THE ITO WD 21(1)(2), MUMBAI v. M/S. JANARDHAN MARUTI SUPLE, MUMBAI

ITA 4019/MUM/2008 | 2005-2006
Pronouncement Date: 30-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 401919914 RSA 2008
Assessee PAN AAGPS5190R
Bench Mumbai
Appeal Number ITA 4019/MUM/2008
Duration Of Justice 1 year(s) 10 month(s) 23 day(s)
Appellant THE ITO WD 21(1)(2), MUMBAI
Respondent M/S. JANARDHAN MARUTI SUPLE, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 30-04-2010
Date Of Final Hearing 11-02-2010
Next Hearing Date 11-02-2010
Assessment Year 2005-2006
Appeal Filed On 06-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI T.R. SOOD (AM) ITA NO.4019/MUM/2008 ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER WARD 21(1)(2) 6 TH FLOOR ROOM NO.604 PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-400 051. ..( APPELLANT ) VS. MS. JANARDHAN MARUTI SUPLE SHOP NO.15 IRLA SHOPPING CENTRE COOPER ROAD VILE PARLE(W) MUMBAI-400 056. ..( RESPONDENT ) P.A. NO. (AAGPS 5190 R) APPELLANT BY : SHRI L.K. AGRAWAL RESPONDENT BY : SHRI PA RAS SAVLA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 31.3.2008 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL DERIVES INCOME FROM TAILORING. THE RETURN WAS FILED DECLARING AN INCOME OF RS.1 39 210/-. THE ASSESSEE OWNED A SHOP NO .15 IN IRLA CO-OPERATIVE HOUSING SOCIETY LTD. DURING THE COURSE OF ASSESSMENT IT WAS INTERALIA OBSERVED BY THE AO THAT THE ASSESSEE HAS SHOWN LONG ITA NO.4019/MUM/08 A.Y:05-06 2 TERM CAPITAL GAINS TO THE TUNE OF RS.17 00 000/- AND T HE SAME HAS CLAIMED AS EXEMPT U/S.54EC AS INVESTMENT IN RURAL ELECTR IFICATION BOND. ON GOING THROUGH THE AGREEMENT BETWEEN THE P RIME DEVELOPERS AND THE ASSESSEE THE ASSESSING OFFICER OBSERVED THAT COMPENSATI ON OF RS.17 00 000/- AND EXPENSES FOR ALTERNATE ACCOMMODATION HAVE BEEN PROVIDED TO THE ASSESSEE BY THE DEVELOPER I.E PRIME DE VELOPERS AGAINST THE TEMPORARY SHIFTING OF THE EXISTING PREMISE S IN THE IRLA CHS. SINCE THIS PREMISES OF SPECIFIED AREA OF 158 SP.FT. IS BEING RECONSTRUCTED IN THE MANNER DESIRED AND AGREED UPON BY THE ASSESSEE THERE IS NO TRANSFER IN FACT AND THE COMPENSATION PAID I S MERELY FOR THE SUFFERANCE OF INCONVENIENCE FOR THE PERIOD OF CONSTRUCTIO N AND RELOCATING TEMPORARILY. HENCE THE ASSESSING OFFICER HAS ASSESSED THE ENTIRE RECEIPTS OF RS.17.00 LACS ALONG WITH THE COST OF N EW CONSTRUCTION AND EXPENDITURE INCURRED BY THE DEVELOPER FOR ALTERN ATE ACCOMMODATION AS INCOME FROM OTHER SOURCES AND DISALLOWED DEDUCTION CLAIMED U/S.54EC. THE ASSESSING OFFICER FURTHE R OBSERVED THAT THE ASSESSEE HAS BEEN PROVIDED WITH ALTERNATE ACCOMM ODATION BY THE BUILDER DURING THE PERIOD OF CONSTRUCTION I.E. FOR 10 MONTHS HOWEVER THE ASSESSING OFFICER AFTER TAKING INTO ACCOUNT TH E PREVAILING MARKET RATE RS.8 000/- PER MONTH ADDED RS.80 000/- AS ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.20 30 000/- VIDE ORDER DATE D ITA NO.4019/MUM/08 A.Y:05-06 3 26.11.2007 PASSED U/S.144 OF THE ACT. ON APPEAL THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW EXEMPTION CLAIMED U/S.54EC BY TREATING THE TRANSACTION AS CAPITAL GAIN AND DELETED T HE ADDITION OF DEEMED RENT OF RS.80 000/-. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWI NG THE EXEMPTION U/S.54EC OF THE INCOME TAX ACT ON THE COMPENSATION RECEIVED RS.17.00 LAKH TREATING THE TRANSACTION AS CAPITAL GAIN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETI NG THE ADDITIONAL INCOME OF RS.80 000/- RECEIVED BY THE ASSESSEE ON ACCOUNT OF ALTERNATE ACCOMMODATION. 4. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED T HAT BOTH THE ISSUES ARE SQUARELY COVERED BY THE ORDER OF THE TRIBUNA L IN THE CASE OF ONE OF THE CO-OWNERS IN ITO VS. SHRI PARESH K. BHARMANI IN ITA NO.3913/M/08 FOR ASSESSMENT YEAR 2005-05 ORDER DATED 5. 10.2009 WHEREIN THE TRIBUNAL HAS RESTORED BACK THE MATTER TO T HE FILE OF THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO F ILED THE COPY OF THE SAID ORDER OF THE TRIBUNAL . 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO ITA NO.4019/MUM/08 A.Y:05-06 4 DISPUTE THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN SHRI PARESH K. BHAR MANI (SUPRA) WHEREIN THE TRIBUNAL HAS RESTORED BACK THE SIMILAR MA TTER TO THE FILE OF THE AO VIDE FINDING RECORDED IN PARA-4 OF ITS ORDER D ATED 5.10.2009 WHICH IS REPRODUCED AS UNDER :- 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE UNDISPUTED FAC T IS THAT ALONG WITH OTHER SHOP OWNERS IN IRLA CO-OPERAT IVE HOUSING SOCIETY LTD. THE ASSESSEE TRANSFERRED ITS S HOPS TO M/S PRIME DEVELOPERS. IN LIEU OF THE SURRENDER OF T HE RIGHTS IN THE SAID SHOP THE ASSESSEE WAS GIVEN A S UM OF RS. 17.00 LAKHS IN ADDITION TO SHOP WITH THE SAME C ARPET AREA I.E. 184 SQ.FT. IN THE NEW PREMISES. APART FRO M THAT THE ASSESSEE WAS TO BE ALLOWED CAR PARKING IN THE N EW MALL BESIDES AN ALTERNATE ACCOMMODATION FOR 10 MONT HS OF THIS YEAR. THE ASSESSEE SHOWED LONG TERM CAPIT AL GAIN AT RS. NIL BY CONSIDERING THE SALE CONSIDERAT ION AT RS. 17.00 LAKHS AND CLAIMED THE BENEFIT U/S 54EC OF THE ACT IN VIEW OF THE INVESTMENT OF EQUAL AMOUNT IN EL IGIBLE BONDS. THE AO HELD THAT IT WAS NOT A CASE OF TRAN SFER AND HENCE THE PROVISIONS OF `CAPITAL GAINS ARE N OT ATTRACTED. HE MADE ALL THE ADDITIONS UNDER THE HEAD INCOME FROM OTHER SOURCES. WE ARE NOT CONVINCED W ITH THE VIEW TAKEN BY THE AO ON THE SAID TRANSFER OF RIGHTS IN THE OLD SHOPS WHICH CONSTITUTE CAPITAL ASSET. IT I S OBVIOUS THAT THE OLD STRUCTURE WAS HANDED OVER BY THE ASSES SEE TO M/S PRIME DEVELOPERS AND IN EXCHANGE OF THAT THE ASSESSEE WAS GIVEN A SUM OF RS. 17.00 LAKH ALONG WI TH A SHOP WITH SAME CARPET AREA AND PARKING FACILITY IN THE NEW MALL TO BE CONSTRUCTED ON THE LAND OF THE SOCIE TY. THE LEARNED AR HAS RIGHTLY RELIED UPON CERTAIN DECISION S FOR CONTENDING THAT SURRENDER OF SUCH RIGHTS AMOUNTS TO TRANSFER OF CAPITAL ASSET. IN PRINCIPLE WE ARE IN AGREEMENT WITH THE ARGUMENT RAISED BY THE LEARNED AR THAT IT WAS TRANSFER OF CAPITAL ASSET BY THE ASSESSEE AGAINST W HICH THE SPECIFIC CONSIDERATIONS WERE RECEIVED. SECTION 45(1) OF THE ACT PROVIDES THAT ANY PROFITS OR GAINS ARISING FROM TRANSFER OR CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE TO INCOME TAX UND ER THE HEAD CAPITAL GAINS. THE MODE OF COMPUTATION OF TH E INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS HA S ITA NO.4019/MUM/08 A.Y:05-06 5 BEEN PROVIDED FOR IN SECTION 48 ACCORDING TO WHICH EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH THE TRANSFER AND ALSO THE COST OF ACQUISITION OF THE ASSET AND COST OF ANY IMPROVEMENT THERETO ARE TO B E REDUCED FROM THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF TRANSFER OF CAPITAL ASSE T. IT THEREFORE TRANSPIRES THAT CAPITAL GAIN IS TO BE COMPUTED U/S 48 OF THE ACT BY CONSIDERING THE `FULL VALUE O F CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET ON ONE HAND AND DEDUC TING THEREFROM THE COST OF ACQUISITION AND COST OF IMPRO VEMENT TOGETHER WITH THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. THE A SSESSEE HAS PROCEEDED WITH THE PREMISE THAT ONLY A SUM OF R S. 17.00 LAKH IS THE SALE CONSIDERATION AND SINCE THE EQUAL AMOUNT WAS INVESTED IN THE ELIGIBLE BONDS NO AMOUN T IS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. I N OUR OPINION THE COMPUTATION OF CAPITAL GAINS SO MADE BY THE ASSESSEE BY CONSIDERING THAT ONLY A SUM OF RS. 17.0 0 LAKHS CONSTITUTES FULL VALUE OF CONSIDERATION IS ERRONEOUS. IN FACT EVERY THING RECEIVED OR TO BE RECEIVED BY T HE ASSESSEE IN MONEY OR MONEY WORTH IN LIEU OF TRANSF ER OF SHOP IS PART OF THE FULL VALUE OF CONSIDERATION BE IT THE VALUE OF NEW BUILDING VALUE OF CAR PARKING FACILIT Y AND RENTAL VALUE OF THE PROPERTY PROVIDED BY THE DEVELO PER TO THE ASSESSEE FOR THE INTERREGNUM. THE LEARNED CIT( A) HAS ERRED IN COMING TO THE CONCLUSION THAT DEEMED RENT OF RS.80 000/- WILL ALSO BE TAKEN TO BE THE EXPENDI TURE FOR CARRYING OUT REGULAR BUSINESS BY THE APPELLANT. HAV ING HELD AND RIGHTLY SO THAT CAPITAL GAIN WAS ATTRACTE D IN THIS CASE THE QUESTION WAS TO COMPUTE THE VALUE OF THE BENEFIT RECEIVED BY THE ASSESSEE IN LIEU OF SURREND ER OF ASSESSEES RIGHT IN THE PROPERTIES. THERE WAS NO QU ESTION OF ALLOWING ANY DEDUCTION TOWARDS DEEMED EXPENDITUR E INCURRED FOR CARRYING ANY BUSINESS BY THE ASSESSEE. HIS FURTHER VIEW WAS THAT ADDITION OF RS. 7 36 000/- TO WARDS COST OF CONSTRUCTION AND RS.2.00 LAKH AS VALUE OF C AR PARKING WAS NOT INCLUDIBLE AT ALL AND ONLY THE SUM OF RS. 1 35 000/- WAS TO BE INCLUDED IS A PART OF HIS MIST AKEN APPROACH IN THE MATTER. NO DOUBT THESE TWO ADDITION S PER SE CANNOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSE SSEE BUT THE AMOUNT RECEIVED AND THE VALUE OF WHATEVER W AS ACQUIRED BY THE ASSESSEE IN LIEU OF THE SURRENDER O F HIS RIGHTS IN SHOPS WAS TO BE CONSIDERED AS `FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T RANSFER OF CAPITAL ASSET. SINCE BOTH THE AUTHORITIES BELOW HAVE CHOSEN TO DEAL WITH THE ISSUE IN A MANNER WHICH IS ABSOLUTELY NOT SUPPORTED BY ANY STATUTORY PROVISION WE ITA NO.4019/MUM/08 A.Y:05-06 6 ARE OF THE CONSIDERED OPINION THAT THE ORDER OF THE CIT(A) CANNOT BE UPHELD. THE IMPUGNED ORDER IS THEREFORE SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO FOR COMPUTING THE AMOUNTS CHARGEABLE TO TAX UNDER THE H EAD CAPITAL GAINS AS PER THE PROVISIONS OF THE ACT AF TER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS FURTHER CLARIFIED THAT IF THE AMOUN T OF RS. 17.00 LAKHS IS INVESTED IN THE ELIGIBLE BONDS THE AO AFTER VERIFICATION WILL GRANT DEDUCTION U/S 54EC OF THE ACT IN THE FRESH COMPUTATION OF INCOME ON THIS COUNT UNDER THE CAPITAL GAINS. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE PARTIES WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRI BUNAL SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT A ND SEND BACK THE MATTER TO THE FILE OF THE AO WHO SHALL DECIDE TH E SAME AFRESH AS PER THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE CASE OF PARESH K. BHARMANI (SUPRA) AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND S TAKEN BY THE REVENUE ARE THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT REVENUES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.4.2010. SD/- SD/- (T.R. SOOD) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 30.4.2010. JV. ITA NO.4019/MUM/08 A.Y:05-06 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 22.4.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23.4.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 30.4.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 30.4.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER