ACIT 16(2), MUMBAI V. LAKSHMI MANI AYER, MUMBAI

ITA 6710/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3395 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MORYA PRATAP
• Assessee Lawyers: RAVIKANT S PATH AK
• Keywords: Diversion of income; Cost of acquisition; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 6710/MUM/2014 ASSESSMENT YEAR: 2011-12 THE ACIT 16(2), 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI- 400007. VS. MS. L AKSHMI MANI AYER, L-1, BREACH CANDY APTS., 12 TH FLOOR, BHULABHAI DESAI ROAD, MUMBAI- 4000007. PAN:-AABPA7143B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. MORYA PRATAP RESPONDENT BY : SHRI. RAVIKANT S.PATHAK DATE OF HEARING: 3 1/05/2016 DATE OF PRONOUNCEMENT: 03/06/20 16 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST O RDER DATED 07/08/2014 PASSED BY THE LD. CIT(APPEALS)-27, MUMBA I, FOR THE ASST. YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2011-12 ON 31/08/2012 DECLARING THE TOTAL INCOME OF RS.68,89,620/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT). AFTER SCRUTINY THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF T HE ASSESSEE AT RS. 1,02,53,860/- MAKING ADDITION OF RS. 32,64,242/- RE CEIVED FROM M/S K.S. AIYER & CO. UNDER THE HEAD INCOME FROM OTHER SOURCES. T HE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE LD. CIT (A) FOLLOWING THE DECISIONS 2 ITA NO. 6710/MUM/2014 ASSESSMENT YEAR: 2011-12 RENDERED BY THE ITAT, MUMBAI IN ASSESSEES OWN CASE S AND THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN PADMARAJE R KADAMBA NDE VS CIT (1992) 195 ITR877 ALLOWED THE MAIN GROUND OF APPEAL OF THE ASS ESSEE. 3. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AG AINST THE SAID ORDER ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A .O. WITHOUT APPRECIATING THAT THE FIRM DOES NOT HAVE ANY CONTRO L OVER THE CHARGE CREATED BY THE PARTNERSHIP DEED ON THE GROSS PROFIT OF THE FIRM IN FAVOUR OF THE SPOUSE/HEIRS OF THE DECEASED PARTNERS WHICH WOULD CONSTITUTE DIVERSION OF INCOME BY WAY OF OVERRIDIN G TITLE WHICH WILL CONSTITUTE REVENUE RECEIPT COMING WITHIN THE MEANIN G OF SEC. 28(IV) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A .O. WITHOUT APPRECIATING THAT THE PATNA HIGH COURT JUDGMENT IN THE CASE OF JAYA BHASKRAN 168 ITR 256 RELIED ON BY THE ASSESS, IS DI STINGUISHABLE FROM THE FACTS OF THE INSTANT CASE, INASMUCH AS CHA RGE BY THE SPOUSE/HEIR OF THE DECEASED PARTNER IS ON THE GROSS PROFIT AND NOT ON THE NET PROFIT OF THE FIRM. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A .O. WITHOUT APPRECIATING THAT THE PAYMENTS MADE BY THE FIRM TO THE SPOUSE/HEIRS OF THE DECEASED PARTNERS CAN ALTERNATI VELY BE TREATED AS A CAPITAL RECEIPT ON WHICH CAPITAL GAINS CAN BE COMPUTED BY 3 ITA NO. 6710/MUM/2014 ASSESSMENT YEAR: 2011-12 TREATING AS A CAPITAL RECEIPT ON WHICH CAPITAL GAIN S CAN BE COMPUTED BY TREATING THE COST OF ACQUISITION AS NIL, BY VIRT UE OF PROVISIONS OF SEC. 55(A)(II) OF THE INCOME-TAX ACT, 1961, AS THE PAYMENTS ARE COMPENSATION IN LIEU OF FOREGOING OF CLAIM ON THE F IRM BY THE SPOUSE/HEIRS OF THE DECEASED PARTNERS, AS THE AMOUN TS PAID ARE IN FULL AND FINAL SETTLEMENT OF THE RIGHTS OF THE DECE ASED PARTNER. 4. THE LD. AR SUBMITTED BEFORE US THAT THE PRESENT CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, MUMBAI, IN ASSESSEES OWN CASE ITA NO. 2436/M/09 FOR THE A.Y. 2005-06, ITA NO. 1416/M/11 F OR THE A.Y. 2006-07 AND ITA NO. 5950 & 5951/M/12 FOR THE A.Y. 2007-08 & 200 9-10. RS. 32,64,242/-, RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION FROM M/S K.S. AIYAR & CO. HAS BEEN REFLECTED IN THE CAPITAL ACCOU NT. THE ASSESSEE HAS NOT INCLUDED THE SAID RECEIPT IN THE TOTAL INCOME OF TH E ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE PATNA HIGH COURT IN CIT VS . JAYA BHASKARAN 168 ITR 256 (PAT). ON THE OTHER HAND, THE LD. DR RELYING U PON THE FINDING OF THE AO, SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) I S ERRONEOUS AN LIABLE TO BE SET ASIDE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO G ONE THROUGH THE MATERIAL PLACED BEFORE US. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITION RS. 32,64,242/MADE BY THE AO, WITHOUT APPRECIATING THE FACT THAT THE FIRM DOES NOT HAVE A NY CONTROL OVER THE CHARGE CREATED BY THE PARTNERSHIP DEED ON THE GROSS PROFIT OF THE FIRM IN FAVOUR OF THE SPOUSE/HEIRS OF THE DECEASED PARTNERS. WE NOTICE T HAT THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ASSESSEES OWN CASE ITA NO.2436/MUM/2009 FOR THE A.Y. 2005-06, DCIT VS. LAXMI MANI AIYAR, BY THE MUMBAI, TRIBUNAL FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN PADMARAJE R KADHAMBANDE VS. CIT (1992) 195 ITR 877 AND 4 ITA NO. 6710/MUM/2014 ASSESSMENT YEAR: 2011-12 THE HONBLE PATNA HIGH COURT IN CIT VS. JAYA BHASKARAN (SUPRA). IN THE AFORESAID CASE THE ONLY ISSUE BEFORE THE TRIBUNAL W AS WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE AFTER THE DEATH OF HER HUS BAND FROM THE FIRM M/S K.S.AIYER & CO., IN WHICH HE WAS A PARTNER, IS A CA PITAL OR REVENUE RECEIPT? THE TRIBUNAL DECIDED THE SAID ISSUE IN FAVOUR OF THE AS SESSEE HOLDING AS UNDER:- IN VIEW OF THE ABOVE JUDGMENTS OF THE HONBLE SUP REME COURT AND ALSO THE JUDGMENT OF THE HONBLE PATNA HIGH COURT IN THE CASE OF JAYA BASKARAN (SUPRA), TAKING INTO CONSIDERATION OF THE FACTS OF THE PRESENT CASE, WE UPHOLD THE ORDER OF CIT (A) IN HOLDING THA T THE AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE CANNOT BE CHARGED TO TAX AS THE SAME ARE IN CAPITAL RECEIPT. 6. THIS DECISION OF THE COORDINATE BENCH WAS FURTH ER FOLLOWED BY THE COORDINATE BENCHES IN THE ASSESSEES OWN CASES ITA NO. 5892 TO 5895/M/09 FOR THE A.YS. 2001-02 TO 2004-05, SOLAR ITA NO. 1416/M/2011FOR TH E A.Y. 2006-07, ITA NO 5950 & 5951/MUM/2012 FOR THE A.Y. 2007-08 & 2009-10 , ITA NO 8270/MUM/2011 FOR THE A.Y. 2008-09 AND ITA NO 6000/ MUM/2013 FOR THE A.Y. 2010-11. 7. THUS CONSISTENT WITH THE VIEW TAKEN ON THE IDEN TICAL ISSUE BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS IN ASSESSEES OWN C ASES, WE UPHOLD THE ORDER OF THE CIT(A) DELETING THE ADDITION IN QUESTION BY TRE ATING IT AS CAPITAL RECEIPT. ACCORDINGLY, GROUND OF APPEAL RAISED BY THE REVENUE STANDS DISMISSED. 8. IN THE RESULT APPEAL FILED BY THE REVENUE FOR T HE A.Y. 2011-12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 03 RD JUNE, 2016. 5 ITA NO. 6710/MUM/2014 ASSESSMENT YEAR: 2011-12 SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 03/06/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA