ITO 16(1)(4), MUMBAI V. JITENDRA A SHAH, MUMBAI

ITA 2548/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3727 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Additional evidence; Cost of acquisition
• Section: 143(3); 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER / I .TA NO. 2548/MUM/2014 ( / ASSESSMENT YEAR: 2010-11 THE ITO - 16(1)(4), MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 / VS. SHRI JITENDRA A. SHAH, FLAT NO. 100, 10 TH FLOOR, GIRNAR BLDG., 69, TARDEO ROAD MUMBAI-40 034 C.O. NO. 127/MUM/2014 (ARISING OUT OF I .TA NO. 2548/MUM/2014) ( / ASSESSMENT YEAR: 2010-11 SHRI JITENDRA A. SHAH, FLAT NO. 100, 10 TH FLOOR, GIRNAR BLDG., 69, TARDEO ROAD MUMBAI-40 034 / VS. THE ITO - 16(1)(4), MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 ./ ./ PAN/GIR NO.AAPPS 9941J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI ASHISH HELIWAL / RESPONDENT BY: SHRI ASHOK MEHTA / DATE OF HEARING :26.02.2016 ! / DATE OF PRONOUNCEMENT :29.04.2016 / O R D E R PER C.N. PRASAD, JM: THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OB JECTION IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-27, MUMBAI DATED 31.01.2014 PERTAINING TO ASSESSMENT YEAR 201 0-11. ITA NO. 2548/M/2014 & C.O. NO. 127/M/20-15 2 2. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS T HAT WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT CAPITAL GAIN ARISING ON T RANSFER OF FLAT WAS A LONG TERM CAPITAL GAIN AND NOT SHORT TERM CAPITAL G AIN WHEN HOLDING PERIOD WAS LESS THAN 36 MONTHS FROM THE DAT E OF PURCHASE OF PROPERTY. 3. BRIEF FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL A ND FILED ITS RETURN OF INCOME ON 1.02.2011 DECLARING TOTAL INCOME OF RS . 7,65,550/-. THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 7.12.2012 D ETERMINING TAXABLE INCOME AT RS. 55,16,760/-. WHILE COMPLETIN G THE ASSESSMENT, THE ASSESSING OFFICER COMPUTED THE CAPITAL GAIN ON SALE OF FLAT OF THE ASSESSEE AT SHREYANSH, KESAR BAUG CHS LTD., BORIVAL I, MUMBAI AS SHORT TERM CAPITAL GAIN AS AGAINST THE ASSESSEES C OMPUTATION OF LONG TERM CAPITAL GAIN. ON APPEAL, THE LD. CIT(A) H ELD THAT THE COMPUTATION OF THE ASSESSEE AS LONG TERM CAPITAL G AIN IS CORRECT BY ALLOWING THE APPEAL OF THE ASSESSEE. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSING OFFICER HAS TAKEN THE DATE OF SALE DEED A S RELEVANT DATE FOR COMPUTING THE PERIOD OF 36 MONTHS NECESSARY FOR A C APITAL ASSET TO QUALIFY AS LONG TERM CAPITAL ASSET AS AGAINST THE D ATE OF ALLOTMENT CONSIDERED BY THE ASSESSEE IN COMPUTING THE CAPITAL GAINS. HE STRONGLY SUPPORTS THE ORDERS OF THE ASSESSING OFFIC ER. 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY PLACES RELIANCE ON THE ORDERS OF THE LD. CIT(A) HOLDING THAT AS ON THE DAT E OF ALLOTMENT LETTER ITA NO. 2548/M/2014 & C.O. NO. 127/M/20-15 3 DATED 2.2.2005, THE ASSESSEE HAD ACQUIRED SUBSTANTI AL DOMAIN OVER THE FACT AS FULL CONSIDERATION WAS PAID AND THEREFO RE, WHEN THE FLAT WAS ULTIMATELY SOLD IN DECEMBER, 2009, MORE THAN 36 MONTHS HAD ELAPSED GIVING RISE TO LONG TERM CAPITAL GAIN. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LD. CIT(A) FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HILLA J.B. WADIA (216 ITR 376) AND TAKING NOTE OF THE CBDT CIRCULAR NO. 495 DATE D 22.9.1987 HELD THAT THE PERIOD OF HOLDING IS MORE THAN 36 MONTHS , THEREFORE THE GAIN IS TO BE COMPUTED AS LONG TERM CAPITAL GAIN. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE CASE LAW RELIED ON BY THE LD. COUNSEL. IN THIS CASE, THE ASSESSEE SOLD HIS FLAT SITUATED AT A -703, 7 TH FLOOR, KESAR BAUG CHS LTD., BORIVALI, MUMBAI BY ENTERING INTO A GREEMENT FOR SALE DATED 4.12.2009 FOR RS. 70 LAKHS. THE ASSESSEE CLA IMED INDEX COST OF ACQUISITION AND COMPUTED THE LONG TERM CAPITAL GAIN AT RS. 40,51,026/-. THE SAID LONG TERM CAPITAL GAIN WAS C LAIMED EXEMPT U/S. 54 OF THE ACT AND SHOWN NIL INCOME FROM CAPITA L GAINS. THE ASSESSEE COMPUTED LONG TERM CAPITAL GAIN TAKING THE DATE OF ALLOTMENT I.E. 2.2.2005 AS THE RELEVANT DATE FOR CO MPUTING PERIOD OF 36 MONTHS AS HOLDING PERIOD. ACCORDING TO THE ASSE SSEE, MORE THAN 36 MONTHS HAD ELAPSED BETWEEN THE DATE OF ACQUISITI ON OF CAPITAL ASSETS I.E. ON 2.2.2005 AND THE DATE OF TRANSFER/SA LE I.E. 4.12.2009, THUS THE HOLDING PERIOD IS MORE THAN 36 MONTHS. TH E ASSESSEE COMPUTED LONG TERM CAPITAL GAIN ACCORDINGLY. THE A SSESSING OFFICER HOWEVER COMPUTED THE SHORT TERM CAPITAL GAIN BY TAK ING THE DATE OF PURCHASE DEED I.E. 26.4.2007 AS THE RELEVANT DATE F OR COMPUTING ITA NO. 2548/M/2014 & C.O. NO. 127/M/20-15 4 PERIOD OF 36 MONTHS. ACCORDING TO HIM THE PERIOD O F HOLDING IS LESS THAN 36 MONTHS. 7. THE LD. CIT(A) TAKING NOTE OF THE FACT THAT THE ASSESSEE HAD MADE FULL PAYMENT OF CONSIDERATION ON 2.2.2005 AND OBTAINED ALLOTMENT LETTER FROM THE BUILDER ON THE SAME DAY C ONSIDERED THE DATE OF ALLOTMENT AS THE DATE FOR COMPUTING THE PER IOD OF 36 MONTHS AS AGAINST THE PURCHASE DATE ADOPTED BY THE ASSESSI NG OFFICER. WHILE TAKING THIS VIEW THE LD. CIT(A) FOLLOWED THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HILLA J.B. WADIA ( SUPRA) AND ALSO TAKING NOTE OF THE CBDT CIRCULAR NO. 495 DATED 22.9 .1987 CONCLUDED THAT THE LONG TERM CAPITAL GAIN COMPUTED BY THE ASS ESSEE IS IN ORDER. WHILE HOLDING SO, THE LD. CIT(A) OBSERVED AS UNDER: 2.4.8. IN THE INSTANT CASE, THE APPELLANT HAD MAD E THE FULL PAYMENT BY WAY OF CHEQUE NO.445416 DATED 16.1 0.200 4 (RS.11 ,00,000/-) AND CHEQUE NO.227006 DATED 02.02:2005 (RS.10,00,000/-) ON THE BASIS OF WHICH ALLOTMENT LE TTER WAS ISSUED TO HIM ON 02.02.2005 WHICH IS NOT UNDER DISPUTE. WH AT IS ALSO NOT UNDER DISPUTE IS THE DATE OF SALE AGREEMENT OF THE PREMISES IN QUESTION ON 04.12.2009. 2.4.9 IN VIEW OF THE SAME, EVEN WITHOUT ADMITTING T HE ADDITIONAL EVIDENCE, IT IS CLEAR THAT AS ON THE DAT E OF ALLOTMENT LETTER (02.02.2005), THE APPELLANT HAD ACQUIRED SUB STANTIAL DOMAIN OVER THE FLAT AS FULL CONSIDERATION WAS PAID AND THEREFORE, WHEN THE FLAT WAS ULTIMATELY SOLD IN DECEMBER 2009, MORE THAN 36 MONTHS HAD ELAPSED GIVING RISE TO LTCG AND THER EFORE, NO MERIT COULD BE FOUND IN THE ACTION OF THE LD AO IN TREATING IT AS STCG. AS BROUGHT OUT EARLIER, THE DECISION IN THE CASE OF SMT. R.R. SOOD (SUPRA) WAS GIVEN IN LIGHT OF THE PRE AMENDED SECTION AND AFTER THE AMENDMENT W.E.F. 1.4.88 WHICH HAS BEEN EX PLAINED-IN DETAIL BY THE CBDT CIRCULAR NO.495 DATED 22.09.1987 REPRODUCED EARLIER, IT HAS BEEN HELD THAT ANY ARRANGEMENT WHER EBY PERSON ACQUIRES ANY RIGHT IN ANY BUILDING WHICH IS EITHER BEING CONSTRUCTED OR WHICH IS TO BE CONSTRUCTED GIVES RIS E TO ACQUISITION ITA NO. 2548/M/2014 & C.O. NO. 127/M/20-15 5 OF RIGHTS WHICH ARE TAXABLE UNDER THE HEAD 'CAPITAL GAINS. IT WAS ALSO CLEARLY STATED IN THE ABOVE CIRCULAR THAT TRAN SACTIONS OF THIS NATURE ARE NOT REQUIRED TO BE REGISTERED UNDER THE REGISTRATION ACT, 1908 FOR GIVING RISE TO ANY RIGHTS, THE TRANSF ER OF WHICH WOULD GIVE RISE TO CAPITAL GAINS TAX, THUS, CLEARLY ESTABLISHING THAT EVEN WITHOUT A TRANSFER OF TITLE OF FLAT BY THE BUI LDER IN A MULTI- STORIED CONSTRUCTION, IF AN ARRANGEMENT OF FULL PAY MENT IS MADE AND A LETTER OF ALLOTMENT IS ISSUED, THE PERSON ACQ UIRES A RIGHT IN SUCH A FLAT, THE TRANSFER OF WHICH WOULD DEFINITELY GIVE RISE TO CAPITAL GAINS AND IF THE DURATION OF HOLDING OF SUC H RIGHTS IS MORE THAN 36 MONTHS WHICH IS A CASE AT HAND, IT WOULD CE RTAINLY BE TAXED AS LTCG. LD. A.O. HAS ALSO NOT DOUBTED THE A CQUISITION OF NEW PROPERTY IN RESPECT OF WHICH DEDUCTION U/S.54 H AS BEEN CLAIMED AND THEREFORE, IT CANNOT ALSO BE SAID THAT THERE WAS SOME ULTERIOR MOTIVE IN GETTING AN ALLOTMENT LETTER ISSU ED ON 02.02.2005 WHEN THE PROPERTY WAS ULTIMATELY SOLD ON 04.12.2009. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE HO N'BLE BOMBAY HIGH COURT IN THE CASE OF HILLA J.B. WADIA (SUPRA) AND IN LIGHT OF THE CBDT CIRCULAR NO.495 (SUPRA), THE ISSUE HAS TO BE DECIDED IN FAVOUR OF THE APPELLANT. ACCORDINGLY, GROUND NOS. 1 & 2 ARE ALLOWED AND GROUND NO.3 IS NOT REQUIRED TO BE ADJUD ICATED IN VIEW OF THE DECISION IN RESPECT OF EARLIER GROUNDS. 8. ON GOING THROUGH THE ORDER OF THE LD. CIT(A) AND THE FINDINGS THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) IN HOLDING THAT THE DATE OF ALLOTMENT SHOULD BE TAKEN FOR COMPUTING THE HOLDING PERIOD OF 36 MONTHS FOR ARRI VING AT LONG TERM CAPITAL GAIN IN THIS CASE. IN THE CIRCUMSTANCES, W E UPHOLD THE ORDER OF THE LD. CIT(A). THE APPEAL FILED BY THE REVENUE IS DISMISSED. C.O. NO. 127/M/2015 9. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ONL Y IN SUPPORT OF THE ORDER OF THE LD. CIT(A). AS THE REVENUES APPE AL IS DISMISSED UPHOLDING THE ORDER OF THE LD. CIT(A), THE CROSS OB JECTION BECOME INFRUCTUOUS AND THE SAME IS DISMISSED. ITA NO. 2548/M/2014 & C.O. NO. 127/M/20-15 6 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016. SD/- SD/- (ASHWANI TANEJA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 29 TH APRIL, 2016 . % . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI