RAMESH SHARMA, MUMBAI V. DCIT CEN CIR 8, MUMBAI

ITA 1764/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8545 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 25-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1764/M/2015 ASSESSMENT YEAR: 2010-11 SHRI RAMESH SHARMA G-3, BLACK DIAMOND CO-OP. HSG. SOC. LTD., KHAR, DANDA ROAD, KHAR(W) MUMBAI - 400052 PAN:AAOPS5769A VS. DCIT CENTRAL CIRCLE 8 MUMBAI (APPELLANT) (RESPONDENT) ITA NO.1765/M/2015 ASSESSMENT YEAR: 2010-11 SHRI KRISHNA SHARMA G-3, BLACK DIAMOND CO-OP. HSG. SOC. LTD., KHAR, DANDA ROAD, KHAR DANDA ROAD, KHAR (W) MUMBAI - 400052 PAN: AAOPS5770R VS. DCIT CENTRAL CIRCLE 8 MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ANANT N. PAI, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 11.10.2017 DATE OF PRONOUNCEMENT : 17.11.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TWO ASSESSEES AGAINST THE ORDER DATED 03.11.2014 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) 37, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELE VANT TO ASSESSMENT YEAR 2010-11. 2. THE COMMON GROUND IN BOTH THESE APPEALS TAKEN BY THE ASSESSEE AS UNDER:- WITHOUT PREJUDICE TO THE GENERALITY IN THE ABOVE G ROUND, THE LEARNED COMMISSIONER (APPEALS), IN DENYING THE SAID DEDUCTI ON U\S 54, MORE PARTICULARLY ITA NO.1764&1765/M/15 A.Y.2010-11 2 ERRED IN LOSING SIGHT OF THE VITAL CIRCUMSTANCE THA T THE DATE OF PURCHASE OF THE NEW RESIDENTIAL HOUSE OUGHT TO BE CONSTRUED FROM TH E DATE ON WHICH THE APPELLANT OBTAINED DOMAIN OVER THE SAME IN TERMS OF THE PROVI SIONS OF THE MAHARASHTRA APARTMENT OWNERSHIP ACT, 1970 AND THAT THEREFORE, T HE DECISIONS RELIED BY LEARNED COMMISSIONER (APPEALS) IN DISMISSING THE APPELLANT' S APPEAL WERE CLEARLY DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF HIS CASE. 3. THE ASSESSEE HAS RECEIVED THE ORDER OF COMMISSIO NER WITHIN TIME BUT THE ASSESSEE WAS NOT PRESENT AT A RELEVANT TIME. THERE FORE, ASSESSEE RECEIVED THIS ORDER LATE. THEREFORE, THERE WAS A DELAY IN FILING THE APPEAL. THEREFORE, HE REQUESTED TO CONDONE THE DELAY. 4. THE LD. D.R. OBJECTED TO IT. 5. HAVING GONE THROUGH THE AFFIDAVIT FILED BY THE E MPLOYEE ONE MS. KIRTI BHANUDAS GAJUR IT IS FOUND THAT ASSESSEE HAS REASON ABLE CAUSE FOR DELAY. THEREFORE, WE CONDONE THE SAME. 6. THE SHORT FACTS OF THE CASE ARE AS UNDER:- THE ASSESSEE HAS FILED THE RETURN OF INCOME DISCLOS ING TOTAL INCOME OF RS.56,34,640/- WAS FILED ON 12.10.2010, CLAIMING EX EMPTION U/S.54 OF RS.1,58,79,304/-. THE ASSESSEE HAD RESIDENTIAL PROP ERTY HELD BY THE ASSESSEE JOINTLY WITH HIS WIFE KRISHNA SHARMA WAS S OLD FOR A CONSIDERATION OF RS.5,30,00,000/- ON 24.08.2009. T HE ASSESSEES SHARE WAS 50% AT RS.2,65,00,000/- AND 50% OF HIS WIFE. A FTER DEDUCTING THE INDEXED COST OF RS.1,06,20,696/-, THE NET CAPITAL G AIN WAS COMPUTED AT RS.1,58,79,304/-. THE EXEMPTION WAS CLAIMED U/S.54 IN RESPECT OF PURCHASE OF NEW HOUSE PROPERTY FOR RS.6,50,00,000/- IN WHICH THE ASSESSEE AND HIS WIFE HAD 50% SHARE EACH. THE ASSE SSING OFFICER NOTED DATE OF SALE OF OLD PROPERTY WAS 24.08.2009 A ND DATE OF REGISTRATION OF AGREEMENT FOR PURCHASE OF NEW HOUSE PROPERTY WAS 02.11.2007. THE ASSESSING OFFICER NOTED THAT NEW H OUSE PROPERTY WAS PURCHASED MORE THAN ONE YEAR BEFORE THE DATE OF SAL E OF THE PROPERTY GIVING RISE TO CAPITAL GAINS. HENCE, THE CLAIM OF DEDUCTION U/S.54 WAS ITA NO.1764&1765/M/15 A.Y.2010-11 3 WRONGLY CLAIMED. THE ASSESSEE CLAIMED THAT THOUGH THE AGREEMENT FOR PURCHASE OF NEW PROPERTY WAS REGISTERED ON 02.11.20 07, THE POSSESSION WAS RECEIVED ON 26.09.2008. THE ASSESSING OFFICER NOTED THAT TOTAL PAYMENT WERE MADE BY THE ASSESSEE TO THE BUILDER AS ON 02.11.2007 AND THERE WAS NO AMOUNT PAYABLE THEREAFTER EXEMPT FOR M AINTENANCE. THE ASSESSING OFFICER MADE ENQUIRIES FROM THE DEVELOPER S OF THE PROJECT IN WHICH THE NEW PROPERTY WAS PURCHASED. AS PER THE A GREEMENT, THE DEVELOPERS AGREED TO HANDED OVER THE POSSESSION BY 15.12.2007. THE ASSESSEE CLAIMED THAT THE POSSESSION LETTER THE DEV ELOPER HAS SAID THAT THE FORMAL POSSESSION WOULD BE GIVEN ON RECEIPT OF OCCUPATION CERTIFICATE AND OCCUPATION CERTIFICATE WAS RECEIVED ON 19.03.2008 AND THEREFORE CLAIM FOR DEDUCTION U/S.54 IS IN ORDER. 7. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESS EE HAD SUBMITTED A LETTER TO THE SECRETARY OF THE CONDOMINIUM ON 02.05.2008 F OR PERMISSION TO INSTALL TELEPHONE CONNECTION. THE ASSESSING OFFICER NOTED THAT THE LAST POSSESSION LETTER IN RESPECT OF THE FLATS IN THE NEW BUILDING WAS ON 14.05.2008, THEREFORE HE CLAIMED THAT FULL OCCUPATION CERTIFICATE WAS ISSUED BY BMC ON 19.03.2008, THEREFORE CLAIM MAY BE ALLOWED. THEREFORE, ASSESSI NG OFFICER WAS OF A VIEW THAT CONDOMINIUM LETTER WAS GIVEN ON 26.09.2008 BUT THAT IS NOT A LEGAL ONE, THEREFORE THE AO AND CIT(A) DID NOT ALLOW THE CLAIM OF SECTION 54. 8. THE LEARNED AR SUBMITTED THAT ASSESSEE HAS TAKEN THE POSSESSION OF FLAT UNDER MAHARASHTRA APARTMENT OWNERSHIP ACT, 1970 UND ER WHICH THE CONDOMINIUM WAS FORMED, WAS DIFFERENT FROM THE HOUS ING CO-OPERATIVE HOUSING SOCIETY ACT. THE POSSESSION OF FLAT WITHOU T THE BUILDER GIVING THE POSSESSION OVER THE UNDIVIDED INTEREST IN THE LAND DOES NOT COMPLETE THE ACQUISITION. EVEN, AFTER THE APARTMENT OWNER HAS E XCLUSIVE POSSESSION OVER HIS FLAT, TILL HIS SPECIFIC PERCENTAGE IN THE UNDIVIDED LAND AND OTHER COMMON AREAS IS NOT CARVED OUT AND ALSO POSSESSION OF THE LAND A ND COMMON AREAS IS NOT GIVEN, HIS PROPERTY RIGHTS IS INCHOATE. THE ASSESS EE IS RELIED UPON THE DECISION ITA NO.1764&1765/M/15 A.Y.2010-11 4 OF JURISDICTIONAL HIGH COURT IN CASE OF COMMISSIONE R OF INCOME TAX VS.GIRISH L.RAGHA, [2016] 69 TAXMANN.COM 95 (BOMBAY). 9. THE LEARNED DR RELIED UPON THE ORDER OF REVENUE AUTHORITIES. 10. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAD SOLD THE PROPERTY ON 24.08.2009 AND AS PER THE PROVISIONS OF SECTION 54 OF THE ACT REQUIRED WITHIN ONE YEAR TO PURCHASE THE PROPERTY BUT DATE OF SALE OF OLD PROPERTY WAS 24.08.2009 WHEREAS THE DATE OF REGISTRATION OF AGRE EMENT FOR PURCHASE OF NEW PROPERTY WAS 02.11.2007 AND THUS THE NEW PROPERTY WAS PURCHASED MORE THAN A YEAR BEFORE THE DATE OF SALE GIVING RISE TO CAPIT AL GAIN. THE ASSESSEE HAS PURCHASED THE PROPERTY AND POSSESSION WAS GIVEN ON 21.12.2007. IN THE NEW BUILDING THE LAST POSSESSION WAS GIVEN ON 14.05.200 8, THEREFORE, ASSESSEE IS NOT ENTITLED FOR ANY DEDUCTION U/S.54 OF THE ACT. THER EFORE, REVENUE AUTHORITIES IS JUSTIFIED FOR REJECTING THE CLAIM. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL PLACED BEFORE US. THE UNDISPUTED FACTS OF THE CASE ARE AS UNDER:- (A) DATE OF SALE OF RESIDENTIAL FLAT 24-08-2009. (B) DATE OF POSSESSION OF NEW FLAT FOR CARRYING FUR NITURE WORK (C) DATE OF SIGNING OF DECLARATION UNDER MAO ACT 30 -3-2009. DECLARATION IS REGISTERED ON 1-4-2009. (D) DATE OF THE BUILDER HANDLING POSSESSION OF LAND I.E. DATE OF FINAL CONVEYANCE ON 17-4-2010.- BEING DATE OF FINAL CONVE YANCE THE ASSESSEE SOLD THE RESIDENTIAL PROPERTY JOINTLY OWNED WITH HIS WIFE KRISHNA SHARMA FOR A CONSIDERATION OF RS.5,30,00,000/-. TH E ASSESSEES SHARE WAS RS.2,65,00,000/-. AFTER DEDUCTING THE INDEXED COST OF RS.1,06,20,696/-, THE NET CAPITAL GAIN WORKED OUT TO RS.1,58,79,304/-. ASSES SEE AND HIS WIFE HAS EARLIER ITA NO.1764&1765/M/15 A.Y.2010-11 5 ENTERED INTO AGREEMENT DATED 02.11.2007 FOR ACQUIRI NG A NEW RESIDENTIAL PREMISES IN BUILDING FOR TOTAL CONSIDERATION OF RS. 6,50,00,000/-. THE SAID FLAT WAS ACQUIRED BY THE ASSESSEE UNDER CONDOMINIUM AS P ER MAHARASHTRA APARTMENT OWNERSHIP ACT, 1970. UNDER THE MAHARASHT RA APARTMENT OWNERSHIP ACT, 1970, THE LAND AND BUILDING IS DIRE CTLY OWNED AND HELD BY THE FLAT OWNERS AND NOT BY A CORPORATE ENTITY LIKE A CO -OPERATIVE SOCIETY. AND THE FLAT OWNER ACQUIRES EXCLUSIVE OWNERSHIP RIGHT OVER HIS INDIVIDUAL FLAT PLUS AN UNDIVIDED SHARE IN THE LAND AND COMMON AREAS OF THE BUILDING. THERE IS MARKED DIFFERENCE IN THE MODE OF OWNERSHIP AND HOLD ING OF PROPERTIES UNDER THE CO-OPERATIVE SOCIETY MODE AND THE CONDOMINIUM M ODE UNDER MAHARASHTRA APARTMENT OWNERSHIP ACT, 1970. UNDER THE SOCIETY M ODE THE LAND AND BUILDING IS OWNED AND HELD BY THE CO-OPERATIVE SOCI ETY AS A CORPORATE ENTITY DISTINCT FROM ITS MEMBER AND THE MEMBER HAS ONLY TR ANSFERABLE OCCUPANCY RIGHTS IN THE FLAT ALLOTTED TO HIM BY THE SOCIETY. BUT IN CONTRAST, WHEN THE PROPERTY IS PURCHASED UNDER THE CONDOMINIUM MODE, T HE PURCHASER IS OWNER OF THE LAND AND BUILDING AND NOT THE CONDOMINIUM. THE CONDOMINIUM IS NOT A CORPORATE ENTITY AND IS JUST COLLECTIVE NAME GIVEN TO ALL PURCHASERS ADDRESSED TOGETHER. THE CONDOMINIUM CANNOT HOLD PROPERTY AS I T IS NOT A LEGAL ENTITY. THE PURCHASER UNDER THE MAO ACT IS LEGALLY COMPELLED TO HOLD BOTH HIS EXCLUSIVE OWNERSHIP RIGHT IN THE FLAT AND THE UNDIVIDED SHARE IN THE LAND AND COMMON AREAS TOGETHER AS ONE COMPOSITE PROPERTY. HIS RESID ENTIAL HOUSE, FOR THE PURPOSES OF SECTION 54, CONSTITUTES THIS EXCLUSIVE OWNERSHIP RIGHT OVER THE FLAT PLUS UNDIVIDED SHARE IN THE LAND AND COMMON AREAS O F THE BUILDING AS ONE SINGLE COMPOSITE PROPERTY. DOMAIN OVER THE PROPERTY IS ACHIEVED WHEN HE IS IN CONTROL OVER BOTH HIS FLAT AND LAND PORTION. POSSES SION OVER THE FLAT ONLY DOES NOT COMPLETE THE DOMAIN. AFTER ALL THE PROPERTY PUR CHASED IS BOTH THE FLAT AND LAND PORTION AND NOT THE FLAT ONLY. IN CITY LIKE MU MBAI, THE MAJOR PART OF THE COST OF THE RESIDENTIAL PREMISES IS IN THE LAND AND THEREFORE, DOMAIN OVER LAND IS SIGNIFICANT AS THE SUBSTANTIAL PORTION OF INVESTMEN T IS IN LAND . ALSO, TILL THE ITA NO.1764&1765/M/15 A.Y.2010-11 6 DECLARATION UNDER SECTION 2 UNDER MAO ACT 1970 IS N OT EXECUTED AND REGISTERED, THE EXTENT OF THE UNDIVIDED SHARE IN LA ND AND COMMON AREAS OF A PURCHASER IS ALSO NOT KNOWN. THE UNDIVIDED SHARE IS CONFIRMED ONLY IN THE INSTRUMENT OF DECLARATION REGISTERED AND NOT BEFORE . THEREFORE, EVEN IF POSSESSION OF FLAT IS GIVEN TO THE PURCHASER BEFORE THE EXECUTION OF THE DECLARATION, THE PURCHASER DOES NOT HAVE DOMAIN OVE R THE LAND BECAUSE HIS UNDIVIDED SHARE IS NOT ASCERTAINED AND ALSO POSSESS ION OF THIS UNDIVIDED SHARE IN LAND IS PENDING. THE POSSESSION OF THE LAND AND COMMON AREAS WAS GIVEN ON 17.04.2010. UNDER THIS ACT LAND AND BUILDING IS NO T DIRECTLY OWNED AND HELD BY THE SOCIETY OWN RIGHT AS A CORPORATE ENTITY DIST INCT FROM ITS MEMBERS. EACH FLAT OWNER ACQUIRES EXCLUSIVELY RIGHT FOR HIS OWN I NDIVIDUAL FLAT IN COMMON AREA OF BUILDING AS PER MAHARASHTRA CO-OPERATIVE OW NERSHIP ACT. THE RESIDENTIAL PREMISES ARE ACQUIRED BY AGREEMENT TO P URCHASE THE PREMISES FROM BUILDERS BUT THE LAND MAY NOT GIVEN TO BUYER. IN THIS REGARD, ASSESSEE HAS MADE DECLARATION THAT HE WILL GET LAND AND BUILDING BOTH AND THEREFORE, BUYER EXCLUSIVE OWNERSHIP IS IN THE FLAT AND IN COMMON AR EA OF BUILDING INCLUDING LAND. IF WE CONSIDER THE CONDOMINIUM MODE THEN ASS ESSEE HAS GOT THE POSSESSION AND ACQUIRED THE POSSESSION OF LAND ON 0 7.12.2010 BEING FINAL DEED. THEREFORE ASSESSEE IS ENTITLED FOR EXEMPTION U/S.54 OF THE ACT. IN THE INSTANT CASE THE DATE OF SALE OF FLAT IS 24.08.2009 AND DA TE OF DECLARATION IS 30.03.2009 AND HANDING OVER OF POSSESSION OF LAND IS 07.10.201 0 BEING FINAL DATE OF CONVEYANCE AND CONSEQUENTLY THE ASSESSEE IS ENTITL ED FOR DEDUCTION U/S.54.MOREOVER THESE ARE BENEFICIAL PROVISIONS AND SHOULD BE CONSTRUED IN A LIBERAL MANNER. WE FIND THAT SIMILAR ISSUE HAD COM E UP BEFORE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS. MRS. HILLA J. B. WADIA WHEREIN THE HONBLE HIGH COURT HAS HELD THAT SECTION 54 OF ACT HAS TO BE CONSIDERED CONSTRUED IN THE CONTEXT OF THE MANNE R IN WHICH RESIDENTIAL PROPERTIES ARE NOW BEING CONSTRUCTED IN A CITY LIKE BOMBAY WHERE, LOOKING TO THE COST OF LAND, CO-OPERATIVE HOUSING SOCIETIES AR E BEING FORMED FOR ITA NO.1764&1765/M/15 A.Y.2010-11 7 CONSTRUCTING A BUILDING IN WHICH FLATS ARE ALLOTTED MEMBERS. THIS MUST ALSO BE VIEWED AS A METHOD OF CONSTRUCTING RESIDENTIAL TENE MENTS. WHAT WE HAVE TO SEE IS WHETHER THE ASSESSEE HAS ACQUIRED A RIGHT TO A SPECIFIC FLAT IN SUCH A BUILDING WHICH IS BEING CONSTRUCTED BY THE SOCIETY AND WHETHER HE HAS MADE A SUBSTANTIAL INVESTMENT WITHIN THE PRESCRIBED PERIOD WHICH WILL ENTITLE HIM TO OBTAIN POSSESSION OF THE FLAT SO CONSTRUCTED AND IN WHICH HE INTENDS TO RESIDE. THE HONBLE HIGH COURT HAS RELIED UPON THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO.471, DATED OCTOBER 18, 1986. WE FIND TH AT SIMILARLY IN THIS CASE THE ASSESSEE HAS AGREED TO PURCHASE A FLAT ON 02.11.200 7 BY WAY OF AGREEMENT. THE ASSESSEE, THEREAFTER ACQUIRED THE POSSESSION OF THE FLAT BUT NOT UNDIVIDED SHARE IN LAND AND COMMON AREAS. THEREAFTER, THERE WAS A DECLARATION OF SIGNING THE DECLARATION AS PER MAHARASHTRA APARTMENT OWNERS HIP ACT, 1970. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. A.R. THAT THE A SSESSEE OBTAINED DOMAIN OVER HIS RESIDENTIAL HOUSE EITHER ON THE DATE OF RE GISTRATION OF DECLARATION U/S 2 OF MAHARASHTRA APARTMENT OWNERSHIP ACT, 1970 WHICH OCCURRED ON 01.04.2009 ON WHICH DATE THE ASSESSEES UNDIVIDED S HARE IN THE LAND AND THE COMMON AREAS BECAME ASCERTAINED OR ON 17.04.2010 WH EN THE BUILDER HANDED OVER POSSESSION OF LAND ON EXECUTING FINAL CONVEYAN CE OF THE DEED AND THE ASSESSEE ACQUIRED THE COMPLETE DOMAIN OVER THE COMP LETE PROPERTY BUILDING AS WELL AS LAND ON THAT DATE. THUS, BOTH THESE DATES I.E. 01.04.2009 AS WELL AS 17.04.2010 FALL WITHIN THE EXEMPTION PERIOD U/S 54 OF ONE YEAR BEFORE AND TWO YEARS AFTER THE DATE OF SALE OF OLD FLAT WHICH IS I N THE PRESENT CASE IS 24.08.2009. 12. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, W E ARE OF THE CONSIDERED VIEW THAT ASSESSEE HAS RIGHTLY CLAIMED THE EXEMPTIO N UNDER SECTION 54 OF THE ACT AND THEREFORE WE HEREBY SET ASIDE THE ORDER OF LD. CIT(A) AND ALLOW BOTH THE APPEALS OF THE ASSESSEE. ITA NO.1764&1765/M/15 A.Y.2010-11 8 13. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.11.2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.11.2017. * MP . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI