Ita/1200/2006 Of The Commissioner Of Income Tax v. Mr. Pramod Kurian

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 14 DAY OF AUGUST 2012 PRESENT THE HON’BLE MR.JUSTICE K.SREEDHAR RAO AND THE HON’BLE MR.JUSTICE B.MANOHAR I.T.A.No.1200/2006 C/w. I.T.A.Nos.1201 & 1202/2006 ITA.Nos.1200 & 1201/2006 : BETWEEN: 1.The Commissioner of Income Tax C.R.Building, Queens Road Bangalore. 2.The Income-Tax Officer, Ward 5(7) C.R.Building, Queens Road Bangalore. .. Appellants ( By Sri M.Thirumalesh, Advocate ) AND: Mr.Pramod Kurian, No.7, Golden Orchards, 10/1, Kasturba Road Bangalore. .. Respondent ( By Sri A.Shankar & M.Lava, Advocates ) ITA.No.1200/2006 is filed under Section 260-A of the Income Tax Act, 1961 arising out of order dated 21.4.2006 passed in ITA.No.708/Bang/2002 for the Assessment Years 1997-98 praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No.708/Bang/2002 dated 21.4.2006 confirming the order passed by the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward No.5(7), Bangalore, in the interest of justice and equity. ITA.No.1201/2006 is filed under Section 260-A of the Income Tax Act, 1961 arising out of order dated 21.4.2006 passed in ITA.No.709/Bang/2002 for the Assessment Years 1998-99 praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No.709/Bang/2002 dated 21.4.2006 confirming the order passed by the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward No.5(7), Bangalore, in the interest of justice and equity. ITA.No.1202/2006 : BETWEEN: 1.The Commissioner of Income Tax C.R.Building, Queens Road Bangalore. Queens Road Bangalore. 2.The Income-Tax Officer, Ward 9(1) C.R.Building, Queens Road Bangalore. .. Appellants ( By Sri M.Thirumalesh, Advocate ) AND: Mr.Pramod Kurian, No.7, Golden Orchards, 10/1, Kasturba Road Bangalore. .. Respondent ( By Sri A.Shankar & M.Lava, Advocates ) ITA.No.1202/2006 is filed under Section 260-A of the Income Tax Act, 1961 arising out of order dated 21.4.2006 passed in ITA.No.1336/Bang/2002 for the Assessment Years 1999-00 praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No.1336/Bang/2002 dated 21.4.2006 confirming the order passed by the Appellate Commissioner and confirm the order passed by the Income Tax Officer, Ward No.9(1), Bangalore, in the interest of justice and equity. These Appeals are coming on for hearing this day, K.SREEDHAR RAO, J., delivered the following : J U D G M E N T Respondent-assessee is the shareholder of M/s.Elixir Hotels Pvt.Ltd., The company has leasehold rights of the land initially for a period of 30 years. Later on, the lease period was extended by 50 years. The company wanted to construct and run a hotel business. The contemplated project did not come through because of financial constraints. The shareholders, including the assessee, sold their respective shares to third parties. The assessee valued the shares at the rate of Rs.12,000/- per share as on 1.4.1981. The Assessing Officer assessed the value of share at Rs.1,759/- per share and accordingly assessed the capital gains. The Commissioner of Income Tax (Appeals) assessed the share value at Rs.7,061/- per share. The Tribunal confirmed the order of the Commissioner of Income Tax (Appeals) and dismissed the appeal of the Revenue. Hence, these appeals are filed. ITA.No.1200/2006 pertains to the assessment year 1997-98, ITA.No.1201/2006 pertains to the assessment year 1998-99 and ITA.No.1202/2006 pertains to the assessment year 1999-00. The following substantial questions of law have been formulated at the time of admission of these appeals: ITA.No.1200/2006 pertains to the assessment year 1997-98, ITA.No.1201/2006 pertains to the assessment year 1998-99 and ITA.No.1202/2006 pertains to the assessment year 1999-00. The following substantial questions of law have been formulated at the time of admission of these appeals: (1)Whether the Appellate Tribunal was right in upholding the order of the Appellate Commissioner, deleting the addition made in his order to the income of the assessee from capital gains, without recording a finding relating to computation of cost on the basis of claim of goodwill being cost of shares as on 01.04.1981? right in upholding the order of the Appellate Commissioner, deleting the addition made in his order to the income of the assessee from capital gains, without recording a finding relating to computation of cost on the basis of claim of goodwill being cost of shares as on 01.04.1981? (2)Whether the Appellate Tribunal was right in holding that the compensation received at the rate of Rs.80,867/- per month towards loss of rental income on account of delayed construction of a property by the builder was a capital and not a revenue receipt?right in holding that the compensation received at the rate of Rs.80,867/- per month towards loss of rental income on account of delayed construction of a property by the builder was a capital and not a revenue receipt? 2. The Assessee contends that in respect of shares of the same company, other three shareholders have filed returns. The Assessing Officer has accepted the share value at Rs.7,061/- following the order of the Commissioner of Income Tax (Appeals) and accordingly they have been taxed. In the instant case, it is not permissible for the Revenue to take a different stand to contend that the share value should be assessed at Rs.1,759/-. 3. Sri M.Thirumalesh, learned counsel appearing for the Revenue has relied upon the decisions of the Supreme Court in the case of C.K.Gangadharan & another –v- Commission of Income Tax { (2008) 304 ITR 00612}. In the said decision, in paras-12 & 13, the following observations are made : -“ Para12 : If the assessee takes the stand that the revenue acted mala fide in not preferring appeal in one case and filing the appeal in other case, it has to establish mala fides. As a matter of fact, as rightly contended by the learned counsel for the revenue, there may be certain cases where because of the small amount of revenue involved, no appeal is filed. Policy decisions have been taken not to prefer appeal where the revenue involved is below a certain amount. Similarly, where the effect of decision is revenue neutral there may not be any need for preferring the appeal. All these certainly provide the foundation for making a departure. -Para13: In answering the reference, we hold that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the Tribunals or the High Courts.” 4. Learned counsel for the appellants relying upon the observations in the said decision argues that, merely because in respect of other shareholders, the Revenue has not preferred appeal is not a ground to hold that the present appeals are not maintainable on the rule of parity. He further submits that assessee has also not established any mala fides on the part of the Revenue in discriminating and filing these appeals; in other cases, the appeals were not filed for the reason of low tax affect or monetary limits and therefore, the Revenue is not precluded in law from filing the appeal and challenging the valuation fixed. Consequently, he contended that the Commissioner of Income Tax (Appeals) and the Tribunal does not 4. Learned counsel for the appellants relying upon the observations in the said decision argues that, merely because in respect of other shareholders, the Revenue has not preferred appeal is not a ground to hold that the present appeals are not maintainable on the rule of parity. He further submits that assessee has also not established any mala fides on the part of the Revenue in discriminating and filing these appeals; in other cases, the appeals were not filed for the reason of low tax affect or monetary limits and therefore, the Revenue is not precluded in law from filing the appeal and challenging the valuation fixed. Consequently, he contended that the Commissioner of Income Tax (Appeals) and the Tribunal does not give any valid reasons to fix the value at Rs.7,061/- per share, whereas, the Assessing Officer had taken the assistance of departmental valuer in fixing the value of the shares. Therefore, whatever valuation fixed by the Assessing Officer is on scientific basis and the order of the Tribunal in upholding the value at Rs.7,061/- is bad in law and the same has to be set aside. 5. Learned counsel for the respondent-assessee relied upon the decision of this Court in the case of Commissioner of Income Tax –v- H.Fatheychand (ITA.No.455/2003, disposed of on 10[th] December 2007), to contend that in Hindu undivided family, when the shares of other co-owners has been assessed at the value, there should be a uniform treatment to all the co-owners and there should not be a discrimination in fixing the liability. 6. On thorough consideration of the facts and material, we find that the decision in C.G.Gangadharan’s case is distinguishable from the facts of this case. In the present case, in respect of the same company, same shares, the other shareholders have been assessed and the share value per share is fixed at Rs.7,061/-. The Revenue has accepted the said value and have not preferred any revision. The matter may be different if on a principle of law stated in different situation between different parties, if Revenue has not filed an appeal earlier challenging the said method of assessment, it may not preclude the Revenue from challenging the said method of assessment in a different case for any valid reason like monetary limits or having no tax effect. But, in the instant case, in respect of the same company, same shares, when other shareholders have been assessed and taxed, there should not be any discriminatory treatment to the assessee in question. Besides, the fixation of the share value is a question of fact. There has been a concurrent finding by the Commissioner of Income Tax (Appeals) and the Tribunal. In the circumstances, we do not find any good ground to interfere with the order of the Tribunal. In respect of ITA.Nos.1201/2006 which pertains to the assessment year 1998-99 and ITA.No.1202/2006 which pertains to the assessment year 1999-00, the company has entrusted the construction activity to a contractor. The contractor could not complete the construction. Therefore, having failed to construct, a compensation of Rs.80,000/- was paid to each shareholder. The said amount is considered as a capital receipt. In respect of the said amount so received by other shareholders, the Assessing Officer in those cases has held it as capital receipts. Therefore, in these cases also, no different stand could be taken. Therefore, the questions of law are answered against the Revenue. Accordingly, Appeals are dismissed. Sd/- JUDGE Sd/- JUDGE *bk/-