Appeal details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 2842 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-10-2015
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
04-02-2015
Assessment Year
2006-2007
Appeal Filed On
08-01-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH , MUMBAI BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER . ITA. NO. 253 / M UM /20 1 3 (ASSESSMENT YEAR: 2 00 6 - 0 7 ) SMT. RATHAN B SHETTY 1 19 , UDHY OG MANDIR NO.1 , 17C, PITAMBER LANE, MAHIM WEST , MUMBAI 4000 16 APPELLANT VS. A DDL. COMMISSIONER OF INCOME T AX 1 7 ( 2 ) , ROOM NO.217, 2 ND FLOOR, PIRAMAL CHAMBERS, MUMBAI 400 0 1 2 RESPONDENT PAN: AA DPS2958N / BY APPELLANT : SHRI M. N. NANDGAONKAR , A.R. / BY RESPONDENT : SHRI VIVEK ANAND OJHA , D.R. / DATE OF HEARING : 0 8 . 1 0.2015 / DATE OF PRONOUNCEMENT : 28 . 1 0 .201 5 I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 2 ORDER PER SHAI LENDRA KUMAR YADAV, J . M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME - TAX (APPEALS) - 34 , MUMBAI , DATED 2 1 . 11 . 20 1 2 FOR A.Y. 200 6 - 0 7 ON FOLLOWING GROUNDS: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN ASSESSING AND LEARNED CIT(A) HAS ERRED IN CONFIRMING TO TAX U/ S. 45 OF THE ACT, THE CONSIDERATION RECEIVED ON ACCOUNT OF TRANSFER OF LAND/ DEVELOPMENT AGREEMENT DT. 25.8.2005 JOINTLY EXECUTED BY THE APPELLANT, IN SPITE OF THE FACT THAT THE APPELLANT HAD NOT INCURRED ANY COST FOR ACQUIRING THE SAID LAND / RIGHTS.' (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING AND THE LEARNED CIT(A) HAS ERRED IN CONF IRMING THAT COST OF ACQUISITION OF THE LAND / RIGHTS THEREIN BY THE APPELLANT IN PLOT NO.9 SURVEY NO. 239/1 VILLAGE MALAD WAS ASCERTAINABLE IN SPITE OF THE FAT THAT NO COST OF ACQUISITION WAS INCURRED BY THE APPELLANT & HER JOINT OWNERS. ' ( 3 ) ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN INVOKING PROVISIONS OF SECTION 50C & THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE INVOKING OF THE SAME AND IN APPLYING THE SAME TO TRANSFER OF LAND/ RIGHTS BY APP ELLANT WHICH WAS/ WERE VESTED IN HER JOINTLY, AS OCCUPANTS CLASS II UNDER THE MAHARASHTRA LAND REVENUE CODE (M.L.R.C.) AND THE URBAN LAND CEILING & REGULATION ACT, 1976.' (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSIN G OFFICER HAS ERRED IN ADOPTING AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 3 ADAPTATION OF THE FULL VALUE OF CONSIDERATION FOR THE TRANSFER OF DEVELOPMENT RIGHTS AT RS.2,28,45,000/ - AS ADOPTED BY THE STAMP DUTY AUTHORITIES FOR LEVY OF STAMP DUTY, IGN ORING THE ACTUAL CONSIDERATION RECEIVED BY APPELLANT ALONG WITH TWO JOINT OWNERS OF RS.1,50,00,000/ - ' (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASS ESSING OFFICER HAS ERRED IN AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMI NG NOT ALLOWING THE DEDUCTION OF RS. 38,50,000/ - U/S. 54 F ON ACCOUNT OF COST OF CONSTRUCTION OF A NEW RESIDENTIAL HOUSE PAID IN F. Y. 2005 - 06. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT T HE INVESTMENT IN THE NEW PROPERTY WAS NOT MADE WITHIN 2 YEARS FROM THE DATE OF TRANSFER OF THE ORIGINAL ASSETS. HENCE THE APPELLANT IS NOT ENTITLED TO BENEFIT OF EXEMPTION U/S. 54 F. 2. AT THE OUTSET OF HEARING, LEARNED AUTHORIZED REPRESENTATIVE DID NOT PRESS THE GROUND NO.4. SO, SAME IS DISMISSED AS NOT PRESSED. 3 . ASSESSEE RECEIVED ABSOLUTE RIGHT WITH REGARD TO 2000SQ.MTRS. OF LAND OUT OF 62 ACRES ALLOTTED TO MS. FEDINSHAW CHARITABLE TRUST BY WAY OF CONSENT DECREE DATED 13.07.1999, WHICH WAS DEEMED T O BE LONG TERM CAPITAL ASSET. ASSESSEE GOT 1/3 RD OF RIGHT IN ABLOVE LAND. AS PER DEED OF CONFIRMATION DATED 17/07/2003 WHICH WAS DULY REGISTERED WITH SUB - REGISTRAR, BORIVALLI 1, ASSESSEE BECAME ABSOLUTE OWNER AND ON APPLICATION MADE BY ALL THE THREE CO - OWNERS, PROPERTY WAS TRANSFERRED INTO THE NAME OF ASSESSEE BY THE CONCERN CITY SURVEY OFFICE. ASSESSEE AND OTHER CO - OWNER SUBSEQUENTLY I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 4 ENTERED INTO A DEVELOPMENT AGREEMENT WITH HEMKUNT REAL ESTATE PVT. LTD. AND RECEIVED CONSIDERATION OF RS.1.2 CRORES, WH EREAS PROPERTY WAS REGISTERED WITH MARKET VALUE OF RS.2.28 CRORES BY STAMP VALUE AUTHORITY. ASSESSEE CLAIMED THAT THERE WAS NO COST OF ACQUISITION TO ACQUIRE THE RIGHTS IN ABOVE LAND, THE CHARGING SECTION 45 FAILS WHEN THERE IS NO COST AND HENCE CAPITAL G AINS CANNOT BE COMPUTED. HOWEVER, ASSESSING OFFICER WAS OF THE VIEW THAT THE COST OF ACQUISITION WAS ONLY NIL, BUT IT WAS CAPABLE OF BEING DETERMINED AND ACCORDINGLY COMPUTED LONG TERM CAPITAL GAIN. ASSESSING OFFICER HAD ALSO INVOKED PROVISIONS OF SECTIO N 50C. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN ORDER OF ASSESSING OFFICER WAS CONFIRMED. 3.1 BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT ITAT E BENCH, MUMBAI IN SIMILAR SET OF CIRCUMSTANCES IN CASE OF OTHER CO - OWNER HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY A NUMBER OF DECISIONS OF THE HON'BLE SUPREME COURT AS WELL OF VARIOUS HI GH COURTS OF THE COUNTRY. THE BASE DECISION IS IN THE CASE OF CIT V. B.C. SRINIVASA SHETTY (1981) 128 ITR 294; (1981) 2 SCC 460 WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT ALL TRANSACTIONS ENCOMPASSE D BY SECTION 45 MUST FALL WITHIN THE COMPUTATION PROVISIONS OF SECTION 48. IF THE COMPUTATION AS PROVIDED UNDER SECTION 48 COULD NOT BE APPLIED TO A PARTICULAR TRANSACTION, IT MUST BE REGARDED AS 'NEVER INTENDED BY SECTION 45 TO BE THE SUBJECT OF THE CHARG E'. THE HON'BLE SUPREME COURT IN THE CASE OF 'PNB FINANCE LTD. VS. CIT (2008) 307 ITR 75' HAS REITERATED THE ABOVE PROPOSITION OF LAW .IN THE CASE OF CIT V. B.C. SRINIVASA SHETTY (SUPRA) THE I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 5 COURT WAS CO NSIDERING WHETHER A FIRM WAS LIABLE TO PAY CAPITAL GAINS ON THE SALE OF ITS GOODWILL TO ANOTHER FIRM. THE COURT FOUND THAT THE CONSIDERATION RECEIVED FOR THE SALE OF GOODWILL COULD NOT BE SUBJECTED TO CAPITAL GAINS BECAUSE THE COST OF ITS ACQUISITION WAS I NHERENTLY INCAPABLE OF BEING DETERMINED. THE PRINCIPLE PROPOUNDED IN B.C. SRINIVAS SHETTY (1981) 128 ITR 294 (SC) HAS BEEN FOLLOWED BY SEVERAL HIGH COURTS WITH REFERENCE TO THE CONSIDERATION RECEIVED ON SURRENDER OF INTER ALIA TENANCY RIGHTS SALE OF GOOD W ILL ETC. IT WAS TO MEET THE SITUATION CREATED BY THE DECISION IN B.C. SRINIVAS SHETTY (1981) 128 ITR 294 (SC) AND THE SUBSEQUENT DECISIONS OF THE HIGH COURTS THAT VIDE FINANCE ACT , 1994, SECTION 55 (2) WAS AMENDED TO PROVIDE THAT THE COST OF ACQUISITION OF, INTER ALIA, A TENANCY RIGHT , GOOD WILL ETC. WOULD BE TAKEN AS NIL. 8. THUS, IT MAY BE NOTED THAT AFTER THE AMENDMENT OF 1995, CERTAIN ASSETS LIKE GOO DWILL, TENANCY RIGHTS ETC. HAVE BEEN CHARGED TO TAX BY SPECIFICALLY PROVIDING THAT IF THERE IS NO COST INCURRED BY THE ASSESSEE IN THIS RESPECT, THE 6 ITA 807/M/13 COST SHALL BE TAKEN AS NIL. HOWEVER, WE FIND THAT VIDE AMENDMENT, PARTICULAR ASSETS LIKE GOO DWILL, TENANCY RIGHTS, TRADE MARK ETC. HAVE BEEN BROUGHT INTO THE AMBIT OF CHARGING SECTION. HOWEVER, THE RIGHTS OBTAINED BY WAY OF ADVERSE POSSESSION HAVE NOT BEEN INCLUDED IN THE PROVISION NEITHER IN THE CHARGING SECTION 45 NOR IN THE SECTION 48 WHICH PROVIDES MODE OF COMPUTATION. THERE IS NO ANY PROVISION REGARDING THE CHARGING OF CAPITAL GAINS TAX ON AN ASSET TITLE TO WHICH HAS BEEN ACQUIRED IN RECOGNI TION OF RIGHTS OF ADVERSE POSSESSION. EVEN U/S 49, THE COST OF THE ASSET WITH REGARD TO CERTAIN MODE OF ACQUISITION, SUCH AS BY WAY OF GIFT OR WILL, BY SUCCESSION, INHERITANCE OR DEVOLUTION OR ON ANY DISTRIBUTION OF ASSETS ON THE DISSOLUTION OF A FIRM, BOD Y OF AOP OR LIQUIDATION OF COMPANY ETC.; THE RIGHTS ATTAINED IN AN ASSET ON ACCOUNT OF ADVERSE POSSESSION HAVE NOT BEEN INCLUDED. THOUGH THE PARLIAMENT HAS MADE AN AMENDMENT THAT IN CERTAIN TYPE OF ASSETS LIKE GOODWILL, TENANCY RIGHTS ETC., THE COST OF ACQ UISITION WOULD BE TAKEN AS ACTUAL COST INCURRED AND IF NO COST INCURRED, THE SAME BE TAKEN AT NIL, HOWEVER THE SAID DEEMING SECTION IS APPLICABLE TO THE ASSETS WHICH HAVE BEEN SPECIFICALLY BROUGHT WITHIN THE PURVIEW OF THE SAID PROVISION. THE ASSETS OR THE RIGHTS I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 6 WHICH DO NOT FIND MENTION IN THE RELEVANT PROVISION, CANNOT BE BROUGHT WITHIN THE AMBIT OF CHARGING SECTION, IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT. WE FURTHER FIND THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DIRECT DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. STAR CHEMICALS (BOMBAY) PVT. LTD. (INCOME TAX APPEAL NO . 1110 OF 2009 & INCOME TAX APPEAL NO. 1153 OF 2009, DATED 14TH AUGUST, 2009) WHEREIN THE HON' BLE COURT WHILE ANSWERING THE QUESTION OF CHARGEABILITY OF CAPITAL GAINS IN RELATION TO AN ASSET/TITLE WHICH WAS ACQUIRED BY WAY OF ADVERSE POSSESSION, HAS HELD THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT FOR WANT OF ACQUISITION COST, CAPITAL GAINS TAX WOU LD NOT ARISE. SINCE A DIRECT DECISION OF THE HON'BLE JURISDICTIONAL COURT IN RELATION TO THE CHARGEABILITY OF CAPITAL GAIN ON ASSET ACQUIRED BY WAY OF ADVERSE POSSESSION IS AVAILABLE, HENCE, THE SAME IS BINDING UPON THIS TRIBUNAL. WE THEREFORE HOLD THAT NO CAPITAL GAIN ARE CHARGEABLE TO TAX IN 7 ITA 807/M/13 RELATION TO THE ASSET ACQUIRED BY WAY OF ADVERSE POSSESSION. APPEAL OF THE ASSESSEE IS ALLOWED AND ORDER OF THE LOWER AUTHORITIES IS SET ASIDE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLO WED. 3.2 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO, FOLLOWING SAME REASONING, WE HOLD THAT NO CAPITAL GAIN IS CHARGEABLE TO TAX IN RELATION TO ASSET ACQUIR ED BY WAY OF ADVERSE POSSESSION AS DISCUSSED. AC CORDINGLY, APPEAL OF ASSESSEE IS ALLOWED ON THIS POINT. 4. NEXT ISSUE IS WITH REGARDS TO ALLOWABILITY OF DEDUCTION OF RS.38,50,000/ - U/S.54 ON ACCOUNT OF COST OF CONSTRUCTION OF A NEW RESIDENTIAL HOUSE PAID. ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 20 OF HIS ORDER, ASSESSEE HAD INVESTED RS.38,50,000/ - IN A PROPERTY AT BANGALORE VIDE AGREEMENT DATED 05.02.2008 WITH M/S.GODREJ PROPERTIES LTD. THE ABOVE I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 7 PAYMENT WAS MADE TOWARDS ADVANCE ON 27 TH MARCH, 2006 THROUGH ASSESSEES CITY BANK ACCOUNT. ACC ORDING TO ASSESSING OFFICER TO AVAIL BENEFIT OF EXEMPTION U/S.54F, ASSESSEE SHOULD HAVE INVESTED IN A PROPERTY EITHER ONE YEAR BEFORE OR TWO YEARS AFTER DATE OF SALE. ASSESSING OFFICER OBSERVED FROM THE COPY OF AGREEMENT OF SALE BETWEEN ASSESSEE AND M/S. GODREJ PROPERTIES LTD. AND FOUND THAT POSSESSION OF SAID FLAT WOULD BE GIVEN TO ASSESSEE WITHIN THE PERIOD OF 36 MONTHS. AS PER CLAUSE 11 OF AGREEMENT, IT WAS TENTATIVELY FIXED AS ON OR BEFORE 31 ST MARCH, 2009. HOWEVER, TILL THE DATE OF ASSESSMENT ORDER, ASSESSEE WAS NOT GIVEN POSSESSION OF SAID FLAT AND HENCE ASSESSING OFFICER DENIED THE BENEFIT OF EXEMPTION CLAIMED BY ASSESSEE U/S.54F OF THE ACT, WHICH WAS CONFIRMED BY CIT(A). 4.1 THE STAND OF ASSESSEE HAS BEEN THAT ASSESSEE HAS BEEN ALLOTTED PLOT BY M/S. GODREJ PROPERTIES LTD. BY LETTER IN MARCH 2006 ON PAYMENT OF RS.38,50,000/ - ON 27.02.2006. THE STAND OF ASSESSEE HAS BEEN THAT SHE HAD APPROPRIATED RS.38,50,000/ - TOWARDS CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN TIME AS PROVIDED U/S.54F OF THE ACT. 4.2 AS PER PROVISION OF SECTION 54F, CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. IN CASE, CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG - TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE AND ASSESSEE HAS, WITHIN A PERIOD OF ONE YEAR BEFORE I T A NO . 253 / M UM / 1 3 A.Y. 06 - 0 7 [ SMT. RATHAN B SHETTY VS. AC IT ] PAGE 8 OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLACE PURCHASED, OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENTIAL HOUSE , CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH PROVISIONS OF S ECTION . THE INVESTMENT HAS TO BE TAKEN AT THE DATE OF ADVANCE I.E. 27.03.2006 OR DATE OF AGREEMENT I.E. 05.02.2008 WITH SELLER M/S. GODREJ PROPERTIES LTD. WE FIND THAT REVENUE HAS NOT DISPUTED THE ADVANCE TOWARD ABOVE FLATS ON 27.03.2006. ACCORDING TO US , THE AGREEMENT DATED 05.02.2008 WILL RELATE BACK TO 27.03.2006 I.E. DATE OF ADVANCE AS FAR AS INVE STMENT IN PROPERTY IS CONCERNED. A CCORDINGLY, ASSESSEE WILL BE ENTITLED FOR BENEFIT U/S. PROVISION OF SECTION 54F. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 5 . AS A RESULT, APPEAL FILED BY ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 28TH DAY OF OCTO BER , 201 5 . SD/ - SD/ - ( RAJESH KUMAR ) (SHAILENDRA KUMAR YAD AV) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : DATED 28 / 1 0 /2015 S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1 . / REVENUE 2 . / ASSESSEE 3 . / CONCERNED CIT
Mehul