CHANDNI KISHORE CHANDIRAMANI, MUMBAI V. ITO 19(1)(3), MUMBAI

ITA 6400/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5810 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Gift; Earning of tax free income; Fair market value
• Section: 147; 54; 6

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI . . , ! ' #$. . %&. . ' , ' ! ( BEFORE SHRI N K SAINI, ACCOUNTANT MEMBER AND DR S T M PAVLAN, JUDICIAL MEMBER . : 6399 / / 2013 A.Y. 2008-09 ITA NO. : 6399/MUM/2013 (ASSESSMENT YEAR: 2008-09) MRS. CHANDA KISHORE CHANDARAMANI, 501, DHANSHILA, 14-A ROAD, ASHIMSA MARG, KHAR (WEST), MUMBAI -400 052 PAN: AETPC 8041 C VS INCOME TAX OFFICER, WARD - 19(1)(3), ROOM NO. 314, PIRMAL CHAMBERS, LALBAUG, PAREL, MUMBAI -400 012 (APPELLANT) (RESPONDENT) . : 6400 / / 2013 A.Y. 2008-09 ITA NO. : 6400/MUM/2013 (ASSESSMENT YEAR: 2008-09) MS CHANDANI KISHORE CHANDRAMANI, MUMBAI -400 052 PAN: AIFPC 9649 C VS INCOME TAX OFFICER, WARD - 19(1)(3), MUMBAI -400 012 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANUJ KISNADWALA RESPONDENT BY : SHRI M L PERUMAL /DATE OF HEARING : 11-02-2014 / DATE OF PRONOUNCEMENT : 11-02-2014 + O R D E R . . , . . : PER N K SAINI, AM: THESE TWO APPEALS FILED BY THE DIFFERENT ASSESSES ARE DIREC TED AGAINST THE SEPARATE ORDERS, EACH DATED 25,09.2013 OF CI T(A) -30, MUMBAI. MRS. CHANDA KISHO RE CHANDIARAMANI & MS CHANDANI KISHORE CHANDIRAMANI ITA 6399 & 6400/MUM/2013 2 COMMON ISSUE IS INVOLVED IN BOTH THESE APPEALS HAVING IDENT ICAL FACTS AND THE APPEALS ARE HEARD TOGETHER, SO THESE AR E BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. COMMON GROUNDS RAISED IN THESE APPEALS READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -30 HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION OF RS. 40,00,000/- MADE BY THE ASSESSING OFF ICER (AO) UNDER THE HEAD CAPITAL GAINS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ACTION OF THE AO IN ASS ESSING THE COMPENSATION RECEIVED FROM ANOTHER LEGAL HEIR ON SETTLE MENT OF FAMILY DISPUTE UNDER THE HEAD CAPITAL GAINS. 3. THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED COST OF AC QUISITION OF THE ASSET SOLD BEING FLAT NO. 8A. HE OUGHT TO HAVE DIRECTED THE ASSES SING OFFICER TO ALLOW SUCH COST BASED ON THE FAIR MARKET VALUE OF THE ASSET AS O N 01.04.1981 AND INDEXATION THEREON. 3. FACTS OF THESE CASES IN BRIEF ARE THAT; THE ASSESSES IN THEIR RESPECTIVE RETURN DECLARED NIL LO NG-TERM- CAPITAL-GAIN AND HAVE CLAIMED EXEMPTION U/S 54 OF THE INC OME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) AMO UNTING TO RS. 23,16,580/- AND RS. 15,71,910/- IN THE CASE OF MRS. CHANDA KISHORE CHANDIARAMANI AND MS CHANDANI KISHORE CHANDIRAMANI RESPE CTIVELY. HOWEVER, THEIR CLAIM WAS RESTRICTED BY THE AO TO RS. 12,88,566/- EACH . THE AO, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IN THE CASE OF SMT. SAKSHI CHANDIRAMANI DAUGHTER OF MRS. CHANDA KISHORE CHANDARAMANI NOTICED THAT ASSESSEE HAS CLAIMED EXEMPT INCOME OF RS. 45,00,000/-. THE INCOME HAS BEEN CLAIMED EXEMPT ON ACC OUNT OF IT HAVING BEEN RECEIVED BY THE ASSESSEES THROUGH INHERITANCE. THE AO, AFTER CONSIDERING THE REPLY OF THE ASSESSEES T REATED THE ABOVE AMOUNT AS COMPENSATION RECEIVED ON TRANSFER OF RIG HTS AND THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE ON CONCLUSION OF FAMILY SETTLEMENT BETWEEN FAMILY MEMBERS, OUT OF THE COURT AND THERE WAS NO QUESTION OF RELINQUISHMENT OF ANY RIGHTS BY THE ASSESSEE. CONSEQUENTLY, THE ASSESSMENT IN THE CASES OF ASSESSEES FOR THE YEAR UNDER CONSIDERATION WERE REOPENED U/S 147 OF THE INCOM E-TAX ACT, 1961 (THE ACT AS REFERRED TO IN SHORT). THE AO ASKED TH E ASSESSEES TO MRS. CHANDA KISHO RE CHANDIARAMANI & MS CHANDANI KISHORE CHANDIRAMANI ITA 6399 & 6400/MUM/2013 3 SHOW CAUSE AS TO WHY THE AMOUNT OF RS. 40 LACS EACH M AY NOT BE ADDED TO THEIR INCOME FOR RELINQUISHMENT/SURRENDER OF RIGHT S IN THE PROPERTY BEING ESTATE OF DECEASED SHEWARAM CHANDIRAMAN I & LAJWANTI SHEWARAM CHANDIRAMANI. THE ASSESSEES SUBMITTED THAT TH ERE WAS A DISPUTE AMONGST THE FAMILY MEMBERS AND ACCORDINGLY A SU IT WAS FILED BY THEM & OTHERS IN THE MUMBAI HIGH COURT AND THE AMOU NT RECEIVED WAS CONCLUSION OF FAMILY SETTLEMENT OUT OF THE COURT, SO, T HERE WAS NO QUESTION OF RELINQUISHMENT OF ANY RIGHTS BY THEM. HOWEVER, T HE AO DID NOT FIND ANY MERIT IN THEIR SUBMISSIONS AND HELD THAT THE IMPUGNED AMOUNT WAS TAXABLE AS CAPITAL GAIN AND ADDED TO THE INCO ME OF THE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A), WHO CONFIRMED THE ADDITION BY FOLLOWING THE DECISION OF THE THEN CIT(A) DATED 30.09.2011 IN THE CASE OF SMT SAKSHI K. CHANDIRAMANI, BEING ANOTHER BENEFICIARY OF RS. 45 LACS FROM T HE ESTATE OF LATE SHEWARAM CHANDIRAMANI & LAJWANTI SHEWARAM CHANDIRAMANI. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL. 5. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, STATED THAT THE CASE OF SMT SAKS HI K. CHANDRAMANI ON THE BASIS OF WHOSE CASE, THE ADDITION WAS CONFIRMED BY THE LD. CIT(A) WAS A SUBJECT MATTER OF APPEAL BEFORE THE ITAT M UMBAI BENCH E, MUMBAI IN ITA NO. 7996/MUM/2011 AND ADDITION WAS DELE TED VIDE ORDER DATED 21.11.2013. COPY OF THE SAID ORDER WAS FURNISHED. IN HIS RIVAL SUBMISSIONS, THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A) BUT COULD NOT CONTROVERT THE AFORESAID CONTENT ION OF THE LD. COUNSEL FOR THE ASSESSEE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIE S AND CAREFULLY GONE THROUGH THE MATERIAL PLACED ON RECORD. IT IS NOTICED THAT MRS. CHANDA KISHO RE CHANDIARAMANI & MS CHANDANI KISHORE CHANDIRAMANI ITA 6399 & 6400/MUM/2013 4 A SIMILAR ISSUE HAVING IDENTICAL FACTS HAS ALREADY BEEN ADJU DICATED BY THE ITAT E BENCH MUMBAI IN THE CASE OF ONE OF THE CO -OWNERS OF THE SAME PROPERTY I.E. IN THE CASE OF M/S SAKSHI KISHORE CHAN DIRAMANI AND ADDITION SUSTAINED BY THE LD. CIT(A) HAS BEEN DELETED. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 6 TO 8 OF THE SA ID ORDER, WHICH READ AS UNDER: 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS ADVANCED AT THE HANDS OF THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS LEARNED DR FOR THE REVENUE AND PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. WE HAVE ALSO GONE THROUGH THE PAPER BOOK FILED BEFORE US. THE ASSESSEE S PAPER BOOK CONTAINS A COPY OF THE PLAINT FILED BEFORE THE HONBLE HIGH COURT DISP UTING THE GIFT TO MRS. SANJANA RAMESH WADHWANI, COPY OF THE REPLY TO THE SAID SUIT BY MRS. SANJANA RAMESH WADHWANI, FAMILY TREE OF THE ASSESSEE, COPY OF THE DEED OF THE SAID FLAT FROM MRS. LAJWANTI CHANDIRAMANI TO MRS. SANJANA R AMESH WADHWANI AND MINUTES OF THE ORDER OF HONBLE BOMBAY HIGH COURT FOR W ITHDRAWAL OF SUIT ON PAYMENT BY MRS. SANJANA RAMESH WADHWANI FOR SETTLEME NT. THESE DOCUMENTS WERE ALREADY AVAILABLE TO THE REVENUE AUTHORITIES TOO. THE FACT OF GIFTING OF THE FLAT, FILING OF PLAINT BEFORE THE HONBLE HIGH COURT BY THE ASSESSEE AND OTHERS, FAMILY SETTLEMENT, RECEIPT OF THE SAID AMOUNT OF RS. 45 LAKHS BY THE ASSESSEE, ARE UNDISPUTED EVENTS. THE ONLY ISSUE THAT IS TO BE DE CIDED BY US HERE IS WHETHER THE SAID AMOUNT CONSTITUTES PART OF THE SETT LEMENT OF THE SAID FLAT NO. 8A ON 8 TH FLOOR IN VAIBHAV APARTMENT, MODERN BEACH CANDY CO-OPE RATIVE HOUSING SOCIETY LTD., SITUATED AT 80, BHULABHAI DESAI ROAD, MUMBAI -400 026 AND IT IS TO REMOVE THE INEQUALITIES OF DISTRIBUTION OF TH E ASSETS AMONG THE LEGAL HEIRS. AFTER HEARING THE PARTIES, WE ARE OF THE OPINIO N, THE SAID AMOUNT WAS PAID TO THE ASSESSEE TO EQUALIZE THE INEQUALITIES IN DISTRIBUT ION OF THE IMMOVABLE PROPERTY. IN OUR OPINION, THESE ISSUES STAND COVERED BY THE JUDGMENT OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF AS HWANI CHOPRA & ANOTHER (SUPRA) AND THE HELD POST OF THE SAID DECISION R EADS AS FOLLOWS:- HELD, DISMISSING THE APPEALS, THAT THE PAYMENT OF RS. . TO THE ASSESSEE WAS TO EQUALIZE THE INEQUALITIES IN PARTITION OF THE ASSETS OF HSL. THE AMOUNT SO PAID WAS IMMOVABLE PROPERTY. IF SU CH AMOUNT WAS TO BE TREATED AS INCOME LIABLE TO TAX, THE INEQUALITIES WOULD SET IN AS THE SHARE OF THE RECIPIENT WOULD DIMINISH TO THE EXTENT OF TAX. SINCE THE AMOUNT PAID DURING THE COURSE OF PARTITION WAS TO SETT LE THE INEQUALITIES IN PARTITION, IT WOULD BE DEEMED TO BE IMMOVABLE PROPERTY . SUCH AMOUNT WAS NOT AN INCOME LIABLE TO TAX. THUS, THE AMOUNT OF O WELTY I.E., COMPENSATION DEPOSITED BY GROUP B WAS TO EQUALIZE THE P ARTITION AND REPRESENTED IMMOVABLE PROPERTY AND WOULD NOT ATTRACT C APITAL GAINS. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE IS E NTITLED TO RELIEF CONSIDERING THE PRINCIPLE OF OWELTY AS ARGUED BY THE LEARNED COU NSEL BEFORE US. IN OUR OPINION, THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT AN INCOME BUT A SHARE IN THE IMMOVABLE PROPERTY THOUGH PAID IN CASH. IT IS THE CA SH VALUE TO SETTLE THE INEQUALITIES IN PARTITION. IN THE LANGUAGE OF THE HONBLE H IGH COURT IN THE CASE OF ASHWANI CHOPRA & ANOTHER (SUPRA), SUCH AMOUNT CANNOT BE TREATED AS INCOME LIABLE TO CAPITAL GAINS. THE SAID JUDGMENT WAS PRONOUNCE D AFTER CONSIDERING THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF T.S. SWAMINATHA ODAYAR VS. OFFICIAL RECEIVER OF WEST TANJORE, REPORTED IN AIR 1957 SC 577. THE OTHER RELEVANT REASONING GIVEN BY THE HONBLE HIGH COURT , WHICH APPEARED IN PAGE 628, READS AS UNDER:- PARTITION IS NOT A TRANSFER AND ADJUSTMENT OF SHAR ES, CRYSTALLIZATION OF THE RESPECTIVE RIGHTS IN THE FAMILY PROPERTIES CANNOT BE CONSTRUED AS A TRANSFER IN THE EYE OF LAW. WHEN THERE IS NO TRANSFE R OF ASSET, THERE IS NO CAPITAL GAINS AND, CONSEQUENTLY, THERE IS NO LIABILITY OF PAY TAX ON CAPITAL GAINS. IN VIEW OF THE AFORESAID PRINCIPLES OF LAW, WE FIND THAT THE PAYMENT OF RS. CRORES TO GROUP A IS EQUALIZE THE INEQUALITIES IN PA RTITION OF THE ASSETS OF M/S HIND SAMACHAR LTD. THE AMOUNT SO PAID IS IMMOVABLE MRS. CHANDA KISHO RE CHANDIARAMANI & MS CHANDANI KISHORE CHANDIRAMANI ITA 6399 & 6400/MUM/2013 5 PROPERTY. IF SUCH AMOUNT IS TO BE TREATED AS INCOME LI ABLE TO TAX, THE INEQUALITIES WOULD SET IN A S THE SHARE OF THE RECIPIENT WILL DIMINISH TO THE EXTENT OF TAX. SINCE THE AMOUNT PAID DURING THE CO URSE OF PARTITION IS TO SETTLE THE INEQUALITIES IN PARTITION, THEREFORE, DEEME D TO BE IMMOVABLE PROPERTY. SUCH AMOUNT IS NOT AN INCOME LIABLE TO TAX. T HUS, THE AMOUNT OF OWELTY, I.E., COMPENSATION DEPOSITED BY GROUP B IS TO EQUALIZE THE PARTITION REPRESENTS IMMOVABLE PROPERTY AND WILL NOT ATTR ACT CAPITAL GAINS. THE ARGUMENT THAT THE ASSESSEE IS LIABLE TO TAX BEING I NTEREST ON CASH, SUFFERS IT TO SAY, THAT SUCH QUESTION OR FACT DOES NO T ARISE FROM THE ORDERS OF THE TRIBUNAL. 8. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT T HE ORDER OF THE CIT(A) IS REQUIRED TO BE REVERSED AND GROUNDS RAISED BY THE ASS ESSEE ARE ALLOWED. CONSIDERING THE RELIEF GRANTED TO THE ASSESSEE ON THE G ROUNDS, THE ISSUE RAISED WITHOUT PREJUDICE BECOMES ACADEMIC, THEREFORE, THE SA ME ARE DISMISSED AS ACADEMIC. SINCE THE FACTS OF THE PRESENT CASES ARE SIMILAR TO THE FACTS INVOLVED IN THE AFORESAID REFERRED CASE OF MS. SAKSHI K. CHA NDIRAMANI IN ITA NO. 7996/MUM/2011 FOR THE AY 2008-09, SO, RESPEC TFULLY FOLLOWING THE SAID ORDER DATED 21.11.2013, THE IMPUGNED ADDIT IONS IN THE HANDS OF THE ASSESSEES ARE DELETED. 7. IN THE RESULT, APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 11 TH OF FEBRUARY 2014. SD/- SD/- ( #$. . %&. . ' ) ( . . ) ! ! (DR S T M PAVLAN) (N K SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE: 11 TH FEBRUARY, 2014 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ! ! ' (#) - 16, %&' / THE CIT(A) -16, MUMBAI. 4) ! ! ' -8, %&' / THE CIT 8, MUMBAI, 5) #() * , ! * , %&' / THE D.R. C BENCH, MUMBAI. 6) ), - COPY TO GUARD FILE. MRS. CHANDA KISHO RE CHANDIARAMANI & MS CHANDANI KISHORE CHANDIRAMANI ITA 6399 & 6400/MUM/2013 6 !./0 / BY ORDER / / TRUE COPY / / [ 1/ 2 &3 ! * , %&' DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *562 .. * CHAVAN, SR. PS