JT CIT (OSD) 4(3), MUMBAI V. NEW PIECE GOODS BAZAR CO. LTD, MUMBAI

ITA 6983/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3495 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Assessee Lawyers: S S BANSAL
• Keywords: Capital asset
• Section: 143(3); 2(14)

Judgement Text

1 ITA 6983/MUM/2012 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBETR) I.T.A. NO.6983/MUM/2012 (ASSESSMENT YEAR : 2009-2010) JOINT CIT (OSD)-4(3) MUMBAI VS M/S NEW PIECE GOODS BAZAR CO LTD, 2 ND FLOOR, OFFICE GALLY, M.J. MARKET, KALBADEVI ROAD, MUMBAI-2 PAN : AABCC7515L PAN : AAC6T1770F (APPELLANT) (RESPONDENT) APPLICANT BY SMT. BHARTI SINGH RESPONDENT BY SHRI S.S. BANSAL DATE OF HEARING : 18-05-2016 DATE OF PRONOUNCEMENT : 25-05-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-8, MUMBAI [HER EINAFTER REFERRED TO AS THE CIT(A)] DATED 27-09-2012 FOR THE ASSESSMENT YE AR 2009-10 AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 12-12-2011 BY THE ASSESSING OFFICER ON THE FOLLOWING GROUNDS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS PREMIUM OF 2 ITA 6983/MUM/2012 RS.1,15,50,OOO /- RECEIVED BY THE APPELLANT COMPANY ON TRANSFER OF TENANCY RIGHT OF THE SHOPS FROM ONE TENANT TO ANOTH ER AS CAPITAL GAINS AND ALLOWED DEDUCTION U/S 54EC OF THE ACT. 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSE QUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED.' 2. DURING THE COURSE OF HEARING ARGUMENTS WERE MAD E BY SM. BHARTI SINGH ON BEHALF OF THE DEPARTMENT AND SHRI S.S. BANSAL, O N BEHALF OF THE ASSESSEE. 3. THE ONLY EFFECTIVE ISSUE RAISED BY THE REVENUE I S THAT PREMIUM RECEIVED BY THE ASSESSEE COMPANY ON TRANSFER OF TENANCY RIGH TS OF THE SHOPS FROM ONE TENANT TO ANOTHER SHOULD BE TREATED AS INCOME FROM OTHER SOURCES AND NOT AS CAPITAL GAINS AS CLAIMED BY THE ASSESSEE AND ALLOWE D BY THE LD.CIT(A) AND HAS ALSO AGITATED THE ACTION OF THE LD.CIT(A) IN ALLOWI NG DEDUCTION U/S 54EC OF THE ACT. 4. DURING THE COURSE OF HEARING, THE LD.DR VEHEMENT LY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND, ON THE OTHER HA ND, THE LD. COUNSEL OF THE ASSESSEE RELIED UPON THE DETAILED FINDINGS OF THE L D.CIT(A). 5. WE HAVE CONSIDERED THE ORDERS OF LOWER AUTHORITI ES AND FACTS BROUGHT BEFORE US. THE BASIC ISSUE INVOLVED HEREIN IS ABOU T THE CHARACTERIZATION OF THE NATURE OF AMOUNT OF PREMIUM RECEIVED BY THE ASSESSE E ON ACCOUNT OF TRANSFER OF TENANCY RIGHTS FROM ONE TENANT TO ANOTHER. THE ASSESSEE TREATED THE SAID AMOUNT AS INCOME FROM CAPITAL GAINS BUT AS PER ASSE SSING OFFICER THE SAME WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SO URCES. THE ASSESSING OFFICER HELD THAT FOR THE INCOME TO BE TAXED AS CAP ITAL GAIN THERE HAS TO BE 3 ITA 6983/MUM/2012 CAPITAL ASSET AND THERE SHOULD BE TRANSFER OF CAPIT AL ASSET RESULTING INTO CHANGE IN THE OWNERSHIP OF THE IMPUGNED ASSET. IT WAS HEL D BY THE ASSESSING OFFICER THAT ASSESSEE WAS OWNER OF THE SHOPS (IMPUGNED ASS ETS), AND THAT THE OLD TENANTS HAD TRANSFERRED THE TENANCY RIGHTS IN FAVOU R OF THE NEW TENANTS (ALONG WITH RIGHTS OF POSSESSION), BUT THE ASSESSEE REMAIN ED THE OWNER OF THESE SHOPS AS IT WAS AND CONSEQUENTLY, THERE WAS NO TRANSFER O F CAPITAL ASSET, BEING SHOPS. EVEN AFTER THE TRANSFER OF TENANCY RIGHTS, THE ASSE SSEE CONTINUED TO REMAIN OWNER OF THESE SHOPS. IT WAS FURTHER HELD BY THE A SSESSING OFFICER THAT UNDISPUTEDLY, THE TRANSFER OF TENANCY RIGHTS RESULT ED INTO CAPITAL GAIN. BUT THE RESULTANT GAIN COULD NOT BE TAXED AS CAPITAL GAIN I N THE HANDS OF THE ASSESSEE. SINCE AS PER ASSESSING OFFICER, THE RESULTANT CAPIT AL GAINS WOULD BE TAXABLE IN THE HANDS OF OUTGOING TENANTS, BUT THE AMOUNT RECEI VED BY THE ASSESSEE AS PREMIUM SHOULD BE TAXABLE IN THE HANDS OF ASSESSEE AS INCOME FROM OTHER SOURCES AND NOT AS CAPITAL GAINS. RESULTANTLY, T HE ASSESSING OFFICER ALSO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/ S 54EC. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD.CIT(A) WHEREIN DETA ILED SUBMISSIONS WERE FILED. IT WAS INTER-ALIA SUBMITTED BY THE ASSESSEE THAT IN EARLIER AND SUBS EQUENT YEARS ALSO SIMILAR AMOUNT WAS RECEIVED FROM OTHER PROPERT IES WHICH WAS OFFERED TO TAX UNDER THE HEAD CAPITAL GAINS AND THE SAME WAS ACCEPTED BY THE INCOME- TAX DEPARTMENT. IT WAS FURTHER SUBMITTED BY THE AS SESSEE THAT TENANCY RIGHT WAS UNDOUBTEDLY CAPITAL ASSET UNDER THE LAW AND, TH EREFORE, ANY GAIN ARISING FROM THE TRANSFER OF THE SAME HAS TO BE ASSESSED UN DER THE HEAD CAPITAL GAINS. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND ACCEPTED THE SAME AND ALLOWED THE CLAIM OF THE ASSESSEE BY H OLDING THAT THE IMPUGNED INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOME FR OM CAPITAL GAINS. RELEVANT OBSERVATIONS OF LD.CIT(A) ARE REPRODUCED B ELOW: 4 ITA 6983/MUM/2012 2.13 I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLANT WAS OWNER OF SHOPS IN CLOTH MARKET. THERE WERE SEVERAL SHOPS IN THE CLOTH MARKET. THE SHOPS IN THE SAID CLOTH MARKET WERE GIVEN ON RENT T O DIFFERENT TENANTS. EVERY YEAR SOME TENANTS WERE TRANSFERRING THE POSSE SSION OF SHOPS TO THE NEW TENANTS BUT ONLY WITH THE CONSENT OF THE APPELL ANT BEING OWNER OF THE SAID SHOPS. IN LIEU OF GIVING ITS CONSENT (BEIN G OWNER) TO THE TRANSFER OF POSSESSION OF SAID SHOPS FROM OLD TENANTS TO THE NEW TENANTS, THE APPELLANT WAS RECEIVING CERTAIN PREMIUM FROM THE OL D TENANT. IN EARLIER YEARS, THE RECEIPT OF SAID PREMIUM BY THE APPELLANT WAS SHOWN BY APPELLANT UNDER THE HEAD 'CAPITAL GAINS'. DURING TH E YEAR ALSO CERTAIN OLD TENANTS TRANSFERRED THEIR POSSESSORY RIGHTS OF THE RENTED SHOPS TO THE NEW TENANTS WITH THE CONSENT OF THE APPELLANT. IN L IEU OF GIVING SUCH CONSENT FOR SUCH TRANSFER OF POSSESSORY RIGHTS, THE APPELLANT RECEIVED PREMIUM OF RS. 1,15,50,000/- FROM THE OLD TENANTS. 2.14 THE QUESTION FOR CONSIDERATION IS AS TO WHETHE R SUCH PREMIUM RECEIVED AT RS.1,15,50,OOO/- WAS ASSESSABLE IN THE HANDS OF THE APPELLANT UNDER THE HEAD 'CAPITAL GAINS' AS SHOWN B Y THE APPELLANT OR UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AS HELD BY THE ASSESSING OFFICER. THE CONSEQUENTIAL QUESTION IS AS TO WHETHE R THE RECEIPT OF PREMIUM OF RS. 1,15,50,000/- WAS ON ACCOUNT OF TRAN SFER OF CERTAIN CAPITAL ASSET OR RECEIPT WITHOUT TRANSFER OF CAPIT AL ASSET. IN CASE THE SAID PREMIUM WAS RECEIVED ON ACCOUNT OF TRANSFER OF CAPI TAL ASSET, THE RESULTANT INCOME IS REQUIRED TO BE ASSESSED AS CAPI TAL GAINS. 2.15 AS EXPLAINED ABOVE, THE APPELLANT WAS OWNER OF THE SHOPS. SUCH SHOPS WERE CAPITAL ASSET IN THE HANDS OF THE COMPAN Y. HOWEVER, THERE WAS NO TRANSFER OF OWNERSHIP OF THE SAID SHOPS. THU S, EVEN AFTER CHANGE OF TENANTS, THE APPELLANT REMAINED AS OWNER OF THE ASSET I.E. THE SHOPS. IN THE FACTS AND CIRCUMSTANCES, THE QUESTION IS AS TO WHETHER WHAT WAS THE CAPITAL ASSET TRANSFERRED BY THE APPELLANT GIVI NG RISE TO EARNING PREMIUM OF RS. 1,15,50,000/- CONSEQUENTLY GIVING RI SE TO CAPITAL GAINS. IT HAS BEEN DISCUSSED AND EXPLAINED IN THE DECISIONS O F COURTS AND TRIBUNALS THAT A 'RIGHT' IS A BUNDLE OF BENEFITS EMBEDDED IN SOME ASSET OR INDEPENDENT THEREOF. SIMILARLY, THE CAPITAL ASSETS, AS DEFINED IN SECTION 2(14) OF THE ACT MEANS PROPERTY OF ANY KIND HELD BY THE ASSESSEE. PROPERTY CAN BE TANGIBLE OR INTANGIBLE. THUS A RIGH T WHETHER OR NOT ATTACHED TO ANY ASSET IS ALSO A PROPERTY. IN THE CA SE UNDER CONSIDERATION, THE APPELLANT HAS EXPLAINED THAT THE OLD TENANT COU LD TRANSFER THE POSSESSORY RIGHTS OF THE RENTED SHOPS BUT ONLY WITH THE CONSENT OF THE 5 ITA 6983/MUM/2012 APPELLANT OWNER. THUS, THE OLD TENANT COULD NOT TRA NSFER POSSESSION OF SHOP TO NEW TENANTS WITHOUT APPELLANT'S CONSENT. IN THE FACTS AND CIRCUMSTANCES, SUCH RIGHT OF CONSENT WAS A PROPERTY IN THE HANDS OF THE APPELLANT. SINCE THIS RIGHT OR PROPERTY WAS CONNECT ED TO THE CAPITAL ASSET I.E. SHOPS, THEREFORE, SUCH RIGHT OF CONSENT WAS AL SO A CAPITA! ASSET IN THE HANDS OF THE APPELLANT COMPANY. THIS WAS MORE OR LE SS SIMILAR TO 'TENANCY RIQHT' WHICH IS CAPITAL ASSET. THUS, ON TR ANSFER OF SUCH CAPITAL ASSET I.E. GIVING CONSENT TO CHANGE IN (HE POSSESSI ON OF RENTED PREMISES FROM OLD TENANT TO A NEW TENANT, THE PREMIUM RECEIV ED ASSESSING OFFICER IS, THEREFORE, DIRECTED TO ASSESS SUCH PREMIUM AS CAPITAL GAINS AND ALLOW DEDUCTION U/S 54EC OF THE A CT. THESE GROUNDS OF APPEAL ARE, THEREFORE, ALLOWED. 6. WE HAVE GONE THROUGH THE FINDINGS OF LD.CIT(A). WE AGREE WITH THE OBSERVATIONS OF THE LD.CIT(A) THAT DURING THE COURS E OF TIME THE ASSESSEE ACQUIRED BUNDLE OF RIGHTS WITH RESPECT TO THE IMPUG NED SHOPS. THESE RIGHTS INCLUDE INTER-ALIA , RIGHTS OF POSSESSION IN TENANCY. AS PER SECTION 2(14) CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY AN ASSESS EE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION. A PERUS AL OF THIS DEFINITION SHOWS THAT THE LEGISLATURE HAS INTENDED TO DEFINE THE TER M CAPITAL ASSET IN THE WIDEST POSSIBLE MANNER. THIS DEFINITION HAS BEEN C URTAILED TO THE EXTENT OF EXCLUSIONS GIVEN IN SECTION 2(14) ITSELF WHICH INCL UDE STOCK-IN-TRADE AND PERSONAL EFFECTS. THE IMPUGNED ASSET DOES NOT CLEA RLY FALL IN THE AFORESAID EXCLUSIONS GIVEN IN SECTION 2(14). THE BUNDLE OF R IGHTS ACQUIRED BY THE ASSESSEE IS UNDOUBTEDLY VALUABLE IN TERMS OF MONEY. IN OUR VIEW, THE SAID TENANCY RIGHTS SHALL FORM PART OF A CAPITAL ASSET I N THE HANDS OF THE ASSESSEE AND, THEREFORE, ANY GAINS ARISING THERE FROM WOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM CAPITAL GAINS ELIGIBLE FOR DEDUC TION U/S 54EC OF THE ACT. UNDER THESE CIRCUMSTANCES, WE FIND THAT THE FINDING S OF THE LD.CIT(A) ARE WELL REASONED AND IN ACCORDANCE WITH LAW AND FACTS AND D O NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, THE ORDER OF LD.CIT(A) IS UPHELD. 6 ITA 6983/MUM/2012 7. AS A RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON25TH MAY, 2016. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 25 TH MAY, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ,B, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES