Shri Dhimant T.Naik, Surat V. The Income tax Officer,Ward-3(4), Surat

ITA 781/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5533 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: R B SHAH
• Keywords: Capital asset; Capital receipt; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD SMC BENCH (BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT) ITA.NO.781/AHD/2010 ASSTT.YEAR : 2006-2007 SHRI THAKORBHAI V. NAIK DECEASED THAKOREBHAI V.NAIK L.H. DHIMANT T. NAIK 40, SUGAM SOCIETY ADAJAN PATIA, SURAT. VS. ITO, WARD-3(4) SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.B. SHAH REVENUE BY : SHRI R.K.DHANESTA O R D E R THIS IS ASSESSEES APPEAL AGAINST ORDER OF THE CIT (A)-II, SURAT DATED 04.12.2009. THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT MAY BE HELD THAT THE COMPENSATION OF RS.2,80,209/- RECEIVED FROM M/S.GUJ ARAT GAS CO. LTD., FOR GRANTING THE RIGHT OF USER OF THE AGRICULTURAL LAND FOR LAYING OUT PIPELINES UNDER THE LAND, IS NEITHER LIABLE AS INCO ME NOR AS CAPITAL GAINS UNDER THE I.T.ACT, 1961. 2. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASS ESSMENT YEAR UNDER CONSIDERATION, THE GUJARAT GAS COMPANY LTD. (GGCL ) LAID DOWN UNDERGROUND PIPELINES IN THE AGRICULTURAL LAND OWNE D BY THE ASSESSEE. THEY HAD PAID THE COMPENSATION TO THE ASSESSEE FOR LAYIN G SUCH UNDERGROUND PIPELINES IN THE ASSESSEE AGRICULTURE LAND. THE CO MPENSATION RECEIVED BY THE ASSESSEE AMOUNTING TO RS.2,80,245/- WAS TREATED AS INCOME FROM OTHER SOURCES BY THE AO. ON APPEAL, THE CIT(A) HELD THE SAME TO BE CAPITAL RECEIPT, HOWEVER, HE DIRECTED THE AO TO COMPUTE THE CAPITAL GAIN THEREON. THE REVENUE HAS ACCEPTED THE ABOVE ORDER OF THE CIT(A). BUT TH E ASSESSEE AGGRIEVED WITH ITA.NO.781/AHD/2010 -2- THE DIRECTIONS OF THE CIT(A) TO CHARGE CAPITAL GAIN ON THE COMPENSATION RECEIVED BY THE ASSESSEE IS IN APPEAL BEFORE THE IT AT. 3. IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THER E WAS NO TRANSFER OF AGRICULTURE LAND OR ANY OTHER CAPITAL ASSETS BY THE ASSESSEE. THEREFORE, THE COMPENSATION RECEIVED CANNOT BE CHARGED TO CAPITAL GAIN TAX. HE THEREFORE SUBMITTED THAT THE DIRECTION OF THE CIT(A) TO CHARG E CAPITAL GAINS TAX ON THE CAPITAL RECEIPTS SHOULD BE MODIFIED AND IT MAY BE H ELD THAT THE COMPENSATION RECEIVED BY THE ASSESSEE IS CAPITAL RECEIPT NOT CHA RGEABLE TO TAX. 4. THE LEARNED DR RELIED UPON THE ORDERS OF THE CIT (A) AND HE HAS STATED THAT THE ASSESSEE HIMSELF IN THE WRITTEN SUBMISSION S BEFORE THE CIT(A) HAS ALTERNATIVELY CLAIMED THAT THE CAPITAL RECEIPT MAY BE CHARGED TO CAPITAL GAIN TAX. IN THE REJOINDER, IT WAS SUBMITTED BY THE LEARNED C OUNSEL THAT IN THE SAME WRITTEN SUBMISSION, THE ASSESSEE HAS, IN DETAIL, ST ATED THAT THE CAPITAL RECEIPT IS NOT CHARGEABLE TO CAPITAL GAIN TAX. HOWEVER, AS AN ALTERNATIVE, HE SUBMITTED THAT THE RECEIPT CAN BE CHARGED TO THE CAPITAL GAIN TAX, THAT WOULD NOT AMOUNT TO ADMISSION AND HENCE, WHEN THERE IS NO TRANSFER OF A SSETS, THE CAPITAL GAIN TAX CANNOT BE LEVIED. 5. I HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH TH E SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THERE IS NO DISPUTE ABO UT THE FACT THAT THE ASSESSEE RECEIVED THE COMPENSATION FOR LAYING DOWN THE UNDER GROUND PIPELINE BY THE GGCL IN THE AGRICULTURAL LAND OWNED BY THE ASSESSEE . THE COMPENSATION WAS TREATED AS INCOME FROM OTHER SOURCES BY THE AO BUT THE CIT(A) HELD THE SAME TO BE CAPITAL RECEIPT. THE ORDER OF THE CIT(A) IS ACCEPTED BY THE REVENUE. THUS, ONLY QUESTION BEFORE ME IS WHETHER THE CAPITA L RECEIPT IS CHARGEABLE TO CAPITAL GAIN TAX OR NOT. AS PER SECTION 45 ANY PRO FIT OR GAINS ARISING FROM THE TRANSFER OF CAPITAL ASSET, IS CHARGEABLE TO TAX. T HUS, TRANSFER OF CAPITAL ASSETS IS A NECESSARY CONDITION FOR CHARGEABILTY OF CAPITAL G AIN TAX. IN THE CASE BEFORE ME, THE ASSESSEE CONTINUED TO BE THE OWNER OF THE A GRICULTURAL LAND. THERE IS NO ITA.NO.781/AHD/2010 -3- TRANSFER OF AGRICULTURAL LAND, OR ANY RIGHT IN AGRI CULTURAL LAND BY THE ASSESSEE TO GGCL. WHEN THERE IS NO TRANSFER OF CAPITAL ASSETS, IN MY OPINION, THE RECEIPT CANNOT BE CHARGED TO CAPITAL GAIN TAX. IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS PARTLY MODIFIED AND IT IS HELD THAT THE C OMPENSATION RECEIVED BY THE ASSESSEE IS CAPITAL RECEIPT NOT CHARGEABLE TAX. 6 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30/7 2010. SD/- (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 30-07-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD