ASST CIT CEN CIR 17 & 28, MUMBAI V. JYEMKO, MUMBAI

ITA 8193/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75897 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Department
• Bench Allotted: J
• Next Hearing Date: 06-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2011
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: S N INAMDAR
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Cost of acquisition; Scheme of amalgamation
• Section: 143(3); 2(14); 148

Judgement Text

M/S JYEMKO 1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER ITA NO. 8193/MUM/2011 ASSESSMENT YEAR. 2007-08 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIR 17 & 28, MUMBAI. ROOM NO. 401, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD,L MUMBAI 400 020. VS. M/S JYEMKO 301, 3 RD FLOOR, M.G. ROAD, DESTINATION BLDG, NEXT TO SHOPPERS STOP, CHEMBUR, MUMBAI 400 089. PAN: AAAFJ1075C APPELLANT RESPONDENT CO NO. 236/MUM/2012 ARISING OUT OF ITA NO. 8193/MUM/2011 ASSESSMENT YEAR. 2007-08 M/S JYEMKO 301, 3 RD FLOOR, M.G. ROAD, DESTINATION BLDG, NEXT TO SHOPPERS STOP, CHEMBUR, MUMBAI 400 089. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIR 17 & 28, MUMBAI. ROOM NO. 401, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD,L MUMBAI 400 020. PAN: AAAFJ1075C APPELLANT RESPONDENT ITA NO. 8267/MUM/2011 ASSESSMENT YEAR. 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIR 17 & 28, MUMBAI. ROOM NO. 401, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD,L MUMBAI 400 020. VS. M/S JYEMKO 301, 3 RD FLOOR, M.G. ROAD, DESTINATION BLDG, NEXT TO SHOPPERS STOP, CHEMBUR, MUMBAI 400 089. PAN: AAAFJ1075C APPELLANT RESPONDENT M/S JYEMKO 2 ITA NO. 8202/MUM/2011 ASSESSMENT YEAR. 2008-09 M/S JYEMKO 301, 3 RD FLOOR, M.G. ROAD, DESTINATION BLDG, NEXT TO SHOPPERS STOP, CHEMBUR, MUMBAI 400 089. VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIR 17 & 28, MUMBAI. ROOM NO. 401, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD,L MUMBAI 400 020. PAN: AAAFJ1075C APPELLANT RESPONDENT REVENUE BY SHRI. A. RAMCHANDRAN ASSESSEE BY SHRI S.N. INAMDAR ORDER PER BENCH, THESE TWO APPEALS BY THE REVENUE AND CROSS APPEAL A ND CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDERS O F CIT(A) BOTH DATED 2.09.2011 FOR A.Y. 2007-08 AND 2008-09. FOR THE ASSESSMENT YEAR 2007-08 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT T HE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AS AGAINST THE SAME AS SESSED AS INCOME FROM BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO REWORK THE COMPUTATION OF SHORT TERM CAPITAL GAIN MADE AT RS. 2,24,107/- BY MODIFYING THE COST O F ACQUISITION TAKEN BY THE AO. DATE OF HEARING 06.03.2014 DATE OF PRONOUNCEMENT 14 - 03 - 2014 M/S JYEMKO 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,12,14,267/ - MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN. 2. FIRST GROUND IS REGARDING TREATMENT OF RENTAL IN COME AS INCOME FROM HOUSE PROPERTY OR BUSINESS. 2.1 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED THE RENTAL INCOME FROM THE FOLLOWING PARTIES:- (I) M/S TRESS TALK FOR 301, DESTINATION CHEMBUR RS. 9, 60,000/- (II) ARVIND BRANDS LTD. & FOR RAJDOOT CO-OP. HSG. SOCIET Y RS. 16,56,000/- THE AO TREATED THE RENTAL LINCOME AS INCOME FROM BU SINESS AND CONSEQUENTLY DISALLOWED THE DEDUCTIN U/S 24(1). 2.2 ON APPEAL, CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AND TREATED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY BY FOLLOWING T HE ORDER FOR THE A.Y. 2006-07. 2.3 WE HAVE HEARD THE LD. DR AS WELL AS THE LD AR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. DR HAS RELIED UPON THE ORDER OF AO AND SUBMITTED THAT EARLIER THESE TWO PROPERTIES WERE TREATED BY THE AS SESSEE AS BUSINESS ASSET AND, THEREFORE, THE AO IS JUSTIFIED IN TREATING THE RENT AL INCOME AS INCOME FROM BUSINESS. ON THE OTHER HAND LD. AR HAS SUBMITTED THAT IN THE EA RLIER YEARS THE ASSESSEE USED THESE PROPERTIES FOR BUSINESS PURPOSE BUT IN THE A.Y. 200 6-07, THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS AND LET OUT THESE PROPERTIES FOR R ENT. THE AO TREATED THE RENTAL INCOME AS BUSINESS INCOME FOR A.Y. 2006-07 BUT THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. THE LD. AR HAS FURTHER SUBMITTED THAT DEPARTMENT HA S ACCEPTED THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 ON THIS ISSUE, THEREFOR E, THE AO CANNOT DISALLOW THE CLAIM OF ASSESSEE WHEN THE CLAIM WAS ACCEPTED FOR A.Y. 20 06-07 M/S JYEMKO 4 2.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFUL PERUSAL OF THE RELEVANT RECORD, WE NOTE THAT AN IDENTICAL ISSUE AROSE FOR T HE A.Y. 2006-07, WHEN THE AO TREATED THE RENTAL INCOME OF THESE TWO PROPERTIES IN QUESTI ON AS BUSINESS INCOME. THE ASSESSEE CHALLENGED THE ACTION OF THE AO FOR THE A.Y. 2006-0 7 BEFORE CIT(A) AND THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FOR TH E ASSESSMENT YEAR UNDER CONSIDERATION THE CIT(A) HAS DECIDED THE ISSUE BY FOLLOWING THE O RDER OF A.Y. 2006-07 IN PARA 10 AND 10.2 AS UNDER:- THE NEXT ISSUE TO BE DECIDED IS WHETHER THE RENTAL INCOME RECEIVED IS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR INCOME FROM BUSINES S. DURING THIS ACCOUNTING YEAR THE APPELLANT HAS RECEIVED THE FOLLOWING RENT FROM THES E TWO PARTIES. 1) TRESS TALK RS. 9,60,000/- 2) ARAVIND BRANDS RS. 26,16,000/- RS. 26,16,000/- 10.1 THE ABOVE TWO PARTIES HAVE ALSO DEDUCTED TDS ON THE RENT PAID 10.2 THE ISSUE WHETHER THESE INCOME ARE TO BE ASS ESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR UNDER THE HEAD INCOME FROM BUSI NESS CAME UP FOR MY ADJUDICATION IN ASST. YEAR 2006-07 AND I HAVE HELD IN PARA 5 OF HE APPELLATE ORDER FOR ASST. YEAR 2006- 07 AS FOLLOWS:- I HAVE GONE THROUGH THE ISSUE. I HAVE GONE THROUGH THE LEAVE AND LICENSE AGREEMENT ENTERED BETWEEN THE APPELLANT AND M/ S. TRESS TALK AND AGREEMENT ENTERED BETWEEN THE APPELL ANT AND ARVIND CLOTHING LTD. IT IS SEEN THAT THE APPELLANT WAS OWNING THE PROPERTIES MENTIONED IN PARA 4.1 OF THIS APPELLATE ORDER AND IN THE ACCOUNTING YEAR RELEVANT TO THIS ASSESSMENT YEAR HAS LET OUT THESE PROPERTIES ON RENT, THE APPELLANT HAS CONSIDERED THESE INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' WHEREAS THE A. O. HAS TAXED THIS INCOME UNDER THE HEAD 'INCOME FROM BUSINESS'. THE A. O. HAS TAKEN THIS VIEW. IN VIEW OF THE FACT THAT IN EARLIER YEAR THE APPELL ANT HAS USED THESE PROPERTIES FOR BUSINESS. BUT IN THIS YEAR IT IS SEE N THAT THE APPELLANT HAS NOT CARRIED OUT ANY BUSINESS. WHAT HE IS EARNING IS BY WAY OF EXPLOITING THE PROPERTIES OWNED BY HIM AND NOT EXPLOITING THE BUSINESS AS-SETS DURING THE COURSE OF THE BUSINESS. IT IS ALSO NOT BROUGHT ON RECORD THAT THESE PROPERTIES: WHICH WERE AS BUSINES S AS SETS WERE TEMPORARILY LET OUT AND THERE IS AN INTENTION OF STARTING THE BUSINESS AGAIN BY THE APP ELLANT. IN THE ABSENCE OF SUCH INTENTIONS IT CANNOT BE SAID THAT THE BUSINESS ASSE TS WERE EXPLOITED AND THE INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS. IT IS A CLEAR CASE OF LETTING OUT OF THE HOUSE PROPERTY OWNED BY THE APPELLANT AND THE INCOME IOIL! COME UNDER THE PURVIEW OF SECTION 22 OF THE I . T. ACT. IN VIEW OF THIS 1 HOLD THAT INCOME SHOULD BE CHARGED UNDER THE HEAD 'I NCOME FROM HOUSE PROPERTY'. IN VIEW OF THIS. 1 DIRECT THE AO . TO DELETE THE ADDITION MODE IN THE ASSESSMENT ORD ER. 10.2.1 THERE IS NO CHANGE IN THE FACTS OF THE CASE. I DIRECT THE AO TO CONSIDER THESE INCOMES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ALL OW THE DEDUCTION U/S 24 OF THE I.T. ACT. M/S JYEMKO 5 2.5 UNDISPUTEDLY, THE DEPARTMENT HAS ACCEPTED THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07 AND THERE IS NO CHANGE IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE, THE AO IS NOT PERMITTED TO TAKE AN INCONSISTENCE STAND ON THE SAME ISSUE. EVEN OTHERWISE WHEN THE ASSESSEE HAS DISCONT INUED THE BUSINESS ACTIVITY AND CONSEQUENTLY THESE PROPERTIES WERE LET OUT FOR EARN ING THE RENTAL INCOME THEN INCOME DERIVED BY THE ASSESSEE FROM LETTING OUT THESE PROP ERTIES IS NOTHING BUT INCOME FROM HOUSE PROPERTY. ACCORDINGLY WE DO NOT FIND ANY ERRO R OR ILLEGALITY IN THE IMPUGNED ORDER OF CIT (A) QUA THIS ISSUE. 3. GROUND NO. 2 IS REGARDING COMPUTATION OF SHORT T ERM CAPITAL GAIN. 3.1 THE ASSESSING WAS HAVING A FLAT NO. 2 AND TWO G ARAGES IN RAJDOOT CO-OP HOUSING SOCIETY. IN THE PROCESS OF REDEVELOPMENT OF THE BUI LDINGS IN SOCIETY THE ASSESSEE SOLD ONE GARAGE TO THE DEVELOPER FOR RS. 6,25,000/-. THI S GARAGE WAS EARLIER USED FOR BUSINESS PURPOSES UP TO A.Y. 2005-06, THEREFORE, THE ASSESSE E CLAIMED THAT THE SALE PRICE SHOULD BE REDUCED FROM THE BLOCK OF ASSETS. HOWEVER, THE A O WAS OF THE VIEW THAT EACH BUILDING IS A SEPARATE BLOCK AND FOR THIS GARAGE TH E DIFFERENCE BETWEEN THE SALE PRICE AND WDV OF THE GARAGE SHOULD BE ASSESSED AS SHORT T ERM CAPITAL GAINS U/S 50 OF THE IT ACT. 3.2 ON APPEAL, CIT(A) NOTED THAT THE BUILDING/ASSET WAS USED FOR BUSINESS PURPOSE UPTO A.Y. 2005-06, THEREAFTER, THE PROPERTIES WERE LET OUT ON RENT. THE ASSESSEE HAS ALSO CONSIDERED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ACCORDINGLY IN THE VIEW OF CIT(A) THE PROPERTIES WE RE NOT BUSINESS ASSET AND SALE HAS TO NECESSARILY BE CONSIDERED UNDER THE HEAD CAPITAL GA IN AND, THEREFORE, NO QUESTION OF REDUCING THE SALE PRICE FROM WDV AS CLAIMED BY THE ASSESSEE. THUS THE CIT(A) HAS HELD THAT THE BLOCK OF ASSETS CEASED TO EXIST AND THE SA LE OF GARAGE HAS TO BE CONSIDERED UNDER THE HEAD CAPITAL GAIN. SINCE THE DEPRECIATION WAS ALREADY CLAIMED ON THIS PROPERTY, THE PROVISIONS OF SECTION 50A OF THE ACT IS ATTRACTED IN VIEW OF THE CIT(A), ACCORDINGLY THE AO WAS DIRECTED TO CONSIDER WDV OF THE GARAGE AS COMPUTED BY THE AO AS COST OF ACQUISITION OF THE ASSET AND FIND OUT WH ETHER THE GARAGE IS A LONG TERM CAPITAL M/S JYEMKO 6 ASSET OR SHORT TERM CAPITAL ASSET AND COMPUTE THE C APITAL GAIN IN ACCORDANCE WITH THE DECISION OF THE TRIBUNAL IN THE CASE OF SAKTHI META L DEPOT VS. ITO 3 SOT 368 (COCHIN). 3.3 BEFORE US, THE LD DR HAS RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT WHEN THE ASSET IS DEPRECIABLE ASSET AS THE ASSESSEE CLAIMED DEPRECIATION ON THIS ASSET THEN THE AO IS JUSTIFIED IN COMPUTING THE SHORT TER M CAPITAL GAIN U/S 50 OF THE INCOME TAX ACT. 3.4 ON THE OTHER HAND LD. AR HAS SUBMITTED THAT THE ASSET IN QUESTION WAS NO LONGER AS BUSINESS ASSET WHEN FOR A.Y. 2006-07 IT WAS LET OUT AND NOT USED FOR BUSINESS PURPOSE. THE LD. AR HAS CONTENDED THAT THE BLOCK OF ASSET CEASED TO EXIST WHEN THE ASSESSEE CLOSED THE BUSINESS ACTIVITY AND LET OUT THE ASSET FOR RENT. HE HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF ACE BUILDERS PVT. LTD. ( 281 ITR 210) AND SUBMITTED THAT THE ASSET IN QUESTI ON IS A LONG TERM CAPITAL ASSET FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN ON TRANSFER. 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. WHILE DECIDING THE GROUND NO. 1 OF THE REVE NUES APPEAL REGARDING ASSESSMENT OF THE RENTAL INCOME, WE FIND THAT THESE ASSETS WER E CEASED TO BE BUSINESS ASSET WHEN THE ASSESSEE STOPPED THE BUSINESS ACTIVITY AND LET OUT THE PROPERTY FOR RENT. IN VIEW OF THE FINDING THAT THESE PROPERTIES WERE NO LONGER BU SINESS ASSET AND CEASED TO THE PART OF BLOCK OF ASSET THEN FOR THE PURPOSE OF COMPUTING CAPITAL GAIN ARISING FROM TRANSFER OF DEPRECIABLE ASSET THE PROVISIONS OF SECTION 50A WOU LD BE APPLICABLE. IT IS PERTINENT TO NOTE THAT THE BASIC DIFFERENCE IN THE LANGUAGE OF S ECTION 50 AND 50A IS THE UNDERLYING CAPITAL ASSET FORMING PART OF BLOCK OF ASSET. AS PE R SECTION 50 THE CAPITAL GAIN IN CASE OF DEPRECIABLE ASSET FORMING PART OF BLOCK OF ASSET SH ALL BE DEEMED TO BE SHORT TERM CAPITAL GAIN WHEREAS AS PER SECTION 50A, THE COST O F ACQUISITION OF A DEPRECIABLE ASSET, THE PROVISIONS OF SECTION 48 AND 49 SHALL APPLY SUB JECT TO THE MODIFICATION IN THE WRITTEN DOWN VALUE AS PER SECTION 43(6). THEREFORE, WHEN TH E CAPITAL ASSET IS NOT FORMING PART OF THE BLOC OF ASSET THEN THE PROVISIONS OF SECTION 50 ARE NOT APPLICABLE BUT PROVISIONS OF SECTION 50A ARE APPLICABLE. ACCORDINGLY WE DO NOT F IND ANY ERROR IN THE IMPUGNED ORDER M/S JYEMKO 7 OF CIT(A) IN DIRECTING THE AO TO RE-COMPUTE THE C APITAL GAIN AS PER THE PROVISIONS OF SECTION 50A. 4. GROUND NO. 3 IS REGARDING ADDITION MADE BY AO ON ACCOUNT OF SHORT TERM CAPITAL GAIN. 4.1 THE ASSESSEE PURCHASED THE FLAT NO. 2 AND GARAG E NO. 23 IN RAJDOOT KHAR CO- OPERATIVE HOUSING SOCIETY LTD FOR RS. 40,00,000/- O N 15.05.2002. ON 18.12.2005, THE ENTIRE PROPERTY OF RAJDOOT KHAR CO-OPERATIVE HOUSIN G SOCIETY LTD, WAS TAKEN UP FOR REDEVELOPMENT BY M/S ANKUR DEVELOPERS. IN THE REDEV ELOPMENT PROCESS, THE ASSESSEE WAS ALLOTTED THE EXISTING CARPET AREA +25% OF THE EXISTING CARPET AREA. THE ASSESSEE WAS ALSO PAID RS. 8,19,531/- FOR THE HARDSHIP SUFFERED BY THE ASSESSEE. THE AO HELD THAT THE ASSESSEE WAS HAVING RIGHT FOR ADDITIONAL FSI AND T RANSFERRED THIS RIGHT TO ANKUR DEVELOPERS AND ACCORDINGLY WORKED OUT THE SHORT TER M CAPITAL GAIN SAT RS. 1,12,14,267/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) AND SUBMITTED THAT THERE IS NO TRANSFER OF CAPITAL ASSET WHEN THE ENTI RE SOCIETY WAS TAKEN UP FOR REDEVELOPMENT. EVEN IF THERE IS A TRANSFER OF RIGHT FOR ADDITIONAL FSI AND TDR FSI THEN THE COST OF ACQUISITION OF RIGHT FOR ADDITIONAL FSIT IS NIL AND, THEREFORE, THE MACHINERY SECTION OF COMPUTATION OF CAPITAL GAINS FAILS AND NO CAPITA L GAIN ARISES IN THIS CASE. THE ASSESSEE HAS RELIED UPON THE VARIOUS DECISIONS OF THE TRIBUN AL IN SUPPORT OF ITS CONTENTION. 4.2 CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE BY FO LLOWING THE DECISION OF THIS TRIBUNAL IN CASE OF NEW SHAILJA CO-OP. HSG. SOCIETY LTD. VS. ITO (121 TTJ 62). 4.3 BEFORE US, THE LD. DR HAS REFERRED TO THE ASSES SMENT ORDER AND SUBMITTED THAT THE AO HAS COMPUTED THE SHORT TERM CAPITAL GAIN ON THE BASIS OF MARKET VALUE OF ADDITIONAL AREA OF 190 SQ. FT. GOT BY THE ASSESSEE IN THE REDEVELOPMENT AGREEMENT AS WELL AS THE MARKET VALUE OF THE NEWLY CONSTRUCTED F LAT BY REDUCING THE COST OF ACQUISITION OF THE OLD FLAT. THE LD. DR HAS SUBMITT ED THAT THE ASSESSEE PURCHASED THE FLAT IN A VERY OLD BUILDING IN DILAPIDATED CONDITION, TH EREFORE, THE ASSESSEE WAS HAVING KNOWLEDGE OF UTILIZING THE PLOT FSI AND TDR FSI REL ATING TO AND ARISING OF THE SAID LAND. M/S JYEMKO 8 APART FROM THE TRANSFER OF ADDITIONAL FSI AND TDR F SI, THE ASSESSEE ALSO RECEIVED ADDITIONAL 25% OF CARPET AREA IN THE NEW BUILDING, THEREFORE, THE AO HAS COMPUTED THE SHORT TERM CAPITAL GAIN AS THE ASSESSEE HAS TRANSFE RRED THE ADDITIONAL FSI AND TDR. HE HAS RELIED UPON THE ORDER OF AO. 4.4 ON THE OTHER HAND, THE LD AR HAS SUBMITTED THAT THE ASSESSEE DID NOT OWN THE LAND BUT WAS OWNER OF A FLAT AND GARAGE AND, THEREF ORE, THERE IS NO TRANSFER OF CAPITAL ASSET IN THE FORM OF ADDITIONAL FSI OR TDR FSI. FUR THER THE ADDITIONAL FSI AND TDR FSI CANNOT BE ASSESSED TO TAX AS THERE IS NO COST OF AC QUISITION. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF RASIKLAL MANEKLAL HUF [1974] 95 ITR 656 (BOM.) AS WELL AS IN THE CASE OF CIT VS SHIRINBAI PUNDOLE, 129 ITR 448 (BOM) AND CONTENDED THAT THE ARRANGEMENT OF DEVELO PMENT OF PROPERTY IS NOT TRANSFERRED IN TERMS OF SECTION 2(4 7), BECAUSE ASSESSEE REMAINS THE OWNER OF THE PROPERTY IN QUESTION AND GOT NEWLY COM PLETED FLAT IN LIEU OF THE OLD FLAT AND RIGHT IN THE PROPERTY. THEREFORE, THIS IS NOT T RANSFER OF CAPITAL ASSET RESULTING ANY CAPITAL GAIN TO THE ASSESSEE. HE HAS ALSO RELIED UP ON THE FOLLOWING DECISIONS:- (I)MAHESHWAR PRAKASH -2 CO-OP. HOUSING SOCIETY LTD. VS. ITO 118 ITD 223 (MUM) (II)NEW SHAILJA CO-OP. HSG. SOCIETY LTD. VS. ITO (1 21 TTJ 62). (III)JETHALAL D. MEHTA VS. DCIT (2 SOT 422) 4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE FIND THAT THERE IS NO SALE , PURCHASE, EXCHANGE OR RELINQUISHMENT OF CAPITAL ASSET BY THE ASSESSEE, UNDER THE ARRANGE MENT MADE FOR REDEVELOPMENT OF THE BUILDING AS A WHOLE. THE DECISION OF REDEVELOPMENT WAS A COLLECTIVE DECISION OF THE SOCIETY AND MEMBERS OF THE SOCIETY WHO AGREED TO RE DEVELOPMENT BY DEMOLITION OF THE EXCISING BUILDING. UNDER THE REDEVELOPMENT ARRANGEM ENT THE ASSESSEE RECEIVED RECONSTRUCTED FLAT IN LIEU OF EXISTING OLD FLAT. TH E AO ASSESSED THE CAPITAL GAIN BY ASSUMING THE TRANSACTION OF TRANSFER OF FSI AND TDR FSI AND FURTHER THE AGREEMENT OF DEVELOPMENT OF THE PROPERTY IS TREATED AS THE TRANS ACTION OF TRANSFER OF THE PROPERTY TO THE DEVELOPER. THE CONSIDERATION WAS COMPUTED BY TH E AO ON THE BASIS OF MARKET RATE M/S JYEMKO 9 OF THE PROPERTY AS PER THE VALUATION OF THE STAMP D UTY AUTHORITY BY REDUCING THE COST OF ACQUISITION OF THE OLD FLAT. SO FAR AS ASSESSMENT O F ADDITIONAL FSI AND TDR PURCHASED BY THE DEVELOPER THIS ISSUE HAS BEEN CONSIDERED AND DE CIDED BY THIS TRIBUNAL IN A SERIES OF DECISIONS INCLUDING THE DECISION RELIED UPON BY THE CIT(A). THE CIT(A) HAS DECIDED THE ISSUE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN PARA 12.2 AS UNDER:- 'THE ASSESSEE WAS THE OWNER OF THE LAND AND BUILDIN G AND CONTINUED TO REMAIN THE SAME EVEN AFTER TRANSFER OF THE SAID CAPITAL ASSET. THUS , THE COST OF THE LAND AND BUILDING OF THE EXISTING STRUCTURE COULD NOT BE ATTRIBUTED TO THE A DDITIONAL FSI RECEIVED BY MEANS OF 1991 RULES. IT IS TRUE THAT SUCH RIGHT IS A CAPITAL ASSET AS PER THE PROVISIONS OF S. 2(14) BUT IN ORDER TO COMPUTE THE CAPITAL GAINS APART FRO M THE EXISTENCE OF CAPITAL ASSET, THERE SHOULD BE SAFE CONSIDERATION ACCRUING AS A RESULT O F TRANSFER OF CAPITAL ASSET AS WELL AS THE COST OF ACQUISITION OF THE ASSET ALONG WITH THE COST OF ANY IMPROVEMENT THERETO, IF ANY. SEC. 48 SETS OUT THE MODE OF COMPUTATION OF INCOME UNDER TH E HEAD CAPITAL GAINS BY PROVIDING THAT THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF A CAPITAL ASSET ALONQ WITH THE COST OF ACQUISITION AND COST OF ANY IMPROVEMENT, IF ANY, SHALL BE DEDUCTED FROM THE FULL VALUE OF CO NSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF CAPITAL ASSET. TRANSFER O F CAPITAL ASSET WHICH DOES NOT HAVE ANY COST OF ACQUISITION DOES NOT RESULT INTO CAPITAL GA INS CHARGEABLE TO TAX UNDER S, 15. THE LEGISLATURE IN ITS WISDOM BROUGHT OUT CERTAIN CATEG ORIES OF CAPITAL ASSES UNDER S. 55(2) AS HAVING COST OF ACQUISITION AT RS. NIL, WHERE SUCH ASSETS HAVE NOT BEEN PURCHA SED BY THE ASSESSEE FOR CONSIDERATION. THE EFFECT OF THIS SUB- SECTION IS THAT WHEN THE ASSETS SO SPECIFIED IN SUB-S (2) OF THE S. 55 ARE TRANSFERRED, THEN THE COST OF ACQUISITION HAS B EEN TAKEN AT RS. NIL EXCEPT WHERE THE ASSESSEE HAD ACQU IRED SUCH ASSETS BY MEANS OF PURCHASING FROM THE PREVIOUS OWNER, AND THE COMPUTA TION OF THE CAPITAL GAINS WOULD BE DONE ACCORDINGLY. THERE IS A DIFFERENCE ILL THE SITUATION WHEN COST OF ACQUISITION IS RS. NIL AND WHERE THE COST OF ACQUISITION CANNOT BE ASCERTAINED OR NO COST OF ACQUISITION HAS BEEN INCURRED. THE ITEMS OF CAPITAL ASSETS SPECIFIED IN S. 55(2) ARE THOSE FOR WHICH TILE COST OF ACQUISITION SHALL BE TAKEN AT RS. NIL FOR C OMPUTING CAPITAL GAINS. HOWEVER, IF THE ASSESSEE HAD NOT INCURRED ANY COST OF ACQUISITION ON A CAPITAL ASSET AND SUCH CAPITAL ASSET DOES NOT FALL IN THE CATEGORY OF THE CAPITAL ASSETS SPECIFIED IN S. 55(2) THEN NO CAPITAL GAIN WOULD BE CHARGED. IT IS ABUNDANTLY CLEAR THAT THE ASSESSE E HAD NOT INCURRED ANY COST 'OF ACQUISITION IN RESPECT OF THE RIGHT WHICH EMANATED FROM THE 1 991 RULES MAKING THE ASSESSEE ELIGIBLE TO ADDITIONAL FSI. THE LAND AND B UILDING EARLIER IN THE POSSESSION OF THE ASSESSEE CONTINUED TO REMAIN WITH IT AS SUCH EVEN A FTER THE TRANSFER OF THE RIGHT TO ADDITIONAL FSI FOR RS. 48.96 LAKHS. THE DEPARTMENTAL REPRESENTATIVE COULD NOT PO INT OUT ANY PARTICULAR ASSET AS SPECIFIED IN SUB-S(2) OF S. 55, WHICH WOULD INCLUDE THE RIGHT TO ADDITIONAL FSI. NO CAPITAL GAINS COULD BE CHARGED O N THE TRANSFER OF THE ADDITIONAL FSI BY THE ASSESSEE FOR SALE CONSIDERATION OF RS. 48.96 LA KHS FOR THE REASONS THAT IT HAS NOT COST OF ACQUISITION. JETHALAL D. MEHTA VS. DY. CIT (ITA NO. 672/MUM/2000) FOLLOWED; CIT VS. B.C. SRINIVASA SETTY (1981) 21 CTR (SC) 138: (1981 ) ITR 294 (SC) APPLIED. M/S JYEMKO 10 4.6 NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR NO TICE BY THE DEPARTMENT, HENCE WE DO NOT FIND ANY ERROR IN THE ORDER OF CIT(A) ON THIS POINT. 4.7 AS REGARDS THE ARRANGEMENT FOR REDEVELOPMENT OF THE PROPERTY IT IS APPARENT THAT THERE IS NO ELEMENT OF TRANSFER OF OWNERSHIP BY THE ASSESSEE BUT THE OWNERSHIP REMAINED WITH THE ASSESSEE. FURTHER THERE IS NO REA L INCOME IN THIS ENTIRE PROCESS OF REDEVELOPMENT AS THE ASSESSEE NEVER LOST ITS OWNERS HIP OF THE PROPERTY. IN THE CASE OF RASIKLAL MANEKLAL HUF, THE ISSUE OF CAPITAL GAIN WA S INVOLVED ON THE EVENT OF AMALGAMATION APPROVED BY THE HONBLE HIGH COURT, TH E ASSESSEE WAS TO TRANSFER SHARES TO THE NEW COMPANY AND TO RECEIVE THE SHARES IN THE NEW COMPANY IN LIEU OF THE SHARES OF OLD COMPANIES. THE HONBLE HIGH COURT HAS HELD A S UNDER:-. THE QUESTION THEN ARISES WHETHER THERE IS RELINQUI SHMENT AS A RESULT OF WHICH CAPITAL GAINS HAVE ACCRUED TO THE ASSESSEE. THE WORD 'RELIN QUISHMENT' IS NEITHER DEFINED IN THE ACT NOR ANY OTHER STATUTE TO WHICH OUR ATTENTION HA S BEEN DRAWN. HOWEVER, THE ESSENTIAL FEATURES OF A TRANSACTION OF RELINQUISHMENT CAN BE CLEARLY SPECIFIED. IN A TRANSACTION OF RELINQUISHMENT THE PROPERTY IN WHICH INTEREST IS RE LINQUISHED CONTINUES TO EXIST; THE PROPERTY CONTINUES TO BE OWNED BY SOME PERSON OR PE RSONS EVEN AFTER THE TRANSACTION OF RELINQUISHMENT AND THE INTEREST OF THE PERSON RELIN QUISHING HIS INTEREST IN THE PROPERTY IS EITHER GIVEN UP OR ABANDONED OR SURRENDERED. THE QU ESTION WHETHER A TRANSACTION OF RELINQUISHMENT HAS COME INTO EXISTENCE IN THE PRESE NT CASE CAN ONLY ARISE QUA THE 90 SHARES OF SHORROCK COMPANY HELD BY THE ASSESSEE. TH E ASSESSEE HAS NOT GIVEN UP, SURRENDERED OR ABANDONED OR EVEN RELINQUISHED HIS I NTEREST IN THESE SHARES. AS BY THE APPROPRIATE ORDERS OF THE COURT ALL THE ASSETS AND LIABILITIES OF SHORROCK COMPANY ARE TRANSFERRED TO NEW SHORROCK COMPANY AND AS UPON THE FILING OF THE ORDER SHORROCK COMPANY IS DIRECTED TO BE DISSOLVED, THAT COMPANY E ASED TO EXIST. THUS, IF SHORROCK COMPANY CEASED TO EXIST UPON COMPLIANCE OF THE ORDE RS THERE IS NO QUESTION OF THE ASSESSEE RELINQUISHING HIS INTEREST IN THE 90 SHARE S OF THE COMPANY AND, THEREFORE, SUCH A TRANSACTION CAN IN NO SENSE OF THE TERM BE REGARD ED AS A RELINQUISHMENT AS UNDERSTOOD EITHER IN LAW OF IN COMMON PARLANCE. REL INQUISHMENT ALSO PRESUPPOSES THAT THE PROPERTY IN WHICH THE INTEREST IS RELINQUISHED CONTINUES TO BE IN EXISTENCE. IN THIS CASE, UPON DISSOLUTION OF SHORROCK COMPANY THE SHAR ES OF THAT COMPANY HAVE BECOME A SCRAP OF PAPER AND OF NO VALUE. 12. IN THE RESULT, IN OUR OPINION, AS A RESULT OF A LLOTMENT OF 45 SHARES OF NEW SHORROCK COMPANY UNDER THE SCHEME OF AMALGAMATION TO THE ASS ESSEE BY REASON OF HIS HOLDING OF 90 SHARES OF SHORROCK COMPANY, NEITHER A TRANSACTIO N OF EXCHANGE NOR RELINQUISHMENT HAS TAKEN PLACE AND OUR ANSWER TO QUESTION NO. 1 IS ACCORDINGLY IN THE NEGATIVE. AS QUESTION NO. 1 IS ANSWERED IN THE NEGATIVE, QUESTIO N NO. 2 DOES NOT SURVIVE FOR DETERMINATION AND IT IS UNNECESSARY TO ANSWER THE S AME. THE REVENUE SHALL PAY THE COSTS OF THE ASSESSEE. M/S JYEMKO 11 4.8. WE FURTHER NOTE THAT THE DECISION OF HONBLE H IGH COURT IN THE CASE OF RASIKLAL MANEKLAL (HUF) (SUPRA) HAS BEEN UPHELD BY THE HONB LE SUPREME COURT REPORTED IN (177 ITR 198) AND IT WAS HELD THAT THE RECEIPT OF SHARES OF NEW COMPANY UPON AMALGAMATION BY REASON OF SHARE HOLDING OF THE OLD COMPANY INVOL VES NO EXCHANGE IN THE TRANSACTION AS THERE WAS NO MUTUAL TRANSFER OF OWNERSHIP OF ONE THING FOR THE OWNERSHIP OF ANOTHER. FURTHER IT WAS ALSO HELD THAT THE RELINQUISHMENT TA KES PLACE WHEN THE OWNER WITHDRAWS HIMSELF FROM THE PROPERTY AND ABANDONS HIS RIGHTS T HERETO. THE PROPERTY CONTINUES TO EXIST AFTER THE RELINQUISHMENT. UPON AMALGAMATION, THE SHARES OF OLD COMPANY LOST ALL VALUE AS THAT COMPANY STOOD DISSOLVED, THEREFORE, T HERE IS NO RELINQUISHMENT. AN IDENTICAL ISSUE HAS ALSO BEEN CONSIDERED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF. CIT VS. SHIRINBAI PUNDOLE (SUPRA), WHEREIN THE ASSESSEE WAS A TENANT OCCUPYING A FLAT IN A BUILDING UNDER THE LEASE. THE TENANCY WAS TERMINATED BY THE NOTICE AND, THEREFORE, THE ASSESSEE OCCUPIED THE FLAT AS STATUT ORY TENANT. THE BUILDING WAS SOLD TO A COMPANY WHO SERVED A NOTICE TO THE ASSESSEE TO QUI T. ULTIMATELY PURSUANT TO THE ARRANGEMENT ARRIVED AT BETWEEN THE PARTIES THE ASSE SSEE HANDED OVER THE VACANT POSSESSION OF THE FLAT TO THE COMPANY AND WAS GIVEN ALTERNATE ACCOMMODATION IN THE SHAPE OF OWNERSHIP OF A FLAT HAVING LESSER AREA IN ANOTHER BUILDING. THE QUESTION ARISES WHETHER THIS TRANSACTION ATTRACT ANY LIABILITY OF T AX AS CAPITAL GAIN UNDER THE PROVISIONS OF SECTION 45 OF THE INCOME TAX ACT. THE HIGH COURT HE LD AS UNDER:- WE FIND THAT THE FACTS IN THIS CASE ARE IN ALL MATE RIAL REGARDS SIMILAR TO THE FACTS IN THE CASE OF CIT VS JEHMI JAL COOPER (INCOME-TAX APPLICAT ION NO 59 OF 1977) IN THAT CASE, THE COMMISSIONER HAD MADE A SIMILAR APPLICATION U/S 256 (2) OF THE SAID ACT TO THIS COURT FOR DIRECTING THE TRIBUNAL TO STATE A CASE AND TO REFER THE QUESTION SET OUT IN THAT APPLICATON TO THIS COURT FOR DETERMINATION THE SAID APPLICATIO N WAS SUMMARILY REJECTED BY A DIVISION BENCH OF THIS COURT ON 20TH JUNE, 1977 THE COMMISSI ONER APPLIED FOR SPECIAL LEAVE TO APPEAL AGAINST THIS DECISION TO THE SUPREME COURT O F INDIA AND EVEN THAT APPLICATION WAS REJECTED BY SUPREME COURT ON 20TH NOVEMBER, 1978 IN THESE CIRCUMSTANCES, WE SEE NO REASON TO DIRECT THE TRIBUNAL TO STATE A CASE AND R EFER THE AFORESTATED QUESTIONS AS APPLIED FOR BY THE COMMISSIONER IN THE CASE IN HAND AS THERE WAS NO TRANSFER, EXCHA NGE OR RELINQUISHMENT, THEREFORE, THERE IS NO QUESTION OF ANY CAPITAL GAIN IN THE HAN DS OF THE ASSESSEE ASSESSABLE TO TAX. 5. IN THE CROSS OBJECTION NO. 236/MUM/2012, THE ASS ESSEE HAS RAISED FOLLOWING GROUNDS:- M/S JYEMKO 12 ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FA ILED TO APPRECIATE THAT THE ASSESSMENT DONE U/S 143(3) R.W.S 147 WAS B AD IN LAW, WITHOUT JURISDICTION AND OUGHT TO BE CANCELLED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FA ILED TO APPRECIATE THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESS EE TO MAKE A RETURN OF INCOME OR TO DISCLOSE FULLY AND TRULY ALL THE MA TERIAL FACTS. 5.1 AT THE TIME OF HEARING, THE LD. AR OF THE ASSES SEE STATED THAT THE ASSESSEE DOES NOT WANT TO PRESS THE CROSS OBJECTION AND THE SAME MAY BE DISMISSED AS NOT PRESSED. 5.2 THE LD. DR HAS NO OBJECTION IF THE CROSS OBJECT ION OF THE ASSESSEE IS DISMISSED AS PRAYED. 5.3 ACCORDINGLY, WE DISMISS THE CROSS OBJECTION OF THE ASSESSEE AS BEING NOT PRESSED. 6. FOR THE ASSESSMENT YEAR 2008-09, THE REVENUE HAS RAISED F OLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,19,85,825/- ON AC COUNT OF SHORT TERM CAPITAL GAINS IGNORING THAT THE AID CAPITAL GAIN HAD ARISEN ON TRANSFER OF EXISTING CAPITAL ASSETS IN EXCHANGE FOR AN ALTERNATE CAPITAL ASSET I N TERMS OFHTE PROVISIONS OF SECTION 2(47)(I) OF THE INCOME TAX ACT, 1961. 6.1 THE ASSESSEE PURCHASED THE OFFICE BEARING NO. 1 08B TO 120 ON THE FIRST FLOOR AND 201 TO 206 AND 207A ON THE SECOND FLOOR INCLUDING C OMMON AREA TOTAL ADMEASURING CARPET AREA OF 6261.33 SQ. FTS. IN THE BUILDING KNO WN AS BRITE TOOLS CO. PVT. LTD. PLOT-B, SURVEY NO. 272 AT LBS MARG, MULUND (W), MUMBAI FOR A CONSIDERATION OF RS. 1.5 CRORE VIDE AGREEMENT DATED 28.08.2007 FROM M/S ATONEMENT PROPERTIES PVT. LTD. ON 23.08.2007 ANOTHER TRIPARTITE AGREEMENT WAS ENTERED INTO AMONG THE ASSESSEE, BRITE TOOLS CO. PVT. LTD. AND M/S ATONEMENT PROPERTIES PV T. LTD. VIDE WHICH IT WAS AGREED THAT M/S JYEMKO 13 THE BUILDING WAS TO BE RECONSTRUCTED AFTER DEMOLITI ON AND THE ASSESSEE WILL GET 6261.33 SQ FTS CARPET AREA ON 7 TH FLOOR IN THE NEW BUILDING. THE ASSESSEE WAS ALSO R EQUIRED TO PAY RS. 25,00,000/- AS ITS SHARE TOWARDS THE COST OF CO NSTRUCTION OF NEW BUILDING. THE EXISTING OFFICE PURCHASED BY THE ASSESSEE WAS OCCUP IED BY THE LIC UNDER LEASE AGREEMENT DATED 18.07.2007 FOR A PERIOD OF NINE YEA RS AND THE NEW PREMISES ALLOTTED TO THE ASSESSEE, THE LIC WILL HAVE RIGHT TO OCCUPY AS A LESSEE FOR THE REMAINING YEARS. APART FROM THE OFFICE SPACE OF 6261.33 SQ FTS, THE ASSESS EE HAS ALSO PURCHASED THE OFFICE BEARING NO. 703 AT 7 TH FLOOR IN THE NEW BUILDING ADMEASURING 333 SQ FT C ARPET AREA FOR A CONSIDERATION OF RS. 21,00,000/-. IN THE ASSESSMENT ORDER THE AO HELD THAT THE ASSESSEE HAS TRANSFERRED ITS RIGHT IN THE OLD PROPERTY WITH ADDITIONAL FSI TO THE DEVELOPER AND TOWARD THIS THE DEVELOPER HAS AGREED TO GIVE THE A PPELLANT BY WAY OF CONSIDERATION OF EQUIVALENT AREA AT AN ADDITIONAL COST OF RS. 25,00, 000/-. THE AO COMPUTED THE SHORT TERM CAPITAL GAIN BY CONSIDERING THE MARKET VALUE O F 6261.33 SQ FT CARPET AREA AT RS. 3.94 CRORES BY REDUCING THE COST OF OFFICE AT RS. 1.5 CR ORE AND FURTHER THE CONSTRUCTION COST OF RS. 25,00,000/- 6.2 ON APPEAL, CIT(A) HELD THAT THE ASSESSEE WAS NO T HAVING ANY DEVELOPMENT RIGHT OVER THE LAND, AND THEREFORE, NO QUESTION OF TRANSF ER OF RIGHT IN FAVOUR OF THE DEVELOPER. IT WAS HELD THAT THERE IS NO TRANSFER OF CAPITAL AS SET INVOLVED IN THE ASSESSEES CASE AND NO QUESTION OF CHARGIN ANY CAPITAL GAIN ARISES. 6.3 BEFORE US, THE PARTIES HAVE ADVANCED THEIR RESP ECTIVE ARGUMENTS ON THE SIMILAR LINE AS IN THE ASSESSMENT YEAR 2007-08 ON THE SIMIL AR ISSUE INVOLVED IN GROUND NO.3 OF THE REVENUES APPEAL. 6.4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CA REFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS TO BE NOTED THAT THE OFFI CE PURCHASED BY THE ASSESSEE AT FIRST AND SECOND FLOOR OF THE OLD BUILDING WERE OCCUPIED BY THE LIC AND, THEREFORE, THE LIC WAS ALSO A CONFIRMING PARTY IN THE REDEVELOPMENT AG REEMENT. IN THE NEWLY CONSTRUCTED BUILDING LIC WILL HAVE A RIGHT TO OCCUPY AS LESSEE FOR THE REMAINING PERIOD OF LEASE OF NINE YEARS. AT THE FIRST PLACE NO TRANSFER OF ANY CAPITAL ASSET BY THE ASSESSEE IS INVOLVED IN THIS ARRANGEMENT OF REDEVELOPMENT. RATHER APART FROM PURCHASE CONSIDERATION OF RS. M/S JYEMKO 14 1.5 CRORE, THE ASSESSEE HAS ALSO PAID RS. 25,00,000 /- AS CONSTRUCTION COST OF HIS SHARE. WHEN THE AO HAS ACCEPTED THE PURCHSASE CONSIDERATIO N OF RS. 1.5 CRORE AND THE COST OF CONSTRUCTION AT RS. 25,00,000/- THENT ADOPTING THE MARKET PRICE OF THE OFFICE SPACE IS HIGHLY IMPROPER AS THERE IS NO SALE OR TRANSFER BY THE ASSESSEE IN THE NEWLY BUILT UP OFFICE. THE ISSUE HAS BEEN DISCUSSED BY US WHILE DE CIDING GROUND NO.3 OF THE REVENUES APPEAL FOR THE A.Y. 2007-08 AND ACCORDINGLY WE DO N OT FIND ANY ERROR IN THE ORDER OF CIT(A) QUA THIS ISSUE. 7. THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 HAS RAI SED THE FOLLOWING GROUNDS: 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE ASSESSMENT MADE U/S. 143(3) R.W.S.147 WAS BAD IN LAW, WITHOUT JURISDICTI ON AND OUGHT TO BE CANCELLED. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THERE WAS NO FAILURE ON THE PART OF THE APPELLANT T O MAKE A RETURN OF INCOME OR TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. (C) THE APPELLANT WAS NOT ISSUED ANY NOTICE UNDER S ECTION 148 OF THE INCOME TAX ACT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CO NFIRMING THE ACTION OF IN THE ASSESSING OFFICER TAXING RS.39,52,341/- BEING THE AMOUNT RECEIVED FROM LIFE INSURANCE CORPORATION OF INDIA IN RESPECT OF ALTERN ATE ACCOMMODATION PROVIDED TO THEM. HE FAILED TO APPRECIATE THE SAID AMOUNT WAS N OT INCOME AS CONTEMPLATED UNDER THE INCOME TAX ACT, 1961. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF IN THE ASSESSING OFFICER TAXING RS.39,52,341/- BEING THE AMOUNT RECEIVED FROM LIFE INSURANCE CORPO RATION OF INDIA AS INCOME FROM OTHER SOURCES AND THEREBY DENY ING DEDUCTION OF 30% OF THE ANNUAL VALUE UNDER SECTION 24 OF THE INCOME TAX ACT . 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEDUCTION OF RS.1,80,0001- BEING INTEREST PAID ON LOAN BORROWED AND UTILISED T O ACQUIRE PROPERTY. 7.1 GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING OF ASSESSMENT ORDER. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER TAXING RS. 17,18,100/- BEING THE AMOUNT RECEIVED FROM ANKUR DEVELOPERS FOR LOSS OF RENT DURING THE PERIOD OF CO NSTRUCTION OF THE RAJDOOT BUILDING. M/S JYEMKO 15 HE OUGHT TO HAVE APPRECIATED THAT THE SAID AMOUNT W AS NOT INCOME AS CONTEMPLATED UNDER THE INCOME TAX ACT, 1961. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) E RRED IN CONFIMING THE ACTION OF AO TAXING RS. 17,18,100/- BEING THE AMOUNT RECEIVED FR OM ANKUR DEVELOPERS AS INCOME FROM OTHER SOURCES AND THEREBY DENYING DEDUCTION OF 30% UNDER SECTION 24 OF THE INCOME TAX ACT, 1961. 7.2 AT THE TIME OF ARGUMENT THE LD. AR OF THE ASSES SEE HAS SUBMITTED THAT THE ASSESSEE DOES NOT PRESS GROUND NO. 1 AND THE SAME M AY BE DISMISSED AS NOT PRESSED. LD. DR HAS NO OBJECTION IF THE GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED AS NOT PRESSED. 7.3 ACCORDINGLY, WE DISMISS THE GROUND NO. 1 OF THE ASSESSEES APPEAL AS BEING NOT PRESSED. 8. GROUND NO. 2 AND 3 IS REGARDING RENT RECEIVED FR OM LIC WAS ASSESSED BY THE AO AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY AS CLAIMED BY THE ASSESSEE. 8.1 AS WE HAVE DISCUSSED THE FACTS IN THE REVENUES APPEAL THAT THE ASSESSEE PURCHASED OFFICE PREMISES HAVING CARPET AREA OF 626 1.33 SQ. FT. VIDE AGREEMENT DATED 18.08.2007 IN THE BUILDING NAMELY BRITE TOOLS CO. L TD, PLOT NO. B, SURVEY NO. 272, LBS MARG, MULUND (W), MUMBAI. THE SAID OFFICE PREMISE W ERE LEASED OUT TO THE LIC BY M/S ATONEMENT PROPERTIES PVT. LTD. FROM WHOM THE ASSESS EE HAS PURCHASED THE SAID OFFICE. AT THE TIME OF REDEVELOPMENT OF THE BUILDING, THE L IC AGREED TO SHIFT TO A TEMPORARY TRANSIT ACCOMMODATION PROVIDED BY ATONEMENT PROPERT IES PVT. LTD. AGAINST WHICH THE ASSESSEE WAS ENTITLED TO RECEIVE THE LEASE RENT AND OTHER AMOUNTS TO BE PAID BY THE LIC. IN PURSUANT TO THIS AGREEMENT THE ASSESSEE RECEIVED AN AMOUNT OF RS. 39,52,341/-+ SERVICE TAX. THE AO TAXED THIS AMOUNT AS INCOME FRO M OTHER SOURCES. 8.2 ON APPEAL, CIT(A) ISSUED THE REMAND ORDER AND A FTER CONSIDERING THE REMAND REPORT HELD THAT THIS AMOUNT WAS RECEIVED BY THE AS SESSEE FROM M/S ATONEMENT M/S JYEMKO 16 PROPERTIES PVT. LTD. AS COMPENSATION OF LOSS OF REN T AND ACCORDINGLY THE SAME IS ASSESSABLE TO TAX AS INCOME FROM OTHER SOURCES.. 8.3 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THIS AMOUNT WAS RECEIVED BY THE ASSESSEE FROM LIC AND NOT FROM ATONEMENT PRO PERTIES PVT LTD, WHICH WAS AS PER THE LEAVE AND LICENSE AGREEMENT AND, THEREFORE, THI S RENT RECEIVED BY THE ASSESSEE IS ASSESSABLE TO TAX AS INCOME FROM HOSUE PROPERTY. 8.4 ON THE OTHER HAND LD. DR HAS RELIED UPON THE OR DERS OF AUTHORITIES BELOW AND SUBMITTED THAT THIS AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE AS COMPENSATION AGAINST THE LOSS OF RENTAL INCOME, THEREFORE, IT WAS ASSESS ED AS INCOME FROM OTHER SOURCES. 8.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RELEVANT MATERIAL ON RECORD. THE CIT(A)HAS RECORDED THE FACTS ON THIS IS SUE IN PARA 5 AS UNDER:- WITH REGARD TO THE OTHER GROUNDS OF APPEAL, DURING THE APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED THAT DURING THE PREVIOUS YEAR T HE APPELLANT BY AN AGREEMENT DATED 18 TH AUGUST 2007 WITH ATONEMENT PROPERTIES PVT. LTD. AN D BRITE TOOLS COMPANY PVT. LTD. ACQUIRED OFFICE PREMISES HAVING CARPET AREA 6261.33 SQ. FT. COMPRISING THE OFFICE UNITS BEARING NOS. 108B TO 120 AND 201 TO 206 AND 207A IN THE BUILDING SITUATED ON PLOT B BEARING SURVEY NO. 272, HISSA NO. 1(PART) AT L.B.S MARG, MULUND (W), MUMBAI. THE SAID OFFICE PREMISES WERE LEASED TO LIFE INSURANCE CORPO RATION OF INDIA (LIC) BY ATONEMENT PROPERTIES PVT. LTD. FROM WHOM THE PREMISES WERE AC QUIRED. AFTER THE EXECUTION OF THE AGREEMENT, ONE MORE AGREEMENT DATED 23 RD AUGUST 2007 WAS EXECUTED BETWEEN THE THREE PARTIES UNDER WHICH IT WAS AGREED TO REDEVELO P THE BUILDING (WHEREIN THE PREMISES ACQUIRED BY THE APPELLANT WERE SITUATED) BY DEMOLIS HING THE EXISTING BUILDING AND BY CONSTRUCTING A NEW BUILDING. THE APPELLANT AGREED T O CO-OPERATE IN THIS REDEVELOPMENT. ATONEMENT PROPERTIES PVT. LTD. HAD NEGOTIATED WITH THE LIC AND LIC AGREED TO SHIFT TO A TEMPORARY TRANSIT ACCOMMODATION PROVIDED BY ATONEME NT PROPERTIES PVT. LTD. THE LIC ACCORDINGLY SHIFTED TO THE SAID TRANSIT ACCOMMODATI ON. AS A PART OF THIS AGREEMENT IT WAS AGREED THAT THE APPELLANT (HAVING ACQUIRED THE OFFI CE PREMISES) WAS ENTITLED TO RECEIVE THE LEASE RENT AND OTHER AMOUNTS TO BE PAID BY THE LIC. IN PURSUANCE TO THIS AGREEMENT, THE APPELLANT RECEIVED AMOUNT OF RS. 39,52,341/- FR OM THE LIC PLUS SERVICE TAX. THE AO HAS TAXED THIS AMOUNT AS INCOME FROM OTHER SOURCES. 8.6 IT IS CLEAR FROM THE ABOVE FACTS RECORDED BY TH E CIT(A) THAT THE AMOUNT OF RS. 39,52,341/- WAS STATED TO BE RECEIVED FROM LIC. HOW EVER WHILE GIVING THE FINDING ON THE ISSUE THE CIT(A|) HAS ASSUMED THAT THIS AMOUNT WAS RECEIVED FROM M/S ATONEMENT PROPERTIES PVT. LTD. AS COMPENSATION FOR LOSS OF RE NT. THE ASSESSEE HAS RECEIVED THIS AMOUNT AS RENT AS PER LEASE AGREEMENT WITH THE LIC. FURTHER THE TRANSIT ACCOMMODATION M/S JYEMKO 17 TO THE LIC WAS GIVEN ONLY BY VIRTUE OF ASSESSEE BEI NG THE OWNER OF THE EXISTING OFFICES IN THE BUILDING TO BE DEMOLISHED AND REDEVELOPED. THER EFORE, THE ALTERNATIVE ACCOMMODATION PROVIDED TO THE LIC WAS ONLY ON THE B EHEST TO THE ASSESSEE. THEREFORE, THE AMOUNT RECEIVED FROM THE LIC IS IN THE PURSUANT TO THE LEASE AGREEMENT AS WELL AS TRIPARTITE AGREEMENT BETWEEN THE PARTIES WHEREBY TH EY AGREED FOR REDEVELOPMENT PLAN AND SHIFTING TO THE TRANSIT ACCOMMODATION TO FACILI TATE THE DEMOLITION AND RECONSTRUCTION OF THE OLD PREMISES IN QUESTION. ACC ORDINGLY THE RENT PAID BY THE LIC CANNOT BE CATEGORIZED OTHER THAN THE INCOME FROM TH E HOUSE PROPERTY AS THERE IS A DIRECT NEXUS BETWEEN THE OLD PROPERTY AND TRANSIT A CCOMMODATION AND NEW ACCOMMODATION IN WHICH THE LIC HAS A RIGHT TO OCCUP Y. 9. GROUND NO. 4 IS REGARDING DISALLOWANCE OF INTERE ST ON LOAN TAKEN FOR ACQUISITION OF THE PROPERTY LET OUT TO LIC. 9.1 WE HAVE HEARD LD. AR AS WELL AS LD. DR AND CON SIDERED THE RELEVANT MATERIAL ON RECORD. THIS ISSUE IS CONSEQUENTIAL IN NATURE TO TH E ISSUE OF TREATMENT OF RENTAL INCOME RECEIVED FROM THE LIC. THE LD. DR HAS ARGUED THAT T HE PROPERTY ACQUIRED BY THE ASSESSEE WAS DEMOLISHED AND NOT IN EXISTENCE, THEREFORE, NEI THER RECEIPT CAN BE TREATED AS INCOME FROM HOUSE PROPERTY NOR THE INTEREST CAN BE LEVIED AGAINST THE SAID INCOME WHICH HAS NO CONNECTION WITH THE PROPERTY ACQUIRED BY THE ASSESSEE. 9.2 HAVING CONSIDERED THE RIVAL SUBMISSIONS. WE NOT E THAT THERE IS NO DISPUTE THAT INTEREST OF RS. 1,80,000/- WAS PAID BY THE ASSESSE ON THE LOAN TAKEN FOR ACQUISITION OF THE OFFICE PREMISES LET OUT TO LIC. THE INCOME RECEIVED DURING THE TRANSIT PERIOD FROM THE LIC IS NOTHING BUT RENTAL INCOME AND ASSESSABLE AS INCOME FROM HOUSE PROPERTY AS HELD BY US IN THE PRECEDING PARAS. THEREFORE, THE ASSESS EE IS ENTITLED TO DEDUCTION OF INTEREST AS PER SECTION 24 OF THE INCOME TAX ACT. 10. GROUND NO. 5 AND 6 ARE REGARDING THE AMOUNT OF RS. 17,18,100/- RECEIVED FROM M/S ANKUR DEVELOPER FOR LOSS OF RENT ASSESSED BY AO AS INCOME FROM OTHER SOURCES AND THEREBY DENIED THE DEDUCTION U/S 24 OF THE INCOME T AX ACT. M/S JYEMKO 18 10.1 WE HAVE HEARD LD. AR AS WELL AS LD. DR AND CON SIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THIS SUM OF RS. 17 ,18,100/- RECEIVED BY THE ASSESSEE FROM M/S ANKUR DEVELOPERS BEING COMPENSATION AGAINS T THE LOSS OF RENT ON DEMOLITION OF THE BUILDING FOR RECONSTRUCTION. THIS AMOUNT IS REGARDING THE LOSS OF RENT IN RESPECT OF THE PREMISES OWNED BY THE ASSESSEE IN THE SAID SOCI ETY AND WAS GIVEN ON LEAVE AND LICENSE TO ARVIND BRANDS LTD. ON DEMOLITION THE TEN ANT IN RESPECT OF THE PREMISES VACATED AND THE BUILDER HAS COMPENSATED THE ASSESSE E AGAINST THE LOSS OF RENT. THEREFORE THIS AMOUNT HAS BEEN RECEIVED BY THE ASSE SSEE BEING COMPENSATION FOR LOSS OF RENTAL INCOME AND NOT AS A RENTAL INCOME AS IT W AS NOT RECEIVED FROM THE TENANT AND FURTHER THE TENANT WAS NO MORE IN OCCUPATION OF THE ASSESSES PREMISES OR ALTERNATIVE PREMISES. ACCORDINGLY WE DO NOT FIND ANY ERROR OR I LLEGALITY IN THE ORDERS OF AUTHORITIES BELOW QUA THIS ISSUE. 7. IN THE RESULT REVENUES APPEAL AND CO OF THE ASSESSEE ARE DISMISSED WHEREAS THE CROSS APPEAL OF THE ASSESSEE FOR A.Y 2008- 09 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 /03/2 014 SD/- SD/- (N.K. BILLAIYA) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 14 /03/2014 SKS SR. P.S COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI