Seema Subhash Zambad, Pune V. Assistant Commissioner of Income-tax, Circle - 3, Aurangabad

ITA 1280/PUN/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4811 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-11-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 07-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED
• Keywords: Capital asset; Business income; Capital Gains
• Section: 43CA; 5(2); 6; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO. 1280/PUN/2018 / ASSESSMENT YEAR : 2014-15 SEEMA SUBHASH ZAMBAD, SHAH KHANDELWAL JAIN & ASSOCIATES, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESELY ROAD, PUNE 411 001 PAN :AACPZ8374N VS. ACIT, CIRCLE-3, AURANGABAD (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 26-06-2018 IN RELATION TO THE ASS ESSMENT YEAR 2014-15. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.89,54,638/- TOWARDS LONG TERM APPELLANT BY SHRI RAJIV THAKKAR RESPONDENT BY SHRI S.P. WALIMBE DATE OF HEARING 08-11-2019 DATE OF PRONOUNCEMENT 08-11-2019 ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 2 CAPITAL GAIN AND OF RS.1,42,43,500/- AS BUSINESS INCOME ON SALE OF LAND SITUATED AT GUT NO. 123, TISGAON TAL AND DIST. AURANGAB AD. 3. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE A LONG WITH CERTAIN OTHER PERSONS PURCHASED A PIECE OF LAND ADMEA SURING 6100 SQ. MTRS ON 4.4.2003 AT GUT NO.123, TISGAON, WALUJ, AURANGABAD, WITH HER SEPARATE SHARE AT 66.67% COMING TO 4066 SQ.MTRS. THE ASSESSEE CONVERTED SUCH LAND FROM CAPITAL A SSET TO STOCK IN TRADE IN THE FINANCIAL YEAR 2010-11 RELEVANT TO THE ASSESSMENT YEAR 2011-12 AND COMPUTED DEEMED CAPITAL GAIN U/S.45(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO C ALLED `THE ACT) AT RS.89,54,638/-. THEREAFTER, A PARTNERSHIP FIRM WITH THE NAME AND STYLE OF M/S. FULZAN PROPERTIES WAS BROUGHT INTO EXISTENCE BY THE ASSESSEE AND HER HUSBAND. THE FIRM UN DERTOOK CONSTRUCTION OF A PROJECT ON THE SAID LAND OWNED BY THE AS SESSEE AND ALSO SIMULTANEOUSLY GAVE LOAN OF RS.3.86 CRORE TO THE ASSESSEE. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, T HE ASSESSEE WAS CALLED UPON TO EXPLAIN THE NATURE OF UNSECURE D LOAN OF RS.3.86 CRORE TAKEN FROM M/S. FULZAN PROPERTIES. SHE SUBMITTE D THAT THE PARTNERSHIP FIRM PLANNED TO SET UP A NEW HOTEL PROJE CT AND ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 3 FOR THAT PURPOSE LAND AT GUT NO.123 BELONGING TO HER WAS US ED, ON WHICH THE CONSTRUCTION WORK WAS UNDERTAKEN. THE ASSESSEE CLAIMED THAT THE LAND CONTINUED TO BE HER OWN STOCK IN TRADE WHICH WA S REFLECTED IN THE BALANCE SHEET AS SUCH AND NOT THAT OF THE PARTNERSHIP FIRM. THE ASSESSING OFFICER OBSERVED THAT M/S. FULZAN PROPERTIES HAD SHOWN A SUM OF RS.1.63 CRORE IN ITS BALAN CE SHEET UNDER THE HEAD FIXED ASSETS AS GUT NO.123, WALUJ AND C APITAL WORK IN PROGRESS OF RS.44,40,471/-. WHEN FURTHER ENQ UIRED, IT TRANSPIRED THAT M/S. FULZAN PROPERTIES STARTED CONSTRUCTION ON THE LAND BELONGING TO THE ASSESSEE, WHICH WAS ALSO PARTLY RENTED OUT. THE AO OPINED THAT M/S. FULZAN PROPERTIES HAD ACQUIRED A RIGH T IN THE LAND OWNED BY THE ASSESSEE WHICH WAS COVERED WITHIN THE PURVIEW OF THE DEFINITION OF `TRANSFER U/S. 2(47)(VI) OF TH E ACT. HE, THEREFORE, HELD THAT INCOME FROM SUCH TRANSFER WAS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE. CONSIDERING THE FAC T THAT THE ASSESSEE HAD HERSELF COMPUTED DEFERRED CAPITAL GAIN U/S.4 5(2) AT RS.89,54,638/- IN HER RETURN FOR THE A.Y. 2011-12 WHEN THE CAPITAL ASSET WAS CONVERTED INTO STOCK IN TRADE, THE AO COMPUTED BUS INESS PROFIT AT RS.1,42,43,500/-, BEING, THE VALUE ADOPTED FOR STAMP DUTY AS ON 01-04-2013 AT RS.4050 PER SQ.MTR ON 6100 SQ. MTR S AS ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 4 REDUCED BY THE MARKET VALUE CONSIDERED ON THE DATE OF CON VERSION IN THE F.Y. 2010-11 AT RS.1.04 CRORE. HE, THEREFORE, AD DED RS.89,54,638/- AS CAPITAL GAIN IN THE HANDS OF ASSESSEE AND A FURTHER SUM OF RS.1.42 CRORE AS BUSINESS INCOME ON THE TRANSFER OF SUCH LAND TO M/S. FULZAN PROPERTIES. THE LD. CIT(A) ECHOED THE ASSESSMENT ORDER ON THIS POINT. THE ASSESSEE IS AGGRIEVE D BY THE DECISION OF THE LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH TH E RELEVANT MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE PURCHASED GUT NO. 123 AT VILLAGE TISGAON, WALUJ, AURANGABAD ON 04-04-2003 WITH A TOTAL AREA OF 61R. THIS LAND WAS SHOWN BY HER AS A CAPITAL ASSET TILL THE F.Y. 2010-11, WHEN IT WAS CONVERTED INTO STOCK IN TRADE. THEREAFTER SHE CONTINUED TO SHOW THE SAME LAND AS STOCK IN TRADE IN HER BALANCE SHEETS INCLUDING FOR THE YEAR UNDER CONSIDERATION. NO AGREEMENT WAS ENTERED INTO W ITH M/S. FULZAN PROPERTIES, A PARTNERSHIP FIRM IN WHICH THE ASSESS EE IS A PARTNER ALONG WITH HER HUSBAND, FOR TRANSFERRING THE LAND TO THE FIRM. M/S. FULZAN PROPERTIES CONSTRUCTED BUILDING THEREON AND TH E ONLY BUSINESS ACTIVITY CARRIED ON BY THE FIRM IS TO COMMERCIAL LY EXPLOIT THE PROPERTY SO CONSTRUCTED. A PART OF THE BUILDING S O ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 5 CONSTRUCTED ON THE SAID LAND WAS LET OUT BY M/S FULZAN PROPERTIE S TO M/S BHUVAN, FROM WHICH RENTAL INCOME TO THE TUNE OF RS.2 0.00 LAKH WAS RECEIVED AND OFFERED FOR TAXATION BY THE FIRM IN ITS OWN RETURN FOR THE A.Y. 2013-14. NOTWITHSTANDING THE ABOVE, IT IS CLEAR FROM THE ABOVE FACTUAL NARRATION THAT THE ASSESSEE DID NOT LEG ALLY TRANSFER THE OWNERSHIP OF LAND TO M/S. FULZAN PROPERTIES AND SIMPLY GAVE ITS POSSESSION FOR CONSTRUCTING BUILDING THEREON. 6. AT THIS JUNCTURE, IT IS RELEVANT TO NOTE THE JUDGMENT OF HONBLE SUPREME COURT IN CIT VS. BALBIR SINGH MAINI (2017) 398 ITR 531 (SC) IN WHICH THE ISSUE WAS ABOUT THE AMBIT OF TRANSFER U/S. 2(47) OF THE ACT. WHILE DEALING WITH THE ISSUE, THE H ONBLE SUPREME COURT HAS HELD THAT IF AN AGREEMENT FOR TRANSFER O F IMMOVABLE PROPERTY IS NOT REGISTERED, IT DOES NOT TAKE EFFE CT AND HENCE TRANSFER OF IMMOVABLE PROPERTY, OTHERWISE THAN THROU GH A REGISTERED AGREEMENT, DOES NOT AMOUNT TO `TRANSFER U/S 5 3A OF THE TPA IN VIEW OF THE 2001 AMENDMENT AND ALSO SIMULTANEOUS AMENDMENT TO SECTIONS 17(1A) AND 49 OF THE REGISTRATION ACT, 1908. THEIR LORDSHIPS FURTHER OBSERVED IN PARA 19 OF TH E JUDGMENT THAT: `AN AGREEMENT OF SALE WHICH FULFILLED THE INGREDIENTS OF SECTION 53A WAS NOT REQUIRED TO BE EXECUTED THROUGH A REGIS TERED ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 6 INSTRUMENT. THIS POSITION WAS CHANGED BY THE REGISTRATION AND OTHER RELATED LAWS (AMENDMENT) ACT, 2001. AMENDMENTS WE RE MADE SIMULTANEOUSLY IN SECTION 53A OF THE TRANSFER OF PROPER TY ACT AND SECTIONS 17 AND 49 OF THE INDIAN REGISTRATION ACT. BY THE AFORESAID AMENDMENT, THE WORDS THE CONTRACT, THOUGH REQUIR ED TO BE REGISTERED, HAS NOT BEEN REGISTERED, OR IN SECTION 53A O F THE 1882 ACT HAVE BEEN OMITTED. SIMULTANEOUSLY, SECTIONS 17 AND 4 9 OF THE 1908 ACT HAVE BEEN AMENDED, CLARIFYING THAT UNLESS THE DOCUMENT CONTAINING THE CONTRACT TO TRANSFER FOR CONSIDERATION A NY IMMOVABLE PROPERTY (FOR THE PURPOSE OF SECTION 53A OF 1882 ACT) IS REGISTERED, IT SHALL NOT HAVE ANY EFFECT IN LAW, OTHER THAN BEING RECEIVED AS EVIDENCE OF A CONTRACT IN A SUIT FOR SPECIFIC P ERFORMANCE OR AS EVIDENCE OF ANY COLLATERAL TRANSACTION NOT REQUIRED TO BE EFFECTED BY A REGISTERED INSTRUMENT. THEREAFTER, IT OBSERV ED IN PARA 20 OF THE JUDGMENT THAT: `THE EFFECT OF THE AFORESAID AME NDMENT IS THAT, ON AND AFTER THE COMMENCEMENT OF THE AMENDMENT ACT OF 2001, IF AN AGREEMENT, LIKE THE JDA IN THE PRESENT CASE, IS NOT REGISTERED, THEN IT SHALL HAVE NO EFFECT IN LAW FOR THE PURPOSES OF SECTION 53A. IN SHORT, THERE IS NO AGREEMENT IN THE EYES OF LAW WHICH CAN BE ENFORCED UNDER SECTION 53A OF THE TRANSFER OF ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 7 PROPERTY ACT.. FINDING THAT THE ASSESSEE CONTINUED TO BE THE OWNER THROUGHOUT THE AGREEMENT AND HAD AT NO STAGE PURPORTED TO TR ANSFER RIGHTS AKIN TO OWNERSHIP TO THE DEVELOPER, IT WAS HELD THAT AT THE HIGHEST, POSSESSION ALONE WAS GIVEN UNDER THE AGREEMENT, AND THAT TOO FOR A SPECIFIC PURPOSE. 7. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS FOUND THAT N OT ONLY NO REGISTERED SALE DEED WAS EXECUTED BY THE ASSESSEE IN FAVOUR OF M/S FULZAN PROPERTIES, BUT EVEN THE POSSESSION WAS ALSO NO T GIVEN TO BE ENJOYED AS AN OWNER. THERE ARE TWO PARTS O F THE ULTIMATE PROPERTY, NAMELY, THE SUPERSTRUCTURE WHICH IS OWN ED BY THE FIRM AND THE LAND BENEATH, WHICH IS OWNED BY THE ASSESS EE. IN VIEW OF THE FACT THAT THE ASSESSEE DID NOT TRANSFER THE LAND TO M/S. FULZAN PROPERTIES, WE HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING IT AS A CASE OF SALE, BEING, TRANSFER OF LAND BY THE ASSESSEE TO THE FIRM. 8. AT THIS JUNCTURE, IT IS SIGNIFICANT TO NOTE THE `SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION FOR TRANSFER OF ASSETS OTHE R THAN CAPITAL ASSETS IN CERTAIN CASES AS CONTAINED IN SECTION 43CA O F THE ACT, WHICH HAS BEEN HEAVILY RELIED BY THE AO. SUB-SECTION ( 1) ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 8 PROVIDES THAT : `WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF AN ASSET (OTHE R THAN A CAPITAL ASSET), BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOV ERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SU CH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABL E SHALL, FOR THE PURPOSES OF COMPUTING PROFITS AND GAINS FROM TRANSFER OF SUCH ASSET, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER . IT IS MANIFEST FROM THE ABOVE PROVISION THAT IT IS A DEEMING PROVISION IN SO FAR AS THE FULL VALUE OF CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF SOME PROPERTY, WHICH IS HELD OTHERWISE THAN A CAPITAL ASSET, IS CON CERNED. IT IS NOT A CHARGING PROVISION IN ITSELF NOR DOES THE DEEMING F ICTION EXTENDS TO `TRANSFER. UNLESS THE CHARGE IS CREATED FIRST U NDER A SPECIFIC PROVISION, THE DEEMING PROVISION FOR COMPUTATION IS NOT ACTIVATED. THE LD. DR HAS NOT DRAWN OUR ATTENTION TOWARDS AN Y PROVISION OF THE ACT, WHICH IN THE GIVEN CIRCUMSTANCES, DEEMS `TRANSFER OF LAND SO AS TO ATTRACT CHARGEABILITY. SECTION 4 3CA OF THE ACT CAN BE MAGNETIZED ONLY WHEN SOME BUILDING OR LAND ETC ., HELD OTHERWISE THAN AS A CAPITAL ASSET, IS TRANSFERRED. IN CASE THE ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 9 PROPERTY ITSELF IS NOT TRANSFERRED, THE QUESTION OF DEEMING TH E STAMP VALUE AS THE FULL VALUE OF CONSIDERATION DOES NOT ARISE, WH ICH IS ONLY A STAGE POSTERIOR TO THE `TRANSFER OF THE PROPERTY. 9. WE, THEREFORE, HOLD THAT THE AUTHORITIES BELOW WERE N OT JUSTIFIED IN MAKING OR CONFIRMING THE ADDITION IN THE HANDS OF TH E ASSESSEE UNDER THE HEAD `CAPITAL GAINS AS WELL AS `PROFITS A ND GAINS FROM BUSINESS OR PROFESSION BY TREATING IT AS A CAS E OF TRANSFER OF LAND TO M/S FULZAN PROPERTIES IN AS MUCH AS THE LAN D ITSELF WAS NOT TRANSFERRED BY THE ASSESSEE DURING THE YEA R UNDER CONSIDERATION. 10. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S. SYAL) JUDICIAL MEMBER VICE PRESIDENT PUNE; DATED : 08 TH NOVEMBER, 2019 ITA NO. 1280/PUN/2018 SEEMA S. ZAMBAD 10 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-1, AURANGABAD 4. THE PR. CIT-1, AURANGABAD 5. , , / DR A, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 08-11-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-11-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *