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TMI Blog2009 (11) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be issued for subsequent years Deduction u/s 80HHC – Exclusion of Excise Duty of Rs. 47013935 from total turnover for the purposes of computation of deduction - Supreme Court in the case of CIT vs. Lakshmi Machine Works (2007 -TMI - 6557 SC) – Accordingly this issue was decided in the favour of assessee Since there was no difference of opinion on the point of taxability on capital gain in the year under consideration, the appeal of the Revenue on this point is accepted and the learned CIT(A)'s order in this regard is reversed and that of the AO order is restored – Appeal is partly allowed - - - - - Dated:- 20-11-2009 - Member(s) : PRADEEP PARIKH., U. B. S. BEDI., T. R. SOOD. ORDER-U.B.S. BEDI, J.M.: This appeal of Department is directed against the order passed by the learned CIT(A)-II, Madurai, dt. 22nd Jan., 2007 relevant to the asst. yr. 2002-03 whereby besides challenging the action of learned CIT(A) in directing the AO to accept the long-term capital gain of Rs. 1,71,82,270 returned by the assessee as against the long-term capital gain of Rs. 13,20,29,940 determined by the AO, the Department has also challenged the action of learned CIT(A) in deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was to receive the entire sale consideration in this year and handed over possession of the property during this year and as per provisions of s. 53A of the Transfer of Property Act, there was a transfer within the meaning of s. 2(47)(v) of the IT Act. He, therefore, conducted enquiries by issuing summons to Shri Devadoss Sundaram, executive director of M/s Ceedeeyes Housing Finance Ltd. In response to the summons, a reply dt. 5th March, 2005 was received from the purchaser in which it was reiterated that they took possession of the land on 25th May, 2001 itself and construction was started on 4th June, 2001 and the construction cost incurred during the financial year 2001-02 was Rs. 12,14,60,382. The AO supplied a copy of the letter received from the purchaser and sent a proposal to the assessee to tax the entire capital gains in this assessment year. The assessee filed a reply dt. 21st March, 2005 in which it was stated that the undivided interest in the land was sold to many buyers through M/s Ceedeeyes Housing Finance Ltd., for a total consideration of not less than Rs. 14 crores. It was further submitted that the assessee offered the long-term capital gains on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only allowed the developer to construct compound wall in one part of the land and at the same time the said land was used as magazine for storing the fireworks. He submitted that as per the sale agreement dt. 25th May, 2001 the possession was not handed over to the developer as alleged by the AO. He submitted that as per cl. 10 of the sale agreement the developer shall be entitled to enter the land agreed to be sold; to construct compound wall enclosing the land to be sold and keep the same fully secured and to advertise for sale of undivided share in the above property. Further the developer shall be entitled to form layout, demarcate and lay the roads, earmark the area towards open space reservation and to carry out other work for the development of the said land. He submitted that the assessee did not give power of attorney to the developer and the possession rights were retained by the assessee till such time the documents were directly registered in the name of prospective buyers of the flats. He further argued that even though the assessee submitted in its letter dt. 21st March, 2005 that the possession was not given, the AO based on the statement of M/s Ceedeeyes Housing F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the possession of the property. As such, s. 2(47)(v) or (vi) is not applicable to the case of the appellant. 4.9 Without prejudice to the above, I accept the alternative plea of the representative that the appellant did not obtain no-objection certificate from the Appropriate Authority as the agreement was not registered with Appropriate Authority. Without clearance from the Appropriate Authority, the agreement could not have been acted upon. As such the sale agreement is not valid and, therefore, it cannot be said that the appellant, handed over the possession of the property consequent to such invalid agreement. For this reason also, the issue is to be decided in favour of the appellant. 4.10 In view of the above discussion, I accept the plea of the representative that there was no handing over of possession of land and the appellant retained the possession of the rights till such time the documents were directly registered in the names of buyers of the flats and as such s. 53A of the Transfer of Property Act, 1882 shall not be applicable and, therefore, there is no transfer within the meaning of s. 2(47)(v) or (vi) of the IT Act. The AO shall accept the computation of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record as well as the case law relied upon by the authorities below and find that all the points raised before us and before the learned CIT(A) were also raised before the AO, who dealt with the same in paras 2.5 to 2.7, which read as under: "2.5 The assessee's explanation is far from satisfactory and to the reality of the case. As per para 10 of the sale agreement, M/s Ceedeeyes Housing Finance Ltd. Was given possession of the land immediately after the date of execution of the sale agreement. This fact has been confirmed by them as per their letter dt. 5th March, 2005. Moreover, in order to strengthen its stand that it has not given complete possession of the land, the assessee has filed a copy of the explosive licence relating to licence Nos. Ma/6424/E and Ma/645/E valid from 7th April, 2001 to 31st March, 2002. Mere renewal of explosive licence need not be construed that the magazines in question were really put to use during this assessment year. The fact remains that these licences have been renewed w.e.f. 7th April, 2001, i.e., prior to the date of sale agreement. If they were renewed from 7th April, 2001, naturally the application for such renewal ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gains by treating the transfer of possession to C in August, 1993, as a transfer under s. 2(47)(v) of the Act. Subsequently, she claimed that there was no transfer relevant for the asst. yr. 1994-95 and that the actual transfers were made in the asst. yr. 1995-96 when the power of attorney holders executed registered sale deeds in favour of others. This claim was rejected by the Department. On a writ petition: Held, rejecting the claim of the assessee, that the ingredients of s. 53A of the Transfer of Property Act, 1882, were satisfied when the assessee had put C in possession of the property in August, 1993, after receipt of the full sale consideration. The subsequent execution of the sale deeds by the power of attorney holders did not militate against the operation of s. 53A of the Transfer of Property Act, 1882.' In the case of Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 180 CTR (Bom) 107 : (2003) 260 ITR 491 (Bom) the Court has held as under: 'Even arrangements conferring privileges of ownership without transfer of title could fall under s. 2(47)(v), where the agreement is a development agreement, the test to be applied to decide the year of chargeability is the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce no further material or evidence has been adduced by the learned counsel for the assessee to rebut such findings as recorded by the AO either before the learned CIT(A) or before us during the hearing on the basis of such agreement further sale deeds have been executed by the assessee in favour of the persons nominated by the company, so it cannot be the case of the assessee that the agreement has not been acted upon and the assessee has also gone for compounding of prosecution launched in violation of provision of Chapter XX-C and otherwise violation of a provision cannot be valid defense for violator in other proceedings would not be of any help to the assessee to hold that sale agreement is not valid and possession is not handed over when on the basis of said agreement only construction was started on 4th June, 2001 by taking over possession on 25th May, 2001 so it has wrongly been held by the learned CIT(A) that transfer did not take place in the year under consideration, therefore, in view of the facts and circumstances and material on record, we hold that transfer took place within the accounting period relevant to the assessment year under consideration as contemplated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty and sales-tax did not involve any such turnover such taxes had to be excluded. Commission, interest, rent, etc., do yield profits, but they do not partake of the character of turnover and therefore they are not includible in the 'total turnover'. If so, excise duty and sales-lax also cannot form part of the 'total turnover' under s. 80HHC(3)." 12. Following the said decision of the Hon'ble Supreme Court, we uphold the order of the learned CIT(A) in this regard, as same is in conformity with the precedent noted above and dismiss this ground appeal of the Revenue. 13. As a result, appeal of the Revenue is partly allowed. T.R. SOOD, A.M.: 19th June, 2009 I have carefully gone through the order of the learned JM and have discussed the matter with him. Though I am in agreement with him in respect of second issue, as far as first issue is concerned, taxing the capital gain in the year before us, I am in agreement but I have failed to persuade myself with the order of the learned JM while dealing with the alternative argument of the learned counsel for the assessee that if capital gain tax was held to be leviable in this year then since the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the Department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions. ............ It is important to remember that the proviso does not confer any fresh power upon the ITO to make assessments in respect of escaped incomes without any time-limit. It only lifts the ban of limitation in respect of certain assessments made under certain provisions of the Act and the lifting of the ban cannot be so construed as to increase the jurisdiction of the Tribunals under the relevant section. The lifting of the ban was only to give effect to the orders that may be made by the appellate, revisional or reviewing Tribunal within the scope of its jurisdiction. If the intention was to remove the period of limitation in respect of any assessment against any person, the proviso would not have been added as a proviso to sub-s. (3) of s. 34, which deals with completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years then the year under appeal, the same could be rejected by applying analogy as laid down in ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC) or direction could be issued to adjust the taxes paid by the assessee in subsequent assessment years on capital gain in the year under appeal." PRADEEP PARIKH, VICE PRESIDENT (AS THIRD MEMBER): 1st Oct., 2009 There being a difference between the two Members who originally heard this appeal, the Hon'ble President was pleased to nominate the Zonal Vice President as Third Member as intimated by U.O. No. F. 18-Jd(ATD-CS)/2009, dt. 30th July, 2009. Accordingly, the matter was heard and the same is now disposed of. The question referred to the Third Member is as follows: "Whether, while dealing with the Department's appeal, the alternative plea of the respondent-assessee raised during hearing. in the absence of any appeal or cross-objection by the assessee, in view of the decision in State of Kerala vs. Vijaya Stores (1979) 116 ITR 15 (SC), to give direction to the AO to exclude capital gain offered by the assessee in the subsequent assessment years than the year under appeal, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned JM. The learned counsel while supporting the order proposed by the learned AM, relied on two judgments of the Madras High Court. They are in the case of CIT vs. Smt. S. Vijayalakshmi (2000) 162 CTR (Mad) 569 : (2000) 242 ITR 46 (Mad) and that in the case of CIT vs. Ramnath Goenka (Decd.) (2001) 252 ITR 653 (Mad). It was also submitted that the judgment of the Supreme Court in State of Kerala vs. Vijaya Stores (1979) 116 ITR 15 (SC) is not applicable to the facts of the case and the judgment of the Supreme Court in the case of Murlidhar Bhagwan Das has been considered by the learned AM. 4. I have duly considered the rival contentions and the material on record. I have also carefully perused the orders proposed by the two Members. At the outset, I would like to consider the judgment in the case of Vijaya Stores. In this case, which is a case under the Kerala General Sales-tax Act, 1963, transactions to the tune of Rs. 80,218 recorded in the rough notebook were not recorded in the regular books of account. The Sales Tax Officer (STO) made an addition to the extent of 10 per cent of the turnover. The addition amounted to Rs. 45,654. The AAC reduced the addition to Rs. 22,823. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notice issued to him under s. 34(1)(a) of the 1922 Act was invalid and therefore the appeal of the Department should be dismissed. The Tribunal did not permit the assessee to raise such a ground. It felt that if the plea was allowed to be raised and it was accepted. the entire order of the AAC would stand vitiated. However. the High Court observed that the assessee wanted to raise a new point as a ground of defence in the appeal and it was specifically stated that he wanted to rely upon it only for the purpose of having the appeal by the Department for enhancement in income-tax dismissed. In other words, the High Court held that part of the order which was against the assessee would not be disturbed or set aside. The ground was being taken only as (sic). The fact that the notice was invalid was not in dispute. Yet, that part of the AAC's order which was against the assessee would stand as the assessee was not in appeal. However, the defence sought to be taken by the assessee was only against enhancement which the High Court allowed. Thus, the learned JM has relied on the decision in the case of Vijaya Stores by making a very general observation rather than going into the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection" in s. 153(3)(ii) of the Act, it is now well-settled that it must be an express direction necessary for the disposal of the case before the authority or Court. It must be also a direction which the authority or Court is empowered to give while deciding the case before it. The expressions "finding" and "direction" in s. 153(3)(ii) of the Act must be accordingly confined. Sec. 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or Court. It is a provision which merely raises the bar of limitation for making an assessment order under s. 143 or s. 144 or s. 147. ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC) and N.K.T. Sivalingam Chettiar vs. CIT (1967) 66 ITR 586 (SC). The question formulated by the Tribunal raises the point whether the AAC could convert the provisions of s. 147(1) into those of s. 153(3)(ii) of the Act. In view of s. 153(3)(ii) dealing with limitation merely, it is not easy to appreciate the relevance or validity of the point." From the above observations it is clear that the direction to be given in the present case that credit of taxes already paid should be given is a direction necessary for the disposal of the appeal. The fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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