Income Tax Appellate Tribunal - Mumbai
Dcit 1(3), Mumbai vs Venkateshwara Securities P.Ltd, ... on 17 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "F", MUMBAI BEFORE SHRI B.R. BASKARAN ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 1045/Mum/2013 (Assessment Year- 2009-10) DCIT 1(3) M/s Venkateshwara Securities Pvt.
Room No. 540, 5th Floor, Ltd. Lotus House, 33-A,
Aayakar Bhavan, M.K. Road, Vs. New Marine Lines,
Mumbai-400020. Mumbai -400020
PAN: AABCV6095J
(Appellant) (Respondent)
Revenue represented by : Ms. Pooja Swarup (DR)
Assessee represented by : Shri Sanjay M. Shah (AR) Date of hearing : 17.08.2017 Date of order : 17.08.2017 Order under section 254(1) of Income-tax Act Per Pawan Singh Judicial Member;
1. This appeal by Revenue under section 253 of Income-tax Act ('Act') is directed against the order of Ld. Commissioner (Appeals)- 2, Mumbai dated 26.11.2012 for Assessment Year (AY) 2009-10. The Revenue has raised the following grounds of appeal:
1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that Long Term Capital Loss arising on sale of shares of Metropolitan Heart Institute & Research Centre Pvt. Ltd.
(MHIRCL) is genuine ignoring the fact that the AO in his assessment order has clearly established that the MHIRCL was not in existence on the date of transfer of shares?"
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that Long Term Capital Loss arising on sale of flat was materialize during the year under consideration ignoring the fact that the registration of sale deed took place on 24.06.2009 only and thus, the assessee failed to satisfy the basic condition laid down u/s 53A of the Transfer of the Property Act for the transaction to be considered as a ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd. "Transfer" within the meaning of provision of section 2(47)(v) of the IT Act and thereby to qualify for the Long Term Capital Loss?'
2. Brief facts of the case are that the assessee filed return of income for relevant AY on 30.09.2009 declaring total income at Rs. 1,36,49,615/-. The assessment was completed u/s 143(3) of the Act on 27.12.2011. The Assessing Officer (AO) while passing the assessment order disallowed the Long Term Capital Loss (LTCL) of Rs. 89,00,000/- on sale of shares Metropolitan Heart Institute & Research Centre Pvt. Ltd. (MHIRCL) and also LTCL on sale of Flats for Rs.19,56,105/-. On appeal before the ld. CIT(A) both the disallowance was deleted. Thus, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.
3. We have heard the ld. Departmental Representative (DR) for the Revenue and ld. Authorized Representative (AR) of assessee and perused the material available on record. First ground of appeal relates to allowing the LTCL on sale of shares of Metropolitan Heart Institute & Research Centre Pvt. Ltd. (MHIRCL). The ld. DR for the Revenue argued that the assessee claimed LTCL of Rs. 89.20 Lakhs on sale of shares, which was set off of against the Long Term Capital Gain (LTCG) of Rs. 3.50 Crore. The assessee artificially booked a loss on account of sale of 74,25,500 shares of M/s Metropolitan Heart Institute of Research Centre P. Ltd. (MHIRCL). The M/s MHIRCL is one of the group company of assessee. The shares were sold to Mrs. Ajit Kumar Karsandas Hamlai for a 2 ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd. consideration of Rs. 74,250/- only @ 0.10/- per share. No valuation was prepared for valuing the share; the assessee has shown the purchase cost at Rs. 10 per share while sale was booked at Rs. 0.10/- per share thereby arising as huge Long Term Index Loss of Rs. 89.28 Lakhs. The company M/s MHIRCL was taken over by another company in the auction held by the banker under SARFAESI Act. The shares were transferred to Mr. Ajit Kumar Karsandas Hamlai, who is director in both the companies. The transaction was between the interested parties and was shown only to avoid the tax. The ld. DR for the Revenue further argued that ratio of conclusion arrived by ld. DR for the Revenue is without any logic holding that there is no restriction on sale or transaction within group company. The assessee has created a device to avoid legitimate tax due to the Revenue. The ld. CIT(A) has not rebutted the finding of AO. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). It was argued that during the relevant year, the assessee-company sold the shares of following companies:
Qty Cost Indexed Sale value Loss/profit
value
a) Metropolitan 742500 74,25,000 90,02,813 74,250 (89,28,563)
Heart Institute &
Research Institute
(Pvt.) Ltd.
b) Datar LTD 90,000 9,00,000 11,78,812 10,000 (11,61,812)
c) V-Tech Pvt. 50,000 5,00,000 6,06,250 3,56,49,287 30,50,43,037
(Ltd)
3
ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd.
4. The assessee has set off of LTCL of two companies against the LTCG on 3rd company i.e. V-Tech Pvt. Ltd. in accordance with section 74 of the Act. The AO accepted the set off of Long Term of loss of shares of Datar Ltd. against the LTCG of V-Tech Pvt. Ltd. However, denied the loss in respect of M/s MHIRCL. M/s. MHIRCL is Pvt. Ltd. Company which seized to do business and as per audited balance-sheet on 31.03.2009 had accumulated loss of Rs. 6,30,51,502/-. The company had no asset except the accumulated business loss. Thus, the breakup value of company's share was zero. Mr. Ajit Kumar Karsandas Hamlai being director of the company acquired the share and paid Rs. 74,250/-. It was further argued that the assessee claimed the LTCL in accordance with law. The AO allowed the loss in respect of one script of share. However, denied set off of losses for another scripts. The assessee has shown the Capital Gain of more than Rs. 3.50 Crore during the year under consideration.
5. We have considered the rival submission of the parties and have gone through the orders of authorities below. The AO denied the set off of LTCL of Rs 89,28,563/- in respect of sale of shares of M/s MHIRCL. The AO made a belief of suspicious transaction as it was between the related parties. The another objection of AO was that the assessee has not filed copy of return of income of M/s MHIRCL for the relevant AY. The AO formed his opinion that the transaction between the related parties is to 4 ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd. avoid the tax. We have noted that the assessee has shown the LTCG of more that Rs. 3.50 Crore. The AO has allowed the set off of loss of Rs.11,61,812/- in respect of script/share of Datar Ltd. However, denied the set off of loss for M/s MHIRCL. The ld. CIT(A) after considering the submission of the assessee allowed the claim/loss of assessee with the following observation:
"2.10 I have gone through the issue. From the copy of the Share certificate filed by the appellant, it is seen that the appellant's shares in the company Metropolitan Heart Institute & Research Centre (India) Ltd was transferred to Mr. Ajit Kumar Karsandas Hamlai on 02/0112009 and sale proceeds was also received by the appellant in January 2009. It is also seen that the break- up value of the shares is negative and hence the sale price fixed appears to be correct. Further it is nothing wrong for an assessee to arrange his affairs in a legitimate manner in order to pay minimum tax. The tax authorities can disallow the claim only if the transaction is not genuine. In this case there is nothing available on record to show that the transaction is not genuine. The appellant could have executed the transaction in order to reduce the tax liability. That will not make the transaction as not genuine. Further the appellant's case is fully supported by the Hon'ble Gujarat High Court's decision in the case of ACIT v/s Biraj Investment P. Ltd Tax Appeal No.260 of 2000 order dated 07/08/2012.
In view of all these facts, I hold that the appellant is entitled to claim the long term capital loss on the sale of shares of the above said company. The AO is directed to allow the claim of long term capital loss as claimed by the appellant."
6. We have seen that the AO has not doubted the genuineness of transaction. The AO disallowed the set off of loss forming an opinion that transaction in between interested parties. The ld. CIT (A) after considering the fact that the assessee has shown the substantial LTCG during the year. The AO has allowed the capital loss only in respect of one script and disallowed for another script. We have seen that the ld. CIT(A) passed the order by following the decision of Hon'ble Gujrat High Court in ACIT vs 5 ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd. Biraj Investment P. Ltd (supra). No contrary decision was brought to our notice. Thus, the ld DR for the revenue failed to convince us, as to why the order of ld CIT (A) is not lawful. Hence, this ground of appeal raised by Revenue has no force and the same is dismissed.
7. Ground No.2 relates to allowing the LTCL on sale of Flat. The ld. DR for the Revenue supported the order of AO and would argue that the assessee has artificially bring the capital loss in the year under consideration, though it is clear from the date of agreement, date of registration of sale- deed and the advance received against the sale of Flat that all transaction are not related with the AY under consideration. On the other hand the ld AR for the assessee supported the order of the ld CIT(A). It was argued that the assessee during the year under consideration transferred the ownership of two residential flats in 'Hill View' TPS, Shardhanand Road, Ville Parle (E), in favour of one of its Director. The sale deed was executed on behalf of assessee on 27.03.2009; however the registration before Sub-Registrar took place on 26.04.2009. The copy of the sale deed dated 27.03.2009 is placed on record at page No.73 to 103 of PB. The requisite stamp duty of Rs. 6,75,000/- was paid on 25th March 2009. The possession of the flats was also handed over to the purchaser on 27.03.2009 in accordance with the clause No.16 of the sale deed. The ld AR also drawn our attention on clause 12(iii) and 16 of the transfer deed/ sale deed dated 27.03.2009. It was argued that the flats was under the 6 ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd. tenancy of M/s CITI Bank and the Bank has paid the advance rent up to 31.12.2009. While executing the sale deed the assessee has a credit balance of Rs.11,44,868/- which was appropriated toward the sale consideration. Further clause 12(iii) of the sale deed clearly mentions that rent of Rs.6,61,257/- received by the assessee from 01.04.2009 to 31.12.2009 is also appropriated against the sale consideration.
8. We have considered the rival submissions of the ld representatives of the parties and have gone through the orders of the authorities below. The AO objected while allowing the set off of loss for three reasons. Firstly, CITI bank has paid rent to the assessee up to 31.03.2009, thus the assessee remained in possession of the property till 31.03.2009. Secondly, the registration of sale deed took after 31.03.2009. Thirdly, the consideration was received in the subsequent year, which implies that no consideration was received on 27.03.2009. We have examined the various clauses in the sale deed. The perusal of the sale deed shows that it was executed on 27.03.2009. Clause 12(iii) of sale deed reveals that payments of advance rent received from CITI Bank is duly reflected therein. Further the assessee assigned the leave and licensee of CITI Bank in favour of the purchaser. The balance of compensation on account of 9 month was duly adjusted against the sale consideration. Further clause 16 of the sale reveals that the possession of the premises along with common area was handed over to the assessee. The payment of requisite stamp 7 ITA No. 1045/M/2013 M/s Venkateshwara Securities Pvt. Ltd. duty on 25.03.2009 was not disputed by the AO. In our view the transferee become the owner of the property when he had paid the consideration, executed the transfer / sale deed, and obtained the possession thereof. The registration of the instrument is thereafter a legal formality. Even otherwise as per section 24 of Registration Act, the document can be presented for its registration within four months from the date of its execution. Section 47 of Registration Act further provides that the registered documents shall operate from the date of its execution and not from date of registration. We have seen that the AO has not brought any evidence on record to disbelieve the contention of the assessee. In view of the above discussion we do not find any reason for interfering in the order of ld CIT(A). Hence, this ground of appeal raised by revenue is also failed.
9. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 17th day of August 2017.
Sd/- Sd/-
(B.R. BASKARAN) (PAWAN SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 17/8/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT BY ORDER,
5. DR, ITAT, Mumbai
6. Guard file. या पत त //True Copy/ (Asstt.Registrar)
ITAT, Mumbai
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