Case Law Details

Case Name : Commissioner of Income-tax-III Vs Mohd. V. Shaffiulla (Karnataka High Court)
Appeal Number : IT Appeal No. 403 to 406 OF 2010
Date of Judgement/Order : 22/02/2012
Related Assessment Year :
Courts : All High Courts (3864) Karnataka High Court (198)

HIGH COURT OF KARNATAKA

Commissioner of Income-tax-III

v.

Mohd. V. Shaffiulla

IT APPEAL NOS. 403 to 406 OF 2010

FEBRUARY 22, 2012

JUDGMENT

N. Kumar J. 

As in all these four appeals, the point that arises for consideration is the same and hence we have taken them up for consideration together and disposed off by this common order.

2. In ITA Nos. 403/2010 and 405/2010, the assessee claimed Rs. 90,00,000/- each as liaison charges. Whereas in ITA Nos.404/2010 and ITA 406/2010, the assessee has claimed Rs. 1,16,00,000/- and Rs. 1,04,00,000/- as liaison charges respectively. Though the Tribunal has passed four separate orders, the reasoning is identical.

3. These four assessees jointly agreed to provide an extent of 2,27,000 sq. ft. of land to M/s. Purvankara Projects Ltd. Originally, the price agreed upon was Rs. 22,00,00,000/-. However, as there were some huts/slums on those lands, the purchaser was not prepared to take the land and get it registered with those slum dwellers and insisted for their removal. The dispute arose between the parties. The dispute was referred to arbitration. An agreement of arbitral award came to be passed on 23.02.2006 enhancing the total consideration to Rs. 32.20 crores and additional developmental charges of Rs. 50/- lakhs for removal of huts vide Additional award dated 03.03.2006. Accordingly, ail the four assessees received the consideration, which was due to them. They ategorized the same as long-term and short-term capital gains. In respect of long-term capital gains, the amount representing the same was invested in REC bonds. In so far as the short-term capital gains are concerned, they claimed the aforesaid amount as liaison charges i.e., the cost, of improvement such as hut clearing expenses, tenancy compensation, liaison charges, etc. The liaison amount was paid by way of account payee cheque to one DJ. Koshy, who has acknowledged the said amount and also confirmed the same by a letter dated 27.03.2008. The assessee claimed deduction of the said liaison charges towards expenses in respect of short-term capital gains. The Assessing Authority asked the assessees why the liaison charges were claimed against short-term capital gains only and not against long-term capital gains, particularly when the long-term capital gain is claimed as exemption from tax under Section 54EC i.e., the investment in REC Bonds. In response, the assessee submitted that as per the bill given by B.G. Koshy, they are claiming the said amount. The Assessing Officer was not convinced with the said explanation. He was of the opinion that the same has to be apportioned between the short term capital gains and long-term capital gains. Accordingly, he disailowed the liaison charges, which is apportioned to the long-term capital gains. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). The Appellate Authority set aside the order of the Assessing Authority on the ground that absolutely there is no basis for such apportionment and deleted the disallowance. Aggrieved by the said order, the revenue preferred an appeal before the Tribunal, which has confirmed the said order. It is against those two orders, the revenue is in appeal.

4. The learned Counsel for the revenue assailing the impugned order contends that the assessee has not produced any material to show that in the sites which resulted in short-term capital gains, only slum dwellers were there. As the said benefit was not accessible in respect of long-term capital gains, the assessee has deliberately contending that slum dwellers were there in those sites which resulted in short-term capital gains. Therefore, the Assessing Authority was justified in apportioning the liaison charges in respect of those sites, which has not been properly appreciated by the appellate authorities. We do not see any substance in the said contention.

5. The total extent of land sold by the assessees is not in dispute. The total consideration received is also not in dispute. It is also not in dispute that having regard to the dates on which the sites were acquired the long-term capital gains and short-term capital gains were arrived at. The amount realized by way of long-term capital gains is invested in REC bonds to have the benefit under Section 54EC of the Act.

6. In respect of short-term capital gains, the assessees have claimed liaison charges to the extent set out above. The fact that the sites, which were the subject matter of the sale, were in the occupation of slum dwellers is not in dispute. The dispute is whether they were in occupation of all the sites or only those sites, which resulted in the short-term capital gains. The assessee has paid the money by way of account payee cheque to one Mr. B.G. Koshy to clear the slum dwellers, which amount has been acknowledged by him. According to the assessees, the slum dwellers were in possession of the land, which resulted in short-term capital gains. There is no material on record to show that the said contention of the assessee is wrong, misleading or deliberately made with an intention to evade tax. The Assessing Authority proceeds on the assumption that the entire liaison charges is to be appropriated in respect of all the sites on the assumption that these slum dwellers were there in each and every States, which has no basis. The sites’ numbers are mentioned by B.G. Koshy in the bill, which he has raised. Not to believe those facts set out in the bill, the department have not placed any other material. In the absence of the material, it is highly inappropriate to consider the contention of the revenue. Based on the documentary evidence of B.G. Koshy, who has acknowledged the entire amount for the aforesaid purpose, the two appellate authorities on proper consideration of the same, has held that the laison charges refers to only short-term capital gains. We have no reason to disagree with the same. No substantial question of law is involved in these appeals that merits admission. Accordingly, all the appeals are dismissed.

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