Income Tax Appellate Tribunal - Mumbai
P.N. Amersey Huf, Mumbai vs Assessee on 10 March, 2011
आयकर अपील य अ धकरण,
धकरण मंुबई यायपीठ 'सी' मंुबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, MUMBAI
सव ी संजय अरोड़ा,
अरोड़ा, लेखा सद य एवं ी वजयपाल राव,
राव या.स
या स ।
BEFORE SHRI SANJAY ARORA,
ARORA , AM & SHRI VIJAY PAL RAO, JM
आयकर अपील सं./I.
I.T.A.
I. T.A. No. 4812/Mum/2011
( नधारण वष / Assessment Year : 2007-08)
P. N. Amersey-HUF, बनाम/ ACIT 16(1),
बनाम
Prop Of Amersey Industries & Matru Mandir, Ta rdeo,
Vs.
Exports, C.S. No. 180/1, Mumbai
Arvind House, Darukhana,
Quay Street, Rea y Road East
Mumbai-400010
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAAHP6321H
(अपीलाथ /Appellant
Appellant)
Appellant .. ( यथ / Respondent)
Respondent
अपीलाथ ओर से / Appellant by : Shri Hira Rai
यथ क ओर से/Respondent by : Shri Santosh Kumar
सनवाई
ु क तार ख / D t. o f H e ari n g : 2nd July 2013
घोषणा क तार ख/D
ख t. O f P ro n o u n c e m e n t : 10th July 2013
आदे श / O R D E R
PER : वजयपाल राव, या.स. / VIJAY PAL RAO, JM
This appeal by the assessee is directed against the order dated 10.3.2011 of Commissioner of Income Tax(Appeals) for the assessment year 2007-08.
2. The assessee has raised the following grounds:
"1. (a) On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in confirming the action of the ACIT in taxing u/s 48 r.w.s. 55(2)(a) of the I.T. Act two sums one of ` 4,55,46,575/- and another of ` 5.00 lakhs received by the appellant for surrendering the possessary rights of premises situated at Mathuradas Mills Estate by incorrectly treating the said rights as tenancy rights as also sub tenancy rights.2 ITA No. 4812/M/2011
P N Amersey HUF .
(b) The learned CIT (Appeals) has further erred in holding that two agreements entered into by the appellant one dated 14.8.1969 with Munshaw Investment Corporation and another dt. 29.4.1970 with Nanu's Metal (Brass) Works, are not one of Leave and License but are for lease and consequently the appellant had right as a sub-tenant in the said premises.
(c) The learned CIT (Appeals) has failed to appreciate that the appellant had only possessary rights in the premises surrendered, which are different from tenancy rights and hence the consideration received for the same is not taxable as capital gain u/s 48 r.w.s. 55(2)(a) of the I.T. Act.
2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in disallowing interest of ` 17,26,591/- paid on loans borrowed by the appellant."
Ground No. 1(a) to (c) is regarding assessment u/s 48 r.w.s 55(2)(a) of Income Tax Act of the amount received by the assessee for surrendering the rights in the premises in question. The assessee was in occupation of the premises on the ground floor, 1st floor and 2nd floor situated in the Mathuradas Mills Compound premises estate, Lower Parel, Mumbai. The premises was owned by Trustees of the Trust settled by M/s Karunashankar Punjaram. The said Trust leased the said premises to M/s Munshaw Investment Corporation, a partnership firm on monthly rent. M/s Munshaw Investment Corporation, further given this premises to the assessee's proprietorship concerned M/s Amersey Industries & Exports vide agreement dated 14.8.1969 for a monthly license fee of ` 14,050/-. The assessee surrendered its rights in the said premises in favour of M/s Piramid Retail Pvt. Ltd. vide agreement dated 7.2.2006 for compensation of ` 4,55,46,575/-. Further, during the year under consideration the assessee received additional sum of ` 5 lacs from Mr. Manek Davar for the 3 ITA No. 4812/M/2011 P N Amersey HUF .
rights surrendered in respect of another premises situated at Mathuradas Mills Estate, Lower Parel, Mumbai.
3. Before the authorities below, the assessee contended that the assessee has possessory rights over the impugned property by virtue of the agreements between the parties and such rights cannot be equated with tenancy rights. Further, the assessee has submitted that since it has only surrendered its licence to use the said premises and the cost of acquisition of such licences being nil, the amount received by the assessee on surrendering of licence/possessory rights is not taxable. The AO held that the possessory rights in the property possess by the assessee are nothing but sub-tenancy rights available to the assessee having regard to the terms and conditions of the agreement entered into between the parties. The AO was of the view that the rights termed as possessory rights having been acquired by a validly executed tenancy agreement and also surrendered by way of agreement namely 'the deed of surrender of tenancy' and therefore, the impugned rights are nothing but tenancy rights covered u/s 2(14) r.w.s 55(2)(a) of the Act. Accordingly, the AO brought the said amount received by the assessee on surrendering of the rights of the property to tax under the head 'capital gain'. On appeal, the CIT(A) confirmed the action of the AO by following the order of his predecessor for the assessment year 2005-06, wherein an identical issue was involved.
4ITA No. 4812/M/2011
P N Amersey HUF .
4. We have heard the Ld. AR as well as the Ld. DR and considered the relevant material on record. The Ld. AR has reiterated the contentions and submissions as made before the authorities below as well as the arguments advanced before the Tribunal for the assessment year 2005-
06. On the other hand, the Ld. DR has relied upon the orders of the authorities below and submitted that the issue is covered by the order for the assessment year 2005-06. The Ld. AR has fairly conceded that the facts and issue are identical as in assessment year 2005-06 and this Tribunal has decided this issue against the assessee vide order dated 29.2.2012 in ITA No. 1897/M/2009. As pointed out by the parties, we note that an identical issue has been considered and decided by the Co- ordinate Bench in this Tribunal for the assessment year 2005-06 in para 10.6-11 as under:
"10.6 In the present case the assessee is in continuous possession of the property, was continuously conducting the business from the premises, in fact had right to construct buildings therein for the purpose of business subject to permission from the tenants and the authorities and further he had undertaken to pay increased tax, if any, on the said premises. All these factors including the fact that the assessee undertook not to sublet the premises to others do indicate that the assessee is keeping the premises only as a sub-tenant with tenancy rights. As rightly observed by the Hon'ble Bombay High Court in the case of Sardar Pruthisingh vs Kanchanlal Purushottamdas Desai in AIR 2001 Bom 255, the question of allowing to let out the premises can only by a tenant.
10.7 Another factor which also can be viewed but may not be material for deciding the issue, is that the landlord/vendor has only received a consideration of ` 75 lakhs for sale of the trust property, whereas the assessee for surrendering his possessory title/ other rights (as mentioned in the agreement itself) has obtained ` 1.75 laths (plus ` 5 lakhs from Mr. Maneck Davar by virtue of two agreements. Of course since all parties are same, how the amounts are apportioned for vacating two premises under 5 ITA No. 4812/M/2011 P N Amersey HUF .
occupation under two different agreements can only be explained by the assessee). The fact is that the amount received by the assessee was more than the amount received by the vendors per se. This also indicates that there is a right in the said property to the assessee and not mere a license holder as contended. Considering all the above aspects, we have no hesitation in affirming the orders of the Revenue authorities that the assessee is having property as a sub tenant and his tenancy rights were surrendered to the buyer. Therefore, provisions of section 55(2) are applicable.
10.8. The case law relied upon by the assessee in the case of CIT vs. M. Appukutty 253 ITR 159 is not applicable for the reason that the act was amended subsequently. The said decision was rendered for the assessment year 1987-88 when the provisions of section 55(2) were not on statute. Therefore, reliance on the principles established in the above said decision is not correct In the case of M. N. Clubwala vs. Fida Hussain Saheb. & Others (AIR 1965 (SC) 610) also relied on by the Counsel, the facts are entirely different from that of assessee. The facts in the above referred case are that the appellants were holding the license to a market constituting of stalls which were licensed to various stall holders. The ownership rights were that the appellant and stall holders were conducting their business only for a fixed period and that to they did not have the right to stay in the premises beyond the business hours. Further, the maintenance and cleaning of the market was the responsibility of the appellant (owner) and there is no permission given to keep the goods in the said premises. Accordingly considering those facts, the Hon'ble Supreme Court held that the arrangement is only a license agreement and not lease. Other decisions laid upon are also not applicable as considered above on the facts of the case.
11 Therefore, respectfully following the principles laid down by the decisions of the Hon'ble Supreme Court (Supra) and Hon'ble Bombay High Court in the case of Sardar Pruthisingh vs Kanchanlal Purushottamdas Desai in AIR 2001 Bom 255, we hold that assessee is having substantial rights as tenant (sub-tenant) vide the agreement and not mere license holder and the amount is correctly brought to tax by the Revenue authorities and therefore, assessee's contentions in Ground No.1 does not require any consideration. Accordingly Ground No.1 is rejected."
Following the order of this Tribunal, in the assessee's own case for the assessment year 2005-06, we decide this issue against the assessee 6 ITA No. 4812/M/2011 P N Amersey HUF .
and in favour of the revenue. The impugned order of the CIT(A) qua this issue is upheld.
5. Ground No. 2 is regarding disallowance of interest. The assessee has claimed a sum of ` 17,26,591/- as interest expenditure. The AO has disallowed this amount on the ground that the assessee has advanced interest free amount to the related party by invoking the provision of section 36(1)(iii) as a similar disallowance was made for the assessment year 2005-06. The CIT(A) has confirmed the disallowance made by the AO by following the order of his predecessor for the assessment year 2005-
06.
6. We have heard the Ld. AR as well as the Ld. DR and considered the relevant material on record. At the outset, we note that an identical issue has been considered and disposed off by this Tribunal for the assessment year 2005-06 in para 14 as under:
"14. We are unable to understand the logic of the CIT (A) in enhancing the disallowance. It was the submission before him that assessee has old interest free loans as well as interest bearing loans and new loans taken during the year were advanced for business purposes. The assessee further submitted that the labour charges received were to the tune of ` 1.26 crores to ` 1.75 crores in the earlier three years and the business was done with M/s Milton Skin wear Pvt. Ltd and Miltons Pvt. Ltd. It was also further submitted that the assessee has credit balances, reserves and current liabilities to the extent of ` 4.05 crores and investment in fixed assets and current assets to the tune of ` 1.75 crores. It was further submitted that the relying on the decision of the Supreme Court judgments in the case of SA Builders (288 ITR 1), the entire amount advanced is for the purpose of business. These aspects were not considered by the CIT(A) in its correct perspective and enhanced the amount. We are of the opinion that the nexus of the borrowed funds to that of utilization is to be re-examined by the Assessing Officer so as to determine whether any of the borrowed 7 ITA No. 4812/M/2011 P N Amersey HUF .
funds were diverted for non- business purposes. Therefore, in the interest of justice, we restore the issue to the-file of the Assessing Officer and direct him to examine and give his findings whether the amounts borrowed on interest were advanced for non business purposes and if so, disallow the amount to the extent of diversion under section 36(1)(iii). The orders of the Assessing Officer and the CIT(A) on this issue are accordingly set aside and the issue to that extent is restored to the file of the Assessing Officer to examine afresh after giving due opportunity to the assessee and decide the disallowance, if any, as per facts and law. Ground No.2 is considered as allowed for statistical purposes."
Accordingly, following the earlier order of this Tribunal, we set aside this issue to the record of the Assessing Officer to examine afresh in terms of the directions given by the Tribunal for the assessment year 2005-06.
7. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on this day of 10th July 2013 Sd/- Sd/-
(संजय अरोड़ा) ( वजयपाल राव)
लेखा सद य या यक सद य
(SANJAY ARORA) (VIJAY PAL RAO)
Accountant Member Judicial Member
Place: Mumbai: Dated: 10th July 2013
Subodh
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai