Smt.Sunitha S.Bathija, Bangalore V. Additional Commissioner of Income tax, Bangalore

ITA 668/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7385 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-08-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Capital Gains
• Section: 50C; 234B; 250; 13

Judgement Text

N THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI A.K GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.668/BANG/2017 ASSESSMENT YEAR : 2007-08 SMT. SUNITA S BATHIJA, PROP. M/S BATHIJA BROTHERS, SHAUKAT BUILDING, SJP ROAD CROSS, BENGALURU-560 002. PAN AGZPB 0172 F VS. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-5, BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE REVENUE BY : SMT. R PREMI, JCIT DATE OF HEARING : 18-08-2020 DATE OF PRONOUNCEMENT : 28-08-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 05/12/2016 PASSED BY LD. CIT (A)-5, BANGALORE FOR ASSESSMENT YEAR 2007-08 ON FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) PASSED UNDER SECTION 250 OF THE ACT IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PR OBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES HERSELF LIABLE TO BE ASSESS ED OVER AND ABOVE THE INCOME RETURNED BY HER OF RS. 1,96,35,600 /- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. PAGE 2 OF 16 ITA NO.668/BANG/2017 3. THE LEARNED CIT (A) HAVING HELD THAT THE PROVISI ONS OF SECTION 50C OF THE ACT IS NOT APPLICABLE TO THE CASE OF THE APPELLANT AND OUGHT TO HAVE DELETED THE ADDITIONS MADE BY THE LEARNED A SSESSING OFFICER UNDER SECTION 50C OF THE ACT AND INSTEAD HE DIRECTE D THE LEARNED ASSESSING OFFICER TO ADOPT THE VALUATION OF THE PRO PERTIES MADE BY THE DVO VIS--VIS THE VALUE OF THE SHARES TRANSFERRED F OR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAINS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE REFERENCE MADE BY THE LEARNED ASSESSING OFFICER TO DVO ITSELF IS N OT PROPER AND OUGHT NOT TO HAVE DIRECTED THE LEARNED ASSESSING OFFICER TO ADOPT THE VALUE ARRIVED AT BY THE DVO FOR THE PURPOSES OF SALE OF S HARES UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE CIT (A) FAILED TO APPRECIATE THAT THE REFERE NCE TO THE DISTRICT VALUATION OFFICER WITH REGARD TO THE VALUATION OF T HE COMMERCIAL COMPLEX IS NOT JUSTIFIED IN TAW UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT THERE IS TRANSFER OF SHARES HELD BY THE APPELLANT DURING THE IMPUGNED AS SESSMENT YEAR AND NOT CAPITAL ASSETS BEING LAND OR BUILDINGS OR B OTH AS HELD BY THE LOWER AUTHORITIES ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE LEARNED CIT (A) WAS NOT JUSTIFIED IN ALLEGIN G THAT THE TRANSFER OF SHARES BY THE APPELLANT DURING THE IMPUGNED ASSE SSMENT YEAR AS A COLOURABLE DEVICE TO AVOID TAX ON THE FACTS AND C IRCUMSTANCES OF THE CASE. 8. WITHOUT PREJUDICE THE LEARNED CIT (A) FAILED TO APPRECIATE THAT TAX PLANNING IS PERMISSIBLE IN THE EYES OF LAW AS H ELD BY VARIOUS COURTS IN THE COUNTRY AND ALSO BY THE HON'BLE APEX COURT IN THE CASE OF IJOL VS. AZADI BACHAO ANDOLAN, 263 ITR 706 (SC). 9. THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN NOT GIVING THE BENEFIT OF INDEXATION UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. THE APPELLANT DENIES HERSELF LIABLE TO BE CHARG ED TO INTEREST UNDER SECTION 234B AND 234C OF THE ACT AND FURTHER THE CALCULATION OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT IS NOT IN ACCORDANCE WITH LAW SINCE THE RATE, METHOD OF CALCU LATION, QUANTUM IS NOT DISCERNABLE FROM THE ORDER OF ASSESSMENT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 11. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUBST ITUTE AND DELETE ANY OR ALL OF THE GROUNDS OF APPEAL URGED ABOVE. 12. FOR THE ABOVE AND OTHER GROUNDS TO BE URGED DUR ING THE HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL B E ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. BRIEF FACTS OF THE CASE ARE AS UNDER: PAGE 3 OF 16 ITA NO.668/BANG/2017 2. ASSESSEE IS AN INDIVIDUAL AND FILED RETURN OF IN COME ON 31/10/2007 DECLARING TOTAL INCOME OF RS.1,96,35,600 /-. THE RETURN WAS PROCESSED UNDER SECTION 143(1), AND SUBSEQUENTLY NOTICE UNDER SECTION 143 (2) WAS ISSUE D TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICE, REPRESEN TATIVE OF ASSESSEE APPEARED BEFORE LD. AO AND FILED REQUISITE DETAILS. LD.AO OBSERVED THAT, ASSESSEE INVESTED SUBSTANTIAL AMOUNT OF MONEY TOWARDS PURCHASE OF 4 SHOPS IN SHOPPING CO MPLEX BY THE NAME ESTEEM ARCADE, AT THE INTERSECTION OF R ACE COURSE ROAD AND KUMARA KRUPA ROAD BANGALORE. IT WAS NOTED THAT, SAID PROJECT WAS COMPLETED DURING PREV IOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, AN D ASSESSEE SOLD 4 SHOPS OWNED BY HER. ASSESSEE DECLAR ED LONG- TERM GAIN ON SALE OF SHARES IN COMPANY M/S ESTEAM ARCADE PVT.LTD. LD.AO OBSERVED THAT SHARES IN THE COMPANY OWNED BY ASSESSEE HAD SPECIFIC INTEREST IN DEMARCATED SHO PS IN ESTEEM ARCADE BUILDING DEVELOPED BY THE COMPANY. LD .AO WAS OF THE OPINION THAT THE SALE CONSIDERATION SHOW N BY ASSESSEE WAS MUCH LESS THAN THE VALUE ATTRACTED UND ER SECTION 50C OF THE ACT. ACCORDINGLY ASSESSEE WAS CA LLED UPON TO EXPLAIN LIABILITY UNDER SECTION 50C WITH GUIDAN CE VALUE ADOPTED BY STAMP VALUATION AUTHORITIES. ASSESSEE IN RESPONSE SUBMITTED THAT THE SAID PROPERTIES DID NOT ATTRACT STAMP DUTY AS ASSESSEE ONLY SOLD SHARES IN THE COMP ANY M/S ESTEEM ARCADE PVT.LTD. 3. LD. AO, ACCORDINGLY WORKED OUT CAPITAL GAIN ARIS ING FROM SALE OF 4 SHOPS AT RS.53,39,040/-AS AGAINST PAGE 4 OF 16 ITA NO.668/BANG/2017 RS.11,64,598/-ADOPTED BY ASSESSEE. THE CAPITAL GAIN ON SALE OF 4 SHOPS WAS WORKED OUT PENDING RECEIPT OF DVO RE PORT. 4. AGGRIEVED BY ADDITION MADE BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). 5. IT WAS SUBMITTED THAT, AS APPEAL WAS PENDING BE FORE LD.CIT (A), DVO REPORT WAS RECEIVED. 6. BASED ON SUBMISSIONS OF ASSESSEE, LD.CIT (A) OBS ERVED AS UNDER: 7.2 SECTION 50C OF THE ACT PROVIDES THAT IF THE CO NSIDERATION RECEIVED OR ACCRUING IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY OF T HE STATE GOVERNMENT FOR SUCH TRANSFER THEN THE VALUE SO ADOP TED OR ASSESSED OR ASSESSABLE SHALL BE DEEMED TO BE THE FU LL VALUE OF CONSIDERATION AND THE CAPITAL GAINS WILL BE COMPUTE D ACCORDINGLY. THE PHRASEOLOGY OF SECTION 50C OF THE ACT CLEARLY P ROVIDES THAT IT WOULD APPLY ONLY TO 'A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH'. THE MOOT QUESTION IS AS TO WHETHER SUCH EXPR ESSION WOULD COVER THE TRANSFER OF A CAPITAL ASSET BEING LEASEHO LD RIGHTS IN LAND OR BUILDING AND THE SHARES IN A COMPANY. THERE CANN OT BE A DISPUTE TO THE PROPOSITION THAT THE EXPRESSION LAND BY ITSELF CANNOT INCLUDE WITHIN ITS FOLD LEASEHOLD RIGHT IN L AND ALSO. SO HOWEVER, EVERY KIND OF A 'CAPITAL ASSET' IS NOT COV ERED WITHIN THE SCOPE OF SECTION 50C OF THE ACT FOR THE PURPOSES OF ASCERTAINING THE FULL VALUE OF CONSIDERATION. IN FACT, THE HEADI NG OF SECTION ITSELF PROVIDES THAT IT IS 'SPECIAL PROVISION FOR FULL VAL UE OF CONSIDERATION IN CERTAIN CASES'. THEREFORE, THERE IS A SIGNIFICAN CE TO THE EXPRESSION 'A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH' CONTAINED IN SECTION 50C OF THE ACT. THE SIGNIFICAN CE IS THAT ONLY CAPITAL ASSET BEING LAND OR BUILDING OR BOTH ARE CO VERED WITHIN THE SCOPE OF SECTION 50C OF THE ACT, AND NOT ALL KINDS OF CAPITAL ASSETS. 7.3 THE PURPOSE OF INTRODUCING SECTION 5OC OF THE ACT WAS TO COUNTER SUPPRESSION OF SALE CONSIDERATION OF SALE O F IMMOVABLE PROPERTIES. BEFORE INSERTION OF SECTION 50C OF THE ACT TO THE STATUTE, THERE ARE LOT OF LITIGATIONS AS TO CONSIDE RATION SHOWN IN DOCUMENT CONVEYING TITLE AND PAYMENT OF STAMP DUTY. TO OVERCOME THE LITIGATIONS, THE PROVISION OF SECTION 50C OF THE ACT HAS BEEN INSERTED TO THE STATUTE W.E.F. 1.6.2003 WH EREIN IT IS MADE MANDATORY TO ADOPT VALUE U/S 50C OF THE ACT FO R THE PURPOSE OF DETERMINATION OF CONSIDERATION. A PROVIS O TO SECTION 50C OF THE ACT HAS BEEN INSERTED BY THE FINANCE ACT , 2016 WET. 1.4.2017 TO RESOLVE THE GENUINE AND INTENDED HARDSH IP, IN THE PAGE 5 OF 16 ITA NO.668/BANG/2017 CASE IN WHICH THE DATE OF AGREEMENT TO SALE IS PRIO R TO THE DATE OF SALE AND MARKET VALUE OF THE PROPERTY AS ON THE DAT E OF AGREEMENT TO SALE AND DATE OF SALE DEED IS DIFFEREN T. 7.4 IN THE CASE OF IRFAN ABDUL KADER FAZLANI VS. AC IT THE HONBLE MUMBAI TRIBUNAL HAS HELD THAT THE CAPITAL ASSETS TH AT ARE COVERED UNDER THE PROVISIONS ARE LAND OR BUILDING O R BOTH. EXPRESSION 'TRANSFER' SHALL HAVE TO BE A DIRECT TRA NSFER AS DEFINED UNDER SECTION 2(47) OF THE ACT WHICH DOES NOT INCLU DE THE TAX PLANNING ADOPTED BY THE ASSESSEE. IN THE INSTANT CA SE, WHAT TRANSFERRED BY THE ASSESSEE WERE THE SHARES IN THE COMPANY AND NOT THE LAND OR BUILDING OR BOTH. ASSESSEE DID NOT HAVE FULL OWNERSHIP ON THE FLATS WHICH WERE OWNED BY THE COMP ANY. THE TRANSFER OF SHARES WAS NEVER A PART OF THE ASSESSME NT OF THE STAMP DUTY AUTHORITIES OF THE STATE GOVERNMENT. THE COMPANY WAS DERIVING INCOME, TAXABLE UNDER THE HEAD INCOME FROM PROPERTY FOR MORE THAN A TO DECADE. THE EXPRESSION 'ASSESSABLE' IS INSERTED IN SECTION 50C (1) OF THE ACT IS NOT RE LEVANT FOR THE IMPUGNED ASSESSMENT YEARS. IN SUCH CIRCUMSTANCES, T HE ASSESSING OFFICER'S DECISION TO INVOKE THE PROVISIO NS OF SECTION 500 TO THE TAX PLANNING ADOPTED BY THE ASSESSEE WAS NOT PROPER AND IT DID NOT HAVE THE SANCTION OF THE PROVISIONS OF IT ACT. 7. FURTHER LD.CIT(A), REFERRING TO DVO REPORT, CAME TO THE CONCLUSION THAT, REAL INTENTION OF ASSESSEE WAS TO ADOPT A COLOURABLE DEVICE TO AVOID TAX IN GUISE OF TRANSFE R OF SHARES. LD.CIT(A) RELIED UPON DECISIONS OF HONBLE SUPREME COURT IN CASE OF MCDOWELL & CO LTD VS CTO REPORTED IN 154 ITR 148 AND UNION OF INDIA VS AZADI THE BACHAO ANDOLAN REPORTED IN (2003) 132 TAXMAN 373 . LD.CIT (A), THUS, BASED ON DVO REPORT UPHELD CAPIT AL GAINS COMPUTED IN ACCORDANCE WITH VALUE ADOPTED BY DVO. 8. AGGRIEVED BY ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US NOW. 9. AT THE OUTSET, LD.AR SUBMITTED THAT, PROVISIONS OF SECTION 50C IS NOT APPLICABLE TO PRESENT FACTS OF T HE CASE, AS, HAS BEEN HELD BY LD.CIT(A). HE SUBMITTED THAT, LD.C IT(A), THEREAFTER PROCEEDED TO DIRECT LD.AO TO COMPUTE CAP ITAL PAGE 6 OF 16 ITA NO.668/BANG/2017 GAINS BASED ON VALUE ADOPTED BY DVO IN THE REPORT, WHICH WAS SUBSEQUENTLY MADE AVAILABLE. IT HAS BEEN SUBMIT TED THAT, IDENTICAL SITUATION AROSE BEFORE HONBLE KARNATAKA HIGH COURT , IN CASE OF BHORUKA ENGINEERING INDS.LTD VS DCIT REPORTED IN (2013) 36 TAXMANN.COM 82. HE SUBMITTED THAT HONBLE JURISDICTIONAL HIGH COURT HELD THAT, IF THE SHAREHOLDERS CHOOSES TO TRANSFER THE LANDS AND PART WITH THE LAND TO PURCHASE OF SHARES, IT WOULD BE A VALID LEG AL TRANSACTION IN LAW AND MERELY BECAUSE THEY WERE ABL E TO AVOID PAYMENT OF TAX, IT CANNOT BE SAID TO BE A COL OURABLE DEVICE OR A SHAM TRANSACTION OR AN UNREAL TRANSACTI ON. ON THE CONTRARY, LD.SR.DR PLACED RELIANCE ON DECISI ON OF HONBLE ALLAHABAD HIGH COURT IN CASE OF CIT LUCKNOW VS.CARLTON HOTEL(P) LTD., REPORTED IN (2017) 88 TAXMANN.COM 257. SHE SUBMITTED THAT THE RATIO IN THIS CASE IS SQUARELY APPLICABLE TO THE PRESENT FACTS OF THE CASE. 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. ASSESSEE ACQUIRED CERTAIN SHARES AND PLACED CERTAIN AMOUNT OF DEPOSITS IN A COMPANY CALLED M/S ESTEEM ARCADE P VT. LTD. ASSESSEE WAS THUS ENTITLED TO BENEFICIAL ENJO YMENT OF CERTAIN PORTION OF PROPERTY IN THE BUILDING CONSTR UCTED BY SAID COMPANY, TO THE EXTENT OF SHARES HELD BY HER, WHICH WAS SUBMITTED TO BE IN ACCORDANCE WITH SCHEME OF T HE COMPANY. DETAILS OF UNITS ALLOTTED, PURSUANT TO SH ARES HELD AND DEPOSITS MADE BY ASSESSEE ARE AS UNDER: PAGE 7 OF 16 ITA NO.668/BANG/2017 DATE OF AGREEMENT UNIT ALLOTTED AREA IN SQFT NO. OF SHARES COST OF SHARES (RS.) DEPOSIT (RS.) TOTAL COST 14.11.2003 S-4 1,220 1,380 1,38,000 16,56,000 17,94,000 18.6.2004 G- 10 889 1,049 1,04,900 12,58,800 13,63,700 14.8.2004 G 11 450 450 45,000 5,40,000 5,85,000 28.2.2005 G - 4 1,077 1,237 1,23,700 14,84,400 16,08,100 TOTAL 4,116 4,11,600 49,39,200 53,50,800 12. IT IS TO BE NOTED THAT, LAND ON WHICH COMPANY CONSTRUCTED BUILDING, WAS LEASEHOLD LAND AND NOT A FREEHOLD LAND. IN THE LEASE AGREEMENT IT IS ALSO BEEN AGREED THAT COMPANY WOULD BE CONSTRUCTING SUPERSTRUCTURE AND TH E SAME WOULD BE UTILISED IN ACCORDANCE WITH THE SCHEM E OF THE COMPANY, AND THAT, THE COMPANY HAD NO RIGHTS TO SEL L THE SUPERSTRUCTURE. IT IS ALSO BEEN NOTED THAT, CERTAIN PORTIONS OF AREA WOULD BELONG TO THE SAID COMPANY UNTIL THE EX PIRY OF LEASE PERIOD, AND HENCE, THERE COULD NOT BE ANY ABS OLUTE TRANSFER OF PROPERTIES. ASSESSEE PLACED LEASE AGREEMENT ENTERED INTO BY COM PANY WITH INDIAN RED CROSS SOCIETY, DATED 11/07/2001 AT PAGE 12 TO 30 OF PAPER BOOK. ASSESSEE ALSO ENTERED INTO AGREEMENT WITH THE COMPA NY, WHEREIN, SHE IS A PARTNER IN RESPECT OF 4 UNITS ALL OTTED TO HER UNDER THE SCHEME OF COMPANY, BASED HOLDING OF SPEC IFIC NO. OF SHARES AND ALSO SPECIFIC AMOUNT OF DEPOSIT WITH THE COMPANY. PAGE 8 OF 16 ITA NO.668/BANG/2017 13. SUBSEQUENTLY, ASSESSEE SOLD HER SHARES TO 4 DI FFERENT BUYERS. COPIES OF THE AGREEMENTS HAVE BEEN PLACED A T PAGE 109 -130 OF PAPER BOOK. THE DETAILS OF SALE OF SHAR ES AND DEPOSIT ARE AS UNDER: NAME OF THE BUYER UNIT ALLOTTED SAIE VALUE FOR SHARES RECEIPT FOR DEPOSITS TOTAL RECEIPT SURPLUS M.BHAVANA S-4 3,45,000 16,56,000 20,01,000 2,07,000 BHATIA ET OTHERS G- 10 4,72,050 12,58,800 17,30,850 3,67,150 BHATIA ET OTHERS G 11 2,02,5C0 5,40,000 7,42,500 1,57,500 RATANCHAND G - 4 5,56,650 14,84,400 20,41,050 4,32,950 TOTAL 15,76,200 49,39,200 65,15,400 11,64,600 14. LD. CIT (A) AGREED WITH CONTENTION OF ASSESSEE THAT PROVISIONS OF SECTION 50 C ARE NOT APPLICABLE TO TH E PRESENT FACTS OF THE CASE. 15. HOWEVER LD. CIT (A) PROCEEDED ON FOOTING THAT I S A COLOURABLE DEVICE TO AVOID TAX, BASED ON THE DVO RE PORT THAT WAS RECEIVED AFTER THE ASSESSMENT PROCEEDINGS. WE NOTE THAT, LD.CIT (A) WAS OF THE OPINION THAT, P ROVISIONS OF SECTION 50 C (2) CANNOT BE INVOKED IN THE PRESEN T FACTS OF THE CASE, THEN HOW COULD HE REFERRED TO DVO REPORT . WE NOTE THAT , ASSESSEE WAS ENTITLED TO BENEFICIAL ENJ OYMENT OF THE ALLEGED UNITS, SO LONG AS SHE REMAINED A SHAREH OLDER OF THE COMPANY, AND WAS HOLDING REQUIRED AMOUNT OF DEP OSITS WITH THE COMPANY. IT IS ALSO AN ADMITTED FACT THAT, ASSESSEE TRANSFERRED ONLY SHARES AND DEPOSITS TO THE BUYERS. PAGE 9 OF 16 ITA NO.668/BANG/2017 17. WE REFER TO DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF, BHORUKA ENGINEERING INDS. LTD VS DCIT (SUPRA), WHEREIN HONBLE COURT OBSERVED AS UNDER: 24. IN THE INSTANT CASE, THE ASSESSEE IS HOLDING THE S HARES IN BFSL FROM 01.10.1984. THEREFORE, IT IS A LONG TERM CAPITAL ASSET. THE TRANSACTION HAS TAKEN PLACE SUBSEQUENT TO 28.09 .2004 AS SUCH THE SECOND CONDITION IS FULFILLED. THEY HAVE P AID THE SECURITY TRANSACTION TAX TO MAGADHA STOCK EXCHANGE. WHERE AL L THESE THREE CONDITIONS STIPULATED UNDER SECTION 10(38) OF THE A CT ARE FULFILLED, THE ASSESSEE IS ENTITLED TO THE BENEFIT FLOWING THE REFROM I.E., THE INCOME FROM SUCH TRANSFER SHALL, NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR. MEREL Y BECAUSE IF A REGISTERED SALE DEED HAS BEEN EXECUTED BY BFSL SELL ING THE LAND IN FAVOUR OF DFL-CDL IN WHICH EVENT CAPITAL GAIN SH OULD HAVE BEEN PAID ON THE SALE CONSIDERATION, IS NO REASON T O HOLD THAT WHEN A SHAREHOLDER OF BFSL TRANSFER HIS SHARE FOR A CONSIDERATION, AFTER COMPLYING WITH THE LEGAL REQUI REMENTS, IS NOT ENTITLED TO THE BENEFIT OF TAX EXEMPTION. ALL THE A UTHORITIES ARE CARRIED AWAY BY THIS ASPECT: OF THE MATTER AND BECA USE THE ASSESSEE WAS ABLE TO AVOID PAYMENT OF INCOME TAX, C ONSEQUENTLY THE DEPARTMENT WAS DEPRIVED OF THE TAX, THEY HAVE C OME TO THE CONCLUSION THAT IT IS A COLOURABLE DEVICE AND TAX P LANNING TO AVOID PAYMENT OF TAX. THE ASSESSEE BY RESORTING TO SUCH A TAX PLANNING, HAS TAKEN ADVANTAGE OF THE BENEFIT OF THE LAW OR TH E LOOPHOLES IN THE LAW, WHICH HAD ENURED TO HIS BENEFIT. AFTER SEE ING HOW THIS LOOPHOLE HAS BEEN EXPLOITED WITHIN FOUR CORNERS OF THE LAW, IT IS OPEN TO THE PARLIAMENT TO AMEND THE LAW PLUGGING TH E LOOPHOLE. HOWEVER, BY ANY JUDICIAL INTERPRETATION WE CANNOT R EAD INTO THE SECTION, WHICH WAS NOT INTENDED TO, BY THE PARLIAME NT AT THE TIME OF ENACTING THIS PROVISION. THE LANGUAGE EMPLOYED I N SECTION 10(38) OF THE ACT IS SIMPLE AND UNAMBIGUOUS AND IT MAKES NO DISTINCTION BETWEEN THE TRANSFER OF SHARE OF COMPAN Y WITH AN IMMOVABLE ASSET AND MOVABLE ASSET, INSTEAD OF EXECU TING A SALE DEED IN RESPECT OF THE IMMOVABLE PROPERTY BY THE CO MPANY, WHICH IS OWNING THE LAND. IF THE SHAREHOLDER CHOOSES TO T RANSFER THE LANDS AND PART WITH THE LAND TO THE PURCHASER OF TH E SHARES, IT WOULD BE A VALID LEGAL TRANSACTION IN LAW AND MEREL Y BECAUSE THEY WERE ABLE TO AVOID PAYMENT OF TAX, IT CANNOT B E SAID TO BE A COLOURABLE DEVICE OR A SHAM TRANSACTION OR AN UNREA L TRANSACTION. 18. IN THE PRESENT FACTS, OF THE CASE WE NOTE THAT COMPANY HAD NO RIGHTS TO SELL SUPERSTRUCTURE. COMPANY IS PE RMITTED ONLY TO SUBLET OR SUBLEASE OR ASSIGN OR NOMINATE AN Y PORTIONS THEREOF FALLING TO ITS SHARE TO ONE OR MOR E PARTIES IN PAGE 10 OF 16 ITA NO.668/BANG/2017 ONE OR MORE THAN ONE DEEDS FOR THE PERIOD OF LEASE. WE HAVE ALSO PERUSED SCHEME OF ALLOTMENT BY THE ESTEEM ARCA DE PVT. LTD., WHEREIN, THE MEMBERS ENROLLED UNDER THIS SCH EME WOULD BE ALLOTTED COMMERCIAL SPACE/UNIT ON FOLLOWI NG TERMS AND CONDITIONS: SCHEME FOR ALLOTMENT OF OFFICE SPACE / COMMERCIAL SPACE (UNITS) TO SHARE HOLDERS IN THE BUILDING PROPOSED TO BE CON STRUCTED ON THE PROPERTY BEIINO.26, RACE COURSE ROAD, BANGALORE - 5 60 00 ITO BE ENJOYED BY THE SHARE HOLDERS FOR A PERIOD OF 85 YEA RS ON LEASE BASIS COMMENCING FROM 11 .07.2002. 1. THE COMPANY HAS REGISTERED 67% UNDIVIDED LEASEHO LD RIGHTS IN THE PROPERTY SITUATED AT NO.26, RACE COURSE ROAD, B ANGALORE STARTING FROM 11.07.2002 WITH A RIGHT TO PUT UP THE BUILDING AND USE THE SAME FOR A PERIOD OF 85 YEARS. THE SAID DOC UMENT HAS BEEN REGISTERED AS DOCUMENT NO. 1481 DATED 11.7.200 2 AND STORED IN C.D. NO. G.N.S.R.8. THE ORIGINAL OF THE D OCUMENT IS AVAILABLE FOR INSPECTION BETWEEN THE OFFICE HOURS I N THE REGISTERED OFFICE OF THE COMPANY. 2. A BUILDING COMPRISING OF OFFICES AND SHOPS SHALL BE CONSTRUCTED ON THE AFORESAID PROPERTY BEARING NO. 26, RACE COUR SE ROAD, BANGALORE, BELONGING TO THE COMPANY AS PER CORPORAT ION APPROVED PLAN. THE EXTEND OF BUILT AREA BELONGING TO THE COM PANY IS APPROXIMATELY 35,000 SQ. FT. AND THE BALANCE AREA B ELONGS TO LESSORS I.E. INDIAN RED CROSS SOCIETY THE SCHEME IS IN RESPECT OF THE BUILDING BELONGING TO COMPANY ONLY AND NOT APPL ICABLE TO THE BALANCE AREA BELONGING TO INDIAN RED CROSS SOCIETY. 3. THE SUPER-BUILT AREA OF EACH UNIT IS COMPUTED TA KING INTO ACCOUNT THE CIRCULATION AREA, SERVICE AREA AND COMM ON AREA WHICH IS DRAFTED BY MIS. ZACHARIAH CONSULTANTS, ARCHITECT S. 4. THE MEMBERS BE ENROLLED UNDER THE SCHEME FOR THE PURPOSE OF ALLOTMENT OF COMMERCIAL SPACE / UNITS ON THE FOLLOW ING TERMS AND CONDITIONS - A. THE MEMBERS SHALL HOLD AS MANY EQUITY SHARES IN THE CAPITAL OF THE COMPANY, IN RESPECT OF EACH COMMERCIAL SPACE UN IT AS ENCLOSED IN ANNEXURE. THE MEMBERS, IF THEY HAVE NOT ALREADY ACQUIRED THE REQUIRED SHARES SHALL ACQUIRE THE SAME AND SHALL PAY TOWARDS SHARE CAPITAL AS AND WHEN CALLS ARE MADE ON THEM IF THE SAME HAVE ALREADY NOT BEEN PAID. B. EACH MEMBER SHALL PAY AN AMOUNT EQUAL TO TWELVE TIMES THE FACE VALUE OF - THE SHARE AS SECURITY DEPOSIT IN OR DER TO GET THE ENTITLEMENT OF THE ENJOYMENT OF THE UNIT TO BE ALLO TTED TO HIM/HER. THE SAME IS PAYABLE ON DEMAND BY THE COMPANY. C. THE TOTAL VALUE OF THE SHARES & DEPOSIT TO BE HE LD BY THE MEMBER FOR EACH UNIT IS FOUND IN THE ANNEXURE ENCLO SED HEREWITH. PAGE 11 OF 16 ITA NO.668/BANG/2017 D. THE BOARD SHALL HAVE DISCRETION IN VARYING THE A BOVE DEPOSIT AMOUNT. THE ABOVE DEPOSIT AMOUNT SHALL BE PAID IN S UCH INSTALMENTS AS MAY BE SPECIFIED BY THE BOARD. THE B OARD SHALL HAVE FULL DISCRETION IN THE ABOVE MATTER AND MAY SP ECIFY DIFFERENT INSTALMENTS FOR DIFFERENT MEMBERS. E. THE DEPOSIT SHALL BE ADJUSTED AGAINST THE ASSETS OF THE COMPANY AT THE EXPIRY OF LEASE PERIOD OF 85 YEARS. THE COMPANY CAN MODIFY THE SCHEME OF ADJUSTMENT OF DEPOSITS ONL Y IF SO RESOLVED BY THE MEMBERS IN THE GENERAL METING BY 2/ 3 RD MAJORITY TO TAKE ADVANTAGE OF FISCAL LAWS OF THE COUNTRY FRO M TIME TO TIME. F. IN THE EVENT OF ANY MEMBER CEASING TO BE A MEMBE R OF THE COMPANY OTHER THAN BY WAY OF DEATH, INSOLVENCY, TRA NSFER OR OPERATION OF LAW THEN AND IN THAT EVENT THE COMPANY SHALL REFUND THE PROPORTIONATE DEPOSIT TO THE EXTENT OF THE UNEX PIRED PERIOD OF LEASE. 5. EACH MEMBER SHALL BE ENTITLED TO THE POSSESSION AND ENJOYMENT OF UNIT / COMMERCIAL SPACE ALLOTTED TO HIM PURSUANT TO THE ABOVE SCHEME TOGETHER WITH FULL RIGHT TO POSSESS, ENJOY, LET-OUT AND REALIZE THE RENT THERE FROM. THE MEMBER SHALL ALONE BE ENTITLED TO RENT OR OTHER CONSIDERATION RECEIVED FOR PARTING WI TH POSSESSION OR GRANTING LICENSE TO OUTSIDERS IN RESPECT OF HIS / H ER / THEIR UNITS AND THE COMPANY SHALL NOT BE ENTITLED THERETO; 6. THE MEMBER SHALL BE BOUND TO CONTRIBUTE TOWARDS THE COMMON EXPENSES OF THE COMPANY AND FOR THE MAINTENANCE OF THE SUPER STRUCTURE, SUCH AMOUNTS AS THE BOARD OF DIRECTORS O F THE COMPANY MAY DETERMINE FROM TIME TO TIME. 7. THE MEMBER SHALL ALSO- KEEP A MAINTENANCE DEPOSI T OF SUCH AMOUNT AS THE COMPANY DECIDES IN A GENERAL MEETING. 8. THE MEMBER SHALL BE LIABLE TO PAY THE CORPORATIO N TAX AND OTHER LEVIES THAT MAY BE LEVIED ON THE UNIT/COMMERCIAL SP ACE GRANTED TO HIM. 9. THE MEMBER SHALL PAY DEPOSIT AND PRO-RATA CHARGE S TO KEB, BWSSB AND OTHER AGENCIES FOR SECURING SERVICE CONNE CTION OF ELECTRICITY, WATER AND OTHER CONNECTIONS, IF DEMAND ED BY THE COMPANY AFTER THE APPROVAL OF THE MEMBERS IN GENERA L MEETING. 10. THE COMPANY SHALL EXECUTE THE DEEDS IN TERMS OF THE SCHEME CONFERRING NECESSARY RIGHTS ON THE MEMBER. 11. THE MEMBER SHALL BE ENTITLED TO SELL OR DISPOSE OF HIS SHARES AS WELL AS THE DEPOSITS AFTER THE PAYMENT OF THE FU LL AMOUNT DUE TO THE COMPANY TOWARD SHARES AND /OR DEPOSIT, IN ACCOR DANCE WITH RULES AND REGULATIONS SUBJECT TO THE ARTICLES OF AS SOCIATION OF THE COMPANY. 12. THE COMPANY SHALL HAVE LIEN ON THE SHARES AND D EPOSIT AMOUNT OF THE MEMBER IN RESPECT OF ALL THE MONIES D UE AND OUTSTANDING FROM THE MEMBER TO THE COMPANY. 13. THE MEMBER SHALL COMPLY WITH THE TERMS OF THE M EMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION OF THE C OMPANY. PAGE 12 OF 16 ITA NO.668/BANG/2017 14. THE COMPANY SHALL HAVE DISCRETION IN VARYING TH E DEPOSIT AMOUNT PAYABLE OR THE INSTALMENT. THIS RIGHT IS VES TED IN THE COMPANY TILL SUCH TIME ALL THE SHARES ARE ALLOTTED. 15. THE COMPANY SHALL HAVE RIGHT TO AMEND THE PLANS AND CONSTRUCT SUCH ADDITIONAL AREA FOR WHICH THE MEMBER HEREBY AGREES TO THE SAME. 16. THE MEMBER SHALL BE SUBJECT TO SUCH RESTRICTION S IN THE ENJOYMENT OF THE UNIT AS MAY BE SET FORTH FROM TIME TO TIME BY THE COMPANY IN THE INTEREST OF THE SHARE HOLDER/MEMBERS OF THE COMPANY. 17. THE MEMBER SHALL ALSO HAVE SUCH RIGHTS IN RESPE CT OF HIS UNITS AS MAY BE SPECIFIED BY THE COMPANY FROM TIME TO TIM E. 18. THE MEMBER SHALL NOT BE ENTITLED TO ALTER THE S TRUCTURE OF THE UNIT ALLOTTED TO HIM. HOWEVER, HE SHALL BE ENTITLED TO FIX MOVABLE FIXTURES AND PARTITIONS, AIR CONDITIONER ETC., WITH IN HIS UNIT. 19. EACH MEMBER SHALL JOIN THE EXECUTION OF DEED AN D DOCUMENTS REQUIRED BY THE COMPANY AND SHALL BEAR STAMP DUTY A ND OTHER EXPENDITURE INVOLVED IN GRANTING ALLOTMENT OF THE U NIT. 20. A UNIT/COMMERCIAL SPACE ALLOTTED SHALL ABSOLUTE LY BELONG TO THE MEMBER FOR HIS/HER ENJOYMENT AND SUCH RIGHT IS HERITABLE, PROVIDED THE LEGAL HEIRS CONTINUE TO HOLD THE SHARE S AND DEPOSIT. 21. THE SHARES AND RELEVANT DEPOSIT SHALL ALWAYS GO WITH A SPECIFIC UNIT/COMMERCIAL SPACE AND THE TRANSFER THE REOF SHALL BE DONE SIMULTANEOUSLY TO THE SAME PERSON IN WHOM THE RIGHT OF ENJOYMENT OF THAT UNIT IS VESTED. NO TRANSFER OF DE POSIT WITHOUT THE SHARES BEING TRANSFERRED IN FAVOUR OF ANY PERSON IS POSSIBLE UNDER ARTICLE NO.7 OF ARTICLES OF ASSOCIATION OF THE COMP ANY. 22. THE MUNICIPAL TAXES PAYABLE SHALL BE PAID BY TH E COMPANY AFTER COLLECTION FROM SHAREHOLDERS BASED ON THE ASS ESSMENT DONE BY THE CORPORATION IN RESPECT OF EACH OF THE UNITS. THE INDIVIDUAL UNIT OWNERS SHALL PAY THE ADDITIONAL TAXES, IF ANY DETERMINED BY THE CONCERNED AUTHORITIES IN RESPECT OF THEIR UNITS . 23. BUILDING SHALL REVERT BACK TO THE ORIGINAL LAND LORD I.E. M./S. INDIAN RED )SS SOCIETY AFTER LAPSE OF 85 YEAR S IN TERMS OF LEASE DEED DATED P72002. (AND AS PER LAWS PREVAL ENT AT THAT TIME ) 24. ANY LEASE DEED EXECUTED BY INDIVIDUAL MEMBERS O F THE COMPANY OR UNIT HOLDER SHALL NOT BE BINDING ON THE COMPANY, IF IT IS EXECUTED BEYOND A PERIOD OF 85 YEARS STARTING FR OM 11.07.2002. 25. THE INDIVIDUAL UNIT OWNERS / SHAREHOLDERS SHALL HAND OVER THEIR RESPECTIVE UNITS BACK TO THE COMPANY ON OR BE FORE 11.07.2087. 26. THE INDEPENDENT CAR PARKS (I.E. CAR PARKS NOT A TTACHED WITH ANY UNIT) ALLOTTED TO INDIVIDUAL MEMBERS SHALL NOT BE SOLD TO ANY OTHER PERSON OTHER THAN THE EXISTING MEMBER OF THE COMPANY. 27. THE COMPANY HAS A LIABILITY TO PAY A SUM OF RS. 2,00,000/- EVERY YEAR TO M/S INDIAN RED CROSS SOCIETY AND THIS LIABILITY TO PAY THE RENT HAS BEEN TAKEN OVER BY THE COMPANY ITS ELF AND THE PAGE 13 OF 16 ITA NO.668/BANG/2017 SAME IS NOT COLLECTED FROM THE SHAREHOLDERS. FURTHE R THIS LIABILITY OF RS.2,00,000/- SHALL BE PAID BY THE SHAREHOLDER, TO WHOM UNIT NO.G - 3 HAS BEEN ALLOTTED. THE AMOUNT COLLECTED FO R THIS PARTICULAR UNIT HAS BEEN DISCOUNTED ACCORDINGLY. 19. WE NOTE THAT THERE WAS AN EMBARGO ON ASSESSEE T O SELL THEIR UNITS AS IT EMANATES FROM THERE SCHEME ADOPTE D BY THE COMPANY. AUTHORITIES BELOW HAVE DISPUTED OR DOUBTE D THE SCHEME OF COMPANY UNDER WHICH THE ASSESSEE COULD ON LY TRANSFER THE SHARES AND OR DEPOSITS HELD IN THE CO MPANY WHICH IS SUBJECT TO FULFILMENT OF CERTAIN CONDITION S. 20. WE HAVE PERUSED DECISION OF HONBLE ALLAHABAD H IGH COURT RELIED UPON BY LD.CIR.DR. FACT IN THAT CASE WAS THAT ASSESSEE THEREIN HAD TRANSFERRED A LAND OF WHICH HE WAS AN UNAUTHORIZED OCCUPANT IN VIEW OF SEC.2 OF TRANSFER OF PROPERTY ACT 1882. ASSESSEE COULD NOT HOLD THE LAN D AS A PART OF CAPITAL ASSET AND THEREFORE ASSESSEE THER EIN HAD DISCLOSED THE VALUE OF LAND TO BE NIL IN BOOKS OF ACCOUNT. THEREAFTER ASSESSEE ON SUBSTANTIAL LAPSE OF TIME, P OSSESSED THE LAND WITH EXECUTION OF FEEHOLD DEED. HONBLE C OURT ALSO NOTED THAT THE MARKET VALUE OF THE LAND WAS DETERMI NED BASED ON CONVERSION CHARGES PAID AND THAT ASSESSEE HAD NOTHING ON RECORD TO SHOW THAT FREE HOLD CONVERSATI ON WERE FOUNDED ON MARKET VALUE OF THE LAND AT THE TIME OF EXECUTION OF SUCH CONVERSION DEED. HONBLE COURT UNDER SUCH CIRCUMSTANCE HELD APPLICABILITY OF SEC.50C. 21. THERE IS NOTHING ON RECORD TO SUBSTANTIATE THE ALLEGATION OF INTENTION TO AVOID TAX IN THE GUISE OF TRANSFER OF SHARES. LD.CIT(A) ON ONE HAND HOLDS THAT THERE WAS NO TRANSFER OF CAPITAL ASSET, WHEREAS ON THE OTHER HAND, REFERS TO DVO REPORT TO ALLEGE TAX AVOIDANCE BY PAGE 14 OF 16 ITA NO.668/BANG/2017 ASSESSEE. LD.CIT(A) ONCE REJECTED APPLICATION OF S EC.50C CANNOT RELY ON DVO REPORT TO HOLD THAT ASSESSEE ADO PTED A COLOURABLE DEVICE TO AVOID TAX. FACTS IN PRESENT C ASE ARE DIFFERENT AS COMPARED TO FACTS CONSIDERED BY HONBL E ALLAHABAD HIGH COURT. IN OUR VIEW, ASSESEE CANNOT BLOW HOT AND COLD AT THE SAME TIME. THERE IS NO DOCUMENTARY EVIDENCE BROUGHT ON RECORD BY AUTHORITIES BELOW TO ESTABLISH SUCH ALLEGATION. 22. WE NOTE THAT INDIVIDUAL MEMBERS CANNOT ENJOY TH E UNITS ALLOTTED IN RESPECT OF SHARES AND DEPOSITS HE LD WITH THE COMPANY BEYOND A PERIOD OF 85 YEARS STARTING FROM 11/07/2002. WE ALSO NOTE THAT NUMBER OF UNITS HELD BY A PARTICULAR MEMBER IS PROPORTIONATE WITH 12 TIMES TH E FACE VALUE OF SHARES AS SECURITY DEPOSIT IN ORDER TO GET ENTITLEMENT OF ENJOYMENT OF THE UNIT TO BE ALLOTTED . FURTHER CLAUSE 11 OF THE SCHEME ALLOWS A MEMBER TO SELL OR DISPOSE OF HIS/HER SHARES ALONG WITH DEPOSITS SUBJECT TO PA YMENT OF FULL AMOUNT DUE TO THE COMPANY TOWARDS SHARES/OR DE POSIT IN ACCORDANCE WITH THE RULES AND REGULATIONS SUBJEC T TO ARTICLES OF ASSOCIATION OF THE COMPANY. ACCORDINGLY GROUNDS RAISED BY ASSESSEE STANDS ALLOW ED. IN THE RESULT, APPEAL FILED BY ASSESEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUG, 2020. SD/- SD/- (A.K GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 28 TH AUG, 2020. /VMS/ PAGE 15 OF 16 ITA NO.668/BANG/2017 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL. BANGALORE