Income Tax Appellate Tribunal - Pune
M/S. Sunnygold Wineries Private Ltd.,, ... vs Joint Commissioner Of Income-Tax,, on 18 July, 2018
आयकर अपील
य अ धकरण "ए" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
ी डी. क णाकरा राव,लेखा सद य, एवं ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.703/PUN/2015
"नधा&रण वष& / Assessment Year : 2010-11
M/s. Sunnygold Wineries Private Limited.
C/o- Ramkrishnan & Co., Chartered
Accountants, Office No.418,
Amanora Chamber, Amanora Town
Centre, East Block, Hadapsar,
Karadi-bypass Road,
Pune-411 028.
PAN : AACCS6640R
.......अपीलाथ / Appellant
बनाम / V/s.
The Income Tax Officer,
Joint Commissioner of Income Tax,
Range-6, Pune.
......
यथ / Respondent
Assessee by : Shri Sunil Pathak
& Shri R. Ramakrishnan
Revenue by : Shri Rajeev Kumar, CIT DR
सन
ु वाई क तार ख / Date of Hearing : 20.04.2018
घोषणा क तार ख / Date of Pronouncement : 18.07.2018
आदे श / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal filed by assessee is directed against the order of Commissioner of Income Tax (Appeals)-4, Pune dated 19.10.2015 for the assessment year 2010-11.
2ITA No.703 /PUN/2015
M/s. Sunnygold Wineries Private Limited
2. The assessee has raised following grounds in appeal:
"1. The learned Commissioner of Income Tax (Appeal) erred in disallowing interest to the extent of Rs.77,58,595/- on account of interest paid on borrowed capital, as proportionate interest allocated towards interest free loans and advances given to sister concerns.
2. Without prejudice to ground No. 1, the learned Commissioner of Income tax (Appeal) erred in disallowing the interest without giving effect for the period for which the money's were lent to the sister concern.
3. The learned Commissioner of Income Tax (Appeal) erred in considering the loan term capital gain of Rs.9,53,38,667/- on sale of factory land and short term capital gain on sale of factory building Rs.2,85,00,000/- as the income for the assessment year 2010-11.
4. The learned Commissioner of Income Tax (Appeal) erred in disallowing the brokerage charges of Rs.77,24,632/- paid on sale of the factory land and building.
5. The appellant prays for just and equitable relief.
6. The appellant prays to add, alter, amend, explain and modify the ground/s as the occasion may demand."
3. From the above it is evident that vide grounds No. 1 and 2, the assessee is aggrieved with the findings of CIT(A) in disallowing proportionately the interest expenditure to the tune of Rs.77,58,595/-on account of interest paid on borrowed capital. The other issues raised in grounds No.3 and 4 relate to taxation of capital gains for the assessment year 2010-11 against offering the same to tax in the assessment year 2011-12 qua the provisions of section 38 of the Sales Tax Act. Other grounds i.e. ground No. 5 and 6 are general in nature and are dismissed as such.
4. Ground Nos.1 and 2 relate to disallowance of interest of Rs.77,58,595/-. The Assessing Officer disallowed the same by stating that the assessee gave loans/advances of Rs. 4.86 Crore to the sister concerns and related persons out of interest bearing funds. The Assessing Officer applied 15% rate of 3 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited interest. The CIT(A) confirmed the same ignoring the fact that the assessee possesses interest free funds of Rs.1.78 Crores.
5. At the outset, on the issue of disallowance Rs.77,58,595/- on account of interest paid, the Ld. Counsel for the assessee submitted that the assessee has interest free funds to the tune of Rs.1.78 Crores (share capital Rs.78,02,000/- + Reserves Rs.99,89,655/-). In principle, while accepting the disallowance of interest, the Ld. Counsel submitted that said disallowance may be restricted to the (i) net advances given to sister concern/ related persons (i.e. 4.85 Crores-1.78 Crore); and (ii) while calculating the disallowance interest/expenditure, the number of days of loan/advance given should be considered and not the full financial years as done by the AO/CIT(A) in the assessment.
6. On hearing both the sides, we find these arguments of the Ld. A.R. for the assessee are reasonable. The settled legal proposition relating to presumption of investment out of the interest free funds as highlighted in the various judgments i.e. CIT Vs. Reliance Utilities & Power Ltd reported as 313 ITR 340 and CIT vs. HDFC Bank Ltd [2014] reported as 366 ITR 505 (Bom) shall help the assessee on the argument raised above.
Further, we also find calculating the disallowable interest on the yearly basis is not a correct approach of the AO as the loan/advance is given for the part of previous year too. In that case, the number of months or days becomes relevant. Accordingly, we are of the considered opinion that this issue may be remanded back to the file of Assessing Officer for fresh adjudication after considering of findings above. In the set aside proceedings, the facts about availability of interest free funds/reserves as well as the 4 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited loans/advances given to sister concerns and period of loan should be considered as stated above. The Assessing Officer shall decide the issue afresh after considering binding judgments (supra.). The Assessing Officer shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. The Assessing Officer is directed to compute disallowable interest after examining availability of funds with the assessee. In the result, subject to the above directions, the ground Nos. 1 and 2 raised in appeal by the assessee are allowed for statistical purpose.
7. The Year of Taxability of Capital Gains : Regarding the ground No. 3, briefly stated relevant facts include that the assessee owned a land admeasuring 7.6 acre at Bhima and sold the said land on 18.09.2009 to M/s. Kider (India) Pvt. Ltd for a total consideration of Rs.12.50 Crores. The payment was made during the period from 10.06.2009 to 09.09.2009. Date of registration of the sale deed is 18.09.2009. The assessee stated that there are several attachments on the said property and the said property was mortgaged to Punjab National Bank. The owner has outstanding dues to the Sales Tax Department and therefore, Sales Tax Department attached the said property. In fact, the name of Sales Tax Department appears in the revenue records. As per sale deed dated 18.09.2009, by the date of registration mortgaged property was released by virtue of payment of Rs.5.35 crore on 09.09.2009. There was pending possession of the retained land of 261136 sq. ft. worth around Rs.1,00,00,000/- which was transferred to escrow account. Regarding sales tax liability, the assessee had to give eight undated cheques amounting to Rs.1,05,10,242/- within nine months from the date 18.09.2009. The sale deed referred to all these liabilities and attachment 5 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited pending with the said property. Mutation entry No.5050 reveals that sales tax dues payable are recorded at Rs.7,74,61,524/-, which is much higher than the sales tax liability. Strictly following the date of registration of the property i.e. 18.09.2009 relevant to A.Y.2010-11, the Assessing Officer taxed the capital gains for this assessment year. The contents of Para 20 to 37 of the assessment order are relevant in this regard. There were long term capital gain attachment on the land works out at Rs. 9.54 Crore (rounded off) and short term capital gain attachment in factory and building works out at Rs.2.85 Crores. Therefore, this is a case of preponement of the taxes by the AO on the capital gains for the year under consideration against the assessee's decision to offer the same in the subsequent assessment year i.e. 2011-12.
8. During First Appellate proceedings, the assessee made various submissions stating that the amount involved in capital gains has been rightly offered by the assessee in subsequent assessment year notwithstanding of the fact the date of registration and receipt of part of the sale consideration. This issue is analyzed in Para 4 and sub-paras of the order of CIT(A). The CIT(A) extracted the same in Para 4.1 of his order. Eventually, relying on the Judgment of Hon'ble Supreme Court of India in the case of Suraj Lamp & Industries (P) Ltd Vs. State of Haryana reported in 14 taxmann.com 103. The CIT(A) held that the transfer of the property was effected by the assessee in the year under consideration and confirmed the conclusion of the Assessing Officer in brining to tax the capital gains in the year under consideration. The contents of Para 4.4.4 of the order of CIT(A) are relevant in this regard and the same is reproduced herein below:
"4.4.4. In view of the preceding discussion it is held that the transfer of the impugned property was effected by the appellant in the year under 6 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited appeal and the order of Assessing Officer in brining to tax capital gains in this year is confirmed. Ground No. 2 is also dismissed."
9. Allowability of the Brokerage and Land Development Expenditure:
In connection with the above said sale of land sold to M/s. Kider (India) Pvt.
Ltd, the assessee claimed brokerage payment of Rs.77,24,632/- in the assessment year 2011-12. The assessee was asked to substantiate the same with documentary evidences by the Assessing Officer. In reply, the assessee submitted that Rs.5.59 lakhs paid to M/s. Paras Soft Exports and Rs.17.08 lakhs to Shri Ajay Sonalkar which totals to Rs.22.67 Lakhs as against 77.24 lakhs as claimed by the assessee. Further, the assessee submitted that huge expenditure of Rs.1,00,06,000/- was incurred in aggregate of brokerage of Rs.27,65,000/- and Rs.72,40,500/- towards land filling on dismantling of the old factory premises. In this respect, the assessee submitted before the CIT(A) that if the capital gain is considered to be taxable in assessment year 2010-11, then the same may be allowed as deductable amount during the year, since the expenditure is connected to the sale of land. On consideration, the CIT(A) quantified the total brokerage expenses to the tune of Rs.27,65,500/- only. He has further opined that the said expenses cannot be termed as expenses incurred in connection with transfer of capital asset and held not allowable under the provision of section 48(i) of the Act. Eventually, the CIT(A) dismissed the ground as per the discussion given in Para 5.2 of his order. For the sake of completeness, the relevant paragraph is extracted as under:
"5.2 The submissions of the appellant are considered carefully. The total expenses as per the books of the appellant for the period 01.04.2010 to 31.03.2011 are Rs.27,65,500/-. The appellant had itself admitted that some of the bills do not pertain to brokerage and land development and the same had been inadvertently included as brokerage expenses. Perusal of the impugned bills shows that admittedly the vouchers and invoices of M/s Paras Soft 7 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited Exports pertained to software programming and provision for software; hence the two bills of Rs.5,59,000/- and Rs.4,98,500/- totaling Rs.10,57,500/- have been wrongly claimed and are not expenses incurred in connection with the transfer. The two other bills of the broker Ajit Sonalkar for Rs.8,23,000/- and Rs.8,85,000/-- have been disallowed by the Assessing Officer on the ground that the appellant had not claimed the said expense in the return of income for the impugned year. Perusal of the bills and invoices shows that the pertained to the month of September and October 2010, whereas the impugned land and building had been sold in September 2009 itself. The appellant has not specified as to what were the services rendered by the said broker, specially in the background that the physical possession of the property had been handed over to the buyer, except for a small portion of licensed premises which continued to be occupied by the appellant. In the absence of any proof of services rendered, as also the fact that the expenses have been incurred after the date of handing over possession and thereby transfer of the property, I am inclined to accept the view of the Assessing Officer that these cannot be termed as expenses incurred in connection with transfer of the capital asset, in accordance with the provision of section 48(i). Further, the appellant has also claimed that certain other expenses claimed that had been incurred in the subsequent year relating to land filling, development and dismantling of the old factory premises may also be allowed. This submission is unacceptable considering the fact that the sale deed in question does not speak of any improvement to the land being desired by the buyer. Rather, as per the sale deed, the vacant land along with the attached godown, office and dilapidated constructions made over some part as described in schedule-I have been handed over by the appellant to the buyer. Since the vacant and peaceful possession of almost the entire land has been handed over to the buyer by the appellant as on 18.09.2009, except for a small portion measuring 26,136 sq. ft. retained by the appellant on lease basis, it is clear that no expenses were required to be incurred after that date by the appellant. Even considering the fact that the mutation of the impugned property stands recorded in favour of the buyer MIs Kider (India) Pvt. Ltd. dated 09.10.2009 and sales tax lien on the property stands removed with effect from 11.06.2010, all the expenditure related to land filling and dismantling of the old factory that has been claimed falling after the said dates (namely 11.09.2010, 16.09.2010, 18.10.2010 and 03.11.2010) cannot be said to be expenses incurred wholly and exclusively in connection with the transfer of the capital asset. Accordingly no relief can be provided to the appellant on account of the expenses that are claimed to have been incurred on transfer. Ground no.3 is also dismissed."
10. Aggrieved with the order of CIT(A), the assessee is in appeal before us by raising the grounds as extracted above.
11. Before us, on the issue relating to the year of taxability of capital gains and on the allowability of the brokerage expenditure, the Ld. A.R. made 8 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited various arguments. On the issue of year of taxability of the gains, the Ld. Counsel for the assessee submitted that the case of the assessee is that the capital gain is taxable in assessment year 2011-12 and not in assessment year 2010-11. According to the Ld. AR , the registered deed dated 18.09.2009 is void as it is against the spirit of section 38 of the Sales Tax Act, Govt. of Maharashtra.
