ITO, ward - 31(1), Kolkata, Kolkata V. Mahesh Kumar Singhania (HUF), Kolkata

ITA 1387/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1306 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPTA
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 50C

Judgement Text

ITA NO.1387/KOL/2017 MAHESH KUMAR SINGHANIA (HUF) A.Y.2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC K OLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM] ITA NO.1387//KOL/2017 ASSESSMENT YEAR : 2013-14 I.T.O., WARD-31(1) VERSUS- MAHESH KUMAR SING HANIA(HUF) KOLKATA KOLKATA (PAN: AACHM 5435 P) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SOUMYAJIT DASGUPTA, JCI T FOR THE RESPONDENT: SHRI MIRAJ D.SHAH, ADVOCATE DATE OF HEARING : 08.09.2017. DATE OF PRONOUNCEMENT : 25.10.2017. ORDER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX-(A)-9, KOLKATA RELATING TO A.Y. 2013 -14 ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE LD. CIT (A) IS ARBITRARY, ILLE GAL, PERVERSE AND BAD IN LAW. 2. FOR THAT THE LD. CIT(A) ERRED IN HOLDING THAT SE CTION 50C OF THE ACT DID NOT APPLY TO THE BOOKING RIGHTS AND TO TREAT THE SALE C ONSIDERATION AT RS.65,00,000/ - AND NOT AT RS.94, 14,000/-. 3. FOR THAT THE LD. CIT(A) ERRED IN HOLDING THAT TH E BOOKING RIGHTS WAS HELD FOR MORE THAN 36 MONTHS HENCE THE SAME IS TO BE CONSIDE RED AS LONG TERM CAPITAL ASSET. HE HAS FURTHER ERRED IN DIRECTING TO TREAT T HE INCOME FROM TRANSFER OF THE PROPERTY AS LONG TERM CAPITAL GAINS AND ALSO ALLOW THE BENEFIT OF INDEXATION AS PER SECTION 48 OF THE IT ACT IN COMPUTING THE CAPIT AL GAINS. 4. FOR THAT THE LD CIT (A) ERRED IN REDUCING THE RE TURNED INCOME OF THE ASSESSEE. 5. FOR THAT THE REVENUE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 2. THE ASSESSEE IS A HUF AND DERIVES INCOME FROM RE NT AND CAPITAL GAINS. IT FILED ITS RETURN OF INCOME ON 16.07.2013 DECLARING GROSS TOTA L INCOME OF RS.8,58,201/-. THE FACTS OF THE ISSUE THAT ARISES FOR MY CONSIDERATION IS BROUGHT OUT AT PARA 2 PAGES 2 TO 5 ITA NO.1387/KOL/2017 MAHESH KUMAR SINGHANIA (HUF) A.Y.2013-14 2 OF HIS ORDER. FOR THE SAKE OF BREVITY THE SAME IS N OT EXTRACTED. IN BRIEF THE FACTS ARE AS FOLLOWS :- THE ASSESSEE BOOKED A FLAT IN A BUILDING COMPLEX BY NAME IDEAL HEIGHTS FOR CONSIDERATION OF RS.48,18,875/-. HE CLAIMED THAT HE ACQUIRED BOOKING RIGHTS IN THE FLAT. THE ASSESSEE CLAIMS THAT BEFORE COMPLETION OF THE BUILDING, HE TRANSFERRED AND NOMINATED THESE BOOKING RIGHTS IN THE FLAT TO, MR .MOHAN LAL DUGAR AND MR. ABHISHEK KUMAR DUGAR FOR THE CONSIDERATION OF RS.65 ,00,000/- AND THUS EARNED RS.14,55,545/-. THE ASSESSE CLAIMED EXPENSES OF RS. 7,68,522/- AND THE NET INCOME OF RS.66,87.023/- WAS OFFERED TO TAX UNDER THE HEAD O THER SOURCES. THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS OFFERED POSSESSION OF TH E FLAT BY THE DEVELOPER AND THEREFORE IT HA TO BE TAKEN THAT THE FLAT WAS DELIV ERED TO THE ASSESSEE AND HENCE THE TRANSACTION IN QUESTION WAS FOR TRANSFER OF A FLAT AND NOT OF BOOKING RIGHTS AND HENCE THE GAIN IS ASSESSABLE ON CAPITAL GAINS. HENCE THE AO TREATED THE DATE OF ACQUISITION OF THE PROPERTY AS 11.02.2012 AND THE DATE OF TRANSFER AS 26.03.2013 AND TREATED THE TRANSACTION AS SHORT TERM CAPITAL GAIN. HE APPLIED SECTION 50C OF THE ACT AND SUBSTITUTED THE SALE CONSIDERATION. SHORT TERM CAP ITAL GAIN WAS COMPUTED AT RS.45,95,125/-. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER I N APPEAL. THE FIRST APPELLATE AUTHORITY AGREED WITH THE CONTENTIONS OF THE ASSESS EE THAT WHAT WAS TRANSFERRED WAS BOOKING RIGHTS AND NOT IMMOVABLE PROPERTY IN THE FO RM OF A FLAT. CONSEQUENTLY HE HELD THAT SECTION 50C OF THE ACT WERE NOT APPLICABLE. HE GAVE A FACTUAL FINDING THAT THE ASSESSEE HAS NEVER TAKEN POSSESSION OF THE FLAT AND HAD NOMINATED THE BUYER IN ITS PLACE. HE DIRECTED THE AO TO TREAT THE TRANSFER OF PROPERTY AS LONG TERM CAPITAL GAIN. AGGRIEVED THE REVENUE IS BEFORE US ON APPEAL. 4. AFTER HEARING THE RIVAL CONTENTIONS AND CONS IDERING THE PAPERS ON RECORD OF THE AUTHORITIES BELOW AND THE CASE LAW CITED I HELD AS FOLLOWS:- THE IMPORTANT DATES ARE GIVEN IN PART-VIII AT PAGE- 5 OF THE ASSESSMENT ORDER WHICH IS EXTRACTED FOR THE REFERENCE : ITA NO.1387/KOL/2017 MAHESH KUMAR SINGHANIA (HUF) A.Y.2013-14 3 DATE OF BOOKING OF FLAT 27.12.2006 DATE OF ALLOTMENT OF FLAT 19.01.2007 DATE OF AGREEMENT FOR PURCHASE OF FLAT BY THE ASSESSEE 15.09.2008 DATE OF LAST INSTALMENT OF PAYMENT MADE BY THE ASSESSEE 19.05.2012 DATE OF POSSESSION OFFERED FOR FIT OUT/INTERIORS TO ASSESSEE 01.08.20111 DATE OF RESIDENTIAL POSSESSION OFFERED TO ASSESSEE 11.04.2012 DATE OF AGREEMENT FOR SALE OF FLAT BY ASSESSEE 2 5.01.2013 DATE OF NOC GIVEN BY ASSESSEE TO DEVELOPER REGARDING TRANSFER OF PROPERTY AND RECEIPT OF 65LAKH FROM MOHAN LAL & ABHISHEK DUGAR 12.02.20 13 DATE OF CONVEYANCE FOR SALE OF FLAT BY ASSESSEE 2 6.03.2013 5. A PERUSAL OF THE PAPER BOOK FILED BY THE AS SESSEE DEMONSTRATES THAT THE POSSESSION WAS NEVER TAKEN BY THE ASSESSEE. RECITAL S AT PARA-9 OF THE CONVEYANCE DEED EXECUTED BY THE BUILDER M/S. IDLE HEIGHTS PVT. LTD IN FAVOUR OF MR.MOHAN LAL DUGAR AND MR. ABHISHEK KUMAR DUGAR AND SHRI M.K.SINGHANIA , DEMONSTRATES THAT THE POSSESSION WAS HANDED OVER BY THE DEVELOPER TO THES E PURCHASERS ON 26.03.2013. HENCE THIS PROVES THAT THE ASSESSEE HAS NEVER RECEI VED POSSESSION OF THIS PROPERTY. THE ASSET ACQUIRED WAS RIGHTS IN THE PROPERTY, BY WAY O F AN AGREEMENT AND WHAT WAS TRANSFERRED WAS THERE RIGHTS. THESE RIGHTS ARE CAPI TAL ASSET. 6. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS SRI.SR JEYASHANKAR 373 ITR 120 (MADRAS) HELD AS FOLLOWS :- ASSESSABILITY OF ASSET SALE - STCG OR LTCG - SALE OF RIGHT - DATE OF ALLOTMENT LETTER ISSUED BY THE BUILDER - WHETHER THE ASSET WH ICH WAS SOLD BY THE ASSESSEE WOULD BE SUBJECT TO SHORT TERM CAPITAL GAINS IN TER MS OF SECTION 2(42A) OR LONG TERM CAPITAL GAINS IN TERMS OF SECTION 2(29A) - HEL D THAT- THE TRIBUNAL PLACED RELIANCE ON MRS.MADHU KAUL V. CIT [Z014 (2) TMI 111 7 - PUNJAB & HARYANA HIGH COURT] - A RIGHT HAS BEEN CONFERRED ON THE ALLOTTEE TO HOLD A FLAT WHICH WAS LATER IDENTIFIED AND POSSESSION DELI VERED ON A LATER DATE - THE MERE FACT THAT POSSESSION WAS DELIVERED LATER DOES NOT D ETRACT FROM THE FACT THAT THE ALLOTTEE WAS CONFERRED A RIGHT TO HOLD PROPERTY ON ISSUANCE OF AN ALLOTMENT LETTER AND THE PAYMENT OF BALANCE INSTALMENTS, IDENTIFICAT ION OF A PARTICULAR FLAT AND DELIVERY OF POSSESSION ARE CONSEQUENTIAL ACTS THAT RELATE BACK TO AND ARISE FROM THE RIGHTS CONFERRED BY THE ALLOTMENT LETTER - THE ALLOTTEE GETS THE TITLE TO THE PROPERTY ON ISSUANCE OF ALLOTMENT LETTER AND THE PA YMENT IN INSTALMENTS IS ONLY A ITA NO.1387/KOL/2017 MAHESH KUMAR SINGHANIA (HUF) A.Y.2013-14 4 CONSEQUENTIAL ACT UPON WHICH DELIVERY OF POSSESSION TO THE PROPERTY FLOWS - THUS, THERE IS NO REASON AS TO WHY THE SAME PRINCIPLE SHO ULD NOT BE APPLIED TO ALL TRANSACTIONS BASED ON AGREEMENTS IN RESPECT OF CAPI TAL ASSET - THE BREACH OF AGREEMENT WOULD ONLY GIVE RIGHT TO THE BENEFICIARY FOR ENFORCING THE RIGHT OVER THE PROPERTY - THUS, THE ORDER OF THE TRIBUNAL IS U PHELD - DECIDED AGAINST REVENUE. APPLYING THE PROPOSITION LAID DOWN IN THIS CASE TO THE FACT OF THIS CASE I UPHOLD THE FINDING OF THE LD. CIT(A) THAT THE ASSET IS A LONG TERM CAPITAL AND LIABLE TO LONG TERM CAPITAL GAIN. AS WHAT IS SOLD IS NOT AN IMMOVABLE P ROPERTY, SECTION 50C DOES NOT APPLY. 7. HENCE I UPHOLD THE FINDING OF THE LD. CIT(A) AT 4 AND 4.1. OF HIS ORDER. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 25/10/2017. SD/- [ J.SUDHAKAR REDDY ] ACCOUNTANT MEMBER DATED : 25/10/2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.MAHESH KUMAR SINGHANIA (HUF), 2A, ROOM NO.5, 9 TH FLOOR, COMMERCE HOUSE, GANESH CHANDRA AVENUE, KOLKTA-700013. 2. I.T.O., WARD-31(1), KOLKATA. 3. C.I.T.(A)- 9, KOLKATA 4. C.I.T-4, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES ITA NO.1387/KOL/2017 MAHESH KUMAR SINGHANIA (HUF) A.Y.2013-14 5