M/s. Arora Pharma India Pvt. Ltd., Gurgaon V. ITO, New Delhi

ITA 5844/DEL/2011

• Counselvise Citation: 584420114 RSA 2011
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-10-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 28-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BILASH MEENA
• Keywords: Deemed owner of house property; Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5838 TO 5844 /DEL/2011 A. YS. 1994-95 ,95-96,97-9898-99, 1999002000-01& 2001-02 M/S ARORA PHARMA INDIA ITO, PVT. LTD., C/O MRS. MEERA JAIN, WARD-2 (1), C-12/9, DLF CITY, PHASE-I, NEW DELHI. GURGAON. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACA AAACA AAACA AAACA- -- -7043 7043 7043 7043- -- -G GG G APPELLANT BY : SHRI SALIL AGARWAL, ADVOCATE. RESPONDENT BY : SHRI RAM BILASH MEENA, SR. DR. ORDER PER TS KAPOOR, AM: THESE ARE BUNCH OF SEVEN APPEALS FILED AGAINST THE CON SOLIDATED ORDER OF LD CIT(A) DATED 6.11.2007. THESE APPEALS HA VE BEEN FILED BY THE ASSESSEE AGAINST THE ABOVE SAID ORDER. THESE APPEALS W ERE HEARD TOGETHER AND ARE BEING DISPOSED OFF THROUGH THIS COMMO N CONSOLIDATED ORDER. THE GROUNDS OF APPEALS INVOLVED IN ALL THESE YE ARS ARE COMMON. HOWEVER, THE AMOUNT IS DIFFERENT IN DIFFERENT YEARS. HOWEVER, THE COMMON GROUND IN ALL THESE APPEALS TAKEN BY THE ASSESSEE IS COVERED BY GROUND NO.2.1 OF GROUNDS OF WHICH READS AS UNDER:- ITA NO5838 TO 5844/DEL/11 2 2. THAT THE LD CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS THAT IN NOT CONCLUDING THAT ASSESSMENT FRAMED BY THE LD ITO WA S WITHOUT JURISDICTION AND THUS DESERVED TO BE QUASHED AS SUCH. 2.1. THAT THE LD CIT(A) HAS FAILED TO APPRECIATE TH AT THE COMPANY HAD BEEN DISSOLVED AND HAS BEEN ADJUDGED AS DEFUNCT COM PANY U/S 560 OF THE COMPANIES ACT, 1956, NO ORDER OF ASSESSME NT COULD BE MADE AGAINST THE COMPANY AND AS SUCH THE ORDE R SO MADE WAS INVALID, ILLEGAL UNTENABLE AND UNSUSTAINABLE IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT FOR TH E ASSESSMENT YEAR 1994-95 WAS DONE BY THE ASSESSING OFFICER WH EREIN ADDITION OF ` 16,00,000/- WAS MADE ON ACCOUNT OF DEEMED HOUSE PROPERTY INCOME. THE ASSESSING OFFICER HAD MADE THE ADD ITION CONSIDERING THE FACT THAT ASSESSEE OWNED 3.75 ACRES OF L AND IN CHHATTARPUR MEHRAULI, DELHI WHICH HAD GIVEN ON LEASE THIS LAND TO M/S ACIT A SISTER CONCERN OF THE ASSESSEE FOR AGRICULTURAL AC TIVITIES VIDE AGREEMENT DATED 1.6.1992. ACCORDING TO CLAUSE (VII) OF AGREEMENT, THE LESSEE WAS ENTITLED TO CONSTRUCT FARM HOUSE AND STORAGE F ACILITY FOR CARRYING OUT AGRICULTURAL ACTIVITIES AND IN ACCORDAN CE THEREOF, THE LESSEE HAD CONSTRUCTED A BUILDING THEREON. THE SAID BU ILDING WAS THEN SHOWN AS AN ASSET IN THE BALANCE SHEET OF THE ASSESSEE AND AN AMOUNT OF ` .2.02 CRORES WAS TAKEN AS THE VALUE OF BUILDING AND CO RRESPONDING ENTRY WAS SHOWN AS LOAN TAKEN FROM ACIL. THE ASSESSING O FFICER HELD THAT FARM HOUSE THUS CONSTRUCTED HAD SERVED THE PURPOSE AS RESIDENCE OF DIRECTOR OF THE ASSESSEE COMPANY AND THAT OF LESSEE CO MPANY AND THEREFORE HE COMPUTED THE ANNUAL VALUE OF PROPERTY U/S 23 OF THE INCOME TAX ACT, 1961 ON THE BASIS OF MARKET VALUE OF THE BUILDING AND CONSIDERING THE REASONABLE YIELD ASSESSED THE DEEMED INCO ME FROM HOUSE PROPERTY AT ` .20,00,000/-. THE CONTENTION OF THE ASSESSEE THAT ITA NO5838 TO 5844/DEL/11 3 AS PER AGREEMENT IT WAS ENTITLED TO ` .37,500/- PER ANNUM ONLY WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ADDITIONS IN THE SUBSEQUENT YEARS STARTING FROM 1996-97 TO 2001-02 WERE ALSO MADE ON SIMILAR BASIS. THE SAID ADDITIONS WAS UPHELD BY LD CIT(A) AND ASSE SSEE WENT IN APPEAL BEFORE HON'BLE ITAT AND HON'BLE ITAT REMANDE D BACK THE CASE OF THE ASSESSEE TO THE FILE OF ASSESSING OFFICER. THE MATTE R WAS REMANDED FOR ADJUDICATION ON THE QUESTION OF OWNERSH IP IN RELATION TO THE IMPUGNED CONSTRUCTION. HON'BLE ITAT VIDE ITS ORDE R FOR ABOVE YEARS HELD AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY AND HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND PR OCEED TO DISPOSE OF THE ISSUE ON THE FOLLOWING LINES. THE CRUX OF THE ISSUE RESOLVES AROUND THE ASCERTAINMENT OF ANNUAL VALUE OF T HE PROPERTY IN QUESTION, INCOME FROM HOUSE PROPERTY IS TA XABLE IN CHAPTER-IV OF THE INCOME TAX ACT, 1961 . THE INCOME FROM PROPERTY IS TAXABLE IN THE HANDS OF THE OWNER OF SUCH PROPERTY. IN THE INSTANT CASE, THE BONE OF CONTENTION IS IN RELATIO N TO THE PROPERTY CONSTRUCTED ON THE PREMISES GIVEN ON LEASE BY THE ASSESSEE. APPARENTLY MONEYS FOR THE CONSTRUCTION HAVE BEE N FURNISHED BY THE LESSEE AND CLAUSE V OF THE LEASE AGREEM ENT ALSO MAKES A MENTION THAT ON TERMINATION OF THE LEASE AGRE EMENT NOTHING SHALL BE PAYABLE TO THE LESSEE ON ACCOUNT OF M ONEY SPENT ON CONSTRUCTION BY LESSEE DURING THE CURRENCY OF THE AGREEMENT. IN THE FACE OF AFORESAID BEFORE WE PROCEE D TO ASSESS THE INCOME ACCRUING TO THE ASSESSEE UNDER THE HEAD INCO ME FROM HOUSE PROPERTY. IT IS NECESSARY TO ADJUDICATE THE OWNERSHIP IN RELATION TO THE IMPUGNED CONSTRUCTION./ ONCE THE ISSUE WITH REGARD TO THE OWNERSHIP IS ESTABLISHED, IT IS ONLY, THE REAFTER THAT THE SUBSEQUENT PROVISIONS OF SECTION 23 SHALL START OPERAT ING. WE ITA NO5838 TO 5844/DEL/11 4 FIND THAT THE LOWER AUTHORITIES HAVE NOT ADDRESSED THE MSELVES TO THE IMPUGNED ISSUE WHICH GOES TO THE ROOT OF THE MATTE R. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE MA TTER IS LIABLE TO BE RE-EXAMINED BY THE ASSESSING OFFICER IN THE AFORE SAID LIGHT BY CONSIDERING THE ENTIRE GAMUT OF FACTS ARISING OUT O F THE LEASE AGREEMENT, ETC. WHICH WOULD HAVE A BEARING ON THE SA ID ISSUE. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER AUTH ORITIES ON THIS ISSUE AND REMAND THE MATER BACK TO THE FILE OF TH E ASSESSING OFFICER TO RE-COMPUTE THE INCOME CHARGEABLE FROM TH E IMPUGNED PROPERTY IN THE HANDS OF THE ASSESSEE AFRESH. 3. THE ASSESSING OFFICER VIDE HIS ORDER DATED 21.9.2006, 22,.9.2006, 25.9.2006, 26.9.2006, 27.9.2006, 28.9.2006 AND 29.9 .2006 RESPECTIVELY IN RESPECT OF ABOVE ASSESSMENT YEARS HELD TH AT THE BUILDING BELONGED TO THE ASSESSEE AND THEREFORE HE MADE THE ADDITIONS ON ACCOUNT OF DEEMED INCOME FROM HOUSE PROPERTY. THE MATTER AGAIN WENT TO LD CIT(A) WHO VIDE HIS ORDER DATED 6.11.2007 DEALT WITH ALL THESE YEARS AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 4. DISSATISFIED WITH THE ORDER, THE ASSESSEE FILED APPEALS BEFORE THIS TRIBUNAL WHICH WERE HEARD TOGETHER. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE SUBMITTED THA T THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HON 'BLE ITAT DELHI BENCH A IN THE CASE OF M/S IMSPAT (P) LTD. V. ITO REPORTED IN 91 ITD 354. THE LD AR SUBMITTED THAT COMPANY HAS BEEN W IND UP AS PER PROVISIONS OF SECTION 560 OF THE COMPANIES ACT, 1956. HE INVITED OUR ATTENTION TO PAGE 364 OF PAPER BOOK WHEREIN HE SHOWE D A CERTIFICATE ISSUED BY THE REGISTRAR OF COMPANIES CERTIFYING THAT TH E ABOVE SAID COMPANY HAS BEEN DISSOLVED AND THEREFORE HE ARGUED THA T NO ITA NO5838 TO 5844/DEL/11 5 PROCEEDINGS CAN BE CONTINUED/INITIATED AGAINST THE SAI D COMPANY. THE LD AR FURTHER SUBMITTED THAT IN THE CASE LAW RELIED UPON BY HIM, THE FACTS AND CIRCUMSTANCES WERE SAME AND HE TOOK US TO PA RA 19 OF THE SAID JUDGEMENT AT PAGE 366. 6. THE LD DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF LD CIT(A) AND ARGUED THAT ORIGINALLY WHEN ASSESSMENTS WERE UNDERTA KEN, THE ASSESSEE WAS VERY MUCH IN EXISTENCE AND THE RE-ASSESSMENT PROCEEDINGS AFTER BEING REMANDED BACK BY HON'BLE ITA T WERE PART OF ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE IT CAN B E SAID THAT PROCEEDINGS WERE INITIATED AT THE TIME WHEN THE ASSESSE E WAS IN EXISTENCE. HE ALSO TOOK US TO PAGE 4 OF THE LD CIT(A) S ORDER WHEREIN THE LD CIT(A) HAD EXTRACTED THE PROVISIONS OF SECTION 560(5) OF COMPANIES ACT WHICH STATES THAT THE LIABILITY OF EVERY DIRECTOR, MANAGER OR OTHER OFFICER WHO WAS EXERCISING ANY POWE R AND MANAGEMENT SHALL CONTINUE AND CAN BE ENFORCED AS IF T HE COMPANY HAD NOT BEEN DISSOLVED. IN VIEW OF THE ABOVE, HE ARGU ED THAT SINCE THE PROCEEDINGS WERE PART OF PROCEEDINGS INITIATED AT THE TIME OF EXISTENCE OF THE ASSESSEE AND ACCORDING TO PROVISIONS OF SECTION 560 (5) OF THE ACT, THE DIRECTORS ARE LIABLE FOR ANY LIABILITY ON T HE DISSOLUTION OF A COMPANY. THEREFORE, HE ARGUED THAT EITHER THE PROC EEDINGS BE CONTINUED OR IN THE ALTERNATIVE DIRECTORS OF THE CO MPANY BE HELD LIABLE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORD, WE FIND THAT ASSESSMENT OF ASSESSEE AFTER BEING REMANDED B ACK FROM ITAT WERE COMPLETED IN THE MONTH OF SEPTEMBER, 2006 WHEREAS THE COMPANY WAS NOT IN EXISTENCE AT THAT TIME AS PER CERTI FICATE OF REGISTRAR OF COMPANIES PLACED AT PAGE 364 OF PAPER BO OK WHEREIN THE REGISTRAR HAD CERTIFIED VIDE CERTIFICATE DATED 21.7. 2006 THAT THE SAID ITA NO5838 TO 5844/DEL/11 6 COMPANY HAS BEEN WOUND UP. THOUGH THE ASSESSMENT ORDERS W ERE PASSED IN CONSEQUENCE OF ORDER OF HON'BLE ITAT BUT STIL L THESE WERE SEPARATE AND DISTINCT ORDERS WHICH WERE PASSED ON A NON EXISTENT COMPANY AS BEFORE THE DATE OF ORDER THE COMPANY WAS A LREADY WOUND UP. THE APPEALS BEFORE LD CIT(A) WERE FILED IN THE M ONTH OF FEBRUARY,, 2007 AND ORDER BY THE LD CIT(A) WERE PASSED IN THE M ONTH OF NOVEMBER, 2007 BOTH AFTER THE DATE WHEN COMPANY BEC AME NON EXISTENT. THE LD CIT(A) HAD REJECTED THE GROUND OF A PPEAL FOR DISCONTINUATION OF PROCEEDINGS ON THE BASIS THAT COMPAN Y WAS ALREADY WOUND UP. HE FURTHER RELYING UPON THE PROVISIONS OF SE CTION 560(5) OF COMPANIES ACT, UPHELD THE ADDITIONS MADE BY ASSESSING OFF ICER. IN FACT, INSTEAD CONFIRMING THE ADDITIONS, HE SHOULD HAVE INSTRUCTED. THE ASSESSING OFFICER TO INITIATE PROCEEDINGS IN RESPECT OF L IABILITY OF THE COMPANY ON THE DIRECTORS OF THE COMPANY IN VIEW OF P ROVISIONS OF SECTION 560(5) OF THE COMPANIES ACT AS PROCEEDINGS CANN OT BE CONTINUED ON A N ON EXISTENT ASSESSEE. IN THE CASE OF M/S IMSPAT (P) LTD. V. ITO REPORTED IN 91 ITD 354 RELIED UPON BY L D AR, THE HON'BLE TRIBUNAL HAD HELD AS UNDER:- IT IS THUS CLEAR THAT IN THE PRESENT CASE THE ASSESSEE CO MPANY CEASED TO EXIST AFTER BEING DISSOLVED U/S 560. ONCE IT C EASED TO EXIST, THERE WAS NO QUESTION OF ASSESSING IT FOR INCOME TA X, AS IT APPEARS THAT THERE IS NO PROVISION IN THE PRESENT ACT TO ASSESS A COMPANY WHICH IS DISSOLVED. OUR ATTENTION WAS NOT DRAWN TO ANY PROVISION IN THE ACT ENABLING THE ASSESSING OFFICER TO DO SO./ SECTION 159 OF THE PRESENT ACT DOES NOT CURE THE LAC UNA. IT CORRESPONDS TO SECTION 24B OF THE 1922 ACT. SUB SECTIO N (1) SAYS THAT WHERE A PERSON DIES HIS LEGAL REPRESENTATIVES SHALL BE LIABLE TO PAY ANY SUM WHICH THE DECEASED WOULD HAVE BEEN LI ABLE TO PAY IF HE HAD NOT DIED, IN THE LIKE MANNER AND TO T HE SAME EXTENT ITA NO5838 TO 5844/DEL/11 7 AS THE DECEASED. SUB SECTION (2)(B) ENABLES THE ASSESSING O FFICER TO TAKE ANY PROCEEDINGS AGAINST THE LEGAL REPRESENTAT IVE OF A DECEASED PERSON, WHICH HE COULD HAVE TAKEN AGAINST THE DECEASED HIMSELF IF HE HAD NOT DIED AND CLAUSE ( C) OF THE SUB SECTION SAYS THAT THE OTHER PROVISIONS OF THE ACT SHALL A PPLY ACCORDINGLY. SUB SECTION (3) SAYS THE LEGAL REPRESENTAT IVE OF THE DECEASED SHALL FOR THE PURPOSES OF THIS ACT, BE DEEMED T O BE AN ASSESSEE. SUB SECTION (4) MAKES EACH AND EVERY LEGAL REPRESENTATIVE PERSONALLY LIABLE FOR THE TAX PAYABLE BY HIM IN SUCH CAPACITY AND SUB SECTION (6) SAYS THAT SUCH LIABILIT Y WILL HOWEVER BE LIMITED TO THE EXTENT TO WHICH THE ESTATE IS CAPABLE OF MEETING THE LIABILITY. THIS SECTION, IN THE VERY N ATURE OF THINGS AND CONSIDERING THE LANGUAGE EMPLOYED IN SUB SECTION ( 1), CAN APPLY ONLY TO INDIVIDUALS OR NATURAL PERSONS. IN CWT V . GE NARAYANA (1992) 193 ITR 41, 49 THE KARNATAKA HIGH C OURT HELD WHILE INTERPRETING SECTION 19 OF THE WT ACT WHICH IS IN PARI MATERIAL WITH THE SECTION 159 OF THE IT ACT THAT THE WORD DIES IS NORMALLY REFERABLE TO THE LIFE OF A LIVING PERSON AN IMAL OR PLANT AND IN THE ABSENCE OF ANY STATUTORY FICTION CANNOT BE EXTENDED TO COVER A CASE OF DISRUPTION OF A JOINT FAMILY. SIMILA RLY, IT CANNOT ALSO COVER A CASE OF A DISSOLUTION OF A COMPANY AND THE RE IS NO STATUTORY FICTION EXTENDING SECTION 159 TO A CASE OF D ISSOLUTION OF A COMPANY UNDER SECTION 560 OF THE COMPANIES ACT. IN THE ABOVE JUDGMENT IT WAS HELD AT PAGE 48 THAT A A SPECIFIC P ROVISION IS NECESSARY TO MAKE AN ORDER OF ASSESSMENT AGAINST A TAXAB LE ENTITY WHICH DOES NOT EXIST ON THE DATE OF ASSESSMENT EV EN THOUGH THE SAID ENTITY WAS IN EXISTENCE WHEN THE LIABI LITY TO TAX AROSE. ITA NO5838 TO 5844/DEL/11 8 8. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASES ARE SI MILAR AS ABOVE. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THA T NO PROCEEDINGS CAN BE INITIATED/CONTINUED AS THE ASSESSEE IS NOT IN EXIST ENCE. THEREFORE, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWE D. THE QUANTUM IN THE CASES IS NOT BEING DECIDED AS IT HAS BECOME INFRU CTUOUS. HOWEVER, THE DEPARTMENT IS AT LIBERTY TO TAKE AN ACT ION AS PER PROVISIONS OF SECTION 560(5) OF THE COMPANIES ACT AGAIN ST THE DIRECTORS OF COMPANY OR OTHER OFFICERS OF THE COMPANY WHICH IT MAY DEEM FIT. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE A LLOWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF NOVEMBER, 2012. SD/- SD/- (A.D. JAIN) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.30.11.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 9.10.2012 DATE OF DICTATION 23.11.2012 DATE OF TYPING 26.11.2012 DATE OF ORDER SIGNED BY 30.11.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 30.11.2012 & SENT TO THE BENCH CONCERNED.