B.R. MACHINE TOOLS P.LTD, MUMBAI V. ASST CIT CEN CIR 38, MUMBAI

ITA 4178/MUM/2013

• Counselvise Citation: 417819914 RSA 2013
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Keywords: Capital asset; Cost of acquisition
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.C SHARMA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 4178/MUM/2013 ASSESSMENT YEAR: 2008-09 B.R. MACHINE TOOLS PVT. LTD. 1 ST FLOOR, D-WING, OBEROI GARDEN ESTATE CHANDIVALI FARMS ROAD, CHANDIVALI ANDHERI (E) MUMBAI400 072 VS. ACIT-CC 38, AAYAKAR BHAVAN, GROUND FLOOR, M.K. ROAD. MUMBAI- 400 020 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAACB 5836 C ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI A.C. TEJPAL DATE OF HEARING : 13.03.2014 DATE OF PRONOUNCEMENT : 16.04.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -41, MUMBAI DATED 04.04.2013 FOR THE ASSE SSMENT YEAR 2008-09. 2. IN GROUNDS NO. 1 & 2, THE ASSESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) IN ADOPTING A LOWER VALUE OF WDV OF THE BUILDING IG NORING CAPITALIZATION TO BUILDING ACCOUNT IN EARLIER YEARS AND IGNORING THE CAPITALIZ ATION TO THE LAND IN EARLIER YEARS FOR THE PURPOSE OF COMPUTATION CAPITAL GAINS RESPECTIVE LY. 2.1 THE LD.AR HAS BROUGHT ON RECORD THAT THE ISSUES RAISED IN GROUNDS NO. 1 AND 2 ARE DUE TO THE EARLIER YEAR DISALLOWANCES. HOWEVE R, THE SAID DISALLOWANCES IN THE EARLIER YEARS HAVE BEEN DELETED/ALLOWED BY THE AO W HILE GIVING EFFECT TO THE ORDER OF THE TRIBUNAL PROVIDING RELIEF TO THE ASSESSEE IN TH E ASSESSMENT YEARS 2004-05, 2005- 06, 2006-07 AND 2007-08. SINCE THE ISSUES AGITATED IN THE SAID GROUNDS ARE CONSEQUENTIAL TO THE EARLIER DISALLOWANCES AND THE SAME ARE SETTLED AS OF NOW, THE AO IS DIRECTED TO TAKE COGNIZANCE OF THE MATTER AND ACCORDINGLY ALLOW THE CLAIM AFTER ITA NO. 4178/MUM/2013 B.R. MACHINE TOOLS PVT. LTD. ASSESSMENT YEAR: 2008-09 2 CONSIDERING THE SAID ORDERS GIVING EFFECT TO THE DE CISIONS OF THE TRIBUNAL. GROUNDS NO 1 & 2 ARE ALLOWED FOR STATISTICAL PURPOSE. 3. IN GROUND NO. 3, THE ASSESSEE HAS AGITATED THE A CTION OF THE LD.CIT(A) IN CONFIRMING THE DECISION OF THE AO IN ADOPTING THE D ATE OF ACQUISITION OF THE LAND AS 31.01.1992 AGAINST THE CLAIM OF THE ASSESSEE I.E., 07.08.1974 FOR THE PURPOSE OF CALCULATING THE INDEXED COST OF ACQUISITION. 3.1 BRIEFLY STATED, DURING THE YEAR UNDER CONSIDERA TION, THE ASSESSEE SOLD A PIECE OF LAND SITUATED AT BANGALORE AND THEREBY COMPUTED THE LONG TERM CAPITAL GAIN AT RS.28,81,28,960/- AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS.23,61,604/- BY ADOPTING THE COST INFLATION INDEX OF 1981-82. AC CORDING TO THE ASSESSEE, THE LAND WAS LEASED BY KARNATAKA INDUSTRIAL AREAS DEVELOPMEN T BOARD (KIADB) TO M/S. TOOL CRAFT (A PARTNERSHIP FIRM WHICH WAS TAKEN OVER BY T HE ASSESSEE IN 1978) ON 07.08.1974 AND CONSEQUENTLY BY THE AGREEMENT DATED 31.01.1992, KIADB SOLD THE SAID LAND TO THE ASSESSEE. THE TRANSACTION OF SALE IS FOR CONVERSION OF LEASE HOLD RIGHTS INTO FREE HOLD RIGHTS BY WAY OF IMPROVEMENT OF TITLE. THEREFORE, ACCORDING TO THE ASSESSEE, IT IS ENTITLED TO CLAIM THE INDEXED C OST OF ACQUISITION OF THE YEAR 1981 AS THE ASSET WAS HELD BY THE ASSESSEE PRIOR TO 1981 . HOWEVER, THE AO COMPUTED THE INDEXED COST OF ACQUISITION AT RS.35,64,607/- BY CO NSIDERING 1991-92 AS THE YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE. ON APPEAL , THE LD.CIT(A) CONFIRMED THE DECISION OF THE AO. ACCORDING TO THE LD.CIT(A), THE OWNERSHIP RIGHTS OVER THE LAND IN QUESTION WAS NOT ACQUIRED BY THE ASSESSEE BUT ONLY LEASE HOLD RIGHTS OVER THE LAND WAS GIVEN TO M/S. TOOL CRAFT IN THE YEAR 1974. AS T HE ASSESSEE GOT THE OWNERSHIP RIGHT IN THE SAID PROPERTY ONLY IN THE YEAR 1992, T HE CAPITAL ASSET COULD BE SAID TO BE HELD BY THE ASSESSEE ONLY SINCE 1991-92 AND HENCE T HE AO WAS CORRECT IN ADOPTING THE INDEXED COST OF ACQUISITION ON THE BASIS OF THE YEAR 1991-92. AGGRIEVED BY THE IMPUGNED DECISION, THE ASSESSEE HAS RAISED THIS GRO UND IN THE APPEAL BEFORE US. 3.2 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT IS PERTINENT TO MENTION THAT VIDE AGREEMENT DATED 07.0 8.1974, KIADB HAS GIVEN THE IMPUGNED PROPERTY TO M/S. TOOL CRAFT ON LEASE FOR T ERM OF 11 YEARS COMMENCING FROM 1973 FOR A CONSIDERATION OF RS.31,600/- AND ON AN AGREED YEARLY RENT AS MENTIONED IN THE SAID AGREEMENT. PARA 7 OF THE AGRE EMENT PROVIDES THAT AT THE END ITA NO. 4178/MUM/2013 B.R. MACHINE TOOLS PVT. LTD. ASSESSMENT YEAR: 2008-09 3 OF 11 YEARS OF THE LEASE TERM, THE TOTAL AMOUNT OF RENT PAID BY THE LESSEE FOR THE PERIOD OF LEASE SHALL BE ADJUSTED TOWARDS BALANCE O F THE VALUE OF THE PROPERTY AT THE TIME OF EXECUTION OF SALE DEED. IN PURSUANCE OF THE SAME, POSSESSION OF THE SAID LAND HAS BEEN GIVEN TO M/S. TOOL CRAFT VIDE POSSESS ION CERTIFICATE DATED 01.08.1974. AFTER WHICH, M/S.TOOL CRAFT, A PARTNERSHIP FIRM HAS BEEN TAKEN OVER BY THE ASSESSEE IN THE YEAR 1978. CONSEQUENTLY, BY THE AGREEMENT DA TED 31.01.1992, THE KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD ENTERED INTO A S ALE DEED WITH THE ASSESSEE AND THEREBY KIADB SOLD THE LAND TO THE ASSESSEE. THE PE RUSAL OF THE COPIES OF THE LEASE AND SALE DEEDS INDICATES THAT THE TRANSACTION OF SA LE IN THE YEAR 1992 IS FOR CONVERSION OF LEASE HOLD RIGHTS INTO FREE HOLD RIGH TS BY WAY OF IMPROVEMENT OF TITLE. IN THIS CONNECTION, IT IS PERTINENT TO MENTION THAT THE ALLAHABAD HIGH COURT, IN THE CASE OF CIT VS. SMT. RAMA RANI KALIA [2013] 358 ITR 499 (ALL), HAS HELD THAT THE CONVERSION OF RIGHTS OF LESSEE IN THE PROPERTY FROM LEASE HOLD RIGHT INTO FREE HOLD ONLY RESULTS IN IMPROVEMENT OF HIS/HER RIGHTS OVER PROPE RTY AND IT WOULD NOT HAVE ANY EFFECT ON TAXABILITY OF CAPITAL GAINS FROM SUCH PRO PERTY WHICH IS RELATED TO PERIOD OVER WHICH PROPERTY IS HELD. IN VIEW OF THE FACT THAT TH E PROPERTY HAS BEEN HELD BY M/S. TOOL CRAFT, ON LEASE HOLD BASIS SINCE 1974 AND THE ASSESSEE HAS ACQUIRED THE PARTNERSHIP FIRM IN THE YEAR 1978 TO WHICH THE TITL E OVER THE PROPERTY IN QUESTION HAS BEEN IMPROVISED BY CONFERRING FREE HOLD RIGHTS, THE YEAR OF ACQUISITION OF THE SAID PROPERTY IS TO BE HELD AS 1974 AND NOT THE YEAR 199 2. THEREFORE, THE ASSESSEE IS ENTITLED FOR THE INDEXED COST OF ACQUISITION SINCE 1981 AS CLAIMED. WE DIRECT AND ORDER ACCORDINGLY. RESULTANTLY, GROUND NO. 3 IS ALLOWED . 4. IN GROUND NO. 4, THE ASSESSEE HAS AGITATED THE A CTION OF THE LD.CIT(A) IN CONFIRMING THE DECISION OF THE AO IN CHARGING INTER EST U/S 234A OF THE ACT AMOUNTING TO RS.1,33,38,104/- BY INCLUDING THE CHARGING OF IN TEREST ON THE SELF ASSESSED TAX PAID OF RS.8,97,08,359/- BEFORE FILING THE RETURN O F INCOME. 4.1 BRIEFLY STATED, THE RETURN FOR THE A.Y. 2008-09 WAS NOT FILED BY THE ASSESSEE UP TO THE DUE DATE OF FILING THE RETURN OF INCOME I .E., 30.09.2008. THE ASSESSEE AFTER RECEIVING A NOTICE DATED 13.04.2010 U/S 153A OF THE INCOME-TAX ACT, FILED THE RETURN OF INCOME U/S 153A ON 07.05.2010. WHILE COMPUTING T HE TOTAL TAXES PAYABLE, THE AO HAD GIVEN THE CREDIT OF SELF ASSESSED TAX OF RS.8,9 7,08,359/-, WHICH WAS PAID BY THE ITA NO. 4178/MUM/2013 B.R. MACHINE TOOLS PVT. LTD. ASSESSMENT YEAR: 2008-09 4 ASSESSEE ON 23.10.2009 AND 03.11.2009. HOWEVER, FOR THE PURPOSE OF CHARGING INTEREST, THE AO IGNORED THE SAME AS THE SAME WAS N OT ADVANCE TAX PAYMENT AGAINST THE CLAIM OF THE ASSESSEE THAT THE SAID TAX PAID WAS TO BE CONSIDERED AS ADVANCE TAX FOR THE PURPOSE OF SECTION 234A (1). AC CORDINGLY, THE AO CHARGED THE INTEREST U/S 234A FOR DELAY IN FILING THE RETURN OF INCOME U/S 153A OF THE ACT WHICH INCLUDED THE CHARGING OF INTEREST ON A SUM OF RS.8, 97,08,359/- ALSO. ON APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE INTERMEDIATE PAYMENTS MADE TOWARDS THE TAXES BEFORE FILING OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR IN QUESTION CANNOT BE REDUCED FROM THE TAX DET ERMINED FOR WORKING OUT THE INTEREST PAYABLE BY THE ASSESSEE U/S 234A. AGGRIEVE D BY THE IMPUGNED DECISION, THE ASSESSEE HAS RAISED THIS GROUND IN THE APPEAL BEFOR E US. 4.2 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON THIS GROUND, IT IS PERTINENT TO MENTION THAT THERE IS PLETHORA OF DECI SIONS TO SUPPORT THE PROPOSITION THAT FOR THE PURPOSE OF CALCULATING THE INTEREST U/ S 234A, INTEREST IS TO BE CHARGED ON ASSESSED TAX AFTER REDUCING THE AMOUNT OF TAX PAID BEFORE FILING THE RETURN OF INCOME. IT IS PERTINENT TO MENTION THAT THE HONBLE APEX COURT IN THE CASE OF CIT VS PRANAY ROY 309 ITR 231 (SC) HAS OBSERVED THAT THE LEVY OF INT EREST UNDER SECTION 234A IS COMPENSATORY AND NOT PENAL IN NATURE. THE T RIBUNAL, IN THE CASE OF SACHIN VS DCIT 13 ITR (TRIB) 161 HAS HELD THAT INTEREST UNDER SEC TION 234A SHOULD BE CHARGED AFTER GIVING CREDIT OF TAX ALREADY PAID. AL SO, IN THE CASE OF EPARI SADASIVA RAO (HUF) VS ACIT 18 ITR (TRIB) 569, THE TRIBUNAL HAS HELD THAT INTE REST UNDER SECTION 234A IS ONLY TO BE CHARGED TILL DATE OF PAY MENT OF SELF-ASSESSMENT TAX, EVEN THOUGH RETURN HAS BEEN FILED LATER. AFTER CONSIDERI NG THE FACTS IN TOTO AND APPRAISING THE POSITION OF LAW ON THIS ISSUE, WE DIRECT THE AO TO GIVE CREDIT OF SELF ASSESSED TAX PAID BEFORE FILING THE RETURN OF INCOME AND THEREBY REDUCE THE SAME FOR THE PURPOSE OF CHARGING INTEREST U/S 234A OF THE ACT. ACCORDING LY, GROUND NO 4 IS ALLOWED . 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF APRIL, 2014. SD/- SD/- (R.C. SHARMA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.04.2014. *SRIVASTAVA ITA NO. 4178/MUM/2013 B.R. MACHINE TOOLS PVT. LTD. ASSESSMENT YEAR: 2008-09 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.