Lachmandas & Sons, Cochin v. DCIT, Ernakulam

ITA 953/COCH/2008 | 2005-2006
Pronouncement Date: 12-05-2010

Appeal Details

RSA Number 95321914 RSA 2008
Assessee PAN AAAFL9555D
Bench Cochin
Appeal Number ITA 953/COCH/2008
Duration Of Justice 1 year(s) 5 month(s) 22 day(s)
Appellant Lachmandas & Sons, Cochin
Respondent DCIT, Ernakulam
Appeal Type Income Tax Appeal
Pronouncement Date 12-05-2010
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 12-05-2010
Date Of Final Hearing 04-05-2010
Next Hearing Date 04-05-2010
Assessment Year 2005-2006
Appeal Filed On 20-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.953/COCH/2008 ASSESSMENT YEAR:2005-06 LACHMANDAS & SONS COCHIN-35. PA NO.AAAFL 9555D VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-2(2) ERNAKULAM. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI A.S.NARAYANAMOORTHY C.A. RESPONDENT BY SHRI T.J. VINCENT JR.D.R. O R D E R PER N.VIJAYAKUMARAN J.M: THIS IS AN APPEAL BY THE ASSESSEE VIZ. LACHMANDAS & SONS COCHIN-35. THE APPEAL RELATES TO THE ASSESSMENT YEAR 2005-06. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-II KOCHI DATED 15-1 0-2008 AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S.143( 3) OF THE INCOME-TAX ACT 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30-10-2005 DECL ARING AN INCOME OF RS.36 75 130/- WHICH WAS PROCESSED U/S.1 43(1) ITA NO. 953/COCH/2008 2 AND SUBSEQUENTLY SELECTED FOR SCRUTINY AND ASSESSME NT WAS FRAMED U/S.143(3) ON 27-12-2007. IN THE RETURN ASS ESSEE DECLARED LONG TERM CAPITAL LOSS OF RS.45 51 944/-. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD ENTER ED INTO A MEMORANDUM OF UNDERSTANDING (MOU) ON 22-6-2001 BETWEEN DAMODAR SONS & CO. AND THEIR PARTNERS FOR ACQUISITION OF CERTAIN PROPERTY. THE PROPERTY I N QUESTION HAD A DECREE AGAINST IT BY CENTRAL BANK OF INDIA AS WELL AS RECOVERY CERTIFICATE ISSUED BY DEBT RECOVERY TRIBUN AL. THE PROPERTY WAS ATTACHED BY AN ORDER OF ATTACHMENT DUL Y REGISTERED WITH THE SUB REGISTRAR ERNAKULAM. THE ASSIGNORS M/S. DAMODAR SONS & CO ALONGWITH THEIR PA RTNERS APPROACHED THE ASSESSEE TO SELL THE PROPERTY AFTER REQUESTING THEM TO CLEAR OFF THE DEBT. AS PER MOU SALE CONSIDERATION WAS RS.3 CRORES BUT SALE DEED WAS EXE CUTED ON 25-2-2005 FOR A CONSIDERATION OF RS.4 25 00 000/- T O AL- AHALI BUSINESS TRADE LINKS (P) LTD. THE ASSESSEE H AD PAID A SUM OF RS.3 CRORES ON 11-2-2004. IN SHORT MOU WA S ENTERED ON 22-6-2001. RS. 3 CRORES WAS PAID ON 11- 2-2004. NO TOKEN MONEY OF RS.25 000/- AS AGREED BETWEEN TH E PARTIES WAS PAID. SALE DEED WAS EXECUTED ON 25-2- 2005. THE ASSESSEE COMPUTED THE COST OF ACQUISITION OF RI GHT TO PURCHASE THE PROPERTY AT RS.4 17 58 600/- AS ON 22- 6-2001 ITA NO. 953/COCH/2008 3 I.E. THE DATE OF MOU AND COMPUTED LONG TERM CAPITAL LOSS OF RS.45 51 944/- ON A SALE CONSIDERATION OF RS.4.25 C RORES. THE ASSESSING OFFICER HELD THAT NO RIGHT TO PURCHAS E WAS ACQUIRED ON 22-6-2001 I.E. DAY OF SIGNING OF MOU B ECAUSE NONE OF THE CONDITIONS STIPULATED IN THE SAID MOU W ERE FULFILLED AS ON THAT DATE. ACCORDINGLY THE ASSES SING OFFICER WAS OF THE VIEW THAT GAIN ON TRANSFER OF THIS RIGHT IS A SHORT TERM CAPITAL GAIN AND COMPUTED SHORT TERM CAPITAL GAIN AT RS.7 41 400/-. THUS ASSESSMENT WAS FRAMED ON A T OTAL INCOME OF 44 16 530/-. ON APPEAL THE LD. CIT(APP EALS) ON AN APPRECIATION OF COPIES OF MOU AND CONVEYANCE DE ED CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. HENCE ASSESSEE IS ON SECOND APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUT E ON THE FACTS THAT MOU WAS ENTERED ON 22-6-2001. RS. 3 CRO RES WAS PAID ON 11-2-2004. NO TOKEN MONEY OF RS.25 000/- A S AGREED BETWEEN THE PARTIES WAS PAID. SALE DEED WA S EXECUTED ON 25-2-2005. ON THE BASIS OF THE ABOVE F ACTS LET US GO THROUGH THE MEANING AND DEFINITION OF LONG T ERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS. LO NG TERM CAPITAL GAIN MEANS CAPITAL GAIN ARISING FROM THE T RANSFER OF A LONG-TERM CAPITAL ASSET. FROM THE DEFINITION W E CAN INFER ITA NO. 953/COCH/2008 4 FROM THE OPERATIVE DEFINITION SHORT TERM CAPITAL G AIN. HERE SHORT TERM CAPITAL GAIN IN RELATION TO THE SHORT TERM CAPITAL ASSET MEANS A CAPITAL ASSET HELD BY AN ASSE SSEE FOR NOT MORE THAN 36 MONTHS IMMEDIATELY PRECEDING THE D ATE OF TRANSFER. IN THE PRESENT CASE THERE IS NO DISPUT E THAT THERE WAS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE I.T.ACT AND IT GIVES GAIN FOR THE PARTIES FOR CHARG ING INTO CAPITAL GAIN. THE ONLY ISSUE IS WHETHER IT TAKES TH E CHARACTER OF LONG TERM CAPITAL GAIN AS CONTENDED BY THE ASSES SEE OR IS IT TO BE BOOKED UNDER SHORT TERM CAPITAL GAIN AS HELD BY THE INCOME-TAX AUTHORITIES IS THE REAL ISSUE BEFORE US . CONSIDERING THE FACTS OF THE CASE AS NARRATED ABOVE AND THE MEANING AND DEFINITION OF LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS IN ITS ENTIRETY WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER WAS RIGH T IN HIS APPROACH AND HOLDING THAT SINCE NO EVIDENCE OF TRA NSFER OF THE PROPERTY TO THE ASSESSEE IS IN EXISTENCE THE AS SESSEE CANNOT CLAIM THE DATE OF ACQUISITION AS ON JUNE 200 1 BUT THE DATE WOULD ONLY BE IN FEBRUARY 2004 WHEN THE FUNDS WERE TRANSFERRED AS PER THE MOU. THE TRANSACTION IN RE SPECT OF THIS LAND WOULD THEREFORE BE A SHORT TERM CAPITAL G AIN RATHER THAN THE LONG TERM CAPITAL GAIN CLAIMED BY T HE ASSESSEE. HENCE WE FIND NO ERROR ON THE PART OF THE LD. ITA NO. 953/COCH/2008 5 CIT(APPEALS) IN CONFIRMING THE ORDER OF THE ASSESSI NG OFFICER. 4. IN THE RESULT ASSESSEE FAILS. APPEAL DISMISSE D. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM DATED THE 12 TH MAY 2010. PM. COPY FORWARDED TO: 1. LACHMANDAS & SONS DEVI COMPLEX DORAISWAMY IYER R OAD COCHIN-35. 2. THE DY. CIT CIRCLE-2(2) ERNAKULAM. 3. CIT(A)-II 4. CIT KOCHI. 5. D.R.