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TMI Blog2009 (12) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... owner of the property and nowhere the agreement registers that Shri Rakesh Agrawal has acted on behalf of the HUF as its Karta for purchasing the property in the name of HUF. 1( c )The ld. CIT(A) further failed to appreciate that as per provisions of section 27( iiia ), even a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof. Whereas, in the instant case, the property is registered in the name of the assessee and the assessee is the effective owner of the property at 6, Jantar Mantar Road, New Delhi. 2.The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. C.O. No. 118/Ahd./2008 ITA No. 2420/Ahd./2008 [Assessee]: 1.The Hon ble Commissioner of Income-tax (Appeals) has erred in confirming re-opening the assessment invoking provisions of section 147 of the Income-tax Act. It is submitted that provisions of section 147 are not applicable. It be held so now and order passed be cancelled. 2.The Hon ble Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of Talati Talati, CAs. He added that since the issue raised in this appeal have also been raised in CO No. 118/Ahd./2008 arising out of the Revenue s appeal in ITA No. 1432/Ahd./2008, even if this appeal is dismissed as barred by limitation, the assessee will have no grievance. On the other hand, ld. DR vehemently opposed the aforesaid application for condonation of delay in filing the appeal. 3. We have heard both the parties and gone through the facts of the case. In the light of aforesaid undisputed facts, especially when admittedly the assessee did not have any evidence of submitting the relevant papers in M/s. Talati Talati, CAs nor the partner of said firm placed before us any evidence of handing over the relevant appeals papers to them, apparently the assessee has not come with clean hands before us. In these circumstances, the assessee having failed to establish with cogent and proper evidence that there existed sufficient cause for not presenting the appeal within the stipulated period while the partner of M/s. Talati Talati, CAs has not substantiated his statements in the application dated 23-6-2008, delay of 62 days in filing the appeal, cannot be condoned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made elaborate submissions in this regard. He has pointed out that the Assessing Officer has disregarded a vital evidence, i.e., the Wealth-tax return of the appellant where in the amount invested in the property has been shown as loan to the R.S. Agarwal HUF. This is so for financial years 1998-99 and 1999-2000. 7.2 I have considered the facts of the case, the arguments of the Assessing Officer and the submissions made by the learned AR. I find that the addition made by the Assessing Officer cannot be sustained for the following reasons: The appellant has advanced loan to his HUF and the property is purchased by the HUF. This fact is apparent from the balance sheet of the appellant and also from the Wealth-tax records where the amount invested appears as loan. The Wealth-tax returns for financial year 1998-99 and financial year 1999-2000 support this fact. The AR has also pointed out that for property transactions, the ownership registration is normally done in the name of the individual and the status of HUF is only confined to the Income-tax proceedings. It has also been argued that the loan to the HUF has been fully paid back in the later years. Therefore, I am of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have heard the rival contentions and gone through the facts and circumstances of the case. The documents placed at pages 3 and 6 of assessee s paper book reveal statement of assets liabilities of Shri Rakesh Agarwal, individual, as on 31-3-1999 and 31-3-2000, where in the assessee is stated to have advanced a sum of Rs. 1,11,58,650 and Rs. 1,57,78,578 to his HUF for making payments to Ansal Properties out of ICICI Bank, Baroda on following dates between March, 1997 and July, 1997 [pg. 30 of the PB]: In matter of Shri Rakesh S. Agrawal Details of Amount. Paid for Delhi Flat on behalf of R.S. Agrawal HUF from Bank A/c. No. 000301001052 ICICI Bank, Race Course, Baroda Date Party Name Chq. No. Amount 25 Mar-97 Ansal Properties, Delhi 045106 1,11,58,650 7 Jul-99 Ansal Properties, Delhi 507763 22,77,485 26 Jul-99 Ansal Properties, Delhi DD 4,00,000 26 Jul-99 Ansal Properties, Delhi DD 65,000 16 Aug-99 Ansal Properties, Delhi DD 6,62,981 The Revenue have not placed before us any material to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said gift is given to Shri Rakesh S. Agarwal who is the Managing Director of the company and having substantial shareholding in the said company. In the return of income filed by the assessee on 26-6-2000, Shri Rakesh Agarwal, in note to the computation mentions that he has received the said gift. No details of the gift were furnished. Since Shri Rakesh Agarwal is the Managing Director of Geetganga Leasing Finance (P.) Ltd. and having about 45 per cent of shareholding, the aforesaid amount is nothing but the dividend within the meaning of section 2( 22 ) of the Income-tax Act, 1961. Since the assessee has not offered the amount of Rs. 50 lakhs for the year under consideration as his income, I have reason to believe that income of Rs. 50 lakhs has escaped assessment within the meaning of section 147 of the Income-tax Act. 10.1 During the course of reassessment proceedings, the Assessing Officer show caused the assessee vide notice dated 6-1-2006 as to why income of Rs. 50 lakhs be not assessed in his hands. In response, the assessee stated that in the case of company s assessment the action of gift by the company has been accepted by the Revenue as it is. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been regarding the assessee as its benefactor. The other aspect is that the assessee has been with growing popularity accelerating his own acumen and expertise in the world of art and art collection, if the balance sheet figure of Rs. 1,61,70,114 reflecting as investments in jewellery and paintings as at 31-3-2000 was any indication to go by, then it was evident that the assessee-company has been entrusting major part of its resources to the professional care and expertise of the assessee for parking them in long-term remunerative assets which the dynamics of the emerging markets of the present would have been recognizing as valuable investments. ( c )The assessee has also substantial shareholdings in the said company as stated above along with the other members of the family. Apart from the fact that the personal interest of the assessee in the said company was locked with his own investments therein, it was also clear that the assessee was entrusted with the responsibility of handling the company s resources with due diligence and prudence as would be expected of any manager entrusted with the same responsibility. Thus for being burdened with such responsibility, any profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer while referring to a number of decisions further concluded as under: From the above discussion and the ratio of various decisions relied upon by the revenue to drive home its point that the gift of Rs. 50 lakhs received by the assessee was indeed remuneration in disguise. It is clear that the said receipt of Rs. 50 lakhs is taxable as income of the assessee for the previous year under assessment. It is also reiterated in this regard that the said amount of Rs. 50 lakhs is very much intimately connected with the office or vocation pursued by the assessee vis- -vis his position with the said company which benefited the assessee by the sum of Rs. 50 lakhs in recognition of his services rendered to it. Since nothing has been placed on record to substantiate that the gift by the company was made purely for personal reasons, it is only axiomatic to infer with reasonable presumption that the gift has not been made on account of any personal reasons but in connection with the holding of the office by the said assessee. The resolution which was passed by the Board of Directors in the matter of conferring the gift of Rs. 50 lakhs to the assessee does not reflect any indication to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 4 of the Act has to be kept in mind while levying income-tax on any assessee. Referring to an old decision of Privy Council in the case of Shaw Wallace, it was submitted that every receipt is not an income and it is for the Assessing Officer to conclusively prove that what is received by the assessee is in the nature of income as envisaged under the Act. The concept of income is extremely important before tax is levied on any receipt and question whether any particular receipt is income or not, depends on nature of the receipt and true scope and effect of the relevant taxing provision. Unless a receipt is taxable under a specific provision of the Act, the Assessing Officer cannot treat such receipt as income, the ld. AR added. Continuing, the ld. AR pointed out that reasons recorded for reopening under section 147 of the Act mention that the amount of Rs. 50 lakhs received by the assessee is nothing but dividend within the meaning of provisions of section 2(22) of the Act whereas, the Assessing Officer while determining the total income, assessed the receipt of Rs. 50 lakhs as remuneration under section 28( iv ) of the Income-tax Act. Relying on the decision of Punjab Hary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is mentioned as Individual/Hindu Undivided Family/Company/Firm and Association of Persons. It is therefore clear beyond doubt that a Company as such is capable of making gift and a gift can be made by the Company by transferring the property belonging to it without consideration. It is also well-settled that if a gift is made in appreciation of personal qualities of donee and not in appreciation of any of his service such gifts are not treated as income prior to the amendment brought out by the Legislature by inserting clause ( v ) in section 56 with effect from 1-4-2005. This also gives full support and it is also borne out from several case laws that gift is not income. In the case of Parimisetti Seetharamamma v. CIT 57 ITR 532 (SC) wherein it has been held as under : .......the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. Where however a receipt is of the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gift has been given without consideration and also has been accepted so specifically. Such receipt by way of gift cannot be dragged under any other section for making it taxable and stated that such kind of receipts have been made taxable specifically from the assessment year 2005-06 under section 56( v ) of the Act. As such, receipt of gift being capital in nature cannot by any stretch of imagination be taxed as remuneration under section 28( iv ) of the Income-tax Act. He therefore submitted that the order of Assessing Officer and CIT(A) be reversed and amount be treated as capital receipt only. 13. On the other hand, the learned DR while referring to the impugned orders submitted that the amount of Rs. 50 lakhs received by the assessee, a Director in the Company has to be taxed as remuneration. The learned DR also argued that how can a company, an artificial juridical person have love and affection towards another person and, therefore, a company cannot make such gift. He, therefore, submitted that the income has to be taxed in the hands of the assessee as remuneration. To a query raised by the Bench as to how the amount can be taxed under section 28( iv ), the learned DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee actually rendered any kind of services to the said company. There is no material before us establishing the nexus between the gift of Rs. 50 lakhs and management of the affairs of the company by the assessee. In the absence of any evidence, the findings of the Assessing Officer and the ld. CIT(A) that the accumulated profits of the company are solely attributable to the efforts of the assessee or that affairs of the company are managed by the assessee are baseless and devoid of merit. We find that the Assessing Officer brought the amount to tax, having recourse to provisions of section 28( iv ) of the Act. The relevant provisions of section 28( iv ) of the Act read as under : 28. The following income shall be chargeable to income-tax under the head Profits and gains of business or profession , ****** ( iv )the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; 15.1 As is evident from the aforesaid provisions, the condition of invoking section 28( iv ) is that the chargeable income of the assessee should arise from the business or the exercise of profession. There must be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must necessarily fall under the specific charging provisions. The Revenue Authorities have applied the provisions of section 28( iv ) of the Act wherein it is provided that any benefit or perquisite arising out of exercise of business or profession would be treated as income. These two words have been used in this provision, i.e., benefit or perquisite and other condition is that such benefit or perquisite should arise out of exercise of business or profession. In the facts of the case, the revenue has not established conclusively that the amount of gift arose to the assessee as a consequence of exercise of business or profession because such gifts have got no element of consideration being paid for services obtained by the company. It is also noted that both the words benefit and perquisite refer to specific situations wherein, generally receipt of revenue nature having attributes of income would be covered and such attribute should exist from the very beginning. To illustrate this aspect, we state that where a gift is made in lieu of paying consideration for services obtained and this fact is established, then, such amount of gift can fall within the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion that the gift of Rs. 50 lakhs is not of the nature of any benefit or perquisite as contemplated under section 28( iv ) of the Act. Consequently, we delete the addition made by the Assessing Officer and upheld by the ld. CIT(A), especially when Revenue have not brought to our notice any evidence of services rendered by the assessee to the aforesaid company nor placed any material suggesting that the aforesaid amount of Rs. 50 lakhs was attributable to efforts made by the assessee. Therefore, ground No. 2 in the CO is allowed. 17. As regards ground No. 3 relating to levy of interest under sections 234B and 234D of the Act raised in the CO, the ld. AR on behalf of the assessee did not make any submissions before us. Levy of interest under sections 234B and 234D of the Act, being mandatory [ CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 (SC)] and no infirmity having been pointed out in its levy, this ground is dismissed. However, the Assessing Officer shall allow consequential relief while giving effect to this order. 18. Ground No. 4 being general in nature does not require any separate adjudication while no additional ground having been raised in terms of residuar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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