ITO 21(3)(1), MUMBAI V. BHAGWAN T. FATNANI, MUMBAI

ITA 7811/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0951 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Charitable institution; Cost of acquisition; Fair market value
• Section: 2(14); 142(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.7811/MUM/2011 ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER,-21(3)(1), ROOM NO.503,, C-11, 5 TH FLOOR, PRATYAKASHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. MR. BHAGWAN T.FATNANI. M/SPLY WINSE, SHOP NO.9, NAHAR AMRIT, NEAR CHANDIVALI STUDIO , POWAI, ANDHERI (EAST) MUMBAI-400072 ( / REVENUE) ( '#$% & /ASSESSEE) P.A. NO. AAIPF8124C / REVENUE BY SHRI VIJAY KUMAR BORA-DR '#$% & / ASSESSEE BY DR. P. DANIEL ' '( ) & * / DATE OF HEARING 08/04/2015 ) & * / DATE OF ORDER: 08/04/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 06/09/2011 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. MR. BHAGWAN T.FATNANI . . 2 2. THE ONLY EFFECTIVE GROUND IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THAT THE ASSESSEE COULD NOT PROVE OWNERSHIP OF THE PROPERTY, THEREFORE, HAVE NO LEGAL RIGHT OR TITLE U PON THE ASSET, CONSEQUENTLY, THE INCOME COULD NOT BE TAXED AS LONG TERM CAPITAL GAIN. 2.1. DURING HEARING OF THIS APPEAL, SHRI VIJAY KU MAR BORA, LD. DR, BROADLY, DEFENDED THE CONCLUSION ARRI VED AT IN THE ASSESSMENT ORDER BY INVITING OUR ATTENTION TO P ARA 4.3 AND ASSERTED THAT EVEN THE ASSESSEE HAS ACCEPTED TH AT HE WAS UNAUTHORIZEDLY/ ILLEGALLY HAVING THE POSSESSION OVER THE LAND BY ENCROACHING THE SAME WHICH WAS MEANT FO R A PRIMARY SCHOOL. IT WAS PLEADED THAT IN SPITE OF SUF FICIENT OPPORTUNITIES PROVIDED TO THE ASSESSEE NO SALE DEED/PURCHASE DEED/PROOF OF OWNERSHIP OF LAND/TRANS FER DEED WAS EVER PRODUCED, MEANING THEREBY, THE ASSESS EE IS NOT HAVING ANY LEGAL RIGHT/TITLE OVER THE PROPERTY. RELIANCE WAS PLACED UPON THE RATIO LAID DOWN BY THE HONBLE KERALA HIGH COURT IN227 ITR 490 (KERALA). 2.2. ON THE OTHER HAND, DR. P. DANIEL, LD COUNSEL F OR THE ASSESSEE, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT WHETHER OWNERSHIP RIGHTS ARE NECESSARY FOR CALCULATING THE GAINS FOR WHICH OUR ATTENTION WAS INVITED TO SECTION 2(14) AND 2(47) OF THE ACT. IT WAS PLEADED THAT EVEN NO SUCH REQUIREMENT IS THE RE IN SECTION 45 OF THE ACT THAT THE ASSESSEE HAS TO BE T HE OWNER MR. BHAGWAN T.FATNANI . . 3 OF THE PROPERTY. IT WAS PLEADED THAT THE ASSESSEE O CCUPYING THE PROPERTY FOR THE LAST ABOUT 20 YEARS, THEREFORE , IT HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS. RELIANCE WAS PLACED UPON THE DECISION FROM HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS SMT. NILOFER I. SINGH (2009) 309 ITR 233 (DELHI) AND ALSO THE DECISION IN MADATHIL BROTHERS VS DCIT (2008) 301 ITR 345 (MAD.) 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRI EF, ARE THAT THE ASSESSEE RETURNED INCOME OF RS.9,99,290/- ON 30/09/2008, WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX, ACT, 1961 (HEREINAFTER THE ACT). THE CA SE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTICES U/S 142(1 ) AND 143(2) WERE ISSUED AND SERVED UPON THE ASSESSEE TO WHICH THE ASSESSEE ATTENDED THE PROCEEDINGS. IT WAS FOUND BY THE ASSESSING OFFICER THAT, DURING FINANCIAL YEAR 2007- 08, THE ASSESSEE DECLARED BUSINESS INCOME BY WAY OF REMUNER ATION RECEIVED FROM PARTNERSHIP FIRM I.E. POLY WINES, AL SO DECLARED INCOME FROM CAPITAL GAINS AND OTHER SOURCE S BY WAY OF INTEREST RECEIVED FROM BANK DEPOSITS. THE IS SUE IN HAND BEFORE US IS WITH RESPECT TO LONG TERM CAPITAL GAINS SHOWN IN ITS BOOKS FROM UNAUTHORIZEDLY ENCROACHED S CHOOL LAND FOR WHICH HE HAS NO TITLE/RIGHT. THE LD. ASSES SING OFFICER VIDE NOTICE DATED 18/08/2010 ASKED THE ASSE SSEE TO FURNISH COPY OF PURCHASE/SALE AGREEMENT OF THE IMMO VABLE PROPERTY WHEREIN LONG TERM CAPITAL GAINS WAS CLAIME D. AGAIN NOTICE DATED 13/12/2010 U/S 142(1) OF THE ACT WAS MR. BHAGWAN T.FATNANI . . 4 ISSUED TO THE ASSESSEE TO FURNISH THE SAME DETAILS ALONGWITH WORKING OF THE LONG TERM CAPITAL GAINS. T HE ASSESSEE FURNISHED SALE AGREEMENTS WITH RESPECT TO FATNANI VILLA, WHEREIN, THE ASSESSEE CLAIMED TO HAVE SOME S HARES. THE ASSESSING OFFICER FOUND THAT THE AGREEMENT WAS NOT REGISTERED BEFORE ANY GOVERNMENT AUTHORITY AND FURT HER THE DOCUMENT WAS FOUND TO BE INCOMPLETE. THESE DEFE CTS WERE POINTED OUT TO THE AUTHORISED REPRESENTATIVE O F THE ASSESSEE TO WHICH NO EXPLANATION WAS FURNISHED. THE ASSESSEE WAS PROVIDED SEVERAL OPPORTUNITIES TO PROD UCE THE PURCHASE AGREEMENT OR PROOF OF ANY RIGHT OR OWNERSH IP OF THE PROPERTY. IN THE ABSENCE OF A VALID AGREEMENT/ DOCUMENT, THE VALUATION OF THE PROPERTY WAS REFERRE D TO THE VALUATION OFFICER OF THE DEPARTMENT. THE ASSESSEE D ID NOT PRODUCE THESE DOCUMENTS EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE VALUATION OFFICER. BEFORE COM ING TO ANY CONCLUSION WE ARE REPRODUCING HEREUNDER THE FACTUAL FINDING RECORDED BY THE LD. ASSESSING OFFICER:- 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE HAS FURNISHED COPIES OF SALE AGREEMENTS CLAIMING TO BE PERTAINING TO FATNANI VILLA WHEREIN THE ASSESSEE HAS SOME SHARE. ON PERUSAL OF THE SAME, IT IS SEEN THAT THE AGREEMENT IS NOT REGISTERED BEFORE AN Y GOVERNMENT AUTHORITY AND FURTHER THE AGREEMENTS ALS O ARE INCOMPLETE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THESE DEFECTS WHERE POINTED OUT TO THE LD. AR FOR WHICH NO EXPLANATION HAVE BEEN PROVIDED. AS THE ASSESSEE HAS NOT FURNISHED THE PURCHASE AGREEMENT AND THE SALE AGREEMENT FURNISHED HAVE MR. BHAGWAN T.FATNANI . . 5 INHERENT LACUNA, THE SAME CANNOT BE RELIED UPON. TH E ISSUE OF VALUATION OF PROPERTY WAS REFERRED TO THE VALUATION OFFICER, INCOME TAX DEPARTMENT. THANE. TH E ASSESSEE HAS IN SPITE OF SEVERAL OPPORTUNITIES BEIN G PROVIDED NO PURCHASE AGREEMENT HAS BEEN FURNISHED. FURTHER. THE ASSESSEE HAS ALSO NOT PRODUCED THESE DOCUMENTS BEFORE THE VALUATION OFFICER WHICH IS ALS O A POINT WORTH NOTHING. THE VALUATION OFFICER VIDE HIS LETTER DATED 29.12.2010, FILED IN THIS OFFICE ON 30.12.2010 HAS MADE CERTAIN OBSERVATIONS. THE RELEVANT PORTION OF THE SAME IS BEING PRODUCED HERE WITH: THE PROPERTY WAS INSPECTED BY ME ON 17/12/2010. HOWEVER THE ASSESSEE HAS NOT FURNISHED THE COMPLETE DETAILS OF THE PROPERTY. HOWEVER WITH THE AVAILABLE DETAILS, THE FOLLOWING FIGURES FOR THE TENTATIVE FMV ARE FURNISHED HEREWIT H WHICH ARE SUBJECT TO CHANGE, IF THE ASSESSEE PRODUC ES THE REQUIRED DETAILS. THIS IS TO PREVENT THE ASSESS EE FROM TAKING UNDUE ADVANTAGE DUE TO DELAY IN ASSESSMENT, BY HIS NOT FURNISHING THE REQUIRED DETAILS. 4.2. THIS CLEARLY SHOWS THE NON COOPERATION ATTITUD E OF THE ASSESSEE. THE INTENTION OF THE ASSESSEE IS NOT TO PRODUCE THE COPIES OF THE DOCUMENTS IN SUPPORT OF T HE COST OR ACQUISITION. ALSO, THE CLAIM THAT THE INVES TMENT BY THE ASSESSEE IS DULY REFLECTED IN HIS BALANCE SH EET FOR LAST SEVERAL YEARS DOES NOT SUPPORT HIS CLAIM W ITH REGARD TO THE OWNERSHIP UNTIL THE SAME HAS BEEN SUBSTANTIATED BY DOCUMENTARY EVIDENCE. FURTHER, THE MERE FACTS THAT CERTAIN ENTRIES WERE MADE IN THE MR. BHAGWAN T.FATNANI . . 6 BALANCE SHEET WOULD NOT SUBSTANTIATE OR JUSTIFY THE SAME TO BE ADOPTED AS THE COST OF ACQUISITION UNLES S SUCH CLAIM IS SUBSTANTIATED AS AND WHEN CALLED UPON THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS FAILED TO PRODUCE THE SAME IN THE PRESENT PROCEEDINGS DESP ITE REPEATED OPPORTUNITIES ON VARIOUS OCCASIONS. AS TH E ASSESSEE HAS SHOWN THE SALE OF THE IMMOVABLE PROPERTY DURING THE YEAR UNDER CONSIDERATION, THE O NUS IS ON THE ASSESSEE TO PROVE THAT HE IS THE OWNER OF THE PROPERTY THAT HAS BEEN SOLD. THE PROOF CAN BE SUBSTANTIATED ONLY THROUGH THE PURCHASE AGREEMENT. AS SUCH, THE VALUE OF COST OF ACQUISITION IS BEING CONSIDERED AS ZERO OR NIL. 4.3. WITH REGARD TO REGISTRATION OR THE PROPERTY, T HE ASSESSEE THROUGH HIS A.R HAS SUBMITTED THAT THE PROPERTY WAS ON A PLOT WHICH WAS RESERVED FOR PRIMA RY SCHOOL AND THE PROPERTY WAS UNAUTHORISED, CONSTRUCTED. AS THE ASSESSEE HAS FAILED TO PROVE TH E OWNERSHIP OF THE PROPERTY SOLD EVEN AFTER PROVIDING SEVERAL OPPORTUNITIES AND WHEN THE PROPERTY IS UNAUTHORIZED, THE CONCLUSION CAN BE DRAWN THAT THE PROPERTY HAS BEEN USURPED BY THE ASSESSEE AND THEREFORE THAT THE ASSESSEE DOES NOT HAVE LEGAL RIG HT OR TITLE OVER THE ASSET THIS LEADS TO THE CONCLUSION T HAT THERE IS NO CAPITAL ASSET OWNED BY THE ASSESSEE AND THEREFORE THE INCOME DECLARED IS NOT CHARGEABLE U/S 45 OF INCOME TAX ACT, 1961. AS SUCH, THE INCOME SO BE ING ARRIVED FROM THE SALE OF THE RESIDENTIAL AND THE COMMERCIAL UNITS IS BEING TREATED AS INCOME FROM OT HER SOURCES WITHIN THE MEANING OF SECTION 56(1) OF THE INCOME TACT ACT, 1961. HAVING ARRIVED AT THE HEAD O F INCOME TO WHICH THE INCOME IS TO TAXED. I NOW PROC EED MR. BHAGWAN T.FATNANI . . 7 TO ARRIVE AT THE INCOME. 4.4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN HIS SHARE OR ONE RESIDENTIAL UNI T AND THREE COMMERCIAL UNITS. IT IS SHOWN THAT THE AMOUNT RECEIVED FROM RESIDENTIAL UNIT IS RS. 12,00,000/- AND IN RESPECT OR THE SHOPS THE TOTAL RECEIPT IS RS. 9,94,100/-. IT IS CLAIMED THAT THE ASSESSEE IS CO-OWNER OF THE SHOPS. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSEE THROUGH HIS AUTHORIZED REPRESENTATIVE WAS REQUIRED TO FURNISH T HE SHARE IN THE COMMERCIAL UNIT. AS THE ASSESSEE HAS RAILED TO FURNISH THE SAME IT IS ASSUMED THAT THE ASSESSEE IS HAVING 100% SHARE AND THUS THE ASSESSEE HAS SAID TO RECEIVE AN AMOUNT OF RS.9,94,100/-. THE ASSESSEE HAD SUFFICIENT TIME (FROM 18.08.2010 WHEN THE NOTICE U/S 142(1) WAS ISSUED TO THE DATE OR ORD ER) TO FURNISH COPY OF PURCHASE AGREEMENT PROVING THE OWNERSHIP AND THE SHARE THEREUPON. AS THE ASSESSEE HAS FAILED TO FURNISH THE DOCUMENTARY EVIDENCE IN RESPECT OF HIS SHARE IN THE COMMERCIAL UNIT, THE SH ARE OF THE ASSESSEE IN THE COMMERCIAL UNIT IS BEING TAK EN AT 100%. 2.4. TOTALITY OF FACTS CLEARLY INDICATES THAT THE A SSESSEE IS NEITHER THE LEGAL OWNER OF THE PROPERTY NOR WAS HAV ING ANY DOCUMENT SHOWING ANY RIGHT/TITLE IN HIS FAVOUR AND UNCONTROVERTEDLY THE LAND WAS MEANT FOR A PRIMARY S CHOOL AND THE ASSESSEE ILLEGALLY ENCROACHED UPON SUCH LAN D. BEFORE US, THE ONLY ARGUMENT OF THE ASSESSEE IS THA T OWNERSHIP OF THE PROPERTY IS NOT A PRE-CONDITION FO R THE MR. BHAGWAN T.FATNANI . . 8 CLAIM OF CAPITAL GAINS. WE ARE NOT AGREEING WITH TH IS PROPOSITION BECAUSE HOW A GAIN CAN BE CLAIMED ON A ILLEGALLY OCCUPIED PROPERTY WHICH WAS A MEANT FOR A SCHOOL AND THE ASSESSEE IS NOT HAVING ANY TITLE/RIGHT OVER THE LAND. SECTION 2(14) DEFINES CAPITAL ASSET, WHICH IS REPRO DUCED HEREUNDER FOR READY REFERENCE:- 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINES S OR PROFESSION, BUT DOES NOT INCLUDE (I) ANY STOCK-IN-TRADE], CONSUMABLE STORES OR RAW MATERIALS HELD FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION ; [(II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PRO PERTY (INCLUDING WEARING APPAREL AND FURNITURE) HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM, BUT EXCLUDES (A) JEWELLERY; (B) ARCHAEOLOGICAL COLLECTIONS; (C) DRAWINGS; (D) PAINTINGS; (E) SCULPTURES; OR (F) ANY WORK OF ART. [EXPLANATION.]FOR THE PURPOSES OF THIS SUB-CLAUSE, 'JEWELLERY' INCLUDES (A) ORNAMENTS MADE OF GOLD, SILVER, PLATINUM OR ANY OTHER PRECIOUS METAL OR ANY ALLOY CONTAINING ONE OR MORE OF SUCH PRECIOUS METALS, WHETHER OR NOT CONTAINING ANY PRECIOUS OR SEMI-PRECIOUS STONE, AND WHETHER OR NOT WORKED OR SEWN INTO ANY WEARING APPAREL; (B) PRECIOUS OR SEMI-PRECIOUS STONES, WHETHER OR NO T SET IN ANY FURNITURE, UTENSIL OR OTHER ARTICLE OR WORKED O R SEWN INTO ANY WEARING APPAREL;] THE FOLLOWING EXPLANATION 2 SHALL BE INSERTED AFTER THE RENUMBERED EXPLANATION 1 BY THE FINANCE (NO. 2) ACT , 2014, W.E.F. 1-4-2015 : EXPLANATION 2.FOR THE PURPOSES OF THIS CLAUSE MR. BHAGWAN T.FATNANI . . 9 (A) THE EXPRESSION 'FOREIGN INSTITUTIONAL INVESTOR' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (A) OF TH E EXPLANATION TO SECTION 115AD; (B) THE EXPRESSION 'SECURITIES' SHALL HAVE THE MEAN ING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SE CURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956); [(III) AGRICULTURAL LAND IN INDIA, NOT BEING LAND S ITUATE (A) IN ANY AREA WHICH IS COMPRISED WITHIN THE JURIS DICTION OF A MUNICIPALITY (WHETHER KNOWN AS A MUNICIPALITY, MUNICIPAL CORPORATION, NOTIFIED AREA COMMITTEE, TOW N AREA COMMITTEE, TOWN COMMITTEE, OR BY ANY OTHER NAME) OR A CANTONMENT BOARD AND WHICH HAS A POPULATION 4 OF NOT LESS THAN TEN THOUSAND [] ; OR [(B) IN ANY AREA WITHIN THE DISTANCE, MEASURED AERI ALLY, (I) NOT BEING MORE THAN TWO KILOMETRES, FROM THE LO CAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFE RRED TO IN ITEM (A) AND WHICH HAS A POPULATION OF MORE THAN TEN THOUSAND BUT NOT EXCEEDING ONE LAKH; OR (II) NOT BEING MORE THAN SIX KILOMETRES, FROM THE L OCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFE RRED TO IN ITEM (A) AND WHICH HAS A POPULATION OF MORE THAN ONE LAKH BUT NOT EXCEEDING TEN LAKH; OR (III) NOT BEING MORE THAN EIGHT KILOMETRES, FROM TH E LOCAL LIMITS OF ANY MUNICIPALITY OR CANTONMENT BOARD REFE RRED TO IN ITEM (A) AND WHICH HAS A POPULATION OF MORE THAN TEN LAKH. EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, 'POPULATION' MEANS THE POPULATION ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ;]] [(IV) 6 PER CENT GOLD BONDS, 1977,[OR 7 PER CENT GO LD BONDS, 1980,] [OR NATIONAL DEFENCE GOLD BONDS, 1980 ,] ISSUED BY THE CENTRAL GOVERNMENT ;] [(V) SPECIAL BEARER BONDS, 1991, ISSUED BY THE CENT RAL GOVERNMENT ;] [(VI) GOLD DEPOSIT BONDS ISSUED UNDER THE GOLD DEPO SIT SCHEME, 1999 NOTIFIED BY THE CENTRAL GOVERNMENT.] [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HERE BY CLARIFIED THAT 'PROPERTY' INCLUDES AND SHALL BE DEE MED TO HAVE ALWAYS INCLUDED ANY RIGHTS IN OR IN RELATION T O AN MR. BHAGWAN T.FATNANI . . 10 INDIAN COMPANY, INCLUDING RIGHTS OF MANAGEMENT OR CONTROL OR ANY OTHER RIGHTS WHATSOEVER;] 2.5. FROM THE AFORESAID DEFINITION OF CAPITAL ASSET , THE LD. COUNSEL FOR THE ASSESSEE CANVASSED THAT THE WORD US ED IS PROPERTY OF ANY KIND AND IT IS NOT NECESSARY THAT IT SHOULD BE LAWFULLY ACQUIRED PROPERTY. WE ARE NOT IN AGREEM ENT WITH THIS PROPOSITION BECAUSE THE LEGISLATURE IN IT S WISDOM HAS USED THIS WORD FOR LAWFUL PROPERTY ONLY. OTHERW ISE, THE NATURAL INTENTION OF THE LEGISLATURE WILL BE DEFEAT ED AND ANYBODY WILL CLAIM BY A FORGED DOCUMENTS THAT HE/SH E IS THE OWNER OF GATEWAY OF INDIA IN MUMBAI OR RED FORT IN DELHI BY SHOWING THESE PROPERTIES IN THEIR ACCOUNTS/BALANCE-SHEET AND WILL CLAIM CAPITAL GAINS . IT IS NOT PERMISSIBLE. IT IS A CASE, WHERE, LEGAL ACTION WAS REQUIRED TO BE TAKEN AGAINST THE ASSESSEE FOR ILLEG ALLY ENCROACHING UPON THE LAND MEANT FOR A PRIMARY SCHOO L HOWEVER THAT WAS NOT DONE BY THE CONCERNED AUTHORIT IES DUE TO THE REASON BEST KNOWN TO THEM ONLY. IN SUB-C LAUSE (III), AGRICULTURAL LAND HAS BEEN DEFINED WHICH IS WITHIN THE SPECIFIED LIMIT OF A MUNICIPALITY FOR THE PURPOSES OF CAPITAL ASSET. IF THE PLEA OF THE ASSESSEE IS ALLOWED THEN ANY PERSON WILL ENCROACH UPON A GOVERNMENT LAND BY SHOWING THE SAME IN HIS BALANCE SHEET AND SHALL CLAIM CAPITAL G AINS, IN OUR HUMBLE OPINION, IT IS NOT PERMISSIBLE. IN OUR V IEW, ANY KIND HELD MEANS LEGALLY HELD BY THE ASSESSEE. 2.6. THE LD. COUNSEL FOR THE ASSESSEE HEAVILY RELIE D UPON THE DECISION FROM HONBLE MADRAS HIGH COURT IN MADA THIL BROTHERS (SUPRA). IN THAT CASE, THE ASSESSEE ENTERE D INTO AN MR. BHAGWAN T.FATNANI . . 11 AGREEMENT FOR SALE OF PROPERTY UNDER DOCUMENT DATED 16TH SEPTEMBER, 1975 AND THE POSSESSION WAS HANDED OVER TO THE ASSESSEE ON 01ST JANUARY 1976. DURING THE ASSES SMENT YEAR, 1987-88, THE ASSESSEE SOLD THE PROPERTY FOR A SUM OF RS.45 LAKH TO K ON 30/09/1986. IT WAS STATED THAT T HE SALE DEED IN FAVOUR OF THE ASSESSEE WAS EXECUTED ON 10/07/1986 BY V AND REGISTERED ON 26/09/1986. THE ASSESSING AUTHORITY TOOK THE VIEW THAT SINCE THE AS SESSEE WAS IN POSSESSION FOR A PERIOD OF TWO MONTHS, IT WA S ASSESSABLE AS SHORT TERM CAPITAL GAIN. THIS ORDER W AS UPHELD BY THE TRIBUNAL. ON APPEAL, BEFORE THE HONB LE HIGH COURT, IT WAS HELD AS UNDER:- THAT A PERUSAL OF THE DOCUMENTS SHOWED THAT ADMITT EDLY, THE ASSESSEE WAS PUT IN POSSESSION AND ENJOYMENT OF THE SUIT PROPERTY AS AGREEMENTHOLDER RIGHT FROM JANUARY 1,1976. THE SUIT FOR SPECIFIC PERFORMANCE WAS FILED BY THE ASSESSEE BEFORE THE COURT AND IN TERMS OF THE COMPR OMISE MEMO FILED IN THE SUIT, A DECREE WAS PASSED ON SEPT EMBER 30, 1983, IN FAVOUR OF THE ASSESSEE. ALTHOUGH AS PA RT OF THE SETTLEMENT TERMS, THE PARTIES AGREED TO REVISE THE SALE CONSIDERATION THIS WAS DONE WITH REFERENCE TO THE C LAIM UNDER THE AGREEMENT. THE SALE DEED WAS EXECUTED IN TERMS OF THE SETTLEMENT REACHED IN THE SUIT PROCEEDINGS. AS SUCH THERE WAS NO NOVATION OF CONTRACT TO RESULT IN A FR ESH AGREEMENT ENTERED INTO. THE ASSESSMENT HAD TO BE MA DE TREATING THE GAIN AS LONG TERM CAPITAL GAINS ARISIN G OUT OF THE SALE OF THE IMMOVABLE PROPERTY. 2.7. IF THE AFORESAID CONCLUSION/FACTS ARE ANALYZED ADMITTEDLY, THE ASSESSEE WAS PUT IN POSSESSION AND ENJOYMENT OF THE SUIT PROPERTY AS AGREEMENT HOLDER RIGHT FROM JANUARY, 1, 1976 AND SUIT FOR SPECIFIC PERFORM ANCE WAS FILED BEFORE THE COURT IN TERMS OF COMPROMISE M EMO FILED IN THE SUIT AND THUS DECREE WAS PASSED ON 30/09/1983 IN FAVOUR OF THE ASSESSEE. THE ASSESSEE WAS IN MR. BHAGWAN T.FATNANI . . 12 LAWFUL POSSESSION OF A DOCUMENT/AGREEMENT TO SALE. IN THAT SITUATION, THE ASSESSMENT WAS HELD TO BE MADE TREAT ING THE GAIN AS LONG TERM CAPITAL GAINS ARISING OUT OF SALE OF IMMOVABLE PROPERTY. HOWEVER, THE FACTS ARE ABSOLUTE LY DIFFERENT IN THE PRESENT APPEAL AS THE ASSESSEE ILL EGALLY ENCROACHED UPON A LAND, WHICH WAS MEANT FOR A SCHOO L WITHOUT HAVING ANY TITLE/OWNERSHIP RIGHT. THUS, THE BENEFIT OF THE AFORESAID DECISION/OBSERVATION FROM HONBLE HIGH COURT CANNOT BE EXTENDED TO THE ASSESSEE BEING ON D IFFERENT FACTS. 2.8. ANOTHER DECISION RELIED UPON BY THE ASSESSEE I S FROM HONBLE DELHI HIGH COURT IN CIT VS SMT. NILOFER I. SINGH (309 ITR 233) (DEL.), WHEREIN, THE ISSUE BEFORE THE HONBLE HIGH COURT WAS FOR COMPUTATION OF CAPITAL GAINS, IT WAS HELD THAT IT DOES NOT REFER TO MARKET VALUE BUT ONL Y TO CONSIDERATION SPECIFIED IN SALE DEED. IT WAS FURTHE R HELD THAT THERE WAS NO NECESSITY TO COMPUTE FAIR MARKET VALUE. OBVIOUSLY, THE FACTS ARE ALL TOGETHER DIFFERENT, TH EREFORE, THE ASSESSEE CANNOT BE BENEFITED FROM THIS ORDER ALSO. BECAUSE, THE FACTS WERE WHEN A SALE OF A PROPERTY TOOK PLACE , THE CAPITAL GAINS, ARISING OUT OF SUCH TRANSFER, HAS TO BE COMPUTED BY TAKING INTO ACCOUNT, THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF S UCH TRANSFER, THUS, THE FACTS ARE DIFFERENT BECAUSE THE RE IS NO TRANSFER OF LAND IN THE PRESENT APPEAL. 2.9. THE LD. DR, PLACE RELIANCE TO THE RATIO LAID D OWN BY MR. BHAGWAN T.FATNANI . . 13 HONBLE KERALA HIGH COURT IN 227 ITR 490 IN PENINSU LAR PLANTATION LTD. VS CIT, WHEREIN, IT WAS HELD AS UND ER:- HELD, THAT THE SUM IN QUESTION COULD NOT BE TREATE D AS INCOME FROM HOUSE PROPERTY BECAUSE THE ASSESSEE WAS NOT THE OWNER OF THE HOUSE PROPERTY WHICH WAS THE SUBJECT-MATTER OF THE AGREEMENT, AS NO SALE DEED HA D BEEN EXECUTED. THE VENDOR CONTINUED TO BE THE OWNER, AND RECEIVED RENTS, BUT WHEN HANDED OVER TO THE ASSESSE E, THE SUMS RECEIVED BY THE ASSESSEE FROM THE OWNER WERE N OT RENT BUT WERE RECEIVED UNDER THE TERMS OF THE AGREE MENT, AND WERE THEREFORE ASSESSABLE UNDER THE HEAD 'INCOM E FROM OTHER SOURCES'. IF THE AFORESAID DECISION IS KEPT IN JUXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, IT CAN BE SAID THA T THE AMOUNT SHOWN BY THE ASSESSEE CAN NEVER BE SAID TO B E A CAPITAL GAINS AT ALL RATHER AT BEST IT CAN BE SAI D TO BE INCOME FROM OTHER SOURCES, IF ANY. 2.10. BROADLY, CAPITAL ASSET INCLUDES EVERY KIND OF PROPERTY AS GENERALLY UNDERSTOOD, HOWEVER, THE MEANING OF TH E EXPRESSION PROPERTY IT INCLUDES EVERY CONCEIVABLE THING, RIGHT OR INTEREST OR LIABILITY AS WAS HELD BY HONB LE KERALA HIGH COURT IN SYNDICATE BANK LTD. VS ADCIT 155 ITR 681 (KER.). UNDER THE CHARGING SECTION, THE CRUCIAL REQ UIREMENTS ARE THAT THERE MUST BE A TRANSFER AND SUCH TRANSFER MUST BE OF A CAPITAL ASSET. THE IMPLICATION IS THAT AT T HE TIME OF TRANSFER, THE SUBJECT OF TRANSFER MUST BE A CAPITAL ASSET AS WAS HELD BY MADRAS HIGH COURT IN M. VENKATESHAN VS CIT MR. BHAGWAN T.FATNANI . . 14 (1993) 144 ITR 886 (MAD.). IF THIS RATIO IS APPLIED TO THE FACTS OF THE PRESENT APPEAL, IT IS CLEAR THAT THERE IS NO TRANSFER OF ASSET AS SUCH RATHER, AS MENTIONED EARL IER, THE PRIMARY SCHOOL LAND WAS ENCROACHED UPON/ILLEGALLY OCCUPIED BY THE ASSESSEE AND AS SUCH THERE IS NO TR ANSFER OF CAPITAL ASSET, THUS, UNDER THE PRESENT FACTS, IT CANNOT BE EXTENDED TO SUCH AN EXTENT AS HAS BEEN CLAIMED BY T HE ASSESSEE. IN OUR HUMBLE OPINION, THE WORD USED IN T HE SECTION AS ANY KIND MEANS LAND, BUILDING, CONVEYA NCE OF PROPERTY ( CIT VS TATA SERVICES LTD.-122 ITR 594-BO M.), MORTGAGE (BAFNA CHARITABLE TRUST VS CIT-230 ITR 864 BOM.), SHARE IN FIRM (V. RANGASWAMI NAIDUE VS CIT - 31 ITR 711- MAD.), AN UNDERTAKING (INDIAN BANK LTD. VS CIT 153 ITR 282- MAD.), RUNNING BUSINESS (CIT VS F.X. PERIE RA & SONS (T.) (P.) LTD. 184 ITR 461-KER.), ROUTE PERMIT S (ADDL. CIT VS GANPATI RAJU JEGI, SANYASI RAJU-119 ITR 715-AP/S.VAIDYANATHA SWAMY VS CIT -119 ITR 369-MAD. ), FIXED DEPOSITS (CIT VS EAST INDIA CHARITABLE TRUST- 206 ITR 152-CAL.), ETC. AND NOT AS HAS BEEN CANVASSED BY TH E LD. COUNSEL FOR THE ASSESSEE. TO ELABORATE IT FURTHER, IT CAN BE SAID THAT SECTION 6 OF THE TRANSFER OF PROPERTY ACT , WHICH USES THE SAME EXPRESSION PROPERTY OF ANY KIND IN THE CONTEXT OF TRANSFERABILITY MAKES AN EXCEPTION IN TH E CASE OF MERE RIGHT TO USE. THE DECISIONS THEREUNDER MAKES I T ABUNDANTLY CLEAR THAT RIGHT TO SUE FOR DAMAGES IS N OT ACTIONABLE CLAIM. IT CANNOT BE ASSIGNED. TRANSFER O F SUCH A RIGHT IS AS MUCH OPPOSED TO PUBLIC POLICY AS IS GAM BLING IN LITIGATION. AS SUCH, IT WILL NOT BE QUITE CORRECT T O SAY THAT MR. BHAGWAN T.FATNANI . . 15 SUCH A RIGHT CONSTITUTE A CAPITAL ASSET WHICH IN TURN HAS TO BE AN INTEREST OF PROPERTY OF ANY KIND. THIS PROP OSITION IS SUPPORTED BY THE DECISION FROM THE HONBLE JURISDIC TIONAL HIGH COURT IN CIT VS ABHAS BHOY A. BEGHGAMWALLA (19 92) 195 ITR 28 (BOM.). 2.11. SO FAR AS, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS, THOUGH ILLEGALLY, OC CUPYING THE SCHOOL PREMISES FOR THE LAST 20 YEARS, IN OUR O PINION, DOES NOT GIVE THE ASSESSEE THE CONTROLLING RIGHTS. EVEN OTHERWISE, CONTROLLING INTEREST IS NOT AN IDENTIFIA BLE OR DISTINCT CAPITAL ASSET INDEPENDENT OF HOLDING OF SH ARES AND THEREFORE DOES NOT SATISFY THE LANGUAGE OF A CAPIT AL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. IDE NTICALLY WAS HELD BY HONBLE APEX COURT IN VODAFONE INTERNAT IONAL HOLDING B.V. VS UNION OF INDIA (2012) 204 TAXMAN 40 8 (SC). RIGHT FROM ASSESSMENT STAGE, THE ASSESSEE HAS NOT P ROVED IN ANY MANNER THAT THE ASSESSEE IS HAVING ANY LEGAL RIGHT/TITLE OVER THE PROPERTY. IN SUCH A SITUATION FOR DECIDING THE ISSUE OF ANY KIND ALL RELEVANT FACTS MUST BE CUMULATIVELY CONSIDERED. THE RATIO LAID DOWN, THOUG H ON DIFFERENT ISSUE, IN THE CASE OF SARIFA BIBI MOHAMMA D IBRAHIM VS CIT (204 ITR 631) (SC), WHEREIN, WHETHER A LAND IS AN AGRICULTURAL LAND OR NOT ESSENTIALLY A QUESTI ON OF FACT. SEVERAL TESTS HAVE BEEN EVOLVED IN THE DECISION OF THE SUPREME COURT AND HIGH COURT, BUT ALL OF THEM ARE M ORE IN THE NATURE OF GUIDELINES. THE QUESTIONS HAVE TO BE ANSWERED IN EACH CASE HAVING REGARD TO THE FACTS AN D THE MR. BHAGWAN T.FATNANI . . 16 CIRCUMSTANCES OF THAT CASE. THERE MAY BE FACTORS BO TH FOR AND AGAINST A PARTICULAR POINT OF VIEW. THE COURT H AS TO ANSWER THE QUESTION ON A CONSIDERATION OF ALL OF TH EM BY A PROCESS OF EVALUATION, THEREFORE, THE INFERENCE HAS TO BE DRAWN ON CUMULATIVE CONSIDERATION OF ALL THE RELEVA NT FACTS, SUPPORTS OUR VIEW. UNDER THE FACTS AVAILABLE BEFORE US, IF SUCH A LIBERAL/EXTENDED MEANING IS ASSIGNED TO THE WORD ANY KIND THEN IT WILL DEFEAT THE VERY PURPOSE OF THE LEGISLATION AND WILL ENLARGE THE SCOPE OF UNSCRUPUL OUS PERSONS TO GRAB THE GOVERNMENT PROPERTY OR PROPERTY OF ANY PERSON AND AFTER SOME TIME HE/SHE MAY TAKE THE PLEA THAT SUCH PROPERTY HAS BEEN SHOWN IN HIS/HER BALANCE SHE ET AND ALSO PAID CAPITAL GAINS TAX TO THE INCOME TAX DEPARTMENT, THEREFORE, IT MAY BE LEGALLY TRANSFERRE D IN HIS NAME THEREAFTER. IN OUR HUMBLE OPINION, SUCH LEVERA GE CANNOT BE EXTENDED TO THE ASSESSEE UNDER THE FACTS AVAILABLE BEFORE US. 2.12. IF THIS ISSUE IS ANALYZED WITH RESPECT TO SEC TION 45 OF THE ACT. CAPITAL GAINS ACCRUES ONLY IF THERE IS A S ALE OR ANY TRANSFER OF THE CAPITAL ASSET. IF THE ASSESSEE SATI SFIES THE ASSESSING OFFICER ON THE BASIS OF A SALE DEED/TRANS FER DOCUMENT ONLY THEN CONCLUSION CAN BE DRAWN THAT ANY GAINS HAS ACCRUED. HOWEVER, IN THE PRESENT CASE, NE ITHER ANY SALE OR TRANSFER OF THE PROPERTY/ASSET TOOK PLA CE, THEREFORE, THERE IS NO QUESTION OF CAPITAL GAIN. TH E RATIO LAID DOWN IN HIRA LAL RAMDAYAL VS CIT (122 ITR 461)(P & H) SUPPORTS OUR VIEW. CAPITAL GAINS IS TO BE INCLUDED ONLY AT MR. BHAGWAN T.FATNANI . . 17 THE TIME, IT IS ASCERTAINED, THE QUESTION OF CAPITA L GAIN IS INTERRELATED WITH THE QUANTIFICATION OF THE AMOUNTS WHICH ONLY CAN HAPPEN IN THE CASE OF SALE/TRANSFER OF CAP ITAL ASSET. HOWEVER, IN THE PRESENT APPEAL, THERE WAS NO QUESTION OF ANY SALE/TRANSFER OF ASSET, THEREFORE, THERE IS NO QUESTION OF ANY CAPITAL GAINS. IN ORDER TO ATTRACT SECTION 45 OF THE ACT, IT SHOULD BE ESTABLISHED THAT BY THE TRANSFER/SALE, THE TITLE OF THE PROPERTY PASSED TO THE PURCHASER. IF ANY IMMOVABLE PROPERTY IS SOLD OR TRANSFERRED, IT SHOULD BE ESTABLISHED BY A CONVEYAN CE/ REGISTERED DEED OR ANY OTHER LEGAL DOCUMENT. THE HO NBLE APEX COURT IN ALAPATI VENKATRAMIAH VS CIT 57 ITR 18 5 (SC) HELD THAT ENTRIES IN ACCOUNTS BOOK ARE NOT RELEVANT , RATHER THE DATE OF SALE OR THE TRANSFER DATE WHEN THE SAL E OR TRANSFER TAKES PLACE IS RELEVANT. THE RATIO LAID DO WN IN BUDDIAH VS CIT 155 ITR 277 (KARN.), HARISHCHANDRA V S CIT 154 ITR 478 (DEL.), SYED ABDUL BASIR VS CIT 170 ITR 566 (RAJ.), ADDL. CIT VS NEW JAHANGIR VAKIL MILLS COMPA NY LTD. 117 ITR 849 (GUJ.), CIT VS PURSHOTAMBHAI MAGANBHAI HATHEESINGH (HUF) 156 ITR 150 (GUJ.) AND M.B. KARMA RKAR AND P.L. GOKHALE VS CIT 150 ITR 234 (BOM.), WHEREIN , IT WAS HELD THAT IN COMPULSORY ACQUISITION CASES, DATE OF TAKING POSSESSION BY GOVERNMENT IS RELEVANT, SUPPOR TS OUR VIEW. THE RATIO LAID DOWN IN THESE CASES IS THAT TH ERE SHOULD BE TRANSFER OF CAPITAL ASSET BUT IN THE PR ESENT APPEAL THERE IS NO TRANSFER AS SUCH RATHER AS MENTI ONED EARLIER THE ASSESSEE ENCROACHED UPON THE SCHOOL LAN D, THEREFORE, THERE IS NO QUESTION OF ANY SALE OR TRAN SFER OF MR. BHAGWAN T.FATNANI . . 18 CAPITAL ASSET, CONSEQUENTLY, THERE IS NO QUESTION O F ANY CAPITA GAIN AS HAS BEEN CLAIMED. THE HONBLE JURIS DICTIONAL HIGH COURT IN THE AFOREMENTIONED CASE OF M.B. KARMA RKAR AND P.L. GOKHALE (SUPRA) HELD THAT UNTIL THE AWARD WAS MADE, THERE IS NO QUESTION OF PASSING OF PROPERTY O R LEGAL VESTING OF THE SAME TO THE GOVERNMENT. THE FACT THA T POSSESSION WAS HANDED OVER TO THE GOVERNMENT EARLIE R WOULD HAVE NO RELEVANCE TO THE PASSING OF THE PROPE RTY OR VESTING OF IT, CONSEQUENTLY, THERE IS NO QUESTION O F ANY CAPITAL GAIN. SO FROM THIS ANGLE ALSO, THE ASSESSEE IS HAVING NO CASE AT ALL. 2.13. THE ASSESSEE RIGHT FROM ASSESSMENT STAGE AND TILL BEFORE THIS TRIBUNAL HAS NOT PRODUCED ANY DOCUMENT REGARDING TRANSFER/PURCHASE OF THE IMPUGNED PROPERT Y IN HIS FAVOUR AS IS EVIDENT FROM PARA 4.1 OF THE ASSES SMENT ORDER ALSO. THE ASSESSEE DID NOT PRODUCE ANY DOCUME NT IN SUPPORT OF THE COST OF ACQUISITION OR INVESTMENT MA DE FOR THE PROPERTY/CAPITAL ASSET. THE FATNANI FAMILY IS C ONSISTING OF THREE BROTHERS AND ENCROACHED UPON THE ADJACENT PLOT MEANT FOR A PRIMARY SCHOOL. EVEN IN PARA-2 AT PAGE -3 OF THE IMPUGNED ORDER, IT HAS BEEN ADMITTED BY THE ASS ESSEE ITSELF THAT HE OCCUPIED THE SCHOOL LAND UNAUTHORIZE DLY AND ILLEGALLY CARRIED OUT CONSTRUCTION. THE TOTALITY OF FACTS CLEARLY INDICATES THAT THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) WITHOUT APPRECIATING THE FACTS REACHED TO A PARTICULAR CONCLUSION, THEREFORE, SUCH ORDER CANNOT BE UPHELD. THE APPEAL OF THE REVENUE IS THEREFORE ALLO WED. MR. BHAGWAN T.FATNANI . . 19 FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE OF BOTH SIDES, AT TH E CONCLUSION OF HEARING ON 08/04/2015. SD/- SD/- ( D.KARUNAKARA RAO ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ' ( MUMBAI; +' DATED : 08/04/2015 F{X~{T? P.S/. '. . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 2 2 ' 3& ( ,- ) / THE CIT, MUMBAI. P4. 2 2 ' 3& / CIT(A)- , MUMBAI 5. 56 0&'# , 2 ,-* ,# , ' ( / DR, ITAT, MUMBAI 6. $ 7( / GUARD FILE. / BY ORDER, 15-& 0& //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI