ALLAUDDIN NOORMOHAMED KADIWALA, MUMBAI V. INCOME TAX OFFICER 31(1)(1), MUMBAI

ITA 5105/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7008 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 31-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M MAKHIJA; LIPSA A CHANCHLANI
• Keywords: Capital asset; Business income; Salary income; Cost of acquisition; Capital receipt; Benefit of exemption; Capital Gains
• Section: 143(3); 54F; 2(14); 143(1); 147; 27; 148; 54; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENC H MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMB ER ITA NO.5105/MUM/2017 ( ASSESSMENT YEAR :2012-13 ) ALLAUDDIN NOORMOHAMED KADIWALA A/301, NEW EKTA CHSL BEHRAM BAUG, JOGESHWARI (W) MUMBAI-400 102 VS. ITO -31(1)(1) 407, EARNEST HOUSE NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AABPK6147K APPELLANT ) .. RESPONDENT ) ASSESSEE BY S.M.MAKHIJA & LIPSA A. CHANCHLANI REVENUE BY JOTHI LAKSHMI NAYAK DATE OF HEARING 2 0 /06/2019 DATE OF PRONOUNCEME NT 31 / 0 7 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE LD CIT(A)-42, MUMBAI, DATED 01/05/2017 AND IT PERTAINS TO ASSESSMENT YEAR-2012-13. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THE LD. ASSESSING OFFICER HAS ERRED IN BRINGIN G TO TAX A SUM OF RS. 50,59,270/- RECEIVED FROM M/S DELTA VENTURES AS INCOME FROM OTHER SOURCES INSTEAD OF HOLDING THE SAME TO BE LONG TERM CAPITAL GAIN REPRESENTING AMOUNT RECEIVED ON TRANSFER OF HIS RIG HT OF OCCUPANCY AS AN ALLOTTEE IN A PARTICULAR PIECE OF LAND AS A MEMBER/ SHAREHOLDER OF THE JANTA CO-OPERATIVE DAIRY SOCIETY LTD. AS WELL HIS B USINESS AND LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE SAME WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE IN TOTALITY. 2. THE APPELLANT SUBMITS THAT LD. COMMISSIONER OF I NCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE AMOUNT RECEIVED AGAINST THE TRANSFER O F CAPITAL ASSET AS INCOME FROM OTHER SOURCES ON IRRELEVANT CONSIDERAT IONS AND WITHOUT ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 2 CONSIDERING VARIOUS CASE LAWS RELIED BY ASSESSEES IN THE COURSE OF HEARING OF APPEAL. 3. WITHOUT PREJUDICE TO THE ABOVE THE APPELLANT SUB MITS THAT ASSESSEE MAY PLEASE BE ALLOWED DEDUCTION UNDER SECT ION 54F OF THE INCOME TAX ACT, 1961 TO THE EXTENT OF RS.50,59,270/ - OUT OF THE AMOUNT INVESTED BY HIM IN PURCHASE OF A HOUSE WITHIN A STI PULATED PERIOD. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR VARY ANY OF THE GROUND/GROUNDS AT THE TIME OR BEFORE HEARING OF THIS APPEAL. 5. THE APPELLANT THEREFORE PRAYS THAT THE AMOUNT RE CEIVED BY THE APPELLANT FROM M/S DELTA VENTURES ON TRANSFER OF HI S CAPITAL ASSETS MAY PLEASE BE DIRECTED TO BE TREATED AS LONG TERM CAPIT AL GAIN AND CLAIM OF SECTION 54F OF THE INCOME TAX ACT, 1961 MAY PLEASE BE ALLOWED FOR MAKING INVESTMENT OF THE SAID AMOUNT IN THE PURCHAS E OF THE NEW HOUSE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, ENGAGED IN DAIRY BUSINESS. THE ASSESSE E HAS FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 26/02/2013. THE ASSESSEE