KAVITA M SURI, MUMBAI v. ITO 12(3)(1), MUMBAI

ITA 8281/MUM/2011 | 2008-2009
Pronouncement Date: 30-04-2014 | Result: Allowed

Appeal Details

RSA Number 828119914 RSA 2011
Assessee PAN AEDPG7913H
Bench Mumbai
Appeal Number ITA 8281/MUM/2011
Duration Of Justice 2 year(s) 4 month(s) 22 day(s)
Appellant KAVITA M SURI, MUMBAI
Respondent ITO 12(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-04-2014
Date Of Final Hearing 23-04-2014
Next Hearing Date 23-04-2014
Assessment Year 2008-2009
Appeal Filed On 08-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . ! ' . # . $%& #' ()* # ( ! BEFORE SHRI D MANMOHAN VICE-PRESIDENT & SHRI N K B ILLAIYA AM ( ./ ITA NO.8280/MUM/2011 + ' + / ASSESSMENT YEAR 2008-09 DIPTI SURESH GANDHI C/102 ASHISH BLDG. TIRUPATI APTS. BHULABHAI DESAI ROAD MUMBAI- 400 026 PAN AEDPG7913H VS. THE ITO 12(3)(1) MUMBAI. ( -. /APPELLANT) ( /0-. /RESPONDENT) ( ./ ITA NO.8281/MUM/2011 + ' + / ASSESSMENT YEAR 2008-09 KAVITA M SURI C/102 ASHISH BLDG. TIRUPATI APTS. BHULABHAI DESAI ROAD MUMBAI- 400 026 PAN AAKPS6139G VS. THE ITO 12(3)(1) MUMBAI. ( -. /APPELLANT) ( /0-. /RESPONDENT) APPELLANTS BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI GANESH BARE ( ' 1 2' / DATE OF HEARING :23.04.2014. 3 1 2' / DATE OF PRONOUNCEMENT :30.04.2014 ITA NOS.8280& 8281/MUM/2011 2 )#4 )#4 )#4 )#4 / O R D E R PER N K BILLAIYA AM: THESE TWO APPEALS BY TWO DIFFERENT ASSESSEES ARE A GAINST TWO SEPARATE ORDERS OF THE CIT(A)-23 MUMBAI DATED 18.10.2011 PE RTAINING TO A.Y 2008-09. AS COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS T HEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 2. WE PROCEED WITH ITA NO. 8280/M/2011 . THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW 1.A THE LEARNED CIT(A) ERRED IN CONFIRMING THE SUM OF RS.85 00 000/- AS LONG TERM CAPITAL GAIN WHILE THE SAME WAS A CAPITAL RECEIPT AS MONEYS WERE RECEIVED IN LIEU OF INHERITANCE. B. THE LEARNED CIT(A) ERRED IN INFERRING THAT THE M ONEYS WERE RECEIVED FOR SURRENDER OF RIGHTS WHILE THE APPELLA NT DID NOT HOLD ANY RIGHTS TO POSSESSION AND ENJOYMENT OVER PART OF THE PROPERTY WHEREAS INFACT THE AMOUNT WAS RECEIVED ON ACCOUNT OF BEQUES T THAT WAS MADE BY GRANDFATHER. C. WITHOUT PREJUDICE TO GROUND (A) & (B) ABOVE THE LEARNED CIT(A) FAILED TO TAKE INTO CONSIDERATION THAT THE A MOUNTS RECEIVED FROM HER UNCLE MR. SUKUMAR SHAH WOULD AMOUNT TO A GIFT GIVEN OUT OF NATURAL LOVE AND AFFECTION AND THEREFORE COMES W ITHIN THE PURVIEW OF RELATIVES AS DEFINED IN THE PROVISO OF SECTION 5 6(1)(VII) AND THEREFORE NOT CHARGEABLE TO TAX. 2.A. WITHOUT PREJUDICE TO GROUND NO.1 THE LEARNED CIT(A) ERRED IN NOT GRANTING THE APPELLANT THE PROPORTIONATE COST OF ACQUISITION AS ON 01-04-1981 WHILE COMPUTING THE CAPITAL GAINS ON MO NEYS RECEIVED BY THE APPELLANT AS INHERITANCE. B. THE LEARNED CIT(A) FAILED TO TAKE INTO CONSIDERA TION THAT THE APPELLANT HEREIN HAD AN INHERENT RIGHT IN HER GRAND FATHERS ESTATE AND THUS MAKING THE APPELLANT AN OWNER THEREOF AFTER HI S DEATH AND THEREFORE WHILE COMPUTING LONG TERM CAPITAL GAIN PR OPORTIONATE COST OF ACQUISITION SHOULD HAVE BEEN ALLOWED. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAS INVESTED RS.30 LACS IN BIRLA SUN LIFE MUTUAL FUND. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF ITA NOS.8280& 8281/MUM/2011 3 INVESTMENT ALONG WITH SUPPORTING DOCUMENTARY EVIDEN CES. THE ASSESSEE REPLIED THAT THE SOURCE OF INVESTMENT IS FROM THE AMOUNT RE CEIVED AS INHERITANCE AS PER THE WILL OF LATE SHRI NATWARLAL MANILAL SHAH. THE ASSE SSEE FILED NECESSARY RELATED DOCUMENTS TO SUBSTANTIATE HER CLAIM. ON PERUSAL OF THE DOCUMENTS THE AO OBSERVED THAT RS.85 LACS CLAIMED TO BE RECEIVED FRO M SHRI SUKUMAR SHAH IS ACTUALLY DRAWN BY SHRI KAMLESH MEHTA WHO HAS PURCHASED THE PROPERTY MOTILAL MANSION FROM SHRI SUKUMAR SHAH. THE AO WAS OF THE FIRM BEL IEF THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS NOTHING BUT THE COMPENSATION IN LIEU OF SURRENDERING OF RIGHTS IN THE PROPERTY. THEREFORE THE AMOUNT OF RS. 85 LACS RECEIVED BY THE ASSESSEE IS TAXABLE AND CANNOT BE SAID THAT THE AMOUNT RECEIVED WAS AS PER BEQUEST OF WILL. THE AO FINALLY CONCLUDED THAT RS.85 LACS RECEIVED B Y THE ASSESSEE WAS TOWARDS SURRENDERING OF HER RIGHTS IN THE PROPERTY AND THE SAME WAS TAXABLE AS CAPITAL GAINS. THE COST OF ACQUISITION WAS TAKEN AT RS NIL AND THE ENTIRE COMPENSATION OF RS.85 LACS WAS ADDED AS LONG TERM CAPITAL GAIN. TH E ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). IT WAS EXPLAINED THAT SHRI NATW ARLAL MANILAL SHAH WAS THE MATERNAL GRANDFATHER OF THE ASSESSEE WHO WAS IN JO INT OWNERSHIP AND POSSESSION OF THE PROPERTY KNOWN AS MOTILAL MANSION ALONG WITH HIS BROTHER. SHRI NATWARLAL SHAH HAS ONE SON AND ONE DAUGHTER; DAUGHTER DIED LEAVING BEHIND TWO LEGAL HEIRS I.E. TWO DAUGHTERS WHO ARE IN APPEAL BEFORE US. SUBSEQUENT LY SHRI NATWARLAL SHAH DIED AND AS PER HIS WILL HE BEQUEATHED 50% SHARE TO HIS SON SHRI SUKUMAR SHAH. AS PER THE WILL OF SHRI NATWARLAL SHAH HIS SON SHRI SUKUMA R SHAH CAN DECIDE IF ANYTHING IS TO BE GIVEN TO HIS DAUGHTERS CHILDREN. IT WAS EXPL AINED TO THE CIT(A) THAT IN VIEW OF THIS DISCRETION SHRI SUKUMAR SHAH HAS GIVEN A SUM OF RS.85 LACS TO THE ASSESSEE OUT OF NATURAL LOVE AND AFFECTION WHICH WAS THE SO URCE OF INVESTMENT IN MUTUAL FUND. IN THE ALTERNATIVE IT WAS ALSO PLEADED BEFO RE THE CIT(A) THAT IF IT IS CONSIDERED AS A CASE OF SURRENDER OF RIGHT IN PROPE RTY THEN THE ASSESSEE IS ENTITLED FOR COMPUTATION OF CAPITAL GAINS AS PER THE PROVISI ONS OF LAW. IN SUPPORT THE ASSESSEE FILED A VALUATION REPORT BEFORE THE CIT(A) GIVING VALUATION OF THE PROPERTY AS ON 01.04.1981. THE SAME WAS TRANSMITTED TO THE AO CALLING FOR A REMAND REPORT. IN HIS REMAND REPORT THE AO STATED THAT THE ASSESSE E IS NOT ENTITLED TO ANY DEDUCTION ON ACCOUNT OF COST OF ACQUISITION AS IT I S A CASE OF SURRENDERING OF RIGHTS AND THE ASSESSEE HAS NOT PAID ANY CONSIDERATION COS T TOWARDS PURCHASE OF THE RIGHT. ITA NOS.8280& 8281/MUM/2011 4 THEREFORE THE QUESTION OF COST OF ACQUISITION DOES NOT ARISE. AFTER CONSIDERING THE FACTS SUBMISSIONS AND MATERIAL ON RECORD THE CIT( A) OBSERVED THAT THE ASSESSEE HAS NOT PROVED THAT THE RIGHT/PROPERTY WAS RECEIVED THROUGH INHERITANCE. THE CIT(A) FURTHER OBSERVED THAT THE AMOUNTS WERE RECEI VED FROM SHRI KAMLESH MEHTA THE PURCHASER OF THE PROPERTY. SINCE THE ASSESSEE HAS SURRENDERED SUCH RIGHT THERE WAS NO COST OF ACQUISITION AND THE SAME HAS TO BE T REATED AS NIL. THE CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. 4. THE COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT WHAT THE ASSESSEE HAS RECEIVED WAS AS PER THE DISCRETION VESTED UPON SHRI SUKUMAR SHAH BY VIRTUE OF WILL OF LATE SHRI NATWARLAL SHAH. THE COUNSEL TOOK US T HROUGH THE WILL OF LATE SHRI NATWARLAL SHAH AND DREW OUR ATTENTION TO PARA 4 OF THAT WILL WHICH READ AS UNDER: I HAVE GOT ONE DAUGHTER VIZ NAYANA SURESH GANDHI W HATEVER I HAVE TO GIVE HERE I HAVE GIVEN HER DURING MY LIFE TIME. HOWEVER MY SON SUKUMAR WHO IS MY SOLE EXECUTOR CAN DECIDE IF ANYT HING IS TO BE GIVEN TO MY DAUGHTERS CHILDREN. THE COUNSEL FURTHER DREW OUR ATTENTION TO THE CONFI RMATION OF SHRI SUKUMAR SHAH BY WHICH SHRI SUKUMAR SHAH CONFIRMED OF HAVING PAID RS .85 LACS AS PER THE BEQUEST OF LATE SHRI NATWARLAL SHAH. IT IS THE SAY OF THE COU NSEL THAT WHAT HAS BEEN RECEIVED BY THE ASSESSEE IS NOTHING BUT UNDER WILL OF LATE S HRI NATWARLAL SHAH. IN ALTERNATIVE THE COUNSEL REITERATED THE CLAIM OF CO MPUTATION OF CAPITAL GAINS AS PER THE PROVISIONS OF LAW. THE DR STRONGLY RELIED UPON THE FINDINGS OF THE AO. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW WITH THE RELEVANT MATERIAL EVIDENCES BROUGHT ON RECORD BEFOR E US. THE AO HAS TAKEN A FIRM STAND THAT WHAT THE ASSESSEE HAS RECEIVED IS TOWARD S SURRENDER OF HER RIGHT IN THE PROPERTY. THIS STAND OF THE AO HAS BEEN CATEGORICA LLY CONFIRMED BY THE CIT(A). ON THIS ACCEPTED FACT WE WILL NOT ALLOW THE REVENUE AU THORITIES TO BLOW HOT AND COLD IN THE SAME BREATH. IF THE CONSIDERATION RECEIVED IS TOWARDS SURRENDER OF INHERITED RIGHTS IN PROPERTY THEN THE SAME HAS TO BE TAXED W ITHIN THE LIGHT OF THE PROVISIONS OF SECTION 45 READ WITH SECTIONS 47 AND 48 OF THE I .T ACT. MEANING THEREBY THAT SINCE IT IS AN UNDISPUTED FACT THAT THE PROPERTY IN QUESTION IS INHERITED THE COST OF ACQUISITION OF THE SAID PROPERTY HAS TO BE TREATED AS PER THE FAIR MARKET VALUE AS ON ITA NOS.8280& 8281/MUM/2011 5 01.04.1981. MATERIAL ON RECORD SHOWS THAT THE ASSE SSEE HAS ALSO FILED A VALUATION REPORT TO SUBSTANTIATE HER CLAIM OF FAIR MARKET VAL UE AS ON 01.04.1981. THE AO HAS COMPLETELY IGNORED THIS FACT HOLDING THAT THE COST OF ACQUISITION HAS TO BE TAKEN AT NIL WHICH IS NOT A CORRECT PROPOSITION OF LAW. IN OUR CONSIDERED VIEW AND HOLDING THAT THE TRANSACTION INVOLVES CAPITAL GAINS TAX LIA BILITY THE SAME HAS TO BE COMPUTED AS PER THE PROVISIONS OF LAW. WE ACCORDINGLY RESTO RE THIS ISSUE BACK TO THE FILE OF THE AO. THE AO IS DIRECTED TO DETERMINE THE COST O F ACQUISITION OF THE PROPERTY AS ON 01.04.1981 BY REFERRING THE MATTER TO THE VALUAT ION CELL OR IN ALTERNATIVE ACCEPT THE VALUATION REPORT OF THE ASSESSEE AND RE-DETERMI NE THE LONG TERM CAPITAL GAINS AFTER GIVING A REASONABLE AND SUFFICIENT OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 6. AS WE HAVE HELD THAT THE IMPUGNED TRANSACTION IN VOLVES CAPITAL GAINS TAX LIABILITY GROUND NO.1 WITH ALL ITS SUB-GROUNDS BEC OMES OTIOSE. 7. THE FACTS OF THE CASE IN ITA NO. 8281/MUM/2011 A RE IN PARI MATERIA THE SAME THEREFORE FOR SIMILAR REASONS THAT APPEAL IS ALSO ACCORDINGLY DECIDED. 8. IN THE RESULT APPEALS FILED BY THE ASSESSEES AR E ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF APRIL 2014. SD/- SD/- (D MANMOHAN) (N K BILLAIY A) ! ! ! ! /VICE-PRESIDENT #' #' #' #' ()* ()* ()* ()* / ACCOUNTANT MEMBER MUMBAI; 5) DATED : 30 TH APRIL 2014. SA )#4 )#4 )#4 )#4 1 11 1 /2$ /2$ /2$ /2$ 6#$ 2 6#$ 2 6#$ 2 6#$ 2 / COPY OF THE ORDER FORWARDED TO : 1. -. /THE APPELLANTS. 2. /0-. / THE RESPONDENT. 3. 7 ( ) / THE CIT(A) MUMBAI. 4. 7 / CIT 5. $'89 /2 / DR A BENCH ITAT MUMBAI ITA NOS.8280& 8281/MUM/2011 6 )#4 ( / BY ORDER (0$2 /2 //TRUE COPY// / ( : (DY./ASSTT. REGISTRAR) / ITAT MUMBAI