ITO 14(2)(1), MUMBAI V. HEMANDAS J. PARIYANI, MUMBAI

ITA 2508/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48561 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-04-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 31-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARIOM TULSIANI
• Keywords: Capital asset; Cost of acquisition
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI R,S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 2508/MUM/2010 ASSESSMENT YEAR: 1997-98 INCOME TAX OFFICER,14(2)-1, APPELLANT ROOM NO. 304, 3 RD FLOOR EARNEST HOUSE, NARIMAN POINT, MUMBAI 400 051. VS. SHRI HEMANDAS J. PARIYANI, RESPONDENT FLAT NO. 23, 2 ND FLOOR, BLDG.NO. 1, RAJRATAN PALACE CO-OP. HSG. SOCIETY LTD., PLOT NO. 60, SHANKAR LANE, KANDIVALI (W), MUMBAI 400 067. APPELLANT BY : MR. R.K. GUPTA RESPONDENT BY : MR. HARIOM TULSIANI . ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- 35, MUMBAI, PASSED ON 08/01/2010 FOR THE AS SESSMENT YEAR 1997-98 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASS ESSEE WAS NOT HOLDING ANY CAPITAL ASSET, IGNORING THE FACT THAT T HE SHARE OF THE ASSESSEE IN THE TOTAL FSI AVAILABLE TO THE CHS IS T HE CAPITAL ASSET HELD BY THE ASSESSEE. 3. THE LD. CIT(A) ERRED IN HOLDING THAT THE CAPITAL ASSET HAS NOT BEEN SOLD EXCHANGED OR RELINQUISHED, IGNORING THE F ACT THE ASSESSEES SHARE IN THE TOTAL FSI AVAILABLE TO THE CHS HAS BEEN SOLD TO THE DEVELOPER I.E. NEW INDIA CONSTRUCTION C O. AND THE ITA NO. 2508/M/2010 HEMANDAS J. PARIYANI 2 CONSIDERATION OF RS. 5,87,565/- IS TOWARDS THE SALE OF THIS CAPITAL ASSET. 4. FOR THESE AND OTHER REASONS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT( A) BE QUASHED AND THAT THE AO RESTORED. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED MEMBER OF THE SOCIETY VIZ., M/S RAJRATAN PALACE COO PERATIVE HOUSING SOCIETY LTD. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT SOCIETY HAD ENTERED INTO AGREEMENT DAT ED 18/05/1996 WITH M/S NEW INDIA CONSTRUCTION COMPANY AND AS PER THE AGREEMENT, THE SOCIETY AND THE MEMBERS OF THE SOCIETY RECEIVED AN AMOUNT OF RS. 3,02,16,828/- ON ACCOUNT OF SALE OF FSI TO M/S NEW INDIA CONSTRUCTION COMPANY. OUT OF THE ABOVE AMOUNT, RS. 2,99,65,828/- WAS RECEIVED DIRECTLY BY THE 51 MEMBERS OF THE SOCI ETY AS PER THE 51 INDEPENDENT AGREEMENTS MADE BY THE MEMBERS WITH THE BUILDERS AND THE SOCIETY RECEIVED ONLY RS. 2,51,000/-. AS M/S NE W INDIA CONSTRUCTION COMPANY ENTERED INTO SEPARATE AGREEMEN TS WITH THE INDIVIDUAL MEMBERS OF THE SOCIETY, REOPENING PROCEE DINGS U/S 147 OF THE ACT WERE INITIATED TO BRING TO TAX THE COMPENSA TION RECEIVED BY EACH AND EVERY 51 MEMBERS OF THE SOCIETY AS THE INC OME RECEIVED FROM M/S NEW INDIA CONSTRUCTION COMPANY WAS NOT DECLARED IN THE RETURN OF INCOME. SINCE TOTAL AMOUNT OF COMPENSATION RECEI VED FROM M/S NEW INDIA CONSTRUCTION COMPANY BY RAJRATNA PALACE COOP . HSG. LTD AND 51 MEMBERS OF THE COOPERATIVE SOCIETY IS TAXED ON S UBSTANTIAL BASIS IN THE LANDS OF COOP. HOUSING SOCIETY, THE SHARE OF CO MPENSATION RECEIVED BY THE ASSESSEE OF RS. 5,87,565/- WAS CHARGED ON PR OTECTIVE BASIS. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SU BMISSION AND THE CONTENTS OF WHICH HAD BEEN EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGE 2. AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE, THE CIT(A) DIRECTED THE AO NOT TO CHARGE CAPITAL GAINS TAX ON THE COMPENSATION ITA NO. 2508/M/2010 HEMANDAS J. PARIYANI 3 RECEIVED BY THE ASSESSEE EVEN ON PROTECTIVE BASIS B Y HOLDING AS UNDER:- ON CAREFULLY CONSIDERING THE FACTS OF THE CASE AS W ELL AS GOING THROUGH THE ORDERS OF HONBLE ITAT PARTICULARLY IN THE CASE OF DEEPAK S. SHAH VS. ITO, WARD 20(2) WHICH IS FOUND T O BE A LATEST DECISION DATED 16/06/2008, WHEREIN ON THE IDENTICAL SET OF FACTS AND CIRCUMSTANCES AND AFTER THOROUGHLY EXAMINING TH E ISSUE AND CONDITIONS LAID DOWN AS PER SECTION 45 OF THE IT AC T AS WELL AS THE DEFINITION OF CAPITAL ASSET AS PER SECTION 2(14 ) OF THE ACT, THE HONBLE ITAT HELD THAT THE ASSESSEE WAS NEITHER HO LDING ANY CAPITAL ASSET NOR THE SAME HAS BEEN SOLD, EXCHANGE OR RELINQUISH OF ASSETS. IN OTHER WORDS, THERE IS NO TRANSFER OF CAPITAL ASSET IN ACCORDANCE WITH IT ACT. WE, THEREFORE, ARE OF THE C ONSIDERED VIEW THAT SECTION 45 OF THE ACT IS NOT ATTRACTED IN THE LIGHT OF THE ABOVE DISCUSSION. WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO CAPITAL GAIN U/S 45 OF THE ACT. THE HONBLE ITAT BEFORE COMING TO THE ABOVE CONCLUSION HAVE ALSO DISCUSSED THE JUDGEMENT OF HON 'BLE SUPREME COURT IN THE CASE OF AR KRISHNAMURTHY AND F OUND THE SAME TO BE DISTINGUISHABLE ON THE FACTS. BY RESPECT FULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL IT AT, WHICH IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANTS CASE, I ALSO HOLD THAT THE PROVISIONS OF SECTION 45 OF THE ACT I S NOT APPLICABLE IN THE CASE OF THE APPELLANT AND THE APPELLANT IS N OT LIABLE FOR CAPITAL GAINS. THE AO IS, THEREFORE, DIRECTED NOT T O CHARGE CAPITAL GAINS TAX ON THE COMPENSATION RECEIVED BY THE ASSES SEE EVEN ON PROTECTIVE BASIS. THIS GROUND IS, THEREFORE, ALLOWE D IN FAVOUR OF THE APPELLANT. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DR HAS RELIED UPON THE ORDER OF AO W HEREAS THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANC E ON THE ORDER OF CIT(A) AND CANVASSED THAT THE ISSUE UNDER CONSIDERA TION IS COVERED BY THE DECISION OF ITAT, MUMBAI IN THE CASE OF JETHALA L D. MEHTA VS. DCIT, [2005] 2 SOT 422 (MUM.). 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ISSUE IN DISPU TE IS COVERED BY THE DECISION OF ITAT IN THE CASE OF JETHALAL VS. DCIT ( SUPRA) WHEREIN THE ITAT HELD THAT TRANSFERABLE DEVELOPMENT RIGHTS GRANTED BY THE DEVELOPMENT CONTROL REGULATIONS FOR GREATER MUMBAI, 1991, QUALIFYING ITA NO. 2508/M/2010 HEMANDAS J. PARIYANI 4 FOR EQUIVALENT FLOOR SPACE INDEX HAVING NO COST OF ACQUISITION, SALE THEREOF DOES NOT GIVE RISE TO TAXABLE CAPITAL GAINS . SINCE THE FACTS OF THE CASE UNDER CONSIDERATION IS IDENTICAL TO THAT O F THE DECISION OF THE ITAT IN THE SAID CASE, WE RESPECTFULLY FOLLOW THE S AME AND IN THE LIGHT OF THAT WE UPHOLD THE ORDER OF THE CIT(A) IN DIRECT ING THE AO NOT TO CHARGE CAPITAL GAINS TAX ON THE COMPENSATION RECEIV ED BY THE ASSESSEE EVEN ON PROTECTIVE BASIS. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ON THIS COUNT IS HEREBY DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 29 TH APRIL, 2011. SD/- SD/- (R.S.SYAL) (V. DURGA R AO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 29 TH APRIL, 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, H BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV