THE ACIT-1(1), Bhopal V. SHRI RAKESH GUPTA, Bhopal

ITA 604/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5308 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-12-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: ANIL KHAA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Salary income
• Section: 50C; 56(2)

Judgement Text

ITA NO. 604/IND/2016 RAKESH GUPTA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO.604/IND/2016 ASSESSMENT YEAR: 2012-13 ACIT 1(1) BHOPAL :: APPELLANT VS RAKESH GUPTA BHOPAL ./ PAN: AAXPG 9477C :: RESPONDENT REVENUE BY SHRI MOHD. JAVED ASSESSEE BY SHRI ANIL KHABYA ! ' #$ DATE OF HEARING 6.12.2016 %&'( #$ DATE OF PRONOUNCEMENT 20.12.2016 * O R D E R PER SHRI D.T. GARASIA, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, BHOPAL, DATED 23.3.201 6. ITA NO. 604/IND/2016 RAKESH GUPTA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 18.7.2012 DECLARING TOTAL INC OME AT RS. 35,86,120/-. THE ASSESSEE DERIVES INCOME FROM SALARY FROM M/S STAR DELTA TRANSFORMER LIMITED, BHOPAL, AND ALSO DERIVES INCOME FROM PARTNERSHIP FIRM M/S GUPT A SONS AND INCOME FROM INTEREST. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS RELINQUISHED HIS RIGHTS IN THE PROPERTY I .E. RESIDENTIAL HOUSE NO. E-1/207, ARERA COLONY, BHOPAL IN FAVOUR OF HIS ELDER BROTHER SHRI KISHORE GUPTA. THE MARKET VALUE OF THE PROPERTY AT THE TIME OF RELINQUISHMENT I. E. ON 26.3.2012 WAS RS. 2,76,18,300/-.AS PER THE RELINQUISHMENT DEED, THE ASSESSEE WAS THE OWNER OF HALF OF THE PROPERTY AND RELINQUISHED HIS WHOLE RIGHTS TO TH E TUNE OF RS. 1,39,00,000/- IN FAVOUR OF HIS BROTHER SHRI K ISHORE GUPTA. THE ASSESSING OFFICER HELD THAT AS PER SECTION 2(47) OF THE ACT, RELINQUISHMENT OF RIGHTS IN ANY PROPERTY IS ITA NO. 604/IND/2016 RAKESH GUPTA 3 TREATED AS TRANSFER OF A CAPITAL ASSET. SINCE THE ASSES SEE HAD RELINQUISHED HIS WHOLE RIGHTS TO THE TUNE OF RS. 1,39,00,000/- IN FAVOUR OF HIS BROTHER SHRI KISHORE GUPTA IN THE SAID PROPERTY, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS LIABLE TO PAY CAPITAL GAIN TAX ON THE VALUE OF THE PROPERTY RELINQUISHED. THE SHOW CAUSE NOTICE WAS GIVEN AND IN REPLY TO THE SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT HE HAD VOLUNTARILY AND OUT OF LOVE AND AFFECTION GIFTED HIS 50% SHARE IN THE RESIDENTIAL HOUS E AT E- 1/207, ARERA COLONY, BHOPAL, TO HIS BROTHER SHRI KIS HORE GUPTA WITHOUT ANY MONETARY CONSIDERATION. THE ASSESSEE FURTHER SUBMITTED THAT THE ENTIRE CONSIDERATION FOR HOUSE CONSTRUCTION WAS PAID BY HIS BROTHER AND FOR THE PURPO SE OF SECURITY, HIS NAME WAS ADDED AS CO-OWNER AT THE INSTANCE OF HIS FATHER. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS GIFTED THE SAID PROPERTY TO HIS BROTHER W ITHOUT ANY MONETARY CONFIRMATION, THEREFORE, IT IS NOT A TRANSF ER OF ITA NO. 604/IND/2016 RAKESH GUPTA 4 CAPITAL ASSET BUT THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SUBMISSION OF THE ASSESSEE THAT THE ENTIRE CONSIDERATION FOR HOUSE CONSTRUCTION WAS PAID BY HIS BROTHER WAS FACTUALLY INCORRECT BECAUSE AS PER PURCHASE DEED, BOTH THE BROTHERS I.E. RAKESH GUPTA AND SHRI KI SHORE GUPTA PURCHASED THE SAID RESIDENTIAL HOUSE FROM M/S BHOPAL WIRES PVT. LTD. ON 3.5.1993 FOR A CONSIDERATION OF RS.7,50,000/-. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT THIS IS NOT A GIFT BECAUSE GIFT DEED HAS NOT BEEN EXECUTED. THE ASSESSING OFFICER, THEREFORE, WAS OF T HE VIEW THAT AS PER THE PROVISIONS OF SECTION 2(47) OF THE AC T, THE RELINQUISHMENT IS A TRANSFER. 3. WITH THE ABOVE TREATMENT OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) AND LEARNED CIT(A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER :- ITA NO. 604/IND/2016 RAKESH GUPTA 5 9. HAVING GONE THROUGH THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I CONSIDER THAT THE A.O. HAS TOTALLY MISDIRECTED HERSELF IN APPRECIATING THE FAC TS AND APPLYING CORRECT LAW ON THE FACTS. THERE IS NO DOUB T THAT THE RELINQUISHMENT OF RIGHTS SHOULD BE CONSIDERED A S TRANSFER OF PROPERTY WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. IT IS IMPORTANT TO NOTE THAT CERTAIN TR ANSFERS ARE NOT REGARDED AS TRANSFER FOR THE PURPOSE OF CAP ITAL GAIN AS PROVIDED UNDER SECTION 47 OF THE ACT. SECTI ON 47(III) OF THE ACT CLEARLY LAYS DOWN THAT TRANSFER OF CAPITAL ASSET UNDER A GIFT OR WILL ETC. IS NOT A TR ANSFER WHICH ATTRACTS CAPITAL GAINS. THE ARGUMENT OF THE APPELLANT THAT IT WAS A GIFT TO THE ELDER BROTHER W AS REJECTED SOLELY FOR THE REASON THAT NO GIFT DEED WA S EXECUTED BY THE APPELLANT. IN THE EYE OF THE LAW TH E RELINQUISHMENT DEED IS AS MUCH A GIFT DEED AS A GIF T DEED PER SE. WHAT IS RELEVANT FOR SOME TRANSACTION TO BE ITA NO. 604/IND/2016 RAKESH GUPTA 6 CONSTRUED AS GIFT OR OTHERWISE IS THE FACT WHETHER ANY CONSIDERATION WAS RECEIVED IN LIEU OF THE TRANSFER OR NOT OR THE TRANSACTION RECEIVED WAS LESS OR INADEQUATE VIS A VIS THE MARKET VALUE OF THE ASSET TRANSFERRED. THE A.O. HAS NEITHER ALLEGED NOR INDICATED IN THE ASSESSMENT ORDER THAT THE APPELLANT RECEIVED ANY CONSIDERATION IN LIEU OF RELINQUISHMENT. WHEN THE A.O. IS ACCEPTING THE CONTENTION OF THE APPELLANT THAT NO CONSIDERATION WHATSOEVER WAS RECEIVED IN LIEU OF RELINQUISHMENT, THEN THERE IS NO DOUBT THAT IN SUBSTANCE THIS WAS A GIFT MADE BY THE APPELLANT. THE FIGURE OF RS.1,39,00,000/- HA S BEEN TAKEN BY THE A.O. FROM THE RELINQUISHMENT DEED AND THIS IS THE VALUE OF THE PROPERTY RELINQUISHED FOR THE STAMP DUTY PURPOSES. THE A.O. HAS NEVER SUGGESTED THAT THE APPELLANT GOT THIS AMOUNT OF MONEY AS A CONSIDERATION FOR RELINQUISHMENT. ITA NO. 604/IND/2016 RAKESH GUPTA 7 10. IT IS IMPORTANT TO UNDERSTAND THAT PRIOR TO THE ABOLITION OF GIFT TAX ACT, THE DONOR USED TO BE LIA BLE FOR PAYING GIFT TAX. THIS LAW HAS BEEN SUBSTANTIALLY CHANGED AFTER THE INTRODUCTION OF SECTION 56(2) OF THE IT ACT WHERE THE RECIPIENT/DONEE HAS BEEN MADE LIABLE FOR TAX IF PROPERTY WITHOUT CONSIDERATION/INADEQUATE CONSIDERATION HAS BEEN TRANSFERRED. 11. THOUGH THE A.O. HAS NOT MENTIONED SECTION 50C O F THE ACT IN THE ASSESSMENT ORDER BUT THE ONLY WAY ADDITION MADE BY THE A.O. CAN BE UNDERSTOOD IS PERHAPS ON INVOCATION OF SECTION 50C OF THE ACT, AS THERE IS NO ALLEGATION ON PART OF THE A.O. THAT ANY CONSIDERATION FOR RELINQUISHMENT OF THE PROPERTY WA S RECEIVED BY THE APPELLANT. SECTION 50C OF THE ACT CREATES A LEGAL FICTION WHERE THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY IS DEEMED TO BE FULL VALUE OF CONSIDERATION RECEIVED FOR THE TRA NSFER. ITA NO. 604/IND/2016 RAKESH GUPTA 8 12. THE A.O. REFUSAL TO TREAT THE RELINQUISHMENT DE ED AS A GIFT FOR THE PURPOSE OF SECTION 47 OF THE IT A CT IS INCORRECT. THE RELEASE DEED IS STATED TO BE HAQ TYAGPATRA IN HINDI. THE TERM GIFT HAS NOT BEEN DEFINED IN THE INCOME TAX ACT BUT THE SAME IS DEFIN ED IN TRANSFER OF PROPERTY ACT AND THE GIFT TAX ACT, 1958 . IT IS SETTLED PRINCIPLE THAT IN ABSENCE OF ANY DEFINITION GIVEN TO A PARTICULAR TERM IN A STATUTE, THE MEANING WHIC H IS TO BE GIVEN TO THE TERM IS THE MEANING IN WHICH IT DEF INED IN DIFFERENT ACTS OR UNDERSTOOD IN COMMON PARLANCE. UNDER THE PROVISIONS OF SECTION 122 OF THE TRANSFER OF PROPERTY ACT, 1882, GIFT IS DEFINED U/S 122 AND I S DEFINED AS TRANSFER OF CERTAIN EXISTING MOVABLE OR IMMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION, BY ONE PERSON, CALLED THE DONOR, TO ANOTHER, CALLED THE DONEED AND ACCEPTED BY OR ON BE HALF OF DONEE. SIMILARLY, THE DEFINITION OF GIFT UNDER SECTION ITA NO. 604/IND/2016 RAKESH GUPTA 9 2(XII) OF THE GIFT TAX ACT, 1983 PROVIDES THAT GIF T MEANS THE TRANSFER BY ONE PERSON TO ANOTHER OF ANY EXISTING MOVABLE OR IMMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION OF ANY PROPER TY REFERRED IN SECTION 4, DEEMED TO BE A GIFT UNDER TH AT SECTION. TO CONSTRUE GIFT, THE TRANSFER OUGHT TO BE MADE VOLUNTARILY AND WITHOUT MONETARY CONSIDERATION. 13. WHAT IS ALSO VERY APPROPRIATE TO NOTE HERE THAT THE APPELLANT IS REAL BROTHER OF THE DONEE AND THE GENUINENESS OF THE GIFT CANNOT THEREFORE BE SUSPECT . EVEN THE A.O. HERSELF HAS NOT SUSPECTED THE GENUINENESS OF THE GIFT OR HAS ALLEGED THAT SOME UNDECLARED CONSIDERATION WAS RECEIVED BY THE APPELL ANT BUT HAS SIMPLY GONE BY THE LITERAL NOMENCLATURE OF THE TRANSFER DOCUMENT. AS THERE IS NO DOUBT THAT IN SUBSTANCE THIS TRANSACTION OF TRANSFER BY THE APPEL LANT WAS A GIFT TO A REAL BROTHER, CAPITAL GAINS ARE NOT ITA NO. 604/IND/2016 RAKESH GUPTA 10 CHARGEABLE. THE CONTENTION OF THE APPELLANT IS ACCE PTED AND THE ADDITION MADE BY THE A.O. IS THEREFORE, DELETED. 4. AGAINST THE ABOVE FINDINGS OF THE LEARNED CIT(A), T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LEARNED DR SUBMITTED THAT IT IS A FAC T THAT THE ASSESSEE AND HIS BROTHER HAVE PURCHASED THE SAID RESIDENTIAL HOUSE FROM BHOPAL WIRES LIMITED ON 3.5.1 993 FOR A CONSIDERATION OF RS. 7,50,000/-. IN THE PURCHASE DEED, IT IS MENTIONED THAT TWO SEPARATE CHEQUES OF RS. 3,75,0 00/- EACH WERE GIVEN BY SHRI RAKESH GUPTA AND SHRI KISHORE GUPTA. IN THE RELINQUISHMENT DEED, BOTH THE BROTHERS HAVE EQUAL RIGHTS IN THE SAID PROPERTY. THEREFORE, THE BROT HER HAD MADE THE GIFT TO HIS BROTHER WITHOUT ANY CONSIDER ATION AND IT CANNOT BE SAID THAT IT IS A GIFT. THE BROTHER HAD NOT EXECUTED ANY GIFT DEED. THEREFORE, IT IS A TRANSFER O F CAPITAL ASSET IN THE NAME OF RELINQUISHMENT OF RIGHT. THE LEAR NED ITA NO. 604/IND/2016 RAKESH GUPTA 11 DR RELIED UPON THE ORDER OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. BHARANI PICTURES; 1979-LL - 0216 AND SUBMITTED THAT THE QUESTION BEFORE THE HON'B LE HIGH COURT WAS WHETHER THE ASSESSEE FIRM IS LIABLE TO GIFT TAX IN RESPECT OF THE TRANSACTION BY WHICH THE PROPER TY OF THE FIRM WAS TAKEN OVER BY THE PARTNER AND THE HON'BLE HIGH COURT CONSIDERING VARIOUS JUDGMENTS OF THE HON' BLE SUPREME COURT OBSERVED THAT THIS TRANSFER IS SUBJECT TO LIABILITY TO GIFT TAX AND IT WAS HELD THAT THE PROPERTY WAS TRANSFERRED OTHERWISE THAN ADEQUATE CONSIDERATION, HENCE, ATTRACT SECTION 4(1)(A) OF THE GIFT TAX ACT. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THIS RELINQUISHMENT OF RIGHT BY ONE BROTHER IN FAVOUR OF HIS SECOND BROTHER WITHOUT ANY CONSIDERATION DID NOT ATTRACT ANY TRANSFER. THE LEARNED COUNSEL FOR THE ASSES SEE RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN ITA NO. 604/IND/2016 RAKESH GUPTA 12 THE CASE OF RADIALS INTERNATIONAL VS. ACIT; 367 ITR 1(DE LHI) AND SUBMITTED THAT THE NOMENCLATURE OF A DOCUMENT OR DEED IS NOT CONCLUSIVE OF WHAT IS SEEKS TO ACHIEVE, T HE COURT HAS TO CONSIDER ALL PARTS OF IT AND ARRIVE AT A FIND ING IN REGARD TO TRUE FACTS. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF TEHMI JIMMY COOPER VS. ITO; I TA NO. 357/PN/2011 AND SUBMITTED THAT THE TRANSFER OF PROPERTY BY RESPECTIVE CO-OWNER IN FAVOUR OF THE ASSE SSEE THROUGH RELINQUISHMENT DEED IN PURSUANCE WITH LOVE AN D AFFECTION AMOUNTS TO TRANSFER OF PROPERTY THROUGH GIF T. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF CGT VS. SATYANARAYANMURTHY; 56 ITR 353(AP) THE HON'BLE ANDHRA PRADESH HIGHN COURT HELD THAT THROWIN G OF SELF ACQUIRED PROPERTY INTO HOTCH POTCH OF HUF IS A GI FT. ITA NO. 604/IND/2016 RAKESH GUPTA 13 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES. IT IS IMPORTANT TO UNDERSTAND THAT PRIOR TO THE ABOLITI ON OF GIFT TAX ACT, THE DONOR USED TO BE LIABLE FOR PAYING GIFT TAX. THIS LAW HAS BEEN SUBSTANTIALLY CHANGED AFTER THE INTRODUCTION OF SECTION 56(2) OF THE IT ACT WHERE T HE RECIPIENT/DONEE HAS BEEN MADE LIABLE FOR TAX IF PROPER TY WITHOUT CONSIDERATION/INADEQUATE CONSIDERATION HAS BEEN TRANSFERRED. THOUGH THE A.O. HAS NOT MENTIONED SECTIO N 50C OF THE ACT IN THE ASSESSMENT ORDER BUT THE ONLY W AY ADDITION MADE BY THE A.O. CAN BE UNDERSTOOD IS PERHAPS ON INVOCATION OF SECTION 50C OF THE ACT, AS THERE IS NO ALLEGATION ON PART OF THE A.O. THAT ANY CONSIDERATION FOR RELINQUISHMENT OF THE PROPERTY WAS RECEIVED BY THE ASSESSEE. SECTION 50C OF THE ACT CREATES A LEGAL FICTIO N WHERE THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY IS DEEMED TO BE FULL VALUE OF ITA NO. 604/IND/2016 RAKESH GUPTA 14 CONSIDERATION RECEIVED FOR THE TRANSFER. THE A.O.S R EFUSAL TO TREAT THE RELINQUISHMENT DEED AS A GIFT FOR THE PURPOSE OF SECTION 47 OF THE IT ACT IS INCORRECT. THE RELEASE D EED IS STATED TO BE HAQ TYAGPATRA IN HINDI. THE TERM GIFT HAS NOT BEEN DEFINED IN THE INCOME TAX ACT BUT THE SAME IS DEFINED IN TRANSFER OF PROPERTY ACT AND THE GIFT TAX ACT, 1958. IT IS SETTLED PRINCIPLE THAT IN ABSENCE OF ANY DEFINITION GIVEN TO A PARTICULAR TERM IN A STATUTE, THE MEANING WHICH IS TO BE GIVEN TO THE TERM IS THE MEANI NG IN WHICH IT DEFINED IN DIFFERENT ACTS OR UNDERSTOOD IN COMMON PARLANCE. UNDER THE PROVISIONS OF SECTION 122 OF THE TRANSFER OF PROPERTY ACT, 1882, GIFT IS DEFINED U/ S 122 AND IS DEFINED AS TRANSFER OF CERTAIN EXISTING MOVABLE OR IMMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION, BY ONE PERSON, CALLED THE DONOR, TO ANO THER, CALLED THE DONEED AND ACCEPTED BY OR ON BEHALF OF DONE E. ITA NO. 604/IND/2016 RAKESH GUPTA 15 SIMILARLY, THE DEFINITION OF GIFT UNDER SECTION 2(XI I) OF THE GIFT TAX ACT, 1983 PROVIDES THAT GIFT MEANS THE TR ANSFER BY ONE PERSON TO ANOTHER OF ANY EXISTING MOVABLE OR IMMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION OF ANY PROPERTY REFERRED IN SECTION 4, DEEMED TO BE A GIFT UNDER THAT SECTION. TO CONSTRUE GIFT, TH E TRANSFER OUGHT TO BE MADE VOLUNTARILY AND WITHOUT MONETARY CONSIDERATION. WHAT IS ALSO VERY APPROPRIATE TO NOTE HER E THAT THE ASSESSEE IS REAL BROTHER OF THE DONEE AND THE GENUINENESS OF THE GIFT CANNOT THEREFORE BE SUSPECT. EVEN THE A.O. HERSELF HAS NOT SUSPECTED THE GENUINENESS O F THE GIFT OR HAS ALLEGED THAT SOME UNDECLARED CONSIDERATION W AS RECEIVED BY THE ASSESSEE. WE, THEREFORE, HOLD THAT T HIS TRANSACTION OF TRANSFER BY THE ASSESSEE WAS A GIFT TO TH E REAL BROTHER ON WHICH CAPITAL GAINS ARE NOT ATTRACTED. IN THI S ITA NO. 604/IND/2016 RAKESH GUPTA 16 VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE LEARNE D CIT(A). 8. IN THE RESULT, THE REVENUES APPEAL FAILS AND IS DISMISSED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 20 DECEMBER, 2016. SD/- SD/- ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER )'* / DATED : 20 DECEMBER, 2016. DN/ ITA NO. 604/IND/2016 RAKESH GUPTA 17