ITO 25(2)(1), MUMBAI V. KRISHNAKUMARI R. AGARWAL, MUMBAI

ITA 1756/MUM/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0986 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 14-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Tax effect; Set aside; Capital Gains
• Section: 50C; 54EC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 1756/M/2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, APPELLANT 25(2)(1), C-11, BLDG., ROOM NO. 107, P.K. BHAVAN, BKC, BANDRA (E), MUMBAI 51. VS. MRS. KRISHNAKUMAR R. AGARWAL, RESPONDENT 34, SBI STAFF, GULMOHAR CHS, CHIKUWADI, BORIVALI (W), MUMBAI 92. C.O. NO. 93/M/2010 (IN ITA NO. 1756/M/2010 ASSESSMENT YEAR: 2006-07) MRS. KRISHNAKUMAR R. AGARWAL, CROSS O BJECTOR 34, SBI STAFF, GULMOHAR CHS, CHIKUWADI, BORIVALI (W), MUMBAI 92. VS. INCOME TAX OFFICER, RESPONDENT 25(2)(1), C-11, BLDG., ROOM NO. 107, P.K. BHAVAN, BKC, BANDRA (E), MUMBAI 51. REVENUE BY : MR. S.K. SINGH ASSESSEE BY : MR. SAMEER DALAL O R D E R THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDERS OF CIT(A)-35, MUMBAI, PASSED ON 03.12.2009 F OR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS RAISED C. O. AGAINST THE SAID ORDER OF CIT(A). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, WHETHER THE LD. CIT(A) IS RIGHT IN HOLDING THA T THE PROVISIONS OF SECTION 50C ARE STRICTLY APPLICABLE T O LAND OR BUILDING OR BOTH AND NOT TO FSI WITHOUT APPRECIATIN G THE FACT ITA NO.1756/M/10 & C.O. NO. 93/MUM/10 MRS. KRISHNAKUMARI R. AGARWAL 2 HAS EMERGED OUT OF BUILDING AND IT IS PART OF & PAR CEL OF THE BUILDING WHICH CLEARLY FALLS UNDER THE PROVISIONS O F SECTION 50C OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW, WHETHER THE LD. CIT(A) IS RIGHT IN HOLDING THAT TH E PROVISIONS OF SECTION 50C ARE STRICTLY APPLICABLE TO LAND OR B UILDING OR BOTH NOT TO FSI WITHOUT APPRECIATING THE FACT THAT THE VALUATION OF FSI WILL BE DONE ON THE BASIS OF BUILDING OR LAN D OR BOTH SOLD AND IT IS AN INDEPENDENT ASSET. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE AO BE RESTO RED. 3. THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJE CTIONS IN HIS C.O.:- 1. THE APPEAL PREFERRED BY THE AO 25(2)(1) INVOLVE S TAX EFFECT OF ONLY RS. 52,106/-. APART FROM THE POSITION OF LA W, THE APPEAL IS AGAINST THE CIRCULAR OF CENTRAL BOARD OF DIRECT TAXES, WHICH IS ISSUED WITH A VIEW TO REDUCE LITIGATION AN D BINDING ON THE REVENUE AND RESTRAIN THE REVENUE FROM FILING AP PEALS WHERE THE TAX EFFECT IS BELOW THE LIMITS PRESCRIBED THEREIN. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO NO TICED THAT THE ASSESSEE SOLD DEVELOPMENT RIGHTS FOR A SUM OF RS. 7 ,01,000/- AND CLAIMED DEDUCTION U/S 54EC OF THE ACT AS HE PURCHAS ED BONDS OF NATIONAL BANK FOR AGRICULTURE. AFTER EXAMINING THE SALE DEED, THE AO FOUND THAT THE MARKET VALUE AS PER THE REGISTRAR OF PROPERTIES OF FSI SOLD BY THE ASSESSEE WAS RS. 10,01,500/- WHE REAS THE ASSESSEE SOLD THE SAME FOR RS.7,01,000/-. THEREFORE , THE AO APPLIED SECTION 50C AND ADOPTED THE SALE CONSIDERAT ION OF RS. 10,01,500/- BY REFUSING THE OBJECTION OF THE ASSESS EE THAT SECTION 50C IS APPLICABLE TO LAND AND BUILDING ONLY AND NOT FOR DEVELOPMENT RIGHTS INCLUDING SALE OF FSI, ON THE GR OUND THAT FSI IS PART AND PARCEL OF THE BUILDING AND, THEREFORE, SEC TION 50C IS APPLICABLE. THE AO, THEREFORE, ADDED RS. 3,00,500/- UNDER THE HEAD CAPITAL GAINS. THE CIT(A) DELETED THE SAID ADDITION BY HOLDING THAT SECTION 50C IS APPLICABLE ONLY TO LAND OR BUILDING OR BOTH AND IT CANNOT BE APPLIED TO OTHER ASSETS AS SECTION 50C BE ING A DEEMING PROVISION SHOULD BE INTERPRETED STRICTLY AND THE SC OPE OF SECTION 50C CANNOT BE EXTENDED TO DEVELOPMENT RIGHT LIKE SA LE OF FSI. ITA NO.1756/M/10 & C.O. NO. 93/MUM/10 MRS. KRISHNAKUMARI R. AGARWAL 3 5. THE LEARNED AR, AT THE OUTSET, SUBMITTED THAT ON MERIT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN THE CASE OF ASSESSEE IN ITA NO. 1561/M/0 9 VIDE ORDER DATED 27.11.09 AND IN THE CASE OF M/S SHAKTI INSULA TED WIRES P LTD. IN ITA NO. 3710/MUM/07 VIDE ORDER DATED 27.4.0 9, OF WHICH COPIES ARE ON RECORD. 6. AFTER HEARING THE LEARNED DR, I FIND THAT THE AO INVOKED SECTION 50C IN RESPECT OF SALE OF FSI ON THE GROUND THAT FSI IS PART AND PARCEL OF THE BUILDING. THE CIT(A) DELETED THE ADDITION MADE BY THE AO OBSERVING THAT SECTION 50C IS APPLICABLE ONL Y TO LAND OR BUILDING OR BOTH AND IT CANNOT BE APPLIED IN RESPEC T OF SALE OF FSI. I FIND THAT AN IDENTICAL ISSUE WHETHER SECTION 50C IS APPLICABLE IN RESPECT OF TRANSFER OF TENANCY RIGHT CAME UP BEFORE THE ITAT CITED SUPRA. THE ITAT IN ITA NO. 1561/M/09 (SUPRA) AFTER A DETAILED DISCUSSION, HELD AS UNDER:- 3.5 FROM ABOVE DISCUSSIONS I NOTICED FROM PLAIN RE ADING OF THE SECTION 50C THAT UNLESS THE PROPERTY TRANSFERRE D HAS BEEN COVERED BY THAT SECTION 50C, THAT IS A CAPITAL ASSE T, BEING LAND OR BUILDING OR BOTH REGISTERED BY SALE DEED AND FOR THAT PURPOSE THE VALUE HAS BEEN ASSESSED AND STAMP DUTY HAS BEEN PAID BY THE PARTIES, ONLY THEN SECTION 50C CAN NOT COME INTO OPERATION. IN THE CASE UNDER CONSIDERATION THE RE IS TRANSFER OF TENANCY RIGHT THOUGH THAT IS CAPITAL AS SET BUT NOT A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH. TH EREFORE, SECTION 50C IS NOT APPLICABLE TO THE FACTS OF THE C ASE UNDER CONSIDERATION. ACCORDINGLY, THE AO IS NOT CORRECT I N TAKING THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY OF A STA TE GOVERNMENT/ THE STAMP VALUATION FOR THE PURPOSE CA LCULATION OF CAPITAL GAINS ON TRANSFER OF TENANCY RIGHT. THE ORDERS OF AO AND CIT (A) ARE SET ASIDE AND THE CLAIM OF THE ASSE SSEE IS ALLOWED. 7. SINCE THE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THAT OF THE CASES DECIDED BY THE ITAT (SUPRA), I FOLLOW THE DECISION OF ITAT AND IN THE LIGHT OF THAT I DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, I CONFIRM THE ORDER OF CIT(A). 8. SINCE I DISMISSED THE APPEAL OF THE REVENUE ON M ERIT, THE C.O. FILED BY THE ASSESSEE BECOMES INFRUCTUOUS, THE REFORE, THE SAME IS DISMISSED AS INFRUCTUOUS. ITA NO.1756/M/10 & C.O. NO. 93/MUM/10 MRS. KRISHNAKUMARI R. AGARWAL 4 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND C.O . OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.07.2010. SD/- (A.L. GEHLOT) ACCOUNTANT MEMB ER DATED: 14 TH JULY, 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, SMC BEN CH, I.T.A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INTALS 1. DRAFT DICTATED ON 14.07.2010 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 14.07.2010 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER