9911796707
TMI Blog2021 (5) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Sudhakar Shetty (130 ITD 197(Mum) and thereby treating the amount of Rs. 1,35,38,77,722/- as capital receipt not chargeable to tax u/s.45. 2. "On the facts and circumstances of the case and in law Ld. CIT(A) erred in deleting an amount of Rs. 1,34,68,82,688/- as alleged long term capital gains on retirement from erstwhile from PLA-1 treating the same as not transfer u/s.2(47) and not chargeable to tax. 3. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in allowing the deduction of Rs. 1,35,57,86,616/- while computation of book profit u/s.115JB. 4. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred deleting the addition of Rs. 1,19,85,18,833/- as alleged undisclosed / unaccounted out of books income/investment." 5. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in treating the rent received as business income instead of income from house property." 6. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of notional interest on interest free deposit received by the assessee on Ankleswar factory and Santacruz prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the total income of the firm PLA including the capital gains was Rs. 153,33,50,024/- and the assessee's share in total income for claim u/s 10(2A) of the Act was Rs. 148,73,49,523/-. However, this amount of Rs. 148,73,49,523/- was not paid to the assessee. The firm PLA utilised the consideration of Rs. 220,00,00,000/- as follows:- a) Discharge of loan liability of Rs. 160 crores b) Other expenditure of Rs. 11 crores c) Tax on sale of property of Rs. 30 crores d) Brokerage paid of Rs. 1.25 crores 4.1. We find that on 1.4.2007, PLA firm had revalued its capital asset and increased the amount of investment by Rs. 262,12,92,699/-. On 6.11.2009, PLA firm had devalued the same asset by Rs. 119,85,18,833/-. The effect of accounting entries was reflected in firm PLA's audited accounts in the Asst Years 2008-09 and 2010-11 respectively. But we find that the assessee company gave net effect of the aforesaid revaluation and devaluation in its books in Asst Year 2010-11 when the profits were realised by the firm PLA on sale of the immovable property. On 3.3.2010, the firm PLA sold the land development rights to firm PLA-2 for Rs. 220,00,00,000/- . The erstwhile firm PLA filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs. 119,85,18,833/- as undisclosed / unaccounted out of books income/investment. 4.4.1. We find that the share of assessee being surplus on revaluation of investment of firm PLA amounted to Rs. 135,38,77,7238/- which was determined pursuant to revaluation of the investment on 1.4.2007 by Rs. 262,12,92,699/- and devaluation of the same on 6.11.2009 by Rs. 119,85,18,833/-. On 3.3.2010, the firm PLA sold the said investments to firm PLA-2 and duly offered income to capital gains tax. The assessee gave net effect of the aforesaid revaluation and devaluation in its books in the Asst Year 2010-11 (i.e the year under consideration) when the profits were realised by the firm PLA on sale of the immovable property. The assessee retired from the firm PLA on 3.3.2010. Upon retirement, Rs. 92,18,852/- was paid to the assessee by the firm. While computing total income, the assessee claimed Rs. 135,38,77,722/- as exempt u/s 10(2A) of the Act . Further the said amount was also reduced in computing book profits as per clause (ii) to Explanation 1 of section 115JB of the Act. During the assessment proceedings, the ld AO denied the exemption u/s 10(2A) of the Act and held that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no entry was passed in the books of the assessee firm as on 31/03/2008, by correspondingly increasing the investment made in Pranik Landmark Associates with corresponding credit to current account of the partners of the assessee firm. The assessee passed this entry belatedly only in the year of receipt of actual money from Pranik Landmark Associates i.e. during the F.Y.2009-10 relevant to A.Y.2010-11 in which year, it retired from Pranik Landmark Associates. Pursuant to assessee passing this entry during A.Y.2010-11 in its books for the revaluation, the amounts ultimately received by the assessee from the partnership firm exactly matched with the investments made in the partnership firm. In other words, the assessee did not receive any sum over and above the value of its investments from Pranik Landmark Associates. Hence, there cannot be any levy of capital gains or any levy in the nature of income within the meaning of Section 2(24) of the Income Tax Act in the hands of the assessee. 11. Decision of Hon'ble Gujarat High Court in the case of CIT vs. Mohanbhai Pamabhai reported in 91 ITR 393 (Guj) which has been approved by Hon'ble Supreme Court in the same case reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty reported in 130 ITD 197 which decision was reversed by this Tribunal in the case of his wife i.e. in the case of Hemalata S Shetty vs. ACIT in wherein it was held as under:- "9. In this connection, we find that decision of the jurisdictional High Court in the case of CIT vs. Shri Riyaz A. Sheikh (2014) 41 taxman.com 455 (Bom) which is on similar issue, was not available when the appeal of Shri Sudhakar Shetty was decided by ITAT..... ........We were made aware by Ld. Authorized Representative that after the decision of Hon'ble Bombay High Court in the case of Riyaz A. Sheikh (supra) ITAT "E" Bench, Mumbai by following the said decision has taken a view wherein the decision in the case of Shri Sudhakar Shetty has been reversed. In view of this the issue in the case of present assesses has to be decided in its favour by following the decision of jurisdictional High Court in the case of Riyaz A. Sheikh (supra). In view of above legal discussion, we hold that the amount received by assessee on retirement from partnership firm is not taxable under the head 'capital gains'. The Assessing Officer is directed accordingly." 12.1. As could be seen from the above, the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumpsum. In that circumstance, the amount received by the assessee on retirement from firm was held to be liable to be taxed as long term capital gain. Hence, the facts of the case before the Pune Tribunal are clearly distinguishable from the facts of the instant case before us. 12.5. We also find that in the case of Shri Sudhakar Shetty referred to by the ld. DR, the retiring partner thereof relinquished his share / rights in the partnership and its assets in favour of continuing partners and had received a lumpsum consideration in respect of the same. Whereas, in the facts of the instant case before us, there was no transfer of relinquishment of rights in favour of the continuing partners thereby making it squarely distinguishable. 12.6. We also find that the ld. DR placed the reliance on the Co-ordinate Bench decision of Bangalore Tribunal in the case of Savitri Kadur in ITA No.1700/Bang/2016 dated 03/05/2019 in support of his proposition. We find that in the said decision, the order of Assessing Officer was upheld and capital gain tax was levied on the excess amount paid over and above the amount standing to the credit of the capital account of the partner. We find that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta High Court in the case of Ankit Metal and Power Ltd. in ITA No.155 of 2018 dated 09/07/2019 had held that when a capital receipt does not fall within the definition of "income" u/s.2(24) of the Act, then the same cannot form part of the book profits u/s.115JB of the Act. The copy of the said decision had been placed on record by the ld AR. From the said decision, it could be safely concluded that first the nature of receipt should fall within the definition of income u/s.2(24) of the Act so as to fall within the ambit of book profit u/s.115JB of the Act. If a particular receipt from the inception does not have any element of income u/s.2(24) of the Act, the same would be automatically outside the scope of inclusion as book profits u/s.115JB of the Act. 13.4. We find that the Co-ordinate Bench of this Tribunal in the case of Karanja Terminal & Logistics Pvt. Ltd. vs. DCIT in ITA Nos. 2472, 2473 & 5752/Mum/2018 dated 20/03/2019 had held as under:- "20. ...In the case of lndo Rama Synthetics (I) Ltd. V/s. CIT, 330 ITR 363(SC) the Hon'ble Apex Court has held that the object of MAT provisions is to bring out the real profit of the companies. The thrust is to find out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from its inception is not at all income such as capital receipt as is present in the instant case, then, the said capital receipt would be outside the scope of inclusion as book profits u/s.115JB of the Act. 13.6. The ld. DR also placed reliance on the following decisions in support of his proposition:- a. Decision of Special Bench of Hyderabad Tribunal in the case of Rain Commodities Ltd vs. DCIT reported in 40 SOT 265. b. Decision of Chennai Tribunal in the case of DCIT vs. Western India Cashew Co. Pvt. Ltd. reported in 155 ITD 356 13.7. In view of the elaborate observations, the aforesaid decisions relied upon by the ld. DR would not come to the rescue of the revenue. We also find that all these decisions were subsequently considered by various decisions of this Tribunal in several other cases reported in 178 TTJ 658 (Kol), authored by the undersigned. 13.7. In view of our aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the amount received from partnership firm in the sum of Rs. 10,48,51,708/- requires to be reduced while calculating the book profits u/s.115JB of the Act. Accordingly, the ground No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed to tax in the hands of firm PLA as capital gains on which tax has already been paid by the firm PLA u/s 45(1) of the Act. d) The revaluation / devaluation of asset is a capital receipt; since it is capital in nature, no tax can be levied on such amount - such view is affirmed by Hon'ble Supreme Court and various other courts such as in ITO vs Paru D Dave reported in 303 ITR (AT) 569 and hence, the ld AO could not consider this capital receipt as undisclosed income / investments. e) The amount cannot be said to be taxed u/s 69B of the Act as in the instant case, the assessee had property which was existing in the accounts, it was recorded in the books of accounts and the assessee had made no investment in the current year under question i.e Asst Year 2010-11. f) The amount cannot be said to be taxed u/s 158B(b) of the Act as in the instant case, the assessee had previously recorded the revaluation profit from the property in its books and thereafter again recorded the loss on devaluation of the property in its books of accounts. g) The devaluation resulted into a capital loss for the assessee and hence cannot be considered as undisclosed income / investments. 5.2. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents as business income. The ld AO considered the amount of Rs. 500 per month as income from house property as the business was being conducted by M/s Lupin Ltd on behalf of the assessee by utilising the plant and machinery and other amenities under the 'Business Conducting Agreement'. Further, the ld AO proceeded to hold that the balance amount of Rs. 99,500 per month (1,00,000 - 500) should be treated as rent in respect of factory premises used by Lupin Ltd for conducting their business and taxed the same under the head 'income from house property' instead of 'income from business', 6.2. We find that the ld AR vehemently argued that the ld AO in the assessment order had made a wrong finding that the assessee has long back stopped the manufacturing operations. The ld AO was of the opinion that the intention behind leasing of the property was not of exploiting the property for commercial business activities, but for earning a fixed income by granting M/s Lupin Ltd the right of using the said premise, plant and machinery and other facilities. The assessee contended before the ld CITA that the assessee had not let out a house property but a manufacturing facility vide Business Condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the instant case for the year under consideration. Hence, we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the Ground No. 5 raised by the revenue is dismissed. 7. The Ground Nos. 6 to 7.2 raised by the revenue are challenging the action of the ld CITA in deleting the addition made on account of notional interest to interest free deposit received by the assessee on Ankleshwar factory premises and Santacruz property. 7.1. We have heard the rival submissions and perused the materials available on record. We find that the ld AO sought to add notional interest income of Rs. 1,08,00,000/- calculated at 6% on interest free deposit of Rs. 18 crores and treated the same as 'income from house property' for Ankleshwar property. Additionally, in respect of Santacruz property, the ld AO computed an amount of 6% of the security deposit of Rs. 54,86,400/- i.e Rs. 3,29,184/- as notional interest on the deposit and after allowing standard deduction of 30%, added an amount of Rs. 2,30,428/- to 'income from house property'. We find that the assessee raised objections for the same by pointing out that before considering the notional interest, the ld AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JB of the Act with regard to the capital receipt of Rs. 135,38,77,723/-.
10.1. We have heard the rival submissions and perused the materials available on record. We find that all the aforesaid issues had already been dealt in detail hereinabove while adjudicating the revenue appeal for the Asst Year 2010-11. Accordingly, we hold that the amount of Rs. 135,38,77,723/- received from the firm PLA by the assessee is eligible for exemption u/s 10(2A) of the Act. We hold that the capital gains tax of Rs. 92,18,852/- is not leviable and the ld AO is directed to delete the same.
We hold that the amount received from the firm PLA is a capital receipt and hence the addition of Rs. 135,38,77,723/- made while computing the book profits u/s 115JB of the Act is hereby directed to be deleted.
Accordingly, the Grounds 1 to 3 raised by the assessee are allowed.
11. The Ground Nos. 4 & 5 raised by the assessee are general in nature and does not require any specific adjudication.
12. In the result, the appeal of the revenue is dismissed and appeal of the assessee is allowed.
Order pronounced on 21/04/2021 by way of proper mentioning in the notice board. X X X X Extracts X X X X X X X X Extracts X X X X
|
