ITO, Jaipur V. SANJAY MANGAL, Jaipur

ITA 278/JPR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6186 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Keywords: Capital asset; Depreciation; Cost of acquisition; Fair market value; Capital receipt
• Section: 32; 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 276/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 THE ITO, WARD-6(1), JAIPUR. CUKE VS. SHRI VIJAY MANGAL, B-5, GOVIND NAGAR, RAJA PARK, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABCPM 5382 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDE NT CO NO. 13/JP/2017 (ARISING OUT OF ITA NO. 276/JP/2017) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 SHRI VIJAY MANGAL, B-5, GOVIND NAGAR, RAJA PARK, JAIPUR. CUKE VS. THE ITO, WARD-6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABCPM 5382 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 277/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 THE ITO, WARD-6(1), JAIPUR. CUKE VS. SHRI SUNIL AGARWAL, B-5, RAJA PARK, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAKPA 7165 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 2 CO NO. 11/JP/2017 (ARISING OUT OF ITA NO. 277/JP/2017) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 SHRI SUNIL AGARWAL, B-5, RAJA PARK, JAIPUR. CUKE VS. THE ITO, WARD-6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAKPA 7165 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 278/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 THE ITO, WARD-6(1), JAIPUR. CUKE VS. SHRI SANJAY MANGAL, 87, MOZI COLONY, MALVIYA NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABMPM 1586 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT CO NO. 12/JP/2017 (ARISING OUT OF ITA NO. 278/JP/2017) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 SHRI SANJAY MANGAL, 87, MOZI COLONY, MALVIYA NAGAR, JAIPUR CUKE VS. THE ITO, WARD-6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABMPM 1586 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VINOD GUPTA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/03/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 18/04/2018 ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 3 VKNS'K@ ORDER PER BENCH: THESE THREE SET OF APPEALS BY THE REVENUE AND CROS S OBJECTION BY THE ASSESSEES ARE DIRECTED AGAINST THREE SEPARAT E ORDERS OF LD. CIT(A) IN RESPECT OF THREE RELATED ASSESSEES WHO AR E CO-OWNERS OF THE LEASE MINES FOR THE ASSESSMENT YEAR 2011-12. COMMON GROUNDS ARE RAISED IN THESE APPEALS AS WELL AS CROSS OBJECTIONS THEREFORE, THE GROUNDS RAISED IN ITA NO. 276/JP/2017 AND CO NO. 13 /JP/2017 ARE REPRODUCED AS UNDER:- REVENUES GROUND (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) WAS JUSTIFIED IN DELET ING THE ADDITION OF RS. 1,10,00,485/- ON ACCOUNT OF LONG TERM CAPITA L GAIN ON SALE OF MINING LEASE AND HOLDING THE ASSESSEE NOT T O BE OWNER JOF SUCH CAPITAL ASSET. (II) THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. CROSS OBJECTION GROUND 1 UNDER THE FACTS AND CIRCUMSTANCES, LD. CIT(A) H AS ERRED BY SUSTAINING THE INITIATIONS OF PROCEEDINGS U/S 147 O F THE INCOME TAX ACT, 1961. THE INITIATION OF PROCEEDING IS ILLE GAL AND UNJUSTIFIED. ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 4 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A) HAS ERRED IN NOT DECIDING THE FOLLOWING GROU NDS WHILE LD. A.O. HAS ERRED IN:- (I) ALLEGING THAT TRANSACTION ENTERED IS TRANSFER WITHIN THE MEANING ASSIGNED TO IN SECTION 2(47) OF THE INCOME TAX ACT, 1961 (II) NOT CONSIDERING THAT THE AGREEMENT UNDER CONSIDERAT ION HAS ALREADY BEEN CANCELLED. (I) NOT CONSIDERING THE SUBMISSION MADE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IN RIGHT PROSPECTIVE AND DRA WING INFERENCES BASED ON INCORRECT ASSUMPTION OF FACTS 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A) HAS ERRED IN NOT DECIDING THE FOLLOWING GROU NDS WHILE LD. A.O. HAS ERRED IN:- (I) NOT TAKING COST OF ACQUISITION OF THE ASSET UNDER CONSIDERATION CORRECTLY I.E. FAIR MARKET VALUE AS O N 01.04.1981 AND ALSO ERRED BY NOT PROVIDING INDEXATI ON ACCORDINGLY . (II) ALLEGING THAT NO COST WAS PAID FOR ACQUISITION OF A SSET UNDER CONSIDERATION. (III) ALLEGING THAT COST OF PREVIOUS OWNER WAS NIL AND TH US IN THE CASE OF ASSESSEE ALSO THE COST OF ACQUISITION IS NI L. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A) ERRED IN NOT DECIDING WHILE THE ACTION OF LD . A.O. IS CONTRADICTORY, AS ON ONE HAND COST OF ACQUISITION H AS BEEN TAKEN AS NIL WHEREAS, ON THE OTHER HAND THE ALLEGED RECEI PTS HAS NOT CONSIDERED AS CAPITAL RECEIPTS. 5. THE CROSS OBJECTOR CRAVES TO ADD, ALTER, AMEND A ND MODIFY ANY GROUND OF CROSS OBJECTIONS. ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 5 2. FOR THE PURPOSE OF RECORDING THE FACTS WE TAKE T HE APPEAL IN ITA NO. 276/JO2017 AND CO NO. 13/JP2017 AS A LEAD CASE. THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 12. 01.2012 DECLARING TOTAL INCOME OF RS. 1,41,760/- UNDER THE HEAD INCOM E FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDING S, AO NOTED THAT THE ASSESSEE ALONG WITH TWO OTHER BROTHERS HAD SOLD LEASEHOLD RIGHTS OF THE LIMESTONE & MARBLE MINES AT PANCH PAHADI TO M/S J.K. CEMENT LTD. FOR A CONSIDERATION OF RS. 3,31,00,000/-. THE AO PR OPOSE TO ASSESS THE CAPITAL GAIN IN THE HANDS OF THREE BROTHERS BY TAKI NG 1/3 SHARE OF SALES CONSIDERATION. THE ASSESSMENT IN CASE OF TWO BROTHE RS WERE REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 12.06.2014. IN RESPONSE TO THE NOTICE U/S 148 THE ASSESSEE FILED HIS RETURN OF INC OME DECLARING A SUM OF RS. 1,41,760/-. THE ASSESSEE CONTENDED THAT THER E WAS NO SALE RATHER IT WAS MERELY AGREEMENT SUBJECT TO CERTAIN T ERMS AND CONDITIONS. IT WAS FURTHER SUBMITTED THAT THE RENEWAL PROCEDURE OF MINES AS PER AGREEMENT WAS PENDING AT THE LEVEL OF COMPETENT AUT HORITY. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND NOTED THAT THE SAID AGREEMENT WAS DULY REGISTERED ON 10.06.2010 FOR A V ALUE OF RS. 3,31,00,000/-. IT WAS A CLEAR UNDERSTANDING BETWEEN THE PARTIES FOR TRANSFER OF MINING LEASE UNDER THE SAID AGREEMENT A GAINST THE AMOUNT ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 6 OF CONSIDERATION AS AGREED AND METHOD OF ACCEPTANCE HAS ALSO BEEN CLARIFIED IN THE AGREEMENT. A SUM OF RS. 25 LACS HA S BEEN TAKEN AS ADVANCE AND FURTHER, A SUM OF RS. 61 LACS WAS ALSO PAID BY THE M/S J.K. CEMENTS. THEREFORE A TOTAL SUM OF RS. 1,28,00,000/- WAS PAID BY M/S J.K. CEMENTS UNDER THE SALE AGREEMENT. THE AO CONCL UDED THAT IN VIEW OF THE FACT THAT THE ASSESSEE HAS TRANSFERRED THE M INING LEASE VIDE SALE AGREEMENT DATED 10.06.2010 FOR A CONSIDERATION OF R S. 3,31,00,000/- OUT OF WHICH AN ADVANCE OF RS. 25,00,000/- WAS RECE IVED AT THE TIME OF AGREEMENT AND A SUM OF RS. 1,03,000/- WAS ALSO RECE IVED, SUBSEQUENTLY. ACCORDINGLY, THE AO HELD THAT THE TRA NSACTION OF TRANSFER OF MINING LEASE COMPLETED WITHIN THE MEANING AND PU RVIEW OF SECTION 2(47) OF THE ACT READ WITH EXPLANATION TO SECTION 2 (47) OF THE ACT. ACCORDINGLY, THE AO MADE AN ADDITION OF RS. 1,10, 3 3,333/- BEING 1/3 SHARE OF EACH ASSESSEE. ON APPEAL, THE LD. CIT(A) H ELD THAT THE OWNERSHIP OF THE MINING LEASE VESTED WITH SHRI SUNI L AGARWAL AND THEREFORE, NO ADDITION CAN BE MADE IN THE HANDS OF THE OTHER TWO BROTHERS. AS IN THE CASE OF THE SHRI SUNIL AGARWAL THE LD. CIT(A) FURTHER HELD THAT THE SALE AGREEMENT WAS EXECUTED WITHOUT P OSSESSION AND THEREFORE, NO TITLE OR OWNERSHIP WHATSOEVER WAS CON VEYED IN FAVOUR OF M/S J.K. CEMENTS LTD. FURTHER, M/S J.K. CEMENTS LTD . ALSO SENT A LETTER ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 7 FOR CANCELLATION HENCE, THERE WAS NO TRANSFERRED WI THIN THE MEANING OF SECTION 2(47) OF THE ACT. ACCORDINGLY, THE LD. CIT (A) DELETED THE ADDITION MADE BY THE AO. 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT AS PER AGREEMENT DATED 10.06.2010 SHIR SANJAY MANGAL, SHRI VIJAY MANGAL & SHRI AKSHAY MANGAL SONS OF LATE KAILASH CHAND MANGAL WERE THE OWNERS O F THE MINING LEASE AS IT WAS TRANSFERRED IN THEIR NAMES AFTER THE DEAT H OF THEIR FATHER OF KAILASH CHAND MANGAL. HE HAS FURTHER SUBMITTED THAT THE PARTIES HAVE DULY STATED AND ACCEPTED THAT THE LEASE OF THE MINE S IN QUESTION WERE TRANSFERRED IN THE NAME OF THESE THREE SONS VIDE TR ANSFER ORDER DATED 03.01.1995 AND 02.11.2006 AND WAS RENEWED FOR A PER IOD OF 10 YEARS. THEREFORE, THE LD. DR HAS SUBMITTED THAT THE FINDIN GS OF THE LD. CIT(A) THAT THE OWNERSHIP OF MINING LEASE IS VESTED WITH S HRI SUNIL AGARWAL IS CONTRARY TO THE RECORD AS ADMITTED BY THE PARTIES I N THE SAID AGREEMENT. AS REGARDS THE TRANSFER AS PER SECTION 2(47) OF THE ACT THE LD. DR HAS SUBMITTED THAT ONCE THE LEASEHOLD RIGHTS OF MINES W ERE TRANSFERRED UNDER THE AGREEMENT AGAINST THE CONSIDERATION AND T HE PARTIES HAVE ALSO PERFORMED THEIR PART BY RECEIVING PARTY PAYMEN T OF RS. 25 LACS THEN, THE SAID RIGHT IN THE LEASE MINES STANDS TRAN SFERRED IN FAVOUR OF M/S J.K. CEMENTS LTD. ON THE DATE OF EXECUTION OF T HE SAID AGREEMENT. ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 8 THOUGH THE RENEWAL OF LEASE WAS PENDING BEFORE THE GOVERNMENT AUTHORITIES HOWEVER, WHATEVER RIGHTS IN THE LEASE M INES HELD BY THE ASSESSEE WERE STAND TRANSFERRED IN FAVOUR OF M/S J. K. CEMENTS LTD. VIDE AGREEMENT DATED 10.06.2010. HE HAS RELIED UPON THE ORDERS OF THE ASSESSING OFFICER. 4. ON THE OTHER HAND, LD. AR OF THE ASSESSEE HAS SU BMITTED THAT A MINING LEASE WAS ALLOTTED BEING HIGHEST BIDDER TO S HRI KAILASH CHAND MANGAL, FATHER OF ASSESSEE VIDE ORDER DATED 10 TH APRIL,1969 FOR DEAD RENT OF RS. 41,000/- P.A.. THE SAID MINE IS SITUATE D AT NEAR VILLAGE TORDA AT PANCH PAHARI, TEHSIL BAIRATH, DISTRICT JAIPUR. A T THE TIME OF ALLOTMENT, THE FATHER OF THE ASSESSEE WAS LIVING JOINTLY WITH HIS BROTHER SHRI DEEN DAYAL AGARWAL. THEREAFTER, A FAMILY SETTLEMENT WAS ARRIVED BETWEEN THE BROTHERS OF FATHER OF ASSESSEE ON 25.7.1973, WHEREI N, THE SAID MINING LEASE WAS AGREED BETWEEN THE BROTHERS TO BE OF SHRI DEEN DAYAL AGARWAL. SHRI DEEN DAYAL AGARWAL EXECUTED A REGISTE RED WILL ON 8TH JUNE, 2009, WHEREIN, HE MADE THE WILL OF THIS MINE RECEIVED THROUGH FAMILY SETTLEMENT IN FAVOUR OF HIS SON SHRI SUNIL A GARWAL. SHRI SUNIL AGARWAL DURING THE ASSESSMENT PROCEEDINGS HAS ALSO FILED AN AFFIDAVIT CONFORMING THAT HE IS THE OWNER OF THE MINING LEASE RIGHT UNDER CONSIDERATION. THE SAID MINE WAS IN THE NAME OF SHR I KAILASH CHAND ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 9 MANGAL IN THE MINING DEPARTMENT. THEREAFTER, UPON D EATH OF SHRI KAILASH CHAND MANGAL, THE MINE WAS TRANSFERRED TO H IS LEGAL HEIR I.E. HIS THREE SONS NAMELY : SHRI SANJAY MANGAL, SHRI VIJAY MANGAL AND SHRI AJAY MANGAL VIDE ORDER DATED 2.5.2006. ON 11.6.2010, ASS ESSEE ALONGWITH HIS TWO BROTHERS ENTER INTO AGREEMENT WITH J.K. CEM ENT LIMITED. THE AGREEMENT WAS REGISTERED WITH SUB-REGISTRAR. TH SAI D AGREEMENT WAS WITHOUT POSSESSION AND ACCORDINGLY, STAMP DUTY WAS ALSO PAID, APPLICABLE TO AN AGREEMENT WITHOUT POSSESSION. IN C LAUSE NO. 4 OF THIS AGREEMENT, IT IS SPECIFICALLY MENTIONED THAT ACTUAL LY THE MINE UNDER CONSIDERATION IS OF SHRI SUNIL AGARWAL AND ACCORDIN GLY, HE RECEIVED THE ADVANCE. ASSESSEE AND HIS BROTHERS SIGNED THE AGREE MENT ONLY DUE TO PENDING CHANGE IN NAME DUE TO MINING POLICIES. HE HAS STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A) ON THE POINT THAT THERE WAS NO TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AS THE TRANSFER WAS SUBJECT TO VARIOUS CONDITIONS INCLUDING THE REN EWAL OF LEASE HOLD RIGHTS. THEREFORE, THE CONSIDERATION WAS PAYABLE ON LY ON THE RENEWAL OF THE LEASE HOLDS RIGHTS BY THE DEPARTMENT OF MINING. SINCE, THE MINING DEPARTMENT DID NOT RENEW THE LEASE HOLDS RIGHTS THE REFORE, THE TRANSACTION CANNOT BE TREATED AS TRANSFER MERELY BY ENTERING INTO AGREEMENT DATED 10.06.2010. HE HAS RELIED UPON THE DECISION OF THE ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 10 HONBLE SUPREME COURT IN CASE OF CIT VS SHRI BALBIR SINGH MAINI 398 ITR 531 . 5. THE LD. AR FURTHER SUBMITTED THAT P ERUSAL OF THE DOCUMENT SHOWS THAT IT IS AN AGREEMENT WITH CERTAIN OBLIGATIONS AN D RIGHTS AND NOT CONVEYING ANY TITLE, OWNERSHIP, OR INTEREST IN THE ALLEGED LEASEHOLD RIGHTS TO THE SECOND PARTY AND ALSO NOT GIVING ANY RIGHT TO RECEIVE ANY PROFIT FROM SUCH ALLEGED LEASEHOLD RIGHTS. CONCLUSION OF RELINQUISHMENT OF ASSET WITHOUT GIVING POSSESSION ON FACE ITSELF I S NOT SUSTAINABLE. HOWEVER, FIRST PARTY HAS NOT GIVEN UP OR WITHDRAW A ND ABANDONED THEIR RIGHTS, OWNERSHIP OR INTEREST, WHATSOEVER, IN THE P ROPERTY UNDER CONSIDERATION MEANS THEY DOES NOT HAVE RELINQUISHED THE PROPERTY. IN VIEW OF THESE FACTS, THE QUESTION OF EXTINGUISHMENT OF ANY RIGHTS ALSO DOES NOT ARISE. FIRSTLY, THE FIRST PARTY ITSELF DOES NOT HAVE ANY LEGALLY OPERATIVE ALLEGED LEASEHOLD RIGHTS AT THE RELEVANT TIME. SECONDLY, BOTH THE PARTIES ARE OPEN TO CANCEL THE AGREEMENT U NDER CONSIDERATION UNDER CERTAIN CIRCUMSTANCES. THIRDLY, WHATEVER THE FIRST PARTY HAVE ALLEGED MINING LEASED RIGHTS, ARE INTACT WITH THE FIRST PARTY, SINCE, SECOND PARTY IS NOT AUTHORIZED TO DO ANYTHING ON ITS OWN BEHALF INCLUDING MINING, TRANSFER, CHANGE OF NAME, ETC. LASTLY, IT IS A TIME BOUND AGREEMENT; THEREAFTER BOTH THE PARTIES A RE FREE. THE ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 11 AGREEMENT DOES NOT CONVEYING EVEN THE SINGLE RIGHT IN ABSOLUTE TERM. THE FIRST PARTY ENTITLED TO ENJOY ALL THE RIGHTS WH ATSOEVER THEY HAVE, THEN QUESTION OF EXTINGUISHMENT DOES NOT ARISES. TH E PARTIES UNDER CONSIDERATION HAVE AGREED TO AFFECT TRANSFER UPON F ULFILLMENT OF CERTAIN TERMS AND CONDITIONS WITHIN STIPULATED PERIOD OF TI ME. UNDER THE FACTS AND CIRCUMSTANCES, THE SECOND PARTY NEITHER HAS THE POSSESSION NOR HAS ANY RIGHT TO CARRY OUT MINING ACTIVITY NOR CAN ENJO Y THE PROPERTY AS OWNER. HE HAS ALSO FURTHER PLACED RELIANCE ON THE D ECISION IN THE CASE OF SMT. MONIBEN HIRJI JADAVJI BHATT & VS. INCOME TA X OFFICER DECIDED ON 31.01.1997 OF ITAT (AHM.), THUS RENEWAL OF THE LEASEHOLD RIGHT REQUIRES BEFORE CONVEYING THE SALE DEED APART FROM OTHER IMPORTANT CONDITIONS AS STATED IN THE AGREEME NT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEES ARE LEGAL HEIRS OF LATE SHRI KAILASH CHAND MANGAL WHO WAS FATHER OF THE ASSESSEE NAMELY SANJAY MANGAL, SHRI VIJAY MANGAL AND UNCLE OF THE ASSESSEE NAMELY SHRI SUNIL AGARWAL. THOUGH THE LEASEHOLD RIGHTS OF THE MINES I N QUESTION WERE VESTED TO SHRI KAILASH CHAND MANGAL HOWEVER, AS PER THE FAMILY ARRANGEMENT AS WELL AS WILL THE OWNERSHIP OF THE MI NING RIGHTS WERE GIVEN TO SHRI SUNIL AGARWAL. THE AO THOUGH ASSESSED THE CAPITAL GAIN ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 12 IN THE HANDS OF THE THREE BROTHERS WHO ARE SONS OF SHRI KAILASH CHAND MANGAL AND PROTECTIVE ASSESSMENT IN THE HAND OF SHR I SUNIL AGARWAL HOWEVER, ALL THESE ASSESSEE HAVE CONTENDED BEFORE T HE AO AS WELL AS LD. CIT(A) THAT THE ACTUAL OWNER OF THE MINING RIGH T IS SHRI SUNIL AGARWAL WHO HAS ALSO ACCEPTED THIS FACT THAT HE IS THE REAL OWNER OF THE MINING RIGHTS IN QUESTION. THE LD. CIT(A) HAS C ONSIDERED THIS ISSUE OF OWNERSHIP OF THE MINING RIGHTS IN CASE OF SANJAY MANGAL AND VIJAY MANGAL AS WELL AS IN CASE OF SHRI SUNIL AGARWAL AND HELD THAT SHRI SUNIL AGARWAL IS THE OWNER OF THE MINING RIGHTS AND IF ANY CAPITAL GAIN IS LIABLE TO THE ASSESSED ON TRANSFER OF MINING RIG HTS IT HAS TO BE IN THE HAND OF SHRI SUNIL AGARWAL. THE FINDING OF THE LD. CIT(A) IN CASE OF SHRI SUNIL AGARWAL IN PARA 5.4 IS AS UNDER:- 5.4 WHILE DECIDING THE APPEAL OF SHRI SANJAY MANGA L AND SHRI VIJAY MANGAL VIDE ORDERS DATED 17.01.2017, I HAVE H ELD IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE CONSIDERED VIE W THAT THE OWNER OF THE MINING RIGHTS IS, SHRI SUNIL AGARWAL S /O LATE SHRI DEEN DAYAL AGARWAL AND APPELLANT CANNOT BE CONSIDER ED AS OWNER. ACCORDINGLY, ADDITION WITH RESPECT TO THE IN COME FROM MINING RIGHTS, IF ANY IS REQUIRED TO BE MADE IN THE HANDS OF SHRI SUNIL AGARWAL. THEREFORE, FOR THE PURPOSE OF COMPU TING CAPITAL GAIN IN THE HANDS OF THE APPELLANT, ON TRANSFER OF MINING RIGHTS, IF AND WHEN IT TAKES PLACE IN FUTURE, THE ADVANCE MONEY RECEIVED BY THE APPELLANT, TO THE EXTENT NOT RETURN ED BACK, SHALL BE DEDUCTED FROM THE COST/FAIR MARKET VALUE OF THE ASSET, IN ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 13 COMPUTING THE COST OF ACQUISITION, AS PER PROVISION OF SECTION 51. THIS FINDING OF THE LD. CIT(A) HAS NOT BEEN DISPUTE D BY THE ASSESSEE THOUGH THE REVENUE HAS CHALLENGED THE ORDERS OF THE LD. CIT(A) IN ALL THE CASES INCLUDING IN CASE OF SHRI SUNIL AGARWAL B UT THE PARTICULAR FINDING OF THE LD. CIT(A) IN CASE OF THE SHRI SUNIL AGARWAL HAS NOT BEEN CHALLENGED BY THE REVENUE. THE GROUND RAISED B Y THE REVENUE IN CASE OF SHRI SUNIL AGARWAL IN ITA NO. 277/JP/201 7 ARE AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION O F RS. 3,30,01,448/- ON ACCOUNT OF LONG TERM CAPITAL GAIN ON SALE OF MINING LEASE AS THE TRANSFER OF THE CAPITAL ASSET S WITH MEANING OF SECTION 2(47) OF THE I.T. ACT. (II) WHETHER ON THE FACTS OF THE LD. CIT(A) WAS JUS TIFIED IN OMITTING THE FACT THAT THE TOTAL AMOUNT OF RS. 25,0 0,000/- AND MONTHLY PAYMENTS WHICH WAS PAID BY J K CEMENT TO TH E ASSESSEE IN LIEU OF SUCH TRANSFER HAS NOT YET BEEN PAID BACK BY THE ASSESSEE. (III) THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. THUS, IT IS CLEAR THAT THE REVENUE HAS CHALLENGED T HE FINDINGS OF THE LD. CIT(A) ONLY ON THE POINT THAT THERE WAS NO TRAN SFER OF ANY CAPITAL ASSET BY VIRTUE OF AGREEMENT DATED 10.06.2010 AND C ONSEQUENTLY NO LONG TERM CAPITAL GAIN IS LIABLE TO TAX. THE ALTERN ATIVE GROUND OF THE REVENUE IS REGARDING THE AMOUNT OF RS. 25,00,000/- PAID AS PER THE ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 14 AGREEMENT AS WELL AS MONTHLY PAYMENTS WHICH WERE PA ID BY M/S J.K. CEMENTS LTD. TO THE ASSESSEE ARE TO BE ASSESSED AS INCOME OF THE ASSESSEE. IN VIEW OF THE ADMITTED POSITION BY ALL T HE ASSESSEES THAT THE REAL OWNER THE MINING RIGHTS IS SHRI SUNIL AGAR WAL AND THE REVENUE HAS NOT CHALLENGED THAT FINDING OF THE LD. CIT(A) IN CASE OF SHRI SUNIL AGARWAL WE DO NOT FIND ANY SUBSTANCE OR MERITS IN THE APPEALS OF THE REVENUE IN CASE OF SHRI SANJAY MANAG AL AND SHRI VIJAY MANGAL. ITAT NO. 277/JP/2017 7. AS REGARDS THE ISSUE OF CAPITAL GAIN ARISING FRO M TRANSFER OF THE MINING LEASE VIDE AGREEMENT DATED 10.06.2010 WE FIN DS THAT THOUGH BY VIRTUE OF THE SAID AGREEMENT THE ASSESSEE TRANSF ERRED HIS RIGHT IN THE MINING LEASE AS ON THE DATE OF AGREEMENT SUBJEC T TO THE TRANSFER OF THE RIGHTS TO BE VESTED WITH THE ASSESSEE ON REN EWAL OF LEASE BY THE GOVERNMENT WHICH WAS PENDING WITH THE AUTHORITI ES. THEREFORE, THE CONSIDERATION OF RS. 3,31,00,000/- WAS AGREED U PON BETWEEN THE PARTIES FOR TRANSFER OF LEASE RIGHTS INCLUDING THE RIGHTS AFTER RENEWAL OF LEASE BY THE GOVERNMENT. HENCE, SO FAR AS THE TOTAL CONSIDERATION AS AGREED BETWEEN THE PARTIES AS PER THE AGREEMENT DAT ED 10.06.2010 THE SAME CANNOT BE CONSIDERED AS FULL VALUE CONSIDE RATION UNTIL AND ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 15 UNLESS THE LEASE OF THE MINES IS RENEWED BY THE GOV ERNMENT IN VIEW OF VARIOUS CONDITIONS OF THE AGREEMENT AD IT WAS NE CESSARY PRE CONDITION FOR THE BALANCE PAYMENT THAT THE SAME WIL L BE PAID BY THE TRANSFEREE ONLY AFTER RENEWAL OF THE LEASE AND SUBS EQUENT TRANSFER OF THE SAME BY THE TRANSFEROR IN FAVOUR OF THE TRANSFE REE. THE HONBLE SUPREME COURT IN CASE OF CIT VS. SHRI BALBIR SINGH MAINI 398 ITR 531 WHILE DEALING WITH AN ISSUE OF TRANSFER UNDER THE JDA SUBJECT TO VARIOUS CONDITIONS TO BE FULFILLED AND FINALLY CONC LUDED IN PARA 27 TO 29 ARE AS UNDER:- 27. IN THE FACTS OF THE PRESENT CASE, IT IS CLEAR THAT THE INCOME FROM CAPITAL GAIN ON A TRANSACTION WHICH NEVER MATE RIALIZED IS, AT BEST, A HYPOTHETICAL INCOME. IT IS ADMITTED THAT, F OR WANT OF PERMISSIONS, THE ENTIRE TRANSACTION OF DEVELOPMENT ENVISAGED IN THE JDA FELL THROUGH. IN POINT OF FACT, INCOME DID NOT RESULT AT ALL FOR THE AFORESAID REASON. THIS BEING THE CASE, IT I S CLEAR THAT THERE IS NO PROFIT OR GAIN WHICH ARISES FROM THE TRANSFER OF A CAPITAL ASSET, WHICH COULD BE BROUGHT TO TAX UNDER SECTION 45 READ WITH SECTION 48 OF THE INCOME TAX ACT. 28. IN THE PRESENT CASE, THE ASSESSEE DID NOT ACQUIRE ANY RIGHT TO RECEIVE INCOME, INASMUCH AS SUCH ALLEGED RIGHT WAS DEPENDENT UPON THE NECESSARY PERMISSIONS BEING OBTAINED. THIS BEING THE CASE, IN THE CIRCUMSTANCES, THERE WAS NO DEBT OWED TO THE ASSESSEES BY THE DEVELOPERS AND THEREFORE, THE ASSE SSEES HAVE NOT ACQUIRED ANY RIGHT TO RECEIVE INCOME UNDER THE JDA. THIS BEING SO, NO PROFITS OR GAINS 'AROSE' FROM THE TRAN SFER OF A CAPITAL ASSET SO AS TO ATTRACT SECTIONS 45 AND 48 OF THE IN COME TAX ACT. ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 16 29. WE ARE, THEREFORE, OF THE VIEW THAT THE HIGH COURT WAS CORRECT IN ITS CONCLUSION, BUT FOR THE REASONS STAT ED BY US HEREINABOVE. THE APPEALS ARE DISMISSED WITH NO ORDE R AS TO COSTS. THEREFORE, THE HONBLE SUPREME COURT HAS OBSERVED T HAT FOR WANT OF PERMISSIONS, THE ENTIRE TRANSACTION OF DEVELOPMENT ENVISAGED IN THE JDA FELL THROUGH AND CONSEQUENTLY NO PROFIT AND GAIN WH ICH ARISES FROM THE TRANSFER OF A CAPITAL ASSET COULD BE BROUGHT TO TAX UNDER SECTION 45 READ WITH SECTION 48 OF THE INCOME TAX ACT. 8. IN THE CASE IN HAND SO FAR AS THE TRANSFER OF TH E LEASEHOLD RIGHTS ARE CONCERNED THE SAME ARE SUBJECT TO RENEWAL BY TH E AUTHORITIES HOWEVER, BY WAY OF THIS AGREEMENT M/S J.K. CEMENTS HAD ACQUIRED A RIGHT TO GET THE MINING LEASE RIGHTS TO BE TRANSFER RED IN ITS FAVOUR ON RENEWAL. IT IS NOT A CASE OF TRANSFER OF IMMOVABLE PROPERTY BUT IT IS ONLY MINING RIGHTS UNDER LEASE WERE AGREED TO BE TRANSFE RRED FOR A CONSIDERATION TO M/S J.K. CEMENTS HAD SECURED THE R IGHT TO GET THE MINING LEASEHOLD RIGHTS TRANSFERRED IN ITS FAVOUR B Y WAY OF THIS AGREEMENT DATED 10.06.2010 AND ALSO PAID A SUM OF R S. 25 LACS TO SECURE THE SAID RIGHT. THUS, THOUGH PRIOR TO THE R ENEWAL OF THE LEASE BY THE GOVERNMENT THERE CANNOT BE ANY REAL TRANSFER OF THE MINING RIGHTS HOWEVER, THE RIGHTS TO GET SUCH LEASE TRANSF ER IN ITS FAVOUR WAS ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 17 SECURED BY THE M/S J.K. CEMENTS VIDE THIS AGREEMENT DATED 10.06.2010 AND AGAINST A CONSIDERATION OF RS. 25 LACS WHICH IS NOT REFUNDABLE. THE RELEVANT CLAUSE OF THE AGREEMENT IS CLAUSE NO. 10 R EADS AS UNDER:- 10- FD GE IZFKE I{K VIUS YHT GKSYM JKBZVL VKI F}RH; I{K DKS GLRKURFJR DJUK PKGRS GSA VKSJ D;KSAFD VHKH [KKU ,OA HKWFOKKU FOHKKX ESA GEKJS IZKFKZUKI= FOPKJK/KHU GS RFKK [KLJK UECJ 672 DS LECU/K ESA GEKJS I{K ESA EKUUH; MPP U;K;KY; ESA OKN YFECR GKSUS RFKK I;KZOJ.K LOHD`R [KKU ,OA I;KZOJ.K EA=KY; LS VKUS DS I'PKR~ UOHUHDJ.K [KKU FOHKKX }KJK GEKJS I{K ESA FUIKFNR ,OA IATHD`R GKS TK;SXHA ;KFU GE PKGRS GS FD VHKH LS TKS HKH [KUU IV~VK VF/KDKJ IZFKE I{K DS IKL GS MLS F}RH; I{K DKS GLRKURFJR DJUK PKGRS GSA ,OA IZFKE I{K }KJK [KKU IZKIR DJUS ,OA MLDS FODKL IJ FD;S GQ, [KPSZ DS CNYS NKSUKSA I{ KKSA US FEY CSBDJ 3]31]00]000@& RHU DJKSM+ BXRHL YK[K :I;K R; DH XB Z GS TC RD IWJH DK;ZOKGH GEKJS I{K ESA UGH GKSRH RC RD VKIDS V KSJ GEKJS CHP OKRKZ GQBZ MLDS VK/KKJ IJ GEUS VKI F}RH; IK{K LS 25]00]00 0@& IPPHL YK[K :I;K VFXZE TKS FD GEUS EKBZUL DKS LGH DJUS ES A] MLDK ESUVHUSUL DJUS] YHT ,SFJ;K DKS LQJF{KR J[KUS RFKK V U; NKSVK&EKSVK [KPKZ GQVK MLDK IV~VK IZKIR DJ FY;K GS TSLS GH YHT MHM DK UOHUHDJ.K GKS TKRK GS VKSJ IV~VK GE IZFKE I{K DKS IZKIR GKS T KRK GS GE IZFKE I{K YHT GKSYM JKBZV~L DS CKCR NLRKOST VKI F}RH; I{K DS I{K ESA GLRKURFJR DJ NSAXS VKSJ CDK;K JDE IZKIR DJ YSAXSA ; FN F}RH; I{K [KUU IV~VK {KS= ESA IZKSLISFDVAX DS I'PKR~ ;G FU.KZ; YSRK GS FD MUGSA [KUU IVVK GLRKURFJR DJKUS ESA :FP UGHA GS RKS IZFKE I{K }KJK IZIR VFXZE :I LS 25]00]000@& IPPHL YK[K :I;K OKIL IZKI R UGHA DJ ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 18 LDSAXSA NKSUKSA I{KKSA DS CHP R;'KQNK JKF'K HKQXRKU F}RH; I{K JH LQUHY VXZOKY DKS DJSAXS TSLK FD ISJK PKJ ESA MYYSF[KR GS FD [KKU DS OKLRFOD EKFYD JH NHU N;KY TH VXZOKY ,OA JH LQUHY VXZOKY GS ,OA IZFKE I{K BLDS FY, FDL IZDKJ DK MTZ UGHA DJSAXSA VFXZE JK F'K :I;S 25 YK[K DK HKQXRKU TFJ, PSD LA[;K 144930 LS 144934 RD IZR;SD 5&5 YK[K :I;S DS IKWAP DS }KJK FNUAKD 4 TWU 2010 DKS D J FN;K GSA THUS, IT IS CLEAR THAT CASE IN THE PARTIES SUBSEQUE NTLY DECIDE NOT TO PROCEED FURTHER FOR TRANSFER OF MINING RIGHT UNDER LEASE THE SAID PAYMENT OF RS. 25 LACS IS NOT REFUNDABLE. HENCE, WE ARE OF THE VIEW, THAT THOUGH THE MINING RIGHTS PER SE ARE NOT TRANSF ERRED BEING SUBJECT TO THE RENEWAL OF THE LEASE HOWEVER, BY VIRTUE OF T HE AGREEMENT DATED 10.06.2010 THE ASSESSEE HAS TRANSFERRED AND SURREND ERED HIS RIGHTS IN THE SAID ASSET AS ON THE DATE OF AGREEMENT AND IS B OUND TO TRANSFER THE LEASEHOLDS RIGHTS IN FAVOUR OF M/S J.K. CEMENTS WHE NEVER THE SAME ARE RENEWED BY THE GOVERNMENT. HENCE, THIS AGREEMENT DA TED 10.06.2010 HAS DEFINITELY TRANSFER A RIGHT IN FAVOUR OF THE M/ S J.K. CEMENTS AND RELINQUISHED RIGHT ON THE PART OF THE ASSESSEE AS H E CANNOT TRANSFER THESE LEASEHOLD MINING RIGHTS IN FAVOUR OF ANY OTHE R PERSONS THEN M/S J.K. CEMENTS. ACCORDINGLY, THE AMOUNT OF RS. 25 LAC S RECEIVED BY THE ASSESSEE FOR EXECUTION OF THE SAID AGREEMENT WOULD BE THE INCOME OF THE ASSESSEE. SINCE, THIS CONSIDERATION WAS RECEIVE D IN RELATION TO THE ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 19 RIGHTS IN A CAPITAL ASSET THEREFORE, THE SAID AMOUN T IS LIABLE TO BE ASSESSED AS CAPITAL GAIN AS CONSIDERED BY AO. ACCOR DINGLY, WE DIRECT THE AO TO ASSESS THE CAPITAL GAIN IN THE HAND OF TH E ASSESSEE SHRI SUNIL AGARWAL BY CONSIDERING RS. 25 LACS AS A CONSIDERATI ON SUBJECT TO ALLOWABLE OTHER DEDUCTIONS BEING COST OF ACQUISITIO N WHICH WE WILL DEAL WITH IN THE CROSS OBJECTION OF THE ASSESSEE. AS REGARDS THE CO FILED BY SHRI VIJAY MANGAL AND SH IR SANJAY MANGAL IN CO NO. 12 & 13/JP2017. 9. GROUND NO. 1 BECOMES INFRUCTUOUS IN VIEW OF THE FINDING OF THE APPEAL OF THE REVENUE. 10. GROUND NO. 2 IS REGARDING DISALLOWANCE OF EXPEN SES U/S 57 OF THE INCOME TAX ACT. 11. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. CIT(A) HAS CON SIDERED AND DECIDED THIS ISSUE IN PARA 5.3 AS UNDER:- 5.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMENT OF FACTS, GROUNDS OF APPEAL AND THE SUBMISSION OF THE APPELLANT CAREFULLY. IT IS SEEN THAT THE AO HAS DISCUSSED THE ISSUE AT PAGE 2 OF THE ASSESSMENT ORDER AS UNDER: ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 20 'I HAVE CONSIDERED THE DETAILS FILED AND ALSO THE W RITTEN SUBMISSION FILED IN RESPONSE TO THE SHOW CAUSE NOTI CE ISSUED. IN THE ASSESSEE'S CASE IT IS NOTICED THAT THE ASSESSEE HAS NOT FURNISHED ANY INDEPENDENT EVIDENCE WITH REGARD TO T HE COMMISSION INCOME, OTHER INCOME AND SHARE OF PROFIT AS SUCH THE RECEIPT PART IS NOT SUBJECT TO VERIFICATION. IN THE ABSENCE OF NECESSARY DETAILS THE ASSESSEE'S GROSS RECEIPTS ON ACCOUNT OF INCOME FROM OTHER SOURCES NOT SUBJECT TO VERIFICATI ON. ON THE EXPENSES PART THE ASSESSEE HAS NOT FURNISHED ANY EV IDENCE WITH REGARD TO THE FIXED ASSETS ON WHICH DEPRECIATION HA S BEEN CLAIMED AND ALSO FURTHER MORE THE USE OF ASSETS FOR THE PUR POSE OF EARNING THE INCOME FROM OTHER SOURCES. THE ASSESSEE HAS NOT FURNISHED ANY DETAILS AS WELL AS BILLS AND VOUCHERS IN RESPEC T OF OTHER EXPENSE OF RS. 24,000/-. THE ASSESSEE HAS NOT FURNI SHED ANY EVIDENCE WITH REGARD TO THE LEGAL FEE AND PURPOSE F OR WHICH LEGAL FEES WAS PAID. SO FAR AS THE INTEREST EXPENSES ARE CONCERNED THE ASSESSEE HAS NOT FURNISHED ANY CO-RELATION WITH REG ARD TO THE INTEREST EXPENSES INCURRED AGAINST THE FUND WHICH W ERE UTILIZED FOR GIVING LOANS AND ADVANCES FOR WHICH INTEREST HAS BE EN RECEIVED. AS SUCH THE ASSESSEE 'S CLAIM OF EXPENSES OF RS. 1, 98,759/- IS WITHOUT ANY JUSTIFICATION AND ALSO NOT SUPPORTED WI TH ANY DOCUMENTARY EVIDENCES. THE ASSESSEE HAS NOT DISCHAR GED HIS ONUS PROVING JUSTIFICATION WITH THE DOCUMENTARY EVI DENCES AS WELL JUSTIFICATION OF THE EXPENSES CLAIMED AND ACCORDING A SUM, OF RS. 1,98,759/- IS DISALLOWED AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE.' EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS, THE APPELLANT HAS NOT BEEN A BLE TO PROVE WITH THE HELP OF DOCUMENTARY EVIDENCES THAT T HE EXPENSES OF RS. 1,98,759/- CLAIMED BY HIM U/S 57 WE RE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING THE INCOME DECLARED UNDER THE HEAD 'INCOME FROM OTHER SOURCES' U/S 56. THEREFORE, THE DISALLOWANCE OF THE ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 21 EXPENSES OF RS. 1,98,759/- MADE BY THE AO IS HEREBY CONFIRMED. ACCORDINGLY, THIS GROUND OF APPEAL IS DI SMISSED. THUS, THE AO AS WELL AS LD. CIT(A) DECIDED THIS ISS UE FOR WANT OF ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM TH AT THE EXPENDITURE WAS INCURRED FOR EARNING THE INCOME FRO M OTHER SOURCES. NOTHING HAS BEEN PRODUCED BEFORE US TO SHO W THAT THE SAID ALLEGED EXPENDITURE INCURRED BY THE ASSESSEE F OR EARNING OF INCOME FROM OTHER SOURCES ACCORDINGLY, WE DO NOT FI ND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT( A) QUA THIS ISSUE. THE CROSS OBJECTION NO. 12& 13/JP/2017 OF THE ASSES SEE ARE DISMISSED. 12. CO NO. 11/JP/2017:- THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1.UNDER THE FACTS AND CIRCUMSTANCES, LD. CIT(A) HA S ERRED BY SUSTAINING THE INITIATIONS OF PROCEEDING U/S 147 OF THE INCOME TAX ACT, 1961. THE INITIATION OF PROCEEDING IS ILLEGAL AND UNJUSTIFIED. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A) HAS ERRED IN NOT DECIDING THE FOLLOWING GROUNDS WHILE LD. AO HAS ERRED IN:- (I) NOT TAKING COST OF ACQUISITION OF THE ASSET UND ER CONSIDERATION CORRECTLY I.E. FAIR MARKET VALUE AS O N ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 22 01.04.1981 AND ALSO ERRED BY NOT PROVIDING INDEXATI ON ACCORDINGLY. (II) ALLEGING THAT NO COST WAS PAID FOR ACQUISITION OF ASSET UNDER CONSIDERATION. (III) ALLEGING THAT COST OF PREVISIONS OWNER WAS NI L AND THUS IN THE CASE OF ASSESSEE ALSO THE COST OF ACQUISITIO N IS NILL. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A) ERRED IN NOT DECIDING WHILE THE ACTION O F LD. A.O. IS CONTRADICTORY, AS ON ONE HAND COST OF ACQUISITIO N HAS BEEN TAKEN AS NIL WHEREAS, ON THE OTHER HAND THE ALLEGED RECEIPTS HAS NOT CONSIDERED AS CAPITAL RECEIPTS. 4. THE CROSS OBJECTOR CRAVES TO ADD, ALTER, AMEND A ND MODIFY AND GROUND OF CROSS OBJECTIONS. 13. GROUND NO. 1 IS REGARDING THE VALIDITY OF REOPE NING. THE LD. AR OF THE ASSESSEE HAS NOT ADVANCED ANY ARGUMENT IN RESPECT OF GROUND NO. 1. EVEN OTHERWISE WE DO NOT FIND ANY SUB STANCE OR MERITS IN GROUND NO. 1 OF THE CO. ACCORDINGLY, GROU ND NO. 1 OF THE CO IS DISMISSED. 14. THE ONLY OTHER ISSUE RAISED IN THE CO IS REGARD ING THE COST OF ACQUISITION OF THE CAPITAL ASSET BEING THE FAIR MARKET VALUE (FMV) AS ON 01.04.1981. ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 23 15. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUT E THAT THE LEASEHOLD RIGHTS WERE ACQUIRED BY THE PREDECESSOR O F THE ASSESSEE IN THE YEAR 1969 AND FURTHER, THE ASSESSEE HAS INHE RITED PROPERTY WHICH FALL IN THE CATEGORY OF TRANSFER OF CAPITAL A SSET AS PER SECTION 49(1)(I)(III)(A) OF THE ACT. ONCE THE CAPIT AL ASSET IN QUESTION BECOMES THE PROPERTY OF THE ASSESSEE AS PE R SECTION 49(1)(I)OR(III) AND THE PREVIOUS OWNER HAD ACQUIRED THE PROPERTY PRIOR TO 01.04.1981 THEN, THE COST OF ACQUISITION O F THE CAPITAL ASSET FOR THE PURPOSE OF SECTION 48/49 SHALL BE THE COST OF ACQUISITION OF THE ASSET TO THE PREVIOUS OWNER OR T HE FAIR MARKET VALUE OF THE ASSET AS ON 01.04.1981 AT THE OPTION O F THE ASSESSEE AS PROVIDED U/S 55(2)(II)(B) OF THE INCOME TAX ACT. FOR READY REFERENCE WE QUOTE SECTION 55(2)(A)(B) AS WELL AS S ECTION 55(3) AS UNDER:- (2)[FOR THE PURPOSES OF SECTIONS 48 AND 49 , 'COST OF ACQUISITION' 25 , 26 [(A ) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL 25 OF A BUSINESS 27 [OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS] 28 [OR 25 A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING] 29 [OR RIGHT TO CARRY ON ANY BUSINESS 30 [ OR PROFESSION ]], TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 24 (I ) IN THE CASE OF ACQUISITION OF S UCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE ; AND (II ) IN ANY OTHER CASE [NOT BEING A CASE FALLING UNDER S UB - CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 49 ], SHALL BE TAKEN TO BE NIL ; (AA ) 31 [IN A CASE WHERE, BY VIRTUE OF HOLDING A CAPITAL AS SET, BEING A SHARE OR ANY OTHER SECURITY 32 , WITHIN THE MEANING OF CLAUSE (H ) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE FINANCIAL ASSET), THE ASSESSEE (A ) BECOMES ENTITLED TO SUBSCRIBE TO ANY ADDITIONAL FINANCIAL ASSET ; OR (B ) IS ALLOTTED ANY ADDITIONAL FINANCIAL ASSET WITHOUT ANY PAYMENT, THEN, SUBJECT TO THE PROVISIONS OF SUB-CLAUSES (I) AND (II ) OF CLAUSE (B)], (I ) IN RELATION TO THE ORIGINAL FINANCIAL ASSET, ON THE BASIS OF WHICH THE ASS ESSEE BECOMES ENTITLED TO ANY ADDITIONAL FINANCIAL ASSET, MEANS THE AMOUNT ACTUALLY PAID FOR ACQUIRING THE ORIGINAL FINANCIAL ASSET ; (II ) IN RELATION TO ANY RIGHT TO RENOUNCE THE SAID ENTIT LEMENT TO SUBSCRIBE TO THE FINANCIAL ASSET, WHEN SUCH RIGH T IS RENOUNCED BY THE ASSESSEE IN FAVOUR OF ANY PERSON, SHALL BE TAKEN TO BE NIL IN THE CASE OF SUCH ASSESS EE ; (III ) IN RELATION TO THE FINANCIAL ASSET, TO WHICH THE AS SESSEE HAS SUBSCRIBED ON THE BASIS OF THE SAID ENTITLEMENT , MEANS THE AMOUNT ACTUALLY PAI D BY HIM FOR ACQUIRING ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 25 SUCH ASSET ; 33 [(IIIA ) IN RELATION TO THE FINANCIAL ASSET ALLOTTED TO THE ASSESSEE WITHOUT ANY PAYMENT 34 AND ON THE BASIS OF HOLDING OF ANY OTHER FINANCIAL ASSET, SHALL BE TAKEN TO BE NIL IN THE CASE OF SUCH ASSESSEE ;] AND (IV ) IN RELATION TO ANY FINANCIAL ASSET PURCHASED BY ANY PERSON IN WHOSE FAVOUR THE RIGHT TO SUBSCRIBE TO SU CH ASSET HAS BEEN RENOUNCED, MEANS THE AGGREGATE OF TH E AMOUNT OF THE PURCHASE PRICE PAID BY HIM TO THE PERSON RENOUNCING SUCH RIGHT AND THE AMOUNT PAID BY HIM TO THE COMPANY OR INSTITUTION, AS THE CASE MAY BE, FOR ACQUIRING SUCH FINANCIAL ASSET ;] 35 [(AB ) IN RELATION TO A CAPITAL ASSET, BEING EQUITY SHARE OR SHARES ALLOTTED TO A SHAREHOLDER OF A RECOGNISED STOCK EXC HANGE IN INDIA UNDER A SCHEME FOR 36 [DEMUTUALISATION OR] CORPORATISATION APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF IN DIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992), SHALL BE THE COST OF ACQUISITION OF HIS ORIGINAL MEMBERSHIP OF THE EXCHA NGE:] 36 [ PROVIDED THAT THE COST OF A CAPITAL ASSET, BEING TRADIN G OR CLEARING RIGHTS OF THE RECOGNISED STOCK EXCHANGE AC QUIRED BY A SHAREHOLDER WHO HAS BEEN ALLOTTED EQUITY SHARE OR S HARES UNDER SUCH SCHEME OF DEMUTUALISATION OR CORPORATISA TION, SHALL BE DEEMED TO BE NIL;] (B ) IN RELATION TO ANY OTHER CAPITAL ASSET,] (I ) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE 37 BEFORE THE 38 [1ST DAY OF APRIL, 39 [ 39A [ 1981 ] ]], MEANS THE COST OF ACQUISITION OF THE ASSET TO THE A SSESSEE OR THE FAIR 40 MARKET VALUE OF THE ASSET ON THE 41 [1ST DAY ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 26 OF APRIL, 42 [ 42A [ 1981 ] ]], AT THE OPTION OF THE ASSESSEE ; (II ) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE 43 BY ANY OF THE MODES SPECIFIED IN 44 [SUB - SECTION (1) OF] SECTION 49 , AND THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER BEFORE THE 45 [1ST DAY OF APRIL, 46 [ 46A [ 1981 ] ]], MEANS THE COST OF THE CAPITAL ASSET TO THE PREVIOUS OWNER OR THE FAIR 47 MARKET VALUE OF THE ASSET ON THE 45 [1ST DAY OF APRIL, 46 [ 46A [ 1981 ] ]], AT THE OPTION OF THE ASSESSEE ; (III ) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE 43 ON THE DISTRIBUTION OF THE CAPITAL ASSETS OF A COMPANY ON ITS LIQUIDATION AND THE ASSESSEE HAS BEE N ASSESSED TO INCOME- TAX UNDER THE HEAD 'CAPITAL GAINS' IN RESPECT OF THAT ASSET UNDER SECTION 46 , MEANS THE FAIR 47 MARKET VALUE OF THE ASSET ON THE DATE OF DISTRIBUTI ON ; (IV ) 48 [***] 49 [(V ) WHERE THE C APITAL ASSET, BEING A SHARE OR A STOCK OF A COMPANY, BECAME THE PROPERTY OF THE ASSESSEE ON (A ) THE CONSOLIDATION AND DIVISION OF ALL OR ANY OF THE SHARE CAPITAL OF THE COMPANY INTO SHARES OF LARGER AMOUNT THAN ITS EXISTING SHARES, (B ) THE CONVERSI ON OF ANY SHARES OF THE COMPANY INTO STOCK, (C ) THE RE- CONVERSION OF ANY STOCK OF THE COMPANY INTO SHARES, (D ) THE SUB- DIVISION OF ANY OF THE SHARES OF THE COMPANY INTO SHARES OF SMALLER AMOUNT, OR ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 27 (E ) THE CONVERSION OF ONE KIND OF SHARES OF THE COMPANY INTO ANOTHER KIND, MEANS THE COST OF ACQUISITION OF THE ASSET CALCULAT ED WITH REFERENCE TO THE COST OF ACQUISITION OF THE SHARES OR STOCK FROM WHICH SUCH ASSET IS DERIVED.] (3) WHERE THE COST FOR WHICH THE PREVIOUS OWNER ACQ UIRED THE PROPERTY C ANNOT BE ASCERTAINED, THE COST OF ACQUISITION TO THE PREVIOUS OWNER MEANS THE FAIR MARKET VALUE O N THE DATE ON WHICH THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER. THUS, IT IS CLEAR FROM THE PROVISIONS OF SECTION 55 (2)(A)(B) R.W.S. SECTION 55(3) OF THE ACT THAT IN CASE OF ASSESSEE H AS EXERCISED HIS OPTION THAT THE COST OF ACQUISITION OF THE CAPITAL SHALL BE THE FAIR MARKET VALUE AS ON 01.04.1981 THEN, THE COST OF ACQ UISITION OF CAPITAL ASSET OF THE PREVIOUS OWNER BECOMES IRRELEV ANT FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. UNDISPUTEDLY THE PREVIOUS ACQUIRED THE LEASEHOLD RIGHTS PRIOR TO 01.04.1981 T HEREFORE, THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 HAS TO BE CONSIDERED AS COST OF CAPITAL ASSET FOR THE PURPOSE OF SECTIONS 48 AND 49 OF THE ACT. ACCORDINGLY, WE DIRECT THE AO TO COMPUTE THE CAPITAL GAIN AFTER ALLOWING THE COST OF ACQUISITION BEING THE FAIR MARKET VALUE AS ON 01.04.1981. ONCE, THIS BENEFIT I S ALLOWED AGAINST THE CAPITAL GAIN IN THE YEAR UNDER CONSIDER ATION, THE SAME ITA NO. 276 TO 278 & CO.NO. 11 TO 13 /JP/2017 ITO VS. SHRI VIJAY MANGAL AND OTHERS 28 WILL NOT BE ALLOWED AT THE TIME OF TRANSFER OF THE LEASEHOLD RIGHTS ON RENEWAL BY THE GOVERNMENT. IN THE RESULT, THE APPEAL OF THE REVENUES IN ITA NO . 276 &278/JP2017 AND CO OF THE ASSESSEE IN CO NO. 12 & 1 3/JP/2017 ARE DISMISSED. THE APPEAL OF THE REVENUE IN ITA NO. 277/JP2017 AND CO OF THE ASSESSEE IN CO NO. 11/JP/2017 ARE PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/04/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/04/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD-6(1), JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- SHRI VIJAY MANGAL, SHRI SUNIL AGARW AL, & SHRI SANJAY MANGAL, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 276 TO 278/JP/2017 & CO NO. 11 TO 13/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR