ACIT, Bangalore v. Sri Suresh Salaria, Bangalore

ITA 1139/BANG/2009 | 2006-2007
Pronouncement Date: 24-05-2010 | Result: Dismissed

Appeal Details

RSA Number 113921114 RSA 2009
Bench Bangalore
Appeal Number ITA 1139/BANG/2009
Duration Of Justice 5 month(s) 22 day(s)
Appellant ACIT, Bangalore
Respondent Sri Suresh Salaria, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 24-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 24-05-2010
Date Of Final Hearing 06-04-2010
Next Hearing Date 06-04-2010
Assessment Year 2006-2007
Appeal Filed On 02-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.1139/BANG/2009 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 7(1) BANGALORE. : APPELLANT VS. MR. SURESH SALARIA NO.12/1 VERSOVA LAYOUT C.V. RAMAN NAGAR BANGALORE 560 093. : RESPONDENT APPELLANT BY : SMT. V.S. SREELEKHA ADDL. CIT(DR) RESPONDENT BY : SHRI H. GURUSWAMY ITP O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF LD. CIT (A)-III BANGALORE IN ITA NO: 13/C-7(1)/CIT (A)-III/BNG/08-09 DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2006-07 IN THE CA SE OF SURESH SALARIA. 2. THOUGH THE REVENUE HAS RAISED FOUR GROUNDS THE SOLITARY GROUND SURVIVES FOR ADJUDICATION IS - OTHERS BEING GENERAL IN NATURE - THAT THE CIT(A) ERRED IN DELETING THE LIAISON CHARGES F ROM STCG IN FULL AS CLAIMED INSTEAD OF APPORTIONING THE SAME BETWEEN S TCG AND LTCG AS WAS DONE BY THE AO. ITA NO.1139/BANG/09 PAGE 2 OF 7 3. THE ISSUE IN BRIEF THE ASSESSEE - AN INDIVIDU AL THE OWNER (ALONG WITH THREE INDIVIDUALS) OF VAST LANDS SITUAT ED AT OLD MADRAS ROAD HAD ENTERED INTO TWO AGREEMENTS WITH PURVANKARA PRO JECTS LIMITED [PPL] TO SELL 2 27 000 SFT. [25000+202000 SFT.] OF LAND FOR RS.22 CRORES [RS.1.80 CRORES + RS.20.20 CRORES]. THE CLAIM OF THE ASSESS EE WAS THAT THOSE LANDS WERE PURCHASED DURING THE PERIOD FROM 1993 TO 2003 AND AS PER THE AGREEMENTS WITH THE PURCHASERS THE LANDS WERE TO BE HANDED OVER IN VACANT POSSESSION. AS THERE WERE SOME HUTS/SLUMS O N THOSE LANDS AND THE PURCHASER WAS NOT AGREED FOR REGISTRATION UNLESS TH EY WERE REMOVED THE DISPUTE WAS REFERRED FOR ARBITRATION ACCORDING TO WHICH THE COMPENSATION WAS ENHANCED TO RS.32.20 CRORES PLUS ADDITIONAL DEV ELOPMENTAL CHARGES OF RS.50 LAKHS FOR REMOVAL OF HUTS ETC. VIDE AWARDS DA TED: 23.2.06 AND 3.3.06. ACCORDING TO THE AO THE ASSESSEE AND THREE OTHERS RECEIVED RS.37.5 CRORES FROM THE DEAL AND THE ASSESSEES SHARE BEING RS.10 05 83 424/- OUT OF WHICH THE ASSESSEE HAD ADMITTED RS.5 44 88 161/ - AS LTCG AND RS.4 60 95 263/- AS STCG. 4. THE ASSESSEE HAD CLAIMED COST OF IMPROVEMENT SU CH AS HUT CLEARING EXPENSES TENANCY COMPENSATION LIAISON CH ARGES ETC. THE ASSESSEE CLAIMED LIAISON FEE OF RS.90 00 000/- PAID THROUGH CHEQUE TO B.G. KOSHY WHO HAD ALSO VOUCHED THE SAME BY A CONFI RMATION LETTER DATED: 27.3.08. WHEN THE ASSESSEE WAS QUERIED AS TO WHY T HE LIAISON CHARGES WERE CLAIMED AGAINST STCG ONLY INSTEAD OF LTCG WHEN THE ENTIRE LTCG WAS CLAIMED AS EXEMPT U/S 54EC INVESTMENTS IN REC BONDS THE ASSESSEE RESPONDED THAT THE AMOUNT WAS PAID AS PER BILL RAISED BY KOSHY. ITA NO.1139/BANG/09 PAGE 3 OF 7 4.1. REJECTING THE ASSESSEES REASONING THE AO OP INED THAT THE SAME HAD TO BE APPORTIONED BETWEEN STCG AND LTCG. CONSIDERING THE ENTIRE DEAL PER SFT VALUE WHICH COMES TO RS.147/- A ND THE AREA RESULTING IN STCG WAS 29898 SFT RESPECTIVELY THE AO TOOK A STAN D THAT THE ASSESSEE WAS ELIGIBLE TO CLAIM ONLY RS.43 95 000/- AS AGAINS T STCG (TAKING RS.147/SFT) INSTEAD OF RS.90 LAKHS CLAIMED. ACCORD INGLY HE HAD DISALLOWED RS.46 04 994/-. 5. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUE BEFOR E THE CIT(A) FOR REMEDY. AFTER TAKING INTO ACCOUNT THE ELABORAT E SUBMISSION MADE BY THE ASSESSEE (WHICH HAS BEEN EXTRACTED AND ALSO MAD E PART OF HIS ORDER) THE LD. CIT (A) HAS OBSERVED THUS 6.0.ON A PERUSAL OF THE IMPUGNED ORDER U/S 14 3(3) I FIND THAT THE AO HAS DOUBTED AS TO WHY LIASONING (SIC) L IAISON CHARGES ARE CLAIMED ONLY AGAINST STCG. IN THIS REGARD I FIND CONVINCING AND REASONABLE EXPLANATION OF THE APPELLANT NARRATED AT PARAGRAPH 5 ABOVE REGARDING THE REASONS FOR PAYMENT OF LIAISON CHARGES TO B.G.KOSHY ONLY FOR PLOTS LIABLE TO TAX AS STCG. IN MY OPINION THE SAID EXPLANATION HAS CONVINCINGLY NEGATED THE DOUBTS CAS T BY THE AO. ON FURTHER PERUSAL OF THE IMPUGNED ORDER U/S 143(3) I T APPEARS TO ME THAT THE AO HAS ASSUMED THAT THE LIAISON CHARGES WAS PAI D TO KOSHY FOR ARRANGING THE SALE OF THE LARGE PLAT OF 227000 SFT. (HEREAFTER REFERRED TO AS THE COMBINED PLOT) TO PURVANKARA PROJECTS L TD.[PPL]. HOWEVER ON EXAMINATION I FIND THAT THE LIAISON CHA RGES WERE PAID FOR ARRANGING THE PURCHASE OF 93 SITES THAT WAS AGGREGA TED TO FORM THE SAID COMBINED PLOT. IN THIS REGARD I FIND THAT THE PLOTS RELATED TO THE APPELLANT CONSISTED OF 24 SITES OF WHICH 9 SITES WE RE PURCHASED DURING THE PERIOD 8.12.93 TO 27.5.02 AND 15 SITES WERE PUR CHASED BETWEEN 16 TH APRIL TO 31ST OF MAY 03. IT IS SEEN THAT THE VARIO US SITES WERE PURCHASE ON VARIOUS DATES FROM VARIOUS PARTIES. IN OTHER WO RDS THOUGH THE SALE OF THE COMBINED PLOT TO PPL WAS CARRIED OUT THROUG H A SINGLE TRANSACTION THE PURCHASES OF THE SMALLER PLOTS WHI CH AGGREGATED TO FORM THE COMBINED PLOT COMPRISED OF MANY SEPARATE TRANSACTIONS. IN SUCH A CASE IN ORDER TO CLAIM THAT THE LIAISON CHA RGES PAID TO KOSHY WERE RELATED TO THE ENTIRE 24 SITES THE AO OUGHT T O HAVE POINTED OUT THE INVOLVEMENT OF KOSHY IN EACH AND EVERY PURCHASE TRA NSACTIONS RELATING TO THE ENTIRE 24 SITES. HOWEVER I FIND THAT IN MA KING APPORTIONMENT OF THE LIAISON CHARGES THE AO HAS NOT FURNISHED ANY R EASON FOR SUCH APPORTIONMENT AND HAS MERELY STATED THAT I AM OF THE OPINION THAT ITA NO.1139/BANG/09 PAGE 4 OF 7 THE SAME HAS TO BE APPORTIONED BETWEEN STCG AND LTC G. THEREFORE IN VIEW OF THE CLAIM OF THE APPELLANT TH AT KOSHY WAS INVOLVED ONLY IN THE PURCHASE OF PLOTS LIABLE TO ST CG AND THE CONVINCING REASONS [ELABORATED AT PARAGRAPH 5] FOR SUCH CLAIM AND THE ABSENCE OF ANYTHING TO THE CONTRARY HAVING BEEN POI NTED OUT BY THE AO I AM OF THE OPINION THAT THE GENERALIZED APPORTIONM ENT OF LIAISON CHARGES BETWEEN STCG AND LTCG MADE BY THE AO IS NOT IN ORDER. I THEREFORE DIRECT THE AO TO ALLOW DEDUCTION OF LIAIS ON CHARGES FROM STCG IN FULL AS CLAIMED BY THE APPELLANT.. 6. DISENCHANTED WITH THE FINDING OF THE LD. CIT(A) THE REVENUE HAS COME UP WITH THE PRESENT APPEAL. THE LD. D R H AD PLACED STRONG URGE ON THE REASONING OF THE AO AND ACCORDINGLY PLEADE D THAT THE FINDING OF THE AO REQUIRES TO BE SUSTAINED. 6.1. ON THE OTHER HAND THE LD. A R CAME UP WITH S PIRITED ARGUMENTS THE SUBSTANCES OF WHICH ARE SUMMARIZED A S UNDER: THE ASSESSEE JOINTLY OWNED IMMOVABLE PROPERTIES IN SY. NOS.4/IB 4/1C 4/1D AND 4/IE IN BINNAMANGALA TO THE EXTENT OF 2020 00 SFT WHICH WERE PURCHASED IN 2003 AND SOLD TO PPL AS PER THE SALE AGREEMENT DATED: 12.12.2003 AND AS PER ARBITRATION AWARD DATED 23.2. 06 FOR A SALE CONSIDERATION OF RS.4 60 95 263/- OUT OF WHICH THE COST OF LAND AND OTHER INCIDENTAL EXPENSES OF RS.2 72 24 361/- CLAIMED AN D THE NET STCG OF RS.1 88 70 902/- WAS OFFERED TO TAX. THE EXPENDITU RE CLAIM OF RS.2 72 24 361/- WAS INCLUSIVE OF RS.90 00 000/- BE ING LIAISON CHARGES PAID TO ONE KOSHY WHOSE SERVICES AVAILED TO WARD OFF THE SLUM DWELLERS WHO WERE IN ILLEGAL OCCUPATION OF THE SAID LAND. THE LIAISO N CHARGES PAID THROUGH CHEQUE WAS DULY ACKNOWLEDGED BY KOSHY. THE LEGITIMATE CLAIM OF THE ASSESSEE OF LIAISON FEE OF RS.90 LAKHS HAS BEEN APPORTIONED BY THE AO INTO TWO PARTS ATTRIBUTABLE TO LTCG AND STCG AND ACCORDINGLY APPORTIONED RS.43 95 006/- AND RS.46 0 4 994/- AS STCG AND LTCG RESPECTIVELY. THUS THE AO DISALLOWED LIAISON CHARGES OF RS.46 04 994/- BEING ATTRIBUTABLE TO LTCG. ITA NO.1139/BANG/09 PAGE 5 OF 7 INITIALLY IT WAS AGREED TO PART WITH THE LAND FOR RS.20.20 CRORES AS PER THE SALE AGREEMENT HOWEVER SUBSEQUENT TO ARBITRATION AWARD THE SALE PRICE WAS DETERMINED AT RS.35.20 CRORES AND THE ENHANCED SALE CONSIDERATION WAS OFFERED FOR TAXATION. THE ENHANCEMENT IN SALE CONS IDERATION WAS ACHIEVED SOLELY THE LAND IN QUESTION EARLIER EMBEDDED WITH ILLEGAL ENCROACHMENTS BY URCHINS GOONS APART FROM SLUM DWELLERS BECAME FRE E FROM ALL ILLEGAL ENCROACHMENTS THANKS TO THE LIAISON AND TACTFUL HAN DLING OF THE WHOLE ISSUE BY KOSHY WHO WAS PAID THE LIAISON CHARGES PURELY RE LATED TO THIS PROPERTY. ACCORDINGLY THE LIAISON CHARGE OF RS.90 LAKHS WAS CLAIMED AS EXPENDITURE WHILE COMPUTING STCG. HOWEVER THE AO HAD NEITHER BROUGHT ANY MATERIAL EV IDENCE ON RECORD TO CONTRADICT THE LEGITIMATE CLAIM OF THE ASSESSEE NOR JUSTIFIED WITH ANY VALID REASONS FOR THE APPORTIONMENT OF THE LIAISON CHARGE S AND THEREBY DISALLOWING RS46 04 994/-. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND DILIGENTLY PERUSED THE RELEVANT RECORDS. AT THE OU T-SET WE WOULD LIKE TO POINT OUT THAT THE AO HAD NEITHER DISBELIEVED THE L IAISON CHARGES PAID NOR BROUGHT ON RECORD ANY TANGIBLE EVIDENCE OR ADDUCING ANY CREDIBLE REASONING FOR APPORTIONING OF THE EXPENSES BETWEEN STCG AND LTCG. HE HAD ALSO NOT SPELT OUT THE REASONABLENESS IN INDULG ING IN APPORTIONMENT OF THE EXPENSES BETWEEN THE TWO. 7.1. MOREOVER THE AO HAD MADE NO SINCERE EFFORTS TO REFUTE THE ASSESSEES CLAIM THAT THE LAND IN QUESTION WAS UNDE R THE ILLEGAL ENCROACHMENTS. IT IS PERTINENT TO MENTION HERE THA T IT IS NOT UNCOMMON IN METROPOLIS THAT EVEN A SMALL PIECE OF LAND LYING VA CANT FOR A WHILE; THE SAME WOULD BE ENCROACHED BY IMMIGRANTS AND WORK FOR CE FROM RURAL AREAS BY OVERNIGHT WITH A TACTICAL SUPPORT OF LOCAL HOODL UMS. ONCE THE VACANT ITA NO.1139/BANG/09 PAGE 6 OF 7 LAND IS OCCUPIED BY SUCH UNAUTHORIZED PERSONS THE LEGITIMATE OWNER OF SUCH A LAND WOULD BE ENTANGLED WITH A PROLONGED LIT IGATION APART FROM POLITICAL PRESSURE AND ALSO THREATS FROM LOCAL GOON S. TO ACHIEVE SUCH A MAN-OEUVRE THE ASSESSEE HAD AVAILED THE SERVICES OF KOSHI WHO PERHAPS WITH HIS SHEER TACTFULNESS GOT THE LAND IN QUESTION FREE FROM THE CLUTCHES OF THE UNLAWFUL ENCROACHERS WHICH FACILITA TED THE ASSESSEE TO HAND OVER THE VACANT POSSESSION OF THE LAND TO HIS PURCH ASERS. THE SERVICE RENDERED BY KOSHI WAS COMPENSATED AS LIAISON CHARGE THROUGH CHEQUE WHICH WAS REFLECTED IN THE BANK STATEMENT OF THE AS SESSEE AND KOSHI HIMSELF HAD CONFIRMED THE RECEIPT OF THE SAME. THU S THE VERACITY OF THE PAYMENT OF LIAISON CHARGE BY THE ASSESSEE CANNOT BE SUBJECT TO A SCAN. THIS VERY FACT HAS NOT ALSO BEEN DISPUTED BY THE A O. THUS THE DISALLOWANCE OF RS.46 04 994/- RESORTED TO BY THE A O TO DESCRIBE IT GENTLY WAS WITHOUT ANY SOUND BASIS AND ALSO NO TANGIBLE DO CUMENTARY EVIDENCE WAS BROUGHT ON RECORD TO SUPPORT HIS STAND. THE AO S MERE ASSERTION I AM NOT IN AGREEMENT WITH THE ASSESSEE AND I AM OF T HE OPINION THAT THE SAME HAS TO BE APPORTIONED BETWEEN STCG AND LTCG DOESNT STAND THE SCRUTINY OF LAW. 7.2. IN VIEW OF THE ABOVE AND ALSO THE FINDING OF THE LD. CIT (A) IN HIS IMPUGNED ORDER WHICH IS THE SUBJECT MATTER OF T HIS APPEAL WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE SUM OF RS.46 04 994/-. IT IS ORDERED ACCORDINGLY. 7.3. IN THE NUT-SHELL THE ASSESSEE GETS A RELIEF OF RS.46 04 994/- ON THIS COUNT. ITA NO.1139/BANG/09 PAGE 7 OF 7 8. IN THE RESULT THE REVENUES APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MAY 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 24 TH MAY 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.