ITO, CHENNAI V. Shri Yogesh B.Sanghvi, CHENNAI

ITA 1919/CHNY/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4511 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 22-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: JAYAKUMAR V
• Keywords: Sale consideration of property below Jantri Value; Advance ruling
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1919/MDS/2008 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER, BUSINESS WARD-II(2), 3 RD FLOOR,NEW BLOCK, AAYAKAR BHAVAN, 121, M.G. ROAD, CHENNAI 34. (APPELLANT) VS SHRI YOGESH B. SANGHVI, 16, LAKSHMAN STREET, T.NAGAR, CHENNAI 600 017. [PAN: AALPS 3136 J] (RESPONDENT) REVENUE BY : SHRI T.N. BETGERI, JCIT ASSESSEE BY : SHRI JAYAKUMAR, V.S. DATE OF HEARING : 21-08-2013 DATE OF PRONOUNCEMENT : 21-10-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, CHEN NAI DATED 17-04-2008 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 4-05. I.T.A. NO. 1919/MDS/2008 2 2. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY. 2004-05 ON 29-07-2004 DECLARING HIS INCOME AS ` 27,81,075/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U /S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE ON 26-07-2005. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S CO-OWNER OF LAND AND BUILDING SITUATED AT NO. 22, SARDAR PAT EL ROAD, CHENNAI ALONG WITH HIS MOTHER AND BROTHER. ALL THE CO-OWNERS ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH M/S . ARIHANT FOUNDATIONS AND HOUSING LTD., ON 02-08-2000 FOR TH E CONSTRUCTION OF COMMERCIAL COMPLEX AT THE AFOREMENTIONED SITE. THE MOTHER OF THE ASSESSEE RELINQUISHED HER SHARE IN THE PROPERTY IN FAVOUR OF HER TWO SONS I.E., THE ASSESSEE AND HIS BROTHER VID E DEED OF SETTLEMENT DATED 03-04-2002. AS PER THE TERMS AND CONDITIONS OF THE DEVELOPMENT AGREEMENT, THE ASSESSEE AND HIS BRO THER WERE ENTITLED TO RETAIN 50% OF THE LAND AREA ALONG WITH 50% OF THE TOTAL AREA TO BE CONSTRUCTED BY THE BUILDER. THE ASSESSE E OBTAINED NOC FROM THE APPROPRIATE AUTHORITY ON 20-09-2000 AN D POWER OF ATTORNEY WAS EXECUTED IN FAVOUR OF THE DEVELOPER ON 21-04-2003. THE COMMERCIAL BUILDING TO BE CONSTRUCTED WAS TO BE COMPLETED WITHIN A PERIOD OF TWENTY FOUR MONTHS PLUS ADDITION AL GRACE PERIOD OF THREE MONTHS FROM THE DATE OF PLANNING PERMISSIO N OBTAINED I.T.A. NO. 1919/MDS/2008 3 FROM CMDA. THE ASSESSING OFFICER VIDE ASSESSMENT O RDER DATED 29-12-2006 INVOKED THE PROVISIONS OF SECTION 50C TO DETERMINE THE CAPITAL GAINS. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) VIDE IMPUGNED ORDER HELD THAT THERE IS NO JUSTIFICA TION IN TAKING THE GUIDELINE VALUE AND DIRECTED THE ASSESSING OFFICER TO ADOPT ACTUAL CONSIDERATION RECEIVED BY THE ASSESSEE IN TERMS OF VALUE OF BUILT- UP AREA RECEIVED IN TERMS OF AGREEMENT ENTERED INTO WITH THE DEVELOPER. THE CIT(APPEALS) HELD THAT PROVISIONS O F SECTION 50C ARE NOT APPLICABLE AND ALLOWED THE APPEAL OF THE AS SESSEE. AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS), TH E REVENUE HAS COME IN APPEAL BEFORE US. 3. SHRI T.N. BETGERI, APPEARING ON BEHALF OF THE RE VENUE VEHEMENTLY SUPPORTED THE ASSESSMENT ORDER AND SUBMI TTED THAT THE ASSESSING OFFICER HAD RIGHTLY APPLIED THE PROVI SIONS OF SECTION 50C OF THE ACT. THE LD. DR CONTENDED THAT THE ASSE SSING OFFICER HAD ADOPTED THE VALUE AS REFLECTED IN THE REGISTERE D DOCUMENT. THE LD.DR PRAYED FOR SETTING ASIDE THE IMPUGNED ORD ER. I.T.A. NO. 1919/MDS/2008 4 4. ON THE OTHER HAND, SHRI JAYAKUMAR, APPEARING ON BEHALF OF THE ASSESSEE SUPPORTING THE ORDER OF THE CIT(APPEAL S) SUBMITTED THAT THE TRANSACTION PERTAINS TO THE PERIOD WHEN TH E PROVISIONS OF SECTION 50C WERE NOT IN FORCE. THE LD. AR FURTHER CONTENDED THAT WHEN THE PROVISIONS OF SECTION 50C ARE NOT APPLICAB LE, THEN THE VALUE AS PER THE APPROPRIATE AUTHORITY CANNOT BE IG NORED. THE LD.AR RELIED ON THE THIRD MEMBER DECISION OF THE CH ENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. P.R.CHOCKALINGAM REPORTED AS 135 ITD 75 (CHENNAI) (TM) . 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE ALSO PER USED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF THE TRIBUNAL IN CASE OF ACIT VS. P.R.CHOCKALINGAM (SUPRA). WE FIND THAT THE CIT(APPEALS) RELYING ON THE DECISION BY AUTHORITY F OR ADVANCE RULING IN THE CASE OF JASBIR SINGH SARKARIA REPORTE D AS 294 ITR 196 CAME TO THE CONCLUSION THAT THE VALUE OF THE PROPER TY SHOULD BE DETERMINED AT THE TIME OF HANDING OVER OF POSSES SION OF THE PROPERTY AND NOT AT THE TIME OF REGISTRATION. THE VALUE HAS BEEN DETERMINED IN ACCORDANCE WITH THE TERMS AND CONDITI ONS MENTIONED IN MOU BETWEEN THE ASSESSEE AND THE DEVEL OPER. SINCE, THE TRANSACTION HAS CULMINATED IN ACCORDANCE WITH I.T.A. NO. 1919/MDS/2008 5 COVENANTS SET OUT IN AGREEMENT WHICH WAS ENTERED IN TO IN THE YEAR 2000, THE PROVISIONS OF SECTION 50C WILL NOT BE APP LICABLE AS THEY WERE INSERTED BY THE FINANCE ACT, 2002 W.E.F. 01-04 -2003. WE FURTHER FIND THAT THE CASE OF THE ASSESSEE IS CO VERED BY THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF ACIT VS. P.R.CHOCKALINGAM (SUPRA), WHEREIN IT HAS BEEN HELD THAT: 10. NOW, THE QUESTION IS AS TO WHEN THE FINAL AND BINDING NOC WAS ISSUED BY THE APPROPRIATE AUTHORITY IN THE PRESENT CASE. THE FINAL NOC WAS ISSUED ON 21-2-2000. THE RE VENUE IS CLINCHING ON THIS DATE TO SHOW THAT THE NOC WAS ISSUED ON 21-2-2000 AND, THEREFORE, THE TRANSFER COULD HAVE B EEN TAKEN PLACE ONLY AFTER THAT DATE AND NEVER BEFORE THAT DA TE AND PARTICULARLY ON 28-11-1999. THIS ARGUMENT OF THE RE VENUE IS HIGHLY TECHNICAL. THE REVENUE HAS OVERLOOKED THE SE QUENCE OF EVENTS PRECEDED THE ISSUE OF FINAL NOC BY THE AP PROPRIATE AUTHORITY ON 21-2-2000. TO REPEAT AGAIN, THE ORIGIN AL AGREEMENT OF SALE WAS EXECUTED ON 28-6-1996. THE APPROPRIATE AUTHORITY HAD ISSUED THE NOC ON THE BAS IS OF THAT AGREEMENT ON 8-10-1996 ITSELF. THEREAFTER THE CIRCU MSTANCES WARRANTED TO REVISE THE AGREEMENT TWICE, ONE FOR RE STATING THE ACTUAL EXTENT OF THE PROPERTY AND THE OTHER FOR RES TATING THE NEGOTIATED CONSIDERATION OF SALE. THE ASSESSEE HAD FILED REVISED APPLICATIONS FOR NOC BEFORE THE APPROPRIATE AUTHORITY ON BOTH OCCASIONS WHEN THE ORIGINAL AGREEMENT WAS R ESTATED. MEANWHILE, THE POSSESSION WAS ALSO HANDED OVER TO T HE BUYERS AND THE CONSIDERATION WAS ALSO RECEIVED FROM THEM. THEREFORE, IT IS NECESSARY TO CONSIDER ALL THESE EV ENTS AS I.T.A. NO. 1919/MDS/2008 6 INSEPARABLE SEGMENTS OF A SINGLE AND COMPOSITE TRAN SACTION. THE ORIGINAL SALE AGREEMENT WAS EXECUTED BY THE PAR TIES ON 28-6-1996. THE SUBSEQUENT RESTATEMENTS OF THE AGREE MENT WERE ONLY TO INCORPORATE MODIFICATIONS AND NOT TO A LTER OR SUBSTITUTE THE ORIGINAL AGREEMENT. THE APPROPRIATE AUTHORITY HAD ALREADY GRANTED ITS NOC ON THE BASIS OF THE ORI GINAL AGREEMENT ON 8-10-1996 ITSELF. THIS FIRST NOC ISSUE D BY THE APPROPRIATE AUTHORITY HOLDS GOOD FOR THE PROVISIONS OF CHAPTER XX-C OF THE INCOME-TAX ACT, 1961. THE LATEST NOC IS SUED BY THE APPROPRIATE AUTHORITY ON 21-2-2000 IS ONLY A RE VISION OF THE FIRST NOC GRANTED ON 8-10-1996. THE LATEST NOC ISSUED BY THE APPROPRIATE AUTHORITY ON 21-2-2000 CANNOT BE CO NSIDERED IN ISOLATION OF THE EARLIER NOC ISSUED BY THE APPRO PRIATE AUTHORITY ON 8-10-1996. IT IS TO BE SEEN THAT THE L ATEST NOC ISSUED BY THE APPROPRIATE AUTHORITY ON 21-2-2000 RE LATES BACK TO THE FIRST NOC ISSUED BY THE APPROPRIATE AUTHORIT Y ON 8-10- 1996. THE RESTATEMENTS OF THE ORIGINAL AGREEMENT AN D THE RE- ISSUE OF NOC HAVE NOT DISTURBED THE FIRST NOC ISSUE D BY THE APPROPRIATE AUTHORITY. THEREFORE, IT IS TO BE SEEN THAT THE NOC ISSUED ON 21-2-2000 RELATES BACK TO 8-10-1996 AND A S SUCH REINFORCES THE FACT OF TRANSFER OF THE PROPERTY ON 28-11-1999, WHEN THE POSSESSION WAS HANDED OVER TO THE BUYERS. IN THESE CIRCUMSTANCES, AS FAR AS THIS CASE IS CONCERNED, TH EREFORE, THERE IS COMPLETE COMPATIBILITY BETWEEN THE APPLICA TION OF SECTION 2(47) OF THE INCOME-TAX ACT, 1961 WITH SECT ION 53A OF THE TRANSFER OF PROPERTY ACT AND CHAPTER XX-C OF TH E INCOME- TAX ACT, 1961. I.T.A. NO. 1919/MDS/2008 7 THE REVENUE HAS NOT BEEN ABLE TO CONTROVERT THE FI NDINGS GIVEN IN THE IMPUGNED ORDER. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS). TH E ORDER OF THE CIT(APPEALS) IS CONFIRMED AND THE APPEAL OF THE REV ENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON MONDAY, THE 21 ST OCTOBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 21 ST OCTOBER, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR