ITO, Alwar V. M/S SUN GOLD METAL PVT. LTD., Alwar

ITA 294/JPR/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5053 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHIVR SINGH DAGUR
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Capital asset; Capital receipt; Revised return

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 294/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 THE ITO WARD- 2(3) ALWAR CUKE VS. M/S. SUN GOLD METAL (P) LTD. E-127, INDUSTRIAL AREA BHIWADI, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAJCS 6087 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY:SHRI RAGHIVR SINGH DAGUR, ADDL CIT-. DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI P.C. PARWAL , CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/09/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/09/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), ALWAR DATED 02-12-2011 FOR THE ASSESSMENT YEAR 2007-08 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 60.00 LACS ON ACCOUNT OF SHORT TER M CAPITAL GAIN. ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 2 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 1.80 LACS ON ACCOUNT OF INTEREST I NCOME. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED THE RETURN OF INCOME ON 31-10-2007 DECLARING NIL INCOME. SUBSEQUE NTLY ASSESSEE FILED THE REVISED RETURN ON 24-10-2008 AT NIL INCOME. IN THE REVISED RETURN, THE ASSESSEE COMPANY CLAIMED EXPENSES OF RS. 60.00 LACS ON ACCOUNT OF PAYMENT OF BROKERAGE. HOWEVER, THIS AMOUNT WAS ADDE D BACK TO THE TOTAL INCOME BEING NO TAX WAS DEDUCED AT SOURCE AT THE TI ME OF MAKING THE PAYMENT OF BROKERAGE. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS AND NOTICE U/S 143(2) WAS ISSUED ON 26 -08-2008 BY FIXING THE DATE OF HEARING FOR 21-09-2008. IN COMPLIANCE T HEREOF, THE LD. AR OF THE ATTENDED THE ASSESSMENT PROCEEDINGS AND BOOKS O F ACCOUNTS WERE PRODUCED FOR EXAMINATION BY THE AO. AT PAGE 2 OF TH E LD. CIT(A), THE CONCISE OBSERVATION OF THE AO IN HIS ASSESSMENT ORD ER IS MENTIONED WHICH IS REPRODUCED AS UNDER:- 1. THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT O N 20-04-2006 TO PURCHASE THE LAND AND BUILDING SITUAT ED AT SP -3, 11B(1)(&(2), INDUSTRIAL AREA, KHUSKHERA, MEASURING 80886 SQ. MTR FOR A SUM OF RS. 6.00 CRORES WITH M/S. ARJUN IN DUSTRIES LTD. HAVING ITS REGISTERED OFFICE AT B-1/14, SAFRDARJUNG ENCLAVE, NEW DELHI. THE TENTATIVE DATES FOR PAYMENT WERE FIXED A S PER CLAUSE2 OF THE AGREEMENT WHICH WERE LINKED WITH COMPLETION OF CERTAIN ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 3 FORMALITIES. IT WAS ALSO AGREED BETWEEN THE PARTIES TO THE AGREEMENT THAT IN THE EVENT OF INABILITY OF THE PARTIES TO EX ECUTE THE SALE DEED WITHIN SIX MONTH FROM THE DATE HEREOF, I.E. ON OR B EFORE 20-10-2006 FOR ANY EXTRANEOUS REASON BEYOND THE CONTROL OF FIR ST PARTY. THE FIRST PARTY SHALL REFUND THE ENTIRE AMOUNT RECEIVED TILL THEN ALONGWITH LIQUIDATED DAMAGES EQUIVALENT TO EARNEST MONEY I.E. RS. 60 LACS ONLY FROM THE SECOND PARTY IN TIMES HEREOF ALONGWITH INTEREST @ 18% PER ANNUM AND THE AGREEMENT SHALL CO ME TO AN END. THE FIRST PARTY WITHOUT BRINGING THE REASON IN THE NOTICE OF THE SECOND PARTY AND WITHOUT WAITING FOR THE PERIOD OF SIX MONTHS AS AGREED, TOOK THE UNILATERAL DECISION ADSENT THE NOT ICE FOR CANCELLATION OF THE DEED JUST WITHIN ONE AND HALF M ONTH OF THE DATE OF AGREEMENT. WHEN THE COMPANY CAME TO KNOW THAT TH E FIRST PARTY HAS MISREPRESENTED THE FATS AND TOOK FALSE EXCUSE I N THE NOTICE AND IN FACT AT A HIGHER PRICE, IT IMMEDIATELY FILED A S UIT IN THE COURT OF ADDITIONAL DISTRICT & SESSION JUDGE, KISHANGARH AGA INST THE PARTY AND REQUESTED THE COURT TO PASS THE ORDER IN FAVOUR OF THE ASSESSEE AND FORBID THE FIRST PARTY FROM ENTERING INTO AN AG REEMENT TO SELL WITH AN OTHER PERSON OR TO EXECUTE THE DEED OR GIVE THE POSSESSION TO ANY OTHER PERSON. 1.2 WITH THE ABOVE FACTS, THE ASSESSING OFFICER CAM E TO THE CONCLUSION THAT THE ASSESSEE CONTENTION ABOUT T HE ASSESSEE'S CONTENTION THAT COMPENSATION RECEIVED FOR BREACH OF THE CONTRACT FOR PURCHASE OF LAND IS A CAPITAL RECEIPT IS NOT CO RRECT. IN FACT, IT IS A CASE OF RELINQUISHMENT OF THE ASSETS AND IS A TRANS FER IN RELATION TO A CAPITAL ASSETS IN VIEW OF THE PROVISION OF SECTION 2(47) OF THE I.T. ACT. IT IS ALSO STATED BY THE AO THAT THE ASSESSEE COMPANY HAS ACCEPTED THE AMOUNT OF LIQUIDATED DAMAGES OF RS. 60 LACS FROM THE SELLER PARTY IN VIOLATION OF THE CLAUSE 10 OF THE A GREEMENT TO SELL. THE ASSESSEE CLAIMED THAT THE FIRST PARTY (SELLER) TOOK THE UNILATERAL DECISION AND SENT THE NOTICE FOR CANCELLATION OF TH E DEED AND THE ASSESSEE FILED A SUIT AGAINST THE CANCELLATION OF D EAL IN THE COURT OF ADDITIONAL DISTT. & SESSION JUDGE, KISHANGARH AND D ECISION WHEREOF IS PENDING IS NOT RELEVANT AND DOES NOT SER VE ANY PURPOSE. FROM THESE FACTS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT BY ACCEPTING THE AMOUNT OF INTEREST MONEY AND LIQUI DATED DAMAGES AND INTEREST ASSESSEE COMPANY RELINQUISHED ITS RIGH TS IN THE LAND ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 4 AND THEREFORE, IT IS CERTAINLY A TRANSFER IN RELATI ON TO CAPITAL ASSET IN TERMS OF SECTION 2(47) OF THE I.T. ACT AND THEREFOR E, THE LIQUIDATED DAMAGES OF RS. 60 LACS RECEIVED BY THE ASSESSEE COM PANY IS TAXED AS A SHORT TERM CAPITAL GAIN. INTEREST OF RS. 1.80 LACS IS TAXED AS INCOME FROM OTHER SOURCE. WHILE COMING TO THESE CON CLUSION, THE AO HAS RELIED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIJAY FLEXIBLE CONTAINERS (1990) 186 ITR 6 93 (BOM.) AND CIT VS. TATA SERVICES LTD. 122 ITR 594 (BOM.) THUS THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED B Y THE AO AS UNDER:- INCOME AS PER COMPUTATION OF TOTAL INCOME RS. 45,774/- ADD: SHORT TERM CAPITAL GAIN RS. 60,00,000,- INTEREST INCOME(INCOME FROM OTHER SOURCES ) RS. 1,80,000/- NET TAXABLE INCOME RS. 61,34,226/ 2.2 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO HAD DELETED THE BOTH THE ADDITIONS MADE BY THE AO BY OBSERVING AS UNDER:- 5.0 AFTER HAVING HEARD THE COUNSEL IN DETAILS AND PERUSING THE CASE LAWS AS RELIED UPON BY HIM, I AM CONVINCED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN GIVING A FIND ING THAT THERE IS EXTINGUISHMENT OF RIGHT OF THE ASSESSEE COMPANY VIS -A-VIS THE LAND FOR WHICH THE AGREEMENT WAS EXECUTED GOING BY THE D ECISION RELIED UPON BY THE COUNSEL. THE ASSESSING OFFICER HAS NOT BROUGHT ANY DOCUMENTARY EVIDENCE THAT THE ASSESSEE COMPANY HAD ABANDONED ITS RIGHT TO PURCHASE THE PROPERTY, ON THE CONTRARY , IT HAS FILED A CASE OF SPECIFIC PERFORMANCE ON THE COURTS OF LAW, THERE FORE, IT CANNOT BE AID THAT THERE IS ABANDONMENT AND IF THE POSITIO N IS SO THEN THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY CANNOT BE T AXED INTO ITS HANDS IN THE YEAR OF RECEIPT. SIMILARLY ACCEPTING T HE AMOUNT OF EARNEST MONEY TOGETHER WITH THE COMPENSATION DOES N OT GIVE RISE TO THE TAXABILITY OF THE AMOUNT. THE ACCEPTANCE OF THE AMOUNT MAY ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 5 ASSUME A NUMBER OF COLORS. THE ASSESSEE COMPANY HAS CREDITED THE AMOUNT OF COMPENSATION AS LIABILITY IN ITS BOOKS O F ACCOUNT. THEREFORE, CONSIDERING ALL THESE FACTUAL POSITION, THE RECEIPT OF COMPENSATION OF RS. 60,00,000/- ALONGWITH THE INTER EST OF RS. 1,80,000/- CANNOT BE TAXED AS SHORT TERM CAPITAL GA IN IN THE HANDS OF THE ASSESSEE COMPANY IN THE YEAR OF RECEIPT. NOW COMING ON THE ISSUE OF TAXABILITY OF THE AMOUNT OF COMPENSATION, I DERIVE THE CONCLUSION FROM THE DECISION OF BOMBAY HIGH COURT A S GIVEN IN THE CASE OF CIT VS. VIJAY FLEXIBLE CONTAINERS 186 I TR (BOM.) WHEREIN IT HAS BEEN HELD THAT THE TAXABILITYOF THE AMOUNT CAN BE DETERMINED ONLY AFTER THE PASSING OF THE DECREE AND NOT OTHERWISE, IT IS SEEN THAT THE ASSESSEE COMPANY HAS FILED A SU IT AGAINST THE SELLER FOR SPECIFIC PERFORMANCE IN THE COMPETENT CO URT OF LAW AND THE NECESSARY PAPERS / PLAINT AND THE COPIES OF THE ORDER SHEET WERE ALSO FILED, THEREFORE, IT IS DIRECTED THAT THE AMOU NT OF RS. 60.00 LACS AND THE INTEREST OF RS. 1.80 LACS WILL BE TAXABLE I N THE YEAR OF SETTLEMENT OF DISPUTE. WHILE COMING TO THE CONCLUSI ON, I QUOTE FROM DECISION OF NYLO PLAST INDUSTRIES (P) LTD. VS. ACIT ,82 ITD 315 (MUM.) AS UNDER:- IN THE CASE OF A CONTRACTUAL LIABILITY THE DEDUCT ION IS PERMISSIBLE IN THE YEAR OF SETTLEMENT OF THE DISPUT E. THIS VIEW IS SUPPORTED BY THE DECISIONS OF THE SUPREME COURT IN THE CASE OF SHREE SAJJAN MILLS LTD. V. CIT (1985) 156 ITR 585 (SC) AN D IN THE CASE OF INDIAN MOLASSES CO. (P.) LTD. V. CIT (1959) 37 ITR 66 (SC) AND ALSO THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE O F CIT V. PHALTON SUGAR WORKS LTD. (1986) 162 ITR 622 (BOM.). IN THE CASE OF CIT V. ASHOKBHAI CHIMANBHAI (1965) 56 ITR 42 (SC), THEIR LORDSHIPS OF THE SUPREME COURT HELD THAT THE INCOME IS SAID TO BE RE CEIVED BY THE ASSESSEE WHEN IT REACHES HIM; WHEN THE RIGHT TO REC EIVE THE INCOME BECOMES VESTED IN THE ASSESSEE, IT IS SAID TO ACCRU E OR ARISE. IN VIEW OF THE AFOREMENTIONED DECISIONS, WE ARE OF THE CONSIDE RED VIEW THAT IN A CASE WHERE THE ASSESSEE';S RIGHT TO RECEIVE THE INC OME UNDER A CONTRACT IS DISPUTED THE INCOME WILL BE ASSESSABLE IN THE YE AR OF SETTLEMENT OF DISPUTE. SINCE THERE WAS A DISPUTE BETWEEN THE PART IES RELATING TO THE CONTRACTUAL OBLIGATION THE INCOME ACCRUED TO THE AS SESSEE ONLY IN THE YEAR OF THE SETTLEMENT OF THE DISPUTE. ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 6 IN VIEW THEREOF, I AM OF THE CONSIDERED OPINION THA T THE ASSESSING OFFICER IS NOT JUSTIFIED IN TAXING A SUM OF RS. 60.00 LACS AND RS. 1.80 LACS AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 AND THE SAME IS DELETED. THUS THE GROUND OF APPEAL NUMBER 1 TO 4 ALLOWED AND THE ASSESSEE COMPANY WILL GET THE NECESSARY RELIEF. 2.3 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO. 2.4 DURING THE COURSE OF HEARING THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT EMERGES FROM THE RECORD THA T THE AO MADE THE ADDITION OF RS. 61.80 LACS I.E. RS. 60 LACS ON ACCO UNT OF SHORT TERM CAPITAL GAIN AND RS. 1.80 LACS ON ACCOUNT OF ASSESSEE COMP ANY INTEREST INCOME. THE LD. CIT(A) HAS DELETED BOTH THE ADDITIONS CITIN G THE DECISIONS OF ITAT MUMBAI BENCHES IN THE CASE OF NYLO PLAST INDUS TRIES (P) LTD. VS. ACIT 82 ITD 315 AND OTHER DECISIONS AT PARA 5.0 OF HIS ORDER. IT IS FURTHER NOTED THAT SIMILAR VIEW HAD BEEN ADOPTED ON SUCH TYPE OF ISSUES BY ITAT, JAIPUR BENCH AND HON'BLE SUPREME COURT WHO HAVE DELIVERED THEIR DECISIONS AS UNDER:- ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 7 SHARDA PAREEKH VS. ACIT 145 TTJ 041 (UO)- (ITAT JAI PUR BENCH) HEAD NOTE : INCOME COMPENSATION TAXABILITY AS SESSEE RECEIVED INTERIM RELIEF FROM HIGH COURT IN TERMS OF INTEREST ON THE AMOUNT OF COMPENSATION FROM THE INSURANCE COMPANY O N ACCOUNT OF DEATH OF HER HUSBAND IN AN APPEAL FILED BY THE INSURANCE COMPANY AO & CIT(A) HELD THAT INCOME RECEIVED OR ACCRUING DURING THE RELEVANT PREVIOUS YEARIS SUBJECT TO T AN NEXURE ASSESSEE FILED AN APPEAL ON THE GROUND THAT SINCE T HE AMOUNT HAS NOT REACHED FINALITY, IT CANNOT BE TAXED HELD, TH E ORDER OF MACT IS NOT FINAL AND THE SAME HAS BEEN CHALLENGED BY IN SURANCE COMPANY BEFORE HIGH COURT THIS IS A CASE OF DEATH BY ACCIDENT AND IF THE LEGAL HEIR DIRECTED TO REFUND THE COMPEN SATION ALONGWITH INTEREST THEN THERE IS NO REMEDY TO THESE LEGAL HEI RS ESPECIALLY WHEN THE ASSESSEE WILL BE IN A ADVERSE POSITION THE IN TEREST AWARDED BY MACT MAY BE REVENUE OR COMPENSATION BUT IT CANNOT B E TAXED IN THE YEAR UNDER CONSIDERATION AS THE SAME HAS NOT BE EN REACHED ITS FINALITY CIT VS. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD. 161 ITD 524 (SC) HEAD NOTE: INCOME-ACCRUAL-ENHANCED COMPENSATION FO R ACQUISITION OF LAND- ASSESSEE'S LAND ACQUIRED BY GO VERNMENT INITIAL COMPENSATION FIXED ENHANCED BY ARBITRATOR APPEAL AGAINST THE ENHANCEMENT BY THE STATE GOVT. BEFORE THE HIGH COURT THIS IS DISTINGUISHABLE FROM THE CASE WHERE THE RIGHT TO RE CEIVE PAYMENT IS ADMITTED AND ONLY QUANTIFICATION OF LIABILITY IS TO BE SETTLED ADDITIONAL COMPENSATION NOT TAXABLE AS THE ASSESSEE HAS NOT GOT THE ABSOLUTE RIGHT TO RECEIVE THE ADDITIONAL COMPENSATI ON. 2.5.1 CONSIDERING THE ENTIRETY OF THE FACTS, CIRCUM STANCES, ORDERS OF THE LOWER AUTHORITIES AND RESPECTFULLY FOLLOWING THE DE CISIONS OF THE ITAT, JAIPUR BENCH AND HON'BLE SUPREME COURTS (SUPRA), WE FIND NO INFIRMITY ITA NO. 294/JP/2012 THE ITO , WARD- 2(3) ALWAR VS. M/S. SUN GOLD METAL (P) LTD. , ALWAR . 8 IN THE ORDER OF THE LD. CIT(A) ON BOTH THE ISSUE. T HUS GROUND NO. 1 AND 2 OF THE REVENUE ARE DISMISSED 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26/09/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- 2(3), ALWAR 2. IZR;FKHZ@ THE RESPONDENT- M/S. SUN GOLD METAL (P) LTD., ALWA R 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.294/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR