Itxa/52/2010 Of The Commissioner Of Income Tax -7 Mumbai v. United Moters (I) Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.52 OF 2010 The Commissioner of Income Tax-7 ..Appellant. V/s. M/s. United Motors (I) Ltd. ..Respondent. Mr. Suresh Kumar for appellant. Mr. Porus Kaka, senior Advocate with A.K. Jasani for respondent. CORAM : J.P. DEVADHAR AND MRS. MRIDULA BHATKAR, JJ.DATED : 22ND FEBRUARY, 2011 P.C. :- 1.Three questions of law are raised by the revenue in this appeal, which read as under:- i)Whether on the facts and in the circumstances of the case and in law, a sum of Rs.50 lakhs received by the assessee from M/s. Trent Ltd. being (upfront non refundable / non accountable signing fees) is to be treated as business income or capital receipt ?law, a sum of Rs.50 lakhs received by the assessee from M/s. Trent Ltd. being (upfront non refundable / non accountable signing fees) is to be treated as business income or capital receipt ? ii)Whether on the facts and in the circumstances of the case and in law, the ITAT was correct in law in remanding the case to AO for computing the capital gain u/s. 45 of the I.T. Act ignoring the decision of the Delhi High Court in the case of CIT V/s. R.L. Bhargava reported in 174 ITR 0050 as the character of the receipt is a revenue receipt as it was not in association with disposal of a capital asset ?law, the ITAT was correct in law in remanding the case to AO for computing the capital gain u/s. 45 of the I.T. Act ignoring the decision of the Delhi High Court in the case of CIT V/s. R.L. Bhargava reported in 174 ITR 0050 as the character of the receipt is a revenue receipt as it was not in association with disposal of a capital asset ? iii)Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that there was a transfer of the capital asset by way of extinguishment of rights disregarding law, the ITAT was justified in holding that there was a transfer of the capital asset by way of extinguishment of rights disregarding 2 itxa52-10sxw the provisions of sub clause (v) used in the definition of transfer of Section 2(47) ? 2.As regards the first question is concerned, finding of fact recorded by the Tribunal is that the assessee was carrying on the automobile business in a building constructed by it on a plot of land taken on lease from the Municipal Corporation several decades ago. In the assessment year in question, the assessee shifted its business to another rented premises and gave the premises in question to M/s.Trent Limited for retailing business for a period of 10 years by receiving lumpsum payment of Rs.50 lakhs. The assessing officer treated the amount of Rs.50 lakhs received by the assessee as business income and taxed accordingly. 3.On appeal filed by the assessee, the CIT(A) held that the sum of Rs.50 lakhs received by the assessee is to be treated as capital receipt not includible in the income of the assessee. On further appeal by the revenue, the ITAT by the impugned order dated 9/6/2009 held that the amount of Rs.50 lakhs be treated as capital gains and accordingly directed the assessing officer to compute capital gains in accordance with law. The argument of the revenue is that the amount of Rs.50 lakhs received by the assessee ought to have been assessed as business income of the assessee. The Tribunal in para 6 of its order has held thus:- 3.On appeal filed by the assessee, the CIT(A) held that the sum of Rs.50 lakhs received by the assessee is to be treated as capital receipt not includible in the income of the assessee. On further appeal by the revenue, the ITAT by the impugned order dated 9/6/2009 held that the amount of Rs.50 lakhs be treated as capital gains and accordingly directed the assessing officer to compute capital gains in accordance with law. The argument of the revenue is that the amount of Rs.50 lakhs received by the assessee ought to have been assessed as business income of the assessee. The Tribunal in para 6 of its order has held thus:- " This receipt is neither a consideration for the automobiles business which was earlier carried on by the assessee at this premises and later on shifted to another rented premises nor it was towards the actual conducting of the retailing business, which was yet to be started. On the other hand, it is a consideration for allowing Trent Ltd. to use the premises for the retailing business and was received even prior to the commencement of the retailing business. It is a one time non-refundable amount having no relation with the actual carrying on of the business by M/s. Trent Limited with the assistance of the assessee." 4.In our opinion, the decision of the Tribunal is based on finding of fact and no question of law arises out of the order of the Tribunal. 5.As regards the second question is concerned, admittedly the said question does not arise out of the order of the Tribunal. Therefore, the second question cannot be entertained. 6.As regards the third question is concerned, the Tribunal after considering Section 2(47)(v) of the Act arrived at a conclusion that the transaction involved capital gains and accordingly the third question cannot be said to be a question arising out of the order of the Tribunal. Accordingly, the appeal is dismissed with no order as to costs. (MRS. MRIDULA BHATKAR, J.) (J.P. DEVADHAR, J.)