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2016 (11) TMI 1058 - ITAT MUMBAI

2016 (11) TMI 1058 - ITAT MUMBAI - TMI - Capital gain computation - Held that:- No valid reason to interfere with the findings given by the Ld. CIT(A) that the transfer took place in the Assessment Year prior to the Assessment Year 2004-05 and capital gains arose prior to the Assessment Year 2004-05 and therefore capital gains is not assessable during the Assessment Year 2004-05. None of the findings of the Ld. CIT(A) have been rebutted by the Revenue so as to canvas that the transfer took place .....

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ration, it is apparent that the transfer took place prior to 2004-05 therefore the Ld. CIT(A) is perfectly justified in holding that no capital gains arose in Assessment Year 2004-05. Thus, we sustain the order of the Ld. CIT(A). - I.TA No.356/Mum/2014, I.TA No.1335/Mum/2014 - Dated:- 28-9-2016 - SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER For The Assessee : Shri N.R. Agrawal For The Revenue : Shri Manjunatha Swamy, Shri N. Sathya Moorthy ORDER PER C.N. PRASAD, JM: The .....

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ceived by the assessee of ₹ 3,65,589/- 3. The Ld. CIT(A) erred in disallowing compensation aid/expenses paid by the appellant of ₹ 89,80,000/- for Assessment Year 2005-06. 4. The Ld. CIT(A) erred in confirming the interest u/s. 234B(3) of the Act. 3. At the outset, the Ld. Counsel for the assessee submits that all the three grounds are decided by the Tribunal in its own case for the Assessment Years 2003-04 to 2010-11 and the appeal for this Assessment Year remains to be adjudicated .....

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essee union therefore cannot be treated as income from business or profession and they are exempt u/s. 10(24) of the I.T. Act as well as on the principle of the mutuality. 4. In so far as ground No. 3 regarding compensation aid/expenses are concerned, the Ld. Counsel for the assessee submits that the Tribunal in para-22 held that in view of the findings given in ground No. 1 & 2, this ground of appeal of the assessee becomes infructuous. 5. The Ld. Departmental Representative vehemently supp .....

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sessee are in pursuant to its activities which are in accordance with the objects of the assessee union therefore cannot be treated as income from business or profession and accordingly it was held that the same is exempt u/s. 10(24) of the I.T. Act as well as on the principle of mutuality observing as under: We have considered the rival submissions as well as relevant material on record. There is no dispute that during the search & seizure operation, the department has not recorded even a s .....

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e is eligible for exemption u/s. 10(24) of the Act as a registered Trade Union. The dispute is only with respect to the contribution from the employers/corporate entities on account of settlement of the disputes between the workers and employers through assesses's union. It is one of the objects of the assessee as per the constitution of the assessee union to seek redressal of grievances of the members and to secure the settlement of disputes between the employers and the employees by negoti .....

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s not for achieving the objects of the assessee. The amount received by the assessee from the employers has a direct nexus with the negotiation and settlement arrived between the parties. The role of the assessee of negotiating on behalf of the workers for settlement of disputes between the worker and the employers is limited only in respect of the disputes between the member workers and employers. Therefore, the activity of the assessee cannot be generalized in the nature of professional servic .....

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workers and employers is a composite activity and the contribution received from the employer cannot be taken as a separate activity of the assessee but it is a part and parcel of activity of achieving the object as per the constitution/by laws of the assessee. Therefore, when the pre-dominant object of the activity of the assessee is to arrive at a settlement of disputes between the workers and the management in the interest and welfare of the workers and not to earn any income or profit then .....

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rom workers, the fund received by the assessee from employers is otherwise for the purpose of achieving the objects being a welfare body of the workers and excess fund if any after meeting out the expenses incurred on account of activity performed by the assessee, are refunded to the members as bonus then the said consideration received on account of settlement cannot be treated as business income earned by the assessee. An identical issue was considered by the Indore Benches of this Tribunal in .....

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refunded to the deserving employees. From record we find that substantial amount received from the employees was refunded to them in the years 1999 and 2000 after meeting the expenditure. Thus, the amount received from the workers for meeting such expenditure was not in the nature of income in the hands of the assessee being a coordination committee but was merely in the nature of deposit which was meant for meeting expenditure for defending/prosecuting various cases of employees. From record we .....

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ribute funds for a common purpose, the amount of funds not so required for common purpose and refunded to such individual, cannot be treated as income in their hands liable to tax. Thus, the general principle applicable to the mutual concern is that the surplus accruing to it cannot be regarded as income, profits or gains for the purpose of income tax. 21. As discussed hereinabove, the amount received by the assessee was not in the nature of income and the assessee was not doing any business act .....

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he settlement agreement which was signed by all the parties, therefore, there is no material or any fact brought on record by the Assessing Officer to indicate that the amount received by the assessee from workers as well as from the employers are not voluntary but under coercion or force. If the Assessing Officer doubted the voluntary contribution made by the workers and employers then he could have conducted a proper enquiry. In the absence of any contrary fact or evidence found during the sea .....

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vant evidence in support of its claim that this is a voluntary contribution. Once the CIT(A) has accepted the contribution of the workers as exempt from tax u/s 10(24). Similarly the contribution made on account of the same service/activity of the assessee by the counter party being employer in pursuant to the settlement/resolution of disputes, is also exempt u/s 10(24) of the Income Tax Act. As per section 27(2) of the Trade Union Act 1926, even the rule of trade unions do not provide for distr .....

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e with the objects of the assessee union cannot be treated as income from business or profession and accordingly the same is exempt u/s 10(24) of the Income Tax Act as well as on the principle of mutuality being distributed among the members of the assessee union . Respectfully following the said decision, we allow the grounds raised by the assessee on this issue. 7. In so far as ground No. 3 is concerned, the Co-ordinate Bench in para-22 of its order dismissed the ground as infructuous in view .....

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of sale of property at "Poiser", is not taxable in the A. Y 2004-05, stating that the same arose prior to A. Y 2004-05, without appreciating the fact that the assessee had not credited the sale proceeds in the Income and Expenditure account for the A. Y. 95-96 and subsequent years and offered no taxable income under capital gains for such assessment year and also the fact that no return of income was filed for the A. Y. 95-96 and 96-97, disclosing the capital gain on sale of property. .....

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ty was not complete, i.e no transfer had taken place within the meaning of sec 2(47)of the I. T. Act prior to A. Y. 2004-05" 10. Briefly stated the facts are that the assessee had filed return of income on 20/07/104 declaring 'NIL' total income after claiming exemption u/s. 10(24) on the entire income. However, from the profit and loss account it was found that out of total receipts of ₹ 2,38,83,663/- an amount of ₹ 2,23,42,132/- was received on account of 'profit on .....

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₹ 2,23,42,132/- against loss as per Income expenditure account of ₹ 1,16,76,294/- and assessed taxable income at ₹ 1,06,65,840/-. 10.1. Being aggrieved the assessee filed appeal before CIT(A) and the CIT(A) by order dated 19/02/08 enhanced the total income to ₹ 2,23,42,132/- by treating the resultant income under the head capital gain(LTCG), thereby negating the set off of business loss of ₹ 1,16,76,294/-. In doing so the Ld. CIT(A)held that since the appellant had .....

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order after necessary examination in the light of the observations made above and after allowing opportunity of hearing to the assesee.' 10.3. In the reassessment order the assessing officer reproduced Para 3.1 and other relevant paragraphs of the CIT(A)'s appellate order leading to computation of long term capital gain at ₹ 2,23,42,132/-. There is no discussion of the compliance with the directions of Hon'ble ITAT and the verification carried out. The Assessing Officer accordi .....

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s and therefore the Assessing Officer is justified in holding that there is transfer within the meaning of provisions of Sec. 2(47) of the Act during this Assessment Year and bringing to capital gains tax the property given for development. 12. The Ld. Counsel for the assessee supports the orders of the Ld. CIT(A). 13. Heard the rival submissions and perused the orders of the authorities below. We find from the Ld. CIT(A) s order that the issue has been elaborately considered by the CIT(A) with .....

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the capital gains arose prior to the Assessment Year 2004-05 and therefore not liable to tax in the Assessment Year 2004-05 observing as under: 5.1. I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 5.2. Before me it is argued that the Ld. Assessing Officer has passed the order simply relying on earlier CIT(A)'s order and that the AO did not follow the direc .....

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or 1996-97. 5.3. The fact remains that the appellant did not reflect profit on sale of property at Poiser at ₹ 2,23,42,132/- in any of the earlier assessment years including assessment year 1995-96 or 1996-97. It is only in the assessment year 2004-05 that the appellant credited the profit amount on sale of property in the profit and loss account. However, even in this year it did not offer the same for taxation. The claim of the appellant that the same is exempted u/s. 10(24) is also not .....

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r books of accounts for several years. It never credited this amount to its income and expenditure account till A.Y. 2004-05. No acceptable reason has been given for treating the advance received as advance in all these years prior to A.Y. 2004-05. The inescapable conclusion can only be that only the appellant wanted to hide the nature of transaction and to avoid payment of taxes in respect of this transaction. Even in A.Y. 2004-05, in the return filed it was claimed that the same is exempted u/ .....

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to Dattani Construction. They also noted that the land was subject matter of acquisition and restraints under the Urban Land Ceiling Act and therefore whether and when such right or interest in the property could be legally transferred should be examined. They also noted that the Power of Attorney holder was required to make application under ULCA and it is not clear as to what permission has been received. The fact that the assessee itself has shown amount received as advance till 01/04/2003 i .....

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order for Dereservation dated 10/06/1996, ULC order dated 17/02/1997 & 17/10/1996 from Add. Collector, Commencement Certificate for construction of building from BMC dated 20/01/1998, Solicitor's certificate dated 04/08/2007 certifying that land is transferred in 1995/96 u/s 53A of Transfer of Properties Act, Bank Certificate for payments received from Developer & Power of Attorney in favour of builder. Thereafter, the entire portion from the earlier CIT(A) order, which was the subje .....

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for a consideration of ₹ 614,3601- , the appellant was allowed to develop and sell, in respect of plot of land at Poisar of 30718 square yards approx 24882 square meters. The owner allowed developer to apply for and obtain required permissions, develop and sell constructions on the land. If permissions were received, and sales of flats took place, the developer was entitled to all proceeds without having to pay the owner any further payments. The agreement was on 'as is where is' .....

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with Cable Corporation. Thus, it recorded the restriction of ULC u/s 8(4), reservation for Municipal Godown, and was on 'as is where is' basis. It allowed developer Dattanis to enter property as licensee. The amount received as consideration was a total of ₹ 260,00,000/- over a period of 10-8-1994 to 31-12-1995. Power of Attorney, was executed by Cable Corporation of India Ltd first in favour of appellant trust and then in name of Dattani group. Similar P of A was executed by appel .....

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ission to develop and construct residential units. It was also stipulated that NOC from ULC will be obtained. ii) Order dated 17-10-1996 from Collector under ULC, granting NOC with reference to the condition imposed by BMC in its permission dated 10-6-1996. It was noted that one of the conditions under which development is permitted, is that 25% of constructed area will be handed over to BMC for Municipal Godown. iii) Commencement Certificate permission dated 20-1-1998 from BMC iv) Order dated 1 .....

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LC and BMC were received. Consideration was received and possession was handed over. Thus, to conclude, as directed by ITAT in this case, the title could have been transferred with ULC approval in FY 1996-97 relevant to Assessment Year 1997-98. 5.12. It is also the argument of the appellant that u/s. 2(47) clause (v), since possession was given on 18.9.1994, transfer took place at that time. This clause is in respect of contract of the nature referred to in section 53A of Transfer of Property Ac .....

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