Smt. Yashod Deora, Kolkata V. ITO, Ward - 30(3), Kolkata

ITA 835/KOL/2008

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100254 (ITAT-KOLKATA)
• Duration Of Justice: 7 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-10-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 13-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU ACITSRDR
• Keywords: Capital asset; Gift; Cost of acquisition; Competent authority; Capital receipt; Surrender of tenancy right
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 835 / KOL / 2008 & ITA NO.281/KOL/2013 ASSESSMENT YEAR :2003-04 SMT. YASHOD DEORA 2-B, QUEENS PARK, KOLKATA 700019 [ PAN NO.ACXPD 9387 L ] SHRI PRADEEP KUMAR DEORA 2B, QUEENS PARK, KOLKATA 700 019 [ PAN NO.ACXPD 9388 F ] V/S . V/S . INCOME TAX OFFICER, WARD-30(3), AAYAKAR BHAWAN DAKSHIN, 2, GARIAHAT ROAD (S), KOLKATA 700 068 DCIT, CENTRAL CIRCLE- XXIV, KOLKATA /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI RAVI TULSIYAN, FCA /BY REVENUE SHRI DAVID Z. CHAWNGTHU, ACIT-SR-DR /DATE OF HEARING 05-11-2015 ! /DATE OF PRONOUNCEMENT 11-12-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- BOTH APPEALS FILED BY DIFFERENT ASSESSEE ARE ARISI NG OUT OF SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-XIV/ II KOLKATA DATED 27.02.2008 AND 31.12.2012. ASSESSMENT WAS FRAMED BY ITO WARD- 30(3)/ACIT,CC-XXIV KOLKATA U/S 143(3)/147 OF THE IN COME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE THEIR O RDERS DATED 27.12.2006 & 27.02.2006 FOR ASSESSMENT YEAR 2003-04 RESPECTIVELY . ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 2 2. THESE TWO SETS OF APPEAL OF DIFFERENT ASSESSEE B EING HUSBAND AND WIFE FOR THE SAME ASSESSMENT YEAR (2003-04), COMMON ISSU E ARE INVOLVED, THEREFORE WE HEARD TOGETHER AND DEEM IT FIT TO DISP OSE OF BY THIS COMMON ORDER. 3. BEFORE CREPT OUT THIS SPECIFIC GRIEVANCES OF ASS ESSEE, WE DEEM FIT TO TAKE NOTE OF THE BACK GROUND OF THE CASE. WE TAKE UP ASSESSEES APPEAL IN ITA NO.281/KOL/2013 . 4. THERE WAS A RESIDENTIAL FLAT IN MUMBAI BEARING A DDRESS FLAT NO. 1 TURF VIEW, HORNBY VELLARD ESTATE, WORLI, MUMBAI (HEREINA FTER) KNOWN AS DISPUTED FLAT. THE FLAT WAS OWNED BY M/S MAHABIR LOATHER BOA RDS PVT. LTD. (MLBPL FOR SHORT) AND THIS DISPUTED FLAT WAS OCCUPIED BY MRS. YASHOD DEORA ALONG WITH HER HUSBAND SRI PRADEEP KUMAR DEORA WHO WAS THEN DI RECTOR/EMPLOYEE IN MLBPL HAVING ADDRESS AT 67/69 M.K. MARK DARIYANAGAR , HOUSE, MARINE LINES, MUMBAI-400002, M/S PERCEPT ADVERTISING LIMIT ED. (PAL IN SHORT) HAD PURCHASED THE DISPUTED FLAT FROM MLBPL BY VIRTUE OF A PURCHASED DEED DATED 25.02.1997. SINCE THE DISPUTED FLAT WAS OCCUPIED BY MR. P.K.DEORA THEREFORE M/S PERCEPT ADVERTISING LTD. ENTERED INTO A SETTLEM ENT DEED ON 18.04.1997. BY VIRTUE OF SAID SETTLEMENT DEED, MS PERCEPT ADVERTIS ING LTD., WAS TO PAY A SUM OF 50 LAKH AND MR. P.K.DEORA AGREED TO SURRENDER THE R IGHT OF THE SAID DISPUTED FLAT. MR. P.K.DEORA AGREED TO VACATE THE D ISPUTED FLAT ON 30.09.1998 AND ALSO AGREED TO PAY MONTHLY COMPENSATION OF 5,000/- TILL THE DATE OF VACATION OF THE DISPUTED FLAT. HOWEVER MRS. YASHOD DEORA DID NOT VACATE THE DISPUTED FLAT EVEN AFTER THE EXPIRY OF THE AGREEMEN T DATED 30.09.1997 AS PER THE DEED OF SETTLEMENT. M/S. PERCEPT ADVERTISING LT D. FILED AN APPLICATION (NO.74 OF 1998) BEFORE THE COMPETENT AUTHORITY DIVI SION FOR THE EVICTION OF THE DISPUTED FLAT FROM MR. P.K. DEORA AND MRS. YASHOD D EORA. 5. MR. P.K.DEORA HAS DISCLOSED 50 LAKH IN THE BALANCE-SHEET FOR A.Y 1998-99 UNDER HEAD SUNDRY CREDITOR FOR THAT YEAR, THE ASSESSMENT WAS ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 3 FRAMED OF MR. P.K.DEORA U/S.1 43(3) OF THE ACT, WHE REIN THE AO DISALLOWED SUM OF 50 LAKH AND ADDED IT TO THE INCOME OF ASSESSEE U/S. 68 OF THE ACT. MR. P.K.DEORA FILED AN APPEAL BEFORE LD. CIT(A) AGAINST THE AY 1998-99 WHO UPHELD THE ACTION OF ASSESSING OFFICER. AGAINST THE ORDER OF LD. CIT(A), MR. P.K.DEORA FILED AN APPEAL BEFORE TRIBUNAL AND TRIBU NAL DELED THE ADDITION MADE MY AO AND SUBSEQUENTLY CONFIRMED BY LD. CIT(A) U/S.68 OF THE ACT VIDE ORDER DATED 25.10.2005 IN ITA NO. 306 TO 310/KOL/2005 BY OBSERVING AS UNDER:- SINCE THE ASSESSEE HAS PROVED THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS IN TERMS OF SECTION 68 OF THE I.T ACT AND IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE HAS FILED TO DISC HARGE HIS BURDEN AT ANY STAGE, WE ARE OF THE VIEW THAT THE ADDITION MAD E BY THE AO U/S 68 AND SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW. AS REGARDS THE TAXABILITY OF THE AMOUNT OF RS.50 LAKHS UNDER T HE HEAD CAPITAL GAINS, WE FIND THAT SINCE IT IS AN ADVANCE WITHOUT GIVING ANY POSSESSION AND THAT TO UNDER DISPUTE AND ALSO THE ENTIRE AMOUNT OF RS.50 LAKHS HAS BEEN SHOWN BY THE ASSESSEE IN HIS CAPITAL ACCOUNT A S ON 31.03.2003 AND ALSO OFFERED FOR TAXATION, THEREFORE, WE ARE OF THE VIEW THAT FROM THIS POINT OF VIEW ALSO THE SAID AMOUNT IS NOT TAXABLE I N THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ACCORDIN GLY, THE ADDITION OF RS.50 LAKHS MADE BY THE AO AND SUSTAINED BY THE CIT (A) IS DIRECTED TO BE DELETED. NOW IN THE RELEVANT YEAR UNDER CONSIDERATION ASSESS EE HAS TRANSFERRED THE SUNDRY CREDITOR LIABILITY OF 50 LAKH WHICH WAS ARISING AS A RESULT OF SETTLEMENT WITH MS/ PERCEPT ADVERTISEMENT LTD. TO ITS CAPITAL ACCOUNT. IT WAS ALSO FOUND THAT ANOTHER 5 LAKH WAS ALSO TRANSFERRED TO CAPITAL ACCOUNT OF A SSESSEE WHICH WAS RECEIVED FROM M/S PERCEPT ADVERTISEMENT LTD. FO R FURTHER SETTLEMENT. THIS CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT U/S. 143( 3) OF THE ACT. ON QUESTION BY AO TO ASSESSEE REGARDING THE SOURCE OF 55 LAKH THE ASSESSEE EXPLAINED THE ENTIRE FACTS OF THE CASE AS STATED AFORESAID AN D ARGUED THAT SAID COMPENSATION RECEIVED BY ASSESSEE FOR AN AMOUNT 55 LAKH IS NOT SUBJECT TO TAX UNDER THE INCOME TAX ACT AS THE SAID DISPUTED F LAT WAS OCCUPIED BY ASSESSEE NEITHER ON ACCOUNT OF OWNERSHIP NOR ON ACC OUNT OF ANY TENANCY. THE SAID PROPERTY STAND OCCUPIED BY ASSESSEE UNDER FORC EFUL POSSESSION. ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 4 THEREFORE, THE SAID RECEIPT HAS TO BE CONSIDERED TO BE A CAPITAL NATURE, THEREFORE NOT LIABLE TO TAX. THE SAID AMOUNT RECEIV ED ON ACCOUNT OF VACATING THE SAID PROPERTY HELD UNDER FORCEFUL POSSESSION IS NOT COVERED BY ANY PROVISION OF CAPITAL GAINS FOR CHARGING OF INCOME T AX UNDER THE ACT. THE SAID AMOUNT WOULD HAVE BEEN CHARGEABLE IF THE SAME HAD B EEN RECEIVED IN ORDER TO VACATE THE PROPERTY IF THE ASSESSEE HAD BEEN A T ENANT THEREOF. BUT THE ASSESSEE HAD OCCUPIED THE SAID PREMISES FORCEFULLY AND THERE IS NO PROVISION UNDER THE ACT FOR CHARGING SUCH CAPITAL RECEIPT. HO WEVER, AO HAS DISREGARDED THE CLAIM OF ASSESSEE STATING THAT THERE WAS A LAWF UL EVICTION NOTICE FILED BY M/S PERCEPT ADVERTISEMENT LTD. HAD THERE BEEN ANY F ORCEFUL POSSESSION, THEN MATTER WOULD HAVE GONE TO POLICE AND NOT FOR A LAWF UL SETTLEMENT. THE ASSESSEE WAS ALLOWED TO STAY IN THE SAID FLAT IN TH E CAPACITY OF DIRECTOR OF MLBPL. BESIDES THERE WAS AN AGREEMENT WITH CERTAIN VALUE OF 55 LAKH FOR HANDING OVER THE PEACEFUL POSSESSION OF SAID DISPUT ED FLAT AND THIS IS NOTHING BUT VALIANT QUESTION FOR TENANCY RIGHT. IN VIEW OF ABOVE, AO HAS HELD THE TRANSACTION AS CHARGEABLE INCOME UNDER THE HEAD OF INCOME FROM OTHER SOURCES AND ADDED THE SUM OF 55 LAKH TO THE INCOME OF ASSESSEE BY WAY OF MAKING PROTECTIVE ASSESSMENT.. 6. SINCE THE HUSBAND AND WIFE BOTH WERE STAYING IN THAT DISPUTED FLAT THEREFORE AO HAS FRAMED THE ASSESSMENT BY ENHANCING INCOME OF BOTH COUPLE (ASSESSEE AND HIS WIFE) FOR AN AMOUNT OF 55 LAKH EACH UNDER THE HEAD PROTECTIVE ASSESSMENT CONCEPT IN ORDER TO AVOID A NY UNFORESEEN LOSS TO THE REVENUE. SO THE INCOME OF BOTH COUPLE (ASSESSEE) EN HANCED BY AN AMOUNT OF 55 LAKH RESPECTIVELY. 7. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- 6. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE RELE VANT DOCUMENTS FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND T HE REMAND PROCEEDINGS. THE FACTS OF THE CASE HAVE ALREADY BEE N DISCUSSED AS ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 5 ABOVE. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW, I FIND NO FORCE IN THE SUBMISSION OF THE APPELLANT THAT THE RECEIPT OF RS.55 LAKHS FROM PERCEPT ADVERTISING LTD, CREDITED IN THE APPELLANT S CAPITAL ACCOUNT WAS A CAPITAL RECEIPT AND NOT LIABLE TO TAX. FROM THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE AO HELD THAT THE APPELLANTS WIFE , MRS. YASOD DEORA WAS THE LICENSEE OF THE FLAT NO 1, TURF VIEW, HORNB Y VELLARD ESTATE, WORLI, MUMBAI AND THE APPELLANT WAS STAYING IN THE SAID FLAT IN THE CAPACITY OF HER HUSBAND AND DIRECTOR OF MAHAVIR LEA THER BOARD PVT. LTD., IT APPEARS THAT THE AFORESAID OBSERVATION WAS MADE BY THE AO ON THE BASIS OF EVICTION PETITION FILED BY PERCEPT ADV ERTISING LTD., BEFORE THE COMPETENT AUTHORITY, APPOINTED UNDER SECTION 31B OF THE BOMABY RENT ACT, 1947. OTHERWISE, THERE IS NO EVIDENCE THAT SMT . YASHOD DOERA WAS A LICENSEE OF THE SAID DISPUTED FLAT. IN THE COURSE OF REMAND PROCEEDINGS, THE APPELLANT FILED THE EVIDENCE THAT HE WAS THE MANAGING DIRECTOR OF THE COMPANY NAMED AS KEDIA DISTELLERIES LIMITED, 160, KANCHAN BAGH, INDORE. IT IS STATED BY THE APPELLANT THAT THE FLAT UNDER DISPUTED AT MUMBAI WAS GIVEN BY THE SAID COMPANY TO RESIDE IN THE CAPACITY OF A DIRECTOR. THAT, IN THE MONTH OF JUNE, 1996, HE RESIGNED FROM THE DIRECTORSHIP OF KEDIA DISTELLERIES LTD., I N THE LIGHT OF THE ABOVE FACTS, I AM OF THE OPINION THAT, INITIALLY IT CANNO T BE SAID THAT THE FLAT WAS UNDER FORCEFUL POSSESSION OF THE APPELLANT BECAUSE HE HAD OCCUPIED THE FLAT IN THE CAPACITY OF DIRECTOR OF KEDIA DISTELLER IS LTD., AND THE SAID COMPANY ALLOWED HIM TO OCCUPY THE SAME. THE OWNER C OMPANY, I.E. MAHAVIR LEATHER BOARD PVT. LTD., SOLD THE FLAT TO P ERCEPT ADVERTISING LTD., AND HENCE THEREAFTER THE APPELLANT WAS REQUIR ED TO VACATE THE FLAT BECAUSE HE WAS NO MORE THE DIRECTOR OF THE COMPANY WHICH ALLOWED HIM TO OCCUPY THE FLAT. HOWEVER, HE DID NO VACATE T HE FLAT AND HAND OVER THE POSSESSION TO THE PRESENT OWNER. IN ORDER TO GE T THE PEACEFUL VACANT POSSESSIONS OF THE FLAT, THE PRESENT OWNER ENTERED INTO AN AGREEMENT WITH MR. & MRS. DEORA AND PAID A SUM OF RS.50 LAKHS WHICH WAS DEPOSITED BY THE APPELLANT IN HIS BANK ACCOUNT AND SHOWED THE AMOUNT IN HIS BALANCE SHEET AS ON 31.03.1998 UNDER THE HEA D LIABILITIES. EVEN AFTER RECEIVING THE AMOUNT OF RS.50 LAKHS AND EXPIR Y OF GRACE PERIOD ALLOWED TO THEM TO VACATE THE FLAT, DEORAS DID NOT HAND OVER THE VACANT POSSESSION TO PERCEPT ADVERTISING LTD., THIS WAS NO THING BUT THE BREACH OF AGREEMENT. THEREFORE, THE PRESENT OWNER APPROACH ED THE COMPETENT AUTHORITY TO GET POSSESSION OF IS FLAT. SUBSEQUENTL Y, MR. AND MRS. DEORA APPROACHED PERCEPT ADVERTISING LTD., IN WRITING, TH AT THEY SHALL HAND OVER THE VACANT AND PEACEFUL POSSESSION OF THE FLAT UPON PAYING THEM A TOTAL COMPENSATION OF RS.55 LAKH. IN THE SAID LETTE R, DEORAS CONFIRM HAVING EARLIER RECEIVED SUM OF RS.50 LAKHS AS AN AD HOC AND ADVANCE PAYMENT. CONSEQUENTLY, PERCEPT ADVERTISING LTD. PAI D ANOTHER SUM OF RS.5 LAKHS WHICH WAS DEPOSITED BY THE APPELLANT IN HIS BANK ACCOUNT AND HANDED OVER THE POSSESSION OF THE FLAT TO PERCE PT ADVERTISING. THUS, THE FINAL SETTLEMENT OF DISPUTE WAS MADE IN T HE YEAR UNDER CONSIDERATION I.E. AY 2003-04. THE APPELLANT TRANSF ERRED AND CREDITED ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 6 THE SUM OF RS.55 LAKHS IN HIS CAPITAL ACCOUNT BUT D ID NOT OFFER THE SAME FOR TAX FOR THE REASONS THAT THE RECEIPT WAS CAPITA L IN NATURE. IT IS OBSERVED THAT IN THE COURSE OF ASSESSMENT PROCEEDIN GS AS WELL AS THE APPELLATE PROCEEDINGS, THE APPELLANT HAS REPEATEDLY ARGUED THAT THE RECEIPT OF RS.55 LAKHS WAS NOT FOR THE SURRENDER OF TENANCY RIGHT BECAUSE NEITHER THE APPELLANT NOR HIS WIFE WERE THE TENANT OF THE FLAT. THE SUM WAS RECEIVED TO VACATE THE FORCEFUL UNAUTHO RIZED POSSESSION AND UNDER THE INCOME TAX ACT THERE IS NO PROVISION TO TAX THE SUM RECEIVED TO VACATE FORCEFUL UNAUTHORIZED POSSESSION OF A CAPITAL ASSET. ACCORDING TO THE APPELLANT THE SUM OF RS.55 LAKHS W AS RECEIVED TO EXTINGUISH A CAPITAL RIGHT I.E. THE RIGHT TO POSSES SIONS OF THE PROPERTY. HOWEVER, I AM NOT INCLINED TO AGREE WITH THE CONTEN TION OF THE APPELLANT BECAUSE IF HE HAD UNAUTHORIZED AND FORCEFUL OCCUPAT ION OF THE FLAT, WHO CREATED THE RIGHT OF POSSESSION OF THE FLAT IN HIS FAVOUR? IF, HE HAD NEITHER THE OWNERSHIP OF THE FLAT NOR HAD THE LEGAL RIGHT TO STAY THEREIN, HOW HE MAY HAVE THE LEGAL RIGHT TO POSSESSIONS THER EOF, SO THAT TO SAY THAT THE RECEIPT OF RS.55 LAKHS WAS THE CAPITAL REC EIPT. IT IS NOT LIKE THAT ANYONE CAN FORCEFULLY OCCUPY ONES PROPERTY AND DEM AND COMPENSATION TO VACATE THE ILLEGAL POSSESSION AND LATER ON SAY T HAT THE RECEIPT IS CAPITAL RECEIPT. IN FACT, IT IS NOTHING BUT WINDFAL L FOR THE APPELLANT AND THE RECEIPT IS DEFINITELY LIABLE TO TAX AS CASUAL RECEI PT UNDER THE HEAD INCOME FROM OTHER SOURCES, IF NOT AS CAPITAL GAIN . I AM OF THE OPINION THAT THE INCOME IS TAXABLE SUBSTANTIVELY IN THE HAN DS OF THE APPELLANT BECAUSE HE WAS STAYING IN THE FLAT IN THE CAPACITY OF DIRECTOR OF KEDIA DISTELLERIES LTD., AND DID NOT VACATE THE FLAT AFTE R RESIGNING FROM THAT COMPANY. FURTHER, THE ENTIRE RECEIPT OF RS.55 LAKHS WAS RECEIVED BY HIM, DEPOSITED IN HIS BANK ACCOUNT AND ALSO CREDITE D IN HIS CAPITAL ACCOUNT. THEREFORE, THE RECEIPT IS TAXABLE IN THE H ANDS OF APP ON SUBSTANTIVE BASIS AND NOT IN THE HANDS OF HIS WIFE YASHOD DEORA. IN VIEW OF ABOVE, IT IS HELD THAT THE RECEIPT OF RS.55 LAKHS IS TAXABLE IN THE HANDS OF APPELLANT AS INCOME FROM OTHER SOURCES/CAP ITAL GAIN. THE ADDITION OF RS.55 LAKHS MADE BY THE AO IS CONFIRMED . THE GROUND NOS. 1, 2 AND 3 ARE DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E PREFERRED SECOND APPEAL BEFORE US BY RAISING FOLLOWING GROUNDS:- 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE ARBITRARY, ERRONEOUS, WITHOUT PROPER REASONING, INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED DIN HOLDING THAT THE RECEIPT OF RS.55 LAKHS I S TAXABLE IN THE HANDS OF THE APPELLANT ON SUBSTANTIVE BASIS AS INCOME FRO M OTHER SOURCES/CAPITAL GAIN. ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 7 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE RECEIPT OF THE S UM OF RS.55 LAKHS BY THE APPELLANT FROM M/S PERCEPT ADVERTISING LTD. WAS FOR SURRENDERING THE RIGHT OF FORCEFUL OCCUPATION OF THE FLAT NO.1 TURF VIEW, 3 RD FLOOR, HORNBY VELLARD ESTATE, WORLI, MUMBAI, AND THEREFORE, IT DI D NOT COME UNDER THE PURVIEW OF EITHER TAXABLE CAPITAL RECEIPT OR INCOME FROM OTHER SOURCES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN PASSING A VAGUE ORDER BY HOLDING THAT THE RECEIPT OF RS.55 LAKHS BY THE APPELLANT IS TAXABLE IN HIS HANDS AS INCOME FROM OTHER SOURCES/ CAPITAL GAIN, NEGLECTING TO TAKE INTO ACCOUNT THE F ACT THAT THE RATES OF TAXES FROM INCOME FROM OTHER SOURCES AND CAPITAL GAINS ARE DIFFERENT. 5. ON THE FATS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.55 LAKHS ON ERRONEOUS REASONING. SHRI RAVI TULSIYAN, LD. AUTHORIZED REPRESENTATIVE A PPEARING ON BEHALF OF ASSESSEE AND SHRI DAVID Z. CHAWNGTHU, LD. DEPARTMEN TAL REPRESENTATIVE APPEARING ON BEHALF OF REVENUE. 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE. LD. AR SUBMITTED WRITTEN SUBMI SSIONS ALONG WITH PAPER BOOK RUNNING PAGES FROM 1 TO 28 AND STATED THAT IT IS CLEAR CASE OF ADVERSE POSSESSION OF THE DISPUTED FLAT BY MR & MRS. DEORA. NONE OF THEM WAS HAVING THE RIGHT OF POSSESSION OF THE FLAT NEITHER AS A DI RECTOR OR EMPLOYEE OF M/S MAHAVIR LEATHER BOARD PVT. LTD. IN FACT THE HUSBAND WAS ALLOWED TO RESIDE IN THE FLAT ON ACCOUNT OF HIS DIRECTORSHIP IN KEDIA DI STILLERIES LTD. THE ASSESSEE AND HER HUSBAND HAVE NO KNOWLEDGE REGARDING THE ARR ANGEMENT BETWEEN M/S MAHAVIR LEATHER BOARD PVT. LTD. AND M/S KEDIA DISTI LLERIES LTD., LD. AR FURTHER STATED THAT IT IS CORRECT THAT AS HIS WIFE, THE ASS ESSEE WAS ALSO CO-OCCUPYING THE SAID FLAT BUT SHE NEVER HAD ANY LEGAL RIGHT THE REIN. LD. AR SUBMITTED THAT SO FAR AS IN THE PRESENT CASE THE ASSESSEE AS ALLEG ED BY AO (ALTHOUGH WITHOUT ADDUCING ANY EVIDENCE IN SUPPORT OF HIS CLAIM), OBT AINED RIGHTFUL POSSESSIONS OF THE FLAT CONCERNED AS A LICENSEE HOLDS NO MERIT. INDEED, THE PURCHASER OF THE FLAT VIZ., M/S PECEPT ADVERTISING LT., HAD TO B RING A LEGAL ACTION BY WAY O MAKING AN APPLICATION BEFORE A JUDICIAL BODY VIZ., THE COMPETENT AUTHORITY, ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 8 KONKAN DIVISION, MUMBAI, FOR RECOVERING THE SAID PO SSESSION FROM THE ASSESSEE. AS PER THE TRUE FACTS OF THE CASE ALSO, THE HUSBAND OF THE ASSESSEE HAD ACQUIRED THE RIGHT TO POSSESS THE PROPERTY AS A DIRECTOR OF M/S KEDIA DISTILLERIS LTD., AND THE WIFE ACQUIRED THE RIGHT T O RESIDE IN THE FLAT ON ACCOUNT OF BEING HER HUSBAND. THEREFORE, THIS WAS A VALUABLE R IGHT ACQUIRED AND ALSO ENJOYED BY HER WHICH REQUIRED A LEGAL ACTION BY KM/ S PERCEPT ADVERTISING LTD., TO TAKE AWAY THE RIGHT. FINALLY, BOTH THE PARTIES A RRIVED AT A MUTUAL SETTLEMENT FOR DELIVERY OF THE POSSESSION BY THE ASSESSEE ON P AYMENT OF A SUM OF RS.55 LAKHS TO THE HUSBAND OF THE ASSESSEE BY THE OTHER P ARTY. THIS SETTLEMENT WAS ALSO APPROVED OF AND RATIFIED BY THE COMPETENT AUTH ORITY. HENCE, IT CAN BE SEEN THAT THE RIGHT OF POSSESSION OF THE FLAT WAS A LEGAL RIGHT WHICH HAD TO BE EXTINGUISHED BY NOT ONLY A PROCESS OF LAW BUT ALSO SUBSTANTIAL PAYMENT BY THE OTHER PARTY. HENCE, IT MUST BE HELD THAT THE SAID R IGHT OF POSSESSIONS WAS NOT ONLY A PROPERTY AS ENUNCIATED IN THE VARIOUS JUDI CIAL DECISIONS CITED ABOVE BUT IT WAS ALSO A VALUABLE PROPERTY HAVING A SUBSTANTIA L MONEY VALUE. THEREFORE, THE RIGHT OF POSSESSION MUST BE CONSIDERED TO BE A CAPITAL ASSET FOR THE PURPOSE OF INCOME TAX ACT AND ESPECIALLY FOR SECTIO N 45 OF THE ACT. EVEN THE AO HAS TREATED THE SAID RIGHT AS A CAPITAL ASSET AN D HAS CHARGED THE AMOUNT RECEIVED BY THE HUSBAND OF THE ASSESSEE AS CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. IT CAN ALSO BE SEEN THAT UNDER THE SETTLE MENT ARRIVED AT WITH THE PURCHASER COMPANY, THE ASSESSEE AND HER HUSBAND RE LINQUISHED THEIR ABOVE RIGHT OF POSSESSIONS OF THE DISPUTED FLAT. THERE WA S ALSO AN EXTINGUISHMENT OF THE SAID RIGHT. HENCE, IN ACCORDANCE WITH THE DIFFE RENT CLAUSES OF SEC.2(47) OF THE ACT, THERE WAS A TRANSFER OF THE CAPITAL ASSE T OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ANY PROFIT OR GAIN ARISIN G OUT OF THIS TRANSFER IS, THUS, LIABLE TO BE ASSESSED TO TAX UNDER THE HEAD CAPITA L GAINS AS HAS BEEN DONE BY THE AO. HOWEVER, THIS CAPITAL GAIN IS REQUIRED T O BE COMPUTED FOR TAX PURPOSE IN ACCORDANCE WITH THE COMPUTATION PROVISIO NS OF SEC. 48 OF THE ACT. IT MAY, HOWEVER, BE CLEARLY SEEN THAT THERE WAS NO COST OF ACQUISITION OF THE RIGHT OF POSSESSIONS OF THE SAID DISPUTED FLAT, AS THE ASSESSEE DID NOT SPEND ANYTHING FOR OBTAINING THE SAID POSSESSION. HENCE, THE MECHANISM FOR ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 9 COMPUTATION OF CAPITAL GAIN WITH REFERENCE TO COST OF ACQUISITION OF THE ASSET TRANSFERRED CLEAERLYFAILS. THE ULTIMATE RESULT IS, THUS, THAT THE ABOVE MENTIONED CAPITAL GAINS IS NOT EXIGIBLE TO INCOME TAX, AS H AS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF SRINIVASA SETTY (B.C) 128 ITR 294 (SC) AND REPEATED BY THE HON'BLE SUPREME COURT IN CASE OF PN B FINANCE LTD. 220 CTR 110. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDERS OF AUTHORITIES BELOW. 9. WE FIND THAT AO HAS MADE THE PROTECTIVE ASSESSME NT IN THE HANDS OF HUSBAND-AND-WIFE WITH A VIEW TO AVOID THE LOSS TO T HE REVENUE WHICH MAY OCCUR IN FUTURE AND AO HAS HELD THE COMPENSATION RE CEIVED BY ASSESSEE AS THE RELINQUISHMENT OF RIGHT OF THE PROPERTY AND LD. CIT(A) HAS CONFIRMED THE ACTION OF AO BY OBSERVING THAT IN CASE IT IS NOT SU CH A TRANSACTION WHICH IS TO BE TAXED UNDER THE HEAD CAPITAL GAINS BUT DEFINIT ELY INCOME AS PER THE PROVISION OF INCOME FROM OTHER SOURCE AND WHICH I S CHARGEABLE TO TAX. HOWEVER, WE FIND THAT THIS ITAT MUMBAI OF E BENCH HAS DECIDED THE MATTER IN FAVOUR OF ASSESSEE WHICH WAS INVOLVING THE SAME FACTS OF THE PRESENT CASE AND THE RELEVANT EXTRACT OF THE ITAT MUMBAI PARA-7- 8 IN ITA NO. 807/MUM/2013 DATED 11.09.2015 IS REPRODUCED BELOW:- 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE FI ND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY A NUMBER OF D ECISIONS OF THE HON'BLE SUPREME COURT AS WELL AS VARIOUS HIGH COURT S OF THE COUNTRY. THE BASE DECISION IS INCOME CIT V. B.C. SRINIVASA SHETTY (1981) 128 ITR 294; (1981) 2 SCC 460 WHEREIN THE HON'BLE SUPRE ME COURT HAS HELD THAT ALL TRANSACTIONS ENCOMPASSED BY SECTION 4 5 MUST FALL WITHIN THE COMPUTATION PROVISIONS OF SECTION 48. IF THE CO MPUTATION AS PROVIDED UNDER SECTION 48 COULD NOT BE APPLIED TO A PARTICUL AR TRANSACTION, IT MUST BE REGARDED AS NEVER INTENDED BY SECTION 45 TO BE THE SUBJECT OF T HE CHARGE . THE HON'BLE SUPREME COURT IN THE CASE OF PNB FINANCE LTD. VS. CIT (2008) 307 ITR 75 HAS REITERATED THE ABOVE PROPOSITION OF LAW. IN THE CASE OF CIT V. B.C. SRINIVASA SHETTY (SUPRA) THE COURT WAS CONSIDERING WHETHER A FIRM WAS LIABLE TO PAY CAPITA L GAINS ON THE SALE OF ITS GOODWILL TO ANOTHER FIRM THE COURT FOUND THAT T HE CONSIDERATION RECEIVED FOR THE SALE OF GOODWILL COULD NOT BE SUBJ ECTED TO CAPITAL GAINS BECAUSE THE COST OF ITS ACQUISITION WAS INHERENTLY INCAPABLE OF BEING DETERMINED. THE PRINCIPLE PROPOUNDED IN B.C. SRINIV AS SHETTY (1981) 128 ITR HAS BEEN FOLLOWED BY SEVERAL HIGH COURTS W ITH REFERENCE TO THE ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 10 CONSIDERATION RECEIVED ON SURRENDER OF INTER ALIA T ENANCY RIGHTS SALE OF GOOD WILL ETC. IT WAS TO MEET THE SITUATION CREATED BY THE DECISION IN B.C. SRINIVAS SHETTY (1981) 128 ITR 294 (SC) AND TH E SUBSEQUENT DECISIONS OF THE HIGH COURTS THAT VIDE FINANCE ACT, 1994, SECTION 55(2) WAS AMENDED TO PROVIDE THAT THE COST OF ACQUISITION OF, INTER ALIA, A TENANCY RIGHT, GOOD WILL ETC. WOULD BE TAKEN AS NIL . 8. THUS, IT MAY BE NOTED THAT AFTER THE AMENDMENT O F 1995, CERTAIN ASSETS LIKE GOODWILL, TENANCY RIGHTS ETC. HAVE BEEN CHARGED TO TAX BY SPECIFICALLY PROVIDING THAT IF THERE IS COST INCURR ED BY THE ASSESSEE IN THIS RESPECT, THE COST SHALL BE TAKEN AS NIL. HOWEVER, W E FIND THAT VIDE AMENDMENT, PARTICULAR ASSES LIKE GOODWILL, TENANCY RIGHTS, TRADE MARK ETC. HAVE BEEN BROUGHT INTO THE AMBIT OF CHARGING S ECTION. HOWEVER, THE RIGHTS OBTAINED BY WAY OF ADVERSE POSSESSION HAVE N OT BEEN INCLUDED IN THE PROVISION NEITHER IN THE CHARGING SECTION 45 NO R IN THE SECTION 48 WHICH PROVIDES MODE OF COMPUTATION. HERE IS NO ANY PROVISION REGARDING THE CHARGING OF CAPITAL GAINS TAX ON AN A SSET TITLE TO WHICH HAS BEEN ACQUIRED IN RECOGNITION OF RIGHTS OF ADVERSE P OSSESSION. EVEN U/S. 49, THE COST OF THE ASSET WITH REGARD TO CERTAIN MO DE OF ACQUISITION, SUCH AS BY WAY OF GIFT OR WILL, BY SUCCESSION, INHERITAN CE OR DEVOLUTION OR ON ANY DISTRIBUTION OF ASSTS ON THE DISSOLUTION OF A F IRM, BODY OF AOP OR LIQUIDATION OF COMPANY ETC.; THE RIGHTS ATTAINED IN AN ASSET ON ACCOUNT OF ADVERSE POSSESSION HAVE NOT BEEN INCLUDED. THOUGH T HE PARLIAMENT HAS MADE AN AMENDMENT THAT IN CERTAIN TYPE OF ASSET S LIKE GOODWILL, TENANCY RIGHTS ETC., THE COST OF ACQUISITION WOULD BE TAKEN AS ACTUAL COST INCURRED AND IF NO COST INCURRED, THE SAME BE TAKEN AT NIL, HOWEVER THE SAID DEEMING SECTION IS APPLICABLE TO THE ASSET S WHICH HAVE BEEN SPECIFICALLY BROUGHT WITHIN THE PURVIEW OF THE SAID PROVISION. THE ASSETS OR THE RIGHTS WHICH DO NOT FIND MENTION IN THE RELE VANT PROVISION, CANNOT BE BROUGHT WITHIN THE AMBIT OF CHARGING SECTION, IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT. WE FURTHER F IND THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DIRECT DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. STAR CHEMICALS(BOMBAY) PVT. LTD. ( INCOME TAX APPEAL NO. 1110 OF 2009 & INCOME TAX APP EAL NO. 1153 OF 2009, DATED 14 TH AUGUST, 2009) WHEREIN THE HON'BLE COURT WHILE ANSWERING THE QUESTION OF CHARGEABILITY OF CAPITAL GAINS IN RELATION TO AN ASSET/TITLE WHICH WAS ACQUIRED BY WAY OF ADVERSE PO SSESSION, HAS HELD THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT FOR WAN T OF ACQUISITION COST, CAPITAL GAINS TAX WOULD NOT ARISE. SINCE A DIRECT D ECISION OF THE HON'BLE JURISDICTIONAL COURT TIN RELATION TO THE CHARGEABIL ITY OF CAPITAL GAIN ON ASSET ACQUIRED BY WAY OF ADVERSE POSSESSION IS AVAI LABLE, HENCE, THE SAME IS BINDING UPON THIS TRIBUNAL. WE THEREFORE HO LD THAT NO CAPITAL GAIN ARE CHARGEABLE TO TAX IN RELATION TO THE ASSET ACQUIRED BY WAY OF ADVERSE POSSESSION. APPEAL OF THE ASSESSEE IS ALLOW ED AND ORDER OF THE LOWER AUTHORITIES IS SET ASIDE. ITA NO.835/KOL/08 & 281/KOL/13 A.Y. 2003-04 SMT. YASHOD DEORA SRI PRADEEP KUMAR DEORA PAGE 11 IN VIEW OF THE ABOVE, WE FIND THAT THERE WAS NO TEN ANCY RIGHT AVAILABLE WITH THE ASSESSEE WHICH IS, IN FACT, CHARGEABLE UNDER THE IN COME TAX ACT UNDER THE HEAD INCOME FROM CAPITAL GAINS. HOWEVER, IN THE P RESENT CASE, ASSESSEE WAS HAVING ADVERSE CHARGE ON THE PROPERTY AND CHARG E OF TAX ON SUCH TRANSACTION HAS NOWHERE BEEN DEFINITE UNDER THE ACT . THEREFORE, WE ARE HOLDING THAT THIS TRANSACTION OUT OF PURVIEW OF TAX . IN OUR CONSIDERED VIEW, WE REVERSE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION MADE BY ASSESSING OFFICER AND SUBSEQUENTLY CONFIRMED BY LD. CIT(A). THIS GROUND RAISED BY ASSESSEE IS ALLOWED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. COMING TO ASSESSEES APPEAL IN ITA NO.835/KOL/2008. 11. SINCE THE ISSUE IS COMMON IN ASSESSEES APPEAL IN ITA NO. 281/KOL/13 AND TAKING A CONSISTENT VIEW WE ALLOW ASSESSEES AP PEAL AND THIS GROUND RAISED BY ASSESSEE IS ALLOWED. 12. IN COMBINE RESULT, BOTH THE APPEAL OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 11 /12/2015 SD/- SD/- (MAHAVIR SINGH) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP '#$- 11 /1 2 /2015 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE SMT. YASHOD DEORA, 2-B QUEENS PARK, KOLKATA- 700 019 SHRI PRADEEP KR. D EORA, 2B, QUEENS PARK, KOLKATA-19 2. /REVENUE-ITO, WARD-30(3), AAYAKAR BHAWAN DAKSHIN, 2 G ARIAHAT RD.(S) KOL-68 DCIT,CC-XXIV, KOLKATA 3.#-#./ 0 / CONCERNED CIT KOLKATA 4. 0- / CIT (A) KOLKATA 5.2 3455./, ./!, / DR, ITAT, KOLKATA 6.489:; / GUARD FILE. BY ORDER/ , /TRUE COPY/ /# ./!,