HAS DECLARED INCOME UNDER THE HEAD PROFIT & GAINS OF BU SINESS AND PROFESSION, LONG TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES. THE ASSESSEE IS A MEMBER OF SOCIETY CALLED JANTA CO -OPERATIVE DAIRY SOCIETY LTD. THE SOCIETY ACQUIRED AN IMMOVABL E PROPERTY AT VILLAGE MIRA, BHAYANDER, THANE DISTRICT, ADMEASURIN G 22,865 METERS, VIDE REGISTERED DEED OF CONVEYANCE DATED 21/09/1973 . THE SOCIETY PERMITTED ITS MEMBER TO CONSTRUCT KHILLAS (CATTLE S HEDS) AND SEVERAL OTHER STRUCTURES FOR STORING GRASS & CATTLE FEEDS T O CARRY OUT THEIR DAIRY BUSINESS. THE SOCIETY HAD ALSO DEVELOPED OTHE R COMMON INFRASTRUCTURE LIKE TUBE WELLS, COMMON AREA FOR STO RAGE, SEWERAGE STRUCTURES, COMMON ELECTRICAL FITTING, TO HELP THE MEMBERS TO CARRY OUT DAIRY BUSINESS. DURING THE YEAR UNDER CONSIDERA TION, THE SOCIETY ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 3 HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH M/S DELTA REALITY, A PARTNERSHIP FIRM VIDE JD AGREEMENT DATED 23/12/2011 FOR DEVELOPMENT OF 20174 SQ. MTRS OF THE PROPERTY. THE SAID AGREEMENT IS TRIPARTITE BETWEEN THE ASSESSEE, M/S DELTA REALT Y AND ALSO THE ASSESSEE BEING ONE OF THE CONFIRMING PARTY. AS PER SAID AGREEMENT, FOR THE PURPOSE OF JOINT VENTURE, M/S DELTA VENTURE HAS VALUED ENTIRE LAND AT RS.25,21,00,000/- AND PAID THE SOCIETY A SU M OF RS.12,60,00,000/- BEING 50% OF THE VALUE OF LAND. T HE SAID 50% MONEY RECEIVED FROM THE DEVELOPERS HAS BEEN DISTRIB UTED BY THE SOCIETY AND ITS MEMBERS AT THE RATIO OF 7.5% FOR SO CIETY AND 42.5% FOR ITS MEMBERS. ACCORDINGLY, THE ASSESSEE HAD RECE IVED A SUM OF RS.50,59,270/-. THE ASSESSEE CLAIMED THAT AMOUNT R ECEIVED FROM BUILDER ON ACCOUNT OF SURRENDER OF HIS TENANCY RIGH TS/POSSESSORY RIGHTS IS CAPITAL IN NATURE AND ACCORDINGLY, COMPUT ED LONG TERM CAPITAL GAIN FROM TRANSFER OF TENANCY/POSSESSORY RI GHTS AND ALSO CLAIMED EXEMPTION U/S 54F OF THE ACT, FOR A CONSIDE RATION OF RS.53,76,850/- FOR PURCHASE OF RESIDENTIAL HOUSE. 4. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON T HE BASIS OF INFORMATION FURNISHED BY THE ASSESSEE INCLUDING AGR EEMENT BETWEEN THE ASSESSEE, THE SOCIETY AND THE DEVELOPER CAME TO THE CONCLUSION THAT WHAT WAS RECEIVED BY THE ASSESSEE FROM THE DEV ELOPER IS ON ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 4 ACCOUNT OF LOSS OF BUSINESS BUT, NOT FOR TRANSFER T O HIS TENANCY RIGHTS/POSSESSOR, RIGHTS, WHICH IS EVIDENT FROM THE TERMS AND CONDITIONS OF AGREEMENT BETWEEN THE PARTIES AS PER WHICH THE LAND WAS BELONGS TO THE SOCIETY AND THE MEMBERS WAS ALLO WED TO CONSTRUCT KHILLAS FOR THE PURPOSE OF CARRY OUT THEI R BUSINESS, THEREFORE, AT ANY STRETCH OF IMAGINATION, IT CANNOT BE CONSIDERED THAT THE ASSESSEE IS HAVING ANY KIND OF RIGHTS IN THE SA ID PROPERTY. ACCORDINGLY, HE REJECTED ARGUMENTS OF THE ASSESSEE AND CONSIDERED AMOUNT RECEIVED FROM THE BUILDER UNDER THE HEAD INC OME FROM OTHER SOURCES AND ALSO REJECTED EXEMPTION CLAIMED U/S 54 F OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) , THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS VIDE HIS LE TTER DATED 01/09/2017, WHICH HAS BEEN REPRODUCED AT PARA-4 ON PAGES 3 TO 8 OF THE LD. CIT(A)S ORDER. THE SUM AND SUBSTANCE OF AR GUMENTS OF THE ASSESSEE BEFORE THE LD. CIT(A) ARE THAT BY VIRTUE O F AGREEMENT BETWEEN THE ASSESSEE, THE SOCIETY AND THE BUILDER, HE GOT COMPENSATION FOR TRANSFER/RELINQUISHMENT OF POSSESS ORY RIGHTS IN THE PROPERTY, THEREFORE, THE SAME HAS BEEN RIGHTLY CONS IDERED UNDER THE HEAD CAPITAL GAIN AND ACCORDINGLY, COMPUTED LONG TE RM CAPITAL GAIN AFTER CLAIMING NECESSARY EXEMPTION U/S 54F OF THE ACT. ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 5 6. THE LD. CIT(A) AFTER CONSIDERING RELEVANT SUBMI SSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF AGREEMENT BETWEEN T HE PARTIES HELD THAT WHAT WAS RECEIVED BY THE ASSESSEE FROM TH E BUILDER BY VIRTUE OF AGREEMENT BETWEEN THEM IS ESSENTIALLY TO COMPENSATE THE MEMBER FOR LOSS OF BUSINESS AND FOR RELINQUISHMENT OF THEIR RIGHTS IN SAID KHILLAS, STRUCTURES AND OTHER INFRASTRUCTURES PUT UP BY THEM. THEREFORE, MONEY RECEIVED BY THE MEMBERS OF THE SO CIETY WAS ONLY TO COMPENSATE FOR PHYSICAL STRUCTURE PUT UP BY THE M AND NOT FOR SURRENDER OF ANY TENANCY RIGHTS, BECAUSE NO TENANCY RIGHTS HAS BEEN GIVEN TO THOSE MEMBERS. THE LD. CIT(A), FURTHER OBS ERVED THAT THE RIGHT OF USUFRUCT OR EASEMENT DOES NOT ENTITLE THE ASSESSEE CLAIM THAT IT IS HOLDING A CAPITAL ASSET WHICH CAN BE TR ANSFERRED BY HIM UNDER ANY LAW. THEREFORE, HE OPINED THAT THERE IS N O MERIT IN THE CLAIM OF THE ASSESSEE THAT COMPENSATION RECEIVED F ROM BUILDER IS ON ACCOUNT OF TRANSFER OF TENANCY RIGHTS OR POSSESSORY RIGHTS OF THE PROPERTY AND ACCORDINGLY, UPHELD THE FINDINGS OF TH E LD. ASSESSING OFFICER IN ASSESSMENT OF SAID COMPENSATION UNDER TH E HEAD INCOME FROM OTHER SOURCES AND ALSO REJECTION OF EXEMPTIO N CLAIMED U/S 54F OF THE ACT. 7. AGGRIEVED BY THE LD. CIT(A)S ORDER, THE ASSESSE E IS IN APPEAL BEFORE US. ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 6 8. LD. LD. AR FOR THE ASSESSEE, SUBMITTED THAT THE LD. ASSESSING OFFICER AS WELL AS THE LD. CIT(A) WERE ERRED IN NOT APPRECIATING THE FACTS IN RIGHT PROPER PERSPECTIVE IN LIGHT OF EVIDE NCES FILED BY THE ASSESSEE BEFORE COMING TO THE CONCLUSION THAT WHAT WAS RECEIVED BY THE ASSESSEE FROM THE BUILDER IS ON ACCOUNT OF LOSS OF BUSINESS, BUT NOT COMPENSATION FOR TRANSFER OF TENANCY RIGHTS/POS SESSORY RIGHTS IN PROPERTY. THE LD. AR FURTHER SUBMITTED THAT AN IDEN TICAL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF ITAT, M UMBAI BENCH IN THE CASE OF RAHIM KASM KADIWAL VS PR. CIT IN ITA NO.3387 & 3388/MUM/2018 FOR AY 2012-13 AND 2013-14, WHERE UND ER IDENTICAL SET OF FACTS AND ALSO ON THE BASIS OF SIMILAR AGREE MENT BETWEEN THE ASSESSEE AND JANTA CO-OPERATIVE DAIRY SOCIETY LTD. AND M/S DELTA REALTY, THE TRIBUNAL HELD THAT COMPENSATION RECEIVE D FROM THE BUILDER IS ON ACCOUNT OF TRANSFER OF TENANCY/POSSES SORY RIGHTS, CONSEQUENTLY THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS. HE, FURTHER SUBMITTED THAT EXACTLY I DENTICAL IN THE NATURE FROM THAT OF THE ISSUE WHICH HAD BEEN ALREAD Y CONSIDERED BY THE TRIBUNAL, THE ADDITIONS MADE BY THE ASSESSING O FFICER TOWARDS COMPENSATION RECEIVED FROM THE BUILDER UNDER THE HE AD INCOME FROM OTHER SOURCES SHOULD BE DELETED AND LONG TERM CAPIT AL GAIN COMPUTED BY THE ASSESSEE AND ALSO RESULTANT EXEMPTI ON CLAIMED U/S 54 OF THE ACT SHOULD BE ACCEPTED. ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 7 9. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HA S RIGHTLY UPHELD THE FINDINGS OF THE ASSESSING OFFICER IN LIGHT OF V ARIOUS FACTS BROUGHT OUT BY THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A COMPENSATION FOR LOSS OF BUSINESS, BUT NOT FOR TRAN SFER OF TENANCY RIGHTS/POSSESSORY RIGHTS IN PROPERTY. THE LD. DR HA D TAKEN US TO THE PAPER BOOK FILED BY THE ASSESSEE, MORE PARTICULARLY TRIPARTITE AGREEMENT BETWEEN THE PARTIES TO ARGUE THAT AS PER SAID AGREEMENT, THE LAND IS OWNED BY THE ASSESSEE AND THE MEMBER WA S NOT HAVING ANY RIGHT IN THE SAID PROPERTY. FURTHER, THE MEMBER S WERE ALLOWED TO CONSTRUCT CATTLE SHEDS FOR STORAGE OF GRASS AND OTH ER ITEMS WHICH IS RELEVANT FOR THEIR DAIRY BUSINESS. THE LD. DR FURTH ER SUBMITTED WHEN THE SOCIETY ENTERED INTO A JOINT DEVELOPMENT AGREEM ENT WITH THE BUILDER, THE MEMBER STARTED DISPUTE WITH THE SOCIET Y, THEREFORE, AFTER PROLONGED DISCUSSION, THEY REACHED TO UNDERSTANDING AND AS PER WHICH THE BUILDER AND THE SOCIETY AGREED TO COMPENS ATION FOR LOSS OF BUSINESS AS WELL AS STRUCTURES PUT UP BY MEMBERS, T HEREFORE, THE SAME CANNOT BE CONSIDERED AS COMPENSATE FOR TRANSFE R OF TENANCY RIGHTS/POSSESSORY RIGHTS. THE LD. DR FURTHER SUBMIT TED THAT ON GOING THROUGH THE AGREEMENT BETWEEN THE PARTIES, IT WAS V ERY CLEAR THAT NOWHERE IT IS MENTIONED THAT THE MEMBERS HAVE ANY R IGHT IN PROPERTY ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 8 NOR THEY HAVE BEEN GIVEN TENANCY RIGHTS IN THE SAID LAND. UNLESS, IT WAS PROVED WITH NECESSARY EVIDENCE THAT THEY ARE HA VING SOME KIND OF RIGHTS IN THE SAID PROPERTY INCLUDING ANY KIND O F TENANCY RIGHTS, THE AMOUNT RECEIVED FROM THE BUILDER CANNOT BE CONSIDER ED AS CAPITAL RECEIPT CAN BE ASSESSABLE UNDER THE HEAD CAPITAL G AINS. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE CO NSIDERED RELEVANT FACTS TO COME TO THE CONCLUSION THAT AMOUNT RECEIV ED FROM THE BUILDER IS A COMPENSATION FOR LOSS OF BUSINESS AND THE SAME IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE SOLE DISPUTE IS WITH REGARD TO COMPENSATION RECEIVE D BY THE ASSESSEE BY VIRTUE OF TRIPARTITE AGREEMENT BETWEEN JANTA CO- OPERATIVE DAIRY SOCIETY LTD., M/S DELTA REALITY AND THE ASSESSEE BEING ONE OF THE CONFIRMING PARTIES. THE ASSESSEE C LAIMS THAT SAID COMPENSATION IS ON ACCOUNT OF TRANSFER OF HIS TENAN CY RIGHTS/POSSESSORY RIGHTS IN THE PROPERTY, THEREFORE , THE SAME IS RIGHTLY ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS, CONSEQUENTLY EXEMPTION AVAILABLE U/S 54FOF THE ACT HAS BEEN RIGH TLY CLAIMED. THE ASSESSING OFFICER ASSESSED COMPENSATION RECEIVED FR OM THE BUILDER UNDER THE HEAD INCOME FROM OTHER SOURCES ON THE GRO UND THAT THE ASSESSEE WAS NOT HAVING ANY KIND OF RIGHT OR INTERE ST IN THE PROPERTY, ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 9 BUT WHAT WAS RECEIVED BY THE ASSESSEE BY VIRTUE OF TRIPARTITE AGREEMENT IS COMPENSATION FOR LOSS OF BUSINESS AND OTHER STRUCTURES PUT UP BY THE ASSESSEE TO CARRY OUT THEIR DAIRY FAR MING ACTIVITY. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN SUBJECT MATTE R OF DELIBERATION FROM THE CO-ORDINATE BENCH OF ITAT, MUMBAI, IN THE CASE OF RAHIM KASAM KADIWAL VS PR. CIT IN ITA NO.3387 & 3388/MUM/ 2018 FOR AY 2012-13 AND 2013-1 IN 263 PROCEEDINGS. WE FURTHER N OTED THAT THE TRIBUNAL HAD CONSIDERED IDENTICAL ISSUE IN THE LIGH T OF TRIPARTITE AGREEMENT BETWEEN THE ASSESSEE, JANTA CO-OPERATIVE DAIRY SOCIETY LTD. AND M/S DELTA REALITY, DEVELOPER OF THE PROJEC T AND AFTER CONSIDERING RELEVANT FACTS HELD THAT WHAT WAS RECEI VED BY THE ASSESSEE BY VIRTUE OF TRIPARTITE AGREEMENT IS FOR T RANSFER OF TENANCY RIGHTS/POSSESSORY RIGHTS AND SAME IS ASSESSABLE UND ER THE HEAD INCOME FROM CAPITAL GAINS. THE TRIBUNAL FURTHER OBS ERVED THAT WHEN THE DEPARTMENT HAS ACCEPTED INCOME DECLARED UNDER T HE HEAD CAPITAL GAINS IN OTHER MEMBERS CASES, WAS ERRED IN NOT ACCEPTING IN THE CASE OF THE ASSESSEE WITHOUT BRINGING ON RECORD ANY CHANGES IN FACTS. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 7. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED A.R . OF THE ASSESSEE AND THE LEARNED D.R. FOR REVENUE AND PERUSED THE MA TERIAL ON RECORD. THE LEARNED A.R. OF THE ASSESSEE SUBMITS THAT INITI ALLY THE RETURN OF INCOME WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT . THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE AC T ON 03.08.2016. NOTICE UNDER SECTION 148 OF THE ACT DAT ED 03.08.2016 WAS ISSUED TO THE ASSESSEE. THE LEARNED A.R. FURTHE R SUBMITS THAT DURING THE RE-ASSESSMENT PROCEEDINGS THE AO EXAMINE D THE ISSUE EXTENSIVELY. THE AO, AFTER EXAMINING THE ISSUE, DEN IED THE EXEMPTION ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 10 OF LONG TERM CAPITAL GAIN, WHICH IS NOW SUBJECT MAT TER OF APPEAL BEFORE THE CIT(A). THE LEARNED A.R. INVITED OUR ATTENTION TO PARA 5 OF THE ASSESSMENT ORDER AND HAS SHOWN THAT THE ISSUE WAS E XAMINED BY THE AO AT LENGTH. THE LEARNED A.R. FURTHER SUBMITS THAT SECTION 27 OF THE ACT DEFINES THE OWNERSHIP AND AS PER CLAUSE (III) O F SECTION 27 OF THE ACT A MEMBER OF A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS TO WHOM A BUILDING OR PART THEREOF IS AL LOTTED OR LEASED UNDER A HOUSE BUILDING SCHEME OF THE SOCIETY, COMPA NY OR ASSOCIATION, AS THE CASE MAY BE, SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART THEREOF. 8. THE LEARNED A.R. OF THE ASSESSEE FURTHER SUBMITS THAT IN RESPECT OF OTHER MEMBERS OF THE SOCIETY THE REVENUE HAS ACCEPT ED THE CLAIM OF LONG TERM CAPITAL GAIN. THE LEARNED A.R. OF THE ASS ESSEE FURNISHED A COPY OF ASSESSMENT ORDER IN THE CASES OF (I) SHRI TAJDIN KASAM PRASLA BY ITO, WARD 31(3)(2), MUMBAI UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, (II) SHRI TAJBHAI JIVAN KARVALIA BY ITO, WARD 31(3 )(2), MUMBAI OR A.Y. 2012- 13 UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, (III) SHRI IQBAL RAJABAI MOMIN BY ITO, WARD 31(2)(1 ), MUMBAI FOR A.Y. 2012- 13 UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 24.12.2016 AND (IV) SHRI NIZARALI N. PRASALA BY ITO, WARD 31(2)(4) , MUMBAI FOR A.Y. 2012-13 UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 28 .12.2016. 9. THE LEARNED A.R. FURTHER SUBMITS THAT NO REVISIO N ORDER IS PASSED IN ALL THE FOUR CASES. THE LEARNED A.R. THEREFORE SUBMITS THAT THE ORDER OF THE AO IS NOT ERRONEOUS AS THE ASSESSING OFFICER HA S TAKEN A REASONABLE AND POSSIBLE VIEW AND IN VIEW OF THE LAW LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIA L CO. LTD. VS. CIT 243 ITR 83 THE TWIN CONDITIONS AS ENUNCIATED UNDER SECTION 263 OF THE ACT ARE NOT FULFILLED. THEREFORE THE REVISION ORDER PASSED BY THE LEARNED PR.CIT IS LIABLE TO BE QUASHED. THE LEARNED A.R. ALSO RELIED UPON THE DECISIONS IN CASE OF CIT VS. FINE JEWELLE RY (INDIA) LTD. 372 ITR 303, CIT VS MAX INDIA (295 ITR 282 SC), GRASIM INDUSTRIES LTD VS CIT (321 ITR 303 BOM), IDEA CELLULAR LTD VS DCIT (301 ITR 407 BOM), REAL TRADERS VS PCIT (2929/MUM/2016), SIMANDH AR ASSOCIATION VS PCIT (ITA NO789/MUM/2016) AND UNION OF INDIA VS CADELL WEAVING MILLS CO. LTD & OTHER( 273 ITR 3 SC) . 10. ON THE OTHER HAND, THE LEARNED D.R. FOR THE REV ENUE SUPPORTED THE ORDER OF THE LEARNED PR. CIT. THE LEARNED D.R. FURT HER SUBMITTED THAT THE AO HAS NOT EXAMINED IF THE LONG TERM CAPITAL GA IN IS CORRECT OF NOT. THERE IS NO EXAMINATION OF LONG TERM CAPITAL GAIN C LAIM BY THE ASSESSEE. THE AO HAS EXAMINED ONLY THE EXEMPTION UN DER SECTION 54F OF THE ACT ONLY. THE CASE LAW RELIED AND REFERR ED BY THE LEARNED A.R. OF THE ASSESSEE ARE NOT APPLICABLE ON THE FACT S OF THE PRESENT CASE AS THE CASE LAW RELIED UPON BY THE LEARNED A.R . ARE PRIOR TO EXPLANATION 2 OF SECTION 263(1) OF THE ACT. SINCE T HE AO HAS NOT ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 11 EXAMINED THE NATURE OF COMPENSATION, THEREFORE, THE ORDER IS NOT ONLY ERRONEOUS BUT PREJUDICIAL TO THE INTEREST OF REVENU E. THE LEARNED D.R. FURTHER SUBMITS THAT WHEN TWO VIEWS ARE POSSIBLE TH E VIEW TAKEN BY THE PR.CIT PREVAILS. IF THE AO COMMITTED ERROR THEN THE LEARNED PR.CIT HAS THE RIGHT TO CORRECT THE SAME. THUS, THE VIEW T AKEN BY THE LEARNED PR.CIT ON THE ISSUE WILL PREVAIL. IN SUPPORT OF HIS SUBMISSION THE LEARNED D.R. RELIED UPON THE DECISION OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. GOETZE (INDIA) LTD. 361 ITR 505. 11. IN REJOINDER THE LEARNED A.R. SUBMITS THAT THE ORDER OF THE LEARNED PR.CIT IS CONTRARY IN ITSELF. THE PR.CIT AT ONE PLA CE CONCLUDED THAT THE ASSESSEE HAS NO TENANCY RIGHT. ON THE OTHER HAND TH E PR.CIT TREATED THE ASSESSEE AND OTHER 43 MEMBERS OF THE SOCIETY AS TENANTS. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AO AS WELL AS THE OR DER PASSED BY THE LEARNED PR. CIT UNDER SECTION 263 OF THE ACT. IN OU R VIEW THE SOLE ISSUE FOR OUR CONSIDERATION IS WHETHER THE AMOUNT O F COMPENSATION RECEIVED BY THE ASSESSEE IS A CAPITAL GAIN OR IN COME FROM OTHER SOURCES. SECTION 2(14) OF THE ACT DEFINE CAPITAL ASSET MEANS A PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER O R NOT CONNECTED WITH THE BUSINESS OR PROFESSION. THE CLAIM OF THE A SSESSEE IS THAT BEING A MEMBER OF THE SOCIETY THE ASSESSEE HAS RECE IVED COMPENSATION OF `1.01 CRORES AS HIS SHARE FROM A JO INT VENTURE AGREEMENT. IN THE RETURN OF INCOME THE ASSESSEE CLA IMED THIS AMOUNT AS A RECEIPT ON ACCOUNT OF SURRENDERING THE TENANCY RIGHT (HIS SHARE) AS CAPITAL GAIN AND CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT FOR `99,52,083/- ON INVESTMENT FOR PURCHASING RESID ENTIAL HOUSE. THE CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT IS NOT THE ISSUE BEFORE US. THE ONLY ISSUE AS WE HAVE REFERRED EARLI ER IS WHETHER THE COMPENSATION RECEIVED BY THE ASSESSEE IS RECEIVED O N ACCOUNT OF TRANSFER OF CAPITAL GAIN OR THE RECEIPT SHOULD BE TREATED AS INCOME FROM OTHER SOURCES. THE ASSESSEE WAS HOLDING A RIG HT BEING A MEMBER OF THE SOCIETY AND ALSO CONSTRUCTED PERMANEN T STRUCTURE FOR RUNNING HIS DAIRY. THERE IS NO DISPUTE THAT THE ASS ESSEE RECEIVED COMPENSATION ON SURRENDER OF HIS RIGHTS IN THE SOCI ETY. THE RIGHT SURRENDERED BY THE ASSESSEE IS SURELY A CAPITAL ASS ET AS DEFINE UNDER SECTION 2(14) OF THE ACT. THOUGH, THE ASSESSEE HAS SHOWN IN RETURN OF INCOME AS SURRENDERING OF TENANCY RIGHT, IT MAY BE DUE TO WRING NOMENCLATURE OR MISCONCEPTION OF FACTS. BUT FACT RE MAINED THE SAME THAT THE ASSESSEE WAS A MEMBER OF THE SOCIETY. 13. WE HAVE NOTED THAT IN THE SHOW CAUSE NOTICE UND ER SECTION 263 THE LD. PCIT RELIED ON THE DECISIONS OF SPECIAL BENCH O F MUMBAI TRIBUNAL IN CADELL WEAVING MILLS CO (P) LTD VS CIT WHEREIN I T WAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FOR SURRENDERING OF TENANCY RIGHT CONSTITUTE CASUAL AND NON-RECURRING INCOME UNDER SE CTION 10(3) AND WAS ASSESSABLE AS INCOME FROM OTHER SOURCE. 14. THE DECISION OF THE SPECIAL BENCH OF MUMBAI TRI BUNAL HAS BEEN REVERSED BY HONBLE JURISDICTIONAL HIGH COURT IN CA DELL WEAVING MILLS ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 12 CO (P) LTD VS CIT (249 ITR 265 BOM). THE HONBLE HI GH COURT HELD THAT WHENEVER THERE IS A RECEIPT, ONE HAS TO ASCERT AIN ITS SOURCE: IF IT IS A BUSINESS INCOME OR SALARY INCOME OR CAPITAL GAINS CHARGEABLE UNDER SECTION 45. FURTHER, INQUIRY HAS TO BE MADE, VIZ., WHETHER THE RECEIPT IS CASUAL AND NON-RECURRING. SINCE CAPITAL GAINS AR E BROUGHT WITHIN THE TAX NET UNDER SECTION 45, IT CANNOT FALL IN SECTION 10(3). IF ANY AMOUNT OF CAPITAL GAINS IS NON-TAXABLE FOR ANY REASON AS C APITAL GAINS, THAT AMOUNT CANNOT BE TREATED, AUTOMATICALLY, AS A CASUA L AND NON- RECURRING RECEIPT UNDER SECTION 10(3). IN ORDER TO ATTRACT SECTION 10(3), TWO CONDITIONS ARE REQUIRED TO BE SATISFIED, VIZ., THAT THE RECEIPT SHOULD BE CASUAL AND NON-RECURRING AND THAT IT SHOULD NOT ARISE BY WAY OF BUSINESS INCOME, SALARY INCOME OR CAPITAL GAINS CHA RGEABLE UNDER SECTION 45. THEREFORE, THE AFORESTATED THREE TYPES OF INCOMES CONSTITUTE EXCEPTIONS TO SECTION 10(3). THAT CAPITA L RECEIPTS DO NOT FALL UNDER SECTION 10(3). IF THE WHOLE OF THE VALUE OF T HE CAPITAL ASSET TRANSFERRED IS BROUGHT TO TAX, THEN WHAT WOULD BE C HARGED IS THE CAPITAL VALUE OF THE ASSET AND NOT PROFIT OR GAIN A S CONTEMPLATED IN SECTION 45 OF THE ACT. HENCE, SECTION 56 HAS NO APP LICATION. IT, THEREFORE, FOLLOWED THAT THE AMOUNT RECEIVABLE ON S URRENDER OF TENANCY RIGHTS WOULD NOT FALL WITHIN THE PURVIEW OF SECTION 10(3). IN VIEW OF SECTION 2(24) WHICH DEFINES THE WORD INCOM E, IT IS CLEAR THAT ONLY CAPITAL GAINS CHARGEABLE UNDER SECTION 45 WOUL D FALL WITHIN THE DEFINITION OF SECTION 2(24)(VI). THEREFORE, THERE W AS NO MERIT IN THE CONTENTION OF THE DEPARTMENT THAT CAPITAL GAINS WHI CH ARISE IN CASES OF TRANSFER OF ASSETS WHOSE COST OF ACQUISITION CANNOT BE COMPUTED WOULD FALL UNDER SECTION 56. 11. IN THIS VIEW OF THE MATTER AND ALSO BY F OLLOWING THE DECISION OF THE ITAT, MUMBAI D BENCH IN THE CASE OF RAHIM KASM KADIWAL VS PR. CIT IN ITA NO.3387 & 3388/MUM/2018, WE ARE OF THE CONSIDERED VIEW THAT ASSESSING OFFICER AS WELL AS T HE LD. CIT(A) WERE ERRED IN CONSIDERING COMPENSATION RECEIVED BY THE ASSESSEE BY VIRTUE OF TRIPARTITE AGREEMENT UNDER THE HEAD IN COME FROM OTHER SOURCES, ACCORDINGLY, WE DIRECT THE ASSESSING OFFIC ER TO ASSESS COMPENSATION RECEIVED FROM TRANSFER OF TENANCY/POSS ESSORY RIGHTS UNDER THE HEAD CAPITAL GAINS. ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 13 12. HAVING SAID SO, LET US COME TO THE ISSUE OF DED UCTION CLAIMED U/S 54F OF THE ACT. THE ASSESSING OFFICER DENIED 54 F BENEFIT FOR THE SIMPLE REASON THAT SAID COMPENSATION HAS BEEN ASSE SSED UNDER THE HEAD INCOME FROM OTHER SOURCES, CONSEQUENTLY, BENEF IT OF EXEMPTION OF U/S 54F OF THE ACT CANNOT BE GIVEN. WE FIND THAT WE HAVE DIRECTED THE ASSESSING OFFICER TO ASSESS SAID COMPENSATION U NDER THE HEAD CAPITAL GAINS, CONSEQUENTLY, BENEFIT OF EXEMPTION U /S 54F OF THE ACT SHALL ALSO NEEDS TO BE GIVEN TO THE ASSESSEE, IF PR ESCRIBED CONDITIONS OF SECTION U/S 54F OF THE ACT ARE FULFILLED. IN THI S CASE, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE H AS PAID A SUM OF RS.51 LAKHS FOR PURCHASE OF RESIDENTIAL HOUSE VIDE AGREEMENT DATED 07/03/2012 AND ALSO CLAIMS THAT A SUM OF RS.25 LAKH S HAS BEEN PAID BEFORE 31/07/2012 AND BALANCE AMOUNT OF RS.26 LAKHS CLAIM TO HAVE BEEN PAID BY M/S DELTA VENTRURE DIRECTLY TO THE BUI LDER. THESE FACTS NEEDS TO BE VERIFY BY THE ASSESSING OFFICER IN LIGH T OF AGREEMENT ALONG WITH PAYMENT PROOF. THEREFORE, WE SET-ASIDE T HE ISSUE TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO CAU SE NECESSARY ENQUIRIES TO ASCERTAIN FACTS WITH REGARD TO PAYMENT OF CONSIDERATION ON OR BEFORE PRESCRIBED DATE AS PROVIDED U/S 54F OF THE ACT, IN ORDER TO GIVE BENEFIT OF EXEMPTION. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ITA NO.5105/MUM/2017 ALLAUDDIN NOORMOHAMED KADIWALA 14 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 /07/2019 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31/07/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//