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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri K. Gopal and Ms. Neha Paranjpe Department by: Shri R.P.Rastogi सुनवाई क� तार�ख / Date of Hearing: 11.05.2016 घोषणा क� तार�ख /Date of Pronouncement:23.09.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 04.01.2013 passed by the Commissioner of Income Tax (Appeals) 29, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10.
ITA No.2985/M/2013 A.Y. 2009-10
The assessee has raised the following grounds:-
“1. The Ld. Commissioner of Income Tax (Appeals)-29, Mumbai [hereinafter referred to as ‘Ld. CIT(A)’] erred in passing the order dated 04.01.2013 under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “of the Act”] confirming the action of the A.O. in making following additions and disallowances without appreciating the facts and circumstances of the case: Amount (₹) Sr. Particulars No. A Disallowance of under section 14A 1,32,944/- B Addition of Income from other sources 49,71,900/- A. Disallowance of under section 14A -₹1,32,944/- 2. The Ld. CIT(A) erred in confirming the action of Ld. A.O. in making disallowance of ₹1,32,944/- under section 14A of the Act by invoking the provisions of Rule 8D of Income Tax Rules, 1962. The Appellant, therefore, prays that disallowance of ₹1,32,944/- under section 14A r.w.Rule 8D is not justified and hence, the same may be deleted.
3. The Ld. CIT(A) failed to appreciate that the Ld. A.O. has not given any reasons why he considers that Appellant has incurred expenditure to earn exempt income over and above ₹2,65,068/-. Thus, the provision of Rules 8D are not applicable. Hence, the disallowance of Rs.1,32,944/- is not justified.
4. The Ld. CIT(A) further failed to appreciate that the Appellant has incurred ₹2,65,068 as expenditure with respect to the exempt income and disallowed the same in his returns. Therefore, disallowance of ₹1,32,944/- is not at all justified and the same may be deleted. B. Addition of Income from other sources -₹49,71,900/- 5. The Ld. CIT(A) erred in confirming the action of the A.O. in addition of ₹49,71,900/-. The Appellant, therefore, prays that ITA No.2985/M/2013 A.Y. 2009-10 the addition of ₹49,71,900/- is not at all justified and hence, the same may be deleted.
6. The Ld. CIT(A) failed to appreciate that the short term capital gains on account of transfer of Depreciable asset are not tenable as the block of asset continues to exist in the books of the appellant. Thus, addition of ₹49,71,900/- is not justified. C. Levy of interest under section 234A, 234B and 234C of the Act not justified 7. The appellant denies any liability to pay interest under section 234A, 234B and 234C of the Act. Hence, the same are not leviable.”
The brief facts of the case are the at the assessee filed his return of income for the A.Y.2009-10 on 16.09.2009 declaring total income to the tune of Rs.49,37,912/-. The return was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). Thereafter, the case was selected for scrutiny through CASS and notice u/s.143(2) dated 18.08.2010 was issued and served upon the assessee. Further, notice u/s.142(1) of the Act along with questionnaire was issued and served upon the assessee. The Assessing Officer assessed the expenditure to earn the exempt income to the tune of Rs.3,98,012/- whereas the assessee disallowed the expenditure to the tune of Rs 2,65,068 and added the difference to the tune of Rs 1,32,944 to the income of assessee and also assessed the income from other sources on account of sale of piece of land by the assessee but the assessee was not satisfied, therefore an appeal was filed before CIT(A) who confirmed
ITA No.2985/M/2013 A.Y. 2009-10 the order of the Assessing Officer, therefore the assessee filed the present appeal before us.
ISSUE NO.1 TO 4:-
Under this issue the assessee has challenged the disallowance of expenditure to the tune of R.1,32,944/-. It is necessary to advert the finding of the Assessing Officer in this regard on record:-
“6. Disallowance u/s.14A :
On perusal of records, it is seen that the assessee has earned the following exempt income from the investments:-
(1) Share of profit 10(2) – Ashok L. Shah : 8,931/- (2) -do- - First Fashion : 6,91,969/- (3) Long Term Capital Gain : 3,33,594/- (4) Dividend on shares : 5,489/- (5) Dividend on mutual fund : 11,24,415/- (6) PPF Interest : 6,20,544/- TOTAL : 27,85,042/- The CIT(A) has confirmed the said order. The contention of the assessee is that the Rule 8D of the Act is not applicable to the facts of the case because the assessee himself has disallowed the expenditure to the tune of Rs.2,65,068/- to earn the exempt income. No bifurcation of the expenses is on record. If the bifurcation of the expenses to earn the exempt income is not on record therefore it is quite clear that the expenses would be allowed in view of the other
ITA No.2985/M/2013 A.Y. 2009-10 provisions of the section 14A read with Rule 8D of the act. On appraisal of the order passed by the Assessing Officer we found nothing ambiguity for the application of the Rule 8D of the Act for calculation of the expenses to earn the exempt income. The Assessing Officer has assessed the expenditure in view of the facts and circumstances of the case wherein no specific expenditure has been shown to be explained to earn exempt income. Therefore, in the said circumstances the CIT(A) has rightly confirmed the order of the Assessing Officer on this issue which does not require to be interfere with at this appellate stage.
ISSUE NO.5 & 6:-
The assessee has challenged the addition of income from other sources to the tune of Rs.49,71,900/-. Before going further it is necessary to advert the finding of the CIT(A) on this issue on record:-
I have considered the facts of the case, findings in assessment order and submission made during appellate proceedings. The contention of the appellant cannot be accepted for the following reasons:-
(i) Appellant’s claim that as per partnership deed dated 01.12.1996, the right and ownership of the industrial gala belong to the appellant cannot be accepted for the simple reason that this asset has ITA No.2985/M/2013 A.Y. 2009-10 been constantly shown by the firm, M/s. Ashok L. Shah in the Balance Sheet filed from A.Y.1996-97.
(ii) There was no transfer of this asset in the books of the firm.
(iii) The firm has been showing this asset regularly in its Balance Sheet and has also been claiming depreciation thereon.
(iv) Even the registration of the property has been done in the name of firm, M/s.Ashok L. Shah and not in the name of the individual i.e., Ashok L. Shah.
(v) The ownership of immovable properties cannot be transferred by any internal agreement between the partners. There has to be registered legal agreement for transfer of asset.
(vi) Nobody can claim ownership by inserting a clause to that effect in the partnership deed. The sanctity of a legal document cannot be challenged by any internal family arrangement.
(vii) The capital gain can arise only when the capital asset owned by the assessee is transferred. When the asset itself is not owned by the appellant, the ITA No.2985/M/2013 A.Y. 2009-10 question of capital gains in the hand of the appellant does not arise.
The above facts clearly prove that the asset belong to the firm and not to the appellant. Therefore, the capital gain cannot be assessed in the hand of the appellant. However, since the amount has been credited in the books of the appellant, this is undoubtedly income in his hands. It is not a case where capital gain is offered in the hands of the firm by filing a revised return. Thus, it is not a case of double taxation. The gain/income has to be taxed at some place – either in the case of firm or in the case of appellant. As no income has been offered in case of firm M/s.Ashok L .Shah, this income is rightly taxed by the Assessing Officer in the hands of the appellant as “income from other sources”. Thus, the action of the Assessing Officer is upheld. This ground is dismissed.
6. The contention of the assessee is that the assessee is the owner of the property and the said property never become the property of the firm M/s.Ashok L. Shah and according to the agreement of the partnership, it is also apparent on record that the said property would never became part of the partnership firm of M/s. Ashok L. Shah. Therefore, in the said circumstances the ownership of the property lies with the assessee and the sale of the said property is liable to be ITA No.2985/M/2013 A.Y. 2009-10 assessed as Long Term Capital Gain. Therefore, in the said circumstances the order passed by the CIT(A) is wrong against law and facts and is liable to be set aside. However the Ld Representative of the department refuted the said contention. The order passed by the CIT(A) speaks about this facts that the said land was belonging to the firm M/s. Ashok L. Shah which cannot be treated as the property of the assessee, therefore on account of the sale, the proceed was assessed as income from other sources on the part of the assessee i.e. Rs.49,71,900/-. No doubt the CIT(A) has given the some reasons which has been reproduced above but it is required to be seen that the property sold by the assessee is belonging to the partnership firm M/s. Ashok L. Shah or not. The agreement on record speaks about this facts that the property was given for the purpose of the firm but the other partners have no right of any kind on this property. The CIT(A) has raised the issue with regard to the ownership of the property and held that the property was owned by the firm therefore, on account of the sale of the said property the CIT(A) has treated the sale proceed as income from other sources. Anyhow, this issue has not been properly adjudicated on the basis of the ownership of the property. Utilization of land and sale of land is quite different. Accordingly the income of assessee is required to be assessed. It is not a case of double taxation when the income of the assessee was assessed on the basis of utilization and sale of land. Since the matter of controversy has not been adjudicated by the CIT(A) on the basis title, therefore, we set
ITA No.2985/M/2013 A.Y. 2009-10 aside the finding of the CIT(A) in this regard and direct the Assessing Officer to decide this issue afresh in view of the said observations after giving an opportunity of being heard to the assessee in accordance with law. Accordingly, these issues are decided in favour of the assessee .
ISSUE NO.7:-
This issue is consequential therefore there is no need not be decide the same.
In the result, the appeal filed by the assessee is hereby partly allowed. Order pronounced in the open court on 23rd September, 2016.