DCIT CC 23, MUMBAI v. GREENFIELD HOTELS & ESTATES P.LTD, MUMBAI

ITA 5053/MUM/2012 | 2007-2008
Pronouncement Date: 23-10-2013 | Result: Dismissed

Appeal Details

RSA Number 505319914 RSA 2012
Assessee PAN AAACG0561F
Bench Mumbai
Appeal Number ITA 5053/MUM/2012
Duration Of Justice 1 year(s) 2 month(s) 15 day(s)
Appellant DCIT CC 23, MUMBAI
Respondent GREENFIELD HOTELS & ESTATES P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 23-10-2013
Assessment Year 2007-2008
Appeal Filed On 07-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH MUMBAI BEFORE SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ITA NO. 5053/MUM/2012 (ASSESSMENT YEAR:2007-08) ACIT - CENTRAL CIRCLE - 23 RANGE-7 ROOM NO.409 4 TH FLOOR AAYAKAR BHAVAN MK ROAD MUMBAI-20. VS. M/S. GREENFIELD HOTELS & ESTATES P. LTD. CONSTRUCTION HOUSE B 2 ND FLOOR 623 LINKING ROAD. KHAR (W) MUMBAI-52. (APPELLANT) (RESPONDENT) P.A. NUMBER : AAACG 0561 F ASSESSEE BY : SHRI SANJAY SAWANT REVENUE BY : SHRI ANURAG SRIVASTAVA DATE OF HEARING : 01/10/2013 DATE OF PRONOUNCEMENT : 23/10/2013 O R D E R PER SANJAY GARG JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER OF THE CIT(A) DATED 15/06/2012 RELEVANT TO TH E ASSESSMENT YEAR 2007-08 CHALLENGING THE ACTION OF THE CIT(A) IN DEL ETING THE DISALLOWANCES MADE BY THE AO WITH RESPECT TO WRITTEN OFF INTEREST AMOUNT OF RS. RS.28 49 068/ AS BAD DEBT AND OF RS. 80 58 000/- O N ACCOUNT OF CAPITAL GAINS HOLDING SECTION 50 C IS NOT APPLICABLE IN CA SE OF TRANSFER OF LEASE HOLD RIGHTS. BOTH THE ISSUES ARE DISCUSSED SEPARATE LY HEREUNDER: ITA NO.5053/M/12 A.Y.07-08 2 GROUND NO 1: WRITTEN OFF BAD DEBT: 2. VIDE GROUND NO.1 THE REVENUE HAS OBJECTED TO TH E DELETION OF DISALLOWANCE OF BAD DEBT WRITTEN OFF AMOUNTING TO R S.28 49 068/-. 2.1 THE ASSESSEE COMPANY DEBITED A SUM OF RS.28 49 068/- TO THE P&L A/C. UNDER THE HEAD INTEREST RECEIVABLE WRITTEN OFF . THE ASSESSEE HAD OFFERED THE INTEREST AMOUNT IN QUESTION FOR TAX IN THE RELEVANT YEARS. SINCE THE AMOUNT WAS NO MORE RECOVERABLE THE SAME WAS WRITTEN OFF DURING THE RELEVANT YEAR. HOWEVER THE ASSESSING OF FICER DID NOT FIND ANY SUCH SUM RECEIVABLE IN THE BALANCE SHEET OF THE ASS ESSEE AS ON 31.03.2006 HENCE HE MADE THE DISALLOWANCE OF THE INTEREST AMOUNT WRITTEN OFF. 2.2 IN APPEAL THE LD. CIT(A) OBSERVED THAT THE SOL E REASON FOR NOT ALLOWING THE WRITE OFF BY THE LD. A.O WAS THAT THE STATED AMOUNT WAS NOT APPEARING AS A SUM RECEIVABLE. HOWEVER HE OBS ERVED THAT IN THE BALANCE SHEET THE SAID AMOUNT WAS GROUPED UNDER THE RECOVERABLE AMOUNT FROM M/S. A.R. ENTERPRISES. HE HELD THAT MER ELY FOR THE REASON OF FOLLOWING SUCH SYSTEM OF MAKING THE ACCOUNTING ENTR Y WAS NOT ENOUGH TO DENY THE ASSESSEE ITS CLAIM FOR WRITE OFF OF BAD DE BT. THE AMOUNT WAS OFFERED FOR TAXATION IN RELEVANT YEARS AND THE ASSE SSEE HAD NOT BEEN ABLE TO RECOVER THE SAME FROM THE PARTY CONCERNED. RELYI NG UPON AN AUTHORITY OF THE BOMBAY HIGH COURT IN THE CASE OF DCIT(IT) VS. OMAN INTERNATIONAL BANK (313 ITR 128) HE ORDERED FOR T HE DELETION OF THE DISALLOWANCE SO MADE BY THE AO UNDER THIS HEAD. THE REVENUE IS THUS IN APPEAL BEFORE US. 3. AT THE OUTSET THE LD. AR BEFORE US HAS SUBMIT TED THAT THE ABOVE ISSUE IS SQUARELY COVERED WITH THE JUDGMENT OF THE BOMBAY HIGH COURT IN ITA NO.5053/M/12 A.Y.07-08 3 THE CASE OF OMAN INTERNATIONAL BANK.(SUPRA) WHER EIN THE HONBLE HIGH COURT WHILE DEALING WITH A SIMILAR ISSUE HAS OBSERV ED AS UNDER: 22. CONSIDERING THE ABOVE DISCUSSION IN OUR OPINI ON TO TREAT THE DEBT AS BAD DEBT HAS TO BE COMMERCIAL OR BUSINE SS DECISION OF THE ASSESSEE BASED ON THE RELEVANT MATE RIAL IN POSSESSION OF THE ASSESSEE. ONCE THE ASSESSEE RECOR DS THE DEBT AS BAD DEBT IN HIS BOOKS OF ACCOUNT THAT WOULD PRIMA FACIE ESTABLISH THAT IT IS A BAD DEBT UNLESS THE A. O. FOR GOOD REASONS HOLDS OTHERWISE. THE WRITING IN THE ACCOUNT S NO DOUBT HAS TO BE BONAFIDE. ONCE THAT BE THE CASE TH E ASSESSEE IS NOT CALLED UPON TO DISCHARGE ANY FURTHER BURDEN. IN OUR OPINION THEREFORE WE ARE IN AGREEMENT WITH THE VI EW TAKEN BY THE MAJORITY CONSTITUTING THE BENCH OF THE LD. T RIBUNAL. 23. THE QUESTION AS FRAMED WILL HAVE TO BE ANSWERED BY HOLDING THAT AFTER THE AMENDMENT IT IS NEITHER OBLIGATORY N OR IS THE BURDEN ON THE ASSESSEE TO PROVE THAT THE DEBT WRITT EN OFF BY HIM IS INDEED A BAD DEBT AS LONG AS IT IS BONAFIDE AND BASED ON COMMERCIAL WISDOM OR EXPEDIENCY. APPEAL DISPOSED OF ACCORDINGLY. 3.1 THE LD. DR COULD NOT BRING TO OUR NOTICE ANY NE W FACT OR PROPOSITION OF LAW WHICH MAY JUSTIFY DEPARTURE THER E FROM THE ABOVE SETTLED LEGAL POSITION ON THE ISSUE BY THE HONBLE BOMBAY HIGH COURT. SO RESPECTFULLY FOLLOWING THE LAW LAID DOWN BY THE HON BLE HIGH COURT WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE AND AS SUCH THE SAME IS UPHELD. GROUND NO.2. :ADDITION OF CAPITAL GAINS INCOME: 4. VIDE GROUND NO.2 THE REVENUE HAS CHALLENGED T HE INVOCATION OF SECTION 50C OF IT ACT RESULTING INTO HIGHER COMPUTA TION OF CAPITAL GAINS INCOME BY TAKING THE SALES CONSIDERATION AT RS.1 4 5 58 OOO/- AS AGAINST RS. 65 00 000/- ACTUALLY RECEIVED BY THE AS SESSEE. ITA NO.5053/M/12 A.Y.07-08 4 4.2 BEFORE THE CIT(A) THE ASSESSEE CLAIMED THAT SE CTION 50C HAD BEEN WRONGLY INVOKED BY THE AO AS THE ASSESSEE WAS NO T ALLOWED THE BENEFIT OF VALUERS REPORT IN RESPECT OF THE PROPERTY SOLD. THE LD. CIT(A) OBSERVED THAT NO DISPUTE REGARDING THE NATURE OF RIGHT IN TH E PROPERTY BEING A LEASEHOLD RIGHT. HE FURTHER RELIED UPON AN AUTHORIT Y OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI. ATUL G . PURANIK VS. ITO IN ITA NO.3051/MUM/2010 DATED 13.05.2011 HOLDING THAT SEC TION 50C IS NOT APPLICABLE TO THE COMPUTATION OF CAPITAL GAINS IN R ESPECT OF TRANSFER OF PROPERTY OF LEASEHOLD RIGHTS IN LAND AND BUILDING. HE THEREFORE DELETED THE ADDITIONS MADE UNDER THIS HEAD. 4.4 BEFORE US AT THE OUTSET THE LD. AR HAS BROUGH T OUR ATTENTION TO THE LEGAL PROPOSITION LAID DOWN BY THE CO ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI. ATUL G. PURANIK VS. ITO (SUP RA) WHEREIN IT HAS BEEN HELD THAT LEASE RIGHTS IN A PLOT OR LAND CAN NOT BE INCLUDED WITHIN THE SCOPE OF LAND OR BUILDING OR BOTH AS PROVIDED U/S 50C AND IN CASE OF TRANSFER OF LEASEHOLD RIGHTS THEREIN PROVISIONS OF SECTION 50C WOULD NOT APPLY. THE RELEVANT EXTRACT OF THE OBSERVATIONS OF THE TRIBUNAL IN THE SAID CASE OF SHRI. ATUL G. PURANIK VS. ITO (SUPRA) IS REPRODUCED AS UNDER: 11.4 IN VIEW OF THE AFORENOTED JUDGMENTS RENDERED BY THE HONBLE APEX COURT AND THAT OF THE HONBLE JURISDIC TIONAL HIGH COURT IT IS CLEAR THAT A DEEMING PROVISION CAN BE APPLIED ONLY IN RESPECT OF THE SITUATION SPECIFICALLY GIVEN AND HENCE CANNOT GO BEYOND THE EXPLICIT MANDATE OF THE SECTION. TURN ING TO SEC. 50C IT IS SEEN THAT THE DEEMING FICTION OF SUBSTIT UTING ADOPTED OR ASSESSED OR ASSESSABLE VALUE BY THE STAMP VALUAT ION AUTHORITY AS FULL VALUE OF CONSIDERATION IS APPLICA BLE ONLY IN RESPECT OF LAND OR BUILDING OR BOTH. IF THE CAPITA L ASSET UNDER TRANSFER CANNOT BE DESCRIBED AS LAND OR BUILDING O R BOTH THEN SEC. 50C WILL CEASE TO APPLY. FROM THE FACTS OF THI S CASE NARRATED ABOVE IT IS SEEN THAT THE ASSESSEE WAS AL LOTTED LEASE RIGHT IN THE PLOT FOR A PERIOD OF SIXTY YEARS WHIC H RIGHT WAS FURTHER ASSIGNED TO M/S. PATHIK CONSTRUCTION IN THE YEAR IN QUESTION. IT IS AXIOMATIC THAT THE LEASE RIGHT IN A PLOT OF LAND ITA NO.5053/M/12 A.Y.07-08 5 ARE NEITHER LAND OR BUILDING OR BOTH AS SUCH NOR CAN BE INCLUDED WITHIN THE SCOPE OF LAND OR BUILDING OR B OTH. THE DISTINCTION BETWEEN A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH AND ANY RIGHT IN LAND OR BUILDING OR BOTH I S WELL RECOGNIZED UNDER THE I.T. ACT. SEC. 54D DEALS WITH CERTAIN CASES IN WHICH CAPITAL GAIN ON COMPULSORY ACQUISITI ON OF LAND AND BUILDING IS CHARGED. SUB-SEC.(1) OF SEC. 54D OP ENS WITH : SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) WHER E THE CAPITAL GAIN ARISES FROM THE TRANSFER BY WAY OF COMPULSORY ACQUISITION UNDER ANY LAW OF A CAPITAL ASSET BEING LAND OR BUI LDING OR ANY RIGHT IN LAND OR BUILDING FORMING PART OF AN INDUS TRIAL UNDERTAKING... IT IS PALPABLE FROM SEC. 54D THAT LAND OR BUILDING IS DISTINCT FROM ANY RIGHT IN LAND OR BU ILDING. SIMILAR POSITION PREVAILS UNDER THE W.T. ACT 1957 ALSO. SE CTION 5(1) AT THE MATERIAL TIME PROVIDED FOR EXEMPTION IN RESPECT OF CERTAIN ASSETS. CLAUSE (XXXII) OF SEC. 5(1) PROVIDED THAT THE VALUE AS DETERMINED IN THE PRESCRIBED MANNER OF THE INTERES T OF THE ASSESSEE IN THE ASSETS (NOT BEING ANY LAND OR BUILD ING OR ANY RIGHTS IN LAND OR BUILDING OR ANY ASSET REFERRED TO IN ANY OTHER CLAUSES OF THIS SUB-SECTION) FORMING PART OF AN IND USTRIAL UNDERTAKING SHALL BE EXEMPT FROM TAX. HERE ALSO IT IS WORTH NOTING THAT A DISTINCTION HAS BEEN DRAWN BETWEEN L AND OR BUILDING ON ONE HAND AND OR ANY RIGHTS IN LAND OR BUILDING ON THE OTHER. CONSIDERING THE FACT THAT WE ARE DEAL ING WITH SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION I N CERTAIN CASES U/S.50C WHICH IS A DEEMING PROVISION THE FICTION CREATED IN THIS SECTION CANNOT BE EXTENDED TO ANY ASSET OTHER THAN THOSE SPECIFICALLY PROVIDED THEREIN. AS SEC. 50C APPLIES ONLY TO A CAPITAL ASST BEING LAND OR BUILDING OR BOTH IT CA NNOT BE MADE APPLICABLE TO LEASE RIGHTS IN A LAND. AS THE ASSESS EE TRANSFERRED LEASE RIGHT FOR SIXTY YEARS IN THE PLOT AND NOT LAND ITSELF THE PROVISIONS OF SEC.50C CANNOT BE INVOKED . WE THEREFORE HOLD THAT THE FULL VALUE OF CONSIDERATIO N IN THE INSTANT CASE BE TAKEN AS RS.2.50 CRORES. 5. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY NEW FACT OR PROPOSITION OF LAW WHICH MAY JUSTIFY DEPARTURE THER E FROM THE ABOVE SETTLED LEGAL POSITION ON THE ISSUE BY THE COORDINA TE BENCH OF THE TRIBUNAL ON THIS ISSUE. SO RESPECTFULLY FOLLOWING THE SAME IT IS HELD THAT SECTION ITA NO.5053/M/12 A.Y.07-08 6 50C CAN NOT BE INVOKED IN THE CASE OF ASSESSEE BEIN G THE CASE OF TRANSFER OF LEASE HOLD RIGHTS. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER 2013. SD/- SD/- (D. KAURUNAKARA RAO) ACCOUNTANT MEMBER (SANJAY GARG ) JUDICIAL MEMBER MUMBAI DATED: 23/10/2013. JV. 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.