ENGINEERING MAZDOOR SABHA, MUMBAI v. ACIT CEN CIR 43, MUMBAI

ITA 356/MUM/2014 | 2004-2005
Pronouncement Date: 28-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 35619914 RSA 2014
Assessee PAN AAABE0116B
Bench Mumbai
Appeal Number ITA 356/MUM/2014
Duration Of Justice 2 year(s) 8 month(s) 13 day(s)
Appellant ENGINEERING MAZDOOR SABHA, MUMBAI
Respondent ACIT CEN CIR 43, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 28-09-2016
Assessment Year 2004-2005
Appeal Filed On 15-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH MUMBAI BEFORE SHRI RAJENDRA ACCOUNTANT MEMBER AND SHRI C.N. PRASAD JUDICIAL MEMBER / I .TA NO.356/MUM/2014 ( / ASSESSMENT YEAR: 2004-05 M/S. ENGINEERING MAZDOOR SABHA KENNEDY HOUSE 4 TH FLOOR GOREGAONKAR ROAD MUMBAI-400 007 / VS. THE ACIT CENTRAL CIRCLE - 43 OR CIT CENTRAL 4 AAYAKAR BHAVAN MUMBAI-400 020 / I .TA NO.1335/MUM/2014 ( / ASSESSMENT YEAR: 2004-05 THE ACIT CENTRAL CIRCLE - 43 OR CIT CENTRAL 4 AAYAKAR BHAVAN MUMBAI-400 020 / VS. M/S. ENGINEERING MAZDOOR SABHA KENNEDY HOUSE 4 TH FLOOR GOREGAONKAR ROAD MUMBAI-400 007 ./ ./ PAN/GIR NO. AAABE 0116B ( / APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY: SHRI N.R. AGRAWAL / REVENUE BY: SHRI MANJUNATHA SWAMY SHRI N. SATHYA MOORTHY / DATE OF HEARING :18.07.2016 ! / DATE OF PRONOUNCEMENT : 28 .09.2016 / O R D E R PER C.N. PRASAD JM: ITA NO. 1335 & 356/M/2014 2 THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND TH E REVENUE AGAINST THE ORDERS OF THE LD. CIT(A)-37 MUMBAI DAT ED 20.12.2013 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ACIT BY TREATING CONTRIBUTION/DONATIONS RECEIVED BY THE ASSESSEE OF RS. 3 65 589/- FOR PROFESSIONAL/BUSINESS INCOME. 2. THE LD. CIT(A) ERRED IN NOT FOLLOWING MUTUALITY CONCEPT FOR CONTRIBUTION/DONATION RECEIVED BY THE ASSESSEE OF RS. 3 65 589/- 3. THE LD. CIT(A) ERRED IN DISALLOWING COMPENSATION AID/EXPENSES PAID BY THE APPELLANT OF RS. 89 80 000/- FOR ASSESSMENT YEAR 2005-06. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE INTEREST U/S . 234B(3) OF THE ACT. 3. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT ALL THE THREE GROUNDS ARE DECIDED BY THE TRIBUNAL IN IT S OWN CASE FOR THE ASSESSMENT YEARS 2003-04 TO 2010-11 AND THE APPEAL FOR THIS ASSESSMENT YEAR REMAINS TO BE ADJUDICATED THOUGH IT PERTAINS TO THE BLOCK ASSESSMENT ORDER PASSED U/S. 143(3) R.W. SEC. 153A OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN SO FAR AS GROUND NOS. 1 & 2 IS CONCERNED THE TRIBUNAL DECIDED THE ISSUE IN RESPECT OF CONTRIBUTIONS/DONATIONS RECEIVED BY THE ASSESSEE AT PARA-7 OF ITS ORDER IN ITA NO. 1373 TO 1379/M/2013 DATED 25.2.201 5 AND IT WAS HELD THAT CONTRIBUTIONS RECEIVED BY THE ASSESSEE AR E IN PURSUANT TO ITS ACTIVITY AND THEY ARE IN ACCORDANCE WITH THE OBJECT S OF THE ASSESSEE UNION THEREFORE CANNOT BE TREATED AS INCOME FROM BU SINESS OR ITA NO. 1335 & 356/M/2014 3 PROFESSION AND THEY ARE EXEMPT U/S. 10(24) OF THE I .T. ACT AS WELL AS ON THE PRINCIPLE OF THE MUTUALITY. 4. IN SO FAR AS GROUND NO. 3 REGARDING COMPENSATION AID/EXPENSES ARE CONCERNED THE LD. COUNSEL FOR THE ASSESSEE SUB MITS THAT THE TRIBUNAL IN PARA-22 HELD THAT IN VIEW OF THE FINDIN GS GIVEN IN GROUND NO. 1 & 2 THIS GROUND OF APPEAL OF THE ASSESSEE BE COMES INFRUCTUOUS. 5. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY S UPPORTS THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE ORDERS OF THE CO-ORDINATE BENCH AND FIN D THAT ALL THE GROUNDS ARE DECIDED BY THE TRIBUNAL. IN SO FAR AS GROUND NO. 1 & 2 ARE CONCERNED I.E. IN RESPECT OF TREATING CONTRIBUT ION/DONATIONS RECEIVED BY THE ASSESSEE AS PROFESSIONAL/BUSINESS I NCOME BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT THE CO-ORDINATE BENCH HELD THAT SUCH DONATIONS/CONTRIBUTIONS RECEIV ED BY THE ASSESSEE ARE IN PURSUANT TO ITS ACTIVITIES WHICH AR E IN ACCORDANCE WITH THE OBJECTS OF THE ASSESSEE UNION THEREFORE CANNOT BE TREATED AS INCOME FROM BUSINESS OR PROFESSION AND ACCORDINGLY IT WAS HELD THAT THE SAME IS EXEMPT U/S. 10(24) OF THE I.T. ACT AS W ELL AS ON THE PRINCIPLE OF MUTUALITY OBSERVING AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT DURING THE SEARCH & SEIZURE OPERATION THE DEPARTMENT HAS NOT RECORDED EVEN A STATEMENT OR SEIZED ANY DOCUMENT FROM THE PLACE OF THE ASSESSEE. THUS IT IS CLEAR THAT NEITHER ANY INCRIMINATING REC ORD NOR ANY INFORMATION WAS GATHERED BY THE DEPARTMENT AS A RES ULT OF SEARCH & SEIZURE ACTION IN THE CASE OF THE ASSESSEE . ONCE THERE IS ITA NO. 1335 & 356/M/2014 4 NO DOCUMENT EITHER SEIZED OR FOUND AND EVEN NO STA TEMENT WAS RECORDED DURING THE SEARCH PROCEEDINGS THEN THE AD DITION MADED BY THE ASSESSING OFFICER IS BASED ON EXIST ING RECORD AND MATERIAL. THE DEPARTMENT HAS NOT DISPUTED THAT THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S. 10(24) OF THE ACT AS A REGISTERED TRADE UNION. THE DISPUTE IS ONLY WITH RESPECT TO T HE CONTRIBUTION FROM THE EMPLOYERS/CORPORATE ENTITIES ON ACCOUNT OF SETTLEMENT OF THE DISPUTES BETWEEN THE WORKERS AND EMPLOYERS T HROUGH ASSESSES'S UNION. IT IS ONE OF THE OBJECTS OF THE A SSESSEE AS PER THE CONSTITUTION OF THE ASSESSEE UNION TO SEEK REDRESSA L OF GRIEVANCES OF THE MEMBERS AND TO SECURE THE SETTLEMENT OF DISP UTES BETWEEN THE EMPLOYERS AND THE EMPLOYEES BY NEGOTIATION AND BY MUTUAL CONSULTATION. THEREFORE THE NEGOTIATION ON BEHALF OF THE WORKERS AND TO ARRIVE AT A SETTLEMENT IN THE INTEREST AND W ELFAREOF THE WORKERS AS WELL AS FOR THE EMPLOYERS TO AVOID ANY S TAND OFF BETWEEN THE EMPLOYERS AND WORKERS THE ASSESSEE PLA Y A VITAL ROLE. THE CONTRIBUTION RECEIVED BY THE ASSESSEE I S ONLY IN RESPECT OF AND ON ACCOUNT OF ITS ACTIVITY OF ACHIEVING THE OBJECT AS PER THE CONSTITUTION. IT IS NOT A CASE OF RECEIVING ANY AMO UNT OR INCOME BY DOING AN ACTIVITY WHICH IS NOT FOR ACHIEVING THE OBJECTS OF THE ASSESSEE. THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE EMPLOYERS HAS A DIRECT NEXUS WITH THE NEGOTIATION A ND SETTLEMENT ARRIVED BETWEEN THE PARTIES. THE ROLE OF THE ASSESS EE OF NEGOTIATING ON BEHALF OF THE WORKERS FOR SETTLEMENT OF DISPUTES BETWEEN THE WORKER AND THE EMPLOYERS IS LIMITED ONL Y IN RESPECT OF THE DISPUTES BETWEEN THE MEMBER WORKERS AND EMPL OYERS. THEREFORE THE ACTIVITY OF THE ASSESSEE CANNOT BE G ENERALIZED IN THE NATURE OF PROFESSIONAL SERVICE OR OCCUPATIONAL SERVICE OPEN TO GENERAL PUBLIC BUT IT IS OTHERWISE PERMITTED UNDE R THE BY LAWS AND CONSTITUTION OF THE ASSESSEE AS WELL AS TRADE U NION ACT. THOUGH THE CONTRIBUTION FROM EMPLOYER IS RECEIVED A S PER THE TRIPARTITE AGREEMENT HOWEVER IT IS ONLY INCIDENTA L TO THE ACTIVITY OF SERVICES OF THE ASSESSEE IN RESOLVING THE DISPUT ES BETWEEN THE MEMBER WORKERS AND THE EMPLOYERS WITH THE INTENTION OF ADVANCEMENT OF WELFARE OF MEMBERS. THE NEGOTIATION AND SETTLEMENT OF DISPUTES BETWEEN THE WORKERS AND EMP LOYERS IS A COMPOSITE ACTIVITY AND THE CONTRIBUTION RECEIVED FR OM THE ITA NO. 1335 & 356/M/2014 5 EMPLOYER CANNOT BE TAKEN AS A SEPARATE ACTIVITY OF THE ASSESSEE BUT IT IS A PART AND PARCEL OF ACTIVITY OF ACHIEVIN G THE OBJECT AS PER THE CONSTITUTION/BY LAWS OF THE ASSESSEE. THERE FORE WHEN THE PRE-DOMINANT OBJECT OF THE ACTIVITY OF THE ASSESSEE IS TO ARRIVE AT A SETTLEMENT OF DISPUTES BETWEEN THE WORKERS AND TH E MANAGEMENT IN THE INTEREST AND WELFARE OF THE WORKE RS AND NOT TO EARN ANY INCOME OR PROFIT THEN THE CONTRIBUTION RECEIVED FROM THE EMPLOYERS ON ACCOUNT OF THE SETTLEMENT BETWEEN THE WORKERS AND THE EMPLOYERS CANNOT BE SAID TO BE THE BUSINESS /PROFESSIONAL OR OCCUPATIONAL INCOME OF THE ASSESSEE. THEREFORE THE SAID AMOUNT OF CONTRIBUTION RECEIVED FROM THE EMPLOYERS AT THE MOST WOULD BE THE INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES AND CANNOT BE REGARDED AS BUSINESS INCOME A ND ACCORDINGLY EXEMPT U/S 10(24) OF THE INCOME TAX ACT . APART FROM THE CONTRIBUTION RECEIVED BY THE ASSESSEE FROM WORK ERS THE FUND RECEIVED BY THE ASSESSEE FROM EMPLOYERS IS OTHERWIS E FOR THE PURPOSE OF ACHIEVING THE OBJECTS BEING A WELFARE BO DY OF THE WORKERS AND EXCESS FUND IF ANY AFTER MEETING OUT TH E EXPENSES INCURRED ON ACCOUNT OF ACTIVITY PERFORMED BY THE AS SESSEE ARE REFUNDED TO THE MEMBERS AS BONUS THEN THE SAID CONS IDERATION RECEIVED ON ACCOUNT OF SETTLEMENT CANNOT BE TREATED AS BUSINESS INCOME EARNED BY THE ASSESSEE. AN IDENTICAL ISSUE W AS CONSIDERED BY THE INDORE BENCHES OF THIS TRIBUNAL IN THE CASE OF ASSTT. COMMISSIONER OF INCOME TAX VS. COORDINATION COMMITT EE OF SPM UNIONS HOSHANGABAD (SUPRA) IN PARA 20 AND 21 AS UN DER:- '20. FROM THE RECORD WE FIND THAT 15% OF INCENTIVE BONUS PAYABLE TO WORKERS WAS CONTRIBUTED BY THEM TO THE ASSOCIATION. THIS AMOUNT WAS DEPOSITED WITH THE ASSOCIATION TO MEET ALL SORTS OF EXPENDITURE INCLUD ING LAWYERS' FEE TA/DA TYPING STENOGRAPHIC CHARGES COURT FEE AND ALL OTHER INCIDENTAL EXPENSES. THE BALANCE OUT OF SUCH CONTRIBUTION WAS TO BE REFUNDED TO THE DESERVI NG EMPLOYEES. FROM RECORD WE FIND THAT SUBSTANTIAL AMO UNT RECEIVED FROM THE EMPLOYEES WAS REFUNDED TO THEM IN THE YEARS 1999 AND 2000 AFTER MEETING THE EXPENDITURE. THUS THE AMOUNT RECEIVED FROM THE WORKERS FOR MEETING SU CH ITA NO. 1335 & 356/M/2014 6 EXPENDITURE WAS NOT IN THE NATURE OF INCOME IN THE HANDS OF THE ASSESSEE BEING A COORDINATION COMMITTEE BUT WAS MERELY IN THE NATURE OF DEPOSIT WHICH WAS MEANT FOR MEETING EXPENDITURE FOR DEFENDING/PROSECUTING VARIO US CASES OF EMPLOYEES. FROM RECORD WE FIND THAT THE AS SESSEE WAS NOT MERELY REPRESENTING ITS WORKERS BUT IN FACT A PARTY TO ALL THE LITIGATION EITHER AS A PETITIONER OR RESPONDENT. THE MANAGEMENT OF SPM HON'BLE HIGH COU RT AND SUPREME COURT ACCEPTED THE STATUS OF THE ASSESS EE AS AN ASSOCIATION CONSISTING OF WORKERS AND THEREFORE ALLOWED IT TO CONTEST IN ITS OWN NAME INSTEAD OF PU TTING UP THE NAMES OF INDIVIDUAL WORKERS. THERE WAS A CLEAR CONCEPT OF MUTUALITY. NO-ONE CAN MAKE PROFIT OUT OF HIMSELF . WHEN A MEMBER AGREES TO CONTRIBUTE FUNDS FOR A COMMON PURPOSE THE AMOUNT OF FUNDS NOT SO REQUIRED FOR CO MMON PURPOSE AND REFUNDED TO SUCH INDIVIDUAL CANNOT BE TREATED AS INCOME IN THEIR HANDS LIABLE TO TAX. THUS THE G ENERAL PRINCIPLE APPLICABLE TO THE MUTUAL CONCERN IS THAT THE SURPLUS ACCRUING TO IT CANNOT BE REGARDED AS INCOME PROFITS OR GAINS FOR THE PURPOSE OF INCOME TAX. 21. AS DISCUSSED HEREINABOVE THE AMOUNT RECEIVED B Y THE ASSESSEE WAS NOT IN THE NATURE OF INCOME AND THE AS SESSEE WAS NOT DOING ANY BUSINESS ACTIVITY AND AS SUCH THE APPLICATION OF PROVISIONS OF SECTION 40A(IA) WAS NO T JUSTIFIED. FOR APPLICATION OF SECTION 40A(IA) FIRST LY THERE MUST BE SOME BUSINESS/PROFESSIONAL INCOME AGAINST W HICH AN EXPENDITURE HAS BEEN CLAIMED. IN THE INSTANT CAS E BEFORE US SINCE THERE IS NO BUSINESS OR PROFESSIONAL INCO ME IN THE HANDS OF THE ASSOCIATION THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40A(IA) OF THEAC T' 7. WE FIND THAT IN THE CASE OF THE ASSESSEE THE AMO UNT RECEIVED IS AS PER THE SETTLEMENT AGREEMENT WHICH W AS SIGNED BY ALL THE PARTIES THEREFORE THERE IS NO M ATERIAL OR ANY FACT BROUGHT ON RECORD BY THE ASSESSING OFFICER TO INDICATE THAT THE AMOUNT RECEIVED BY THE ASSESSEE F ROM WORKERS AS WELL AS FROM THE EMPLOYERS ARE NOT VOLUN TARY ITA NO. 1335 & 356/M/2014 7 BUT UNDER COERCION OR FORCE. IF THE ASSESSING OFFI CER DOUBTED THE VOLUNTARY CONTRIBUTION MADE BY THE WORK ERS AND EMPLOYERS THEN HE COULD HAVE CONDUCTED A PROPER ENQUIRY. IN THE ABSENCE OF ANY CONTRARY FACT OR EVI DENCE FOUND DURING THE SEARCH OR GATHERED DURING THE ASSE SSMENT PROCEEDINGS THE ALLEGATION OF THE AUTHORITIES BELO W ARE MERELY BASED ON ASSUMPTIONS AND NOT ON ANY SUBSTANC E OR MATERIAL. ON THE CONTRARY THE ASSESSEE HAS PRODUCED THE CONFIRMATION LETTERS FROM THE EMPLOYERS WHO PAID T HE CONTRIBUTION AS WELL AS FROM THE WORKERS IN WHOSE C ASES THE MATTERS/ DISPUTES WERE SETTLED THROUGH THE ASS ESSEE AND THE CONTRIBUTION WAS MADE AS PER THE SETTLEME NT AGREEMENT BETWEEN THE PARTIES. THEREFORE THE ASSES SEE HAS PRODUCED THE RELEVANT EVIDENCE IN SUPPORT OF IT S CLAIM THAT THIS IS A VOLUNTARY CONTRIBUTION. ONCE THE CIT (A) HAS ACCEPTED THE CONTRIBUTION OF THE WORKERS AS EXEMPT FROM TAX U/S 10(24). SIMILARLY THE CONTRIBUTION MADE ON ACCOUNT OF THE SAME SERVICE/ACTIVITY OF THE ASSESSEE BY TH E COUNTER PARTY BEING EMPLOYER IN PURSUANT TO THE SETTLEMENT/RESOLUTION OF DISPUTES IS ALSO EXEMPT U /S 10(24) OF THE INCOME TAX ACT. AS PER SECTION 27(2) OF THE TRADE UNION ACT 1926 EVEN THE RULE OF TRADE UNIONS DO NOT PROVIDE FOR DISTRIBUTION OF FUNDS OF THE TRADE UNIO NS ON DISSOLUTION THE REGISTRAR SHALL DIVIDE THE FUNDS A MONGST THE MEMBERS IN SUCH MANNER AS MAY BE PRESCRIBED THEREFORE IN ANY CASE THE FUNDS AVAILABLE WITH THE ASSESSEE SHALL BE DISTRIBUTED AMONG THE MEMBERS EITHER AS PE R THE RULES OF UNION OR AS PER THE PROVISIONS OF SECTION 27(2) OF THE TRADE UNION ACT 1926. IN VIEW OF THE ABOVE DISC USSION WE ARE OF THE VIEW THAT THE CONTRIBUTION RECEIVED B Y THE ASSESSEE IN PURSUANT TO ITS ACTIVITY WHICH ARE IN A CCORDANCE WITH THE OBJECTS OF THE ASSESSEE UNION CANNOT BE TR EATED AS INCOME FROM BUSINESS OR PROFESSION AND ACCORDINGLY THE SAME IS EXEMPT U/S 10(24) OF THE INCOME TAX ACT AS WELL AS ON THE PRINCIPLE OF MUTUALITY BEING DISTRIBUTED AMO NG THE MEMBERS OF THE ASSESSEE UNION. ITA NO. 1335 & 356/M/2014 8 RESPECTFULLY FOLLOWING THE SAID DECISION WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. 7. IN SO FAR AS GROUND NO. 3 IS CONCERNED THE CO-O RDINATE BENCH IN PARA-22 OF ITS ORDER DISMISSED THE GROUND AS INFRUC TUOUS IN VIEW OF THE FINDINGS GIVEN IN GROUND NO. 1 & 2. AS THE SAM E WILL APPLY MUTATIS AND MUTANDIS FOR THIS YEAR ALSO THIS GROU ND IS DISMISSED AS INFRUCTUOUS. 8. GROUND NO. 4 IS REGARDING LEVY OF INTEREST U/S. 234B AND IT IS ONLY CONSEQUENTIAL. THUS THIS GROUND IS DISMISSED A S CONSEQUENTIAL. 9. COMING TO THE REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE CAPITAL G AINS ARISING OUT OF SALE OF PROPERTY AT 'POISER' IS NOT TAXABLE IN THE A. Y 2004-05 STATING THAT THE SAME AROSE PRIOR TO A. Y 2004-05 WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE HAD NOT CREDITED THE SALE PROCEEDS IN THE INCOME AN D EXPENDITURE ACCOUNT FOR THE A. Y. 95-96 AND SUBSEQU ENT YEARS AND OFFERED NO TAXABLE INCOME UNDER CAPITAL G AINS FOR SUCH ASSESSMENT YEAR AND ALSO THE FACT THAT NO RETURN OF INCOME WAS FILED FOR THE A. Y. 95-96 AND 96-97 DIS CLOSING THE CAPITAL GAIN ON SALE OF PROPERTY. ' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE CAPITAL G AINS ARISING OUT OF SALE OF PROPERTY AT POISER IS NOT T AXABLE IN THE A. Y 2004-05 SINCE THE SAME AROUSE PRIOR TO A. Y 2004- 05 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD KEPT THE ENTIRE SALE PROCEEDS IN THE BALANCE SHEET ON THE LIABILITY SIDE AS ADVANCE FOR SEVERAL YEARS TILL A. Y 2004-05 WHICH CLEARLY INDICATES THAT THE TRANSACTIONS RELAT ING TO SALE OF PROPERTY WAS NOT COMPLETE I.E NO TRANSFER HAD TAKEN PLACE WITHIN THE MEANING OF SEC 2(47)OF THE I . T. ACT PRIOR TO A. Y. 2004-05' ITA NO. 1335 & 356/M/2014 9 10. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME ON 20/07/104 DECLARING 'NIL' TOTAL INCOME AF TER CLAIMING EXEMPTION U/S. 10(24) ON THE ENTIRE INCOME. HOWEVER FROM THE PROFIT AND LOSS ACCOUNT IT WAS FOUND THAT OUT OF T OTAL RECEIPTS OF RS. 2 38 83 663/- AN AMOUNT OF RS. 2 23 42 132/- WAS RE CEIVED ON ACCOUNT OF 'PROFIT ON SALE OF POISER PROPERTY' AND THIS WAS NOT OFFERED TO TAX. THE CASE WAS REOPENED ON THE ABOVE GROUND A ND ORDER U/S. 143(3) R.W.S. 147 WAS PASSED ON A TOTAL INCOME OF R S. 1 06 65 840/- ON 13/12/2007. THE GAINS ON SALE OF 'POISER PROPERT Y' NOT OFFERED BY ASSESSEE WAS TAXED IN THE ASSESSMENT ORDER. THE AO HELD THAT THE ASSESSEE HAD NOT OFFERED THE INCOME EARLIER TO AVOI D TAXES AND ALSO INVOKED SECTION 68 OF IT ACT TO MAKE THE ADDITION. THE ASSESSING OFFICER TAXED CAPITAL GAINS OF RS 2 23 42 132/- A GAINST LOSS AS PER INCOME EXPENDITURE ACCOUNT OF RS 1 16 76 294/- AND ASSESSED TAXABLE INCOME AT RS 1 06 65 840/-. 10.1. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEF ORE CIT(A) AND THE CIT(A) BY ORDER DATED 19/02/08 ENHANCED THE TOTAL I NCOME TO RS. 2 23 42 132/- BY TREATING THE RESULTANT INCOME UNDE R THE HEAD CAPITAL GAIN(LTCG) THEREBY NEGATING THE SET OFF OF BUSINES S LOSS OF RS. 1 16 76 294/-. IN DOING SO THE LD. CIT(A)HELD THAT SINCE THE APPELLANT HAD NOT OFFERED THIS INCOME EARLIER AND CREDITED TH E SAME IN BOOKS ONLY IN AY 2004-05 LED TO INFERENCE THAT SALE WAS NOT COMPLETED EARLIER. THE LD. CIT(A) FURTHER HELD THAT SECTION 68 WAS NOT APPLICABLE TO FACTS OF THE CASE. 10.2. THE MATTER WAS CARRIED TO ITAT AND THE HON'B LE ITAT 'E' BENCH MUMBAI IN ITA NO. 1910/M/2008 DATED 23/06/0 9 SET ASIDE ITA NO. 1335 & 356/M/2014 10 THE MATTER BY OBSERVING THAT 'WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF THE OBS ERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESEE .' 10.3. IN THE REASSESSMENT ORDER THE ASSESSING OFFIC ER REPRODUCED PARA 3.1 AND OTHER RELEVANT PARAGRAPHS OF THE CIT(A)'S A PPELLATE ORDER LEADING TO COMPUTATION OF LONG TERM CAPITAL GAIN AT RS. 2 23 42 132/-. THERE IS NO DISCUSSION OF THE COMPLIANCE WITH THE D IRECTIONS OF HON'BLE ITAT AND THE VERIFICATION CARRIED OUT. THE ASSESSING OFFICER ACCORDINGLY ASSESSED THE LONG TERM CAPITAL GAIN AT RS. 2 23 42 132/-. THE LD. CIT(A) HELD THAT CAPITAL GAINS AROSE PRIOR TO THE ASSESSMENT YEAR 2004-05 AND HE DELETED THE CAPITAL GAINS ASSES SED BY THE ASSESSING OFFICER DURING THIS ASSESSMENT YEAR. 11. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTING THE ORDER OF THE ASSESSING OFFICER SUBMITS THAT THE ASSESSEE CREDITED ADVANCES RECEIVED FROM SALE OF PROPERTY AS INCOME I N THIS YEAR ONLY. HE SUBMITS THAT RETURNS WERE NOT FILED IN EARLIER Y EARS AND THEREFORE THE ASSESSING OFFICER IS JUSTIFIED IN HOLDING THAT THERE IS TRANSFER WITHIN THE MEANING OF PROVISIONS OF SEC. 2(47) OF T HE ACT DURING THIS ASSESSMENT YEAR AND BRINGING TO CAPITAL GAINS TAX T HE PROPERTY GIVEN FOR DEVELOPMENT. 12. THE LD. COUNSEL FOR THE ASSESSEE SUPPORTS THE O RDERS OF THE LD. CIT(A). ITA NO. 1335 & 356/M/2014 11 13. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND FROM THE LD. CIT(A)S O RDER THAT THE ISSUE HAS BEEN ELABORATELY CONSIDERED BY THE CIT(A) WITH REFERENCE TO THE AVERMENTS IN THE ASSESSMENT ORDER THE DIRECTIONS G IVEN BY THE ITAT IN ITS EARLIER ORDER AND THE SUBMISSIONS OF THE ASS ESSEE AND CONCLUDED THAT THERE IS NO TRANSFER OF PROPERTY DUR ING THIS ASSESSMENT YEAR WITHIN THE MEANING OF THE PROVISION S OF SEC. 2(47) OF THE ACT. THE LD. CIT(A) AFTER APPRECIATING THE DOCUMENTS SUBMITTED BY THE ASSESSEE CONCLUDED THAT THE TITLE OF THE PROPERTY HAS BEEN TRANSFERRED IN THE FINANCIAL YEAR 1996-97 RELE VANT TO ASSESSMENT YEAR 1997-98 AND THEREFORE THE CAPITAL G AINS AROSE PRIOR TO THE ASSESSMENT YEAR 2004-05 AND THEREFORE NOT LI ABLE TO TAX IN THE ASSESSMENT YEAR 2004-05 OBSERVING AS UNDER: 5.1. I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS PERUSED THE MATERIAL ON RECORD AND DUL Y CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO T HE APPLICABLE LEGAL POSITION. 5.2. BEFORE ME IT IS ARGUED THAT THE LD. ASSESSING OFFICER HAS PASSED THE ORDER SIMPLY RELYING ON EARLIER CIT( A)'S ORDER AND THAT THE AO DID NOT FOLLOW THE DIRECTIONS OF THE HON'BLE ITAT AT ALL. A PAPER BOOK HAS ALSO BEEN FIL ED NUMBERING PAGES 1 TO 173 WHICH ENCLOSED THE COPIES OF VARIOUS DOCUMENTS AND CASE LAWS. IT IS THE CONTENTI ON OF THE APPELLANT THAT POSSESSION OF THE PROPERTY WAS H ANDED OVER ON 18/09/94 AND HENCE TRANSFER TOOK PLACE ON 18/09/94 U/S. 2(47) CLAUSE (V). IT IS SUBMITTED THA T THE APPELLANT HAD RECEIVED FULL PAYMENTS AND IT EXECUTE D IRREVOCABLE POWER OF ATTORNEY IN FAVOUR OF THE BUIL DER AND HENCE TRANSFER HAS TAKEN PLACE IN 1995-96 OR 1996-9 7. 5.3. THE FACT REMAINS THAT THE APPELLANT DID NOT RE FLECT PROFIT ON SALE OF PROPERTY AT POISER AT RS.2 23 42 132/- IN ITA NO. 1335 & 356/M/2014 12 ANY OF THE EARLIER ASSESSMENT YEARS INCLUDING ASSES SMENT YEAR 1995-96 OR 1996-97. IT IS ONLY IN THE ASSESSME NT YEAR 2004-05 THAT THE APPELLANT CREDITED THE PROFIT AMOU NT ON SALE OF PROPERTY IN THE PROFIT AND LOSS ACCOUNT. HO WEVER EVEN IN THIS YEAR IT DID NOT OFFER THE SAME FOR TAX ATION. THE CLAIM OF THE APPELLANT THAT THE SAME IS EXEMPTED U/ S. 10(24) IS ALSO NOT CORRECT SINCE THIS SECTION DOES NOT EXEMPT THE INCOME IN THE NATURE OF CAPITAL GAINS IN THE HAND OF TRADE UNION. 5.4. THE APPELLANT ENTERED IN TO AGREEMENTS FOR DEVELOPMENT CUM SALE ON 30/10/1995 WITH DIFFERENT PERSONS BELONGING TO DATTANI CONSTRUCTION BY WAY OF SEPARATE AGREEMENTS. AS A RESULT OF THESE AGREEMENT S THE APPELLANT RECEIVED CERTAIN CONSIDERATIONS TOTALING TO RS. 2 60 00 000/- DURING THE PERIOD AUGUST 1994 TO DECEMBER 1995. THE APPELLANT TREATED THESE AMOUNTS AS ADVANCES IN THEIR BOOKS OF ACCOUNTS FOR SEVERAL YEA RS. IT NEVER CREDITED THIS AMOUNT TO ITS INCOME AND EXPEND ITURE ACCOUNT TILL A.Y. 2004-05. NO ACCEPTABLE REASON HAS BEEN GIVEN FOR TREATING THE ADVANCE RECEIVED AS ADVANCE IN ALL THESE YEARS PRIOR TO A.Y. 2004-05. THE INESCAPABLE CONCLUSION CAN ONLY BE THAT ONLY THE APPELLANT WANT ED TO HIDE THE NATURE OF TRANSACTION AND TO AVOID PAYMENT OF TAXES IN RESPECT OF THIS TRANSACTION. EVEN IN A.Y. 2004-05 IN THE RETURN FILED IT WAS CLAIMED THAT THE SAME IS EX EMPTED U/S. 10(24) OF THE INCOME TAX ACT. THERE WAS A DELI BERATE INTENTION TO CONCEAL THE PARTICULARS OF INCOME IN R ESPECT OF PROFIT EARNED ON SALE OF PROPERTY AND TO EVADE TAX LIABILITY. 5.5. IN THE ORDER OF THE HON'BLE ITAT THE HON'BLE BENCH NOTED THAT THE ASSESSEE HAD ACQUIRED THE SAID PROPE RTY VIDE AGREEMENT FOR SALE DATED 14/05/94 FROM M/S. CABLE CORPORATION OF INDIA. IT THEN ENTERED INTO AGREEMEN TS FOR DEVELOPMENT CUM SALE OF THE PROPERTY ON DIFFERENT D ATES WITH DIFFERENT PERSONS BELONGING TO DATTANI CONSTRU CTION. THEY ALSO NOTED THAT THE LAND WAS SUBJECT MATTER OF ACQUISITION AND RESTRAINTS UNDER THE URBAN LAND CEI LING ITA NO. 1335 & 356/M/2014 13 ACT AND THEREFORE WHETHER AND WHEN SUCH RIGHT OR IN TEREST IN THE PROPERTY COULD BE LEGALLY TRANSFERRED SHOULD BE EXAMINED. THEY ALSO NOTED THAT THE POWER OF ATTORNE Y HOLDER WAS REQUIRED TO MAKE APPLICATION UNDER ULCA AND IT IS NOT CLEAR AS TO WHAT PERMISSION HAS BEEN RECE IVED. THE FACT THAT THE ASSESSEE ITSELF HAS SHOWN AMOUNT RECE IVED AS ADVANCE TILL 01/04/2003 INDICATES THAT IT HAD NO PERMISSION TO TRANSFER. BUT THIS ASPECT HAS NOT BEE N EXAMINED. ACCORDINGLY THE MATTER WAS RESTORED TO ASSESSING OFFICER FOR VERIFICATION. 5.6. THE ASSESSING OFFICER IN HIS ORDER GIVING EFFE CT TO ITAT ORDER HAS MERELY STATED THAT: 'ACCORDINGLY THE CASE WAS FIXED FOR HEARING AND SHR I N R AGARWAL FCA & AR VIDE HIS FORWARDING LETTER DATED 24/12/2010 SUBMITTED DETAILS IN CONNECTION WITH THE PROCEEDINGS. HE HAS SUBMITTED MUNICIPAL CORPORATION OF GREATER BOMBAY'S ORDER FOR DE- RESERVATION DATED 10/06/1996 ULC ORDER DATED 17/02/1997 & 17/10/1996 FROM ADD. COLLECTOR COMMENCEMENT CERTIFICATE FOR CONSTRUCTION OF BUILDING FROM BMC DATED 20/01/1998 SOLICITOR'S CERTIFICATE DATED 04/08/2007 CERTIFYING THAT LAND IS TRANSFERRED IN 1995/96 U/S 53A OF TRANSFER OF PROPERTIES ACT BANK CERTIFICATE FOR PAYMENTS RECEIVED FROM DEVELOPER & POWER OF ATTORNEY IN FAVOUR OF BUILDER. THEREAFTER THE ENTIRE PORTION FROM THE EARLIER CIT (A) ORDER WHICH WAS THE SUBJECT MATTER OF APPEAL BEFORE ITAT HAS BEEN EXTRACTED WITHOUT ANSWERING THE QUESTIONS RAISED BY HON'BLE ITAT AND DETERMINING WHEN TRANSFER TOOK PLACE. 5.7. IN THE APPELLATE PROCEEDINGS DETAILS BY WAY O F PAPER BOOK PAGES 1 TO 173 HAS BEEN FILED DATED 6-9-2011. IT IS SUBMITTED THAT THE SAME WERE FILED BEFORE THE ASSESSING OFFICER AN D THAT NO NEW EVIDENCE IS FILED. ITA NO. 1335 & 356/M/2014 14 5.8. A PERUSAL OF THE PAPERS FILED INDICATES THAT V IDE DEVELOPMENT AGREEMENT EXECUTED ON 10-6-1994 CABLE CORPORATION OF INDIA LTD. FOR A CONSIDERATION OF RS.614 3601- THE APP ELLANT WAS ALLOWED TO DEVELOP AND SELL IN RESPECT OF PLOT OF LAND AT POISAR OF 30718 SQUARE YARDS APPROX 24882 SQUARE METERS. THE OWNER ALLOWED DEVELOPER TO APPLY FOR AND OBTAIN REQUIRED PERMISSIONS DEVELOP AND SELL CONSTRUCTIONS ON THE LAND. IF PERM ISSIONS WERE RECEIVED AND SALES OF FLATS TOOK PLACE THE DEVELO PER WAS ENTITLED TO ALL PROCEEDS WITHOUT HAVING TO PAY THE OWNER ANY FURTHER PAYMENTS. THE AGREEMENT WAS ON 'AS IS WHERE IS' BAS IS. IT WAS RECORDED THAT THE LAND WAS UNDER RESTRAINT AS PER O RDER OF COLLECTOR U/S 8(4) DATED 31-10-81 AND THAT THE PROP ERTY WAS RESERVED FOR MUNICIPAL GODOWN . 5.9. VIDE SIMILAR 10 AGREEMENTS DATED EITHER 19-9- 1994 OR 30- 10-1995 THE APPELLANT ENTERED INTO AGREEMENT FOR D EVELOPMENT CUM SALE WITH DATTANI GROUP. EACH AGREEMENT COVERED A PART OF THE LAND WHICH WAS TAKEN FROM CABLE CORPORATION MEN TIONED EARLIER. THE TERMS OF THIS AGREEMENT WERE SIMILAR T O THE DEVELOPMENT AGREEMENT OF APPELLANT WITH CABLE CORPO RATION. THUS IT RECORDED THE RESTRICTION OF ULC U/S 8(4) RESERVATION FOR MUNICIPAL GODOWN AND WAS ON 'AS IS WHERE IS' BASIS . IT ALLOWED DEVELOPER DATTANIS TO ENTER PROPERTY AS LICENSEE. T HE AMOUNT RECEIVED AS CONSIDERATION WAS A TOTAL OF RS 260 00 000/- OVER A PERIOD OF 10-8-1994 TO 31-12-1995. POWER OF ATTORN EY WAS EXECUTED BY CABLE CORPORATION OF INDIA LTD FIRST IN FAVOUR OF APPELLANT TRUST AND THEN IN NAME OF DATTANI GROUP. SIMILAR P OF A WAS EXECUTED BY APPELLANT TRUST IN FAVOUR OF DATTAN I DATED 5.11.96. 5.10. IN THE PROCEEDINGS BEFORE ASSESSING OFFICER APART FROM THE ABOVE AGREEMENTS AND POWER OF ATTORNEY THE COPIES OF FOLLOWING DOCUMENTS WERE SUBMITTED WHICH ALSO FORMS PAPER BO OK FILED IN PRESENT APPEAL PROCEEDINGS. I) BMC ORDER DATED 10/6/1996 - THIS PERMISSION ALLO WS THE DEVELOPMENT ON LAND UNDER REFERENCE WITH CONDITION THAT 25% OF BUILTUP ARE WILL BE CONSTRUCTED AS GODOWN AND HANDE D OVER TO ITA NO. 1335 & 356/M/2014 15 MUNICIPAL CORPORATION FREE OF COST IN LIEU OF PERMI SSION TO DEVELOP AND CONSTRUCT RESIDENTIAL UNITS. IT WAS ALS O STIPULATED THAT NOC FROM ULC WILL BE OBTAINED. II) ORDER DATED 17-10-1996 FROM COLLECTOR UNDER ULC GRANTING NOC WITH REFERENCE TO THE CONDITION IMPOSED BY BMC IN ITS PERMISSION DATED 10-6-1996. IT WAS NOTED THAT ONE O F THE CONDITIONS UNDER WHICH DEVELOPMENT IS PERMITTED IS THAT 25% OF CONSTRUCTED AREA WILL BE HANDED OVER TO BMC FOR MUN ICIPAL GODOWN. III) COMMENCEMENT CERTIFICATE PERMISSION DATED 20-1 -1998 FROM BMC IV) ORDER DATED 17-2-1997 OF COLLECTOR BOMBAY UNDE R ULC GRANTING NOC FOR RECEIVING TDR ON PART OF LAND UNDE R DP RESERVATIONS FOR PARK AND DP ROAD. V) POSSESSION LETTER FOR THE LAND IN QUESTION DATED 18/9/1994 FROM APPELLANT TO DATTANI GROUP IN RESPECT OF THE D EVELOPMENT AGREEMENT OF APPELLANT WITH DATTANI GROUP. VI) COPY OF BANK STATEMENT SHOWING THE RECEIPT OF P AYMENTS BY THE APPELLANT. 5.11. FROM THESE DOCUMENTS IT IS INFERRED THAT THE PERMISSION TO DEVELOP THE LANDS AROSE IN 1996-97 WHEN PERMISSIONS FROM ULC AND BMC WERE RECEIVED. CONSIDERATION WAS RECEIVED A ND POSSESSION WAS HANDED OVER. THUS TO CONCLUDE AS D IRECTED BY ITAT IN THIS CASE THE TITLE COULD HAVE BEEN TRANSF ERRED WITH ULC APPROVAL IN FY 1996-97 RELEVANT TO ASSESSMENT YEAR 1997-98. 5.12. IT IS ALSO THE ARGUMENT OF THE APPELLANT THAT U/S. 2(47) CLAUSE (V) SINCE POSSESSION WAS GIVEN ON 18.9.1994 TRANSFER TOOK PLACE AT THAT TIME. THIS CLAUSE IS IN RESPECT OF C ONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF TRANSFER OF PR OPERTY ACT RELATING TO PART PERFORMANCE. THIS WAS INSERTED IN THE STATUTE WEF 1.4.1988. THE CAPITAL ASSET IN THIS CASE IS DE VELOPMENT RIGHTS IN THE PROPERTY ON 'AS IS WHERE IS BASIS' WITH ALL THE RESTRICTIONS ITA NO. 1335 & 356/M/2014 16 AND THE SAME RIGHTS WERE TRANSFERRED TO DATTANI AS WAS OBTAINED FROM CABLE CORPORATION OF INDIA LTD. 5.13. THERE IS NO DOUBT IN MY MIND THAT THE APPELLA NT HAS DELIBERATELY SUPPRESSED RECOGNITION OF CAPITAL GAIN S IN EARLIER YEARS AND THUS AVOIDED PAYMENT OF TAXES. THE ARGUME NT THAT ITS INCOME IS NOT TAXABLE U/S 10(24) IS NOT ACCEPTABLE. HOWEVER THE CAPITAL GAINS AS PER VERIFICATIONS DIRECTED BY ITA T IN THIS CASE AROSE PRIOR TO AY 2004-05 AND ARE THUS ARE NOT TAX ABLE IN AY 2004-05. 14. ON A CAREFUL READING OF THE LD. CIT(A)S ORDER WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDINGS GIV EN BY THE LD. CIT(A) THAT THE TRANSFER TOOK PLACE IN THE ASSESSMENT YEAR PRIOR TO THE ASSESSMENT YEAR 2004-05 AND CAPITAL GAINS AROSE PRI OR TO THE ASSESSMENT YEAR 2004-05 AND THEREFORE CAPITAL GAINS IS NOT ASSESSABLE DURING THE ASSESSMENT YEAR 2004-05. NON E OF THE FINDINGS OF THE LD. CIT(A) HAVE BEEN REBUTTED BY TH E REVENUE SO AS TO CANVAS THAT THE TRANSFER TOOK PLACE IN THE ASSESSME NT YEAR 2004-05. APPARENTLY THE POSSESSION OF THE PROPERTY HAS BEEN GIVEN PRIOR TO 2004-05 I.E. IN THE FINANCIAL YEAR 1996-97 RELEVANT TO ASSESSMENT YEAR 1997-98. ALL THE DEVELOPMENT AGREEMENTS WERE EXECUTED DURING THE PERIOD 10.6.1994 TO 30.10.1995 FOR DEVEL OPMENT OF THE PARTY. THE POSSESSION OF THE PROPERTY HAS BEEN GI VEN ON 18.9.1994 TO DATTANI GROUP IN RESPECT OF DEVELOPMENT AGREEMEN T ENTERED INTO BY THE ASSESSEE WITH DATTANI GROUP. TAKING ALL THE SE FACTS INTO CONSIDERATION IT IS APPARENT THAT THE TRANSFER TOO K PLACE PRIOR TO 2004-05 THEREFORE THE LD. CIT(A) IS PERFECTLY JUSTI FIED IN HOLDING THAT NO CAPITAL GAINS AROSE IN ASSESSMENT YEAR 2004-05. THUS WE SUSTAIN THE ORDER OF THE LD. CIT(A). ITA NO. 1335 & 356/M/2014 17 15. IN THE RESULT THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $% ' /JUDICIAL MEMBER MUMBAI; (' DATED 28 TH SEPTEMBER 2016 . % . ./ RJ SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ %%-. -.! / DR ITAT MUMBAI 6. /01 / GUARD FILE. / BY ORDER *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI