Income Tax Appellate Tribunal - Ahmedabad
Nishchay Fab Pvt. Ltd.,, Ahmedabad vs Assessee on 26 August, 2014
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद यायपीठ 'बी
बी',
बी , अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
सम ौी अिनल चतुवद
, लेखा सदःय एवं ौी कुल भारत, याियक सदःय ।
BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
1. आयकर अपील सं./I.T.A. No.2579/Ahd/2013 - A.Y. 2009-10
2. आयकर अपील सं./I.T.A. No.2829/Ahd/2013 - A.Y. 2009-10
1. Nishcay Fab Pvt.Ltd. बनाम/ 1. Jt.Commissioner of
8, Lavanya Soc., Vs. Income Tax (OSD)
Nr.Jaltarang Club Circle-5
Vasna, Ahmedabad Ahmedabad
2. ACIT, Circle-5 2. M/s.Nishcay Fab Pvt.
Ahmedabad Ltd., Ahmedabad
ःथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AABCN 4115 F
(अपीलाथ+ /Appellants) .. (ू-यथ+ / Respondents)
Assessee by :
Shri J.P. Shah, A.R.
Revenue by :
Shri V.K.Singh, Sr.D.R.
सुनवाई क/ तार ख / Date of Hearing 13/08/2014
घोषणा क/ तार ख /Date of Pronouncement 26/08/2014
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
These cross-appeals by the Assessee and the Revenue are directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XI, Ahmedabad ('CIT(A)' in short) dated 02/09/2013 pertaining to Assessment Year (AY) 2009-10. These appeals were heard together and are being disposed of by way of this consolidated order for the sake of convenience.
ITA No.2579/Ahd/2013 (By Assessee)and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -2-
2. First, we take up the Assessee's appeal in ITA No.2579/Ahd/2013 for AY 2009-10. The abridged ground of appeal raised by the Assessee reads as under:-
1. The order of C.I.T.(Appeals) disallowing the amount of Rs.88,72,276/- paid to Ketan Shah, Alpa Shah, Jenal Patel and Dipika Patel in computation of taxable capital gain from sale of land to M/s.Writers and Publishers Ltd. as per Sale Deed of 30.06.2008 is bad in law as also on facts.
2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 26/12/2011, thereby the Assessing Officer (AO in short) made disallowance of Rs.88,72,276/- on account of the compensation paid to Shri Ketan Shah and others and also disallowed compensation paid to Gujarat Steel & Pipes amounting to Rs.57,20,000/-. Against this, the assessee preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee partly allowed the appeal. While allowing the appeal, the ld.CIT(A) confirmed the disallowance of Rs.88,72,272/- and deleted the disallowance of Rs.57,20,000/-. Now, both the Assessee and the Revenue are in cross-appeals before us.
3. The ld.counsel for the assessee submitted that the undisputed facts are that the assessee entered into an agreement to sell to four persons;
namely, Shri Ketan Shah, Ms.Alpa Shah, Shri Jenal Patel and Ms. Dipika Patel. The ld.counsel for the assessee submitted that before the sale-deed could be executed, the assessee found another buyer of the land who offered high price for the land, therefore the assessee entered into an ITA No.2579/Ahd/2013 (By Assessee) and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -3- agreement of cancellation of agreement to sell on 20/06/2008 and agreed to make payment to the purchasers at 50% of the sale consideration received higher than the price with the original purchasers. He submitted that in the business of real estate, this kind of arrangement happens day in and day out. He submitted that the authorities below have grossly erred in making addition of this amount. He submitted that the original purchasers have offered for taxation the amount received from the assessee-company. He has drawn our attention towards the assessment order, and submitted that the AO strangely proceeded on the basis that out of four original purchases, two were not having sufficient means to purchase the land. The ld.counsel for the assessee submitted that the authorities below have failed to appreciate the fact that there was no occasion to make any avoidance of tax by the assessee since the capital gain would be payable at the lesser rate. He submitted that the Revenue has all liberty to proceed against the original purchasers if they do not reflect the amount received from the assessee-company. He submitted that the payment has been made through banking channels. He further submitted that the cheques of the original purchasers were duly cleared in the account of the assessee.
3.1. On the contrary, the ld.Sr.DR supported the orders of the authorities below and submitted that there is no error in the order of the ld.CIT(A).
4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below.
ITA No.2579/Ahd/2013 (By Assessee)and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -4- We find that the authorities below have rejected the claim of the assessee on the basis that the assessee-company did not receive any advance from the original purchasers as the cheques which were handed over to the assessee-company were not presented to the bank prior to execution of sale-deed with the new buyer. Therefore, the authorities below of the view that there was no creation of any encumbrance. The contention of the assessee is that once the assessee has executed agreement to sell and received cheques, then a contract is executed and the rights in favour of the original purchasers were created to proceed against the assessee- company. It is also the contention of the assessee that the consideration was received in the form of the cheques being the negotiable instrument and in case the assessee presented the same, the bankers of the original purchasers would have cleared the same and in case of dishonour of the cheques, the assessee-company was at liberty to proceed under the Negotiable Instrument Act. Therefore, certain rights and liabilities were created by receiving the consideration in the form of cheques. We find that the AO has doubted the genuineness of the transaction on the basis that actually no advance was received by the assessee-company from the original purchasers. It was only the sale consideration that was received from M/s.Writers and Publishers Ltd. that has been rotated through the original purchasers that to the account of the assessee-company. These are nothing but circular entries. The ld.CIT(A) has confirmed these findings on the basis that the agreement dated 17/04/2008 does not appear to be legally enforceable document. Its genuineness remains unproved in absence of any other corroborative evidences. It appears to be a self created evidence by the appellant in order to reduce his overall ITA No.2579/Ahd/2013 (By Assessee) and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -5- capital gain tax liability. The parties to whom the compensation have been paid do not appear to be the persons having creditworthiness to afford purchase of land by paying an amount of over Rs.2 crores. We find that the ld.CIT(A) has not given any basis as to how these agreements executed by the assessee-company with the original purchasers are not legally enforceable. In the absence of clear findings, we are of the considered view that the matter requires fresh decision. Therefore, we restore this issue back to the file of the ld.CIT(A) to give a clear finding as to how the agreements with original purchasers are not enforceable under the law. Moreover, the authorities below have not placed any concrete evidence proving that the entire compensation paid to the original purchasers came back to the assessee-company. Hence, all these aspects require fresh adjudication. Thus, assessee's ground of appeal is allowed for statistical purposes.
5. In the result, the appeal of the assessee in ITA No.2579/Ahd/2013 is allowed for statistical purposes.
6. Now, we take up the Revenue's appeal in ITA No.2829/Ahd/2013 for AY 2009-10. The Revenue has raised the following grounds of appeal:-
i) The ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.57,20,000/- claimed by the assessee towards cost of improvement and added by the A.O. treating the same as not an expense incurred in connection with the transfer of the capital asset in question but payments made with a motive to avoid taxes.ITA No.2579/Ahd/2013 (By Assessee)
and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -6-
ii) On the facts and circumstances of the case, the Ld.Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer to the above extent.
iii) It is, therefore, prayed that the order of the Ld.Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored to the above extent.
7. The ld.Sr.DR argued that the CIT(A) was not justified in deleting the addition made by the AO in respect of the compensation paid to the Gujarat Steel and Pipes a sister-concern of the assessee. He submitted that the AO has given a finding that the alleged payment of compensation of Rs.65 lacs was only dubious arrangement as the same was received by the assessee-company.
7.1. On the contrary, the ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that there is no error in the order of the ld.CIT(A). He submitted that the undisputed fact remains that on the land in question Gujarat Steel & Pipes had erected Industrial structures and was carrying out the business. Due to the decision of the assessee- company to sell the land, Gujarat Steel and Pipes was put to hardships and loss.
8. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue in paras 3.1.1 & 3.1.2 of his order, which are in the following terms:-
"3.1.1.With regard to the payment o compensation to tenants, the facts that clearly emerge are ITA No.2579/Ahd/2013 (By Assessee) and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -7- (1) M/s.Gujarat Steels & Pipes were in occupation of the land since February, 2006.
(2) The appellant had entered into an agreement to sell the land and therefore had asked the tenant to vacate the land prior to the completion of the lease period.
(3) That M/s.Gujarat Steels & Pipes had carried out certain construction on the land and had borne the expenditure on account of the same.
(4) That the tenant had to bear certain cost on account of shifting after vacation from the said land to another premises.
(5) That the tenant had to bear inconvenience on account of shifting before the expiry of the lease period.
(6) That the amount of compensation of Rs.65,00,000/- has been paid by the appellant to the tenant on the basis of MOU between the appellant and the tenant.
3.1.2. The above amount cannot be said to be excessive in view of the fact that the tenant had to incur almost matching expenditure on construction, shifting and other incidentals. The provisions of sec.40A(2)(b) cannot be made applicable on a transaction claimed as deduction against capital gain. The contention of the A.O. that the entire arrangement is a sham transaction with a motive to avoid tax is not acceptable because the other party is taxed at maximum marginal rate whereas the appellant had to pay the tax and interest at the rate of 20% on account of L.T.C.G. I therefore, I hold that the disallowance of Rs.57,20,000/- of compensation paid to the tenant is not justified and is deleted."
8.1. We find that the above findings on fact is not controverted by the Revenue by placing any contrary material on record, therefore we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld.
ITA No.2579/Ahd/2013 (By Assessee)and ITA No.2829/Ahd/2013 (By Revenue) Nishchay Fab Pvt.Ltd. vs.Jt.CIT/ACIT Asst.Year - 2009-10 -8- Thus, ground raised by the Revenue is rejected and appeal of the Revenue is dismissed.
9. In the combined result, the appeal of the Assessee is allowed for statistical purposes, whereas the appeal of the Revenue is dismissed.
Order pronounced in Court on the date mentioned hereinabove at caption page Sd/- Sd/-
(अिनल चतुवद
) (कुल भारत)
लेखा सदःय याियक सदःय
( ANIL CHATURVEDI ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 26/ 08/2014
ट .सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श क/ ूितिल7प अमे7षत/Copy
षत of the Order forwarded to :
1. अपीलाथ+ / The Appellant
2. ू-यथ+ / The Respondent.
3. संबंिधत आयकर आयु9 / Concerned CIT
4. आयकर आयु9(अपील) / The CIT(A)-XI, Ahmedabad
5. 7वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड< फाईल / Guard file.
आदे शानुसार/ BY ORDER, स-या7पत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation ..26.8.14(dictation-pad 16-pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ...26.8.14 Other Member...
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S.......27.8.14
6. Date on which the file goes to the Bench Clerk.....................27.8.14
7. Date on which the file goes to the Head Clerk..........................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................