RITA SUNIL MANAKTALA, MUMBAI V. ITO 19(3)(2), MUMBAI

ITA 255/MUM/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3747 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI; MANISHA C H AVAN
• Keywords: Capital asset; Opportunity of being heard; Question of law; Capital receipt; Revised return

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R. K. GUPTA , JM ITA NO. 255 / MUM/ 20 1 3 ( ASSESSMENT YE AR : 200 9 - 20 10 ) RITA SUNIL MANAKTALA, KUMAR METAL INDUSTRIES, 101, KAKAD BHAVAN, 30 TH ROAD BANDRA (WEST), MUMBAI - 400 050 VS. ITO 1 9 ( 3 )( 2 ), MUMBAI - 12 PAN/GIR NO. : A A CPM 0374 K ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI S.C.TIWARI & MS. MANISHA C H AVAN /REVENUE BY : SMT. JOTHILAKSHMI NAYAK DATE OF HEARING : 2 ND APRIL , 201 3 DATE OF PRONOUNCEMENT : 8 TH MAY , 2013 O R D E R TH IS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 8 - 11 - 2012 OF LEANED CIT(A) - 30 , MUMBAI RELA TING TO THE ASSESSMENT YEAR 200 9 - 10 . 2 . THE ASSESSEE IS OBJECTING IN CONFIRMING THE ADDITION OF RS. 2,10,00 0/ - DISCLOSED BY THE ASSESSEE HERSELF IN HER REVISED RETURN ON ASKING BY THE AO. 3 . BRIEF FACTS OF THE CASE ARE THAT THE AO FOUND THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS. 2,10,000/ - TOWARDS COMPENSATION FROM THE BUILDERS M/S EKTA SUPREME CORPORATION. THE ASSESSEE WAS ASKED TO EXPLAIN THAT WHY THIS INCOME HAS NOT BEEN SHOWN IN THE ORIGINAL RETURN ITA NO. 255 /20 1 3 2 ON 26 - 2 - 2010 . IT WAS EXPLAINED THAT THIS AMOUNT WAS NOT SHOWN AS A SUM RECEIVED AS COMPENSATION ON ACCOUNT OF DELAY OF POSSESSION OF THE FLAT. HOWEVER, THE RE VISED RETURN WAS FILED BEFORE THE AO SHOWING THE AMOUNT OF RS.2,10,000/ - AS INCOME. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED. 4 . BEING AGGRIEVED WITH THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) , BEFORE WHOM IT WAS SUBM ITTED THA T IN FACT THE AMOUNT OF RS. 2,10,000/ - IS NOT AN INCOME EITHER FROM BUSINESS OR FROM OTHER SOURCES AS THIS IS A COMPENSATION AND, THEREFORE, THE SAME CANNOT BE TREATED AS REVENUE RECEIPT. BEING THE RECEIPT CAPITAL IN NATURE, NOT REQUIRE FOR TAXATION. HOWEVE R, LEARNED CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION AS HE WAS AGREED WITH THE CONTENTION OF THE AO. ACCORDINGLY, HE CONFIRMED THE ACTION OF THE AO. 5 . LEARNED COUNSEL OF THE ASSESSEE REITERATED THE CONTENTION RAISED BEFORE THE LEARNED CIT(A) . FURTHE R RELIANCE WAS PLACED ON THE DECISION OF H O N BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT, REPORTED IN (199 8 ) 229 I TR 383 (SC) AND IN THE CASE OF CIT VS. SAURASHTRA CEMENT LIMITED, REPORTED IN (2010) 325 I TR 422 (SC) . COPIES OF THESE JUDGMENTS HAVE ALSO BEEN FILED. 6 . ON THE OTHER HAND, LEARNED DR STRONGLY PLACED RELIANCE ON THE ORDER OF AO AND CIT(A) . IT WAS FURTHER SUBMITTED THAT THE DECISION RELIED UPON BY THE LEARNED AR ARE DISTINGUISHABLE ON FACTS. IN REPLY, I T ITA NO. 255 /20 1 3 3 WAS SUBMIT TED BY LEARNED AR THAT WHEN THE AO POINTED OUT TO THE ASSESSEE THAT WHY THE RECEIPT OF RS. 2,10,000/ - HAS NOT BEEN SHOWN, THEN ONLY A REVISED RETURN WAS FILED AND ACCORDINGLY THE ASSESSMENT WAS COMPLETED BY THE AO. 7 . IN REPLY, LEARNED COUNSEL OF THE ASS ESSEE ALSO STATED THAT THOUGH THE ASSESSEE HAS FILED REVISED RETURN BUT IN FACT THE INCOME SHOWN IN THE REVISED RETURN IS NOT TAXABLE IN THE LAW AND, THEREFORE, IT CANNOT BE CHALLENGED BEFORE THE APPELLATE AUTHORITY. 8 . AFTER CONSIDERING THE SUBMISSION AN D PERUSING THE MATERIAL ON RECORD, I FOUND THAT THE ASSESSEE DESERVES TO SUCCEED ON THE ISSUE INVOLVED. IT IS SEEN THAT THIS IS ASSESSEES RIGHT TO CHALLENGE THE ISSUE BEFORE THE APPELLATE AUTHORITY IF THE ISSUE IS LEGAL ONE. THE HONBLE SUPREME COURT IN T HE CASE OF NATIONAL THERMAL POWER CO. LTD. (SUPRA) , HAS HELD THAT THE TRIBUNAL HAS JURISDICTION TO EXAMINE THE QUESTION OF LAW, WHICH ARISES FROM THE FACTS AS FOUND BY THE AUTHORITIES BELOW AND HAVING A BEARING ON THE TAX LIABILITY OF THE ASSESSEE, NOTWIT HSTANDING THE FACT THAT SAME WAS NOT RAISED BEFORE THE LOWER AUTHORITIES. 9 . IN FACT IN THIS CASE, AN AMOUNT WAS ASSESSED BY THE AO ON THE BASIS OF AMOUNT SHOWN IN THE RETURN. B EFORE THE TRIBUNAL, IT WAS SUBMITTED THAT THE AMOUNT SHOWN IN THE RETURN IS N OT TAXABLE AND, THEREFORE, A LEGAL GROUND WAS TAKEN. HOWEVER, THE TRIBUNAL DISMISSED THE GROUND OF THE ASSESSEE AND THE HON BLE HIGH COURT HAS ALSO ITA NO. 255 /20 1 3 4 CONFIRMED THE ORDER OF THE TRIBUNAL. ON APPEAL, THE HONBLE SUPREME COURT HAS HELD THAT UNDER SECTION 254, THE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THIN K S FIT. THE HONBLE SUPREME COURT HAS GIVEN AN EXAMPLE THAT AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDIN G BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FAC TS ARE ON RECORD IN RESPECT OF THAT ITEM. THERE IS NO REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUND WHICH ARISE FROM THE ORDER OF THE CIT(A). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APP EAL/CROSS - OBJECTIONS BEFORE THE TRIBUNAL. THE TRIBUNAL SHOULD NOT BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 10 . THE RATIO OF DECISION OF THE HON BLE SUPREME COURT IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. THE ASSESSEE HAS FILED REVISED RETURN SHOWING INCOME OF RS. 2,10,000/ - RECEIVED AS COMPENSATION ON DELAY OF POSSESSION OF THE FLAT . IN VIEW OF THE ASSESSEE, THIS RECEIPT IS NON - TAXABLE AS THIS IS NOT RECEIVED ON ACCOUNT OF ANY BUSINESS DEALING OR ANY OTHER SOURCES AS THE SAME WAS RECEIVED AS COMPENSATION ON DELAY OF POSSESSION OF THE FLAT, WHICH IS A CAPITAL ASSET. THIS CONTENTION WAS REJECTED BY THE LEARNED CIT(A) , BEFORE WHOM THE ISSUE WAS RAISED FOR THE FIRST TIME. IN MY VIEW, THE ITA NO. 255 /20 1 3 5 CIT(A) SHOULD HAVE CONSIDERED THE ASPECT THAT THE RECEIPT IS NOT TAXABLE BEING CAPITAL IN NATURE. HOWEVER, LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT THE ASSESSEE HIMSELF HAS SHOWN IN THE REVISED RETURN FILED BY HERSELF. 1 1 . THE HON BLE SUPREME COURT IN THE CASE OF SAURASHTRA CEMENT LIMITED (SUPRA) , WHERE IN THE QUESTION WAS RAISED AS TO WHETHER THE TRIBUNAL HAS ERRED IN LAW ON FACTS IN HOLDING THAT THE AMOUNT OF RS.8,50,000/ - RECEIVED BY THE ASSESSEE WAS NOT TAXABLE AS REVE NUE RECEIPT IN THE HANDS OF THE ASSESSEE? , AFTER CONSIDERING ALL THE ASPECTS FOUND THAT AS PER CLAUSE NO. 6 OF THE AGREEMENT THE LIQUIDATED DAMAGES WERE TO BE CALCULATED AT 0.5 PER CENT OF THE PRICE OF THE RESPECTIVE MACHINERY AND EQUIPMENT TO WHICH THE ITE MS WERE DELIVERED LATE, FOR EACH MONTH OF DELAY IN DELIVERY COMPLETION, WITHOUT PROOF OF THE ACTUAL DAMAGES THE ASSESSEE WOULD HAVE SUFFERED ON ACCOUNT OF THE DELAY. THE DELAY IN SUPPLY COULD BE OF THE WHOLE PLANT OR A PART THEREOF BUT THE DETERMINATION OF DAMAGES WAS NOT BASED UPON THE CALCULATION MADE IN RESPECT OF LOSS OF PROFIT ON ACCOUNT OF SUPPLY OF A PARTICULAR PART OF THE PLANT. IT IS EVIDENT THAT THE DAMAGES TO THE ASSESSEE WAS DIRECTLY AND INTIMATELY LINKED WITH THE PROCUREMENT OF A CAPITAL ASSET I.E. THE CEMENT PLANT, WHICH WOULD OBVIOUSLY LEAD TO DELAY IN COMING INTO EXISTENCE OF THE PROFIT - MAKING APPARATUS, RATHER THAN A RECEIPT IN THE COURSE OF PROFIT - EARNING PROCESS. COMPENSATION PAID FOR THE DELAY IN PROCUREMENT OF CAPITAL ASSET AMOUNTED TO S TERILIZATION OF THE CAPITAL ASSET OF THE ASSESSEE AS SUPPLIER HAD FAILED TO SUPPLY THE PLANT WITHIN TIME AS ITA NO. 255 /20 1 3 6 STIPULATED IN THE AGREEMENT AND CLAUSE NO.6 THEREOF CAME INTO PLAY. ACCORDINGLY, IT WAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS COMPEN SATION FOR STERILIZATION OF THE PROFIT - EARNING SOURCE , NOT IN THE ORDINARY COURSE OF THEIR BUSINESS , WAS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. THE DECISION OF THE H O N BLE HIGH COURT WAS CONFIRMED. 12 . THE RATIO OF THIS DECISION IS SQUARELY APPL ICABLE ON THE FACTS OF THE PRESENT CASE AS IN THIS CASE ALSO THE COMPENSATION WAS GIVEN TO THE ASSESSEE AS PER AGREEMENT ON ACCOUNT OF DELAY OF POSSESSION OF THE FLAT. NEITHER IT WAS THE BUSINESS OF THE ASSESSEE NOR THERE WAS ANY OTHER ACTIVITY FOR EARNING ANY PROFIT. THE FLAT WAS A CAPITAL ASSET AND ON ACCOUNT OF DELAY OF POSSESSION OF THE FLAT, THE COMPENSATION OF RS. 2,10,000/ - WAS GIVEN TO THE ASSESSEE. THEREFORE, IN MY CONSIDERED VIEW, THE RECEIPT IS CAPITAL IN NATURE AND NOT LIABLE TO TAX. ACCORDINGLY, I DELETE THE ADDITION MADE AND CONFIRMED BY THE LOWER AUTHORITIES. 1 3 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MAY .2013 201 3 SD/ - ( ) ( R.K.GUPTA ) / JUDICIAL MEMBER MUMBAI ; DATED : 08/05/2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : ITA NO. 255 /20 1 3 7 1. / THE APPELLANT 2. / THE RESP ONDENT. 3. / THE CIT(A) , MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI