2016 (11) TMI 1058 - AT - Income Tax

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 in the Assessment Year 2004-05. Apparently, the possession of the property has been given prior to 2004-05 i.e. in the financial year 1996-97 relevant to Assessment Year 1997-98. All the development agreements were executed during the period 10.6.1994 to 30.10.1995 for development of the party. The possession of the property has been given on 18.9.1994 to Dattani group in respect of development agreement entered into by the assessee with Dattani Group. Taking all these facts into consideration, 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).

Summary

Issues Involved:
1. Whether the contributions/donations received by the assessee should be treated as professional/business income.
2. Whether the concept of mutuality applies to the contributions/donations received by the assessee.
3. Whether the compensation aid/expenses paid by the appellant for Assessment Year 2005-06 should be disallowed.
4. Whether the levy of interest under Section 234B(3) of the Income Tax Act is justified.
5. Whether the capital gains arising from the sale of property at "Poiser" are taxable in the Assessment Year 2004-05.

Issue-wise Detailed Analysis:

1. Treatment of Contributions/Donations as Professional/Business Income:
The Tribunal examined whether contributions/donations received by the assessee amounting to ?3,65,589/- should be treated as professional/business income. It was held that these contributions were in pursuance of the assessee's activities and aligned with the objectives of the assessee union. Therefore, they cannot be treated as income from business or profession and are exempt under Section 10(24) of the Income Tax Act. The Tribunal noted that no incriminating evidence was found during the search and seizure operation, and the contributions were voluntary and directly related to the negotiation and settlement activities of the assessee, which are part of its constitutional objectives.

2. Application of Mutuality Concept:
The Tribunal also addressed whether the concept of mutuality applies to the contributions/donations received by the assessee. It was determined that the contributions received from employers and workers were for achieving the objectives of the assessee union and were not intended to generate profit. The Tribunal emphasized that the contributions were incidental to the assessee's activities and were distributed among the members, thus supporting the principle of mutuality. Consequently, these amounts were not considered business income and were exempt under Section 10(24) of the Income Tax Act.

3. Disallowance of Compensation Aid/Expenses:
Regarding the disallowance of compensation aid/expenses amounting to ?89,80,000/- for Assessment Year 2005-06, the Tribunal referred to its earlier findings on contributions/donations. It concluded that since the primary grounds (contributions/donations) were resolved in favor of the assessee, the issue of compensation aid/expenses became infructuous and was dismissed accordingly.

4. Levy of Interest under Section 234B(3):
The Tribunal noted that the issue of interest under Section 234B(3) of the Income Tax Act is consequential. Since the primary grounds were decided in favor of the assessee, the levy of interest was dismissed as a consequential matter.

5. Taxability of Capital Gains from Sale of Property:
The Revenue appealed against the decision of the CIT(A) regarding the non-taxability of capital gains arising from the sale of property at "Poiser" in the Assessment Year 2004-05. The Tribunal examined the facts and concluded that the transfer of the property took place in the financial year 1996-97, relevant to Assessment Year 1997-98. The Tribunal noted that the possession of the property was handed over, and necessary permissions were obtained in the earlier years. Therefore, the capital gains did not arise in Assessment Year 2004-05. The Tribunal upheld the CIT(A)'s decision, stating that the capital gains were not assessable during the Assessment Year 2004-05.

Conclusion:
The Tribunal partly allowed the appeal filed by the assessee and dismissed the appeal filed by the Revenue. The contributions/donations received by the assessee were exempt under Section 10(24) of the Income Tax Act, and the capital gains from the sale of the property were not taxable in the Assessment Year 2004-05. The issue of compensation aid/expenses was dismissed as infructuous, and the levy of interest under Section 234B was dismissed as consequential.