Lachmandas & Sons, Cochin V. DCIT, Ernakulam

ITA 953/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4389 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 04-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-11-2008
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: A S NARAYANAMOORTHY
• Keywords: Capital asset; Cost of acquisition; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.953/COCH/2008 ASSESSMENT YEAR:2005-06 LACHMANDAS & SONS, COCHIN-35. PA NO.AAAFL 9555D VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), ERNAKULAM. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI A.S.NARAYANAMOORTHY, C.A. RESPONDENT BY SHRI T.J. VINCENT, JR.D.R. O R D E R PER N.VIJAYAKUMARAN,J.M: THIS IS AN APPEAL BY THE ASSESSEE, VIZ. LACHMANDAS & SONS, COCHIN-35. THE APPEAL RELATES TO THE ASSESSMENT YEAR 2005-06. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-II, KOCHI, DATED 15-1 0-2008 AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S.143( 3) OF THE INCOME-TAX ACT,1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30-10-2005 DECL ARING AN INCOME OF RS.36,75,130/-, WHICH WAS PROCESSED U/S.1 43(1) ITA NO. 953/COCH/2008 2 AND SUBSEQUENTLY SELECTED FOR SCRUTINY AND ASSESSME NT WAS FRAMED U/S.143(3) ON 27-12-2007. IN THE RETURN, ASS ESSEE DECLARED LONG TERM CAPITAL LOSS OF RS.45,51,944/-. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD ENTER ED INTO A MEMORANDUM, OF UNDERSTANDING (MOU) ON 22-6-2001 BETWEEN DAMODAR SONS & CO. AND THEIR PARTNERS FOR ACQUISITION OF CERTAIN PROPERTY. THE PROPERTY I N QUESTION HAD A DECREE AGAINST IT BY CENTRAL BANK OF INDIA AS WELL AS RECOVERY CERTIFICATE ISSUED BY DEBT RECOVERY TRIBUN AL. THE PROPERTY WAS ATTACHED BY AN ORDER OF ATTACHMENT DUL Y REGISTERED WITH THE SUB REGISTRAR, ERNAKULAM. THE ASSIGNORS M/S. DAMODAR SONS & CO ALONGWITH THEIR PA RTNERS APPROACHED THE ASSESSEE TO SELL THE PROPERTY AFTER REQUESTING THEM TO CLEAR OFF THE DEBT. AS PER MOU SALE CONSIDERATION WAS RS.3 CRORES BUT SALE DEED WAS EXE CUTED ON 25-2-2005 FOR A CONSIDERATION OF RS.4,25,00,000/- T O AL- AHALI BUSINESS TRADE LINKS (P) LTD. THE ASSESSEE H AD PAID A SUM OF RS.3 CRORES ON 11-2-2004. IN SHORT, MOU WA S ENTERED ON 22-6-2001. RS. 3 CRORES WAS PAID ON 11- 2-2004. NO TOKEN MONEY OF RS.25,000/-, AS AGREED BETWEEN TH E PARTIES WAS PAID. SALE DEED WAS EXECUTED ON 25-2- 2005. THE ASSESSEE COMPUTED THE COST OF ACQUISITION OF RI GHT TO PURCHASE THE PROPERTY AT RS.4,17,58,600/- AS ON 22- 6-2001, ITA NO. 953/COCH/2008 3 I.E. THE DATE OF MOU AND COMPUTED LONG TERM CAPITAL LOSS OF RS.45,51,944/- ON A SALE CONSIDERATION OF RS.4.25 C RORES. THE ASSESSING OFFICER HELD THAT NO RIGHT TO PURCHAS E WAS ACQUIRED ON 22-6-2001, I.E. DAY OF SIGNING OF MOU B ECAUSE NONE OF THE CONDITIONS STIPULATED IN THE SAID MOU W ERE FULFILLED AS ON THAT DATE. ACCORDINGLY, THE ASSES SING OFFICER WAS OF THE VIEW THAT GAIN ON TRANSFER OF THIS RIGHT IS A SHORT TERM CAPITAL GAIN AND COMPUTED SHORT TERM CAPITAL GAIN AT RS.7,41,400/-. THUS, ASSESSMENT WAS FRAMED ON A T OTAL INCOME OF 44,16,530/-. ON APPEAL, THE LD. CIT(APP EALS) ON AN APPRECIATION OF COPIES OF MOU AND CONVEYANCE DE ED, CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. HENCE, ASSESSEE IS ON SECOND APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUT E ON THE FACTS THAT MOU WAS ENTERED ON 22-6-2001. RS. 3 CRO RES WAS PAID ON 11-2-2004. NO TOKEN MONEY OF RS.25,000/-, A S AGREED BETWEEN THE PARTIES WAS PAID. SALE DEED WA S EXECUTED ON 25-2-2005. ON THE BASIS OF THE ABOVE F ACTS, LET US GO THROUGH THE MEANING AND DEFINITION OF LONG T ERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS. LO NG TERM CAPITAL GAIN MEANS CAPITAL GAIN ARISING FROM THE T RANSFER OF A LONG-TERM CAPITAL ASSET. FROM THE DEFINITION, W E CAN INFER ITA NO. 953/COCH/2008 4 FROM THE OPERATIVE DEFINITION SHORT TERM CAPITAL G AIN. HERE, SHORT TERM CAPITAL GAIN IN RELATION TO THE SHORT TERM CAPITAL ASSET MEANS A CAPITAL ASSET HELD BY AN ASSE SSEE FOR NOT MORE THAN 36 MONTHS IMMEDIATELY PRECEDING THE D ATE OF TRANSFER. IN THE PRESENT CASE, THERE IS NO DISPUT E THAT THERE WAS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE I.T.ACT AND IT GIVES GAIN FOR THE PARTIES FOR CHARG ING INTO CAPITAL GAIN. THE ONLY ISSUE IS WHETHER IT TAKES TH E CHARACTER OF LONG TERM CAPITAL GAIN AS CONTENDED BY THE ASSES SEE OR IS IT TO BE BOOKED UNDER SHORT TERM CAPITAL GAIN AS HELD BY THE INCOME-TAX AUTHORITIES, IS THE REAL ISSUE BEFORE US . CONSIDERING THE FACTS OF THE CASE AS NARRATED ABOVE AND THE MEANING AND DEFINITION OF LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS IN ITS ENTIRETY, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER WAS RIGH T IN HIS APPROACH AND HOLDING THAT SINCE NO EVIDENCE OF TRA NSFER OF THE PROPERTY TO THE ASSESSEE IS IN EXISTENCE THE AS SESSEE CANNOT CLAIM THE DATE OF ACQUISITION AS ON JUNE 200 1 BUT THE DATE WOULD ONLY BE IN FEBRUARY 2004 WHEN THE FUNDS WERE TRANSFERRED AS PER THE MOU. THE TRANSACTION IN RE SPECT OF THIS LAND WOULD THEREFORE BE A SHORT TERM CAPITAL G AIN RATHER THAN THE LONG TERM CAPITAL GAIN CLAIMED BY T HE ASSESSEE. HENCE, WE FIND NO ERROR ON THE PART OF THE LD. ITA NO. 953/COCH/2008 5 CIT(APPEALS) IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER. 4. IN THE RESULT, ASSESSEE FAILS. APPEAL DISMISSE D. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 12 TH MAY,2010. PM. COPY FORWARDED TO: 1. LACHMANDAS & SONS, DEVI COMPLEX, DORAISWAMY IYER R OAD, COCHIN-35. 2. THE DY. CIT, CIRCLE-2(2), ERNAKULAM. 3. CIT(A)-II, 4. CIT, KOCHI. 5. D.R.