SAKSHI K CHANDIRAMANI, MUMBAI V. ITO 19(1)-4, MUMBAI

ITA 7996/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71657 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Keywords: Capital asset; Gift; Fair market value; Capital receipt
• Section: 54F; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE SHRI D.KARUNAKARA RAO , A M & SHRI SANJAY GARG , J M IT A NO. 7996 /MUM/201 1 ( ASSESSMENT YEAR :200 8 - 200 9 ) MS SAKSHI K. CHANDIRAMANI, 501, DHANSHILA, 5 TH FLOOR, PLOT NO.27, 14 TH ROAD AHINSA MARG, KHAR(W), MUMBAI - 52 VS. ITO 19(1)(4), MUMBAI PAN/GIR NO. : A IFPC 9634 F ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. VIJAY MEHTA & MR. ANUJ KISNADWALA /REVENUE BY : MR . ASHOK SURI DATE OF HEARING : 2 1 ST NOVEMBER , 201 3 DATE OF PRONOUNCEMENT : 2 1 ST NOVEMBER,2013 O R D E R PER D.KARUNAKARA RAO ( A .M.) : TH IS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED AGAINST THE ORDER DATED 30 - 9 - 2011 , PASSED BY THE LEARNED CIT(A) - 30 , MUMBAI FOR THE ASSESSMENT YEAR 200 8 - 200 9 . 2 . AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR ATTENTION TO THE REVISED GROUNDS OF APPEAL AND MENTIONED THAT THE ISSUE FOR ADJUDICATION BEFORE THE TRIBUNAL RELATES TO THE JUSTIFICATION IN CONFIRMING THE ADDITION OF RS. 45 LAKHS AND TAXING THE SAME UNDER THE HEAD CAPITAL GAINS UNDER SECTION 45 OF THE ACT. FURTHER, THE COUNSEL MENTIONED THAT WITHOUT PREJUDICE TO THE ABOVE, WHILE COMPUTING THE ITA NO. 7996 /201 1 2 CAPITAL ASSET, THE FACT OF FAIR MARKET VALUE OF THE ASSET AS ON 1 - 4 - 1981 AFTER IN DEXATION, HAS NOT BEEN CONSIDERED. 3 . BRIEFING RELEVANT FACTS, IT IS SUBMITTED THAT AFTER DEMISE OF SHEWARAM CHANDIRAMANI, SMT. LAJWANTI SHEWARAM CHANDIRAMANI BECAME THE OWNER OF A N IMMOVABLE PROPERTY I.E. FLAT NO. 8A ON 8 TH FLOOR IN VAIBBHAV APARTMENT, MO DERN BEACH CANDY CO - OPERATIVE HOUSING SOCIETY LTD., SITUATED AT 80, BHULABHAI DESAI ROAD, MUMBAI - 400 026. THE SAID PROPERTY WAS GIFTED TO MRS. SANJANA RAMESH WADHWANI. THE PRESENT ASSESSEE IS THE DAUGHTER OF THE BROTHER OF MRS. SANJANA RAMESH WADHWANI . THE ASSESSEE ALONG WITH OTHERS DISPUTED THE SAID GIFT BEFORE THE HONBLE HIGH COURT CLAIMING THEIR SHARE IN THE SAID PROPERTY. IN RESPONSE, MRS. SANJANA RAMESH WADHWANI FILED AN AFFIDAVIT BEFORE THE HONBLE HIGH COURT ON 31 - 1 - 2006. AS PART OF THE FAMILY SETTL EMENT, THE ASSESSEE RECEIVED THE AMOUNT FOR A SUM OF RS. 45 LAKHS . THE ASSESSEE , AFTER RECEIVING THE SAID AMOUNT , DECLARED TO WITHDRAW THE SUIT FILED EARLIER BEFORE THE HONBLE HIGH COURT AGAINST MRS. SANJANA RAMESH WADHWANI BEARING SUIT NO .182/2006, COPY O F WHICH IS PLACED AT PAGE 40 OF THE PAPER BOOK. FURTHER, LEARNED COUNSEL BROUGHT TO OUR NOTICE TO PAGE 39 OF THE PAPER BOOK IN REGARD TO PROCEEDINGS OF HONBLE HIGH COURT OF BOMBAY, WHEREBY THE SUIT WAS FINALLY DISMISSED AS WITHDRAWN. THUS, THE SUMMARY OF THE PROCEEDINGS IS THAT , AS PER THE FAMILY SETTLEMENT QUA THE IMPUGNED FLAT NO. 8A ON 8 TH FLOOR IN VAIBBHAV APARTMENT, MODERN BEACH CANDY CO - OPERATIVE HOUSING SOCIETY LTD., SITUATED AT 80, BHULABHAI DESAI ROAD, MUMBAI - ITA NO. 7996 /201 1 3 400 026 , THE ASSESSEE RECEIVED A SUM OF RS. 45 LAKHS, WHICH IS THE SUBJECT MATTER OF THE PROCEEDINGS BEFORE THE INCOME TAX AUTHORITIES. THE ASSESSEE INVESTED THIS AMOUNT OF RS.45 LAKHS IN NEW ASSET AND CLAIMED EXEMPT UNDER SECTION 54F OF THE ACT. THUS, THE ASSESSEE DID NOT PAY TAX ON RS. 45 LAKHS AND ALSO CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT. ON THE OTHER HAND, IT IS THE CASE OF THE AO THAT THE SAID SUM OF RS. 45 LAKHS CONSTITUTES CAPITAL GAINS AND DENIED ANY EXEMPTION. REVENUES OPINION IS THAT THE SAID RECEIPT OF RS.45 LAKHS CONSTITUTES CAPITAL GAINS IN TOTO . THE AO TOOK COST OF CONSIDERATION OF THE SAID CAPITAL RECEIPT AT NIL. IN APPEAL, THE CIT(A) CONFIRMED THE SAID ADDITION MADE BY THE AO. 4 . DURING THE PROCEEDINGS BEFORE US, AFTER EXPLAINING THE ABOVE MENTIONED FACTS, LD. COUNSEL AR GUED BY STATING THAT THE SAID RECEIPT IS NOT A COMPENSATION FOR ANY LOSS OR EXTINGUISHING OF RIGHTS. IT IS IN FACT, PART OF THE IMMOVABLE PROPERTY IN THE FORM OF CASH GIFTED BY THE DONOR. IN SUBSTANCE, IT IS THE GIFT RECEIVED FROM THE ANCESTOR AS PART OF T HE FAMILY SETTLEMENT AND THE SAME IS NOT SUBJECTED TO TAX. THE SAID AMOUNT IS OUTSIDE THE PURVIEW OF THE CONCEPT OF TRANSFER DEFINED IN SECTION 2 ( 47 ) OF THE ACT. RELYING HEAVILY ON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ASHWANI CHOPRA & ANOTHER, REPORTED IN (2013) 352 ITR 620 (P&H) , LEARNED COUNSEL MENTIONED THAT CONSIDERING THE PRINCIPLE OF OWELTY, THE SAID AMOUNT OR SUCH A RECEIPT CANNOT BE TREATED AS INCOME LIABLE TO CAPITAL GAINS. DRAWING ANALOGY TO THE FACTS O F THE ASSESSEE, THE COUNSEL ITA NO. 7996 /201 1 4 SUBMITTED THAT SUCH AMOUNT WAS PAID TO EQUALIZE THE INEQUALITIES IN A PARTITION OF THE ASSET AMONG ELIGIBLE LEGAL HEIRS. 5 . ON THE OTHER HAND, LEARNED DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO AS WELL AS CIT(A) . 6 . WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS ADVANCED AT THE HANDS OF THE LEARNED COUNSEL FOR THE ASSESSEE AS WELL AS LEARNED DR FOR THE REVENUE AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE PAPER BOO K FILED BEFORE US. THE ASSESSEE S PAPER BOOK CONTAINS A COPY OF THE PLAINT FILED BEFORE THE HONBLE HIGH COURT DISPUTING THE GIFT TO MRS. SANJANA RAMESH WADHWANI , COPY OF THE REPLY TO THE SAID SUIT BY MRS. SANJANA RAMESH WADHWANI , FAMILY TREE OF THE ASSESS EE, COPY OF THE DEED OF THE SAID FLAT FROM MRS. LAJWANTI CHANDIRAMANI TO MRS. SANJANA RAMESH WADHWANI AND MINUTES OF THE ORDER OF HON BLE BOMBAY HIGH COURT FOR WITHDRAWAL OF SUIT ON PAYMENT BY MRS. SANJANA RAMESH WADHWANI FOR SETTLEMENT. THESE DOCUMENTS WE RE ALREADY AVAILABLE TO THE REVENUE AUTHORITIES TOO . THE FACT OF GIFTING OF THE FLAT, FILING OF PLAINT BEFORE THE HONBLE HIGH COURT BY THE ASSESSEE AND OTHERS, FAMILY SETTLEMENT, RECEIPT OF THE SAID AMOUNT OF RS. 45 LAKHS BY THE ASSESSEE, ARE UNDISPUTED EV ENTS. THE ONLY ISSUE THAT IS TO BE DECIDED BY US HERE IS WHETHER THE SAID AMOUNT CONSTITUTES PART OF THE SETTLEMENT OF THE SAID FLAT NO. 8A ON 8 TH FLOOR IN VAIBBHAV APARTMENT, MODERN BEACH CANDY CO - OPERATIVE HOUSING SOCIETY LTD., SITUATED AT 80, BHULABHAI D ESAI ROAD, MUMBAI - 400 026 AND IT IS TO REMOVE THE INEQUALITIES OF ITA NO. 7996 /201 1 5 DISTRIBUTION OF THE ASSETS AMONG THE LEGAL HEIRS. AFTER HEARING THE PARTIES, WE ARE OF THE OPINION, THE SAID AMOUNT WAS PAID TO THE ASSESSEE TO EQUALIZE THE INEQUALITIES IN DISTRIBUTION OF T HE IMMOVABLE PROPERTY. IN OUR OPINION, THESE ISSUES STAND COVERED BY THE JUDGMENT OF THE HON BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF ASHWANI CHOPRA & ANOTHER (SUPRA) AND THE HELD POST OF THE SAID DECISION READS AS FOLLOWS : - HELD, DISMISSING THE APPEALS, THAT THE PAYMENT OF RS TO THE ASSESSEE WAS TO EQUALIZE THE INEQUALITIES IN PARTITION OF THE ASSETS OF HSL. THE AMOUNT SO PAID WAS IMMOVABLE PROPERTY. IF SUCH AMOUNT WAS TO BE TREATED AS INCOME LIABLE TO TAX, THE INEQUALITIES WOULD SET IN AS THE SHARE OF THE RECIPIENT WOULD DIMINISH TO THE EXTENT OF TAX. SINCE THE AMOUNT PAID DURING THE COURSE OF PARTITION WAS TO SETTLE THE INEQUALITIES IN PARTITION, IT WOULD BE DEEMED TO BE IMMOVABLE PROPERTY. SUCH AMOUNT WAS NOT AN INCOME LIABLE TO TAX. THUS, T HE AMOUNT OF OWELTY, I.E., COMPENSATION DEPOSITED BY GROUP B WAS TO EQUALIZE THE PARTITION AND REPRESENTED IMMOVABLE PROPERTY AND WOULD NOT ATTRACT CAPITAL GAINS. 7 . FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEE IS ENTITLED TO RELIEF CONSIDERING THE P RINCIPLE OF OWELTY AS ARGUED BY THE LEARNED COUNSEL BEFORE US. IN OUR OPINION, THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT AN INCOME BUT A SHARE IN THE IMMOVABLE PROPERTY THOUGH PAID IN CASH. IT IS THE CASH VALUE TO SETTLE THE INEQUALITIES IN PARTITION. IN THE LANGUAGE OF THE HON BLE HIGH COURT IN THE CASE OF ASHWANI CHOPRA & ANOTHER (SUPRA) , SUCH AMOUNT CANNOT BE TREATED AS INCOME LIABLE TO CAPITAL GAINS. THE SAID JUDGMENT WAS PRONOUNCED AFTER CONSIDERING THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE C ASE OF T.S.SWAMINATHA ODAYAR VS. OFFICIAL RECEIVER OF WEST TANJORE, ITA NO. 7996 /201 1 6 REPORTED IN AIR 1957 SC 577 . THE OTHER RELEVANT REASONING GIVEN BY THE HONBLE HIGH COURT, WHICH APPEARED IN PAGE 628, READS AS UNDER : - .. PARTITION IS NOT A TRANSFER AND ADJUSTMENT O F SHARES, CRYSTALLIZATION OF THE RESPECTIVE RIGHTS IN THE FAMILY PROPERTIES CANNOT BE CONSTRUED AS A TRANSFER IN THE EYE OF LAW. WHEN THERE IS NO TRANSFER OF ASSE T , THERE IS NO CAPITAL GAINS AND, CONSEQUENTLY, THERE IS NO LIABILITY OF PAY TAX ON CAPITAL GA INS. IN VIEW OF THE AFORESAID PRINCIPLES OF LAW, WE FIND THAT THE PAYMENT OF RS . CRORES TO GROUP A IS TO EQUALIZE THE INEQUALITIES IN PARTITION OF THE ASSETS OF M/S HIND SAMACHAR LTD. THE AMOUNT SO PAID IS IMMOVABLE PROPERTY. IF SUCH AMOUNT IS TO BE TREA TED AS INCOME LIABLE TO TAX, THE INEQUALITIES WOULD SET IN A S THE SHARE OF THE RECIPIENT WILL DIMINISH TO THE EXTENT OF TAX. SINCE THE AMOUNT PAID DURING THE COURSE OF PARTITION IS TO SET TLE THE INEQUALITIES IN PARTITION, THEREFORE, DEEMED TO BE IMMOVABLE PROPERTY. SUCH AMOUNT IS NOT AN INCOME LIABLE TO TAX. THUS, THE AMOUNT OF OWELTY, IE., COMPENSATION DEPOSITED BY GROUP B IS TO EQUALIZE THE PARTITION REPRESENTS IMMOVABLE PROPERTY AND WILL NOT ATTRACT CAPITAL GAINS. THE ARGUMENT THAT THE ASSESSEE IS LIABL E TO TAX BEING INTEREST ON CASH, SUFFICE IT TO SAY, THAT SUCH QUESTION OR FACT DOES NOT ARISE FROM THE ORDERS OF THE TRIBUNAL. 8 . CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) IS REQUIRED TO BE REVERSED AND GROUNDS RAISED BY T HE ASSESSEE ARE ALLOWED . C ONSIDERING THE RELIEF GRANTED TO THE ASSESSEE ON THE GROUNDS, THE ISSUE RAISED WITHOUT PREJUDICE BECOMES ACADEMIC, THEREFORE, THE SAME ARE DISMISSED AS ACADEMIC. 9 . IN THE RESULT, APPEAL OF THE AS S ESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 1 ST OF NOV. 201 3 . 2 1 ST 201 3 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( D.KARUNAKARA RAO ) / JUDICIALMEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 1 /11/ 2013 /PKM , PS ITA NO. 7996 /201 1 7 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//