DIGITAL ELECTRONICS LTD, MUMBAI V. ACIT 8(1), MUMBAI

ITA 8646/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3583 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJENDRA KUMAR
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI .. , ! '#$ % % % % &. '.'.. %( ) '#$ '* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM './ I.T.A. NO. 8646/MUM/2010 ( )( , %-, )( , %-, )( , %-, )( , %-, / / / / ASSESSMENT YEAR : 2007-08) DIGITAL ELECTRONICS LIMITED, 86, JOLLY MAKER CHAMBER NO. II, 8 TH FLOOR, NARIMAN POINT, MUMBAI 400 021. ( ( ( ( / VS. ASSTT. COMMISSIONER OF INCOME TAX- (8)(1), MUMBAI. $. ! './ PAN : AAACD1798F ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ' / APPELLANT BY : SHRI PRADIP KAPASI 01./ 2 3 ' / RESPONDENT BY : DR. RAJENDRA KUMAR '(% 2 ! / // / DATE OF HEARING : 30-04-2013 45- 2 ! / DATE OF PRONOUNCEMENT :21.06.2013 # 6 / O R D E R PER P.M. JAGTAP, A.M . .. , ! '#$ : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) -16 MUMBAI DTD. 13-10-2010 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS. 2,10,75,000/- M ADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) BY TREATING THE COMPENS ATION RECEIVED BY THE ASSESSEE FOR WAIVING AND GIVING UP OF RIGHTS AND EN TITLEMENTS UNDER ARTICLE 8.6 AND 8.7 OF THE JOINT VENTURE AGREEMENT AS INCOM E CHARGEABLE TO TAX UNDER THE HEAD SHORT TERM CAPITAL GAIN. ITA 8646/MUM/2010 2 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF TRADING AND SERVICING OF ELECTRONIC EQU IPMENTS AND COMPUTER PERIPHERALS. THE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED BY IT ON 30-10-2007 DECLARING TOTAL INCOME OF RS. 5 ,33,93,427/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CREDITED AN AMOUNT OF RS. 2,10,75,000/ - DIRECTLY TO THE CAPITAL RESERVE CLAIMING THE SAME TO BE A CAPITAL RECEIPT. HE, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO HOW THE SAME AMOUNT CREDI TED TO THE CAPITAL RESERVE ACCOUNT DID NOT CONSTITUTE ITS INCOME CHARGEABLE TO TAX. IN REPLY, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESSEE:- THE ASSESSEE HAD ENTERED INTO A JOINT VENTURE AGRE EMENT WITH LAND INSTRUMENT INTERNATIONAL LTD. ON 27-05-2005. AS PE R CLAUSE 8.6 OF THE AGREEMENT IN THE EVENT OF UNIDEL GROUP OR LAND GROU P IS AMALGAMATED WITH OR BEING TAKEN OVER BY A THIRD PARTY, THE OTH ER GROUP SHALL HAVE THE OPTION OF PURCHASING ALL THE SHARES IN JVCO OF THE GROUP, AMALGAMATING NOT BEING TAKEN OVER OR OF SELLING ALL ITS SHARES IN JVCO TO THE GROUP BEING AMALGAMATED OR TAKEN OVER. DUE TO THE TAKEOVER OF LAND INSTRUMENTS INTERNATIONAL LTD. UK BY A USA BAS ED COMPANY, DIGITAL ELECTRICALS LTD. EXERCISED ITS OPTION TO SE LL ALL THE SHARES OF THE JV COMPANY TO OTHER JV PARTNER AND HAS RECEIVED RS. 210.75 LACS AS COMPENSATION FOR WAIVING AND GIVING UP ALL THE ITS RIGHTS AND ENTITLEMENT TO SELL THE SHARES OF JV COMPANY. WHIL E CREDITING THE SAID RECEIPT TO CAPITAL RESERVE ACCOUNT AND TREATING THE SAME AS A CAPITAL RECEIPT THE ASSESSEE HAS RELIED UPON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF KETTLEWELL BULEN AND CO. LTD. VS. CIT 53 ITR 261 (1964) AND OBEROI HOTELS PVT. LTD. VS. CIT 236 ITR 903 (SC). THE ASSESSEE HAS RELIED UPON VARIOUS OTHER JUDICIAL PRO NOUNCEMENT IN THIS REGARD. IN VIEW OF THE FACTS STATED ABOVE AND VARIO US LEGAL DECISIONS, THE COMPENSATION OF RS. 210.75 LACS FOR WAIVING AND GIV ING UP ALL ITS RIGHTS AND ENTITLEMENT TO SELL THE SHARES OF JV COMPANY IS A CAPITAL RECEIPT WHICH DOES NOT INVOLVE ANY COST ELEMENT IS NOT TAXA BLE UNDER THE PROVISIONS OF THE INCOME TAX ACT. THE ABOVE EXPLANATION OFFERED BY THE ASSESSEE WAS N OT FOUND ACCEPTABLE BY THE A.O. ACCORDING TO HIM, THE ASSESSEE COMPANY HA D ENTERED INTO A JOINT VENTURE AGREEMENT WITH M/S LAND INSTRUMENT INTERNAT IONAL LTD. WITH 50% SHARES HELD BY BOTH THE JOINT VENTURE PARTNER IN TH E JOINT VENTURE COMPANY AND AS PER THE TERMS OF THE SAID AGREEMENT, IN CASE OF ANY OF THE JOINT VENTURE PARTNER AMALGAMATING OR TAKING OVER BY A TH IRD PARTY, THE OTHER JOINT ITA 8646/MUM/2010 3 VENTURE PARTNER HAD THE OPTION OF EITHER PURCHASING OF THE SHARES OF THE PARTNER GETTING AMALGAMATED OR TAKEN OVER OR TO SEL L ITS OWN SHARES TO THE PARTNER BEING AMALGAMATED OR TAKEN OVER. HE OBSERVE D THAT M/S LAND INSTRUMENT INTERNATIONAL LTD. WAS TAKEN OVER BY A COMPANY INCORPORATED IN USA AND CONSEQUENT TO THE SAID TAKE OVER, OPTION WA S EXERCISED BY THE ASSESSEE AS PER CLAUSE 8.6 AND 8.7 OF THE JOINT VEN TURE AGREEMENT TO SELL ITS 50% SHARE IN THE JOINT VENTURE COMPANY TO M/S LAND INSTRUMENT INTERNATIONAL LTD. FOR RS. 210.75 LACS. HE HELD T HAT THE AMOUNT OF 210.75 LACS THUS WAS RECEIVED BY THE ASSESSEE AGAINST SALE OF ITS 50% SHARES OF THE JOINT VENTURE COMPANY AND THE SAME WAS CHARGEABLE T O TAX IN THE HANDS OF THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAI N. 3. THE ADDITION MADE BY THE A.O. ON ACCOUNT OF SHO RT TERM CAPITAL GAIN TO ITS INCOME WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESS EE BEFORE THE LD. CIT(A) THAT M/S LAND INSTRUMENT INTERNATIONAL LTD. WAS PR OPOSED TO BE TAKEN OVER BY AMETEK INC., USA WHICH ENTAILED THE ASSESSEE TO INVOKE THE PROVISIONS OF ARTICLE 8.6 AND 8.7 OF THE JOINT VENTURE AGREEMENT VIDE LETTER DTD. 31-1-2006 IN ORDER TO EXERCISE ITS OPTION TO SELL ALL THE SHA RES HELD IN THE JOINT VENTURE COMPANY TO THE OTHER JOINT VENTURE PARTNER I.E. M/S LAND INSTRUMENT INTERNATIONAL LTD. IT WAS SUBMITTED THAT THE ASSES SEE COMPANY AND M/S LAND INSTRUMENT INTERNATIONAL LTD., HOWEVER, REACHED AN AGREEMENT AFTER DUE DISCUSSION AND DELIBERATION ON 15 TH JUNE, 2006 WHEREBY THE ASSESSEE AGREED TO WAIVE AND GIVE UP ALL ITS RIGHTS AND ENTITLEMENT UNDER ARTICLE 8.6 AND 8.7 OF THE JOINT VENTURE AGREEMENT IN CONSIDERATION OF M/S LAND INSTRUMENT INTERNATIONAL LTD. PAYING A SUM OF RS. 2,10,75,000/ - TO THE ASSESSEE. IT WAS CONTENDED THAT THE ASSESSEE COMPANY THUS HAD RECEIV ED A SUM OF RS. 2,10,75,000/- AS COMPENSATION FOR WAIVING AND GIVIN G UP OF RIGHTS AND ENTITLEMENT UNDER ARTICLE 8.6 AND 8.7 OF THE JOINT VENTURE AGREEMENT AND SINCE THE ASSESSEE EVEN AFTER THE RECEIPT OF SUCH C OMPENSATION CONTINUED TO ITA 8646/MUM/2010 4 HOLD THE INVESTMENT IN THE SHARES OF JOINT VENTURE COMPANY, THE AMOUNT OF COMPENSATION DID NOT CONSTITUTE ANY INCOME BUT THE SAME IN THE NATURE OF CAPITAL RECEIPT NOT CHARGEABLE TO TAX. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON BEHALF OF THE ASSESSEE ON THE FOLLOWI NG JUDICIAL PRONOUNCEMENTS:- - CIT VS. VAZIR SULTAN & SONS (36 ITR 1.75) (SC) ( 1959) - HAN KAILASH & CO VS CIT (22 ITR 195) (ALL) (1952) - GOVINDBHAI C PATEL (1 ITR 34) (AHMADABAD TRIBUNAL ) (2010) - B C SRINIVASA SETTY (128 ITR 294) (1981) (SC) - RUF OF H.H LATE SIR J. M SCINDIA VS ACIT (118 ITD 190) - MRS. YOGESH AURORA VS ITO, (2009) TIOL 511, BCAJ JOURNAL SEPTEMBER, 2009. - CIT VS MAGNUN EXPORT (P) LTD (130 TAXMAN 702) (CA L) (2003) - CIT VS MANOHARSINHJI P JADEJA (281 ITR 19) (GUJ) (20061) IT WAS ALSO SUBMITTED ON BEHALF OF THE ASSESSEE BEF ORE THE LD. CIT(A) THAT THERE WAS NO TRANSFER OR SALE OF ANY SHARES HELD BY IT IN THE JOINT VENTURE COMPANY AND THE FINDINGS RECORDED BY THE A.O. IN THIS REGAR D TO BRING TO TAX THE COMPENSATION RECEIVED BY THE ASSESSEE UNDER THE HEA D SHORT TERM CAPITAL GAIN WAS FACTUALLY INCORRECT. 4. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE W ERE NOT FOUND ACCEPTABLE BY THE LD. CIT(A) AND HE CONFIRMED THE A DDITION OF RS. 2,10,75,000/- MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD SHORT TERM CAPITAL GAIN FOR THE FOLLOWING RE ASONS GIVEN IN PARA 4.3.1 TO 4.3.8 :- 4.3.1 1 HAVE CAREFULLY CONSIDERED THE CONTENTION O F THE APPELLANT COMPANY AS WELL AS CAREFULLY GONE THROUGH THE AVAIL ABLE DOCUMENTS ON RECORD. I FIND THAT RIGHT OF FIRST REFUSAL (ROFR) C OMMONLY CONNOTES A PROVISION IN AN AGREEMENT STATING THAT A SPECIFIED PARTY MUST BE GIVEN AN OPPORTUNITY BEFORE ANY OTHERS TO EITHER ACCEPT O R REJECT AN OFFER. THE RIGHT OF FIRST REFUSAL MAY EXTEND, FOR EXAMPLE, TO THE ACT OF SELLING PROPERTY. IN THIS CASE, IF AND WHEN THE OWNER DECID ES TO SELL, THE PROPERTY MUST FIRST BE OFFERED TO THE SPECIFIED PAR TY. UPON REFUSAL BY THE SPECIFIED PARTY, THE PROPERTY MAY THEN BE OFFERED U NDER THE SAME TERMS AND CONDITIONS TO OTHERS, RIGHT OF FIRST REFUSAL (R OFR OR RFR) IS A CONTRACTUAL RIGHT THAT GIVES ITS HOLDER THE OPTION TO ENTER A BUSINESS TRANSACTION WITH THE OWNER OF SOMETHING, ACCORDING TO SPECIFIED TERMS, ITA 8646/MUM/2010 5 BEFORE THE OWNER IS ENTITLED TO ENTER INTO THAT TRA NSACTION WITH A THIRD PARTY. IN BRIEF, THE RIGHT OF FIRST REFUSAL. IS SIM ILAR IN CONCEPT TO A CALL OPTION. 4.3.2 AN ROFR CAN COVER ALMOST ANY SORT OF ASSET, I NCLUDING REAL ESTATE, PERSONAL PROPERTY, A PATENT, LICENSE, A SCR EENPLAY, OR AN INTEREST IN A BUSINESS. IT MIGHT ALSO COVER BUSINESS TRANSAC TIONS THAT ARE NOT STRICTLY ASSETS, SUCH AS THE RIGHT TO ENTER A JOINT VENTURE OR DISTRIBUTION ARRANGEMENT. ROFR IS A CONTRACTUAL RIGHT, THE HOLDE RS REMEDIES FOR BREACH ARE TYPICALLY LIMITED TO RECOVERY OF DAMAGES . IN OTHER WORDS, IF THE OWNER SELLS THE ASSET TO A THIRD PARTY WITHOUT OFFERING THE HOLDER THE OPPORTUNITY TO PURCHASE IT FIRST, THE HOLDER CAN TH EN SUE THE OWNER FOR DAMAGES. 4.3.3 IN FINANCE, AN OPTION IS A DERIVATIVE FINANC IAL INSTRUMENT THAT ESTABLISHES A CONTRACT BETWEEN TWO PARTIES CONCERNI NG THE BUYING OR SELLING OF AN ASSET AT A REFERENCE PRICE DURING A S PECIFIED TIME FRAME. DURING THIS TIME FRAME, THE BUYER OF THE OPTION GAI NS THE RIGHT, BUT NOT THE OBLIGATION, TO ENGAGE IN SOME SPECIFIC TRANSACT ION ON THE ASSET, WHILE THE SELLER INCURS THE OBLIGATION TO FULFILL T HE TRANSACTION IF SO REQUESTED BY THE BUYER. THE PRICE OF AN OPTION IS D ERIVED FROM THE VALUE OF AN UNDERLYING ASSET (COMMONLY A STOCK, A BOND, A CURRENCY OR A FUTURES CONTRACT) PLUS A PREMIUM BASED ON THE TIME REMAINING UNTIL THE EXPIRATION OF THE OPTION. OTHER TYPES OF OPTIONS EX IST, AND OPTIONS CAN IN PRINCIPLE BE CREATED FOR ANY TYPE OF VALUABLE ASSET . 4.3.4 AN OPTION WHICH CONVEYS THE RIGHT TO BUY SO METHING IS CALLED A CALL; AN OPTION WHICH CONVEYS THE RIGHT TO SELL I S CALLED A PUT. THE PRICE SPECIFIED AT WHICH THE UNDERLYING MAY BE TRAD ED IS CALLED THE STRIKE PRICE OR EXERCISE PRICE. THE PROCESS OF ACTI VATING AN OPTION AND THEREBY TRADING THE UNDERLYING ASSET AT THE AGREED- UPON PRICE IS REFERRED TO AS EXERCISING IT. MOST OPTIONS HAVE AN EXPIRATION DATE. IF THE OPTION IS NOT EXERCISED BY THE EXPIRATION DATE, IT BECOMES VOID AND WORTHLESS. 43.5 IN RETURN, FOR GRANTING THE OPTION, CALLED W RITING THE OPTION, THE ORIGINATOR OF THE OPTION COLLECTS A PAYMENT, THE PR EMIUM, FROM THE BUYER. THE WRITER OF AN OPTION MUST MAKE GOOD ON DE LIVERING (OR RECEIVING) THE UNDERLYING ASSET OR ITS CASH EQUIVAL ENT, IF THE OPTION IS EXERCISED. AN OPTION CAN USUALLY BE SOLD BY ITS ORI GINAL BUYER TO ANOTHER PARTY. MANY OPTIONS ARE CREATED IN STANDARDIZED FOR M AND TRADED ON AN ANONYMOUS OPTIONS EXCHANGE AMONG THE GENERAL PUBLIC , WHILE OTHER OVER-THE-COUNTER OPTIONS ARE CUSTOMIZED TO THE DESI RES OF THE BUYER ON AN AD HOC BASIS, USUALLY BY AN INVESTMENT BANK. 4.3.6 FROM THE FOREGOING IT IS CLEAR THAT AN OPTIO N IS A CONTINUING OFFER TO SELL DURING THE DURATION OF THE OPTION AGREEMENT WHICH ON BEING EXERCISED BY THE OPTIONEE BECOMES A BINDING AND ENF ORCEABLE CONTRACT. TO BE AN EFFECTIVE EXERCISE OF AN OPTION, THE EXERC ISE OF THAT OPTION ITA 8646/MUM/2010 6 MUST BE UNEQUIVOCAL AND IN ACCORDANCE WITH THE TERM S OF THE OPTION WHATEVER THE OPTION REQUIRES MUST BE DONE. AS IN TH E CASE OF ALL OFFERS, REVOCABLE OR IRREVOCABLE, THE EXERCISE MUST BE UNCO NDITIONAL AND IN EXACT ACCORD WITH THE TERMS OF THE OPTION. WHEN THE OPTIONEE DECIDES TO EXERCISE ITS OPTION, IT MUST ACT UNCONDITIONALLY AN D ACCORDING TO THE TERMS OF THE OPTION. IT IS AN ACCEPTED POSITION OF LAW THAT TO CONSTITUTE A VALID CONTRACT, THE OFFER OF ONE PARTY MUST BE CERT AIN AND DEFINITE, AND THE ACCEPTANCE OF THE OTHER PARTY MUST CORRESPOND W ITH THE OFFER IN ITS ENTIRETY. A CONTRACT, TO BE FINAL, MUST EXTEND TO A LL THE TERMS WHICH THE PARTIES INTEND TO INTRODUCE, AND MATERIAL TERMS CAN NOT BE LEFT FOR FUTURE SETTLEMENT. A RIGHT OF FIRST REFUSAL, OR PRE-EMPTI VE RIGHT, IS A TYPE OF OPTION. THE PURPOSES FOR WHICH RIGHTS OF FIRST REFU SAL ARE UTILIZED ARE CLOSELY RELATED TO THE PURPOSES OF APPEAL TRADITIO NAL OPTION CONTRACTS. THE TWO TYPES OF AGREEMENTS ARE DISSIMILAR, HOWEVER , IN TERMS OF THE LEGAL RELATIONSHIPS OF THE PARTIES WHO ENTER THEM. 4.3.7 THE APPELLANT, THEREFORE,. OBTAINED AN IMPOR TANT RIGHT WHEN IT ENTERS INTO A JOINT VENTURE AGREEMENT WITH ITS JOIN T VENTURE PARTNERS ON 27TH MAY 2005, ARTICLE 8.6 OF THE JOINT VENTURE AS EXTRACTED ABOVE CLEARLY PROVIDES THAT IN THE EVENT UNIDEI GROUP OR LAND GROUP IS AMALGAMATING WITH OR BEING TAKEN OVER BY A THIRD PA RTY, THE OTHER GROUP SHALL HAVE THE OPTION OF PURCHASING ALL THE S HARES IN THE JV CO OF THE GROUP, AMALGAMATING OR BEING TAKEN OVER OR OF S ELLING ALL ITS SHARE IN THE JV CO TO THE GROUP BEING AMALGAMATED OR TAKE N OVER. THE UNDISPUTED FACT IS THAT THE APPELLANT EXERCISED ITS OPTION AND HAD RECEIVED AN AMOUNT OF RS.210.57 LATHS AS COMPENSATI ON FOR VARYING AND GIVING ITS RIGHT AND ENTITLEMENT TO SELL THE SHARES OF JC CO. THE SAID RIGHT EMERGES FROM JV AGREEMENT AND IS A VALUABLE R IGHT WHICH HAS BEEN WAIVED OFF. THE COST OF ACQUISITION OF THIS RI GHT IS IN PURSUANCE TO JV AGREEMENT AND SUB SECTION 2 OF SEC. 55 PROVIDES AS UNDER: (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS [OR A TRADE MARK OF BRAND NAME ASSOCIATED WITH A BUSINE SS] [OR A RIGHT IN MANUFACTURE, PRODUCE OR PROCESS ANY ARTICL E OR THING] [OR RIGHT TO CARRY ON ANY BUSINESS] TENANCY RIGHTS, STA GE CARRIAGE PERMITS OR LOOM HOURS: (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASS ESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHASE PRICE; AND (II) IN ANY OTHER CASE (NOT BEING A CASE FAILING UN DER SUB CLAUSE (I) TO (IV) OF SUB SECTION (1) OF SECTION 49 ], SHALL BE TAKEN TO BE NIL. 4.3.8 THE APPELLANT HAS ACQUIRED THIS RIGHT OF FIR ST REFUSAL THE DAY IT HAD ENTERED THE JV AGREEMENT. THEREFORE, THE APPELL ANT HAS NOT ACQUIRED THIS RIGHT FROM ANY PREVIOUS OWNER AND IT IS AN IMPORTANT RIGHT WHICH ENABLES THE APPELLANT AS WELL AS THE OTHER JV PARTNER TO CARRY ON ITA 8646/MUM/2010 7 THE BUSINESS. THEREFORE, THE COST OF ACQUISITION OF SUCH A RIGHT WILL BE NIL AS PER THE PROVISIONS OF SEC. 55(2)(A). 1, THER EFORE, FIND THAT THE LD. AO HAS RIGHTLY COMPUTED THE SHORT TERM CAPITAL GAIN ASSESSABLE ON RECEIPT OF RS. 210.57 LAKHS. THE ACTION OF THE LD. ASSESSING OFFICER IS ACCORDINGLY SUSTAINED AND THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS OBSERVED THAT THE AMOUNT OF RS. 2,10,75,000/- IN QUESTION RECEIVED BY THE ASSESSEE AND CLAIMED TO BE A CAPITAL RECEIPT NOT CHARGEABLE TO TAX WAS BROUGHT T O TAX BY THE A.O. IN THE HANDS OF THE ASSESSEE UNDER THE HEAD SHORT TERM CA PITAL GAIN AFTER RECORDING A FINDING THAT THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE AS CONSIDERATION FOR SALE OF ITS 50% SHARES IN THE JOINT VENTURE COM PANY TO M/S LAND INSTRUMENT INTERNATIONAL LTD. . THIS FINDING RECOR DED BY THE A.O., HOWEVER, WAS FACTUALLY IN-CORRECT AND THIS POSITION DEMONSTR ATED BY THE ASSESSEE BEFORE THE LD. CIT(A) WAS NOT DISPUTED BY HIM. A PERUSAL OF THE IMPUGNED ORDER OF THE LD. CIT(A) SHOWS THAT HE ALSO HAS NOT DEALT WIT H THE PLEA TAKEN BY THE ASSESSEE RELYING ON THE VARIOUS JUDICIAL PRONOUNCEM ENTS THAT THE AMOUNT IN QUESTION HAVING BEEN RECEIVED BY IT AS COMPENSATION FOR WAIVING AND GIVING UP OF ITS RIGHTS AND ENTITLEMENTS UNDER ARTICLE 8.6 AND 8.7 OF THE JOINT VENTURE AGREEMENT DID NOT CONSTITUTE INCOME AND THE SAME WAS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. ON THE OTHER HAND, HE HAS PROCEEDED ON AN ALTOGETHER DIFFERENT BASIS AND CONFIRMED THE ADDITI ON MADE BY THE A.O. BY TREATING THE AMOUNT IN QUESTION RECEIVED BY THE ASS ESSEE AS SHORT TERM CAPITAL GAIN BY HOLDING THAT THE ASSESSEE WAS HAVI NG RIGHT OF FIRST REFUSAL WHICH WAS AKIN TO CALL OPTION AND THE COMPENSATIO N RECEIVED FOR GIVING UP THE SAID RIGHT WAS CHARGEABLE TO TAX AS SHORT TERM CAPITAL GAIN. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT NO OPPORTUNITY WHATSOEVER WAS GIVEN BY THE LD. CIT(A) TO THE ASSESSEE OF BEING HEARD AND MAKE ITS SUBMISSION ON THIS ALTOGETHER DI FFERENT BASIS ADOPTED BY ITA 8646/MUM/2010 8 THE LD. CIT(A) TO CONFIRM THE ADDITION MADE ON ACCO UNT OF SHORT TERM CAPITAL GAIN AND THIS POSITION CLEARLY APPARENT FROM THE I MPUGNED ORDER OF THE LD. CIT(A) HAS NOT BEEN DISPUTED BY THE LD. D.R. WE, T HEREFORE, CONSIDER IT JUST AND PROPER TO SET ASIDE THE IMPUGNED ORDER OF THE L D. CIT(A) AND REMIT THE MATTER BACK TO HIM FOR DECIDING THE SAME AFRESH AFT ER GIVING PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND BY PASSING A WELL CONSIDERED AND WELL DISCUSSED ORDER AFTER DEALING W ITH THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7 8 )( ,7 2 '92 :; < = $% > 2 ?@ ORDER PRONOUNCED IN THE OPEN COURT ON 21-6-2013 201 3 # 6 2 45- ! A#(8 21-06-2013 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) '#$ JUDICIAL MEMBER ! '#$ / ACCOUNTANT MEMBER MUMBAI ; A#( DATED 21-06-2013 %.)(.'./ RK , SR. PS # 6 2 0)=B C B- # 6 2 0)=B C B- # 6 2 0)=B C B- # 6 2 0)=B C B-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. D () / THE CIT(A)16, MUMBAI. 4. D / CIT 8, MUMBAI 5. B%G 0))( , , / DR, ITAT, MUMBAI D BENCH 6. , H / GUARD FILE. # 6(' # 6(' # 6(' # 6(' / BY ORDER, '1B 0) //TRUE COPY// : : : :/ // /'? '? '? '? ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI