SHIV PARVATI CHS. LTD., MUMBAI V. I.T.O.-19-(1)(2), MUMBAI

ITA 1639/MUM/2011

• Counselvise Citation: 163919914 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 25-08-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Capital asset; Cost of acquisition
• Section: 148; 143(3)

Judgement Text

, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - H BENCH. . . , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1639/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2002-03 SHIV PARVATI CHS. LTD., PLOT NO. 439, 4TH ROAD, KHAR (W), MUMBAI-400052 VS ITO 19(1)(2), PIRAMAL CHAMBERS, MUMBAI-400012 PAN: AADAS1163J ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI K.R.LAKSHMINARAYANAN + * / REVENUE BY : SHRI JAVED AKHTAR ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 25-08-2014 -.# + ), / DATE OF PRONOUNCEMENT : 25-08-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED.31.01.2011 OF THE CIT(A )-30,MUMBAI, ASSESSEE HAD RAISED FOLLOWING GROUNDS APPEAL: 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LA W. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE COMPEN SATION RECEIVED BY THE APPELLANT CHS FROM THE DEVELOPER FOR TRANSFER OF DEVELOPMENT RIGH TS IS TAXABLE. 3. THE LEARNED CIT(A) ERRED IN NOT TAKING NOTE OF THE FOLLOWING MUMBAI ITAT DECISIONS IN SIMILARLY PLACED CASES HOLDING THAT SUCH COMPENSATI ON IS NOT TAXABLE. MAHESHWAR PRASAD 2CHS VS. ITO 118 ITD 223 AMBER CROFT CHS VS. ITO ITA NO. 5697/M/2006. ITO VS. NEW SHAILAJA CHS ITA NO. 512/M/2007 DT. 2.1 2.2008. ITO VS. LOTIA COURT CHS 27 SOT 36 URO. 4. IT IS PRAYED THAT THE COMPENSATION RECEIVED BY THE SOCIETY FROM THE DEVELOPER FOR THE TRANSFER OF DEVELOPMENT RIGHTS MAY BE HELD AS NON-TAXABLE IN THE LIGHT OF MUMBAI ITAT'S DECISIONS (SUPRA). 5. THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER, AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 2. AS PER THE INFORMATION AVAILABLE ON RECORD,THE ASSE SSING OFFICER(AO) FOUND THAT ASSESSEE CO- OPERATIVE SOCIETY HAD SOLD FSI IN THE FORM OF TDR F OR A CONSIDERATION OF RS. 12.99 LAKHS VIDE AGREEMENT DATED 26.01.2002. H WAS OF THE OPINION TH AT THE TDR BEING CAPITAL ASSET,GAINS ARISING OUT OF TRANSFER OF TDR CONSTITUTED TAXABLE INCOME U /S 45 OF THE ACT. SINCE NO RETURN OF INCOME WAS FILED,A NOTICE U/S. 148 WAS ISSUED. IN RESPONSE TO THE SAME THE ASSESSEE FILED A RETURN DECLARING NIL INCOME ON 13.08.2008. AO FOUND THAT IN THE RETURN FILED BY THE ASSESSEE, IT HAD NOT DISCLOSED THE AMOUNT RECEIVED FROM THE DEVELOPER AS ITS INCOME FOR THE YEAR IN THE RET URN FILED IN RESPONSE TO THE SECTION 148 OF THE ACT. HE CALLED FOR INFORMATION U/S 133 OF THE ACT F ROM THE BUILDER. IT WAS FOUND BY HIM THAT THE ASSESSEE HAD RECEIVED A TOTAL CONSIDERATION OF RS. 1.33 CRORES IN LIEU OF TRANSFER OF TDR AND PERMISSION TO CONSTRUCTION ADDITION FLOOR. HE ISSUE D A NOTICE TO THE ASSESSEE IN THIS REGARD. AFTER ITA NO. 1639/MUM/2011 SHIV PARVAT I CHS. LTD. 2 CONSIDERING THE VARIOUS CLAUSE OF THE AGREEMENTS HE COMPLETED THE ASSESSMENT ON 22.12.2008, U/S 143(3) R.W.S 147 OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS. 62.24 LAKHS. SIMULTANEOUSLY,HE INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). BEFORE HIM IT WAS STATED THAT SOCIETY'S BUILDING HAD BEEN CONSTRUCTED IN THE YEAR 1962,THAT DUE TO THE AGE IT HAD BECOME THE DILAPIDATED,THAT IT LACKED THE NECESSARY FINANCE AND TECHNICAL EXPERTISE TO CARRY THE REPAIRS,THAT IT ENGAGED SERVICES OF A DEVELOPER TO REPAIR AND DEVELOPED THE BUILDING WHICH NO COST TO THE SOCIETY,THAT THE DEVELOPER AGREED TO PAY THE SOCIETY AND TO THE INDIVIDUAL FLAT OWNERS AN AGGREGATE AMOUNT OF RS. 1.33 CRORES FOR GRANT OF PE RMISSION TO CONSTRUCT ADDITION FLOORS ON THE EXISTING STRUCTURE BY UTILISING FSI AVAILABLE WITH THE SOCIETY,THAT ENTIRE AMOUNT WAS NOT RECEIVED IMMEDIATELY ON SIGNING OF THE MOU BUT ON DIFFERENT DATES SPREAD OVER THE YEARS, THAT THE AMOUNT RECEIVED BY THE INDIVIDUAL FLAT OWNERS COULD NOT BE TAXED IN THE HANDS OF THE SOCIETY. ASSESSEE RELIED UPON THE FOLLOWING ORDERS OF THE TRIBUNAL: MAHESHWAR PRASAD 2CHS VS. ITO 19(2)(4), 118 ITD 2 23 DT. 15.05.2005 NEW SHAILAJA CHS ITA NO. 512/M/2007 A.Y. 2003-04 DT . 2.12.2008. AMBER CROFT CHS VS. ITO 19(10(3) ITA NO. 5697/M/200 6 DT. 1.06.2009. 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT SOCIETY WAS THE OWNER OF THE LAND AND THE BUILDING THEREON, THAT BEING THE OWNERS OF THE LAND THE FSI/TDR WERE AVAILABLE TO THE ASSESSEE ONLY, THAT C ONSIDERATION ARISING OUT OF THE TRANSFER OF FSI IN THE FORM OF TDR WOULD ASCERTAINABLE IN THE HANDS OF THE ASSESSEE SOCIETY, THAT PAYMENT MADE BY THE DEVELOPERS TO IT WAS TAXABLE AS LTCG IN THE HANDS OF THE SOCIETY. WITH REGARD TO THE CASE LAWS RELIED UPON BY THE SOCIETY AND THE CASE OF B.S .SRINIVAS SHETTY (28 ITR 294), THE FAA HELD THAT CONTENTIONS OF THE ASSESSEE WAS NOT CORRECT, T HAT THE CASE LAWS WERE DISTINGUISHABLE ON FACTS, THAT IN THE CASE OF ASSESSEE THERE WAS DEFINITE CAS E OF ACQUISITION OF TDR OF RS. 70.04 LAKHS.HE REFERRED TO THE CASE OF SHAKTI INSULATED WIRES (87 ITD 56) AND THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF CHHEDA HOUSING DEVELOPMENT CORPORATION (3 MHLJ 402) AND HELD THAT DATE OF ACQUISITION OF TDR WAS ASCERT AINABLE,THAT FROM THE DEVELOPMENT RIGHTS CERTIFICATE ISSUED BY THE BMC DATE COULD BE ASCERTA INED. FINALLY, HE HELD THAT THE SUM OF RS. 63.24 LAKHS(1.33 CRORES 70.04 LAKHS) WAS TAXABLE IN THE HANDS OF THE SOCIETY. HE CONFIRMED THE ORDER PASSED BY THE AO. 5. BEFORE US, AUTHORISED REPRESENTATIVE (AR) RELIED UPON THE FOLL OWING ORDERS: 1. OM SHANTI CO-OPERATIVE SOCIETY LTD. (ITA NO. 25 50/M/2007). 2. M/S. NEW SHAILAJA CHS LTD. (ITA NO. 512/M/2007). 3. MAHESHWAR PRAKASH-2 CO-OP. HSG. SOCIETY LTD. (24 SOT 366) MUM. 4. RAJ RATAN PALACE CO-OP. HSG. SOCIETY LTD. (ITA N O. 674/M/2004). 5. PEOPLES COSMOPOLITAN CHS LTD. (ITA NO. 1204/M/20 11). 6. LAND BREEZ CO-OPERATIVE HOUSING SOCIETY LTD. (28 TAXMAN.COM 196(MUM). 7. M/S. AMBER CROFT CO-OPERATIVE HOUSING SOCIETY LT D. (ITA NO. 5697/M/2006). 8. LOTIA CO-OPERATIVE HOUSING SOCIETY (ITA NO. 5096 /M/2005). 9. DEEPAK SHAH (29 SOT 26 MUM. 10. JETHALAL D. MEHTA (2 SOT 422 MUM. 11. RAM KUMAR MALHOTRA (ITA NO. 4843/M/2009). DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDE R OF THE FAA. 6 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT VARIOUS BENCHES OF THE MUMBAI TRIBUNAL IN THE CASES RELIED UPON BY THE AR HAVE HELD THAT THE ASSESSEE DO ITA NO. 1639/MUM/2011 SHIV PARVAT I CHS. LTD. 3 NOT INCUR ANY COST OF ACQUISITION WITH REGARD TO TH E RIGHT WHICH FLOW FROM THE RULES MADE BY THE LOCAL AUTHORITIES AND WHICH ALLOW THE ASSESSEE ELIG IBLE FOR ADDITIONAL FSI, THAT THE LAND AND THE BUILDING IN POSSESSION OF THE ASSESSEE CONTINUES TO REMAIN WITH IT EVEN AFTER THE TRANSFER OF RIGHT OF ADDITIONAL FSI TO THE DEVELOPER,THAT IT IS NOT POSS IBLE TO POINT OUT ANY PARTICULAR ASSET WHICH WOULD INCLUDE THE RIGHT OF ADDITIONAL FSI.WE FIND THAT TH E ASSESSEE HAD PERMITTED THE DEVELOPER TO CONSTRUCTION ADDITIONAL FLATS ON THE PLOT OF LAND, THAT NO PART OF THE LAND WAS EVER TRANSFERRED BY TH E SOCIETY TO THE DEVELOPER.IN THESE CIRCUMSTANCES,IT HAS TO BE HELD THAT THE SOCIETY MERELY GAVE PERMISSION TO THE DEVELOPER TO CARRY OUT DEVELOPMEN T,THAT IN LIEU OF THAT DEVELOPER HAD PAID CERTAIN AMOUNT TO THE SOCIETY AS WELL AS TO THE MEM BERS OF THE SOCIETY. FROM THE ABOVE FACTS,IT IS CLEAR THAT THE ASSESSEE DID NOT PART WITH ANY RIGHT OR DID NOT RECEIVE ANY CONSIDERATION FOR TRANSFER OF TDR/FSI.THE AO AND THE FAA HAD TOTALLY IGNORED T HE FACTS OF THAT OUT OF RS. 1.33 CRORES THE SOCIETY HAD RECEIVED RS. ONLY 12.99 LAKHS AS PER TH E AO HIMSELF.THEREFORE, MAKING THE ADDITION FOR THE ENTIRE AMOUNT WAS ALSO NOT JUSTIFIED.SECOND LY,THE ENTIRE AMOUNT WAS NOT RECEIVED IN THE YEAR UNDER APPEAL.AS HELD EARLIER,THE SOCIETY CONTI NUED TO BE OWNER OF THE PLOT OF LAND AND NO CHANGE IN THE OWNERSHIP OF THE LAND HAD TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION. THEREFORE,FAA WAS NOT JUSTIFIED IN HOLDING THAT THE COST OF FSI WAS RS. 70.04LAKHS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWI NG THE ABOVE REFERRED 11 DECISIONS,AT PARAGRAPH 5 OF THE ORDER,OF THE VARIOUS BENCHES OF THE TRIBUN AL,WE REVERSE THE ORDER OF THE FAA AND DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASS ESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE HOUSING SOCIETY STANDS ALLOWED. 1)2 '() 3 4 + / 5 + ) 67 . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH ,AUGUST 2014 . 0 + -.# 8 9' 25 /) , 201 4 . + / : SD/- SD/- . . / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9' /DATE: 25.08 . 2014. SK 0 0 0 0 + ++ + &); &); &); &); < ;#) < ;#) < ;#) < ;#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR H BENCH, ITAT, MUMBAI / ;?/ &)' , , . . . 6. GUARD FILE/ / 1 ';) ';) ';) ';) &) &)&) &) //TRUE COPY// 0' / BY ORDER, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI