MR.RAJU DAYAL SHAHANI, MUMBAI V. INCOME TAX OFFICER WARD 4(2)(1), MUMBAI

ITA 2583/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5273 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTHILAKSHMI NAYAKLD
• Assessee Lawyers: HARI RAHEJA LD
• Keywords: Cost of acquisition; Capital Gains
• Section: 54F; 54

Judgement Text

ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.2583/MUM/2018 ( / ASSESSMENT YEAR : 2011-12 ) MR. RAJU DAYAL SHAHANI C/O. HARI S. RAHEJA 206, NEELKANTH BLDG. 98, MARINE DRIVE MUMBAI- 400 002. / VS. IT O - WARD 4(2)(1 ) AIR INDIA BUILDING MUMBAI- 400 021. %& ./ ./PAN/GIR NO. AAZPS-3528-E ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : SHRI HARI RAHEJA-LD.AR REVENUE BY : MS. JYOTHILAKSHMI NAYAK-LD. DR / DATE OF HEARING : 17/02/2020 / DATE OF PRONOUNCEMENT : 20/02/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2011-12 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-58, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-58, MUMBAI/10036/2014-15 DATED 12 /03/2018 ON FOLLOWING GROUNDS: - ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT (APPEALS) HAS GROSSLY ERRED IN HOLDING THAT THE APP ELLANT HAS HELD THE ASSET FOR A PERIOD OF LESS THAN 36 MONTHS THUS DETERMINING CAPI TAL GAINS ON SALE OF RIGHTS TO A FLAT AS 'SHORT TERM' DISREGARDING THE EXPLANATION G IVEN BY THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT (APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE PERIOD OF HOL DING THE ASSET WAS TO BE CALCULATED FROM THE DATE OF REGISTRATION AND NOT FROM THE DATE OF ALLOTMENT TOTALLY DISREGARDING THE DECISION OF THE SUPREME COURT IN THE CASE OF GU RBAX SINGH V. KARTAR SINGH AND OTHER REPORTED IN 254 1TR 112 (SC), WHEREIN THE HON . COURT HAS HELD THAT A DOCUMENT ON SUBSEQUENT REGISTRATION WILL TAKE EFFEC T FROM THE TIME WHEN IT WAS EXECUTED AND NOT FROM THE DATE OF REGISTRATION WHIC H IN THIS CASE IS THE DATE OF BOOKING I.E. 14.10.2006 3. THE APPELLANT SUBMITS THAT THE DATE OF BOOKING IS 14.10.2006, AND THE DATE OF ALLOTMENT IS 25.11.2006 AND THE DATE OF SALE IS 18. 10.2010, AND HENCE THE CIT (APPEALS) HAS ERRED IN UPHOLDING THE DATE OF OWNERS HIP AS 06.08.2010. 4. THE APPELLANT PRAYS THAT THE GAIN IS A LONG-TE RM CAPITAL GAIN AND THE APPELLANT BE ALLOWED THE BENEFIT OF INDEXATION AND REINVESTMENT IN THE NEW FLAT AS CLAIMED. 2. WE HAVE CAREFULLY HEARD THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES AND PERUSED RELEVANT MATERIAL ON RE CORD INCLUDING DOCUMENTS PLACED IN THE PAPER BOOK. WE HAVE ALSO DE LIBERATED UPON THE JUDICIAL PRONOUNCEMENTS AS RELIED UPON DURING THE C OURSE OF HEARING. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3.1 FACTS ON RECORD WOULD REVEAL THAT ASSESSEE BEIN G NON-RESIDENT INDIVIDUAL WAS ASSESSED FOR YEAR UNDER CONSIDERATIO N U/S.143(3) ON 18/03/2014 WHEREIN INCOME OF THE ASSESSEE WAS DETER MINED AT RS.82.36 LACS AFTER CERTAIN ADJUSTMENTS AS AGAINST RETURNED INCOME OF RS.1.11 LACS E-FILED BY THE ASSESSEE ON 30/03/2012. 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT TRANSPIRED THAT THE ASSESSEE SOLD ONE RESIDENTIAL FLAT BEARING NO.504, OBEROI SPLENDOR, VILLAGE MAJAS, JVLR, JOGESHWARI (E), MUMBAI, FOR A SALE CONSIDERATION OF RS.165.00 LACS. IT WAS STATED BY THE ASSESSEE THAT THE SAID FLAT WAS ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 3 ALLOTTED BY WAY OF ALLOTMENT LETTER DATED 25/11/200 6 FOR A TOTAL SUM OF RS.83.74 LACS. IT WAS FURTHER STATED THAT SAID FLAT WAS BOOKED ON 14/10/2006 UPON PAYMENT OF RS.7.96 LACS. THEREAFTER , THE BUILDER VIDE ALLOTMENT LETTER DATED 25/11/2006 ALLOTTED SAID FLA T TO THE ASSESSEE. HOWEVER, THE AGREEMENT WAS REGISTERED ONLY ON 06/08 /2010. IN ITS COMPUTATION OF INCOME, THE ASSESSEE CLAIMED INDEXED COST OF ACQUISITION BY APPLYING COST INFLATION INDEX FOR FINANCIAL YEAR 2006-07 AND WORKED OUT LONG-TERM CAPITAL GAIN (LTCG) OF RS.51.80 LACS. AGA INST THE SAME, THE ASSESSEE CLAIMED DEDUCTION U/S. 54 IN VIEW OF PURCH ASE OF ANOTHER FLAT BEARING NO.1601 AT OCTAREST, LOKHANDWALA TOWNSHIP, AKURLI ROAD, KANDIVALI (E), MUMBAI, WHICH WAS REGISTERED FOR A SUM OF RS.122 LACS ON 22/10/2010. ACCORDINGLY, ASSESSEE REFLECTED NIL LTCG ON TRANSFER OF FLAT. 3.3 HOWEVER, UPON NOTICING THAT THE AGREEMENT WAS R EGISTERED ONLY ON 06/08/2010, LD. AO OPINED THAT THE RESULTANT GAINS WOULD BE SHORT-TERM CAPITAL GAINS IN NATURE. THE SAID CONCLUSION WAS AR RIVED AT IN TERMS OF EXPLANATION (III) TO SEC.48 OF THE ACT WHICH DEFINE THE EXPRESSION INDEXED COST OF ACQUISITION. ACCORDING TO THIS EXPLANATION, THE INDEXATION BENEF IT WOULD BE AVAILABLE ONLY FROM THE YEAR IN WHICH THE ASSET WAS FIRST HELD BY THE OWNER. SINCE THE ASSESSEE ACQUIRED THE PROPERTY ONLY ON 06/08/2010, THE INDEX FOR FINANCIAL YEAR 2010-11 WO ULD ONLY APPLY. FURTHER, THE LETTER OF ALLOTMENT WOULD BECOME REDUC TANT BY THE DOCUMENTS REGISTERED ON 06/08/2010. SINCE THE PROPE RTY WAS SOLD WITHIN A PERIOD OF 41 DAYS ON 18/09/2010, THE NATURE OF CA PITAL GAINS WOULD BE SHORT-TERM CAPITAL GAINS AS PER DEFINITION PROVIDED IN SEC. 2(42A) AND ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 4 THEREFORE, THE BENEFIT OF INDEXATION WOULD NOT BE A VAILABLE TO THE ASSESSEE. CONSEQUENTLY, DEDUCTION U/S 54 WAS ALSO D ENIED SINCE THE SAME WOULD APPLY ONLY IN CASE OF LTCG. FINALLY, SHO RT-TERM CAPITAL GAINS WERE COMPUTED AT RS.81.25 LACS WHICH WAS ADDED TO T HE INCOME OF THE ASSESSEE. 4. THE LEARNED CIT(A), UPON PERUSAL OF TERMS OF ALL OTMENT LETTER DATED 25/11/2006, OPINED THAT THE SAID LETTER ENVISAGED O NLY RESERVE OF AN ALLOTMENT AND THE SAME WAS A CONDITIONAL ALLOTMENT. THEREFORE, THE LETTER WAS NOT AN ALLOTMENT LETTER HAVING LEGAL VALIDITY T O ESTABLISH RIGHTS OVER THE PROPERTY. THEREFORE, THE ALLOTMENT LETTER WOULD NOT FALL INTO THE CATEGORY OF DOCUMENTS WHICH PROVES THAT THE PROPERT Y WAS HELD BY THE ASSESSEE. CONSEQUENTLY, THE ACTION OF LD. AO WAS UP HELD. AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 5. WE HAVE CAREFULLY PERUSED THE DOCUMENTS, AS PLAC ED ON RECORD, CONCERNING PROPERTY TRANSACTIONS CARRIED OUT BY THE ASSESSEE. UPON PERUSAL OF LETTER DATED 14/10/2006 AS ISSUED BY THE BUILDER, IT IS EVIDENT THAT THE ASSESSEE HAS BOOKED A FLAT IN SPECIE I.E. FLAT BEARING NO.504, TOWER-I, WING B IN A PROJECT NAMELY OBEROI SPLENDO R, VILLAGE MAJAS, JVLR, JOGESHWARI (E), MUMBAI (IN SHORT PROPERTY) AT AGREED CONSIDERATION OF RS.79.62 LACS. THE TERMS OF THE LE TTER POSTULATES TERMINATION / CANCELLATION OF BOOKING AS WELL AS TR ANSFER OF RIGHT UPON CERTAIN TERMS AND CONDITIONS. THE PERUSAL OF THE SA ME WOULD LEAD IS TO CONCLUDE THAT THE ASSESSEE HAD ACQUIRED CERTAIN TRA NSFERABLE RIGHT IN A PROPERTY IN SPECIE. ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 5 6. SUBSEQUENTLY, ANOTHER LETTER DATED 25/11/2006 HA S BEEN ISSUED BY THE BUILDER WHICH RECOGNIZES THE RIGHT OF THE ASSES SEE IN THE SAID PROPERTY AND THE BUILDER AGREE TO RESERVE THE PROPE RTY FOR ALLOTMENT SUBJECT TO CERTAIN STIPULATIONS AND CONDITIONS INCL UDING PAYMENT TERMS. UPON PERUSAL OF THE TERMS, WE FIND THAT THE SAID LE TTER CREATE RIGHT IN FAVOR OF THE ASSESSEE TO GET THE ALLOTMENT OF THE PROPERT Y IN HIS NAME SUBJECT TO CERTAIN TERMS AND CONDITIONS AS AGREED UPON BETW EEN THE ASSESSEE AND THE BUILDER. THIS LETTER HAS BEEN ISSUED SUBJEC T TO PREMISES OWNERSHIP AGREEMENT WHICH WAS HAS SUBSEQUENTLY BEEN EXECUTED ON 22/06/2010. AS PER RECITAL-Y OF THIS AGREEMENT, THE DEVELOPER HAS AGREED TO ALLOT TO THE PURCHASERS AND THE PURCHASER S AGREE TO ACQUIRE THE SAID PROPERTY FROM THE DEVELOPER. THIS RECITAL RECOGNIZES THAT FACT THAT THE SAID PROPERTY IS UNDER CONSTRUCTION STAGE WHICH FACT IS AGAIN RECOGNIZED IN CLAUSE-1 OF THE AGREEMENT. THE ASSESS EE HAS SUBSEQUENTLY ENTERED INTO AGREEMENT OF TRANSFER DAT ED 18/09/2010. RECITAL C OF THE SAID AGREEMENT READ AS UNDER: - THE TRANSFEREE/S HAVE EVINCED INTEREST IN PURCHASE OF THE SAID PREMISES, HENCE, AFTER DISCUSSIONS AND NEGOTIATIONS THE TRANSFEROR/S HAVE AGREED TO SELL, TRANSFER AND ASSIGN THEIR RIGHT, TITLE AND INTEREST IN THE SAID PREMISE UNDER THE SAID PRINCIPAL AGREEMENT AND ALL THE BENEFIT INCIDENTAL THERETO. UPON COMBINED READING OF ALL THESE DOCUMENTS, IT WO ULD TRANSPIRE THAT THE ASSESSEE HAS ACQUIRED CERTAIN RIGHTS OF ALLOTME NT IN A SPECIFIC PROPERTY. THESE RIGHTS WERE CREATED IN ASSESSEES F AVOR, BY THE LETTER OF BUILDER ISSUED ON 14/10/2006. THE SUBSEQUENT LETTER DATED 25/11/2006 AS WELL AS PREMISES OWNERSHIP AGREEMENT WAS NOTHING BUT IMPROVEMENT IN THE SAID RIGHTS OF THE ASSESSEE WHICH WERE ALREA DY CREATED VIDE LETTER ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 6 DATED 14/10/2006. THE ASSESSEE HAS SOLD THESE RIGHT S VIDE AGREEMENT DATED 18/09/2010. THEREFORE, WHAT WAS ACQUIRED BY T HE ASSESSEE AND WHAT HAS ULTIMATELY BEEN SOLD BY THE ASSESSEE IS PA RI-MATERIA THE SAME. THIS BEING THE CASE, THERE WOULD BE NO OCCASION TO CONSIDER THE DATE OF ACQUISITION OF THE SAID RIGHT AS 22/06/2010. THE AS SESSEE, IN OUR OPINION, ACQUIRED THE RIGHT ON 14/10/2006 WHICH WAS ULTIMATE LY SOLD ON 18/09/2010. THEREFORE, SINCE THE HOLDING PERIOD OF THE SAME IS MORE THAN 36 MONTHS, THE RESULTANT GAINS WOULD BE LONG-TERM C APITAL GAINS IN NATURE. CONSEQUENTLY, THE BENEFITS OF INDEXATION WO ULD BE AVAILABLE SINCE FINANCIAL YEAR 2006-07. THE LD. AR SUBMITTED THAT T HE ASSESSEES DEDUCTION CLAIM WOULD FALL U/S 54F AND NOT U/S 54 S INCE WHAT HAS BEEN SOLD IS MERELY A CERTAIN RIGHT IN THE PROPERTY. WE FIND THAT THE SAID FACTS WERE BROUGHT TO THE NOTICE OF LD. CIT(A) ALSO. THER EFORE, THE ALTERNATIVE CLAIM AS MADE BY THE ASSESSEE U/S 54F WOULD BE ADMI SSIBLE. THE LD. AO IS DIRECTED TO VERIFY ASSESSEES CLAIM U/S 54F A ND RECOMPUTE THE INCOME IN TERMS OF THIS ORDER. 7. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH FEBRUARY, 2020. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 20/02/2020 SR.PS, JAISY VARGHESE ITA NO.2583/MUM/2018 MR. RAJU DAYAL SHAHANI ASSESSMENT YEAR :2011-12 7 !'! / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 3567 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.