P.N. AMERSEY HUF, MUMBAI v. ACIT 16(1), MUMBAI

ITA 4812/MUM/2011 | 2007-2008
Pronouncement Date: 10-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 481219914 RSA 2011
Assessee PAN AAAHP6321H
Bench Mumbai
Appeal Number ITA 4812/MUM/2011
Duration Of Justice 2 year(s) 25 day(s)
Appellant P.N. AMERSEY HUF, MUMBAI
Respondent ACIT 16(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 10-07-2013
Date Of Final Hearing 24-12-2012
Next Hearing Date 24-12-2012
Assessment Year 2007-2008
Appeal Filed On 15-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH BENCH BENCH BENCH MUMBAI MUMBAI MUMBAI MUMBAI ! ! ! ! ' ' ' ' # # # # . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI SANJAY ARORA SANJAY ARORA SANJAY ARORA SANJAY ARORA AM AM AM AM & & & & SHRI SHRI SHRI SHRI VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM ./ I. I.I. I.T.A. NO. T.A. NO. T.A. NO. T.A. NO.4812/MUM/2011 4812/MUM/2011 4812/MUM/2011 4812/MUM/2011 ( $% & $% & $% & $% & / ASSESSMENT YEAR : 2007-08) P. N. AMERSEY-HUF PROP OF AMERSEY INDUSTRIES & EXPORTS C.S. NO. 180/1 ARVIND HOUSE DARUKHANA QUAY STREET REAY ROAD EAST MUMBAI-400010 % % % % / VS. ACIT 16(1) MATRU MANDIR TARDEO MUMBAI !' ./ ( ./ PAN/GIR NO. : AAAHP6321H ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') / APPELLANT BY : SHRI HIRA RAI *+') - *+') - *+') - *+') - /RESPONDENT BY : SHRI SANTOSH KUMAR % - . % - . % - . % - . / DT. OF HEARING : 2 ND JULY 2013 /& /& /& /& - -- -. . . . /DT. OF PRONOUNCEMENT: 10 TH JULY 2013 0 / O R D E R PER : # . . / VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 10.3.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRM ING THE ACTION OF THE ACIT IN TAXING U/S 48 R.W.S. 55(2)(A) OF THE I. T. ACT TWO SUMS ONE OF ` 4 55 46 575/- AND ANOTHER OF ` 5.00 LAKHS RECEIVED BY THE APPELLANT FOR SURRENDERING THE POSSESSARY RIGHTS OF PREMISES SITUATED AT MATHURADAS MILLS ESTATE BY INCORRECTLY TREATING THE SAID RIGHTS AS TENANCY RIGHTS AS ALSO SUB TENANCY RIGHTS . ITA NO. 4812/M/2011 P N AMERSEY HUF . 2 (B) THE LEARNED CIT (APPEALS) HAS FURTHER ERRED IN HOLDING THAT TWO AGREEMENTS ENTERED INTO BY THE APPELLANT ONE DATED 14.8.1969 WITH MUNSHAW INVESTMENT CORPORATION AND ANOTHER DT. 29.4.1970 WITH NANUS METAL (BRASS) WORKS ARE NOT ONE OF LEA VE AND LICENSE BUT ARE FOR LEASE AND CONSEQUENTLY THE APPELLANT HA D RIGHT AS A SUB-TENANT IN THE SAID PREMISES. (C) THE LEARNED CIT (APPEALS) HAS FAILED TO APPREC IATE THAT THE APPELLANT HAD ONLY POSSESSARY RIGHTS IN THE PREMISE S SURRENDERED WHICH ARE DIFFERENT FROM TENANCY RIGHTS AND HENCE T HE CONSIDERATION RECEIVED FOR THE SAME IS NOT TAXABLE AS CAPITAL GAIN U/S 48 R.W.S. 55(2)(A) OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED CIT (APPEALS) HAS ERRED IN DISALLOWING INTEREST OF ` 17 26 591/- PAID ON LOANS BORROWED BY THE APPELLANT . GROUND NO. 1(A) TO (C) IS REGARDING ASSESSMENT U/S 48 R.W.S 55(2)(A) OF INCOME TAX ACT OF THE AMOUNT RECEIVED BY THE ASSESS EE FOR SURRENDERING THE RIGHTS IN THE PREMISES IN QUESTION. THE ASSESSE E WAS IN OCCUPATION OF THE PREMISES ON THE GROUND FLOOR 1 ST FLOOR AND 2 ND FLOOR SITUATED IN THE MATHURADAS MILLS COMPOUND PREMISES ESTATE LOWER PA REL MUMBAI. THE PREMISES WAS OWNED BY TRUSTEES OF THE TRUST SETTLED BY M/S KARUNASHANKAR PUNJARAM. THE SAID TRUST LEASED THE S AID PREMISES TO M/S MUNSHAW INVESTMENT CORPORATION A PARTNERSHIP FIRM ON MONTHLY RENT. M/S MUNSHAW INVESTMENT CORPORATION FURTHER GIVEN THIS PREMISES TO THE ASSESSEES PROPRIETORSHIP CONCERNED M/S AMERSEY IND USTRIES & EXPORTS VIDE AGREEMENT DATED 14.8.1969 FOR A MONTHLY LICENS E FEE OF ` 14 050/-. THE ASSESSEE SURRENDERED ITS RIGHTS IN THE SAID PRE MISES IN FAVOUR OF M/S PIRAMID RETAIL PVT. LTD. VIDE AGREEMENT DATED 7.2.2 006 FOR COMPENSATION OF ` 4 55 46 575/-. FURTHER DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED ADDITIONAL SUM OF ` 5 LACS FROM M R. MANEK DAVAR FOR THE ITA NO. 4812/M/2011 P N AMERSEY HUF . 3 RIGHTS SURRENDERED IN RESPECT OF ANOTHER PREMISES S ITUATED AT MATHURADAS MILLS ESTATE LOWER PAREL MUMBAI. 3. BEFORE THE AUTHORITIES BELOW THE ASSESSEE CONTE NDED THAT THE ASSESSEE HAS POSSESSORY RIGHTS OVER THE IMPUGNED PR OPERTY BY VIRTUE OF THE AGREEMENTS BETWEEN THE PARTIES AND SUCH RIGHTS CANNOT BE EQUATED WITH TENANCY RIGHTS. FURTHER THE ASSESSEE HAS SUBM ITTED THAT SINCE IT HAS ONLY SURRENDERED ITS LICENCE TO USE THE SAID PREMIS ES AND THE COST OF ACQUISITION OF SUCH LICENCES BEING NIL THE AMOUNT RECEIVED BY THE ASSESSEE ON SURRENDERING OF LICENCE/POSSESSORY RIGH TS IS NOT TAXABLE. THE AO HELD THAT THE POSSESSORY RIGHTS IN THE PROPERTY POSSESS BY THE ASSESSEE ARE NOTHING BUT SUB-TENANCY RIGHTS AVAILAB LE TO THE ASSESSEE HAVING REGARD TO THE TERMS AND CONDITIONS OF THE AG REEMENT ENTERED INTO BETWEEN THE PARTIES. THE AO WAS OF THE VIEW THAT TH E RIGHTS TERMED AS POSSESSORY RIGHTS HAVING BEEN ACQUIRED BY A VALIDLY EXECUTED TENANCY AGREEMENT AND ALSO SURRENDERED BY WAY OF AGREEMENT NAMELY THE DEED OF SURRENDER OF TENANCY AND THEREFORE THE IMPUGNE D RIGHTS ARE NOTHING BUT TENANCY RIGHTS COVERED U/S 2(14) R.W.S 55(2)(A) OF THE ACT. ACCORDINGLY THE AO BROUGHT THE SAID AMOUNT RECEIVED BY THE ASSE SSEE ON SURRENDERING OF THE RIGHTS OF THE PROPERTY TO TAX UNDER THE HEAD CAPITAL GAIN. ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE AO B Y FOLLOWING THE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2005-06 WH EREIN AN IDENTICAL ISSUE WAS INVOLVED. ITA NO. 4812/M/2011 P N AMERSEY HUF . 4 4. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR HAS REITERA TED THE CONTENTIONS AND SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW AS WELL AS THE ARGUMENTS ADVANCED BEFORE THE TRIBUNAL FOR THE ASSE SSMENT YEAR 2005- 06. ON THE OTHER HAND THE LD. DR HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ISSUE IS C OVERED BY THE ORDER FOR THE ASSESSMENT YEAR 2005-06. THE LD. AR HAS FAIRLY CONCEDED THAT THE FACTS AND ISSUE ARE IDENTICAL AS IN ASSESSMENT YEAR 2005-06 AND THIS TRIBUNAL HAS DECIDED THIS ISSUE AGAINST THE ASSESSE E VIDE ORDER DATED 29.2.2012 IN ITA NO. 1897/M/2009. AS POINTED OUT BY THE PARTIES WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DEC IDED BY THE CO- ORDINATE BENCH IN THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06 IN PARA 10.6-11 AS UNDER: 10.6 IN THE PRESENT CASE THE ASSESSEE IS IN CONTIN UOUS POSSESSION OF THE PROPERTY WAS CONTINUOUSLY CONDUCTING THE BU SINESS FROM THE PREMISES IN FACT HAD RIGHT TO CONSTRUCT BUILDI NGS THEREIN FOR THE PURPOSE OF BUSINESS SUBJECT TO PERMISSION FROM THE TENANTS AND THE AUTHORITIES AND FURTHER HE HAD UNDERTAKEN T O PAY INCREASED TAX IF ANY ON THE SAID PREMISES. ALL TH ESE FACTORS INCLUDING THE FACT THAT THE ASSESSEE UNDERTOOK NOT TO SUBLET THE PREMISES TO OTHERS DO INDICATE THAT THE ASSESSEE IS KEEPING THE PREMISES ONLY AS A SUB-TENANT WITH TENANCY RIGHTS. AS RIGHTLY OBSERVED BY THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF SARDAR PRUTHISINGH VS KANCHANLAL PURUSHOTTAMDAS DESAI IN A IR 2001 BOM 255 THE QUESTION OF ALLOWING TO LET OUT THE PREMIS ES CAN ONLY BY A TENANT. 10.7 ANOTHER FACTOR WHICH ALSO CAN BE VIEWED BUT MA Y NOT BE MATERIAL FOR DECIDING THE ISSUE IS THAT THE LANDLO RD/VENDOR HAS ONLY RECEIVED A CONSIDERATION OF ` 75 LAKHS FOR SAL E OF THE TRUST PROPERTY WHEREAS THE ASSESSEE FOR SURRENDERING HIS POSSESSORY TITLE/ OTHER RIGHTS (AS MENTIONED IN THE AGREEMENT ITSELF) HAS OBTAINED ` 1.75 LATHS (PLUS ` 5 LAKHS FROM MR. MANE CK DAVAR BY VIRTUE OF TWO AGREEMENTS. OF COURSE SINCE ALL PARTI ES ARE SAME HOW THE AMOUNTS ARE APPORTIONED FOR VACATING TWO PR EMISES UNDER ITA NO. 4812/M/2011 P N AMERSEY HUF . 5 OCCUPATION UNDER TWO DIFFERENT AGREEMENTS CAN ONLY BE EXPLAINED BY THE ASSESSEE). THE FACT IS THAT THE AMOUNT RECEI VED BY THE ASSESSEE WAS MORE THAN THE AMOUNT RECEIVED BY THE V ENDORS PER SE. THIS ALSO INDICATES THAT THERE IS A RIGHT IN TH E SAID PROPERTY TO THE ASSESSEE AND NOT MERE A LICENSE HOLDER AS CONTE NDED. CONSIDERING ALL THE ABOVE ASPECTS WE HAVE NO HESIT ATION IN AFFIRMING THE ORDERS OF THE REVENUE AUTHORITIES THA T THE ASSESSEE IS HAVING PROPERTY AS A SUB TENANT AND HIS TENANCY RIGHTS WERE SURRENDERED TO THE BUYER. THEREFORE PROVISIONS OF SECTION 55(2) ARE APPLICABLE. 10.8. THE CASE LAW RELIED UPON BY THE ASSESSEE IN T HE CASE OF CIT VS. M. APPUKUTTY 253 ITR 159 IS NOT APPLICABLE FOR THE REASON THAT THE ACT WAS AMENDED SUBSEQUENTLY. THE SAID DECISION WAS RENDERED FOR THE ASSESSMENT YEAR 1987-88 WHEN THE P ROVISIONS OF SECTION 55(2) WERE NOT ON STATUTE. THEREFORE RELIA NCE ON THE PRINCIPLES ESTABLISHED IN THE ABOVE SAID DECISION I S NOT CORRECT IN THE CASE OF M. N. CLUBWALA VS. FIDA HUSSAIN SAHEB. & OTHERS (AIR 1965 (SC) 610) ALSO RELIED ON BY THE COUNSEL THE F ACTS ARE ENTIRELY DIFFERENT FROM THAT OF ASSESSEE. THE FACTS IN THE A BOVE REFERRED CASE ARE THAT THE APPELLANTS WERE HOLDING THE LICEN SE TO A MARKET CONSTITUTING OF STALLS WHICH WERE LICENSED TO VARIO US STALL HOLDERS. THE OWNERSHIP RIGHTS WERE THAT THE APPELLANT AND ST ALL HOLDERS WERE CONDUCTING THEIR BUSINESS ONLY FOR A FIXED PER IOD AND THAT TO THEY DID NOT HAVE THE RIGHT TO STAY IN THE PREMISES BEYOND THE BUSINESS HOURS. FURTHER THE MAINTENANCE AND CLEANI NG OF THE MARKET WAS THE RESPONSIBILITY OF THE APPELLANT (OWN ER) AND THERE IS NO PERMISSION GIVEN TO KEEP THE GOODS IN THE SAID P REMISES. ACCORDINGLY CONSIDERING THOSE FACTS THE HONBLE SU PREME COURT HELD THAT THE ARRANGEMENT IS ONLY A LICENSE AGREEME NT AND NOT LEASE. OTHER DECISIONS LAID UPON ARE ALSO NOT APPLI CABLE AS CONSIDERED ABOVE ON THE FACTS OF THE CASE. 11 THEREFORE RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN BY THE DECISIONS OF THE HONBLE SUPREME COURT (SUPRA) AND HONBLE BOMBAY HIGH COURT IN THE CASE OF SARDAR PRUTHISINGH VS KANCHANLAL PURUSHOTTAMDAS DESAI IN AIR 2001 BOM 255 WE HOLD T HAT ASSESSEE IS HAVING SUBSTANTIAL RIGHTS AS TENANT (SU B-TENANT) VIDE THE AGREEMENT AND NOT MERE LICENSE HOLDER AND THE A MOUNT IS CORRECTLY BROUGHT TO TAX BY THE REVENUE AUTHORITIES AND THEREFORE ASSESSEES CONTENTIONS IN GROUND NO.1 DOES NOT REQU IRE ANY CONSIDERATION. ACCORDINGLY GROUND NO.1 IS REJECTED. FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 WE DECIDE THIS ISSUE A GAINST THE ASSESSEE ITA NO. 4812/M/2011 P N AMERSEY HUF . 6 AND IN FAVOUR OF THE REVENUE. THE IMPUGNED ORDER OF THE CIT(A) QUA THIS ISSUE IS UPHELD. 5. GROUND NO. 2 IS REGARDING DISALLOWANCE OF INTERE ST. THE ASSESSEE HAS CLAIMED A SUM OF ` 17 26 591/- AS INTEREST EXPE NDITURE. THE AO HAS DISALLOWED THIS AMOUNT ON THE GROUND THAT THE ASSES SEE HAS ADVANCED INTEREST FREE AMOUNT TO THE RELATED PARTY BY INVOKI NG THE PROVISION OF SECTION 36(1)(III) AS A SIMILAR DISALLOWANCE WAS MA DE FOR THE ASSESSMENT YEAR 2005-06. THE CIT(A) HAS CONFIRMED THE DISALLOW ANCE MADE BY THE AO BY FOLLOWING THE ORDER OF HIS PREDECESSOR FOR THE A SSESSMENT YEAR 2005- 06. 6. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DISPOSED OFF BY THIS TRIBUN AL FOR THE ASSESSMENT YEAR 2005-06 IN PARA 14 AS UNDER: 14. WE ARE UNABLE TO UNDERSTAND THE LOGIC OF THE C IT (A) IN ENHANCING THE DISALLOWANCE. IT WAS THE SUBMISSION B EFORE HIM THAT ASSESSEE HAS OLD INTEREST FREE LOANS AS WELL AS INT EREST BEARING LOANS AND NEW LOANS TAKEN DURING THE YEAR WERE ADVA NCED FOR BUSINESS PURPOSES. THE ASSESSEE FURTHER SUBMITTED T HAT THE LABOUR CHARGES RECEIVED WERE TO THE TUNE OF ` 1.26 CRORES TO ` 1.75 CRORES IN THE EARLIER THREE YEARS AND THE BUSINESS WAS DON E WITH M/S MILTON SKIN WEAR PVT. LTD AND MILTONS PVT. LTD. IT WAS ALSO FURTHER SUBMITTED THAT THE ASSESSEE HAS CREDIT BALANCES RE SERVES AND CURRENT LIABILITIES TO THE EXTENT OF ` 4.05 CRORES AND INVESTMENT IN FIXED ASSETS AND CURRENT ASSETS TO THE TUNE OF ` 1. 75 CRORES. IT WAS FURTHER SUBMITTED THAT THE RELYING ON THE DECISION OF THE SUPREME COURT JUDGMENTS IN THE CASE OF SA BUILDERS (288 ITR 1) THE ENTIRE AMOUNT ADVANCED IS FOR THE PURPOSE OF BUSINESS. THE SE ASPECTS WERE NOT CONSIDERED BY THE CIT(A) IN ITS CORRECT PE RSPECTIVE AND ENHANCED THE AMOUNT. WE ARE OF THE OPINION THAT THE NEXUS OF THE BORROWED FUNDS TO THAT OF UTILIZATION IS TO BE RE-E XAMINED BY THE ASSESSING OFFICER SO AS TO DETERMINE WHETHER ANY OF THE BORROWED ITA NO. 4812/M/2011 P N AMERSEY HUF . 7 FUNDS WERE DIVERTED FOR NON- BUSINESS PURPOSES. THE REFORE IN THE INTEREST OF JUSTICE WE RESTORE THE ISSUE TO THE-FI LE OF THE ASSESSING OFFICER AND DIRECT HIM TO EXAMINE AND GIVE HIS FIND INGS WHETHER THE AMOUNTS BORROWED ON INTEREST WERE ADVANCED FOR NON BUSINESS PURPOSES AND IF SO DISALLOW THE AMOUNT TO THE EXTE NT OF DIVERSION UNDER SECTION 36(1)(III). THE ORDERS OF THE ASSESSI NG OFFICER AND THE CIT(A) ON THIS ISSUE ARE ACCORDINGLY SET ASIDE AND THE ISSUE TO THAT EXTENT IS RESTORED TO THE FILE OF THE ASSESSIN G OFFICER TO EXAMINE AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE AND DECIDE THE DISALLOWANCE IF ANY AS PER FACTS AND L AW. GROUND NO.2 IS CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY FOLLOWING THE EARLIER ORDER OF THIS T RIBUNAL WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER T O EXAMINE AFRESH IN TERMS OF THE DIRECTIONS GIVEN BY THE TRIBUNAL FOR THE ASS ESSMENT YEAR 2005-06. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 0 TH JULY 2013 SD/- SD/- ( ) ! (SANJAY ARORA) ACCOUNTANT MEMBER ( # ) $ ! (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI: DATED: 10 TH JULY 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI