DCIT 13(1), MUMBAI V. AJAYKUMAR ABHAY JAIN, MUMBAI

ITA 7509/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4019 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARORA , AM ./ I.T .A. NO. 7509/MUM/2013 ( / ASSESSMENT YEAR: 2010 - 11 ) DY. CIT - 13(1), ROOM NO. 418, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, NEW MARINE LINES, MUMBAI - 400 020 / VS. AJAYKUMAR ABHAY JAIN 114, SARANG STREET, MUMBAI - 400 003 ./ ./ PAN/GIR NO. AABPJ 0071 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MOHAMMED RIZWAN / RESPONDENT BY : SHRI SHEKHAR GUPTA / DATE OF HEARING : 09.12 .2015 / DATE OF PRONOUNCEMENT : 12 .02.2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 24 , MUMBAI (CIT(A) FOR SHORT) DATED 06.9.201 3 , ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 30.10.2012 . 2 ITA NO. 7509/MUM/2013 (A.Y.2010 - 11) DY. CIT VS. AJAYKUMAR ABHAY JAIN 2. 1 THE SOLE ISSUE ARISING PER THE INSTANT APPEAL BY THE REVENUE IS THE HEAD OF INCOME UNDER WHICH THE INCOME BY WAY OF LICENSE FEE, RECEIVED FROM M/S. EROS MULTIMEDIA P. LTD. (EMPL), IN RESPECT OF A PROPERTY AT VIRA INDUSTRIAL EST ATE, A - 6, VEERA DESAI ROAD, OFF JAYPRAKASH NARAYAN ROAD, ANDHERI (W), MUMBAI - 400 058, PU RCHASED BY THE ASSESSEE, ALONG WITH TWO OTHERS, VIDE INDENTURE OF SALE DATED 14.5.1991, I S ASSESSABLE, I.E., WHE THER U/S. 22 AS INCOME FROM HOUSE PROPERTY (IFHP) OR U/S. 56 AS INCOME FROM OTHER SOURCES (IFOS). THE TAX IMPLICATION OF THE ASESSSABILITY UNDER DIFFERENT HEADS OF INCOME IS ON ACCOUNT OF DEDUCTIONS EXIGIBLE IN COMPUTING THE TAXABLE INCOME , WHICH ARE SPECIFI C TO THE HEAD OF INCOME. SECTION 22 OF THE ACT MANDATES THAT THE ANNUAL VALUE OF A HOUSE PROPERTY, OF WHICH THE ASSESSEE IS THE OWNER, IS ASSESSABLE AS IFHP . THE QUESTION, THEREFORE, BOILS DOWN TO WHETHER THE ASSESSEE IS THE OWNER OF THE HOUSE PROPERTY UNDER REFERENCE OR NOT? THE ASSESSEE, RELYING ON THE DECISION IN THE CASE OF CIT VS. PODDAR CEMENT PVT. LTD. [1997] 226 ITR 625 (SC), STATES OF HAVING RECEIVED RENT IN HIS (JOINT) OWN RIGHT, SO THAT HE IS THE OWNER OF THE PROPERTY. THAT , IN OUR VIEW , WOULD NOT BY ITSELF PROVE OWNERSHIP . A TENANT MAY SUBLET OR SUB - LEASE A PROPERTY, WHERE THE TERMS OF THE RENT/LEASE AGREEMENT SO PERMIT, RECEIVIN G RENT, AND ONLY IN HIS OWN RIGHT. THAT WOULD NOT, HOWEVER, ENABLE HIM TO STAKE A CLAIM OF OWNERSHIP, AND RENT RECEIVED WOULD BE ASSESSABLE ONLY AS IFOS U/S. 56. TH AT THE AMOUNT STANDS RECEIVED IN HIS OWN RIGHT, ONLY MAKES IT IN THE NATURE OF INCOME IN THE HANDS OF THE ASSESSEE, A FACT WHICH IS NOT IN DISPUTE. RATHER, THE PURCHASE DEED DATED 14.5.1991, DULY REGISTERED, IS A PRIME DOCUMENT, EVIDENCING THE ASSESSEE AS THE OWNER, ALONG WITH TWO CO - OWNER S, NAMELY VIJAY K UMAR S. JAIN AND VISHAL R. JAIN. TRUE , PA GE 3 OF THE PURCHASE DEED MENTIONS OF LI T IGATION. HOWEVER, THE SAME , AS IT APPEARS, IS ONLY BY TENANTS/LICEN SEES TO WHOM SHE D S HAD BEEN LET OUT , AND CONTINUES FROM THE TIME THE ASSESSEE S VENDORS, MANUBHAI P. CHOLIA AND DHUN MANEKSHA COLAH, PARTNERS IN M/S . MEERA CHEMCIAL WORKS AND M/S. MEERA PULVERI Z ERS, PURCHASED THE PROPERTY IN 1973 (REFER PAGE 13 OF THE IMPUGNED ORDER). THE DISPUTE WITH THE TENANTS WHICH WOULD EXTEN D TO THEIR RIGHTS AS 3 ITA NO. 7509/MUM/2013 (A.Y.2010 - 11) DY. CIT VS. AJAYKUMAR ABHAY JAIN TENANTS, W OULD NOT IMPINGE ON THE ASSESSEE AS THE OWNER ; HE MERELY ENTERING INTO THE SHOES OF THE PREVIOUS O WNER /S . ALL THAT CAN BE SAID IS THAT THE ASSESSEE, BY VIRTUE OF THE PURCHASE DEED, PURCHASED A PROPERTY E NCUMBE RED BY TENANCY, OR SUBJECT TO SUIT S AGAINST , AS IT APPEARS , EV ICTION , FILED BY THE TENANTS IN THE S MALL C AUSE S C OURT AT MUMBAI . HOW COULD THAT, WE WONDER, IMPINGE ON THE ASSESSEES TITLE TO THE PROPERTY ? THERE IS NO ADVERSE CLAIM OR TITLE (OWNERSHIP) AND, ACCORDINGLY, THE ASSESSEE CAN ONLY BE SAID TO BE AN OWNER, THOUGH PERHAPS CANNOT, IN VIEW OF THE DISPUT E AS TO THE LEGAL POS SESS ION OF THE PROPERTY, BE SAID TO BE AN ABSOLUTE OWNER. THAT HOWEVER WOULD NOT MAKE HIM ANY LESS AN OWNER , OR RENT INCOME THERE - FROM AS NOT ON ACCOUNT OF OWNERSHIP. IN FACT, THE ASSESSEE , SUBSEQUENT TO THE PURCHASE, ENTERED INTO A DEVELOPMENT AGREEMENT DATED 30.5.2005 , VIDE WHICH THE THREE CO - OWNERS (THE ASSESSEE AND TWO OTHERS) WERE TO GET 50% OF THE CONSTRUCTED AREA, THE BALANCE 50% TO BE RETAINED BY THE B UILDER (FOR DEVELOPING THE PROPERTY). THE CONSTRUCTED AREA, OF WHICH THE ASS ESSEE G O T HIS SHARE ON THE COMPLETION OF THE CONSTRUCTION , I S ONLY IN LIEU OF THE RIGHTS IN LAND , WHICH ALONG WITH SOME SHED S THEREON , WAS PURCHASED IN MAY, 1991. HOW COULD THEN IT BE SAID THAT THE ASSESSEES RIGHT IN LAND I S DISPUTED ? AGAIN, WHO , OTHER TH AN THE ASSESSEE, COULD BE SAID TO BE THE OWNER OF THE PREMISES, THE BASEMENT AND THE PARKING SPACE LEASED TO EMPL VIDE A GREEMENT S DATED 20.6.2007 AND 03.9.2007. 2.2 WE , NEXT , CONSIDER THE REVENUES CHARGE OF THE RECEIPT IN RESPECT OF THE MUNICIPAL TAX, CLAIMED U/S. 24 (A) AT RS.34,81,325/ - , BEING NOT IN THE NAME OF THE ASSESSEE, THE PERSON WHO CLAIMS OWNERSHIP, BUT IN THE NAME S OF TWO BUSINESS ENTITIES, I.E., B HAIRAMJI JI JIBHOY PVT. LTD. AND MIRA CHEMICALS. IN THIS REGARD, WE FIND THAT THE ASSESSEE HAS FU RNISHE D A LETTER FROM M/S. SATYA DEV M EMBER S ASSOCIATION (DATED 20.9.2012), WHICH STATES THAT RS.25 LACS HAS BEEN PAID BY THE ASSESSEE TO THE MUNICIPAL CORPORATION DIRECTLY , WHILE THE BALANCE RS.9,81,325/ - HAS BEEN PAID BY IT. WHY SHOULD, WE WONDER, THE A S SOCIATION (OR ANY OTHER) PAY THE MUNICIPAL TAX ? WHAT 4 ITA NO. 7509/MUM/2013 (A.Y.2010 - 11) DY. CIT VS. AJAYKUMAR ABHAY JAIN IS THIS ASSOCIATION, WHICH THE ASSESSEE VIDE HIS LETTER DATED 24.9.2012 STATES OF HAVING NOT BEEN FRAMED? EVEN SO, IT COULD AT BEST ACT AS A COLLECTING AGENCY, COLLECTING TAX FROM MEMBERS AND REMITTING IT TO THE C ORPORATION, IN WHICH CASE IT WOULD BE FOR THE FULL AMOUNT , I.E., FOR THE ENTIRE PROPERTY. SURELY, SOME ARRANGEMENT IS IN PLACE, WHICH HAS NOT BEEN DISCLOSED OR EXPLAINED. THE SAME, IN FACT, IS PAID AT RS.13 LACS (ON 12.8.2009) , STATED AS INCLUSI VE OF RS.9.81 LACS CLAIMED BY THE ASSESSEE. TO WHOSE ACCOUNT IS THE BALANCE , AND HOW IS THE SAME (RATIO) WORKED OUT? AS REGARDS THE ASSESSEE PAYING A LOWER SUM, I.E., TH A N THAT CLAIMED, I S IT THAT THE ASSESSEE HAS CLAIMED EXCESS MUNICIPAL TAX, OR CON VER S E L Y, IS IT THAT THE ASSESSEE IS THE OWNER ONLY OF THE PROPERTY CORRESPONDING TO THE AMOUNT PAID BY HIM ? IN FACT, EVEN HERE WE FIND THAT OF RS.25 LACS (SUPRA), RS.15 LACS HAS BEEN PAID BY THE ASSESSEE, AND THE REMAINING RS.10 LACS IS BY M/S. SHADI L AL AND SONS AND THE ASSESSEE (REFER PARA 5.1.2 OF THE IMPUGNED ORDER). W HO IS TH I S ENTIT Y , I.E., SHADILAL AND SONS, AND WHY SHOULD IT PAY ON ASSESSEES BEHALF, I.E., ASSUM ING THE ENTIRE AMOUNT CLAIMED TO BE THE ASSESSEES SHARE OF THE MUNICIPAL TAX. IS THE AMOUNT (CL AIMED BY THE ASSESSEE) PAID BY THE A SSOCIATION , OR SHADI L AL AND SONS FOR THAT MATTER, PAID ON ASSESSEES BEHALF, RECEIVING THE AMOUNT SUBSEQUENTLY FROM HIM? THERE IS NO INDICATION , THOUGH, TO THIS EFFECT. FURTHER, EVEN IF THE PAYERS ARE NOT PAID BY HIM , DO ES THE ASSESSEE ACKNOWLEDGE HIS DEBT TO THEM FOR THE SAME? HOW HAS THE ASSESSEE, OR THESE P ERSONS, TREATED THE AMOUNT PAID/CLAIMED IN THEIR ACCOUNTS, WHICH TREATMENT THOUGH MAY NOT BE DETERMINATIVE OF THE MATTER ? W E FIND NO CONTENTION OR EXP LANATION O N THI S OR OTHER REL ATED ASPECTS . W E , IT MAY BE CLARIFIED, CAN UNDERSTAND TH AT THE MUNICIPAL CORPORATION ISSUES RECEIPTS IN THE NAME /S OF THE PERSON/S WHO IS AN OWNER/S ON ITS RECORDS , B UT THE PAYMENT OF TAX WOULD ONLY BE BY THE OWNER ( OR ON HIS BEHALF) . THE MAT TER, IN ANY CASE, NEEDS TO BE EXPLAINED . WHAT, AFTER ALL, IS THE STATU S OF THE PERSONS PAYING MUNICIPAL TAX VIS - - VIS THE ASSESSEES PROPERTY, IS A QUESTION THAT BEGS AN ANSWER. FURTHER, AS POSED BY THE A.O., WHY , IN - SPITE THE P URCHASE DEED, A REGISTERED D OCUMENT, THE OWNERSHIP HAS NOT BEEN REGISTERED I N THE NAME OF THE ASSESSEE (AND, PRESUMABLY, OTHER CO - OWNERS AS WELL ) IN THE RECORDS 5 ITA NO. 7509/MUM/2013 (A.Y.2010 - 11) DY. CIT VS. AJAYKUMAR ABHAY JAIN OF THE M UNICIPAL C ORPORATION DESPITE A LAPSE OF TWO DECAD ES ? THIS BECOMES RATHER P E R PLEXING CONSIDERING THAT THE BUILDER HA S RETAINED, OSTENSIBLY AS A N OWNER, 50% OF THE CONSTRUCTED AREA. THE SAID CONSTRUCTION AS WELL AS THAT F A LLING TO THE SHARE OF THE OTHER TWO CO - OWNERS, MAY BE OR , RATHER , WOULD HAVE BEEN SOLD/TRANSFERRED BY THEM TO OTHERS . NON - TRANSFER OF TITLE IN THE NAME OF THE OWNERS (ASSUMING IT TO BE SO FOR OTHER CO - OWNERS AS WELL) WOULD CAUSE PROBLEMS FOR THE SUBSEQUENT TRANSFER OF TITLE. THE OWNERSHIP CONTEMPLATED U/S. 22 IS OF THE HOUSE PROPERTY, I.E., THE CONSTRUCTED AREA, AND WHICH IN A GIVEN CASE MAY BE INDEPENDE NT OF OWNERSHIP OF LAND, AS WHERE IT IS O N A LEASE - HOLD LAND OR IN RESPECT OF WHICH THE OWNER PAYS GROUND RENT. IN THE PRESENT CASE, THE ASSESSEE HAD PURCHASED INDUSTRIAL SHEDS, I.E., AN INDUSTRIAL PLOT WITH SHEDS , SO THAT NON - CONVEYANCE THEREOF IN H IS NAM E IS NOT UNDERSTOOD. THEN, AGAIN, THE ASSESSEE PURCHASING PROPERTY FROM MANUBHAI P. CHOLIA AND DHUN M . COLAH, PARTNERS IN M I RA CHEMCIAL WORKS AND MEERA PULVERI Z ERS RESPECTIVELY , WHAT IS THE LOCUS STANDI OF THE PERSONS, I.E., B HAIR AMJI J I JIBHOY PVT. LTD. AN D MIRA CHEMICALS , IN WHOSE NAME S THE RECEIPT S (TOWARD TAX) STAND ISSUED BY THE MUNICIPAL CORPORATION. TH E S E ASPECTS , NOT ADDRESSED BY THE IMPUGNED ORDER, RAISE DOUBTS ON THE ASSESSEES STAT U S AS A N OWNER, I.E., VIS - - VIS A PROTECTED TENANT , AND WOULD REQUI RE BEING SATISF ACTORILY ANSWERED . THAT IS, TH EIR IMPORT CANN OT BE LIMITED TO THE DEDUCTIBILITY OF THE MUNICIPAL TAX ONLY - WHICH, SUBJECT TO THE SATISFACTION OF THE CONDITION OF PAYMENT, FOLLOWS IN CONSEQUEN CE , AND MAY HAVE IMPLICATION AS TO OWNERSHIP AS W ELL. NO DOUBT, THE PURCHASE DEED AS WELL AS THE ABSENCE OF ADVERSE CLAIM/S (IN - AS - MUCH AS THERE IS NO SUCH FINDING) ARE IMPORTANT ASPECT S IN ASSESSEES FAVOUR, BUT WE CANNOT HELP NO TI CING THAT SOME ASPECTS OF THE TRANSACTION REMAIN UNEXPLAINED AND/OR OBS CU R E IN VIEW OF WHICH THE STATUS OF OWNERSHIP CANNOT BE STA T ED AS A FACT. THE PLAINTS/RESPONSE S , I.E . , THE PR O CE E DING IN THE EVICTION SUITS ; DEVELOPMENT AGREEMENT AS WELL AS THE LEASE AGREEMENTS, ARE ALSO NOT ON RECORD , AND MAY BE RELEVANT. WE MAY THOUGH CLA RIFY THAT AN ABSOLUTE OWNERSHIP IS NOT A CONDITION FOR S. 22, AND THE BENEFICIAL OWNERSHIP TO THE EXCLUSION OF OTHERS, OF THE HOUSE PROPERTY, WOULD BE SUFF ICIENT T O ATTRACT S. 22 ( PODDAR CEMENT (P) LTD. (SUPRA)). 6 ITA NO. 7509/MUM/2013 (A.Y.2010 - 11) DY. CIT VS. AJAYKUMAR ABHAY JAIN 3. WE , IN VIEW OF THE FOREGOING, RESTORE THE MATTER BACK TO THE FILE OF THE LD. C IT(A) TO ADJUDICATE AFRESH PER A SPEAKING ORDER IN ACCORDANCE WITH LAW . HE SHALL ADDRESS AND RE SOLVE THE ISSUES HIGHLIGHTED BY US. FURTHER, HE HAVING REMITTED THE MATTER FOR VERIFICATION TO THE FILE OF THE A.O., GIVI NG DIRECTIONS ON A RELATED ASPECT, I.E., DEDUCTIB I L ITY OF MUNICIPAL TAX, IS AT LIBERTY TO SEEK HIS REPORT OR ANY OF THE ASPECTS DEEMED RELEVANT. THE FINDINGS BY THE A.O. WITH REGARD TO THE SAID ISSUE MAY ALSO BE RELEVANT. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE R EVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 12 , 201 6 SD/ - SD/ - ( JOGINDER SINGH) (S ANJAY ARORA) / J U DICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 12 . 0 2 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI