9911796707
TMI Blog2000 (2) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... aroda whereunder the purchasers had agreed to purchase on ownership basis the following floors namely 3rd, 44th, 5th, 6th, 7th and 8th floors of the building at a total price of Rs. 1,03,22,325. The sale agreement is placed at pages 18 to 24 of the paper book filed during the course of hearing before us. As per clause (2) of the agreement the said purchase price was agreed to be paid as follows : (a) A sum of Rs. 15,00,000 to be paid to the assessee on the purchasers being satisfied about the title of the assessee to the building and the right to sell the said premises. (b) The balance purchase price to be paid on the completion of the sale and on the purchasers taking possession as the owners of the said premises including the third floor after handing over the possession of the 9th floor to the assessee. Clause (4) provided that the assessee shall take all necessary steps for determination of the sub-lease between the purchasers (Bank of Baroda) and Amora Chemicals Pvt. Ltd. and the lease between the sellers and Amora Chemicals. From the copy of the resolution passed at the Board Meeting of Amora Chemicals on 10-6-1984 placed at page 25 of the paper book it appears that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted by the assessee HUF in 1978. The assessee-HUF comprises inter alia Shri Lalit M. Patel, karta and his brother Shri Bhupendra M. Patel and their families. M/s. Amora Chemicals is a private limited company with fully paid-up share capital of Rs. 81,400 comprising 814 equity shares of 100 each. Out of 814 shares 805 shares are held by members of the assessee-HUF. The company is thus controlled and managed by the assessee-HUF and both the brothers viz. S/Shri L.M. Patel and B.M. Patel are directors of the company. As per the rent agreement placed at page 13 of the paper book the assessee-HUF entered into the agreement on 1-7-1978 where by partly constructed building was agreed to be rented to the company whereby half-portion of the second floor, and 4th, 5th, 6th and 7th floors were given on monthly rent of Rs. 9,970. The agreement further provided that the assessee-HUF shall give on rent to the company the 8th, 9th and 10th floors of the said building as and when they are constructed and ready. It appears that even before the company had entered into the aforesaid agreement, it has been going about looking for the tenants in the market and carrying on negotiations with the prosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the sale transaction. The ld. Counsel further added that the purchaser party viz. Bank of Baroda insisted that clear title over the premises should be conveyed after the termination of the tenancy rights of Amora Chemicals. 6. The ld. D.R., supporting the order of the CIT(A) on the issue argued that the revenue is entitled to pierce the corporate veil and go behind the smoke screen and discover the true state of affairs. The ld. D.R. emphasised that the substance of the transaction is to be seen and not merely the form only. According to the ld. D.R. Amora Chemicals is closely held and controlled by the assessee HUF and the payment of Rs. 15 lakhs claimed as made by way of compensation is not motivated by the sale transaction and has in fact been made under a make-believe arrangement and that it was merely, a device to minimise the assessee's tax liability. 7. We have given our, earnest consideration to the facts and circumstances of the case as well as the rival submissions made before us. The facts are undisputed that M/s. Amora Chemicals is controlled and managed by the assessee-HUF. Shri B.M. Patel, brother of Shri L.M. Patel (who is the karta of the assessee HUF) has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion. In the instant case the payment of Rs. 15 lakhs has been made by the assessee-HUF to a company controlled and managed by the members of the assessee-HUF itself. Relationship by itself, without more cannot possibly lead to the inference of excluding the possibility of the payment being wholly and exclusively for the purpose of the sale transaction. Admittedly dealing with the relatives in contrast with or in preference to strangers is neither prohibited by law nor can be tabooed. However this would not obviously give a licence to cover up make-believe arrangements. The Courts and authorities are not to wear, blinkers to over look or condone the passing of public revenue to one's own kith and kin by subterfuqe or clever devices clothed in legalistic jargone. It is only appropriate, indeed normal, that dealings involving transfer of funds to near and dear ones needs to be looked into with care and caution and necessary inferences drawn if there are abnormalities attached to such transactions. It is an erroneous proposition to contend that as soon as an assessee has established two facts i.e. the existence of an agreement and the fact of payment, no discretion is left to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances on record clearly indicate that the payment of Rs. 15 lakhs, apparently shown as compensation for termination of tenancy rights is in fact not related to the transaction of sale made by the assessee-HUF. From the conveyance deed placed at pages 59 to 76 of the paper book it appears that the entire payment of Rs. 1,03,22,325 has been made by the Bank of Baroda on 9-6-1984 itself as under : a. A sum of Rs. 15 lakhs has been paid on 9-6-1984 by pay slip No. 76/2285 of Bank of Baroda, Sayaji Gunj, Baroda. b. The balance of Rs. 88,22,325 has been paid on 9-6-1984 by transferring this amount into savings account No. 34610 of Bank of Baroda in the account of the assessee HUF. This clearly indicates that the purchasers viz. Bank of Baroda, who were already in possession of the property, were satisfied on 9-6-1984 regarding the clear title of ownership vesting with the assessee HUF. Regarding the termination of tenancy rights, the board of directors of Amora Chemicals passed the resolution on 10-6-1984 whereby it was resolved that the company, would relinquish the tenancy rights in the Suraj Plaza building on the condition that the assessee-HUF pays the sum of Rs. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore dismissed. 11. The next ground as projected by ground No. 4 is that the CIT(A) earned in holding that interest of Rs. 1,66,014 accrued on the savings account on the amount of advances given by the purchasers against the purchase consideration is income from other sources. On this issue also, the ld. counsel made a brief reference to the claim of the assessee that interest income of Rs. 1,66,014 accruing in the savings bank account should be assessed as property income and not as income from other sources. The only ground relied by the ld. counsel in support of his stand is that the interest has been earned on the advances received from the prospective purchasers of the property in lieu of the rental income. We are not inclined to accept the contention of the ld. counsel. The interest has been received from the Bank on the savings account. Even if the amount deposited in the savings bank account represents the advances received by the assessee, this would not by itself alter intrinsic character of the income earned by the assessee. Interest has been earned from the Bank and is liable to be assessed under the head other sources as held by the ld. CIT(A). This ground is th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
