Kusum Mohta, Kolkata V. ITO, WD-44(3), KOLKATA, Kolkata

ITA 1334/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5840 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 14-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: VIKAS SHARMA
• Keywords: Capital asset; Gift; Proportionate interest; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA B BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER) ITA NO. 1334/KOL/2016 ASSESSMENT YEAR: 2010-11 KUSUM MOHTA....................................APPELLANT 5/2, RAM KRISHNA LANE BAGBAZAR KOLKATA 700 003 [PAN : AHMPM 9143 K] INCOME TAX OFFICER, WARD-44(3), KOLKATA......................................RESPONDENT APPEARANCES BY: SHRI VIKAS SHARMA, FCA, APPEARED ON BEHALF OF THE ASSESSEE. SHRI S. DASGUPTA, ADDL. CIT, D/R. APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JUNE 14 TH , 2018 DATE OF PRONOUNCING THE ORDER : JULY 20 TH , 2018 ORDER PER J. SUDHAKAR REDDY, AM :- THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKATA (HEREINAFTER THE LD. CIT(A)), DT. 19/02/2016, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), RELATING TO ASSESSMENT YEAR 2010-11. 2. THE FACTS OF THE CASE ON HAND ARE AT PAGE 2 PARA 4 OF THE ASSESSMENT ORDER. THEY ARE EXTRACTED FOR READY REFERENCE:- 4. ON VERIFICATION OF THE DETAILS RELATING TO THE CAPITAL GAIN FROM LAND, AS SUBMITTED BY THE A/R OF THE ASSESSEE DURING THE PROCEEDINGS, FOLLOWING OBSERVATION AND FINDINGS HAVE BEEN BROUGHT IN RECORD AND THE SAME WERE PLACED BEFORE THE ASSESSEE FOR HER EXPLANATION WITH EVIDENCES, VIDE THIS OFFICE LETTER DATED 05.03.2013. (I) IT APPEARS FROM THE COPY OF THE DEED OF GIFT MADE ON 4TH NOVEMBER,2004 BETWEEN SMT. MAINA DEVI SHATTER AND SMT. KUSUM MOHTA, AS FILED BY THE ASSESSEE, DURING THE SCRUTINY PROCEEDINGS, THAT THE VALUE THE GIFTED AREA AS ON 04.11.2004 HAS BEEN VALUED AT RS. 1,48,000/- BY THE STAMP DUTY AUTHORITY. AS SUCH, THE INDEXED VALUE OF THE REFERRED PLOT OF LAND MEASURING 7.40 COTTAHS WOULD BE AT RS. 1,94,867/- (RS.1,48000/480 X 632) FOR FINANCIAL YEAR 2009-10, INSTEAD OF RS. 2,33,840/-, AS CLAIMED BY THE ASSESSEE. 2 ITA NO. 1334/KOL/2016 ASSESSMENT YEAR: 2010-11 KUSUM MOHTA (II) IT APPEARS FROM THE DEVELOPMENT AGREEMENT MADE ON 04-11-2004 BETWEEN SUYOG NIRMAN AND 8 NUMBER OF OWNERS OF THE LANDS, INCLUDING THE ASSESSEE, THAT 73.5% OF UNDIVIDED SHARES OF THE' CONSTRUCTED AREAS TOGETHER WITH SHARE OR INTEREST AND TOGETHER WITH LAND APPURTENANT THERETO AND TOGETHER WITH SHARE IN CAR PARKING SPACE TO THE EXTENT THE SAME PERCENTAGE OF 73.5% WILL BE UNDER OWNERSHIP OF THE DEVELOPER (DEVELOPERS ALLOCATION) VIDE CLAUSE 10 OF THE DEED. IT IS FURTHER EVIDENT FROM THE SAID DEED THAT THE SAID DEVELOPER WILL ENJOY THE RIGHT OF 73.5% OF THE OWNERSHIP IN EXCHANGE OF ALL COSTS OF PLAN (CLAUSE 5), DEVELOPMENT (CLAUSE 6), COST OF CONSTRUCTION (CLAUSE 7), ARCHITECT (CLAUSE 8) AND ADVANCE AND DEPOSIT (CLAUSE 9). AS SUCH, THE CONSTRUCTION COST OF RS. 3,94,854/- IS UNDER THE DOMAIN OF THE DEVELOPER DULY BEEN CLAIMED BY THE DEVELOPER IN HIS BALANCE SHEET. (III) IT APPEARS FROM THE DETAILS SUBMITTED BY THE ASSESSEE THAT SHE HAS MADE CAPITAL GAIN EQUAL TO THE AGGREGATE AMOUNT OF SALE CONSIDERATION FOR FLAT NO. 1A & 4B AND FAIR MARKET VALUE OR VALUATION OF FLAT 28 AFTER DEDUCTING THE INDEXED COST OF LAND TO THE TUNE OF RS. 1,94,867/-. AS SUCH, THE VALUATION OF FLAT 28 SHALL BE WITHIN THE PURVIEW OF THE TOTAL CAPITAL GAIN OF THE ASSESSEE. HENCE TOTAL LONG-TERM CAPITAL GAIN OF THE ASSESSEE IS TO BE DETERMINED BY AGGREGATING THE SALES CONSIDERATION OF FLAT 1A & 2B AND VALUE OF FLAT 4B. IN REPLY THE A/R OF THE ASSESSEE FILED WITTEN SUBMISSION DATED 12.03.2013, WHEREIN IT HAS BEEN STATED THAT (1) THE VALUE OF THE GIFTED AREA TO THE TUNE OF RS. 1,48000/- HAS BEEN VALUED FOR THE MUTATION PURPOSE. (2) EXPENSES FOR IMPROVEMENT HAVE BEEN MADE FOR ALTERATION, ADVERTISEMENT, PRINTING, STATIONARY, BROKERAGE, ETC. (3) IF AGGREGATING THE SALE CONSIDERATION OF FLAT 1A, 4B AND 2B THEN THE ASSESSEE WOULD BE DECLINED THE BENEFIT OF INVESTMENTS IN INFRASTRUCTURE BONDS OUT OF REALIZATION/SALE PROCEED OF FLAT2B, WHICH WAS SOLD IN SUBSEQUENT YEAR. THE LD. ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE. 2.1. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. FIRST APPELLATE AUTHORITY WAS OF THE OPINION THAT THE PROVISIONS OF BUSINESS PROFITS AS WELL AS CAPITAL GAINS SHOULD HAVE BEEN WORKED OUT BY THE ASSESSEE. HE HELD THAT, IN THE COMPUTATION OF INCOME THE ASSESSEE HAS TO TAKE THE COST OF INDEX OR THE COST OF LAND FOR ENTIRE PORTION OF LAND. HE POINTED OUT THAT THE ASSESEE HAS TREATED THE ENTIRE TRANSACTION AS A CAPITAL GAIN AND HAS SUBSEQUENTLY TRIED TO SPLIT THE CAPITAL GAIN ARISES IN THIS CASE AND THAT INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND THAT THE BASIS OF SALE OF EACH UNIT SEPARATELY. HE HELD THAT THERE IS NO CAPITAL GAIN AND THE PROJECT COMPLETION METHOD OF ACCOUNTING HAS TO BE ADOPTED AND THE INCOME SHOULD BE RECOGNISED FOR THE ENTIRE SALE IN THE YEAR. HE HELD THAT THE ASSESSEE IS NOT ENTITLED FOR 3 ITA NO. 1334/KOL/2016 ASSESSMENT YEAR: 2010-11 KUSUM MOHTA BENEFIT U/S 54EC AS THE INCOME IN QUESTION IS RECEIVED FROM BUSINESS AND NOT BY WAY OF CAPITAL GAIN. HE FURTHER HELD THAT INDEXED COST OF THE LAND COULD NOT BE ALLOWED AS A DEDUCTION. 3. AGGRIEVED THE ASSESSEE IS BEFORE US. WE HAVE HEARD SHRI VIKAS SURANA, FCA, LD. COUNSEL FOR THE ASSESSEE AND SHRI S. DASGUPTA, THE ADDL. CIT SR. D/R ON BEHALF OF THE REVENUE. 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE-LAW CITED, WE HOLD AS FOLLOWS:- 4.1. THE ASSESSEE SMT. KUSUM MOHTA, RECEIVED A GIFT OF LAND ON 4 TH NOVEMBER, 2004 FROM HER MOTHER SMT. MAINA DEVI BHATTER. SHE HAD ENTERED INTO A DEVELOPMENT AGREEMENT ON THE VERY SAME DAY I.E. 04/11/2004 WITH M/S. SUYOG NIRMAN ALONG WITH 8 OTHER CO-OWNERS OF THE LAND, FOR DEVELOPMENT OF THE PROPERTY. AS PER THE DEVELOPMENT AGREEMENT, ALL THE CO-OWNERS WOULD RETAIN 26.5% OF THE DEVELOPED PROPERTY AND THE BUILDER WOULD BE GIVEN 73.5% OF THE UNDIVIDED SHARE OF THE CONSTRUCTED AREA ALONG WITH PROPORTIONATE INTEREST IN LAND, PARKING AREA ETC. THE ASSESSEE RECEIVED THREE FLATS BEARING NO. 1A, 4B AND 2B IN EXCHANGE OF HER SURRENDER OF THE LAND. DURING THE IMPUGNED AY, 2010-11, THE ASSESSEE SOLD FLAT NO. 1A & 4B AND DISCLOSED LONG TERM CAPITAL GAINS ON SUCH SALE. SHE ALSO CLAIMED BENEFIT U/S 54EC OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE SHOULD HAVE OFFERED TO TAX CAPITAL GAINS ON FLAT NO. 2B MEASURING 1212 SQ.FT. ALSO AS THE ASSESEE HAD TRANSFERRED THE PROPORTIONATE LAND TO THE BUILDER. THE LD. CIT(A) CONCLUDES THAT HE ASSESSEE HAS DONE BUSINESS. WE COULD NOT APPROVE THE VIEW TAKEN BY THE LD. CIT(A). THE ASSESSEE IS AN INDIVIDUAL WHO HAD OFFERED HER LAND FOR DEVELOPMENT IN EXCHANGE OF CONSTRUCTED RESIDENTIAL AREA. SHE TRANSFERRED 7.40 COTTAHS OF LAND TO THE BUILDER AND IN RETURN SHE RECEIVED AS CONSIDERATION 3 FLATS I.E. FLAT NO. 1A OF 955 SQ.FT. FLAT NO. 2B 0F 1212 SQ.FT. AND FLAT NO 4B OF 1370 SQ. FT. THE GAIN THAT ARISES OUT OF TRANSFER OF LAND TO THE DEVELOPER UNDER THE DEVELOPMENT AGREEMENT IS TO BE TAXED AS CAPITAL GAIN ONLY IN THE HANDS OF THE 4 ITA NO. 1334/KOL/2016 ASSESSMENT YEAR: 2010-11 KUSUM MOHTA OWNER. THE CAPITAL GAIN HAS TO BE COMPUTED BY TAKING THE COST OF THE PREVIOUS OWNER AND THE DATE OF ACQUISITION OF THE PREVIOUS OWNER I.E. THE MOTHER OF THE ASSESSEE SMT. MAINA DEVI BHATTER AS PER SECTION 49 (1)(II) OF THE ACT AND BENEFIT OF INDEXATION SHOULD BE GRANTED TO THE ASSESSEE FROM THE DATE ON WHICH THE PREVIOUS OWNER ACQUIRED THE PROPERTY AS HELD BY THE COURTS IN THE CASE OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INCOME TAX APPEAL NO. 3378 OF 2010 IN THE CASE OF THE COMMISSIONER OF INCOME TAX-12 V. MANJULA J. SHAH (2013)355 ITR 0474. CAPITAL GAIN ON TRANSFER OF LAND HAS TO BE CALCULATED IN THIS MANNER. 4.2. THE CONSIDERATION RECEIVED BY THE ASSESSEE FROM THE BUILDER WOULD BE THE COST OF CONSTRUCTION INCURRED BY THE BUILDER FOR CONSTRUCTION OF THESE THREE FLATS. THIS TRANSACTION IS TAXABLE IN YEAR IN WHICH THE DEVELOPMENT AGREEMENT HAS BEEN ENTERED INTO, IF THE POSSESSION OF THE PROPERTY HAD BEEN HANDED OVER TO THE BUILDER, ON THE DATE OF EXECUTION OF THE DEVELOPMENT AGREEMENT AND IF NOT, IN THE YEAR IN WHICH THE CONSTRUCTED FLATS ARE HANDED OVER TO THE ASSESSEE. IT WAS SO HELD IN THE JUDGMENTS IN THE CASE OF POTLA NAGESHWAR RAO VS. DCIT (AP HIGH COURT JUDGMENT DT. 9 TH APRIL 2014 ITTA NO. 245 OF 2014). IN CASE THE ASSESSEE HAD HANDED OVER THE POSSESSION OF THE LAND TO THE BUILDER ON 09/11/2004, THEN THE CAPITAL GAIN CAN BE BROUGHT TO TAX ONLY IN THE ASSESSMENT YEAR 2005-06 AND NOT IN THIS YEAR. 4.2.1. IF THE ASSESSEE HAD NOT HANDED OVER PHYSICAL POSSESSION OF THE PROPERTY TO THE BUILDER ON 4/11/2004, THEN THE CAPITAL GAIN WOULD BE TAXABLE IN THE YEAR IN WHICH THE BUILDER HAS HANDED OVER POSSESSION OF THE FLATS TO THE ASSESSEE. THIS IS TO BE ASCERTAINED. THUS, BRINGING TO TAX CAPITAL GAIN IN THIS YEAR MAY NOT BE IN ACCORDANCE WITH LAW. AS THERE IS NO ESTOPPEL AGAINST LAW, EVEN IF THE ASSESSEE HAS OFFERED CAPITAL GAINS TO TAX THIS YEAR, THE SAME CANNOT BE ASSESSED TO TAX IN THE SAME YEAR. THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION U/S 54F, FOR THE VALUE OF THE FLATS AS PER LAW, IN CASE THE OTHER CONDITIONS SPECIFIED IN THE SECTION ARE FULFILLED. 4.3. THE SECOND TRANSFER WOULD BE FROM THE DATE OF FIRST TRANSFER OF THE LAND TO THE BUILDER I.E. THE A.Y. 2005-06, IF IT IS 04/11/2004 AND THE DATE OF SALE OF THESE FLATS. THE PERIOD HAS TO BE RECKONED, DEPENDING ON THE DATES. IF THE INITIAL TRANSFER WAS ON 5 ITA NO. 1334/KOL/2016 ASSESSMENT YEAR: 2010-11 KUSUM MOHTA 04/11/2004 THEN THE SALE OF THESE TWO FLATS DURING THE IMPUGNED AY WOULD BE SALE OF LONG TERM CAPITAL GAIN. IN THAT SCENARIO THE MARKET VALUE OF FLAT NO. 2B CANNOT BE ADDED AS THERE IS NO SALE OF THIS FLAT. THE PROCEEDS RECEIVED BYTE HE ASSESSEE ON SALE OF FLAT NO. 1A & 4B CANT ONLY BE TAXED AND IF THE PROCEEDS ARE INVESTED, EXEMPTION CLAIMED U/S 54EC OF THE ACT. 4.4. THE ISSUE WHETHER TRANSFER HAS TAKEN PLACE ON 04/11/2004 IS TO BE GATHERED BOTH FROM THE DEVELOPMENT AGREEMENT, THE FACTS ON RECORD AND ACTION OF THE BUILDER SUYOG NIRMAN. IF M/S. SUYOG NIRMAN HAD SOLD SOME FLATS UNDER CONSTRUCTION AND REGISTERED THE SAME IN FAVOUR OF PROSPECTIVE BUYERS PRIOR TO THE IMPUGNED ASSESSMENT YEAR, THEN IT HAS TO BE CONCLUDED THAT THE TRANSFER OF THE LAND IN FAVOUR OF THE BUILDER HAS TAKEN PLACE ON 4/11/2004 AND THE CAPITAL GAIN ON SUCH TRANSFER OF LAND SHOULD BE TAXED ONLY IN THE ASSESSMENT YEAR 2005-06. 4.5. WITH THESE OBSERVATIONS, WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE THE ISSUE DE NOVO AS PER THE DIRECTIONS GIVEN ABOVE. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. KOLKATA, THE 20 TH DAY OF JULY, 2018. SD/- SD/- [ S.S. VISWANETHRA RAVI ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20.07.2018 {SC SPS} 6 ITA NO. 1334/KOL/2016 ASSESSMENT YEAR: 2010-11 KUSUM MOHTA COPY OF THE ORDER FORWARDED TO: 1. KUSUM MOHTA 5/2, RAM KRISHNA LANE BAGBAZAR KOLKATA 700 003 2. INCOME TAX OFFICER, WARD-44(3), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES