POONAM KARAN LALCHAND, MUMBAI V. ASST CIT 16(2), MUMBAI

CO 233/MUM/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9438 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-03-2014
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Next Hearing Date: 05-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2013
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Capital asset
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.C SHARMA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 6036/MUM/2012 ASSESSMENT YEAR: 2009-10 C.O. NO. 233/MUM/2013 (ARISING OUT OF ITA NO. 6036/MUM/2012) ASSESSMENT YEAR: 2009-10 SMT. POONAM KARAN LALCHAND 24, CHITRAKOOT, ALTAMOUNT ROAD, CAMPS CORNER, MUMBAI- 400 026 VS. ASSTT. COMMISSIONER OF INCOME TAX-16(2) MATRU MANDIR, TARDEO ROAD, MUMBAI- 400 007 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AACPD 4308 C ASSESSEE BY : NONE REVENUE BY : SHRI M.L. PERUMAL DATE OF HEARING : 05.03.2014 DATE OF PRONOUNCEMENT : 12.03.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARISE OUT OF THE ORDER OF THE LD.CIT(A)-27, MUMBAI DATED 23.07.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. NO ONE HAS APPEARED ON BEHALF OF THE ASSESSEE AN D THEREFORE, WE PROCEED TO DECIDE THE APPEAL OF THE REVENUE AND THE CROSS OBJE CTION OF THE ASSESSEE AFTER CONSIDERING THE SUBMISSIONS OF THE LD.DR AND ALSO P ERUSING THE ORDERS OF LOWER AUTHORITIES. ASSTT. COMMISSIONER OF INCOME TAX-16(2) MATRU MANDIR, TARDEO ROAD, MUMBAI- 400 007 VS. SMT. POONAM KARAN LALCHAND 24, CHITRAKOOT, ALTAMOUNT ROAD, CAMPS CORNER, MUMBAI- 400 026 (APPELLANT) (RESPONDENT) ITA NO. 6036/MUM/2012 C.O. NO. 233/MUM/2013 (ARISING OUT OF ITA NO. 6036/MUM/2012) SMT. POONAM KARAN LALCHAND ASSESSMENT YEAR: 2009-10 2 3. THE ONLY ISSUE ARISES OUT OF THE APPEAL AND THE CROSS OBJECTION RELATE TO THE DETERMINATION OF DATE OF ACQUISITION OF THE FLAT BY THE ASSESSEE FOR THE PURPOSE OF DECIDING THE TRANSACTION OF SALE OF THE SAID FLAT B Y THE ASSESSEE AMOUNTS TO WHETHER LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. 4. BRIEFLY STATED, THE RELEVANT FACTS ARE THAT DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD THE FLAT OWNED BY HER AT DIAMOND COURT, LAXMIBAI JAGMOHANDAS MARG, MUMBAI FOR A CONSIDERATION OF RS.3.21 CRORES AND COMPUTED THE LONG TERM CAPITAL GAIN THEREON AT RS1.08 CRORES, WHICH WAS CL AIMED TO BE EXEMPT U/S 54 OF THE ACT ON ACCOUNT OF INVESTMENT IN A NEW RESIDENTIAL F LAT IN MUMBAI. 4.1 THE AO IN HIS ASSESSMENT ORDER HELD THAT THE IM PUGNED PROPERTY AT DIAMOND COURT WAS A SHORT TERM CAPITAL ASSET AND ACCORDINGL Y, THE ASSESSEE WAS LIABLE TO PAY TAX ON SHORT TERM CAPITAL GAIN OF RS.2.39 CRORES. T HE AO IN THE ASSESSMENT ORDER NOTED THAT THERE WAS A MOU DATED 03.11.1992 FOR SAL E OF IMPUGNED PROPERTY FOR A CONSIDERATION OF RS.75 LAKHS, BETWEEN THE VENDORS M R. JAL N. KARANI & MRS. NAJOO JAL KARANI AND THE ASSESSEE, BEING THE VENDEE. THE MOU WAS SUBJECT TO THE ORDERS OF THE APPROPRIATE AUTHORITY WHO HAD TO ISSUE THE NO O BJECTION CERTIFICATE. THE APPROPRIATE AUTHORITY, INSTEAD OF GRANTING AN NOC, PASSED THE PURCHASE ORDER DATED 28.01.1993 U/S 269UD OF THE ACT, WHICH WAS CONTESTE D IN WRIT PETITION BEFORE THE BOMBAY HIGH COURT BY THE VENDOR. THE WRIT PETITIONS WERE ADMITTED AND THE HIGH COURT STAYED THE PURCHASE ORDER PASSED BY THE APPRO PRIATE AUTHORITY, PENDING THE HEARINGS AND THE FINAL DISPOSAL, WITH THE CONDITION THAT THE PETITIONER WILL NOT SELL OR TRANSFER THE FLAT TO ANYBODY IN MEANWHILE. THE HIGH COURT FINALLY DELIVERED THE JUDGMENT ON 27.11.2006 AND QUASHED THE PURCHASE ORD ER OF THE APPROPRIATE AUTHORITY, CONSEQUENT TO WHICH THE NOC WAS ISSUED T O THE VENDOR. AS A RESULT, THE SALE AGREEMENT BETWEEN THE VENDORS AND THE ASSESSEE WAS FINALLY EXECUTED ON 23.07.2007. BEFORE THE AO, THE ASSESSEE CONTENDED T HAT SHE WAS GIVEN POSSESSION OF THE IMPUGNED PROPERTY IN THE YEAR 1993 AND THE P AYMENT OF RS.75 LAKHS THEREOF WAS ALSO PAID TO THE VENDORS AS PER THE HIGH COURT ORDERS, PENDING THE IMPUGNED PROPERTY SINCE 1993 AND THEREFORE, SHE WAS LIABLE T O OFFER LONG TERM CAPITAL GAINS TAX ON SALE OF THE AFORESAID PROPERTY BY HER DURING THE YEAR UNDER CONSIDERATION. THE AO IN HIS ASSESSMENT ORDER, HAVING REGARD TO THE PURCH ASE ORDER PASSED BY THE ITA NO. 6036/MUM/2012 C.O. NO. 233/MUM/2013 (ARISING OUT OF ITA NO. 6036/MUM/2012) SMT. POONAM KARAN LALCHAND ASSESSMENT YEAR: 2009-10 3 APPROPRIATE AUTHORITY, AND ALSO CONDITIONS LAID BY THE BOMBAY HIGH COURT WHILE PASSING THE STAY ORDER AGAINST THE AFORESAID PURCHA SE ORDER OF THE APPROPRIATE AUTHORITY, AND ALSO THE FACT THAT THE FINAL SALE AG REEMENT BETWEEN THE VENDORS AND APPELLANT WAS EXECUTED/REGISTERED ONLY ON 23.07.200 7, HELD THAT THE ASSESSEE CAN BE REGARDED AS OWNER OF THE IMPUGNED PROPERTY WITH EFFECT FROM 23.07.2007 ONLY AND NOT BEFORE. ACCORDINGLY, THE AO REJECTED THE CL AIM FOR COMPUTING LONG TERM CAPITAL GAINS FROM THE SALE OF THE AFORESAID PROPER TY BY THE ASSESSEE ON 16.04.2008. 4.2 ON APPEAL, THE LD.CIT(A) HELD THAT THE ASSESSEE WAS HOLDING THE IMPUGNED PROPERTY SINCE THE YEAR 1993 AND IT BECAME A LONG T ERM CAPITAL ASSET IN THE HANDS OF THE ASSESSEE IN THE YEAR 2008 AND THEREFORE, THE AS SESSEE WAS ENTITLED FOR THE BENEFIT OF COST INDEXATION ON ITS SALE SINCE THE YE AR 1993. ACCORDINGLY, THE LD.CIT(A) DIRECTED THE AO TO ALLOW THE AFORESAID BENEFIT TO T HE ASSESSEE AND COMPUTE THE LONG TERM CAPITAL GAIN ON TRANSFER OF THE SAID ASSET. AG GRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE US. IN THE CROSS OBJECT ION FILED BY THE ASSESSEE, THE ASSESSEE HAS PRAYED FOR CONFIRMING ORDER PASSED BY THE LD.CIT(A). 5. HAVING HEARD THE CASE OF THE REVENUE AND PERUSED THE MATERIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS CLEAR LY ESTABLISHED BEFORE THE LD.CIT(A) THAT THE ASSESSEE HAS PAID FULL CONSIDERA TION AND THE IMPUGNED PROPERTY HAS BEEN HANDED OVER TO HER IN THE YEAR 1993 ON THE STRENGTH OF THE ORDER OF THE HONBLE BOMBAY HIGH COURT. IT IS OBSERVED THAT WHIL E ADMITTING THE WRIT PETITIONS, THE HONBLE BOMBAY HIGH COURT HAS STAYED THE PURCHA SE ORDER PASSED BY THE APPROPRIATE AUTHORITY, THE EFFECT OF WHICH IS THAT THE PURCHASE HAS NOT BEEN ALLOWED TO BE MADE OPERATIONAL. CONSEQUENTLY, THE PROPERTY CONTINUED TO VEST WITH THE VENDOR AND NOT THE CENTRAL GOVERNMENT. THE HIGH COU RT HAS ALSO LAID DOWN CERTAIN CONDITIONS ON THE PART OF THE VENDOR NOT TO TRANSFE R THE IMPUGNED PROPERTY DURING THE PERIOD OF OPERATION OF STAY. SUCH CONDITIONS WE RE PARTLY RELAXED VIDE HIGH COURTS ORDER DATED 30.07.1993 AND THE VENDOR WAS ALLOWED T O RECEIVE THE CONSIDERATION AND HAND OVER THE VACANT POSSESSION OF THE PROPERTY TO THE APPELLANT WHILE DISPOSING THE SUBSEQUENT NOTICE OF MOTION MOVED BY THE VENDOR AND THE ASSESSEE. FURTHER, ALL THE CONDITIONS THAT WERE APPLICABLE TO THE VENDORS AT THE TIME OF ADMITTING THE WRIT ITA NO. 6036/MUM/2012 C.O. NO. 233/MUM/2013 (ARISING OUT OF ITA NO. 6036/MUM/2012) SMT. POONAM KARAN LALCHAND ASSESSMENT YEAR: 2009-10 4 PETITION AND GRANTING STAY, WERE IPSO-FACTO MADE AP PLICABLE TO THE ASSESSEE FROM THE DATE THE PROPERTY WAS TAKEN POSSESSION. THE HIGH CO URT HAS ALSO TAKEN ON RECORDS, THE AFFIDAVITS FILED BY THE ASSESSEE ON 30.07.1993 WHEREIN A CLEAR UNDERTAKING WAS GIVEN TO THE HIGH COURT THAT THE ASSESSEE SHALL TAK E OVER ALL OBLIGATIONS AND RESPONSIBILITIES OF THE VENDORS AS REQUIRED IN THE HIGH COURTS ORDER 22.02.1993 PASSED IN THE WRIT PETITION NO. 293 OF 1993. IN THE AFORESAID ORDER, IT WAS CLEARLY DIRECTED BY THE HIGH COURT THAT THE PETITIONERS I.E . THE VENDORS, LATER SUBSTITUTED BY THE ASSESSEEE, SHALL SURRENDER VACANT AND PEACEFUL POSSESSION OF THE PROPERTY TO THE APPROPRIATE AUTHORITY IN THE EVENT OF THE RULE BEIN G ULTIMATELY DISCHARGED, AS IF THE PURCHASE ORDER WAS PASSED ON THE DAY THE RULE WAS S O DISCHARGED. IN OTHER WORDS, THE PURCHASE ORDER IN CASE IT WAS TO BE UPHELD, THE SAME SHALL COME INTO EFFECT FROM THE DATE THE WRIT PETITION WAS DECIDED AGAINST THE PETITIONERS AND NOT BEFORE. FURTHER, THE ASSESSEE IN HER AFFIDAVIT BEFORE THE H IGH COURT HAS ALSO UNDERTAKEN TO PAY ALL THE SOCIETY CHARGES, MAINTENANCE, MUNICIPAL TAXES, WATER CHARGES, ELECTRICITY AND ALL OUTGOINGS IN RESPECT OF THE IMPUGNED PROPER TY TILL THE TIME THE VACANT AND PEACEFUL POSSESSION IS GIVEN TO THE APPROPRIATE AUT HORITY, IN THE EVEN THE RULE IS DISCHARGED. IN TERMS OF THE SAID UNDERTAKING, ASSES SEE HAS PAID ALL THE CHARGES AGAINST THE IMPUGNED PROPERTY FROM THE TIME SHE HAS TAKEN POSSESSION OF THE SAME. IN THIS BACKGROUND, THE LD.CIT(A) HAS HELD THAT IT IS AN UNDISPUTED FACT THAT THE CONSIDERATION WAS PAID IN FULL AND THE PROPERTY WAS IN POSSESSION OF THE ASSESSEE SINCE 1993, PENDING FOR REGISTRATION OF SALE AGREEM ENT FOR WANT OF DISPOSAL OF THE PENDING WRIT PETITION BEFORE THE HIGH COURT. THE LD .CIT(A) HAS FURTHER OBSERVED THAT IT IS ALSO A FACT THAT, IN THE FINALITY, THE PURCHA SE ORDER OF THE APPROPRIATE AUTHORITY WAS QUASHED AND THE PROPERTY CONTINUED TO BE IN THE POSSESSION OF THE APPELLANT WITHOUT ANY DISTURBANCE FROM THE YEAR 1993 TILL IT WAS SOLD BY HER ON 09.04.2008. THE WRIT PETITIONS WERE DISPOSED IN NOVEMBER, 2006 AND THE PURCHASE ORDER OF THE APPROPRIATE AUTHORITY DATED 28.01.1993 WAS QUASHED BY THE HIGH COURT. IN OTHER WORDS, THE PURCHASE ORDER WAS QUASHED WITH EFFECT F ROM THE DATE IT WAS ISSUED AND AS A RESULT OF THE HIGH COURTS ORDER IT CANNOT EXI ST DURING THE INTERVENING PERIOD IN WHICH THE WRIT WAS PENDING. FURTHER, THE NOC PENDIN G FROM THE APPROPRIATE AUTHORITY WAS A REQUIREMENT OF LAW FOR REGISTERING THE PROPERTY AND CONVEYING TITLE ITA NO. 6036/MUM/2012 C.O. NO. 233/MUM/2013 (ARISING OUT OF ITA NO. 6036/MUM/2012) SMT. POONAM KARAN LALCHAND ASSESSMENT YEAR: 2009-10 5 TO THE TRANSFEREE. IN THE PRESENT CONTEXT, THERE WA S A DELAY IN ISSUING OF NOC BY THE APPROPRIATE AUTHORITY I.E. AS LATE AS 22.03.2007 AG AINST THE APPLICATION MADE ON 03.11.1992, WHICH IS ON ACCOUNT OF PENDENCY OF WRIT PETITIONS BEFORE THE HIGH COURT AND THE FINAL ORDERS BEING ISSUED BY HIGH COURT ONL Y IN NOVEMBER, 2006. THEREFORE, IN THE GIVEN CONTEXT, WHERE THE PURCHASE ORDER WAS QUASHED, THE DATE OF NOC CANNOT BE TAKEN AS THE DATE FROM WHICH THE SALE AGR EEMENT COMES INTO FORCE. IN THE LIGHT OF THE AFOREMENTIONED DISCUSSIONS BY THE LD.C IT(A), HE HAS CONCLUDED THAT THE FACT OF PAYING THE CONSIDERATION AND TAKING POSSESS ION OF THE IMPUGNED PROPERTY AND TAKING OVER THE OBLIGATIONS AND RESPONSIBILITIES OF THE VENDOR BY THE ASSESSEE, SUBJECT TO THE CONDITIONS APPROVED BY THE HIGH COUR T WOULD AMOUNT TO PART PERFORMANCE OF THE CONTRACT. IN OTHER WORDS, THE IM PUGNED PROPERTY STOOD TRANSFERRED TO THE ASSESSEE IN THE YEAR 1993 ITSELF . THE FINAL AGREEMENT DATED 23.07.2007 AND ITS EXECUTION BEFORE THE REGISTERING AUTHORITIES ON THE SAID DATE ON ACCOUNT OF THE DELAYED NOC FROM APPROPRIATE AUTHORI TY CANNOT BE DETERMINING FACTORS IN DECIDING THE DATE OF TRANSFER. ALSO, WE CONCUR WITH THE LEGAL POSITION STATED BY THE LD.CIT(A) IN HIS ORDER THAT IT IS JUDICIALLY HELD IN MANY CASES THAT THE CONVEYANCE OF PROPERTY THROUGH REGISTRATION OF THE DOCUMENT IS A MERE FORMALITY. THEREFORE, IN A CASE WHERE THE PROPERTY IS ALREADY TRANSFERRED AND THE SALE DEED IS REGISTERED AT A LATER DATE, IT CANNOT BE STATED THA T THE TRANSFER COMES INTO EXISTENCE FROM THE DATE OF REGISTERING THE DOCUMENT AND NOT B EFORE. SINCE THE LD.CIT(A) HAS CORRECTLY APPRECIATED THE FACTS AND THE POSITION OF LAW FOR COMING TO THE CONCLUSION THAT THE ASSESSEE HAS HELD THE IMPUGNED PROPERTY SI NCE THE YEAR 1993, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE S AID DECISION OF THE LD.CIT(A) AS TO THE DATE OF ACQUISITION OF THE FLAT BY THE ASSESSEE AND HENCE THE SAME IS UPHELD. HOWEVER, IT IS OBSERVED THAT NEITHER THE AO NOR THE LD.CIT(A) HAS EXAMINED/VERIFIED THE CLAIM OF THE ASSESSEE THAT THE IMPUGNED LONG TE RM CAPITAL GAIN THEREON AT RS1.08 CRORES IS INVESTED IN A NEW RESIDENTIAL FLAT IN MUMBAI FOR THE PURPOSE OF PROVIDING EXEMPTION U/S 54 OF THE ACT. IN VIEW OF T HAT MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE AO SHALL BE AT LIBERTY TO EXAMINE/VERIFY THE ALLOWABILITY OF THE CLAIM IN THE LIGHT OF THE PROVISIONS OF SECT ION 54 OF THE ACT TREATING THAT THE ASSESSEE HAS HELD THE IMPUGNED PROPERTY SINCE THE Y EAR 1993. ITA NO. 6036/MUM/2012 C.O. NO. 233/MUM/2013 (ARISING OUT OF ITA NO. 6036/MUM/2012) SMT. POONAM KARAN LALCHAND ASSESSMENT YEAR: 2009-10 6 6. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISPOSED OFF IN THE ABOVE SAID TERMS . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF MACH, 2014. SD/- SD/- (R.C. SHARMA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.03.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.