STANDFORD INVESTMENTS & PROPERTIES P. LTD, MUMBAI v. ADDL CIT 8(3), MUMBAI

ITA 1097/MUM/2010 | 2006-2007
Pronouncement Date: 25-11-2011 | Result: Allowed

Appeal Details

RSA Number 109719914 RSA 2010
Assessee PAN AAACS5897G
Bench Mumbai
Appeal Number ITA 1097/MUM/2010
Duration Of Justice 1 year(s) 9 month(s) 15 day(s)
Appellant STANDFORD INVESTMENTS & PROPERTIES P. LTD, MUMBAI
Respondent ADDL CIT 8(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 25-11-2011
Date Of Final Hearing 17-11-2011
Next Hearing Date 17-11-2011
Assessment Year 2006-2007
Appeal Filed On 10-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI T.R. SOOD (ACCOUNTANT MEMBER) ITA NO.1097/MUM/2010 ASSESSMENT YEAR-2006-07 M/S. STANDFORD INVESTMENTS & PROPERTIES PVT. LTD. 3 RD FLOOR LUTHRIA HOUSE ANANDRAO DEVALE ROAD JUHU MUMBAI-400 049 PAN-AAACS 5897G VS. THE ADDL CIT 8(3) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) ITA NO.1210/MUM/2010 ASSESSMENT YEAR-2006-07 THE ADDL CIT 8(3) AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. STANDFORD INVESTMENTS & PROPERTIES PVT. LTD. 3 RD FLOOR LUTHRIA HOUSE ANANDRAO DEVALE ROAD JUHU MUMBAI-400 049 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S.K. MUTSADDI DEPARTMENT BY: SHRI G.P.TRIVEDI DATE OF HEARING :17.11.2011 DATE OF PRONOUNCEMENT: 25.11.2011 O R D E R PER B.R. MITTAL JM : THESE CROSS APPEALS ARE FILED BY ASSESSEE AND DEPAR TMENT FOR ASSESSMENT YEAR 2006-07 AGAINST ORDER OF LD. CIT(A) DT. 7.12.2009. 2. IN THE APPEAL FILED BY ASSESSEE THERE IS ONLY ON E GROUND OF APPEAL DISPUTING DISALLOWANCE OF RS. 11 38 783/- MADE BY A O U/S. 14A OF I.T. ACT R.W.RULE 8D OF I.T. RULE IN RESPECT OF DIVIDEND INCO ME WHICH IS EXEMPTED IN ITA NO. 1097 & 1210/M/2010 2 ASSESSMENT YEAR UNDER CONSIDERATION. THE LD. CIT(A ) HAS CONFIRMED SAID ACTION OF AO BY APPLYING DECISION OF SPECIAL BENCH IN THE CASE OF ITO VS DAGA CAPITAL MANAGEMENT PVT. LTD . 312 ITR (AT) 01 (SB)( MUM). 3. HOWEVER SAID DECISION OF SPECIAL BENCH OF ITAT HAS BEEN REVERSED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS DCIT 328 ITR 81 WHEREIN IT HAS BEEN HELD THAT RULE 8D OF I.T. RULE IS PROSPECTIVE IN NATURE AND IS APPLICABLE FROM ASSESS MENT YEAR 2008-09. IN VIEW OF ABOVE WE SET ASIDE THE ORDERS OF AUTHORITI ES BELOW AND RESTORE THE MATTER TO AO WITH A DIRECTION TO RE-DECIDE THE SAME AFTER GIVING DUE OPPORTUNITY OF HEARING TO ASSESSEE AS PER LAW. THER EFORE GROUND OF APPEAL TAKEN BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOS ES. 4. NOW WE TAKE UP APPEAL FILED BY DEPARTMENT BEING ITA NO. 1210/M/2010. 5. THE DEPARTMENT HAS DISPUTED ORDER OF LD. CIT(A) IN DELETING BROKERAGE OF RS. 39 00 000/- WHICH WAS PAID (A) RS. 20 00 000/- TO MS. LATA SHAH AND (B) RS. 19 00 000/- TO M.R. SERVICES PROPRIETORSHI P FIRM BELONGING TO WIFE OF SHRI M.R. SHARMA CHARTERED ACCOUNTANT OF ASSESSEE. 6. THE RELEVANT FACTS ARE THAT ASSESSEE DECLARED LO NG TERM CAPITAL GAIN OF RS. 72 88 01 260/- ON SHARES HELD BY ASSESSEE C OMPANY IN ELEL HOTELS AND INVESTMENT LTD. THE ASSESSEE CLAIMED PAYMENT OF BROKERAGE AGGREGATING TO RS. 39 00 000/- COMPRISING OF RS. 20 00 000/- T O MS. LATA SHAH AND RS. 19 00 000/- TO M.R. SERVICES PROPRIETORSHIP CONCER N OF MRS. RAMA MANMOHAN SHARMA WIFE OF SHRI M.R. SHAH CHARTERED ACCOUNTAN T OF ASSESSEE-COMPANY. THE ASSESSING OFFICER STATED THAT ASSESSEE COULD NO T FURNISH REQUISITE EVIDENCE THAT SAID BROKERAGE(S) WAS PAID FOR SERVIC ES GENERATED BY THEM AND THEREFORE PAYMENT WAS NOT WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SHARE TRANSACTION FOR WHICH LONG TERM CAPITAL GAIN WAS SH OWN BY ASSESSEE. IN THE ITA NO. 1097 & 1210/M/2010 3 FIRST APPEAL LD. CIT(A) DELETED DISALLOWANCE VIDE PARA 5.6 & 5.7 OF IMPUGNED ORDER WHICH READ AS UNDER: 5.6. I HAVE CAREFULLY CONSIDERED THE INFORMATION O N RECORD. THE APPELLANT HAS CLEARLY EXPLAINED THE BACKGROUND OF T HE TRANSACTION THE LITIGATION THAT WENT THROUGH BEFORE THE SHARES COULD BE SOLD IN THE MARKET AND THE DIFFICULTY HE FACED DUE TO DISPU TE WITH THE MAJORITY SHARE HOLDERS AND THE RUMORS THAT WERE CIR CULATED BY THEM TO THWART THE TRANSACTION. DURING THE COURSE OF AP PELLATE PROCEEDINGS THE DETAILS OF INCOME TAX RETURNS OF M /S. M.R. SERVICES AND MS. LATA SHAH ARE BROUGHT ON RECORD. IT IS EVID ENT FROM THE INFORMATION SUBMITTED BY THE APPELLANT THAT AN AMOU NT OF RS. 18 03 100/- WAS PAID THROUGH CHEQUE BY THE APPELLAN T TO M/S. M.R. SERVICES AFTER DEDUCTING THE TDS AND THE SAME WAS C REDITED IN THE ACCOUNT OF M/S. M.R. SERVICES THE INCOME RECEIVED HAS REFLECTED IN THE P&L A/C OF M/S. M.R. SERVICES. 5.7. SIMILARLY AN AMOUNT OF RS. 18 98 000/- WAS PAID THROUGH CHEQUES BY THE APPELLANT TO MS. LATA SHAH AFTER DED UCTING THE TDS FROM RS. 20 00 000/-. THIS AMOUNT IS CREDITED IN H ER BANK ACCOUNT AND IS ALSO OFFERED IN HER INCOME TAX RETURN IN THE RELEVANT ASSESSMENT YEAR. MOREOVER 1% BROKERAGE ON THE SAL E CONSIDERATION IS ALSO REASONABLE AND IS NORMAL PERC ENTAGE OF BROKERAGE IN REAL ESTATE TRANSACTION. FURTHER THE AOS OBSERVATION THAT M/S. M.R. SERVICES IS A PROPRIETARY CONCERN OF MRS. RAMA MANMOHAN SHARMA WHO IS THE WIFE OF THE AR OF THE A PPELLANT THIS FACT HAS NO RELEVANCE ON THE ISSUE WHETHER THE BROK ERAGE IS TO BE ALLOWED OR NOT. IN FACT THE COMPANY IS PAYING ONLY 20% ON LONG TERM CAPITAL GAIN WHEREAS THE BROKERS ARE PAYING AT THE HIGHEST RATE. FURTHER IT IS LEGALLY WELL SETTLED THAT THE BROKER AGE COMMISSION STAMP DUTY AND REGISTRATION CHARGES PAID IN CONNECT ION WITH THE TRANSFER ARE ALLOWABLE U/S. 48 AS DECIDED BY THE HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF ABDUL KHAUM 184 ITR 404. HENCE DEPARTMENT IS IN APPEAL BEFORE TRIBUNAL. 7. DURING THE COURSE OF HEARING THE LD. DEPARTMENT AL REPRESENTATIVE RELIED ON ORDERS OF AUTHORITIES BELOW. HOWEVER ON BEHALF OF ASSESSEE IT WAS CONTENDED THAT M/S. M.R. SERVICES AND MRS. LATA SHA H MADE THEIR EFFORTS TO ENABLE ASSESSEE TO SELL SHARES OF ASSESSEE-COMPANY TO M/S. SKYDECK PROPERTIES AND FOR WHICH 1% BROKERAGE WAS PAID ON S ALE VALUE. IT WAS SUBMITTED THAT ONLY BECAUSE OF EXCLUSIVE EFFORTS OF ABOVE TWO BROKERS ITA NO. 1097 & 1210/M/2010 4 ASSESSEE-COMPANY COULD SELL SHARES AT RS. 44 CRORES AS AGAINST RS. 14 CRORES OFFERED BY MAJORITY SHARE HOLDERS. IT WAS ALSO CONT ENDED THAT TDS WAS ALSO DEDUCTED OUT OF PAYMENT(S) MADE TO ABOVE NAMED TWO PERSONS AND INCOME WAS OFFERED BY BOTH OF THEM FOR TAX IN THEIR RESPEC TIVE ASSESSMENT. IT WAS SUBMITTED THAT SAID BROKERAGE WAS PAID WHOLLY AND E XCLUSIVELY TO CARRY OUT AFORESAID TRANSACTION OF SALE OF SHARES. 8. ON CONSIDERATION OF FACTS OF THE CASE AND IN THE ABSENCE OF ANY MATERIAL ON RECORD TO THE CONTRARY WE ARE OF THE C ONSIDERED VIEW THAT CLAIM OF ASSESSEE IS JUSTIFIED PARTICULARLY WHEN ASSESSEE HAS CONTENDED THAT SAID TWO BROKERS MADE EFFORTS IN AFFECTING SALE OF SHARE S AND ENHANCING SALE VALUE FROM RS. 14 CRORES TO 44 CRORES WHICH WAS EARLIER O FFERED BY MAJORITY SHARE HOLDER. THE DEPARTMENT HAS NOT DISPUTED GENUINENES S OF PAYMENT TO AFORESAID TWO BROKERS. WE OBSERVE THAT NO OTHER BR OKERAGE HAS BEEN CLAIMED BY ASSESSEE IN RESPECT OF SAID SHARE TRANSACTION. WE ALSO OBSERVE THAT TDS WAS ALSO DEDUCTED. HENCE GENUINENESS OF PAYMENT CAN NOT BE DISPUTED. ACCORDINGLY WE AGREE WITH LD. CIT(A) IN DELETING S AID DISALLOWANCE OF RS. 39 00 000/- BY REJECTING GROUND OF APPEAL TAKEN BY DEPARTMENT. 9. IN RESPECT OF SECOND GROUND TAKEN BY DEPARTMENT O F DISALLOWANCE OF RS.1 25 953/- MADE BY AO OUT OF TRAVELLING EXPENSES AO STATED THAT ASSESSEE COULD NOT GIVE SATISFACTORY DETAILS REGARD ING TRAVELLING EXPENSES AND HAS ALSO NOT BEEN ABLE TO ESTABLISH ANY NEXUS BETWE EN TRAVELLING EXPENSES AND LONG TERM CAPITAL GAIN OR TO ESTABLISH TRAVELLI NG EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TRANSFER OF SHARES. IN THE FIRST APPEAL LD. CIT(A) HAS DELETED SAID DISALLOWA NCE VIDE PARA 5.8 OF IMPUGNED ORDER. 10. DURING THE COURSE OF HEARING LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF AO AND LD. AR SUPPORTED ORDER OF LD . CIT(A). ITA NO. 1097 & 1210/M/2010 5 11. WE OBSERVE THAT ASSESSEE STATED THAT SAID TRAVE LLING AND OTHER EXPENSES PAID TO SHRI VAIBHAV WHO DEFENDED THE CA SE FILED AGAINST ASSESSEE COMPANY BY MAJORITY SHARE HOLDERS IN MUMBAI HIGH CO URT AND ALSO TO ATTEND CERTAIN ISSUES PENDING BEFORE COMPANY LAW BOARD AT NEW DELHI. WE OBSERVE THAT ASSESSEE CLAIMED LEGAL AND PROFESSIONAL FEES P AID TO LAWYER OF RS. 9 00 000/- WHICH AO HIMSELF HAS ALLOWED. CONSIDERI NG ABOVE FACTS AND THE REASONS GIVEN BY LD. CIT(A) IN PARA 5.8 OF IMPUGNED ORDER WE DO NOT FIND ANY MERIT TO INTERFERE WITH THE ORDER OF LD. CIT(A ). WE THEREFORE REJECT GROUND NO. 2 OF APPEAL TAKEN BY DEPARTMENT BY UPHOL DING ORDER OF LD. CIT(A) 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND WHEREAS APPEAL OF DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF NOVEMBER 2011 SD/- SD/- ( T.R. SOOD) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 25 TH NOVEMBER 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI