT OBJECTED TO THE VALUE OF THE PROPERTY AS ADOPTED BY STAMP DUTY AUTHORITIES FOR STAMP DUTY VALUATION PUR POSES. THE LAND AND STRUCTURE THEREON WAS HELD BY THE ASSESSEE AS CAPIT AL ASSET AND WAS RIGHTLY BROUGHT TO TAX AS CAPITAL GAINS BY THE AUTHORITIES BELOW AND IT WAS ALSO SUBMITTED THAT SECTION 50C OF THE ACT IS CLEARLY AP PLICABLE AND VALUE AS COMPUTED BY THE STAMP DUTY VALUATION AUTHORITIES FO R STAMP DUTY PURPOSES WAS RIGHTLY ADOPTED BY THE AUTHORITIES BELOW AS PER MANDATE OF SECTION 50C OF THE ACT. THE LD. D.R. SUBMITTED THAT ADDITIONAL EVI DENCES ARE SUBMITTED BEFORE THE TRIBUNAL WHICH WERE NOT SUBMITTED BEFORE THE AU THORITIES BELOW WHICH ARE PLACED IN SEPARATE PAPER BOOK CONTAINING ADDITIONAL EVIDENCES RUNNING INTO 37 PAGES AND THE AUTHORITIES BELOW HAVE NOT VERIFIE D THESE ADDITIONAL EVIDENCES . 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS RELIED UPON . WE HAVE OBSERVED THAT SH DATTATRAY NAMDEV SAWANT , KARTA OF THE ASSESSEE ITA 2360/MUM/2013 19 WITHOUT THE PERMISSION AND/OR AUTHORITY OF BAI ZAVE RIBAI PURSHOTTAM NATHU CHARITABLE TRUST ( WHO WERE THE LAWFUL OWNER OF THE PLOT OF LAND AT BHATWADI , VILLAGE KAROL, GHATKOPAR(WEST) IN GRE ATER MUMBAI BEARING SURVEY NUMBER 24, HISSA NO. 4(PART) AND 6(P ART) AND CITY SURVEY NUMBER 68(PART) ADMEASURING 100 SQUARE YARDS EQUIVALENT TO 83.61 SQUARE METERS (PB/PAGE11) IN 1990) CONSTRUCT ED A STRUCTURE CONSISTING OF GROUND FLOOR AND ONE UPPER FLOOR IN A ND AROUND 1990(PB/PAGE11) AND THEREAFTER PERMITTED THE SAID S TRUCTURE TO BE USED BY A PRIMARY SCHOOL KNOWN AS DNYAN PRAKASH VID YALAYA THEN RUN BY JANKALYAN SEVASANSTHA , A PUBLIC CHAITABLE TRUST DULY REGISTERED UNDER BOMBAY PUBLIC TRUST ACT,1950 . THE SAID BAI ZAVERIBAI PURSHOTTAM NATHU CHARITABLE TRUST WAS FINDING DIFFI CULTY IN RECOVERING THE POSSESSION OF THE LAND OF THE SAID ORIGINAL PLO T BEING OCCUPIED BY THE SAID MR DATTATRAY NAMDEV SAWANT , KARTA OF THE ASSESSEE WITHOUT PERMISSION AND AUTHORITY . THE SAID PLOT OF LAND O F 83.61 SQUARE METERS WAS THEN SOLD BY THE SAID BAI ZAVERIBAI PURSHOTTA M NATHU CHARITABLE TRUST FOR LUMPSUM CONSIDERATION OF RS.1,00,000/- WH EREBY FIRST AGREEMENT TO SALE WAS EXECUTED ON 30-07-1996 BY THE SAID BAI ZAVERIBAI PURSHOTTAM NATHU CHARITABLE TRUST IN FAVO UR OF THE ASSESSEE AND THEREAFTER ON 31-07-1996 IRREVOCABLE GENERAL P OWER OF ATTORNEY WAS EXECUTED IN FAVOUR OF MR DATTATRAY NAMDEV SAWAN T AND HIS SON MR RAJENDRA DATTATRAY SAWANT TO EXECUTE CONVEYANCE DEE D IN RESPECT OF THE PLOT IN FAVOUR OF THE ASSESSEE WHILE FURTHER FO R RS.3,50,000/- SAID BAI ZAVERBAI PURUSHOTTAM CHARITABLE TRUST FURTHER A GREED TO SELL ADDITIONAL 52.39 SQUARE METERS ALONG WITH BENEFIT O F CONSUMPTION OF FSI OF 54 SQUARE METERS FOR USE AND BENEFIT OF SCHO OL RECORDED IN SUPPLEMENTARY AGREEMENT DATED 24-01-2001 (PB/PAGE 10-19). THESE DETAILS ARE DULY RECORDED IN DEED OF INDENTURE DATE D 27-03-2006 WHEREBY THE SAID ZAVERBAI PURUSHOTTAM CHARITABLE TR UST CONVEYED TITLE OF THE SAID PLOT IN FAVOUR OF THE ASSESSEE. THUS, T HE SAID PLOT WAS IN-FACT ITA 2360/MUM/2013 20 OCCUPIED BY THE SH DATTATRAY NAMDEV SAWANT, KARTA O F THE ASSESSEE WITHOUT AUTHORITY OF THE LAWFUL OWNER WHEREIN HE BU ILT STRUCTURES WITHOUT PERMISSION OF THE OWNER OF THE SAID LAND AN D PERMITTED OCCUPATION OF THE PLOT ALONG WITH STRUCTURE COMPRIS ING OF GROUND AND ONE UPPER FLOOR TO A PRIMARY SCHOOL RUN BY JANAKALY AN SEVASANSTHA , A CHARITABLE PUBLIC TRUST REGISTERED UNDER BOMBAY PUB LIC TRUST ACT, 1950 SINCE 1990S WHILE THE ACQUISITION OF THE PLOT BY THE ASSESSEE STARTED IN 1996 BY MAKING FIRST PAYMENT OF RS.1,00, 000/- TO THE ORIGINAL OWNER FOR ACQUIRING PLOT ADMEASURING 100 S QUARE YARDS (83.61 SQUARE METERS) FOLLOWED BY ACQUISITION OF ANOTHER P LOT OF 52.39 SQUARE METERS ALONG WITH BENEFIT OF CONSUMPTION OF FSI OF 54 SQUARE METERS FOR USE AND BENEFIT OF SCHOOL FOR WHICH PAYMENTS OF RS. 3,50,000/ WERE MADE IN 2001. THE APPROVAL FROM CHARITY COMMISSIONE R WAS RECEIVED ON 06-05-2004 WHILE CONVEYANCE DEED WAS REGISTERED IN FAVOUR OF THE ASSESSEE ON 27-03-2006 WITH RESPECT TO THE PLOTS AD MEASURING IN AGGREGATED 136 SQUARE METERS. THE ASSESSEE HAS NOT PRODUCED ITS BALANCE SHEETS OF THE INSTANT PREVIOUS YEAR UNDER A PPEAL OR FOR THE EARLIER YEARS TO EVIDENCE THAT THE ASSESSEE WAS REF LECTING THE SAID PLOT OF LAND AS STOCK-IN-TRADE. NO EVIDENCE IS BROUGHT ON R ECORD THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF BUILDER, TR ADER OF LAND OR IN CONSTRUCTION BUSINESS OR IN THE REAL ESTATE BUSINES S, THE PERUSAL OF THE COMPUTATION OF INCOME REVEALS THAT THE SOURCES OF I NCOME OF THE ASSESSEE IS RENTAL INCOME WHICH HAS BEEN SHOWN UNDE R THE HEAD INCOME FROM OTHER SOURCES APART FROM NOMINAL INTE REST INCOME FROM BANK. THE CIRCUMSTANCES SURROUNDING THE ACQUISITION OF THE PLOT OF LAND CLEARLY REVEALS THAT THE ASSESSEE ACQUIRES THE SAME AS CAPITAL ASSET AND NOT AS TRADER OR STOCK-IN-TRADE OR BUSINESS ASSET A S THE POSSESSION OF THE SAID PLOT OF LAND ALONG WITH THE STRUCTURES THE REUPON ( NOW COMPRISING GROUND FLOOR AND FOUR FLOORS WHEN DEED O F CONVEYANCE WAS REGISTERED IN 2006) WAS OCCUPIED BY THE PRIMARY SCH OOL RUN BY ITA 2360/MUM/2013 21 JANKALYAN SEVASANSTHA , A PUBLIC CHARITABLE TRUST D ULY REGISTERED UNDER BOMBAY PUBLIC TRUST ACT,1950. THE SAID PUBLIC TRUST JANKALYAN SEVASANSTHA GOT AMALGAMATED WITH VATSALABHAI DATTAT RAY SAWANT CHARITABLE TRUST, ANOTHER PUBLIC CHARITABLE TRUST R EGISTERED UNDER BOMBAY PUBLIC TRUST ACT, 1950 IN THE YEAR 2004 WITH THE APPROVAL OF CHARITY COMMISSIONER. MOREOVER, IT IS MENTIONED IN THE PURCHASE AGREEMENT DATED 27-03-2006 WITH ZAVERBAI PURUSHOTTA M CHARITABLE TRUST THAT THE PLOTS WERE ACQUIRED BY THE ASSESSEE FOR ADVANCEMENT OF EDUCATIONAL PURPOSES FOR RUNNING SCHOOL. UNDER THE ABOVE CIRCUMSTANCES, IT IS FAR-FETCHED TO ASSUME THAT THE ASSESSEE ACQUIRED THE SAID PROPERTY AS STOCK-IN-TRADE OR BUSINESS ASS ET FOR DOING ANY DEVELOPMENT ETC RATHER THE ASSESSEE ACQUIRED THE PL OT WHICH WAS USED BY THE TRUSTS WHEREBY THE COPARCENERS OF THE ASSESS EE ARE STATED TO BE TRUSTEES OF THE TRUST RUNNING THE SCHOOL. THUS, INT ENTIONS TO ACQUIRE THE PLOTS BY THE ASSESSEE WAS TO BRING WITHIN ITS F OLD BY WAY OF OWNERSHIP OF THE PLOTS OF LAND WHICH WAS EARLIER OC CUPIED ( 100 SQUARE YARDS PLOT) BY THE ASSESSEE WITHOUT PERMISSION OF THE LAWFUL OWNER SO THAT THE CONTINUATION OF THE EDUCATION IMPARTED BY THE SCHOOL CAN BE SMOOTHLY CONTINUED AND FURTHER ADVANCED , AND WE H AVE NO HESITATION IN HOLDING THAT THE SAID PLOTS OF LAND AGGREGATING TO 136 SQUARE METERS SO ACQUIRED BY THE ASSESSEE FROM ZAVERBAI PURUSHOTT AM CHARITABLE TRUST WAS HELD AS CAPITAL ASSET U/S 2(14) OF THE ACT. IT IS FOR THE ASSESSEE TO HAVE BROUGHT ON RECORD COGENT EVIDENCES TO DISPROVE THE CONTENTIONS OF THE AUTHORITIES BELOW TO PROVE THAT THE SAID PLOT OF LAND WAS IN-FACT ACQUIRED AS STOCK-IN-TRADE OR BUSINESS ASSET AND IN THE ABSENCE OF COGENT MATERIAL/EVIDENCES ON RECORD WHIL E THE SURROUNDING CIRCUMSTANCES SPEAKS OTHERWISE , WE ARE AFRAID THE CONTENTIONS OF THE ASSESSEE CANNOT BE ACCEPTED AS THE ONUS WAS ON ASSE SSEE TO BRING ON RECORD COGENT MATERIAL/EVIDENCES TO PROVE ITS CONT ENTIONS IF IT WANTS THE TRIBUNAL TO BELIEVE ITS CONTENTIONS THAT THE PL OT WAS HELD AS STOCK- ITA 2360/MUM/2013 22 IN-TRADE OR BUSINESS ASSET BY THE ASSESSEE. EVEN BA LANCE SHEETS OF THE ASSESSEE WERE NEVER FILED BEFORE THE REVENUE OF THE INSTANT YEAR AS WELL OF PREVIOUS YEARS. THE SAME IS ALSO NOT BROUGHT ON RECORD EVEN DURING APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) AS WELL BEFORE THE TRIBUNAL NOR THERE IS ANY EVIDENCE TO PROVE THAT TH E ASSESSEE PERSE WAS IN THE CONSTRUCTION BUSINESS OR IN THE REAL ESTATE BUSINESS. THE ASSESSEE HAS CLAIMED THAT THE OWNERSHIP OF T HE SCHOOL BUILDING ( GROUND AND FOUR FLOORS EXISTING ON THE PLOT ON THE DATE OF EXCHANGE ON 03-06-2008 ) WERE BEING VESTED AND OWNED IN JANKALY AN SEVASANSTHAN LATER AMALGAMATED WITH VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST IN THE YEAR 2004, WHICH BUILDING CONSISTING OF GRO UND FLOOR AND FOUR FLOORS WERE EXISTING ON THE SAID PLOT OF LAND ON T HE DATE OF EXCHANGE ON 03-06-2008. THE ASSESSEE HAS PRODUCED CERTAIN APPRO VALS FROM BMC BEING OBTAINED BY TRUST / SH D N SAWANT WITH RESPEC T TO CONSTRUCTION OF CERTAIN FLOORS FOR SCHOOL BUILDING AS ADDITIONAL EVIDENCES WHICH NEED VERIFICATION BY THE AUTHORITIES BELOW TO CONCLUSIVE LY PROVE AND ESTABLISH ABOUT THE OWNERSHIP OF BUILDING STRUCTURES AS NO C OGENT/CONCLUSIVE MATERIAL HAS BEEN BROUGHT ON RECORD SUCH AS BALANCE SHEETS OF THE TRUSTS , CONSTRUCTION INVOICES , PROOF OF PAYMENT VIDE BANK STATEMENTS ETC TO PROVE CONCLUSIVELY THAT THE STRUCTURES/BUILD ING WERE IN-FACT OWNED BY THE SAID TRUSTS , IN THE ASSESSMENT PROCEE DINGS AS WELL APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) AS WELL BEFORE THE TRIBUNAL. THE ONUS WAS ON THE ASSESSEE TO BRING ON RECORD COGENT AND CONCLUSIVE MATERIAL TO SUBSTANTIATE AND PROVE ITS C ONTENTIONS. WHILE ON THE OTHER HAND PERUSAL OF THE DEED OF EXCHANGE OF P ROPERTIES DATED 03- 06-2008 (PAGE 96/PB) BETWEEN THE ASSESSEE AND M/S V ATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST CLEARLY REVEALS T HAT STRUCTURE HAVING AREA OF 387.55 SQUARE METERS ON THE PROPERTY SO TRA NSFERRED BY THE ASSESSEE TO VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST WAS ITA 2360/MUM/2013 23 CONSTRUCTED BY THE ASSESSEE (PB/PAGE 96) , THUS LEA DING TO PRESUMPTION THAT THE ASSESSEE WAS THE OWNER OF THE PLOT ALONG W ITH CONSTRUCTED STRUCTURE ON GROUND FLOOR AND FOUR FLOORS ADMEASURI NG 387.55 SQUARE METERS WHICH WAS OWNED BY THE ASSESSEE AND NOT THE TRUST UNLESS THIS PRESUMPTION IS REBUTTED BY THE ASSESSEE WITH COGENT MATERIAL/EVIDENCES . THE ONUS WAS ON THE ASSESSEE T O BRING ON RECORD COGENT AND CONCLUSIVE MATERIAL/EVIDENCES TO PROVE T HAT THE CONSTRUCTED STRUCTURES WERE OWNED BY THE TRUST RUNNING THE SCHO OL . THE ASSESSEE DID NOT EVEN PRODUCE ITS BALANCE SHEET AS WELL BALA NCE SHEETS OF THE TRUST FOR THE INSTANT PREVIOUS YEAR OR EARLIER YEAR S DURING ASSESSMENT PROCEEDINGS OR DURING APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) OR BEFORE THE TRIBUNAL TO PROVE THE SOURCES OF CONS TRUCTION COST BEING INCURRED FOR SCHOOL BUILDING AND DETERMINATION OF COST OF CONSTRUCTION ACTUALLY INCURRED TOWARDS THE SAME AND CONSEQUENTLY TO ESTABLISH THE OWNERSHIP OF SCHOOL BUILDING. THUS, WE ARE INCLINE D TO SET ASIDE THIS ISSUE TO THE FILE OF AO WITH DIRECTION TO VERIFY , EXAMINE AND ENQUIRE ABOUT THE CLAIM OF THE ASSESSEE WITH RESPECT TO THE CONSTRUCTION COSTS INCURRED FOR BUILDING THE STRUCTURES ON THE PLOT OF LAND EXCHANGED BY THE ASSESSEE WITH VATSALABHAI DATTATRAY SAWANT CHAR ITABLE TRUST AND CONSEQUENTLY THE OWNERSHIP STATUS OF THE BUILDING B EFORE ALLOWING THE CLAIM OF THE ASSESSEE. THE ASSESSEE SHALL BE ALLOWE D BY THE AO TO PRODUCE ALL RELEVANT EVIDENCES AND EXPLANATIONS TO SUBSTANTIATE ITS CONTENTIONS INCLUDING ADDITIONAL EVIDENCES PLACED B EFORE THE TRIBUNAL IN ITS DEFENSE. NEEDLESS TO SAY THAT THE AO SHALL A LLOW PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LA W. EVEN FOR THE SAKE OF ARGUMENT IT IS ACCEPTED THAT THE SCHOOL BUILDING IS OWNED BY THE TRUST THEN IN THAT SCENARIO THE ASSESSEE HAS TRANSF ERRED LAND VALUED AT RS. 30,84,480/- AND IN LIEU GOT THE LAND FROM VATSA LABHAI DATTATRAY SAWANT CHARITABLE TRUST VALUED AT RS.94,51,000/- , THE TAXABILITY OF THE ITA 2360/MUM/2013 24 SAID CONSIDERATION OF RS.94,51,000/- RECEIVED BY TH E ASSESSEE IN LIEU OF THE PLOT OF LAND VALUED AT RS.30,84,480/- SHALL ALS O BE VERIFIED, EXAMINED AND ENQUIRED BY THE AO BEFORE FASTENING AN Y LIABILITY TO TAX ON THE ASSESSEE. WE ORDER ACCORDINGLY. NEXT ISSUE IS WITH RESPECT TO THE CONTENTION OF THE ASSESSEE THAT THE AFORE-STATED EXCHANGE OF PROPERTIES BETWEEN ASSES SEE AND VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST VIDE DEED OF EXCH ANGE DATED 03-06- 2008 CANNOT BE CONSIDERED AS TRANSFER WITHIN THE ME ANING OF TRANSFER AS CONTEMPLATED U/S 2(47) OF THE ACT AND HENCE NOT EXIGIBLE TO CAPITAL GAINS TAX U/S 45 OF THE ACT ON THE GROUNDS THAT THI S A FAMILY SETTLEMENT/ ARRANGEMENT AS COPARCENER OF THE ASSESS EE ARE TRUSTEES OF VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST. WE A RE AFRAID THAT THIS CONTENTIONS OF THE ASSESSEE CANNOT BE ACCEPTED . ON THE FIRST BLUSH THIS PROPOSITION ADVANCE BY THE LEARNED COUNSEL FOR THE ASSESSEE LOOKS VERY ATTRACTIVE BUT ON DEEPER ANALYSIS SOON IT LOOSES I TS SHEEN. THE SAID VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST IS A PUBLIC CHARITABLE TRUST WHICH IS CREATED FOR CHARITABLE OBJECTIVES AS LAID DOWN IN ITS TRUST DEED AND IS REGISTERED UNDER BOMBAY PUBLIC TRUST AC T,1950 . THE SAID TRUST IS ALSO REGISTERED U/S 12AA(1)(B)(I) OF THE A CT W.E.F 01-04-2006 . THE SAID PUBLIC TRUST EXISTS FOR PUBLIC CHARITABLE AND WELFARE PURPOSES AND IS NOT EXISTING FOR WELFARE OF TRUSTEES/ SETTL ER OR THEIR RELATIVES OR CONCERNS IN WHICH THEY ARE INTERESTED. THE PUBLIC C HARITABLE TRUST ARE NOT FAMILY ENTERPRISES/ CONCERNS EXISTING FOR THE W ELFARE OF INDIVIDUALS WHO HAVE OWNERSHIP INTEREST BUT ARE CREATED FOR PUB LIC WELFARE . THERE ARE RESTRICTIONS / PROHIBITIONS WITH GRAVE CONSEQU ENCES ON PUBLIC CHARITABLE TRUST ON DIVERSION OF FUNDS / PROPERTIE S FOR BENEFIT OF TRUSTEES/SETTLER OR RELATIVES OF THE TRUSTEES/SETTL ER OR CONCERNS ASSOCIATED WITH THE TRUSTEES/SETTLER AND FUNDS / PR OPERTIES OF PUBLIC CHARITABLE TRUST CAN ONLY BE UTILIZED FOR THE CHARI TABLE AND WELFARE ITA 2360/MUM/2013 25 OBJECTS FOR PUBLIC WELFARE AS LAID DOWN IN THE OBJ ECT CLAUSE IN THE TRUST DEED. EVEN ON DISSOLUTION OF THE TRUST THERE IS A B AR ON DISTRIBUTING THE FUNDS/PROPERTIES AVAILABLE AT THE TIME OF DISSOLUTI ON TO SETTLER OR TRUSTEES OR THEIR RELATIVES OR THE ASSOCIATED CONCE RNS AND THE REMAINING FUNDS/PROPERTIES ON DISSOLUTION IS TO BE DISPOSED O F AS PER THE LAWS APPLICABLE TO CHARITABLE TRUST FOR TRANSFER TO OTHE R CHARITABLE TRUST ETC.AND THAT TOO WITH THE PERMISSIONS OF CHARITY CO MMISISONER. IN THE INSTANT CASE , THE APPROVAL WAS OBTAINED FROM CHARI TY COMMISSIONER WHO GRANTED THE APPROVAL ON THE GROUNDS THAT THE SA ID EXCHANGE WAS IN FAVOUR OF AND BENEFICIAL TO THE TRUST. THUS, IN OUR CONSIDERED VIEW, FAMILY SETTLEMENT/ARRANGEMENT IS WORD WHICH IS ALIE N TO CONCEPT OF PUBLIC CHARITABLE TRUST WHICH SOLELY EXISTS FOR PUB LIC WELFARE RATHER THAN WELFARE OF THE TRUSTEES/SETTLER OR THEIR RELAT IVES OR CONCERNS ASSOCIATED WITH THE TRUSTEES/SETTLER. THIS CONTENTI ON OF THE ASSESSEE THAT IT HAS ENTERED INTO FAMILY SETTLEMENT / ARRANG EMENT WITH PUBLIC CHARITABLE TRUST NAMELY VATSALABHAI DATTATRAY SAWAN T CHARITABLE TRUST TO EXCHANGE THE PROPERTIES AND HENCE THE SA ME IS NOT EXIGIBLE TO TAX RELYING ON THE CASE LAWS WHICH ARE NOT DIRECTLY ON THE FAMILY SETTLEMENTS WITH AND BY PUBLIC CHARITABLE TRUSTS IS HEREBY REJECTED. THE SAID EXCHANGE OF PROPERTIES BY AND BETWEEN TH E ASSESSEE AND VATSALABHAI DATTATRAY SAWANT CHARITABLE TRUST IS DI RECTLY HIT BY PROVISIONS OF SECTION 2(47) OF THE ACT WHICH EXPRES SLY COVERS EXCHANGE AS BEING CONTEMPLATED UNDER THE DEFINITION OF TRAN SFER TO BE EXIGIBLE TO CAPITAL GAINS TAX U/S. 45(1) OF THE ACT. THE SECTI ON 2(47) OF THE ACT IS REPRODUCED HEREUNDER WHICH CLEARLY ENVISAGED THAT E XCHANGE OF CAPITAL ASSET IS DULY COVERED WITHIN AMBIT OF TRANSFER OF C APITAL ASSET EXIGIBLE TO TAX U/S 45 OF THE ACT :- DEFINITIONS. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES , ITA 2360/MUM/2013 26 **** **** **** (47) ['TRANSFER'IN RELATION TO A CAPITAL ASSET, INCLUDE S, (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSET ; OR ***** ***** NEXT CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASS ESSEE WAS THAT STAMP DUTY VALUATION OF THE PROPERTY TRANSFERRED BY IT IS AT RS.1,30,89,000/-- AS ON 03-06-2008 I.E. THE DATE OF EXECUTION OF DEED OF EXCHANGE BY STAMP DUTY VALUATION AUTHORITIES FOR STAMP DUTY VAL UATION WHICH IS EXCESSIVE AS IN THE YEAR 2006 ON 27-03-2006 WHEN TH E PROPERTY WAS CONVEYED IN FAVOUR OF THE ASSESSEE BY BAI ZAVERBAI PURUSHOTTAM CHARITABLE TRUST , THE STAMP DUTY VALUATION AUTHORI TIES VALUED THE PROPERTY AT RS.17,76,500/- WHILE NOW ON 03-06-2008 WHEN THE SAME PROPERTY WAS EXCHANGED BY THE ASSESSEE WITH VATSALA BHAI DATTATRAY SAWANT CHARITABLE TRUST THE STAMP DUTY VALUATION AU THORITIES VALUED THE SAME PROPERTY AT RS.1,30,89,000/-WITH IN SHORT SPAN OF PERIOD OF MERELY 2 YEAR, THIS ARGEUMENT OF LEARNED COUNSEL FO R THE ASSESSEE SUFFERS FROM BASIC FALLACY AS IN THE YEAR 2006 THE STAMP DUTY VALUATION AUTHORITIES VALUED THE PROPERTY CONSISTING OF PLOT OF 136 SQUARE METERS ALONG WITH BENEFIT OF FSI OF 54 SQUARE METERS AT RS .17,76,500/- ON 27- 03-2006 WHICH THE ASSESSEE ACQUIRED FROM BAI ZAVERB AI PURUSHOTTAM CHARITABLE TRUST AS THE SAID BAI ZAVERBAI PURUSHOTT AM CHARITABLE TRUST ONLY SOLD THE PLOTS ADMEASURING 136 SQUARE ME TERS WITH BENEFIT OF FSI AS WE HAVE SEEN EARLIER THE CONSTRUCTION WAS DONE BY THE ASSSESSEE FIRSTLY AS UNAUTHORIZED STRUCTURE IN 1990 I.E. GROUND AND ONE ITA 2360/MUM/2013 27 UPPER FLOOR WHICH LATER WAS EXPANDED TO FOUR FLOORS AS WE DISCUSSED IN PRECEDING PARAS, WHILE ON 03-06-2008 WHEN EXCHANGE TOOK PLACE THE STAMP DUTY VALUATION AUTHORITIES VALUED THE PROPERT Y CONSISTING OF PLOT OF 136 SQUARE METERS AND CONSTRUCTED AREA OF STRUCT URE ADMEASURING 387.5 SQUARE METERS FOR STAMP DUTY PURPOSES WHICH A GGREGATEDTO RS.1,30,89,000/- . IT IS THE CONTENTION OF THE ASSE SSEE THAT THE PLOT OF LAND OCCUPIED BY THE TRUST NAMELY VATSALABHAI DATTA TRAY SAWANT CHARITABLE TRUST WAS OCCUPIED BY 20 HUTMENTS AND TH US ADDITIONAL COSTS ARE TO BE INCURRED BY THE ASSESSEE ALSO SUFFE RS FROM INFIRMITY AS THE PERUSAL OF THE JUDGMENT DATED 15-03-2008 DELIVE RED BY HONBLE JOINT CHARITY COMMISSIONER, MUMBAI U/S 36(1)(A) OF BOMBAY PUBLIC TRUST ACT,1950 IN APPEAL/APPLICATION NO. J-4/62/07 VIDE ORDERS DATED 15-03-2008, A COPY OF WHICH IS PLACED IN FILE , REA DS AS UNDER : 4. PRESENTLY, THE PLOT OF THE TRUST IS VACANT. EAR LIER THERE WERE ENCROACHMENTS ON THE PLOT BEING A CHAWL CONSISTING OF 20 HUTMENT WHICH HAS BEEN DECLARED AS A SLUM AREA. THE INHABIT ANTS THEREIN WERE VACATED. THE LEGAL PROCEEDINGS THEREOF WERE CA RRIED OUT BY THE OWNER OF THE ADJOINING PLOT OF LAND. THIS CLEARLY ESTABLISHES THAT THE PLOT OF LAND WAS VACANT AND THE ASSESSEE WANTED TO EXCHANGE THE SAME TO COMMERCIALLY EXPLOIT THE SAME WHICH IS ADMITTED BY THE ASSESSEE AND IS ALSO BORNE OUT FROM THE ASSESSMENT ORDER PASSED BY THE AO . THE SAID PLOT OF LAND WAS THEREA FTER GIFTED BY THE ASSESSEE TO SON OF THE KARTA OF THE ASSESSEE ON 11/06/2008 W HICH IS STATED BY THE AO IN THE ASSESSMENT ORDER PARA 3 WHICH IS NOT DENIED BY THE ASSESSEE AND LATER DEVELOPED BY SON OF THE KARTA OF THE ASSESSEE. FURT HER, THE ASSESSEE HAS TAKEN A PLEA THAT IF IT IS HELD TO BE CAPITAL GAIN CHARGEABLE TO TAX U/S 45 OF THE ACT AND SECTION 50C IS INVOKED, THEN THE MATTER BE REFERRED TO THE DEPARTMENTAL VALUATION OFFICER(DVO) FOR DETERMINING THE CORRECT VALUATION OF ITA 2360/MUM/2013 28 THE PROPERTY AS THE VALUATION ADOPTED BY THE STAMP DUTY VALUATION AUTHORITY FOR STAMP DUTY VALUATION AUTHORITY IS EXCESSIVE FOR THE REASONS STATED ABOVE AND ALSO THAT THE ASSESSEE HAD EXCHANGED PROPERTY O F VALUE OF RS.1,30,89,000/- WITH THE PROPERTY VALUED AT RS.94, 51,000/- AND HENCE IT EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY ON TH E DATE OF TRANSFER. IN OUR CONSIDERED VIEW, THIS PLEA OF THE ASSESSEE AUGERS W ELL ON MERITS AND DESERVES TO BE ALLOWED AND WE ARE INCLINED TO SET ASIDE AND RESTORE THE ISSUE TO THE FILE OF THE AO TO REFER THE DETERMINATION OF VALUATION O F THE PROPERTY TO DVO IN TERMS OF PROVISIONS OF SECTION 50C(2) OF THE ACT. T HE ASSESSEE SHALL BE ALLOWED TO SUBMIT RELEVANT EVIDENCES AND EXPLANATION IN ITS DEFENSE WHICH SHALL BE ADMITTED AND ADJUDICATED ON MERITS. NEEDLESS TO SAY PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD SHALL BE PROVIDED TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WI TH LAW. WE ORDER ACCORDINGLY. FINALLY, WE MAY REITERATE THAT THE AO SHALL DE-NOVO ADJUDICATE THE ISSUE ON MERITS AFTER DULY CONSIDERING OUR DECISIONS IN THE PRECEDING PARAS AS WELL REPORT OF DVO, VALUATION OF THE PROPERTY AS DETERMI NED BY STAMP DUTY VALUATION AUTHORITIES FOR STAMP DUTY PURPOSES, RELE VANT EVIDENCES ADDUCED BY THE ASSESSEE IN ITS DEFENSE AND ALL OTHER MATERI AL ON RECORD IN ACCORDANCE WITH LAW. 10. IN THE RESULT, ASSESSEES APPEAL IN ITA NO 236 0/MUM/2013 IS PARTLY ALLOWED AS INDICATED ABOVE. ITA 2360/MUM/2013 29 ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST , 2016. # $% &' 17-08-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 17-08-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI D BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI