ACIT 11(3), MUMBAI V. MODERN HOSPITAL FOR WOMEN, MUMBAI

ITA 5924/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1420 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-05-2016
• Assessment Year: 1996-1997
• Appeal Filed On: 28-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Cost of acquisition; Fair market value; Surrender of tenancy right
• Section: 143(3); 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 THE ACIT - 11(3), ROOM NO. 446, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI- 400 020. VS. MODERN HOSPITAL FOR WOMEN, LAXMI NIWAS, 6, DR. WILSON STREET, MUMBAI- 400 004. PAN: AAAFM2743G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. SUMAN KUMAR RESPONDENT BY : SHRI. SUBHASH CHHAJED DATE OF HEARING: 0 5/12/2016 DATE OF PRONOUNCEMENT: 14/12/20 16 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST ORDER DATED 03/07/2012 PASSED BY THE CIT(APPEALS)-2, MUMBAI, FO R THE ASST. YEAR 1996- 97, WHEREBY THE LD. CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST RECTIFICATION ORDER PASSED BY THE ACIT 11(3) U/S 15 4 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM ENGAGED IN RUNNING NURSING HOME, FILED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 2,23,012/-. ASSESSMENT ORDER U/S 143(3) WAS FRAMED BY THE A.O DETERMINING THE TOTAL INCOME OF RS. 74,07,590/- AFTER MAKING AD DITION OF RS. 71,57,500/- AS LONG TERM CAPITAL GAIN ON TRANSFER OF TENANCY RI GHT. 2 ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 3. AGGRIEVED BY THE ORDER OF A.O, THE ASSESSEE PREF ERRED FIRST APPEAL BEFORE THE LD. CIT(A), WHO AFTER HEARING THE ASSESSEE CONF IRMED THE ASSESSMENT ORDER. AGAINST THE SAID ORDER THE ASSESSEE PREFERRED SECON D APPEAL BEFORE THE ITAT. THE ITAT VIDE ITS ORDER DATED 27/07/2005 CONFIRMED THE ORDER OF THE CIT(A). THEREAFTER THE ASSESSEE FILED MISCELLANEOUS APPLICA TION BEFORE THE ITAT. THE ITAT AFTER HEARING BOTH THE PARTIES REMITTED THE I SSUE REGARDING COST OF ACQUISITION OF TENANCY RIGHTS AND BENEFIT OF INDEXA TION TO THE A.O. GIVING EFFECT TO THE ORDER OF THE ITAT, THE A.O PASSED ORDER DA TED 26/03/2008 REJECTING THE ASSESSEES CLAIM FOR CONSIDERING RS. 3,80,000/- AS COST OF ACQUISITION OF TENANCY RIGHTS,. IN APPEAL AGAINST THE SAID ORDER, THE LD. CIT(A) CONFIRMED THE ASSESSMENT ORDER. THE ASSESSEE FILED RECTIFICATION APPLICATION U/S 154 WITH LD. CIT(A), WHO AFTER CONSIDERING THE PROVISIONS OF SE CTION 55 OF THE ACT, VIDE ORDER DATED 07/04/2010 ADVISED THE ASSESSEE TO FILE RECTI FICATION APPLICATION BEFORE THE A.O. ON THE ISSUE OF CALCULATING COST OF ACQUI SITION OF TENANCY RIGHTS. 4. ACCORDINGLY, RECTIFICATION APPLICATION WAS SUBMI TTED BEFORE THE AO. THE A.O AFTER TAKING INTO CONSIDERATION THE SUBMISSION MADE BY THE ASSESSEE PASSED ORDER U/S 154 WITHOUT CHANGING THE INCOME DE TERMINED U/S 143(3) OF THE ACT. AGGRIEVED, THE ASSESSEE FILED THE APPEAL B EFORE THE LD. CIT(A) AGAINST RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER RAISING THE SOLE GROUND THAT WHILE COMPUTING CAPITAL GAINS DEDUCTION MAY BE GIVE N FOR COST OF ACQUISITION THE TENANCY RIGHTS BY ADOPTING FAIR MARKET VALUE OF TENANCY RIGHT AS ON 01/04/1981. THE LD. CIT(A) AFTER HEARING THE ASSESS EE ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCT INDEX COST OF ACQUISITION OF TENANCY RIGHTS. THE DEPARTMENT IN AP PEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER PASSED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS:- 3 ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A)-2, MUMBAI HAS ERRED IN HOLDING THAT TAKI NG THE COST OF ACQUISITION OF TENANCY RIGHTS AT NIL BY THE A.O WAS MISTAKE APPARENT FROM RECORDS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A)-2, MUMBAI HAS ERRED IN DIRECTING THE A.O TO WORK OUT CAPITAL GAIN ON SURRENDER OF TENANCY RIGHTS AFTER T AKING INTO ACCOUNT THE COST OF ACQUISITION OF TENANCY RIGHTS A S WORKED OUT BY THE REGISTERED APPROVED VALUER AND ALLOW THE BENEFI T OF INDEXATION OF THIS COST OF ACQUISITION AS PER PROVISIONS OF S EC 48 OF THE I.T.ACT. 5. BEFORE US THE LD. DR RELYING ON THE ORDER PASSED BY THE AO SUBMITTED THAT THE LD. CIT(A) HAS WRONGLY HELD THAT THE AO SH OULD NOT HAVE TAKEN THE ACQUISITION RIGHT AS NIL AND WRONGLY DIRECTED THE A .O. TO WORK OUT CAPITAL GAIN ON SURRENDER OF TENANCY RIGHTS AFTER TAKING INTO AC COUNT THE COST OF ACQUISITION OF TENANCY RIGHT AS WORKED OUT BY THE REGISTERED AP PROVED VALUER AND ALLOW THE BENEFIT OF INDEXATION OF THIS COST OF ACQUISITION A S PER PROVISIONS OF SECTION 48 OF THE ACT. 6. PER CONTRA THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ORDER PASSED BY THE LD. CIT(A) IS IN ACCORDANCE WITH THE DIRECTION ISSUED BY THE ITAT MUMBAI IN MA NO. 931/M/2006 IN ITA NO. 923/M/2002 V IDE WHICH THE TRIBUNAL MODIFIED ITS EARLIER ORDER DATED 27.7.2005 BY REMITTING THE LIMITED ISSUE OF ASCERTAINMENT OF THE COST OF ACQUISITION OF TENANCY RIGHTS IF ANY AND 4 ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 GRANTING BENEFIT OF INDEXATION IN RESPECT OF THE S AME. PLACING RELIANCE ON THE DECISION OF THE ITAT MUMBAI, RENDERED IN DCIT VS. SHRI. BHUPINDRA SINGH ANAND (ITA NO. 7743/M/2012 FOR THE A.Y. 2007-08) , THE LD. COUNSEL SUBMITTED THAT THE ASSESSEES CASE IS COVERED BY THE SAID CAS E. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL PLACED BEFORE US INCLUDING THE CASES RELIED UPON BY THE PARTIES. WE FIND THAT IN MA NO. 231/M/2006 (SUPRA), THE CO-ORDINATE BENCH MO DIFIED ITS EARLIER ORDER AND REMITTED THE ISSUE OF ASCERTAINMENT OF COST OF ACQUISITION OF TENANCY RIGHTS AND GRANTING BENEFIT OF INDEXATION BY OBSERVING AS UNDER:- THEREFORE, WE DEEM IT FIT AND PROPER TO PARTLY MO DIFY THE TRIBUNAL ORDER DATED 27/07/2005 BY REMITTING THE LIMITED ISS UE OF ASCERTAINMENT OF THE COST OF ACQUISITION OF TENANCY RIGHTS IF NAY AND GRANTING BENEFIT OF INDEXATION IN RESPECT OF THE SA ME. WE, HOWEVER, MAKE IT CLEAR THAT ONUS IS ON THE ASSESSEE TO DEMON STRATE THAT THERE WAS INDEED A COST OF ACQUISITION FOR THE TENANCY RI GHTS AND TO QUANTIFY THE SAME. IN CASE THE ASSESSEE CAN SUCCESS FULLY DEMONSTRATE THE COST OF TENANCY RIGHTS, THE ASSESSI NG OFFICER SHALL GIVE PROPER DEDUCTION FROM THE CAPITAL GAIN BY WAY OF REDUCING THE INDEXED COST OF ACQUISITION OF TENANCY RIGHTS FOR C ALCULATING CAPITAL GAIN TO THAT EXTENT MODIFY OUR ORDER DATED 27/07/20 05. 8. IN THE LIGHT OF THE ABOVE OBSERVATIONS, THE LD. CIT(A) HAS RIGHTLY POINTED OUT THAT THE A.O HAS NOT GIVEN CORRECT APPEAL EFFE CT TO THE ORDER OF THE ITAT. THE LD. CIT(A) HAS FURTHER POINTED OUT THAT THE A.O HAS BEEN COMMITTING LEGAL MISTAKE AGAIN AND AGAIN BY APPLYING THE PROVISIONS OF SECTION 55(2)(A)(II) INSTEAD OF THE PROVISIONS OF SECTION 55(2)(A)(I) OF THE ACT BECAUSE APPELLANT FIRM HAD PURCHASED THE CLOTH BUSINESS ALONG WITH THE TE NANCY RIGHTS VIDE DEED OF 5 ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 ASSIGNMENT DATED 21/11/1950 FOR RS. 9,500/- THIS AM OUNT OF RS. 9,500/- PAID FOR ACQUIRING ONGOING CONCERN ALSO INCLUDED AMOUNT PAID BY THE APPELLATE FIRM FOR ACQUIRING THE TENANCY RIGHTS. IN THE LIGHT OF T HE AFORESAID FACTS, WE ALSO AGREE WITH THE LD. CIT(A) THAT THE A.O HAS NOT GIVE N CORRECT EFFECT TO THE ORDER OF THE TRIBUNAL. IT IS APPARENT FORM THE DEED OF AS SIGNMENT THAT A SUM OF RS. 9,500/- WAS PAID BY THE APPELLANT FIRM IN 1950 TOWA RDS THE ACQUISITION OF BUSINESS INCLUDING TENANCY RIGHTS. 9. WE FURTHER NOTICED THAT COPIES OF AGREEMENT DATE D 19/09/1950, LETTER DATED 21/11/1950 INDICTING THEREIN TRANSFER OF BUSI NESS ALONG WITH BENEFIT OF TENANCY RIGHT, POWER OF ATTORNEY DATED 21/11/1950 G IVEN BY ASSIGNOR, MR. DHANSING NETRAM REFERRING TO DEED OF ASSIGNMENT DAT ED 21/11/1950 TO CARRY ON CORRESPONDENCE WITH LANDLORD, ETC., LETTER DATED 17/10/1950 ADDRESSED TO BOMBAY SAMACHAR AND GOVERNMENT GAZZETTE FOR PUBLIC NOTICE, PUBLIC NOTICE DATED 19/09/1950, SUIT FILED BY LANDLORD FOR EVICTI ON OF THE PREMISES AND CONSENT TERMS AND ORDER OF THE SMALL CAUSES COURT I N REGARD TO SURRENDER OF PREMISES BY THE APPELLANT FIRM ETC. WERE MADE AVAIL ABLE BY THE ASSESSEE TO THE AO DURING ASSESSMENT PROCEEDINGS. ON THE BASIS OF T HE SAID DOCUMENTS THE AO COULD HAVE SAFELY CONCLUDED THAT THE ASSESSEE FIRM HAD PAID RS. 9,500/- IN 1950 TOWARDS ACQUISITION OF BUSINESS INCLUDING TENA NCY RIGHTS. HENCE, IN OUR CONSIDERED VIEW THE AO HAS WRONGLY TREATED THE COST OF ACQUISITION OF TENANCY AS NIL. 10. IN DCIT VS. SHRI. BHUPINDRA SINGH ANAND IN ITA NO. 77 43/M/2012 FOR THE A.Y. 2007-08 , THE CO-ORDINATE BENCH VIDE ORDER DATED 12.9.2014 HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. IN THE SAID CASE, THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER THE LD. CIT(A) ERRED IN ALLOWING THE INDEXATION ON COST OF ACQUISITION OF THE TENANC Y RIGHTS AS ON 01/04/1981, WITHOUT TAKING INTO CONSIDERATION THE FACT THAT THE COST OF ACQUISITION OF 6 ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 TENANCY RIGHTS ACQUIRED BY THE PREVIOUS OWNER I.E., FATHER OF THE ASSESSEE WITHOUT ANY COST IN THE YEAR 1973 IS STOOD ITSELF A T NIL TO THE ASSESSEE AS ON 01/04/1981. THE CO-ORDINATE BENCH AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE PARTIES IN THE LIGHT OF THE RATI O LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS MANJULA J SHAH[2011] 355 ITR 474 (BOM), DISMISSED THE GROUND RAISED IN APPEAL BY THE REVENU E AND CONFIRMED THE ORDER OF THE LD. CIT(A). 11. IN VIEW OF THE FACTS OF THE CASE AND THE DECIS ION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SHRI. BHUPINDRA SINGH ANAND (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE ORDER PASSED BY THE LD. CIT(A) IS IN ACCORDANCE WITH THE DIRECTIONS ISS UED BY THE ITAT MUMBAI IN MA NO. 931/M/2006 IN ITA NO. 923/M/2002 AFORESAID. THE LD. CIT(A) HAS RIGHTLY DIRECTED THE A.O. TO WORK OUT CAPITAL GAIN ON SURRENDER OF TENANCY RIGHTS AFTER TAKING INTO ACCOUNT THE COST OF ACQUISITION O F TENANCY RIGHT AS WORKED OUT BY THE REGISTERED APPROVED VALUER AND ALLOW THE BEN EFIT OF INDEXATION OF THE COST OF ACQUISITION AS PER THE PROVISIONS OF SECTION 48 OF THE ACT. THERE IS NO LEGAL OR FACTUAL INFIRMITY IN THE ORDER OF THE LD. CIT(A) TO INTERFERE WITH THE SAME. WE THEREFORE, UPHOLD THE FINDINGS OF THE LD. CIT(A) AN D DISMISS THE SOLE ISSUE RAISED IN APPEAL BY THE DEPARTMENT. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE F OR ASST. YEAR 1996-97 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 14 TH DECEMBER, 2016. SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED:14/12/2016 7 ITA NO. 5924/MUM/2012 ASSESSMENT YEAR: 1996-97 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA