JAGANNATH K BIBIKAR, MUMBAI V. ITO RG 18(3)(2), MUMBAI

ITA 2735/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71912 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 07-11-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Keywords: Cost of acquisition; Assessment record
• Section: 143(3); 263; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL J JJ J BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.2735/MUM/2012 2735/MUM/2012 2735/MUM/2012 2735/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2005-06) JAGANNATH K. BIBIKAR, 6, ROUDELAY SOC., SHEETALADEVI TEMPLE ROAD, MAHIM, MUMBAI-400016 % % % % / VS. INCOME TAX OFFICER, RANGE- 18(3)(2), MUMBAI #' ! ./ ( ./ PAN/GIR NO. :AABPB6986B ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI ANIL SATHE # # # # . / . / . / . / / REVENUE BY : SHRI S. D. SRIVASTAVA % % % % . .. . -! -! -! -! / DATE OF HEARING : 4 TH DECEMBER 2013 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 11 TH DECEMBER 2013 '2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 21.10.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) F OR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING SUM OF ` 5,00,000/- WHICH WAS PAID TO SAMYAK ERECTORS P VT. LTD. AND CLAIMED AS DEDUCTION OF EXPENDITURE INCURRED IN CON NECTION WITH THE TRANSFER. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THE ALTERNATE CONTENTION THAT THE SUM OF ` 5,00,000/- BE TREATED AS COST OF IMPROVEMENT. ITA NO.2735/M/2012 JAGANNATH K. BIBIKAR 2 3. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN NOT ADJUDICATING UPON THE 2 ND GROUND OF APPEAL (GROUND NO. 2) AND CONSEQUENTLY ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF CALCULATING THE INDEXED COST OF ACQUISIT ION OF INHERITED ASSET, FROM THE DATE ON WHICH THE ASSET WAS HELD BY THE ASSESSEE INSTEAD OF FROM THE DATE OF ACQUISITION BY THE PREVIOUS OWNER. 3. GROUND NO. 1 & 2 REGARDING DISALLOWANCE OF ` 5,0 0,000/- AS DEDUCTION OF EXPENDITURE INCURRED IN CONNECTION WIT H THE TRANSFER. THE ORIGINAL ASSESSMENT U/S 143(3) WAS PASSED ON 31.12. 2008. SUBSEQUENTLY, THE CIT SET ASIDE THE ASSESSMENT VIDE ORDER DATED 9 .12.2009 PASSED U/S 263 AND DIRECTED THE A.O IN PARA 4 AS UNDER: 4. ON GOING THROUGH THE ASSESSMENT RECORDS, I FIND THAT PAGE 8 IS MISSING FROM THE PHOTO COPY OF THE TRANSFER AGRE EMENT FILED BEFORE THE A.O. IT IS, THEREFORE, CLEAR THAT THE A. OS DECISION WAS TAKEN IN ABSENCE OF THIS EVIDENCE WHICH HAS BEEN PR ODUCED FOR THE FIRST TIME BEFORE ME. SINCE ONLY THIS PAGE IS M ISSING FROM THE PHOTO COPY, IT BECOMES NECESSARY TO EXAMINE THE ORI GINAL TRANSFER AGREEMENT. FOR THIS PURPOSE THE ASSESSMENT HAS TO BE SET ASIDE TO THE A.O. 4. THUS, THE A.O WAS DIRECTED TO RE-EXAMINING THE I SSUE OF LIABILITY OF ` 5,00,000/- AS CLAIMED BY THE ASSESSEE. THE ASSESSIN G OFFICER IN THE ORDER PASSED IN PURSUANT TO THE DIRECTION OF CIT U/S 263 HAS DISALLOWED THE DEDUCTION OF ` 5,00,000/-. ON APPEAL, THE CIT(A) HA S CONFIRMED THE DISALLOWANCE MADE BY THE A.O. 5. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE PAID ` 5,00,000/- TOWARDS HIS SHARE (50%) OF ` 10,00,000/- TO SAMYAK ERECTORS PVT. LTD. TOWARDS THE DEVELOPMENT C HARGES IN TERMS OF CLAUSE 10 OF THE DEVELOPMENT AGREEMENT. HE HAS REFE RRED THE DEVELOPMENT AGREEMENT AND SUBMITTED THAT THE ASSESS EE IS UNDER ITA NO.2735/M/2012 JAGANNATH K. BIBIKAR 3 OBLIGATION REGARDING ANY CHARGES OR ENCUMBRANCES IN RESPECT OF THE PLOT OF LAND TRANSFER TO A DEVELOPER AND IN CASE ANY CHA RGE OR ENCUMBRANCES IS FOUND THE ASSESSEE IS LIABLE TO WARD OFF OF THE SAM E. HE HAS FURTHER SUBMITTED THAT THE PAYMENT WAS MADE TO THE CONSENTI NG PARTY BEING IN OCCUPATION OF PART OF THE PROPERTY IN QUESTION AND THEREFORE, THE PAYMENT WAS MADE IN CONNECTION WITH TRANSFER OF THE ASSET I N QUESTION. THE PAYMENT IN FACT WAS MADE FOR REMOVAL OF SETTLED HUT MENTS AND THEREFORE THE ASSESSEE TO DISCHARGE ITS LIABILITY TO REMOVE T HE ENCUMBRANCES HAS INCURRED THIS EXPENDITURE WHICH IS ALLOWABLE. ON TH E OTHER HAND, THE LD. D.R HAS SUBMITTED THAT THE AGREEMENT IN QUESTION DO ES NOT SPEAK ABOUT ANY PAYMENT TO THE CONSENTING PARTY AND THEREFORE, THERE IS NO SUCH LIABILITY AS PER THE AGREEMENT. THIS SO CALLED ENCU MBRANCES IN THE SHAPE OF SETTLED HUTMENTS WAS ALREADY IN EXIST AT THE TIM E OF AGREEMENT AND WHEN NOTHING HAS BEEN MENTIONED IN THE AGREEMENT AB OUT THE PAYMENT TOWARDS REMOVAL OF THESE HUTMENTS THIS PAYMENT CANN OT BE ALLOWED AS DEDUCTION BEING EXPENDITURE IN CONNECTION WITH TRAN SFER. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFUL PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE WAS A CO- OWNER OF LAND PLOT NO. 313, CA NO. 929B AT VILLAGE BHAMBARDI, PUNE. THE LE ASEHOLD RIGHTS IN RESPECT OF PLOT WERE SOLD TO M/S HAVANA HOTELS RESO RTS PVT. LTD. AND M/S SAMYAM ERECTORS PVT. LTD. THE CAPITAL GAINS ARISING FROM THE TRANSACTION WAS OFFERED TO TAX BY THE ASSESSEE IN TWO YEARS I.E . 2005-06 AND 2006-07 AFTER CLAIMING ` 5,00,000/- PAID TOWARDS RELOCATION EXPENSES. THE A.O ITA NO.2735/M/2012 JAGANNATH K. BIBIKAR 4 ASSESSED THE ENTIRE CAPITAL GAINS IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND DISALLOW THE CLAIM OF DEDUCTION O F ` 5,00,000/- PAID BY THE ASSESSEE TOWARDS RELOCATION OF HUTMENTS ON THE GROUND THAT THE TRANSFER/DEVELOPMENT AGREEMENT DOES NOT SPEAK ABOUT SUCH LIABILITY OR PAYMENT BY THE ASSESSEE. THE CIT(A) CONCURRED WITH THE A.O ON THE SIMILAR REASONING. THE LD. LD. D.R HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND REITERATED THE ARGUMENT THAT THE PAYMENT TO THE HUTMENT DWELLERS HAS BEEN ARISEN AFTER THE DATE OF AGREEMENT THEREFORE, THIS IS A TRANSACTION SUBSEQUENT TO THE TRANSFER AN D DOES NOT FALL UNDER THE DEDUCTION OF EXPENDITURE IN CONNECTION WITH TRANSFE R. THE LD. A.R COUNTER THE ARGUMENT OF LD. D.R AND SUBMITTED THAT THE ASSE SSEE RECEIVED PART OF THE SALE CONSIDERATION IN THE NEXT YEAR AND ONLY SU BSEQUENT TO THE PAYMENTS IN QUESTION TOWARDS RELOCATION OF HUTMENTS . THEREFORE, THE LD. A.R URGED THAT WHEN THE ENTIRE CAPITAL GAINS HAS BE EN ASSESSED IN THE YEAR UNDER CONSIDERATION THEN THESE PAYMENT IS ALSO ALLOWABLE IN THE YEAR UNDER CONSIDERATION. IT IS PERTINENT TO NOTE THAT T HE GENUINENESS OF PAYMENT HAS NOT BEEN DISPUTED BY THE AUTHORITIES BE LOW AND EVEN THE PURPOSE OF PAYMENT IS ALSO NOT QUESTION BY THE A.O AS WELL AS CIT(A). THE DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT THE T RANSFER/DEVELOPMENT AGREEMENT DOES NOT SPEAK ABOUT SUCH PAYMENT. WHEN T HE PAYMENT IS UNDISPUTEDLY MADE TOWARDS RELOCATION OF HUTMENT DWE LLERS THEN IT IS CERTAINLY FOR THE PURPOSE OF REMOVING THE ENCUMBRAN CES IN THE TITLE OF THE OWNERS IN RESPECT OF THE LAND IN QUESTION. AS PER C LAUSE 10 OF THE DEVELOPMENT AGREEMENT DATED 10.9.2004 IT IS OBLIGAT ORY ON THE PART OF THE OWNERS/TRANSFERERS OF THE LAND TO WARD OFF ANY CHARGE AND ITA NO.2735/M/2012 JAGANNATH K. BIBIKAR 5 ENCUMBRANCES ARISES IN THE PROPERTY. THEREFORE, WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE ARGUMENT OF THE REVENUE T HAT IN THE ABSENCE OF ANY SPECIFIC MENTION IN THE AGREEMENT SUCH PAYMENT IS NOT ALLOWABLE DEDUCTION. THE PAYMENT HAS BEEN MADE FOR REMOVAL OF ENCUMBRANCES IN RESPECT OF THE PROPERTY IN QUESTION BEING RELOCATIO N OF THE HUTMENT DWELLERS THEREFORE, THIS FALLS UNDER THE CATEGORY O F EXPENDITURE INCURRED IN CONNECTION WITH TRANSFER OF THE PROPERTY. ACCORDING LY, WE ALLOW THE CLAIM OF THE ASSESSEE ON THIS ACCOUNT. 7. GROUND NO. 3 REGARDING THE BENEFIT OF INDEXATION OF COST OF ACQUISITION WITH EFFECT FROM 1.4.1981. THOUGH THIS ISSUE WAS NOT A SUBJECT MATTER OF SECTION 263 ORDERS HOWEVER THE A.O TOOK T HE COST OF ACQUISITION AS ON 5.2.1986 WHEN THE FATHER OF THE ASSESSEE EXPI RED. ON APPEAL, THE CIT(A) HAS NOT ADJUDICATED THE ISSUE OF INDEXATION. 8. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE THOUGH FILED AN APPLICATION FOR RECTIFICAT ION U/S 154 BEFORE THE CIT(A) BUT TILL DATE NO ORDER HAS BEEN PASSED IN TH IS RESPECT. HE HAS FURTHER SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS MANJULA J. SHAH 204 TAXMAN 691 (BOM). ON THE OTHER HAND, THE LD. D.R HAS RELIED UP ON THE ORDER OF THE ASSESSING OFFICER. 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE NOTE THAT THE A.O HAS NOT DISPUTED THE FACT THAT THE PROPERTY IN QUESTION HAS BEEN INHERITED BY THE ASSESSEE FROM HIS FATHER AND THEREFORE, FOR THE PURPOSE OF DETERMINE THE INDEXED COST OF ACQUISITION IT ITA NO.2735/M/2012 JAGANNATH K. BIBIKAR 6 HAS TO BE COMPUTED BY APPLYING THE DEEMING FICTION CONTAINED IN EXPLANATION 1(I)(B) TO SECTION 2(42A) AS WELL AS PR OVISIONS OF SECTION 49(1) OF THE INCOME TAX ACT. THE ISSUE NOW COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS MANJULA J. SHAH (SUPRA). ACCORDINGLY, THE ISSUE IS SET ASIDE TO THE RECORD O F THE CIT(A) TO DECIDE THE SAME AS PER LAW. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF DECEMBER 2013 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 11 TH DECEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI