BS Venkatesan, Vellore V. ITO Ward 2, Vellore

ITA 736/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5938 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 28-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V NAGAPRASAD

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.736/CHNY/2018 & '& / ASSESSMENT YEAR : 2010-11 SHRI B.S. VENKATESAN, 15C/1, ABBAI STREET, VELLORE MAIN ROAD, 2 ND STREET, VARADARAKA CHETTIAR SCHOOL, ARCOT, VELLORE 632 503. PAN : AESPV 1633 C V. THE INCOME TAX OFFICER, WARD 2, VELLORE, NO.2, BARRACKS CROSS STREET, OFFICERS LINE, VELLORE 632 001. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI V. NAGAPRASAD, CA +,)* - . / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT / - 0# / DATE OF HEARING : 08.01.2019 12' - 0# / DATE OF PRONOUNCEMENT : 22.01.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -13, CHENN AI, DATED 18.09.2017 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ASSES SMENT OF CAPITAL GAIN. 2 I.T.A. NO.736/CHNY/18 3. SHRI V. NAGAPRASAD, THE LD. REPRESENTATIVE FOR T HE ASSESSEE, SUBMITTED THAT THE FATHER OF THE ASSESSEE SHRI B. S AMBANDA MUDALIAR PURCHASED AN OLD BUILDING USED AS KALYANA MANDAPAM CONSISTING OF 4 GROUNDS IN THE NAME OF THE ASSESSEE AND HIS BROTHER SHRI B.S. MURUGESAN ON 05.12.1979. ON THE DATE OF PURCHASE OF THE PROPERTY, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE AND HIS BROTHER SHRI B.S. MURUGESAN WERE MINORS. THE M INORS HAD NO INDEPENDENT SOURCE OF INCOME. OUT OF THE INCOME OF THE FAMILY, SHRI SAMBANDA MUDALIAR PURCHASED THE PROPERTY IN THE NAM E OF TWO MINOR CHILDREN. THEREFORE, ACCORDING TO THE LD. RE PRESENTATIVE, THE PROPERTY NOW IN QUESTION IS A FAMILY PROPERTY. IN OTHER WORDS, THE PROPERTY BELONGS TO HINDU UNDIVIDED FAMILY OF SHRI SAMBANDA MUDALIAR EVEN THOUGH THE DOCUMENT WAS REGISTERED IN THE NAMES OF MINOR CHILDREN OF SHRI SAMBANDA MUDALIAR. 4. SHRI V. NAGAPRASAD, THE LD. REPRESENTATIVE FOR T HE ASSESSEE, FURTHER SUBMITTED THAT SHRI SAMBANDA MUDALIAR INIT IALLY ENGAGED IN THE BUSINESS OF LEATHER TRADING IN THE NAME AND STY LE OF B.S. LEATHERS. SUBSEQUENTLY, THE PROPRIETORSHIP CONCERN OF B.S. LEATHERS WAS CONVERTED INTO PARTNERSHIP FIRM ON 18. 02.1987. 3 I.T.A. NO.736/CHNY/18 ACCORDING TO THE LD. REPRESENTATIVE, THERE WERE FOU R PARTNERS IN THE PARTNERSHIP FIRM CONSISTING OF SHRI SAMBANDA MUDALI AR AND HIS THREE SONS INCLUDING SHRI B.S. MURUGESAN. ACCORDING TO T HE LD. REPRESENTATIVE, THE PARTNERSHIP FIRM BORROWED LOAN FOR BUSINESS FROM STATE BANK OF INDIA, WALAJAPET BRANCH, MORTGAGING T HE LAND IN QUESTION. SINCE IT IS A FAMILY PROPERTY BELONGING TO HINDU UNDIVIDED FAMILY AND THE ASSESSEE AND HIS BROTHER SHRI B.S. M URUGESAN BEING COPARCENERS OF THE HINDU UNDIVIDED FAMILY, SI GNED THE DOCUMENT FOR MORTGAGE. SUBSEQUENTLY, ACCORDING TO THE LD. REPRESENTATIVE, THE PARTNERSHIP FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY IN THE NAME AND STYLE OF M/S B.S. S HOES PVT. LTD. IN THE YEAR 1995. ACCORDING TO THE LD. REPRESENTAT IVE, THE LOAN GRANTED BY STATE BANK OF INDIA, WALAJAPET BRANCH WA S TRANSFERRED TO THE COMPANY AND THE GUARANTEE AND SECURITIES GIVEN FOR LOAN CONTINUED. IN THE YEAR 1998, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEES FATHER SHRI SAMBANDA MUDALIAR PASSED AWAY. AFTER THE DEATH OF THE ASSESSEES FATHER, THE BUSINESS OF THE COMPANY COULD NOT BE CARRIED ON EFFECTIVELY AND IT SUFFERED CONTINUOUS LOSS. IN THE YEAR 2001, ACCORDING TO THE LD. REPRESENTATI VE, STATE BANK OF INDIA INITIATED PROCEEDING FOR RECOVERY OF OUTSTAND ING AMOUNT. IN 4 I.T.A. NO.736/CHNY/18 FACT, STATE BANK OF INDIA RECALLED THE ENTIRE LOAN WITH INTEREST IN THE YEAR 2003. STATE BANK OF INDIA ALSO APPROACHED DEB T RECOVERY TRIBUNAL TO RECOVER THE OUTSTANDING AMOUNT AND ALSO INVOKED THE PROVISIONS OF SARFAESI ACT TO RECOVER THE BANKS DU E BY TAKING OVER THE POSSESSION OF ALL SECURITIES. IN FACT, AC CORDING TO THE LD. REPRESENTATIVE, ON 28.11.2005, THE STATE BANK OF IN DIA TOOK THE POSSESSION OF THE PROPERTY WHICH IS NOW IN QUESTION . THE TOTAL OUTSTANDING WAS 12.17 CRORES. THE ASSESSEE NEGOTIATED WITH STATE BANK OF INDIA AND THERE WAS MUTUAL SETTLEMENT BETWEEN STATE BANK OF INDIA AND THE COMPANY. ULTIMATELY, ACCORDI NG TO THE LD. REPRESENTATIVE, STATE BANK OF INDIAS LOAN WAS CLEA RED ON PAYMENT OF 6.5 CRORES BY WAY OF ONE TIME SETTLEMENT. THE AMOU NT OF 6.5 CRORES WAS PAID BY FEDERAL BANK LTD. BY TAKING OVER THE LOAN FROM STATE BANK OF INDIA. IN OTHER WORDS, THE LOAN OF S TATE BANK OF INDIA TO THE EXTENT OF 6.5 CRORES WAS TAKEN OVER BY FEDERAL BANK LTD. ON 30.03.2007 AND THE SECURITIES GIVEN BY THE ASSESSEE AND THE BUSINESS CONCERN CONTINUED AS SUCH. 5. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEES BROTHER SHRI B.S. MURUGESAN MET WITH A ROAD ACCIDENT AND DIED ON 29.12.2007. ACCORDING TO THE LD. 5 I.T.A. NO.736/CHNY/18 REPRESENTATIVE, THE BUSINESS OF THE COMPANY COULD N OT PICK UP AND IT SUFFERED A HEAVY LOSS. THE LOAN SANCTIONED BY FEDE RAL BANK LTD. TO THE EXTENT OF 6.5 CRORES HAD COME TO THE EXTENT OF 10 CRORES AND FEDERAL BANK LTD. ALSO INITIATED RECOVERY PROCEEDIN G BY INVOKING PROVISIONS OF SARFAESI ACT. SINCE THE ASSESSEE COU LD NOT DO ANYTHING BEING A COPARCENER OF HINDU UNDIVIDED FAMI LY, ACCORDING TO THE LD. REPRESENTATIVE, THE PROPERTY WAS SOLD TO THE EXTENT 2 GROUNDS FOR 5 CRORES TO M/S NAC JEWELLERS PVT. LTD. THE SALE DEED STOOD IN THE NAME OF THE ASSESSEE AND HIS BROT HER SHRI B.S. MURUGESAN. THEY EXECUTED THE SALE DEED IN FAVOUR O F M/S NAC JEWELLERS PVT. LTD. ACCORDING TO THE LD. REPRESENT ATIVE, ON BEHALF OF SHRI B.S. MURUGESAN, HIS LEGAL HEIR SIGNED THE DOCU MENT FOR SALE OF PROPERTY. OUT OF TWO GROUNDS, THE ASSESSEE SOLD ON E GROUND ON 11.1.2010 FOR A CONSIDERATION OF 3 CRORES AND THE BUYER PAID THE ENTIRE AMOUNT TO THE BANK LIABILITY. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE COULD NOT GET EVEN A S INGLE PIE. THE ASSESSING OFFICER FOUND THAT THE PROPERTY WAS SOLD FOR 3 CRORES BY THE ASSESSEE, THEREFORE, HE HAS TO PAY LONG TERM CA PITAL GAINS FOR TRANSFER OF ASSET. ACCORDING TO THE LD. REPRESENTA TIVE, THE PROPERTY WAS ADMITTEDLY PURCHASED ON 05.12.1979, A COPY OF D OCUMENT IS 6 I.T.A. NO.736/CHNY/18 AVAILABLE AT PAGE 8 OF THE PAPER-BOOK. THE ENGLISH VERSION OF DOCUMENT IS AVAILABLE AT PAGE 6 OF THE PAPER-BOOK. ACCORDING TO THE LD. REPRESENTATIVE, THIS DOCUMENT CLEARLY ESTAB LISHES THAT THE ASSESSEE WAS A MINOR ON THE DATE OF PURCHASE, I.E. ON 05.12.1979. THE ASSESSEES FATHER, OUT OF FAMILY FUNDS, PURCHAS ED THE PROPERTY IN THE NAME OF THE ASSESSEE AND HIS BROTHER SHRI B. S. MURUGESAN. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, IT IS A PROPERTY BELONGING TO HINDU UNDIVIDED FAMILY. HENCE, THE CA PITAL GAIN ON TRANSFER OF SUCH LAND HAS TO BE AT THE BEST ASSESSE D ONLY IN THE HANDS OF HINDU UNDIVIDED FAMILY. THE LD. REPRESENT ATIVE HAS ALSO ALTERNATIVELY SUBMITTED THAT THE FUNDS WERE INVESTE D BY THE ASSESSEES FATHER SHRI SAMBANDA MUDALIAR, THEREFORE , IT IS HIS PROPERTY AND IT CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE IN HIS INDIVIDUAL CAPACITY. HENCE, ACCORDING TO THE L D. REPRESENTATIVE, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER WITH REGARD TO LEVY OF CAPITAL GA IN. 6. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT ADMITTE DLY THE PROPERTY IN QUESTION STOOD IN THE NAME OF THE ASSES SEE AND HIS BROTHER SHRI B.S. MURUGESAN. ACCORDING TO THE LD. D.R., THE 7 I.T.A. NO.736/CHNY/18 ASSESSEE SOLD ONE GROUND OF LAND FOR 3 CRORES. MERELY BECAUSE THE ENTIRE AMOUNT WAS PAID TOWARDS DISCHARGING OF B ANK LIABILITY OF THE FAMILY BUSINESS, ACCORDING TO THE LD. D.R., IT DOES NOT MEAN THAT THE ASSESSEE WAS ABSOLVED FROM THE PAYMENT OF CAPIT AL GAIN TAX. EVEN THOUGH THE ENTIRE SALE CONSIDERATION OF THE PR OPERTY WAS PAID TO THE BANK FOR DISCHARGING THE BUSINESS LOAN, ACCO RDING TO THE LD. D.R., THE GAIN ARISING OUT OF THE SALE OF PROPERTY IS LIABLE FOR TAXATION. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEA LS) HAS RIGHTLY CONFIRMED THE CAPITAL GAIN TAX LEVIED BY THE ASSESS ING OFFICER. ON A QUERY FROM THE BENCH WHEN THE PROPERTY WAS PURCHASE D BY THE ASSESSEES FATHER IN THE YEAR 1979 WHEN THE ASSESSE E ADMITTEDLY WAS MINOR AND THE ASSESSEE HAD NO INDEPENDENT SOUR CE OF INCOME, WHETHER THE PROPERTY BELONGS TO THE ASSESSE E OR HUF OF SHRI SAMBANDA MUDALIAR?, THE LD. D.R. SUBMITTED THA T HE IS PLACING RELIANCE ON THE OBSERVATION MADE BY THE ASSESSING O FFICER AND THE CIT(APPEALS). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE PROPERTY IN QUESTION WAS PURCHASED BY SHRI SAMBANDA MUDALIAR, THE ASSESSEES FATHER ON 05.12.1979 IN THE NAME OF THE ASSESSEE 8 I.T.A. NO.736/CHNY/18 AND HIS BROTHER SHRI B.S. MURUGESAN. ON THE DATE O F PURCHASE, THE ASSESSEE AND HIS BROTHER WERE ADMITTEDLY MINORS AND THEY HAD NO INDEPENDENT SOURCE OF INCOME. THE INCOME GENERATED OUT OF FAMILY BUSINESS WAS INVESTED IN THE PROPERTY IN QUESTION. THE ASSESSEE BEING ONE OF THE COPARCENERS, THE PROPERTY WAS PURC HASED BY HIS FATHER IN THE NAME OF THE ASSESSEE AND HIS BROTHER. IT IS ALSO NOT IN DISPUTE THAT THE PROPERTY IN QUESTION WAS MORTGAGED FOR BORROWING LOAN FOR THE FAMILY BUSINESS. THEREFORE, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE PROPERTY IN QUESTION BE LONGS TO HINDU UNDIVIDED FAMILY OF SHRI SAMBANDA MUDALIAR. 8. HINDU UNDIVIDED FAMILY IS NOT A LEGAL ENTITY UND ER THE COMMON LAW. THEREFORE, IT CANNOT HOLD ANY PROPERTY / TITLE OVER THE IMMOVABLE PROPERTY. HENCE, THE REGISTERED SALE DEE D FOR PURCHASE OF THE PROPERTY IN QUESTION HAS TO BE IN THE INDIVI DUAL NAME OF THE COPARCENER. IN THIS CASE ON OUR HAND, THE ASSESSEE AND HIS BROTHER ARE ADMITTEDLY COPARCENERS. THEREFORE, THE PROPERT Y WAS PURCHASED IN THE NAME OF THE ASSESSEE AND HIS BROTHER BY THEI R FATHER. HOWEVER, UNDER THE INCOME-TAX ACT, HINDU UNDIVIDED FAMILY IS A SEPARATE AND INDEPENDENT ASSESSABLE UNIT. SINCE TH E PROPERTY BELONGS TO HINDU UNDIVIDED FAMILY AND THE HINDU UND IVIDED FAMILY 9 I.T.A. NO.736/CHNY/18 IS AN INDEPENDENT AND SEPARATE ASSESSABLE UNIT UNDE R THE INCOME- TAX ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE GAIN ARISING OUT OF SALE OF PROPERTY HAS TO BE ASSESSED ONLY IN THE HANDS OF HINDU UNDIVIDED FAMILY AND DEFINITELY NOT IN THE HANDS OF INDIVIDUAL COPARCENER. THE ASSESSEE AND HIS BROTHE R ARE INDIVIDUAL COPARCENERS. THEREFORE, THERE CANNOT BE ANY CAPITA L GAIN ASSESSMENT IN RESPECT OF THE PROPERTY BELONGING TO THE HINDU UNDIVIDED FAMILY IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE ARE UNABLE TO UPHOLD THE ORDERS OF BOTH T HE AUTHORITIES BELOW. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ADDITION IS DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 22 ND JANUARY, 2019 AT CHENNAI. SD/- SD/- (. ! ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 22 ND JANUARY, 2019. KRI. 10 I.T.A. NO.736/CHNY/18 - +056 76'0 /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. / 80 () /CIT(A)-13, CHENNAI-34 4. PRINCIPAL CIT- 8, CHENNAI-34 5. 69 +0 /DR 6. :& ; /GF.