TMI Blog2015 (10) TMI 1746X X X X Extracts X X X X X X X X Extracts X X X X ..... It is abundantly clear from the explanation given in circular No.8 of 2002, dated 27th Aug, 2002 that the basic intention to insert sec. 50C is for the purpose of determining full value of sale consideration for the purpose of computation of capital gains under sec. 48. The issuing of notification or circular is good guide of contemporaneous exposition of the position of the law and this rule is popularly known as "contemporanea expositio". There should not be any cloud of doubt that sec. 50C has application only to the extent of determining sale consideration for computation of capital gain under Chapter IV-E of the Act and it cannot be applied for determining the income under other heads. Therefore, when admittedly in the present case the sale of the property is treated as the business income and not as a capital gain, the provision of Sec.50C is not applicable. Being so, considering the entire facts and circumstances of this case, we are of the opinion that the Commissioner of Income Tax (Appeals) is not justified in enhancing the assessment. - I.T.A. No.623/Mds/2015 - - - Dated:- 11-9-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered into an agreement with Srri Ramachandra Educational Health Trust for the sale of the Adyar Property for a value of E39,50,00,000/- on which Sri Ramachandra Education Health Trust had paid a sum of E.35,42,50,000/- on various dates starting from 19.12.2005 to 27.02.2006. Since this transaction was not crystallized upon in full, a compromise was struck between the following parties by way of tripartite agreement entered into on 21.2.2007:- 1. Shri. Ramachandran Educational Health Trust - Party of first part 2. M/s. Viacons Infrastructure Environmental - Party of second part 3. M/s. A.R Housing Pvt. Ltd - Confirming party As per the tripartite agreement, the Adyar property has been sold to M/s. Vicoans Infrastructure and Environmental Engg. Pvt.Ltd., for a value of E35,42,50,000/- This property in turn was sold to Shri.Ramachandra Educational Health Trust by M/s Viocans Infrastructure Environmental Engg. Pvt. Ltd. As this transaction has not been disclosed to the Department by way of filing Return of Income, the case was reopened . Based on the above reason, notice u/s 148 was issued to the assessee on 28.3.2012. 3.2 In this case, the assessee had purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale deed, how can the sale deed be executed treating the estates of Mrs.Meerabai Dawson as the owner of the property and how come this has been accepted by the Sub-Registrar, Adyar. When this query was posed to the assessee by the Assessing Officer , the assessee had stated that, they have entered into a MOU with the estates of Mrs.Meerabai Dawson and various other people who were the tenants occupying the said disputed property with temporary sheds and registered the MOU with High Court of Madras. On production of this Registered MOU before the SRO, they have executed the sale deed treating M/s A.R.Housing Pvt. Ltd., ie., the assessee as confirming party. It was further stated by the assessee, that the estate of Mrs. Meerabai Dawson have paid the Capital Gain Tax of E 14,61,02,118/- towards the entire value of sale consideration i.e., E64,00,48,000/- and the assessee had stated that, since the entire tax of E.14,61,02,118/- had been paid on the entire sale consideration, by the Estates of Mrs.Meerabai Dawson, no tax had been paid by the assessee on the Adyar property. The contention of the assessee was not accepted by the Assessing Officer due to the reason that the said tripa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability on the guidelines value of E64 crores vests on the assessee company. During the course of appellate proceedings, the Assessing Officer vide his letter dated 19.01.2015 has brought to his notice that the assessee had filed its return of income in response to notice u/s.148 by declaring net profit as per P L account of E38,84,32,623 and claimed exemption under AOP. As the assessee failed to prove the existence of AOP before the Assessing Officer, the net profit admitted in the return of income needs to be taxed in the hands of the assessee either under business income or under Other Sources. The Assessing Officer had also made an analysis of the balance- sheet and submitted that as on 31.3.06 Sri Ramachandra Educational Health which was shown as creditor for E35.67 crores, for the year ended 31.3.07 there was no outstanding amount due to Sri Ramachandra Educational Health Trust implying that the advance owed by the assessee was settled by a tripartite agreement since the buyer VIEE took over the liability of Sri Ramachandra Educational Health. The fact that the assessee has treated M/s. Viacons Infrastructure Environmental Engg. Pvt. Ltd. as a debtor for E30 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that the assessee had declared the profits of E38,89,50,349/- from business of real estate for the assessment year 2007-2008 as under:- Sale value (Guideline value) 64,00,48,000/- Less: Settlement with the legal owner 20,00,00,000/- Less: Property purchase cost 4,19,50,651/- Less: Eviction charges paid prior to 2006 84,47,000/- Less: Legal charges paid 7,00,000/- 24,69,00651/- 38,89,50,349/- The above working was evident from the letter filed by the assessee before the Assessing Officer on 14.03.2013 and the letter dated 28.01.2015 filed before the Commissioner of Income Tax (Appeals) in response to the enhancement notice issued. The fact that the assessee had received an amount more than the settled amount with Sri Ramachandra Educational Health Trust was also evident from the statement of director of the assessee company Shri. N. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the will of Mrs. Meera Bai Dawson who was the original owner of the property, filed a case in the Madras High Court contesting the ownership of the asset and the case was settled out of court and the Madras High Court vide its order dated 6.12.2004 in O.P. No.192 of 2003 granted letter of administration which is placed on record at page no.14 of paper book. Meanwhile the assessee M/s. A.R. Housing Pvt. Ltd, entered into an agreement on 19.12.2005 to sell the property to Sri Ramachandra Educational and Health Trust for a consideration of E39.85 crores which is placed in paper book at page No.36. In view of the litigation by Executor of Mrs. Meera Bai Dawson, the said agreement of sale with Sri Ramachandra Educational Health Trust was cancelled on 9.2.2007 which is placed in paper book at page no.48. Meanwhile, writ petitions filed by the persons in possession of the property before the High Court in W.P. Nos.39649 of 2002, 27303 of 2003, 17736 and 20357 of 2004, the sale certificate dated 9.8.2002 and the order of the DRT directing dispossession of the tenants are quashed vide order dated 21.03.2005 which is placed at record at paper book at page no.19. The above order in writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Meerabai Dawson, along with the capital gains on the sale of the property which is estimated at Rs. .14 crores based on the prevailing guideline value of Rs .64 crores, totaling in all to Rs. .20 crores as negotiated by the party of the first part with the Estate of Meerabai Dawson, out of the consideration of ₹ 35.42 crores already received by the party of the second part and referred to in the MOU entered into on 21-02-2007 between M/s. Sri Ramachandra and education and health Trust and the first and second parties respectively Whereas the part of the second part is also agreeable to the same, subject to the condition that there would be no tax liability on this sale to party of the second part as the entire tax on the transaction is being paid on vendor s account to facilitate the execution of sale deed . Since the litigation was going on long time the parties decided to close the issue through Memorandum of Compromise between M/s.Viacons Infrastructure Environmental Engineering Pvt. Ltd and the assessee and another Memorandum of Compromise entered on 22.02.2007 between estate of Meera Bai Dawson and the assessee in MOC dated 21.02.2007, the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Mrs.Meerabai Dawson and tax on the deemed consideration of ₹ 64 crores amounting to E14.61 was assessed in the hands of Executor of Mrs.Meerabai Dawson, which was paid out of the amount given by the assessee for this purpose. Now the department would like to tax E38 crores retained by the assessee. As per the compromise agreement both the assessee and Executor of Mrs. Meerabai Dawson agreed to join together and sell the property. The assessee had given E15 crores to Executor of Mrs.Meerabai Dawson to meet their tax liability. Thus, in the transaction the Executor of Mrs. Meerabai Dawson are entitled to only E5 crores and E15 crores was given by the assessee to pay the tax. The sale transaction is a single transaction for transfer of land. As per agreement Executors of Ms. Meera Dawson has to meet the tax liability. The Capital gains on the entire transaction is ₹ 14.61 Crores and the same has been recovered from the executors of Ms. Meera Dawson. Further tax cannot be recovered from the same transaction. Without prejudice, if part of the consideration is now foisted upon the Assessee credit should also be given for the E.15 crores since assessee has passed on to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms. Meera Bai Dawson in PAN No.ALLPD 1138N. This is tax paid on the capital gain as transfer to land by the legal/real owner i.e the executor of Ms. Meera Bai Dawson and to in the name of the assessee. In this transaction, it is brought to notice that the assessee had acquired by virtue of registered document in the name of assessee either or illegally a right on the property and that is why the assessee was treated as confirmer under the stamp duty Act. For relinquishing the right of the assessee on the above said property for which the assessee received ₹ 64,00,48,000/-. The capital gain on transfer of the right on the above said property works out to ₹ 37,95,95,157/- resulting in under assessment to an extent of ₹ 23,34,93,039/- (379595157-146102118). If the gain arising out of transfer of right is brought to tax there would be a tax demand of ₹ 19,33,61,150/- (including interest u/s.234A B) as against ₹ 11,49,24020/- . Since it is failure on the part of the assessee in not truly and fully disclosing all the material facts during the course of assessment proceedings, I have reason to believe that the income has escaped assessment for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two properties at Adyar through Debts Recovery Tribunal sale on 29.8.2001 and registered it on 16.4.2003 and on 25.7.2003 respectively. On 19.12.2005, M/s A.R. Housing Pvt. Ltd., had entered into an agreement with Sri Ramachandra Educational Health Trust for the sale of the Adyar Property for a value of ₹ 39,50,00,000/- on which Sri Ramachandra Education Health Trust had paid a sum of Rs. .35,42,50,000/- on various dates starting from 19.12.2005 to 27.02.2006. Since this transaction was not crystallized upon in full, a compromise was struck between the following parties by way of tripartite agreement entered into on 21.2.2007:- 1 Shri. Ramachandran Educational Health Trust - Party of first part 2 M/s. Viacons Infrastructure Environmental - Party of second part 4. M/s. A.R Housing Pvt. Ltd - Confirming party As per the tripartite agreement, the Adyar property has been sold to M/s. Vicoans Infrastructure and Environmental Engg. Pvt.Ltd., for a value of ₹ 35,42,50,000/- This property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her first appellate authority had exceeded his jurisdiction. In this case, while computing the income of the assessee, the Assessing Officer considered the payment of E14.61 crores for income tax paid by estates of Mrs. Meera Bai Dawson on behalf of the assessee as the income of the assessee. According to the Assessing Officer, the assessee derived the benefit to that extent as the assessee was the owner of the capital asset who was liable to pay tax. Thus, only the matter dealt by the Assessing Officer in the assessment year was treatment of payment of income tax by estates of Meera Bai Dawson in the hands of the assessee as assessee s income. None of the issue which was dealt by the Commissioner of Income Tax (Appeals) was considered by the Assessing Officer as seen from the records. It is evident from the order of first appellate authority that he brought into taxation income from transfer of assets. In other words, this income considered by the Commissioner of Income Tax (Appeals) was not at all considered by the Assessing Officer at the time of framing reopened assessment. In our opinion, the addition on account of income from sale of property as business income in the hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and thus the first appellate authority have jurisdiction of enhancement of income. Limitation on the powers of the Commissioner of Income Tax (Appeals), however, is that he cannot travel beyond the subject matter of assessment and return of income. It is to be noted that it is not subject matter of appeal, but the subject matter of assessment, when it is said that he cannot travel beyond the subject matter of assessment what is meant in that he cannot introduce in the assessment new source as his powers of assessment enhanced is restricted only to the income which was subject matter of consideration for the purposes of assessment by the Assessing Officer. Therefore, if an income is subject matter of consideration by the Assessing Officer and even though the Assessing Officer may come to the conclusion that income is not subject to taxation, it would be open to the Commissioner of Income Tax (Appeals) to take different view and bring that income to tax. But, in doing so he cannot, include the income derived by the assessee say, from assessee s income from the transfer of capital asset which was already subject to tax in the hands of estates of Meera Bai Dawson. Moreover, the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no cause of action against the second party individually or severally in future in respect of the schedule mentioned properties. f) The First party agrees not to press the suit CS 120 of 2005 and to therefore withdraw the suit on the basis of this memorandum of comprise. g) A.R. Housing (P) ltd has deposited with the purchaser all sale certificates pertaining to the Schedule A mentioned property issued by the DRT-I, in the course of OA 271 of 2001 and confirm that there are no further sale certificate issued by the DRT-I in OA 271 of 2001 with respect to the schedule A mentioned property. h) Ahninesha Babu has also deposited with the purchaser the documents listed in Schedule B herein to be dealt with in any manner deemed fit by the purchaser. . 11. The parties filed MOC before the Jurisdictional High Court in C.S. No.120 of 2005 and A.Nos.137, 138, 666, 667 1346 of 2005, wherein the High Court held as under:- Civil Suit under Order VII Rule I of C.P.C. 1908 (as amended) r/w Order IV Rule I of the O.S. Rules. Learned counsel for the plaintiffs makes a statement, making an endorsement in the plaint also that the suit has been settled bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders, which this Hon ble Court may deem fit and proper under the circumstances of the case thus render justice. Dated at Madras on this the 27thday of March, 2009 The memo of compromise entered into between the parties is recorded and the same shall form part of this proceedings. This writ appeal is disposed of in terms of the memo of comprise. No cost. Consequently, WAMP Nos. 1787 to 1789 and 1858 of 2005 are closed. 13. Now, the Department cannot thrust upon the absolute ownership of the property on the assessee. Being so, from this angle also taxing the gain on transfer of asset in the hands of the assessee is not appropriate. Needless to say that, the single transaction cannot be taxed more than one persons hand on the same reason which amount to double taxation. In our opinion, the issue took up by the Commissioner of Income Tax (Appeals) after cancelling the assessment order is not appropriate. 14. Further, it is also brought to our notice that the Assessing Officer reopened the assessment for the second time vide notice issued u/s.148, dated 31.03.2014 recording the reasons as under:- 2. For the assessment year 2007-08, you had filed your income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2007-08 and it is a fit case warranting reassessment. 4. In connection with the reassessment proceedings, your was posted for hearing on 29.05.2014 at 3.00PM. However, you failed to appear in person or through your authorized representative on the said date. And you also failed to furnish the details as called for vide statutory notice(s) issued u/s.143(2)/142(1) of the I.T. Act 1961 dated 21.05.2014. Therefore, your case is again posted for hearing on 05.06.2014 at 3.00PM . 15. Against this, the assessee filed Writ Petition before the Madras High Court, wherein the proceedings was stayed by the High Court vide its order dated 18.11.2014 in W.P.No.28022 of 2014 and MP No.1 of 2014. Meanwhile, after coming to know about the stay of second reopening by the High Court, the Assessing Officer requested the Commissioner of Income Tax (Appeals) for enhancement of taxable income. Further, we also note that u/s.251 of the Act, the Commissioner of Income Tax (Appeals) has to apply his mind independently and come to the conclusion on the issue before him. The Assessing Officer cannot influence the decision making process and in this case decision making process of the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ye of law and who fill in different legal personalities in any one individual as held by the Jurisdictional High Court in the case of Mariam Aysha vs. Commissioner of Agricultural Income Tax, 104 ITR 381. 17. Irrespective of any other aspect of the matter, the impugned order of the Commissioner of Income Tax (Appeals) needs to be set aside on the reason that the Commissioner of Income Tax (Appeals) considered the income under the head income from business and invoked the provision of section 50C to determine the sale consideration at E64 crores on the basis of guideline adopted for stamp valuation purposes by State Government. On analyzing the language used by the legislature in Sec. 50C, following prominent aspect can be seen that the said section specifically deals with the transfer of the capital asset being land or building or both and it provides for replacing the value adopted or assessed for the purpose of stamp duty more particularly under sec. 48 in place of value or sale consideration shown by the assessee. It is to take note that the expression capital asset has specific relevance with sec. 45 which provides for brining to tax on transfer of capital asset as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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