DCIT CC. 35, MUMBAI V. WHITEN COLOUR, MUMBAI

ITA 7455/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88057 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 24-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 01-11-2010
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.7455/MUM/2010 ASSESSMENT YEAR: -2008-09 DCIT CENTRAL CIRCLE 35, ROOM NO. 108A, FIRST FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. VS.` M/S WHITEN COLOUR INDUSTRIES PVT. LTD. 29/30, STAMBHA TIRTH, KIDWAI ROAD, WADALA, MUMBAI 400 031. PAN: - AAACW0552A APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 18.08.2010 OF CIT (A) FOR A.Y. 2008-09. THE ASSESSE E HAS RAISED FOLLOWING GROUNDS:- 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN HOLDING THAT ASSE SSEE COMPANY HAS ACQUIRED PLOT PRIOR TO 1-04-1981 AND THEREBY HOLDIN G THAT THE COMPUTATION OF CAPITAL GAIN BY ASSESSEE ON SALE OF PLOT BY ADOPTING FMV OF PLOT AS ON 1-04-1981 IS CORRECT WHEREAS IN F ACT ASSESSEE HAS ACQUIRED PLOT ONLY ON 23-05-1989 WHEN IT ENTERED IN TO AGREEMENT WITH MIDC.' REVENUE BY SHRI KISHAN VYAS ASSESSEE BY SHRI RAKESH JOSHI DATE OF HEARING 8.12.2014 DATE OF PRONOUNCEMENT 14.01.2015 M/S WHITEN COLOUR INDUSTRIES PVT. LTD. 2 | P A G E 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT COST OF AC QUISITION OF PLOT IS REQUIRED TO BE INCREASED BY RS. 1,60,000/- BEING TH E AMOUNT ALLEGEDLY PAID BY PARTNERS OF ERSTWHILE FIRM AT TIM E OF AUCTION AND NOT PAID BY ASSESSEE.' 2. THE ASSESSEE SOLD THE PLOT NO. 40, MIDC, TTC IN DUSTRIAL AREA, NEW MUMBAI FOR A CONSIDERATION OF RS. 4.61 CRORES AS PE R MOU FOUND DURING THE SEARCH OPERATION. THE ASSESSEE ADMITTED THE SALE CO NSIDERATION AT RS. 4.61 CRORES AND PAID THE TAX UNDER THE HEAD CAPITAL GAI N. THE LAND IN QUESTION WAS ACQUIRED BY M/S WHITEN CORPORATION (A PARTNERSHIP F IRM) IN AN AUCTION SALE CONDUCTED BY COURT RECEIVER IN PURSUANT TO THE ORDE R DATED 24.10.1975 OF THE HONBLE HIGH COURT IN THE CASE OF SBI VS. M/S BITA SEAL PVT. LTD. & OTHERS IN SUIT NO. 968 OF 1975. M/S WHITEN CORPORATION WAS TH E HIGHEST BIDDER OF RS. 1,60,000/- AND ACCORDINGLY BY ORDER OF HONBLE HIGH COURT DATED 29-03-1978, THE POSSESSION OF THE PLOT OF LAND IN QUESTION WAS DELIVERED TO M/S WHITEN CORPORATION ON 29-03-1978. THUS THE LAND IN QUESTIO N WAS ACQUIRED BY THE SAID PARTNERSHIP FIRM ON 29-07-1978 WHEN THE POSSES SION WAS DELIVERED AS PER THE ORDERS OF HON'BLE HIGH COURT. A CERTIFICATE TO THIS EFFECT WAS ISSUED BY THE COURT RECEIVER ON 28.051987 FOR EXECUTION OF LE ASE DEED BY THE MIDC AND ACCORDINGLY THE LEASE DEED WAS EXECUTED BY THE MIDC IN FAVOUR OF M/S WHITEN CORPORATION ON 6.10.1989. IN THE MEANTIME M/S WHITE N COLOURS PVT. LTD., (THE ASSESSEE BEFORE US) WAS INCORPORATED ON 23.05.1989 BY THE PARTNERS OF THE ERSTWHILE PARTNERSHIP FIRM M/S WHITEN CORPORATION. THE TWO PARTNERS OF THE PARTNERSHIP FIRM NAMELY SMT. NALINI A PAREKH AND SH RI VIJAY D MEHTA HAVING EQUAL SHARE AND CONTRIBUTION IN THE CAPITAL, GOT TH E SHARE HOLDING OF 50% EACH OF THE ASSESSEE COMPANY. THE LAND IN QUESTION WAS T HEN TRANSFERRED IN THE NAME OF THE ASSESSEE COMPANY. THE ASSESSEE SHOWN IN ITS BALANCE-SHEET THE COST OF THE LAND AS RS. 17,600 BEING THE PREMIUM PA ID TO MIDC AT THE TIME OF EXECUTION OF LEASE DEED. WHILE COMPUTING THE CAPITA L GAIN FROM SALE OF LAND IN M/S WHITEN COLOUR INDUSTRIES PVT. LTD. 3 | P A G E QUESTION THE ASSESSEE TOOK THE COST OF ACQUISITION AT RS. 1,77,600/- WHICH COMPRISES RS. 1,60,000/- PAID IN THE AUCTION SALE A ND RS. 17,600/- BEING PREMIUM PAID TO MIDC. THE ASSESSEE ALSO CLAIMED IND EXED COST W.E.F 1.4.1981 BY CLAIMING THE DATE OF ACQUISITION AS ON 28.03.197 8. THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AND TOOK THE C OST OF ACQUISITION AT RS. 17,600/- SHOWN IN THE BALANCE SHEET OF THE ASSESSEE AND ACCORDINGLY COMPUTED THE CAPITAL GAIN. THE ASSESSING OFFICER HAS ALSO DE NIED THE INDEXED COST OF THE ASSESSEE FROM 01.04.1981 BY CONSIDERING THE DATE OF LEASE AS THE DATE OF ACQUISITION. THE CIT(A) ACCEPTED THE CLAIM OF ASSES SEE REGARDING THE DATE OF ACQUISITION OF PLOT OF LAND IN QUESTION AND ACCORDI NGLY DELETED THE ADDITION MADE BY ASSESSING OFFICER ON THIS ACCOUNT. 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE LEA SE DEED WAS EXECUTED BY MIDC ONLY ON 25.03.1989 AGAINST THE PAYMENT OF PRE MIUM OF RS. 17,600 WHICH WAS SHOWN BY THE ASSESSEE COMPANY IN THE BALA NCE-SHEET UNDER THE HEAD FIXED ASSET. THEREFORE, THE COST OF ACQUISIT ION OF THE ASSESSEE COMPANY IS ONLY RS. 17,600/-, BEING THE COST OF TRANSFER IN TH E NAME OF THE ASSESSEE COMPANY. HE HAS FURTHER SUBMITTED THAT THE LAND IN QUESTION HAS BEEN TRANSFERRED IN THE NAME OF THE ASSESSEE ONLY AFTER 23.5.1989, THEREFORE, THE DATE OF ACQUISITION BY THE ASSESSEE CANNOT BE BEF ORE THE INCORPORATION. HE HAS STRONGLY RELIED UPON THE ORDER OF ASSESSING OFFICER . 4. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE HAS SUBMITTED THAT IT IS A CASE FALLING U/S 49 R.W. S 47(XIII) AND CONSEQUENTLY THE COST OF ACQUISITION OF THE ASSET IN THE HANDS O F THE ASSESSEE SHALL BE DEEMED TO BE THE COST FOR WHICH THE EARLIER OWNER (BEING P ARTNERSHIP FIRM) ACQUIRED THE PROPERTY. HE HAS RELIED UPON THE ORDER OF CIT(A ). M/S WHITEN COLOUR INDUSTRIES PVT. LTD. 4 | P A G E 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. IT IS MANIFEST FROM THE FACT OF THE CAS E THAT THE PLOT OF LAND IN QUESTION WAS ACQUIRED BY THE PARTNERSHIP FIRM M/S W HITEN CORPORATION HAVING TWO PARTNERS NAMELY SMT. NALINI A PAREKH AND SHRI VIJAY D. MEHTA IN AN AUCTION SALE HELD ON 20.03.1978 IN PURSUANT TO THE ORDER OF HONBLE HIGH COURT DATED 24.10.1975 AS WELL AS THE ORDER DATED 7.4.197 6. THE ERSTWHILE PARTNERSHIP FIRM ACQUIRED THE PLOT OF LAND IN QUEST ION FOR A CONSIDERATION OF RS. 1,60,000/- IN THE SAID AUCTION SALE. THE AUCTION WA S CONFIRMED BY THE HONBLE HIGH COURT VIDE ORDER DATED 20.03.1978 AND DIRECTED THE COURT RECEIVER TO DELIVER THE POSSESSION. ACCORDINGLY, THE POSSESSION OF THE PLOT OF LAND WAS DELIVERED ON 29.03.1978. THEREAFTER, THE COURT RECE IVER ALSO ISSUED A CERTIFICATE DATED 29.05.1987 SUMMARIZING THE FACTS AND AUCTION SALE OF PLOT IN QUESTION. ON THE BASIS OF THE SAID CERTIFICATE OF THE COURT R ECEIVER, THE MIDC EXECUTED THE LEASE DEED ON 6.10.1989 IN PURSUANT TO THE DIRECTIO N OF HON'BLE HIGH COURT. THE LEASE DEED WAS EXECUTED IN FAVOUR OF SMT. NALIN I A PAREKH AND SHRI VIJAY D. MEHTA BEING THE PARTNERS OF THE PARTNERSHIP FIRM M/ S WHITEN CORPORATION AGAINST THE PAYMENT OF PREMIUM OF RS. 17,600/-. THE EXECUTION OF LEASE DEED WOULD NOT ALTER THE DATE OF ACQUISITION OF PLOT IN AUCTION SALE AS ON 20.03.1978 AND THE POSSESSION OF PLOT OF LAND IN QUESTION WAS DELIVERED ON 29.03.1978 IN PURSUANT TO THE ORDERS OF HON'BLE HIGH COURT. THE A SSESSEE COMPANY WAS INCORPORATED IN THE YEAR 1989 AND TOOK OVER THE PAR TNERSHIP FIRM. IT IS A CASE OF SUCCESSION OF PARTNERSHIP FIRM BY THE ASSESSEE C OMPANY . THE PARTNERS OF THE FIRM GOT 50% OF EACH SHARE HOLDING IN ASSESSEE COMPANY. THEREFORE, AS PER THE PROVISIONS OF SECTION 49(1) R.W.S 47(XIII), THE COST OF ACQUISITION OF THE ASSET IN QUESTION IN THE HANDS OF THE ASSESSEE WOUL D BE DEEMED TO BE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED I T. HENCE THE COST OF ACQUISITION WOULD BE THE COST AT WHICH THE FIRM ACQ UIRED THE LAND IN QUESTION AND FURTHER THE COST OF IMPROVEMENT IF ANY. M/S WHITEN COLOUR INDUSTRIES PVT. LTD. 5 | P A G E 6. IN THE CASE IN HAND, THE ASSESSEE CLAIMED THE CO ST OF ACQUISITION AT RS. 1,77,600/- COMPRISING THE PAYMENT MADE BY THE FIRM OF RS. 1,60,000/- AND AUCTION SALE AND THE PREMIUM AMOUNT OF RS. 17,600/- PAID TO THE MIDC AT THE TIME OF EXECUTION OF LEASE DEED. SINCE THE ASSETS I N QUESTION WAS ACQUIRED BY THE FIRM PRIOR TO 1.4.1981, THEREFORE, THE INDEXED COST OF ACQUISITION WOULD BE COMPUTED FROM THE 01.04.1981. ACCORDINGLY, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) QUA THIS ISSUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 14 TH DAY OF JANUARY 2015. SD/- SD/- (D.KARUNAKARA RAO) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 14-01-2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI