ICHHA CONSTRUCTION P.LTD, MUMBAI V. DCIT CEN CIR 36, MUMBAI

ITA 6043/MUM/2013

• Counselvise Citation: 604319914 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 15-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OFFERED LONG; A TOTAL CONSIDERATION OF RS
• Keywords: Capital asset; Cost of acquisition
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 6043/M/2013 ASSESSMENT YEAR: 2010 - 11 M/S. ICHHA CONSTRUCTION PVT. LTD., 317, 3 RD FLOOR, RAHEJA CHAMB ERS, FREE PRESS MARG, NARIMAN POINT, MUMBAI 400 023 PAN: AAACI 1277N VS. DCIT, CENTRAL CIRCLE 36, ROOM NO.11, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASS ESSEE BY : SHRI VIJAY MEHTA, A.R. REVENUE BY : SHRI SACHHIDANAND DUBE, D.R. DATE OF HEARING : 15.04 .201 5 DATE OF PRONOUNCEMENT : 03.06. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AG AINST THE ORDER DATED 31.07.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2010 - 11 . 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) HAS ERRED IN LAW A ND ON FACTS IN PASSING THE IMPUGNED ORDER WHICH IS ILLEGAL AND BAD IN LAW. 2. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT CONSIDERING THE AMOUNT OF RS. 13,80,00 0/ - PAID TO THE COLLECTOR OF MU M BAI AS TRANSFER FEE AS FORMING PART OF THE COST OF ACQUISITION OF CAPITAL ASSET. ITA NO.6043/M/2013 M/S. ICHHA CONSTRUCTION PVT. LTD. 2 3. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATIVE, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE AFORESAID AMOUNT OF RS. 13,80,000/ - SHOULD BE CONSIDERED AS THE COST OF IMPROVEMENT OF THE CAPITAL ASSET AS WITHOUT THE SAID EXPENDITURE THE APPELLANT COULD NOT HAVE EFFECTED THE TRANSFER THEREOF. 4. THE APPELLANT COMPANY CRAVES LEAVE TO ADD, TO AMEND, ALTER / DELETE AND / OR MODIFY THE ABOVE GROUNDS OF CROSS OBJECTION ON O R BEFORE THE FINAL DATE OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVED THAT THE ASSESSEE HAD SOLD ITS PREMISES LOCATED AT RAHEJA CHAMBERS, NARIMAN POINT, MUMBAI FOR A TOTAL CONSIDERATION OF RS. 1,08,31,000/ - AND OFFERED LONG TERM CAPITAL GAIN OF RS.44,39,839/ ON SALE THEREOF. FROM PERUSAL OF THE COMPUTATION OF LONG TERM CAPITAL GAIN, IT WAS OBSERVED THAT A SUM OF RS.13,80,000/ - PAID TO THE COLLECTOR OF MUMBAI BY WAY OF TRANSFER FEES WAS ADDED TO THE COST OF THE ACQUISITION OF THE SAID PROPERTY. THE A.O. ASKED THE ASSESSEE TO EXPLAIN A S TO WHY THE SAID AMOUNT OF RS. 13,80,000/ - SHOULD NOT BE REDUCED FROM THE COST OF ACQUISITION. THE ASSESSEE SUBMITTED T HAT THE SAID TRANSFER FEES WAS PART OF ITS COST OF ACQUISITION AS IT WAS A MANDATORY PAYMENT . T HE ASSESSEE HAD INITIATED LEGAL PROCEEDINGS AGAINST THE SAID UNFAIR LEVY OF TRANSFER FEES . THE ASSESSEE FURTHER SUBMITTED THAT IT HAD PAID TRANSFER FEES IN CONN ECTION WITH ACQUISITION OF PROPERTY AND HENCE IT WAS DIRECTLY RELATED TO ASSET WITHOUT WHICH THE PROPERTY W OULD NOT HAVE BEEN REGISTERED ITS NAME. AFTER CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE , THE A.O. HELD THAT THE SAID PAYMENT HAD BEEN MAD E BY THE ASSESSEE TO THE GOVERNMENT OF MAHARASHTRA AS PER DIRECTION OF HON'BLE BOMBAY HIGH COURT CONTAINED IN ITS ORDER DATED 18 . 08.2005 AND THAT PERUSAL OF PARAS 4 AND 5 OF THE SAID ORDER CLEARLY SHOWED THAT THE SAID PAYMENT OF RS.13,80,000/ - WAS REFUNDAB LE IN N ATURE AND, THEREFORE, THE SAME COULD NOT BE INCLUDED IN THE COST OF ACQUISITION . A GGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) . ITA NO.6043/M/2013 M/S. ICHHA CONSTRUCTION PVT. LTD. 3 4. THE LD. CIT(A), AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE TRANSFE R FEES PAID BY THE ASSESSEE TO THE COLLECTOR, BOMBAY FOR OBTAINING PERMISSION TO SELL OR TRANSFER THE LEASEHOLD RIGHTS IN THE PROPERTY WAS PART OF COST OF ACQUISITION OF THE LEASEHOLD RIGHTS IN THE PROPERTY BY THE ASSESSEE. HE ALSO OBSERVED THAT THE PAYME NT OF TRANSFER FEES BEING AN IMPERATIVE NECESSITY FOR TRANSFER OF THE PROPERTY/ LEASEHOLD RIGHTS IN THE PROPERTY WOULD CONSTITUTE PART OF COST OF ACQUISITION OF THE SAID PREMISES. HE, HOWEVER, OBSERVED THAT SINCE THE TRANSFER FEES OF RS.13,80,000/ - DEPOSIT ED BY THE ASSESSEE WAS SUBJECT TO LITIGATIO N BEFORE THE HONBLE HIGH COURT, HENCE UNDER SUCH CIRCUMSTANCES IT WAS A PAYMENT CONTINGENT TO THE DECISION OF THE WRIT PETITION FILED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT. HE, THEREFORE, HELD THAT THE A O WAS JUSTIFIED IN TREATING THE PAYMENT OF RS.13,80,000/ - AS A KIND OF REFUNDABLE DEPOSIT. HE, HOWEVER, FURTHER HELD THAT AS AND WHEN THE AMOUNT OF TRANSFER FEES PAYABLE BY THE ASSESSEE WOULD BE DETERMINED OR CRYSTALLIZED UPON FINAL DISPOSAL OF THE WRIT P ETITION . THE ASSESSEE WOULD BE FREE TO APPROACH THE AO UNDER SECTION 154 FOR WRIT PETITION OF THE LONG TERM CAPITAL GAINS ACCORDINGLY. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5. ADMITTEDLY, THE PAYMENT OF T RANSFER FEES TO THE COLLECTOR AS PER THE GOVERNMENT RULES WAS A PRE - CONDITION FOR GETTING NO OBJECTION FROM THE COLLECTOR AND THEREBY FOR GETTING THE PROPERTY TRANSFERRED AND REGISTERED IN THE NAME OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE HAS BEEN DENIE D BY THE LD. CIT(A) ON THE GROUND THAT THE ASSESSEE HAD CHALLENGED THE RELEVANT RULES RELATING TO REQUIREMENT OF SUCH PAYMENT OF TRANSFER FEES. THE HONBLE HIGH COURT , IN THE WRIT PETITION, DIRECTED THE ASSESSEE TO DEPOSIT THE TRANSFER FEES AS PER THE RUL ES. THE ASSESSEE, THEREAFTER DEPOSITED THE FEES AS PER RULES AND THE COLLECTOR AFTER GETTING DEPOSITED THE FEES AS PER RULES GRANTED NO OBJECTION AND ITA NO.6043/M/2013 M/S. ICHHA CONSTRUCTION PVT. LTD. 4 THE PROPERTY WAS TRANSFERRED TO THE ASSESSEE. MERELY BECAUSE, THE ASSESSEE HAD CHALLENGED THE VALIDITY O F THE RULES BEFORE THE HONBLE HIGH COURT THAT DOES NOT MEAN THAT THE ASSESSEE HAD NOT PAID THE TRANSFER FEES OR THAT THE SAID TRANSFER FEES WAS NOT THE PART OF COST OF ACQUISITION OF THE PROPERTY. THE ASSESSEE MAY OR MAY NOT SUCCEED IN HIS WRIT PETITION. HOWEVER, THE FACT REMAINS THAT THE TRANSFER FEES PAID BY THE ASSESSEE AS PER RULES OF THE GOVERNMENT HAS TO BE TREATED AS PART OF COST OF ACQUISITION OF THE PROPERTY AND THE ASSESSEE IS ENTITLED TO CLAIM THE SAME WHILE COMPUTING THE LONG TERM CAPITAL GAI NS. BY NO STRETCH OF IMAGINATION , IT CAN BE SAID THAT THE TRANSFER FEES PAID BY THE ASSESSEE WAS A REFUNDABLE DEPOSIT. THE FINDING OF THE LOWER AUTHORITIES TO THIS EFFECT IS WRONG AND THE SAME IS THEREFORE SET ASIDE. HOWEVER, IF THE ASSESSEE SUCCEEDS IN ITS LITIGATION AND THE HONBLE HIGH COURT STRIKES DOWN THE RULE REQUIRING THE PAYMENT OF TRANSFER FEES AND THE ASSESSEE GETS ANY REFUND, THEN THE ASSESSEE WILL BE LIABLE TO OFFER THE SAME FOR TAXATION. HOWEVER, AT THIS STAGE, THE ASSESSEE IS ENTITLED TO CLAIM THE AMOUNT OF TRANSFER FEES PAID AS PART OF COST OF ACQUISITION. 6. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.06. 201 5 . SD/ - SD/ - ( R.C. SHARMA ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 03.06.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI ITA NO.6043/M/2013 M/S. ICHHA CONSTRUCTION PVT. LTD. 5 THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.