ITO, Ward-33(1), Kolkata, Kolkata V. Mrs. Ariyeh Khaleeli, Kolkata

ITA 118/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1615 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 22-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Capital asset; Gift; Cost of acquisition; Tangible material; Fair market value; Valuation report; Assessment record; Reason to believe
• Section: 143(3); 54F; 10B; 147; 148; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B, KOLKATA [BEFORE SHRI ABY. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 118/KOL/2015 ASSESSMENT YEAR: 2007-08 I.T.O., WARD- 33(1), KOLKATA.................................APPELLANT 10B, MIDDLETON ROW, 3 RD FLOOR KOLKATA - 700071 MRS. ARIYEH KHALEELI RESPONDENT 214, A.J.C. BOSE ROAD, KOLKATA 700 017 [PAN NO. AEUPK9058E] APPEARANCES BY: SHRI G.H. SEEMA, ADDL. CIT (DR) APPEARING ON BEHALF OF THE REVENUE. SHRI MIRAJ D. SHAH APPEARING ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : JULY 05, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 23, 2017 ORDER PER WASEEM AHMED, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT (APPEALS) XIX, KOLKATA DATED 05.11.2014. THE ASSESSMENT WAS FRAMED BY ITO WARD 33(1), KOLKATA, U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 22.03.2013 FOR THE ASSESSMENT YEAR 2007-08. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XIX KOLKATA ERRED IN HOLDING THAT THE REOPENING U/S 148 OF THE IT ACT, 1961 WAS BAD IN LAW. 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XIX KOLKATA ERRED IN QUASHING THE ASSESSMENT ORDER PASSED U/S 147/143(3) OF THE IT ACT 1961 (THE ACT) ON 22.03.2013 BY THE ITO WARD 33(1) KOLKATA. 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XIX KOLKATA ERRED IN HOLDING THAT THE LONG TERM CAPITAL GAINS ARISING ON JOINT VENTURE OF THE LAND AT ABSHOT LAYOUT BANGALORE WAS TAXABLE IN AY 2006-07. 4. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XIX KOLKATA ERRED IN HOLDING THAT THE SALE VALUE OF FLAT NO 102 WAS TO BE APPORTIONED AS RS. 70,80,552/- AS LONG TERM AND RS. 69,35,040/- AS SHORT TERM WITHOUT ANY MATERIAL AND THUS THIS SHOULD BE SET ASIDE. 5. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XIX KOLKATA ERRED IN DIRECTING THAT THE DEDUCTION U/S 54F OF THE IT ACT, 1961 WAS TO BE ALLOWED TO THE ASSESSEE. MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 2 6. FOR THAT THE LEAVE BE GRANTED TO FILE REVISED GROUNDS OR ADDITIONAL GROUNDS AT THE TIME OF THE HEARING OF THE APPEAL. SHRI G.H. SEEMA, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF THE REVENUE AND SHRI MIRAJ D. SHAH LD. ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. 2. THE FIRST ISSUE RAISED BY REVENUE IN GROUND NO. 1 AND 2 IS THAT THE LD. CIT(A) ERRED IN HOLDING THE ASSESSMENT FRAMED UNDER SECTION 147/143(3) OF THE ACT AS INVALID. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASES IS AN INDIVIDUAL AND DERIVING HER INCOME FROM THE SOURCE OF INVESTMENT. THE ASSESSEE HAS FILED HER RETURN OF INCOME DATED 26.02.2008 DECLARING A TOTAL INCOME OF RS. 6,0039/- ONLY. THE RETURN OF INCOME OF THE ASSESSEE WAS DULY PROCESSED UNDER SECTION 143(1) DATED 23.03.2004. SUBSEQUENTLY THE CASE WAS REOPENED UNDER SECTION 147 OF THE ACT AND ACCORDINGLY NOTICE UNDER SECTION 148 OF THE ACT WAS SERVED UPON THE ASSESSEE DATED 18.08.2011. THE REASONS RECORDED FOR REOPENING OF THE CASE UNDER SECTION 147 OF THE ACT READS AS UNDER: IN THE COURSE OF ASSESSMENT PROCEEDING U/S. 143(2) OF THE INCOME TAX ACT, 1961 FOR A.Y. 2008-09, IT WAS OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENTS DURING THE F.Y. 2007-08, THE SOURCE OF WHICH IS RECEIPT OF RS. 1,40,00,000/- FROM RELINQUISHMENT OF HER RIGHT IN APARTMENT, NU 102, FIRST FLOOR, PRESTIGE ABSHOT, SANKEY ROAD CROSS, BANGALORE ON 31.11.2006. THE SUM OF RS. 1,40,00,00/- IS, THEREFORE, LIABLE TO LTCG TAX FOR THE F.Y. 2006-07 IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT, THE ASSESSEE SUBMITTED THAT THE RETURN FILED U/S 139 OF THE ACT MAY BE TREATED AS RETURN FILED U/S 148 OF THE ACT. THE ASSESSMENT WAS FRAMED U/S 147/143(3) OF THE ACT AFTER MAKING CERTAIN DISALLOWANCE / ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,53,16,246/- ONLY. 4. THE ASSESSEE HAS CHALLENGED THE ASSESSMENT ORDER FRAMED U/S 147/143(3) OF THE ACT BEFORE THE LD. CIT (A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT THE INVESTMENT WAS MADE FOR RS. 1.40 CRORES IN THE ASSESSMENT YEAR 2008-09 OUT OF THE SALE OF THE LONG TERM CAPITAL ASSETS BEING RESIDENTIAL FLAT. AS SUCH, THE ENTIRE CONSIDERATION RECEIVED BY THE ASSESSEE ON THE SALE OF RESIDENTIAL FLAT WAS SOLD OUT AND ACCORDINGLY AN EXEMPTION U/S 54F OF THE ACT WAS CLAIMED. MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 3 ACCORDINGLY, THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS HELD THE ASSESSMENT FRAMED U/S 147/143(3) OF THE ACT AS INVALID BY OBSERVING AS UNDER: I HAVE CONSIDERED THE SUBMISSION AND ALSO EXAMINED THE REASONS RECORDED WHICH IS AVAILABLE ON FIRST PAGE OF THE ASSESSMENT ORDER. ON AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE BACKDROP OF THE MATERIALS ON RECORD AS WELL AS THE ARGUMENTS ADVANCED BY THE AR, I FIND FORCE IN THE CONTENTIONS OF THE AR, THE AO IN THE REASONS HAD HELD THAT THE APPELLANT HAD EARNED LONG TERM CAPITAL GAINS ON THE SUM OF RS. 1,40,00,000/- AND THIS AMOUNT WAS INVESTED IN AY 2008-2009 IN RESIDENTIAL FLAT. THUS, IF THERE WAS ANY LONG TERM CAPITAL GAINS THE SAME WAS REDUCED TO NIL DUE TO EXEMPTION U/S 54/54F OF THE ACT. THAT BEING THE CASE THERE WAS NOTHING LEFT TO BE TAXED AS LONG TERM CAPITAL GAINS AND HENCE THERE COULD NOT BE ANY INCOME WHICH HAD ESCAPED ASSESSMENT. I FIND THAT THE BOMBAY HIGH COURT IN BALKRISHNA HIRALAL WANI VS. LNCOME-TAX OFFICER AND OTHERS 321 ITR 519 WHERE IT WAS HELD AS FOLLOWS : '...FOR THE PURPOSE OF DETERMINING THE VALIDITY OF THE CHALLENGE TO THE NOTICE UNDER SECTION 148, THE COURT WOULD HAVE TO REFER TO THE REASONS RECORDED BY THE ASSESSING OFFICER AND TO THOSE REASONS ALONE.' THEREFORE, CONSIDERED FROM ALL PERSPECTIVES, THE REASONS WHICH HAVE BEEN DISCLOSED BY THE ASSESSING OFFICER, CAN BY NO STRETCH OF LOGIC LEAD TO FORM A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. FOR THE PURPOSE OF DETERMINING THE VALIDITY OF THE CHALLENGE TO THE NOTICE UNDER SECTION 148, THE REASONS RECORDED BY THE ASSESSING OFFICER AND TO THOSE REASONS ALONE ARE RELEVANT. I THEREFORE HOLD THAT THE CONDITION PRECEDENT PRIOR TO THE EXERCISE OF THE POWER TO REOPENING THE ASSESSMENT UNDER SECTION 147 AF THE ACT HAS NOT BEEN FULFILLED. THEREFORE THE REOPENING IS HELD TO BE BAD IN LAW AND THE REASSESSMENT ORDER PASSED U/S 143(3)1147 CANNOT BE SUSTAINED AND IS THUS HELD TO BE ULTRA VIRES ORDER . AS A RESULT THE ORDER U/S 147/143(3) PASSED BY THE AO FOR AY 2007-2008 IS HEREBY ANNULLED ON THE GROUNDS OF INFIRMITY ON BOTH FACTS AND LAW. THE AO IS DIRECTED ACCORDINGLY. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE US. 5. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 6. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, IT WAS OBSERVED THAT THE ASSESSEE HAS SOLD FLAT ON WHICH CAPITAL GAIN INCOME WAS EARNED. BUT THE SAME WAS NOT REPORTED IN INCOME TAX RETURN. THE INFORMATION OF CAPITAL GAIN INFORMED WAS REVEALED TO THE AO DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2008-09 U/S 143(3) OF THE MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 4 ACT. THEREFORE, IN OUR CONSIDERED VIEW THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT IS VALID AS IT WAS REOPENED ON THE BASIS OF THE TANGIBLE MATERIALS GATHERED FROM THE INDEPENDENCE SOURCES. THUS, IN OUR CONSIDERED VIEW, THE ACTION OF THE AO FOR REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT IS WITHIN THE FRAMEWORK OF LAW. HENCE THE GROUND OF APPEAL OF REVENUE IS ALLOWED. 7. THE SECOND ISSUE RAISED BY REVENUE IN GROUND NO. 3 IS THAT LD. CIT (A) ERRED IN HOLDING THAT THE LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE FROM THE JOINT VENTURE AGREEMENT FOR THE DEVELOPMENT OF THE LAND IN BANGALORE WAS TAXABLE IN ASSESSMENT YEAR 2006-07. 8. THE ASSESSEE ALONG WITH HER BROTHER AND SISTER HAS RECEIVED A GIFT FROM HER FATHER BEING LAND MEASURING 19403 SQ. FT. LOCATED AT ABSHOT LAYOUT, SANKEY ROAD, HIGH GROUND, BANGALORE 560520. THE IMPUGNED LAND WAS RECEIVED BY THE ASSESSEE DATED 09.11.2002 FROM HER FATHER MR. AFSUR MIRZA KHALEELI. THE ASSESSEE IN THE IMPUGNED LAND WAS 1/3 RD OWNER I.E. 6467.67 SQ. FT. THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS AGREED TO TRANSFER THE LAND IN FAVOUR OF THE M/S. PRESTIGE ESTATE PROJECTS PVT. LTD. (PEPPL) FOR THE PURPOSE OF DEVELOPMENT OF THE LAND. IN THIS REGARD, AN AGREEMENT WAS REGISTERED AT THE SRO GANDHI NAGAR, BANGALORE VIDE DATED 11.02.2004. AS PER THE AGREEMENT, THE BUILDER WAS TO CONSTRUCT AND DEVELOP THE LAND. IT WAS AGREED THAT 50% OF THE SUPER BUILT UP AREA WILL BE GIVEN TO THE ASSESSEE ALONG WITH HER FAMILY MEMBERS FREE OF COST BY THE PEPPL. AS PER THE MUTUAL UNDERSTANDING OF THE ASSESSEE WITH HER OTHER FAMILY MEMBERS, SHE WAS ENTITLED FOR 20.31% OF THE CONSTRUCTED AREA. 9. A SUPPLEMENTARY AGREEMENT WAS MADE FURTHER BETWEEN THE ASSESSEE ALONG WITH HER FAMILY MEMBERS AND PEPPL VIDE DATED 01.08.2005 WHEREIN IT WAS AGREED THAT TOTAL SUPER BUILT UP ARE WAS PROPOSED TO BE 72190 SQ. FT. THE TOTAL SUPER BUILT UP AREA WAS TO BE SHARED BETWEEN THE ASSESSEE ALONG WITH OTHER MEMBERS AS WELL AS PEPPL AS AGREED. HOWEVER THE BUILDER HAS TAKEN 120 SQ. FT. AREA MORE THAN ITS SHARE AS AGREED IN THE AGREEMENT DATED 11.02.2004. ACCORDINGLY, THE BUILDER AGREED TO PAY A SUM OF RS. 3,00,000/- TO THE ASSESSEE ALONG WITH HER RELATIVES IN THEIR RESPECTIVE RATIO. 10. SUBSEQUENTLY A SECOND SUPPLEMENTARY AGREEMENT WAS MADE BETWEEN THE ASSESSEE ALONG WITH OTHER FAMILY MEMBERS AND PEPPL VIDE DATED 26.09.2006 MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 5 WHEREIN VALUE OF THE 50% OF LAND WAS TO BE AGREED AT RS. 4.53 CRORES. IN THE SECOND SUPPLEMENTARY AGREEMENT, IT WAS RECORDED THAT THERE IS NO CHANGE IN THE ORIGINAL AGREEMENT AND SUPPLEMENTARY AGREEMENT MADE ON 11.02.2004 AND 01.08.2005 RESPECTIVELY. IT WAS ALSO AGREED THAT ALL THE AGREEMENTS SHALL REMAIN IN FORCE. 11. THE AO FROM THE ABOVE DISCUSSION OBSERVED THAT THE ASSESSEE HAS TRANSFERRED ITS LAND ALONG WITH HER FAMILY MEMBERS TO THE BUILDER NAMELY PEPPL ON JOINT VENTURE AGREEMENT BASIS. THE ASSESSEE IN EXCHANGE OF THE LAND RECEIVED TOTAL SUPER BUILT UP AREA OF 7525 SQ. FT. THEREFORE THERE IS TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT AND WHICH IS SUBJECT TO CAPITAL GAIN. ACCORDINGLY THE CAPITAL GAIN WAS DETERMINED BY THE AO AS UNDER: SALE CONSIDERATION: PROPORTIONATE SHARE OF VALUE OF 50% OF UNDIVIDED PORTION OF LAND AS MUTUALLY AGREED VIDE AGREEMENT DATED 26.09.2006 (SEE PARA 4 ABOVE): (RS. 4,53,00,000/- X 6467.67 / 39195*), OR RS. 74,75,072/- [*ASSESSEES AREA: 6467.67 SQ. FT. (SEE PARA 1) OUT OF TOTAL AREA 39195 SQ. FT. AS PER AGREEMENT 11.02.2004] THE COMPONENT OF CASH RECEIVED IS ALSO TO BE ADDED HERE ON PROPORTIONATE BASIS WHICH COMES TO RS. 3,00,000 X 120 SQ FT X6467.67 / 39195 OR RS. 49504/-. TOTAL SALE CONSIDERATION: RS. 75,24,576/-. 1.4 COST OF ACQUISITION: SINCE THE ORIGINAL LAND WAS GIFTED TO THE ASSESSEE BY HER FATHER, THE COST OF PREVIOUS OWNER SHOULD BE THE COST OF ACQUISITION AS PER SECT. 49(1) OF THE ACT. IN THIS CASE, THE LAND GIFTED BY HER FATHER WAS AGAIN ACQUIRED BY HER FATHER THROUGH ANOTHER ORAL GIFT FROM HIS MOTHER ON 11.07.1966, I.E. PRIOR TO 01.04.1981 AS PER SEC. 55(2) READ WITH SEC. 49(1) OF THE ACT. 1.5 HOWEVER, HER REPRESENTATIVE HAS NOT FILED ANY MARKET VALUATION OF THE LAND AS ON 01.04.1981, AND IN THE SUBMISSIONS WITH RESPECT TO THE COPIES OF THE ORAL GIFT DEEDS MADE BY HER FATHER TO THE ASSESSEE AND HER GRANDMOTHER TO HER FATHER, THE COST OF THE LAND WAS NOT MENTIONED. IN ABSENCE OF THE COST OF LAND, THE COST OF ACQUISITION WILL BE TAKEN AS NIL, AND THE COMPUTATION OF THE LTCG IN HER HAND IS: SALE CONSIDERATION: RS. 75,24,576/- LESS: COST OF ACQUISITION RS. 0 ------------------------------------- LONG TERM CAPITAL GAIN RS. 75,24,576/- (SINCE THERE IS NO COST OF ACQUISITION, INDEXATION IS NOT CALCULATED) MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 6 THUS THE AO TREATED THE ABOVE INCOME OF RS. 75,24,576.00 AS CAPITAL GAIN INCOME OF THE ASSESSEE. 12. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT THE IMPUGNED LAND WAS TRANSFERRED TO PEPPL VIDE AGREEMENT DATED 11.02.2004. THEREFORE, THE TRANSFER HAS TAKEN PLACE IN THE ASSESSMENT YEAR 2004-05 AS PER THE PROVISIONS OF SECTION 2(47) OF THE ACT. THUS THE AO ERRED IN TREATING THE CAPITAL GAIN INCOME ON ACCOUNT OF TRANSFER OF LAND IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE IN SUPPORT OF HIS CLAIM HAS RELIED ON THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS CIT REPORTED IN 260 ITR 491. SIMILARLY THE ASSESSEE ALSO RELIED ON THE ORDER OF THIRD MEMBER BENCH OF TRIBUNAL BOMBAY IN THE CASE OF MS. RUBAB M. KAZERANI VS JCIT REPORTED IN 91 ITD 429 (MUM). 12.1 THE ASSESSEE ALSO SUBMITTED THAT VALUATION REPORT AS ON 01.04.1981 IN RELATION TO THE IMPUGNED LAND WAS DULY FILED AT THE TIME OF ASSESSMENT BUT THE AO HAS FAILED TO CONSIDER THE SAME. THE LD. CIT (A) AFTER CONSIDERING SUBMISSION OF THE ASSESSEE HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 4.2 THE SUBMISSIONS OF THE AR OF THE APPELLANT HAVE BEEN DULY CONSIDERED ON BOTH FACTS AND LAW AS DISCUSSED IN THE FOREGOING AND WEIGHED AGAINST THE OBSERVATION AND DECISION OF THE AO. I HAVE ALSO CALLED FOR THE ASSESSMENT RECORD. I FIND THAT BOTH THE APPELLANT AND THE AO AGREE THAT THE CAPITAL GAINS WITH RESPECT TO THE 50% SHARE IN THE LAND SHALL BE ASSESSABLE AS LONG TERM CAPITAL GAINS AS PER SECTION 2(47)(V) OF THE ACT. I FIND BOTH THE AO AND THE APPELLANT ARE RELYING ON THE DECISION OF THE CHATURBHUJ DWARKADAS KAPADIA 260 ITR 491. THE AO AND THE APPELLANT HOWEVER DIFFER ON THE YEAR OF TAXABILITY. AS PER THE APPELLANT THE YEAR OF TAXABILITY WAS AY 2004-2005 AND AS PER THE AO THE YEAR OF TAXABILITY WAS AY 2007-2008. THE FACTS OF THE CASE AS EVIDENT FROM THE ASSESSMENT ORDER AND THE COPIES OF THE AGREEMENT AVAILABLE ON ASSESSMENT RECORD HAVE BEEN EXAMINED. I FIND THAT THE APPELLANT ENTERED INTO THREE AGREEMENTS WITH THE DEVELOPER I.E. M/S PRESTIGE ESTATE PROJECTS (P) LTD. THE FIRST AGREEMENT WAS ENTERED ON 1'L .02.2004 BETWEEN PRESTIGE AND THE APPELLANT AND OTHER CO OWNERS. THE VARIOUS CLAUSES OF THE SAID AGREEMENT NARRATED AS FOLLOWS: (B) PARAGRAPH 5.L ON PAGE L0: THE OWNERS WOULD GET 50% OF THE LAND. MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 7 (C) PARAGRAPH 5.6 PAGE 10: THE DEVELOPER WAS GIVEN RIGHTS TO HOLD, SELL, MORTGAGE, GIFT, LEASE OR OTHERWISE DEAL WITH ITS 50% OF THE BUILDING AND LAND. 4.3. I FIND THAT THE AGREEMENT DATED 11.04.2004 GAVE THE DEVELOPER THE RIGHT TO SELL HIS SHARE OF THE CONSTRUCTED PROPERTY AND ALSO TO RECEIVE THE ADVANCES AGAINST SUCH SHARE. THUS THIS AGREEMENT TOO, ENTAILS UPON THE DEVELOPER OWNERSHIP RIGHTS IN RESPECT OF HIS SHARE OF THE PROPERTY. THE APPELLANT ENTERED INTO A SUPPLEMENTARY SHARING AGREEMENT ON 01.09.2005 WHICH WAS ENTERED BETWEEN THE CO-OWNERS RECORDING THAT THE CORPORATION SANCTION PLAN WAS PASSED ON 27.06.2005 BEARING NO. LP-2412004-2005 AND THE DEVELOPERS AND OWNERS HAD IDENTIFIED THEIR RESPECTIVE AREAS. IT WAS RECORDED THAT AREA OF 35,975 SQ FT WAS TO BE ALLOTTED TO THE DEVELOPER, HOWEVER INSTEAD AN AREA OF 36,125 SQ FT WAS ALLOCATED TO THE DEVELOPER AND THUS A SUM OF RS.300,000/- WAS PAID TO THE OWNERS IN LIEU OF IT SAID 120 SQ FT. IT HAS BEEN RECORDED ON PAGE 4, PARA 2 OF THE AGREEMENT DATED 01.09.2005 THAT THE PROPORTIONATE SHARE IN THE LAND AND BUILDING HAD BEEN ALLOCATED BETWEEN THE OWNERS AND DEVELOPERS BY THE SAID AGREEMENT. THIS AGREEMENT ALSO RECORDED ALLOCATING OF FLATS BETWEEN THE CO OWNERS. THE PARTIES ENTERED INTO ANOTHER AGREEMENT DATED 08.09.2006. AS PER THIS AGREEMENT THE PARTIES MERELY RECORDED THE VALUE OF THE UNDIVIDED LAND WAS DETERMINED AT RS. 4,53,00,000/-. THIS AGREEMENT SPECIFICALLY MENTIONED THAT OTHER THAN FIXING THE VALUE OF THE LAND THERE HAS BEEN NO CHANGE IN THE TERMS AND CONDITIONS OF THE AGREEMENT DATED 11.02.2004 & 01.08.2005. ON EXAMINATIONS OF THE THREE AGREEMENTS I FIND THAT THE AGREEMENT DATED 11.02.2004, PARAGRAPH 1.1 OF PAGE 7 STATES THAT THE POSSESSION OF THE LAND WOULD BE GIVEN WITHIN 15 DAYS OF SANCTION PLAN. THE SANCTION PLAN WAS PASSED ON 27.062005, THEREFORE, THE POSSESSION OF THE LAND WAS GIVEN SOMEWHERE IN THE MONTH OF JULY, 2005. I FIND THAT VIDE AGREEMENT DATED 01.09.2005, THE PARTIES EVEN ALLOCATED THEIR RESPECTIVE FLATS AND AREAS IN THE BUILDING. THUS, FROM THE DOCUMENTS IT IS EVIDENT THAT THE POSSESSION OF THE LAND AND ALLOCATION OF THE FLATS TOOK PLACE BETWEEN 27.06.2005 TO 01.09.2005 WHICH RELATED TO AY 2006-2007. I FIND THAT DECISION OF THE CHATURBHUJ DWARKADAS KAPADIA 260 ITR 491 HAD SETTLED A SIMILAR ISSUE. THE HON'BLE COURT HAD HELD THAT UNDER S. 2(47)(V), ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF S. 2(47)(V). IN ORDER TO ATTRACT S. 53A, THE FOLLOWING CONDITIONS NEED TO BE FULFILLED (A) THERE SHOULD BE A CONTRACT FOR CONSIDERATION, (B) IT SHOULD BE IN WRITING, (C) IT SHOULD BE SIGNED BY THE TRANSFEROR, (D) IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY, (E) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY, LASTLY, (F) THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM HIS PART OF THE CONTRACT. EVEN ARRANGEMENTS CONFIRMING PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE COULD FALL UNDER S. 2(47)(V). SEC. 2(47)(V) WAS INTRODUCED IN THE ACT FROM THE A.Y. 1988- 89. THE COURT IN THIS CASE HELD: THEREFORE, IN THESE TWO CASES CAPITAL GAINS WOULD MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 8 BE TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO, EVEN IF THE TRANSFER OF THE IMMOVABLE PROPERTY IS NOT EFFECTIVE OF COMPLETE UNDER THE GENERAL LAW. UNDER S. 2(47)(V) ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF S. 2(47)(V). THUS, AS PER THIS DECISION THE TRANSFER WOULD TAKE PLACE ON THE HANDING OVER OF POSSESSION WHICH IN THIS CASE TOOK PLACE DURING AY 2006-2007. THE AO MISDIRECTED HIMSELF IN HOLDING THAT THE TRANSFER TOOK PLACE IN AY 2007-2008 VIDE AGREEMENT DATED 08.09.2006, THERE WAS NO HANDING OVER OF POSSESSION OR EVEN TRANSFER OF THE LAND, THE PARTIES MERELY RECORDED THE VALUE OF LAND AND NOTHING ELSE. I THEREFORE HOLD THAT THE 50% OF THE LAND WAS TRANSFERRED IN AY 2006-2007. I HAVE PERUSED THE ASSESSMENT RECORD. THE AR ALSO FILED A COPY OF THE VALUATION REPORT BEFORE ME, GIVEN BY A VALUER MR. S. KARAK AND AS PER THE SAID REPORT THE VALUE OF THE LAND AS ON 01.04.1981 WAS DETERMINED AT RS 2,55,60,000/-. I THEREFORE HOLD THAT THE AO SHOULD CONSIDER THE FAIR MARKET VALUE OF THE LAND AS ON 01.04.1981 AT RS. 2,55,60,000/- FOR THE COMPUTATION OF LONG TERM CAPITAL GAINS. IN VIEW OF THE ABOVE FACTS I FIND THAT THE JOINT DEVELOPMENT AGREEMENT DATED 11.02.2004 READ WITH AGREEMENT DATED 01.08.2005 SATISFIED THE CONDITIONS LAID DOWN BY THE BOMBAY HIGH COURT AND THEREFORE, I HOLD THAT THE LAND WAS TRANSFERRED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT AND WOULD COME WITHIN THE AMBIT OF S. 2(47)(V) IN AY 2006-2007. THE AO IS THEREFORE DIRECTED NOT TO CHARGE CAPITAL GAINS ON THE TRANSFER OF 50% OF THE LAND IN AY 2007-2008. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE US. 13. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE ON HAND, THE ASSESSEE ALONG WITH HER OTHER FAMILY MEMBERS WAS THE OWNER OF THE LAND LOCATED IN BANGALORE. THE ASSESSEE ALONG WITH HER OTHER FAMILY MEMBERS TRANSFERRED THE LAND FOR DEVELOPMENT VIDE AGREEMENT DATED 11.02.2004 TO PEPPL. THE RELEVANT CLAUSE OF THE AGREEMENT READS AS UNDER: 1.1 THE FIRST PARTY SHALL PERMIT THE SECOND PARTY TO ENTER UPON THE SCHEDULE PROPERTY FOR DEVELOPMENT THEREOF WITHIN FIFTEEN DAYS FROM DATE OF SECOND PARTY SECURING THE NECESSARY SANCTION FOR CONSTRUCTION OF THE APARTMENT BUILDING ON THE SCHEDULE PROPERTY FROM THE BANGALORE MAHANAGARA PALIKE AND FROM ALL OTHER CONCERNED AUTHORITIES. 1.2 UPON SUCH PERMISSION BEING GRANTED BY THE FIRST PARTY, THE SECOND PARTY SHALL BE ENTITLED TO ENTER UPON THE SCHEDULE PROPERTY TO COMMENCE AND COMPLETE MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 9 DEVELOPMENT OF THE SCHEDULE PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND IN ACCORDANCE WITH THE SANCTIONS AND APPROVALS RECEIVED FROM THE CONCERNED AUTHORITIES. THE FIRST PARTY HEREBY IRRECOVERABLE AUTHORISE AND EMPOWER THE SECOND PARTY TO DEVELOP THE SCHEDULE PROPERTY BY CONSTRUCTION A RESIDENTIAL APARTMENT BUILDING THEREON AND THE FIRST PARTY SHALL NOT REVOKE THE RIGHTS SO GRANTED TILL COMPLETION OF THE DEVELOPMENT AND SALE AS AGREED HEREIN AND DECLARE ACCORDINGLY. FROM THE ABOVE CLAUSE OF THE AGREEMENT, WE FIND THAT THE PROPERTY WOULD BE HANDED OVER TO PEPPL WITHIN FIFTEEN DAYS OF SANCTION PLAN FROM MUNICIPAL AUTHORITIES. IN THIS REGARD, THE LD. CIT(A) HAS GIVEN HIS CLEAR FINDINGS BY STATING THAT THE SANCTION PLAN WAS PASSED DATED 27.06.2005 AND THEREFORE IT CAN BE INFERRED THE POSSESSION OF THE LAND MUST HAVE BEEN GIVEN WITHIN FIFTEEN DAYS FROM THE DATE OF SANCTION OF THE PLAN I.E. 12 TH JULY 2015 APPROXIMATE WHICH IS FALLING IN THE FINANCIAL YEAR 2005-06 CORRESPONDING TO AY 2006-07. 14.1 IT IS ALSO EVIDENT THAT THE SUPPLEMENTARY AGREEMENT WAS MADE ON 01.09.2005 WHEREIN SPECIFIC FLATS FOR ALLOCATED TO THE ASSESSEE. A COPY OF THE AGREEMENT AND SUPPLEMENTARY AGREEMENT IS PLACED OF PAGE 1 TO 41 AND 42 TO 47 OF THE PAPER BOOK. IT IS ALSO IMPORTANT THAT ONE MORE SUPPLEMENTARY AGREEMENT WAS MADE BETWEEN THE AFORESAID PARTIES WHEREIN THE VALUE OF THE IMPUGNED LAND WAS DECIDED. THERE WAS NO CHANGE IN THE AGREEMENT MADE DATED 11.02.2004 AS WELL AS 01.09.2005 AS EVIDENT UNDER: OTHER THAN FIXING THE VALUE PARTIES HAVE NOT CHANGED THE TERMS OF THE AGREEMENT DATED 11.02.2004 AND SUPPLEMENTARY AGREEMENT DATED 01.08.2005 AND BOTH THESE AGREEMENTS SHALL REMAIN IN FULL FORCE AND EFFECT. IN VIEW OF THE ABOVE, WE HOLD THAT THE POSSESSION OF THE LAND WAS HANDED OVER TO PEPPL IN THE F.Y. 2005-06 AND THEREFORE, THE CAPITAL GAIN ON SUCH TRANSFER SHOULD HAVE BEEN TAXED IN THE ASSESSMENT YEAR 2006-07. IN HOLDING SO WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADS KAPADIA (SUPRA) WHEREIN IT WAS HELD AS UNDER: UNDER SECTION 2( 47 )( V ), ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART-PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT WOULD COME WITHIN THE AMBIT OF SECTION 2( 47 )( V ). IN ORDER TO ATTRACT SECTION 53A, THE FOLLOWING CONDITIONS NEED TO BE FULFILLED. THERE SHOULD BE A CONTRACT FOR CONSIDERATION; IT SHOULD BE IN WRITING; IT SHOULD BE SIGNED BY THE TRANSFEROR; IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY; LASTLY THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM HIS PART OF THE CONTRACT. EVEN ARRANGEMENTS CONFIRMING PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE CAN FALL MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 10 UNDER SECTION 2( 47 )( V ). SECTION 2( 47 )( V ) WAS INTRODUCED IN THE ACT FROM ASSESSMENT YEAR 1988-89 BECAUSE PRIOR THERETO, IN MOST CASES, IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT NO TRANSFER TOOK PLACE TILL EXECUTION OF THE CONVEYANCE. CONSEQUENTLY, ASSESSEES USED TO ENTER INTO AGREEMENTS FOR DEVELOPING PROPERTIES WITH THE BUILDERS AND UNDER THE ARRANGEMENT WITH THE BUILDERS, THEY USED TO CONFER PRIVILEGES OF OWNERSHIP WITHOUT EXECUTING CONVEYANCE AND TO PLUG THAT LOOP HOLE, SECTION 2( 47 )( V) CAME TO BE INTRODUCED IN THE ACT. IT WAS ARGUED BY THE ASSESSEE THAT THERE WAS NO EFFECTIVE TRANSFER TILL GRANT OF IRREVOCABLE LICENCE. 14.2 SIMILARLY WE ALSO FIND SUPPORT FROM THE THIRD MEMBER BENCH OF THE BOMBAY TRIBUNAL IN THE CASE OF MS. RUBAB M. KAZERANI (SUPRA), WHEREIN IT WAS HELD AS UNDER: FROM THE MOU IT WAS CLEAR THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH SA TO DISPOSE OF THE SAID PROPERTY FOR A TOTAL CONSIDERATION OF RS. 5.5 CRORES. THE POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE BUILDER SA AND ORIGINAL DOCUMENTS WERE ALSO GIVEN TO HIM ON THAT DAY WITH AN UNDERSTANDING THAT HE WILL OBTAIN ALL NECESSARY CLEARANCE CERTIFICATE UNDER THE URBAN LAND (CEILING AND REGULATION) ACT, 1976 AND CERTIFICATE UNDER SECTION 269UC. THEREFORE, THE MOU WAS NOT FOR THE PURPOSE OF SIMPLY IDENTIFYING THE PROSPECTIVE BUYER OR THE CONSIDERATION RECEIVED BY THE ASSESSEE WAS ONLY A SECURITY DEPOSIT. THAT WAS A TRANSACTION BY WHICH THE ASSESSEE TRANSFERRED THE PROPERTY IN QUESTION IN THE MANNER PRESCRIBED IN SUB-CLAUSES ( V ) AND ( VI ), INTRODUCED IN SECTION 2(47) WITH EFFECT FROM APRIL, 1988. THE EVENTS WHICH HAD TAKEN PLACE CONSTITUTED TRANSFER WHICH INCLUDES ANY TRANSACTION WHICH ALLOWS POSSESSION TO BE TAKEN/RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882, AND ANY TRANSACTION ENTERED INTO IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY. SIMILARLY, USING THE NOMENCLATURE MOU WILL NOT CHANGE ITS CHARACTER OF SALE AGREEMENT. FURTHER, CAPITAL GAINS WOULD BE TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS ARE ENTERED INTO, EVEN IF THE TRANSFER OF THE IMMOVABLE PROPERTY IS NOT EFFECTIVE OR COMPLETE FOR WANT OF REGISTRATION UNDER THE GENERAL LAW. UNDER SECTION 2(47)( V ) ANY TRANSACTION INVOLVING ALLOWING OF POSSESSION TO BE TAKEN OVER OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE 1882 ACT WOULD COME WITHIN THE AMBIT OF SECTION 2(47)( V ). IN ORDER TO ATTRACT SECTION 53A, THEREFORE, THERE SHOULD BE AN AGREEMENT FOR CONSIDERATION; IT SHOULD BE IN WRITING; IT SHOULD BE SIGNED BY THE TRANSFEROR, IT SHOULD PERTAIN TO TRANSFER OF IMMOVABLE PROPERTY; THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE PROPERTY AND THE TRANSFEREE SHOULD BE READY AND WILLING TO PERFORM HIS PART OF CONTRACT. THEREFORE, CAPITAL GAINS WOULD BE TAXABLE IN THE YEAR IN WHICH SUCH TRANSACTIONS WERE ENTERED INTO, EVEN IF THE TRANSFER OF THE IMMOVABLE PROPERTY WAS NOT EFFECTIVE OR COMPLETE FOR WANT OF REGISTRATION UNDER THE GENERAL LAW. THEREFORE, THE CONCLUSION OF THE ACCOUNTANT MEMBER THAT IT WAS MERELY DOCUMENTS TO IDENTIFY BUYER AND AN ASSURED SECURITY DEPOSIT WAS NOT CORRECT IN THE EYE OF LAW. [PARA 15] THEREFORE, TAXABILITY OF CAPITAL GAINS AT THE HANDS OF THE ASSESSEE DID NOT FALL IN THE ASSESSMENT YEAR 2000-2001 14.3 BESIDES THE ABOVE, WE FIND THAT THE VALUATION REPORT AS ON 01.04.1981 WAS VERY MUCH AVAILABLE ON RECORD AS OBSERVED BY THE LD. CIT(A). HOWEVER, THE AO HAS TAKEN THE COST OF ACQUISITION AS ON 01.04.1981 NIL WHICH IS AGAINST THE PROVISION OF LAW. THE LAW ON THIS ASPECT IS FAIRLY CLEAR. AS PER THE PROVISIONS OF SECTION 49(1) OF THE ACT, THE COST OF THE PREVIOUS YEAR SHALL BE TAKEN IN DETERMINING THE CAPITAL GAIN TAX IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A). HENCE THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 11 15. THE NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT (A) ERRED IN APPORTIONING THE SALE VALUE OF FLAT NO. 102 TOWARDS THE LAND AS WELL AS BUILDING STRUCTURE ON THE LAND. 16. THE ASSESSEE WAS ALLOTTED TWO RESIDENTIAL UNITS BY PEPPL BEING APARTMENT NO. 102 AND 701 AS EVIDENT FROM THE COPY OF AGREEMENT DATED 13.11.2006. THIS FACT WAS ALSO COMMUNICATED BY PEPPL IN ITS LETTER DATED 19.08.2009 TO THE AO DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE SUBSEQUENTLY SURRENDERED HER APARTMENT NO 102 TO THE PEPPL FOR A CONSIDERATION OF RS. 1.70 CRORES. THE ASSESSEE AS PER THE INTERNAL UNDERSTANDING WITH FAMILY MEMBERS WAS ENTITLED FOR 3090 SQ. FT. OF THE TOTAL AREA OF 3700 SQ. FT. OF APARTMENT NO 102 AND ACCORDINGLY THE SHARE OF THE ASSESSEE WAS DETERMINED AT RS. 1,40,16,511/-. THE OTHER APARTMENT BEING NO. 701 WAS RETAINED UNDER THE CUSTODY OF THE ASSESSEE. SUBSEQUENTLY THE ASSESSEE AGREED TO PURCHASE ONE APARTMENT NO 2 IN GROUND FLOOR, TOWER 1 IN THE COMPLEX CASCADES IN UNIWORLD CITY, KOLKATA FOR A TOTAL CONSIDERATION OF RS. 1,35,08,988/-. THE ASSESSEE FOR THE PURCHASE OF FLAT IN KOLKATA ALSO PAID A SUM OF RS. 12,22,278/- TO THE DEVELOPER VIDE LETTER DATED 19.03.2007. 16.1 HOWEVER, AT THE TIME OF ASSESSMENT, THE AO CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE ABOVE INCOME OF RS. 1,40,16,511/- HAVE NOT BEEN DISCLOSED IN THE RETURN OF INCOME. IN COMPLIANCE THERETO THE ASSESSEE SUBMITTED THAT SHE RECEIVED THE MONEY FROM PEPPL FOR THE SURRENDER OF FLAT IN VARIOUS INSTALMENTS WHICH STARTED FROM 17.11.2006 TO 10.12.2007 AGGREGATING TO RS. 1,40,16,511/-. THE ASSESSEE HAS REGISTERED THE APARTMENT BEING 102 IN THE F.Y. 2007-08 IN FAVOUR OF THE BUILDER. SUBSEQUENTLY THE ASSESSEE HAS MADE INVESTMENT IN A RESIDENTIAL PROPERTY LOCATED IN KOLKATA FOR SIMILAR AMOUNT. THEREFORE, AS SUCH THERE WAS NO CAPITAL GAIN INCOME IN THE HANDS OF THE ASSESSEE. THEREFORE, IT WAS NOT REFLECTED IN THE INCOME TAX ASSESSMENT YEAR. 17.2 HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS RELINQUISHED HER RIGHT IN APARTMENT NO 102 IN FAVOUR OF THE BUILDER VIDE AGREEMENT DATED 13.11.2006. THE ASSESSEE FOR RELINQUISHED OF HER RIGHT RECEIVED A CONSIDERATION OF RS. 1,40,16,511/- WHICH IS AGAIN SUBJECT TO CAPITAL GAIN IN THE HANDS OF THE MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 12 ASSESSEE. THE AO WORKED OUT THE SHORT TERM CAPITAL GAIN FROM THE RELINQUISHMENT OF RIGHT IN THE APARTMENT NO 102 AS DETAILED UNDER: 1.7. IN THE RESULT, THE CAPITAL GAIN IN HER HAND WILL BE THE AGGREGATE OF THE TWO CAPITAL GAINS: LONG TERM CAPITAL GAIN AS COMPUTED UNDER PARA 1.5 ABOVE, FOR RELINQUISHMENT OF RIGHTS OF LAND TO THE BUILDER, AND, SHORT TERM CAPITAL GAIN TO BE COMPUTED ON TRANSFER OF THE APARTMENT 102. 2.1 IN ORDER TO CALCULATE THE SHORT TERM CAPITAL GAIN OF THE TRANSFER OF THE APARTMENT 102, THE COST OF ACQUISITION IN HER HAND WILL BE THE COST OF CONSTRUCTION OF THE APARTMENT. AS PER INFORMATION FROM THE BUILDER, THE COST OF THE CONSTRUCTION FOR THE APARTMENT IS RS.2030/- PER SQUARE FEET, AND, AT THIS COST, THE COST OF APARTMENT AREA WITH 3096 SQUARE FEET (AS ENTITLED OUT OF 3755 SQUARE FEET ACCORDING TO INTERNAL UNDERSTANDING BETWEEN HER FAMILY MEMBERS AS PERT THE AGREEMENT DATED 13-11-2006) COMES TO: COST OF ACQUISITION RS.2030/- X 3096 SQ.FT. OR RS.62,84,880/- SHORT TERM CAPITAL GAIN: FULL VALUE OF CONSIDERATION RECEIVED: RS.1,40,16,511/- LESS: COST OF ACQUISITION RS. 62,84,880/- SHORT TERM CAPITAL GAIN ON SALE OF APARTMENT 102RS. 77,31,631/- HERE IT IS TO BE NOTED THAT IT MAKES NO DIFFERENCE WHETHER OR NOT FULL VALUE OF CONSIDERATION IS RECEIVED DURING THE PREVIOUS YEAR. EVEN IF THE FULL VALUE OF CONSIDERATION IS RECEIVED IN INSTALMENTS IN DIFFERENT YEARS, THE ENTIRE VALUE OF CONSIDERATION HA TO BE TAKEN INTO ACCOUNT FOR COMPUTING THE CAPITAL GAINS, WHICH BECOME CHARGEABLE IN THE YEAR OF TRANSFER. HERE THE TRANSFER OF THE NEW ASSET TAKES PLACE ON 13-11-2006. 18. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT (A) SUBMITTED THAT THE APARTMENT NO 102 TRANSFERRED BY HER IS COMPRISING OF LAND AS WELL AS SUPER STRUCTURE OF THE BUILDING. IT IS UNDISPUTED FACT THAT THE LAND WAS HELD BY THE ASSESSEE FOR A PERIOD OF MORE THAN 3 YEARS THEREFORE, THE INCOME OF THE TRANSFER OF THE LAND SHOULD BE TREATED AS LONG TERM WHEREAS THE INCOME ON THE TRANSFER OF SUPER STRUCTURE SHOULD BE TREATED AS SHORT TERM CAPITAL GAIN. THE ASSESSEE ACCORDINGLY MADE SUBMISSION SHOWING THE WORKING OF SHORT TERM AS WELL AS LONG TERM CAPITAL GAIN AS DETAILED UNDER: TABLE A : BIFURCATION OF SALE PROCEEDS (RS/SQ FEET): DESCRIPTION AREA RATE AMOUNT LAND 3755 2497.30 93,77,350 SUPER STRUCTURE 3755 2030 76,22,650 TOTAL 3755 4,527.30 1,70,00,000 TABLE B : AMOUNT DISTRIBUTION BETWEEN OWNERS (ROUNDED TO 00): DESCRIPTION AREA (SQ. FT.) LAND SUPER STRUCTURE MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 13 MR. AKBAR MIRZA KHALEELI 659 16,45,720 13,37,770 MS ARIYEH KHALEELI (THE APPELLANT) 3096 77,31,630 62,84,880 TOTAL 3755 93,77,350 76,22,650 28. THE COMPUTATION OF CAPITAL GAINS AS PER APPELLANT SHOULD BE AS FOLLOWS: (I) TABLE C: LAND (LONG TERM CAPITAL ASSET) SALE PROCEEDS OF LAND (AS PER TABLE B) A 77,31,630 LESS: INDEX COST AS ON 01/04/1981 VALUE AS ON 01/04/1981 (AS PER VALUATION REPORT) 2,55,60,000 PROPORTIONATE VALUE LAND ATTRIBUTABLE TO THE FLAT SOLD (2,55,60,000 * 3,755 / 72,190) B 13,29,516 INDEX COST (519/100)=5.19 (-) 69,00,190 LONG TERM CAPITAL GAIN A-B 8,31,440 (I) TABLE D: SUPER STRUCTURE (SHORT TERM CAPITAL ASSET) SALE PROCEEDS OF SUPER STRUCTURE (AS PER TABLE B) A 62,84,880 COST OF SUPER STRUCTURE AS COMPUTED BY AO IN ASSESSMENT ORDER PAGE 10 PARAGRAPH 2.1 B 62,84,880 SHORT TERM CAPITAL GAIN A-B NIL 28. THE AO MAY THUS BE DIRECTED TO RE-COMPUTE THE CAPITAL GAINS ASSESSABLE IN THE HANDS OF THE APPELLANT AS FOLLOWS: LAND (LONG TERM CAPITAL ASSET) LONG TERM CAPITAL GAINS RS. 31,440 SUPER STRUCTURE (SHORT TERM CAPITAL ASSET) SHORT TERM CAPITAL GAINS NIL THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE ALLOWED THE RELIEF IN PART BY OBSERVING AS UNDER: 5.2 THE SUBMISSIONS OF THE AR OF THE APPELLANT HAVE BEEN DULY CONSIDERED ON BOTH FACTS AND LAW AS DISCUSSED IN THE FOREGOING AND WEIGHED AGAINST THE OBSERVATION AND DECISION OF THE AO. I HAVE ALSO CALLED FOR THE ASSESSMENT RECORD FOR PERUSAL. I FIND THAT BOTH THE APPELLANT AND THE AO ARE IN CONCURRENCE THAT THE CAPITAL GAIN WITH REGARD TO THE SALE OF FLAT NO 102 HAS TO BE COMPUTED. HOWEVER, ACCORDING TO THE AO, THE CAPITAL GAIN IS TO BE TREATED AS SHORT TERM IN NATURE AGAINST THE COUNTER CONTENTION OF THE APPELLANT THAT THE CAPITAL GAIN OF PARTLY LONG TERM AND PARTLY SHORT TERM IN NATURE. ON CONSIDERATION OF THE MATERIAL FACTS, I FIND THAT THE SUBMISSION OF THE APPELLANT LENDS MUCH FORCE WITH MERITS. THE FLAT NO. 102 WAS NOT ONLY SUPERSTRUCTURE BUT ALSO UNDIVIDED INTEREST IN THE LAND. THIS IS EVIDENT FROM PARAGRAPH 1 ON PAGE 2 OF THE AGREEMENT DATED 13.11.2006. THE LAND PROPORTIONATE TO THE SAID FLAT WAS OWNED BY THE APPELLANT MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 14 SINCE 1981 BY VIRTUE OF THE GIFTS AS HELD IN GROUND NO. 2 SUPRA AND THEREFORE, THE SAME WAS A LONG TERM CAPITAL ASSET. THUS, THE APPELLANT WAS CORRECT IN HER SUBMISSION THAT THE LAND SHOULD BE CONSIDERED AS LONG TERM CAPITAL ASSET. THE SUPER STRUCTURE WAS ACQUIRED BY AN AGREEMENT DATED 11.02.2004 AND TRANSFERRED ON 13.11.2006 AND THE HOLDING PERIOD WAS BELOW THREE YEARS, HENCE, THE SAME WAS TO BE CONSIDERED AS SHORT TERM CAPITAL ASSET. I, THEREFORE, HOLD THAT THE LAND PORTION ATTRIBUTABLE TO THE FLAT NO. 102 WAS TO BE CONSIDERED AS LONG TERM CAPITAL ASSET AND THE SUPER STRUCTURE WAS TO BE CONSIDERED AS SHORT TERM CAPITAL ASSET. THIS VIEW IS DULY SUPPORTED BY THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ESTATE OF OMPRAKASH JHUNJHUNWALA 172 CTR 325 AND OTHER DECISIONS. THE AO IS DIRECTED ACCORDINGLY IN THE MATTER. THE SALE PROCEEDS FOR THE FLAT WAS RS. 4527/- PER SQUARE FEET (RS. 1,70,00,000 / 3755 SQ. FT.). AS THE CAPITAL GAIN IS TO BE COMPUTED SEPARATELY, THE SALE PROCEEDS NEEDS TO BE BIFURCATED FOR THE PURPOSE OF COMPUTATION OF LONG TERM AND SHORT TERM CAPITAL GAINS. IN THIS REGARD, THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS VIMAL CHAND GOLCHA 201 ITR 442 HAS HELD AS FOLLOWS: IF THE PRICE OF TWO CAPITAL ASSETS HAS BEEN CHARGED AT ONE CONSOLIDATED PRICE, THEN THE ASSESSEE IS ENTITLED TO BIFURCATE THE SAME. A SITUATION MAY ARISE WHERE A GAIN FROM ONE OF THE CAPITAL ASSETS IS A SHORT TERM CAPITAL GAIN WHILE FROM THE OTHER IS A LONG TERM CAPITAL GAIN AND, IN SUCH A SITUATION THE BENEFIT TO THE ASSESSEE CANNOT BE DENIED IN RESPECT OF A GAIN ARISING FROM THE SALE OF AN ASSET WHICH COULD BE CONSIDERED AS A LONG TERM CAPITAL GAIN. SIMILAR VIEW WAS TAKEN BY THE MADRAS HIGH COURT IN THE CASE OF CIT V DR. D.L. RAMACHANDRA RAO (236 ITR 51) WHEREIN IT WAS HELD AS FOLLOWS: THE DEFINITION OF CAPITAL ASSET INCLUDES PROPERTY OF ANY KIND AND LAND HELD BY THE ASSESSEE IS ALSO A CAPITAL ASSET AND IT IS POSSIBLE TO BIFURCATE THE CAPITAL GAIN ARISING WITH REFERENCE TO THE SALE OF LAND AND BUILDING EVEN IF THEY ARE SOLD AS UNIT, IF THE LANDS ARE HELD BY THE ASSESSEE FOR A PERIOD MORE THAN THAT PRESCRIBED UNDER SECTION 2(42A) OF THE INCOME TAX ACT, 1961, NAMELY 36 MONTHS. IT IS NOT POSSIBLE TO SAY THAT BY CONSTRUCTION OF THE BUILDING, THE LAND WHICH WAS A LONG TERM CAPITAL ASSET, HAS CEASED TO BE A LONG TERM CAPITAL ASSET. THE LAND IS AN INDEPENDENT AND AN IDENTIFIABLE CAPITAL ASSET EVEN AFTER THE CONSTRUCTION OF THE BUILDING. SIMILAR VIEW WAS TAKEN IN THE CASE OF ITC LIMITED V DCIT (86 ITD 131). THE AO HAS ALREADY MADE INQUIRY AND FOUND THAT THE COST OF THE SUPER STRUCTURE WAS RS. 2,030/- PER SQUARE FEET. IN ORDER TO ESTIMATE THE VALUE OF THE SUPER STRUCTURE IN THE HANDS OF THE APPELLANT, I AM OF THE VIEW THAT REASONABLE CONTRACTORS PROFIT, IF ADDED TO THE COST, WOULD BE A REASONABLE ESTIMATE OF THE VALUE OF THE SUPER STRUCTURE. I, THEREFORE, ESTIMATE REASONABLE CONTRACTORS PROFIT @ 10% AND DIRECT THAT THE VALUE OF THE SUPER STRUCTURE BE DETERMINED AT RS. 2,240/- PER SQUARE FEET. AS THE VALUE OF THE SUPER STRUCTURE HAS BEEN DETERMINED AT RS. 2,240/- PER SQUARE FEET, THE BALANCE AMOUNT OF SALE CONSIDERATION REPRESENTS THE VALUE OF THE LAND I.E. RS. 2,287 (RS. 4,527-RS. 2,240). IN VIEW OF THE ABOVE, I DIRECT THE AO TO COMPUTE THE LONG TERM CAPITAL GAINS ON THE SALE OF THE LAND TAKING INTO ACCOUNT THE FULL CONSIDERATION FOR TRANSFER ON ACCOUNT OF LAND AT RS. 2,287/- PER SQUARE FEET. THE APPELLANTS AREA BEING 3096 SQ. FT., THE SALE VALUE OF LAND COMES TO RS. 70,80,552/- AND THE SALE VALUE OF SUPER STRUCTURE COMES TO MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 15 RS. 69,35,040/-. THE AO IS DIRECTED ACCORDINGLY IN THE MATTER. THE COST OF THE SUPER STRUCTURE WAS RS. 2,030/- PER SQUARE FEET AS DETERMINED BY THE AO AND I, THEREFORE, HOLD THAT THE SHORT TERM CAPITAL GAINS THE SALE OF THE SUPER STRUCTURE IS COMPUTED AT RS. 6,50,160/- (RS. 69,35,040 RS. 62,84,880/-). IN GROUND NO 2 THE VALUE OF THE LAND AS ON 01.04.1981 HAS BEEN HELD TO BE RS. 2,55,60,000/-. I, THEREFORE, HOLD THAT THE AO SHOULD CONSIDER THE FAIR MARKET VALUE OF THE LAND AS ON 01.04.1981 AT RS. 2,55,60, X 3,96 / 72,190). THE COST INFLATION INDEX FACTOR FOR THE YEAR UNDER CONSIDERATION WAS 519, HENCE, THE INDEXED COST OF LAND WORKS OUT TO RS. 56,89,213/- (RS. 10,96,187 X 519/100). I, THEREFORE, HOLD THAT THE LONG TERM CAPITAL GAINS ON THE SALE OF LAND BE COMPUTED AT RS. 13,19,339/- (RS. 70,80,552 RS. 56,89,213). THE AO IS DIRECTED ACCORDINGLY. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE US. 19. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 20. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CASE ON HAND, THE ASSESSEE HAS TRANSFERRED ITS APARTMENT NO. 102 TO M/S PEPPL AND RECEIVED HER SHARE OF CONSIDERATION FOR RS. 1,40,16,511/-. THE AO TREATED THE ENTIRE CONSIDERATION AGAINST THE TRANSFER OF IMPUGNED APARTMENT AS SALE PROCEEDS TOWARDS THE SUPERSTRUCTURE ONLY. ACCORDINGLY SHORT TERM CAPITAL GAIN WAS WORKED OUT BY THE AO. HOWEVER, THE LD. CIT(A) FOUND THAT THE CONSIDERATION AGAINST THE TRANSFER OF APARTMENT NO 102 IS NOT ONLY TOWARDS THE LAND BUT ALSO TOWARDS THE SUPER STRUCTURE BUILT ON THE LAND. THIS FACT IS EVIDENT FROM THE COPY OF THE AGREEMENT BETWEEN THE ASSESSEE AND PEPPL WHICH IS PLACED ON PAGE 51 TO 53 OF THE PAPER BOOK. THE RELEVANT EXTRACT OF THE LAND READS AS UNDER: THE MEMBERS OF THE FIRST PARTY HEREBY SURRENDERS, TRANSFER, MAKES OVER AND ASSIGNS ALL THEIR RIGHT, TITLE AND INTEREST IN APARTMENT NO. 102, FIRST FLOOR, PRESTIGE ABSCOT MEASURING 3755 SQ. FT. SUPER BUILT UP AREA ALONG WITH CORRESPONDING UNDIVIDED SHARE IN THE LAND AND TOGETHER WITH TWO CAR PARKING SPACES ATTACHED TO THIS APARTMENT IN FAVOUR OF THE SECOND PARTY AND / OR ITS NOMINEES AND IN CONSIDERATION THEREOF THE SECOND PARTY AGREES TO PAY TO THE FIRST PARTY A SUM OF RS. 1,70,00,000/- (RUPEES ONE CRORE SEVENTY LAKHS ONLY), IN THE MANNER DETAILED BELOW, IN FULL SETTLEMENT OF THE PRICE AND THE VALUE OF THE SAID APARTMENT. MRS. ARIYEH KHALEELI I.T.A. NO. 118/KOL/2015 A.Y: 2007-08 16 FROM THE ABOVE, WE FIND THAT THERE REMAINS NO DOUBT THAT THE TRANSFER OF APARTMENT NO. 102 CONSISTS OF LAND AS WELL AS SUPERSTRUCTURE. THEREFORE, THE CONSIDERATION NEEDS TO BE ALLOCATED TOWARDS THE SALE OF LAND AS WELL AS TOWARDS THE SALE OF SUPERSTRUCTURE. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) AND HENCE THE GROUND OF APPEAL OF REVENUE IS DISMISSED. 21. THE LAST ISSUE RAISED BY REVENUE IS THAT LD. CIT (A) ERRED IN GRANTING THE EXEMPTION OF CAPITAL GAIN UNDER SECTION 54F OF THE ACT. 22. AT THE OUTSET, IT WAS OBSERVED THE AO HAD TREATED THE TRANSFER OF APARTMENT AS SHORT TERM CAPITAL GAIN BUT WE HAVE ALREADY HELD THAT THE TRANSFER OF APARTMENT IS NOT LIMITED TO THE SUPER STRUCTURE BUT ALSO IT EXTENDS TO THE SHARE OF LAND. THEREFORE, THE CAPITAL GAIN ARISING TO THE ASSESSEE IS ON ACCOUNT OF TRANSFER OF LAND IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT AFTER FULFILLING THE CONDITION AS SPECIFIED UNDER THAT SECTION. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) HENCE THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 23. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 AUGUST, 2017. SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23/08/2017 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. MRS. ARIYEH KHALEELI, 214, A.J.C. BOSE ROAD, KOLKATA 700017. 2. ITO WARD 33(1), 10B MIDDLETON ROW, 3 RD FLOOR, KOLKATA 700071. 3. THE CIT(A) 4. THE CIT 5. DR BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA