Smt. Kailashben Anilbhai Virani, Bhavnagar V. The Jt.CIT, Bhavnagar Range-1, Bhavnagar

ITA 59/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9483 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Share purchase agreement; Cost of acquisition
• Section: 143(3)

Judgement Text

ITA NO. 59/AHD/2015 KAILASHBEN ANILBHAI VIRANI VS. JCIT ASSESSMENT YEAR: 2010-11 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR, VP AND MS. MADHUMITA ROY, JM] ITA NO. 59/AHD/2015 ASSESSMENT YEAR: 2010-11 KAILASHBEN ANILBHAI VIRANI ................ ..APPELLANT PLOT NO. 66, SHANTA BHAVAN, KUMUDWADI, NR. LAL TANKI, BHAVNAGAR-364 001 [PAN : ABBPV 0304 Q] VS. JOINT COMMISSIONER OF INCOME-TAX ... .........................RESPONDENT BHAVNAGAR RANGE-1, BHAVNAGAR APPEARANCES BY: SN SOPARKAR & BANDISH SOPARKAR, FOR THE APPELLANT MUDIT NAGPAL, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 14.03.2019 DATE OF PRONOUNCING THE ORDER : 11.06.2019 O R D E R PER PRAMOD KUMAR, VICE PRESIDENT: 1. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 30 TH OCTOBER 2014 PASSED BY THE LEARNED CIT(A) IN THE MA TTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2010-11. 2. GRIEVANCES OF THE ASSESSEE, AS SUMMARISED IN THE CONCISE GROUNDS OF APPAL, ARE AS FOLLOWS:- 1. THE LD. CIT (A)-XX, AHMEDABAD HAS ERRED IN LA W AND IN FACTS BY CONFIRMING THE DISALLOWANCE OF TRANSFER FEES OF RS. 51,00,000/- CLAIMED BY THE APPELLANT WHILE COMPUTING THE COST OF ACQUISITION O F THE CAPITAL GAINS ON THE NEW PROPERTY. 2. THE DISALLOWANCE OF RS. 51,00,000/- BY WAY OF D EDUCTION WHILE COMPUTING THE COST OF ACQUISITION OF THE NEW PROPERTY IS ABSO LUTELY ILLEGAL, UNLAWFUL, CONTRARY TO THE FACTS AND EVIDENCE ON RECORD AND AG AINST THE PRINCIPLES OF LAW, EQUITY AND JUSTICE AND DESERVES TO BE QUASHED AND S ET ASIDE. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE ITA NO. 59/AHD/2015 KAILASHBEN ANILBHAI VIRANI VS. JCIT ASSESSMENT YEAR: 2010-11 PAGE 2 OF 5 HAS SHOWN CAPITAL GAIN OF RS.29,06,53,644/- ON SALE OF A PROPERTY AT MUMBAI. IN THE COMPUTATION OF CAPITAL GAINS, THE ASSESSEE HAD CLAI MED RS.51,00,000/- PAID ON ACCOUNT OF TRANSFER FEES AS PART OF COST OF ACQUISI TION OF THE PROPERTY. THIS CLAIM WAS, HOWEVER, DECLINED BY THE ASSESSING OFFICER BY OBSERVING AS FOLLOWS:- THE ASSESSEE WAS REQUIRED TO FURNISH SUPPORTING E VIDENCES OF EXPENSES INCURRED OF TRANSFER FEE OF RS.51,00,000/- AND LEGA L CHARGES OF RS.349034/-. HOWEVER THE ASSESSEE COMPLETELY FAILED TO FILE THES E EVIDENCES. VIDE ORDER SHEET DATED 11.03.2013 ALSO, THE ASSESSEE WAS AGAIN ALLOWED OPPORTUNITY TO FILE THESE EVIDENCES BUT TILL DAY SHE COULD NOT FIL E ANY EVIDENCE. IT IS TO BE MENTIONED HERE THAT THE PROPERTY UNDER CONSIDERATIO N WAS SITUATED IN THE NEW INDIA COOPERATIVE HOUSING SOCIETY, JUHU VILLE PARLE, MUMBAI AND THE SAID CO-OPERATIVE SOCIETY PLACED FEW CONDITIONS ON THE OWNER OF THE PROPERTY SHRI M M SHAH INCLUDING THE CONDITIONS THAT SHRI M M SHAH WILL PAY RS.1,00,000/- AS TRANSFER FEE TO THE CO-OPERATIVE S OCIETY AND ALSO HE TRANSFEREES WILL PAY A DONATION OF RS.50,00,000/- T O THE CO-OPERATIVE SOCIETY. IT APPEARS THAT THE ASSESSEE HAS CONSIDERED THIS 51 ,00,000/- AS COST OF ACQUISITION OF THIS PROPERTY. HOWEVER IT CANNOT BE CONSIDERED AS COST OF ACQUISITION IN THE HANDS OF THE ASSESSEE FOR THE RE ASONS THAT RS. 1,00,000/- WAS TO BE PAID BY THE PREVIOUS OWNER OF THE PRO PERTY I.E. SHRI M M SHAH AND RS.50,00,000/- WAS REQUIRED AS DONATION TO THE CO-OPERATIVE SOCIETY THEREFORE THE SAME ALSO CANNOT BE CONSIDERED AS COS T OF THE ACQUISITION OF THE PROPERTY IN THE HANDS OF THE ASSESSEE. FURTHER NO A NY EVIDENCE OF ANY KIND HAS BEEN FURNISHED BY THE ASSESSEE IN SUPPORT OF AN Y PAYMENT. AFTER CONSIDERING ALL THESE FACTS THE COST OF ACQUISITION OF THE PROPERTY IS BEING CONSIDERED AFTER REDUCING THE AMOUNT OF RS.51,00,00 0/-. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. IN HIS RATHER DETAILED ORDER, SETTING OUT THE RELATED FACTS AND ARGUMENTS OF THE ASSESSEE AS ALSO HIS ANALYSIS, LEA RNED CIT(A) OBSERVED AS FOLLOWS:- WITH REGARD TO GROUND NOS. 1, 3, 4, 6, 7, 8, 9 & 10, THE ALLOWABILITY OF THE PAYMENT OF RS.51 LAKHS TO THE SOCIETY NAMELY THE NE W INDIA CO.OP. [LOUSING SOCIETY LTD. AS DEDUCTION IT HAS BEEN OBSERVED BY T HE A.O. THAT RS. 1 LAKH WAS THE PAYMENT TO BE MADE BY THE SELLER OF THE PRO PERTY NAMELY SHRI M. M. SHAH FROM WHOM APPELLANT PURCHASED THE PROPERTY WHI CH IS EVIDENT FROM THE COPY OF THE SETTER OF THE AFORESAID SOCIETY DTD. 12 .8.1999 ADDRESSED TO THE SELLER NAMELY SHRI MM. SHAH WHICH READS AS UNDER:- MR. M. M. SHAH AUG.12, 1999 HUSMAN, PLOT 26, NS ROAD 11, JVPD SCHEME MUMBAI 400049 DEAR MR.SHAH, REF:- A) 5 SHARES OF RS.50/- EACH NUMBERED FROM 121 TO125 IN YOUR NAME SHARE CERTIFICATE NO.25 ITA NO. 59/AHD/2015 KAILASHBEN ANILBHAI VIRANI VS. JCIT ASSESSMENT YEAR: 2010-11 PAGE 3 OF 5 B) INDECTURE OF LEASE MADE ON 6TH JAN, 66 WITH THE NEW INDIA CO. OP. HSG. SOC. LTD. THE LESSOR- FOR PLOT NO.26 IN THE SOCIETY YOU HAVE ADVISED THE MANAGING COMMITTEE OF THE SOCI ETY OF YOUR DESIRE TO TRANSFER THE ABOVE \HARES TOGETHER WITH Y OUR LEASE RIGHTS ON THE ABOVE PLOT TO MR. & MRS. ANILBHAI VIRANI OF MUM BAI FOR A CONSIDERATION OFRS.720 LAKHS, THIS SOCIETY HAS NO OBJECTION TO SUCH A TRANSFER ON YOUR COMPLYING WITH THE STATUTORY FORMALITIES AND SUBJECT TO A) YOUR ARRANGING TO PRODUCE A LETTER FROM THE TR ANSFEREES STATING THAT THEY INTEND TO CONSTRUCT A BUNGLOW ON THIS PROPERTY FOR THEIR OWN STAY. B) YOUR PAYING A TRANSFER FEE OF RS. 1 LAC TO SOCI ETY. C) YOUR TRANSFEREES PAYING THE DONATION AMOUNT OF RS.50 LAKHS AT THE TIME OF COMPLETION OF SALE. THIS SOCIETY HAS NO OBJECTION TO THE TRANSFEREES CO NSTRUCTING THEIR OWN FAMILY DWELLING HOME (PLANS OF WHICH SHALL BE SUBJE CT TO PRIOR APPROVAL BY THE SOCIETY) UPON THE ABOVE PLOT AFTER DEMOLITIO N OF THE EXISTING BUILDING/STRUCTURE AFTERCOMPLETION OF THE SALE. SINCERELY YOURS, FOR NEW INDIA CO.OP.HSG.SOC.LTD. SD/- (MOHAN PATEL D. SC.) HON. SECRETARY' THE COLUMN CLAUSE-B OF THE AFORESAID LETTER THE SOC IETY HAS DIRECTED SHRI M.M. SHAH TO PAY RS. 1 LAKH TO THE SOCIETY AS A TRA NSFER FEE. THUS IT WAS THE LIABILITY TO MAKE THE PAYMENT OF THE TRANSFER FEE B Y THE SELLER AND NOT BY THE APPELLANT AS A PURCHASER. THEREFORE THE ALLOWABILIT Y OF SUCH PAYMENT AS DEDUCTION CANNOT BE CONSIDERED IN THE HANDS OF THE APPELLANT. EVEN OTHERWISE ALSO THE APPELLANT HAS NOT GIVEN ANY DETAILS OF PAY MENT OF RS. 1 LAKH TO THE SOCIETY MADE BY IT AND ALSO THE DETAILS OF HER RESP ONSIBILITY/OBLIGATION TO MAKE SUCH PAYMENT TO THE SOCIETY AS THE TERMS AND CONDIT ION IN THE LETTER OF THE SOCIETY REFERRED ABOVE. EVEN FROM THE PURCHASE DEED DTD. 25.11.1999 THE APPELLANT HAS NOT POINTED OUT ANY TERMS AND CONDITI ONS STATING THE LIABILITY OF THE APPELLANT TO MAKE THE PAYMENT OF THE TRANSFER F EE TO THE SOCIETY OVER AND ABOVE TO THE PURCHASE CONSIDERATION. FURTHER THE SO CIETY HAS ASKED THE SELLER NAMELY SHRI MM SHAH TO MAKE THE PAYMENT OF A TRANSF ER FEE AND NOT TO THE APPELLANT. SINCE IT WAS NOT THE LIABILITY/OBLIGATI ON OF THE APPELLANT TO MAKE THE PAYMENT OF RS. 1 LAKH TOWARDS THE TRANSFER FEE THER EFORE NO LIABILITY AROSE IN THE HAND OF THE APPELLANT TO MAKE SUCH A PAYMENT TO THE SOCIETY AND THEREFORE THE DEDUCTION OF SUCH PAYMENT AS A COST OF ACQUISIT ION IS NOT ALLOWED. IN OTHER WORDS THE PAYMENT MADE BY APPELLANT FOR AND ON BEHA LF OF SHRI VI. M SHAH IS NOT A PART OF HER COST OF ACQUISITION AND THE SAME IS NOT DEDUCTIBLE AS PART OF COST FOR ARRIVING AT THE LONG TERM CAPITAL GAIN. ITA NO. 59/AHD/2015 KAILASHBEN ANILBHAI VIRANI VS. JCIT ASSESSMENT YEAR: 2010-11 PAGE 4 OF 5 3.12. FURTHER WITH REGARD TO THE PAYMENT OF RS.50 L AKHS BY THE APPELLANT TO THE AFORESAID SOCIETY IT HAS BEEN SEEN THAT AS PER THE CLAUSE-C OF THE LETTER OF THE AFORESAID SOCIETY DTD. 12.8.1999 AS REFERRED ABOVE ALSO THIS HAS BEEN MENTIONED AS UNDER:- 'C YOUR/TRANSFEREES PAYING THE DONATION AMOUNT O F RS.50 LAKHS AT THE TIME OF COMPLETION OF THE SALE' FURTHER IN THE PURCHASE DEED DT. 25.11.1999 THE REL EVANT CLAUSE IS REPRODUCED AS UNDER:- '14. THE SOCIETY HAS BY ITS LETTER DATED 12 TH AUGUST, 1999 GRANTED ITS NO OBJECTION FOR THE SALE /ASSIGNMENT OF THE SAID P ROPERTY IN FAVOUR OF THE ASSIGNEES AND TO ENABLE THE ASSIGNEES TO CONSTR UCT THEIR OWN DWELLING HOUSE THEREUPON, A COPY OF THE SAID LETTER IS HERETO ANNEXED AND MARKED ANNEXURE 'B'. FROM THE ABOVE CLAUSE IN THE LETTER OF THE SOCIETY ADDRESSED TO THE SELLER NAMELY SHRI MM SHAH IT WAS CLEAR THAT THE SOCIETY W ANTED THE DONATION OF RS.50 LAKHS EITHER FROM THE SELLER SHRI M M SHAH OR THE TRANSFEREE I.E. APPELLANT. BUT THE APPELLANT COULD NOT GIVE THE DET AILS/PROOF STATING THAT THE LIABILITY TO MAKE THE PAYMENT OF RS.50 LAKHS LAID O N THE APPELLANT. EVEN IN THE PURCHASE DEED DTD, 25.11.1999 THERE WAS NO SUCH CLA USE STATING ANY TERMS AND CONDITIONS POINTED OUT BY THE APPELLANT THAT TH E PAYMENT OF RS.50 LAKHS WAS TO BE MADE BY THE APPELLANT OVER AND ABOVE TO T HE PURCHASE CONSIDERATION AS MENTIONED IN THE AFORESAID DEED. T HEREFORE NO LIABILITY / RESPONSIBILITY / OBLIGATION HAD BEEN UPON THE APPEL LANT TO MAKE THE PAYMENT OF THE DONATION. EVEN OTHERWISE ALSO IT WAS THE PAYMENT OF DONATION TO THE SOCIETY FOR RS. 50 LAKHS AND THE PURPOSE OF PAYMENT HAS NOT BEEN SPECI FIED WITH REGARD TO TRANSFER OF THE PROPERTY IN THE NAME OF APPELLANT. FURTHER THE DONATION CANNOT BE THE PART OF THE COST OF ACQUISITION IN VIEW OF T HE PROVISIONS OF SECTION 48 OF I.T. ACT. AS PER THE CLAUSE (II) OF SECTION 48 THE ALLOWABILITY OF THE DEDUCTION WAS IN RESPECT OF THE COST OF ACQUISITION OF ASSET AND THE COST OF ANY IMPROVEMENT THERETO. SINCE THE DONATION HAS BEEN PA ID BY THE APPELLANT TO THE SOCIETY WHICH WAS NEVER BEEN ACCORDINGLY TO ANY TERMS AND CONDITIONS OF THE SALE DEED AND THEREFORE THE SAME CANNOT BE SAID TO BE PART OF COST OF ACQUISITION OF THE ASSETS PURCHASED AND THEREFORE N O DEDUCTION OF SUCH PAYMENTS IS ALLOWED. IN THIS REGARD, AO'S ACTION FO R DENIAL OF THE DEDUCTION OF THE DONATION OF RS.50 LAKHS AS PART OF COST OF ACQU ISITION IS FOUND CORRECT AND JUSTIFIED AND THE GROUNDS OF APPEAL ARE DISMISSED. 5. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. WE FIND THAT THERE IS NO, AND THERE CANNOT BE AN Y, DISPUTE ABOUT THE POSITION THAT THE ASSESSEE HAD ACTUALLY PAID RS.50,00,000/- TO NEW INDIA COOPERATIVE ITA NO. 59/AHD/2015 KAILASHBEN ANILBHAI VIRANI VS. JCIT ASSESSMENT YEAR: 2010-11 PAGE 5 OF 5 HOUSING SOCIETY LTD. THE COPIES OF BANKERS CHEQUE S DATED 25.11.1999 ARE PLACED ON RECORD, AND THESE CHEQUES ARE OF THE SAME DATE A S THE DATE OF TRANSFER. THE TERMS OF SOCIETYS PERMISSION TO TRANSFER OWNERSHIP OF THE PROPERTY ALSO INDICATE THAT THE PAYMENT OF RS.50,00,000/- WAS A SINE QUA NON FOR TRANSFER OF OWNERSHIP OF PROPERTY TO THE ASSESSEE, OF COURSE, ITS NOMENCLATU RE WAS DONATION BUT THATS NOT REALLY MATERIAL TO DECIDE ITS CHARACTER IN THE HAND S OF THE ASSESSEE. THE NATURE OF THIS PAYMENT, SO FAR AS ASSESSEE WAS CONCERNED, WAS A PAYMENT FOR TRANSFER OF OWNERSHIP IN RECORDS OF SOCIETY. CLEARLY, THEREFORE , IT WAS PART OF THE COST OF ACQUISITION OF PROPERTY WHETHER THE PAYMENT OF RS.5 0 LAKHS FOR TRANSFER OF OWNERSHIP IN THE RECORDS OF SOCIETY WAS A PART OF THE TERMS A ND CONDITION OF SALE DEED OR NOT, THE FACT REMAINS THAT THE PAYMENT OF RS.50 LAKHS TO SOCIETY WAS A CONDITION PRECEDENT TO THE TRANSFER OF PROPERTY IN FAVOUR OF THE ASSESSEE. IN OUR CONSIDERED VIEW, THEREFORE, THE IMPUGNED AMOUNT OF RS.50,00,00 0/- WAS PART OF THE COST OF ACQUISITION OF PROPERTY IN THE HANDS OF THE ASSESSE E. 8. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARIN G IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE TO THE ABOV E EXTENT. AS WE DO SO, WE MAKE IT CLEAR THAT NO ARGUMENTS WERE ADVANCED ABOUT RS.1 LAKH PAID TO THE SOCIETY, AND, TO THIS EXTENT, WE TREAT THE GRIEVANCE AS NOT PRESSED. THE RELIEF WILL THEREFORE BE CONFIRMED TO THE EXTENT OF RS.50 LAKHS PAYMENT BY T HE ASSESSEE AS DISCUSSED ABOVE. THE ASSESSING OFFICER IS DIRECTED TO MODIFY THE COMPUTATION OF CAPITAL GAINS ACCORDINGLY. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRO NOUNCED IN THE OPEN COURT TODAY ON THE 11 TH JUNE, 2019 SD/- SD/- MS. MADHUMITA ROY PRA MOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) AHMEDABAD, THE 11 TH DAY OF JUNE, 2019 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION:..ORDER PREPARED AS PER 4 PAGE S MANUSCRIPTS OF HONBLE VP-ATTACHED.11.6.19. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ...11.06.2019.... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: 11.06.2019... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .... 11.06.2019... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : . . 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......