SUNIL O MANAKTALA, MUMBAI V. ASST CIT 19(3), MUMBAI

ITA 72/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0844 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI
• Keywords: Capital asset; Business income; Salary income; Earning of tax free income; Cost of acquisition
• Section: 234B; 14A

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI RAJENDRA, AM .. , , ./ I.T.A. NO. 72 /MUM/2012 ( / ASSESSMENT YEAR : 2008-09 MR. SUNIL O MANAKTALA, C/O KUMAR METAL INDUSTRIES, 101, KAKAD BHAVAN, 30 TH ROAD, BANDRA (W), MUMBAI 400 050. / VS. ASSISTANT COMMISSIONER OF INCOME TAX 19(3), MUMBAI. ./ PAN : AACPM3589L ( / APPELLANT ) .. ( ! / RESPONDENT ) A PPELLANT BY SHRI S.C. TIWARI R E SPONDENT BY : SHRI CHANDRA VIJAY ' # $ % & ' / DATE OF HEARING : 23-07-2015 ()*+ % & ' / DATE OF PRONOUNCEMENT : 31-07-2015 [ , / O R D E R PER A.D. JAIN, J.M . : .. , IN THIS ASSESSEES APPEAL FOR A.Y. 2005-06, THE FOL LOWING GROUNDS HAVE BEEN TAKEN:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREI NAFTER LEARNED CIT (A)) HAS ERRED IN TREATING THE NET AMOUNT OF RS.18, 62,501/- BEING THE AMOUNT RECEIVED FROM THE DEVELOPERS FOR AGREEING TO THE REDEVELOPMENT, FOR ALLEVIATING HARDSHIP OF SHIFTING/RESHIFTING AND AGREEING TO SHARE THE COMMON AREA WITH MORE PERSONS AFTER REDEVELOPMENT; AS INCOME FROM OTHER SOURCES. ITA 72/M/12 2 2. UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT FOLLOWING THE JUDI CIAL PRONOUNCEMENTS CITED BY THE APPELLANT. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING APPLICABILIT Y OF THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE ACT. 4. UNDER THE FACTS AND-CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE CHARGEAB ILITY OF THE INTEREST UNDER THE PROVISIONS OF SECTION 234A, 234B AND 234C OF THE ACT. 2. APROPOS, GROUND NOS. 1 & 2, THE FACTS OF THE CAS E ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND PARTNER IN M/S KUMAR METAL IND USTRIES AND M/S INDIAN CRANKSHAFT INDUSTRIES. DURING THE YEAR, THE ASSESSE ES TOTAL INCOME CONSISTED OF SALARY INCOME, INCOME FROM BUSINESS, CAPITAL GAI NS AND INCOME FROM OTHER SOURCES. THE ASSESSEE WAS A MEMBER OF ARYAVARTA CO- OPERATIVE HOUSING SOCIETY. THE ASSESSEE OWNED A FLAT NO.5 AT SECOND F LOOR, BEING A MEMBER OF THE SAID SOCIETY AT 'OM SADAN', PLOT NO.279, 36 TH ROAD, BANDRA(W), MUMBAI- 50, MEASURING 562.66 CARPET AREA (600 SQ.FT. BUILT- UP AREA). THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH A DEVELOPER, M/S EKT A SUPREME CORPORATION, VIDE AGREEMENT DATED 28/03/2007, WHICH WAS REGISTER ED ON 02/04/2007, FOR REDEVELOPMENT OF THE SOCIETY BUILDING NAMED 'OM SAD AN. AS PER CLAUSES H &. I OF THE SAID AGREEMENT, THE BUILDER HAD BEEN GIVEN PERMISSION FOR DEVELOPING THE SAID SOCIETY BY UTILIZING THE ADDITIONAL FSI/TD R AVAILABLE. THE SOCIETY RESERVED THE RIGHT TO THE EXTENT OF 8440 SQ.FT CARP ET AREA OUT OF THE TOTAL AREA OF THE SOCIETY TO BE CONSTRUCTED BY THE SOCIETY. AS PER CLAUSE 7 OF THE SAID AGREEMENT, THE DEVELOPER HAD TO PAY TO THE SOCIETY RS.5 LAKHS. FURTHER, AS PER CLAUSE 5 OF THE SAID AGREEMENT, THE DEVELOPER AGREE D TO PAY TO THE MEMBERS OF THE SOCIETY, AN AGGREGATE CONSIDERATION OF RS.2,45, 00,000/- AND THE SAME WAS PAID DURING THE FINANCIAL YEAR 2007O8. 