ITO 13(2)(2), MUMBAI V. NARANDAS J. GOKANI, MUMBAI

ITA 220/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88575 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHISHEK TILAK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NOS. 211& 220/MUM/2011 (ASSESSMENT YEARS: 2005-06 & 2004-05) DCIT -13(2)/ITO-13(2)(2) VS. SHRI NARANDAS J. GOKANI ROOM NO. 421/477, 4TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 65, USUF MEHERALI ROAD MUMBAI 400003 PAN - AACPG6733G APPELLANT RESPONDENT CO NO. 221/MUM/2012 (ASSESSMENT YEAR: 2004-05) SHRI NARANDAS J. GOKANI VS. INCOME TAX OFFICER-13(2)(2) C/O. JAMANDAS DWARKADAS & CO. 65, USUF MEHERALI ROAD MUMBAI 400003 ROOM NO. 477, 4TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN - AACPG6733G APPELLANT RESPONDENT APPELLANT BY: SHRI V.K. BORA RESPONDENT BY: SHRI ABHISHEK TILAK DATE OF HEARING: 04.03.2015 DATE OF PRONOUNCEMENT: 04.03.2015 O R D E R PER D. MANMOHAN, V.P. THESE APPEALS INVOLVE A COMMON ISSUE AND THEY ARE D IRECTED AGAINST THE ORDER PASSED BY CIT(A)-24, MUMBAI. 2. WHETHER, IN THE ASSESSMENT YEARS UNDER CONSIDERATIO N, ASSESSEE IS LIABLE TO CAPITAL GAINS ON SALE OF PROPERTY NAMED TARAKUNJ AT VILE PARLE (EAST) IS THE SUBJECT MATTER OF DISPUTE BEFORE US. 3. ASSESSEE, ALONG WITH HIS MOTHER SMT. JAMNABEN J. GO KANI, OWNED THE ABOVE MENTIONED PROPERTY JOINTLY. THIS PROPERTY WAS GIVEN FOR DEVELOPMENT TO ONE M/S. P&K PLINTH PVT. LTD. FOR A TOTAL CONSID ERATION OF ` 6 CRORES VIDE ITA 211&220/M/11/CO 221/M/12 SHRI NARANDAS J. GOKANI 2 DEVELOPMENT AGREEMENT DATED 25.03.2004. ASSESSEE HA S GOT 50% OWNERSHIP RIGHT ON THE SAID PROPERTY AND HENCE RECEIVED A TOT AL CONSIDERATION OF ` 3 CRORES. DEVELOPMENT AGREEMENT DATED 25.03.2004 WAS REGISTERED ON 26.03.2004. ACCORDING TO THE AO THE TRANSFER OF THE SAID PROPERTY HAD TAKEN PLACE ON 25.03.2004, WHICH FALLS WITHIN THE FINANCI AL YEAR 2003-04 AND TAXABLE IN A.Y. 2004-05. 4. ON THE OTHER HAND, THE CASE OF THE ASSESSEE IS THAT THE LAST INSTALMENT WAS PAID ON 25.09.2004 AND THE PROPERTY WAS HANDED OVER ON THE SAID DATE IN WHICH EVENT CAPITAL GAIN, IF ANY, IS LIABLE TO B E TAXED IN A.Y. 2005-06. IT WAS ALSO CONTENDED THAT THE ASSESSEE HAVING INVESTE D THE SALE PROCEEDS WITHIN SIX MONTHS FROM THE DATE OF TRANSFER, HE IS ENTITLED TO THE BENEFIT UNDER SECTION 54EC OF THE ACT WHEREAS ACCORDING TO THE AO THE TRANSFER HAVING OCCURRED ON 25.03.2004 INVESTMENTS WERE NOT MADE WITHIN SIX MONTHS FROM THE SAID DATE AND HENCE ASSESSEE IS NOT ENTITLED TO EXEMPTION UNDER SECTION 54EC OF THE ACT. IT WAS CONTENDED BEF ORE THE AO THAT THE OWNER HAD GIVEN LICENSED POSSESSION TO THE DEVELOPE R UNDER THE AGREEMENT ON THE CONDITION THAT TRANSFER WOULD TAKE PLACE AFT ER COMPLETION OF FINAL PAYMENT, I.E. 25.09.2004. THE TITLE OF THE PROPERTY DOES NOT VEST IN THE DEVELOPER BUT CONTINUE TO VEST IN THE ASSESSEE AND MERE PHYSICAL POSSESSION IS NOT AN ANSWER TO COME TO THE CONCLUSION THAT TRA NSFER IS COMPLETE UNDER SECTION 2(47) OF THE ACT. VARIOUS CLAUSES OF THE DE VELOPMENT AGREEMENT WERE REFERRED TO, APART FROM LEGAL OPINION DATED 20.03.2 008, TO DISTINGUISH THE CASE OF THE ASSESSEE, WHEREIN LICENSED POSSESSION W AS GIVEN INSTEAD OF PHYSICAL POSSESSION AND DEVELOPMENT AGREEMENT IS NO T A SALE IN A STRICT SENSE. AO REJECTED THE CONTENTION OF THE ASSESSEE A ND PROCEEDED ON THE ASSUMPTION THAT ON 25.03.2004 SALE CAN BE STATED TO HAVE TAKEN PLACE AND INVESTMENTS HAVING BEEN MADE IN SPECIFIED BONDS BEY OND THE TIME LIMIT STIPULATED UNDER SECTION 54EC, ASSESSEE IS LIABLE T O PAY CAPITAL GAINS TAX IN A.Y. 2004-05. SIMILARLY, IN THE HANDS OF THE MOTHER OF THE ASSESSEE ALSO CAPITAL GAINS WERE COMPUTED. IT MAY BE NOTICED THAT THE ASSESSEE HAVING OFFERED THE CAPITAL GAINS TO TAX IN A.Y. 2005-06 TH E SAME WAS ASSESSED ON PROTECTIVE BASIS WHILE MAKING SUBSTANTIVE ASSESSMEN T FOR A.Y. 2004-05. ITA 211&220/M/11/CO 221/M/12 SHRI NARANDAS J. GOKANI 3 5. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AGAI NST BOTH THE ASSESSMENT YEARS. THE LEARNED CIT(A) FOLLOWED THE D ECISION OF THE ITAT MUMBAI BENCHES IN THE CASE OF ACIT VS. GEETADEVI PA SARI TO HOLD THAT THE TRANSFER TOOK PLACE ONLY WITHIN THE FINANCIAL YEAR RELEVANT TO A.Y. 2005-06. IN THIS REGARD HE OBSERVED AS UNDER: - 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. C OUNSEL AND IT IS CLEAR THAT BOTH THE DECISION OF HON'BLE ITAT F BE NCH ACIT VS. MS. GEETADEVI PASARI (2006) 104 TTJ (MUM) 375 AND HON'B LE BOMBAY HIGH COURT IN THE CASE OF CIT VS GEETADEVI PASARI (2009) 17 DTR (BOM) 280 STATES VERY CLEARLY THAT IN A CASE WHERE THERE IS A DEVELOPMENT AGREEMENT AND POSSESSION GIVEN IS LATER ON THEN CAP ITAL GAINS TO BE ASSESSED IN THE YEAR IN WHICH THE PURCHASER WAS ACT UALLY PHYSICALLY PUT IN POSSESSION AND THEREFORE IN THE PRESENT CASE IT IS CLEAR THAT THE APPELLANT WAS PUT IN POSSESSION ONLY IN A.Y. 2005-0 6 IN WHICH THE APPELLANT SHOWED CAPITAL GAIN AND NOT A.Y. 2004-05 IN WHICH THE DEPARTMENT HAS SOUGHT TO ASSESS THE SAME AS CAPITAL GAINS. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US AND THE A SSESSEE FILED CROSS OBJECTION FOR A.Y. 2004-05. 6. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED BEFORE AS A COPY OF THE ORDER PASSED BY ITAT E BE NCH, MUMBAI IN THE CASE OF ASSESSEES MOTHER (ITA NO. 219 & 214/MUM/2011) W HEREIN THE TRIBUNAL OBSERVED AS UNDER: - 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE AL SO GONE THOUGH THE RECORDS. THE LD. CIT(A), IN THE IMPUGNED ORDER, HAS GIVEN A CATEGORICAL FINDING THAT PHYSICAL POSSESSION OF THE PROPERTY IN QUESTION WAS GIVEN BY THE ASSESSEE ON 25.09.04. HE, WHILE RE LYING UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF MS. GEETADEVI PASARI (SUPRA), HAS THEREFORE HELD THAT I N CASE OF DEVELOPMENT AGREEMENT, THE CAPITAL GAINS ARE TO BE TAXED IN THE YEAR IN WHICH THE PURCHASER WAS ACTUALLY AND PHYSICALLY PUT INTO POSSESSION OF THE PROPERTY. THE LD. A.R. OF THE ASSESSEE HAS B ROUGHT OUR ATTENTION TO THE VARIOUS DOCUMENTS ON THE FILE TO SHOW THAT T HE POSSESSION OF THE PROPERTY WAS ACTUALLY DELIVERED TO THE DEVELOPER OF THE PROPERTY ON 25.09.04. HENCE, IN OUR VIEW THE LD. CIT(A) HAS COR RECTLY HELD THAT THE CAPITAL GAINS WERE TAXABLE IN THE ASSESSMENT YEAR 2 005-06. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) I N THIS RESPECT. HENCE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVEN UE AND THE SAME IS HEREBY DISMISSED ACCORDINGLY . 7. HE SUBMITTED THAT IN THE CASE OF 50% CO-OWNER THE T RIBUNAL HAVING TAKEN A VIEW THAT THE TRANSFER TOOK PLACE IN FINANC IAL YEAR RELEVANT TO A.Y. ITA 211&220/M/11/CO 221/M/12 SHRI NARANDAS J. GOKANI 4 2005-06, THE ISSUE IN ASSESSEES CASE IS ALSO FULLY COVERED BY THE AFORECITED DECISION. 8. ON THE OTHER HAND, THE LEARNED D.R. SUBMITTED THAT AS PER THE DEVELOPMENT AGREEMENT PHYSICAL POSSESSION OF THE PR OPERTY WAS HANDED OVER TO THE DEVELOPER ON 25.03.2004 AND HENCE CAPITAL GA INS ARE ASSESSABLE TO TAX IN A.Y. 2004-05. HOWEVER, NO MATERIAL, WHATSOEVER, WAS FURNISHED BEFORE US TO CONTRADICT THE FINDINGS OF THE ITAT IN THE CASE OF THE CO-OWNER. NO MATERIAL WAS FILED TO SHOW THAT THE FINDINGS OF THE LEARNED CIT(A) ARE CONTRARY TO LAW. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE VIEW TAKEN BY ITAT E BENCH, MUMBAI I N THE CASE OF CO-OWNER, WE ARE OF THE VIEW THAT THE ORDERS PASSED BY THE LE ARNED CIT(A) DO NOT CALL FOR ANY INTERFERENCE AND ACCORDINGLY WE DISMISS THE APPEALS FILED BY THE REVENUE FOR BOTH THE YEARS. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CROSS OBJECTION FILED BY HIM IS NOT PRESSED AND ACCORDING LY WE DISMISS THE CROSS OBJECTION FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2015. SD/- SD/- ( CHANDRA POOJARI ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 4 TH MARCH, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 24, MUMBAI 4. THE CIT 13, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.