ASSISTANT COMMISSIONER OF INCOME TAX Vs. ADMINISTRATOR OF THE ESTATE OF LATE SHRI E F DINSHAW
INCOME TAX APPELLATE TRIBUNAL
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V.K. Sinha, Accountant Member -
(1.) THESE fifteen appeals relating to three assessees are being consolidated for the sake of convenience, since common issues are involved. Ten appeals out of the above have been filed by the Department and five have been filed by the assessee.
(2.) The main contention in the Departmental appeals relates to the question whether surplus from sale of land should be treated as income from long-term capital gains or as income from business. The basic facts forming the background of the issue are that late Shri F.E. Dinshaw was a partner in a firm of solicitors and was also Financial Adviser to the House of Gwalior. He purchased large tracts of land at Malad and Borivli about 70 years ago, having area of about 2500 acres. He died in 1936 leaving a son Shri E.F. Dinshaw and a daughter Smt. Bachoobai Woronzow, both of whom were non-residents in India and also non-citizens for a long time. They became joint owners of the land left by their father and did not carry out any physical division. Shri E.F. Dinshaw did not marry and died in 1970 leaving a will, according to which he bequeathed his half share in the land to his sister Smt. Bachoobai Woronzow for her life-time and the reversionary rights were given to two charities, viz., the Salvation Army, New York and the American Society for Prevention of Cruelty to Animals, New York. Initially, three Administrators were appointed, but consequent to a judgment of the Bombay High Court dated 21-12-1972, Shri Nusli M. Wadia was appointed as the sole administrator of the estate.
On the other hand, Smt. Bachoobai Woronzow leased out 72 acres of land jointly owned by her and her brother to one M/s. Haven Kores Real Estate Pvt. Ltd. for 99 years on 27-12-1973. Thereafter, on the next day, on 28-12-1973, she created three charitable trusts, as under :-
(i) F.E. Dinshaw Foundation - with corpus consisting of reversionary interest of herself and the Administrator in the land leased to Haven Kores Real Estate Pvt. Ltd.
(ii) F.E. Dinshaw Charities - consisting of corpus of mostly tenanted properties jointly owned.
(iii) F.E. Dinshaw Trust - with corpus consisting of mainly leased and unencumbered free land of F.E. Dinshaw Estate jointly owned by her and her late brother.
(3.) FROM early times, different portions of the property were leased out to different persons on ground rent for the purpose of building house properties on them. Subsequently, a number of encroachments came upon the land and from about 1968 or so, agreements to sale were executed in respect of different portions of the land. However, before the conveyance for sale could be executed, permission was required from the Charity Commissioner under Section 36 of the Bombay Public Trust Act, since the ownership vested in equal measure in the estate of late Shri E.F. Dinshaw on the one hand and one of the three charitable trusts created by Smt. Bachoobai Woronzow on the other hand. Further, both Smt. Bachoobai and the administrator Shri N. Wadia were not citizens of India and, therefore, permission was also required under Section 31 of the Foreign Exchange Regulation Act. At the same time, clearance was also required under the Urban Land Ceiling Act. This was not all and a further clearance was required under the provisions of Chapter XX-C of the Income-tax Act, relating to purchase by Central Government of immovable properties in certain cases of transfer with effect from 1-10-1986. After the necessary permissions and finalisation of conveyances for sales and their registration, there was surplus and the assessee claimed that it was nothing but long-term capital gains. As an illustration, the computation of long-term capital gains by the assessees for assessment year 1987-88 is tabulated below :-
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