3. THE ASSESSEE WAS ENTITLED TO RECEIVE AN AMOUNT O F RS.30,62,501/- ON THE EXECUTION OF THE SAID AGREEMENT. THE ASSESSEE R ECEIVED THE AMOUNT FROM THE DEVELOPER IN THE F.Y. 2007-08. THE SAID AMOUNT WAS CREDITED TO THE ITA 72/M/12 3 CAPITAL ACCOUNT, BUT NOT OFFERED FOR TAXATION IN TH E RETURN OF INCOME FILED BY THE ASSESSEE. ACCORDING TO THE A.O., UNDER THE I.T. ACT, IF A PARTICULAR RECEIPT IS NOT TAXABLE UNDER A PARTICULAR HEAD OF INCOME, I T DOES NOT MEAN THAT THE RECEIPT IS EXEMPT FROM TAX, UNLESS IT IS SPECIFICAL LY STATED TO HAVE BEEN EXEMPT FROM TAX. THE A.O. TAXED ONLY RS. 18,62,501/-, BEIN G THE DIFFERENCE OF COMPENSATION RECEIVED (RS. 30,62,501/-) AND THE COM PENSATION AND BROKERAGE PAID FOR ALTERNATE ACCOMMODATION, OF RS. 12 LAKHS. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE A.O.S ACTION. 4. BEFORE US, AT THE OUTSET, THE LD. COUNSEL FOR TH E ASSESSEE HAS CONTENDED THAT THE ISSUE NOW STANDS SETTLED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING CASE LAWS:- 1. PARANUGRAHA CO-OP. HSG. SOC. LTD. VS. ACIT -(201 4) 39 CCH 042 MUM TRIB. 2. ACIT V. IGE INDIA LTD. -(2013) 22 ITR(TRIB) 3 65(MUM) 3. LAND BREEZ CO.OPERATIVE HOUSING SOCIETY -(2013) 21 ITR(TRIB) 467 (MUM) LTD. VS. ITO 4. NEW SHAILAJA CO-OPERATIVE HOUSING SOCIETY -(2009) 121 TTJ (MUM) 62 LTD. VS. ITO 5. MAHESHWAR PRAKASH -2 CO-OPERATIVE -(2009) 121 T TJ (MUM)641 HOUSING SOCIETY LTD. VS. ITO 6. JETHALAL D. MEHTA VS. DCIT -(2005) 2 SOT 422(MUM) 5. THE LD. D.R., ON THE OTHER HAND, HAS PLACED STRO NG RELIANCE ON THE IMPUGNED ORDER. 6. IN PARANUGRAHA CO-OP. HOUSING SOCIETY LTD. (SU PRA), IT HAS BEEN HELD THAT THE TDR IS EMBEDDED IN THE LAND FOR THE PURPOS ES OF ADDITION MADE BY THE OWNER OR LESSEE; THAT THIS TDR, IN THE FORM OF ADDITIONAL FSI, IS NEGOTIABLE BY THE OWNER TO THE BUYER/DEVELOPER, ONLY FOR PROSP ECTIVE DEVELOPMENT; THAT THERE IS NO ELEMENT OF COST TO THE OWNER AND NO CAP ITAL GAIN IS EXIGIBLE. THE OTHER DECISIONS RELIED ON BY THE ASSESSEE ARE TO TH E SAME EFFECT. THEY HAVE BEEN RENDERED BY CO-ORDINATE BENCHES OF THE MUMBAI TRIBUNAL. ITA 72/M/12 4 7. THEREFORE, THERE IS MERIT IN THE CONTENTION OF T HE ASSESSEE, THAT THE HARDSHIP COMPENSATION RECEIVED WAS DUE TO THE PROBL EM FACED BY THE ASSESSEE ON ACCOUNT OF DEMOLITION OF THE BUILDING A ND THIS RECEIPT IS, THEREFORE, NOT A TAXABLE CAPITAL GAIN, THERE BEING NOT TRANSFER OF ANY CAPITAL ASSET INVOLVED AND NO COST OF ACQUISITION HAVING BE EN INCURRED. 8. IN KEEPING WITH PARANUGRAHA CO. OP. HOUSING SOC IETY LTD. (SUPRA), AND ALSO THE OTHER CASE LAWS CITED BY THE ASSESSEE, THIS CONTENTION OF THE ASSESSEE IS ACCEPTED. THE ORDER OF THE LD. CIT(A) IS CANCELLED. GROUND NOS. 1 & 2 ARE ACCEPTED. 9. SO FAR AS REGARDS GROUND NO. 3, THE A.O. NOTED T HAT IN THE COMPUTATION OF THE TOTAL INCOME, THE ASSESSEE HAD SHOWN INVESTM ENT IN SHARES AND MUTUAL FUNDS. THE INTEREST AND DIVIDEND INCOME WERE CLAIM ED AS EXEMPT. HOWEVER, NO DISALLOWANCE WAS MADE U/S 14A OF THE ACT. THE A .O. DISALLOWED A SUM OF RS. 1,27,465/- AS PER RULE 8D OF THE INCOME TAX RUL ES, 1962. THE LD. CIT(A) CONFIRMED THE A.O.S ACTION. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE AUTHORITIES BELOW HAVE WRONGLY APPLIED RULE 8D OF THE RULES WIT HOUT POINTING OUT ANY ITEM OF EXPENDITURE AS HAVING BEEN INCURRED BY THE ASSESSEE TO EARN EXEMPT INCOME. 11. HE HAS SOUGHT TO PLACE RELIANCE ON THE FOLLOWIN G DECISIONS:- 1. CIT V. K. RAHEJA CORP. P. LTD. ITA NO. 1260 OF 20 09(BOM.HC) 2. CIT V. HERO CYCLES LTD. (2010)232 ITR 518(P&H) 3. JUSTICE SAM P BHARUCHA V. ACIT (2012) 53 SOT 39 (MUM)(URO) 4. CANARA BANK V. ACIT (2014) 99 CCH 291 (KAR.HC) 12. T HE LD. D.R. HAS, AGAIN, PLACED RELIANCE ON THE ORDE R UNDER APPEAL. ITA 72/M/12 5 13. THE MATTER STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. K. REHEJA CORPORATION P. LIMITED, VIDE ORDER DATED 8-9-2011, PASSED IN ITA NO. 1260 OF 2009 (COPY AT PAGE 52-54 OF THE CASE LAWS COMPILATI ON II FILED BY THE ASSESSEE). THEREIN, THE HONBLE JURISDICTIONAL HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL, WHEREBY THE DELETION OF DISALLOWAN CE OF INTEREST MADE U/S 14A OF THE ACT, IN THE ABSENCE OF ANY MATERIAL OR B ASIS TO HOLD THAT THE INTEREST EXPENDITURE DIRECTLY OR INDIRECTLY WAS ATT RIBUTABLE FOR EARNING DIVIDEND INCOME, WAS UPHELD. 14. IN CIT VS. HERO CYCLES LTD., 23 ITR 518 (P&H) , IT WAS HELD, INTER ALIA, THAT THE CONTENTION OF THE REVENUE THAT DIRECT OR I NDIRECT SUM OF EXPENDITURE IS ALWAYS INCURRED WHICH MUST BE DISALLOWED U/S 14A AND THE IMPACT OF EXPENDITURE SO INCURRED CANNOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SECTION 14A , COULD NOT BE ACCEPTED; AND THAT DISALLOWANCE U/S 14A REQUIRES A FINDING OF INCURRENCE OF EXPENDITURE AND WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INC OME, NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE U/S 14A CANNOT STAND. 15. IN VIEW OF ABOVE, HERE ALSO, THE GRIEVANCE OF T HE ASSESSEE IS JUSTIFIED. ACCORDINGLY, GROUND NO. 3 IS ALSO ACCEPTED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2015. , % ()*+ ' -. / 0 31-7-2015 ) % 1$ SD/- SD/- (RAJENDRA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER - ' =$ MUMBAI ; / DATED 31-07-2015 [ ITA 72/M/12 6 #.../ R.K. R.K. R.K. R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. ' E& () / THE CIT(A)- 30, MUMBAI 4. ' E& / CIT- CITY - 19, MUMBAI 5. H#I 1 &JK , ' JK+ , - ' =$ / DR, ITAT, MUMBAI E BENCH 6. 1 L M $ / GUARD FILE. ! ( / BY ORDER, ! H& & //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , - ' =$ / ITAT, MUMBAI