ITO 14(3)(4), MUMBAI V. SUDHA MURARKA, MUMBAI

ITA 170/MUM/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8177 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Gift; Share purchase agreement; Cost of acquisition
• Section: 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI R.C.SHARMA , ACCOUNTANT MEMBER ITA NO.170/MUM/2014 (A.Y.2010-11) INCOME TAX OFFICER 14(3)-4, 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 021. (APPELLANT ) VS. MRS. SUDHA MURARKA, A-2105, SAHAYADRI TOWER, UPPER GOVIND NAGAR, MALAD (EAST), MUMBAI 400097 PAN: APBPM9700K (RESPONDENT) APPELLANT BY : SHRI NEIL PHILIP RESPONDENT BY : SHRI NE ELKANTH KHANDELWAL DATE OF HEARING : 16/10/2014 DATE OF PRONOUNCEMENT : 16 /10/2014 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-25 MUMBAI DATED 04/10/2013 FOR ASSESS MENT YEAR 2010-11. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN HOLDING THE SALE CONSIDERATION RECEIVED BY THE ASSE SSEE ON SALE OF RESIDENTIAL FLAT AS LONG TERM CAPITAL GAIN INSTEAD OF SHORT TERM CAP ITAL GAINS WITHIN THE MEANING OF SECTION 2(42B) AS THE OWNERSHIP OF THE S AID FLAT HOLD BY THE ASSESSEE FROM 18.05.2008. 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS FURTHER ERRED IN RELYING ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT-12 VS. MANJULA J SHAH (2012) 204 TAXMAN 691, AS THE FA CT OF THE CASE ARE DIFFERENT. 3. FURTHER, THE LD. CIT(A) ERRED IN RELYING UPON T HE DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE AS THE SAME WAS ON PLAIN P APER AND UNREGISTERED WHICH HAS NO VALUE IN THE EYE OF LAW. ITA NO.170/MUM/2014 (A.Y.2010-11) 2 4. FOR THE ABOVE MENTIONED REASON AND ANY OTHER RE ASONS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) BE QUASHED AND THAT OF THE AO BE RESTORED. 2. THE ASSESSEE SOLD ONE HALF SHARE IN RESIDENTIAL FLAT NO. G-28, VENUS APARTMENT, WORLI SEA FACE, MUMBAI FOR A CONSIDERAT ION OF RS.1.20 CORES ( VALUE OF 50% SHARE OF THE ASSESSEE) AND NIL LONG TERM CAPIT AL GAIN WAS OFFERED AS PER FOLLOWING CALCULATIONS: SALE CONSIDERATION AS PER AGREEMENT DATED 21.05.2009 2,40,00,000/- ----------------- 50% THEREOF 1,2 0,00,000/- LESS : INDEX COST OF ACQUISITION (A)50% SHARE IN THE PROPERTY ACQUIRED UNDER WILL OF MR. RAMGOPAL MURARKA (B) DETAILS OF ACQUISITION OF PREVIOUS OWNER DATE OF PURCHASE 02.02.1990 YEAR OF PURCHASE 1989-90 COST OF ACQUISITION 23,00 ,000/- ADD: STAMP DUTY 1,79, 000/- REGISTRATION CHARGES 5 ,050/- --------------- 24,84,050/- ========== 50% THEREOF 12,42,025/- INDEXED COST OF ACQUISITION 12,42,025 X 632 45,63,720/ - 172 -------------- 74,36,280/- LESS: EXPENSES IN CONNECTION WITH TRANSFER OF SALE OF RESIDENTIAL FLAT TRANSFER CHARGES 25,000/- BUILDING WELFARE ACCOUNT (RS.48,000+ RS.2,03,500 +RS.2.03.500) 4,55,000/- -------------- 4,80,000/- ========= 50% THEREOF 2,4 0,000/- ------------- 71,96,280/- LESS: DEDUCTION UNDER SECTION 54 74,36,850/- ---------------- NIL ITA NO.170/MUM/2014 (A.Y.2010-11) 3 ========== 2.1 THE AO NOTICED THAT THE 50% SHARE IN THE AFOREM ENTIONED PROPERTY WAS ACQUIRED BY THE ASSESSEE BY WAY OF WILL DATED 2/1 1/2003 MADE BY SHRI RAMGOPAL MURARKA, FATHER-IN-LAW OF THE ASSESSEE. HE REQUIR ED THE ASSESSEE TO FILE COPIES OF PURCHASE DEED, SALE DEED AND COPY OF WILL OBTAINED ALONGWITH DEATH CERTIFICATE OF SHRI RAMGOPAL AND FROM THESE DOCUMENTS HE NOTICED T HAT THE INDEXED COST OF ACQUISITION WAS COMPUTED BY THE ASSESSEE FROM THE D ATE OF PURCHASE BY THE PREVIOUS OWNER I.E. ON 2/2/1990 AND THE INDEXATION COST WAS APPLIED FOR THE YEAR 1989-90. HE REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE C LAIM OF THE ASSESSEE REGARDING INDEXATION BENEFIT SHOULD NOT BE REJECTED. THE AO ALSO NOTICED THAT AS PER SHARE CERTIFICATE ISSUED BY THE SOCIETY IN WHICH SAID FLA T WAS SITUATED THE ASSESSEE WAS SHOWN AS OWNER AS ON 18/05/2008 AND ASSESSEE SOLD T HIS PROPERTY ON 21/05/2009. NOTING ALL THESE FACTS HE CALCULATED THE CAPITAL GA IN AS UNDER: SALE CONSIDERATION AS PER AGREEMENT DATED 21.05.2009 2,40,00,000/- ----------------- 50% THEREOF 1,2 0,00,000/- LESS : INDEX COST OF ACQUISITION (A)50% SHARE IN THE PROPERTY ACQUIRED UNDER WILL OF MR. RAMGOPAL MURARKA (B) DETAILS OF ACQUISITION OF PREVIOUS OWNER DATE OF PURCHASE 02.02.1990 YEAR OF PURCHASE 1989-90 COST OF ACQUISITION 23,00 ,000/- ADD: STAMP DUTY 1,79, 000/- REGISTRATION CHARGES 5 ,050/- --------------- 24,84,050/- ========== 50% THEREOF 1 2,42,025/- ------------------- 1,07,57,975/- LESS: EXPENSES IN CONNECTION WITH TRANSFER OF SALE OF RESIDENTIAL FLAT ITA NO.170/MUM/2014 (A.Y.2010-11) 4 TRANSFER CHARGES 25,000/- BUILDING WELFARE ACCOUNT (RS.48,000+ RS.2,03,500 +RS.2.03.500) 4,55,000/- -------------- 4,80,000/- ========= 50% THEREOF 2,4 0,000/- ------------- TAXABLE SHORT TERM CAPITAL GAIN 1,05,17,975/- =========== 2.2 THE A.O ALSO REJECTED THE SUBMISSIONS OF THE A SSESSEE REGARDING GRANT OF COST OF INDEXATION BENEFIT FROM THE DATE ON WHICH PREVIO US OWNER HAD ACQUIRED THE PROPERTY ON THE BASIS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. MANJULA J. SHAH, 16 TAXMANN.COM 42 (BOM) ON THE GROUND THAT I N THE CASE OF ASSESSEE THE TRANSFER WAS BY WAY OF WILL AS AGAINST THE TRANSFER IN THE CASE OF SMT. MANJULA J. SHAH BY WAY OF GIFT. THE AO HAS ALSO ASCRIBED THE REASON FOR NOT FOLLOWING THE DECISION OF SMT. MANJULA J. SHAH ON THE GROUND THA T THE SAID DECISION OF HONBLE BOMBAY HIGH COURT HAS NOT BEEN ACCEPTED BY THE REVE NUE AND FURTHER SLP HAS BEEN FILED. FOR THE SAKE OF COMPLETENESS OF THE FACTS OBSERVATIONS OF THE AO FROM ASSESSMENT ORDER ARE REPRODUCED BELOW: 5.6 THE EXPLANATION FILED BY THE ASSESSEE IS DULY CONSIDERED. IN THE CASE OF MANJULA J. SHAH, THE PROPERTY WAS ACQUIRED BY WAY OF GIFT WHEREAS IN THE PRESENT CASE THE PROPERTY IS ACQUIRED BY WILL. IT IS OBSERVED TH AT THE WILL FURNISHED BY THE ASSESSEE IS ON PLAIN PAPER WHICH IS NOT DULY REGISTERED. HE RE IT IS PERTINENT TO MENTION THAT THE GIFT IS EFFECTIVE FROM THE DATE OF EXECUTION OF GI FT DEED WHEREAS THE WILL IS EFFECTIVE FROM THE DEATH OF THE DONOR. THE ASSESSEE HAS RELIED UPON THE HONBLE BOMBAY HIG H COURT DECISION IN THE CASE OF CIT-12 VS. MANJULA J. SHAH (2012) 204 TAXMAN 691, I T IS REVEALED THAT THE HONBLE HIGH COURT DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTM ENT IN THE CASE OF MANJULA J. SHAH AND REVENUE FILED SLP BEFORE HONBLE SUPREME COURT OF INDIA. THE SLP FILED BY THE DEPARTMENT HAS BEEN ADMITTED BY HONBLE SUPREME COU RT OF INDIA VIDE ORDER DATED 09.07.2012. AS SUCH THE ISSUE OF TAXABILITY OF CAP ITAL GAIN HAS NOT REACHED TO ITS FINALITY IN THAT CASE. IN THE FACT DROP OF ABOVE SITUATION CAPITAL GAIN ISSUE IS DISCUSSED AS UNDER: .. 5.9 WITH DUE RESPECT OF THE ORDER OF HONBLE HIGH COURT, THE ASSESSEES CLAIM OF COST INDEXATION FROM THE YEAR IN WHICH THE PREVIOUS OWN ER HELD THE ASSET IS BEING DENIED ONLY IN ORDER TO KEEP THE ISSUE ALIVE AND ALSO TO P ROTECT THE INTEREST OF THE REVENUE IN THIS CASE. SINCE IT IS SHORT TERM CAPITAL GAIN, ASSESSE ES CLAIM OF DEDUCTION UNDER SECTION 54 IS ALSO BEING DENIED. IN VIEW OF THE DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. MANJULA J. SHAH, THE DEMAND IN THIS CASE WI LL REMAIN STAYED TILL THE DISPOSAL OF ITA NO.170/MUM/2014 (A.Y.2010-11) 5 SLP IN THE CASE OF SMT.MANJULA J. SHAH, WHICH IS P ENDING WITH THE HONBLE SUPREME COURT OR TILL THE DISPOSAL OF 1 ST APPEAL IN THIS CASE WHICHEVER IS EARLIER. 3. LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE FO LLOWING AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. MA NJULA J. SHAH(SUPRA). THE DEPARTMENT IS AGGRIEVED, HENCE, HAS FILED THIS APPE AL. 4. LD. DR RELYING UPON THE ORDER PASSED BY AO SUBMI TTED THAT THE GAIN BY THE ASSESSEE WAS RIGHTLY TREATED BY THE AO AS SHORT TER M CAPITAL GAIN. THUS, HE PLEADED THAT THE ORDER OF LD. CIT(A) SHOULD BE SET ASIDE A ND THAT OF AO BE RESTORED. 5. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR T HAT ACCORDING TO AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF SMT. MANJULA J. SHAH (SUPRA) THE ASSESSEE IS ENTITLED TO GET THE BENEFIT OF INDEXATION OF COST FROM THE DATE ON WHICH THE PREVIOUS OWNER BECAME OWNER O F THE PROPERTY . THUS, IT WAS PLEADED BY LD. AR THAT ORDER PASSED BY LD. CIT(A) B EING IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT SHOUL D BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THOUGH THE AO HAS OBSERVED THAT THE WI LL IS ON PLAIN PAPER AND IS NOT DULY REGISTERED, HOWEVER, AO HAS ASSESSED THE GAIN IN THE HANDS OF THE ASSESSEE WHO HAS BECOME OWNER OF THE PROPERTY ONLY IN ACCORDANCE WITH THE SAID WILL. IF ASSESSEE HAS ACQUIRED PROPERTY ACCORDING TO THE WILL AND TH E SAID RIGHT OF THE ASSESSEE WAS ACCEPTED BY THE SOCIETY IN WHICH THE FLAT WAS SITUA TED AND THE GAIN HAS BEEN ASSESSED BY THE AO IN THE HANDS OF ASSESSEE THEN THE BENEFIT OF LONG TERM CAPITAL GAIN AND COST INDEXATION FROM THE DATE WHEN THE PREVIOUS OWNER O WNED THE PROPERTY CANNOT BE DENIED TO THE ASSESSEE. THE ACTION OF LD. CIT(A) I S IN ACCORDANCE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SM T. MANJULA J. SHAH (SUPRA), ITA NO.170/MUM/2014 (A.Y.2010-11) 6 THEREFORE, WE DECLINE TO INTERFERE IN THE RELIEF G RANTED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/10/201 4 !' # $%& 16/10/2014 ! ' SD/- SD/- ( . . /R.C.SHARMA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; $% DATED 16/10/2014 ()* ()* ()* ()* +*') +*') +*') +*') / COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. (.,- / THE RESPONDENT. 3. / ( ) / THE CIT(A)- 4. / / CIT 5. *0' ()% , , / DR, ITAT, MUMBAI 6. '1 2 / GUARD FILE. % % % % / BY ORDER, .*) () //TRUE COPY// 3 33 3 / 4 4 4 4 5 5 5 5 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . ./ VM , SR. PS