ACIT, CHENNAI v. M/s. Southern Accessories Pvt Ltd., CHENNAI

ITA 1397/CHNY/2011 | 2008-2009
Pronouncement Date: 26-10-2016

Appeal Details

RSA Number 139721714 RSA 2011
Assessee PAN AAGCS5956G
Bench Chennai
Appeal Number ITA 1397/CHNY/2011
Duration Of Justice 5 year(s) 2 month(s) 21 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Southern Accessories Pvt Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 26-10-2016
Appeal Filed By Department
Bench Allotted A
Date Of Final Hearing 17-10-2016
Next Hearing Date 17-10-2016
Assessment Year 2008-2009
Appeal Filed On 05-08-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . !' BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR JUDICIAL MEMBER ./ I.T.A.NO.1397/MDS./2011 / ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE VI(3) NEW BLOCK 7 TH FLOOR CHENNAI-34. VS. M/S.SOUTHERN ACCESSORIES PVT LTD. NO.38 A & B N.P.INDUSTRIAL ESTATE CHENNAI-97. [PAN AAGCS 5956 G ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.CLEMENT RAMESH KUMAR JCIT DR /RESPONDENT BY : NONE / DATE OF HEARING : 17 - 1 0 - 201 6 !' / DATE OF PRONOUNCEMENT : 26 - 10 - 2016 ' / O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)- V CHENNAI DATED 02.05.2011 PERTAINING TO THE ASSESSMENT YEAR 2008-09 . ITA NO. 1397/MDS./2011 :- 2 -: 2. THE LD.A.R FILED AN ADJOURNMENT LETTER SEEKING FOR ADJOURNMENT FOR REGULAR DATE. SINCE IT IS A VERY OL D MATTER AS THE APPEAL WAS FILED ON 05.08.2011 THE BENCH REJECTED THE ADJOURNMENT PETITION AND THE APPEAL WAS TAKEN UP FO R HEARING. AT THE TIME OF HEARING NONE APPEARED FOR THE ASSESSEE . WE HAVE TAKEN UP THE CASE TO DECIDE ON MERIT AFTER HEARING THE LD.D.R. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY WAS THE OWNER OF THE PROPERTY AT PLOT NO.C30 IN THE SID CO INDUSTRIAL COMPLEX AT GUINDY CHENNAI HAVING PURCHASED THE SAME ON 25 TH SEPTEMBER 2003 BY MEANS OF A REGISTERED SALE DEED B EARING DOC. NO.2077/2003 FOR A TOTAL CONSIDERATION OF ` 35 LAKHS. THE APPELLANT COMPANY ALONG WITH THE OWNERS OF THE NEIG HBOURING PLOTS ENTERED INTO A DEVELOPMENT AGREEMENT WITH ONE SRI KAUSALYA CONSTRUCTIONS LIMITED (SKCL) ON 15TH DECEM BER 2005. IN TERMS OF THE SAID AGREEMENT THE APPELLANT COMPA NY SHALL BE ENTITLED TO CONSTRUCTED AREA OF ABOUT 9515 SQ.FT. I T IS PERTINENT TO NOTE THAT IN TERMS OF CLAUSE 9 AT PAGE 9 OF THE SAI D DEVELOPMENT AGREEMENT /THE LAND OWNERS ON SIGNING THIS DEVELO PMENT AGREEMENT HAVE GRANTED PERMISSIVE POSSESSION TO SKC L TO ENTER UPON THE SCHEDULE PROPERTY FOR THE PURPOSE OF DEVEL OPMENT. THE ITA NO. 1397/MDS./2011 :- 3 -: SAME (SUCH PERMISSIVE POSSESSION) IS SPECIFICALLY S TATED AS NOT INTENDED TO AND SHALL NOT AMOUNT TO DELIVERY POSSES SION IN PART PERFORMANCE OF THE CONTRACT UNDER SECTION 53A OF TH E TRANSFER OF PROPERTY ACT OR SECTION 2(47) OF THE INCOME TAX ACT 1961. 3.1 THE APPELLANT COMPANY ALSO EXECUTED A POWER OF ATTORNEY IN FAVOUR OF THE SAID DEVELOPER SRI KAUSALYA CONSTR UCTIONS LIMITED WHEREIN IT HAS BEEN EXPRESSLY STATED THAT T HE APPELLANT COMPANY WAS DESIROUS OF DEVELOPING THE SAID PROPERT Y INTO AN TECHNOLOGY PARK AND RETAIN ITSELF THE BUILT-UP AREA OF 9515 SQ. FT. IN THE A WING (SOUTH WING) OF THE SIXTH FLOOR ALONG WITH PRORATA 53.18% OF THE UNDIVIDED SHARE OF SAID LAND AND TRAN SFER THE BALANCE OF THE UNDIVIDED SHARE OF LAND ALONG WITH P RO-RATA BUILT-UP AREA PROPOSED TO BE CONSTRUCTED AND SKCL WAS APPOIN TED AS AN AGENT TO DO CERTAIN THINGS WHICH HAVE BEEN SPECIFIC ALLY STATED THEREIN. THE SAID POWER OF ATTORNEY ALSO DOES NOT S PECIFICALLY MENTION ABOUT THE HANDING OVER THE POSSESSION OF TH E SAID PROPERTY TO THE AGENT. ON THE OTHER HAND PARA 3 AT PAGE 2 OF THE POWER OF ATTORNEY CLEARLY STATES THAT THE APPELLANT COMPANY IS THE OWNER OF THE PROPERTY AND IN POSSESSION OF THE PROP ERTY. THE SAID POWER OF ATTORNEY IS A REGISTERED DOCUMENT REGISTER ED AS DOC.NO.2499/2007. IN FACT THE SAID POWER OF ATTORNE Y STATES AT ITA NO. 1397/MDS./2011 :- 4 -: CLAUSE 23 AT PAGE 5 THAT THE AGENT SHALL PUT THE PU RCHASERS OF THE 46.82% IN POSSESSION AS AND WHEN ANY LAND IS SOLD. NEEDLESS TO SAY THAT THAT THE AGENT SHALL DO SO FOR AND ON BEHA LF OF THE APPELLANT COMPANY AND NOT ON ITS OWN BEHALF. IT ALSO APPEARS THAT THE APPELLANT COMPANY HAD ALSO ENTERED INTO A JOINT VENTURE AGREEMENT WITH THE SAID SRI KAUSALY A CONSTRUCTIONS LIMITED DATED 24 OCTOBER 2007. IT HAS BEEN STATED IN THE SAID JV AGREEMENT THAT SINCE THE ENTIRE CONS TRUCTION IS CONSTRUCTED IN STAGES AND AS WHEN SUCH BUILT-UP ARE A IS READY THE SAME WOULD BE LET OUT TO TENANTS AND SINCE DEMARCAT ION PHYSICALLY COULD NOT BE DONE UNTIL THE ENTIRE CONST RUCTION IS COMPLETED THE RENTAL INCOME FROM SUCH LET OUT AREA WOULD BE COLLECTED BY THE SAID JOINT VENTURE TO BE SHARED IN THE RATIO AT WHICH THEY ARE ENTITLED IN THE BUILT AFTER MEETING THE EXPENSES. IT WAS ALSO AGREED THAT ONCE THE ENTIRE CONSTRUCTION I S COMPLETE THE TENANCY AGREEMENTS ENTERED INTO BY THE JV WOULD BE ATONED IN FAVOUR OF THE RESPECTIVE OWNERS. ACCORDINGLY THE AT ONEMENT IN RESPECT OF THE TENANCY AGREEMENT INTO BY THE JV PER TAINING TO THIS APPELLANT WAS ULTIMATELY DONE ON 26TH DECEMBER 2008 WHICH IS EVIDENCED BY A DOCUMENT SIGNED BY THE JV THIS APPE LLANT COMPANY AND THE TENANT. FROM THEN ON THE APPELLANT COMPANY ITA NO. 1397/MDS./2011 :- 5 -: HAS BEEN RECEIVING THE RENT ON THE SAID PREMISES IN ITS OWN RIGHT AND WAS OFFERING THE SAME IN ITS RETURN OF INCOME. 3.2 IN THIS FACTUAL MATRIX OF THIS CASE LET US HA VE A LOOK AT THE ASSESSMENT MADE UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2008-09 (I.E. THE YEAR UNDER APPEAL). FOR THIS ASSESSMENT YEAR THE APPELLANT CO MPANY FILED RETURN OF INCOME ON 29-09-2008 DECLARING A LOSS OF RS.17 74 669/- THIS ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY THE IS SUE OF A NOTICE U/S 143(2) DATED 12-08-2009. THE SAID SCRUTI NY WAS ULTIMATELY COMPLETED DETERMINING A TOTAL INCOME OF RS.2 08 54 551 CONSISTING OF LONG TERM CAPITAL GAIN S AND A BUSINESS LOSS OF RS.16 25 269/- THE ASSESSING OFFIC ER HAS NOT ADJUSTED THE CURRENT YEAR BUSINESS LOSS DETERMINED AT RS.16 25 269/- AGAINST THE LTCG BUT PROCEEDED TO LE VY TAX ON THE ENTIRE LTCG AND ALONG WITH INTEREST LEVIED UNDER SE CTION 234B RAISED A DEMAND FOR RS.68 52 180/-. IN THIS APPEAL THE APPELLANT DISPUTES THE LEVY OF CAPITAL GAINS IN THIS ASSESSME NT YEAR UNDER APPEAL VIZ. 2008-09 AS ACCORDING TO THE APPELLANT NO TRANSFER OF PROPERTY HAS TAKEN PLACE DURING THIS ASSESSMENT YEA R. IT IS WORTHWHILE NOTING AT THIS STAGE THAT NOWHERE IN THE ASSESSMENT ITA NO. 1397/MDS./2011 :- 6 -: ORDER THERE IS MENTION OF THE DETAILS OF THE PROPE RTY SAID TO HAVE BEEN TRANSFERRED BY THE APPELLANT DURING THE ASSESS MENT YEAR. BE THAT AS IT MAY FROM A READING OF THE ASSESSMENT ORDER AND PARTICULARLY THE REFERENCES TO THE DEVELOPMENT AGRE EMENT DATED 1 5TH DECEMBER 2005 AND POWER OF ATTORNEY DATED L2TH OCTOBER 2007 IT HAS TO BE INFERRED THAT THE PROPERTY ALLEG ED TO HAVE BEEN TRANSFERRED DURING THE ASSESSMENT YEAR 2008-09 IS T HE SAME AS THE ONE REFERRED TO ABOVE THE FACTS OF WHICH HAVE BEEN ENUMERATED IN GREAT DETAIL. 4. HOWEVER LD.CIT(A) IN THE APPELLATE PROCEEDINGS CONSIDERED THE NEW ARGUMENT OF THE LD.A.R THAT BOOK VALUE OF THE BUILDING DEMOLISHED FOR THE PURPOSE OF CONSTRUCTION IN THE LAND WHICH IS A SUBJECT MATTER OF TRANSFER TO BE ALLOWED AS SHORT TERM CAPITAL LOSS U/S.50 OF THE ACT AND ADJUSTMENT OF TH E BUSINESS LOSS OF THE ASSESSMENT YEAR 2008-09 AND SET OFF OF SHORT TERM CAPITAL LOSS AGAINST THE LONG TERM CAPITAL GAINS ARISING OU T OF TRANSFER OF LAND. THE LD.CIT(A) CONSIDERED THIS PLEA OF THE ASS ESSEE WITHOUT CALLING FOR A REMAND REPORT FROM THE AO. AS SUCH TH ERE IS VIOLATION OF RULE 46A. ACCORDINGLY IN OUR OPINION IT IS APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF AO TO CONSIDER TH E SAME AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE ITA NO. 1397/MDS./2011 :- 7 -: AND LD. ASSESSING OFFICER SHALL CONSIDER THE SAME IN ACCORDANCE WITH LAW AND DECIDE IT AFRESH. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 26 TH OCTOBER 2016 AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 26 TH OCTOBER 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( (- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( / CIT 6. 02(3 / GF