ACIT (PSD) 2(3), MUMBAI V. SETH INDUSTRIES LTD, MUMBAI

ITA 4094/MUM/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7395 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Capital asset; Depreciation
• Section: 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI SAKTIJITDEY, JUDICIAL MEMBER AND SHRIRAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4094/MUM/2013 (ASSESSMENT YEAR:2009-10) ACIT (OSD) - 2(3) ROOM NO. 556, 5TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. SETH INDUSTRIES P. LTD. 14/15, ASHOKA SHOPPING CENTRE, 2ND FLOOR, L.T. MARG MUMBAI 400001 PAN AAECS9189D APPELLANT RESPONDENT ITA NO.2279/MUM/2015 (ASSESSMENT YEAR:2011-12) M/S. SETH INDUSTRIES P. LTD. 14/15, ASHOKA SHOPPING CENTRE, 2ND FLOOR, L.T. MARG MUMBAI 400001 VS. INCOME TAX OFFICER - 2(3)(2) MUMBAI PAN AAECS9189D APPELLANT RESPONDENT REVENUE BY: MS. POOJA SWAROOP ASSESSEE BY: SHRI SALIL KAPOOR & MS. ANANYA KAPOOR DATE OF HEARING: 23.02.2018 DATE OF PRONOUNCEMENT: 18.05.2018 O R D E R PER SAKTIJIT DEY, JM THE AFORESAID APPEALS, ONE BY REVENUE AND THE OTHER BY THE ASSESSEE, ARE AGAINST TWO SEPARATE ORDERS OF THE COMMISSIONER (APPEALS)-6, MUMBAI FOR ASSESSMENT YEARS 2009-10 AND 2011-12, RESPECTIV ELY. ITA NO. 4094/MUM/2013 A.Y. 2009-10 2. THE EFFECTIVE GROUNDS RAISED BY THE DEPARTMENT IN T HIS APPEAL ARE AS UNDER: - ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF TO THE ASSESSEEOVERLOO KING FACT THAT THE LAND ALONG WITH STAFF QUARTERS CONSTRUCTED THER EON FORMED PART OF THE SCHEDULE OF DEPRECIABLE ASSETS AND THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION, THEREBY MAKING THE PROV ISIONS OF SECTION 50(1) APPLICABLE TO THE TRANSFER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DIRECTING THAT CLAIM REGARDING DEDUCTI ON OF 1.04 CRORE PAID AS SETTLEMENT TO THE EMPLOYEES IS TO BE ALLOWED OVERLOOKING THE FACT THAT THE ASSESSEE HAD NO BUSIN ESS ACTIVITY DURING THE PREVIOUS YEAR AND THEREFORE, SUCH EXPEND ITURE CANNOT BE ALLOWED. 3. THE BRIEF FACTS RELATING TO THE DISPUTED ISSUE ARE THAT THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR UNDER DISPUTE FILED ITS RETURN OF INCOME ON 24.09.2009 DECLARING NIL INCOME. DURING THE ASSE SSMENT PROCEEDINGS, FROM THE INFORMATION AND MATERIAL AVAILABLE ON RECO RD, THE ASSESSING OFFICER(AO) FOUND THAT THE ASSESSEE WAS OWNER OF A CLOSED TEXTILE MILL. AFTER SETTLING THE LEGAL DISPUTES AND PROCEEDINGS BEFORE THE BIFR ASSESSEE GOT POSSESSION OF THE ASSETS OF THE COMPANY. THEREAFTER , THE ASSESSEE ENTERED INTO AGREEMENT WITH DIFFERENT BUILDERS FOR SELLING THE IMMOVABLE PROPERTY OF THE CLOSED TEXTILE MILL. ON VERIFYING THE PROFIT & LOSS ACCOUNT AND COMPUTATION OF INCOME THE AO FOUND THAT IN THE RELE VANT PREVIOUS YEAR ASSESSEE HAS EXECUTED A SALE DEED WITH A BUILDER, M /S. SANGHVI PREMISES P. LTD. FOR SALE OF THE PROPERTY. THE AO NOTICED TH AT THE ASSESSEE HAS OFFERED LONG TERM CAPITAL GAIN FROM SALE OF PROPERT Y BY TREATING IT AS SALE OF LAND. HOWEVER, THE AO WAS OF THE VIEW THAT THE PROP ERTIES SOLD COMPRISE OF MILL WORKERS QUARTERS AGAINST WHICH THE ASSESSEE HA S CLAIMED DEPRECIATION EARLIER. THE PROCEEDS FROM SALE OF PROPERTY HAS TO BE TAXED AS SHORT TERM CAPITAL GAIN. THEREFORE, HE CALLED UPON THE ASSESSE E TO EXPLAIN AS TO WHY THE INCOME SHOULD NOT BE ASSESSED AS SHORT TERM CAP ITAL GAIN. IN RESPONSE IT WAS SUBMITTED BY THE ASSESSEE THAT THE PROPERTY IN QUESTION SOLD BY THE ASSESSEE SINCE WAS A LAND, THE SALE PROCEEDS HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. IN THIS CONTEXT THE ASSESSEE REL IED UPON THE SALE DEED AS WELL AS THE CONFIRMATION OF THE BUYER, I.E. M/S. SA NGHVI PREMISES P. LTD. IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 133(6) OF THE INCOME TAX ACT (HEREINAFTER THE ACT). THE AO, HOWEVER, DID NOT F IND MERIT IN THE ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 3 SUBMISSION OF THE ASSESSEE. REFERRING TO SCHEDULE-I V OF THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME OF THE IMPUGN ED ASSESSMENT YEAR THE AO OBSERVED THAT THAT PROPERTY SOLD BY THE ASSESSEE HAS BEEN SHOWN AS STAFF QUARTERS ON WHICH ASSESSEE HAS CLAIMED DEPREC IATION OVER THE YEARS. THEREFORE, HE HELD THAT COMPUTATION OF CAPITAL GAIN WILL HAVE TO BE MADE IN TERMS OF SECTION 50(1) OF THE ACT PROVIDING FOR CAP ITAL GAIN ON DEPRECIABLE ASSETS. HE OBSERVED THAT DESCRIPTION OF THE PROPERT Y AS VACANT LAND IN THE SALE DEED OR CONFIRMATION BY THE BUYER ARE MERE AFT ERTHOUGHTS AND CANNOT OVERRIDE THE TAXABILITY OF INCOME AS SHORT TERM CAP ITAL GAIN. FURTHER, THE AO OBSERVED THAT THE DEVELOPMENT AGREEMENT BETWEEN THE ASSESSEE AND M/S. SANGHVI PREMISES P. LTD. WAS REGISTERED ON 29. 10.2005. THUS, ACCORDING TO THE AO, AS PER SECTION 2(47)(B) OF THE ACT TRANSFER OF THE PROPERTY TOOK PLACE IN THE FINANCIAL YEAR 2005-06, HENCE, THE CAPITAL GAIN SHOULD HAVE BEEN TAXED IN A.Y. 2006-07. IN THIS CON TEXT THE AO REFERRED TO THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CHATURBHUJ DWARKADASKAPAIDA VS. CIT 260 ITR 491. TH US, THE AO OBSERVED THAT INCOME CHARGEABLE TO TAX IN A.Y. 2006 -07 HAS ESCAPED ASSESSMENT AND PROPOSED TO INITIATE ACTION FOR REOP ENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT FOR A.Y. 2006-07 TO BR ING THE CAPITAL GAIN FROM SALE OF PROPERTY TO TAX IN A.Y. 2006-07. FURTH ER, THE AO OBSERVED THAT FOR ALL PRACTICAL PURPOSES THE ASSESSEE HAS RELINQU ISHED ALL ITS RIGHTS IN THE PROPERTY THROUGH THE REGISTERED AGREEMENT DATED 29. 10.2005 AND THE ASSESSEE HAS HANDED OVER PHYSICAL POSSESSION IN FEB RUARY, 2009. ULTIMATELY,THE AO OBSERVED THAT SHORT TERM CAPITAL GAIN ARISING FROM SALE OF THE PROPERTY IS TO BE ASSESSED ON PROTECTIVE BASIS IN THE IMPUGNED ASSESSMENT YEAR, WHEREAS, SUBSTANTIVE ADDITION WILL BE MADE IN A.Y. 2006- 07. ACCORDINGLY, HE MADE ADDITION OF ` 2,90,04,307/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN ON PROTECTIVE BASIS. ASSESSEE CHA LLENGED THE AFORESAID ADDITION BEFORE THE LEARNED CIT(A). 4. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND PERUSING THE DEVELOPMENT AGREEMENT BETWEEN THE PARTIES EXECUTED ON 29.10.2005, OBSERVED THAT AS PER THE TERMS OF DEVEL OPMENT AGREEMENT ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 4 ASSESSEE WAS RESPONSIBLE FOR VACATING THE EMPLOYEES FROM THE STAFF QUARTERS AT HIS OWN COST AND RISK AND HAND OVER THE VACANT POSSESSION OF THE LAND TO THE DEVELOPER. HE OBSERVED, SINCE, THE ASSESSEE COULD NOT GET THE STAFF QUARTERS VACATED, FINALLY THE DEVELOPER H AS TO STEP IN TO GET THE STAFF QUARTERS VACATED BY PAYING AN AMOUNT OF ` 1,04,00,000/- TO VARIOUS EMPLOYEES OF THE ASSESSEE BY ISSUING CHEQUES TO THE M OVER A PERIOD FROM 26.11.2007 TO 25.02.2009 AND REDUCED THE SAID AMOUN T FROM THE AGREED SALE CONSIDERATION. HE FURTHER OBSERVED THAT IN RES PONSE TO NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT THE DEVELOPER HAS C LEARLY STATED THAT HE HAS ACQUIRED THE LAND FOR THE PURPOSE OF DEVELOPING AND CONVERTING IT INTO REAL ESTATE. THUS, THE LEARNED CIT(A) WAS OF THE OPINION THAT THE INTENTION OF THE PARTIES WAS TO TRANSFER THE LAND ONLY AS THE DEVELO PER WAS NOT INTERESTED IN BUYING STAFF QUARTERS, WHICH WERE OCCUPIED BY THE E MPLOYEES OF THE ASSESSEE AND, IN FACT, THE STAFF QUARTERS WERE CREA TING A HINDRANCE IN THE TRANSFER OF THE LAND. THUS, THE CIT(A) HELD THAT TH E STAFF QUARTERS DID NOT YIELD ANY GAIN TO THE ASSESSEE, RATHER, IT TOOK AWA Y ` 1.04 CRORES FROM THE CONSIDERATION OF LAND FOR GETTING THOSE STAFF QUART ERS VACATED. THE LEARNED CIT(A) CONCLUDED THAT SINCE THE ASSET TRANSFERRED W AS A LAND ON WHICH NO DEPRECIATION IS ALLOWABLE UNDER THE ACT, THE PROVIS IONS OF SECTION 50(1) ARE NOT APPLICABLE. HENCE, THE GAIN ON TRANSFER OF LAND IS ASSESSABLE AS LONG TERM CAPITAL GAIN. AS REGARDS THE OBSERVATION OF TH E AO THAT CAPITAL GAIN SHOULD HAVE BEEN TAXED IN A.Y. 2006-07, THE LEARNED CIT(A) TAKING NOTE OF THE FACT THAT THE AO HAS NOT TAKEN ANY ACTION FOR A SSESSING THE CAPITAL GAIN IN A.Y. 2006-07, OBSERVED THAT THE MATTER PERTAININ G TO ANY ASSESSMENT YEAR OTHER THAN THE IMPUGNED ASSESSMENT YEAR CANNOT BE SUBJECT MATTER OF APPEAL. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPO NTHE OBSERVATIONS OF THE AO, SUBMITTED THAT THERE IS NO DISPUTE THAT THE PROPERTY SOLD BY THE ASSESSEE FROM WHICH THE CAPITA L GAIN AROSE WAS COMPRISING OF LAND AND BUILDING USED AS STAFF QUART ERS FOR THE EMPLOYEES OF THE ASSESSEE. HE SUBMITTED THAT THERE IS NO DISPUTE THAT ASSESSEE HAS CLAIMED DEPRECIATION ON STAFF QUARTERS OVER THE YEA RS AND THE PROPERTY IS ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 5 ALSO MENTIONED AS STAFF QUARTERS IN THE SCHEDULE OF FIXED ASSETS FORMING PART OF THE BALANCE SHEET OF THE ASSESSEE. THUS, TH E LEARNED D.R. SUBMITTED THAT AS PER ASSESSEES OWN ADMISSION THE PROPERTY SOLD IS A BUILDING USED AS STAFF QUARTERS ON WHICH ASSESSEE H AS CLAIMED DEPRECIATION AND COMPUTATION OF CAPITAL GAIN HAS TO BE MADE IN T ERMS OF SECTION 50(1) OF THE ACT AS HAS BEEN PROVIDED FOR DEPRECIABLE ASSETS . THUS, IT WAS SUBMITTED THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLD THAT THE GAIN DERIVED FROM SALE OF PROPERTY HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. FURTHER, THE LEARNED D.R. SUBMITTED THAT THE RECITA LS OF THE DEVELOPMENT AGREEMENT DOES NOT MENTION ANYTHING ABOUT THE QUART ERS STANDING OVER THE LAND AND IT IS NOT CLEAR WHETHER THE PROPERTY WAS G IVEN FOR DEVELOPMENT WITH QUARTERS OR WHETHER THE ASSESSEE HAS DEMOLISHE D THE QUARTERS AND SOLD THE LAND ONLY. THUS, IT WAS SUBMITTED THAT THE ADDITION MADE BY THE AO SHOULD BE RESTORED. 6. THE LEARNED A.R. STRONGLY RELIED UPON THE FINDING O F THE LEARNED CIT(A) AND SUBMITTED THAT AS PER THE RECITALS OF TH E DEVELOPMENT AGREEMENT THE PROPERTY TRANSFERRED IS ONLY LAND. HE SUBMITTED THAT THE CAPITAL ASSET TRANSFERRED AS PER THE DEED OF RECITALS IS ONLY LAN D AND THE AO WAS WHOLLY MISCONCEIVED IN TREATING THE GAIN AS SHORT TERM CAP ITAL GAIN. HE SUBMITTED THAT EVEN IN RESPONSE TO THE NOTICE ISSUE UNDER SEC TION 133(6) OF THE ACT THE BUYER HAS CONFIRMED THAT IT HAS ONLY PURCHASED THE LAND FROM THE ASSESSEE. THE SALE DEED FURTHER ENJOINS UPON THE AS SESSEE TO GET THE STAFF QUARTERS VACATED AT ITS OWN COST AND SINCE THE ASSE SSEE FAILED TO GET IT VACATED EVEN AFTER CONSIDERABLE LAPSE OF TIME, THE BUYER TOOK IT UPON ITSELF TO VACATE THE PROPERTY BY PAYING AN AMOUNT OF ` 1.04 CRORES TO THE EMPLOYEES OF THE ASSESSEE, WHICH WAS ADJUSTED AGAIN ST THE SALE CONSIDERATION. THE LEARNED A.R. SUBMITTED THAT AS P ER PROVISIONS OF SECTION 50(1) OF THE ACT, THE CAPITAL ASSET MUST FORM PART OF BLOCK OF ASSET. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE IT IS NO T SO AS THE LAND IN QUESTION NEVER FORMED PART OF THE BLOCK OF ASSET. H E SUBMITTED THAT AS PER SECTION 2(11) OF THE ACT BLOCK OF ASSET DOES NOT IN CLUDE LAND. THEREFORE, PROVISIONS OF SECTION 50(1) IS NOT APPLICABLE AS TH E LAND IS NOT SUBJECTED TO ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 6 DEPRECIATION. THE LEARNED A.R. SUBMITTED, THE ALLEG ATION OF THE AO THAT THE CLAIM OF SALE OF VACANT LAND AS PER THE SALE DE ED AND CONFIRMATION OF THE BUYER IS AN AFTERTHOUGHT IS MISPLACED CONSIDERI NG THE FACT THAT THE ASSESSEE HAS ENTERED INTO DEVELOPMENT AGREEMENT IN THE YEAR 2005 WHICH CANNOT BE CONSIDERED TO BE AN AFTERTHOUGHT IN THE YEAR 2011. WITHOUT PREJUDICE TO THE AFORESAID SUBMISSION, THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO A REGI STERED DEVELOPMENT AGREEMENT IN THE FINANCIAL YEAR 2005-06 RELEVANT TO A.Y. 2006-07. AS PER THE TERMS OF DEVELOPMENT AGREEMENT, TRANSFER OF THE PROPERTY HAS TAKEN PLACE ON THE DATE OF EXECUTION OF THE AGREEMENT IN TERMS OF SECTION 2(47)(V) AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADASKAPAIDA (SUPRA). HE SUBMITTED, THE AO HIMSELF HAS ACCEPTED THIS FACT IN THE ASSESSMENT ORDER AND HAS GIVEN A CATEGORICAL FINDING THAT THE CAPITAL GAIN ARISING F ROM THE SAID TRANSACTION SHOULD HAVE BEEN TAXED IN A.Y. 2006-07 AND, THEREFO RE, PROPOSED INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT AND ADDED THE SHORTTERM CAPITAL GAIN IN THE IMPUGNED ASSESSMENT Y EAR ON PROTECTIVE BASIS. THUS, IT WAS SUBMITTED, WHEN THE TRANSFER OF CAPITAL ASSET HAS TAKEN PLACE IN A.Y. 2006-07, IT CANNOT BE ASSESSED IN THE IMPUGNED ASSESSMENT YEAR EVEN ON PROTECTIVE BASIS. THE LEARN ED A.R. SUBMITTED, SINCE THE CIT(A) HAS NOT PROPERLY DEALT WITH THIS A SPECT OF THE ISSUE THE ASSESSEE IS ENTITLED TO RAISE THE ISSUE IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A) AS PER THE PROVISION CONTAINED IN RU LE 27 OF THE INCOME TAX APPELLATE RULES, 1963. IN SUPPORT OF SUCH CONTE NTION HE RELIED UPON THE FOLLOWING DECISIONS: - 1. ASSAM COMPANY (INDIA) LTD. VS.CIT(2002) 256 ITR 423 GAUHATI 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PURSED THE MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISI ONS RELIED UPON. THE BASIC ISSUE ARISING FOR CONSIDERATION BEFORE US ARE TWOFOLD. FIRSTLY, WHETHER THE GAIN FROM THE IMMOVABLE PROPERTY SOLD BY THE AS SESSEE IS TO BE TREATED AS LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAI N AND SECONDLY, THE ASSESSMENT YEAR IN WHICH SUCH GAIN IS TAXABLE. IN S O FAR AS THE FIRST ISSUE ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 7 RELATING TO THE NATURE OF CAPITAL GAIN IS CONCERNED , IT IS TO BE SEEN THAT THE AO HAS ASSESSED IT AS SHORT TERM CAPITAL GAIN ON TH E REASONING THAT THE PROPERTY SOLD BY THE ASSESSEE COMPRISES OF STAFF QU ARTERS ON WHICH ASSESSEE HAD CLAIMED DEPRECIATION. THEREFORE, IT HA S TO BE TREATED AS SHORT TERM CAPITAL GAIN AS PER SECTION 50(1) OF THE ACT. PER CONTRA, IT IS THE CLAIM OF THE ASSESSEE THAT THE PROPERTY SOLD IS LAND, HEN CE IT HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. THOUGH, IT IS A FACT THA T IN THE SCHEDULE OF FIXED ASSETS FORMING PART OF THE BALANCE SHEET ASSESSEE H AS SHOWN THE VALUE OF STAFF QUARTERS AT ` 12,26,193/- AND IT IS ALSO A FACT THAT THESE STAFF QUARTERS WERE STANDING OVER THE LAND SOLD BY THE ASSESSEE,HO WEVER, AFTER GOING THROUGH THE RECITALS OF THE REGISTERED AGREEMENT DA TED 29.10.2005 IT IS VERY MUCH CLEAR THAT THE INTENTION OF THE PARTIES WAS TO SELL THE LAND AS THE VALUE OFFERED UNDER THE SALE TRANSACTION WAS THE VA LUE OF LAND AND NOT THE STAFF QUARTERS. IT IS FURTHER EVIDENT THAT THE BUYE R PURCHASED THE PROPERTY FOR THE PURPOSE OF DEVELOPING THE LAND AS A REAL ES TATE. THUS, READING THE DEVELOPMENT AGREEMENT MAKES IT CLEAR THAT THE IMMOV ABLE PROPERTY SUBJECTED TO TRANSFER WAS THE LAND AND NOT THE STAF F QUARTERS. IT IS FURTHER CLEAR FROM THE FACT THAT THE TERMS OF THE DEED REQU IRED THE ASSESSEE TO VACATE THE EMPLOYEES FROM THE STAFF QUARTERS AND HA NDOVER THE VACANT POSSESSION OF THE PROPERTY TO THE BUYER. SINCE, THE ASSESSEE FAILED TO VACATE THE STAFF QUARTERS, THE BUYER TOOK IT UPON ITSELF T O VACATE THE EMPLOYEES FROM THE STAFF QUARTERS BY PAYING COMPENSATION TO T HEM TO THE TUNE OF ` 1.04 CRORES. THUS, FROM THE AFORESAID FACTS IT IS C LEAR THAT THE BUYER INTENDED TO BUY THE LAND FOR THE PURPOSE OF DEVELOP ING IT AND THE CONSIDERATION PAID WAS ALSO FOR THE LAND IN QUESTIO N. FURTHER, IF ONE LOOKS AT THE CONSIDERATION PAID BY THE BUYER TO THE ASSES SEE, IN NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE CONSIDERATION P AID WAS FOR STAFF QUARTERS AS THE VALUE OF THE STAFF QUARTERS, AS PER THE SCHEDULE OF FIXED ASSETS, IS ONLY ` 12,36,193/-, WHEREAS, THE CONSIDERATION PAID TO THE ASSESSEE AS PER THE DEVELOPMENT AGREEMENT IS ` 2,92,50,000/-. THUS, IT BECOMES CLEAR FROM THE REGISTERED DEVELOPMENT AGREE MENT,WHAT THE PARTIES INTENDED TO TRANSACT IS THE LAND AND THE CONSIDERAT ION PAID WAS ALSO FOR THE LAND. SECTION 50(1) OF THE ACT LAYS DOWN THE PROCED URE FOR COMPUTATION OF ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 8 CAPITAL GAIN OF A CAPITAL ASSET FORMING PART OF THE BLOCK OF ASSET IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED. THE BLOCK O F ASSET HAS BEEN DEFINED UNDER SECTION 2(11) OF THE ACT. AS PER THE SAID DEFINITION IT DOES NOT INCLUDE LAND. UNDISPUTEDLY, IN THE PRESENT CASE THE ASSET TRANSFERRED IS A LAND. THAT BEING THE CASE, PROVISIONS OF SECTION 50 (1) WILL NOT BE APPLICABLE. THUS, THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAI N BY TREATING THE ASSET SOLD AS LAND HAS TO BE ACCEPTED. 8. HAVING HELD SO, NOW WE WILL DEAL WITH THE SECOND IS SUE RELATING TO ASSESSMENT YEAR IN WHICH CAPITAL GAIN HAS TO BE ASS ESSED. IN THIS CONTEXT IT NEEDS TO BE MENTIONED THAT THE LEARNED COUNSEL FOR THE ASSESSEE TAKING RESORT TO RULE 27 OF THE INCOME TAX APPELLATE TRIBU NAL RULES, 1963 HAS ADVANCED A WITHOUT PREJUDICE ARGUMENT THAT THE TRAN SFER OF CAPITAL ASSET HAVING TAKEN PLACE IN THE ASSESSMENT YEAR 2006-07 I N TERMS OF SECTION 2(47)(V) OF THE ACT, IT CANNOT BE ASSESSED IN THE I MPUGNED ASSESSMENT YEAR. AS COULD BE SEEN FROM THE FACTS ON RECORD, ASSESSEE HAS ENTERED INTO A REGISTERED DEVELOPMENT AGREEMENT WITH M/S. SANGHVI PREMISES P. LTD. ON 29.10.2005. AS PER THE TERMS OF THE AGREEMENT, TRAN SFER OF THE LAND SHOULD BE CONCLUDED ON THE DATE OF EXECUTION OF THE DEED. THUS, IN TERMS OF SECTION 2(47)(V) OF THE ACT THERE WAS TRANSFER OF C APITAL ASSET IN SO FAR AS IT RELATES TO THE LAND IN QUESTION. THE RATIO LAID DOW N BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADASKAPAIDA (SUPRA) SUPPORTS THIS VIEW. IN FACT, THE AO HIMSELF RELYING ON THE AFORESAID DECISION HAS HELD THAT THE CAPITAL GAIN SHOULD HAVE BEEN TAXED IN A.Y. 2006-07, SINCE, THE TRANSFER OF THE CAPITAL ASSET I N TERMS OF SECTION 2(47)(V) OF THE ACT HAS TAKEN PLACE IN THAT ASSESSMENT YEAR. IN VIEW OF THE AFORESAID, WE HOLD THAT THE GAIN DERIVED FROM TRANS FER OF CAPITAL ASSET WAS TO BE ASSESSED IN A.Y. 2006-07 AND NOT IN THE IMPUG NED ASSESSMENT YEAR. FURTHER, CONSIDERING THE FACT THAT THIS WITHOUT PRE JUDICE ARGUMENT WAS MADE BY THE ASSESSEE UNDER RULE 27 OF THE INCOME TA X APPELLATE TRIBUNAL RULES, 1963, UNDER WHICH THE ASSESSEE IS ENTITLED T O SUPPORT THE ORDER OF THE CIT(A) ON ANY GROUND DECIDED AGAINST HIM,THE RE LIEF IS TO BE RESTRICTED ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 9 TO THE EXTENT GIVEN BY THE LEARNED CIT(A). ACCORDIN GLY, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. 9. AS REGARDS DEDUCTION OF CLAIM OF ` 1.04 CRORES TOWARDS PAYMENT MADE BY THE BUILDER TO THE EMPLOYEES FOR VACATING THE ST AFF QUARTERS, THE MATERIAL ON RECORD CLEARLY DEMONSTRATE THAT AS PER THE TERMS OF THE AGREEMENT THE ASSESSEE WAS OBLIGED TO HANDOVER THE VACANT POSSESS ION OF THE LAND TO THE BUILDER AFTER VACATING THE EMPLOYEES FROM THE STAFF QUARTERS. HOWEVER, IT IS EVIDENT THAT THE ASSESSEE HAS FAILED IN ITS ATTEMPT TO VACATE THE EMPLOYEES. THEREFORE, THE BUYER STEPPED IN AND AFTER PAYING CO MPENSATION OF ` 1.04 CRORES TO THE EMPLOYEES HE GOT THE STAFF QUARTERS V ACATED. THUS, THE SAID AMOUNT WAS ADJUSTED FROM THE AGREED SALE CONSIDERAT ION TO BE PAID TO THE ASSESSEE. THE AFORESAID FACTS MAKE IT CLEAR THAT TH E AMOUNT OF ` 1.04 CRORES WAS NEVER RECEIVED BY THE ASSESSEE FROM THE BUYER A S THE BUYER ADJUSTED IT FROM THE SALE CONSIDERATION. IN ANY CASE OF THE MAT TER, EVEN IF IT IS TREATED AS PART OF SALE CONSIDERATION THE AMOUNT OF ` 1.04 CRORES HAVE TO BE TREATED AS EXPENDITURE INCURRED BY THE ASSESSEE FOR TRANSFE RRING THE PROPERTY, HENCE ALLOWABLE UNDER SECTION 48 OF THE ACT. THUS, LOOKED AT FROM ANY ANGLE THE AMOUNT OF ` 1.04 CRORES HAS TO BE ALLOWED AS DEDUCTION. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) ON THI S ISSUE BY DISMISSING THE GROUND RAISED BY THE REVENUE. 10. IN THE RESULT, DEPARTMENTS APPEAL IS DISMISSED. ITA NO. 2279/MUM/2015 A.Y. 2011-12 11. THE SOLITARY DISPUTE IN THE PRESENT APPEAL BY THE A SSESSEE IS WITH REGARD TO THE ADDITION OF AN AMOUNT OF ` 1,50,41,209/- AS SHORT TERM CAPITAL GAIN. 12. BRIEF FACTS ARE, DURING ASSESSMENT PROCEEDINGS, ON THE BASIS OF INFORMATION AVAILABLE ON RECORD, IT WAS FOUND THAT IN THE RELEVANT PREVIOUS YEAR ASSESSEE HAD SOLD A GUESTHOUSE WHICH WAS GIVEN TO THE DIRECTOR AND STAFF AS QUARTERS. IT WAS ALSO FOUND THAT THE ASSES SEE HAD CLAIMED DEPRECIATION OVER THE SAID ASSET. THUS, THE AO WAS OF THE VIEW THAT THE ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 10 GAIN ARISING FROM THE SAID DEPRECIABLE ASSET HAS TO BE TAXED AS SHORT TERM CAPITAL GAIN. IN THE COURSE OF ASSESSMENT PROCEEDIN GS, WHEN THE ASSESSEE WAS CALLED UPON TO EXPLAIN AS TO WHY THE AMOUNT IN QUESTION SHOULD NOT BE ASSESSED AS SHORT TERM CAPITAL GAIN, IT WAS SUBMITT ED BY THE ASSESSEE THAT SIMILAR TRANSACTION UNDERTAKEN BY THE ASSESSEE IN A .Y. 2009-10 WAS ALLOWED AS LONG TERM CAPITAL GAIN AND THE SAME TREA TMENT HAS TO BE GIVEN IN THE IMPUGNED ASSESSMENT YEAR ALSO. THE AO, HOWEV ER, WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. HE OBSERVED THAT THE DECISION OF THE CIT(A) IN A.Y. 2009-10 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND PROCEEDED TO ASSESS THE GAIN DERIVED FROM SALE OF ASSETS AS SHORT TERM CAPITAL GAIN BY TREATING THE ASSET AS DEPRECIABLE ASSET. 13. ASSESSEE CHALLENGED THE ADDITION MADE THE AO BEFORE THE CIT(A). THE CIT(A), AFTER PERUSING THE MATERIAL ON RECORD, HELD THAT AS PER THE SCHEDULE OF FIXED ASSETS THERE WAS NO MENTION OF LAND. ON TH E CONTRARY THE STAFF QUARTERS OF SIMPLEX HOUSE HAS BEEN SHOWN AS DEPRECI ABLE ASSET. FURTHER, IN THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE OPENING WRITTEN DOW N VALUE OF THE ASSET. THUS, THE LEARNED CIT(A) HELD THAT THE ASSETS SOLD BEING A DEPRECIABLE ASSET THE GAIN DERIVED FROM SALE OF ASSET HAS TO BE TREAT ED AS SHORT TERM CAPITAL GAIN UNDER SECTION 50(1) OF THE ACT. 14. THE LEARNED A.R. SUBMITTED BEFORE US THAT THE ASSES SEE HAS SOLD BOTH LAND AND BUILDING AND HAS ACCORDINGLY OFFERED LONG TERM CAPITAL GAIN FOR SALE OF LAND AND SHORT TERM CAPITAL GAIN FOR SA LE OF BUILDING IN THE RETURN OF INCOME FILED FOR THE YEAR. HE SUBMITTED T HAT THE LAND IN QUESTION NOT BEING A DEPRECIABLE ASSET, THE GAIN DERIVED FRO M SALE OF LAND CANNOT BE TREATED AS SHORT TERM CAPITAL GAIN UNDER SECTION 50 (1) OF THE ACT. 15. THE LEARNED D.R. RELIED UPON THE OBSERVATIONS OF TH E AO AND THE LEARNED CIT(A). 16. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD T HE ASSESSEE, VIDE AGREEMENT DATED 15.04.2009, HAS SOLD ITS 2 / 3 SHARE IN LAND AND ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 11 STRUCTUREON PLOT NO. 44 AT JUHU FOR A CONSIDERATION OF ` 3.26 CRORES, OUT OF WHICH THE ASSESSEE HAS RECEIVED ` 1 CRORE PRIOR TO THE SALE AGREEMENT AND OUT OF THE BALANCE AMOUNT OF ` 2.26 CRORES ASSESSEE RECEIVED ` 51 LAKHS DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R IN DISPUTE. IN THE RETURN OF INCOME FILED THE ASSESSEE OFFERED LONG TE RM CAPITAL GAIN OF ` 46,75,448/- FROM SALE OF LAND PORTION AND SHORT TER M CAPITAL GAIN OF ` 6,78,561/- ON THE BUILT UP PORTION. THUS, AS COULD BE SEEN FROM THE FACTS ON RECORD, ASSESSEE ITSELF HAS BIFURCATED THE SALE OF PROPERTY TO LAND AND BUILDING PORTIONS AND OFFERED LONG TERM CAPITAL GAI N AND SHORT TERM CAPITAL GAIN ON THE SALE CONSIDERATION RECEIVED. HOWEVER, W HEN THE BENCH PUT A QUERY TO THE LEARNED COUNSEL FOR THE ASSESSEE REGAR DING THE EXACT EXTENT OF LAND AND BUILDING SOLD AND HOW THE VALUATION OF THE LAND PORTION AND BUILDING PORTION WAS MADE, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE RELEVANT DOCUMENTS HAVE NOT BEEN FILED. EVEN, THE COPY OF THE SALE AGREEMENT HAS NOT BEEN FILED BEFORE US. THUS, IN THE ABSENCE OF THESE PRIMARY AND BASIC FACTS AND DOCUMENTS SUCH AS SALE AGREEMENT AS WELL AS THE BASIS FOR VALUATION OF PROPERTY, IT IS DIFFICULT FOR US TO RENDER ANY CONCLUSIVE FINDING ON THE CLAIM MADE BY THE ASSESSE E. IN VIEW OF THE AFORESAID, WE ARE INCLINED TO RESTORE THE DISPUTED ISSUE TO THE AO FOR DE NOVO ADJUDICATION AFTER AFFORDING DUE OPPORTUNITY O F HEARING TO ASSESSEE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 18. IN NUTSHELL, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2018. SD/ - SD/ - (RAJESH KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18 TH MAY, 2018 ITA NOS. 4094 /M/2013& 2279/M/2015 M/S. SETH INDUSTRIES P. LTD. 12 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -6, MUMBAI 4. THE CIT- 2, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.