M.R.Durai Raj, CHENNAI V. DCIT, CHENNAI

ITA 2510/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9602 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Keywords: Capital asset; Cost of acquisition; Fair market value
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2510/MDS/2014 / ASSESSMENT YEAR :200 7 - 0 8 SHRI M. R. DURAI RAJ, 222, DR. RADHAKRISHNAN ROAD, COIMBATORE 641 012. [PAN: A CGPD9351F ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , C OMPANY CIRCLE 1 ( 3 ), COIM BATORE . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI VIKRAM VIJAYARAGHAVAN , ADVOCAT E / RESPONDENT BY : DR. B. NISCHAL , J CIT / DATE OF HEARING : 29 . 0 2 .201 6 / DATE OF P RONOUNCEMENT : 26. 0 4 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I , C OIMBATORE , DATED 2 2 . 0 8 . 20 1 4 RELEVANT TO THE ASSESSMENT YEAR 200 7 - 0 8 . T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. I.T.A. NO . 2510 /M/ 14 2 2. THE COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN CONFIRMING THE COMPUTATION OF LONG TERM CAPITAL GAIN AMOUNTING TO RS.1,69,22,508/ - AS COMPUTED BY THE ASSESSING OFFICER. 3. THE COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT 6/7TH SHARE OF THE BUILDING WAS AWARDED TO TH E APPELLANT IN AN ARBITRATION IN EXCHANGE OF VARIOUS ASSETS BY THE APPELLANT WHICH WERE ALLOTTED TO OTHER BROTHERS UNDER ARBITRATION AND THE CIT(A) ERRONEOUSLY CONFIRMED THAT COST OF ACQUISITION OF THE PROPERTY SOLD WAS THE COST OF ACQUISITION. 3. THE C OMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE APPLICATION OF SECTION 49 APPLIED BY THE ASSESSING OFFICER. HE OUGHT TO HAVE APPRECIATED THAT THE CAPITAL ASSET DID NOT BECOME THE PROPERTY OF THE APPELLANT IN ANY OF THE MODES PRESCRIBED U/S 49 O F THE ACT AND HENCE THE COST OF ACQUISITION OF THE EARLIER ORDER CANNOT BE ADOPTED AS THE COST OF ACQUISITION OF THE APPELLANT. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THAT THE IMPUGNED PROPERTY BECAME APPELLANT'S PROPERTY IN FAM ILY SETTLEMENT WITHOUT ANY BASIS. HE ERRED IN HOLDING THAT THE PREVIOUS OWNER VALUE WAS ADOPTED BECAUSE NO VALUE WAS ASSIGNED IN THE AWARD AND FAILED TO APPRECIATE THAT THE VALUABLE PROPERTIES LOST BY THE APPELLANT ALSO HAS SIGNIFICANT VALUE AND THIS PROPE RTY IS IN - LIEU OF THOSE PROPERTIES TAKEN AWAY UNDER THE AWARD WITHOUT CONSIDERING ANY CLAIM BY THE APPELLANT. 4.1 THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT IF VALUE IS NIL NO CAPITAL GAINS TAX COULD BE CHARGEABLE ON THE IMPUGNED PROPERTY AND THEREFORE ADOPTION OF FAIR MARKET VALUE IS THE ALTERNATIVE AS HELD IN VARIOUS SUPREME COURT AND OTHER DECISIONS THAT ONLY REAL PROFITS OR GAINS WILL BE ATTRACTED FOR TAXATION. 5. THE COST OF ACQUISITION OF PROPERTIES ALLOTTED UNDER ARBITRA TION SHOULD BE TAKEN AT THE MARKET VALUE OF SUCH PROPERTY AS ON THE DATE OF VESTING OF THE PROPERTY ON THE APPELLANT PURSUANT TO ARBITRATION. 6. ALTERNATIVELY THE COST OF ACQUISITION OF PROPERTY ALLOTTED ON ARBITRATION SHOULD BE TAKEN AT THE MARKET VALU E OF THE PROPERTIES OF THE APPELLANT ALLOTTED TO THE OTHER PARTIES UNDER THE ARBITRATION AWARD. 7. THE APPELLANT CRAVES LEAVE TO ADDUCE ADDITIONAL GROUNDS AT THE TIME OF HEARING. I.T.A. NO . 2510 /M/ 14 3 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INC OME AND SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS COMPLETED ON 21.12.2009 BY ASSESSING THE INCOME OF THE ASSESSEE AT .11,39,460/ - . THE SAID ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS SET ASIDE BY THE LD. CIT UNDER SECTION 263 OF THE ACT VIDE ORDER DATED 07.03.2012 AND DIRECTED THE ASSESSING OFFICER TO FRAME FRESH ASSESSMENT. ACCORDINGLY, THE CASE WAS POSTED FOR HEARING AND THE ASSESSEE HAS FILED DETAILED NOTE ALONG WITH COPY OF SALE DEED, ARBITRATION AWAR D, DETAILED NOTE FOR CLAIMING CAPITAL GAIN, COPY OF RETURN OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999 - 2000 AND OTHER DETAILS AS REQUIRED BY THE ASSESSING OFFICER. ON VERIFICATION OF RECORDS, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE AND HIS SIX BROTHERS VIZ., SHRI R. ALAGENDRAN, SHRI R. PONNUSAMY, SHRI R. BHASKARAN, SHRI R. DEVENDRAN, SHRI R. DHANASEKARAN AND SHRI R. VETRIVELRAJA HAD JOINTLY PURCHASED THE LAND ON 04.04.1996 FOR .10 LAKHS MEASURING 33 CENTS AND .9 LAKHS FOR 31 CENTS ON 08.10.19 96 FOR A TOTAL CONSIDERATION OF .21,66,066/ - INCLUDING STAMP DUTY AND REGISTRATION CHARGES. DURING THE YEAR 1998 - 99, ALL THE SEVEN BROTHERS JOIN TOGETHER HAD CONSTRUCTED A BUILDING ON THE AFOREMENTIONED PROPERTY AT THE COST OF .1,61,55,349/ - . SUBSEQUENTL Y, ALL THE ASSETS OWNED BY THE FAMILY MEMBERS OF THE ASSESSEE WERE DISTRIBUTED AMONG BROTHERS THROUGH AN ARBITRATION AWARD ON 10.07.2002 AND ACCORDINGLY, THE ASSESSEE HAS RECEIVED CERTAIN ASSETS INCLUDING THE IMPUGNED PROPERTY MENTIONED ABOVE. BY VIRTUE OF THIS ORDER, THE ASSESSEE BECAME THE SOLE AND ABSOLUTE OWNER OF THE IMPUGNED PROPERTY RECEIVING THE I.T.A. NO . 2510 /M/ 14 4 BALANCE 6/7 TH SHARE. LATER THE ASSESSEE HAS SOLD THE PROPERTY , WHICH WAS ALLOTTED TO HIM UNDER AN ARBITRATION AWARD , FOR A SALE CONSIDERATION OF .5,00,00,000/ - ON 09.06.2006. WHILE CALCULATING THE INCOME ACCRUED OUT OF THE ABOVE MENTIONED TRANSACTION, THE ASSESSEE FOR THE PURPOSES OF COST OF ACQUISITION ADOPTED THE DATE OF FAIR MARKET VALUE OF THE PROPERTY AS 10.07.2002 , I.E., THE DATE OF PARTITIO N OF PROPERTY AMONG FAMILY MEMBERS FOR WHICH THE ASSESSEE HAS FILED DETAILED SUBMISSIONS ON 17.01.2013. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND VERIFYING RELEVANT DETAILS, BY APPLYING SECTION 49 OF THE ACT, THE ASSESSING OFFICER WORKED OUT TH E LONG TERM CAPITAL GAINS AT .1,69,22,508/ - AND ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT .1,80,61,968/ - . 3. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT THE IMPUGNED PROPERTY, WHICH WAS SOLD BY THE ASSESSEE, WAS NOT INHERITED BY WAY OF ANY DEED OR WI LL. THE SAID PROPERTY [33 CENTS PURCHASED ON 04.04.1996 AND 31 CENTS PURCHASED ON 08.10.1996] WAS PURCHASED BY THE ASSESSEE AND HIS SIX BROTHERS VIZ., SHRI R. ALAGENDRAN, SHRI R. PONNUSAMY, SHRI R. BHASKARAN, SHRI R. DEVENDRAN, SHRI R. DHANASEKARAN AND SHR I R. VETRIVELRAJA. LATER ON, ON THE SAID I.T.A. NO . 2510 /M/ 14 5 PROPERTY, THE ASSESSEE AND HIS SIX BROTHERS JOINTLY CONSTRUCTED A BUILDING AT THE COST OF .1,61,55,349/ - . WITH THESE FACTS, IT CANNOT BE SAID THAT THE ASSESSEE IS NOT THE ONE OF THE OWNERS OF THE ABOVE PROPERTY. TO AVOID ANY DISPUTE AMONG THE BROTHERS, THE ABOVE PROPERTY WAS SHARED AMONG THE BROTHERS THROUGH ARBITRATION AWARD DATED 10.07.2002. 6. WHILE CALCULATING THE INCOME ACCRUED OUT OF THE ABOVE MENTIONED TRANSACTION, THE ASSESSEE FOR THE PURPOSE OF COST OF A CQUISITION ADOPTED THE DATE OF FAIR MARKET VALUE OF THE PROPERTY AS ON 10.07.2002 I.E., THE DATE OF ARBITRATION AWARD AND PARTITION OF THE PROPERTY AMONG FAMILY MEMBERS. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS CONTENDED THAT SECTION 49 OF THE ACT HA S NO APPLICATION TO ASSESSEE S CASE SINCE SECTION 49 LISTS VARIOUS SITUATIONS IN WHICH NO CONSIDERATION IS PASSING ON AND FICTION IS CREATED BY DEEMING THE COST OF ACQUISITION SHALL BE THE COST FOR WHICH THE PREVIOUS OWNER HAS ACQUIRED IT. HOWEVER, THE ASS ESSING OFFICER HAS OBSERVED THAT T HE ASSESSEE GOT CLEAR TITLE OVER HIS SHARE OF THE PROPERTY THROUGH THE ARBITRATION AWARD, SO, SECTION 49 OF THE ACT CLEARLY ATTRACTS IN ASSESSEE S CASE. WHEN THE COST OF THE PROPERTY WA S VERY MUCH AVAILABLE PRIOR TO ACQUIR ING THE PROPERTY THROUGH ARBITRATION AWARD, FOR ADOPTING THE COST OF ACQUISITION, THE QUESTION OF ADOPTING THE DATE OF FAIR MARKET VALUE OF THE PROPERTY AS ON 10.07.2002 DOES NOT ARISE. THEREFORE, TO DETERMINE THE VALUE FOR CALCULATION OF LONG TERM CAPITAL GAIN, THE VALUE ASSIGNED AT THE TIME OF ORIGINAL PURCHASE I.E. DURING THE PERIOD 1996 - 97 [04.04.1996] AND FOR THE I.T.A. NO . 2510 /M/ 14 6 CONSTRUCTION OF BUILDING 1998 - 99 WAS RIGHTLY RECKONED BY THE ASSESSING OFFICER, WHICH WAS CONFIRMED BY THE LD. CIT(A). WE FIND NO FORCE IN TH E ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE GOT CLEAR THE TITLE OVER HIS SHARE OF THE PROPERTY FROM THE DATE OF PASSING OF ARBITRATION AWARD AND FOR THE PURPOSE OF COST OF ACQUISITION, THE FMV OF THE PROPERTY AS ON THE DATE OF ARBITRATION AWARD SHOULD BE ADOPTED. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THE 26 TH APRIL , 201 6 AT CHE NNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 26 . 0 4 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.