TALWALKARS FITNESS CLUB, MUMBAI V. ASST CIT 21(2), MUMBAI

ITA 7246/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0645 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 7246/M/2014 ASSESSMENT YEAR: 2011 - 12 M/S. TALWALKARS FITNESS CLUB, PLOT NO.34, SONI HOUSE, GULMOHAR PARK, JVPD JUHU, MUMBAI 400049 PAN: AAAFT 0655L VS. ASSISTANT COMMISSIONER OF INCOME TAX. RANGE - 21(2), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ASHOK J. PATIL, A.R. RE VENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 17.03 .201 5 DATE OF PRONOUNCEMENT : 27.05. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 29.10.2014 OF THE COMMI SSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011 - 12 . 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN ASSESSING THE SHORT - TERM CAPITAL GAINS IN AY 2011 - 12, WHEN THE SAME HAS BEEN OFFERED BY THE APPELLANT IN THE AY 2012 - 13. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME TAX (APPEALS), AO FAILED TO A PPRECIATE THAT 90% OF SALE CONSIDERATION AND POSSESSION WAS HANDED OVER TO THE PURCHASER IN JUNE - 2011, RELEVANT TO AY 2012 - 13. ITA NO.7246/M/2014 M/S. TALWALKARS FITNESS CLUB 2 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL, IN THE ALTERNATIVE IF IT IS HELD THAT THE SHORT - TERM CAPITAL GAINS IS TO BE ASSESSED IN AY 2011 - 12, THEN THE APPELLANT OUGHT TO BE GIVEN SET OFF SHORT - TERM LOSS ON SALE OF FURNITURE & FIXTURES AND ELECTRICAL FITTINGS BEING INSEPARABLE PART OF THE GYMNASIUM PREMISES SOLD AND BROUGHT FORWARD UNABSORBED DEPRECIATION LOSSES. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND AND OR DELETE A NY OF THE ABOVE GROUNDS OF APPEAL. 3. THE SOLE ISSUE RAISED BY THE ASSESSEE THROUGH ITS GROUNDS OF APPEAL IS AS TO WHETHER THE SHORT TERM CAPITAL GAINS EARNED BY THE ASSESSEE FROM THE SALE OF THE IMMO VABLE PROPERTY WERE TO BE TAXED IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2011 - 12 AS AGAINST OFFERED BY THE ASSESSEE IN THE SUBSEQUENT A.Y. 2012 - 13. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) NO TICED THAT THE ASSESSEE HAD DISPOSED OF TWO PREMISES EACH MEASURING 1635 SQ. FT. FOR A TOTAL CONSIDERATION OF RS.4,40,00,000/ - BY WAY OF TWO SEPARATE AGREEMENTS TO S ALE . THE AO OBSERVED THAT THE ASSESSEE HAD NOT OFFERED CAPITAL GAINS ARISING OUT ON SUCH S ALE. ON BEING ASKED TO EXPLAIN, THE ASSESSEE SUBMITTED THAT THOUGH THE AGREEMENT S TO SALE WERE EXECUTED DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR IN QUESTION , H OWEVER, THE ACTUAL SALE TOOK PLACE IN THE SUBSEQUENT YEAR AND THE CAPITAL GAINS WER E ACCORDINGLY OFFERED IN SUB SEQUENT ASSESSMENT YEAR 2012 - 13, WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT ALSO. THE ASSESSEE FURTHER EXPLAINED THAT THE ASSESSEE HAD NOT PARTED WITH THE POSSESSION OF THE PROPERTY IN QUESTION DURING THE YEAR UNDER CONSIDERATIO N. THE AO, HOWEVER, DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE. HE OBSERVED THAT THE PROPERTY WAS TRANSFERRED BY WAY OF TWO REGISTERED SALE AGREEMENTS BOTH EXECUTED ON 14.02.2011 I.E. DURING THE YEAR UNDER CONSIDERATION. THE SAID AGREEMENTS WERE DULY REGISTERED WITH THE STAMP DUTY AUTHORITIES. THE SALE AGREEMENT IN QUESTION WAS NOT REVO K ABLE . THE HANDING OVER OF THE POSSESSION OF THE PROPERTY ON A FUTURE DATE WAS A MERE FORMALITY. ITA NO.7246/M/2014 M/S. TALWALKARS FITNESS CLUB 3 HE THEREFORE HELD THAT THE TRANSFER OF THE PROPERTY TOOK PLACE ON THE DATE OF AGREEMENT AND THUS THE CAPITAL GAINS WERE LIABLE TO BE ASSESSED DURING THE YEAR UNDER CONSIDERATION. 3. IN APPEAL, THE LD. CIT(A), WHILE REFERRING TO THE WORDING OF THE SO ME OF THE CLAUSES OF THE AGREEMENT DATED 14.02.11 , UPHELD THE FINDI NGS OF THE AO THAT THE CAPITAL GAINS ARISING FROM THE SALE OF THE SAID PROPERTY WOULD BE LIABLE TO BE ASSESSED IN THE A.Y. 2011 - 12. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 4. THE LD. A.R. OF THE ASSESSEE HAS TAKEN U S THROUGH THE DIFFERENT CLAUSES OF THE AGREEMENT DATED 14.02.11. HE HAS SUBMITTED THAT THOUGH , THE REFERENCE TO THE PARTIES IN THE AGREEMENT HAS BEEN GIVEN AS VENDORS AND PURCHASERS, HOWEVER, IT WAS AN AGREEMENT TO SELL AND NOT THE SALE DEED ITSEL F. AS PER THE SEPARATE AGREEMENTS , EACH OF THE PROPERTY HAD BEEN AGREED TO BE SOLD FOR A CONSIDERATION OF RS. 2,20,00,000/ - . ONLY A TOKEN AMOUNT OF RS.20,00,000/ - WAS RECEIVED AS ADVANCE. HOWEVER, THE BALANCE CONSIDERATION WAS AGREED TO BE PAID BY 26.05. 11. THE POSSESSION OF THE PROPERTY WAS NOT HANDED OVER TO THE PROSPECTIVE PURCHASERS. HE HAS INVITED OUR ATTENTION IN THIS RESPECT TO CLAUSE 3(II) OF THE AGREEMENT , WHEREIN , IT HAS BEEN PROVIDED THAT THE PURCHASERS WOULD PAY THE BALANCE CONSIDERATION OF RS.2 CRORES TO THE VENDORS OR BEFORE 26.05.11 WHICH WAS SUBJECT TO THE CONDITIONS THAT THE VENDORS (ASSESSEE) W OULD MAKE OUT THEIR TITLE AND ALL OTHER RIGHTS AND INTEREST IN THE SAID PROPERTY AS CLEAR , MARKETABLE AND FREE FROM ALL ENCUMBRANCES , HANDOVER TH E VACANT AND PEACEFUL POSSESSION OF THE PREMISES TO THE SAID PURCHASERS, HANDOVER THE ORIGINAL DOCUMENTS AND DEEDS IN RESPECT OF SAID PREMISES AND WOULD ALSO HAVE TO COMPLY WITH ALL OTHER OBLIGATIONS A S MENTIONED IN THE AGREEMENT, INCLUDING THE CONDITIONS MENTIONED IN THE CLAUSE 4 OF THE AGREEMENT. THEREAFTER IN CLAUSE 4 OF THE AGREEMENT IT HAS BEEN PROVIDED THAT THE ASSESSEE WOULD MAKE OUT ITS TITLE , ITA NO.7246/M/2014 M/S. TALWALKARS FITNESS CLUB 4 RIGHTS AND INTEREST IN THE SAID PREMISES AS CLEAR MARKETABLE AND FREE FROM ALL ENCUMBRANCES WITHIN 30 DAYS FROM THE DATE OF EXECUTION OF THE AGREEMENT AND THEREAFTER ALL OTHER CONDITIONS AS MENTIONED ABOVE HAVE BEEN REITERATED. THEREAFTER OUR ATTENTION HAS BEEN BROUGHT TO THE CLAUSE 8 OF THE AGREEMENT VIDE WHICH IT HAS BEEN AGREED BETWEEN THE PARTIES THAT THE VENDOR WOULD NOT ENTER INTO ANY TYPE OF AGREEMENT OR OTHER TRANSACTION WITH ANY OTHER PERSON. THE LD. A.R. HAS FURTHER BROUGHT OUR ATTENTION TO THE CLAUSE 12 OF THE AGREEMENT WHEREIN IT HAS BEEN MENTIONED THAT THE VENDORS HAVE PAID ALL THE DUE PROPERTY T AXES, MAINTENANCE CHARGES, ELECTRICITY CHARGES, WATER CHARGES ETC. TO THE CONCERNED AUTHORITIES. IT HAS BEEN FURTHER PROVIDED THAT THE VENDORS WOULD CONTINUE TO PAY THE SAID CHARGES AND TAXES TO THE AUTHORITIES TILL THEY HANDOVER THE POSSESSION OF THE SAI D PREMISES TO THE PURCHASERS. THE PURCHASERS WOULD BE LIABLE TO PAY THE DUE TAXES ON THE PROPERTY FROM THE DATE OF TAKING OF THE POSSESSION OF THE PREMISES. VIDE CLAUSE NO.13 OF THE AGREEMENT, IT HAS BEEN AGREED THAT THE PURCHASERS WOULD BE ABLE TO TAKE THE POSSESSION OF THE PROPERTY ON PAYMENT OF THE BALANCE CONSIDERATION. WHILE CLAUSE 15 & 16 ARE THE DEFAULT CLAUSES WHEREIN IT HAS BEEN AGREED THAT IF ANY PARTY FAILS TO COMPLY WITH THE OBLIGATIONS AS AGREED TO VIDE VARIOUS CLAUSES OF THE AGREEMENT, THEN THE DEFAULTING PARTY WILL BE LIABLE TO PAY DAMAGES TO THE TUNE OF RS.25,000/ - PER DAY TO THE OTHER PARTY. VIDE CLAUSE NO.17 OF THE AGREEMENT, IT HAS BEEN AGREED THAT IN THE EVENT OF BREACH OF ANY TERMS AND CONDITIONS OF THE AGREEMENT, THE OTHER PARTY SHA LL HAVE RIGHT OF SPECIFIC PERFORMANCE AGAINST THE DEFAULTING PARTY. SO A PERUSAL OF THE ABOVE CLAUSES REVEALS THAT ON THE DATE OF EXECUTION OF AGREEMENT ONLY AN ADVANCE MONEY OF RS.20 LAKHS WAS RECEIVED BY THE ASSESSEE. THE POSSESSION OF THE PROPERTY WAS NOT PARTED WITH. THE TRANSACTION OF THE SALE WAS NOT COMPLETE. THE SALE TRANSACTION WAS DEFERRED FOR A FUTURE DATE ON THE PAYMENT OF BALANCE CONSIDERATION OF THE AMOUNT OF RS.2 CRORES AND THERAFTER THE POSSESSION WAS TO BE HANDED OVER TO THE PROSPECTIVE PURCHASERS . ITA NO.7246/M/2014 M/S. TALWALKARS FITNESS CLUB 5 THE ASSESSEE CONTINUED TO ENJOY THE POSSESSION OF THE PROPERTY EVEN AFTER THE EXECUTION OF THE AGREEMENT AND WAS LIABLE TO HANDOVER THE POSSESSION ON RECEIPT OF THE BALANCE CONSIDERATION AMOUNT. IT MAY ALSO BE OBSERVED THAT THE ADVANCE RECEI VED BY THE ASSESSEE OF RS.20 LAKH WAS LESS THAN THE 10% OF THE TOTAL CONSIDERATION AMOUNT SETTLED. THE ASSESSEE WAS NOT UNDER OBLIGATION TO HANDOVER THE POSSESSION OF THE PROPERTY TILL THE RECEIPT OF THE BALANCE CONSIDERATION OF THE AMOUNT. THE ASSESSEE WAS LIABLE TO PAY THE DUE TAXES ON THE PROPERTY AND WAS ALSO LIABLE FOR ANY TYPE OF LOSS OR DAMAGE TO THE PROPERTY TILL IT WAS HANDED OVER TO THE PROSPECTIVE PURCHASER AFTER RECEIPT OF BALANCE SALE CONSIDERATION. THE LD. A.R. OF THE ASSESSEE HAS FURTHER B ROUGHT OUR ATTENTION TO THE DOCUMENTS/UNDERTAKING EXECUTED AT THE TIME OF HANDING OVER OF THE POSSESSION/COMPLETION OF THE SALE DEED ON 26.06.11. W HEN WE GO THROUGH THE ENTIRE DOCUMENT ALONG WITH THE ACCOMPANIED AGREEMENT ON WHICH THE DUE STAMP DUTY HAS A LSO BEEN PAID, IT REVEALS THAT THE ASSESSEE/VENDORS CONTINUED TO BE THE OWNERS IN POSSESSION OF THE PROPERTY TILL THE HANDING OVER OF THE POSSESSION OF THE SAID PROPERTY TO THE PURCHASERS ON RECEIPT OF BALANCE CONSIDERATION ON 16.06.11. AT THE TIME OF HAN DING OVER OF THE POSSESSION , IT HAD BEEN CONVEYED THAT THE VENDORS WERE THE SOLE AND ABSOLUTE OWNER OF THE SAID PREMISES AND HAVE PAID OF THE STATUTORY TAXES ETC. RELATABLE TO THE SAID PROPERTY TILL THE HANDING OVER OF THE POSSESSION/COMPLETION OF THE TRAN SACTION ON 16.06.11. AFTER PERUSAL OF THE AGREEMENT TO SALE AND RELEVANT DOCUMENTS , IT CAN BE SAFELY SAID THAT THE DOCUMENT EXECUTED ON 14.02.11 WAS AN AGREEMENT TO SALE WHEREAS THE SALE TRANSACTION WAS COMPLETED ON 16.06.11 AND TILL THEN THE ASSESSEE CON TINUED TO BE THE OWNER IN POSSESSION OF THE PROPERTY. THE ASSESSEE HAS ALREADY OFFERED THE DUE TAXES IN THE SUBSEQUENT YEAR RELEVANT TO THE FINANCIAL YEAR IN WHICH THE SALE DEED WAS COMPLETED AND THE POSSESSION WAS HANDED OVER BY THE ASSESSEE TO THE PURCH ASERS , WHICH HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT. HENCE, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE AO ITA NO.7246/M/2014 M/S. TALWALKARS FITNESS CLUB 6 TO TAX THE ASSESSEE FOR SHORT TERM CAPITAL GAINS FOR THE YEAR UNDER CONSIDERATION. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE LOWER AUTHO RITIES ON THIS ISSUE AND HOLD THAT THE ASSESSEE WAS NOT LIABLE TO PAY ANY CAPITAL GAIN TAX RELATING TO THE PREMISES IN QUESTION FOR THE YEAR UNDER CONSIDERATION. 5. THE ASSESSEE , VIDE GROUND NO.3, HAS RAISED THE ALTERNATIVE CLAIM OF SET OFF OF SHORT TER M LOSSES ON FURNITURE AND FIXTURES ETC. AND THAT OF UNABSORBED DEPRECIATION ETC. SINCE WE HAVE DECIDED THE ISSUE RELATING TO THE TAXABILITY OF CAPITAL GAINS IN FAVOUR OF THE ASSESSEE, HENCE THE ALTERNATIVE GROUND HAS BECOME INFRUCTUOUS. 6. IN THE RESUL T, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05. 201 5 . SD/ - SD/ - ( R.C. SHARMA ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI, DATED: 27.05.2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.