Per contra, the view of the Assessing Officer that sale transactions entered into by the assessee with M/s. Kider (India) Pvt. Ltd is not void as the sale deed is already registered in the year under consideration. For his proposition, the Ld. AR relied on the judgment of Hon'ble Gujrat High Court in the case of CIT Vs. Vithalbhai P. Patel, 236 ITR 1001. This is a case where the assessee sold certain plots and did not recognize income in the year as the said sale transactions were stopped by District Magistrate of the District, Surat. Ignoring the same, the Assessing Officer taxed the said income relatable to the said void or illegal sale transactions. The Tribunal granted relief to the assessee. The Hon'ble High Court held that the sale transaction is void till attachments are lifted formally. Bringing our attention to the provision of section 38 of the Sales Tax Act, taking the similarity of the facts, the Ld. A.R. for the assessee submitted that the said decision revolved the spirit of the provision of section 38 of the Sales Tax Act. Therefore, the ratio laid down in the case of Vithalbhai P. Patel (supra.) is squarely applicable to the facts of the present case. He further submitted that the CIT(A) erroneously relied on the decision of CIT Vs. Dr. Arvind S. Phake, reported as 409 ITR 96 (Bom.) which is actually relevant to the assessment year on which the sale deed is registered. However, the Ld. AR for the assessee explained that the said judgement is distinguishable on facts as it was the case of development agreement not the transaction of outright sale as in the 9 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited case of the assessee. Referring payment made by the assessee, the Ld. Counsel submitted that assessee received only three payments in the assessment year under appeal and not the entire sale consideration. The sales tax payment was also made on 07.06.2010 by buyer (M/s. Kider (India) Pvt. Ltd.) and the same is relevant for the assessment year 2011-12 only and not the year under consideration. The Registration deed contains all the details about the outstanding liability to the Sales Tax Department and various contentions which have been already referred before the Lower Authorities. The Ld. Counsel for the assessee, further, referring to section 2(47)(v) of the Act submitted that the said section is applicable in the context of an agreement for sale of property and the present case is not so. The present case is a sale deed which is executed.
12. Bringing our notice to the provision of section 38 of the Sales Tax Act, Ld. Counsel submitted that similar provisions are existed in section 281 of the Income Tax Act which declares that such transfer is void. He also relied on the similar provision existed in Contract Act. i.e. section 65 of Contract Act as well as 64(1) of CPC. Relying on the decision of Calcutta High Court in the case of Jaymac Lesetron P. Ltd. reported as 245 ITR 734, Ld. Counsel submitted that there were outstanding income tax liability because of which the property was attached. The transfer of such property is void u/s. 281 of the IT Act. He also relied on the decision in the case of Thane Janata Sahakari Bank Vs. The Commissioner of Sales Tax, reported as 148 SOT 32 (Bom.) and submitted that the transfer of sale attached to land by the Sales Tax Department was considered to be void and therefore, the Ld. Counsel made following submissions:
"9. Thus, it is submitted that in this case as the sales tax liability was not cleared till 31.03.2010, the sale deed had to be considered as void and there was no transfer u/s. 2(47) which could lead to capital gains 10 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited for A.Y.2010-11. It is only in A.Y.2011-12, that the sales tax liability was fully cleared; the sales tax department also lifted its charge on the property on 24.06.2010 ( page 121 of Paper Book), the transfer of the property took place only in A.Y.2011-12 and therefore, the capital gains should be taxed in A.Y.2011-12 only and the present appeal for A.Y.2010-11 be allowed."
13. On the other hand, the Ld. DR for the Revenue filed written submissions. He further explained the facts of the case culled out the relevant clause relating to attachment of land, payment to sales tax Department, mortgage of the property with Punjab National Bank etc. According to the Ld. DR, the sale deed dated 18.09.2009 narrates the date and details of sales tax payable by the assessee and also referred to the attachment of the property with the said Department. Ld. DR further submitted that the provision of section 38 of the Sales Tax Act cannot override when it comes to Central Laws. Ld. DR submitted that formal conveyance deed has been entered and Sales Tax liabilities have been adequately addressed in the sale deed itself by fixing liability to pay the same to the buyer of the property. Reiterating the facts, the attachment on impugned property was lifted on 11.06.2010 after the assessee company procured stay from the higher authority, Ld. DR submitted that the property was duly registered as well as relevant mutation was done in the name of buyer by Revenue Authorities. Further relying on the decision of in the case of CIT Vs. K. Jeelani Basha reported as 256 ITR 282 (Mad.), Ld. DR submitted that once the possession of the property is partly or fully handed over to the buyer, the provisions of section 2(47)(v) r.w.s. 45 of the Act are met and transfer is completed. He also relied on the decision of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia Vs. CIT, reported as 260 ITR 491 wherein it has been held that capital gain was taxable in the year in which such transaction were entered into even if the transfer of immovable property is not effective or complete under the 11 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited general rule. Ld. DR further placed reliance on the decision of CIT Vs. Dr. Arvind S Phake (supra.) wherein it has been held that if substantial payment have been made in view of the sale deed executed then considering the terms and conditions incorporated in the sale deed, the date of transfer for the purpose of income Tax Act ought to be taken to be 18.09.2009. Eventually, the Ld. DR concluded his submissions in Para 10, 11 and 12 and the same reads as under:
"10. In view of the above. since there has been registration of the sale agreement, as well as the possession of the 7.6 acres of land except some small amount had been handed over, they essentially constitute as per the provision of sec 2(47) (v) of the Income tax Act. Secondly, this is a peculiar case where despite attachment of Sales Tax Department, the buyer had taken adequate care of its own rights and interest by accepting undated cheques and therefore, there are no legal encumbrances on the property as advocated by the appellant and also in view of sec 62 of the Contract Act, the sale deed cannot be considered void by both the parties, the sale has indeed occurred on the date of transfer i.e. 18.9.2009 (FY. 2009-10 relevant to the A.Y. 2009-10). Hence the registered sale deed document NO.3439 of 2009 dated 18-09-2009, which transfers all rights of the appellant and ownership and possession over the land/ building to the buyer except for a small portion retained by the seller for the transitional period and a result of which the entire sale consideration except for a sum of Rs. 1 crore in the Escrow account to be encashed by the appellant once the possession of the retained portion is handed over to the buyer is the final proof that transfer had taken place in the impugned year. In such a situation, the mutation entries 5049 and 5050 of 2010, showing the removal of lien registered in the name of the Sales Tax Department is neither material nor relevant to the question of transfer of impugned capital assets.
11. Undoubtedly, one of the main ingredients of sec 53A of Transfer of Property Act is for registration of document as per provisions of sec 17( 1 A) of the Registration Act to invoke the provisions of sec 2(47(v) of the Act and all these conditions stand fulfilled in the case of the appellant. In this regard, the Hon'ble Allahabad High Court in the case of CIT Vs Ziauddiin Ahmed(2016) 283 CTR 223 (All) [ANNEXURE 'H'] has held that capital gain would be taxable in the year in which the possession is handed over to the buyer. Similarly, applying the ratio of the decision of Chaturbhuj Dwarkadas Kapadia (supra) with the real facts and circumstances of the case, it was clear intention of the assessee to make transfer of the said land by virtue of the agreement itself, under Registration Act 1908.
12. Hence, relying on the above facts and decisions of Ld.CIT(A), it is prayed that the appeal of the assessee may kindly be dismissed."12 ITA No.703 /PUN/2015
M/s. Sunnygold Wineries Private Limited
14. We heard both the sides on this issue. We find there is no dispute about the facts i.e. sale consideration, sales tax liabilities, payment by buyer and attachment of land by Sales Tax Department etc. It is a fact that assessee offered tax towards relevant gains both land as well as building. There is no dispute about quantification of the said gains too. The assessee offered tax for the same in assessment year 2011-12 following the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Vithalbhai P. Patel (supra.). The main issue which arises before us is whether the aforesaid judgment of Hon'ble Gujarat High Court (supra) is applicable to the facts of the present case and if the gains were rightly offered to tax in the subsequent year or not.
15. In this regard, we perused the said judgment of Hon'ble Gujarat High Court. The facts of the said judgment include that the assessee sold land of his share and filed return in respect of capital gain. During the assessment proceedings, the Assessing Officer noted that assessee sold 105 plots out of survey No. 23 and worked out the long term capital gain and added the same in the total income of the assessee. The Appellate Assistant Commissioner held there was order of the Collector, Surat who declared the said sale as null and void vide order dated 27th March,1975 in view of provisions of section 4 of the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972. The order of Appellate Assistant Commissioner was upheld by the Tribunal. On this fact, the Hon'ble High Court held the order of collector declaring sale transactions was null and void, do not permit the AO to tax related capital gains/profits in the year of the order. Therefore, there was no sale transaction in the eye of law and there could be no capital gain arising out of null and void transfer of such land. Accordingly, the Hon'ble High Court confirmed the order of Tribunal and not taxed the gains on such void sale of the plots. Bringing analogy of the facts and the ratio, the Ld. Counsel 13 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited submitted that the law against sale of land attached by the Government Authority likes Sales Tax Department in this case, the transfer or registration of such property constitutes null and void as in the case of sale transaction of plot of land in the case of CIT Vs. Vithalbhai P. Patel (supra.). The transactions involved in this case are not valid in the eye of law and therefore, it is a case where there is no transaction in the eye of law, will not liable to tax on capital gain arising from sale of land and factory building. Relevant findings of the said judgment extracted herein below:
"Held, that the sale was null and void under the provisions of section 4 of the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972. The transaction in question was void ab initio and it was so declared by the Collector by his order dated March 29, 1975. The order of the Collector declaring that the sale transaction was null and void, was not challenged. Thus, as there was no sale transaction in the eye of law, there could be no capital gain arising out of a null and void transfer of such land. Therefore, the Tribunal was right in coming to the conclusion that no capital gain had accrued to the assessee."
16. We have examined the contents of section 38 of the Sales Tax Act, Maharashtra Government relating to 'Transfer to defraud revenue void' and the same is extracted here as under:
"38. Transfer to defraud revenue void.
(1) Where, during the pendency of any proceedings under this Act or after the completion thereof, the Commissioner has reason to believe that the liability of the dealer to pay tax or any other sum payable under this Act, is likely to be in excess of rupees twenty five thousand and the dealer creates a charge on, or parts with the possession by any mode of transfer whatsoever, including sale, mortgage, gift or exchange of any of the assets of his business valued at rupees ten thousand or more in favour of any other person with intent to defraud revenue, then, notwithstanding anything contained in any Act or contract to the contrary such charge or transfer shall be void as against any claim in respect of any tax or other sum payable by the dealer as a result of the completion of such proceedings or otherwise:
Provided that, such charge or transfer shall not be void if made for adequate consideration and without notice of the pendency of the proceeding or of the liability to pay any sum on completion of any proceedings.
(2) Where any person liable to pay tax or other sum payable under this Act has, during the pendency of any proceeding under this Act or after completion thereof, created a charge on or parted with possession by any mode of transfer including sale, mortgage, gift or exchange of any of his 14 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited assets in favour of any other person and the Commissioner is of the opinion that such charge or transfer becomes void under sub-
section(1), then the Commissioner shall issue a notice and hold enquiry and decide whether the charge or transfer became void under sub- section (1).
(3) If, after holding such enquiry the Commissioner is satisfied that the charge or transfer is void, he shall make an order declaring such charge or transfer to be void for the purposes of this Act."
The above provision is very categorically stating that certain transfer/sale/ charge shall be void subject to exception provided under the proviso. It is not the case of the Revenue that charge created on the asset by transferring asset to M/s. Kider India Private Limited while the assessee has still liability to Sales Tax Department during the year under consideration. The payments of outstanding dues to Sales Tax Department were duly paid by the assessee in the subsequent assessment year. In fact, in the mutation entries, there is reference to the Sales Tax Department in the records of Revenue Department.
17. We have also considered the Revenue's argument relating to the supremacy of the Central Laws and Laws of State Government as well as the supremacy of the provisions of section 53 of the TP Act qua provisions of section 38 of the IT Act or for that matter the provisions of section 281 of the IT Act. This aspect is addressed by the Hon'ble Calcutta High Court in the case of Jaymac Lasetron (P) Ltd ANR Vs. CIT & Ors, 245 ITR 734. In para 15 of the said judgment, the Hon'ble High Court held that the provision of section 281 of the IT Act or for that matter section 38 of the Sales Tax Act, Maharashtra Government are more rigorous than the scope and ambit of section 53 of the Transfer of Property Act. The provision of both the sections mentioned above, more safeguard in the interest of the Government so far as the revenue collection is concerned. The mala-fide transactions or to defraud 15 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited the Government/ Revenue exchequer of the country are completely discouraged. Therefore, the transfer of any kind of the properties which are under attachment or strictly prohibited and they are void.
18. In the instant case, payment was made to transfer asset by virtue of registered Sale Deed mentioning of the details of attachment by Sales Tax Department and by Punjab National Bank without clearing dues in the year under consideration. Therefore, so far as the year of taxation of gains, the same is assessable to tax in the year under consideration so long as the name of Sales Tax Department appears in the mutation record of Revenue Department. The same is ultimately reflected in the subsequent assessment year after the payment of outstanding dues to the Sales Tax Department by the assessee or by the buyer. As such, this is not a case of Central Laws Vs. State Laws. It is case of the taking the decision of interest of the revenue exchequer of the Country and therefore, the argument of the Ld. DR on this aspect is not relevant to the issue raised in the present case.
19. We also perused the judgments on which the Ld. DR has placed his reliance i.e. (i) CIT Vs. Dr. Arvind S. Phake (supra.) (ii) CIT Vs. K. Jeelani Basha (supra.) (iii) Chaturvhuj Dwarkadas Kapadia Vs. CIT (supra.) and (iv) CIT Vs. G. Soraja etc. and find that these decisions were delivered in the context of development agreement and illegal occupation of the land etc. These decisions cannot be considered in the context of the facts as closely comparable to the facts of the present case. Therefore, we are of the considered opinion that the assessee has rightly offered the capital gains both short term capital gains and long term capital gains for the assessment year 2011-12, the year in which sales tax liabilities were duly paid and the orders of Sales Tax Department and attachment of the land by Punjab National bank 16 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited were lifted satisfactorily. Accordingly, ground No. 3 raised in appeal by assessee is allowed.
20. With regard to ground No. 4, we find the claim of assessee pertains to payment of brokerage Rs.77,24,632/-in the year 2011-12 and other development expenditure. This amount consists of Rs.27,65,500/- and balance amount is incurred for development of the land. The assessee claimed the said expenses exclusively in connection with the transfer of the asset and claimed the expenditure amount is allowable u/s. 48(i) of the Act. The Assessing Officer and CIT(A) dismissed the claim of assessee stating that the assessee failed to produce any evidence qua the services rendered by the broker. With regard to the expenses incurred on land development, the Assessing Officer and CIT(A) was of the view that sale deed in question does not speak of any improvement to the land being desired by the buyer. Accordingly, assessee is not entitled to grant any relief on account of expenses that are claimed to have been incurred on transfer.
21. On hearing both the sides on this issue, we find this aspect is interlinked to ground No. 3 relating to the correct assessment year of taxation of capital gains. We have held that the transfer of the land on 18.09.2009 is not complete considering the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Vithalbhai P. Patel (supra.). In our view, this issue requires scrutiny of the facts relating to services rendered by the broker on one side and furnishing particulars of expenditure incurred in development of the land by assessee on other side. In any case, this aspect becomes relevant for the assessment year 2011-12 where gains become tenable as offered by the assessee. The assessee filed written submissions in this regard and para 3 is relevant. The same is extracted as under:
17ITA No.703 /PUN/2015
M/s. Sunnygold Wineries Private Limited "3) The assessee submitted that if the capital gains are held to be taxable in A.Y. 2011-12, the question of allowing the deduction of Rs.77,24,632/- will arise only in that year and not in A.Y.2010-11. This is because, if the income by way of capital gains itself is not taxed in this year, the question of allowing or disallowing these expenses of Rs.77,24,632/- in this year does not arise and accordingly, the assessee's ground of appeal can be dismissed."
Therefore, adjudication of this ground No.4 becomes an academic exercise. Accordingly ground No. 4 is dismissed as academic in the assessment year 2011-12.
22. In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced on Wednesday, the 18th day of July, 2018.
Sd/- Sd/- ( वकास अव थी /Vikas Awasthy) (डी. क णाकरा राव/D. KARUNAKARA RAO) या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER पुणे / Pune; !दनांक / Dated : 18th July, 2018. SB
आदे श क* +"त-ल प अ.े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT (Appeals)-4, Pune.
4. The Pr. CIT-3, Pune.
5. %वभागीय त न(ध, आयकर अपील य अ(धकरण, "ए" ब,च, पण ु े / DR, ITAT, "A" Bench, Pune.
6. गाड/ फ़ाइल / Guard File.
// True Copy // आदे शानुसार / BY ORDER, नजी स(चव /Private Secretary आयकर अपील य अ(धकरण, पण ु े / ITAT, Pune.