DILIP BHASKARAN, MUMBAI v. ITO 18(2)(3), MUMBAI

ITA 4504/MUM/2009 | 2006-2007
Pronouncement Date: 29-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 450419914 RSA 2009
Assessee PAN AARPD4341G
Bench Mumbai
Appeal Number ITA 4504/MUM/2009
Duration Of Justice 11 month(s) 29 day(s)
Appellant DILIP BHASKARAN, MUMBAI
Respondent ITO 18(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 29-07-2010
Assessment Year 2006-2007
Appeal Filed On 30-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI D.MANMOHAN (VICE PRESIDENT) & SHRI R.K. PANDA (ACCOUNTANT MEMBER) I.T.A.NO.4504/MUM/2009 (A.Y. 2006-07) SHRI DILIP BHASKARAN C/O.JAYA AUTO REPAIR WORKS NR. RACE COURSE GATE NO. 4 DR.E. MOSES RD. MAHALAXMI MUMBAI-400 021. PAN: AARPD4341G VS. INCOME-TAX OFFICER-18(2)(3) MUMBAI. APPELLANT RESPONDENT I.T.A.NO.4882/MUM/2009 (A.Y. 2006-07) INCOME-TAX OFFICER-18(2)(3) MUMBAI. VS. SHRI DILIP BHASKARAN C/O.JAYA AUTO REPAIR WORKS NR. RACE COURSE GATE NO. 4 DR.E. MOSES RD. MAHALAXMI MUMBAI-400 021. PAN: AARPD4341G APPELLANT RESPONDENT ASSESSEE BY SHRI K. GOPAL. DEPARTMEMT BY SHRI SU RENDRA KUMAR. O R D E R PER R.K. PANDA AM : THESE ARE CROSS APPEALS THE FIRST ONE FILED BY TH E ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER DATED 15-05-2009 OF THE CIT(A)XVIII MUMBAI RELATING TO ASSTT. YEAR 20 06-07. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE WAS OCCUPYING A VACANT LAND AS A MONTHLY TENANT OF MUNICIPAL CORPORATION O F GREATER MUMBAI ON AN AREA ADMEASURING 159.3 SQ. METRES AT PLOT NO.51B DR. E. MOSES ROAD TOGETHER WITH ITA 4504-4882/M/09 DILIP BHASKARAN 2 STONE MASONRY GROUND PLUS ONE UPPER FLOOR STRUCTURE . THE ASSESSEE RECEIVED AN AMOUNT OF RS.20 00 101/- AS COMPENSATION ON ACCOUNT OF TRANSFER OF THE MONTHLY TENANCY RIGHTS. THE ASSESSEE HAS NOT DISCLOSED ANY INCOME ON ACCOUNT OF THE ABOVE TRANSACTION. DURING THE SCRUTINY ASSESSMENT P ROCEEDINGS ON BEING QUESTIONED BY THE AO THE ASSESSEE REPLIED AS UNDE R : I WAS UNDER THE BONA FIDE IMPRESSION THAT COMPENSA TION OF RS.18 00 101/- RECEIVED FOR THE ASSIGNMENT RELATING TO RIGHT AS MONTHLY VACANT LAND TENANT IS NOT EXIGIBLE TO TAX A ND HENCE I HAVE NOT DISCLOSED THE SAME IN MY RETURN OF INCOME. A SU M OF RS.2 00 000/- HAD BEEN PAID BY THE ASSIGNEE TO MY F ATHER AS CONFIRMING PARTY TO THE DEED. SINCE THE MONEY RECEI VED BY MY FATHER BELONGS TO ME AS THE ASSIGNOR I AM WILLING TO OFFER THE TOTAL CONSIDERATION RS.20 00 101/- AFTER DEDUCTING THE IN DEXED COST OF ACQUISITION AND IMPROVEMENT BY WAY OF TRANSFER FEES PAID TO THE CORPORATION AS LONG TERM CAPITAL GAINS AND PAY TAX DUE THERE ON. IT WAS FURTHER SUBMITTED THAT SEC.50C OF THE I.T. A CT IS NOT APPLICABLE TO HIM AS HE IS NOT AN ABSOLUTE OWNER OF THE LAND AND THAT PR OVISIONS OF SEC.50C DO NOT APPLY TO ASSIGNMENT OF RIGHTS EFFECTED BY HIM ON TH E LAND BELONGING TO THE CORPORATION. 3. HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE WAS HOLDING THE SAID PROPERTY ON A TENANCY BASIS AND RELINQUISHING THE RIGHT IN SUCH P ROPERTY ALSO CLEARLY FALLS UNDER CAPITAL GAINS AND THE ASSESSEE IS LIABLE TO PAY TAX THEREON. THE AO NOTED THAT THE ASSESSEE IN THE INSTANT CASE HAS RELINQUISHED HIS RIGHT IN THE PROPERTY FOR A CONSIDERATION OF RS.18 00 101/- VIDE A DEED OF ASSI GNMENT DATED 27-10-2005. HE FURTHER NOTED THAT AS PER THE STAMP DUTY ACT THE MA RKET VALUE ASSIGNED TO THIS PROPERTY IS RS.50 70 500/- AS PER THE COPY OF THE S ALE AGREEMENT FILED. THE AO INVOKED THE PROVISIONS OF SEC. 50C OF THE I.T. ACT AND DETERMINED THE CAPITAL GAINS ARISING IN THE HANDS OF THE ASSESSEE AT RS.46 97 486/-. 4. BEFORE THE CIT(A) THE ASSESSEE FURNISHED A COPY OF THE AGREEMENT VIDE ARTICLES OF AGREEMENT DATED 12-06-1997 BETWEEN MUNI CIPAL CORPORATION OF ITA 4504-4882/M/09 DILIP BHASKARAN 3 GREATER MUMBAI AND SHRI DILIP BHASKARAN. SOME OF TH E MAJOR TERMS & CONDITIONS OF THE AGREEMENT WERE BROUGHT TO THE NOTICE OF THE CIT(A) AND IT WAS SUBMITTED THAT THE TENANCY AGREEMENT BETWEEN MUNICIPAL CORPOR ATION OF GREATER MUMBAI AND THE ASSESSEE DOES NOT CREATE ANY RIGHT TITLE O R INTEREST IN THE SAID PIECE OF LAND. THE ONLY RIGHT THE TENANT GOT IN THE TENANTED PREMISES IS THE RIGHT TO REMAIN IN POSSESSION SO LONG AS HE PAYS THE REQUISITE RENT ETC. SUCH A RIGHT IS A PERSONAL RIGHT TO THE TENANT WHICH CANNOT BE TRANSFERRED OR ASSIGNED. SUCH RIGHT DOES NOT ALSO BRING IN ANY INTEREST IN THE PROPERTY OR ESTAT E WHICH HE CAN SUBLET SURRENDER ASSIGN ETC. IT WAS FURTHER SUBMITTED TH AT THE RIGHT IN QUESTION HAS TO BE CONSIDERED AS CASUAL AND NON-RECURRING IN NATURE AS PER SEC. 10(3) AND CANNOT BE CONSIDERED TO BE CAPITAL RECEIPT. THE DECISION O F THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CADELL WVG. MILL CO.(P) LTD . VS. ACIT REPORTED IN 55 ITD 137 (MUM. SPL.BENCH) WAS RELIED UPON. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND FOLLOWING THE DECISION OF SPL. BENCH OF THE TRIBUNAL IN THE CASE OF CADELL WVG. MILL CO. (P) LTD. (SUPRA) THE CIT(A) HELD THAT THE RECEIPT OF RS.20 00 101/- SHALL BE TREATED AS ASSESSEES INCOME OF CASUAL AND NON-RECURRING RECEI PT TAXABLE U/S.10(3) OF THE I.T. ACT. THEREFORE THE AOS STAND OF TREATING THE SAME AS TAXABLE U/S.50C IS NOT MAINTAINABLE. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT (A) BOTH T HE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL: ITA NO.4504/MUM/09 (BY THE ASSESSEE) : 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) [HE REINAFTER REFERRED TO AS CIT(A)] HAS ERRED IN HOLDING THAT THE AMOUNT OF RS.20 00 101/- RECEIVED ON ACCOUNT OF TRANSFER OF L EASEHOLD RIGHTS IS A CASUAL AND NON-RECURRING RECEIPT TAXABLE UNDER SE CTION 10(3) OF THE INCOME-TAX ACT 1961 WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA 4504-4882/M/09 DILIP BHASKARAN 4 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE AP PELLANT HAD ACQUIRED LEASE HOLD RIGHTS AFTER OBTAINING PERMISSI ON FROM THE LAND OWNER I.E. BMC AND TRANSFERRED THE SAME WITH THE CO NSENT OF THE LAND OWNER I.E. BMC. THUS THE LEASE HOLD RIGHTS AR E TRANSFERABLE RIGHTS HENCE THE SAME ARE CAPITAL ASSET. THUS THE COMPENSATION FOR TRANSFER OF LEASE RIGHT IS A CAPITAL RECEIPT AND CA NNOT BE TAXED UNDER THE PROVISIONS OF SECTION 10(3). 3. THE LD. CIT(A0 FAILED TO APPRECIATE THAT THE AP PELLANT HAD TRANSFERRED THE LEASEHOLD RIGHTS IN RESPECT OF LAND OWNED BY BMC. HENCE THE COMPENSATION RECEIVED ON ACCOUNT OF THE A LLOWING ANOTHER PARTY TO USE THE SAME IS A CAPITAL RECEIPT. THUS C OMPUTING THE INCOME OF THE APPELLANT AS PER THE PROVISIONS OF SE CTION 10(3) TREATING THE CAPITAL RECEIPT AS CASUAL AND NON-RECU RRING RECEIPT IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. 4. THE APPELLANT DENIES ANY LIABILITY TO PAY INTER EST U/S. 234B AND 234C. HENCE THE SAME IS NOT LEVIABLE. ITA NO.4882/MUM/09 (BY THE REVENUE) : ON THE FACTS AND IN LAW THE LD. CIT(A) ERRED IN D IRECTING THE A.O. TO TREAT THE RECEIPT OF RS.20 00101/- AS INCOME OF CAS UAL AND NON- RECURRING RECEIPT TAXABLE U/S.10(3) WITHOUT APPRECI ATING THE FACT THAT THE A.O. HAD RIGHTLY TAXED THE COMPENSATION INCURRE D AS LTCG U/S. 45 R.W.S. 50C OF THE I.T. ACT. 7. AT THE TIME OF HEARING BOTH THE SIDES AGREED TH AT THE MATTER SHOULD BE RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDI CATION SINCE THE DECISION OF THE SPECIAL BENCH HAS BEEN REVERSED BY THE JURISDICTION AL HIGH COURT REPORTED IN 249 ITR 265 AND THE HONBLE SUPREME COURT HAS UPHELD TH E DECISION OF THE JURISDICTIONAL HIGH COURT REPORTED IN 273 ITR 1. FU RTHER PROVISIONS OF SEC. 10(3) ARE OMITTED BY THE FINANCE ACT 2002 W.E.F. 1-4-20 03. SINCE THE DECISIONS OF THE JURISDICTIONAL HIGH COURT AS WELL AS SUPREME COURT WERE AVAILABLE AT THE TIME OF DECIDING THE APPEAL AND SINCE THE CIT(A) HAS NOT CO NSIDERED THOSE DECISIONS AND FURTHER CONSIDERING THE FACT THAT PROVISIONS OF SEC . 10(3) HAVE BEEN OMITTED BY THE FINANCE ACT 2002 THEREFORE WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION OF THE ISSUE. HE SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ITA 4504-4882/M/09 DILIP BHASKARAN 5 ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUN DS RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ITSELF I.E. ON THE 27TH DAY OF JULY 2010. SD/- SD/- (D. MANMOHAN) (R.K. PANDA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 27 TH JULY 2010. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-XVIII MUMBAI. 4 CIT MC-XVIII MUMBAI. 5.DR D BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA 4504-4882/M/09 DILIP BHASKARAN 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 27-07-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 27-07-2010 SR.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/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER