AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 1817
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..... 1: 'Business income' or Capital receipt not subject to tax' (i) The learned ClT(A) erred in confirming the addition of Rs. 50,00000/- arising from the sale of painting (which were gifted from his father M. F. Husain), as Business income' instead of treating the same as Capital Receipt not subject to tax (ii) The learned CIT(A) erred in confirming the addition by considering the source, use and nature of the holding of the paintings sold in the hands of MF HUSAIN (presuming that it formed a part of the father's unsold stock) instead of considering the nature of holding in the hands of the Appellant (i.e. as personal effect, which is outside the scope of the definition of 'capital asset) and not as stock-in-trade and therefore fell outside the purview of Business income. (iii) The learned CIT(A) erred in making the addition on the ground that no documentary evidence was provided for determining that the painting were gifted to the Appellant, although the manner in which the Appellant received it is not relevant so much as the manner and the intention of the Appellant to determine the nature of the holding is relevant. (iv)....
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.... assessment order and facts on record. My observations are as under: 15. The AO has made the first addition of Rs. 50,00,000/- treating it as sale proceeds of paintaings of late M.F. Hussain on the basis of confirmation of receipts of four paintings from two buyers. The confirmation of Art Musings, Mumbai and Manoj N. Israni, as submitted by the appellant, clearly state that the paintings of M.F. Husain were purchased from Mr. Owasis Husain in the months of April and June, 2005. According to the AR of the appellant, these paintings are gifted by Late M.F. Husain during his lifetime to his son, Mr. Owais M. Husain and should be considered as personal effect. 16. Looking to the overall facts brought on record, I do not find any merit in the argument of the AR of the appellant. Inspite of repeated opportunity given by the AO as well as by the undersigned, no documentary evidence is submitted by the appellant that establishes his claim that these paintings are given as gift by Late M.F. Husain during his lifetime. Even in the copy of the will of Mr. M.F. Husain dated 09.04.2009, which was produced during the appellate proceedings, there is not a whisper of gifting of ....
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....from business or capital gains. The same was treated as non taxable capital receipts. The learned Counsel for the assessee stated that the assessee is not a dealer in paintings, therefore, there is no question for sale proceeds to be assessed as income from business or profession. The learned Counsel for the assessee took us through the assessee's paper book page 1 to 2 i.e. computation of income and sated that the only source of income is bank interest and interest from bonds and also deemed rent as notional income from house property. The learned Counsel for the assessee also took us through the page 3 of assessee's paper book, wherein complete detail of sale of paintings and details of payments is enclosed which reads as under: - Bank Summary - Citi Bank A/c-5-573051-019 for FY 2005-06 Opening balance as on 01/04/2005 2,494,589 Add deposits Sale of paintings 10,059,465 Interest of bonds 8,000,000 Dividends of MFs 476 Interest on savings A/c 56,301 Other receipts 200 10,916,442 Less Payments Personal expenses 7,351,432 Credit cards 3,077,871 Property purchased 2,500,000 Income tax paid 300,000 13,229,303 &nb....
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....s and included within the scope of capital asset only with effect from 01.04.2008. Therefore, the capital gains tax on the paintings are liable only with effect from 01.04.2008 in respect for the assessment year 2008-09 & onwards and not in respect of earlier assessment years. Therefore, the paintings were the personal effect of the assessee and the sale of same would not attract tax liability under the head capital gains. He explained that in subsequent years when the law was amended, the assessee himself has offered sale proceeds from paintings gifted to him by his father as taxable capital gain and paid the taxes accordingly. 7. On the other hand, the learned Sr. Departmental Representative heavily relied on the assessment order and the findings of CIT(A) that the assessee could not produce evidences to the effect that these paintings were gifted by his father and hence, this has rightly been treated as business income being adventure in the nature trade. 8. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the receipts from sale of paintings were not included in the return of income as the....
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....axable being personal effect. Accordingly, we delete the addition of Rs. 50 lacs made by the AO and allow this issue of assessee's appeal. 9. The second issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in treating the balance receipts from sale of paintings amounting to Rs. 50,59,465/- as unexplained income. For this assessee has raised the following ground No. 2: - "Ground No. 2: Unexplained income' or Capital receipt not subject to tax' (I) The learned CIT(A) erred in confirming the addition of Rs. 5059465/- arising from the sale of painting (which were gifted from his father M. F. Husain), as Unexplained income' instead of treating the same as 'Capital Receipt not subject to tax'. (ii) The learned CIT(A) erred in confirming the addition by considering the source, use and nature of the holding of the paintings sold in the hands of M. F. Husain (presuming that it formed a part of the father's unsold stock), instead of considering the nature of holding in the hands of the Appellant (i.e. as personal effect, which is outside the scope of the definition of capital asset')" 10. ....
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....in his case. 12. On the other hand, the learned Senior Departmental Representative objected to setting aside the order of the lower authorities to the file of the AO for the reason that the assessee was given sufficient opportunities to produce the details. 13. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that now assessee's Counsel before us has clearly undertook to file the necessary details to prove that receipts from sale of paintings are on account of sale to the respective buyers. He undertook to file the confirmation from these buyers and the relevant evidences to prove that the sale proceeds are deposited in the bank account will be produced before the Assessing Officer. In such undertaking, we are of the view that the primary responsibility/onus is on assessee to file these details and in term of this undertaking we set aside this issue to the file of the Assessing Officer. 14. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in adopting Annual Let able value at Rs. 9,000 PM in respect of each of the flat i.e. in respect of two worli flats, being deemed....
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....e locality, same ALV for the flat at Queens Court can be adopted as that of the flat situated in Dhun Apartment. Hence, the estimation of ALVs of Rs. 9,00,000/- for the two flats are found to be just and fair and hence confirmed. However, I agree with the appellant that since the possession of the flat in Queens Court was taken on 18 August, 2005, the ALV needs to be estimated for only seven months and 12 months instead of for the entire year. Therefore, the AO is directed to compute the deemed rent under section 23(1)(a) from the two flats at Worli, Mumbai by adopting ALV of Rs. 9,00,000/- for Dhun Apartment for the entire year and the ALV of Rs. 9,00,000/- for the Apartment at Queen's Court for seven months and 12 days only. Thus ground of appeal No.3 is partly allowed." Aggrieved assessee came in second appeal before Tribunal. 17. We have heard rival contentions and gone through the facts and circumstances of the case. As cited by the assessee, the decision of Hon'ble Bombay High Court in the case of CIT vs. Tip Top Typography [2014] 368 ITR 330 (Bom.), wherein it is held that for computing letable value, Municipal rateable value can be adopted by the AO. For this Hon'ble ....