PINAKIN GUNVANTLALA DALAL, MUMBAI V. ITO (IT) 1(1), MUMBAI

ITA 881/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2714 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JITENDRA KUMARDR
• Keywords: Capital asset; Cost of acquisition; Surrender of tenancy right

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.881/MUM/2013 ASSESSMENT YEAR-2008-09 PINAKIN GUNVANTLAL DALAL, 17, 2 ND FLOOR, RAJGIR CHAMBERS, S.B.S. ROAD, FORT, OPP. OLD CUSTOM HOUSE, MUMBAI-400023 / VS. ITO(IT)1 - (1) 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, N.M. ROAD, MUMBAI-400038 PAN NO. AADPD0932F ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI NEELKANTH KHANDELWAL / REVENUE BY SHRI JITENDRA KUMAR-DR / DATE OF HEARING : 15/07/2016 / DATE OF ORDER: 07/09/2016 ITA NO.881/MUM/2013 PINAKIN GUNVANTLAL DALAL 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 27/11/2012 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THE PRESENT APPEA L WITH RESPECT TO REJECTING THE CONTENTION THAT COST OF AC QUISITION IN THE CASE OF TENANCY RIGHT IS SPECIFICALLY COVERE D BY THE PROVISIONS OF SECTION 55(2)(A)(II) R.W.S. 49(I) TO (V) AND CANNOT BE TAKEN AT NIL VALUE AND FURTHER APPLICABILITY OF THE DECISION IN THE CASE OF B.C. SRINIVASAN SHETTY (128 ITR 294)(SC). 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI NEELKANTH KHANDELWAL, ADVANCED ARGUMENTS, WHIC H IS IDENTICAL TO THE GROUND RAISED, BY SUBMITTING THAT THE CASE OF THE ASSESSEE IS COVERED BY SECTION 55(2)(A) OF T HE ACT, WHICH COVERS INTANGIBLE ASSETS INCLUDING TENANCY RI GHTS. ON THE OTHER HAND, THE LD. DR, SHRI JITENDRA KUMAR, DE FENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE FILED ORIGINAL RETURN ON 31/0 7/2008. DURING THE YEAR, THE ASSESSEE CLAIMED TO HAVE RECEI VED COMPENSATION FOR SURRENDER OF TENANCY RIGHT AND OFF ERED THE SAME AS TAXABLE INCOME AS LONG TERM CAPITAL GAIN. L ATER ON, THE ASSESSEE REALIZED THAT THERE WAS A MISTAKE ON H IS PART ITA NO.881/MUM/2013 PINAKIN GUNVANTLAL DALAL 3 UNDER THE BELIEF THAT IT WAS NON-TAXABLE INCOME OF THE ASSESSEE, THEREFORE, THE ASSESSEE REVISED ITS INCOM E ON 22/01/2009. THE BELIEF OF THE ASSESSEE WAS THAT T HE TENANCY RIGHT HAS COME TO THE ASSESSEE BY OPERATION OF LAW AND THERE IS NO COST OF ACQUISITION. WE HAVE PERUS ED THE AGREEMENT OF TRANSFER OF TENANCY (PAGES 1 TO 18) OF THE PAPER BOOK. AS PER THE AGREEMENT, THE TENANCY OF FL AT NO.4 STAND IN THE NAMES OF SHRI MOTILAL KARSANDAS DALAL (BROTHER OF FATHER OF ASSESSEE), WHO SURRENDERED ALL HIS RIG HTS, TITLE AND INTEREST IN THE SAID FLAT IN FAVOUR OF HIS BROT HER SHRI GUNVATLAL KARSANDAS DALAL. SHRI MOTILAL KARSANDAS D ALAL DIED IN 1981. THE HEIR OF SHRI MOTILAL DALAL CONFIR MED THAT THEY HAVE NO RIGHT, TITLE, CLAIM OR INTEREST IN FLA T NO.4 EVEN THOUGH THE RENT RECEIPTS WERE ISSUED BY THE LANDLOR D IN THE NAME OF THEIR FATHER MOTILAL DALAL AND THE HEIR HAD NO OBJECTION TO THE OUTGOING TENANTS TRANSFERRING THE TENANCY RIGHT IN RESPECT OF THE FLAT IN THE MANNER THEY DES IRE. AS PER BOMBAY RENT CONTROL ACT, TENANCY RIGHT CANNOT BE TRANSFERRED BY WAY OF WILL AND SUCCESSION. AS PER S ECTION 48 OF THE ACT, CAPITAL GAINS ARE TO BE COMPUTED AFTER DEDUCTING FROM FULL VALUE OF CONSIDERATION, COST OF ACQUISITI ON, COST OF IMPROVEMENT AND EXPENDITURE, WHOLLY AND EXCLUSIVELY FOR THE TRANSFER. UNDER THE AMENDED SECTION 55(2)(A)(II ) OF THE ACT, THE COST OF ACQUISITION IN CASE, THERE IS NO P URCHASE PRICE OR IF IT IS NOT ASCERTAINABLE, IT IS TO BE T AKEN AT NIL IN RESPECT OF CLASS OF ASSETS INCLUDING TENANCY RIGHT. HOWEVER, IN THE GIVEN CASE OF TENANCY RIGHTS UNDER THE BOMBA Y ITA NO.881/MUM/2013 PINAKIN GUNVANTLAL DALAL 4 CONTROL ACT, THIS PROVISION WILL NOT APPLY, BECAUSE THE CASE OF THE ASSESSEE FALLS WITHIN SECTION 49(1)(IV) OF T HE ACT. THE LD. ASSESSING OFFICER COMPLETED THE ASSESSMENT ON T HE BASIS OF ORIGINAL RETURN FILED BY THE ASSESSEE. IT IS ALS O NOTED THAT THE ASSESSEE HIMSELF OFFERED THE COMPENSATION AS TA XABLE INCOME BEING LONG TERM CAPITAL GAIN. AS PER SECTIO N 48, CAPITAL GAINS IS TO BE COMPUTED AFTER DEDUCTING FRO M FULL VALUE OF CONSIDERATION, THE COST OF ACQUISITION, CO ST OF IMPROVEMENT AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE TRANSFER. THE ASSESSEE CLAIMED TO HAVE ACQUIRED PROPERTY THROUGH INHERITANCE. SECTION 49 OF THE ACT PROVIDES THE COST OF ACQUISITION, WHERE THE PRO PERTY IS ACQUIRED THROUGH CERTAIN MODES. UNDER SUB-SECTION(2 ) OF SECTION 55 OF THE ACT, THE COST OF ACQUISITION IN R ELATION TO CAPITAL ASSET, BEING TENANCY RIGHTS, HAS BEEN DEEME D TO BE NIL IN A CASE OTHER THAN THAT FALLING UNDER SUB-CLA USE(I) TO SUB-CLAUSE (IV) OF SECTION 49. IN THIS CASE, THE CO ST HAS TO BE FIRST DETERMINED IN THE HANDS OF THE ORIGINAL HOLDE R OF THE TENANCY RIGHTS. AS THE GRANDFATHER OF THE ASSESSEE HAS NOT ACQUIRED IT THROUGH INHERITANCE OR ANY OTHER MODE MENTIONED IN SECTION 49(1), THE EXCEPTION CLAUSE CO NTAINED IN CLAUSE(II) OF SECTION 55(2)(A) WILL NOT BE APPLI CABLE IN THE PRESENT CASE, THEREFORE, WE FIND NO INFIRMITY IN TH E CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (A PPEAL). HIS STAND IS AFFIRMED RESULTING INTO DISMISSAL OF A PPEAL OF THE ASSESSEE. ITA NO.881/MUM/2013 PINAKIN GUNVANTLAL DALAL 5 FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE P RESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 15/07/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 07/09/2016 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI, 5. /01 )2 , + %& %23 , / DR, ITAT, MUMBAI 6. 14 5 / GUARD FILE. / BY ORDER, */& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI