The ITO, Ward-2, Bharuch V. Shri Akshay Balkrishna Master, Bharuch

ITA 1361/AHD/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6107 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 23-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Assessee Lawyers: M K PATEL
• Keywords: Cost of acquisition
• Section: 143(3); 54

Judgement Text

ITA NO.1361/AHD/2013 ASSESSMENT YEAR : 2007-08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SMC BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO.1361/AHD/2013 ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER, WARD-2, BHARUCH. ..................APPELLANT VS. AKSHAY BALAKRISHNA MASTER, ............................RESPONDENT HOUSE NO.104, RADHEY VAIKUNTH MEGA TOWNSHIP, BHOLAV, BHARUCH. [PAN : AJTPM 1509 L]. APPEARANCES BY RAJESH MEENA FOR THE APPELLANT M.K. PATEL & ANIL SHAH FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 17.11.2017 DATE OF PRONOUNCING THE ORDER : 14.02.2018 O R D E R 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, CHA LLENGES CORRECTNESS OF LEANED CIT(A)S ORDER DATED 22 ND FEBRUARY 2013, IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007- 08, ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN (I) ALLOWING EXEMPTION U/S 54EC OF THE IT ACT CLAIM ED BY ASSESSEE TO THE TUNE OF RS.38 LACS INVESTED BEYOND 6 MONTHS IN CONTRAVENTIO N TO PROVISIONS OF SECTION 54EC OF THE IT ACT BY CONSIDERING CIRCULAR OF MCGM DATED 15.02.2007, IGNORING THE FACT THAT THE SAME WAS A CONSEQUENTIAL ORDER, G IVING EFFECT TO DIRECTIONS OF HONBLE BOMBAY HIGH COURTS ORDER DATED 20.11.2006. (II) DELETING ENTIRE ADDITION OF RS.46,34,667/- INS PITE OF THE FACT THAT ASSESSEE HAS ALREADY AVAILED BENEFIT OF COST OF ACQUISITION IN P RECEDING YEAR, WHICH WAS FORMING PART OF THE IMPUGNED ADDITION. 2. TO ADJUDICATE ON THIS APPEAL, A FEW MATERIAL FAC TS NEED TO BE TAKEN NOTE OF. THE ASSESSEE, AS A 16.67% CO-OWNER OF PROPERTY SITUATED AT CITY SURVEY NO.E788, 2 ND AND 4 TH ROAD, KHAR (W), MUMBAI, HAD ENTERED INTO A DEVELOPMENT AG REEMENT WITH M/S G M DEVELOPERS ON 14.09.2005. UNDER THIS AGREEMENT, G M DEVELOPERS W AS TO PAY A CONSIDERATION OF RS.4 CRORES ITA NO.1361/AHD/2013 ASSESSMENT YEAR : 2007-08 PAGE 2 OF 4 FOR THE BASIC FSI IN THE SAID PROPERTY, AND AN ADDI TIONAL RS.3.51 CRORE IN CASE THE BUILDER WAS ALLOWED FURTHER FSI ON THE SAME. THIS DEVELOPMENT AGREEMENT WAS REGISTERED ON 14.09.2005, AND UNDER THIS AGREEMENT THE ASSESSEE WAS TO RECEIV E RS.66,68,000/- (BEING 16.67% OF RS.4,00,00,000/-) DURING THE FINANCIAL YEAR 2005-06 ITSELF. IN ADDITION TO THE ABOVE, THE ASSESSEE WAS ALSO TO GET ADDITIONAL RS.25,00,667/ -, RS.16,67,000/- AND RS.16,67,000/- AS HIS SHARE IN ADDITIONAL CONSIDERATION FROM THE PURCHASE S WITHIN ONE MONTH, TWO MONTHS AND THREE MONTHS RESPECTIVELY FROM THE DATE OF TDR ON FSI IS PERMITTED TO BE USED AND UTILIZED ON THE SAID PROPERTY. THE MATTER WAS PENDING WITH HONBLE BOMBAY HIGH COURT, AND VIDE JUDGEMENT DATED 20.11.2006 WHICH WAS RECEIVED BY THE ASSESSEE ON 5 TH JANUARY 2007, HONBLE BOMBAY HIGH COURT DIRECTED THE MUNICIPAL CORPORATION OF GR EATER MUMBAI (MCGM) TO FRAME GUIDELINES AND REGULATE USE OF FSI KEEPING IN VIEW THE MAINTEN ANCE OF PARKS, PLAYGROUNDS AND AMENITIES. ACCORDINGLY, MCGM BROUGHT OUT A CIRCULAR, IN ACCORD ANCE WITH THE DIRECTIONS OF HONBLE BOMBAY HIGH COURT, ON 15 TH FEBRUARY 2007. THE BUILDER WAS THUS ENTITLED TO A DDITIONAL FSI, AND, AS A COROLLARY THERETO, THE ASSESSEE WAS ENTITLED TO ADD ITIONAL CONSIDERATION. THE ASSESSEE WAS PAID THE ENTIRE ADDITIONAL COMPENSATION ON 12 TH MAY, 2017. ON THESE FACTS THE ASSESSING OFFICER DECLINED THE INDEXED COST OF ACQUISITION AT RS.12,8 1,823/- AND THE INVESTMENT OF RS.38,00,000/- IN ELIGIBLE LONG TERM SPECIFIED ASSETS BY OBSERVING AS FOLLOWS :- 6.3 IT IS OBSERVED FROM THE SUBMISSIONS SUBMITTED ON 15.12.2011 AND 16.12.2011 THAT THE ASSESSEE WANTS TO CONVEY THAT COST OF ACQU ISITION IS INCLUSIVE OF COST OF BOTH BASIC FSI AND TDR-FSI AND ACCORDINGLY CLAIMED RS.12 ,81,323/- AS INDEXATION BENEFIT AGAINST THE CONSIDERATION ON TRANSFER OF TDR ON FSI AND THE BUYER OF THE PROPERTY WAS ALLOWED TO USE T.D.R ON F.S.I BY THE HON'BLE BOMBAY HIGH COURT. IT IS FURTHER OBSERVED THAT THE ASSESSEE HAD RECEIVED THE ORDER OF HON'BLE BOMBAY HIGH COURT ON 5 TH JANUARY 2007. 6.4 THE ASSESSEE'S PLEA THAT INDEXED COST OF ACQUI SITION RS.12,81,323/- IS TO BE ALLOWED AGAINST THE CONSIDERATION RECEIVED ON TRANS FER OF TDR ON FSI CANNOT BE MAINTAINABLE. THE COST OF ACQUISITION IS WELL KNOWN IN THE YEAR IN WHICH PROPERTY WAS TRANSFERRED. HOWEVER, THE ADDITIONAL CONSIDERATION HAS COME INTO PICTURE ONLY AFTER VERDICT OF HON'BLE MUMBAI HIGH COURT AS ADMITTED BY THE ASSESSEE HIMSELF. THE COST OF ACQUISITION CANNOT BE DEFERRED TO FUTURE YEARS THOU GH THE AMOUNTS IN CONSIDERATION OF TRANSFERRING PROPERTY IS AGREED TO BE RECEIVED IN F UTURE YEARS OR DIFFERENT YEARS. IT IS FURTHER OBSERVED THAT THE ASSESSEE HAD CLAIMED INDE XED COST OF ACQUISITION OF RS.12,81,323/- DURING THE FINANCIAL YEAR 2006-07 WI TH A VIEW TO DIVIDE AND SPREAD THE INDEXED COST TO DIFFERENT YEARS TO REDUCE THE TAX L IABILITY OR INVEST THE CAPITAL GAIN IN THE LONG TERM SPECIFIED ASSET WITHIN THE CEILING LIMITS AS LAID DOWN IN THE PROVISIONS OF SECTION 54EC OF THE ACT. ACCORDINGLY, THE ASSESSEE 'S SHARE IN COST OF ACQUISITION OF THE ENTIRE PROPERTY AND CONSEQUENTLY COST OF ACQUISITIO N AFTER INDEXATION, IF ANY, SHOULD HAVE BEEN CLAIMED IN THE FINANCIAL YEAR IN WHICH PROPERT Y WAS TRANSFERRED I.E. 2005-06 ITSELF. ACCORDINGLY, THE ASSESSEE WAS ALLOWED TO CLAIM THE COST OF ACQUISITION OF RS.10,80,383/- AND CONSEQUENTLY INDEXED COST OF ACQUISITION TO THE TUNE OF RS.53,26,287/- AGAINST THE SALE CONSIDERATION RECEIVED IN THE FINANCIAL YEAR 2 005-06 WHILE COMPUTING THE CAPITAL GAIN FOR THE FINANCIAL YEAR 2005-06 RELEVANT TO THE A.Y. 2006-07. THEREFORE, THE ASSESSEE'S REQUEST TO ALLOW INDEXATION FOR THE F.Y. 2006-07 CANNOT BE ACCEDED TO. ITA NO.1361/AHD/2013 ASSESSMENT YEAR : 2007-08 PAGE 3 OF 4 6.5 IT IS FURTHER OBSERVED FROM THE ABOVE SUBMISSI ONS VIDE LETTER DATED 15.12.2011 AND 16.12.2011 THAT THE ASSESSEE SIMPLY STATED THAT HE INVESTED RS.12,00,000/- ON 21.3.2007 AND RS.38,00,000/- ON 13.07.2007 AND HE H AS NOTHING TO STATE ANY OTHER THING REGARDING RESTRICTION OF EXEMPTION U/S 54EC OF THE ACT TO RS.12,00,000/- TOWARDS INVESTMENT IN LONG TERM SPECIFIED ASSET. 6.5(A) VIDE THE LETTER DATED NIL RECEIVED ON 16.12 .2011 IN THE OFFICE OF THE UNDERSIGNED THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED THE HON'B LE MUMBAI HIGH COURT'S ORDER, PERMITTING THE BUYER TO USE THE T.D.R ON F.S.I, ON 5 TH JANUARY 2007. ACCORDINGLY, TRANSFER OF RIGHT TO USE T.D.R ON F.S.I HAS TAKEN PLACE ON 5 TH JANUARY 2007. THUS TO BE ELIGIBLE TO CLAIM EXEMPTION U/S 54EC OF THE ACT, THE ASSESSEE S HOULD TO HAVE INVESTED IN LONG TERM SPECIFIED ASSET WITHIN 6 MONTHS FROM 5 TH JANUARY 2007 WHICH EXPIRES ON 5.7.2007. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE H AS RECEIVED ENTIRE ADDITIONAL CONSIDERATION AGAINST TRANSFER OF TDR ON FSI BY 12. 05.2007. HOWEVER, THE ASSESSEE INVESTED RS.12,00,000 ON 21.03.2007 AND RS.38,0,000 /-ON 13/07/2007. IT IS CLEAR FROM THE ABOVE THAT RS.38,00,000/- ON 13/07/2007 IS NOT AS PER THE PROVISIONS CONTAINED IN SECTION 54EC OF THE ACT. THEREFORE, THE ASSESSEE'S CLAIM OF EXEMPTION U/S 54EC OF THE ACT IS RESTRICTED TO RS.12,00,000/- ONLY SINCE THE SAME BEING WITHIN THE TIME LIMIT AS ENUNCIATED IN SEC 54EC OF THE ACT. 6.6 IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION OF THE CASE, THE CLAIM OF THE ASSESSEE FOR INDEXED COST OF ACQUISITION IS NOT MAI NTAINABLE. ACCORDINGLY ADDITIONAL CONSIDERATION OF RS.58,34,667/- ACCRUED TO THE ASSE SSEE AS HIS SHARE DURING THE FINANCIAL YEAR 2006-07, AS PER PROVISIONS CONTEMPLA TED IN THE SECTION 48 OF THE ACT, WITHOUT ALLOWING ANY INDEXED COST OF ACQUISITION AN D ALLOWING DEDUCTION OF RS.12,00,000 U/S 54EC OF THE ACT FOR INVESTMENT MADE IN RURAL EL ECTRIFICATION BONDS ON 21/03/2007 IS WORKED OUT TO RS.46,34,667/- (RS.58,34,667 RS.12, 00,000) AS CAPITAL GAIN AND ACCORDINGLY TAXED UNDER THE HEAD LONG TERM CAPITAL GAIN. 3. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO REVERSED THE ACTION OF THE ASSESSING OFFICER BY OBS ERVING AS FOLLOWS :- HAVING NARRATED THE HISTORY OF THE CASE, IN BRIEF NOW I DEAL WITH THE SUBSTANTIVE GROUND WHICH IS PERTAINING TO DISALLOWANCE OF EXEMP TION U/S 54EC. THE ENTIRE ISSUE IS PERTAINING TO THE DATE ON WHICH ADDITIONAL FSI WAS FINALLY ALLOWED FOR THE PURPOSE OF DETERMINING EXPIRY DATE OF 06 MONTHS RESTRICTIONS P ROVIDED IN THE PROVISIONS OF SECTION 54 EC. IT IS CLEAR FROM THE CIRCULAR ISSUED BY THE MCGM THAT USE OF ADDITIONAL FSI WAS SUBJECT TO THE FORMULATION OF GUIDELINES BY MCGM. T HE ORDER OF HON'BLE BOMBAY HIGH COURT WAS NOT A SELF CONTAINED ORDER AUTHORIZING TH E USE OF ADDITIONAL FSI. INSTEAD THE HON'BLE HIGH COURT DIRECTED THE MCGM TO FRAME GUIDE LINES AND REGULATE THE USE OF ADDITIONAL FSI KEEPING IN VIEW THE MAINTENANCE OF P ARKS, PLAYGROUNDS AND OTHER AMENITIES. ACCORDINGLY, THE MCGM BROUGHT OUT A CIRC ULAR IN COMPLIANCE TO THE HIGH COURT'S DIRECTION ON 15/02/2007. THEREFORE, DATE OF TRANSFER (THE DAY TO BE RECKONED WITH) TO COMPUTE 06 MONTHS TIME PERIOD IS 15 TH FEBRUARY. 2007 AND NOT 05 TH JANUARY 2007 AS MENTIONED BY THE AO BECAUSE THE BUYER COULD MAKE US E OF ADDITIONAL FSI ONLY AFTER 15.02.2007. SIMILARLY THE APPELLANT COULD HAVE FORC ED THE BUYER TO COMPLY TO THE CONDITIONS OF DEVELOPMENT AGREEMENT ONLY AFTER 15/0 2/2007. PHRASE USED IN THE DEVELOPMENT AGREEMENT IS 'IF THE DEVELOPERS ARE ENT ITLED TO CONSUME ADDITIONAL/EXTRA FSI'. THE DEVELOPERS GOT ENTITLEMENT VIDE CIRCULAR DATED 15/02/2007 OF THE MCGM. THEREFORE, INVESTMENT MADE IN REC BONDS I.E. RS.12 LAC ON 21/03/2007 AND RS.38 LACS ON 13/07/2007 FALL WELL WITHIN THE PERIOD OF 6 MONT HS RESTRICTION PLACED U/S 54 EC. IN VIEW OF THE ABOVE FACTS, ADDITION OF RS.45,34,66 7/- ON ACCOUNT OF DISALLOWANCE OF EXEMPTION U/S 54EC IS DIRECTED TO BE DELETED. ITA NO.1361/AHD/2013 ASSESSMENT YEAR : 2007-08 PAGE 4 OF 4 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE ME. 5. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LE GAL POSITION. 6. I ENTIRELY AGREE WITH THE LEARNED CIT(A) THAT TH E DATE OF TRANSFER OF ADDITIONAL FSI COULD ONLY BE THE DATE ON WHICH MCGM HAD ISSUED THE CIRCU LAR GRANTING ADDITIONAL FSI IN ACCORDANCE WITH THE GUIDELINES GIVEN BY HONBLE BOMBAY HIGH CO URT AND NOT THE DATE OF JUDGEMENT ITSELF. THE WELL-REASONED CONCLUSION ARRIVED AT BY THE LEAR NED CIT(A) MERIT BEING ACCEPTED. ACCORDINGLY, THE DATE OF JUDGEMENT BY HONBLE BOMBA Y HIGH COURT WAS NOT REALLY RELEVANT IN DETERMINING THE OUTER LIMIT FOR MAKING ELIGIBLE INV ESTMENTS UNDER SECTION 54EC. I SEE NO INFIRMITY IN THE STAND OF THE LEARNED CIT(A). I AP PROVE THE SAME AND DECLINE TO INTERFERE IN THE MATTER. AS REGARDS THE COST OF ACQUISITION ISSUE, I DO NOT SEE ANY DISCUSSION ABOUT THE SAME IN THE CIT(A)S ORDER AND, ACCORDINGLY, THERE IS NO NE ED TO DEAL WITH THE SAME. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT ON THIS 14 TH DAY OF FEBRUARY, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 14 TH DAY OF FEBRUARY, 2018. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD