KIRAN ASHOK THAKURAL, MUMBAI V. DCIT CC 23, MUMBAI

ITA 3491/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4241 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Keywords: Capital asset; Business income; Earning of tax free income
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 3487 TO 3489/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 TO 2008-09 SHRI ASHOK P. THAKURAL, 2103 AMARNATH TOWER, YARI ROAD, VERSOVA, ANDHERI (WEST), NR 7 BANGALOW, MUMBAI 400061 % % % % / VS. DY. COMMISSIONER OF INCOME TAX, CEN.CIR.23, AAYKAR BHAVAN, 2 ND FLOOR, MUMBAI - 400 020. ' '# ./ ( ./ PAN/GIR NO. : AABPT 2441D ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ITA NO.3309/MUM/2011(A.Y. 2007-08) ASSTT. COMMISSIONER OF INCOME TAX, CEN.CIR.23, AAYKAR BHAVAN, 2 ND FLOOR, MUMBAI - 400 020. % % % % / VS. SHRI ASHOK P. THAKURAL, 2103 AMARNATH TOWER, YARI ROAD, VERSOVA, ANDHERI (WEST), NR 7 BANGALOW, MUMBAI 400061 ' '# ./ ( ./ PAN/GIR NO. : AABPT 2441D ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ./ I.T.A. NO. 3490 TO 3492/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 TO 2008-09 SHRI KIRAN ASHOK P. THAKURAL, 2103 AMARNATH TOWER, YARI ROAD, VERSOVA, ANDHERI (WEST), NR 7 BANGALOW, MUMBAI 400061 % % % % / VS. DY. COMMISSIONER OF INCOME TAX, CEN.CIR.23, AAYKAR BHAVAN, 2 ND FLOOR, MUMBAI - 400 020. ' '# ./ ( ./ PAN/GIR NO. : AAEPT 3013A ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 2 ') , ' / APPELLANT BY: MS. AARTI VISSANJI *+') - , ' / RESPONDENT BY : SHRI SURINDER JIT SINGH % - .# / DATE OF HEARING : 11/06/2013 / & - .# / DATE OF PRONOUNCEMENT : 11/06/2013 '0 / O R D E R PER BENCH: ALL THESE APPEALS ARE FILED BY THE ASSESSEE EXCEPT ITA NO.3309/MUM/2011 WHICH IS A CROSS APPEAL AGAINST ITA NO.3488/MUM/201 1. ALL THESE APPEALS ARE DIRECTED AGAINST SEPARATE ORDERS PASSED BY LD. CIT (A) IN EACH OF THE CASE (EXCEPT FOR CROSS APPEAL) DATED 21/2/2011 IN RESPECT OF RES PECTIVE ASSESSMENT YEARS. 2. THE FACTS TO DECIDE THE COMMON ISSUE IN ALL THE APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE AS UNDER: 2.1 THE ASSESSEES HEREIN ARE PARTNERS IN A FIRM STY LED AS MESSERS K.S.CONSTRUCTION. INITIALLY THE PARTNERSHIP WAS C ONSTITUTED BY PARTNERSHIP DEED DATED 10//2/2005 IN WHICH THE CLAUSE RELATING TO INTEREST PAYMENT TO THE PARTNERS WAS DESCRIBED AS UNDER:- 4. THE CAPITAL OF THE PARTNERSHIP FIRM WILL BE RS .5,00,000/- (RUPEES FIVE LAKHS ONLY) AND THE SAME WILL BE CONTRIBUTED BY THE PARTN ERS IN SUCH PROPORTIONS AS MAY BE MUTUALLY AGREED UPON. THE PARTNERS MAY BRING IN FURTHER FUNDS BY WAY OF CURRENT ACCOUNT/LOANS FROM TIME TO TIME AS MAY BE M UTUALLY AGREED UPON AT SUCH RATE AS MAY BE DECIDED BY THEM BUT NOT EXCEEDING 12 % PER ANNUM. 2.2 SUBSEQUENTLY, THE AFOREMENTIONED DEED WAS AMEN DED BY RECONSTITUTING THE PARTNERSHIP FIRM VIDE DEED DATED 31/12/2007 WHICH W AS MADE APPLICABLE W.E.F. 1/4/2006 AND SUBSTITUTED BY CLAUSE RELATING INTE REST PAYMENT TO THE PARTNERS IS DESCRIBED AS UNDER:- 4. THE CAPITAL OF THE PARTNERSHIP FIRM WILL BE RS .5,00,000/- (RUPEES FIVE LAKHS ONLY) AND THE SAME WILL BE CONTRIBUTED BY THE PARTN ERS IN PORTION OF 60% BY THE PARTIES OF THE FIRST AND THE SECOND PART AND 40% BY THE PARTIES OF THE THIRD AND THE FOURTH PART. THE AMOUNTS BROUGHT IN BY W AY OF CURRENT ACCOUNT/LOANS FROM TIME TO TIME BY THE PARTNERS SHALL CARRY INTER EST NOT MORE THAN @12% PER ANNUM. THE PERIOD OF INTEREST TO BE PAID AND RATE OF INTEREST SHALL BE MUTUALLY ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 3 AGREED BY THE PARTNERS DURING THE YEAR OF THE COMPL ETION OF THE PROJECT AND THE SAME SHALL BE CREDITED TO THE CURRENT ACCOUNTS OF THE RE SPECTIVE PARTNERS AT THE YEAR ENDED 31 ST MARCH, 2008 OR AT THE END OF THE YEAR OF THE COMPL ETION OF THE PROJECT WHICH EVEN DATE IS LATER. 2.3 THE SAID PARTNERSHIP FIRM WAS DEVELOPING A PROJ ECT NAMELY K.K.SQUARE AND THE PROFIT FROM SUCH PROJECT WAS TO BE SHOWN ON COMPLETION OF THE SAID PROJECT. THE ASSESSEE DECLARED THAT THE SAID PROJE CT WAS COMPLETED IN THE YEAR ENDING ON 31/3/2010 AND ALONG WITH AUDITED COMPLETE D FOR THAT YEAR ANNEXURE- 3 WAS ATTACHED AS A NOTES TO ACCOUNT IN THE YEAR ENDED 31/3/2010. M/S. K. S. CONSTRUCTIONS ANNEXURE III NOTES TO ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 201 0. 1) THE ASSESSEE FOLLOWS PROJECT COMPLETION METHOD O F ACCOUNTING UNDER WHICH REVENUE ACCRUES ONLY WHEN THE PROJECT IS COMPLETED. COST INCURRED ON THE PROJECT AND SALE PROCEEDS RECEIVED FROM CUSTOMERS ACCUMULAT ED DURING THE COURSE OF CONSTRUCTION OF THE PROJECT AND THE REVENUE DOES NO T ACCRUE UNLESS THE PROJECT IS COMPLETED. 2) THE PROJECT K.K.SQUARE WAS COMPLETED DURING TH E YEAR. HENCE THE ACCOUNT MADE UP TO 31ST MARCH 2010 REFLECTS PROFIT ACCRUED ON THE PROJECT. 3) BALANCES OF PARTNERS CAPITAL AND CURRENT ACCOUNT S ARE SUBJECT TO CONFIRMATION. 4) BALANCES OF SUNDRY CREDITORS, SUNDRY DEBTORS, LO ANS & ADVANCES AND DEPOSITS ARE SUBJECT TO CONFIRMATION. 5) PURSUANT TO DEED OF RECONSTITUTED PARTNERSHIP DA TED 31.12.2007 AND PURSUANT TO CONSENT TERMS DATED 1 0TH JANUARY, 2007 EXECUTED AN D FILED BY ALL THE PARTNERS IN THE BOMBAY CITY CIVIL COURT AT MUMBAI IN S. C. SUIT NO. 4556 OF 2006, THE PARTIES HERETO HAVE DECIDED TO MODIFY AND AMEND SOME OF TER MS AND CONDITIONS OF THE DEED OF PARTNERSHIP DATED 1 0TH FEBRUARY, 2005 AND CONTI NUE THE SAID BUSINESS ON THE NEW TERMS AND CONDITIONS AS ARE RECORDED IN THE SAI D CONSENT TERMS WITH EFFECT FROM APRIL, 2006. IN TERMS OF THE DEED OF RECONSTITUTED PARTNERSHIP AND AFORESAID CONSENT TERMS W.E.F. 0 1/04/2006, PROFITJLOSS SHARI NG PERCENTAGE OF THE RESPECTIVE PARTNERS OF PARTNERS HAVE BEEN AMENDED AS UNDER: MR. ASHOK PITAMBARDAS THAKURAL 41% MR. KIRAN ASHOK THAKURAL 20% MR. CHIMANLAL LAICHAND TAIREJA 20% MR. SHAMSUNDER CHIMANLAL TAFREJA 19% 6) THE FIRM HAS DEDUCTED RETENTION AMOUNT FROM THE TOTAL RUNNING BILL OF THE VARIOUS CONTRACTORS ON ACCOUNT OF DISPUTE AND DEFECTS IN WO RK. THE SAME WILL BE ACCOUNTED ONLY WHEN THEIR FINAL BILLS ARE SETTLED. 7) IN THE OPINION OF THE PARTNERS, THE CURRENT ASSE TS, LOANS AND ADVANCES HAVE BEEN VALUED AT LEAST EQUAL TO THE AMOUNTS SHOWN IN THE B ALANCE SHEET, IF REALISED, IN THE ORDINARY COURSE OF BUSINESS. THE PROVISION FOR ALL THE KNOWN LIABILITIES IS ADEQUATE AND NOT IN EXCESS OF THE AMOUNT REASONABLY NECESSAR Y. ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 4 7) IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40( B)(IV) OF INCOME TAX ACT, 1961 AND AS PER CLAUSE 4 OF DEED OF RECONSTITUTED PARTNERSHI P DATED 31/12/2007 THE AMOUNTS BOUGHT IN BY WAY OF CURRENT ACCOUNT / LOANS FROM TIME TO TIME BY THE PARTNERS SHALL CARRY INTEREST NOT MORE THAN @12% PE R ANNUM. THE PERIOD OF INTEREST TO BE PAID AND THE RATE OF INTEREST SHALL BE MUTUAL LY AGREED BY THE PARTNERS DURING THE YEAR OF THE COMPLETION OF PROJECT AND THE SAME SHALL BE CREDITED TO THE CURRENT ACCOUNTS OF THE RESPECTIVE PARTNERS AT THE YEAR END ED 31.03.2008 OR AT THE END OF THE YEAR OF THE COMPLETION OF THE PROJECT WHICH EVE R DATE IS LATER. ACCORDINGLY, THE PARTNERS HAVE ACCOUNTED INTEREST O N CURRENT ACCOUNT OF PARTNERS FOR THE PERIOD COVERING 1.04.2006 TO 31.12.2009 BY DEBI TING INTEREST IN PROFIT & LOSS A/C. & CREDITING RESPECTIVE PARTNERS CURRENT ACCOUN T AS FOLLOWS: NAME OF PARTNER AMOUNT OF INTEREST CREDIT ED IN CC A/C ASHOK THAKURAL 3,58 ,98,792.53 CHIMANLAL TALREJA 1,63 ,18,397.34 KIRAN THAKURAL 173 ,68,093.93 SHAM TALREJA 1, 74,07,886.28 TOTAL 8,69,93,170.10 AS PER OUR REPORT OF EVEN DATE FOR NAIK DANAIT & ASSOCIATES CHARTERED ACCOUNTANTS FOR K.S. CONSTRUCTIONS F.M.NO.123835 SD/- SD/- (K.S. NAIK) PARTNERS PARTNERS M.N. NO.F-8355 PLACE :MUMBAI DATED:15 OCT 2010 2.4 ON THESE FACTS IT IS THE CASE OF THE PRESENT AS SESSEES BEING PARTNER OF THE AFOREMENTIONED FIRM THAT THEY ARE MAINTAINING THEIR ACCOUNTS ON THE BASIS OF CASH SYSTEM OF ACCOUNTING. THE BORROWED FUNDS IN R ELATION TO WHICH THEY HAVE PAID INTEREST FROM YEAR TO YEAR ARE REQUIRED TO BE ASSESSED AS A LOSS AND IN THE YEAR OF COMPLETION OF PROJECT THE SET OFF OF THE SA ME SHOULD BE GRANTED AGAINST THE INTEREST RECEIVED BY THEM. IT IS ALSO THEIR CASE T HAT AO IN ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, WHICH IS D ATED 30/3/2013 HAS ACCEPTED SUCH CLAIM OF THE PARTNERSHIP FIRM OF THE ASSESSEE AND HAS ALLOWED THE INTEREST TO BE DEDUCTED OUT OF THE INCOME OF THE FIRM ON ACCOUN T OF CAPITAL INVESTED BY THE PARTNERS FOR THE PERIOD 1/4/2006 TO 31/12/2009. I T IS ALSO THE CASE OF THE ASSESSEE THAT IN THE CASE OF SHRI ASHOK P. THAKURAL , IN RESPECT OF ASSESSMENT YEAR 2009-10 THE AO HAS ACCEPTED THE METHOD OF ACCO UNTING OF THE ASSESSEE AS ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 5 CASH METHOD AND HAS ALLOWED THE LOSS OF RS.27,22,73 0/- ON ACCOUNT OF INTEREST PAID BY HIM ON THE BORROWED FUNDS INVESTED AS CAPIT AL IN THE FIRM. REFERENCE IN THIS REGARD WAS MADE TO THE ASSESSMENT ORDER DATED 29/11/2011, COPY OF WHICH HAS BEEN PLACED AT PAGE 8 & 9 OF THE PAPER BOOK. THE YEAR WISE POSITION OF INTEREST PAID BY THE ASSESSEE IN RELATION TO FUNDS BORROWED FOR INVESTING IN THE FIRM IS DESCRIBED IN THE FOLLOWING CHART, A COPY OF WHICH IS PLACED AT PAGE-7 OF THE PAPER BOOK. RE: SHRI ASHOK P. THAKURAL DETAILS OF INTEREST PAID TO OUSIDERS LENDER & RECEI VED FROM M/S. K.S. CONSTRUCTION. ASSESSMENT YEAR INT. PAID TO OUTSIDE LENDER INT. RECD. FROM K.S.CONSTRUCTION NET INT. 2006-07 669,083.00 - (669,083.00) 2007-08 143,087.00 - (143,087.00) 2008-09 3,074,067.00 - (3,074,067.00) 2009-10 3,358,965.00 - (3,358,965.00) 2010-2011 8,635,127.00 35,898,792.53 27,263,66 5.53 TOTAL 15,880,329.00 35,898,792.53 20,018,463.53 2.5 SIMILAR IS THE POSITION IN THE CASE OF SHRI KIR AN THAKURAL AND THE FIGURES ARE AS UNDER: RE: SHRI KIRAN THAKURAL DETAILS OF INTEREST PAID TO OUSIDERS LENDER & RECEI VED FROM M/S. K.S. CONSTRUCTION. ASSESSMENT YEAR INT. PAID TO OUTSIDE LENDER INT. RECD. FROM K.S.CONSTRUCTION NET INT. 2006-07 167,167.00 - ( 167,167.00) 2007-08 871,783 - (871,783.00) 2008-09 3,074,067.00 - (3,074,067.00) 2009-10 1,771,367.00 - (1,771,367.00) 2010-2011 4,642,732.00 16,318,397.34 11,675,665. 34 TOTAL 10,527,116.00 16,318,397.34 5,791,281.34 2.6 IT IS ALSO THE CASE OF THE ASSESSEE THAT IN THE CASE OF SHRI ASHOK THAKURAL AS PER COMPUTATION THE ASSESSEE HAD CLAIMED BROUGH T FORWARD LOSSES WHICH REPRESENTED INTEREST PAID BY THE ASSESSEE TO THE TU NE OF RS.62,47,458/- ( RS.13,71,156/-, RS.21,53,572/- AND RS.27,22,730/- F OR A.Y 2007-08, 2008-09 AND 2009-10 RESPECTIVELY) AND AO HAS ALLOWED SUCH C LAIM OF THE ASSESSEE BY WAY ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 6 OF ASSESSMENT ORDER DATED 28/12/2012 PASSED UNDER S ECTION 143(3) OF THE ACT. COPY OF ORDER WAS PLACED ON RECORD AND A COPY WAS A LSO GIVEN TO LD. D.R. 2.7 IN THE AFOREMENTIONED FACTS AND CIRCUMSTANCES O F THE CASE IT IS THE CASE OF THE ASSESSEE THAT LD. CIT(A) HAS ERRED IN NOT ACCEP TING THE CLAIM OF THE ASSESSEE THAT THE INTEREST PAID BY THESE ASSESSEES ON THE CA PITAL BORROWED BY THEM FOR INVESTING IN THE FIRM HAS WRONGLY BEEN DISALLOWED. IN VIEW OF ACCEPTANCE OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF INTEREST PAI D TO PARTNERS IN THE ASSESSMENT OF FIRM, SUCH CLAIM OF THE ASSESSEE SHOULD HAVE BE EN ACCEPTED. 3. ON THE OTHER HAND, IT IS THE CASE OF LD. D.R THA T CLAIM OF ASSESSEE HAS RIGHTLY BEEN DENIED BY LD. CIT(A). HE SUBMITTED TH AT THE CLAIM OF THE ASSESSEE OF CARRY FORWARD OF LOSSES CANNOT BE ACCEPTED AS NO INCOME HAS BEEN DECLARED BY THE ASSESSEE. HE SUBMITTED THAT IF THERE IS ANY MI STAKE COMMITTED BY THE A.O WHILE ASSESSING THE FIRM OR THE ASSESSEE, THAT DOES NOT MEAN THAT THE SAME SHOULD BE ACCEPTED. THE SAID MISTAKE CAN BE RECTIF IED. THUS IT WAS PLEADED BY LD.D.R THAT THE ORDER PASSED BY LD. CIT(A) IN ALL T HESE APPEALS OF THE ASSESSEE SHOULD BE UPHELD. 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. IT IS A MATTER OF FACT ON RECORD THAT FOR A.Y 2009-10 THE REVENUE IN THE CASE OF SHRI ASHOK THAKURAL HAS ACCEPTED THE ME THOD OF ACCOUNTING AS CASH. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVEN UE TO SHOW THAT THE AMOUNT BORROWED BY THE ASSESSEE IN RELATION TO WHICH INTE REST HAS BEEN CLAIMED WAS IN FACT NOT INVESTED IN THE FIRM. THE FIRM IS SHOWIN G THE PROFIT ON THE BASIS OF COMPLETION OF PROJECT. THE FIRM HAS SO BEEN ASSESS ED BY THE REVENUE WHICH IS CLEAR FROM THE ASSESSMENT ORDER PASSED IN THE CASE OF THE FIRM FOR A.Y 2010-11 BY WAY OF NOTE ATTACHED TO THE AUDIT REPORT, THE CLAIM OF THE ASSESSEE REGARDING PAYMENT ON INTEREST TO THE PARTNERS FOR THE PERIOD FROM 1/4/2006 TO 31/12/2009 HAS BEEN ACCEPTED AND FIRM HAS BEEN ALLOWED TO DEDU CT SUCH INTEREST FROM THE INCOME OF THE FIRM. IT CANNOT BE TERMED TO BE A M ISTAKE COMMITTED BY THE AO AS HAS BEEN ARGUED BY THE LD. DR. IT IS A CONSCIOUS DECISION TAKEN BY THE REVENUE. DECLARATION OF INCOME ON PROJECT COMPLETION METHOD IS AN ACCEPTED METHOD OF ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 7 ACCOUNTING. IF IT IS SO THEN REVENUE CANNOT BE ALL OWED TO TAKE A STAND WHICH IS INCONSISTENT WITH THE POSITION TAKEN BY THE REVENUE IN THE HANDS OF THE FIRM. THEREFORE, WE ARE OF THE OPINION THAT ASSESSEES IN THE PRESENT CASE HAVE TO BE ALLOWED FOR THE SET OFF OF THE INTEREST PAID BY THEM ON THE AMOUNT BORROWED BY THEM FOR INVESTMENT IN THE FIRM. THIS WILL ALSO B E IN ACCORDANCE WITH THE PARTNERSHIP DEED DATED 31/12/2007. HOWEVER, SO FAR AS IT RELATES TO THE CLAIM OF THE ASSESSEE WITH REGARD TO ASSESSMENT YEAR 2006-07 , WE MAY OBSERVE THAT SUCH CLAIM IS NEITHER SUPPORTED BY THE PARTNERSHIP DEED NOR BY THE CLAIM MADE BY THE FIRM IN ITS COMPUTATION. THE INTEREST CLAUSE I N THE RECONSTITUTED PARTNERSHIP DEED HAS BEEN MADE APPLICABLE FROM 1/4/2006 AND IS RELEVANT TO ASSESSMENT YEAR 2007-08 ONWARD. THEREFORE, THE CLAIM OF THE A SSESSEES FOR A.Y 2006-07 HAS RIGHTLY BEEN DISALLOWED AND FOR OTHER YEARS THE AS SESSEES ARE ENTITLED TO GET THE SET OFF OF THE SAME AGAINST INTEREST RECEIVED BY TH EM IN A.Y 2010-11 FROM THE FIRM. WE ORDER ACCORDINGLY. 5. THEREFORE, APPEALS OF THESE ASSESSEES FOR A.Y 2 007-08 AND 2008-09 ARE CONSIDERED TO BE ALLOWED AND FOR A.Y 2006-07 THEY ARE DISMISSED. 6. NOW COMING TO THE DEPARTMENTAL APPEAL IT WAS THE COMMON CONTENTION OF THE PARTIES THAT IDENTICAL ISSUE WAS ADJUDICATED B Y THIS TRIBUNAL IN ONE OF GROUP CASE I.E. IN THE CASE OF SMT. HEMA THAKURAL VIDE OR DER DATED 13/4/2012 IN ITA NO.3374/MUM/2011. THE COPY OF THE SAME WAS PLACED ON OUR RECORD AND COPY WAS ALSO GIVEN TO LD. D.R. FOR THE SAKE OF COMPLE TENESS OF FACTS AND ADJUDICATION THE SAID ORDER IS REPRODUCED IN ENTIRE TY . THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 21.2.2011 PASSED BY THE ID. CIT(A), FOR THE ASSESSM ENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL DERIVES INCOME FROM HOUSE PROPERTY, BUSINESS INCOME AND OTH ER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE AS SESSEE HAS CLAIMED AN AMOUNT OF RS.20,83,333/- AS EXEMPT BEING LONG TERM CAPITAL GAIN ON TRANSFER OF AGRICULTURAL LAND. FROM THE DETAILS FURNISHED THE AO OBSERVED TH AT THE ASSESSEE ALONGWITH OTHER CO-OWNERS IS IN POSSESSION OF AGRICULTURAL LAND SIT UATED AT SURVEY NO 115 AND 114 OF VILLAGE DIGHODE, TALUKA URAN, DISTRICT RAIGAD. V IDE DEED OF RIGHT OF WAY DATED 14.2.2007, THE ASSESSEE ALONG WITH OTHER CO-OWNERS GRANTED RIGHT TO WAY FROM THE LAND TO M/S ASHIWINI INFRASTRUCTURE, P. LTD (COMPAN Y) FOR A TOTAL CONSIDERATION OF RS.1,25,00,000/-. ASSESSEE BEING A CO-OWNER OF THE SAID LAND GOT HIS PROPORTIONATE ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 8 SHARE OF RS.20,83,333/- AND HAS DAIMED THIS AMOUNT AS EXEMPT AS THE SAME HAS BEEN DERIVED FROM TRANSFER OF AGRICULTURAL LAND. IN THIS REGARD THE ASSESSEE, VIDE LETTER DATED 3.12.2009, HAS INTERALLIA, SUBMITTED T HAT THE LAND IS AGRICULTURAL LAND ON WHICH CROP WAS GROWN AND THUS THE CAPITAL GAIN O N SALE OF AGRICULTURAL LAND IS EXEMPT U/S 2(14)(III) OF THE INCOME TAX ACT, 1961 ( THE ACT). THE ASSESSEE HAS ALSO RELIED ON THE JUDICIAL PRONOUNCEMENTS (I) RAMJIBHAI P CHOUDHARY V DCTT (314 ITR 0259)(SIC), (II) CIT VS MURALI LODGE (1992)194 ITR 125 (KER) AND (III) CWT VS H.V.MUNGALE (1984)(145 ITR 208) (BORN). HOWEVER, TH E AO DID NOT ACCEPT THE ASSESSEES SUBMISSIONS. HE OBSERVED THAT THE ASSESS EE ALONG WITH OTHER CO-OWNERS GRANTED RIGHT OF WAY FROM AGRICULTURAL LAND TO A CO MPANY AND GOT ITS PROPORTIONATE SHARE OF RS.20,83,333/-. THE AO REJECTED CLAIM OF THE ASS ESSEE THAT IT REPRESENTED EXEMPT INCOME BEING REVENUE FROM AGRICULTURAL LAND ON ACCO UNT OF TRANSFER OF AGRICULTURAL LAND. THE AO OBSERVED THAT IT IS A COMPENSATION ARI SING OUT OF AGRICULTURAL LAND AND NOT THE SUM RECEIVED BECAUSE OF ANY RENT AGREEMENT OR REVENUE DUE TO AGRICULTURAL ACTIVITY, AND THERE IS NO CULTIVATOR OR RECEIVER OF RENT AGREEMENT BETWEEN THE OWNERS AND THE COMPANY. THERE IS NO PROCESS PERFORMED OF A NY NATURE TO PRODUCE AGRICULTURAL YIELD. HE FURTHER OBSERVED THAT THE SA ID INCOME IS NOT BECAUSE OF ANY BUILDING OWNED OR OCCUPIED BY RECEIVER OF RENT ON S UCH LAND AND AS SUCH IS NOT AGRICULTURAL INCOME UNDER SECTION 2(1A) OF THE ACT AND ACCORDINGLY, THE AC ASSESSED COMPENSATION AS INCOME FROM OTHER SOURCES. HOWEVER, THE AC WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE HAS TREATED THE ABOVE GAIN AS LONG TERM CAPITAL GAIN. 3. ON APPEAL, THE LD.CIT(A) WHILE OBSERVING THAT ME RELY BECAUSE RECEIPT IS NOT TAXABLE UNDER A PARTICULAR HEAD, IT CANNOT BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES, DELETED THE ADDITION MADE BY THE AO. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING EFFECTIVE GROUND OF APPEAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING EXEMPTION ON INCOME BEING CONSIDERATION FOR RIGHT OF WAY OF AGRICULTURAL LAND AMOUNTING TO RS.20,83,333/ - WITHOUT APPRECIATING THE FACT THAT NO TRANSFER OF AGRICULTURAL LAND WAS EFFECTED IN RECORDS OF THE DISTRICT REVENUE AUTHORITY 5. AT THE TIME OF HEARING, THE LD.DR SUPPORTS THE O RDER OF THE AO. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE LD..C1T(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS RECEIVED PROPORTIONATE SHARE OF RS.20,83,333/- BEING RIGHT OF WAY GRANTED BY THE AS SESSEE ON HIS AGRICULTURAL LAND TO M/S ASHIWINI INFRASTRUCTURE, P.LTD AS PER AGREEM ENT DATED 142.2007. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT WHEREIN IT HAS BEEN DEARLY ADMITTED BY THE AO THAT THE AMOUNT RECEIVED BY THE ASSESSEE AND THE OTHER CO-OWNERS WAS IN RESPECT OF SURRENDER OF CERTAIN RIGHTS HELD IN PARA GRAPHS 5.4 OF HIS ORDER AS UNDER 5.4 I AM IN AGREEMENT WITH THE SUBMISSION MADE BY THE LEARNED AR THAT OWNERSHIP IS A BUNDLE OF RIGHTS AND RIGHT OF WAY IS SUBSET OF OWNERSHIP RIGHT. IN FACT, RIGHT OF WAY IS VERY SUBSTANTIAL PART OF O WNERSHIP RIGHT, AND TO THIS EXTENT GIVING RIGHT OF WAY IS ALMOST LIKE PARTING W ITH THE LAND. COMPENSATION RECEIVED FOR RIGHT OF WAY OF AGRICULTURAL LAND IS C APITAL RECEIPT AND ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 9 AGRICULTURAL LAND BEING SPECIFICALLY EXCLUDED FROM THE DEFINITION OF CAPITAL ASSET, NO CAPITAL GAIN TAX IS CHARGEABLE. IT IS EX CLUDED FROM THE DEFINITION OF CAPITAL ASSET BY CLAUSE (III) OF SUB- SECTION (14) OF SECTION 2 OF THE INCOME TAX ACT. FURTHER, AS SUBMITTED BY THE LEARNED AR, AND I N VIEW OF THE COURT DECISIONS CITED, MERELY BECAUSE RECEIPT IS NOT TAXA BLE UNDER A PARTICULAR HEAD WHICH IT IS TAXABLE, IT CANNOT BE TAXED UNDER THE H EAD INCOME FROM OTHER SOURCES. IN VIEW OF THIS, THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT AND THE ADDITION OF RS.20,83,333/- AS INC OME FROM OTHER SOURCES IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS , ACCORDINGLY, ALLOWED. 8. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED O N RECORD BY THE REVENUE AGAINST THE FINDINGS OF THE LD. CT(A), WE ARE OF THE VIEW T HAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO A ND HIS ORDER DOES NOT CALL FOR ANY INTERFERENCE. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 9. IN THE RESULT, THE REVENUES APPEAL STANDS DISMI SSED. 7. SINCE FACTS AND CIRCUMSTANCES ARE NOT STATED TO BE DIFFERENT, RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION WE HOLD THAT ADDITION HAS RIGHTLY BEEN DELETED BY LD. CIT(A). WE DECLINE TO INTERFERE AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. TO SUM UP ASSSESSEES APPEAL IN ITA NO. 3487& 34 90/MUM/2011 AND REVENUES APPEAL IN ITA NO.3309/MUM/11 ARE DISMISSE D AND OTHER APPEALS I.E., ITA NOS 3488, 3489,3491&3492/MUM/2011 ARE ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 11/06/2013 . '0 - & #' 1 2%3 11/06//2013 - 4 SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 2% DATED 11/06/2013 . % . .VM , SR. PS ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 10 '0 '0 '0 '0 - -- - *.56 *.56 *.56 *.56 7'6&. 7'6&. 7'6&. 7'6&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 *.% , , / DR, ITAT, MUMBAI 6. 4: ; / GUARD FILE. '0% '0% '0% '0% / BY ORDER, +6. *. //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NO.3487 TO 3492/MUM/2011 ITA NO.3309/MUM/2011 11 DATE INITIALS 1. DRAFT DICTATED ON: 11/06//2013 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 12/06/.2013 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: