Dr.Suchitra Rao , Mangalore V. The Income TAx Officer Ward-2(1), Mangalore

ITA 1324/BANG/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5637 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 25-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Set aside; Capital Gains
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBE ITA NO. 1324/BANG/2018 ASSESSMENT YEAR : 2013 - 14 DR. SUCHITRA RAO, DOOR NO.15-3-148, SCS HOSPITAL, BENDORE, MANGALURU 575 002. PAN: ABEPR 4423K VS. THE INCOME TAX OFFICER, WARD 2(1), MANGALURU. APP ELLANT RESPONDENT APP ELLANT BY : S MT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : DR. P.V. PRADEEP KUMAR, ADDL.CIT(DR)(ITAT), BENGALU RU. DATE OF HEARING : 05 .09.2019 DATE OF PRONOUNCEMENT : 20 . 09.2019 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORD ER DATED 15.02.2018 OF THE CIT(APPEALS), MANGALURU RELATING TO ASSESSM ENT YEAR 2013-14. 2. THE ISSUE IN THIS APPEAL IS, WHETHER THE CAPITAL GAIN ON SALE OF PROPERTY BY THE ASSESSEE IS TO BE REGARDED AS LONG TERM OR SHORT TERM ITA NO. 1324/BANG/2018 PAGE 2 OF 7 CAPITAL GAIN. AS PER DEFINITION OF LONG TERM CAPIT AL GAIN U/S. 2(29B) OF THE INCOME-TAX ACT, 1961 [THE ACT], LONG TERM CAPITAL ASSET MEANS AN ASSET, WHICH IS NOT A SHORT TERM CAPITAL ASSET. SHORT TER M CAPITAL ASSET MEANS A CAPITAL ASSET HELD BY THE ASSESSEE FOR NOT MORE THA N 36 MONTHS. IN OTHER WORDS, TO CLAIM A GAIN ON SALE OF PROPERTY AS A LON G TERM CAPITAL GAIN, AN ASSESSEE SHOULD HOLD THE PROPERTY FOR A PERIOD OF M ORE THAN 36 MONTHS. 3. THE ASSESSEE IS A DOCTOR BY PROFESSION AND OWNS NON-AGRICULTURAL IMMOVABLE PROPERTY IN KADRI VILLAGE OF MANGALORE TA LUK, KARNATAKA STATE. SHE ENTERED INTO A JOINT DEVELOPMENT AGREEMENT DATE D 21.07.2006 WITH 3 PERSONS, MR. PETER MASCARENHAS, MR. PAUL MASCARENHA S & MR. KRISHNAPPA UCHIL, (HEREINAFTER REFERRED TO AS DEVELOPERS) WH EREBY THE DEVELOPERS AGREED TO DEVELOP THE PROPERTY OWNED BY ASSESSEE BY CONSTRUCTION COMMERCIAL SHOPS/SPACE, WITH AN UNDERSTANDING THAT COST OF CONSTRUCTION WILL BE BORNE BY DEVELOPERS AND 50% OF THE CONSTRUC TED AREA WILL BE GIVEN TO THE ASSESSEE AND REMAINING 50% TAKEN AS SHARE OF THE DEVELOPER. THERE WAS ALSO A MAINTENANCE AGREEMENT DATED 15.11. 2010 BETWEEN THE ASSESSEE AND THE DEVELOPER, WHEREBY THE ASSESSEE AN D THE DEVELOPER AGREED ON THE MODE OF MAINTENANCE AND MANAGEMENT OF COMMON AREAS AND FACILITIES IN THE BUILDING. AFTER THE CONSTRUC TION OF BUILDING, THE ASSESSEE AND THE DEVELOPER HAD TOGETHER SOLD SOME C OMMERCIAL UNITS IN THE BUILT-UP AREA AND WERE IN POSSESSION OF REMAINI NG AREA. 4. ON 25.11.2011, THERE WAS A DEED OF PARTITION WHE REBY THE ASSESSEE AND DEVELOPERS DIVIDED THE BUILT-UP AREA DEVELOPED BY THE DEVELOPERS. AS PER THE SHARES AGREED UNDER THE JOINT DEVELOPMENT A GREEMENT DATED 21.7.2006. SCHEDULE A1 OF THE SAID PARTITION DEED GIVES THE DETAILS OF THE AREA ALLOTTED TO THE ASSESSEE AND THE SAME IS AS FO LLOWS:- ITA NO. 1324/BANG/2018 PAGE 3 OF 7 SCHEDULE A-1. DESCRIPTION OF PROPERTY ALLOTTED TO THE SHARE OF TH E PARTY NO: 1. SI NO FLOOR SHOP NO DOOR NO TOTAL FLOOR AREA PERCENTAGE OF UNDIVIDED RIGHT IN THE LANDS MENTIONED IN SCHEDULE 'A' 1 BASEMENT FLOOR 1 15-13-707/1 (A} 2175 3.76 2 15 - 13 - 707/1 (B) 2176 3.77 2 FIRST FLOOR 1 15 - 13 - 707 5 2640 4.56 3 _ 15 - 13 - 707/7 3145 5.43 3 SECOND FLOOR 4 15 - 13 - 707/12 3610 6.23 4 THIRD FLOOR 1 15 - 13 - 707/ 13 2640 4.56 2 15-13-707/14 3145 5.43 5_ TERRACE FLOOR 1 -------- 4020 6.94 5. IN AY 2012-13, THE ASSESSEE DECLARED LONG TERM C APITAL GAIN ON JOINT DEVELOPMENT AGREEMENT DATED 21.7.2006 AND COMPUTATI ON OF CAPITAL GAIN IN THAT YEAR AS DONE BY THE AO WAS AS FOLLOWS:- CALCULATION OF SALE CONSIDERATION TOTAL COST OF PROJECT OF TIME SQUARE-(NO COSTLY: TE RRACE) (AS PER THE STATEMENT ATTACHED OF ARCHI-TECHNICS, C ERTIFIED ARCHITECTS OF THE BUILDING) RS. 4,94,46,500 PLINTH AREA ( EXC LUDING TERRACE) (AS PER THE STATEMENT ATTACHED OF ARCHI-TECHNICS, C ERTIFIED ARCHITECTS OF THE BUILDING SQ.FT. 53327 TOTAL SUPER - BUILT UP/SALEABLE AREA (EXCLUDING TERRACE) SQ.FT. 48656 COST OF SUPER - BUILT UP/ SALEABLE AREA PER SQ.FT. (NO COST OF TERRACE) (RS. 4,94,46,500/48656) 1016.25 ASSESSEE'S SHARE AS PER PARTITION DEED (EXCLUDING TERRACE) (AS PER THE PARTITION ATTACHED DR. 25-11-2011) SQF T . 19531.00 ASSESSEE'S SHARE AT GROUND FLOOR (WHICH IS NOT PART OF PARTITION DEED) SQ.FT. 3697.50 ASSESSEE'S SHARE UNSOLD AS ON 25 - 11 - 2011 AND DECLARED FOR CAPITAL GAIN 23228.50 TOTAL SALE CONSIDERATION F Y . 2011 - 12 2,36,05,963 (2322&50 SQ. FT. @ RS. 1,016.25/ - ) ITA NO. 1324/BANG/2018 PAGE 4 OF 7 6. THE AO ADOPTED RS.1175/SQ.FT AS THE COST OF CON STRUCTION AND MADE ADDITION ON ACCOUNT OF THE DIFFERENCE (1175-1016.25 ) IN THE ORDER U/S.143(3) FOR AY 2012-13. THE ASSESSEE ACCEPTED THE ADDITION AND THERE IS NO DISPUTE IN THIS REGARD AY 2012-13. 7. IN AY 2013-14, WHICH IS THE ASSESSMENT YEAR IN THE PRESENT APPEAL, THE ASSESSEE SOLD PART OF HER SHARE OF CONSTRUCTED AREA, WHICH SHE GOT FROM THE DEVELOPERS UNDER THE DEVELOPMENT AGREEMENT DATE D 21.7.2006. THE ASSESSEE CLAIMED THAT GAIN ON SUCH SALE SHOULD BE T AXED AS LONG TERM CAPITAL GAIN. ACCORDING TO ASSESSEE, THE PROPERTY THAT WAS SOLD BY HER IN AY 2013-14 WAS OBTAINED BY HER IN AY 2006-07 I.E., WHEN THE DEVELOPMENT AGREEMENT DATED 21.7.2006 WAS ENTERED INTO BY THE D EVELOPERS. THE ASSESSEE THEREFORE CLAIMED THAT PROPERTY WAS HELD B Y HER FOR MORE THAN 36 MONTHS. 8. THE AO, HOWEVER, WAS OF THE VIEW THAT THE ASSESS EE GOT THE PROPERTY THAT WAS SOLD IN AY 2013-14 ONLY UNDER PAR TITION DEED DATED 25.11.2011 AND THEREFORE THE GAIN ON SALE OF PROPER TY WAS A SHORT TERM CAPITAL GAIN AS THE ASSET WAS HELD BY THE ASSESSEE FOR LESS THAN 36 MONTHS. 9. CONSEQUENT TO THE AOS CONCLUSION THAT GAIN WAS SHORT TERM CAPITAL GAIN, DEDUCTION U/S. 54F WAS DENIED TO THE ASSESSEE . 10. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) UPH ELD THE ORDER OF AO OBSERVING AS FOLLOWS:- 5.7 THE SUBMISSION OF THE APPELLANT AND THE ASSESS MENT ORDER WERE CAREFULLY CONSIDERED. THE APPELLANT ENTERED IN TO A JOINT DEVELOPMENT AGREEMENT WITH THE DEVELOPERS ON 21.7.2 006. SUBSEQUENTLY, ON 25.11.2011, THE APPELLANT ENTERED INTO A PARTITION DEED TO GET HER SHARE IN THE BUILT UP ARE A. ACCORDINGLY, THE APPELLANT HERSELF OFFERED THE COST OF CONSTRUCT ION OF THE BUILT UP AREA RECEIVED BY HER (AS PER THE PARTITION DEED DATED 25.112011) IN THE AY 2012-13 AS THE SALE CONSIDERAT ION. THE AO ITA NO. 1324/BANG/2018 PAGE 5 OF 7 ACCEPTED THE APPELLANTS CONTENTION AND THE ASSESSME NT FOR AY 2012-13 REACHED FINALITY. THERE IS NO DISPUTE IN AY 2012-13. 5.8 DURING THE AY 2013-14, THE APPELLANT SOLD SOME PORTION OF THE BUILT AREA (WHICH WAS RECEIVED IN AY 2012-13 ) AND THE SALE CONSIDERATION WAS OFFERED TO TAX UNDER THE HEAD 'LO NG TERM CAPITAL GAINS' CLAIMING DEDUCTION U/S.54F, BEING INVESTMENT IN NEW RESIDENTIAL PROPERTY. THE ASSESSING OFFICER (AO) IN THE ASSESSMENT ORDER FOR AY 2013-14 TREATED THE TRANSAC TION AS SHORT TERM CAPITAL GAINS AND DISALLOWED THE DEDUCTION CLA IMED BY THE APPELLANT U/S.54F AMOUNTING TO RS.29,30,4001-. 5.9 BEFORE ME, THE AR CLAIMED THAT THE PERIOD OF HO LDING SHOULD BE CALCULATED FROM THE DATE OF JOINT DEVELOP MENT AGREEMENT AND NOT FROM THE DATE OF PARTITION DEED. THERE IS NO MERIT IN THE ARGUMENT OF THE AR. THE APPELLANT DID NOT OFFER THE COST OF CONSTRUCTION IN RELEVANT ASSESSMENT YEAR FO R TAXATION AS PER THE DATE OF JOINT DEVELOPMENT AGREEMENT. THE CO ST OF CONSTRUCTION WAS OFFERED TO TAX IN THE ASSESSMENT Y EAR 2012-13 VOLUNTARILY AS PER THE PARTITION DEED. THEREFORE, T HE SALE CONSIDERATION RECEIVED DURING THE CURRENT A.Y.2013- 14 ON SALE OF THE BUILT UP AREA (RECEIVED DURING THE AY 2012-13 A S PER PARTITION DEED) IS DEARLY A SHORT TERM CAPITAL GAINS AS IT WA S HELD FOR LESS THAN 36 MONTHS. THE AO DEARLY DEALT WITH THE ISSUE IN THE ASSESSMENT ORDER. THERE IS NO REASON TO INTERFERE W ITH THE ASSESSMENT ORDER. THE GROUNDS ARE REJECTED. 5.10. THE VARIOUS CASE LAWS RELIED ON BY THE AR ARE NOT RELEVANT TO THE FACTS OF THE CASE AND HENCE NOT CONSIDERED. 11. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASS ESSEE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE TI ME OF HEARING, IT WAS AGREED BY THE PARTIES THAT THE PERIOD OF HOLDING OF ASSET BY THE ASSESSEE SHOULD BE RECKONED FROM THE DATE ON WHICH THE CONST RUCTION OF THE BUILDING WAS COMPLETED BY THE DEVELOPER. NONE OF THE AUTHOR ITIES BELOW HAVE EXAMINED THIS ASPECT WHICH, IN OUR VIEW, IS VERY CR UCIAL. IT IS ONLY FROM THE DATE ON WHICH THE CONSTRUCTION IS COMPLETED THAT IT CAN BE SAID THAT THE ITA NO. 1324/BANG/2018 PAGE 6 OF 7 CAPITAL ASSET IN THE FORM OF BUILDING HAS COME INTO EXISTENCE AND CAN BE HELD BY THE ASSESSEE. THE HOLDING PERIOD OF THE AS SET HAS TO BE CONSIDERED ONLY FROM THE DATE OF COMPLETION OF THE BUILDING. EVEN IN RESPECT OF THE ASSET TRANSFERRED BY THE ASSESSEE, T HERE ARE TWO COMPONENTS VIZ., BUILT-UP AREA AND UNDIVIDED SHARE AND RIGHT IN THE LAND, OVER WHICH THE BUILDING WAS CONSTRUCTED. THERE SHO ULD BE BIFURCATION OF CONSIDERATION BETWEEN THE BUILT-UP AREA AND UNDIVID ED SHARE OF LAND. AS FAR AS UNDIVIDED SHARE OF LAND IS CONCERNED, THE AS SESSEE OWNED THE LAND EVEN AS EARLY AS 2006 AND THEREFORE TO THE EXTENT O F THE SALE CONSIDERATION ATTRIBUTABLE TO THE UNDIVIDED SHARE OF LAND, THE GA IN SHOULD BE COMPUTED SEPARATELY AND ASSESSED AS LONG TERM CAPITAL GAIN. 13. AS FAR AS SALE OF BUILDING IS CONCERNED, ONCE T HE COMPLETION OF CONSTRUCTION IS ASCERTAINED, THEN FROM THAT DATE HO LDING PERIOD OF THE BUILDING SHOULD BE CONSIDERED AND TO THE EXTENT SAL E CONSIDERATION IS ATTRIBUTABLE TO THE BUILDING CAPITAL GAIN SHOULD BE ASSESSED [LONG TERM OR SHORT TERM]. WE ARE ALSO OF THE VIEW THAT THE FAT THAT ASSESSEE DECLARED CAPITAL GAIN IN AY 2012-13 ON THE JOINT DEVELOPMENT OF THE PROPERTY WITH THE DEVELOPER IS OF NO CONSEQUENCE AND THAT SHOULD NOT STAND IN THE WAY OF DETERMINATION OF THE HOLDING PERIOD IN AY 2013-14 I S CONCERNED. IN THIS REGARD, IT IS ALSO SEEN THAT IN THE PARTITION DEED DATED 15.11.2011, THE PARTIES HAVE ACKNOWLEDGED THAT AFTER CONSTRUCTION O F THE BUILDING, THE ASSESSEE AND THE DEVELOPER HAVE JOINTLY SOLD SOME C OMMERCIAL UNITS AND WERE IN POSSESSION OF REMAINING COMMERCIAL UNITS, W HICH WAS BEING PARTITIONED BETWEEN THEM. WE ARE THEREFORE OF THE VIEW THAT THE ISSUE WITH REGARD TO COMPUTATION OF CAPITAL GAIN IN AY 2013-14 SHOULD BE DECIDED AFRESH BY THE AO IN THE LIGHT OF DIRECTIONS GIVEN A BOVE. THE ORDER OF CIT(APPEALS) IS ACCORDINGLY SET ASIDE AND ISSUE REM ANDED TO THE AO FOR FRESH CONSIDERATION, AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO. 1324/BANG/2018 PAGE 7 OF 7 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS TREATE D AS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( B R BASKARAN ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 20 TH SEPTEMBER, 2019. / D ESAI S MURTHY / COPY TO: 1. APPELLA NT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.