Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 3792 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 2 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-02-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
26-03-2015
Assessment Year
2009-2010
Appeal Filed On
18-12-2012
Judgement Text
E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 7490 /MUM/2012 ( / ASSESSMENT YEAR : 2009-10) SUJAYSINGH P. BOBADE (HUF) A-101, AMRIT CHS LTD. 15 CARTER ROAD, KHAR (W), MUMBAI - 400052 / V. I.T.O. 19(1)(2), PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 ./ PAN : AAPHS9015L ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 7491 /MUM/2012 ( / ASSESSMENT YEAR : 2009-10) UDAYSINGH P. BOBADE (HUF) A-101, AMRIT CHS LTD. 15 CARTER ROAD, KHAR (W), MUMBAI - 400052 / V. I.T.O. 19(1)(2), PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 ./ PAN : AAPHU6200L ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SH. M SUBRAMANIAN REVENUE BY : SHRI MANJUNATHA SWAMY, CIT DR / DATE OF HEARING : 03-12-2015 / DATE OF PRONOUNCEMENT : 24-02-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : ITA 7490/MUM /12 & ITA 7491/MUM/2012 2 THESE TWO APPEALS, FILED BY THE TWO DIFFERENT ASSES SEE HUFS, BEING ITA NO. 7490/MUM/2012 AND ITA NO. 7491/MUM/2012, ARE DI RECTED AGAINST THE TWO SEPARATE ORDERS BOTH DATED 08.10.2012 PASSED B Y THE LEARNED COMMISSIONER OF INCOME TAX - 19, MUMBAI (HEREINAFTE R CALLED THE CIT), FOR THE ASSESSMENT YEAR 2009-10. WE WILL FIRST TAKE UP APPEAL NO ITA NO. 7490/MUM/2012 AS LEAD APPEAL AND OUR DECISION IS IT A NO. 7490/MUM/2012 SHALL APPLY MUTATIS MUTANDIS TO APPEA L NO ITA NO. 7491/MUM/2012 AS BOTH THE APPEAL INVOLVES IDENTICAL ISSUE. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE HUF IN ITA NO. 7490/MUM/2012 IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ORDER PASSED U/S 263 OF THE I.T. ACT, 1961 IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LEARNED CIT ERRED IN PASSING AN ORDER U/S 263 OF THE I.T. ACT, 1961 AND THAT TOO WITHOUT GIVING FULL AND PROPER OP PORTUNITY OF BEING HEARD IN THE MATTER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT ERRED IN PASSING AN ORDER U/S 263 OF THE I.T. ACT, 1961 AND THAT TOO WITHOUT APPRECIATING FULLY A ND PROPERLY THE FACTS OF THE CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT ERRED IN HOLDING THAT THE ORDE R PASSED BY THE ITO-19(1)(2) IS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE ALTHOUGH THE SAME WAS NEITHER ERRONEOUS NOR PREJUDI CIAL TO THE INTEREST OF REVENUE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT ERRED IN SETTING ASIDE THE ORD ER PASSED U/S 143(3) OF THE I.T. ACT ON 26.12.2011 FOR A.Y. 2009- 10 ON THE ISSUE OF ASSESSING THE RECEIPTS I.E. TOTAL RECEIPTS OF RS . 65,00,000/- ITA 7490/MUM /12 & ITA 7491/MUM/2012 3 WHERE THE ASSESSEES SHARE IS 1/3 RD , ALTHOUGH THE SAME WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT ERRED IN SETTING ASIDE THE ORD ER PASSED U/S 143(3) OF THE I.T. ACT ON 26.12.2011 FOR A.Y. 2009- 10 ON THE ISSUE OF ASSESSING THE RECEIPTS I.E. TOTAL RECEIPTS OF RS . 65,00,000/- WHERE THE ASSESSEES SHARE IS 1/3 RD , AND DIRECTING THE A.O. TO PASS A FRESH ORDER AFTER TREATING THE SAID INCOME AS INC OME OTHER THAN CAPITAL GAIN AND DISALLOWING THE EXEMPTION U/S 54EC OF THE I.T. ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-HUF FILED ITS RETURN OF INCOME ON 26 TH JULY, 2009 DECLARING TOTAL INCOME OF RS. 91,493/- AND THE ASSESSMENT WAS FRAMED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) VIDE ORDERS DATED 26.12.2011 UNDER SECTION 143 (3) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT) ASSESSING TH E TOTAL INCOME OF THE ASSESSEE-HUF AT RS. 1,62,120/-. IT WAS SEEN BY THE CIT FROM THE ASSESSMENT RECORDS THAT DURING THE YEAR UNDER CONSIDERATION, A S PER THE TENANCY AGREEMENT DATED 06.05.2008, THE ASSESSEE-HUF HAD RE CEIVED RS. 53,00,000/- AS ONE TIME PREMIUM FROM THE TENANTS IN RESPECT OF IMMOVABLE PROPERTY IN RESPECT OF BLOCK NO. D-1 & D-2 ON THE GROUND FLOOR OF D-BUILDING OF JESTHARAM BAUG LOCATED ON DR. AMBEDKAR ROAD AT DADA R,MUMBAI OF WHICH THE ASSESSEE-HUF IS A CO-OWNER HAVING 1/3 RD SHARE IN OWNERSHIP OF THE PROPERTY , IN CONSIDERATION OF GRANTING TENANCY RIG HT TO THE TENANTS. THE SAID PREMIUM IS IN ADDITION TO THE RENT OF RS. 269/- PER MONTH AGREED TO BE PAID BY THE TENANTS AS PER THE SAID AGREEMENT. OUT OF AM OUNT OF RS. 53,00,000/-, SO RECEIVED, OF WHICH THE ASSESSEE-HUFS SHARE COME S TO RS. 17,66,670/- , THE ASSESSEE-HUF HAD INVESTED RS.22,50,000/- IN THE RURAL ELECTRIFICATION CORPORATION BOND AND CLAIMED EXEMPTION OF AN AMOUNT RS. 22,35,000/- U/S 54EC OF THE ACT WHICH WAS ALLOWED BY THE AO . IN A DDITION A SUM OF RS. 12,00,000/- WAS ALSO RECEIVED TO PROVIDE AMENITIES AND MAKING SOME CHANGES ITA 7490/MUM /12 & ITA 7491/MUM/2012 4 AS ALSO FOR REPAIRING, ETC. OUT OF WHICH THE ASSESS EE-HUFS SHARE WAS OF RS. 4,00,000/-. 4. THE CIT WAS OF THE VIEW THAT THE AFOREMENTIONED CLAIM OF THE ASSESSEE-HUF IS INADMISSIBLE UNDER THE ACT. THE OWNERSHIP OF THE PROPERTY REMAINS WITH THE ASSESSEE-HUF AS THERE WAS NO TRANSFER OF TENANCY RI GHT AS THE PROPERTY WAS LET OUT TO THE TENANTS AS A MONTHLY TENANCY AS PER THE AGREEMENT DATED 6.5.2008 , RETAINING THE RIGHT OF TERMINATION OF TE NANCY WITH THE LANDLORD. HENCE, CIT WAS OF THE VIEW THAT NATURE OF INCOME AR ISING FROM THE TRANSACTION IS NOT FROM LONG TERM CAPITAL GAIN BUT INCOME FROM HOUSE PROPERTY AND THE AO HAS ERRONEOUSLY ALLOWED THE EXEMPTION U/S 54EC O F THE ACT. HENCE, IN VIEW OF THE CIT, ASSESSMENT ORDER DATED 26.12.2011 PASSED UNDER SECTION 143(3) IS ERRONEOUS AND SO FAR AS PREJUDICIAL TO TH E INTEREST OF THE REVENUE. A SHOW CAUSE NOTICE WAS ISSUED UNDER SECTION 263 TO T HE ASSESSEE-HUF ON 16.07.2012 PROPOSING THAT THE ASSESSMENT ORDER PASS ED UNDER SECTION 143(3) OF THE ACT DATED 26.12.2011 BE REVISED U/S 263 OF T HE ACT. 5. THE ASSESSEE-HUF MADE A WRITTEN SUBMISSIONS IN R ESPONSE TO NOTICE U/S 263 OF THE ACT AND SUBMITTED THAT ASSESSMENT ORDER PASSED BY THE AO IS NOT ERRONEOUS AND HENCE, NOT PREJUDICIAL TO THE INTERES T OF THE REVENUE. THE ASSESEE-HUF SUBMITTED THAT THE ASSESEE-HUF HAS 1/3 RD SHARE JOINTLY ALONGWITH HIS BROTHERS HUF IN THE BUILDING KNOWN A S JESHTARAM BUILDING AT DADAR,MUMBAI. THE BUILDING IS FULLY LET OUT AND IS OCCUPIED FOR COMMERCIAL AS WELL AS RESIDENTIAL PURPOSE BY THE TENANTS WHO HAVE OCCUPIED ITS TENANCY SINCE LAST 25 YEARS. THE ASSESSEE-HUF SUBMITTED THA T THEY HAVE CREATED TENANCY RIGHTS IN RESPECT OF BLOCK NO. 1 & 2 ON THE GROUND FLOOR OF D BUILDING TO ONE MR. NANJI KENIA AND NAILESH KOTHARI BY ENTER ING INTO TWO SEPARATE TENANCY AGREEMENTS DATED 6 TH MAY, 2008 FOR RS. 26,50,000/- EACH. BOTH THESE AGREEMENTS WERE REGISTERED AND STAMP DUTY OF RS. 13 2500/- WAS PAID ON EACH DOCUMENT. IN ADDITION AS SUM OF RS. 12 LAKHS WAS RE CEIVED FOR CARRYING OUT ITA 7490/MUM /12 & ITA 7491/MUM/2012 5 ADDITION/ALTERATION IN THE SAID FLATS. THE ASSESSEE -HUF SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) REA D WITH SECTION 143(2) OF THE ACT CONDUCTED BY REVENUE, THE QUESTION OF TAXIN G THESE RECEIPTS AS INCOME FROM OTHER SOURCES WAS RAISED BY THE AO AND THE SAME WAS REPLIED IN DETAIL VIDE LETTER DATED 07.12.2011, WHICH WAS ACKN OWLEDGED BY THE ITO ON 08.12.2011 AND THE SAME IS ON RECORD WITH THE REVEN UE. THUS, THE ASSESSEE- HUF IN NUTSHELL SUBMITTED THAT THE ORDER PASSED U/S 143(3) OF THE ACT ON 26 TH DECEMBER, 2011 IS NEITHER ERRONEOUS NOR IS PREJUDIC IAL TO THE INTEREST OF REVENUE AND MERELY BECAUSE THE CIT IS OF DIFFERENT OPINION THE SAME CANNOT BE REVERSED. THE AO HAS TAKEN ONE OF THE TWO POSSIB LE VIEWS WITH WHICH THE CIT DOES NOT AGREE. THE VIEW TAKEN BY THE AO CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE AS SESSEE- HUF SUBMITTED THAT THEY HAVE GRANTED TENANCY RIGHT TO THE NEW TENANTS BY ACCEPTING A ONE-TIME PREMIUM WHICH IS NON-REFUNDABLE. AS SUCH SAME CANNO T BE TAKEN AS ONE- TIME ADVANCE RENT SIMPLY BECAUSE IT IS NON-REFUNDAB LE AND SAME CANNOT BE TREATED AS REVENUE INCOME ONCE IT IS COVERED U/S. 5 5(2)(A) OF THE ACT AND THEREFORE LIABLE TO TAX FOR CAPITAL GAINS TAX.THE A SSESSEE-HUF RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CADELL WEAVING MILL CO. P. LIMITED (2001) 249 ITR 0265(BOM.) THE ASSESSEE-H UF SUBMITTED THAT THESE AGREEMENTS BEING REGISTERED AGREEMENT ON WHICH STAM P DUTY HAS BEEN PAID. THE ASSESSEE-HUF RELIED ON MUMBAI RENT ACT, 2000 WH ICH PROVIDES FOR TERMINATION OF THE TENANCY OF THE TENANT IN AN EVEN T RENT OF MORE THAN 6 MONTHS IS OUTSTANDING. 6. THE CIT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE-HUF HELD THAT ASSESSEE-HUF HAS RECEIVED LUMPSUM ONE TIME PREMIUM FROM TENANTS FOR LETTING OUT OF THE PROPERTY. THIS PAYMENT COULD EIT HER BE ADVANCE PAYMENT OF RENT OR ONE-TIME PAYMENT IN LIEU OF VERY LOW MONTHL Y RENTAL CHARGES IN FUTURE. THE ASSESSEE-HUF HAS FURTHER CLAIMED THE RECEIPT AS CAPITAL RECEIPT. FOR THE RECEIPT TO BE CAPITAL RECEIPT, THERE HAS TO BE TRAN SFER OF CAPITAL ASSET AND THERE ITA 7490/MUM /12 & ITA 7491/MUM/2012 6 IS NEED TO EXAMINE WHETHER THE ASSESSEE-HUF HAD AFF ECTED TRANSFER OF CAPITAL ASSET IN LIEU OF THE IMPUGNED RECEIPTS. THE CIT REF ERRED TO THE TENANCY AGREEMENT PARA 3 AT PAGE 2 WHICH STIPULATED THAT, THE LANDLORDS HAVE AGREED TO LET OUT TO THE TENANTS THE SAID BLOCK AS MONTHLY TENANTS W.E.F. TODAY ON FOLLOWING TERMS AND CONDITIONS UNDER MAHARASHTRA RE NT ACT, 2000. HOWEVER, IT WAS OBSERVED BY THE CIT THAT RIGHT OF TERMINATION O F TENANCY HAS BEEN RETAINED WITH THE LANDLORD AS MENTIONED AT PARA 16 OF THE 5 TH PAGE OF THE AGREEMENT DATED 06.05.2008 WHICH STIPULATED THAT AS SESSEE-HUF HAS SIMPLY LET OUT THE PROPERTY WITHOUT TRANSFER OF ANY RIGHT IN PROPERTY EXCEPT THAT OF OCCUPANCY BY TENANT, WHEREBY THERE IS MERELY THE GR ANT OF RIGHT OF TENANCY AND THERE IS NO TRANSFER OF CAPITAL ASSETS. EVEN TH E RIGHT OF RE-POSSESSION HAS BEEN RETAINED BY THE ASSESSEE-HUF. THE INCOME THERE OF IS NOT A CAPITAL GAIN. THUS, THE CIT HELD THAT THE ORDER OF THE AO IS ERRO NEOUS IN SO FAR AS THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND T HE SAID RECEIPT MUST BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND NOT CAPI TAL GAIN ARISING FROM TRANSFER OF PROPERTY. THE AO WAS REQUIRED TO MAKE I NQUIRIES DURING THE COURSE OF PROCEEDINGS WHICH WAS NOT MADE. SO THIS IS VALID GROUND FOR CIT TO INTERFERE UNDER SECTION 263 OF THE ACT. THE CIT HEL D THAT THE VIEW ADOPTED BY THE AO IS NOT ONE OF THE POSSIBLE VIEW BUT WAS ERRO NEOUS VIEW. UNDER SUCH CIRCUMSTANCES, THE REVISION OF VIEW ERRONEOUSLY ADO PTED BY THE AO IS JUSTIFIED AND SERVES THE INTENT BEHIND SECTION 263 OF THE ACT AND HENCE THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE IN ASSESSING INCOME AS CAPITAL GAIN AND ALLOWING THE E XEMPTION U/S 54EC OF RS. 22,35,000/-. AND HENCE THE ORDER PASSED ON 26.12.20 11 BY THE AO U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2009-10 IS HEREB Y SET ASIDE VIDE ORDERS DATED 08.10.2012 PASSED BY THE CIT U/S 263 OF THE A CT. THE AO WAS DIRECTED BY CIT VIDE ORDERS DATED 08.10.2012 PASSED U/S 263 OF THE ACT TO PASS FRESH ORDERS U/S 143(3) OF THE ACT READ WITH SECTION 263 OF THE ACT AFTER TREATING THE SAID INCOME AS INCOME OTHER THAN CAPITAL GAIN AND D ISALLOWING THE EXEMPTION ITA 7490/MUM /12 & ITA 7491/MUM/2012 7 U/S 54EC OF THE ACT, AFTER AFFORDING SUFFICIENT OPP ORTUNITY TO THE ASSESSEE- HUF. 7. AGGRIEVED BY THE ORDERS OF THE CIT DATED 08-10-2 012 PASSED U/S 263 OF THE ACT, THE ASSESSEE-HUF FILED APPEAL BEFORE THE TRIBU NAL. 8. THE ASSESSEE-HUF SUBMITTED THAT THE ASSESSEE-HUF IS THE CO-OWNER OF THE PROPERTY ALONGWITH HUF OF BROTHERS. THE CIT INVOKED SECTION 263 OF THE ACT VIDE SHOW CAUSE NOTICE DATED 16-07-2012 TO SET ASID E THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE LD. COUNSEL OF THE A SSESSEE-HUF SUBMITTED THAT THEY HAVE TRANSFERRED TENANCY RIGHT WHICH IS TRANSF ER OF CAPITAL ASSET AND ONE TIME PREMIUM OF RS. 53 LAKHS WAS RECEIVED BY THE AS SESSEE-HUF WITH RESPECT TO A PROPERTY VIZ. BLOCK NO D-1 AND D-2 ON THE GROU ND FLOOR OF D-BUILDING OF JESTHARAM BAUG LOCATED AT DR. AMBEDKAR ROAD AT DADA R, MUMBAI , OF WHICH THE ASSESSEE-HUF IS 1/3 CO-OWNER ALONG WITH HUF OF BROTHERS. THE ASSESSEE- HUF SUBMITTED THAT THE PROPERTY D1 & D2 WAS VACANT PROPERTY AND TENANCY RIGHT WAS TRANSFERRED VIDE TWO AGREEMENTS BOTH DAT ED 6.5.2008 FOR AGGREGATE AMOUNT OF RS.53,00,000/- . THE ASSESSEE-HUF SUBMITT ED THERE WAS TRANSFER OF TENANCY RIGHTS FOR WHICH PAGDI OR SALAMI WAS RECEIVED FROM THE TENANTS AND REGULAR RENT IS ALSO RECEIVED APART FROM THE MO NEY RECEIVED ON TRANSFER OF TENANCY RIGHTS. THE ASSESSEE-HUF SUBMITTED THAT LON G TERM CAPITAL GAIN EARNED BY THE ASSESSEE-HUF ON TRANSFER OF TENANCY R IGHTS WAS DULY DECLARED AND DISCLOSED IN THE RETURN OF INCOME FILED WITH TH E REVENUE AND OUR ATTENTION IS DRAWN OF RETURN OF INCOME AND COMPUTAT ION OF INCOME FILED WITH REVENUE WHICH IS PLACED AT PAGES 1-4 OF PAPER BOOK FILED WITH THE TRIBUNAL TO CONTEND THAT THE ASSSESSEE-HUF MADE DUE DISCLOSURE OF LONG TERM CAPITAL GAIN AND EXEMPTION U/S 54EC CLAIMED THEREOF IN THE RETURN OF INCOME FILED WITH THE REVENUE. THE ASSESSEE-HUF SUBMITTED THAT D URING COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT , THE AO HAS MADE SPECIFIC QUERY ON THE CLAIM OF EXEMPTIO N U/S 54EC OF THE ACT ITA 7490/MUM /12 & ITA 7491/MUM/2012 8 WHICH WAS DULY REPLIED BY THE ASSESSEE-HUF VIDE LET TER DATED 07-12-2011 WHICH WAS FILED BEFORE THE AO ON 08-12-2011 AND THE RELEVANT EXTRACT OF THE SAID LETTER READS AS UNDER : WITH REFERENCE TO THE DEDUCTIONS CLAIMED U/S.54EC OF THE INCOME TAX ACT, 1961 OF RS.22,50,000/-, I HAVE BEEN INSTRUCTED BY MY CLIENT TO SUBMIT AS UNDER: 1. MY CLIENT ENTERED IN TO TENANCY AGREEMENT FOR TRANS FER OF TENANCY RIGHTS FOR BLOCK NO. I AND BLOCK NO. II ON THE GROU ND FLOOR OF D BUILDING OF JESHTARAM BUILDING, DR. AMBEDKAR ROAD, DADAR, MU MBAI-400 014. COPIES OF THE AGREEMENTS ARE ATTACHED . TWO AGREEME NTS WERE SEPARATELY EXECUTED FOR BLOCK I AND BLOCK II FOR RS .26,50,000/- EACH . IN ADDITION TO THE ABOVE A SUM OF RS.12,00,000/- WA S RECEIVED AS REGARDS TO THE CAPITAL EXPENDITURE CARRIED OUT IN T HE TWO FLATS. XEROX COPY IS ATTACHED. PLEASE REFER TO CLAUSE 4 ON PAGE 3 OF THE TENANCY AGREEMENT WHEREIN IT IS SPECIFICALLY MENTIONED THAT THE CONSIDERATION IS ONE TIME PREMIUM FOR GRANT OF TENANCY OF THE TWO BLOCKS. THIS NECESSARILY A CAPITAL RECEIPTS AS THIS IS A ONE TIM E PREMIUM RECEIVED FOR GRANT OF TENANCY. PLEASE REFER TO CLAUSE 5 OF T HE TENANCY AGREEMENT WHICH PROVIDE FOR MONTHLY RENT FOR THE US E OF THE PREMISES AND THE TENANCY SHALL BE GOVERNED BY THE MAHARASHTR A RENT CONTROL ACT,2000 . IN THE CIRCUMSTANCES, UNDER NO PRESUMPTI ON THE RECEIPTS FOR THE PREMISES CAN BE TREATED AS INCOME UNDER THE HEA D INCOME FROM HOUSE PROPERTY. MY CLIENT HOLD 1/3 RD SHARE IN THE ABOVE PROPERTY. HENCE, THIS SHARE WORKED OUT TO RS.2235000/-. I AM ATTACHING A NOTE AS WELL AS SOME DECIDED JUDGMENTS IN REGARDS TO THE SURRENDER OF TENANCY RIGHTS WHEREIN THE JUDICIAL AUTHORITIES HAV E TREATED THE SURRENDER OF TENANCY RIGHTS AS COVERED UNDER SECTIO N 45 OF THE INCOME TAX ACT,1961. ITA 7490/MUM /12 & ITA 7491/MUM/2012 9 2. AS REGARDS RS.1200000/- , I AM ENCLOSING A COPY OF THE LETTER EXECUTED WHEREIN THE DETAILS CAPITAL EXPENDITURE AN D AMENITIES PROVIDED ARE LISTED. THE CIT HAS HELD THAT PROPERTY HAS REMAINED WITH TH E OWNERS AND NO ASSET IS TRANSFERRED AND AMOUNT SHOULD BE CHARGED TO TAX UND ER THE HEAD INCOME FROM THE HOUSE PROPERTY THE LD. COUNSEL REFER TO S ECTION 55(2)(A) OF THE ACT WHICH RECOGNIZES TENANCY RIGHT AS CAPITAL ASSET A ND ACTUAL COST OF ACQUISITION PAID FOR ACQUIRING TENANCY WILL BE DEEM ED TO BE ITS COST OF ACQUISITION FOR THE PURPOSES OF SECTION 48 & 49 OF THE ACT WHILE IN THE INSTANT CASE THE COST OF ACQUISITION OF TENANCY RIGHT IS N IL WHILE THE ASSESSEE-HUF SOLD THE TENANCY RIGHTS VIDE AGREEMENT DATED 06-05- 2008 AND RECEIVED CAPITAL RECEIPTS BEING ONE-TIME PREMIUM FOR GRANT OF TENANC Y RIGHTS AND SECTION 45 OF THE ACT IS APPLICABLE AND INCOME SHALL BE COMPUTED AS INCOME FROM CAPITAL GAINS CHARGEABLE TO TAX AS LONG TERM CAPITAL GAINS WHICH WAS OFFERED FOR TAXATION UNDER THE HEAD INCOME FROM CAPITAL GAINS . THE ASSESSEE-HUF SUBMITTED THAT RS. 12 LAKHS HAVE BEEN RECEIVED FOR PROVIDING AMENITIES AND REPAIRING ETC. OF THE FLATS FOR WHICH EXPENSES HAVE BEEN INCURRED. THE ASSESSEE-HUF SUBMITTED THAT IT HAS 1/3 SHARE IN THE SAID PROPERTY. THE ASSESSEE-HUF REFERRED TO TENANCY AGREEMENTS DATED 0 6-05-2008 ENTERED INTO BY THE ASSESSEE-HUF WITH RESPECT TO D-1 AN D-2 BLOC K IN GROUND FLOOR OF JESHTARAM BUILDING , DR AMBEDKAR ROAD, DADAR, MUMBA I WHICH ARE PLACED AT PAGES 9-27 OF PAPER BOOK FILED WITH THE TRIBUNAL. T HE ASSESSEE-HUF SUBMITTED THAT TENANCY RIGHTS IS A CAPITAL ASSET AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. D P SANDU BROS. CHEMBUR PRIVATE LIMITED (2005) 273 ITR 1(SC) AND HONBLE BOMBAY HIG H COURT IN THE CASE OF CADELL WEAVING MILLS CO. PRIVATE LIMITED V. CIT (20 01) 249 ITR 265 (BOM. HC). THE ASSESSEE-HUF ALSO SUBMITTED THAT IN THE CA SE OF THIRD CO-OWNER MR. DUSHYANT P BABODE(HUF) WITH RESPECT TO THE SAME TRA NSACTION BEING 1/3 CO- OWNER, THE CIT(A) HAS HELD THE TRANSFER OF TENANCY RIGHT AS TRANSFER OF LONG ITA 7490/MUM /12 & ITA 7491/MUM/2012 10 TERM CAPITAL ASSET AND BROUGHT THE SAME TO TAX AS INCOME FROM CAPITAL GAINS VIDE ORDERS DATED 21.10.2013 WHICH HAS ATTAINED FIN ALITY AND ARE PLACED IN PAPER BOOK AT PAGE 89-97. THE ASSESSEE-HUF RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD V. CIT IN (2000) 243 ITR 83(SC) , CIT V. MAX INDIA LIMITED (2 008) 295 ITR 282(SC) AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT V. GABRIEL INDIA LIMITED (1993)203 ITR 108(BOM. HC) AND SUBMITTED TH AT THE AO IN THE INSTANT CASE HAS APPLIED HIS MIND AND ADOPTED ONE O F THE POSSIBLE AND PLAUSIBLE VIEW WHICH IS IN-FACT A CORRECT VIEW BEFO RE PASSING THE ASSESSMENT ORDERS AND THE CIT CANNOT SUBSTITUTE HIS VIEW BY I NVOKING PROVISIONS OF SECTION 263 OF THE ACT AND RATHER VIEW ADOPTED BY T HE CIT IS ERRONEOUS VIEW. THE ASSESSEE-HUF SUBMITTED THAT RENT IS CHARGED AS PER MAHARASHTRA RENT CONTROL ACT. THE ASSESSEE-HUF RELIED UPON DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. VIKAS POLYMERS IN (2010 ) 341 ITR 537(DEL. HC) , HONBLE BOMBAY HIGH COURT IN THE CASE OF JEWEL OF I NDIA V. ACIT (2010) 325 ITR 92(BOM. HC) AND HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT V. RATILAL TARACHAND MEHTA IN (1977) 110 ITR 71(BOM. HC ) AND SUBMITTED THE LUMP- SUM PAYMENT AS RECEIVED WHICH IS THE SYSTEM OF PAGD I OF SALAMI IS CAPITAL RECEIPT . THE ASSESSEE-HUF ALSO RELEIED UPON DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF DURGA DAS KHANNA V. CIT(1969) 72 ITR 796(SC) AND ALSO WHEREBY THE HONBLE SUPREME COURT IN 273 ITR 1 (SUP RA) AFFIRMED 249 ITR 265 (SUPRA). 9. THE LD. CIT DR SUBMITTED THAT THE PROPERTY IS GI VEN ON RENT AND CIT HAS RIGHTLY INVOKED SECTION 263 OF THE ACT. THE AO HAS NOT FORMED ANY OPINION ON THE ISSUE. NO INQUIRY HAS BEEN MADE BY THE AO AND T HERE IS NO APPLICATION OF MIND BY THE AO WHILE FRAMING ASSESSMENT U/S 143(3) OF THE ACT ON THIS ISSUE OF ONE TIME LUMP SUM PAYMENT RECEIVED BY THE ASSESS EE-HUF ON TRANSFER OF TENANCY RIGHTS. IT IS MERELY THE INCOME FROM RENTIN G OUT OF THE HOUSE PROPERTY AND LD CIT DR RELIED UPON 249 ITR 265(SUPRA) & THE DECISION IN AARVEE ITA 7490/MUM /12 & ITA 7491/MUM/2012 11 INTERNATIONAL IN (2006) 101 ITD 495 (MUM. TRIB.) & HORIZON INVESTMENT COMPANY LIMITED DECISION IN ITA 1593/MUM/13 AND A LSO UPON DECISION OF MALABAR INDUSTRIAL CO. LTD(SUPRA) AND SUBMITTED TH AT THERE IS NO APPLICATION OF MIND / IN- ADEQUATE INQUIRY BY THE AO . THE LD. CIT DR RELIED UPON DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT V. INFOSYS TECHNOLOGIES LIMITED (2012 ) 17 TAXMANN.COM 203(KAR .HC) AND HONBLE SUPREME COURT IN THE CASE OF TOYOTA MOTOR CORPORATI ON (2008) 306 ITR 52 (SC) AND DECISION IN THE CASE OF IPCA LABORATORIES LIMITED RENDERED BY HONBLE BOMBAY HIGH COURT AND LD. CIT DR SUBMITTED THAT BENEFIT WHICH IS NOT GIVEN BY LAW CANNOT BE CONFERRED. ON THE OTHER HAND LD AR SUBMITTED THAT IT IS SIMPLY TRANSFER OF TENANCY RIGHT AND HE RELIE D UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V TIP TOP TYP OGRAPHY (2014) 48 TAXMANN.COM 191(BOM.HC) . 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL ON RECORD INCLUDING THE CASE LAWS RELIED UPON BY BOTH THE PARTIES. WE HAVE OBSERVED THAT ASSESSEEHUF HAS ENTERED INTO TENANCY AGREEMENT DATED 06.05.2008 WHEREBY THE ASSESSEE-HUF HAS GRANTED MON THLY TENANCY OF THE PROPERTY BLOCK D1 AND D2 ON THE GROUND FLOOR OF D B UILDING KNOWN AS JESTHARAM BAUG SITUATED AT DR. AMBEDKAR ROAD AT DAD AR, MUMBAI. THE ASSESSEE-HUF HAS RECEIVED RS. 53,00,000/- ALONGWITH HIS BROTHERS HUFS WHO ARE ALSO CO-OWNERS IN THE SAID PROPERTY AS ONE TIME PREMIUM FOR ALLOTTING THE TENANCY RIGHT IN THE PROPERTY IN WHICH THE ASSE SSEE-HUF HAS 1/3 RD SHARE , WHICH IS NON-REFUNDABLE. THE TENANTS ARE ALSO PAYIN G RENT OF RS. 269 PER MONTH AND THE TENANCY IS GOVERNED BY MAHARASHTRA RE NT CONTROL ACT, 2000 WHEREBY TENANTS HAVE PROTECTION UNDER THE SAID MAHA RASHTRA RENT CONTROL ACT, 2000. THIS TENANCY IS PERPETUAL AND THERE IS N O PERIOD OF EXPIRY OF TENANCY , WHEREBY LANDLORD DOES NOT HAVE POWER TO E VICT THE TENANT TILL THE RENTS ARE PAID AND TENANTS ARE NOT IN DEFAULT IN P AYMENT OF RENT. LANDLORD I.E ASSESSEE-HUF CANNOT TERMINATE TENANCY UNILATERALLY IF THE RENTS ARE PAID IN ITA 7490/MUM /12 & ITA 7491/MUM/2012 12 TIME BY THE TENANTS AND THE TENANTS ABIDE BY THE TE RMS AND CONDITIONS OF THE AGREEMENT. THE LANDLORD I.E. ASSESSEE-HUF BY GIVING NOTICE OF SIX MONTHS CAN ASK FOR EVICTION ONLY IN CASE OF DEFAULT BY TENANT IN PAYMENT OF RENT. HOWEVER, THERE ARE CLAUSES, WHEREBY NO SUBLETTING IS PERMITT ED AND TENANTS ARE NOT ALLOWED TO CARRY OUT STRUCTURAL ADDITIONS IN THE SA ID PREMISES EXCEPT WITH THE PERMISSION OF LANDLORD. IN OUR CONSIDERED VIEW AFTE R THE CAREFUL READING OF THE CLAUSES OF THE TENANCY AGREEMENT , THE ASSESSEE-HUF HAS IN-FACT ALLOTTED THE OCCUPANCY/TENANCY RIGHTS IN FAVOUR OF THE TENANTS P ERPETUALLY AND ONE TIME PREMIUM IS CHARGED FOR THE SAID ALLOTTMENT OF TENAN CY RIGHTS PERPETUALLY AND IT CANNOT BE MERELY STATED OR EQUATED TO BE RECEIPT OF ADVANCE RENT AS THE TENANCY GRANTED BY THE ASSESSEE-HUF IN FAVOUR OF TE NANTS IS PERPETUAL WITH PROTECTION TO TENANTS UNDER MAHARASHTRA RENT CONTRO L ACT, 2000 UNDER A REGISTERED AGREEMENT WHEREBY DUE STAMP DUTY AND REG ISTRATION FEE ARE PAID TO STATE GOVERNMENT AND NO RIGHT IS RETAINED BY THE L ANDLORD I.E. ASSESSEE-HUF FOR EVICTION OF TENANT IN PERPETUALLY EXCEPT IN THE EXTREME SITUATION OF TENANTS BEING IN DEFAULT FOR PAYMENT OF RENT AND THAT TOO W ILL ENTAIL GIVING NOTICE OF SIX MONTHS FOR EVICTION/TERMINATION OF TENANCY AGREEMEN T AND HENCE, IN OUR CONSIDERED VIEW ONE TIME PREMIUM RECEIVED BY THE AS SESSEE HUF FOR ALLOTMENT OF TENANCY PERPETUALLY IN FAVOUR OF TENAN T IS A CAPITAL RECEIPTS LIABLE FOR TAX UNDER THE HEAD INCOME FROM CAPITAL GAINS U/S. 45 OF THE ACT BEING CAPITAL ASSET AS DEFINED U/S 55(2)(A) OF THE ACT. T HE PROPERTY CONSTITUTE A BUNDLE OF RIGHTS AND TRANSFER BY WAY OF ALLOTMENT O F PERPETUAL TENANCY WITH RIGHT OF OCCUPANCY AND ENJOYMENT OF PROPERTY PERPET UALLY IN FAVOUR OF TENANT IS ALSO TRANSFER OF ONE OF THE RIGHT OUT OF THE BUN DLE OF RIGHTS WHICH PROPERTY CARRIES WITH IT AND SHALL BE CHARGEABLE TO TAX U/S 55(2)(A) READ WITH SECTION 45 OF THE ACT AS INCOME FROM CAPITAL GAINS. NO DOUBT T HE ASSESSEE-HUF HAS RIGHT TO EVICT THE TENANT BUT THAT IS ONLY IN THE S ITUATION OF TENANT IN DEFAULT OF MONTHLY RENT AND THAT TOO WITH A NOTICE OF SIX MONT HS TO TENANT WHEREBY THE TENANT CAN ALWAYS RECTIFY THE DEFAULT AND CONTINUE ENJOYING THE TENANCY PERPETUALLY MORE SO THE TENANT IS PROTECTED TENANT UNDER MAHARASHTRA RENT ITA 7490/MUM /12 & ITA 7491/MUM/2012 13 CONTROL ACT, 2000. THE AO HAS MADE AN INQUIRY BEF ORE GRANTING EXEMPTION UNDER SECTION 54 EC OF THE ACT WITH RESPECT TO THE GRANT OF THE TENANCY RIGHT WHICH WAS REPLIED BY THE ASSESSEE-HUF VIDE LETTER D ATED 07-12-2011 FILED WITH AO ON 08-12-2011 AND HAS ALSO ENCLOSED COPIES OF AGREEMENTS AND DETAILS ALONG WITH THE SAID LETTER, THE SAID LETTER IS REPRODUCED IN PRECEDING PARAS AND IS PLACED AT PAPER BOOK AT PAGE 7-8 ALON G WITH TENANCY AGREEMENTS DATED 06-05-2008 AND LETTER FOR REPAIRS ETC AT PAGE S 9-27 OF PAPER BOOK . THE AO HAS DULY APPLIED HIS MIND WHILE GRANTING THE EX EMPTION UNDER 54EC OF THE ACT. THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS WHICH IN OUR CONSIDERED VIEW IS IN-FACT PLAUSIBLE AND CORRECT VIEW BY TREAT ING ONE TIME PREMIUM ON ALLOTMENT OF TENANCY RIGHTS BY ASSESSEE-HUF IN FAVO UR OF TENANTS AS CAPITAL RECEIPTS CHARGEABLE TO TAX AS INCOME FROM CAPITAL G AINS U/S 45 OF THE ACT ARISING FROM TRANSFER OF LONG TERM CAPITAL ASSET W HICH VIEW IS DULY SUPPORTED BY SECTION 55(2)(A) READ WITH SECTION 45 OF THE ACT AND SEVERAL JUDICIAL PRONOUNCEMENTS TREATING ONE TIME PAGDI OR SALAMI AS CAPITAL RECEIPTS (273 ITR 1(SUPRA) AND 249 ITR 265 (SUPRA)) AND BY N O STRETCH OF IMAGINATION THE SAME VIEW CAN BE HELD TO BE ERRONEOUS VIEW. THE CIT CANNOT SUBSTITUTE ITS OWN VIEW IF THERE ARE TWO POSSIBLE VIEWS AND THE A O HAS TAKEN ONE OF VIEW AFTER APPLICATION OF MIND AND WHICH IS ONE OF THE P LAUSIBLE AND POSSIBLE VIEW (HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUS TRIAL CO. LTD V. CIT IN (2000) 243 ITR 83(SC) , CIT V. MAX INDIA LIMITED (2 008) 295 ITR 282(SC) AND DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT V. GABRIEL INDIA LIMITED (1993)203 ITR 108(BOM. HC) ) . THE CIT CANN OT SUBSTITUTE ITS OWN VIEW ON THE VIEW OF THE AO EVEN IF THE VIEW OF THE CIT IS A BETTER VIEW PROVIDED THE AO HAS TAKEN THE VIEW WHICH IS ONE OF THE POSSI BLE AND PLAUSIBLE VIEW AND THAT VIEW WAS ADOPTED BY THE AO AFTER DUE APPLICATI ON OF MIND AND IN-FACT VIEW OF THE AO IN THE INSTANT CASE IS DULY SUPPORTE D BY THE PROVISIONS OF THE ACT BEING SECTION 55(2)(A) OF THE ACT WHEREBY TENAN CY RIGHT IS CONSIDERED AS CAPITAL ASSET AND ALSO BY SEVERAL JUDICIAL PRONOUNC EMENTS( 273 ITR 1(SUPRA) , 249 ITR 265(SUPRA) ) . THE RELIANCE OF LD CIT DR O N THE CASE LAWS CITED BY ITA 7490/MUM /12 & ITA 7491/MUM/2012 14 HIM IS MISCONCEIVED AS IN THE INSTANT CASE , PROPER AND ADEQUATE ENQUIRY HAS BEEN DULY MADE BY THE AO AND AFTER DUE APPLICATION OF MIND HAS ARRIVED AT THE INSTANT DECISION OF BRINGING TO TAX ONE TIME LU MPSUM PAYMENT RECEIVED BY THE ASSESSEE-HUF ON ALLOTMENT OF TENANCY RIGHTS VID E TENANCY AGREEMENT DATED 06-05-2008 AS CAPITAL RECEIPT CHARGEABLE TO T AX AS INCOME FROM CAPITAL GAINS U/S 45 OF THE ACT. FURTHER, IN THE CASE OF OT HER CO-OWNER DUSHYANT P BOBADO(HUF), THE CIT(A) HAS ACCEPTED THIS LUMPSUM P AYMENT ON ALLOTMENT OF TENANCY RIGHTS BY THE TAX-PAYER IN FAVOUR OF THE TE NANTS RECEIVED VIDE TENANCY AGREEMENT DATED 06-05-2008 AS CAPITAL RECEIPTS CHAR GEABLE TO TAX AS INCOME FROM CAPITAL GAINS U/S 45 OF THE ACT.IN OUR CONSIDE RED VIEW, ORDER DATED 08- 12-2012 PASSED U/S. 263 OF THE ACT BY THE CIT IS N OT SUSTAINABLE UNDER LAW AS IN OUR CONSIDERED VIEW THE AO HAS MADE PROPER AN D ADEQUATE INQUIRIES AND HAS APPLIED HIS MIND AND HAS TAKEN DECISION AFT ER DUE APPLICATION OF MIND AND THE VIEW OF THE AO IS ONE OF THE PLAUSIBLE AND POSSIBLE VIEW AND IN- FACT A CORRECT VIEW WHICH IS DULY SUPPORTED BY PROV ISIONS OF THE ACT BEING SECTION 55(2)(A) AND SECTION 45 OF THE ACT AND SEVE RAL JUDICIAL PRONOUNCEMENTS AND CANNOT BY ANY STRETCH OF IMAGINA TION BE CATEGORIZED AS ERRONEOUS VIEW WHEREBY IN VIEW OF THE AO ONE TIME P REMIUM FOR GRANT OF TENANCY IS CAPITAL RECEIPT AND HENCE IN OUR CONSIDE RED VIEW, THIS ORDER DATED 08-12-2012 OF CIT PASSED U/S 263 OF THE ACT IS NOT SUSTAINABLE IN LAW AND WE HEREBY SET ASIDE THE ORDER DATED 08-10-2012 PASS ED BY THE CIT U/S 263 OF THE ACT AND RESTORE THE ORDER DATED 26-12-2011 OF T HE AO PASSED UNDER SECTION 143(3) OF THE ACT. WE ORDER ACCORDINGLY 11. IN THE RESULT , THE APPEAL IN ITA NO. 7490/MUM/ 2012 FILED BY THE ASSESSEE-HUF IS ALLOWED. 12. OUR DECISION IN ITA NO. 7490/MUM/2012 PASSED HE REIN ABOVE SHALL APPLY MUTATIS-MUTANDIS TO APPEAL NO. ITA 7491/MUM/2012. ITA 7490/MUM /12 & ITA 7491/MUM/2012 15 13. HENCE IN THE RESULT, BOTH THE APPEALS FILED BY THE TWO DIFFERENT ASSESSEE- HUFS BEING ITA NO. 7490/MUM/2012 AND 7491/MUM/2012 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY , 2016. # $% &' 24-02-2016. ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED .9../ LUBNA LUBNA LUBNA LUBNA PS 24-02-2016 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI
