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Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI N.K. BILLAIYA, & MS. ASTHA CHANDRA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
The above captioned two separate appeals by the Revenue are preferred against two separate orders of the ld. CIT(A) -26, New Delhi in respect of two different assessees of the same group dated 27.11.2018 pertaining to Assessment Year 2008-09.
The representatives of both the sides were heard at length, the case records carefully perused. Relevant documentary evidences brought on record carefully perused in light of Rule 18(6) of ITAT Rules.
Since common issues are involved in both these appeals, they were heard together and are disposed of by a common order for the sake of convenience and brevity.
The common grievances in both these appeals read as under:
“1. That the Ld. CIT(A) has erred on facts and law in taking the total sales consideration as only Rs. 106 Cr. against the total consideration received by assessee and his associate companies of Rs. 178.42 Cr. and consequently deleting the Short Term Capital Gain on consequent amount.
2. That the Ld. C1T(A) has erred on facts and law in directing the AO to exclude figures of Rs. 72.42 Cr. for computing the Capital Gains, without appreciating the fact that the Rs. 72.42 cr. was received by other associate companies for the same land deal.
3. That the Ld. CIT(A) has erred on facts and law in deleting the addition of Rs. 30.70 Cr. made by the AO as undisclosed income admitted by assessee without appreciating the fact that the same has been voluntarily admitted and the assessee has filed Return of Income only at Rs. 10.31,87,787/- only.
4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
5. Since the underlying facts in the grounds raised by the Revenue are identical in both the appeals, with the agreement of both the representatives, we are considering the facts of ITA No. 787/DEL/2019.
Briefly stated, the facts of the case are that a search and seizure operation was conducted at the business premises of M/s MDLR group of companies on 31.01.2008. Pursuant to the search operation, statutory notices were issued and served upon the assessee.
The Assessing Officer made addition of Rs. 79,71,38,532/- on account of alleged short term capital gain vide order dated 15.03.2013 framed u/s 144/264 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. In addition to this, Rs. 30.41 crores was added as undisclosed income admitted by the assessee. Thus, total income was computed as under:
a) STCG Rs. 79,71,38,532/- b) Undisclosed income admitted Rs. 30,41,00,000/-
Rs. 1,10,12,38,532/-
STCG was computed as under:
Sr. Particulars Amount No. (Rs.) i) Full value of consideration on alleged transfer of 85% 178,42,77,063 share in M/s Trishul Industries by appellant company and M/s MDLR Estates Ltd. ii) Full value of consideration on alleged transfer of 89,21,38,532 42.5% shares in partnership firm Trishul Industries by the appellant company iii) Less: Cost of acquisition 9,50,00,000 iv) Short Term Capital Gain 79,71,38,532
9. Assessment was challenged before the ld. CIT(A) and the ld. CIT(A), after considering the facts and submissions, sustained the addition to the extent of Rs. 43,49,47,500/-. Relevant findings of the ld. CIT(A) read as under:
“xiv) It will be seen from the aforesaid retirement deed that sum infused by M/s Vatika Ltd was only Rs. 112 crores and not Rs. 178.42 crores. Therefore, sums paid by Vatika Ltd. to any other entity of MDLR group cannot be a ground to bring to tax as capital gain in the hands of assessee on transfer of shares in Trishul Industries. xv) In view of the discussion supra, the AO is directed to exclude figure of Rs. 72.42 crores for computing the capital gain in the hands of the appellant on transfer of shares in the partnership firm M/s Trishul Industries. xvi) Further, the Assessing Officer has himself adopted Rs. 106.01 crores out of Rs. 112 crore which according to the appellant comprises of the following sums:
Sr. Particulars Amount No. 1. MDLR Estates (P) Ltd. 47,12,00,000 2. MDLR Builders (P) Ltd. 45,50,00,000 3. Gopal Kumar Goyal 3,00,00,000 4. MDLR Tour & Travels (P) Ltd. 3,05,00,000 5. MDLR Airlines (P) Ltd. 3,60,00,000 6. KartikeyaBuildcon (P) Ltd. 1,50,000 7. Ashutosh Villa (P) Ltd. 2,10,00,000 8. Cash withdrawal 1,80,00,000
Witness Construction (P) Ltd. (10,00,000) 10. Shivganesh Builders (P) Ltd. (8,00,000) 11. Expenses paid out of money received 50,000 Total 106,01,00,000
xvii) It is apparent from record that sum of Rs. 45.50 crores stands received in the case of appellant, Rs. 47.12 crore in the case of MDLR Estate (P) Ltd and Rs. 3 crores has been added to tax in the hands of Gopal Kumar Goyal and addition confirmed by CIT(A). Relevant findings of the CIT(A) in the case of Gopal Kumar Goyal is as under:
“As regards remaining credits the appellant had claimed the bank entries are as under:-
S. Date Narration as per Bank Amount Account No. N statement o. 1. 27.11.2007 Trishul Industries chq 1,00,00,000 056010100507561 117674 2. 28.01.2008 BY Trishul Industries Chq 2,00,00,000 056010100507561 7764 3. 29.05.2007 By CLG/ZN Hvout/Set 17 5,00,00,000 131010100225922 4. 24.10.2007 BY CLG/ZN MICROUTI/SET 2,41,050 056010100507561 18 5. 24.10.2007 BY CLG/ZN HVOUT/SET 1 9,57,680 056010100507561 6. 24.10.2007 117/OSC104959; Chq no. 5,00,000 131010100225922 644157 7. 20.12.2007 By CLG/ZNHVOUT/Set 20 40,00,000 131010100225922 8,56,98,730 xx. In absence of any valid explanation and corroborative material this addition of Rs. 8,56,98,730/- is confirmed. xxi. In view of the foregoing, addition of Rs. 10,66,98,730/- is confirmed and balance addition of Rs. 13,51,29,836/- is deleted. This ground 30 is accordingly partly allowed in the above terms.” xviii) The AO therefore ought to have adopted the sums, based on the retirement deed, at the figure of Rs. 112 crores with 47.50% share out which works out to Rs. 53.20 crores. xix) The appellant here also contended that addition on account of capital gain stand offered as part of return of income for the instant year, though, as business income. It has been stated mere declaring in the return cannot be ground to bring the tax a capital receipt. However, I have already held about the sum received on retirement from firm is a taxable receipt. xx) In the return of income sum offered by the appellant is as under:
Sr. Particulars No. Amount(Rs.) i) Sale 53,20,00,000 consideration ii) Less: Investment 9,70,52,500 iii) Income 43,49,47,500
To sum up, the income of capital gain as already been declared in the return of income. Therefore, no further addition is warranted. xxi) Having regard to the foregoing, the amount taxable as sale in the hands of the appellant is Rs. 53.20 crores which is the sum declared by the appellant as income from Trishul Industries.”
To summarize the findings of the ld. CIT(A), capital gain was computed as under:
Sale consideration Rs. 53,20,00,000/- LESS: Investment Rs. 9,70,52,500/- Income Rs. 43,49,57,500/-
As regards addition of Rs. 30.41 crores is concerned, the ld. CIT(A) held as under:
“According to the assessee, the sum added has been declared tax as part of the return of income filed for the instant assessment year. This return of income has not been considered while framing the impugned order of assessment. In the remand reports dated 10.08.2018 and 1.11.2018, the aspect of filing of return has not been denied by Assessing Officer. It is also noted that the appellant had paid taxes on the declared income of Rs. 10,31,87,787 and interest on tax of Rs. 3,42,42,390. Proof of challan has also been placed on record. The AO shall verify the same and allow due credits accordingly. Therefore, the addition of Rs. 30,37,00,000 is directed to be deleted. These grounds are thus partly allowed as above.”
Final outcome of the decision of the ld. CIT(A) can be understood from the following chart:
Sr. Particular As per the As per the No. learned learned Assessing Commissioner Officer of Income Tax (Appeals) i) Alleged short term 79,71,38,532 43,49,47,500 capital gain ii) Undisclosed income 30,41,00,000 Nil admitted iii) Disallowance of shares & Nil 13,04,94,600 claimed of expenses Total 110,12,38,532 56,54,42,100
The assessee challenged the order of the ld. CIT(A) before the Tribunal strongly contending that there is no liability of capital gain.
Before the Tribunal, it was vehemently contended that the alleged capital gain arose as sum received by the assessee as partner on retirement from partnership firm and, therefore, the same is exempt u/s 10(2a) of the Act.
This Tribunal, in & 8215/DEL/2018 vide order dated 11.06.2019, held as under :
“24. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case brought to tax an amount of Rs.79,71,38,532/- being short term capital gain on account of transfer of shares in the partnership firm M/s. Trishul Industries by the assessee company to M/s. Vatika Limited. The argument of the assessee that no capital gain arises on sum received by a partner on retirement from the partnership firm was not accepted by the Assessing Officer on the ground that assessee has applied an unsuccessful technique to transfer his capital gain into its account from partnership firm without giving any tax. According to the Assessing Officer the partnership share in a firm is a capital asset within the meaning of section 2 (14) and their transfer is transfer of capital asset within the meaning of section 2 (47) of the IT Act., 1961. We find although the Ld. CIT(A) restricted the addition to Rs.43,49,47,500/-, however in-principle he upheld the action of the Assessing Officer that capital gain arises to the partner on the sum received on retirement from the partnership firm
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Respectively following the above decisions cited (supra)we
hold that the assessee is not liable to any capital gain tax on account of the sum received by it as a partner on retirement from the partnership firm. The order of the CIT(A)on this issue is accordingly set aside and the Assessing Officer is directed to delete the addition of Rs.43,49,47,500/- sustained by the CIT(A).”
Since the co-ordinate bench has categorically held that the assessee is not liable to any capital gain tax on account of sum received by it as partner on retirement from partnership firm, there remains nothing form computation of capital gain tax and, accordingly, the Assessing Officer is directed to delete the impugned addition.
In the result the appeal of the Revenue in ITA Nos. 787/DEL/2019
The order is pronounced in the open court on 03.02.2023.