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2022 Supreme(Bom) 454
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. Shriram, N. J. Jamadar, JJ.
Rohan Developers Pvt. Ltd. - Petitioner
Versus
Income-tax Officer (International Taxation)-3(1) and ors. – Respondents
Writ Petition No.339 of 2011
Decided On : 03-02-2022
Advocate Appeared:
For the Petitioner:Mr. J. D. Mistri, Senior Advocate a/w. Mr. Nitesh Joshi i/b. Mr. Atul K. Jasani
For the Respondent: Mr. Suresh Kumar
Headnote:
Income Tax Act, 1961 - Section 143(3) and 234B - Piece of land - Share - Will - Petitioner is a company engaged in business of development and re-development of various properties in city – One held an undivided ½ (one half) share in a piece of land admeasuring about 8071.64 square yards situated at Dr. Ambedkar Road (Sopari Baug Road) with the buildings standing thereon in Parel Sewri Division in BMC F/South Ward, from year - Other ½ (one half) share in said property belonged to her brother one Mr. Meherwan Nadirshaw - Probate of her Will was granted by Bombay High Court - Under said Will, she had bequeathed her share in the said property to her aunt - Mrs. Rhoda Rustom Framjee and her brother - Mr. Meherwan Nadirshaw in equal shares - Accordingly, undivided 1/4th share in said property vested from year - Expired on leaving her last Will dated, whereunder she bequeathed all her estate including 1/4th share in said property to her husband expired leaving behind two sons as his legal heirs - As per Will of Mr. Rustom Framjee dated he bequeathed his estate including his 1/4th share in said property to his two sons in equal shares - Whether said property is held by him as a short term capital asset or as a long term capital asset – Held, assessment order annexed to affidavit in rejoinder, it does appear that Revenue had selected return of seller for scrutiny and an assessment order dated under Section 143(3) of Act has been passed - In said order, department has accepted capital gains, and in absence of any claim of TDS has not allowed any credit or refund of same - In fact, department has raised demand as seller’s tax along with interest under Section 234B of Act - There is no sur-rejoinder filed by department to this affidavit in rejoinder, denying any of averments in affidavit though more than four years have passed since rejoinder was filed in the Court on when time was granted on that date to respondents to consider affidavit in rejoinder - At this point of time, Court would, therefore, permit department to retain this amount and return the balance out - Department will also refund proportionate interest after recalculating, by taking capital gains that should have been deposited - Petition disposed accordingly.
JUDGMENT :
K. R. Shriram, J.
1. Petitioner is a company engaged in the business of development and re-development of various properties in the city of Mumbai. One Mrs. Dolly Jehangir Gazdar held an undivided ½ (one half) share in a piece of land admeasuring about 8071.64 square yards situated at Dr. Ambedkar Road (Sopari Baug Road) with the buildings standing thereon in Parel Sewri Division in BMC F/South Ward, Mumbai from the year 1972. The other ½ (one half) share in the said property belonged to her brother one Mr. Meherwan Nadirshaw.
2. Mrs. Dolly Jehangir Gazdar expired on 10th June 1982 leaving her last Will and Testament dated 20th June 1979. The Probate of her Will was granted by the Bombay High Court on 5th November 2004. Under the said Will, she had bequeathed her share in the said property to her aunt - Mrs. Rhoda Rustom Framjee and her brother - Mr. Meherwan Nadirshaw in equal shares. Accordingly, the undivided 1/4th share in the said property vested in Mrs. Rhoda Rustom Framjee from the year 1982. Mrs. Rhoda Rustom Framjee expired on 12th May 1992 leaving her last Will dated 3rd June 1977, whereunder she bequeathed all her estate including 1/4th share in the said property to her husband Mr. Rustom Framjee. Mr. Rustom Framjee expired on 17th September 2006 leaving behind two sons as his legal heirs namely, Mr. Sohrab Rustom Framjee and Mr. Pesh Rustom Framjee. As per the Will of Mr. Rustom Framjee dated 19th February 2006, he bequeathed his estate including his 1/4th share in the said property to his two sons in equal shares. Though no probate has been granted in respect of the Wills of Mrs. Rodha Rustom Framjee and Mr. Rustom Framjee, their only sons - Mr. Sohrab Rustom Framjee and Mr. Pesh Rustom Framjee have accepted the said Wills and acted upon the same.
3. Accordingly, Mr. Pesh Rustom Framjee (hereinafter referred to as “seller”) became owner of 1/8th share in the said property. Petitioner had decided to buy that 1/8th share of seller and since Mr. Pesh Rustom Framjee (seller) was a non-resident in so far as the Income Tax Act, 1961 (the Act) is concerned and he had not filed his return of income for any of the earlier years as there was no taxable income in India in those years in his hands, petitioner filed an application before respondent No.1 under Section 195(2) of the Act requesting him to issue a LOW tax rate Certificate for Deduction of Tax at Source in respect of consideration for purchase of immovable property from seller.
4. By an order dated 21st December 2010, respondent No.1 directed petitioner to deduct tax of Rs.28,74,100/-. It is this order, which is impugned in this petition. Admittedly, petitioner has deposited this amount of Rs.28,74,100/- with the Revenue even though it is petitioner’s case that the amount directed to be deducted as tax at source has been incorrectly calculated and according to petitioner, only a sum of Rs.74,523/- was the tax that had to be deducted. For ease of reference, the computation, as given in the petition, is reproduced hereunder:-
|
| As per petitioner | As per respondent No.1 |
| Calculation of indexed cost Value as on 01 04 1981 | 2,77,22,348 | 2,77,22,348 |
| Cost inflation index for 1981 Cost inflation index for FY 1992-93 Cost inflation index for FY 2009-11 | 100 - 711 | - 223 711 |
| Multiplication factor applied on 1/4/81 value | 711/100 | 711/223 |
| Indexed cost of whole | 19,71,05,894 | 8,83,88,293 |
| Indexed cost of 1/8th share | 2,46,38,237 | 1,10,48,537 |
| Calculation of tax on long term capital gain Sale consideration of 1/8th share Less: indexed cost of 1/8th share |
3,00,00,000 2,46,38,237 |
3,00,00,000 1,10,48,537 |
|
Less: investment in bonds under S54EC | 53,61,763 50,00,000 | 1,89,51,463 50,00,000 |
| Long term capital gains chargeable to tax | 3,61,763 | 1,39,51,463 |
| Tax @20.60% | 74,523 | 28,74,100 |
5. A
