Smt. Ranjini Thumboo Chetty, Bangalore V. Income Tax Officer, Ward-1(2), Bangalore

ITA 1919/BANG/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4351 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-03-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 27-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B S BALACHANDRAN SHRI BI
• Keywords: Cost of acquisition; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI G. MANJUNATHA , ACCOUNTANT MEMBER ITA NOS. A.Y. APPELLANT(S) VS. RESPONDENT 1919/BANG/2017 2006-07 SMT. RANJINI THUMBOO CHETTY THE INCOME TAX OFFICER, WARD 1(2), BANGALORE. 1920/BANG/2017 2006-07 SHRI RAJKUMAR THUMBOO CHETTY PAN: AARPT 8032C 1922/BANG/2017 2006-07 LATE MRS. NANCY THUMBOO CHETTY REP. BY L/H SHRI RAJKUMAR THUMBOO CHETTY, PAN: AALPT 2128H # 25/26, B CROSS, ASHOKA AVENUE, K.R. GARDENS, MURUGESHPALYA, BENGALURU 560 017. APPELLANT BY : SHRI B.S. BALACHANDRAN, ADVOCATE RESPONDENT BY : SHRI BISWARAJAN SASMAL, CIT DATE OF HEARING : 11 .03.2019 DATE OF PRONOUNCEMENT : 15 .0 3 .201 9 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE ARE THREE APPEALS FILED BY THREE DIFFERENT AS SESSEES AGAINST THREE DIFFERENT ORDERS ALL DATED 31.7.2017 BY CIT(A PPEALS)-4, BANGALORE, RELATING TO ASSESSMENT YEAR 2006-07. ITA NOS.1919 TO 1921/BANG/2017 PAGE 2 OF 7 2. THE ASSESSEES IN ITA NO.1919 & 1920/BANG/2017 AR E DAUGHTER AND SONS AND ASSESSEE IN ITA NO.1921/BANG/2017 IS THE W IFE OF ONE LATE F. THUMBOO CHETTY RESPECTIVELY. 3. THE REVENUE CAME INTO POSSESSION OF A JOINT DEVE LOPMENT AGREEMENT DATED 22.12.2005, HEREINAFTER REFERRED TO AS JDA ENTERED INTO BETWEEN THE THREE ASSESSEES IN THESE THREE APPEALS AND M/S. H.M. ESTATES & PROPERTIES, A PARTNERSHIP FIRM, HEREINAFTER REFER RED TO AS DEVELOPER, IN RESPECT OF PROPERTY BEARING NO.157, WHEELERS ROAD, CIVIL STATION, BANGALORE, HEREINAFTER REFERRED TO AS THE PROPERTY . AS PER JDA, IN CONSIDERATION OF THE DEVELOPER AGREEING TO CONSTRUC T AND DELIVER TO THE ASSESSEES, 30% OF DEVELOPMENT COMPRISING OF APARTME NTS, COMMON AREA, BASEMENT, CAR PARKING, SURFACE CAR PARKING IN THE B UILDING TO BE CONSTRUCTED ON THE PROPERTY, THE DEVELOPER WAS PERMITTED TO CAR RY OUT DEVELOPMENT OVER THE PROPERTY WITH RIGHT TO OBTAIN CONVEYANCE OF UND IVIDED SHARE OF LAND EQUIVALENT TO THE DEVELOPERS SHARE OF BUILT UP AREA . THE AREA OF CONSTRUCTION THAT THE ASSESSEES WOULD RECEIVE WAS T O BE IDENTIFIED IN WRITING AFTER THE BUILDING SANCTION PLAN IS OBTAINE D. THERE WAS ALSO A SUPPLEMENTAL AGREEMENT DATED 27.1.2006 WHEREBY THE ASSESSEES SHARE OF BUILT UP AREA WAS ARRIVED AT 27900 SQ.FT. OUT OF THE ASSESSEES SHARE 22500 SQ.FT. BUILT UP AREA WAS GIVEN TO THE DEVELOP ER @ RS.4000 PER SQ.FT. AND A SUM OF RS.9 CRORES WHICH WAS THE VALUE OF 225 00 SQ.FT. BUILT UP AREA WAS TO BE PAID TO CANARA BANK IN DISCHARGE OF THE A MOUNTS DUE BY THE OWNERS TO CANARA BANK UNDER A ONE TIME SETTLEMENT. THE ASSESSEES WERE THUS ENTITLED TO RECEIVE ONLY 5400 SQ.FT. OF B UILT UP AREA IN THE PROPOSED DEVELOPMENT OVER AND ABOVE THE SUM OF RS.9 CRORES PAID TO CANARA BANK. ITA NOS.1919 TO 1921/BANG/2017 PAGE 3 OF 7 4. BASED ON THE JDA, THE DEPARTMENT INITIATED PROCE EDINGS U/S.147 OF THE INCOME TAX ACT, 1961 (THE ACT) BY ISSUE OF NO TICE U/S.148 OF THE ACT DATED 27.3.2013. IN SUCH ASSESSMENT PROCEEDINGS, T HE ASSESSEE IN ITA NO.1920/BANG/2017, WHO ACTED AS POWER OF ATTORNEY A GENT OF THE OTHER TWO ASSESSEES, WAS EXAMINED BY THE DDIT(INV.), UNIT 1(1), BANGALORE AND IN HIS STATEMENT, HE STATED AS FOLLOWS: QUESTION NO.6: IT IS SEEN THAT AS PER THE ANSWER TO Q.NO.4, YOU HAVE STATED THAT A PROPERTY AT NO.157, WHEELERS ROAD, BA NGALORE HAS BEEN SOLD FOR A CONSIDERATION OF RS.11.61 CRORES DURING THE F .Y.2005-2006. AS SEEN FROM THE DETAILS OF THE RETURN OF INCOME FOR THE A. Y.2006-07, THE SAID TRANSACTION HAS NOT BEEN REFLECTED. PLEASE OFFER YO UR COMMENTS? ANS: THE PROPERTY WAS INHERITED BY ME AND HAD BEEN MORTGAGED WITH CANARA BANK AS COLLATERAL SECURITY FOR A LOAN TAKEN BY M/S. INDO GLOBAL SPICES LIMITED. I WAS A DIRECTOR IN THE SAID COMPAN Y. THE PROPERTY WAS TRANSFERRED TO M/S. H.M. ESTATES AND PROPERTIES FOR A TOTAL CONSIDERATION OF RS.11.61 CRORES, OUT OF WHICH RS.9 CRORES WENT TOWA RDS CLEARING OF MORTGAGE HELD BY THE BANK. FURTHER INITIALLY SOME P ORTION OF THE BUILT UP AREA WAS TO BE RETAINED BY ME, BUT AS PER A LATER A GREEMENT THE ENTIRE BUILT UP AREA WAS TRANSFERRED TO THE BUYER. THE DOCUMENTS PERTAINING TO THE ABOVE TRANSACTION SHALL BE PRODUCED. I HAD NOT REFL ECTED THE CAPITAL GAINS OF THE SAID SALE TRANSACTION, AS I HAD TAKEN SHELTER O N THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ADDL.CIT VS. GLAD INVESTMENTS PRIVATE LIMITED (2006) 102 ITD 227 . HOWEVER, NOW ON BEING CONVINCED BY MY CHARTERED ACCOUNTANT AND IN VIEW OF THE SUPREME COU RT DECISION REPORTED IN 227 ITR 222 AND 227 ITR 240 IN THE CASES OF R.M. ARUNCHALAM VS. CIT AND V.S.MALHOTRA V/S CIT RESPECTIVELY, EXPLAINED TO ME, I COMPUTE MY CAPITAL GAINS FOR A.Y.2006-2007 AS UNDER:- SALE CONSIDERATION RECEIVED RS. 11,61,00,000/- LESS: INDEXED COST OF ACQUISITION (AT RS.200 /SFT FOR 1981) RS. 3,91,64,778/ - BALANCE RS. 7,69,35,222/- LESS: DEDUCTION U/S.54 RS. 2,21,00,000/ - NET TAXABLE LONG TERM CAPITAL GAINS RS. 5,48,35,222/- ITA NOS.1919 TO 1921/BANG/2017 PAGE 4 OF 7 5. BASED ON THE ABOVE AND IN THE ABSENCE OF ANY OTH ER INFORMATION OR DOCUMENT COMING FROM THE ASSESSEE IN ITA NO.1920/BA NG/2017, THE AO BROUGHT TO TAX LONG TERM CAPITAL GAIN (LTCG) OF RS. 7,69,35,222/-. THE AO DID NOT ALLOW EXEMPTION U/S.54 OF THE ACT OF RS. 2,21,00,000 CLAIMED BY THE ASSESSEE IN THE STATEMENT REFERRED TO ABOVE. 6. IN THE CASE OF ASSESSEES IN ITA NO.1921/BANG/201 7 AND 1919/BANG/2017, THE AO INITIATED PROCEEDINGS U/S.14 7 OF THE ACT AND PASSED AN ORDER ASSESSING THE SUM OF RS.7,69.35,222 /- AS LTCG PROTECTIVELY IN THEIR HANDS ALSO OBSERVING IN THE S AID ORDER THAT THOUGH THE JDA REFERS TO THREE PERSONS AS OWNERS OF THE PROPER TY, SINCE THE ASSESSEE IN ITA NO.1920/BANG/2017 ADMITTED THAT LTCG BELONGS TO HIM THE SUM WAS BEING ASSESSED SUBSTANTIVELY IN HIS HANDS AND P ROTECTIVELY IN THE HANDS OF THE OTHER TWO ASSESSEES. 7. BEFORE CIT(APPEALS), THE ASSESSEES SUBMITTED THE PROPERTY BELONGED TO ALL THE THREE ASSESSEES. THE ASSESSEE POINTED OUT THAT THE PROPERTY ORIGINALLY BELONGED TO MR. R. KEMPRAJ, WHO BY A REGISTERED SETTLEMENT DEED DATED 22.3.1958 SETTLED THE PROPERT Y IN FAVOUR OF HIS SON MR. F. THUMBOO CHETTY AND HIS DAUGHTER IN LAW, NANC Y THUMBOO CHETTY (THE ASSESSEE IN ITA NO.1921/BANG/2017). MR. F. TH UMBOO CHETTY DIED INTESTATE AND HIS WIFE NANCY THUMBOO CHETTY, HIS SO N MR.RAJKUMAR THUMBOO CHETTY AND HIS DAUGHTER MRS.RANJINI THUMBOO CHETTY BECAME ENTITLED TO 1/3RD SHARE EACH IN THE 50% OF SHARE HE LD BY F. THUMBOO CHETTY OVER THE PROPERTY. THE PARTIES WERE INDIAN CHRISTI ANS GOVERNED BY THE INDIAN SUCCESSION ACT, 1925 IN THE MATTER OF INTEST ATE SUCCESSION. THUS, NANCY THUMBOO CHETTY WAS ENTITLED TO 50% + 18.66% A ND MR.RAJKUMAR THUMBOO CHETTY AND MRS. RANJINI THUMBOO CHETTY ENTI TLED TO 18.66% SHARE EACH OVER THE PROPERTY. THE ASSESSEES CONTE NDED THAT LTCG SHOULD BE ASSESSED ACCORDINGLY IN THE HANDS OF EACH OF THE ASSESSEES IN ITA NOS.1919 TO 1921/BANG/2017 PAGE 5 OF 7 PROPORTION TO THEIR RESPECTIVE SHARES AND DEDUCTION U/S.54 OF THE ACT HAS TO BE ALLOWED FOR THE VALUE OF THE BUILT UP AREA WHICH THE ASSESSEES RECEIVED FROM THE DEVELOPER. 8. THE CIT(APPEALS), HOWEVER, WAS OF THE VIEW THAT THERE WAS NO VALID DOCUMENTARY PROOF TO SHOW THAT THE PROPERTY BELONGE D TO THREE ASSESSEES. ACCORDINGLY, THE CIT(A) CONFIRMED THE ACTION OF THE AO. FURTHER, THE CIT(A) ALSO DENIED THE BENEFIT OF DEDUCTION U/S.54/54F OF THE ACT FOR WANT OF EVIDENCE TO PROVE THE CLAIM FOR DEDUCTION. 9. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSES SEES ARE IN APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMI SSIONS. 10. ON THE ISSUE, WHETHER SUM PAID TO THE BANK TO D ISCHARGE LOAN ON THE PROPERTY SHOULD BE ALLOWED AS DEDUCTION OR NOT, ARG UMENTS ADVANCED WERE THE SAME AS WERE ADVANCED BEFORE THE REVENUE AUTHOR ITIES. WE ARE OF THE VIEW THAT THE CONCLUSIONS OF THE REVENUE AUTHORITIE S ON THIS ASPECT IS CORRECT AND THEREFORE WE CONCUR WITH THE VIEW OF TH E CIT(A). 11. AS FAR AS THE ISSUE, WHETHER LTCG IS TO BE ASSE SSED IN THE HANDS OF MR. RAJKUMAR THUMBOO CHETTY OR ALL THE THREE ASSESS EES AND THE SHARES IN RESPECT OF WHICH THEY HAVE TO BE ASSESSED TO LTCG, WE FIND FROM THE DOCUMENTS FILED IN THE PAPERBOOK THAT PROPERTY ORI GINALLY BELONGED TO MR.R. KEMPRAJ, WHO BY A REGISTERED SETTLEMENT DEED DATED 22.3.1958 SETTLED THE PROPERTY IN FAVOUR OF HIS SON MR. F. THUMBOO CHETTY AND HIS DAUGHTER IN LAW, NANCY THUMBOO CHETTY (THE ASSESSEE IN ITA NO.1 921/BANG/2017). F. THUMBOO CHETTY DIED INTESTATE AND HIS WIFE NAN CY THUMBOO CHETTY HIS SON MR. RAJKUMAR THUMBOO CHETTY AND HIS DAUGH TER MRS. RANJINI THUMBOO CHETTY BECAME ENTITLED TO 1/3 RD SHARE EACH IN THE 50% OF SHARE HELD BY F. THUMBOO CHETTY OVER THE PROPERTY. THUS, NANCY THUMBOO CHETTY WAS ENTITLED TO 50% + 18.66% AND MR. RAJKUMA R THUMBOO CHETTY ITA NOS.1919 TO 1921/BANG/2017 PAGE 6 OF 7 AND MRS.RANJINI THUMBOO CHETTY TO 18.66% SHARE EACH OVER THE PROPERTY. IT IS IN THEIR RESPECTIVE CAPACITY AND SHARES, THAT THE ASSESSEES ENTERED INTO JDA WITH THE DEVELOPER. THE BUILT UP AREA WHICH TH E ASSESSEES WERE TO RECEIVE FROM THE DEVELOPER SHOULD, THEREFORE, BE DI VIDED IN THE RATIO IN WHICH EACH OF THE ASSESSEE IS ENTITLED TO SHARE OVE R THE PROPERTY. THE VALUE OF BUILT UP AREA WHICH THE ASSESSEES HAVE RET AINED ( 5400 SQ.FT.) IS TO BE REGARDED AS INVESTMENT IN PURCHASE OF NEW ASSET U/S.54/54F OF THE ACT. THIS INVOLVES LOOKING INTO THE RECORDS AND MAKING C ALCULATIONS AND ASCERTAINING FACTUAL DETAILS AND THEREFORE, WE REMA ND THE ISSUE OF DETERMINATION OF LTCG AND DEDUCTION U/S.54/54F OF T HE ACT TO THE AO FOR ADJUDICATION AFRESH, AFTER AFFORDING ASSESSEE OPPOR TUNITY OF BEING HEARD. THE ASSESSEES WILL ALSO PROVIDE DOCUMENTARY EVIDENC E ESTABLISHING FLOW OF TITLE TO THE PROPERTY WHICH CAN BE IN THE FORM OF P RIMARY OF SECONDARY EVIDENCE. THE AO WILL CONSIDER THE CLAIM OF THE AS SESSEES IN THE LIGHT OF THE FINDINGS/DIRECTIONS GIVEN ABOVE IN ACCORDANCE W ITH LAW. 12. IN THE RESULT, THE APPEALS ARE TREATED AS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF MARCH, 2019. SD/- SD/- ( G. MANJUNATHA ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 15 TH MARCH, 2019. / D ESAI S MURTHY / ITA NOS.1919 TO 1921/BANG/2017 PAGE 7 OF 7 COPY TO: 1 . APP ELL ANT S (3) 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.