ITO WD 21(1)(2), MUMBAI V. ILA DINESH BHUTA, MUMBAI

ITA 4037/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8229 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 01-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K B KASIA
• Keywords: Capital asset; Cost of acquisition; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.4037/MUM/2010 ASSESSMENT YEAR-2007-08 THE ITO, WARD 21(1)(2), PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400 051 VS. MS. ILA DINESH BHUTA, GR. FLOOR, ASMITA, N.S. ROAD 3,JVPD VILE PARLE (W), MUMBAI-400 056 PAN - ACAPB 6114G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIJAY KUMAR JAISWAL RESPONDENT BY: SHRI K.B. KASIA DATE OF HEARING :01.08.2012 DATE OF PRONOUNCEMENT: 03.08.2012 O R D E R PER N.K. BILLAIYA (AM): WITH THIS APPEAL THE REVENUE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF LD. CIT(A)-32, MUMBAI DT. 11.3.2010 PERTAI NING TO ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING THE AMOUN T OF RS. 1,04,00,000/- TO BE TAXED AS CAPITAL GAINS INSTEAD OF INCOME FROM OTHER SOURCES BY THE AO. IN DOING SO, THE LD. CIT(A) HAS NOT APPRECIATED THE FOLLOWING FACTS OF THE CASE NAMELY 2. THE OWNERSHIP IN THE PROPERTY IN FAVOUR OF ASSES SEE WAS ALSO NOT DECIDED AND HENCE THE ASSESSEE WAS ONLY A DOUBTFUL OWNER. 3) THAT THE MONEY WAS RECEIVED BY THE ASSESSEE FOR SETTLEMENT OF A DISPUTE AND NOT FOR ANY RIGHT IN TH E PROPERTY, AS THE TENANCY WAS IN EXISTENCE FOR THE 196 YEARS COMM ENCING ITA NO. 4037/M/10 2 FROM THE YEAR 1975 AND THE TENANT ON THE PROPERTY C ONTINUED WITH THE RIGHT TO PROCESSION UNINTERRUPTED. 4) GOING FURTHER, AT THE MOST, THIS RECEIPT CAN ONL Y BE CONSIDERED AS A COMMUTATION OF THE FUTURE RENT TO B E RECEIVED BY THE ASSESSEE. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO T O TREAT THE VALUE OF THE PROPERTY AS ON 1.4.1981 AT RS. 40,45,5 42/- AS PER THE REGISTERED VALUERS REPORT. IN DOING SO, THE LD . CIT(A) HAS ERRED IN CONSIDERING THE VALUATION ON PAR WITH FREE HOLD LAND INSTEAD OF LEASEHOLD LAND, WHEREIN THE RIGHT OF THE THIRD PARTY NEEDS TO BE DISCOUNTED TO ARRIVE AT THE CORRECT VAL UE OF THE PROPERTY AS ON 1.4.1981. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE AMOUNT OF RS. 1.04 CRORES CANNOT BE TAXED UNDER THE HEAD CAPITAL GAINS AS THE ASSESSEE HAS FAILED TO ESTABLISH ITS OWNERSHIP OVER THE PROPERTY. 3. THE FACTS GIVING RISE TO THIS GRIEVANCE SHOW THA T DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERA TION, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS RECEIVED AN AMO UNT OF RS. 1.04 CRORES BY WAY OF CONSENT TERMS IN TERMINATION OF A LITIGATION OVER A PROPERTY. THE SAME AMOUNT HAS BEEN SHOWN UNDER THE HEAD LONG TERM CAP ITAL GAINS COMPUTED AS UNDER: I THE CONSIDERATION RECEIVED ON SALE OF LEASE HOLD PROPERTY AS PER CONSENT TERMS DEED FILED IN HIGH COURT OF JURIDICATURE AT BOMBAY IN SPPT, 2006 FROM S. KUMARS LTD. RS. 1,04,00,000 II LESS: COST OF PROPERTY: AS PER INDEXED AS PER VALUATION REPORT OF M/S. AT & TS ASSOCIATES IS ATTACHED. VALUE OF THE PROPERTY AS PER VALUATION AS ON 1.4.1981 - RS. 40,45,542/- INDEXED COST OF ACQUISITION-40,45,542X519 100 2,09,96,362 (-)1,05,96,362 III LESSL EXPENSES INCURRED RELATED TO SALE OF PROPERTY: SOLICITORS/ADVOCATES CHARGES 1,00,000 ITA NO. 4037/M/10 3 LONG TERM NET GAIN/LOSS (-)1,06,96,362 LESS:LONG TERM CAPITAL LOSS TO BE CARRIED FORWARD TO NEXT YEAR 1,06,96,362 4. THE AO OBJECTED TO THE ADOPTION OF THE VALUE OF THE PROPERTY AS ON 1.4.1981. ON FURTHER EXAMINATION, THE AO WAS OF TH E OPINION THAT THE ASSESSEE NEVER BECAME THE OWNER OF THE PROPERTY. T HE PROPERTY WAS IN DISPUTE AND WHATEVER ASSESSEE HAS RECEIVED IS RECEI PT IN LIEU OF SETTLEMENT OF THE LITIGATION AND THEREFORE THE SUM OF RS. 1.04 CR ORES IS NOTHING BUT A CASUAL OR A NON-RECURRING INCOME ARISING OUT OF AN OCCUPA TION OF A DOUBTFUL OWNER AS NO RIGHT IN THE PROPERTY IS ESTABLISHED. THE AO ADDED THE ENTIRE SUM OF RS. 1.04 CRORES UNDER THE HEAD INCOME FROM OTHER S OURCES AND COMPLETED THE ASSESSMENT. 5. THE ASSESSEE STRONGLY OBJECTED THIS FINDING BEFO RE THE LD. CIT(A). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT SHE HAS INHERITED THE SAID PLOT OF LAND UNDER THE LAST WILL OF THE ORIGINAL OW NER SMT. MULJI BHAIDAS BHUTA. THE SAID PLOT OF LAND WAS LEASED TO THE PAR TNERS OF M/S. DILKHUSH DYEING AND PRINTING WORKS VIDE LEASE DT. 9.10.1975. THE LESSOR M/S.DILKHUSH ASSIGNED THE LEASEHOLD INTEREST IN THE SAID LAND IN FAVOUR OF M/S. SKM FABRICS AT A MONTHLY RENT OF RS. 1,301/-. THE ASSESSEE FUR THER CONTENDED THAT SHE HAS SHOWN THIS LEASE RENT INCOME IN HER RETURN OF I NCOME TILL 2001 UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH WAS ACCEPTE D BY THE DEPARTMENT. THE ASSESSEE FURTHER SUBMITTED THAT FROM THE YEAR 2 001, THE SAID PLOT OF LAND WAS UNDER VARIOUS UNWANTED LITIGATION AND THEREFORE THE ASSESSEE DID NOT RECEIVE ANY INCOME. TO RESOLVE THE VARIOUS LITIGAT ION, CONSENT TERM WAS FILED IN THE BOMBAY CITY CIVIL COURT AT BOMBAY BY W HICH IT WAS CONFIRMED THAT THE SAID PLOT OF LAND WAS OWNED BY LATE SMT. M ULJI BHAIDAS BHUTA WHO BEQUEATHED THE SAME TO MS. ILA DINESH BHUTA I.E. AS SESSEE. THE ASSESSEE POINTED OUT THAT THIS CLEARLY SHOWS THAT THE ASSESS EE IS THE LEGAL OWNER OF THE SAID PLOT OF LAND. AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, THE LD. CIT(A) WAS CONVINCED THAT THE CONSIDERATION RECEIVE D BY THE ASSESSEE WAS IN LIEU OF TRANSFER OF CAPITAL ASSET AND SHOULD BE TA XED UNDER THE HEAD CAPITAL ITA NO. 4037/M/10 4 GAINS. ON THE ISSUE RELATING TO VALUATION OF THE P ROPERTY AS ON 1.4.1981 AT RS. 40,45,542/-, THE LD. CIT(A) HELD THAT THE ASSES SEE HAS A RIGHT TO ADOPT VALUATION AS ON 1.4.1981 AS COST OF ACQUISITION AS PER SECTION 55(2)(B) OF THE ACT AND ACCORDINGLY ACCEPTED THE CONTENTION OF THE ASSESSEE THAT WHILE CALCULATING TAX UNDER THE HEAD LONG TERM CAPITAL GA IN, COST OF ACQUISITION SHOULD BE CONSIDERED AT RS. 40,45,542/-. 6. AGGRIEVED BY THE FINDING OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THA T THE ASSESSEE HAS FAILED TO ESTABLISH HER TITLE OVER THE SAID PROPERT Y. STRONGLY RELYING UPON THE FINDINGS OF THE AO, THE LD. DR SUBMITTED THAT AS T HE ASSESSEE COULD NEVER ESTABLISH THAT THE SAID LAND WAS IN HER POSSESSION AND OWNERSHIP, THEREFORE ANY CONSIDERATION RECEIVED ON SETTLEMENT HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE PAPER BOOK FILED BY THE A SSESSEE. ON A CAREFUL CONSIDERATION OF THE CONSENT TERMS IN L.C OF SUIT N O. 1943 OF 2004 IN THE BOMBAY CITY CIVIL COURT AT BOMBAY, WE FIND THAT SHR I DINESH VASANTRAI BHUTA, MASTER JAS PRANAV DALAL AND ILA DINESH BHUTA (ASSESS EE) ARE THE PLAINTIFFS AND MUNICIPAL CORPORATION OF GREATER BOMBAY AND S. KUMARS LTD., WHO ARE THE PROPRIETOR OF M/S. S.K.M FABRICS ARE THE DEFEND ANTS. ON PERUSAL OF CLAUSE 2(B) OF THE SAID CONSENT TERMS, IT IS PROV IDED THAT SAID PLOT OF LAND WAS OWNED BY LATE MULIBAI BHAIDAS BHUTA, WHO BEQUEA THED THE SAME TO ILA DINESH BHUTA (ASSESSEE) PURSUANT TO THE WILL DT. 25 .01.1969. AT CLAUSE 4, IT IS MENTIONED THAT PLAINTIFF NO. 3 ILA DINESH BHUT A (ASSESSEE) SHALL EXECUTE A CONVEYANCE DEED IN FAVOUR OF SKM FABRICS (ANDHERI) LTD. CONVEYING HER RIGHT, TITLE AND INTEREST IN THE SAID PLOT OF LAND I.E. REVERSIONARY INTEREST SUBJECT TO THE EXISTING LEASE IN FAVOUR OF THE DEFE NDANT NO.2 FOR A TOTAL ITA NO. 4037/M/10 5 CONSIDERATION OF RS. 1.04 CRORES TO BE RECEIVED ON EXECUTION OF THE CONVEYANCE. 9. CONSIDERING THE ABOVE STATED FACTS, THEIR REMAIN S NO DOUBT THAT THE ASSESSEE HAD A TITLE OVER THE SAID PLOT OF LAND. T HE CONSIDERATION RECEIVED BY THE ASSESSEE IS IN LIEU OF THE TRANSFER OF THE SAID TITLE TO THE PURCHASER. THEREFORE THE CONSIDERATION HAS TO BE TREATED UNDER THE HEAD CAPITAL GAINS. ON THIS NOTE, WE CONFIRM THE FINDINGS OF THE LD. CI T(A). GROUND NO. 1 TO 4 ARE DISMISSED. 10. THE NEXT DISPUTE RELATES TO THE VALUE OF PROPER TY TAKEN AS ON 1.4.1981 AT RS. 40,45,542/- AS PER THE REGISTERED VALUERS R EPORT. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF AO. THE LD. COU NSEL SUBMITTED THAT THE VALUE HAS BEEN TAKEN AS PER THE VALUATION DONE BY A GOVT. APPROVED VALUER AND THEREFORE THE GAIN SHOULD BE ACCEPTED. 11. WE FIND THAT THE LD. CIT(A) HAS HELD THAT THE A SSESSEE HAS A RIGHT TO ADOPT VALUATION AS ON 1.4.1981 AS COST OF ACQUISITI ON. ON CAREFUL CONSIDERATION OF THE VALUERS REPORT, WE FIND THAT AT PARA-6 CLAUSE (A), THE VALUER HAS STATED THAT SINCE PROPERTY HAS CAME IN P OSSESSION OF MS. ILA DINESH BHUTA THROUGH AN INHERITANCE SOMETIMES IN 19 75. THE COST OF ACQUISITION OR COST OF ACQUISITION OF PREVIOUS OWNE R IS THEREFORE NOT KNOWN. THE VALUE OF LAND AS ON 1.4.1981 INDEXED APPROPRIA TELY CAN THEREFORE BE CONSIDERED AS COST OF ACQUISITION FOR THE PURPOSE O F COMPUTATION OF CAPITAL GAINS/LOSSES. THEREAFTER THE VALUER HAS ADOPTED TH E GUIDELINES OF INDIAN VALUERS DIRECTORY AND REFERENCE BOOK INCORPORATED MARKETING VALUE OF PROPERTY IN MUMBAI AS ON 1.4.1981 AND VALUED THE PR OPERTY AT RS. 40,45,542/-. IN OUR HUMBLE OPINION, THE ADOPTION OF THE COST OF ACQUISITION AT RS. 40,45,542/- IS BASED ON THE EXPERTISE OPINIO N, THEREFORE, CANNOT BE BRUSHED ASIDE LIGHTLY. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THE FINDINGS OF THE LD. CIT(A) ARE UPHELD. GROUND NO. 5 IS DISMISSED. ITA NO. 4037/M/10 6 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF AUGUST, 2012 SD/- SD/- (VIJAY PAL RAO) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 3 RD AUGUST, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI