ACIT 2(3), MUMBAI v. SEVAKUNJ INVESTMENTS & TRDG. CO.P. LTD, MUMBAI

ITA 1646/MUM/2009 | 2004-2005
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 164619914 RSA 2009
Assessee PAN AACCS2156G
Bench Mumbai
Appeal Number ITA 1646/MUM/2009
Duration Of Justice 2 year(s) 4 month(s) 11 day(s)
Appellant ACIT 2(3), MUMBAI
Respondent SEVAKUNJ INVESTMENTS & TRDG. CO.P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 22-07-2011
Date Of Final Hearing 09-06-2011
Next Hearing Date 09-06-2011
Assessment Year 2004-2005
Appeal Filed On 12-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND T.R.SOOD (A.M ) ITA NO.1508/MUM/2009 (ASSESSMENT YEAR:2004-05) GO INVESTMENT & TRADING PVT.LTD. (PREVIOUSLY KNOWN AS SEVAKUNJ INVESTMENTS & TRADING CO. PVT.LTD) NEVILLE HOUSE J.N HEREDIA MARG BALLARD ESTATE MUMBAI-400001. PAN: AACCS2156G ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(3) AAYAKAR BHAVAN M.K.MARG MUMBAI-400020. APPELLANT V/S RESPONDENT ITA NO.1646/MUM/2009 (ASSESSMENT YEAR:2004-05) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(3) ROOM NO.555 AAYAKAR BHAVAN M.K.MARG MUMBAI-400020. GO INVESTMENT & TRADING PVT.LTD. (PREVIOUSLY KNOWN AS SEVAKUNJ INVESTMENTS & TRADING CO. PVT.LTD) NEVILLE HOUSE J.N HEREDIA MARG BALLARD ESTATE MUMBAI-400001. PAN: AACCS2156G APPELLANT V/S RESPONDENT ITA NO.2203/MUM/2009 (ASSESSMENT YEAR:2005-06) GO INVESTMENT & TRADING PVT.LTD. (PREVIOUSLY KNOWN AS SEVAKUNJ INVESTMENTS & TRADING CO. PVT.LTD) NEVILLE HOUSE J.N HEREDIA MARG BALLARD ESTATE MUMBAI-400001. PAN: AACCS2156G ASSISTANT COMMISSIONER OF INCOME TAX (OSD)-1 CITY-2 AAYAKAR BHAVAN M.K.MARG MUMBAI-400020. APPELLANT V/S RESPONDENT ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 2 2 ITA NO.2520/MUM/2009 (ASSESSMENT YEAR:2005-06) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(3) ROOM NO.555 AAYAKAR BHAVAN M.K.MARG MUMBAI-400020. GO INVESTMENT & TRADING PVT.LTD. (PREVIOUSLY KNOWN AS SEVAKUNJ INVESTMENTS & TRADING CO. PVT.LTD) NEVILLE HOUSE J.N HEREDIA MARG BALLARD ESTATE MUMBAI-400001. PAN: AACCS2156G APPELLANT V/S RESPONDENT ASSESSEE BY S/SHRI S.E.DASTUR AND M.D.INAMDAR REVENUE BY SHRI SANJEEV DUTT O R D E R PER BENCH ALL THESE FOUR CROSS-APPEALS PREFERRED BY THE ASSES SEE AND REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDER S DATED 31.12.2008 AND 30.1.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. SINCE FACTS ARE IDENTICAL AND ISSUE INVOLVED IS COMMON ALL THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1508/MUM/2009(AY:2004-05) (BY ASSESSEE) ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 3 3 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS AS INVESTMENT COMPANY FILED RETURN DECLARING TOTAL INCOME OF RS.90 943/-. THE AO AFTER PROCESSING THE RETURN U NDER SECTION 143(1) OF THE INCOME TAX ACT 1961(THE ACT) RECEIVED A LETTER DATED 2.1.2007 FROM ACIT(2)(1) MUMBAI WHEREIN IT WAS INDICATED THAT THE ASSESSEE ALONG WI TH THE OTHERS HAS RECEIVED CERTAIN AMOUNTS DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05 AND TH E SAME WAS HELD AS TAXABLE IN THE HANDS OF THE ASSES SEE. BASED ON THIS INFORMATION THE AO RECODED THE REAS ONS THAT ON PERUSAL OF THE BALANCE SHEET FILED AS ON 31.3.20 04 IT IS SEEN THAT A SUM OF RS.11 93 88 000/- IS CREDITED T O THE CAPITAL RESERVE ACCOUNT AS AMOUNT RECEIVED FROM THE ESTATE OF E.F.DINSHAW (EFD)AND THE SIMILAR RECEIPT IN THE CASE OF OTHER ASSESSEE SHRI NUSLI N.WADIA HAS BEE N TAXED AS BUSINESS INCOME THEREFORE THE SUM OF RS.11 93 88 000/- HAS ESCAPED ASSESSMENT WITHIN TH E MEANING OF SECTION 147 OF THE ACT AND ACCORDINGLY ISSUED A NOTICE UNDER SECTION 148 OF THE ACT. IN RESPONSE THE ASSESSEE HAS FILED HIS OBJECTIONS AND HAS ALSO IN TERALIA EXPLAINED THAT A DISTRIBUTION MADE UNDER A WILL IS A DIRECTIONAL DISPOSITION AKIN TO A GIFT WHICH IS NOT IN THE ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 4 4 NATURE OF INCOME IN THE HANDS OF THE BENEFICIARIES. CONSEQUENTLY THE RECEIPTS CONSTITUTES A CAPITAL R ECEIPT IN THE HANDS OF THE ASSESSEE. IT WAS FURTHER SUBMITTE D THAT SUCH DISTRIBUTIONS ARE SPECIFICALLY EXEMPTED UNDER SECTION 47(III) OF THE ACT WHEREIN IT HAS BEEN PROVIDED TH AT WHERE A PERSON MAKES GIFT OR WILL NO GAIN IS MADE BY TH E TESTATOR AND THEREFORE THE QUESTION OF LEVYING AN Y TAX DOES NOT ARISE. THEREFORE THE CAPITAL RESERVE AC COUNT CREDITED WITH SUM OF RS.11 93 88 000/- IS NOT TAXA BLE. HOWEVER THE AO FOR THE REASONS RECORDED AT PAGES 3 TO 11 OF THE ASSESSMENT ORDER INTERALIA HELD THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT IT IS EXEMPTED UNDER SECTION 47(III) OF THE ACT AS THE ASSESSEE W AS NEVER A BENEFICIARY UNDER THE WILL OF E.F.DINSHAW AND H ENCE HE TREATED THE ENTIRE RECEIPT OF RS.11 93 88 000/- AS CONSIDERATION OF TRANSFER OF PROPERTY DURING THE YE AR. HE FURTHER HELD THAT THE ASSESSEE BECAME THE OWNER OF THE PROPERTIES IN QUESTION BY INDENTURE DATED 26.9.2001 OR THEREAFTER THE PROPERTIES TRANSFERRED ARE TO BE TR EATED AS SHORT TERM CAPITAL ASSET GIVING RISE TO SHORT TERM CAPITAL GAIN AND ACCORDINGLY HE WORKED OUT THE SHORT TERM CAPITAL GAIN OF RS.10 56 78 000/- AND ADDED THE SAME TO T HE TOTAL INCOME OF THE ASSESSEE AND THEREBY COMPLETED THE ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 5 5 ASSESSMENT AT AN INCOME OF RS.10 51 93 910/- VIDE O RDER DATED 20.11.2007 PASSED UNDER SECTION 143(3) R.W.S ECTION 147 OF THE ACT. 3. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX (A) WHILE HOLDING THAT THE RECEIPTS FROM THE ESTAT ES IN THE HANDS OF THE APPELLANT ARE CLEARLY EXEMPT UNDER SECTION 47(III) OF THE ACT FOLLOWED THE APPELLATE ORDER IN THE CASE OF SHRI NUSLI N.WADIA BEING ONE OF THE OTHER BENE FICIARIES UNDER THE SAME INDENTURE DATED 26.9.2001 WHEREIN IT HAS BEEN HELD THAT THE AMOUNT RECEIVED IS A CAPITAL RECEIPT NOT LIABLE FOR INCOME TAX HELD THAT THE DISTRIBU TION RECEIVED BY THE APPELLANT FROM THE ESTATE OF EFD I S A CAPITAL RECEIPT NOT LIABLE TO TAX. ON THE ISSUE O F LEVY OF INTEREST UNDER SECTIONS 234A AND 234B THE LEARNED COMMISSIONER OF INCOME TAX(A) DIRECTED THE AO TO L OOK INTO THIS ASPECT WHILE GIVING EFFECT TO HIS ORDER. WITH REGARD TO THE COMPUTATION OF COST AND THE ISSUES RELATING THERETO THE LEARNED COMMISSIONER OF INCOME TAX ( A) HELD THAT SINCE THE ISSUE OF CAPITAL GAIN HAS BEEN DECI DED IN FAVOUR OF THE ASSESSEE THEREFORE HE DOES NOT CON SIDER IT NECESSARY TO GO INTO THE OTHER CONTENTIONS OF THE A SSESSEE ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 6 6 AND ACCORDINGLY THE LEARNED COMMISSIONER OF INCOME TAX (A) PARTLY ALLOWED THE APPEAL. 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) THE ASSESSEE AND REVENUE BOTH ARE IN APPEAL BEFORE US. 5. GROUNDS OF APPEAL NO.1 IN ASSESSEES APPEAL READ S AS UNDER : 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD THE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IN THE HANDS OF THE APPELLANT FOR THE ASSESSMENT YEAR 2004 - 05 AND ACCORDINGLY UPHOLDING THE ACTION OF THE ASSESSING OFFICER WITH REFERENCE TO THE RE-OPENING PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT 1961 6. AT THE TIME OF HEARING THE LEARNED SENIOR COUNSE L FOR THE ASSESSEE HAS MADE NO SUBMISSIONS IN THIS REGARD AND IN THE ABSENCE OF ANY SUPPORTING MATERIAL THE GRO UND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED. 7. GROUNDS OF APPEAL NO.2 3 AND 4 IN ASSESSEES APP EAL READ AS UNDER : 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ADJUDICATING THE ALTERNATIVE PLEA OF THE APPELLANT THAT AS THE AMOUNTS RECEIVED BY THE APPELLANT COULD NOT HAVE BEEN DISTRIBUTED BY THE ESTATE OF MR.E.F.DINS HAW ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 7 7 THE QUESTION OF ANY AMOUNT BEING TAXED IN THE HANDS OF THE APPELLANT DOES NOT ARISE; 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING THAT THE AMOUNTS RECEIVED WERE ADVANCES AND NOT PROCEEDS OF SALE AND /OR DISPOSA L OF THE CORPUS OF THE ESTATE OF MR.E.F.DINSHAW IN INDI A TO THE EXTENT TO WHICH THE SAME CONSISTS OF IMMOVABLE PROPERTIES AND ACCORDINGLY TO THAT EXTENT THE SAM E OUGHT TO BE EXCLUDED IN COMPUTING IF AT ALL THE QUANTUM RECEIVED BY THE APPELLANT IN TERMS OF THE INDENTURE. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING AS TO THE APPELLANTS CON TENTION THAT THE ASSESSING OFFICER ERRED IN NOT CORRECTLY COMPUTING THE COST OF ACQUISITION IN THE HANDS OF T HE APPELLANT. 8. AT THE TIME OF HEARING THE LEARNED SENIOR COUNS EL FOR THE ASSESSEE SUBMITS THAT THESE ISSUES HAVE NOT BEE N ADJUDICATED BY THE LD CIT(A) DESPITE SUBMISSIONS MA DE. ULTIMATELY ASSESSEE HAD RETURNED THE FUNDS RECEIVED FROM THE ESTATE OF EFD BECAUSE OF VARIOUS LEGAL ISSUES. HE FURTHER SUBMITS THAT IN CASE THE ORDER OF THE LD C IT(A) IS REVERSED THEN THE ASSESSEES APPEAL WOULD REQUIRE TO BE RESTORED TO THE FILE OF THE LD CIT(A) FOR CONSIDERA TION OF THOSE SUBMISSIONS WHICH WAS NOT OBJECTED TO BY THE LEARNED D.R. ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 8 8 9. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECO RD AND KEEPING IN VIEW OF THE FINDING RECORDED IN THE APPE AL IN DY.CIT VS. NUSLI NEVILLE WADIA & VICE VERSA IN ITA NO.4573 & 4424/MUM/08 FOR A.Y. 2004-05 DATED 15.07.2011 WHE REIN IT HAS BEEN FINALLY HELD THAT THE RECEIPT OF RS.71. 63 CRORES IS NOT TAXABLE AS BUSINESS PROFIT OR SHORT TERM CAP ITAL GAINS IN THE HANDS OF ASSESSEE WE ARE OF THE VIEW THAT T HE ISSUES RAISED ARE ONLY OF ACADEMIC NATURE AND ACCORDINGLY WE DECLINE TO ADJUDICATE THE SAME. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE REJECTED. 10. GROUND NOS.5 AND 6 READ AS UNDER : 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ADJUDICATING ON THE APPELLANT CONTENTION THAT THE ASSESSING OFFICER ERRED IN INITIATING PENALTY PROCE EDINGS UNDER SECTION 271(1)( C ) OF THE ACT. 6. EACH OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 11. AT THE TIME OF HEARING THE LEARNED SENIOR COUN SEL FOR THE ASSESSEE DID NOT ARGUE THE ABOVE GROUNDS AND K EEPING IN VIEW THAT THE ABOVE GROUND NO.5 RAISED BY THE A SSESSEE ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 9 9 IS PREMATURED THE GROUNDS RAISED BY THE ASSESSEE A RE THEREFORE REJECTED BEING NOT PRESSED. ITA NO.1646/MUM/2009 (AY:2004-05)(BY REVENUE) 12. THE GROUNDS TAKEN BY THE REVENUE READ AS UNDER : 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.11 93 88 000/- TREATED IT AS CAPITA L RECEIPT. 2. THE LD.CIT(A) FAILED TO APPRECIATE THAT RS.11 93 88 000/- IS BUSINESS INCOME. 3. THE LD. CIT(A) ERRED IN HOLDING THAT THE RECE IPT FROM THE ESTATE ARE EXEMPT U/S 47(III) IN THE HANDS OF THE ASSESSEE AS THE ASSESSEE WAS NEVER A BENEFICIAR Y UNDER THE WILL OF MR.E.F.DINSHAW THE BENEFICIARY B EING ONLY THE TESTATORS SISTER MRS. BACHOOBAI WORONZOW. 4. THE LD. CIT(A) HAS ALSO ERRED IN UPHOLDING THE ASSESSEES CONTENTION THAT THE INDENTURE DATED 26.9.2001 DID NOT TRANSFER OWNERSHIP IN THE IMMOVAB LE PROPERTIES OF THE ESTATE OF E.F.DINSHAW IN INDIA T O THE ASSESSEE AND OTHERS AND THAT THE ASSESSEE COULD NO T HAVE TRANSFERRED THE PROPERTY WITHIN THE MEANING OF SECTION 2(47) (4). 5. THE LD. CIT(A) HAS ALSO ERRED IN UPHOLDING THE ASSESSEES CONTENTION THAT SINCE THE ESTATE OF MR.E.F.DINSHAW HAD ALREADY ENTERED INTO DEVELOPMENT AGREEMENTS WITH CERTAIN DEVELOPERS AS REGARDS ITS PROPERTIES MUCH PRIOR TO THE INDENTURE DATED 26.9.2 001 THE QUESTION OF THE SAID IMMOVABLE PROPERTIES BEING TRANSFERRED TO HIM AND THE FOUR COMPANIES DOES NOT ARISE AND NOR COULD THE EXECUTANTS OF THE INDENTURE HAVE DONE SO IN VIEW OF THE SUBSISTING AGREEMENTS DOES NOT ALSO STAND CLOSE SCRUTINY. THESE AGREEMENT S ONLY CREATED LIMITED INTEREST IN FAVOUR OF THE DEVE LOPERS ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 10 10 AND OWNERSHIP REMAINED WITH THE ESTATE OF MRS.BACHOOBAI WORONZOW IN RESPECT OF THE PROPERTIE S NOT FINALLY CONVEYED TILL THEY ARE FINALLY TRANSFER RED. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 13. THE LEARNED D.R. WHILE RELYING ON THE ORDER OF THE AO FURTHER SUBMITS THAT THE FACTS OF THE ABOVE ISSUES ARE SIMILAR TO THE FACTS OF THE CASE IN THE CASE OF SHR I NUSLI N.WADIA FOR THE ASSESSMENT YEAR 2004-05 THEREFORE THE PLEA TAKEN BY THE LEARNED STANDING COUNSEL FOR TH E DEPARTMENT IN THAT APPEALS MAY BE CONSIDERED WHILE DECIDING THE ABOVE GROUNDS OF APPEAL. 14. ON THE OTHER HAND THE LEARNED SENIOR COUNSEL F OR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) FURTHER SUBMITS THAT THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTI CAL TO THE FACTS AND ISSUES RELATING TO THE APPEALS IN THE CAS E OF SHRI NUSLI N.WADIA FOR THE ASSESSMENT YEAR 2004-05 THER EFORE THE PLEA TAKEN BY HIM IN THAT APPEALS MAY BE CONSI DERED WHILE DECIDING THE GROUNDS RAISED BY THE REVENUE I N THIS APPEAL. ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 11 11 15. AFTER HEARING THE RIVAL PARTIES AND PERUSING T HE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE AO H AS HIMSELF HELD THAT SINCE THERE ARE FOUR COMPANIES AS BENEFICIARIES EACH HAVING A DISTINCT AND IDENTIFIED SHARE 10% OF RS.13.47 CRS WHICH WORKS OUT TO RS.1.35 CRS IS EXCLUDED FROM THE TAXABLE INCOME AND KEEPING IN VIEW THAT THERE IS NO DISPUTE THAT T HE FACTS AND ISSUES INVOLVED ARE SIMILAR TO THE FACTS AND I SSUES RAISED IN THE APPEAL IN DY.CIT V/S SHRI NUSLI N.W ADIA (SUPRA) WHEREIN THE TRIBUNAL HAS OBSERVED VIDE PARA GRAPH NO.43 OF ITS ORDER DATED 15.07.2011AS UNDER : 43. DURING THE COURSE OF HEARING LD. SR. ADVOCATE OF THE ASSESSEE FURTHER POINTED OUT THAT OUT OF THE TOTAL SUM OF RS .27 13 36 000/- BY BANK TRANSFERS ONLY A SUM OF RS.13.47 CRORES WAS DISTRI BUTED BY THE ADMINISTRATOR OUT OF THE INCOME WHICH WAS ACCUMULAT ED OVER THE PERIOD OF YEARS BY THE ESTATE OF EFD. HE HAD ALSO ARGUED THAT ONCE THE ESTATE HAD SUFFERED THE TAX THEN THE SAME AMOUNT COULD NOT BE TAXED AGAIN IN THE HANDS OF THE TRANSFEREES. WE FIND MERIT IN THIS ARG UMENT THAT SAME ITEM OF INCOME CANNOT BE TAXED TWICE BECAUSE THIS RECEIPT C OULD NOT HAVE BEEN TREATED AS TAXABLE ITEM IN THE HANDS OF BW. MERELY BECAUSE ASSESSEE HAS ENTERED INTO AN INDENTURE DATED 26-9-2001 BY WHICH ASSESSEE BECAME ENTITLED TO RECEIPT OF DISTRIBUTION OF SALE PROCEED S FROM THE ADMINISTRATOR IN PLACE OF BW WOULD NOT CHANGE THE BASIC PRINCIPAL T HAT NO ITEM OF INCOME CAN BE TAXED TWICE. IN FACT SAME VIEW HAS BEEN TAK EN BY THE DEPARTMENT ITSELF IN THE CASE OF M/S SEVAKUNJ INVESTMENTS & CO . PVT. LTD. [WHICH HAS NOW BEEN RENAMED AS GO INVESTMENTS & TRADING PVT. L TD]. THIS FACT BECAME CLEAR BECAUSE APPEALS OF FOUR ASSOCIATE COMP ANIES WERE ALSO HEARD TOGETHER AND IN I.T.A.NO.1646/M/09 PERTAINING TO M/ S SEVAKUNJ INVESTMENTS & CO. PVT. ALSO SIMILAR ISSUES RAISED I N THE REVENUES APPEAL ALSO ARISE AS RAISED IN THE CASE OF THE ASSESSEE. I N CASE OF THIS COMPANY THE ASSESSMENT WAS REOPENED ON THE BASIS THAT INCOM E HAS ESCAPED ASSESSMENT ON ACCOUNT OF THE SUM OF RS.11 93 88 000 /- WHICH WAS CREDITED TO THE CAPITAL RESERVE ACCOUNT BUT NOT OF FERED FOR TAXATION. AS OBSERVED RIGHT AT THE BEGINNING OF THIS ORDER THAT ASSESSEE HAD ENTERED INTO THE INDENTURE DATED 26-9-01 ALONG WITH FOUR AS SOCIATE COMPANIES AND ASSESSEE ALONG WITH THESE FOUR COMPANIES HAD PAID A CONSIDERATION OF RS.20 LAKHS TO BW FOR GETTING THE RIGHT TO RECEIVE THE SALE PROCEEDS FROM THE ADMINISTRATOR OF THE ESTATE. 60% OF THE RIGHTS WERE TO GO TO THE ASSESSEE AND 10% EACH OF THE RIGHTS WERE TO GO TO E ACH OF THESE ASSOCIATE ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 12 12 COMPANIES. THEREFORE M/S SEVAKUNJ INVESTMENTS & CO . PVT. ALSO BECAME ENTITLED TO RECEIVE 10% OF THE SALE PROCEEDS BY WAY OF DISTRIBUTION. IN THE CASE OF THE ASSESSEE THE ARGUMENT THAT THIS INCOME HAD SUFFERED TAX IN THE HANDS OF THE ESTATE WAS REJECTED BY THE AO BECAUSE DETAILS WERE NOT AVAILABLE. HOWEVER LD. CIT(A) HAS ACCEPTED THIS PO SITION WHO AFTER DETAILED DISCUSSION HELD THAT SAME ITEM OF INCOME C ANNOT BE TAXED TWICE. WHILE DEALING WITH THIS ARGUMENT AT PAGE 10 CLAUSE [VII] OF THE ASSESSMENT ORDER IN THE CASE OF M/S SEVAKUNJ INVESTMENTS & CO. PVT. IT HAS BEEN OBSERVED AS UNDER: (VII) THE SUBMISSION OF THE ASSESSEE WITHOUT PREJ UDICE TO HIS STAND THAT NO TAX LIABILITY ARISES IN HIS HAND THAT IN ANY CA SE SUM OF RS.13.47 CRORES BEING THE CONSIDERATION ON WHICH ESTATE HAS ALREADY PAID APPROPRIATE CAPITAL GAINS TAX IN THE RELEVANT YEARS NOT BEING T HE CURRENT YEAR HAS BEEN CONSIDERED. IT HAS BEEN BROUGHT OUT BY THE ASSESSEE THAT SIMILAR REQUEST WAS MADE IN THE ASSESSMENT OF MR. NUSLI. WADIA BUT THE SAME WAS NOT CONSIDERED BY THE ASSESSING OFFICER FOR WANT OF DET AILS. NOW THE ASSESSEE HAS PRODUCED THE NECESSARY DETAILS IN THIS REGARD. ACCORDINGLY SINCE THERE ARE FOUR COMPANIES AS BENEFICIARIES EACH HAVING A D ISTINCT AND IDENTIFIED SHARE 10% OF RS.13.47 CRS WHICH WORKS OUT TO RS.1. 35 CRS IS EXCLUDED FROM THE TAXABLE INCOME. AFTER THIS OBSERVATION THE INCOME WAS FINALLY COMP UTED AS UNDER: TOTAL RECEIPTS ON ACCOUNT OF SALE OF PROPERTIES RS .11 93 88 000 LESS: COST ATTRIBUTABLE TO ASSESSEES SHARE AS DISCUSSED RS. 19 000 LESS: PORTION OF CAPITAL GAINS WHICH HAD ALREADY R S. 1 37 00 000 BEEN SUBJECT TO CAPITAL GAINS TA X IN THE HANDS OF THE ESTATE --------------------- SHORT TERM CAPITAL GAINS RS.10 56 78 000 =========== THUS FROM THE ABOVE IT IS CLEAR THAT SALE RECEIPT AGAINST WHICH CONVEYANCE DEED WAS ALREADY EXECUTED AND WHICH WERE ASSESSED I N THE HANDS OF ESTATE OF EFD WERE NOT SUBJECTED TO TAX AGAIN. IT HAS BEEN FINALLY HELD VIDE PARA 52 OF THE ORDER THAT: .. THUS IT IS CLEAR THAT THE ABOVE PROVISION BA SICALLY RELATES TO A SITUATION WHERE SOME TRANSFERS SHALL NOT BE CONSIDE RED AS TRANSFER. AS OBSERVED BY US EARLIER THE TRANSFER IS SINE QUA NON FOR ATTRACTING THE PROVISIONS RELATING TO CAPITAL GAINS. SINCE IN ABOV E DETAILED DISCUSSION WE HAVE ALREADY HELD THAT MERE RECEIPT OF SALE PROC EEDS BY THE ASSESSEE FROM THE ESTATE OF EFD WOULD NOT AMOUNT TO ANY EXTINGUISHMENT OF HIS RIGHTS AND ACCORDINGLY THE RECEIPT OF THE SUM CANNOT BE TAXED UNDER THE HEAD CAPITAL GAINS. THE REFORE THE ISSUE REGARDING APPLICABILITY OF SEC.47[III] IS ONLY OF A N ACADEMIC IMPORTANCE AND ACCORDINGLY WE DECLINE TO GO IN FURTHER DISCU SSION AND INTERPRETATION OF THIS PROVISION. IN VIEW OF THE AB OVE DETAILED ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 13 13 DISCUSSION WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE CONF IRM THE ORDER OF THE LD. CIT(A) AND HOLD THAT RECEIPT OF RS.71.63 CRORES IS NOT TAXABLE AS BUSINESS PROFITS OR SHORT TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 16. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE PARTIES WE FOLLOWING THE ORDER OF THE TRIBUNAL HOLD THAT THE LEARNED COMMISSIONER OF INCO ME TAX (A) WAS FULLY JUSTIFIED IN HOLDING THAT THE RECEI PTS FROM THE ESTATE OF E.F.DINSHAW IN THE HANDS OF THE ASSESSEE ARE CLEARLY EXEMPT UNDER SECTION 47(III) OF THE ACT AN D THEREFORE THE AMOUNT RECEIVED BY THE ASSESSEE ON DISTRIBUTION OF A CAPITAL RECEIPT IS NOT LIABLE TO INCOME TAX AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FIND INGS OF THE LEARNED COMMISSIONER OF INCOME TAX (A) IN DELET ING THE ADDITION MADE BY THE AO. THE GROUNDS TAKEN BY TH E REVENUE ARE THEREFORE REJECTED. ITA NO.2203/MUM/2009 (AY:2005-06) (BY ASSESSEE) 17. THE EFFECTIVE GROUNDS OF APPEAL NO.1 TO 6 TAKEN BY THE ASSESSEE READ AS UNDER : 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT CONSIDERING THE ALTERNATIVE PLEA OF THE APPELLANT T HAT AS THE AMOUNT RECEIVED BY THE APPELLANT COULD NOT HAVE ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 14 14 BEEN DISTRIBUTED BY THE ESTATE OF MR.E.F.DINSHAW T HE QUESTION OF ANY AMOUNT BEING TAXED IN THE HANDS OF THE APPELLANT DOES NOT ARISE SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING THAT THE AMOUNTS DISTRIB UTED WERE OUT OF ADVANCES AND NOT PROCEEDS OF SALE AN D/OR DISPOSAL OF THE CORPUS OF THE ESTATE OF MR.E.F.DI NSHAW IN INDIA TO THE EXTENT TO WHICH THE SAME CONSISTS O F IMMOVABLE PROPERTIES AND ACCORDINGLY TO THAT EXTEN T THE SAME OUGHT TO BE EXCLUDED IN COMPUTING IF AT A LL THE QUANTUM RECEIVED BY THE APPELLANT IN TERMS OF T HE INDENTURE SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING ON THE LEARNED ASSISTANT COMMISSIONER ERRONEOUSLY HOLDING THAT THE IMMOVABLE PROPERTIES TRANSFERRED ARE TO BE TREATED AS SHORT TERM CAPITAL ASSETS GIVING RISE TO SHORT TERM CAPITAL GA INS SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT GIVING A SPECIFIC FINDING AS TO THE APPELLANTS CON TENTION THAT THE ASSESSING OFFICER ERRED IN NOT CORRECTLY COMPUTING THE COST OF ACQUISITION IN THE HANDS OF T HE APPELLANT SINCE IN HIS OPINION THIS GROUND WAS CONSEQUENTIAL/GENERAL IN NATURE. 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT ADJUDICATING ON THE APPELLANTS CONTENTION THAT THE ASSESSING OFFICER ERRED IN INITIATING PENALTY PROCE EDINGS UNDER SECTION 271(1)( C ) OF THE ACT. 6. EACH OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 18. AT THE TIME OF HEARING BOTH PARTIES HAVE AG REED THAT THE FACTS OF THE ABOVE ISSUES ARE SIMILAR TO THE FACTS ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 15 15 OF THE CASE FOR THE ASSESSMENT YEAR 2004-05 THEREF ORE THE PLEA TAKEN BY THEM IN THE APPEAL FOR THE SAID ASSES SMENT YEAR MAY BE CONSIDERED WHILE DECIDING THE ABOVE GRO UNDS OF APPEAL. 19. THAT BEING SO AND IN THE ABSENCE OF ANY DISTING UISHING FEATURES BROUGHT ON RECORD BY THE PARTIES WE FOR THE REASONS AS MENTIONED IN PARAGRAPH 9 OF THIS ORDER H OLD THAT THE ISSUES RAISED ARE ONLY OF ACADEMIC NATURE AND H ENCE WE DECLINE TO ADJUDICATE THE SAME. THE GROUND NO.1 TO 4 TAKEN BY THE ASSESSEE ARE THEREFORE REJECTED. 20. WITH REGARD TO GROUND NO.5 AND 6 AT THE TIME O F HEARING THE LEARNED SENIOR COUNSEL FOR THE ASSESSE E DID NOT ARGUE THE ABOVE GROUNDS AND KEEPING IN VIEW TH AT THE ABOVE GROUND NO.5 RAISED BY THE ASSESSEE IS PREMA TURED THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE RE JECTED BEING NOT PRESSED. ITA NO.2520/MUM/2009 (AY:2005-06) (BY REVENUE) 21. THE GROUNDS OF APPEAL NO.1 TO 3 TAKEN BY THE RE VENUE READ AS UNDER: ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 16 16 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.4 50 00 000/- WHICH THE ASSESSEE HAD RECEIVED FROM THE ESTATE OF E.F.DINSH AW AND ASSESSEE HAD NOT OFFERED THIS AMOUNT TO TAX. 2. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT TH E ABOVE AMOUNT IS REVENUE RECEIPT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 22. THE LEARNED D.R. WHILE RELYING ON THE ORDER OF THE AO FURTHER SUBMITS THAT THE FACTS OF THE ABOVE ISSUE A RE SIMILAR TO THE FACTS OF THE CASE IN THE CASE OF SHRI NUSLI N.WADIA FOR THE ASSESSMENT YEAR 2004-05 THEREFORE THE PLEA TAKEN BY THE LEARNED STANDING COUNSEL FOR THE DEPARTMEN T IN THAT APPEALS MAY BE CONSIDERED WHILE DECIDING THE ABOVE GROUNDS OF APPEAL. 23. ON THE OTHER HAND THE LEARNED SENIOR COUNSEL F OR THE ASSESSEE WHILE RELYING ON THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) FURTHER SUBMITS THAT THE FACTS AND ISSUES INVOLVED IN THIS APPEAL ARE IDENTI CAL TO THE FACTS AND ISSUES RELATING TO THE APPEAL IN THE CASE OF SHRI NUSLI N.WADIA FOR THE ASSESSMENT YEAR 2004-05 THERE FORE THE PLEA TAKEN BY HIM IN THAT APPEALS MAY BE CONSI DERED ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 17 17 WHILE DECIDING THE GROUNDS RAISED BY THE REVENUE I N THIS APPEAL. 24. AFTER HEARING THE RIVAL PARTIES AND PERUSING T HE MATERIAL AVAILABLE ON RECORD AND KEEPING IN VIEW T HAT THERE IS NO DISPUTE THAT THE FACTS AND ISSUES INVOLVED A RE SIMILAR TO THE FACTS AND ISSUES RAISED IN THE APPEAL IN DY. CIT V/S SHRI NUSLI N. WADIA(SUPRA) WE FOLLOWING OUR FINDIN G RECORDED IN PARAGRAPHS 15-16 OF THIS ORDER HOLD TH AT THE LEANED COMMISSIONER OF INCOME TAX (A) WAS FULLY JU STIFIED IN HOLDING THAT THE RECEIPTS FROM THE ESTATE OF E. F.DINSHAW IN THE HANDS OF THE ASSESSEE ARE CLEARLY EXEMPT UND ER SECTION 47(III) OF THE ACT AND THEREFORE THE AMO UNT RECEIVED BY THE ASSESSEE ON DISTRIBUTION OF A CAPI TAL RECEIPT IS NOT LIABLE TO INCOME TAX AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LEARNED COMM ISSIONER OF INCOME TAX (A) IN DELETING THE ADDITION MADE BY THE AO. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 18 18 25. IN THE RESULT THE ASSESSEES APPEALS AND REVEN UES APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY 2011. SD/- SD/- (T.R.SOOD) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 22 ND JULY 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.1508/MUM/2009 ITA NO.1646/MUM/2009 ITA NO.2203/MUM/2009 ITA NO.2520/MUM/2009 AYS:2004-05 & 2005-06 19 19 DATE INITIALS 1. DRAFT DICTATED ON 18.07.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18.07.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER