DCIT 22(2), NAVI MUMBAI V. JAI TRIKANAND RAO, MUMBAI

ITA 1792/MUM/2012

• Counselvise Citation: 179219914 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 31-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 15-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L GAJBHIYE
• Keywords: Sale consideration of property below Jantri Value; Gift; Cost of acquisition
• Section: 143(3); 50C; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1792/MUM/2012 ASSESSMENT YEAR: 2005-06 DCIT 22(2) 4 TH FLOOR, TOWER NO. 6 VASHI RLY. STN. BLDG. COMPLEX, VASHI, NAVI MUMBAI VS. MR. JAI TRIKANAND RAO 10 TH FLOOR, JAI SAI, 359, CENTRAL AVENUE ROAD CHEMBUR MUMBAI-. 400 071 PAN :ACLPR 8510 R (APPELLANT) (RESPONDENT) ITA NO. 1543/MUM/2012 ASSESSMENT YEAR: 2005-06 JAI TRIKANAND RAO 10 TH FLOOR, JAI SAI, 359, CENTRAL AVENUE ROAD CHEMBUR MUMBAI-. 400 071 PAN :ACLPR 8510 R VS. DCIT 22(2) MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GOVIND JAVERI REVENUE BY : SHRI SHEKHAR L. GAJBHIYE DATE OF HEARING : 31.10.2013 DATE OF PRONOUNCEMENT : 27.11.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE CROSS APPEALS FILED BY THE REVENUE AND ASSES SEE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) -33, MUMBAI DATED 20.12.2011 FOR THE ASSESSMENT YEAR 2005-06. BOTH THESE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. 2. THE GROUNDS RAISED IN THE APPEALS FILED BY THE A SSESSEE AND THE REVENUE RESPECTIVELY RELATE TO THE DECISION OF THE LD.CIT(A ) REGARDING THE TAXABILITY OF THE CAPITAL GAINS AND ALLOWING THE EXEMPTION CLAIMED BY THE ASS ESSEE U/S 54 OF THE INCOME TAX ACT. ITA NO. 1543/MUM/2012 ITA NO. 1792/MUM/2012 JAI TRIKANAND RAO ASSESSMENT YEAR: 2005-06 2 3. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL CAME TO BE THE OWNER OF THE PROPERTY SITUATED AT CHEMBUR THROUGH A PROCESS INVOLVING INH ERITANCE BY SUCCESSION AND GIFT. THE ASSESSEE DESIRED TO DEMOLISH THE THEN DILAPIDATED S TRUCTURE IN THE SAID PROPERTY AND RECONSTRUCT A MULTI STORIED BUILDING CONSISTING OF BASEMENT, GROUNDS FLOOR AND UPPER FLOORS BY UTILISING THE PERMISSIBLE FSI. THE ASSESSEE ENTE RED INTO A DEVELOPMENT AGREEMENT DATED 16.07.2004 WITH THE DEVELOPER NAMELY M/S. BHA WANJI S. BHADRA. AS PER THE TERM OF THE AGREEMENT , THE DEVELOPER AGREED TO CONSTRUCT A BUILDING JAI SAI AND HAND OVER THE MAJOR PART OF THE BASEMENT, GROUND FLOOR, FIRST, SE COND, NINTH, TENTH AND 11 TH FLOOR PREMISES TO THE ASSESSEE. FURTHER, THE DEVELOPER WA S ENTITLED TO SELL THE REMAINING FLATS. THE ASSESSEE HAD NOT SHOWN ANY TAX ON THE CAPITAL G AINS AS THE POSSESSION OF THE PROPERTY WAS NEVER PARTED BY HIM AND THERE WAS NO T RANSFER AS ENVISAGED IN THE PROVISIONS OF CAPITAL GAINS. FURTHER, THE CONTENTIO N OF THE ASSESSEE WAS THAT HE HAD SOLD RIGHT TO LOAD TDR AND THOUGH IT BEING A CAPITAL ASS ET, WHICH IS NOT TAXABLE SINCE NO COST OF ACQUISITION FOR RIGHT TO LOAD TDR WAS INVOLVED. HO WEVER, IN THE ASSESSMENT FRAMED U/S 143(3) R.W.S. 147 OF THE ACT, THE AO HELD THAT THE CASE OF THE ASSESSEE FALLS WITHIN THE PURVIEW OF SECTION 50C OF THE ACT AND IT WAS A CLEA R CASE WHERE CAPITAL GAIN AROSE ON ACCOUNT OF GRANT OF DEVELOPMENT RIGHTS BY THE ASSES SEE WHICH IS EVIDENCED BY THE DEVELOPMENT AGREEMENT. ON THE ALTERNATE CONTENTION OF THE ASSESSEE THAT HE IS ELIGIBLE FOR EXEMPTION U/S 54 OF THE ACT IN RESPECT OF THE COST AND CONSTRUCTION OF THE THREE FLOORS (9 TH , 10 TH & 11 TH ), THE AO PARTLY ALLOWED THE CLAIM OF EXEMPTION ONL Y IN RESPECT OF 10 TH FLOOR. ON APPEAL, THE LD.CIT(A), WHILE UPHOLDING THE ORDER OF THE AO AS REGARDS THE TRANSFER WHICH ATTRACTS THE PROVISIONS OF CAPITAL GAIN, ALLOWED TH E EXEMPTION CLAIMED BY THE ASSESSEE U/S 54 OF THE ACT. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE HAS FILED THE APPEAL CHALLENGING THE TAXABILITY OF THE CAPITAL GAIN AND THE REVENUE HAS FILED THE APPEAL AGITATING THE ACTION OF THE LD.CIT(A) IN ALLOWING T HE EXEMPTION CLAIMED BY THE ASSESSEE U/S 54 OF THE ACT. 4. FIRSTLY, AS REGARDS THE CLAIM OF THE ASSESSEE RAISED IN HIS APPEAL THAT THE GAINS ARISING FROM THE TRANSFER VIDE AGREEMENT DATED 16.0 7.2007 IN RESPECT OF THE PROPERTY IS NOT TAXABLE UNDER THE ACT, IT IS THE CONTENTION OF THE ASSESSEE THAT THE POSSESSION OF THE PROPERTY HAS NEVER BEEN PARTED BY HIM AND THEREFORE THERE IS NO TRANSFER AS ENVISAGED IN THE PROVISIONS OF CAPITAL GAINS AND THE TRANSFER OF PROPERTY ACT. HOWEVER, WE ARE INCLINED ITA NO. 1543/MUM/2012 ITA NO. 1792/MUM/2012 JAI TRIKANAND RAO ASSESSMENT YEAR: 2005-06 3 TO CONCUR WITH THE FINDINGS OF THE LD.CIT(A) THAT T HE CONTENTIONS OF THE ASSESSEE LACK MERIT IN VIEW OF THE FACT THAT AS REGARDS THE CONST RUCTION RELEVANT TO THE ADDITIONAL FSI OF 11,658 SQ.FT, BEING THE FLATS SOLD BY THE DEVELOPER ON THE SAID PLOT OF LAND, THE SAID PROPERTY IS SOLD AND TRANSFERRED TO THIRD PARTIES A LONG WITH POSSESSION THEREOF. THE DEVELOPER HAD THE RIGHT TO SELL THE SAID FLATS ON A CCOUNT OF THE ADDITIONAL FSI BY VIRTUE OF LOADING TDR. TO THAT EXTENT THE RIGHTS, TITLE AND I NTEREST IN THE SAID PLOT OF LAND HAVE BEEN TRANSFERRED. HENCE, IT IS A CLEAR CASE OF TRANSFER ENVISAGED BOTH UNDER CAPITAL GAINS AND TRANSFER OF PROPERTY ACT. THEREFORE, THE EXISTING F SI AS WELL AS THE ADDITIONAL FSI HAVE THEIR GENESIS AND PRIMARY ROOTS IN THE PLOT OF LAND AND IN THE CONTEXT OF CONSTRUCTION, THE COST OF FSI ASSIGNED OR TRANSFERRED NEEDS TO BE DET ERMINED ON A PRO-RATA BASIS BASED ON THE COST OF ACQUISITION OF THE PLOT OF LAND AS HELD BY THE AUTHORITIES BELOW. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD.CI T(A) ON THIS COUNT AND WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REV ENUE. 5. SECONDLY, IN THE REVENUES APPEAL, THE DECISION OF THE LD.CI T(A) IN ALLOWING THE EXEMPTION OF RS.59,18,496/- U/S 54 OF THE ACT CLAIM ED BY THE ASSESSEE ON ACCOUNT OF THE INVESTMENT/COST OF CONSTRUCTION MADE IN THE FLATS O N 9 TH , 10 TH AND 11 TH FLOOR WHICH ARE IN HIS POSSESSION AS HIS RESIDENTIAL HOUSE HAS BEEN AG ITATED. IT IS PERTINENT TO MENTION THAT THE LD.CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 54 OF THE ACT BY RELYING ON THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SMT. K.G. RUKMINIAMMA [2011] 331 ITR 211 (KAR) WHEREIN IT HAS BEEN HELD THAT RESIDENTIAL FLATS CONSTITUTE A RESIDENTIAL HOUSE FOR THE PURPOSE OF SECTION 54, WHERE PROFIT ON SALE OF PROPERTY IS USED FOR RESIDENCE AND FURTHER HELD THA T FOUR RESIDENTIAL FLATS CANNOT BE CONSTRUED AS FOUR RESIDENTIAL HOUSES FOR THE PURPOS E OF SECTION 54, WHEN ALL ARE SITUATED IN THE SAME BUILDING. IT HAS TO BE CONSTRUED ONLY AS A RESIDENTIAL HOUSE AND THE ASSESSEE IS ENTITLED TO THE BENEFIT ACCORDINGLY. AS REGARDS THE CONTENTION OF THE REVENUE PLACING THE RELIANCE ON THE DECISION OF THE PUNJAB & HARYANA HI GH COURT IN THE CASE OF PAWAN ARYA V. CIT REPORTED IN 2011-TIOL-01-HC- P&H-IT , IT IS PERTINENT TO MENTION THAT THE ASSESSEE, IN THE SAID CASE, HAS CLAIMED EXEMPTION IN RESPECT OF TWO INDEPENDENT RESIDENTIAL HOUSES SITUATED AT DIFFERENT LOCATIONS NAMELY ONE IN DILSH AD COLONY, DELHI AND THE OTHER IN FARIDABAD AND THE BENEFIT HAS BEEN RESTRICTED BY TH E COURT TO ONE HOUSE SINCE TWO NEW HOUSES WERE ACQUIRED IN DIFFERENT LOCATIONS. HOWEVE R, THE FACTS ARE DISTINGUISHABLE IN THE ITA NO. 1543/MUM/2012 ITA NO. 1792/MUM/2012 JAI TRIKANAND RAO ASSESSMENT YEAR: 2005-06 4 CASE OF THE PRESENT ASSESSEE. IT IS RELEVANT TO POI NT OUT THAT THE HIGH COURT OF DELHI IN THE CASE OF CIT VS GITA DUGGAL [2013] 257 CTR 208 (DEL) HAS HELD THAT RESIDENTIAL HOUSE CONSISTS OF SEVERAL INDEPENDENT UNITS CANNOT BE PER MITTED TO ACT AS AN IMPEDIMENT TO ALLOW THE DEDUCTION UNDER SECTION 54/54F OF THE ACT . IN THE CASE OF CIT V. D. ANAND BASAPPA [2009] 309 ITR 329 (KAR.) , THE HIGH COURT OF KARNATAKA HAS HELD THAT 'A RESIDENTIAL HOUSE' AS MENTIONED IN SECTION 54(1) OF THE ACT, HAS TO BE UNDERSTOOD IN A SENSE THAT THE BUILDING SHOULD BE OF A RESIDENTIAL NATURE AND THE WORD 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. THIS DECI SION HAS BEEN FOLLOWED BY THE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SMT. K.G. RUKMINIAMMA (SUPRA) . THE HIGH COURT OF ANDRA PRADESH IN THE RECENT CASE OF CIT VS SYED ALI [2013] 352 ITR 418 (AP), HAS ALSO HELD THAT THE EXEMPTION UNDER SECTION 54 O NLY REQUIRES THAT THE PROPERTY PURCHASED BY ASSESSEE OUT OF SALE PROCEEDS SHOULD B E OF RESIDENTIAL NATURE AND THE FACT THAT RESIDENTIAL HOUSE CONSISTED OF SEVERAL INDEPEN DENT UNITS CANNOT BE AN IMPEDIMENT FOR GRANTING RELIEF UNDER SAID SECTION, EVEN IF SUCH IN DEPENDENT UNITS ARE SITUATED SIDE BY SIDE, ON DIFFERENT FLOORS OR ARE PURCHASED UNDER SEPARATE SALE DEEDS. THE HIGH COURT OF ANDRA PRADESH IN THE SAID CASE HAS AGREED WITH THE FINDIN GS OF THE DECISION OF THE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. D. ANAND BASAPPA (SUPRA). THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES IN THE LIGH T OF CONSISTENT VIEW OF DIFFERENT HIGH COURTS, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS C ORRECTLY DECIDED THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 54 OF THE ACT AS REGARDS THE INVESTMENTS/COST OF CONSTRUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF ALL THE FLATS. IN VIEW OF THAT MATTER, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WIT H THE DECISION OF THE LD.CIT(A) ON THIS COUNT AND THE SAME IS UPHELD. 6. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 7TH DAY OF NOVEMBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.11.2013. *SRIVASTAVA ITA NO. 1543/MUM/2012 ITA NO. 1792/MUM/2012 JAI TRIKANAND RAO ASSESSMENT YEAR: 2005-06 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR J BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.