SATINDERPAL INVESTMENTS P. LTD, MUMBAI v. ITO 7(2)(2), MUMBAI

ITA 4847/MUM/2010 | 2007-2008
Pronouncement Date: 31-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 484719914 RSA 2010
Assessee PAN AAACS5169F
Bench Mumbai
Appeal Number ITA 4847/MUM/2010
Duration Of Justice 3 year(s) 1 month(s) 19 day(s)
Appellant SATINDERPAL INVESTMENTS P. LTD, MUMBAI
Respondent ITO 7(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 31-07-2013
Date Of Final Hearing 26-06-2013
Next Hearing Date 26-06-2013
Assessment Year 2007-2008
Appeal Filed On 11-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI R.K.GUPTA JM & SHRI N.K.BILLAIYA AM ITA NO. 4847 / MUM/ 20 1 0 ( ASSESSMENT YEAR : 200 7 - 0 8 ) M/S SATINDERPAL INVESTMENTS PVT. LTD. KASHIRAM JAMNADAS BLDG. 5 P.D.MELLO ROAD MUMBAI - 400 009 VS. ITO 7(2) (2) MUMBAI PAN/GIR NO. : A AAC S 5169 F ( APPE LLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. H.S.RAHEJA /REVENUE BY : MR. GIRIJA DAYAL DATE OF HEARING : 26 TH JUNE 201 3 DATE OF PRONOUNCEMENT : 31 ST JUL Y 2013 O R D E R PER SHRI R.K.GUPTA JM : TH IS APPEAL HA S BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 31 - 3 - 2010 PASSED BY THE LEANED CIT(A) - 13 MUMBAI RELATING TO THE ASSESSMENT YEAR 2007 - 08 . 2 . WHILE FILING THE APPEAL THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT ACCEPTING THE PLEA OF THE APPELLANT THAT THE AMOUNT RECEIVED BY THE APPELLANT ON RETIREMENT AS A PA RTNER FROM EVEREST CONSTRUCT6ION CO. IS NOT TAXABLE AT THE HANDS OF THE APPELLANT. ITA NO . 4847 /201 0 2 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT ACCEPTING IN HOLDING THAT THE AMOUNT RECEIV ED BY THE APPELLANT ON RETIREMENT AS A PARTNE R FROM EVEREST CONSTRUCTION CO. IS TAXABLE AS SHORT TERM CAPITAL GAINS IN THE HANDS OF THE APPELLANT. 3. WITHOUT PREJUDIC E TO THE ABOVE ON THE FACTS AN D IN T HE CIRCUMSTANCES OF THE CASE AND IN LAW EVEN IF THE AMOUNT RECEIVED BY THE APPELLANT ON RETIREMENT AS A PARTNER FROM EVEREST CONSTRUCTION CO. IS HELD TO BE TAX AB LE IN THE HANDS OF THE APPELLANT; THE LEARNED CO MMIS SIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THE SA M E AS LONG TERM CAPITAL GAINS SINCE TH E APPELLANT WAS A PART.NER IN THE SAID FIRM SINCE 26 - .1.2 - 1980 AND RET IRED ON 31 - 10 - 2006 I.E. AFTER 25 YEARS. 3 . THEREAFTER THE ASSESSEE HAS FILED APPLICATION DATED 9 - 5 - 2011 FOR ADMITTING THE ADDITION GROUNDS WHICH ARE AS UNDER : - 1. WITHOUT PREJUDICE TO THE CONTENTION OF THE APPELLANT THAT THE AMOUNT RECEIVED BY THE APPELLANT ON RETIREMENT AS A PARTNER FROM EVEREST CONSTRUCTION CO. IS NOT TAXABLE AT THE HANDS OF THE APPELLANT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING DEDUC TION OF RS. 10 00 000/ - BEING PROFESSIONAL AND OTHER CHARGES PAID AND CLAIMED BY THE APPELLANT OF WHICH RS. 9 00 000/ - WAS DULY ALLOWED AS A DEDUCTION BY THE ASSESSING OFFICER FROM THE AMOUNT RECEIVED BY THE APPELLANT ON RETIREMENT AS A PARTNER AND THUS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN COMPUTING TAXABLE AMOUNT AS RS. 3 01 72 850/ - IN PLACE OF RS. 2 93 16 165/ - COMPUTED BY THE ASSESSING OFFICER. 4. THE ASSESSEE FILED ANOTHER APPLICATION DATED 1 - 5 - 2012 FOR ADMITTING THE FOLLOWING ADDITION GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME - TAX (APPEALS) WAS NOT JUSTIFIED IN NOT ALLOWING A DEDUCTION FOR THE SUM OF RS. 900 000/ - ALLOWED BY THE ASSESSING OFFICER BEING THE STANDARD THE CHARGES PAID IN RESPECT OF THE RETIREMENT DEED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME - TAX (APPEALS) HAVING HELD THAT THE AMOUNT RECEIVED BY T HE APPELLANT ON RETIREMENT AS A PARTNER FROM EVEREST CONSTRUCTION COMPANY WAS ASSESSABLE AS A CAPITAL GAIN AND NOT EXEMPT AS CLAIMED BY THE APPELLANT OUGHT TO HAVE ALLOWED DEDUCTION OF RS. 10 L AKHS IN RESPECT O F PROFESSIONAL AND OTHER CHARGES PAID BY THE A PPELLANT IN CONNECTION WITH THE RETIREMENT. ITA NO . 4847 /201 0 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW; AND WITHOUT PREJUDICE TO THE OTHER GROUNDS IF THE AMOUNT RECEIVED BY THE APPELLANT ON RETIREMENT AS A PARTNER FROM EVEREST CONSTRUCTION COMPANY IS NOT HELD TO BE EXEMPT FROM TAX AS CLAIMED BY THE APPELLANT BUT CHARGEABLE TO TAX AS LONG - TERM CAPITAL GAIN THEN THE APPELLANT BE ALLOWED THE DEDUCTION IN RESPECT OF A SUM OF RS. 50 LAKHS INVESTED BY THE APPELLANT AS PER THE PROVISIONS OF S. 54EC. 5 . BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AO TREATED THE AMOUNT RECEIVED ON RETIREMENT FROM EVEREST CONSTRUCTION COMPANY AS PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SECTION 28(IV) ON ACTUAL RECEIPTS. DURING THE ASSESSMENT PROCEEDING THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 3 01 72 850/ - AS COMPENSATION PAID ON RETIREMENT FROM M/S EVEREST CONSTRUCTION COMPANY THE PARTNERSHIP FIRM. THE AO NOTICED THAT THE ASSESSEE HAS NOT OFFERED THE SAME AMOUNT FOR TAXATION FOR THE YEAR UNDE R CONSIDERATION. IN HIS VIEW THE RECEIPT RECEIVED BY THE ASSESSEE ON ACCOUNT OF COMPENSATION ON RETIREMENT FROM THE PARTNERSHIP FIRM IS TAXABLE UNDER SECTION 28(IV) OF THE ACT. ACCORDINGLY HE BROUGHT THE AMOUNT TO TAX. THE AO ALSO BROUGHT THE AMOUNT OF RS . 7 09 387/ - FOR THE PURPOSE OF TAXATION WHICH WAS OPENING BALANCE IN THE CAPITAL ACCOUNT OF THE ASSESSEE. IN THIS WAY THE TOTAL AMOUNT OF RS. 3 08 82 238/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. HOWEVER THE DEDUCTION OF RS. 9 LAKHS WAS REDUCED WHICH WA S PAID ON ACCOUNT OF PREPARING THE RETIREMENT DEED ETC. 6 . BEFORE THE CIT(A) THE ASSESSEE OBJECTED THE ADDITION MADE UNDER SECTION 28(IV) OF THE ACT. LEARNED CIT(A) AFTER CONSIDERING THE ISSUE IN DETAIL AND FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS. TRIBHUVANDAS G. PATEL REPORTED IN ITA NO . 4847 /201 0 4 115 ITR 95 WHEREIN IT HAS BEEN HELD THAT THE CAPITAL GAIN TAX WAS C HARGEABLE ON THE AMOUNT DISTRIBUTED BY THE FIRM ON DISSOLUTION. LEARNED CIT(A) ALSO CONSIDERED THE DECISION IN THE CASE OF H.R.ASLOT IN THE CASE OF TRIBHUVANDAS G. PATEL (SUPRA) AND IN THE CASE OF N.A.MODY VS. CIT REPORTED IN 162 ITR 420 AND HELD THAT THE AMOUNT RECEIVED AS COMPENSATION ON RETIREMENT OF THE PARTNER IS TAXABLE. SINCE THE ISSUE WAS COVERED BY THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT ACCORDINGLY THE APPEAL OF THE ASSESSEE WAS DISMISSED. HOWEVER THE AMOUNT OF RS. 7 09 387/ - WAS REDUCED WHICH WAS OPENING CAPITAL OF THE ASSESSEE IN THE FIRM. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 7 . VARIOUS GROUNDS OF APPEAL HAVE BEEN TAKEN WHICH ARE REPRODUCED IN THIS ORDER SOMEWHERE ABOVE. THE CONTENTIONS RAISED BEFORE THE LEARNED CIT(A) WAS REITERATED. IT WAS FURTHER SUBMITTED THAT THE HON BLE BOMBAY HIGH COURT HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE IN CASE OF PRASHANT S. JOSHI VS. ITO REPORTED IN 324 ITR 154 . IN RESPECT OF ADDITIONAL GROUNDS RAISED BY THE ASSESSEE THE RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. MS. SWEETOO H. MEH TA DECIDED IN ITA NO.1270/M/2009 VIDE ORDER DATED 27 - 8 - 2010 . COPY OF THESE ORDERS ARE PLACED ON RECORD. 8 . ON THE OTHER HAND LEARNED DR PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(A) . FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN C ASE OF SUDHAKAR M. SHETTY VS. ACIT REPORTED IN (2011) 130 ITD 197 (MUM) AND IT WAS STATED THAT THE DECISION OF THE HON BLE ITA NO . 4847 /201 0 5 BOMBAY HIGH COURT IN THE CASE OF PRASHANT S. JOSHI (SUPRA) RELIED UPON BY THE LEARNED AR HAS ALSO BEEN TAKEN INTO CONSIDERATION AND THEREAFTER THE APPEAL OF THE ASSESSEE HAS BEEN DISMISSED ON SIMILAR FACTS. ATTENTION OF THE BENCH WAS DRAWN ON A COPY OF THE ORDER FILED DURING THE APPELLATE PROCEEDING. 9 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD ALONG WITH VARIOUS CASE LAWS CONSIDERED BY THE CIT(A) RELIED UPON BY THE LEARNED AR AS WELL AS LEARNED DR WE FOUND THAT LEARNED CIT(A) WAS CORRECT IN HOLDING THAT COMPENSATION RECEIVED ON RETIREMENT F ROM PARTNERSHIP IS TAXABLE UNDER SECTION 28(IV) OF THE ACT. LEARNED CIT(A) HAS CONSIDERED THREE DECISIONS OF THE JURISDICTIONAL HIGH COURT I.E. IN THE CASE OF H.R.ASLOT IN THE CASE OF TRIBHUVANDAS G. PATEL (SUPRA) AND IN THE CASE OF N.A.MODY VS. CIT REPO RTED IN 162 ITR 420 . IN ALL THESE DECISIONS THE HON BLE BOMBAY HIGH COURT HAS HELD THAT THE COMPENSATION RECEIVED IS TAXABLE WITHIN THE MEANING OF SECTION 2(47) READ WITH SECTION 48 OF THE ACT. THESE DECISIONS ARE DIRECTLY ON THE ISSUE THEREFORE THEY AR E BINDING . WE HAVE ALSO SEEN THE DECISION IN CASE OF PRASHANT S. JOSHI (SUPRA) AND FOUND THAT THE ISSUE BEFORE THE HON BLE JURISDICTIONAL HIGH COURT WAS IN RESPECT TO REOPENING OF THE ASSESSMENT. THE HON BLE HIGH COURT HAS HELD THAT THERE WAS NO MATERIAL BEFORE THE AO FOR REOPENING OF THE ASSESSMENT AND ACCORDINGLY APPEAL OF THE ASSESSEE WAS ALLOWED. WE FURTHER NOTED THAT IN THE CASE OF SUDHAKAR M. SHETTY (SUPRA) ALL THE DECISION S OF THE ITA NO . 4847 /201 0 6 HON BLE BOMBAY HIGH COURT INCLUDING THE DECISION IN THE CASE OF PRASH ANT S. JOSHI (SUPRA) HAVE BEEN CONSIDERED AND THEREAFTER IN PARA 52 THE BENCH HAS RECORDED A FINDING THAT WE ARE OF THE VIEW THAT THE HON BLE BOMBAY HIGH COURT HAS IN THE AFORESAID DECISION IN THE CASE OF PRASHANT S. JOSHI (SUPRA) NOT CONSIDERED THE E ARLIER DECISIONS IN THE CASE OF N.A.MODY (SUPRA) AND H.R.ASLOT (SUPRA) . MOREOVER THE DECISION IN THE CASE OF PRASHANT S. JOSHI (SUPRA) WAS RENDERED IN THE CONTEXT OF VALIDITY OF NOTICE UNDER SECTION 148 OF THE ACT. THEREFORE THE AFORESAID DECISION HAS N O APPLICATION TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE TRIBUNAL. FACTS ARE SIMILAR HERE BEFORE US. THEREFORE WE HOLD THAT LEARNED CIT(A) WAS CORRECT IN REJECTING THE GROUNDS OF THE ASSESSEE. ACCORDIN GLY WE CONFIRM THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE. 10 . HOWEVER WE FOUND THAT THE THIRD ADDITION AL GROUND RAISED BY THE ASSESSEE THROUGH ITS APPLICATION DATED 1 - 5 - 2012 IS LIABLE TO BE ACCEPTED. THE LEARNED CIT(A) HAS HELD THAT THE COMPENSATIO N RECEIVED ON RETIREMENT IS LIABLE TO TAX BY TREATING THE SHORT TERM CAPITAL GAIN WHEREAS THE CIT(A) SHOULD HAVE TAKEN INTO CONSIDERATION WHEN THE ASSESSEE JOINED THE PARTNERSHIP. ON JOINING OF PARTNERSHIP AN ASSET HAS BEEN CREATED WITHIN THE MEANING OF SECTION 2(47) READ WITH SECTION 48 OF THE ACT AS HELD BY THE HON BLE HIGH COURT IN THE CASE OF N.A.MODY (SUPRA) AND IN OTHER DECISIONS (SUPRA) . THE ASSESSEE JOINED IN THE PARTNERSHIP FIRM WITH EFFECT FROM 26 - 12 - 1980 AND CONTRIBUTED THE ITA NO . 4847 /201 0 7 RIGHT TO CONSTRUCT A S CAPITAL THEREFORE THE DATE OF ASSET CONTRIBUTED BY THE ASSESSEE IN THE PARTNERSHIP IS TO BE TAKEN AS 26 - 12 - 1980 AND THE ASSESSEE HAS RECEIVED COMPENSATION ON RETIREMENT SOME TIME IN THE YEAR OF 2007 . ACCORDINGLY THE LONG TERM CAPITAL GAIN HAS TO BE CHA RGED. THEREFORE THIS LEGAL GROUND OF THE ASSESSEE IS ALLOWED. WE ALSO HOLD THAT ANY EXEMPTION UNDER SECTION 54EC IF THE CONDITIONS ARE SATISFIED IS ALSO REQUIRED AS HELD BY THE TRIBUNAL IN THE CASE OF MS. SWEETOO H. MEHTA (SUPRA) . IN THIS CASE THE COMP ENSATION SO RECEIVED WAS TREATED AS SHORT TERM CAPITAL GAIN HOWEVER THE DEDUCTION UNDER SECTION 54EC WAS NOT ALLOWED. ON APPEAL LEARNED CIT(A) ALLOWED THE EXEMPTION UNDER SECTION 54EC OF THE ACT. ON APPEAL BY THE DEPARTMENT THE TRIBUNAL CONSIDERED THE ISSUE IN DETAIL AND HELD THAT THE DEDUCTION UNDER SECTION 54EC IS ALLOWABLE. SIMILAR FACTS ARE INVOLVED IN THE PRESENT CASE ALSO AS THE ASSESSEE RECEIVED CERTAIN COMPENSATION ON RETIREMENT FROM THE FIRM AND INVESTED CERTAIN AMOUNT FOR CLAIMING EXEMPTION U NDER SECTION 54EC THEREFORE IN OUR VIEW THE EXEMPTION IS ALLOWABLE IF ALL THE OTHER CONDITIONS ARE SATISFIED. ACCORDINGLY WE DIRECT THE AO TO ALLOW THE EXEMPTION UNDER SECTION 54 EC SUBJECT TO SATISFYING IN RESPECT TO CONDITIONS LAID DOWN FOR CLAIMIN G EXEMPTION UNDER SECTION 54EC. 11 . REGARDING THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE I.E. IN RESPECT TO AMOUNT OF RS. 10 LAKHS OR 9 LAKHS WHICH WERE SPENT BY ASSESSEE IN RESPECT TO COMPENSATION RECEIVED T H ESE GROUND S IN OUR ITA NO . 4847 /201 0 8 CONSIDERED VIEW ARE INFRUCTUOUS IN NATURE AS THE AO HAS ALREADY ALLOWED THE DEDUCTION WHILE COMPLETING THE ASSESSMENT ORIGINALLY UNDER SECTION 143(3) . THE CIT(A) HAS NOT MENTIONED IN HIS ORDER THAT NO DEDUCTION IS ALLOWABLE AS THE ISSUE BEFORE HIM WAS ONLY IN RESPECT OF COMPE NSATION RECEIVED BY THE ASSESSEE WHE THER THE SAME IS TAXABLE OR NOT. SINCE THE DEDUCTION WAS ALREADY ALLOWED BY THE AO THEREFORE THERE IS NO POINT TO ADJUDICATE THESE ADDITIONAL GROUNDS . 12 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JULY 2013 . SD/ - ( ) ( N.K.BILLAIYA ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 31/07/2013 . /PKM PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) MUMBAI. 4. / CIT 5. / DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY // / BY ORDER ( ASSTT. REGISTRAR) / ITAT MUMBA I