Ranjit Singh Bengani (HUF), Kolkata V. DCIT, Circle - 36, Kolkata, Kolkata

ITA 137/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70411 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2012
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Capital receipt; Surrender of tenancy right
• Section: 143(3); 50C; 54F

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ''# ''# ''# ''#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 137/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 RANJIT SINGH BENGANI (HUF) VS. DEPUTY COMMISSION ER OF INCOME-TAX, (PAN:AADHR3792P) CIRCLE-32, KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 06.11.2013 DATE OF PRONOUNCEMENT: 21.11.2013 FOR THE APPELLANT: SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT: SMT. RANU BISWAS, SR. DR $0 / ORDER PER BENCH: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XX, KOLKATA IN APPEAL NO. 109/CIT(A)-XX/CIR-36/09-10/KOL DATED 19.10.2011. A SSESSMENT WAS FRAMED BY DCIT, CIRCLE-36, KOLKATA U/S. 143(3) OF THE INCOME-TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DA TED 12.10.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN RESPECT TO VALUE ADOPTED BY STAMP VALUATION AUTHORITY DESPITE THE FACT THAT THERE IS A TRANSFER OF LEASEHOLD RIGHTS IN FLATS AND MOREOVER, THE AO FAILED TO REFE R THE MATTER TO THE VALUATION OFFICER DESPITE OBJECTION FROM THE ASSESSEE. FOR THIS, ASSESSEE HA S RAISED FOLLOWING TWO GROUNDS: 1. THAT THE CIT(A) IS NOT RIGHT TO APPLY THE VALUE OF RS.74,20,000/- ADOPTED BY THE STAMP DUTY AUTHORITY FOR THE PURPOSE OF STAMP D UTY WITHOUT REFERRING THE SAME TO THE VALUATION OFFICER AS PROVIDED IN SEC. 5 0C OF THE I. T. ACT AND THE APPEAL ORDER AS FRAMED BY THE CIT(A) SHOULD BE QUAS HED IN FULL. 2. THAT THE CONSIDERATION MONEY OF RS.44 LAKHS RECE IVED BY ALL THE CO-OWNERS OF THE LEASED FLAT, IN WHICH THE ASSESSEE HAS 1/3 RD UNDIVIDED SHARE, SHOULD BE ADOPTED AS FAIR MARKET VALUE U/S. 50C OF THE I. T. ACT IN T HE INTEREST OF EQUITY & JUSTICE. 2 ITA NO. 137/K/2012 RANJIT SNGH BENGANI (HUF), AY:2007-08 THESE TWO GROUNDS ARE REVISED GROUNDS AND NOT T AKEN ORIGINALLY. WHEN THIS WAS PUT TO LD. SR. DR SHE FAIRLY CONCEDED THAT SHE HAS NO OBJE CTION IN ACCEPTING THE REVISED GROUND BECAUSE THESE ARE BORNE OUT FROM RECORDS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS OW NER OF 1/3 RD SHARE IN A FLAT AT PARK STREET, KOLKATA WHICH WAS LEASED OUT DURING THE YEAR FOR A TOTAL CONSIDERATION OF RS.44 LACS. THE AO NOTICED FROM THE LEASE DEED THAT THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY FOR THE PURPOSE OF STAMP DUTY BY ADOPTING CIRCLE RATES, THE FAIR MARKET VALUE IS AT RS.74,20,000/-. THE AO WAS OF THE VIEW THAT IN VIEW OF THE PROVISIONS O F SECTION 50C OF THE ACT THE VALUE AS ADOPTED BY STAMP VALUATION AUTHORITY SHOULD BE ADOP TED FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAINS. ACCORDINGLY, HE TOOK 1/3 RD SHARE IN THE TOTAL CONSIDERATION OF RS.74.20 LACS AS DEEMED VALUE FOR THE PURPOSE OF CO MPUTATION OF LONG TERM CAPITAL GAINS AND COMPUTED LONG TERM CAPITAL GAINS AT RS.10,23,335/- IN VIEW OF THE PROVISIONS OF SECTION 50C OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL B EFORE CIT(A), WHO CONFIRMED THE ACTION OF AO BY OBSERVING IN PARA 3 AS UNDER: 3. GROUND NO. 2 AND 3 RELATE TO COMPUTATION OF LON G TERM CAPITAL GAIN ON TRANSFER OF IMMOVABLE PROPERTY. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT HAS 1/3RD SHARE IN A FLAT AT PARK STREET, KOLKATA WHICH WAS TRANSFERRE D DURING THE YEAR FOR TOTAL CONSIDERATION RS.44,00,000/-. THE AO FOUND FROM THE SALE DEED THAT THE VALUATION AUTHORITY ADOPTED THE FAIR MARKET VALUE OF THE PROP ERTY AT RS.74,20,000/- FOR THE PURPOSES OF STAMP DUTY. IT WAS ARGUED AT THE ASSESS MENT STAGE THAT UNEXPIRED PERIOD OF LEASE WAS 71 YEARS; AND CONSEQUENTLY, THE FAIR MARK ET VALUE OF THE PROPERTY WAS RS.44,00,000/- ONLY. THE AO TOOK THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY AS SALE CONSIDERATION IN VIEW OF THE PROVISIONS OF SEC TION 50C; AND COMPUTED THE LONG TERM CAPITAL GAIN ACCORDINGLY. THE LD. AR REITERATE D THAT THE MARKET VALUE OF THE PROPERTY SHOULD BE TAKEN AT RS.44,00,000/- WHILE C OMPUTING THE LONG TERM CAPITAL GAIN. IT WAS ALSO SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN NOT MAKING A REFERENCE TO THE VALUATION OFFICER. I HAVE PERUSED THE ASSESSMENT OR DER AND CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I FIND THAT NO CASE WAS MADE OUT BY THE APPELLANT AT THE ASSESSMENT STAGE FOR REFERENCE TO THE VALUATION OFFICER IN VIE W OF THE PROVISIONS OF SECTION 50C(2). IT WAS ONLY PRAYED BEFORE THE AO THAT THE CONSIDERATIO N OF RS.44,00,000/- SHOULD BE ACCEPTED AS FAIR MARKET VALUE OF THE PROPERTY; AND, THAT IF THE AO SO DESIRES, HE MAY REFER THE MATTER TO THE VALUATION OFFICER. IN THIS FACTUAL BACKGROUND, I FIND NO LEGAL INFIRMITY IN THE ORDER OF THE AO. THE PROVISIONS OF SECTION 50C ARE CLEARLY APPLICABLE IN THE CASE OF THE APPELLANT. THE AO HAS RIGHTLY TAKEN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY AS SALE CONSIDERATION WHILE COM PUTING THE LONG TERM CAPITAL GAIN. IN VIEW OF THE ABOVE, THE ORDER OF THE AO IS UPHELD. G ROUND NOS. 2 AND 3 IS DISMISSED. GROUND NO.1 AND 4 IS GENERAL IN NATURE. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE US. 3 ITA NO. 137/K/2012 RANJIT SNGH BENGANI (HUF), AY:2007-08 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE PROPERTY WAS LEASED OUT FOR UNEXPIRED PERIOD OF 71 YEARS AND FOR THIS, HE DREW OUR ATTENTION TO ASSESSEES PAPER BOOK PAGES 7 TO 25, WHEREIN COPY OF LEASE DEED IS ENCLOSED. H E PARTICULARLY REFERRED TO PAGES 9 AND 10 OF THE PAPER BOOK, WHEREIN THIS FACT IS NARRATED AND T HE RELEVANT PORTION OF THE LEASE DEED READS AS UNDER: A. STEPHEN COURT LIMITED, A COMPANY WITHIN THE MEA NING OF THE COMPANIES ACT 1956 HAVING ITS REGISTERED OFFICE AT 23A NETAJI SUBHAS ROAD KOLKATA IS SEIZED AND POSSESSED OF OR OTHERWISE WELL AND SUFFICIENTLY ENTITLED TO A LL THAT THE ENTIRETY OF PREMISES NO. 18 PARK STREET KOLKATA NOW RENUMBERED AS 18A, 18B, 18C, 18D, 18E, 18F, 18G, 18H, 18I, 18J, 18K, 18L AND 18M PARK STREET KOLKATA WHER EON THE BUILDING COMMONLY KNOWN AS STEPHEN COURT IS SITUATED FOR THE RESIDUAR Y PERIOD OF THE REGISTERED LEASE DT. 13 TH SEPTEMBER 1919 AND REGISTERED LEASE DATED 25 TH JULY 1984 EXECUTED IN FAVOUR OF THE SAID STEPHEN COURT LIMITED WHICH IS DUE TO EXPI RE ON OR ABOUT 1 ST DAY OF JUNE, 2078. FROM THE ABOVE IT IS CLEAR THAT THE PROPERTY IS TRA NSFERRED ON THE LEASEHOLD BASIS FOR THE REMAINING PERIOD I.E. 71 YEARS. LD. COUNSEL FOR THE ASSESSEE FOR THIS RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF DCIT VS. TEJINDER SIN GH, ITA NO.1459/K/2011 AND C.O. NO. 62/K/2011 DATED 29.02.2012, WHEREIN IT HAS BEEN HEL D AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED APPLICABLE LEGAL POSITION IN THE LI GHT OF THE FACTS OF THE CASE. 8. A PLAIN LOOK AT THE UNDISPUTED FACTS OF THIS CAS E CLEARLY SHOWS THAT THE ASSESSEE WAS A LESSEE IN THE PROPERTY WHICH WAS SOLD BY THE KSCT; THERE IS NO DISPUTE ON THIS ASPECT OF THE MATTER. YET, THE ASSESSING OFFIC ER HAS TREATED THE ASSESSEE A SELLER OF PROPERTY APPARENTLY BECAUSE THE ASSESSEE WAS A PARTY TO THE SALE DEED, AND BECAUSE, ACCORDING TO THE ASSESSING OFFICER, C ONSIDERATION IS PAID ON SALE OF THE PROPERTY FOR GIVING UP RIGHT OF THE OWNER OF THE PROPERTY AND THAT IN THE CASE OF LEASEHOLD PROPERTY, THE RIGHT OF OWNER IS D IVIDED BETWEEN LESSOR AND LESSEE. WE ARE UNABLE TO SHARE THIS LINE OF REASON ING. IT IS NO T NECESSARY THAT CONSIDERATION PAID BY THE BUYER OF A PROPERTY, AT T HE TIME OF BUYING THE PROPERTY, MUST ONLY RELATE TO OWNERSHIP RIGHTS. IN THE CASE O F TENANTED PROPERTY, AS IS THE CASE BEFORE US, WHILE THE BUYER OF PROPERTY PAYS TH E OWNER OF PROPERTY FOR OWNERSHIP RIGHTS, HE MAY ALSO HAVE TO PAY, WHEN CO NO. 62/KOL/2011 AND HE WANTS TO HAVE POSSESSION OF THE PROPERTY AND TO REM OVE THE FETTERS OF TENANCY RIGHTS ON THE PROPERTY SO PURCHASED, THE TENANTS TO WARDS THEIR SURRENDERING THE TENANCY RIGHTS. MERELY BECAUSE HE PAYS THE TENANTS, FOR THEIR SURRENDERING THE TENANCY RIGHTS, AT THE TIME OF PURCHASE OF PROPERTY , WILL NOT ALTER THE CHARACTER OF RECEIPT IN THE HANDS OF THE TENANT RECEIVING SUCH P AYMENT. WHAT IS PAID FOR THE TENANCY RIGHTS CANNOT, MERELY BECAUSE OF THE TIMING OF THE PAYMENT, CANNOT BE TREATED AS RECEIPT FOR OWNERSHIP RIGHTS IN THE HAND S OF THE ASSESSEE. THIS DISTINCTION BETWEEN THE RECEIPT FOR OWNERSHIP RIGHT S IN RESPECT OF A PROPERTY AND RECEIPT FOR TENANCY RIGHTS IN RESPECT OF A PROPERTY , EVEN THOUGH BOTH THESE RECEIPTS ARE CAPITAL RECEIPTS LEADING TO TAXABLE CA PITAL GAINS , IS VERY IMPORTANT 4 ITA NO. 137/K/2012 RANJIT SNGH BENGANI (HUF), AY:2007-08 FOR TWO REASONS FIRST, THAT THE COST OF ACQUISITI ON FOR TENANCY RIGHTS, UNDER SECTION 55(2)(A), IS, UNLESS PURCHASED FROM A PREVI OUS OWNER WHICH IS ADMITTEDLY NOT THE CASE HERE, TREATED AS NIL; AND , - SECOND, SINCE THE PROVISIONS OF SECTION 50 C CAN ONLY BE APPLIED IN RESPECT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, THE PROVISIONS OF SECTION 50 C WILL APPLY ON RECEIPT OF CONSIDERATION ON TRANSFER OF A PROPERTY, BEING LAND OR BUILDING OR BOTH, THESE PROVISIONS WILL NOT COME IN TO PLAY IN A CASE WHERE ONLY TENANCY RIGHTS ARE TRANSFERRED OR SURRENDERED. IT I S, THEREFORE, IMPORTANT TO EXAMINE AS TO IN WHAT CAPACITY THE ASSESSEE RECEIVE D THE PAYMENT. NO DOUBT THE ASSESSEE WAS A PARTY TO THE REGISTERED TRIPARTITE D EED DATED 20T H JULY 2007 WHEREBY THE PROPERTY WAS SOLD BY THE KSCT, BUT, AS A PERUSAL OF THE SALE DEED UNAMBIGUOUSLY SHOWS, THE ASSESSEE HAS GIVEN UP ALL THE RIGHTS AND INTERESTS IN THE SAID PROPERTY, WHICH HE HAD ACQUIRED BY THE VIR TUE OF LEASE AGREEMENTS WITH OWNER AND WHICH WERE, THEREFORE, IN THE NATURE OF L ESSEES RIGHTS; THESE RIGHTS COULD NOT HAVE BEEN, BY ANY STRETCH OF LOGIC, COULD BE TREATED AS OWNERSHIP RIGHTS. IT HAS BEEN SPECIFICALLY STATED IN THE SALE DEED THAT THE LESSEE, WHICH INCLUDED THIS ASSESSEE BEFORE US, HAD PROCEEDED TO, INTER ALIA, GRANT, CONVEY, TRANSFER AND ASSIGN THEIR LEASEHOLD RIGHTS, TITLE A ND INTEREST IN THE SAID PREMISES. THERE IS NOTHING ON THE RECORD TO EVEN REMOTELY SUG GEST THAT THE ASSESSEE WAS OWNER OF CO NO. 62/KOL/2011 AND I.T.A.NO.: 1459/KOL ./2011 ASSESSMENT YEAR: 2008-09 THE PROPERTY IN QUESTION. THE MONIES RECEIV ED BY THE ASSESSEE, UNDER THE SAID AGREEMENT, WERE THUS CLEARLY IN THE NATURE OF RECEIPTS FOR TRANSFER OF TENANCY RIGHTS, AND, ACCORDINGLY, AS THE LEARNED CIT(A) RIG HTLY HOLDS, SECTION 50 C COULD NOT HAVE BEEN INVOKED ON THE FACTS OF THIS CASE. RE VENUES CONTENTION THAT THE PROVISIONS OF SECTION 50 C ALSO APPLY TO THE TRANSF ER OF LEASEHOLD RIGHTS IS DEVOID OF LEGALLY SUSTAINABLE MERITS AND IS NOT SUPPORTED BY THE PLAIN WORDS OF THE STATUTE. SECTION 50 C CAN COME INTO PLAY ONLY IN A SITUATION WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, (EMP HASIS SUPPLIED BY US BY UNDERLINING) IS LESS THAN THE VALUE ADOPTED OR ASSE SSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER . CLEARLY, THEREFORE, IT IS SINE QUA NON FOR APPLICATION OF SECTION 50 C THAT THE TRANSFER MUST BE OF A CAP ITAL ASSET, BEING LAND OR BUILDING OR BOTH, BUT THEN A LEASEHOLD RIGHT IN SU CH A CAPITAL ASSET CANNOT BE EQUATED WITH THE CAPITAL ASSET PER SE. WE ARE, THER EFORE, UNABLE TO SEE ANY MERITS IN REVENUES CONTENTION THAT EVEN WHEN A LEASEHOLD RIGHT IN LAND OR BUILDING OR BOTH IS TRANSFERRED, THE PROVISIONS OF SECTION 50C CAN BE INVOKED. WE, THEREFORE, APPROVE THE CONCLUSION ARRIVED AT BY THE CIT(A) ON THIS ASPECT OF THE MATTER. 9. HAVING HELD SO, WE MAY ALSO POINT OUT THAT THE ASSESSING OFFICER HAS ADOPTED COST OF ACQUISITION OF THE ASSET AS LEASE RENT PAID FOR THE SAME AND EVEN GRANTED INDEXATION BENEFITS THEREON. IN THE IMPUGNED ORDER, CIT(A) HAS DIRECTED THAT CONSIDERATION FOR COMPUTATION OF CAPITAL GAINS ON S URRENDERING THE TENANCY RIGHTS IS TO BE TAKEN AT ACTUALS, AND NOT AS RECOMP UTED BY THE ASSESSING OFFICER BY TAKING STAMP VALUATION AS THE SALE CONSIDERATION FOR THE PROPERTY, BUT THEN WHAT THE CIT(A) HAS APPARENTLY MISSED OUT IS THE FA CT THAT IN THE CASE OF SURRENDER OF TENANCY RIGHTS, THE COST OF ACQUISITIO N OF THE TENANCY RIGHTS, IN VIEW 5 ITA NO. 137/K/2012 RANJIT SNGH BENGANI (HUF), AY:2007-08 OF THE SPECIFIC PROVISIONS OF SECTION 55(2)(A), SHO ULD HAVE BE EN TAKEN AS NIL. THIS ASPECT OF THE MATTER IS SOMEWHAT ACADEMIC AND TAX NEUTRAL BECAUSE ADMITTEDLY CO NO. 62/KOL/2011 AND I.T.A. NO.: 1459/ KOL./2011 ASSESSMENT YEAR : 2008-09 QUALIFYING INVESTMENT UNDER SECTION 54F I S MORE THAN THE CONSIDERATION FOR SURRENDER OF THESE TENANCY RIGHTS . THE ASSESSING OFFICER HAS GIVEN A CATEGORICAL FINDING ABOUT THE QUANTUM OF QU ALIFYING INVESTMENT OF RS.1,96,03,685. IN VIEW OF THESE DISCUSSIONS, WE AR E OF THE CONSIDERED VIEW THAT THE ASSESSEE DID NOT HAVE ANY TAXABLE CAPITAL GAIN IN RESPECT OF RECEIPT OF RS 1,59,50,000 ON ACCOUNT OF SURRENDER OF TENANCY RIGH TS. THE RELIEF GRANTED BY THE CIT(A), THEREFORE, DESERVES TO BE UPHELD. 5. WE FIND FROM THE COORDINATE BENCH DECISION IN TH E CASE OF TEJINDER SINGH (SUPRA) THAT THE ISSUE IS SQUARELY COVERED AND REVENUE HAS NOT D ENIED THAT THIS IS NOT SURRENDER OF LEASEHOLD RIGHTS. ONCE THIS IS A FACT THAT CONSIDERATION REC EIVED IS ON ACCOUNT OF SURRENDER OF LEASEHOLD RIGHTS THE PROPERTY CANNOT BE SUBJECT MATTER OF SEC TION 50C OF THE ACT AS DISCUSSED IN THE COORDINATE BENCH DECISION. RESPECTFULLY FOLLOWING THE SAME WE ALLOW THE APPEAL OF ASSESSEE. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2013 SD/- SD/- . . . . ''# ''# ''# ''# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21ST NOVEMBER, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT RANJIT SINGH BENGANI (HUF), 15, INDIA E XCHANGE PLACE, 1 ST FLOOR, KOLKATA-700 001. 2 ./,- / RESPONDENT DCIT, CIRCLE-36, KOLKATA. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .