ACIT, CHENNAI V. M/s. Seshasayee Steels (P) Ltd., CHENNAI

ITA 98/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4818 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MDS; SHAJI P JACOB I T A NO MDS
• Assessee Lawyers: P RANGA RAMANUJAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 1931/MDS/2010 ASSESSMENT YEAR : 2004-05 M/S. SESHASAYEE STEELS PVT. LTD., C/O SHRI GOPU SESHASAYEE, VENKATAMANGALAM VILLAGE, IYERTHOTTAM, CHENNAI-600 048. V. THE ASSISTANT COMMISSIONER OF INCOME-TAX , COMPANY CIRCLE-VI(2), CHENNAI. (PAN: AAHCS8515N) A N D I.T.A. NO. 98/MDS/2011 ASSESSMENT YEAR : 2004-05 THE ASSISTANT COMMISSIONER OF V. M/S. SE SHASAYEE STEELS P. LTD., INCOME-TAX , COMPANY CIRCLE-VI(2), 23, VEN KATAMANGALAM VILLAGE, IYERTHOTTAM,PONMAR PO, CHENNAI-600 048. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI P. RANGA RAMANUJAM DEPARTMENT BY : SHRI SHAJI P. JACOB I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 2 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : ITA NO. 1931/MDS/2010 IS AN APPEAL FILED BY THE AS SESSEE AND ITA NO. 98/MDS/2011 IS AN APPEAL FILED BY THE REVENUE AGAIN ST THE ORDER OF THE LEARNED CIT(APPEALS)-V, CHENNAI IN APPEAL NO. 469/09-10 DAT ED 28-10-2010 FOR THE ASSESSMENT YEAR 2004-05. 2. SHRI P. RENGA RAMANUJAM, CA REPRESENTED ON BEHAL F OF THE ASSESSEE AND SHRI SHAJI P. JACOB LEARNED SR. DR REPRESENTED ON B EHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE IS A COMPANY WHICH IS DOING THE BUSINESS OF MANUFAC TURE AND SALE OF STEEL. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD ENTERED INTO A N AGREEMENT WITH M/S. VIJAY SHANTHI BUILDERS LTD. FOR THE SALE OF 5.62 ACRES OF LAND OWNED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE AGREEMENT WAS ENTERED I NTO ON 15.5.1998 AND THE SALE CONSIDERATION WAS FIXED AT ` 5.50 CRORES. THE ASSESSEE HAD RECEIVED AN ADVANCE OF ` 50 LAKHS ON THE SIGNING OF THE SALE AGREEMENT AND THE BALANCE OF RS 5 CRORES WAS LIABLE TO BE PAID AS AND WHEN M/S. VIJ AY SHANTHI BUILDERS LTD. RECEIVED MONEY FROM ITS NOMINEES/MEMBERS. THIS IS AS PER CLAUSES 3 AND 4 OF THE AGREEMENT DATED 15.5.1998. CONSEQUENT TO THE A GREEMENT, THE ASSESSEE HAD GIVEN A POWER OF ATTORNEY TO M/S. VIJAY SHANTHI BUI LDERS LTD. ON 27-11-1998. IT WAS THE SUBMISSION THAT POSSESSION HAD ALSO BEEN GR ANTED TO M/S. VIJAY SHANTHI I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 3 BUILDERS LTD. THROUGH THE POWER OF ATTORNEY. IT WA S THE FURTHER SUBMISSION THAT THE SALE CONSIDERATION WAS SUBSEQUENTLY REVISED TO ` 6.1 CRORES. M/S. VIJAY SHANTHI BUILDERS LTD. HAD ON VARIOUS DATES PAID ` 4,68,25,6514/- TO THE ASSESSEE OUT OF THE AGREED SALE CONSIDERATION OF ` 6.1 CRORES. AS THERE WAS DELAY IN MAKING THE PAYMENT OF THE BALANCE SALE CONSIDERATIO N, THE ASSESSEE HAD FILED CRIMINAL COMPLAINT AGAINST M/S. VIJAY SHANTHI BUILD ERS LTD. SUBSEQUENTLY ON 19- 07-2003 A COMPROMISE WAS REACHED BETWEEN THE ASSESS EE AND M/S. VIJAY SHANTHI BUILDERS LTD. AS ALSO ONE SHRI CHANDAN KUMAR, AS A CONSEQUENCE OF WHICH THE SALE CONSIDERATION WAS REDUCED BY A SUM OF ` 50 LAKHS AND THE BALANCE AMOUNT DUE TO THE ASSESSEE TO THE EXTENT OF ` 1.05 CRORES WAS AGREED TO BE PAID IN 8 INSTALMENTS SUPPORTED BY POST-DATED CHEQUES, THE LAST CHEQUE BE ING DATED 25-01-2004. IT WAS THE SUBMISSION THAT THE POSSESSION OF THE PROPE RTY HAVING BEEN HANDED OVER TO M/S. VIJAY SHANTHI BUILDERS LTD. THROUGH THE POW ER OF ATTORNEY DATED 27.11.1998, THE TRANSFER AS PER THE PROVISIONS OF S EC. 2(47) OF THE I.T.ACT, 1961 TOOK PLACE DURING THE ASSESSMENT YEAR 1999-2000. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD HELD THAT THE TRANSFER TO OK PLACE DURING THE ASSESSMENT YEAR 2004-05, BEING THE ASSESSMENT YEAR RELEVANT TO THE YEAR IN WHICH THE COMPROMISE DEED WAS PASSED. IT WAS THE SUBMISSION THAT AS PER THE PROVISIONS OF SEC. 53A OF THE TRANSFER OF PROPERTY ACT, AN AGR EEMENT FOR THE SALE OF THE PROPERTY HAD BEEN DRAWN UP ON 15.5.1998 AND THE POW ER OF ATTORNEY HAD ALSO BEEN GIVEN TO THE BUYER BEING M/S. VIJAY SHANTHI BU ILDERS LTD. ON 27.11.1998 AND I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 4 POSSESSION ALSO HAVING BEEN HANDED OVER ON 27.11.19 98 THE CAPITAL GAIN WAS NOT LIABLE TO BE ASSESSED DURING THE ASSESSMENT YEAR 20 04-05 BUT WAS ONLY FOR THE ASSESSMENT YEAR ASSESSEE1999-2000. ON SPECIFIC QUE RIES FROM THE BENCH IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE COMPANY WAS BEFORE THE DEBT RECOVERY TRIBUNAL AND THAT HE W AS NOT SURE AS TO WHETHER CAPITAL GAINS IN REGARD TO THE SALE OF THE SAID PRO PERTY HAD BEEN OFFERED TO TAX DURING ANY OF THE EARLIER ASSESSMENT YEARS. THE CO PY OF THE POWER OF ATTORNEY HAS ALSO NOT BEEN PLACED BEFORE US. THE DOCUMENTS PLACED BEFORE THE TRIBUNAL ARE ONLY THE AGREEMENT FOR SALE DATED 15.5.1998, TH E MEMO OF COMPROMISE DATED 19.7.2003 AND AN ORDER OF THE HON'BLE HIGH COURT OF MADRAS IN CIVIL REVISION PETITION NO. 1537 OF 2001 DATED 16-05-2001, WHEREIN THE HON'BLE HIGH COURT HAS RECOGNIZED THAT AS ON 2001 SUBSTANTIAL STRUCTURES A RE PRESENT ON THE PROPERTY WHICH IS THE SUBJECT MATTER OF LEVY OF CAPITAL GAIN S TAX. 4. IN REPLY, THE LEARNED DR SUBMITTED THAT CAPITAL GAIN HAS NOT BEEN OFFERED BY THE ASSESSEE DURING ANY OF THE EARLIER ASSESSMENT Y EARS IN RESPECT OF THE SALE OF THE SAID PROPERTY. IT WAS THE FURTHER SUBMISSION T HAT AS PER CLAUSE 15 OF THE SALE AGREEMENT, THE SALE WAS CLEARLY A CONDITIONAL SALE INSOFAR AS IF THE CONDITIONS OF THE SALE AGREEMENT WERE NOT COMPLIED WITH, THE AGRE EMENT OF SALE SHALL AUTOMATICALLY STAND CANCELLED. IT WAS THE SUBMISSI ON THAT THE FACT THAT THE ASSESSEE HAD FILED A CRIMINAL COMPLAINT AGAINST THE PURCHASERS CLEARLY SHOWS THAT THE PURCHASERS HAD NOT COMPLIED WITH THE CONDITIONS OF THE SALE AGREEMENT. IT I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 5 WAS THE FURTHER SUBMISSION THAT THE MEMO OF COMPROM ISE ENTERED INTO ON 19.7.2003 WOULD HAVE TO BE TREATED AS THE DATE ON W HICH THE TRANSFER TOOK PLACE IN VIEW OF THE PROVISIONS OF SECTION 53A OF THE TRA NSFER OF PROPERTY ACT. IT WAS THE SUBMISSION THAT AS PER SECTION 53A OF THE TRANS FER OF PROPERTY ACT, THERE SHOULD BE A CONTRACT FOR THE SALE AND ACTS SHOULD H AVE BEEN DONE TO COMPLY WITH THE CONTRACT. IT WAS THE SUBMISSION THAT THE FACT THAT THE CRIMINAL COMPLAINT HAS BEEN FILED SHOWS THAT THERE WAS NO INTENTION TO COM PLY WITH THE CONTRACT OF SALE ENTERED INTO ON 15.5.1998 AND IT WAS ONLY BY THE CO MPROMISE DEED THAT THE INTENTION TO COMPLY WITH THE CONTRACT CAME INTO PLA Y ON 19.07.2003 AND CONSEQUENTLY THE CAPITAL GAIN WAS LIABLE FOR THE AS SESSMENT YEAR 2004-05 AS RIGHTLY DONE BY THE ASSESSING OFFICER. 5. IN REGARD TO THE REVENUES APPEAL IT WAS SUBMITT ED THAT THE LEARNED CIT(A) HAD DIRECTED THAT THE ASSESSEE SHOULD BE GIVEN DEDU CTION ON ACCOUNT OF THE LAND DEVELOPMENT EXPENSES ACTUALLY DEBITED IN THE BOOKS OF THE COMPANY. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD NOT MADE ANY CLAIM AND CONSEQUENTLY THE SAME COULD NOT BE CONSIDERED. 6. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE LAND DEVELOPMENT EXPENSES HAVE BEEN DEBITED TO THE BOOKS OF ACCOUNT OF THE COMPANY AND COMPUTING THE CAPITAL GAINS, IF ANY, TH E DEDUCTIONS PERMISSIBLE ARE LIABLE TO BE ALLOWED. I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 6 7. THE LEARNED DR ALSO RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. CHANDULAL KAMDAR R EPORTED IN 252 ITR 350 AS ALSO THE DECISION OF THE BOMBAY HIGH COURT IN THE C ASE OFZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. PVT. LTD. V. J.R. KA NEKAR, DEPUTY COMMISSIONER OF INCOME-TAX, REPORTED IN 271 ITR 269. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE AGREEMENT OF SALE CLEARLY SHOWS THAT THE AGREEMENT HAD BEEN ENTE RED INTO ON 15.5.1998. THE SALE CONSIDERATION HAS BEEN FIXED IN CLAUSE 1 OF TH E AGREEMENT. THE ADVANCE IS DISCUSSED IN CLAUSE 3. THE PAYMENT OF THE BALANCE OF THE CONSIDERATION IS DISCUSSED IN CLAUSE 4. CLAUSE 15 (B) READS AS FOLL OWS : B. EQUALLY IF THE PARTY OF THE SECOND PART DOES NOT COMPLY WITH ANY OF THE ABOVE TERMS, IT IS OPEN TO T HE PARTY OF THE FIRST PART TO RETURN THE ADVANCE ALREADY RECE IVED AFTER DEDUCTING DAMAGES AT 12% OF THE ADVANCE RECEI VED TO THE PARTY OF THE SECOND PART AND IN SUCH AN EVENT TH IS AGREEMENT SHALL AUTOMATICALLY STAND CANCELLED. A PERUSAL OF THE MEMO OF COMPROMISE DATED 19.7.2003 CLEARLY SHOWS THAT THE ASSESSEE HAD CONFERRED THE POWER TO CONVEY THE UNDI VIDED SHARES IN THE SCHEDULE MENTIONED PROPERTY IN FAVOUR OF THIRD PARTIES BY A DEED OF POWER OF ATTORNEY DATED 27.11.1998. CLAUSE 1 OF THE MEMORANDUM OF CO MPROMISE ALSO RATIFIES THE I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 7 POWER OF ATTORNEY EXECUTED IN FAVOUR OF SHRI CHANDR AN KUMAR BY VIRTUE OF THE DEED OF POWER OF ATTORNEY DATED 27.11.1998. CLAUSE 4 GIVES THE BREAK UP OF THE 8 CHEQUES FOR PAYMENT OF THE BALANCE CONSIDERATION OF ` 1.05 CRORES. CLAUSE 8 DISCUSSES ABOUT THE WITHDRAWAL OF ALL THE CRIMINAL AND CIVIL CASES FILED AGAINST THE PURCHASERS. 9. AS PER THE PROVISIONS OF SECTION 2(47) OF THE INCOME-TAX ACT, 1961, TRANSFER IS AN INCLUSIVE DEFINITION. AS PER CLAU SE (V) OF SECTION 2(47) TRANSACTIONS IN THE NATURE REFERRED TO IN SEC. 53A OF THE TRANSF ER OF PROPERTY ACT, 1882 ARE CONSIDERED AS TRANSFER. A PRIMARY READING MIGHT SHOW THAT THE TRANSFER OF THE PROPERTY TOOK PLACE THROUGH THE POWER OF ATTORNEY D ATED 27.11.1998. HOWEVER, THE FACT THAT THE SALE AGREEMENT DATED 15.5.1998 WA S NOT COMPLIED WITH AND ALL THE CONDITIONS MENTIONED THEREIN WERE NOT ADHERED T O AND HAD CONSEQUENTLY LED TO THE FILING OF THE CRIMINAL COMPLAINT SHOWS THAT THE PROVISIONS OF SEC. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 WERE NOT COMPLIED WI TH AND THE CONTRACT FOR SALE FELL INTO QUESTION WHEN THE CRIMINAL COMPLAINT WAS FILED BY THE ASSESSEE. FURTHER THE FACT THAT THE COMPROMISE DEED DATED 19-7-2003 H AS RATIFIED THE POWER OF ATTORNEY DATED 27.11.1998 CLEARLY SHOWS THAT THE PO WER OF ATTORNEY GRANTED WAS ALSO A SUBJECT MATTER OF REVOCATION. THIS ALSO SUPP ORTS OUR VIEW THAT THE PROVISIONS OF SECTION 53A OF THE TRANSFER OF PROPER TY ACT STOOD VIOLATED AND TRANSFER DID NOT TAKE PLACE ON 27.11.1998 RELEVANT TO THE ASSESSMENT YEAR 1999- 2000. IN FACT, THE RATIFICATION OF THE POWER OF AT TORNEY THROUGH THE MEMO OF I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 8 COMPROMISE DATED 19.07-2003 WOULD SHOW THAT THE POW ER OF ATTORNEY WAS GIVEN ITS LIFE AGAIN ON 19.07.2003 RELEVANT TO THE ASSESS MENT YEAR 2004-05. FURTHER ON THE SPECIFIC QUERY FROM THE BENCH AS TO WHETHER ALL THE CHEQUES AS MENTIONED IN THE COMPROMISE DEED HAVE BEEN ENCASHED, THE ANSWER TO WHICH WAS YES. THIS FURTHER SUPPORTS THAT THE TRANSFER TOOK PLACE DURIN G THE ASSESSMENT YEAR 2004-05 AS THE LAST CHEQUE IS DATED 25-01-2004. THIS VIEW OF OURS ALSO FINDS SUPPORT FROM THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CHANDULAL KAMDAR, REFERRED TO SUPRA AS ALSO THE DECISION OF T HE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ZUARI ESTATE DEVELOPMENT AND INVESTME NT CO. PVT. LTD., REFERRED TO SUPRA. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW TH AT THE CAPITAL GAINS HAS RIGHTLY BEEN BROUGHT TO TAX IN THE ASSESSMENT YEAR 2004-05. 10. IN REGARD TO THE REVENUES APPEAL IT IS NOTICED THAT THE ASSESSING AUTHORITY HAS NOT TAKEN INTO CONSIDERATION THE COST OF THE IM PROVEMENT TO THE LAND. IT IS NOTICED THAT THE LEARNED CIT(A) HAS ONLY DIRECTED T HAT THE DEDUCTION ON ACCOUNT OF THE LAND DEVELOPMENT EXPENSES ACTUALLY DEBITED TO T HE BOOKS OF ACCOUNT OF THE COMPANY ALONG WITH THE INDEXATION OF SUCH EXPENSES WAS LIABLE TO BE ALLOWED AS PER LAW. IT IS NOTICED THAT THE LEARNED CIT(A) HAS NOT GIVEN ANY QUANTIFIED AMOUNT BUT HAS LEFT THE SAME TO THE ASSESSING OFFIC ER TO VERIFY IF SUCH EXPENSES ARE RECORDED IN THE BOOKS. IF THE EXPENSES ARE REC ORDED IN THE BOOKS, THEN OBVIOUSLY THE ASSESSEE IS ENTITLED TO THE CLAIM OF EXPENSES ALONG WITH THE INDEXATION, IF ANY, AVAILABLE. IN THE CIRCUMSTANCE S, WE ARE OF THE VIEW THAT THE I.T.A. NO. 1931/MDS/2010 & 98/MDS/2011 9 FINDING OF THE LEARNED CIT(A) ON BOTH THE ISSUES AR E ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE APPEAL OF THE ASSESSEE STAND DISMISSED. 12. THE ORDER WAS PRONOUNCED IN THE COURT ON 24/06/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 24 TH JUNE, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE