THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 06.05.2010
+ ITA 1322/2009
COMMISSIONER OF INCOME TAX ..... Appellant
- versus -
SHASHI CHARLA ..... Respondent
AND
+ ITA 1323/2009
COMMISSIONER OF INCOME TAX ….. Appellant
– versus –
ATUL CHARLA ..... Respondent
AND
+ ITA 1326/2009
COMMISSIONER OF INCOME TAX ..... Appellant
- versus -
BALDEV RAJ CHARLA ..... Respondent
AND
+ ITA 1328/2009
COMMISSIONER OF INCOME TAX ..... Appellant
- versus -
JYOTI CHARLA ..... Respondent
Advocates who appeared in this case:-
For the Appellant : Mr Sanjeev Sabharwal
For the Respondent : Mr Salil Aggarwal with Mr Prakash Kumar
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V.K. JAIN
ITA Nos.1322/09, 1323/09, 1326/09 & 1328/09 Page No.1 of 5
1. Whether Reporters of local papers may be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in Digest ?
BADAR DURREZ AHMED, J (ORAL)
CM 17469/2009, CM 17471/2009, CM 17474/2009 & CM 17478/2009
The delay in re-filing the appeals is condoned.
These applications stand disposed of.
ITA 1322/2009, ITA 1323/2009, ITA 1326/2009 & ITA 1328/2009
1. These appeals filed by the revenue pertain to the block period
01.04.1996 to 24.09.2002 and arise out of the Income Tax Appellate
Tribunal‟s order dated 29.12.2008 in IT (SS) A Nos. 92, 93, 94 and
95/Del/2007.
2. A company by the name of Ambitious Gold Nibs Company
Private Limited (hereinafter referred to as „Ambitious Gold‟) acquired a
property measuring 2829 sq. yds at C-101 Maya Puri Industrial Area on
17.01.1966 from the DDA. The said property was sold by the said company
on 29.11.1999. During search operations conducted in the residential
premises of the assessees herein, who are directors in Ambitious Gold, a
document entitled “family arrangement” and which purported to have been
reduced to writing on 01.09.1997, was recovered. The said document was
apparently effective from 31.07.1992. According to the assessees, by virtue
of the said family arrangement, half of the company‟s said property came to
the share of the present assessees and the other half went to the share of
another family group. The half that came to the share of the present
ITA Nos.1322/09, 1323/09, 1326/09 & 1328/09 Page No.2 of 5
assessees was sold for an amount of Rs 2.09 crores. The Assessing Officer
assessed capital gains at the hands of the present assessees on the basis of
the said seized document.
3. Thereafter, the matter travelled to the Income-tax Appellate
Tribunal on the question of what would be the proper cost of acquisition of
the said property so as to arrive at the correct computation of capital gains at
the hands of the assessees. The assessees herein sought to invoke the
provisions of Section 49(1) of the Income Tax Act, 1961 (hereinafter
referred to as „the said Act‟). The said plea was accepted by the Tribunal
and the revenue is in appeal before us on this issue.
4. While examining the issue of applicability of Section 49(1) of
the said Act, we find that the same is not at all applicable. Section 49(1)
deals with the computation of cost with reference to certain modes of
acquisition. It, inter alia, provides that where the capital asset became the
property of the assessee on any distribution of assets on the total or partial
partition of a Hindu Undivided Family or on any distribution of assets on
the liquidation of a company, then the cost of acquisition of the asset shall
be deemed to be the cost for which the previous owner of the property
acquired it, as increased by the cost of any improvement of the assets
incurred or borne by the previous owner or the assessee, as the case may be.
In the present case, we find that the asset in question, namely, C-101 Maya
Puri Industrial Area was not the property of a Hindu Undivided Family.
Secondly, it was owned by the said company, namely, Ambitious Gold and
there was no distribution of its assets because there was no liquidation of
ITA Nos.1322/09, 1323/09, 1326/09 & 1328/09 Page No.3 of 5
the company. Consequently, the said capital asset continued to be owned by
Ambitious Gold and did not become the property of the assessees herein
and, therefore, Section 49(1) would not apply.
5. While examining the issue of applicability of Section 49(1), we
noticed that the Assessing Officer and the authorities below were all wrong
in computing capital gains at the hands of the respondents/ assessees
because they never became the owners of the property. It is an admitted fact
that the said property was sold by the said company, namely, Ambitious
Gold. Consequently, any money received by the respondents/ assessees in
their capacity as directors, would be for and on behalf of the company and it
would not be a sale by the assessees but by the said company. This is also
borne out from the fact that the company had been showing the capital asset
in its balance sheets up to the date of the sale. Therefore, it was wrong on
the part of the Assessing Officer and the authorities below to compute
capital gains at the hands of the respondents/ assessees and the question of
capital gains ought to have been examined in the assessment of the
company, that is, Ambitious Gold. Unfortunately, that has not been done.
6. Consequently, the respondents/ assessees could not have been
subjected to payment of capital gains and, therefore, the capital gains would
be at the hands of the company, namely, Ambitious Gold. It goes without
saying that once this is done, then the amounts paid by way of tax on capital
gains by the respondents/ assessees would have to be adjusted against the
dues from the company on account of the capital gains to be paid in the
hands of the company. If, while adjusting the tax already paid by the
ITA Nos.1322/09, 1323/09, 1326/09 & 1328/09 Page No.4 of 5
respondents/ assessees, it is found that the tax paid is more than the tax due
from the company, then the surplus would be refunded to the respondents/
assessees. The counsel for the respondents/ assessees submits that no
benefit has been taken by the respondents/ assessees in respect of the tax on
capital gains paid by them. If any benefit has been taken, the same would
have to be reversed in accordance with law.
7. In view of the aforesaid observations and directions, we set aside
the orders passed by the lower authorities on this aspect of the matter. The
Assessing Officer would have to compute the capital gains in the hands of
the said company in the light of the directions given above. We also place it
on record that the counsel for the respondents/ assessees has fairly
consented to this order being passed.
These appeals stand disposed of in the aforesaid terms.
BADAR DURREZ AHMED, J
V.K. JAIN, J
May 06, 2010
SR
ITA Nos.1322/09, 1323/09, 1326/09 & 1328/09 Page No.5 of 5