Income Tax Appellate Tribunal - Mumbai
Estate Of Late Shri Umesh Chagal Karia , ... vs Department Of Income Tax on 25 June, 2012
ITA No.5014 of 2010 Estate of Late Shri Umesh Chagpal Karia by Execotors-F Bench
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" Bench, Mumbai
Before Shri B. Ramakotaiah, Accountant Member and
Shri Vivek Varma, Judicial Member
ITA No. 5014/Mum/2010
(Assessment year: 2007-08)
ACIT Circle 23(2) C-10/202 Vs. M/s Estate of Late Shri Umesh
2nd Floor, Pratykshakar C. Karia by Executors, C/o
Bhavan, BKC Mumbai Shri Rupesh C. Sheth, B-205
400051 Konark Darshan, Zaver Road,
Mulund (W) Mumbai 400080
PAN No.AAAAE 1535 F
(Appellant) (Respondent)
Department by: Shri Baban Patil, DR
Assessee by: DR. K. Shivaram &
Shri Ajay R. Singh
Date of Hearing: 25/06/2012
Date of Pronouncement: 29/06/2012
ORDER
Per B. Ramakotaiah, A.M.
This is a Revenue appeal against the orders of the CIT (A)-33 Mumbai dated 19.3.2010. The Revenue has raised the following two grounds:
"1. On the facts and circumstances of the case and in law, the CIT (A) erred in accepting the change of ratio to 63:37 from 75:25 in consideration of alleged services and expertise provided by the other co-owner Shri Atul C. choradia.
2. On the facts and circumstances of the case and in law, the CIT (A) erred in not appreciating the facts that assessee had not brought on record anything about the services and expertise stated to have rendered".
2. Briefly stated, assessee is an AOP of Executors of Estate of Late Shri Umesh Karia. For the relevant assessment year 2007-08, assessee filed return of income, declaring total income at Page 1 of 6 ITA No.5014 of 2010 Estate of Late Shri Umesh Chagpal Karia by Execotors-F Bench `30,16,408/-. The return of income was filed after claiming deduction of the entire long term capital gain of `7,43,63,970/- by investing in capital gain bonds of NHAI of `7.45 crores. AO in the course of assessment invoked provisions of section 167B for bringing to tax at maximum margin rate, whereas assessee's contention was that there are two executors and provisions of section 168 are applicable. This contention was accepted by the CIT (A) and Revenue is not in appeal. Therefore, as far as the status of AOP is concerned, the rate that has to be adopted as per section 168 and not as per section 167B (maximum marginal rate) was final. The issue in present appeal is with reference to adoption of the sale consideration.
3. During the year under consideration, property known at Undhri in Pune of about 80 acres was sold to Chalez Properties & Investments (P) Ltd, part of Raheja Group for a total sales consideration of `12,76,05,000/- vide the agreement executed dated 4.8.2006. As per the will of Shri Umesh C. Karia, he was holding 75% share in the plot of land and the balance 25% was held by one Shri Atul Ishwar Das Choradia. Since the Executors could not sell the property on their own, it seems there was a MoU entered into dated 7.4.2003 whereby proceeds on sale of property was modified and the ratio was changed from 75:25 to 63:37. In pursuance of the said MoU, total sale consideration of `12,76,05,000/- was distributed in the ratio of 63:37 and accordingly the returns were filed. Assessee's share of amount was `8,03,91,150/- and after reducing the indexed cost of `60,27,180/-, the net long term capital gain of `7,43,63,970/- was calculated. Since assessee invested the amount of `7.45 crores in NHAI bonds, the capital gain offered was Nil. AO however, did not agree to the revised share ratio entered into by the Executors and Shri Atul I. Choradia and brought to tax Page 2 of 6 ITA No.5014 of 2010 Estate of Late Shri Umesh Chagpal Karia by Execotors-F Bench the difference of 12% of the sale consideration amounting to `1,51,76,570/-.
4. The CIT (A) after considering the MoU and submissions made by assessee (extracted in Para 4.2 of the order), decided the issue in favour of assessee as under:
"4.3. I have carefully considered the above issue and find that the Assessing Officer has not accepted the MOU dated 7.4.2003 wherein the shares of the Executors of Estate vis a vis Shri Atul I Chordia, joint owner of the property has been revised. The Assessing Officer has labeled the MOU as a sham document and held that the first party has parted with 12% of their share in the property without any consideration. The Assessing Officer has summarily dismissed the MOU saying that the services mentioned therein which Mr Chordia is to perform to get the land sold and which has led to a revision in the share of property, are not worth 12% of the sale value of property sold. However, it has not been elucidated as to how the Assessing Officer has arrived at this conclusion. It is not been detailed as to what investigations or inquiries were done by the AO to reach the above conclusion. The Assessing Officer I find, from a reading of the order, is agreeable to a commission being paid to a broker to do the needful for the sale of the property, but is not ready to accept that there could be a revised agreement amongst the holder of land and property regarding the % of share on account of extra work done by one of them to get it sold. The Assessing Officer is of the opinion that as Mr Chordia was one of the owners of the property, he would have sold it without any change of his share in it as this would be in his interest. This observation of the Assessing Officer is a presumption. The sale of the property could be need based and all circumstances show that the need was of the beneficiaries of the Estate. It is also clear that with the demise of Shri Umesh Karia, the expertise and knowledge of Shri Chordia came into use for selling the property. The Assessing Officer has also accepted this. Therefore, the change of share ratio and awarding a higher share to Shri Chordia than what was his first, in lieu of the efforts made by him for the sale of property cannot be doubted or suspected on a surmise unless it can be proved that it was done with an intention to defraud the revenue. The MOU, I find, is a legal Page 3 of 6 ITA No.5014 of 2010 Estate of Late Shri Umesh Chagpal Karia by Execotors-F Bench document agreed to and signed by all concerned in front of witness. Unless through investigation, it is found that the document contains false statements or is not acceptable by any of the signatories, it cannot be labelled as false document or a sham document. The co- owners of the land have all the right to re-determine shares on the basis of some circumstances that occurs. The Will of Shri Umesh Karia authorized the executors to dispose off the property as they deemed fit and proper. So it is not as if the executors exceeded their jurisdiction on this ground by signing the MOU. A reading of the MOU shows that there was no dispute regarding its contents among the beneficiaries of the estate. What has to be seen is that correct income is computed and taxes paid on the transaction that results. In this case, it is seer that both the co-owners have paid the requisite capital gains tax on the sale as per the provisions of Income Tax Act, 1961. I find that, the Assessing Officer has not considered all the above mentioned issues while rejecting the MOU. The Assessing Officer has also not established that the MOU helped in any kind of tax evasion by the persons concerned or is unlawful. The Assessing Officer 's rejection of the MOU, I find, is on the basis of suspicion and assumptions and thus this action cannot be upheld. The additions made requires to be deleted as nothing has been brought to record to show that the MOU was a sham documents formed to defraud revenue. The appeal is therefore allowed".
5. The learned DR submitted that assessee was having 75% of the share and accordingly AO was correct in bringing to tax the share of 75%. He relied on the orders of AO to submit that the CIT (A) wrongly considered the MoU for giving benefit to assessee.
6. The learned Counsel in reply submitted that the MoU was entered for sale of the property and as per the MoU (placed in paper book from page Nos. 15 to 20) there is no distribution of title of the property, but only share consideration from the sale of the said property in different ratio at 63:37. It was his submission that Shri Atul I Choradia, being a resident of Pune and also having wide connections, has helped in disposing of the property for which the additional consideration was given in helping sale of property. It Page 4 of 6 ITA No.5014 of 2010 Estate of Late Shri Umesh Chagpal Karia by Execotors-F Bench was submitted that there is no dispute with reference to the will entered by Shri Umesh Karia and the MoU entered way back in March, 2003 and the subsequent sale of property in 2006. It was his submission that Shri Choradia also offered capital gain, the fact of which was recorded by the CIT (A) and further contended that amount cannot be brought to tax in both the hands i.e. having been offered by Shri Atul I. Choradia, it will be double taxation, if the same was considered as assessee's receipt. It was further submitted that even though assessee is having 75% share in the property, the sale consideration was only divided at the rate of 63% as Choradia helped in selling the property and consideration was given for the services rendered. The actual amount received was correctly offered by the executors of the Estate.
7. We have considered rival contentions and perused the record. It was the case of AO that Shri Choradia was having 75% share in the property and accordingly the sales consideration should have been offered at 75% of the entire sale value. This contention of AO cannot be accepted as parties have entered into separate MoU, for share of sale consideration, in view of the peculiar circumstances of the case and the services being rendered by Shri Atul Choradia. We do not find any reason to differ from the findings of the CIT (A) as the MoU was a legal document created by the parties. It is also one of the contention that even though the title of the property is at different percentage, the parties can agree for receiving the sale consideration in view of the certain legal impediments/practical difficulties. Since assessee's executors received the amount at 63% of the sale consideration by way of MoU, which was also discussed in recital K in page No.6 of the agreement of sale, a registered document, we do not see any reason to doubt the MoU as such. In view of this, since the amount received as per the agreement between the parties was correctly offered and as Shri Atul Choradia Page 5 of 6 ITA No.5014 of 2010 Estate of Late Shri Umesh Chagpal Karia by Execotors-F Bench also offered the balance amount in his return, the order of the CIT (A) deserves be upheld. The Revenue grounds are accordingly dismissed.
8. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 29th June, 2012.
Sd/- Sd/-
(Vivek Varma) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 29th June, 2012.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "F " Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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