FAISAL YUNUS FAZLANI, MUMBAI V. ASST CIT CEN CIR 44, MUMBAI

ITA 8839/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1698 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 19-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.8839/M/2011 (AY: 2007-2008) I.T.A. NO.8840/M/2011 (AY: 2008-2009) SHRI FAISAL YUNUS FAZLANI, 21A, NIRMAL, NARIMON POINT, MUMBAI 400 021. PAN: AACPY 6302 M VS. ACIT, CENTRAL CIRCLE-44, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) I.T.A. NO.8844/M/2011 (AY: 2007-2008) SMT. FARIDABAI ABDUL KADER FAZLANI, 21A, NIRMAL, NARIMON POINT, MUMBAI 400 021. PAN: AACPY 6302 M VS. ACIT, CENTRAL CIRCLE-44, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAHUL K. HAKANI REVENUE BY : SHRI A.P. SINGH, DR DATE OF HEARING: 19.2.2013 DATE OF ORDER: 08.03.2013. O R D E R PER BENCH: THERE ARE THREE APPEALS UNDER CONSIDERATION INVOLVI NG TWO ASSESSEES NAMELY SHRI FAISAL YUNUS FAZLANI AND SMT. FARIDABAI ABDUL KADER FAZLANI. CONSIDERING THE COMMONALITY OF THE GROUNDS RAISED IN ALL THE THREE APPEALS, THEY ARE BEING CLUBBED AND ADJUDICATED IN THIS COMPOSITE ORDER. FOR THE S AKE OF CONVENIENCE, WE SHALL TAKE UP ITA NO. I.T.A. NO.8839/M/2011 (AY: 2007-2008) FIL ED BY SHRI FAISAL YUNUS FAZLANI IS AGAINST THE ORDER OF CIT (A)-38, MUMBAI DATED 16.7.2011 AND THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT (A) ERRED IN CONFIRMING INVOCATION OF THE PROVISIONS OF SECTION 50C OF THE IT ACT, 1961 EVEN THOUGH THE DOCUMENT FOR SALE OF SHARES OF M/S. KAMALA MENSION P. LTD WAS NOT REQUIRED TO BE REGISTERED WITH STAMP AU THORITIES AND IN DETERMINING THE SALE VALUE OF AT RS. 4,12,16,500/- AGAINST AGREEMENT VALUE OF RS. 3,46,71,609/- WHILE WORKING OUT THE CAPITAL GAI N ON SALE OF SHARES OF M/S. KAMALA MENSION P. LTD. 2 THE PURCHASERS OF THE SHARES OF THE COMPANY ARE NOT RELATIVES OF THE DIRECTORS / SHAREHOLDERS OF THE COMPANY NOR THEY HAVE ANY BUS INESS RELATIONSHIP WITH THE DIRECTORS / SHAREHOLDERS OR ANY ASSOCIATES THER EOF. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD CIT (A) ERRED IN CONFIRMING ADDITION OF RS,. 55,28,500/- TO THE SALE CONSIDERATION BEING SEPARATE PAYMENT TO THE COMPANY FOR REPAYMENT OF LO AN TAKEN BY THE COMPANY FOR PURCHASE OF PROPERTY. 3. WITHOUT PREJUDICE ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN NOT CONSIDERING THE GRO UND OF THE APPELLANT TO SUBSTITUTE INDEXED COST OF THE VALUE OF THE IMMOVAB LE PROPERTY WHILE COMPUTING CAPITAL GAINS ON SALE OF IMMOVABLE PROPER TY. 2. AT THE OUTSET, SHRI RAHUL K. HAKANI, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ABOVE THREE APPEALS INVOLVING SHRI FAISAL YUNUS FAZLANI AND SMT. FARIDABAI ABDUL KADER FAZLANI ARE STAND COVERED BY THE ORDER OF THIS TRIBUNAL DATED 2.1.2013 VIDE ITA NO.I.T.A. NO.8831/M/2011 (AY: 2007-2008)I.T. A.NO.8832/M/2011 (AY: 2008-2009) I.T.A. NO.8835/M/2011 (AY: 2007-2008) I.T .A. NO.8836/M/2011 (AY: 2008-2009) I.T.A. NO.8850/M/2011 (AY: 2008-2009) I.T .A.NO.8851/M/2011 (AY: 2007-2008). AS PER THE LD COUNSEL, THE CORE ISSUES RAISED IN ALL THESE APPEALS RELATED TO IF THE PROVISIONS OF SECTION 50C OF TH E IT ACT, 1961 APPLY TO THE FACT OF THIS CASE AND SECONDLY, IF THE SALE CONSIDERATION INCLUDES THE AMOUNTS INFUSED INTO THE COMPANYS ACCOUNTS FOR DISCHARGING THE LIABILIT IES OF THE COMPANY QUA ITS DIRECTORS. FURTHER, LD COUNSEL MENTIONED THAT THE SAID ISSUES STAND COVERED BY THE ABOVE CITED ORDER OF THIS TRIBUNAL AND BROUGHT OUR ATTENTION TO PARA 7 FOR THE ARGUMENTS WHICH HE RELIES. REFERRING TO PARA 11 AN D 12 OF THE SAID ORDER, LD COUNSEL MENTIONED THAT THE PROVISIONS OF SECTION 50 C SHOULD BE INTERPRETED AS PER THE PRINCIPLE OF LITERARY INTERPRETATION. THEREF ORE, THE CAPITAL ASSETS THAT ARE COVERED BY THE SAID PROVISIONS ARE THE TRANSFER O F LAND OR BUILDING OR BOTH AND NOT ANY OTHER MODE OF TRANSFER. FOR THE SAKE OF COMPL ETENESS OF THE ORDER, THE SAID PARA 11 AND 12 ARE REPRODUCED HERE UNDER: 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE OR DER OF THE REVENUE AND THE MATERIAL AVAILABLE BEFORE US. THERE IS NO DISPU TE ON THE FACTS AND THEREFORE, THE DISPUTE RELATES TO THE APPLICABILITY OF PROVISI ONS OF SECTION 50C OF THE ACT. FOR EXAMINING THE VALIDITY OF THE APPLICABILITY OF THE SAID PROVISIONS, WE PROCEED TO EXAMINE RELEVANT PROVISIONS AND THE PROVISIONS O F SECTION 50C OF THE ACT READ AS FOLLOWS. SECTION 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAP ITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR 3 ASSESSED [OR ASSESSABLE] BY ANY AUTHORITY OF A STAT E GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE 'STAM P VALUATION AUTHORITY') FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED [OR ASSESSABLE] SHALL, FOR THE PURPOSES OF SECTION 48 , BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER 12. PRIMA FACIE, THE ABOVE SECTION REFERS TO THE EX PRESSIONS IE CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, ASSESSED (ASSESSABLE DOES NOT APPLY TO THE AY IN QUESTION), CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION ETC. THE AB OVE SUB-SECTION PROVIDES FOR MEANING OF THE FULL VALUE OF THE CONSIDERATION (F VC) AND IT IS A DEEMED DEFINITION. ACCORDINGLY, WHEN THE ASSESSEE TRANSFE RS A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH, FOR A CONSIDERATION LESSER THA N THE VALUE ADOPTED, ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT, THE VALUE S O ADOPTED OR ASSESSED SHALL BE DEEMED TO THE FULL VALUE CONSIDERATION FOR THE PURPOSE OF COMPUTING CAPITAL GAINS U/S 48 OF THE ACT. THE EXPRESSION ASSESSABL E HAS INSERTED INTO THE STATUTE FOR PERSPECTIVE APPLICATION W.E.F 1.10.2009 WHEREAS THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2007-08 AND 2008-09. T HE CAPITAL ASSETS THAT ARE COVERED UNDER THE PROVISIONS ARE LAND OR BUILDING O R BOTH. EXPRESSION TRANSFER SHALL HAVE TO BE A DIRECT TRANSFER AS DE FINED U/S 2(47) OF THE ACT WHICH DOES NOT INCLUDE THE TAX PLANNING ADOPTED BY THE ASSESSEE. IT IS SETTLED ISSUE THAT THE PROVISIONS OF SECTION 50C ARE DEEMED PROVISIONS AND, THEREFORE, THE SAME HAVE TO BE INTERPRETED STRICTLY IN ACCORDANCE WITH THE SPIRIT OF THE PROVISIONS. IN THE LIGHT OF THE ABOVE LEGAL INTERP RETATION OF SECTION 50C OF THE ACT, WE NEED TO EXAMINE THE FACTS OF THE PRESENT CA SE. IN THE INSTANT CASE, WHAT TRANSFERRED BY THE ASSESSEE ARE THE SHARES IN THE COMPANY AND NOT THE LAND OR BUILDING OR BOTH. ASSESSEE DOES NOT HAVE F ULL OWNERSHIP ON THE FLATS WHICH ARE OWNED BY THE COMPANY. THE TRANSFER OF SH ARES WAS NEVER A PART OF THE ASSESSMENT OF THE STAMP DUTY AUTHORITIES OF THE STATE GOVERNMENT. THE COMPANY WAS DERIVING INCOME, TAXABLE UNDER THE HEAD INCOME FROM PROPERTY FOR MORE THAN A DECADE. THE EXPRESSION ASSESSABLE IS INSERTED IN SECTION 50C (1) OF THE ACT IS NOT RELEVANT FOR THE IMPUGNED ASS ESSMENT YEARS. IN SUCH CIRCUMSTANCES, THE AOS DECISION TO INVOKE THE PROV ISIONS OF SECTION 50C TO THE TAX PLANNING ADOPTED BY THE ASSESSEE IS NOT PROPER AND IT DOES NOT HAVE THE SANCTION OF THE PROVISIONS OF IT ACT. THE PROVISIO NS OF SECTION 50C ARE DEEMED PROVISIONS WHICH ARE REQUIRED TO BE STRICTLY INTERP RETED, IT IS NOT COVERED BY THE EXPRESSIONS OF THE PRESENT CASE. THEREFORE, WE ARE OF THE OPINION THAT ORDER OF THE CIT (A) IS REQUIRED TO BE REVERSED WITH A DIREC TION TO THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. ACCORDINGLY, GROUND NO.1 RA ISED BY THE ASSESSEE IS ALLOWED . 3. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSU E, WE ARE OF THE OPINION THAT THIS ISSUE MUST BE DECIDED IN THE FAVOUR OF THE ASS ESSEE. ACCORDINGLY, GROUND NO.1 IS ALLOWED . 4 4. REGARDING THE OTHER ISSUE RELATING TO WHETHER THE SALE CONSIDERATION INCLUDES THE AMOUNTS INFUSED INTO THE COMPANYS ACC OUNTS FOR DISCHARGING LIABILITIES OF THE COMPANY QUA DIRECTORS, LD COUNSEL MENTIONED THAT PARA 13 AND 14 OF THE SAID TRIBUNAL ORDER ARE RELEVANT IN THIS REGARD AND THE SAME ARE READ AS UNDER: 13. GROUND NO.2 RELATES TO THE ADDITIONAL CONSIDER ATION OF MONEY OF RS 55,28,500/- PAID BY THE TRANSFEREES TO THE COMPANY, WHO UTILIZED THE SAME FOR REPAYMENT OF LOANS OF THE COMPANY TO ITS DIRECTORS. ON FINDING THAT THE TRANSFEREES PAID THE SAID AMOUNT TO THE COMPANY IN THE CONTEXT OF THE TRANSFER OF SHARES AND THE BENEFICIARIES ARE THE DIRECTORS O F THE COMPANY, AO MADE AN ADDITION OF RS 55,28,500/- AT THE TIME OF COMPUTATI ON OF THE CHARGEABLE CAPITAL GAINS. BUT AO IGNORED THE BASIC FACT THAT THE TRANS ACTION OF PAYMENT OF RS 55,28,500/- TOOK PLACE BETWEEN THE TRANSFEREE AND T HE ASSESSEE-COMPANY AND THE ASSESSEE ONLY RECEIVED HIS DUES FROM THE COMPAN Y. THE DUES RECEIVED BY THE ASSESSEE CANNOT BE EQUATED WITH THE ADDITIONAL SALE CONSIDERATION. LD DR RELIED ON THE ORDERS OF THE REVENUE. 14. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AND THE PAPERS FILED BEFORE US. THE ENTRIES IN THE BOOK S OF ACCOUNTS VIVIDLY SUGGESTS THAT THE TRANSFEREES INFUSED THE MONEY IN THE ACCOUNTS OF THE COMPANY AND THE COMPANY REPAID THE LIABILITIES OF T HE DIRECTORS AND IT IS NOT THE CASE OF THE TRANSFEREES PAYING ADDITIONAL CONSI DERATION DIRECTLY TO THE TRANSFERORS OF THE SHARES IE CAPITAL ASSETS. THEREF ORE, CONSIDERING THE BOOK ENTRIES PLACED BEFORE US, THE ALLEGATIONS OF THE AO DO NOT HAVE SUSTAINABLE STRENGTH. THEREFORE, INCOME TAX AUTHORITIES HAVE FA LLEN INTO ERROR ZONE IN DEEMING THE LOAN REPAYMENTS AS AN ADDITIONAL SALE C ONSIDERATION. WE AGREE WITH THE ARGUMENTS OF LD COUNSEL. ACCORDINGLY, GROU ND NO.2 RAISED BY THE ASSESSEE IS ALLOWED . 5. CONSIDERING THE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THIS ISSUE SHOULD BE ALLOWED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED . 6. GROUND NO.3 RELATES TO INDEXATION OF THE COST OF VALUE OF PROPERTY WHILE COMPUTING THE CAPITAL GAINS ON SALE OF IMMOVABILITY . THIS GROUND IS RAISED WITHOUT PREJUDICE TO THE ISSUE DISCUSSED ON GROUND NO.1 WHI CH WAS DECIDED IN FAVOUR OF THE ASSESSEE ON THE GROUND OF INAPPLICABILITY OF SECTIO N 50C OF THE ACT. THEREFORE, THE ADJUDICATION OF THIS GROUND NO.3 BECOMES ACADEMIC AND THE SAME IS, THEREFORE, DISMISSED AS ACADEMIC . 5 7. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE ASSESSEES ARE ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MARCH, 2013. SD/- SD/- (VIVEK VARMA) (D. KARUNAKARA RA O) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 8.3.2013 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR F, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI