The ACIT- 1(2), Bhopal v. M/s Bharat Pictures Pvt. Ltd., Bhopal

ITA 331/IND/2013 | 2004-2005
Pronouncement Date: 30-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 33122714 RSA 2013
Assessee PAN AABCB5796Q
Bench Indore
Appeal Number ITA 331/IND/2013
Duration Of Justice 5 month(s) 9 day(s)
Appellant The ACIT- 1(2), Bhopal
Respondent M/s Bharat Pictures Pvt. Ltd., Bhopal
Appeal Type Income Tax Appeal
Pronouncement Date 30-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 30-10-2013
Assessment Year 2004-2005
Appeal Filed On 21-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARM A A.M. PAN NO. : AABCB5796 Q I.T.A.NO. 331 /IND/201 3 A.Y. : 2004-05 ACIT 1(2) BHOPAL VS. M/S. BHARAT PICTURES PRIVATE LIMITED BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI R. A. VERMA SR. DR RESPONDENT BY : SHRI R. N. GUPTA C. A. DATE OF HEARING : 23 . 10 .201 3 DATE OF PRONOUNCEMENT : 30 . 10 .201 3 O R D E R PER R. C. SHARMA A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE CIT(A) DATED 29/12/2013 FOR THE ASSE SSMENT YEAR 2004-05 WHEREIN FOLLOWING GROUNDS HAVE BEEN T AKEN BY THE REVENUE:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN :- BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 2 PAGE 2 OF 11 1. DELETING THE DISALLOWANCE OF RS. 9 92 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE CLAIMED U/S 48(1) FOR EVICTION OF PREMISES. 2. DELETING THE ADDITION OF RS. 10 08 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHORT TERM CAPITAL GAIN ON DEPRECIABLE ASSET. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE ASSESSEE IS A LIMITED COMPANY DERIVING INCOME FROM THE ACTIVITIES SUCH AS RUNNING CINEMA THEATER ON HIRE. THE ASSESSEE HAS OFFERED CAPITAL GAINS IN THE RETUR N OF INCOME. WHILE COMPUTING CAPITAL GAINS THE ASSESSEE HAD CLA IMED PAYMENT OF RS. 9 92 000/- MADE TO THE TENANT FOR V ACATING THE PREMISES AS THE ASSESSEE HAS TO SELL THE SAID PREMI SES. THE ASSESSEE WAS SPECIFICALLY ASKED TO PRODUCE AGREEMEN T IF ANY OF M/S. BHARAT PICTURES PVT.LTD. MADE WITH THE TENA NTS IN REGARD TO PAYMENT AT THE TIME OF VACATING THE SHOPS AS COMPENSATION. THE ASSESSEE PRODUCED A SALE AGREEMEN T BETWEEN BHARAT PICTURES AND THE PURCHASER WHEREIN T HERE IS BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 3 PAGE 3 OF 11 ONLY MENTION OF PAYMENT TO THEIR TENANTS. THE ASSE SSING OFFICER OBSERVED THAT MERE MENTION DOES NOT MEAN TH AT THE AMOUNT WAS PAID IN LIEU OF VACATING THE SHOPS. FURT HER HE OBSERVED THAT SHRI RAMESH KUMAR AGARWAL IS THE DIRE CTOR OF THE COMPANY M/S. BHARAT PICTURES PVT.LTD. AND BROT HER OF SHRI REGHUNANDAN AGARWAL MANAGING DIRECTOR OF THE COMPANY. SHRI ASHWINI KUMAR AGARWAL IS THE SON OF S HRI RAMESH KUMAR AGARWAL THUS IT IS VERY MUCH CLEAR T HAT THE CLAIM OF COMPENSATION IS TRANSACTION WITHIN THE FAM ILY. ACCORDINGLY THE SAME WAS ADDED BACK BY THE ASSESSI NG OFFICER TO THE TOTAL INCOME OF THE ASSESSEE. ASSESS ING OFFICER ALSO TREATED THE CAPITAL GAINS AS SHORT TERM U/S 50 ON THE PLEA OF SHOPS SO SOLD WERE DEPRECIABLE ASSETS. 3. BY THE IMPUGNED ORDER THE LD. CIT(A) ALLOWED ASSESSEES CLAIM OF DEDUCTION OF RS. 9 92 000/- AFT ER HAVING THE FOLLOWING OBSERVATIONS :- 7. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE INSTANT CASE BASICALLY INVOLVES THREE ISSUES. FIRSTLY THE SALE OF SHOPS ARE ASSESSABLE AS LONG TERM CAPITAL GAIN O R BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 4 PAGE 4 OF 11 SHORT TERM CAPITAL GAIN U/S 50 AND ANSWER TO THE QUESTION LIES SOLELY ON THE FACT OF CLAIM OF DEPREC IATION ON THE SAID SHOPS. SECONDLY ALLOWANCE OF DEDUCTION ON ACCOUNT OF COMPENSATION PAID TO THE TENANTS FOR VACATING THE SHOPS. AS REGARDS FIRST ISSUE I FIND THAT THE SIMILAR ISSUE CAME UP IN A. Y 2000-01 WHEN THE APPELLANT HAD SOLD SOME OF THE SHOPS OUT OF THE TOT AL SHOPS OWNED BY THE APPELLANT AND PART OF WHICH HAD BEEN SOLD IN THE YEAR UNDER CONSIDERATION. IT IS AL SO SEEN THAT THE MATTER HAD TRAVELLED BEFORE THE HON'B LE ITAT INDORE BENCH IN ITA NO. 136/IND/06. I FIND TH AT MY LD. PREDECESSOR HAD AFTER EXAMINATION OF THE DOCUMENTS PLACED BEFORE HIM CAME TO THE CONCLUSION THAT THE REASONS RECORDED BY THE A.O FOR REOPENING OF THE ASSESSMENT WERE FACTUALLY INCORRECT AND ACCORDINGLY QUASHED THE ASSESSMENT. I HAVE CAREFULLY PERUSED THE EVIDENCES PLACED BEFORE ME I FIND NO REASON TO TAKE A CONTRARY VIEW THAN THAT TAKEN BY MY LD. PREDECESSOR IN THE APPELLANT'S OWN CASE INASMUCH AS THE APPELLANT DID NOT CLAIM ANY BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 5 PAGE 5 OF 11 EVICTION ON THE SHOPS SOLD AND THUS THE CAPITAL GA IN HAS BEEN CORRECTLY WORKED OUT AS LONG TERM CAPITAL GAIN. 8. SO FAR AS SECOND ISSUE OF ALLOWABILITY OF DEDUCT ION ON ACCOUNT OF COMPENSATION PAID TO THE TENANTS FOR VACATING THE SHOPS IS CONCERNED FROM THE PERUSAL O F TRIPARTITE AGREEMENT BETWEEN THE APPELLANT BUYER NAMELY MR. ANIL CHELANI AND TENANTS I FIND THAT THERE IS MENTION OF PAYMENT OF COMPENSATION TO THE TENANTS FOR VACATING THE SHOPS. IT IS ALSO SEEN THA T THE BUYER HAD MADE THE PAYMENT OF COMPENSATION TO THE TENANTS DIRECTLY THEREFORE THE GENUINENESS OF THE PAYMENT IS NOT DISPUTED. FROM THE PERUSAL OF INCOME TAX RETURN AND COMPUTATION OF TOTAL INCOME OF THE TENANTS PLACED BEFORE ME IT IS SEEN THAT THE TENAN TS DID DISCLOSE THE COMPENSATION RECEIVED AND COMPUTED CAPITAL GAIN ON TRANSFER OF TENANCY RIGHTS . IT IS NOT THE CASE OF THE A.O THAT SUCH DEDUCTION IS NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. THE A.O BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 6 PAGE 6 OF 11 HAS MADE THE DISALLOWANCE FOR THE REASON THAT THE TENANTS AND APPELLANT COMPANY'S DIRECTORS ARE FROM SAME FAMILY. IT IS SEEN THAT THE TENANTS WERE IN OCCUPATION OF THE SHOPS FOR MORE THAN 25 YEARS UNDER THESE CIRCUMSTANCES THE POSSIBILITY OF THE PAYMENT OF COMPENSATION CANNOT BE RULED OUT. IT IS NOT THE CASE OF THE A.O THAT NO SUCH COMPENSATION WAS PAID BY THE APPELLANT TO OTHER TENANTS OCCUPYIN G THE SHOPS FOR SIMILAR PERIOD. I AM OF THE CONSIDERE D OPINION THAT THE DISALLOWANCE HAS BEEN MADE BY THE A.O MERELY ON PRESUMPTION AND SURMISES. THUS THE DISALLOWANCE OF RS. 9 92 000/- MADE BY THE A.O CANNOT BE SUSTAINED. HENCE THE DISALLOWANCE IS DELETED. 4. THE LD. CIT(A) DELETED THE ADDITION OF RS. 10 08 00 0/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHORT T ERM CAPITAL GAIN ON DEPRECIABLE ASSETS AFTER HAVING THE FOLLOW ING OBSERVATIONS :- THE APPELLANT HAS SUBMITTED THAT THE AO IGNORED BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 7 PAGE 7 OF 11 ALL OTHER DEDUCTIONS INCLUDING COST OF ACQUISITION AND TAXED THE ENTIRE SALE CONSIDERATION RS.20 LACS AS A SHORT TERM CAPITAL GAIN BY INVOKING THE PROVISIONS OF SECTION 50; THAT THE SHOPS WERE IN THE POSSESSION O F OLD TENANT AND THE NEW BUYER AGREED TO BUY THE SAID SHOPS IN A VACANT POSSESSION THEREFORE THE APPELL ANT PAID RS.9 92 000/- TO THE OLD TENANT FOR VACATING T HE SAID SHOPS AS PER AGREEMENT DATED 13.02.2004; THAT THE COPY OF THE AGREEMENT AND THE AFORESAID FACTS WERE EXPLAINED TO THE AO VIDE LETTER DATED 17.10..2011; THAT THE SAID DEDUCTION IS PERMISSIBLE U/S 48(1) OF THE I. T .ACT. IN VIEW OF THE DECISION S IN ITO VS. G. THANGAVEL GOUNDER REPORTED IN 12 TTJ 273 (MAD) (TRIB) CIT VS. VENKATARAMAN REPORTED IN 137 ITR 846 (MAD); THAT WITH REGARD THE COST OF ACQUISI TION THE APPELLANT'S CLAIM IS FULLY SUPPORTED BY THE VALUATION REPORT; THAT IN A Y 2000-01 ALSO THE SAM E VALUATION WAS SUBMITTED AND THE LONG TERM CAPITAL GAIN WAS ALSO COMPUTED ON THE SAME BASIS; THAT THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER ARE BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 8 PAGE 8 OF 11 WHOLLY ERRONEOUS AND MISCONCEIVED; THAT THE RENTAL INCOME FROM THE SHOP HAS BEEN SEPARATELY SHOWN AND MERELY BECAUSE IT IS NOT COMPUTED AS THE INCOME FRO M HOUSE PROPERTY FOR TAX PURPOSES THE SAID INCOME DO NOT CEASE TO BECOME THE HOUSE PROPERTY INCOME; THAT THE APPELLANT SUBMITS THAT HAD HE MADE PROPER COMPUTATION HE WOULD HAVE GOT ADDITIONAL DEDUCTION OF 30% U/S 24; THAT THE SCHEDULE WHICH THE A.O IS REFERRING IS PREPARED FOR THE PURPOSE OF FINALIZATI ON OF ACCOUNTS I.E. PREPARATION OF PROFIT & LOSS ACCOUNT UNDER THE PROVISIONS OF COMPANIES ACT AND FOR THE PURPOSE OF ACCOUNTING THE APPELLANT IS REQUIRED TO SHOW THE PROFIT ON SALE OF SHOP AS PER THE REQUIREMENTS OF SCHEDULE 6 OF THE COMPANIES ACT; TH AT THE DEPRECIATION AS CLAIMED IN THE PROFIT & LOSS ACCOUNT WAS ADDED BACK AND THE APPELLANT CLAIMED THE DEPRECIATION IN THE COMPUTATION AS PER THE PROVISIONS OF THE LT. ACT; THAT THE SAID CLAIM OF T HE DEPRECIATION IN THIS YEAR WAS RS.1 46 318/-; THAT T HE DEPRECIATION CHARTS FROM A.Y. 2001-02 TO 2004-05 BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 9 PAGE 9 OF 11 WHICH WOULD SHOW THAT ON THE SHOPS THERE WAS NO CLAIM OF DEPRECATION. 5. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT DURING THE YEAR UN DER CONSIDERATION THE ASSESSEE HAD SOLD SOME OF ITS SH OPS FOR RS. 20 LAKHS ON WHICH THE ASSESSEE HAS CLAIMED NET LONG TERM CAPITAL LOSS OF RS. 29 44 699/- WHICH WORKED OUT A S UNDER :- SALE CONSIDERATION 20 00 000 LESS : PAID TO TENANT FOR EVICTION OF PREMISES CLAIMED DEDUCTION U/S 48(1) BEING EXPENDITURE 9 92 000 BALANCE 10 08 000 LESS: INDEXED COST OF ACQUISITION 39 52 699 NET LONG TERM CAPITAL LOSS CLAIMED IN RETURN (-)29 44 699 6. WHILE FRAMING ASSESSMENT THE ASSESSING OFFICER DECLINED ASSESSEES CLAIM OF LONG TERM CAPITAL GAIN ON THE PLEA THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE S HOPS THEREFORE THE PROVISIONS OF SECTION 50 IS ATTRACTE D UNDER WHICH GAIN IS LIABLE TO BE TAXED AS A SHORT TERM CA PITAL GAIN. THE ASSESSING OFFICER ALSO DECLINED TO ALLOW EXPEND ITURE CLAIMED U/S 48(1) FOR EVICTION OF PREMISES. THUS A S AGAINST BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 10 PAGE 10 OF 11 LONG TERM CAPITAL LOSS OF RS. 29 44 699/- THE ASSE SSING OFFICER ASSESSED THE SAME AT SHORT TERM CAPITAL GAINS OF RS . 20 LAKHS. FROM THE RECORD WE FOUND THAT THE SHOPS SOLD DURIN G THE YEAR WERE ALREADY IN POSSESSION OF TENANTS. THEREFORE T HE ASSESSEE HAS ACTUALLY PAID RS. 9 92 000/- FOR VACATING THE S HOPS TO THE TENANTS. THE LD. CIT(A) HAS RECORDED FACTUAL FINDIN G REGARDING ACTUAL PAYMENT OF EVICTION TO THE TENANTS AS PER SA LE DEED SO EXECUTED. ACCORDINGLY WE CONFIRM THE ACTION OF THE CIT(A) FOR GIVING DEDUCTION OF RS. 9 92 000/- PAID TO THE TENA NTS FOR EVICTING THE SHOPS WHILE COMPUTING GAINS EARNED BY ASSESSEE ON SALE OF SHOPS. SO FAR AS CIT(A)S ACTION OF TREA TING THE GAIN AS LONG TERM CAPITAL GAIN IS CONCERNED WE FOUND THA T AS PER DEPRECIATION CHART PLACED ON RECORD FOR THE LAST TH REE YEARS NO DEPRECIATION WAS CLAIMED BY ASSESSEE ON THESE SHOPS . THUS THE OBSERVATION OF THE ASSESSING OFFICER TO THE EFF ECT THAT DEPRECIATION WERE CLAIMED ON THESE SHOPS IN EARLIER YEARS ARE NOT SUPPORTED BY MATERIAL ON RECORD. HOWEVER THE A SSESSING OFFICER HAS NOT CONSIDERED INDEXED COST OF ACQUISIT ION CLAIMED BY ASSESSEE AT RS. 39 52 699/- WHILE COMPUTING CAPI TAL GAINS NOR CIT(A) HAS DELIBERATED ON THIS ISSUE. IN THE IN TEREST OF BHARAT PICTURES PVT.LTD. BHOPAL I.T.A.NO. 331/IND/2013 A.Y.2004-05 11 PAGE 11 OF 11 JUSTICE WE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRESH. THE ASSESSING OFFICER IS DIRECTED NOT TO APPLY PROVISIONS OF SECTION 50 AND TO ALLOW DEDUCTION OF RS. 9 92 000/- PAID TO THE TENANTS WHILE RECOMPUTIN G CAPITAL GAINS. WE DIRECT ACCORDINGLY. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED IN PART FOR STATISTICAL PURPOSES THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH OCTOBER 2013. CPU* 242830