Ramanand G. Ventekar, Pune V. Income-tax Officer,

ITA 1430/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1123 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P SURTE
• Assessee Lawyers: S P SURTE SHRI SUHAS KULKARNI
• Keywords: Capital asset
• Section: 54

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 1430 /PN/201 6 / ASSESSM ENT YEAR : 20 09 - 1 0 RAMANAND G. VENTEKAR C.S. 80/3/2, FLAT NO.701/A - 1, RAHUL PARK, M. WARJE, PUNE 4110 58 . / APPELLANT PAN: A AKPV5951D VS. THE INCOME TAX OFFICER , WARD 10 ( 2 ), PUNE . / RESPONDENT / APPELLANT BY : SHRI S.P. SURTE / APPELLANT BY : SHRI S.P. SURTE / RESPONDENT BY : SHRI SUHAS KULKARNI / DATE OF HEARING : 08 . 0 8 .201 6 / DATE OF PRONOUNCEMENT: 12 . 0 8 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 6 , PUNE DATED 05 . 0 4 .20 1 6 RELATING TO ASSESSMENT YEAR 20 09 - 1 0 AGAINST ORDER PASSED UNDER SECTION 1 43(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(APPEALS) ERRED IN TREATING RS.20,03,730/ - AS SHORT TERM CAPITAL GAIN OF THE APPELLANT ON THE GROUND THAT ARTICLES OF AGREEMENT ITA NO. 1430 /PN/20 1 6 RAMANAND G. VENTEKAR 2 ENTERED INTO BY THE APPELLANT WAS NO T REGISTERED AND HENCE HE HAD NO RIGHTS IN THE PROPERTY SOLD ON THE DATE OF ENTERING INTO ARTICLES OF AGREEMENT TO QUALIFY AS LONG TERM CAPITAL GAIN AND IN OVERLOOKING THE FACT THAT ARTICLES OF AGREEMENT ENTERED INTO WITH THE PROMOTER AND OWNERS WAS A REGI STERED DOCUMENT, WHICH WAS NOT DISPUTED EVEN BY THE LEARNED ASSESSING OFFICER. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE TREATMENT OF GAIN ARISING ON SALE OF PROPERTY IS WHETHER TO BE TREATED AS LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS EMPLOYED WITH EMERSON DESIGN ENGINEERING CENTRE, HINJEWADI PHASE - II , PUNE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD FLAT NO.704, AT ATUL NAGAR, WAR A J E , PUNE FOR TOTAL CONSIDERATION OF RS.28,80,000/ - . THE SAID PROPERTY WAS IN THE NAME OF ASSESSEE AND HIS WIFE. SINCE THE WIFE OF ASSESSEE WAS NOT ASSESSED TO TAX AND HAD NO SOURCE OF INCOME, THE TOTAL TRANSACTION WAS TREATED AS RELATABLE TO THE ASSESSEE BY THE ASSESSING O FFICER. THE SAID PROPERTY WAS ACQUIRED BY THE ASSESSEE THROUGH REGISTERED AGREEMENT DATED 28.06.2005 FROM RAHUL CONSTRUCTION COMPANY, PUNE. THE ASSESSEE HAD PLEDGED THE ARTICLES OF AGREEMENT TO M/S. UTI BANK LTD. ON 05.07.2005 AND AFTER SANCTIONING OF LO AN FROM THE BANK, FINAL PAYMENT OF RS.5,63,000/ - WAS MADE TO THE BUILDER. THE ASSESSEE TOOK THE POSSESSION OF THE SAID PROPERTY ON 22.07.2005. THE SAID FACTS WERE CONFIRMED BY THE BUILDER . SINCE THE ASSESSEE HAD SOLD THE SAID FLAT ON 27.06.2008, THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD NOT HELD THE FLAT FOR MORE THAN 36 MONTHS AND HENCE, WAS LIABLE TO SHORT TERM CAPITAL GAINS. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE IN THIS REGARD AND IN REPLY, THE ASSESSEE POINTED OUT THAT THE R IGHT IN THE SAID PROPERTY WAS CREATED ON 24.06.2005 WHEN PART PAYMENT WAS MADE TO THE BUILDER. SO, THE ASSESSEE DERIVED THE INTEREST IN THE SAID PROPERTY AND THE INCOME MERITS TO BE ITA NO. 1430 /PN/20 1 6 RAMANAND G. VENTEKAR 3 ASSESSED AS INCOME FROM LONG TERM CAPITAL GAIN, AGAINST WHICH THE ASSESSE E HAD FURTHER CLAIMED THAT IT HAD MADE INVESTMENT IN NEW ASSET TOTALING RS.42,13,750/ - AND EXEMPTION TO THAT EXTENT BE ALLOWED TO THE ASSESSEE. THE ASSESSING OFFICER REJECTING THE CLAIM OF ASSESSEE OBSERVED THAT FLAT AT ATUL CO - OPERATIVE HOUSING SOCIETY, PUNE WAS ACQUIRED BY THE ASSESSEE ON 22.07.2005 AS PER POSSESSION LETTER ISSUED BY M/S. RAHUL CONSTRUCTION COMPANY, PUNE. THE DOCUMENT OF SALE OF THE FLAT WAS PRESENTED ON 26.06.2008 AND WAS REGISTERED ON 27.06.2008. THE ASSESSEE HAD RECEIVED PARTIAL AMO UNT OF SALE CONSIDERATION ON 29.05.2008 AND HENCE, AS PER THE ASSESSING OFFICER, SINCE THE PERIOD BETWEEN PURCHASE OF FLAT AND SALE OF FLAT WAS ABOUT 35 MONTHS, HENCE THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE SAID ASSET TO BE A LONG TERM CAPITAL ASSET. T HE ASSESSING OFFICER TOOK NOTE OF THE FACT THAT THE ASSESSEE HAD PURCHASED ANOTHER FLAT AT RAHUL PARK, WARJE, PUNE ON 03.06.2009 FOR RS.40 LAKHS , H OWEVER, SINCE THE INCOME WAS ASSESSED AS SHORT TERM CAPITAL GAIN, THE BENEFIT OF SECTION 54 OF THE ACT WAS NO T ALLOWED TO THE ASSESSEE. 5. THE CIT(A) HAS UPHELD THE ORDER OF ASSESSING OFFICER HOLDING THAT THE ASSESSEE HAD NOT ESTABLISHED THAT IT HAD OBTAINED THE RIGHT TO PURCHASE THE SAID FLAT ON 28.06.2005 ITSELF. AN ALTERNATE PLEA WAS RAISED BEFORE THE CIT( A) THAT THE CAPITAL GAIN SHOULD BE RESTRICTED TO 50% IN HIS CASE. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF ASSESSEE AND IN CASE THE BALANCE CAPITAL GAIN HAVE NOT BEEN OFFERED BY THE WIFE OF ASSESSEE, THE ASSESSING OFFICER WAS DIREC TED TO REOPEN THE PROCEEDINGS IN HER CASE AND BRING THE BALANCE AMOUNT OF CASH IN HER HANDS. THE ASSESSING OFFICER WAS ALSO DIRECTED TO RESTRICT THE WORKING OF THE CAPITAL GAIN ONLY TO 50% IN ASSESSEES CASE. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDE R OF CIT(A). ITA NO. 1430 /PN/20 1 6 RAMANAND G. VENTEKAR 4 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE TOOK ME THROUGH THE FACTS OF THE CASE AND POINTED OUT THAT WHERE IT HAD ENTERED INTO A REGISTERED AGREEMENT TO SELL ON 28.06.2005 AND HAD EXECUTED THE SALE DEED OF THE SAID PROPERTY ON 27.06.2008, THE ASSESSEE WAS ENTITLED TO CLAIM THE SAID ASSET TO BE LONG TERM CAPITAL ASSET AND HENCE, THE GAIN ARISING ON ITS SALE WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAIN. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE FURTHER POINTED OUT THAT SINCE THE ASSESSEE HAD MADE INVESTMENT IN PURCHASE OF A NEW FLAT WITHIN STIPULATED PERIOD, THE ASSESSEE IS ALSO ENTITLED TO THE BENEFIT ALLOWABLE UNDER SECTION 54 OF THE ACT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. ON PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS THE TREATMENT OF GAIN ARISING ON SALE OF PROPERTY OWNED BY THE ASSESSEE. THE ASSESSEE HAD PURCHASED FLAT NO.704, AT ATUL NAGAR, WARAJE, PUNE VIDE REGISTERED AGREEMENT TO PURCHASE. THE ARTICLES OF AGREEMENT ENTERED INTO BETWEEN M/S. RAHUL CONSTRUCTION COMPANY AND THE ASSESSEE WERE REGISTERED ON 28.06.2005, AS PER THE COPY OF SAID DOCUMENT PLACED AT PAGES 1 TO 30 OF THE PAPER BOOK. THE ASSESSEE HAD PAID RS.10,000/ - IN ADVANCE FOR THE PURCHASE OF SAID PROPERTY AND THE BALANCE SUM OF RS.8,32,000/ - WAS AGREED TO BE PAID TO THE BUILDER. BY ENTERING INTO THE AFORESAID AGREEMENT, THE ASSESSEE ACQUIRES THE RIGHT OF OWNERSHIP IN THE SAID FLAT BY WAY OF REGD. AGREEMENT TO PURCHASE DATED 28.06.2005. THE SAID FLAT OWNED BY THE ASSESSEE WAS SOLD VIDE REGISTERED AGREEMENT FOR SALE DATED 27.06.2008, COPY OF W HICH IS PLACED AT PAGES 31 TO 46 ITA NO. 1430 /PN/20 1 6 RAMANAND G. VENTEKAR 5 OF THE PAPER BOOK FOR TOTAL CONSIDERATION OF RS.28,80,000/ - . THE ISSUE WHICH ARISES BEFORE THE TRIBUNAL IS WHETHER THE ASSET WHICH HAS BEEN SOLD BY THE ASSESSEE IS A LONG TERM CAPITAL ASSET BEEN OWNED BY THE ASSESSEE FOR A PERIOD OF 36 MONTHS OR MORE. THE SAID ASSET WAS PURCHASED IN JOINT NAMES OF ASSESSEE AND HIS WIFE. BUT , THE TOTAL TRANSACTION WAS CONSIDERED IN THE HANDS OF ASSESSEE BY THE ASSESSING OFFICER. HOWEVER, BEFORE THE CIT(A), THE ASSESSEE MADE AN ALTERNATE P LEA THAT HE WAS THE OWNER OF SAID PROPERTY TO THE EXTENT OF 50% SHARE ONLY. THE CIT(A) HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY WHETHER ANY INCOME HAS BEEN DECLARED IN THE HANDS OF ASSESSEE AND IF NOT, THEN THE ASSESSING OFFI CER WAS DIRECTED TO CARRY OUT THE RE - ASSESSMENT PROCEEDINGS. HE WAS ALSO FURTHER DIRECTED BY THE CIT(A) TO ASSESS 50% GAIN IN THE HANDS OF ASSESSEE. IT MAY BE POINTED OUT HEREIN ONLY THAT AFTER THE SALE OF RESIDENTIAL PROPERTY AT WARJE, THE ASSESSEE EXEC UTED A REGISTERED AGREEMENT FOR PURCHASE OF NEW CAPITAL ASSET BEING A FLAT AT RAHUL PARK, WARJE, PUNE ON 03.06.2009 FOR TOTAL CONSIDERATION OF RS.40 LAKHS. THE ASSESSEE THUS, CLAIMS THAT THE SALE PROCEEDS OF LONG TERM CAPITAL ASSET HAVING BEEN INVESTED IN A NEW CAPITAL ASSET WITHIN TIME FRAME, THE BENEFIT OF SECTION 54 OF THE ACT SHOULD BE ALLOWED TO THE ASSESSEE AND NO INCOME FROM CAPITAL GAIN S SHOULD BE ASSESSED IN THE HANDS OF ASSESSEE. 10. ON THE OTHER HAND, THE CASE OF THE REVENUE WAS THAT SINCE THE ASSESSEE HAD RECEIVED POSSESSION VIDE LETTER DATED 22.07.2005, IT HAD ACQUIRED THE SAID FLAT ON 22.07.2005 AND WHERE THE DOCUMENT OF SALE WAS PREPARED ON 26.06.2008 AND REGISTERED ON 27.06.2008 , THE PERIOD BETWEEN THE PURCHASE OF FLAT AND SALE OF FLAT WORK S OUT TO NEARLY ABOUT 35 MONTHS AND NOT 36 MONTHS AND HENCE, THE ASSET SOLD BY THE ASSESSEE WAS SHORT TERM CAPITAL ASSET. THE ASSESSEE ADMITTEDLY HAD ENTERED INTO A REGISTERED DOCUMENT FOR ACQUIRING THE ITA NO. 1430 /PN/20 1 6 RAMANAND G. VENTEKAR 6 RIGHTS IN THE SAID PROPERTY ON 28.06.2005. THE ASSE SSEE HAD MADE PART PAYMENT OF RS.10,000/ - ON 24.06.2005. WHERE THE ASSESSEE HAD ACQUIRED THE RIGHT OF OWNERSHIP BY WAY OF REGISTERED DOCUMENT, THE RIGHTS TO THE SAID CAPITAL ASSET DEVOLVED UPON THE ASSESSEE ON THE SAID DATE ITSELF I.E. 28.06.2005. IN LIE U OF THE SAID ACQUISITION OF RIGHTS ACQUIRED BY THE ASSESSEE ON 28.06.2005, THE POSSESSION OF THE PROPERTY DEVOLVED UPON THE ASSESSEE ON 22.07.2005. HOWEVER, IT CANNOT BE SAID THAT THE ASSESSEE ACQUIRED THE RIGHTS IN THE SAID PROPERTY ON 22.07.2005. IT M AY FURTHER BE POINTED OUT THAT THE ASSESSEE HAD RELINQUISHED HIS RIGHTS IN THE SAID PROPERTY BY WAY OF REGISTERED AGREEMENT TO SELL, WHICH WAS EXECUTED ON 27.06.2008. THE FIRST DOCUMENT OF ACQUISITION OF PROPERTY, UNDER WHICH THE RIGHTS AROSE TO THE ASSES SEE WAS DATED 28.06.2005 WHICH WAS TRANSFERRED BY WAY OF REGISTERED DOCUMENT ON 27.06.2008, HENCE THE TWO TRANSACTIONS I.E. ACQUISITION OF RIGHTS IN THE SAID PROPERTY WAS ON 28.06.2005 AND THE RELINQUISHMENT OF RIGHTS WERE ON 27.06.2008 I.E. AFTER PERIOD O F 36 MONTHS. HENCE, THE ASSET TRANSFERRED BY THE ASSESSEE WAS A LONG TERM CAPITAL ASSET AND GAIN ARISING THEREFROM IS TO BE ASSESSED AS INCOME FROM LONG TERM CAPITAL GAINS IN THE HANDS OF ASSESSEE. THE ORDER OF CIT(A) IS THUS, REVERSED. IN ORDER TO AVAI L THE BENEFIT OF SECTION 54 OF THE ACT, WHEREIN IT IS PROVIDED THAT THE ASSESSEE HAS THE OPTION TO INVEST THE SALE CONSIDERATION ARISING ON SALE OF ORIGINAL ASSET INTO A NEW ASSET WITHIN SPECIFIED PERIOD BY THE ASSESSEE, THEN THE CAPITAL GAIN HAS TO BE ASS ESSED ACCORDING TO THE INVESTMENT MADE BY THE ASSESSEE. THE ASSESSEE IN THE PRESENT CASE AS AGAINST THE SALE CONSIDERATION OF RS.28,80,000/ - , HAD MADE INVESTMENT IN THE NEW ASSET AT RS.40 LAKHS PLUS STAMP DUTY AND REGISTRATION, TOTALING RS.42,13,750/ - . C ONSEQUENTLY, THE ASSESSEE IS ENTITLED TO CLAIM THE BENEFIT OF DEDUCTION UNDER SECTION 54 OF THE ACT. THE SAID ASSETS WERE ALSO ACQUIRED BY WAY OF REGISTERED AGREEMENT FOR PURCHASE OF NEW FLAT VIDE DOCUMENT DATED 03.06.2009. THE PROVISIONS UNDER ITA NO. 1430 /PN/20 1 6 RAMANAND G. VENTEKAR 7 WHICH THE ASSESSEE CLAIMING THE BENEFIT ARE BENEVOLENT PROVISIONS OF THE STATUTE AND HENCE, SHOULD BE INTERPRETED LIBERALLY IN ORDER TO ENABLE THE ASSESSEE TO AVAIL THE AFORESAID BENEFIT. ACCORDINGLY, THE CLAIM OF ASSESSEE IS ALLOWED. SINCE THERE IS NO CAPITAL GA IN ARISING IN THE HANDS OF ASSESSEE AFTER CLAIMING THE DEDUCTION UNDER SECTION 54 OF THE ACT, THE ALTERNATE PLEA OF THE ASSESSEE BEFORE THE CIT(A) HAS NO MERITS. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, ALLOWED. 1 1 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 12 TH AUGUST , 201 6 . G CVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 6 , PUNE ; 4. / THE PR. CIT - 5 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE