Manish Traders, Ghaziabad V. ITO, Ghaziabad

ITA 4481/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7827 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 22-08-2016
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4481/DEL./2016 (ASSESSMENT YEAR : 2011-12) MANISH TRADERS, VS. ITO, WARD 1 (4), 15, G.T. ROAD, GHAZIABAD. GHAZIABAD. (PAN : AABFM7351D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAMESH CHANDER, CA REVENUE BY : SHRI N.K. BANSAL, SENIOR DR DATE OF HEARING : 06.06.2019 DATE OF ORDER : 22.07.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, MANISH TRADERS (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 02.06.2016 PASSED BY THE COMMISSIONER O F INCOME-TAX (APPEALS), GHAZIABAD QUA THE ASSESSMENT YEAR 2011-1 2 ON THE GROUNDS INTER ALIA THAT :- 1. THAT THE JUDGMENT IS AGAINST THE FACTS & LAW OF THE CASE. 2. THAT THE LEARNED CIT HAS ERRED IN CONFIRMING THE ADDITION OF THE ASSESSING OFFICER IN THE INCOME ON ACCOUNT OF THE LONG TERM CAPITAL GAIN OF RS.52,22,895/- . ITA NO.4481/DEL./2016 2 3. THAT THE LEARNED AO WRONGLY DENIED THE INDEXATIO N ON THE LONG TERM CAPITAL GAIN ON WRONG INTERPRETATI ON OF LAW AND FACTS AND HENCE TO BE DELETED. 4. THAT THE ASSESSEE IS ENTITLED TO THE VALUATION A S ON 1.4.1981 U/S 55(2)(B) AS HE IS NOT A TENANT AND HAS SUBMITTED ALL THE DESIRED DOCUMENTS REQUIRED FOR THE PURPOSE OF COMPUTING LTCG AT THE TIME OF ASSESSMENT. 5. THAT THE LD AO HAS WRONGLY DENIED THE DEDUCTION ON ACCOUNT OF BROKERAGE TO AGENTS OF RS.2,00,000/- EVE N AFTER PROVIDING ALL THE PROOFS LIKE BILLS/BANK STATEMENT/CONFIRMATIONS AND THE PAYMENTS HAVE BEEN MADE AFTER DEDUCTION OF DUE TDS @10%. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : FROM THE RETURN OF INCOME FILED BY THE ASSESSEE FOR AY 2011-12 CLAIMING TOTAL INCOME OF RS.4,85,000 /- AFTER SETTING OF ITS BROUGHT FORWARD LOSSES OF RS.1,15,480/- FROM AY 2005-06, ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HA S SOLD HIS ASSETS OF RS.60,05,000/- AND COMPUTED THE LONG TERM CAPITAL G AIN (LTCG) OF RS.6,00,480/- IN RESPECT OF THIS TRANSFER. ASSESSE E TAKEN COST OF ACQUISITION AFTER INDEXATION AT RS.52,04,520/- WHIC H THE AO FOUND INCORRECT. AO PROCEEDED TO HOLD THAT AS PER COMPUT ATION OF ASSESSEE, THE BOOK VALUE OF THE ASSETS TRANSFERRED DURING THE YEA R WAS RS.25,139/- ONLY AND AFTER INDEXATION, THE INDEXED VALUE OF THE SAID ASSETS COULD NOT EXCEED RS.1,81,625/- HAVING A DIFFERENCE OF RS./50, 22,895/- IN THE INDEXED COST OF THE ACQUISITION. CONSEQUENTLY, ASS ESSMENT WAS REOPENED U/S 147 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE AND IN THE ABSEN CE OF ANY SUPPORTING ITA NO.4481/DEL./2016 3 EVIDENCE FOR WORKING OUT THE COST OF ACQUISITION, A O MADE ADDITION OF RS.52,22,895/-. AO ALSO DENIED THE DEDUCTION CLAIM ED BY THE ASSESSEE ON ACCOUNT OF BROKERAGE OF RS.2,00,000/- TO THE AGE NT AND THEREBY ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.57, 13,020/- 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DISMISSED THE APPEAL. FEELING AGGR IEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING TH E PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UP ON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY SPECIFIC ADJUDICATION. GROUNDS NO.2, 3 & 4 6. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER CONTENTED INTER ALIA THAT SINCE THE ASSESSEE HAS AC QUIRED THE LAND IN QUESTION PRIOR TO 01.04.1981, HE IS ENTITLED TO OPT FOR FAIR MARKET VALUE (FMV) AS ON 01.04.1981 AS PER VALUATION OF APPROVED VALUER; THAT AS PER VALUATION REPORT, THE VALUE OF THE PLOT IS RS.7,32, 000/- AS ON 01.04.1981 AS PER PROVISIONS CONTAINED U/S 55 (2)(B) BUT THE A O HAS OVERLOOKED ALL THESE FACTS AND DENIED THE BENEFIT OF PROVISIONS CO NTAINED U/S 55(2) OF THE ACT; THAT THE LD. CIT (A) HAS ERRED IN DENYING THE BENEFIT OF FMV TO ITA NO.4481/DEL./2016 4 THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS HA VING ONLY TENANCY RIGHT IN THE LAND IN QUESTION. 7. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVEN UE RELIED UPON THE ORDER PASSED BY THE AO AS WELL AS LD. CIT (A) A ND CONTENDED THAT THE ASSESSEE HAS BEEN RIGHTLY DENIED THE BENEFIT OF FMV . 8. UNDISPUTEDLY, ASSESSEE IS HOLDING THE LAND IN QU ESTION BY VIRTUE OF THE REGISTERED LEASE DEED DATED 02.07.1977, AVAI LABLE AT PAGES 48 TO 62 OF THE APPEAL FILE , FOR A PERIOD OF 90 YEARS IN THE INDUSTRIAL AREA GHAZIABAD. IT IS ALSO NOT IN DISPUTE THAT THE ASSE SSEE HAS OPTED FOR THE VALUATION OF THE APPROVED VALUER IN ORDER TO ASSESS THE FMV OF THE PROPERTY IN QUESTION AS ON 01.04.1981, WHICH IS VAL UED AT RS.7,32,000/-. 9. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, ARGUMENTS ADDRESSED BY THE LD. AUTHORIZED REP RESENTATIONS OF THE PARTIES TO THE APPEAL AND CASE LAWS RELIED UPON, TH E FIRST QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER LEASEHOLD RIGHTS OF THE ASSESSEE FOR 90 YEARS IN THE PROPERTY IN QUESTION ARE CAPITAL IN NA TURE OR MERE TENANCY RIGHTS AND THAT ASSESSEE IS ENTITLED F OR BENEFIT OF FAIR MARKET VALUE (FMV) SO AS TO COMPUTE THE CAPITAL GAINS? 10. WHEN WE EXAMINE COVENANTS OF THE LEASE DEED, AV AILABLE AT PAGES 48 TO 62 OF THE APPEAL FILE, IT IS PROVED ON RECORD INTER ALIA :- ITA NO.4481/DEL./2016 5 (I) THAT ASSESSEE BEING A LESSEE HAS PAID THE PROVI SIONAL PREMIUM OF RS.22,575/- WHICH CAN BE ENHANCED BY THE LESSOR; (II) THAT ASSESSEE HAS BEEN MADE TO BEAR THE ADDITI ONAL COST OF ELECTRIFICATION OR DEVELOPMENT; (III) THAT IN CASE, THE LESSOR IS REQUIRED TO CONTR IBUTE TOWARDS ANY DEVELOPMENT OR THE PROVISION OF FACILIT IES BENEFITING THE SAID INDUSTRIAL AREA AS A WHOLE, LES SEE SHALL PAY SUCH PROPORTIONATE PREMIUM TO THE LESSOR AS MAY BE DETERMINED IN THIS BEHALF BY THE LESSOR; (IV) THAT THE LESSOR SHALL PAY A SUM OF RS.100/- PE R ACRE PER ANNUM AS LEASE RENT IN ORDER TO MAINTAIN THE AREA; (V) THAT THE ASSESSEE SHALL DISCHARGE ALL THE RATES AND TAXES LEVIABLE ON THE PROPERTY IN QUESTION; (VI) THAT THE PROVISIONAL PREMIUM INCLUDES THE AVER AGE LAND COST COMPONENT BASED ON THE COST OF ACQUISITIO N ALSO UNDER THE LAND ACQUISITION ACT OF THE WHOLE OF THE LAND; (VII) THAT THE LESSEE IS ENTITLED TO ERECT INDUSTRI AL UNIT ON THE LAND IN QUESTION IN ACCORDANCE WITH THE LAY OUT PLA N ETC.; ITA NO.4481/DEL./2016 6 (VIII) THAT THE ASSESSEE IS ENTITLED TO MORTGAGE, S UBLET, RELINQUISH OR ASSIGN HIS INTEREST IN THE PROPERTY I N QUESTION OR THE BUILDING STANDING THEREON WITH THE PREVIOUS CONSENT IN WRITING OF THE LESSOR; (IX) THAT THE LESSEE CAN ALSO MORTGAGE TO THE FINAN CIAL INSTITUTIONS AND SCHEDULED BANKS WHO ARE ENTITLED T O SELL THE MORTGAGED PROPERTY; (X) THAT THE PROPERTY IN QUESTION CAN BE INHERITED BY THE LEGAL HEIRS AND ALL THE TAXES ARE REQUIRED TO BE PA ID BY THE LESSEE/ ASSESSEE; (XI) THAT THE LESSEE SHALL BE LIABLE TO REIMBURSE A LL EXPENSES WHICH CORPORATION/LESSOR MAY HAVE INCURRED ON THE MAINTENANCE OF ROADS, DRAINS, POWER LINES, LIGHTS, CULVERTS, WATER SUPPLY LINES AND SEWERAGE LINES ETC .; AND (XII) THAT THE REGISTRATION CHARGES OF THE LEASE DE ED HAVE ALSO BEEN BORNE BY THE ASSESSEE. 11. ALL THE AFORESAID COVENANTS INSERTED IN THE LEA SE DEED GO TO PROVE THAT THE ASSESSEE IS NOT HAVING TENANCY RIGHT RATHER HE IS HAVING OWNERSHIP OF THE LAND WHICH CAN BE MORTGAGED /SOLD BY HIM AND THE PROPERTY IN QUESTION CAN BE INHERITED BY HI S LEGAL HEIRS ALSO. MOREOVER, SUBSTANTIAL INTEREST OF THE ASSESSEE HAS BEEN CREATED IN ITA NO.4481/DEL./2016 7 THE PROPERTY IN QUESTION. SO, WHEN THE TENURE OF T HE LEASE IS FOR 90 YEARS IT CERTAINLY CREATES OWNERSHIP RIGHTS IN FAVO UR OF THE ASSESSEE WHO IS ENTITLED TO ERECT INDUSTRIAL UNIT ON THE SAM E THOUGH WITH THE PRIOR PERMISSION OF THE LESSOR, NAMELY, UP STATE DE VELOPMENT CORPORATION LTD. 12. COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS JOINT COMMISSIONER OF INCOME TAX VS MUKUND LTD. 291 ITR 2 49 HELD THAT PREMIUM PAID BY THE ASSESSEE FOR ACQUISITION O F THE LEASEHOLD RIGHTS FOR 99 YEARS IN THE LAND ARE CAPITAL IN NATU RE AND AS SUCH THE PREMIUM PAID BY THE ASSESSEE COULD NOT BE CONSIDERE D AS ADVANCE PAYMENT OF RENT. 13. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PROPERTY IN QUESTION IS TO BE TREATED AS LAND AND N OT TENANCY RIGHTS. SINCE THE WORD LAND HAS NOT BEEN INCLUDED IN SECTIO N 55(2)(A), FAIR MARKET VALUE IS LIABLE TO COMPUTE THE CAPITAL GAIN. 14. COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS ITO VS. SHRI HARI OM GUPTA IN ITA NO.222/LKW/2013 ORDER DAT ED 11.04.2014 WHILE DECIDING THE IDENTICAL ISSUE WHEREIN LD. CIT (A) HAS HELD LEASEHOLD RIGHT AS NOT A CAPITAL ASSET SO AS TO APPLY PROVISIONS CONTAINED U/S 55C OF THE ACT AND THE SAI D FINDINGS RETURNED BY THE LD. CIT (A) HAS BEEN SET ASIDE BY T HE COORDINATE BENCH OF THE TRIBUNAL BY HOLDING LEASE RIGHT FOR TH E PERIOD OF 99 ITA NO.4481/DEL./2016 8 YEARS IS ALSO CAPITAL ASSETS TO WHICH PROVISIONS OF SECTION 50C ARE APPLICABLE. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE IN THE LIGHT OF THE DECISION DISCUSSED IN PRECEDING PARAS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEES LEASEHOLD RIGHT S FOR 90 YEARS IN THE PROPERTY IN QUESTION ARE CAPITAL IN NATURE AND NOT TENANCY RIGHTS AND HE IS ENTITLED FOR BENEFIT OF FMV. ACCORDINGLY , QUESTION FRAMED IS ANSWERED IN AFFIRMATIVE. 15. NOW, THE NEXT QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER VALUE OF THE LEASEHOLD RIGHTS IN THE LAND IN QUESTION OF THE ASSESSEE HAS TO BE DETERMINED BY VALUING FAIR MARKET VALUE OF LAND AS ON 01.04.1981 AND INDEXED COST OF ACQUISITION IN ORDER TO EXTEND LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE? 16. COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS M/S. NATRAJ VS. DCIT, AHMEDABAD IN ITA NO.3063/AHD/2010 ORDER DATED 04.01.2013 WHILE DECIDING THE IDENTICAL ISSUE, AS TO HOW THE VALUE OF LEASEHOLD RIGHT IN THE LAND IN QUESTION OF THE ASSESSEE HAS TO BE DETERMINED IN ORDER TO ASSESS THE LONG TERM C APITAL GAIN BY RETURNING THE FOLLOWING FINDINGS:- 7. ..WE FIND THAT THE PROVISION OF SECTION 55(2)(A) SHALL APPLY IN RELATION TO THE CAPITAL ASS ETS MENTIONED IN SECTION 55(2)(A) OF THE ACT ONLY. THE CAPITAL ASSETS AS MENTIONED IN SECTION 55(2)(A) ARE EXHAUSTIVE AND ALL INCLUSIVE OF CAPITAL ASSETS, SUC H AS GOODWILL, TRADE MARK BRAND NAME, RIGHT TO MANUFACTU RE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ITA NO.4481/DEL./2016 9 ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PER MITS OR LOOM HOURS, AND BEING AN EXHAUSTIVE LIST OF CAPI TAL ASSETS, ANY OTHER CAPITAL ASSET SUCH AS LAND ETC. C OULD NOT BE INCLUDED FOR THE PURPOSE OF VALUATION OF CO ST OF ACQUISITION FOR SECTIONS 48 AND 49 OF THE ACT. IT IS WELL SETTLED THAT WHEN CERTAIN PROVISION OF LAW HAS CLEA R LANGUAGE AND LEAVES NO ROOM FOR AMBIGUITY, THERE SHOULD BE NO VIOLENCE TO THE PROVISION AS ENACTED B Y THE LEGISLATURE AND NO WORDS SHOULD BE ADDED OR OMITTED WHILE READING A SPECIFIC PROVISION OF LAW. WE FIND THAT THE LEGISLATURE HAS INTENTIONALLY NOT ADDED WORD L AND IN THE PROVISION OF SECTION 55(2(A) OF THE ACT, AND THEREFORE, THE PROVISION OF SECTION 55(2)(A)(II) OF THE ACT WOULD NOT BE APPLICABLE WHILE VALUING THE COST OF ACQUISITION OF THE LAND FOR THE PURPOSE OF COMPUTA TION OF LONG TERM CAPITAL GAIN OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE VALUE OF THE LEASE-HO LD RIGHTS IN THE LAND IN QUESTION OF THE ASSESSEE, HAS TO BE DETERMINED IN ACCORDANCE WITH THE PROVISION OF SECT ION 48 OF THE ACT BY VALUING FAIR MARKET VALUE OF THE LAND AS ON 1.4.1981 AND THE INDEX COST OF ACQUISITION HA S TO BE DETERMINED IN ORDER TO ASSESS LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 17. WHEN IT IS ESTABLISHED THAT THE PROPERTY IN QUE STION WAS ACQUIRED BY THE ASSESSEE FIRM ON 02.07.1977 AS PER REGISTERED LEASE DEED FOR THE PERIOD OF 90 YEARS I.E. PRIOR TO 01.04 .1981 ASSESSEE IS ENTITLED FOR BENEFIT OF VALUING THE PROPERTY IN QUE STION ON THE BASIS OF FAIR MARKET VALUE AS ON 01.04.1981 AND THE COST OF ACQUISITION IS NOT TO BE TAKEN INTO ACCOUNT FOR COMPUTING THE CAPI TAL GAIN PARTICULARLY WHEN THE ASSESSEE HAS OPTED FOR USE TH E FAIR MARKET VALUE. SO, THE SECOND QUESTION FRAMED IS ALSO ANSW ERED IN AFFIRMATIVE IN FAVOUR OF THE ASSESSEE. ITA NO.4481/DEL./2016 10 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT IN VIEW OF THE FINDINGS RETURN ED IN THE PRECEDING PARAS, ASSESSEES LEASEHOLD RIGHT FOR A P ERIOD OF 90 YEARS IN QUESTION IS A CAPITAL ASSET AND NOT TENANCY RIGH TS TO WHICH PROVISIONS CONTAINED U/S 50C ARE APPLICABLE AND ASS ESSEE IS ENTITLED FOR BENEFIT OF FAIR MARKET VALUE AS ON 01.04.1981 I N ORDER TO COMPUTE THE CAPITAL GAIN. SO, THE FINDINGS RETURNE D BY THE LD. CIT (A) ARE HEREBY REVERSED AND THE AO IS DIRECTED TO C OMPUTE THE CAPITAL GAIN ACCORDINGLY. GROUNDS NO.2, 3 & 4 ARE DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.5 19. AO HAS NOT GRANTED BENEFIT OF DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BROKERAGE PAID TO THE AGENTS TO THE TUNE OF RS.2,00,000/- ON THE GROUND THAT NO EVIDENCE HAS BE EN PRODUCED REGARDING THE ALLEGED EXPENSES MADE ON TRANSFER/BRO KERAGE ETC. 20. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMP UGNED FINDING CONTENDED THAT HE HAS MADE PAYMENT OF BROKE RAGE THROUGH BANKING CHANNEL AFTER DULY DEDUCTING THE TDS. LD. AR FOR THE ASSESSEE ALSO CONTENDED THAT PAYMENT ON ACCOUNT OF BROKERAGE HAS BEEN MADE TO THE AGENTS AFTER GETTING PERMISSION FR OM UPSIDC FOR TRANSFER AND HAS ALSO BROUGHT ON RECORD PAN AND ITR OF THE PAYEE FOR THE RELEVANT PERIOD ALONG WITH BANK STATEMENT. IN THESE ITA NO.4481/DEL./2016 11 CIRCUMSTANCES, AO IS DIRECTED TO DECIDE THE ISSUE A FRESH AFTER TAKING INTO ACCOUNT THE EVIDENCE BROUGHT ON RECORD AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . GROUND NO.5 IS DETERMINED IN FAVOUR OF THE ASSESSEE FOR STATIST ICAL PURPOSES. 21. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF JULY, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND DAY OF JULY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), GHAZIABAD. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.