Income Tax Appellate Tribunal - Ahmedabad
Bhupendra Gopaldas Shah, Ahmedabad vs Department Of Income Tax on 15 September, 2001
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "C"AHMEDABAD
Before S/Shri D. K. Tyagi, J.M. and A. K. Garodia, A.M.
ITA No. Asst. Year
1842/Ahd/2009 2005-06
Income-tax Officer, V/s. Shri Bhupendra
Ward 11(3), Gopaldas Shah, B/h,
Ahmedabad. Alok Chemicals Pipe
Factory, c/o B.N. &
Co., Sukhramnagar,
Gomtipur, Ahmedabad.
(Appellant) .. (Respondent)
Appellant by :- Shri Vinod Tanwani,
Sr.DR
Respondent by:- Shri S. N. Soparkar,
Sr.Advocate with
Shri Tushar Vasa
Date of hearing :15/9/2001.
Date of pronouncement : 23/9/2011
ORDER
Per D. K. Tyagi, Judicial Member.
This is an appeal filed by the Revenue against the order of ld. CIT(A) dated 26.3.2009, raising following grounds:-
(1) The ld. CIT(A) has erred in law and facts deleting the addition of Rs.19,50,000/- made on account of long term capital gain as per the specific provisions of section 45 of the Act, r.w.s. 2(47) on the Act and section 53A of the Transfer of Property Act, 1882.ITA No.1842/Ahd/2009
Asst. Year 2005-06 (2) The ld. CIT(A) has erred in law and on facts in not considering the relevant findings of the AO discussed at paragraph 2.5 of the assessment order.
(3) The ld. CIT(A) has erred in law and facts in directing to the AO to tax the income on account of capital gain in Asst. Year 2006- 07 and not in Asst. Year 2005-06.
2. The only issue involved in this appeal is whether the capital gains arising out of sale of property situated at Borivali(West) Mumbai is taxable in Asst. Year 2005-06 or in Asst. Year 2006-07. The AO after bringing all the facts relevant to the issue on record has taxed this capital gains of Rs.19,50,000/- during the year under appeal by observing as under :-
"2.5 On the basis of the above facts, it emerges that the relinquishment has been made and the deed executed by the assessee on 12.08.2004 which is relevant to Asst. Year 2005-06. Though the assessee has not produced this deed dated 12.08.2004 during the assessment proceedings. However, the assessee has executed the deed of surrender on 28.6.2005 to bring on record the date of transactions relevant to Asst. Year 2006-07 to postpone the payment of tax and set off capital gain loss on other transfers. In fact on perusal of the return of income for Asst. Year 2006- 07, it is seen that the motive of the assessee to postpone the payment of capital gain tax on this transaction to Asst. Year 2006-07 is to nullify the capital gain tax by setting off the capital loss of Rs.21,86,755/- incurred during the Asst. Year 2006-07. The issue is not whether the same is allowable or not. The issue is that capital gain is to be taxed strictly in the assessment year to which it pertains. If the contention of the assessee is accepted, it could lead to a situation where the assessee would relinquish rights/possession of the property and postpone the payment of capital gain tax by executing the deed of transfer/surrender at its own convenience. This is definitely not the intention of the legislature while framing the provisions of section 45 r.w.s. 53A of Property Tax Act, 1882.
2.6 Apart from the facts mentioned about the sale deed executed on 12.08.2004, it is also evident and acknowledged by the assessee that the assessee has already received Rs.8,00,000/- (50% share) during the relevant F.Y. i.e. Asst. Year 2005-06. Thus the entire capital gain 2 ITA No.1842/Ahd/2009 Asst. Year 2005-06 becomes liable for taxation in F.Y.2004-05 relevant to Asst. Year 2005-
06."
Aggrieved by this order of AO the assessee went in appeal before the first appellate authority.
3. Before the first appellate authority assessee's submissions were as under :-
"The return of income was filed on 29.10.2005 declaring total income at Rs.89,387/-. The same was processed on 22.5.2006 u/s 143(1) of the Act.
The assessee is having income from rent, short term and long term capital gains and income from dividend and interest. The assessee has filed return of income showing rental income from the property situated at Gomtipur, Ahmedabad and property situated at Borivali (West), Mumbai having half share in both the properties.
The assessee and his father were partners in the firm of M/s New National Chemical Industries, along with other outside partners. The said firm had lease hold rights of the premises situated at Mu. No.4336/1 and 4333/3 of Simpoly Road, Off Ghodbunder Road (now known as Swami Vivekanand Road) Boriwali (West) Mumbai. The premises was owned by M/s Jam Hosiary (P) Ltd. The premises was constructed for commercial use. Differences and disputes lead to division and partition of property among the partners of the said firm. The physical division of the property was understood at the time of separation of partnership.
By an agreement dt.27.10.1980 between the assignors Shri Gopaldas Premchand Shah and Bhupendra Gopaldas Shah and assignee M/s Desai Builders the property was agreed to be assigned to the developers M/s Desai Builders.
Shri Gopaldas Premchand Shah expired on 20.8.1983 at Ahmedabad. Shri Gopaldas Premchand had made a will dt.20.11.1982 by which he bequeathed his 50% share right title and interest in the profits and asset of the said partnership firm to Jayesh Navnitlal HUF, Anang Navnitlal HUF and Kalpesh 3 ITA No.1842/Ahd/2009 Asst. Year 2005-06 Navnitlal HUF to be shares equally between them i.e. 1/3rd of 50% of the lease hold rights and of the firm.
Disputes arose between the assignors and M/s Desai Builders. In November 2003 the agreement of assignment made on 27.10.1980 was cancelled. It was with the old builders. This was in Asst. Year 2004-05.
Thus the property once again was under the lease hold rights Jayesh Navnitlal HUF, Anang Navnitlal HUF and Kalpesh Navnitlal HUF and Shri Bhupendra Gopaldas.
Dev Puja Builders (P) Ltd. had given Rs.8 lacs by cheque on dated 8.8.2004 to New National Chemical Industries loan. This amount was deposited in the bank account of New National Chemical Industries on 10.8.2004. Assessee had taken Rs.2.5 lacs on 24.2.2005 and Rs.1.5 lacs on 12.3.2005 which was credited in the bank account of the appellant.
The owner M/s Jam Hosiery (P) Ltd. by an agreement for sale dt.12.8.2004 agreed to sell the premises subject to lease graned in favour of New National Chemical Industry. The owners agreed to sell the premises to Dev Puja Builders (P) Ltd. The appellant and legal heirs of late Shri Gopaldas Premchand were not aware of such agreement between the parties and they were also not party to the agreement dt.12.8.2004. Thus Dev Puja Builders (P) Ltd. became owners of the property and assessee and other legal owners became lessee of the owners Dev Puja Builders (P) Ltd. This was in Asst. Year 2005-06.
Assessee along with other co-lessee of the premises negotiated for transfer/surrender of lease rights with the new owners of the said premises and finalized the amount at Rs.42 lacs. In working out the mode of payment Rs.8 lacs which was received from the said Dev Puja Builders (P) Ltd. was included instead of returning the funds to them. The payment received from them is as per details given at page 49 of the paper book. (As per this page the appellant received Rs.34 lacs on 22.6.2005).
The ld. A.O. has construed that the appellant had given possession of the premises as part of surrender agreement in August, 2004 which is incorrect on the fact of the record and the agreement filed by the appellant. The ld. AO has misunderstood the language of the 4 ITA No.1842/Ahd/2009 Asst. Year 2005-06 agreement to construe that the appellant gave possession of the premises to the said Dev Puja Builders (P) Ltd. In fact the document referred that the old owners Jam Hosiery (P) Ltd. gave possession to the new owners who purchased the property from Dev Puja Builders (P) Ltd.
If one reads the clauses 2, 8 & 13 of the release deed it is amply clear that the appellant and other lessees gave possession of the premises to the owners only after execution of the release deed and receiving the payment. They have also handed over all the original documents and papers to the owners Dev Puja Builders (P) Ltd. an execution of the release deed and there is no indication in the document that the appellant had given possession of the premises prior to 22nd June, 2005.
Therefore, there is no question of applicability of the provisions of section 53A of the Act and the judicial decision referred to by the ld. AO.
(1) The agreement of transfer of land is executed between Jam Hosiery (P) Ltd. by which on 12.8.2004 Dev Pooja Builders (P) Ltd. became owners of the land which was leased to assessee who was one of the partners of M/s New National Chemicals Industries and was continued to be in lease with the assessee as per clause -K at page 9 of paper book.
(2) The transfer and sale of land between them was subject to continuation of lease of M/s New National Chemical Industries. Therefore, assessee continued as lessee but of new lessor Dev Puja Builders (P) Ltd.
(3) The assessee surrendered the lease to new owners Dev Pooja Builders (P) Ltd. by executing the Deed of surrender of lease on date 22nd June, 2005.
These facts are very clear in the clause -K at page 6 of the agreement "surrender of lease" dated 22nd June 2005 which is reproduced as under :
"K -by agreement for sale dated 12.08.2004 executed by and between Jam Hosiety Private Ltd. (therein referred to as "the said owners") and the owners herein (therein referred to as "purchasers") the owners herein agreed to purchase the said 5 ITA No.1842/Ahd/2009 Asst. Year 2005-06 property subject to lease granted in favour of New National Chemical Industry. The said agreement is duly registered with the office of Sub-Registrar at Bandra under Serial No.BDR 7935 of 2004. The said Jam Hosiery has authorized the owners to negotiate with the lessees. The said Jam Hosiery has executed an irrevocable Power of Attorney in favour of Owners herein granting various powers including power to execute the Conveyance in respect of the said property on their behalf. The said Jam Hosiery has handed over legal possession of the said property to the owners herein subject to the right of the lessee herein with an exclusive right to take the surrender of the said property in their favour. In the said agreement the said owners have confirmed that they have received entire consideration and owners herein are entitled to deal with the lessees/tenants on the said property and get the leases/tenants surrendered in favour of the owners herein".
There is nothing in the clause which suggests that on 12.8.2004 the surrender of lease of the premises was made by assessee.
Therefore, it is mistaken on part of the AO to observe that assessee had agreed on 12.8.2004 to surrender the lease of the premises.
The assessee as a co-owners executed the registered deed to surrender the lease hold rights to immovable property on 22.6.2005 which is in Asst. Year 2006-07 and upon giving possession of the property received Rs.21,00,000/- as his share on transfer of immovable property.
Accordingly, and in view of decision of Hon'ble Gujarat High Court reported at 205 ITR 542 in the case of CIT vs. Marmasji Mmcharji Vaid the capital gain arises in case of a registered document on the date of execution of document.
The assessee has not relinquished any rights on 12.8.2004 and hence no capital gain arises in Asst. Year 2005-06. There was no "transfer" effected in the accounting year 2005-06, as there was no document executed by the assessee for surrender of lease rights in Asst. Year 2005-06 and hence the provisions of section 45 of the Act not attracted in Asst. Year 2005-06."
6 ITA No.1842/Ahd/2009Asst. Year 2005-06
4. After considering the observations of AO and the submissions of the assessee, the ld. CIT(A) deleted the impugned addition with the following observations :-
"4. In short on 12.8.2004 the ownership of the property was agreed to be transferred from Jam Hosiery (P) Ltd. to Devpuja Builders (P) Ltd. subject to lease granted in favouf of M/s New National Chemicals Industries, a firm in which the appellant had 50% partner. M/s New National Chemical Inds. Has further sub-let the premises to two parties namely Bariwali Rubber Works at monthly rent of Rs.200/- and M/s All India Medical Corpn. at monthly rent of Rs.1551/-. The appellant submitted proof that even after 12.8.2004 the appellant was in the possession of the premises which is evident from the fact that the municipal taxes were paid after 12.8.2004 and the firm M/s New National Chemical Inds. Continued receiving rental income from its sub-tenants even after 12.8.2004 till May, 2005. In other words, according to the Assessing Officer the rights in the Boriwali Property, Mumbai were relinquished by the appellant on 12.8.2004 itself which falls in Asst. Year 2005-06 when the appellant got the share of Rs.4 lac for vacating the property in question. On the other hand the appellant's case is that though the deed of sale was dated 12.8.2004 and in pursuance of that the appellant was paid Rs.4 lac (being 50% share of Rs.8 lac in partnership firm M/s New National Chemical Industries), the capital gain is taxable in the Asst. Year 2006-07 when the deed of surrender dated 22.6.2005 was executed with Devpuja Builders (P) Ltd. to whom the original owners Jam Hosiery Works (P) Ltd. had sold the premises by the deed of sale dated 12.8.2004. According to the appellant the balance consideration of Rs.34 lac was received by the firm (in which the appellant is having 50% share) on 22.6.2005. In support of its claim that the premises were surrendered by the appellant only after March, 2005, the appellant submitted particulars of payment of Municipal Tax of Rs.16,522/- each on 1.5.2004 & 24.11.2004 respectively by debiting the a/c No.1638 with Central Bank of India, Vasna Branch, Ahmedabad. Further appellant produced the copy of bank statement showing that the cheque of rent from the sub-lessee of Rs.1551/- was credited in the bank account of the firm New National Chemical Industries on 15.12.2004, 9.11.2004 etc. Further the appellant has received cheque No.575286 of Rs.1551/- on 13.4.2005 and cheque No.101703 for Rs.1551 on 11.5.2003 from All India Medical Corporation towards rent for the period April, 2005 and May, 2005.
Similarly receipt of rent from another sub-tenant Boriwali Rubber Works @ Rs.200/- p.m. is shown by cheque even after 31.3.2005. In my opinion merely because of a sale deed 12.8.2004 was signed does not necessarily 7 ITA No.1842/Ahd/2009 Asst. Year 2005-06 mean that the property was also handed over and transferred on 12.8.2004 itself. The fact that firm received further consideration of Rs.34 lac on 22.6.2005 the municipal tax are paid after the date of deed of sale on 12.8.2004, the rental income from the sub tenant is accounted for by the appellant till May, 2005 goes to show that the appellant has not surrendered the premises to the new buyer. Therefore, the provisions of sec.53A of transfer of Property Act would not be applicable in this case. I, therefore, held that the property in question is not transferred during Asst. Year 2005-06 but in Asst. Year 2006-07. The AO is therefore directed to tax the income on account of capital gain in Asst. Year 2006- 07 and not in Asst. Year 2005-06."
Against this order of the ld. CIT(A), the Revenue is in appeal before the Tribunal.
5. Before us, the ld. DR supported the order of AO and submitted that the ld. CIT(A) is not justified in deleting the addition of Rs.19,50,000/- made on account of long term capital gain as per the specific provisions of section 45 r.w.s. 2(47) of the Act and section 53A of the Transfer of Property Act, 1882. The ld. CIT(A) has not properly considered the relevant findings of the AO discussed at paragraph 2.5 of the assessment order and hence the order of ld. CIT(A) be set aside and that of the AO be restored.
6. On the other hand, the ld. counsel of the assessee relying on the order of ld. CIT(A) submitted that there is no mistake in the order of ld. CIT(A) who has held that the firm received consideration of Rs.34 lac on 22.6.2005, the municipal taxes are paid after the date of deed of sale on 12.4.2008, the rental income from the sub-tenant is accounted for by the assessee till May, 2005 goes to show that the assessee had not surrendered the premises to the new buyer. The provisions of sec.53A of Transfer of Property Act would not be applicable in this case. The 8 ITA No.1842/Ahd/2009 Asst. Year 2005-06 property was not transferred in Asst. Year 2005-06 but in Asst. Year 2006-07. Accordingly, the ld. CIT(A) was justified in directing the AO to tax the income on account of capital gain in Asst. Year 2006-07 and not in Asst. Year 2005-06. His order may kindly be upheld.
7. After considering the rival submissions and perusing the material on record, we are of the considered view that the ld. CIT(A) was justified in giving direction to tax the capital gain in Asst. Year 2006-07. There is no dispute about the taxing of the capital gain. But the dispute is only relating to the year of taxing the capital gain. The facts of the case are that though the deed of sale was dated 12.8.2004 and in pursuance of that the assessee was paid Rs.4 lac (being 50% share of Rs.8 lac in partnership firm M/s New National Chemical Industries), the capital gain is taxable in Asst. Year 2006-07 when the deed of surrender dated 22.6.2005 was executed with Devpuja Builders (P) Ltd. to whom the original owners Jam Hosiery Works (P) Ltd. had sold the premises by the deed of sale dated 12.8.2004. The balance of consideration of Rs.34 lac was received by the firm (in which the assessee is having 50% share) on 22.6.2005. In support of its claim that the premises were surrendered by the assessee only after March, 2005, the assessee submitted particulars of payment of Municipal Tax of Rs.16,522/- each on 1.5.2004 & 24.11.2004 respectively by debiting the a/c No.1638 with Central Bank of India, Vasna Branch, Ahmedabad. Further assessee produced the copy of bank statement showing that the cheque of rent from the sub-lessee of Rs.1551/- was credited in the bank account of the firm New National Chemical Industries on 15.12.2004, 9.11.2004 etc. Further the assessee has received cheque No.575286 of Rs.1551/- on 13.4.2005 and cheque No.101703 for Rs.1551 on 11.5.2003 from All India Medical Corporation towards rent for the period April, 2005 and May, 2005. Similarly receipt 9 ITA No.1842/Ahd/2009 Asst. Year 2005-06 of rent from another sub-tenant Boriwali Rubber Works @ Rs.200/- p.m. is shown by cheque even after 31.3.2005. We are of the considered view that ld. CIT(A) has rightly held the capital gain is taxable in Asst. Year 2006-07 since the deed of surrender was executed on 22.6.2005. There is no infirmity in the order of ld. CIT(A), we uphold the same and dismiss the grounds raised by the Revenue.
8. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 23/09/2011
Sd/- Sd/-
(A. K. Garodia) (D. K. Tyagi)
Accountant Member Judicial Member
Ahmedabad,
Dated : 23/9/2011
Mahata/-
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)-
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
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ITA No.1842/Ahd/2009
Asst. Year 2005-06
1.Date of dictation 20/9/11.
2.Date on which the typed draft is placed before the Dictating Member 21/9/11.
/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...............
6.Date on which the file goes to the Bench Clerk...........
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................
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