ACIT, CHENNAI V. VGP Video Vision of India, CHENNAI

ITA 448/CHNY/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9640 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 14-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Business income; Business expenditure
• Section: 143(3); 153A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.448/MDS/2013 ( / ASSESSMENT YEAR: 2008-09) THE ASSISTANT COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-6(1)(I/C) 46, NUNGAMBAKKAM HIGH ROAD, CHENNAI. VS M/S. VGP VIDEO VISION OF INDIA, 6, VGP SQUARE, DHARMARAJA KOIL STREET, SAIDAPET, CHENNAI-600 015. PAN:AAAFV4302J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.B.NISCHAL, JCIT /RESPONDENT BY : MR. S.SRIDHAR, ADVOCATE /DATE OF HEARING : 4 TH FEBRUARY, 2016 /DATE OF PRONOUNCEMENT : 12 TH APRIL, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- I, CHENNAI DATED 19.02.2012 IN ITA NO.230/10-11 PAS SED UNDER SECTION 153A R.W.S.153C, 143(3) & 250 OF THE ACT. 2. THERE WAS A DELAY OF 5 DAYS IN FILING THIS APPEA L BY THE REVENUE. THE REVENUE HAS FILED AN AFFIDAVIT EXPLAIN ING THE REASONS FOR THE DELAY IN FILING THE APPEAL BY STATI NG THAT, THERE WAS ACUTE SHORTAGE OF STAFF AND THE PILED UP YEAR E NDING WORK. IT WAS FURTHER SUBMITTED THAT THE DELAY WAS N EITHER 2 ITA NO.448 /MDS/2013 WILLFUL NOR WANTON. THEREFORE, IT WAS PRAYED THAT T HE DELAY MAY BE CONDONED. AFTER CONSIDERING THE SAME, IN TH E INTEREST OF JUSTICE, WE HEREBY CONDONE THE DELAY IN FILING O F APPEAL AND ADMIT THE SAME FOR ADJUDICATION. 3. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOWI NG TWO GROUNDS:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY DIRECTING THE ASSESSING OFFI CER TO TREAT THE INCOME ARISING OUT OF EOU UNIT IN MUMB AI SEPZ AS INCOME FROM CAPITAL GAINS AS AGAINST BUSINESS INCOME. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BY DELETING THE DISALLOWANCE MA DE BY THE LEARNED ASSESSING OFFICER TOWARDS DE-BONDING CHARGES AMOUNTING TO ` 12,48,237/- AND NAME TRANSFER EXPENSES OF ` 8,82,181/- AS BUSINESS EXPENDITURE. 4. BRIEF FACTS ARE THAT THE ASSESSEE IS A FIRM ENGA GED IN THE BUSINESS OF EXPORT OF PRE-RECORDED VIDEO AND AU DIO CASSETTES FROM SEEPZ, MUMBAI. THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEES GROUP ON 03.03.2009 AND CERTAIN INCRIMINATING MATERIALS WERE SEIZED. SUBSEQUENTLY N OTICE UNDER SECTION 153C WAS ISSUED TO THE ASSESSEE AND I N RESPONSE, THE ASSESSEE HAD FILED ITS RETURN OF INCO ME ON 29.10.2010 ADMITTING TOTAL INCOME OF ` 80,43,816/-. THEREAFTER 3 ITA NO.448 /MDS/2013 LEARNED ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 153A R.W.S. 153C/143(3) OF THE ACT ON 29.12 .2010 DETERMINING THE INCOME OF THE ASSESSEE UNDER THE HE AD INCOME FROM BUSINESS INSTEAD OF INCOME FROM CAPI TAL GAINS CLAIMED BY THE ASSESSEE AND FURTHER DISALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS DE-BON DING CHARGES OF ` 12,48,237/- AND NAME TRANSFER EXPENSES OF ` 8,82,181/- . 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO TR EAT THE INCOME RETURNED BY THE ASSESSEE AS INCOME FROM CAP ITAL GAINS AND ALSO DELETED THE ADDITION MADE TOWARDS DE- BONDING CHARGES & NAME TRANSFER EXPENSES, AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE US. GROUND NO.1 INCOME FROM BUSINESS / CAPITAL GAINS: 6. THE SEIZED MATERIALS (ANN/RV/LSS 89- PAGE 65) OBTAINED DURING THE COURSE OF SEARCH REVEALED THAT THE ASSESSEE HAD ENTERED INTO A MEMORANDUM OF UNDERSTAN DING DATED 21.07.2006 WITH M/S. GEODESIC INFORMATION SYS TEMS, 4 ITA NO.448 /MDS/2013 MUMBAI TO SELL ITS SEZ UNIT FOR A SALE CONSIDERATIO N OF RS.2.38 CRORES. IT WAS ALSO AN ADMITTED FACT THAT THE ASSES SEE HAS RECEIVED THE SALE CONSIDERATION IN LIEU OF THE EXEC UTED SALE. IN THE RETURN OF INCOME, THE ASSESSEE DECLARED THE SAL E CONSIDERATION AS RS.2,38,00,000/- BEING THE AMOUNT RECEIVED TOWARDS THE TRANSFER OF LEASEHOLD RIGHTS OF THE PRE MISES OCCUPIED BY THE ASSESSEE IN THE SEEPZ MUMBAI AND TR EATED THE SAME AS INCOME FROM CAPITAL GAIN. HOWEVER, TH E LEARNED ASSESSING OFFICER OPINED THAT THE CLAIM OF THE ASSE SSEE WAS INCORRECT BECAUSE THE TRANSACTION IS IN THE NATURE OF BUSINESS RECEIPTS AND THEREFORE IT HAS TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AGREED WITH TH E VIEW OF THE ASSESSEE THAT THE INCOME DERIVED FROM TRANSF ER OF THE LEASE HOLD RIGHTS IN THE SEZ UNIT AT MUMBAI WOULD A MOUNT TO SALE OF A RIGHT IN CAPITAL ASSET AND ACCORDINGLY IT WILL BE TAXABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS. THE RELEVANT PORTION OF THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 5 ITA NO.448 /MDS/2013 4. THE APPELLANT FIRM WAS IN THE BUSINESS OF EXPOR T OF PRE-RECORDED VIDEO AND AUDIO CASSETTES FROM SEEPZ, MUMBAI. THE APPELLANT HAD BEEN ALLOTTED A UNIT IN T HIS ZONE AND THE APPELLANT WAS NOT THE OWNER OF THIS UN IT. THE APPELLANT DECIDED TO SHIFT ITS BUSINESS AS IT W AS NOT ABLE TO MEET THE COMPETITION AT MUMBAI. THE RIGHTS IN THE UNIT IN THE SPECIAL ZONE WAS GIVEN UP IN FAVOUR OF ANOTHER FIRM. ACCORDING TO THE ASSESSING OFFICER, A S THE ENTIRE UNIT HAS BEEN SOLD, THE PROCEEDS ARE ONL Y BUSINESS RECEIPTS. ACCORDING TO THE APPELLANT, THE UNIT CANNOT BE TRANSFERRED AND ONLY THE RIGHT TO OCCUPATION/POSSESSION OF THE UNIT WAS TRANSFERRED. THE MACHINERY IN THE UNIT WERE SHIFTED TO CHENNAI. THE FURNITURE AND FITTINGS WERE DISPOSED OF INDEPENDENT LY. THEREFORE THE RIGHT OVER THE UNIT CAN ONLY BE EQUIV ALENT TO THE RIGHT OVER A LICENSE. SUCH A RIGHT WOULD CONSTITUTE A CAPITAL ASSET. 5. I HAVE CONSIDERED THE REASONS FOR TREATMENT OF T HE SALE AS BUSINESS INCOME AND THE ARGUMENTS ADVANCED AGAINST SUCH TREATMENT BY THE LEARNED ARS OF THE APPELLANT. THE UNIT AT SEEPZ MUMBAI DID NOT BELONG TO THE APPELLANT. IT HAD ONLY RIGHTS OVER THE UNIT WHI CH WAS TRANSFERRED AND THIS COULD ONLY BE A CAPITAL ASSET. THE APPELLANT IS NOT IN THE BUSINESS OF REAL ESTATE AND IN ANY CASE, THE UNIT DID NOT BELONG TO THE APPELLANT. THE REFORE THE SALE OF SUCH RIGHTS CAN ONLY BE ASSESSED UNDER CAPITAL GAINS. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER IS DIRECTED TO TREAT THE INCOME RETURNED AS INCOME FRO M CAPITAL GAINS. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENT LY ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED ASSES SING OFFICER STATING THAT THE INCOME RECEIVED FROM SALE OF SEZ UNIT AT MUMBAI SHOULD BE TREATED AS INCOME FROM BUSINESS WHILE AS ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRES ENTATIVE 6 ITA NO.448 /MDS/2013 ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAD ONLY TRANSFERRED HIS RIGHT TO OCCUPY / POSSESSION OF THE UNIT TO THE BUYER AND HAD DISMANTLED THE MACHINERY, FURNITURE FITTINGS ET C., AND SHIFTED THE SAME TO HIS PLACE OF WORK IN CHENNAI. I T IS ALSO OBVIOUS THAT THE RIGHT OVER THE UNIT CAN ONLY BE TR EATED AS RIGHT OF OWNING A LICENSE. THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED I N HOLDING THAT THE CONSIDERATION RECEIVED FOR TRANSFER OF SUC H RIGHT BEING A CAPITAL ASSET TO BE ASSESSABLE UNDER THE HEAD IN COME FROM CAPITAL GAINS. HENCE WE DO NOT FIND IT NECESSARY T O INTERFERE WITH HIS ORDER. ACCORDINGLY, WE HEREBY CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. GROUND NO.2 DEBONDING CHARGES / NAME TRANSFER EXPENSE:- 7 ITA NO.448 /MDS/2013 9. THE LEARNED ASSESSING OFFICER HAD DISALLOWED THE EXPENDITURE INCURRED TOWARDS DEBONDING CHARGES OF RS.12,48,237/- AND EXPENSES RELATED TO NAME TRANSFE R RS.8,82,181/- AS ALLOWABLE DEDUCTION. ON APPEAL, TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE L EARNED ASSESSING OFFICER TO DELETE THE ADDITION BECAUSE TH ESE AMOUNTS HAVE ALREADY BEEN REFLECTED IN THE PROFIT A ND LOSS ACCOUNT OF THE ASSESSEE AND ONLY THE GROSS AMOUNT W AS RETURNED AS CAPITAL GAINS AMOUNTING TO RS.2.38 CROR ES. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHE R OBSERVED IN HIS ORDER THAT THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER WOULD AMOUNT TO DOUBLE ADDITION. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMEN TLY ARGUED BEFORE US BY STATING THAT THE DISALLOWANCE O F THESE EXPENSES BY THE LEARNED ASSESSING OFFICER WAS JUSTI FIED AND PLEADED TO CONFIRM HIS ORDER. ON THE OTHER HAND THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE ASSESSEE HAD ADDUCED SUFFICIENT EVIDENCE TO SUBSTAN TIATE THAT THESE EXPENSES WERE PAID BY THE PURCHASER AND ADJUSTED TOWARDS THE PAYMENT DUE TO THE ASSESSEE AND FURTHER THE 8 ITA NO.448 /MDS/2013 GROSS AMOUNT WAS DECLARED AS A CAPITAL GAIN AMOUNTI NG TO RS.2.38 CRORES. THE LEARNED AUTHORIZED REPRESENTATI VE FURTHER SUBMITTED THAT THESE FACTS WERE EXAMINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND HE HAD CATEGORICALLY OBSERVED THAT ANY FURTHER DISALLOWANC E WOULD AMOUNT TO DOUBLE ADDITION. HENCE, IT WAS PLEADED TH AT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) MAY BE CONFIRMED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS EV IDENT FROM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT HE HAS EXAMINED THE ISSUE IN DETAIL AND OBSERVED THAT THE DEBONDING CHARGES AND NAME TRANSF ER EXPENSE WERE ALREADY EXCLUDED AND ONLY THE BALANCE AMOUNT OF RS.2.38 CRORES WAS TREATED AS CAPITAL GAIN OF TH E ASSESSEE THEREBY ANY FURTHER DISALLOWANCE WOULD AMOUNT TO DO UBLE ADDITION IN THE CASE OF THE ASSESSEE. FOR THESE REA SONS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD DE LETED THE ADDITION MADE ON ACCOUNT OF DEBONDING CHARGES O F RS.12,48,237/- AND NAME TRANSFER EXPENSE OF RS.8,82 ,181/- . 9 ITA NO.448 /MDS/2013 THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THI S ISSUE. HENCE WE HEREBY CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE ALSO. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 12 TH APRIL, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF