ITO, New Delhi V. Ms. Amita Batra, New Delhi

ITA 292/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0310 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-02-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 20-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: M P RUSTOGI

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, NEW DELHI, BENCH A NEW DELHI, BENCH A NEW DELHI, BENCH A NEW DELHI, BENCH A BEFORE SHRI I. P. BANSAL, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO. 292/DEL/2010 (ASSESSMENT YEAR 2003-04) I.T.O., WARD 22(2), VS. MS. AMITA BATRA, NEW DELHI. C-680, NEW FRIENDS COLONY, NEW DELHI. (APPELLANTS) (RESPONDENTS) PAN / GIR NO. ACMPB1633J APPELLANT BY: MRS. ANUSHA KHURANA, SR. DR RESPONDENT BY: SHRI M. P. RUSTOGI, ADV. ORDER ORDER ORDER ORDER PER A. K. GARODIA, AM: PER A. K. GARODIA, AM: PER A. K. GARODIA, AM: PER A. K. GARODIA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) XIII, NEW DELHI DATED 11.11.2009 FOR THE ASS ESSMENT YEAR 2003-04. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ACCEPTI NG THE FACT THAT THE ASSESSEE HAS CAPITAL GAINS FROM TWO PROPER TIES WHETHER RECEIVED BY HIM OR SOME OTHER PERSON ON HIS BEHALF BEING VYASA BANK LTD. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE AMOUNT OF ` 1,63,99,656/- BEING THE AMOUNT OF LTCG AND STC G MADE ON THE AUCTION OF THE TWO PROPERTIES. 2. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT ON PERUSAL OF RETURN, IT IS NOTED THAT THE ASSESSEE HAD WRITTEN A NOTE BELOW THE COMPUTATION O F INCOME THAT ASSESSEES PROPERTY BEARING NO.A-21/7, QUTAB ENCLAV E PHASE I, GURGAON AND D-22/5, OKHLA INDUSTRIAL AREA PHASE II, NEW DELHI MORTGAGED WITH VYASA BANK LTD. AGAINST CREDIT FACIL ITIES WERE SOLD THROUGH PUBLIC AUCTION ON 26.02.2003 AND 25.2.2003 BY THE DRT-II, NEW DELHI. IT IS FURTHER NOTED BY THE A.O. THAT AS PER THE DOCUMENTS 292/DEL/2010 2/2 2 ISSUED BY DRT, DELHI DATED 28.03.2005, TOTAL SALE C ONSIDERATION OF BOTH THE PROPERTIES SOLD IN PUBLIC AUCTION IS ` 191 LACS. THE A.O. ALSO RECORDED IN THE ASSESSMENTS ORDER THAT THE COS TS PRICE OF THESE PROPERTIES WAS ` 18,70,841/-. THEREAFTER, THE A.O. HAS WORKED OUT THAT THE ASSESSEE HAS EARNED CAPITAL GAIN ON SALE O F THESE PROPERTIES TO THE EXTENT OF ` 52,70,497/- IN RESPEC T OF GURGAON PROPERTY AS LONG TERM CAPITAL GAIN AND ` 1,06,29,15 9/- IN RESPECT OF FACTORY LAND AND BUILDING AS SHORTS TERM CAPITAL GA IN. THE A.O. HAS ALSO NOTED THAT THE ASSESSEE HAD NOT DECLARED ANY I NCOME FROM LONG TERM OR SHORT-TERM CAPITAL GAINS DURING THE PRESENT YEAR. IN THE COURSE OF ASSESSMENT PROCEEDINGS, VARIOUS OBJECTION S WERE FILED BY THE ASSESSEE BEFORE THE A.O. REGARDING TAXABILITY O F CAPITAL GAIN IN RESPECT OF THE AUCTION OF THESE TWO PROPERTIES BY T HE BANK BUT THE A.O. WAS NOT SATISFIED AND HE COMPLETED THE ASSESSM ENT BY BRINGING TO TAX LONG TERM/SHORT TERM CAPITAL GAIN ON SALE OF THESE TWO PROPERTIES FOR A TOTAL AMOUNT OF ` 1,63,99,656/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD . CIT(A) WHO HAS HELD THAT PROCEEDS OF SALE WERE RECEIVED BY M/S. VY ASA BANK LTD., THE MORTGAGEE AND THE SAME IS NOT SUBJECT TO CAPITA L GAIN TAX IN THE HANDS OF THE ASSESSEE. NOW, THE REVENUE IS IN APPE AL BEFORE US. 3. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). IN ADDITION TO THIS, HE HAS PLACED RELIANCE ON A JUDGMENT OF HON'BLE SUPREME COURT REN DERED IN THE CASE OF CIT VS SITALDAS TIRATHDAS AS REPORTED IN 41 ITR 367. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, HAVE G ONE THROUGH THE MATERIAL AVAILABLE ON RECORD, ORDERS OF AUTHORI TIES BELOW AND THE JUDGMENTS CITED BY THE LD. A.R. FOR THE ASSESSEE. THERE IS NO DISPUTE ABOUT THE FACTS THAT THE PROPERTIES WERE OW NED BY THE ASSESSEE AND THE SAME WERE SOLD BY DRT THROUGH AUCT ION DURING THE PRESENT YEAR. THE DISPUTE IS AS TO WHETHER THE ASSESSEE IS LIABLE TO PAY CAPITAL GAIN TAX ON ACCOUNT ON THE SALE OF T HESE TWO PROPERTIES MORTGAGED WITH BANK AND SOLD AS PER THE DIRECTION OF DRT. THE CLAIM OF THE ASSESSEE IS THAT SINCE THE A SSESSEE HAS NOT 292/DEL/2010 3/3 3 RECEIVED THE SALE PROCEEDS, THE ASSESSEE IS NOT LIA BLE TO PAY CAPITAL GAIN TAX AND IN SUPPORT OF THIS CONTENTION, RELIANC E HAS BEEN PLACED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN T HE C SE OF CITS VS SITALDAS TIRATHDAS (SUPRA). IN OUR CONSIDERED O PINION, THIS JUDGMENT OF HON'BLE SUPREME COURT IS NOT RELEVANT I N THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE , WIFE AND CHILDREN OF THE ASSESSEE WHO CONTINUED TO BE MEMBER OF HIS F AMILY RECEIVED A PORTION OF THE ASSESSEES INCOME AFTER HE HAD REC EIVED IT AS HIS OWN. THERE WAS NO CHARGE ON ANY PROPERTY OF THE AS SESSEE CREATED. THE ASSESSEE IN HIS COMPUTATION OF INCOME CLAIMED D EDUCTION OF THESE AMOUNTS PAID BY HIM AS MAINTENANCE TO HIS WIF E AND CHILDREN UNDER THE DECREE OF THE COURT PASSED BY CONSEQUENCE OF A SUIT. UNDER THESE FACTS, IT WAS HELD THAT THE ASSESSEES INCOME WAS RECEIVED BY THE ASSESSEE AS HIS OWN AND WAS THEREFO RE, ONE OF THE APPLICATION OF A PORTION OF INCOME TO DISCHARGE HIS OBLIGATION AND NOT ONE IN WHICH BY AN OVERRIDING CHARGE, THE ASSESSEE BECAME OWNER AS A COLLECTOR OF ANOTHER INCOME. IT WAS HELD THAT THE ASSESSEE WAS THEREFORE NOT ENTITLED TO DEDUCTION CLAIMED BY HIM. IN THE PRESENT CASE, THE PROPERTY SOLD BY THE BANK IS OWNED BY THE ASSESSEE AND THERE IS NO DISPUTE ON THIS ASPECT. THE PROPERTIES WERE MORTGAGED TO THE BANK AND THE BANK HAD LIMITED RIGHT IN THE P ROPERTY AND SOLD THE SAME TO RECOVER ITS DUES. IF THE SALE PROCEEDS WOULD HAVE BEEN MORE THAN THE AMOUNT RECEIVABLE BY THE BANK FROM TH E ASSESSEE, THE ASSESSEE WAS ENTITLED TO RECEIVE THE EXCESS AMO UNT OF REALIZATION FROM THE BANK. TO THE EXTENT OF AMOUNT REALIZED BY THE BANK BY SELLING THESE PROPERTIES, THE LIABILITY OF THE ASSESSEE HAS GONE DOWN AND HENCE, IT IS AS GOOD AS RECEIPT OF SA LE PROCEEDS BY THE ASSESSEE HIMSELF AND HENCE, THE CAPITAL GAIN TA X IF ANY PAYABLE ON SUCH SALE IS TO BE PAID BY THE ASSESSEE AND THE ASSESSEE DOES NOT GET ANY HELP FROM THIS JUDGMENT OF HONBLE APEX COURT CITED BY THE LD. A.R. FOR THE ASSESSEE. 5. LD. CIT(A) ALSO FOLLOWED THE JUDGMENT OF HON'BLE HIGH COURT OF KERALA RENDERED IN THE CASE OF CIT VS SMT. THRESSIA MMA ABRAHAM 292/DEL/2010 4/4 4 AS REPORTED IN 227 ITR 802 (KER.). IN OUR CONSIDER ED OPINION, THIS JUDGMENT OF HON'BLE HIGH COURT OF KERALA IS ALSO NO T APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE ASSESSEE STOOD GUARANTOR FOR REPAYMENT OF A LOAN TA KEN BY AN INDUSTRIAL CONCERN FROM KERALA FINANCIAL CORPORATIO N AND HAD ALSO MORTGAGED CERTAIN PROPERTY BELONGING TO HER IN FAVO UR OF THE CORPORATION. IN EXERCISE OF ITS RIGHTS UNDER THE DOCUMENT OF MORTGAGE, THE CORPORATION SOLD THE PROPERTY AND APP ROPRIATED THE ENTIRE PROCEEDS TOWARDS DISCHARGE OF THE LOAN. IN THAT CASE, THE SALE PROCEEDS OF THE PROPERTY WAS ADJUSTED AGAINST THE L OAN TAKEN B Y A COMPANY FOR WHICH THE ASSESSEE STOOD A GUARANTOR AN D HENCE, IT WAS NOT ADJUSTED AGAINST ANY LOAN TAKEN BY THE ASSE SSEE IN THAT CASE. IN THE PRESENT CASE, THE LOAN WAS TAKEN BY T HE ASSESSEE AND THEREFORE, THE FACTS ARE DIFFERENT AND HENCE THIS J UDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 6. LD. CIT(A) HAS ALSO RELIED UPON THE TRIBUNAL DEC ISION RENDERED IN THE CASE OF ADDL. CIT VS GLAD INVESTMENTS PVT. L TD. AS REPORTED IN 102 ITD 227 (DEL.). THIS TRIBUNAL DECISION IS ALSO NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. THE FACTS OF THAT CASE ARE THAT THE SHARES BELONGING TO THE ASSESSEE WERE VOLUNTARILY PLEDGED BY THE ASSESSEE WITH CERTAIN CREDIT INSTITU TION TO HELP ANOTHER COMPANY TO RAISE LOAN. WHEN THE ASSESSEE C OMPANY PLEDGED THE SHARES, IT WAS UNDERSTOOD THAT IN CASE OF DEFAULT, THE CREDITOR SHALL HAVE THE RIGHT TO SELL THE SHARES TO RECOVER ITS DUES. HENCE, IN THAT CASE ALSO, LOAN AGAINST WHICH THE PR OPERTY WAS MORTGAGED / PLEDGED, WAS NOT TAKEN BY THE ASSESSEE BUT BY A 3 RD PERSON, WHEREAS IN THE PRESENT CASE, LOAN HAS BEEN TAKEN BY THE ASSESSEE AND FOR THIS LOAN, MORTGAGE WAS CREATED IN FAVOUR OF THE BANK. HENCE, THIS TRIBUNAL DECISION IS ALSO OF NO HELP TO THE ASSESSEE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT AS DISCUSSED ABOVE. 7. WE HAVE NOTE THAT LD. CIT(A) HAS FOLLOWED THESE TWO DECISIONS, WHICH ARE NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE 292/DEL/2010 5/5 5 FACTS ARE DIFFERENT. ONE MORE JUDGMENT OF HONBLE APEX COURT HAS BEEN CITED BY THE LD. A.R. AND WE HAVE DISCUSSED AB OVE THAT THIS DECISION IS ALSO OF NO HELP IN THE PRESENT CASE. T HE FACTS ARE NOT IN DISPUTE. LOAN WAS TAKEN BY THE ASSESSEE AND THE PR OPERTY WAS MORTGAGED WITH THE BANK AND SALE PROCEEDS OF THESE PROPERTIES WERE ADJUSTED AGAINST THE LOAN TAKEN BY THE ASSESSE E IN THE PRESENT CASE AND HENCE, IN OUR CONSIDERED OPINION, THE ASSE SSEE HAD RECEIVED THE BENEFIT OF SALE PROCEEDS BY WAY OF RED UCTION IN HER LIABILITY TOWARD BANK AND SUCH LIABILITY WAS ON ACC OUNT OF LOAN TAKEN BY THE ASSESSEE HERSELF AND NOT BY A THIRD PERSON A ND THEREFORE, ANY CAPITAL GAIN TAX ARISING OUT OF SUCH SALE OF PROPER TY IS PAYABLE BY THE ASSESSEE. HENCE, WE REVERSE THE ORDER OF LD. CIT(A ) ON THIS ISSUE AND RESTORE THAT OF THE A.O. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. 9. PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH., 2011. SD./- SD./- (I. P. BANSAL) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:4 TH MARCH., 2011 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI