Case Law Details
Balachandra Bhatavadekar Vs ACIT (ITAT MUMBAI)
Briefly stated the assessee is a Partner in the firm M/s Balachandra Laboratories. The firm had property at Thane on which development rights were transferred to M/s Friends Development Corporation (FDC) for an amount of Rs.17.00 crores. The said firm paid one third of consideration to legal heirs and Ms Balachandra laboratories claimed deduction in their assessment. The assessee happens to be one of the legal heirs of Late Shri C N Bhatavadekar. In the course of inquiry and assessment proceedings the issue relating to taxing of capital gains in the hands of the firm resulted in allowing the claim made to M/s Videocon Properties Ltd at Rs.95.00 lakhs paid to avoid civil litigation consequent to the compromise reached before the Bombay High Court. However, an amount of Rs.5.29 crores i.e. 1/3 rd of the total amount paid to legal heirs of Shri C N Bhatavadekar (who had 33% share in the property) was not allowed on the reason that it was an appropriation of the firm’s income. There were other issues with reference to the cost of acquisition etc., in the firm’s case which are not relevant for the issue in the present appeal.
The assessee filed return of income, being the Partner of the firm having 45% but also as legal heir of Shri C.N. Bhatvadekar. Initially, the assessee filed return of income declaring his income at Rs.4,61,000/- and subsequently on 27.04.2007 revised return offering the capital gain on the amount received as a legal heir. In revised return, the assessee offered 1/5th of the 1/3rd share and claimed indexation of 1/5th of 1/3rd of the cost offering the income at Rs.59,38,350/- (AO wrongly considered receipt at Rs.1,13,33,333 in the assessment order as against Rs.1,05,93,000/- received by the assessee). In the course of the assessment of the assessee, the Assessing Officer, consequent to his stand taken in the case of the firm that the amount cannot be allowed as deduction, brought to tax the recomputed capital gains on a protective basis. The assessee grievance before the CIT (A) was about the stand taken by AO and also with reference to the denial of the cost of acquisition which was reworked out by the Assessing Officer. However, in the course of the appellate proceedings before the CIT (A), the assessee raised an additional ground that the amount is not taxable as the said amount was not received as legal heir, but was paid to avoid complications from the legal heirs in transfer of property which should be treated as amount paid for removing obstructions and granting consent, thereby the amount was not taxable. The CIT (A), however, considered the submissions of the assessee vide Para 5 onwards of the order and came to a conclusion that the amount was received as a legal heir and therefore, it is taxable as capital gain. He went on in re-determining the cost of acquisition and allowed the appeal partly. The assessee is aggrieved on various issues as raised in the grounds but at present confined only to the issue that the amount received was capital receipt not chargeable to tax as raised in Ground Nos.2 & 3.
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
ITA No. 478/Mum/2010 – (Assessment Year: 2005- 06)
Please become a Premium member. If you are already a Premium member, login here to access the full content.
