Income Tax Appellate Tribunal - Mumbai
Income-Tax Officer vs Narendra S. Kapadia on 14 February, 1996
Equivalent citations: [1996]58ITD329(MUM)
ORDER
M.K. Chaturvedi, JM
1. This appeal by the revenue is directed against the order of the Commissioner of Income-tax (Appeals)-IX, Mumbai and pertains to the assessment year 1987-88.
2. The short question neatly identified by the learned Departmental Representative is :
"Whether, on the facts and in the circumstances of the case, the CIT(A) was correct in giving directions to Assessing Officer, to allow the amount of Rs. 12 lakhs, being the alleged payment made by the assessee to his three brothers for vacating the premises at 51, Monalisa, 10, Bomanji Petit Road, Bombay - 400 030, while calculating the amount of capital gains?"
3. Briefly the facts :- Assessee owned a 1580 sq. ft. flat at Monalisa. Indisputably, the flat was purchased by the assessee with his own funds. It was purchased on 21-2-1968 for Rs. 48,201. It was sold on 25-11-1986 for Rs. 22 lakhs. During the relevant assessment year, assessee reflected capital gains derived from the sale of this flat. He claimed deduction of Rs. 12 lakhs in respect of the amount paid to his brothers, namely, Shashikant, Navin and Hemant. It was claimed that the brothers to whom this amount was paid were living with the assessee. Consequent upon the sale of the flat the proceeds were utilised for purchasing the residential premises.
It was alleged to be family settlement. All the brothers were carrying on the business since 6-11-1972 under the name and style of Gem Traders. The brothers of the assessee were not paying any rent for using the residential premises. A sum of Rs. 4 lakhs was paid to each of the three brothers for relinquishing their rights to stay, in the flat, so as to enable the assessee to sell the flat with vacant possession. Accordingly, it was claimed that Rs. 12 lakhs paid by the assessee to his brothers, be allowed as deduction while computing the amount of capital gains on the sale of the flat. Assessing Officer rejected the claim. CIT(A) directed the Assessing Officer to allow the claim. Hence, this appeal.
4. Shri A.K. Sahay, the learned Departmental Representative vehemently argued that there is no material on record to show that the brothers of the assessee had acquired any right in the said flat. The assessee allowed his brothers to stay in the flat out of natural love and affection. No rent was charged. There was no tenancy. There is absolutely nothing on record to show that the amount given to the brothers was in terms of the family settlement. The core of the dispute was not explained. Besides, this house was not the 'family property'. It was the personal property of the assessee. It could not be the subject-matter of the family settlement. Further, the learned Departmental Representative relied on the order of the Assessing Officer.
5. Shri J.D. Mistry, learned counsel for the assessee appeared before us. It was submitted that the amount of Rs. 12 lakhs was paid by the assessee to get the premises vacated. The brothers of the assessee were reluctant to vacate the premises. They acquired the right in the said premises by holding uninterrupted possession since beginning. In the eventuality of suit being filed for eviction, the matter was likely to be delayed. The assessee might be deprived the price, which he was getting on the sale of the flat. It was, therefore, considered prudent that due compensation be given to the brothers for vacating the flat. The amount was alleged to be paid in terms of family settlement. Thus, it was claimed to be an allowable expenditure. The learned counsel produced before us xerox copy of the ration card. Copies of Passports and marriage certificates of the assessee's brothers in order to prove that his brothers were sharing the flat with the assessee. He further relied on the order of CIT (Appeals).
6. We have heard the rival submissions in the light of the material produced before us. We have examined the documents and papers contained in the paper book. We have also perused the relevant details on which out attention was invited at the time of hearing. Why the assessee paid Rs. 12 lakhs to his brothers? Whether, it was necessary to expedite the sale? Whether, the brothers of the assessee acquired any right in the property? Whether, it was a family arrangement? These are some of the questions which need to be examined for deciding the matter.
7. We do not find any provision in the law by which it can be said that the brothers of the assessee acquired legal right in the premises, on the strength of uninterrupted stayal in the flat. If a person allows his relation to stay in his house, he only provides a licence to use the house. This licence does not confer any right in the property.
Right is a legally protected interest. Infraction of which can be challenged in the Court of Law. Law prescribes remedy against the violation of any legal right. This idea is inculcated in the well known legal maxim - "UBIJUS IBI REMEDIUM" (wherever there is right, there is remedy). In the given situation, we do not think that any Court of Law could allow any claim to the brothers of the assessee. They were not the owners of the house. They were not the tenants. Assessee allowed them to stay out of natural love and affection. There is absolutely no evidence that the assessee took any money for allowing them to stay. In these circumstances, if it is said that the 'right' is generated, we are afraid that the source of generosity will get dry. People will think twice before extending such hospitality to a relation.
8. Whether this payment was necessary to expedite the sale? On record there is nothing to demonstrate the exigency of such payment. It was something personal. Obligation, if there be any way of a personal nature. Examining the situation from the view point of the logic given by the learned counsel, take a situation, to expedite the sale of flat wife of the owner demands a necklace worth Rs. 12 lakhs. She will not vacate unless the necklace is given to her. Assessee makes a purchase of necklace by paying Rs. 12 lakhs. Can he claim this amount as deduction while computing the capital gains. The answer is 'No'. There is no legal obligation. Similarly, in the given circumstance, the payment made to brothers was at best a personal obligation. The amount, therefore, cannot be deducted while computing the capital gains.
9. This can also be not construed as a family arrangement. The conflict of legal claims in praesenti or in futuro is generally a condition for the validity of a family arrangement. There should at least be a bona fide dispute present or possible. Members of a joint Hindu family may, to maintain peace and to bring about harmony in the family, enter into such a family arrangement. In the given case core of the dispute was not explained. The flat was not the family property. It was the personal property of the assessee. It was only an arrangement to reduce the tax burden. When the factum of dispute itself is dubious, there is no sanctity of the award. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuge. We recollect the oft-quoted wordings of Lord Greene, who said "It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers".
10. We have gone through the reasonings given by the learned CIT(A). In our opinion, he did not consider the issue in the right perspective. On the facts and in the circumstances of the case, the amount of Rs. 12 lakhs cannot be deducted while computing the capital gains. Accordingly, we reverse the order of the CIT(A) and restore that of the Assessing Officer.
11. In the result, the appeal of the revenue stands allowed.