Sri Hanumanthiah, Bangalore V. Income-Tax Officer, Bangalore

ITA 206/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0159 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 28-12-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 30-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R PREMI J
• Assessee Lawyers: V SRINIVASAN
• Keywords: Capital Gains
• Section: 143(3); 54F; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES C, BANGALORE BEFORE SHRI GEORGE GEORGE K, JM & SHRI B.R.BASKARAN, AM ITA NO.206/BANG/2017 : ASST.YEAR 2010-2011 SRI HANUMANTHIAH C/O.M/S.S.VENKATESAN & CO. CHARTERED ACCOUNTANTS 31-33, II FLOOR, SNS PLAZA KUMARAKRUPA ROAD BENGALURU 560 001. PAN : AAPPH5596R. V. THE INCOME TAX OFFICER WARD 7(2)(2) BENGALURU. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.V.SRINIVASAN, ADVOCATE RESPONDENT BY : SMT.R.PREMI, JCIT-DR DATE OF HEARING : 28.12.2020 DATE OF PRONOUNCEMENT : 29.12.2020 O R D E R PER GEORGE GEORGE K, JM : THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST CIT(A)S ORDER DATED 30.11.2016. THE RELEVANT ASSESSMENT YEAR IS 2010-2011. 2. TWO ISSUES ARE RAISED IN THIS APPEAL, VIZ., (I) REASSESSMENT IS BAD IN LAW; (II) ASSESSEE IS NOT LIABLE FOR CAPITAL GAIN FOR THE RELEVANT ASSESSMENT YEAR. 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS. THE ISSUE RAISED IN THE ADDITIONAL GROUNDS IS THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 54F OF THE I.T.ACT ON THE ENTIRE UNITS OF APARTMENT RECEIVED BY THE ASSESSEE IN LIEU OF DEVELOPMENT AGREEMENT DATED 10.12.2009. ITA NO.206/BANG/2017 SRI.HANUMANTHIAH. 2 4. THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE ALONG WITH HIS WIFE SMT.SARAWATHI, WERE CO- OWNERS OF A LAND MEASURING 11.04 GUNTAS (12,262.65 SQ.FT.). THE ASSESSEE AND HIS WIFE ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH A BUILDER / DEVELOPER BY THE NAME M/S.RAINBOW PROPERTIES. AS PER THE JOINT DEVELOPMENT AGREEMENT DATED 10.12.2009, THE ASSESSEE TRANSFERRED 58% OF THE UNDIVIDED SHARE OF THE PROPERTY. IN LIEU OF THE SAME, THE ASSESSEE HAD RECEIVED REFUNDABLE DEPOSIT OF RS.1,00,000 AND 42% SUPER BUILT UP AREA IN THE FORM OF APARTMENTS / FLATS, 42% OF CAR PARKING, OTHER BENEFITS ETC. IN THE CONSTRUCTED AREA. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE DID NOT DISCLOSE ANY CAPITAL GAIN ON JOINT DEVELOPMENT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND M/S.RAINBOW PROPERTIES. THE ASSESSMENT FOR ASSESSMENT YEAR 2010-2011 REOPENED WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 OF THE I.T.ACT. IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE I.T.ACT, THE ASSESSEE FILED RETURN OF INCOME ON 28.08.2013. THE ASSESSING OFFICER VIDE ORDER DATED 27.03.2015 PASSED U/S 143(3) R.W.S. 147 OF THE I.T.ACT CALCULATED LONG TERM CAPITAL GAINS OF ASSESSEES SHARE AT RS.52,66,604. 5. AGGRIEVED, THE ASSESSEE FILED APPEAL TO THE FIRST APPELLATE AUTHORITY. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE RAISED THE ISSUE THAT THE REASSESSMENT IS BAD IN LAW AND ON MERITS IT WAS CONTENDED THAT THE ASSESSEE IS NOT LIABLE FOR LONG TERM CAPITAL GAINS FOR THE RELEVANT ASSESSMENT YEAR, VIZ., 2010- 2011. THE CIT(A), HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL. ITA NO.206/BANG/2017 SRI.HANUMANTHIAH. 3 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE ISSUE IN QUESTION IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEES WIFE IN ITA NO.207/BANG/2017 (ORDER DATED 14.08.2020). HOWEVER, THE LEARNED COUNSEL SUBMITTED AS REGARDS THE ADDITIONAL GROUNDS RAISED, VIZ., THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 54F OF THE I.T.ACT ON THE ENTIRE UNITS OF APARTMENTS RECEIVED BY HIM IN LIEU OF THE DEVELOPMENT AGREEMENT, THE ISSUE WAS RESTORED TO THE CIT(A), SINCE IT WAS A LEGAL CLAIM. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS DULY HEARD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IN THE CASE OF ASSESSEES WIFE (CO-OWNER OF THE PROPERTY HAVING 50% OF THE SHARE) HAD HELD THAT THE ASSESSEE IS LIABLE FOR CAPITAL GAINS IN THE RELEVANT ASSESSMENT YEAR. FURTHER, AS REGARDS THE ADDITIONAL GROUNDS, THE SAME WAS ADMITTED SINCE IT WAS A LEGAL CLAIM AND THE ISSUE WAS RESTORED TO THE INCOME TAX AUTHORITIES. THE RELEVANT FINDING OF THE TRIBUNAL IN ASSESSEES WIFES CASE, READS AS FOLLOW:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IF THE JUDGMENT OF HON'BLE APEX COURT CITED BY THE LEARNED AR OF THE ASSESSEE IS APPLICABLE IN THE FACTS OF THE PRESENT CASE, THEN THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. DR. T. K. DAYALU (SUPRA) FOLLOWED BY CIT (A) CANNOT BE APPLIED IN THE PRESENT CASE AND THEREFORE, WE FIRST ITA NO.206/BANG/2017 SRI.HANUMANTHIAH. 4 EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HON'BLE APEX COURT CITED BY THE LEARNED AR OF THE ASSESSEE HAVING BEEN RENDERED IN THE CASE OF SESHASAYEE STEELS PVT. LTD. VS. ACIT (SUPRA). WE FIND THAT IN THAT CASE, THE ASSESSEE ENTERED INTO AN AGREEMENT ON 15.051998 WITH THE BUILDER TO SELL LAND FOR A FIXED CONSIDERATION. UNDER THE AGREEMENT, THE ASSESSEE GAVE PERMISSION TO THE BUILDER TO START ADVERTISING, SELLING. AND MAKE CONSTRUCTION ON THE LAND. SUBSEQUENTLY, A MEMORANDUM OF COMPROMISE DATED JULY 19. 2003 WAS ENTERED INTO BETWEEN THE PARTIES, UNDER WHICH THE AGREEMENT TO SELL AND THE POWER OF ATTORNEY WERE CONFIRMED AND A SUM OF RS.50 LAKHS WAS REDUCED FROM THE TOTAL CONSIDERATION OF RS. 6.10 CRORES. CLAUSE 3 OF THE COMPROMISE DEED CONFIRMED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.4,68,25,644 OUT OF THE AGREED SALE CONSIDERATION. CLAUSE 4 RECORDED THAT THE BALANCE RS. 1.05 CRORES TOWARDS FULL AND FINAL SETTLEMENT IN RESPECT OF THE AGREEMENT ENTERED INTO WOULD BE PAID BY SEVEN POST-DATED CHEQUES. CLAUSE S STATED THAT THE LAST TWO CHEQUES WOULD BE PRESENTED ONLY UPON DUE RECEIPT OF THE DISCHARGE CERTIFICATE FROM ONE PIONEER HOMES. THIS WAS THE DECISION OF HONBLE APEX COURT IN THAT CASE THAT THE ASSESSEES RIGHT IN THE IMMOVABLE PROPERTY WERE EXTINGUISHED ON THE RECEIPT OF THE LAST CHEQUE AND THE COMPROMISE DEED COULD BE SLATED TO BE 3 TRANSACTION WHICH HAD THE EFFECT OF TRANSFERRING THE IMMOVABLE PROPERTY IN QUESTION. 5. AS PER THE FACTS OF THAT CASE AS NOTED ABOVE IT IS SEEN THAT THE ORIGINAL AGREEMENT TO SELL DATED 15.05.1998 WAS REVISED AS PER MEMORANDUM OF COMPROMISE DATED 19.07.2003 AS PER WHICH THE EARLIER AGREED CONSIDERATION WAS REDUCED BY RS. 50 LACS AND AS PER CLAUSES 4 & 5 OF THIS MEMORANDUM OF COMPROMISE DATED 19.07.2003, IT WAS AGREED THAT THE REMAINING CONSIDERATION OF RS.1.05 CRORES WILL BE PAID BY SEVEN POST DATED CHEQUES AND LAST TWO CHEQUES WOULD BE PRESENTED ONLY UPON DUE RECEIPT OF DISCHARGE CERTIFICATE FROM ONE PIONEER HOMES. HENCE, IT IS SEEN THAT AS PER THE ORIGINAL AGREEMENT OF SALE, THE AGREED CONSIDERATION WAS LATER REVISED AND REDUCED AND ONE MORE CONDITION WAS NOTED IN RESPECT OF DISCHARGE CERTIFICATE FROM ONE PIONEER HOMES AND APART FROM GRANTING LICENCE TO THE BUILDER BUYER TO ENTER AND DO CONSTRUCTION WORK ETC., NO OTHER RIGHT LIKE RIGHT TO CREATE MORTGAGE (AS IN THE PRESENT CASE) WAS GIVEN BY THE LAND OWNER SELLER TO THE BUILDER BUYER. HENCE, THE FACTS OF THE PRESENT CASE ARE DIFFERENT. REGARDING THIS ARGUMENT OF THE LEARNED AR OF THE ASSESSEE THAT IN VIEW OF CLAUSE 34 OF THE JDA WHICH PROVIDED THAT IF THE ENTIRE SCHEDULE PROPERTY IS ACQUIRED UNDER ANY LAW BY THE GOVERNMENT OR OTHER AUTHORITY UNDER THE LAW BEFORE CONSTRUCTION OF THE BUILDING THEN THIS AGREEMENT SHALL STAND TERMINATED AND THE ITA NO.206/BANG/2017 SRI.HANUMANTHIAH. 5 ENTIRE COMPENSATION FOR THE CONSTRUCTION PART SHALL BE TAKEN BY THE BUILDER AND ENTIRE COMPENSATION FOR LAND SHALL BE TAKEN BY THE LAND OWNER AND IF THE ACQUISITION TAKES PLACE AFTER COMPLETION OF CONSTRUCTION THEN COMPENSATION SHALL' BE SHARED BETWEEN THE LAND OWNER AND BUILDER IN THE RATIO OF THEIR ENTITLEMENT OF CONSTRUCTED AREA I.E. 42 % TO LAND OWNER AND 58% TO BUILDER AND THEREFORE: IN VIEW OF THIS CLAUSE) IT IS CLEAR THAT THE OWNERSHIP OF LAND IS WITH THE LAND OWNER TILL COMPLETION OF CONSTRUCTION, WE FEEL THAT THE EFFECT OF THIS CLAUSE OF JDA IS NOT THIS THAT TRANSFER HAS NOT TAKEN PLACE ON EXECUTION OF JDA WHICH GAVE RIGHT OF CREATING MORTGAGE ALSO TO THE BUILDER. IN OUR CONSIDERED OPINION, THIS CLAUSE OF IDA TAKES CARE OF THE SITUATION ARISING ON ACQUISITION IF IT TAKES PLACE IN FUTURE. AS THE AGREED CONSIDERATION FOR 58% OF LAND TRANSFERRED BY THE LAND OWNER IS 42% OF CONSTRUCTED AREA TO BE CONSTRUCTED BY THE BUILDER ON THE LAND OF LAND OWNER AND IF ACQUISITION TAKES PLACE BEFORE COMPLETION OF THE CONSTRUCTION THEN SUCH CONSIDERATION CANNOT BE PAID BY THE BUILDER BECAUSE FULL CONSTRUCTION HAS NOT TAKEN PLACE TILL ACQUISITION, IT IS AGREED THAT THE COMPENSATION RECEIVABLE FOR 58% OF LAND TRANSFERRED BY THE LAND OWNER TO BUILDER WILL BE PAYABLE TO THE LAND OWNER INSTEAD OF THE BUILDER BECAUSE THE BUILDER CANNOT PAY THE AGREED CONSIDERATION OF 42% OF CONSTRUCTED AREA. IN FACT, 58% OF TOTAL ACQUISITION COMPENSATION IS AGREED CONSIDERATION OF 42% OF CONSTRUCTED AREA WHICH THE BUILDER WAS REQUIRED TO HAND OVER TO THE LAND OWNER BUT WHICH IS NOT POSSIBLE BECAUSE OF ACQUISITION. IN VIEW OF THIS DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THIS JUDGMENT OF HONBLE APEX COURT IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE AND THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A) WHICH IS RENDERED BY HIM BY FOLLOWING THE BINDING JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. DR.T.K.DAYALU (SUPRA). WE, THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THE MERIT OF ADDITION IN THE PRESENT YEAR BUT WE RESTORE BACK THE MATTER TO THE FILE OF CIT(A) TO DECIDE ABOUT THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 54F AS CLAIMED BEFORE US BY WAY OF AN ADDITIONAL GROUND, WHICH WE ADMIT AS IT IS A LEGAL CLAIM. 9. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES WIFES CASE, WE REJECT THE GROUNDS RAISED BY THE ASSESSEE. AS REGARDS THE ADDITIONAL GROUNDS, THE ISSUE RAISED BEING A LEGAL CLAIM, WE DIRECT THE A.O. TO CONSIDER THE CLAIM OF DEDUCTION U/S 54F OF THE I.T.ACT. IT IS ORDERED ACCORDINGLY. ITA NO.206/BANG/2017 SRI.HANUMANTHIAH. 6 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 29 TH DAY OF DECEMBER, 2020. SD/- SD/- ( B.R.BASKARAN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE; DATED : 29 TH DECEMBER, 2020. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-7, BENGALURU. 4. THE PR.CIT-7, BENGALURU. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE