ITO 25(3)(4), MUMBAI V. TANVI CONSTRUCITON & REALTORS, MUMBAI

ITA 3692/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7561 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition

Judgement Text

ITA NO 3692 OF 2011 TANVI CONSTRUCTIONS & REALTORS MUMBAI PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIVEK VERMA, JUDICIAL MEMBER ITA NO. 3692/MUM/2011 (ASSESSMENT YEAR: 2008-09) INCOME TAX OFFICER 25(3)(4) TANVI CONSTRUCTION&REALTORS R.NO.307 C-10 PRATAYSKHAKR BHAVAN GR.FLOOR,KRISHNA PLACE, NEXT BANDRA KURLA COMPLEX TO SAI DHAM,W.E.HIGHWAY BANDRA (E) MUMBAI 400051 VS KANDIVALI (E)MUMBAI 400 101 PAN NO.AAFFT 3145 A APPELLANT RESPONDENT REVENUE BY: MR.MANOJ MISHRA, DR ASSESSEE BY: MR.NARESH JAIN DATE OF HEARING: 07/03/2012 DATE OF PRONOUNCEMENT: 21/03/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS REVENUE APPEAL AGAINST THE ORDER OF THE CIT (A)-35 MUMBAI ON THE ISSUE OF DELETING THE ADDITION OF ` .1,53,33,333/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I ) OF THE INCOME TAX ACT. 2. BRIEFLY STATED, THE ASSESSING OFFICER NOTICED THAT ASSESSEE PURCHASED LAND FOR DEVELOPMENT FROM MR. YATIN CHAND RAKANT PATEL & OTHERS FOR A CONSIDERATION OF ` .2,30,00,000/-. THE ASSESSING OFFICER NOTICED THAT OUT OF THE THREE CO-VENDORS, T WO OF THEM MRS. SHRADHA ATUL PATEL AND MRS. KALYANI HEMANT PATEL WE RE NON- RESIDENTS AND CAPITAL GAINS PERTAINING TO THEM WAS CHARGEABLE TO TAX. SINCE THE ASSESSEE HAS NOT DEDUCTED THE TAX UN DER SECTION 195 OF THE ACT, HE DISALLOWED AN AMOUNT OF 2/3 RD SHARE OF THE PURCHASE CONSIDERATION ALLEGED TO HAVE BEEN PERTAINING TO T HE NON-RESIDENTS ON THE REASON THAT TDS WAS NOT MADE AND AMOUNT PAYA BLE TO NONRESIDENTS WAS NOT ALLOWABLE U/S 40(A)(IA). ITA NO 3692 OF 2011 TANVI CONSTRUCTIONS & REALTORS MUMBAI PAGE 2 OF 4 3. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE AMOU NT WAS PAID IN INDIA TO MR. YATIN CHANDRAKANT PATEL AND TH E AMOUNT WAS PAID BY WAY OF PAY ORDERS IN FAVOUR OF M/S KIRIT N. DAMANIA & CO, ADVOCATES AND SOLICITORS. FURTHER IT WAS SUBMITTED THAT THE AMOUNT PAID TO THE SAID ADVOCATE AND SOLICITORS WAS IN TUR N TRANSFERRED BY WAY OF BANK TRANSACTION THROUGH SHRI Y.C. PATIL AND THE ENTIRE CONSIDERATION OF ` .2.30 CRORES WAS ADMITTED BY HIM AS SALE CONSIDERATION AND OFFERED CAPITAL GAINS CLAIMING EN TIRE INDEXING COST OF ACQUISITION BASED ON THE PURCHASE COST AS ON 31. 10.2001 FOR ` .16.00 LAKHS. THE ASSESSEE SUPPORTED THE CONTENTION THAT THE ENTIRE PURCHASE COST WAS PAID BY SHRI Y.C. PATIL AN D THE SALE CONSIDERATION WAS RECEIVED BY HIM AS ABSOLUTE OWNER AND THE NAMES OF CO-VENDORS WERE ADDED AS CONFIRMING PARTIE S TO AVOID ANY LEGAL COMPLICATIONS TO THE BUYERS AT A LATER POINT OF TIME. IT WAS FURTHER SUBMITTED THAT PROVISIONS OF SECTION 40(A)( I) ARE NOT APPLICABLE AS THERE IS NO TAXABILITY ON THE PART OF THE NON-RESIDENTS AND THE ENTIRE AMOUNT WAS OFFERED TO TAX BY THE SAI D SHRI Y.C. PATIL. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE PURCHASE D PROPERTY FOR DEVELOPMENT AND SINCE THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD, THE PURCHASE COST ON LAND INCLUD ING THE STAMP DUTY PAID WAS INCLUDED TO THE COST OF PROJECT IN PR OGRESS AS THE ASSESSEE HAS NOT STARTED THE CONSTRUCTION AND ACCOR DINGLY THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION AND THE DISA LLOWANCE OF THE AMOUNT IN THE YEAR UNDER CONSIDERATION DOES NOT ARI SE. THE ASSESSEE ALSO RAISED VARIOUS LEGAL ISSUES WITH REFE RENCE TO SECTION 40(A)(I) ON THE AMOUNTS PAID OR PAYABLE ETC. 4. THE LEARNED CIT (A) AFTER EXAMINING THE CONTENTIONS AND RECORD HELD THAT THE ASSESSEE DID NOT MAKE ANY PAYM ENT TO NON- RESIDENTS AND THE PAYMENT WAS MADE ONLY TO M/S KIRI T N. DAMANIA & CO, ADVOCATES AND SOLICITORS WHO IN TURN PAID TO SHRI YATIN CHANDRAKANT PATEL, WHO IS A RESIDENT. IT WAS FURTHE R HELD THAT THE ENTIRE CAPITAL GAIN WAS OFFERED BY SHRI YC PATEL. I T WAS NOT DISPUTED ITA NO 3692 OF 2011 TANVI CONSTRUCTIONS & REALTORS MUMBAI PAGE 3 OF 4 BY THE ASSESSING OFFICER THAT SINCE THE AMOUNT WAS CORRECTLY CHARGED IN THE HANDS OF SHRI YC PATEL, THERE IS NOT HING CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENTS. THEREFOR E, THERE IS NO LIABILITY TO DEDUCT THE TAX AT SOURCE AND CONSEQUEN TLY THE DISALLOWANCE MADE UNDER SECTION 40(A)(I) WAS NOT JU STIFIED. FURTHER HE ALSO CONSIDERED THE ALTERNATE CONTENTION THAT SI NCE THE ASSESSEE WAS FOLLOWING THE PROJECT COMPLETION METHOD, THE DI SALLOWANCE CAN ONLY BE MADE IN THE YEAR OF COMPLETION OF PROJECT A ND NOT DURING THIS YEAR FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF SAVALA ASSOCIATES V. ITO (2010) 35 SOT 148(MUM). REVENUE IS AGGRIEVED. 5. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE AND THE LEARNED COUNSEL WHO REITERATED THEIR RESPECTIVE CONTENTIONS. AS SEEN FROM THE RECORD, THE INDENTURES OF CONVEYANCE MADE ON 29.10.2007 DO INDICATE THAT THE VENDORS ON FIRST PA RT ARE 3 PERSONS I.E. SHRI YATIN C. PATIL, MRS. SHRADHA ATUL PATEL A ND MRS. KALYANI HEMANT PATEL. THE FACTS AS CULLED OUT FROM THE AGR EEMENT INDICATE THAT ONE KASHMIRA CERAMICS PRODUCTS WAS ASSESSED AN D POSSESSION OF PIECE OR PARCEL OF LAND ADMEASURING 1640 SQ.METE RS SITUATED AT KASHMIRA INDUSTRIAL ESTATE, VILLAGE MIRA, DISTRICT THANE AND VENDORS WERE HOLDING 25% SHARE IN THE PRIVATE LIMIT ED COMPANY AND THE VENDORS HAVING SOME DISPUTE WITH THE COMPANY FI LED A COMPANY PETITION OF 244 OF 1991 IN THE BOMBAY HIGH COURT AN D CONSEQUENT TO THAT COMPROMISE DATED 16.4.2001, ALL THE VENDOR S CONVEYED THE PROPERTY TO THE BUYER. HOWEVER, THE RECORD ALSO DO INDICATE THAT THE ENTIRE CONSIDERATION WAS NOT PAID TO THE VENDORS DI RECTLY AND M/S KIRIT N. DAMANIA & CO, ADVOCATES AND SOLICITORS REC EIVED THE PURCHASE CONSIDERATION OF ` .2.30 CRORES BY WAY OF TWO PAY ORDERS AND THESE WERE CREDITED TO THE SAID FIRMS ACCOUNT INITIALLY AND LATER ON TRANSFERRED TO THE ACCOUNT OF SHRI Y.C. PATEL. S HRI Y.C. PATEL WHO FILED THE RETURN AND CLAIMED THE ACTUAL COST OF PUR CHASE CONSIDERATION AND OFFERED THE CAPITAL GAINS ARISING THERE FROM IN HIS RETURN OF INCOME AS ABSOLUTE OWNER OF THE PROPERTY. IN VIEW OF THE ITA NO 3692 OF 2011 TANVI CONSTRUCTIONS & REALTORS MUMBAI PAGE 4 OF 4 FACT THAT NOTHING WAS PAID TO NON-RESIDENTS, NOR RE VENUE IS ABLE TO ESTABLISH ANYTHING HOW THE AMOUNT WAS RECEIVABLE BY THEM OR PAYABLE TO THEM AND HAVING ACCEPTED THE ENTIRE SALE CONSIDERATION IN THE HANDS OF THE RESIDENT WHO OFFERED THE SAME T O TAX, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE FI NDINGS OF THE CIT (A) ON THE ISSUE. FOR VARIOUS REASONS SOME PARTIES MAY JOIN AS CO- OWNERS/CONFIRMING PARTIES IN ORDER TO AVOID LEGAL D ISPUTES, AS THERE WERE DISPUTES BETWEEN THE VENDORS AND COMPANY EARLI ER. SINCE THE FACTS INDICATE THAT THE ENTIRE CONSIDERATION PAID B Y THE ASSESSEE WAS ACCEPTED BY THE RESIDENT IN INDIA, SHRI Y.C.PATEL A ND OFFERED TO TAX IN HIS HANDS, THE QUESTION OF INVOKING THE PROVISIO NS OF SECTION 40(A)(I) DOES NOT ARISE. AS FAR AS THE ASSESSEE IS CONCERNED, HE HAD PAID AMOUNT TO A RESIDENT VENDOR/ SOLICITOR. THEREF ORE, CONSIDERING OF THE FACTS ON RECORD, WE ARE OF THE OPINION GROUN D RAISED BY REVENUE HAS NO MERIT. ACCORDINGLY THE GROUND IS DIS MISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2012. SD/- SD/- (VIVEK VERMA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 21 ST MARCH, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI