AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1273
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....ppeal with same registration number was re-stored. Accordingly, this appeal has come before us for hearing. 3. Originally, the appellant/assessee filed Ground of Appeal in Form No. 36 but subsequently filed 'Revised Grounds' through a separate application dated 13.10.2023. It is submitted that the Revised Grounds are merely reframed by changing the language and no additional ground has been raised. With the consensus of both sides, the Revised Grounds were taken for adjudication. These grounds read as under: 1. That, the Ld. CIT (A) has erred in law in confirming addition of Rs. 2,53,98,000/- made by Ld. AO by treating the amount received by appellant in respect of transfer of his interest in the property inherited by him viz., share in his father's interest in the partnership firm M/s. Bhagirath and Brothers, which devolved upon him as a result of death of his father on 12.6.1990, treating such right as transfer of his share in the immovable property belonging to the partnership firm and subjecting it to the capital gain in spite of the admitted factual position that the property in question belonged to the partnership firm of M/s. Bhagirath and Brothers....
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....ly a devolved property bequeathed by his deceased father by way of will (Point No. 1, Page No. 5 of assessment-order). After death of father, when the assessee wanted to leave family and the matter prolonged for a long time between assessee and his brothers, the assessee decided to give up his share in favour of family members and executed sale-deed. Thus, it was a mere devolution of property-cum-forced sale to family members. With these twin-submissions, the assessee claimed before AO that neither the impugned transaction would be taxable nor the deeming provision of consideration u/s 50C would apply. Additionally, the assessee also made a submission that the consideration received under sale-deed had been re-invested in certain properties, therefore the assessee would be entitled to exemption u/s 54/54F which would also reduce taxable gain to Rs. Nil. The AO considered assessee's reply in Para 6 to 9 of assessment-order and upon consideration rejected the same. He observed that the assessee received impugned property from his father in individual capacity. He noted that the assessee also made sale in individual capacity which is evident from sale-deed wherein the assess....
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....e feet in land and 1,111 square feet in constructed-shed. To clarify the calculation of assessee's share, we may mention that the partnership firm owned 1.86 acres of land (1 acre = 43,560 square feet, therefore 1.86 acres = 81,021 square feet) and 20,000 square feet of construction. Therefore, 1/3rd share of assessee's father comes to 27,007 square feet of land and 6,666 square feet of construction and assessee's 1/6th share in father's share comes to 4,501 square feet of land and 1,111 square feet of construction. The assessee, described as "Seller" in the sale-deed, sold his share, namely 4,501 square feet of land and 1,111 square feet of construction to his 3 brothers described as "Purchaser" in the sale-deed [The CIT (A) has in advertently mentioned 2 brothers in place of 3 brothers]. Ld. AR that the sale-deed itself clearly mentions the status of property i.e. the property was actually owned by firm M/s Bhagirath & Brothers and not by assessee's late father. The assessee's father only had 1/3rd undivided share in the property of firm which upon his death devolved upon 6 legal heirs (including assessee). Ultimately, the assessee executed sale-deed to transfer/relinquish his ow....
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....the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm; and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm." Then, Ld. AR invited our attention to a commentary given by an author on aforesaid section 14, filed at Page No. 34 of the Paper-Book, reading as under: "7. No part of property of the firm or a definite share belong to any partner individually - It may be said that the rule adopted by English Courts is that real estate intended by the partners to constitute a part of the partnership property or treated by them as belonging to the partnership is regarded in equity as converted in to personality for all purposes and also for the settlement of the claims of the partners inter se. The law in India is not different. Secs. 14 and 15 of the Indian Partnership Act, 1932, speak about what would constitute the property of a firm and declare that such property shall be held and utilized for the purpose of the partn....
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....rtnership after payment of the firm's debts and liabilities out of the assets. In that sense his interest in the partnership may be taken to be an interest in the immovable property belonging to the firm. Many of cases, both English and Indian, undoubtedly held such interest of partners not to be immovable property. But that view is not consistent with the Indian concept of realty and ownership, or the view of the Judicial Committee referred above. Thereafter, Ld. AR relied upon decision of Hon'ble Supreme Court in Addanki Narayanappa and Another Vs. Bhaskara Krishtappa and 13 others (1966) SCC Online SC 6 : (1966) 3 SCR 400 : AIR 1966 SC 1300; we quote below the paras referred by Ld. AR during hearing: 1. In this appeal by special leave from a judgment of the High Court of Andhra Pradesh the question which arises for consideration is whether the interest of a partner in partnership assets comprising of movable as well as immovable property should be treated as movable or immovable property for the purposes of s. 17(1) of the Registration Act, 1908. 4. Direct cases upon this point of the courts in India are few but before we examine them it would be desirable t....
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....to at the option of himself or his representatives to such share of profits made since he ceased to be a partner as may be attributable to the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm. The subject of dissolution of a firm and the consequences are dealt with in chapter VI, sections 39 to 55. Of these the one which is relevant for this discussion is section 48 which runs thus: "In settling the accounts of a firm after dissolution the following rules shall, subject to agreement by the partners, be observed: (a) Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits. (b) The assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order :- (i) in paying the debts of the firm to third parties: (ii) in paying to each partner rateably what is due to him from the firm for advances as distinguished from capit....
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....d have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership. As already stated, his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges. It is true that even during the subsistence of the partnership a partner may assign his share to another. In that case what the assignee would get would be only that which is permitted by section 29(1), that is to say, the right to receive the share of profits of the assignor and accept the account of profits agreed to by the partners. There are not many decisions of the High Courts on the point in t....
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....e, the assessee has sold his share in father's asset/right, received hefty consideration and thereby earned de facto income which cannot remain untaxed. Therefore, the AO has rightly assessed and the CIT (A) has also rightly upheld the AO's action. Ld. DR prayed that no interference is required with the orders of lower-authorities. 10. In rejoinder, Ld. AR submitted that the "Memorandum of family settlement" has been made on the very same day on which the sale-deed was made because nobody wants a time-gap in such matters. Therefore, no adverse inference should be taken based on date of execution. 11. We have considered rival submissions of both sides and perused the orders of lower-authorities as well as the material held in case file. The controversy before us is whether the AO was right in assessing capital gain in the hands of assessee? The admitted undisputed facts are such that (i) the assessee executed a registered sale-deed on 30.05.2011 in favour of his 3 brothers, (ii) the sale-deed was executed by assessee as "seller" in his individual name and individual PAN, and (iii) the assessee received a total consideration of Rs. 1,80,00,000/- from 3 brothers (Rs. 60,00,000/-....
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....). Therefore, the assessee's claim of 'partition of HUF' and thereby exclusion from taxation is an unproved claim besides being untenable in section 47(i); we are rejecting the same. 13. Now, we turn to the two claims/contentions argued by Ld. AR before us as narrated in foregoing para 8(i) and 8(ii). The first claim is such that the assessee executed sale-deed as part of 'family settlement' and 'family settlement' is not taxable under Income-tax. We find that the assessee has never claimed before lower-authorities the factum of "family settlement" although the assessee claimed "partition of HUF". As stated earlier, the theory of "family settlement" has been pushed for the first time in the application under Rule 29 by mentioning "family arrangement or partition", "Family Settlement". Further, in the "additional evidences" filed under Rule 29, the assessee has filed "Memorandum of Family Settlement" alongwith "Partition-Deed" because the "Partition-Deed", as mentioned earlier, does not support assessee's stand. Further, the Ld. AR for assessee has also refrained from making any pleading qua 'partition of HUF' claimed by assessee before lower authorities. Instead, Ld. AR harped o....
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....assessee as seller and his 3 brothers as purchasers have acted upon the sale-deed and essentially the assessee's right became right of brothers for a consideration. Therefore, when a de facto transaction of sale by assessee has been made and the assessee has received a hefty consideration of Rs. 1,80,00,000/- for transfer of his right, it would attract taxability and it is nothing to do with the provisions of section 14 of the Indian Partnership Act. The department is not asking to pay tax on any kind of 'notional' transfer, the revenue's case is such that the assessee has made an actual sale which is taxable. Needless to mention that the assessee is also claiming to have utilized the sale consideration of Rs. 1,80,00,000/- for making investments in newer properties (it is a different point that the assessee claimed exemption u/s 54/54F on the basis of those newer investments but the AO has disallowed exemption on a different premise). Therefore, we do not find any merit in the second claim of assessee argued by Ld. AR too. The same is hereby rejected. 15. In view of above discussions and for the reasons stated therein, the Ground No. 1 raised by assessee is found to be dev....
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.... The addition made by AO is therefore not warranted. The same is hereby deleted. This ground is thus allowed. 19. Resultantly, this appeal is partly allowed. Order pronounced in open court on 18.01.2024. ============= Document 1 "9. पूंजीगत लाठमें वृदà¥à¤§à¤¿ - करदाता दà¥à¤µà¤¾à¤°à¤¾ à¤à¤®à¥Œà¤°à¥€ दà¥à¤¬à¥‡ तहसील व जिला इंदौर में सà¥à¤¥à¤¿à¤¤ जमीन व इस पर निरà¥à¤®à¤¿à¤¤ शेड रॠ1800000/- में विकà¥à¤°à¤¯ की गई । जिसकी वरà¥à¤¤à¤®à¤¾à¤¨ गाइड लाईन मूलà¥à¤¯ उपपंजीयक दà¥à¤µà¤¾à¤°à¤¾ रॠ26183000/- निरà¥à....
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....€ पà¥à¤²à¤¾à¤Ÿ ( जिस पर आयकर निरीकà¥à¤·à¤• की रिपोरà¥à¤Ÿ के आधार पर दिनांक 08.03.2015 तक कोई निरà¥à¤®à¤¾à¤£ कारà¥à¤¯ नहीं किया गया) à¤à¤µà¤‚ अपनी पतà¥à¤¨à¥€ के नाम से जमीन में राशि विनियोग की गई है । किनà¥à¤¤à¥ करदाता दà¥à¤µà¤¾à¤°à¤¾ अपने सà¥à¤µà¤¯à¤‚ के नाम से धारा 54/54F के अंतरà¥à¤—त छूट लेने हेतॠरहà....
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....rs whose names are mentioned at Page No. 2 of sale deed itself. As a result of this appellant got his share of 4501 sq. ft. land and 1111 sq. ft. shed constructed on it.(Out of total 1.86 Acre land & 20000 sq. ft. construction). As per the sale deed dated 30.05.2011, appellant received such property on death of his father, as his son, in individual capacity and sold such property to his brothers Shri Kailash Sharma and Shri Moolchand Sharma, for a sale construction of Rs.1,80,00,000/-. Even sale deed shows sale of this property by appellant Shri Omprakash Sharma, in individual capacity, as PAN mentioned in sale deed is AEFPS1290P, which pertains to him in individual capacity. Therefore there was no reason for appellant not to show capital gain on sale of such land, in his return, but appellant failed to show such land sale and & consequent capital gain in his return. The two excuses submitted by appellant for not showing such income in his return, first that income belonged to his HUE and second that there was no capital gain as it was merely a devolution of property in coparceners on death of his father, are both found false. Firs....
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....of Rs.138.05 lacs in Omprakash Sharma (HUF). Since none of these properties is purchased in name of appellant and appellant in individual capacity is not even a joint owner in any of these two properties, hence condition laid down under provisions of section 54F of the Income Tax Act, are not fulfilled regarding ownership of appellant over new property . For this purpose reliance is place on the decision in case of Prakash v/s ITO (2008) 173 taxman 311 (Bom.). Besides no deduction u/s 54F of the Income tax Act, is available on merely a land plot purchased in name of appellant's HUF as such deduction is available only on a residential house purchased by appellant. Besides this appellant also failed to show that he does not already own other residential property. In view of these facts, deduction u/s 54F of the Income tax Act, will not be available on such long term capital gain. Document 3 “विकà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤· यह विकà¥à¤°à¤¯à¤ªà¤¤à¥à¤° कà¥à¤°à¥‡à¤¤à¤¾ पकà¥à¤....
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....थ शरà¥à¤®à¤¾ का सà¥à¤µà¤°à¥à¤—वास दिनांक 12.06.1990 को हो गया होने से उपरोकà¥à¤¤ वरà¥à¤£à¤¿à¤¤ संपतà¥à¤¤à¤¿ में से उनका à¤à¤• तिहाई अविà¤à¤¾à¤œà¥€à¤¤ हिसà¥à¤¸à¤¾ विकà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤·, कà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤· à¤à¤µà¤‚ शà¥à¤°à¥€à¤®à¤¤à¥€ गंगादेवी पति सà¥à¤µ. शà¥à¤°à¥€ à¤à¤¾à¤—ीरथजी शरà¥à¤®à¤¾ à¤à¤µà¤‚ हंसा पिता सà¥à¤µ. शà¥à¤°à¥€ à¤à¤¾à¤—ीरथजी शरà¥à¤®à¤¾ कà¥....
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....¤ संपतà¥à¤¤à¤¿ विकà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤· के सà¥à¤µà¤¾à¤®à¤¿à¤¤à¥à¤µ à¤à¤µà¤‚ आधिपतà¥à¤¯ की है तथा विकà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤· को उसे विकà¥à¤°à¤¯ करने का पूरà¥à¤£ अधिकार पà¥à¤°à¤¾à¤ªà¥à¤¤ है । उकà¥à¤¤ संपतà¥à¤¤à¤¿ वà¥à¤¯à¤µà¤¸à¤¾à¤¯à¤¿à¤• कà¥à¤·à¥‡à¤¤à¥à¤° में सà¥à¤¥à¤¿à¤¤ होकर औदà¥à¤¯à¥‹à¤—िक उपयोग की है । विकà¥à¤°à¥‡à¤¤à¤¾à¤ªà¤•à¥à¤· ने उकà¥à¤¤ संपतà¥à¤¤à¤¿ के अत....
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....867. Cell: 98264-10260. E-mail: [email protected] New Delhi. Cirst Clear Sunanda Duilding 17/10 Dalinden Ma New Delhi 11000011010000 1. Copy of Declaration of Gift as per "Annexure A" 2. Copy of Memorandum of Family Settlement as per "Annexure B" 3. Copy of Partition Deed as per "Annexure C" From the above annexure it is very clear that the partition of the Hindu Undivided Family did took place and that the asset or shares transferred to the family members pursuant to a family arrangement or partition cannot be constructed as a transfer under section 2(47) of the Income Tax Act, 1961. The applicability of section 50C arises only when there is transfer as per section 2(47) but the partial partition as undertaken at the instance of the appellant is exempt from the definition of transfer and hence the provisions of section 50C are not attracted. Now from the above it is very clear that the transactions is mere a Family Settlement. Kindly consider the above documents. Thanking You, Yours Sincerely, For, Shri Om Prakash Sharma, Acailasy (Counsel of the Appellant) "Annexure B" à¤à¤¾à¤°à¤¤à¥€à¤¯ गै....
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....all encumbrances whatsoever, the movable and immovable propertics described. the schedule A and B ritten hereunder have with an intention to put an end to their community of ownership with Shri krakash Sharma, the party of the first part, have divided and forever separated the share of Shri Omprakash Sharma in the properties mentioned in the said schedule - A for the purpose of same being hereafter jointly owned by Smt.Ganga Devi, Shri Kailash, Shri Ashok, Shri Moolchand and Smt.Hansa, the parties of the Second Part. The parties hereto have earlier settled within themselves the division of properties belonging to late Shri Bhagirath Ji Sharma more particularly described in Schedule - A. WHERAS the immovable property mentioned in Schedule - B being residential house at 1 New Palasia, Indore will continue to remain in co-ownership of the parties mentioned in serial no.1 to 6 above. AND WHEREAS, Shri Omprakash Sharma had decided to be out of the Co-ownership and Sint.Ganga Devi, Shri Kailash, Shri Ashok, Shri Moolchand and Smt.Hansa have mutually decided to pay and partition the assets, so that Shri Omprakash is separated from the common ownership and ....
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..../sale deed to this effect is to be registered at the appropriate registering authority and by doing so the share of Shri Kailash, Shri Ashok and Shri Moolchand in the above immovable properties will be augmented to that extent. 4. Immovable Property as described in Schedule B That the immovable property being residential house mentioned at Serial No.1 in Schedule - B will continue to be under the co-ownership of the parties mentioned at serial no.1 to 6 above. 5. That from the date of oral partition Shri Omprakash shall have no claim on any of the properties mentioned in the Sehedule A written hereunder. Shri Omprakash Sharma hereby further declares that he has no claim on any business/ businesses conducted by Shri Kailash, Shri Ashok and Shri Moolchand at Indore and/or at Pithampur along with other family members. Similarly, Shri Kailash, Shri Ashok and Shri Moolchand has or had never been any interest in any of the business/ businesses conducted by Shri Omprakash at Indore. 6. That Shri Omprakash Sharma has full information of all the properties and the business run by (Late) Shri Bhagirath Ji Sharma and shall not hereafter raise any claim o....
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....ned and executed all such documents, deeds, writing and/or instructions as may be necessary to give effect to this Family Settlement" arrived at amongst the parties on 29/05/2011 and which is recorded in the Memorandum of Family Settlement. IN WITNESS WHEREOF the parties have set and subscribed their respective hands on the day and year first herein above written: Signed and delivered by the withinnamed Omprakash Sharma (s/o (Late) Shri Bhagirath Ji Sharma (the party of the First Part) in the presence of Signed and delivered by the withinnamed Smt.Ganga Devi Sharma Wd/o (Late) Shri Bhagirath Ji Sharma Kailash Sharma S/o (Late) Shri Bhagirath Ji Sharma Ashok Sharma Доринад yas वी -+-+-+#1} S/o (Late) Shri Bhagirath Ji Sharma s Moolchand Sharma S/o (Late) Shri Bhagirath Ji Sharma Smt.Hansa Sharma D/o (Late) Shri Bhagirath Ji Sharma (hereinafter referred to as the parties of the econd Part) The presence of Witness 2 Flansas SCHEDULE A (Forming part of Memorandum of Family Settlement) Details of Properties owned by Late Shri Bhagirath Ji Sharma S.No....
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....siding at 21 Shanti Niketan Colony, Near Bombay Hospital, Indore, hereinafter referred to as the party of the THIRDART; Business Winding at 307 Scheme No.74-C, lagirath Ji Sharma Aged 53 years, Occupation Business anas residing at 307 AD, Scheme No.74-C, Indore, hereinafter referred to as the party of the FOURTH PART; 5. Shri Moolchand Sharma s/o Late Shri Bhagirath Ji Sharma Aged 51 years, Occupation Business residing at 3 Shanti Niketan Colony, Near Bombay Hospital, Indore, hereinafter referred to as the arty of the FIFTH PART; and 6: Smt.Hansa Sharma d/o Late Shri Bhagirath Ji Sharma Aged 46 years, Occupation Housewife residing at Chittorgarh (Rajasthan), hereinafter referred to as party of the SIXTH PART 30.5-11 WHEREAS: (1) Whereas the parties hereto are the members and coparceners of Shri Bhagirath Sharma (HUF) a joint and Hindu Undivided Family. (2) Whereas the HUF - Shri Bhagirath Sharma (HUF) owns certain movable assets in the form of deposit with Pvt.Ltd.Company and Partnership firms. The list of such movable assets in the form of deposit owned by the HUF is more particularly described in Schedule "A" hereunder written....
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....ing.Deposit with Companies and Partnership Firms belonging to the Bhagirath Sharma - HUF a Joint Hindu Undivided Family) Serial Number 1 Description Deposit with Bhagirath Coach & Metal Fabricators Pvt Ltd., Indore Deposit with Mohan Trading Company, Indore Nature Unsecured Loan Unsecured Loan Amount 2,11,965.00 7,50,441.70 TOTAL 9,62,406.70 SCHEDULE "B" (Details of Partition of Movable Property of Bhagirath Sharma - HUF a Joint Hindu Undivided Family amongst the members/coparceners) गंगादेवी S.No. प7: Imploy offe Name of the Member/Coparcener Smt.Ganga Devi Sharma Wd/o Late Shri Bhagirath Ji 1 Sharma 2 Shri Omprakash S/o Late Shri Bhagirath Ji Sharma 3 Shri Kailash S/o Late Shri Bhagirath Ji Sharma 4 Shri Ashok S/o Late Shri Bhagirath Ji Sharma 5. Shri Moolchand S/o Late Shri Bhagirath Ji Sharma 6 Smt. Hansa Sharma w/o Shri Kailash Sharma Amount 1,60,401.12 1,60,401.12 1,60,401.12 Mode of Payment Cheques Cheques Cheques 1,60,401.11 Cheques 1,60,401.11 Cheques 1,60,401.12 962,406.70 Chequ....
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.... Rs. 33,27,700 in the hands of the appellant under section 69 as unexplained investment on the ground that the explanation provided by the appellant was not satisfactory. The appellant humbly submits that the Ld. Assessing Officer has not provided any rationale or reasoning as to how and why the submissions made by the assessee were not satisfactory. On appeal, the addition was affirmed by the Ld. CIT(A) on the ground that the assessee has not explained the sources of cash deposit. The appellant submits that as is clear from the table produced above, the appellant has sufficiently explained the sources from which the cash deposit in question has been deposited by the appellant. It is also evident that the cash deposits by the appellant are from the various cash withdrawals made from the same Bank Account with Oriental Bank 3590 on various dates. Further, the appellant has also reflected an opening cash balance and cash receipts from the Partnership Firm Bhagirath Coach. The appellant submits that once, the appellant has 20 23) 24) given its explanation, it is for the revenue authorities to controvert the same by conduct....