PARESH SHAH, MUMBAI V. ASST CIT 14(1), MUMBAI

ITA 1047/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0461 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y P TRIVEDIMS USHA DALAL
• Assessee Lawyers: RAJAT MITTAL
• Keywords: Value adopted by valuation officer; Deemed owner of house property; Opportunity of being heard; Deemed to accrue or arise in india; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1047/MUM/2014 ASSESSMENT YEAR: 2009 - 10 & ITA NO. 2029/MUM/2015 ASSESSMENT YEAR: 2011 - 12 PARESH SHANTILAL SHAH GALA WOOK WORK COMPOUND OPPORTUNITY. OPP: B.D CHAWL NO. 114, WORLI, MUMBAI - 400013 VS. ACIT 14(1) 2 ND FLOOR EARNESTS HOUSE NARIMAN POINT, MUMBAI - 400021. PAN NO. AELPS9212F (APPELLANT) (RESPONDENT) REVENUE BY : SHRI Y.P. TRIVEDI/ MS. USHA DALAL, AR ASSESSEE BY: SHRI RAJAT MITTAL, DR DATE OF HEARING : 31/05/2017 DATE OF PRONOUNCEMENT: 31/05/2017 ORDER PER N.K. PRADHAN, AM THE CAPTIONED APPEALS FILED BY THE ASSESSEE FOR THE A.Y. 2009 - 10 & 2011 - 12 ARE DIRECTED AGAINST THE ORDER O F THE COMMISSIONER (APPEALS) 25 , MUMBAI AND ARISE OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). AS SOME COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 1047/M/2014 & 2029/M/2015 2 2. THE GROUND S RAISED BY THE ASSESSEE IN APPEAL FOR THE A.Y. 2009 - 10 RELATE TO (I) ADDITION ON ACCOUNT OF LONG TERM CAPITAL G AIN ON SALE OF TENANTED/ ENCROACHED PROPERTY BEING LAND AND OLD FACTORY SHED AT GOREGAO N SUSTAINED BY THE LD. CIT( A) AT RS.1,74,52,400/ - (AFTER ALLOWING A RELIEF OF ONLY RS.3,69,300/ - ON ACCOUNT OF STAMP DUTY PAID) AS AGAINST RS.49,61,000/ - . (II) A SUM OF RS.28,37,292/ - BEING DEEMED INCOME U/S 2(24) (IV) AND (III) A SUM OF RS.3,77,492/ - BEING THE DISALLOWANCE OF EXPENDITURE ON VARIOUS HEADS. 3. THE GROUND S RAISED BY THE ASSESSEE IN APPEAL FOR A.Y. 2011 - 12 RELATE TO (I) ADDITION OF A NET SUM OF RS.27,86,913 / - MADE A S PER PROVISION OF SECTION 2(24) (IV) BEING THE DIFFERENCE ON ACCOUNT OF DEEMED ESTIMATED INTEREST ON THE LOAN RECEIVED FROM M/S COMPUTILITY INDIA PVT. LTD. (II) ADDITION OF A SUM OF RS.2,91,807/ - MADE AS PER PROVISION OF SECTION 2(24)(IV) ON ACCOUNT OF DEEMED ESTIMATED INTEREST ON THE LOAN R ECEIVED FROM M/S PRERNA SYNTWIST PVT. LTD. (III) THE DIRECTION GIVEN BY THE LD. CIT(A) TO A.O. TO VERIFY THE RECORDS AND TAKE APPROPRIATE REMEDIAL MEASUR ES FOR ANY INCOME U/S 2(24)(II) ESCAPED IN A.Y. 2010 - 11 (IV) THE ORDER OF THE LD. CIT(A) DISMISSING THE GROUND OF DISALLOWANCE OF INTEREST PAID TO M/S COMPUTILITY IN DIA PVT. LTD. OF RS.23,86,985/ - (V) THE DISALLOWANCE OF RS.67,751/ - CONSISTING OF INTEREST PAID OF RS.18,000/ - TO M/S PRESTIGE COMPUTERS PVT. LTD. AND RS.43,751/ - TOWARDS BANK CHARGES AND BANK I NTEREST (VI) THE ADDITION OF RS.28,000/ - BEING DEEMED LET OUT PROPERTY INCOME U/S 23(4) (VII) THE DISALLOWANCE OF TOTAL SUM OF RS.79,504/ - TOWARDS SHOPS AND ESTABLISHMENT CHARGES OF RS.900/ - , INSURANCE CHARGES OF RS.14,400/ - , PROPERTY TAX AT CST SUBWAY AND GOREGAON OF RS.15,804/ - AND REPAIRS AND MAINTENANCE CHARGES AT CST SUBWAY OF RS.24,400/ - . ITA NOS. 1047/M/2014 & 2029/M/2015 3 4. WE BEGIN WITH GROUND OF APPEAL FOR THE A.Y. 2009 - 10 WHEREIN THE LD. CIT(A) HAS UPHELD THE LONG TERM CAPITAL GAINS AT RS.1,74,52,400/ - AS AGAINST RS.49,61,000/ - ON SALE OF TENANTED/ ENCROACHED PROPERTY BEING LAND AND OLD FACTORY SHED AT GOREGAON. 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVES THAT THE ASSESSEE HAS SOLD ONE OF HIS PROPERTY BEING 1000.02 SQ MTR OF LAND SITUATED AT CTS NO. 540 AND 5 40/3 TO 12, VILLAGE - PAHADI, S ITUATED AT GOREGAON (E), SONAWALA ROAD, GOREGAON, MUMBAI - 400063. THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN ON THE SALE OF SUCH PROPERTY. THE AO CALCULATED THE LONG TERM CAPITAL GAIN AS UNDER SALE CONSIDERATION (AS PER DVO REPORT) 1,84,91,000 LESS: INDEXED COST OF ACQUISITION (AS PER STATEMENT AS SUBMITTED BY ASSESSEE) 6,69,300/ - TAXABLE LONG TERM CAPITAL GAIN 1,78,21,700 4.2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS ALLOWED A RELIEF OF RS.3,69,300/ - . 4.3. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. SAMBHAJI NAGAR CO - OP. HSG. SOCIETY LTD . (2015) 54 TAXMANN.COM 77 (BOM.). ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A). 4.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN THE CASE OF SAMBHAJI NAGAR CO - OP. HSG. SOCIETY LTD. (SUPRA) , THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT WHERE ASSESSEE HAD NOT INCURRED ANY COST TO ACQUIRE TDR ATTACHED TO LAND OWNED ITA NOS. 1047/M/2014 & 2029/M/2015 4 BY SOCIETY, TRANSFER OF SAME TO DEVELOPER FOR CONSIDERAT ION FOR CONSTRUCTION OF A FLOOR SPACE INDEX WOULD NOT BE ELIGIBLE TO CAPITAL GAINS TAX . WE EXTRACT BELOW THE RELEVANT P ARAGRAPH OF THE ABOVE JUDGMENT: 11. THUS, THE CONCLUSION OF THE HON'BLE SUPREME COURT IS THAT AN ASSET WHICH IS CAPABLE OF ACQUISITION AT A COST WOULD BE INCLUDED WITHIN THE PROVISIONS PERTAINING TO THE HEAD 'CAPITAL GAINS' AS OPPOSED TO ASSETS IN THE ACQUISITION OF WHICH NO COST AT ALL CAN BE CONCEIVED. IN THE PRESENT CASE AS WELL, THE SITUATION WAS THAT THE FSI/TDR WAS GENERATED BY THE PLOT ITSELF. THERE WAS NO COST OF ACQUISITION, WHICH HAS BEEN DETERMINED AND ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD HAVE PROCEEDED TO LEVY AND AS SESS THE GAINS DERIVED AS CAPITAL GAINS. IT MAY BE THAT SUB - SECTION (2) OF SECTION 55 CLAUSE (A) HAVING BEEN AMENDED, THERE IS A STIPULATION WITH REGARD TO THE TENANCY RIGHTS. HOWEVER, EVEN IN THE CASE OF TENANCY RIGHT, THE VIEW TAKEN BY THE HON'BLE SUPREM E COURT, AFTER THE PROVISION WAS SUBSTITUTED W.E.F. 1ST APRIL, 1995, IS AS ABOVE. THE FURTHER ARGUMENT IS THAT THE TENANCY RIGHTS NOW CAN BE BROUGHT WITHIN THE TAX NET AND IN THE PRESENT CASE THE ASSET OR THE BENEFIT IS ATTACHED TO THE PROPERTY. IT IS CAPA BLE OF BEING TRANSFERRED. ALL THIS MAY BE TRUE BUT AS THE HON'BLE SUPREME COURT HOLDS IT MUST BE CAPABLE OF BEING ACQUIRED AT A COST OR THAT HAS TO BE ASCERTAINABLE. IN THE PRESENT CASE, ADDITIONAL FSI/TDR IS GENERATED BY CHANGE IN THE D. C. RULES. A SPECI FIC INSERTION WOULD THEREFORE BE NECESSARY SO AS TO ASCERTAIN ITS COST FOR COMPUTING THE CAPITAL GAINS. THEREFORE, THE TRIBUNAL WAS IN NO ERROR IN CONCLUDING THAT THE TDR WHICH WAS GENERATED BY THE PLOT/PROPERTY/LAND AND CAME TO BE TRANSFERRED UNDER A DOCU MENT IN FAVOUR OF THE PURCHASER WOULD NOT RESULT IN THE GAINS BEING ASSESSED TO CAPITAL GAINS. THE FACTUAL BACKDROP IS NOTED BY THE TRIBUNAL IN PARA 3 AND THEREAFTER THE RIVAL CONTENTIONS. THE TRIBUNAL CONCLUDED AND RELYING UPON ITS ORDER PASSED IN TWO OTH ER CASES THAT WHAT THE ASSESSEE SOLD WAS TDR RECEIVED AS ADDITIONAL FSI AS PER THE D. C. REGULATIONS. IT WAS NOT A CASE OF SALE OF DEVELOPMENT RIGHTS ALREADY EMBEDDED IN THE LAND ACQUIRED AND OWNED BY THE ASSESSEE. THE TRIBUNAL'S CONCLUSION AND FURTHER TO BE FOUND IN PARA 11 IS BASED ON ITS VIEW TAKEN IN THE CASE OF NEW SHAILAJA CO - ITA NOS. 1047/M/2014 & 2029/M/2015 5 OPERATIVE HOUSING SOCIETY LTD. THE TRIBUNAL HAS REPRODUCED THAT CONCLUSION. THE TRIBUNAL'S CONCLUSION ARRIVED AT IN THE CASE OF NEW SHAILAJA CO - OPERATIVE HOUSING SOCIETY LTD., IS BASED ON THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF B. C. SRINIVASA SHETTY ( SUPRA ). THE TRIBUNAL CONCLUDED THAT THE ASSESSEE HAD NOT INCURRED ANY COST OF ACQUISITION IN RESPECT OF THE RIGHT WHICH EMANATED FROM 1991 RULES, MAKING THE ASSESSEE ELIG IBLE TO ADDITIONAL FSI. THE LAND AND BUILDING EARLIER IN THE POSSESSION OF THE ASSESSEE CONTINUED TO REMAIN WITH IT. EVEN AFTER THE TRANSFER OF THE RIGHT OR THE ADDITIONAL FSI, THE POSITION DID NOT UNDERGO ANY CHANGE. THE REVENUE COULD NOT POINT OUT ANY PA RTICULAR ASSET AS SPECIFIED IN SUB - SECTION (2) OF SECTION 55. THE CONCLUSION OF THE TRIBUNAL IS IMMINENTLY POSSIBLE AND IN THE GIVEN FACTS. THAT IS ALSO POSSIBLE IN THE LIGHT OF THE LEGAL POSITION AS NOTED BY LANGUAGE OF SECTION 55(2) AND THE JUDGMENT OF T HE HON'BLE SUPREME COURT, WHICH IS IN THE FIELD. 4 . 5. THE ORDER OF THE LD. CIT(A) IS DATED 23.12.2013. THE HON'BLE BOMBAY HIGH COURT PASSED THE ABOVE JUDGMENT ON 11.12.2014. AS THE RATIO LAID DOWN IN THE ABOVE JUDGMENT IS RELEVANT TO THE PRESENT ISSUE, WE SET ASIDE TO ORDER OF THE LD. CIT(A) AND RESTORE THE SAME TO THE FILE OF THE A.O. TO MAKE A FRESH ASSESSMENT AFTER EXAMINING SAMBHAJI NAGAR CO - OP. HSG. SOCIETY LTD. (SUPRA). NEEDLESS TO SAY, THE AO IS DIRECTED TO ALLOW REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE NECESSARY DETAILS BEFORE THE AO. THUS THE ABOVE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 5. THEN WE TURN TO THE GROUND RELATING TO THE ADDITION MADE U/S 2(24)(IV) IN THE A.Y. 2009 - 10 AND 2011 - 12. THE AO HAS MADE A DISALLOWANCE OF RS.28,37,292/ - U/S 2(24)(IV) IN THE A.Y. 2009 - 10 AND RS.2,91,807/ - IN THE A.Y. 2011 - 12. 5.1. IN APPEAL, LD. CIT(A) AGREED WITH THE RE ASONS GIVEN BY THE AO AND SUSTAINED THE ABOVE ADDITIONS MADE THE AO. ITA NOS. 1047/M/2014 & 2029/M/2015 6 5.2. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT SECTION 2(24)(IV) IS NOT APPLICABLE TO THE FACTS OF THE CASE. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CI T(A). 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FEEL THAT THE ADDITION MADE BY THE AO U/S 2(24)(IV) FOR THE A.Y. 2009 - 10 AND 2011 - 12 REQUIRES RE - EXAMINATION. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A ) ON THE ABOVE ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO EXAMINE AND THEN PASS AN ORDER AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE AO. THUS, THE GROUNDS O F APPEAL FOR BOTH THE ASSESSMENT YEARS ON THE ABOVE ISSUES FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. THEN, WE DEAL WITH DISALLOWANCE OF (I) EXPENDITURE OF RS.3,77,492/ - IN A.Y. 2009 - 10, (II) DISALLOWANCE OF INTEREST OF RS.23,86,985/ - I N A.Y. 2011 - 12, (III) DISALLOWANCE OF EXPENSE OF RS.67,751/ - IN A.Y. 2011 - 12 , (IV) DISALLOWANCE OF RS.79,504/ - TOWARDS S HOPS AND ESTABLISHMENT CHARGES. HAVING PERUSED THE RELEVANT RECORD, WE FIND THAT THE ABOVE DISALLOWANCES REQUIRE RE - EXAMINATION BY THE A O. THE AO IS THUS DIRECTED TO EXAMINE THE ABOVE EXPENSES AND PASS AN ORDER AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE AO. THUS, THE GROUNDS OF APPEAL ON THE ABOVE ISS UES ARE ALLOWED FOR STATISTICAL PURPOSES. 7. WE FIND THAT THE ADDITION OF RS.28,000/ - MADE BY THE AO U/S 23(4) BEING DEEMED LET OUT PROPERTY INCOME IS NOT BASED ON PROPER APPRECIATIONS OF FACTS. THEREFORE, WE DELETE THE ADDITION OF RS.28,000/ - . ITA NOS. 1047/M/2014 & 2029/M/2015 7 8. AS WE A RE CONCERNED HERE EITH THE A.Y. 2011 - 12, WE SET ASIDE THE DIRECTION OF THE LD. CIT(A) TO THE AO TO VERIFY THE RECORDS AND TAKE REMEDIAL MEASURES IF ANY FOR INCOME U/S 2(24)(IV) THAT HAS ESCAPED ASSESSMENT IN A.Y. 2010 - 11. THUS, GROUND NO. 3 OF THE APPEAL F OR THE A.Y. 2011 - 12 IS ALLOWED. 9 . IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/05/2017. SD/ - SD/ - ( MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 31/05/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI