ITO, Bangalore V. M/s Mahat Power systems Pvt. Ltd., Bangalore

ITA 615/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8494 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: DINESH P
• Keywords: Capital asset; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.615/BANG/2009 ASSESSMENT YEAR : 2005-06 THE INCOME TAX OFFICER, WARD 12(1), BANGALORE. : APPELLANT VS. M/S. MAHAT POWER SYSTEMS PVT. LTD., NO.67, INFANTRY ROAD, BANGALORE 560 001. : RESPONDENT APPELLANT BY : SMT. V.S. SREELEKHA RESPONDENT BY : SHRI DINESH P. O R D E R PER GEORGE GEORGE K, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST CI T(APPEALS) ORDER DATED 25.3.09. THE ASSESSMENT YEAR CONCERNED IS 20 05-06. 2. THOUGH THERE ARE SEVEN GROUNDS RAISED, ALL THE G ROUNDS RELATE TO THE SOLITARY ISSUE VIZ., WHETHER THE CIT(APPEALS) IS JU STIFIED IN HOLDING THAT THE PROPERTY CONSISTING OF LAND AND BUILDINGS SOLD BY T HE ASSESSEE IS A LONG TERM CAPITAL ASSET AND THE INCOME FROM SALE OF SAID PROPERTY IS LIABLE TO TAX AS LONG TERM CAPITAL GAINS. ITA NO.615/BANG/09 PAGE 2 OF 6 3. BRIEFLY STATED, THE FACTS ARE AS FOLLOWS. THE A SSESSEE IS A COMPANY. IT HAD FILED ITS RETURN OF INCOME FOR THE CONCERNED ASSESSMENT YEAR DECLARING AN INCOME OF RS.83,099. THE RETURN WAS P ROCESSED AND ASSESSMENT WAS COMPLETED U/S. 143(3) ON 27.3.07. I N THE ASSESSMENT SO COMPLETED, THE AO RELYING ON THE DECISION OF KARNAT AKA HIGH COURT IN THE CASE OF CIT V. DR. V.V. MODI (218 ITR 1) , TREATED THE SALE OF LAND AND BUILDINGS SITUATED AT INDUSTRIAL AREA, PEENYA 4 TH STAGE, BANGALORE, AS A SHORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITA L GAIN CLAIMED BY THE ASSESSEE. 4. ON APPEAL BEFORE THE CIT(APPEALS), IT WAS CONTEN DED BY THE ASSESSEE THAT THE AO OUGHT TO HAVE NOTED THAT THE I MPUGNED PROPERTY WAS HELD BY THE ASSESSEE FOR MORE THAN 36 MONTHS AND CO NSEQUENTLY ON TRANSFER OF THE SAME, THE GAINS ARE LIABLE TO BE TA XED ONLY AS LONG TERM CAPITAL GAINS. IT WAS ALSO SUBMITTED THAT THE DECI SION IN THE CASE OF DR. V.V. MODI (SUPRA) HAS NO APPLICATION TO THE INSTANT CASE, SINCE THE PROVISIONS OF SECTION 2(47) HAS UNDERGONE A CHANGE AND CONSEQUENT LY TRANSACTION OF SALE OF PROPERTY BY THE ASSESSEE GIVES RISE ONLY TO LONG TERM CAPITAL GAINS. 5. THE CIT(APPEALS) FOLLOWING THE DECISION OF THE T RIBUNAL IN THE CASE OF R.N. BALASUBRAMANYA IN ITA NO.984/BANG/08 DATED 14. 8.08 AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N CIT V. SMT. C. SHAKUNTALA IN ITA NO.117 OF 2006 DATED 19.9.07 ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT CAPITAL GAINS ARISING OUT OF SALE OF THE PROPERTY WOULD BE LONG TERM CAPITAL GAINS AND THE AO WAS DIR ECTED TO ALLOW DEDUCTION U/S. 54EC OF THE ACT CLAIMED BY THE ASSES SEE. ITA NO.615/BANG/09 PAGE 3 OF 6 6. DISENCHANTED, THE REVENUE IS IN APPEAL BEFORE US . THE LD. DR SUBMITTED, THE FACT OF THE MATTER IS THAT ASSESSEE WAS IN POSSESSION OF PROPERTY AS A TENANT AND WAS PAYING YEARLY RENT. IT WAS SUBMITTED THAT ASSESSEE WAS NOT THE LEGAL OWNER OF THE PROPERTY TI LL 11.2.03. SHE ALSO SUBMITTED THE FACTS IN THE CASE OF CIT V. SMT. C. SHAKUNTALA (SUPRA) IS DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEES CA SE. 7. THE LD. AR, ON THE OTHER HAND, FURNISHED A LEASE -CUM-SALE AGREEMENT DATED 10.12.93 AND ALSO THE SALE DEED DAT ED 11.2.03 ENTERED INTO BETWEEN THE ASSESSEE AND KIADB. READING THROU GH THE VARIOUS CLAUSES IN THE LEASE-CUM-SALE AGREEMENT AND THE SAL E DEED, THE LD. AR CONTENDED THAT THE SALE DEED STEMS FROM LEASE-CUM-S ALE AGREEMENT DATED 10.12.03. IT WAS FURTHER CONTENDED THAT THE SALE OF IMPUGNED PROPERTY WAS CLEARLY MENTIONED IN THE LEASE-CUM-SALE AGREEMENT D ATED 10.12.93 AND THE ASSESSEE WAS PUT IN POSSESSION OF THE PROPERTY RIGH T FROM YEAR 1993, IN CONSIDERATION OF INITIAL DEPOSIT OF RS.2,09,633, WH ICH WAS ADJUSTED AGAINST THE SALE CONSIDERATION FIXED IN THE YEAR 2003. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE, THE IMPUGNED IND USTRIAL LAND WAS ALLOTTED BY KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD (KIA DB) IN THE NAME OF M/S. MYSORE ALKALINE BATTERIES, A PARTNERSHIP CONCE RN VIDE POSSESSION CERTIFICATE DATED 3.8.1989. M/S. MYSORE ALKALINE BATTERIES CHANGED ITS CONSTITUTION FROM PARTNERSHIP FIRM TO A PRIVATE LIM ITED COMPANY UNDER THE NAME AND STYLE OF MAHAT POWER SYSTEMS PVT. LTD. T HE SAID CHANGE IN THE CONSTITUTION WAS APPROVED BY KIADB AND CONSEQUENTLY POSSESSION OF THE PROPERTY STOOD CHANGED IN THE NAME OF ASSESSEE COMP ANY. A LEASE-CUM- ITA NO.615/BANG/09 PAGE 4 OF 6 SALE AGREEMENT BETWEEN ASSESSEE COMPANY AND KIADB W AS EXECUTED ON 10.12.1993 AND LATER ABSOLUTE SALE DEED WAS EXECUTE D ON 11.2.2003, WHEREBY THE SAID PROPERTY WAS TRANSFERRED IN THE NA ME OF ASSESSEE COMPANY. THE ASSESSEE COMPANY FURTHER TRANSFERRED T HE PROPERTY TO THIRD PARTY ON 4.11.04. 9. THE CASE OF THE REVENUE IS THE ASSET WAS HELD BY THE ASSESSEE FOR A PERIOD OF LESS THAN 36 MONTHS AND CONSEQUENTIALLY T HE SAME IS A SHORT TERM CAPITAL ASSET LIABLE TO TAX AS SHORT TERM CAPITAL G AINS. THUS DEDUCTION U/S. 54EC WAS DENIED BY THE AO. 10. ON CAREFUL PERUSAL OF THE LEASE-CUM-SALE AGREEM ENT DATED 10.12.93 AND ALSO THE SALE DEED DATED 11.2.03, WE FIND AS RI GHTLY POINTED OUT BY THE LD. AR, VARIOUS CLAUSES IN THE LEASE-CUM-SALE AGREE MENT AND THE SALE DEED CLEARLY GOES TO SHOW THAT THE SALE DEED STEMS OUT F ROM THE LEASE-CUM-SALE AGREEMENT DATED 10.12.93. IT IS UNDISPUTED THAT ASS ESSEE WAS IN POSSESSION OF IMPUGNED PROPERTY RIGHT FROM 1993, AF TER A SUM OF RS.2,09,633/- BEING INITIAL DEPOSIT WAS PAID. IN L EASE CUM SALE AGREEMENT DATED 10-12-93, IT IS CLEARLY MENTIONED ABOUT THE S ALE OF PROPERTY, ON FULFILLING CERTAIN CONDITIONS. THE SALE DEED DATED 11.2.2003, IS BASED ON LEASE CUM SALE DATED 10.12.1993. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN HOLDING THAT ASSESSEE HAD HE LD THE PROPERTY IN QUESTION FOR MORE THAN 36 MONTHS AND SAME IS LONG T ERM CAPITAL ASSET LIABLE FOR LONG TERM CAPITAL GAINS ON ITS SALE. ITA NO.615/BANG/09 PAGE 5 OF 6 11. WE HAVE ALSO GONE THROUGH THE FACTS OF THE CASE DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. SMT. C. SHAKUNTALA (SUPRA) . THE HONBLE HIGH COURT WAS CONSIDERING THE FOLLOWING SU BSTANTIAL QUESTION OF LAW : WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT T HE ABSOLUTE SALE DEED EXECUTED IN FAVOUR OF THE ASSESS EE BY THE BDA ON 19.6.1996 AND THE SUBSEQUENT SALE MADE BY THE AS SESSEE IN FAVOUR OF THE 3 RD PARTIES ON 25.3.1997 WOULD NOT ATTRACT SHORT TERM CAPITAL GAINS, BUT SHOULD BE TREATED AS LONG TERM CAPITAL GAINS AS THE LEASE-CUM-SALE AGREEMENT WITH THE BDA WAS EXECUTED ON 28.2.1981 CONTRARY TO THE JUDGMENT OF T HIS COURT IN 218 ITR 1? THE HONBLE HIGH COURT ANSWERED THE ABOVE QUESTION IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: WE HAVE CAREFULLY EXAMINED THE EXTRACTED PORTION OF THE DECISIONS OF THE SUPREME COURT, PUNJAB AND HARYANA HIGH COURT, ANDHRA PRADESH HIGH COURT AND THIS COURT IN THE CAS ES REFERRED TO SUPRA AND ALSO THE PROVISION CLAUSE (V) TO SECTION 2(47) OF THE INCOME TAX ACT, WHICH PROVISION CAME INTO FORCE WIT H EFFECT FROM 1.4.1998. ACCORDING TO US, THE DECISION RENDE RED BY THE KAT APPLYING THE RATIO LAID DOWN BY THE SUPREME COU RT IN THE CASES IN PODDAR CEMENT AND THE MYSORE MINERALS, IS RIGHTLY APPLIED TO THE FACT SITUATION OF THE CASE ON HAND A ND DECIDED THE CASE OF THE ASSESSEE IN HER FAVOUR. THEREFORE, WE ARE OF THE VIEW THAT THE QUESTION OF LAW WOULD ARISE IN THIS APPEAL AND ALSO WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE IMPU GNED JUDGMENT OF THE TRIBUNAL, THEREFORE, THE APPEAL MUST FAIL. 12. RESPECTFULLY FOLLOWING THE DICTUM LAID DOWN BY THE JURISDICTIONAL HIGH COURT CITED SUPRA , WE FIND THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS) AND NO INTERFERENCE IS CALLED FOR. ITA NO.615/BANG/09 PAGE 6 OF 6 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF MARCH, 2010. SD/- SD/- (A. MOHAN ALANKAMONY ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 12 TH MARCH, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.