RAJANI K IYER, MUMBAI V. DCIT 16(3), MUMBAI

ITA 2605/MUM/2011

• Counselvise Citation: 260519914 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV JAIN
• Assessee Lawyers: CHETAN A KARIA
• Keywords: Capital asset; Revision of order; Cost of acquisition
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI , / ! ! ! ! ' . . # . . !$ , % BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER /. ITA NO. 2605/MUM/2011 $& $& $& $& !'& !'& !'& !'& / ASSESSMENT YEAR: 2007-08 RAJANI K IYER 27/28, BANSI LAL BUILDING, 62 D, GIRGAUM ROAD. MUMBAI-400 004 $ $ $ $ / VS. DCIT 16(3) MUMBAI. ( () / APPELLANT) ( *+() / RESPONDENT) PERMANENT ACCOUNT NO. :- AAAPI 3725 N $&,- . / ASSESSEE BY : SHRI CHETAN A. KARIA ! / . / REVENUE BY : SHRI SANJEEV JAIN /. ITA NO. 3111/MUM/2012 $& $& $& $& !'& !'& !'& !'& / ASSESSMENT YEAR: 2007-08 RAVIKUMAR A. KRISHNAMURTHY 28, BANSI LAL BUILDING, 62 D, GIRGAUM ROAD, GIRGAUM MUMBAI-400 004 $ $ $ $ / VS. ASST. CIT RG- 11(3) MUMBAI. ( () / APPELLANT) ( *+() / RESPONDENT) PERMANENT ACCOUNT NO. :- AAIPK 4003 B $&,- . / ASSESSEE BY : SHRI CHETAN A. KARIA ! / . / REVENUE BY : SHRI A. C. TEJPAL $! / - / DATE OF HEARING : 20.02.2014 01' / - / DATE OF PRONOUNCEMENT : 07.03.2014 ITA NO. 2605/MUM/2011 ITA NO. 3111/MUM/2012 RAJANI K IYER RAVIKUMAR A. KRISHNAMURTHY ASSESSMENT YEAR: 2007-08 2 2 / O R D E R PER DR. S.T.M. PAVALAN, JM: THESE APPEALS FILED BY THE ABOVE NAMED ASSESSEES A RE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-27, MUMBAI DATED 27.12.2010 AND THE ORDER PASSED BY THE CIT DATED 29.03.2012 RESPECTIVELY FOR THE ASSESSMEN T YEAR 2007-08. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS, THE SAME A RE HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER. 2. BOTH THE APPEALS RELATE TO THE COMMON ISSUE OF D ETERMINING THE YEAR OF ACQUISITION OF THE CAPITAL ASSET TRANSFERRED BY THE ASSESSEES THEREBY DECIDING THE INDEXED COST OF ACQUISITION. 3. BRIEFLY STATED, ASSESSEESS FATHER, SHRI A.C. KR ISHNAMURTHY PURCHASED A PLOT AT PALI HILL, BANDRA MUMBAI, IN THE YEAR 1962. IN FEBR UARY, 1980, SHRI A.C. KRISHNAMURTHY DIED INTESTATE, LEAVING BEHIND HIS WI FE AND TWO CHILDREN, VIZ. THE ASSESSEES. THUS, THERE WERE THREE INHERITORS OF THE ABOVE PROPERTY LOCATED AT BANDRA, ALL HAVING EQUAL SHARES. THE SAID THREE PER SONS, INCLUDING THE PRESENT ASSESSEES ENTERED INTO AN AGREEMENT FOR SALE OF THE SAID PROPERTY WITH ONE MR. O.P. SHARMA ON 26.09.1986. IN CONSIDERATION OF THE VENDO RS AGREEING TO SELL THEIR RESPECTIVE UNDIVIDED 1/3 RD SHARE IN THE SAID PREMISES TO THE PURCHASER, IT WA S AGREED THAT THE PURCHASER SHOULD CONSTRUCT AND HANDOVER TO EACH OF THE VENDORS, A RESIDENTIAL FLAT EACH, IN THE BUILDING TO BE CONSTR UCTED BY THE PURCHASER ON THE SAID PREMISES. IT WAS SPECIFICALLY AGREED THAT ONE FLAT PARTLY ON THE GROUND FLOOR AND PARTLY ON THE FIRST FLOOR ALONG WITH ATTACHED GARDE N OF NOT LESS THAN 400 SQ.FT AND THE OTHER TWO FLATS ON THE SECOND AND THIRD FLOORS RESP ECTIVELY ALONG WITH TWO CAR PARKING SPACES FOR EACH FLAT, THE THREE FLATS TOGETHER HAVI NG A TOTAL SUPER BUILT UP AREA OF 415 SQ.FT APPROXIMATELY, WOULD BE GIVEN TO THE VENDORS IN THIS REGARD. THAT APART, THE PURCHASER WAS TO PAY EACH OF THE VENDORS ON OR BEFO RE THE EXECUTION OF THE SAID AGREEMENT, A SUM OF RS.32,500/- AGGREGATING TO RS.9 7,500/-, THE RECEIPT OF WHICH WAS ACKNOWLEDGED BY THE VENDORS. FURTHER, THE MARKE T VALUE OF THE SAID FLATS WAS NOTED TO BE AT RS.650/- PER SQ.FT FOR SUPER BUILT U P AREA AT THE MATERIAL POINT OF TIME AND THUS THE MARKET VALUE OF THE CONSTRUCTED SUPER BUILT UP AREA TO BE GIVEN BY THE ITA NO. 2605/MUM/2011 ITA NO. 3111/MUM/2012 RAJANI K IYER RAVIKUMAR A. KRISHNAMURTHY ASSESSMENT YEAR: 2007-08 3 PURCHASER TO THE VENDORS WAS ACCORDINGLY WORKED OUT AT RS.26,97,500/- AND TOGETHER WITH THE AMOUNT OF RS.97,500/- PAID AS ABO VE, THE TOTAL CONSIDERATION FOR THE SALE OF PREMISES WAS AGREED TO BE AT RS.27,95,0 00/- AND THE BOTH THE ASSESSEES SHARE THEREIN WAS ONE THIRD THEREOF EACH. THE PURCH ASER WAS TO COMPLETE THE CONSTRUCTION OF THE ENTIRE BUILDING IN ALL RESPECTS WITHIN A PERIOD OF 22 MONTHS FROM THE DATE OF THE AGREEMENT. TO GIVE EFFECT TO THE TE RMS OF THE AGREEMENT, THE VENDORS, INCLUDING THE ASSESSEES HAVE HANDED OVER T HE POSSESSION OF THE SAID PREMISES TO THE PURCHASER MR. O.P. SHARMA (HEREINAF TER CALLED THE DEVELOPER) WITH A RIGHT TO DEVELOP THE SAME. THEREAFTER, SHRI O.P. SH ARMA, THE DEVELOPER CONSTRUCTED APARTMENTS ON THE SAID PLOT IN THE DUE COURSE OF TI ME AND OBTAINED THE COMPLETION OF WORK/OCCUPATION CERTIFICATE AS LATE AS JANUARY, 2000. SUBSEQUENTLY, BY WAY OF A LETTER DATED 23.07.2003 ADDRESSED BY THE VENDORS TO MR. O.P. SHARMA, THE DEVELOPER, AND THE CONTENTS THEREIN BEING CONFIRMED BY THE SAID MR. O.P. SHARMA BY SIGNING THEREON, IT WAS AGREED THAT IN PARTIAL MODI FICATION OF THE AGREEMENT DATED 26.09.1986, THE VENDORS WERE TO GET FLATS ON THE FO URTH AND FIFTH FLOOR OF THE BUILDING IN THE PLACE OF THE FLATS ON 2 ND AND 3 RD FLOORS OF THE SAID BUILDING, AS PROVIDED IN THE AGREEMENT DATED 26.09.1986. THE ASSESSEES, MRS. RAN JANI K IYER AND SHRI RAVIKUMAR K.KRISHNAMURTHY, BEING THE VENDORS WERE A LLOTTED THE FLAT ON THE FIFTH FLOOR/FOURTH FLOOR OF THE BUILDING IN THIS REGARD. ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT DATED 26.09.1986 WERE REMAINED UNALTERED. THE PARTIAL MODIFICATION AS ABOVE WAS TO BE RECORDED BY A DEED OF MODIFICATION SIGNED BETWEEN THE VENDORS AND THE DEVELOPER. THEREAFTER, AS PER THE VERSION O F SHRI O.P. SHARMA, THE VENDORS WERE CALLED UPON TO TAKE POSSESSION OF THE RESPECTI VE FLATS, WHEREAS THE VENDORS DISPUTED SUCH CLAIM OF THE DEVELOPER STATING THAT T HE POSSESSION/DELIVERY OF THE FLATS WAS NOT GIVEN TO THE VENDORS EVEN IN THE YEAR 2006. CERTAIN CORRESPONDENCE WAS EXCHANGED IN THIS REGARD BETWEEN THE VENDORS, INCLU DING THE ASSESSEES, ON ONE SIDE AND THE DEVELOPER ON THE OTHER SIDE, DURING THE MON THS OF JUNE AND JULY, 2006. THE CORRESPONDENCE REFERS TO NEGOTIATIONS BETWEEN THE V ENDORS AND THE DEVELOPER FOR BUYING OF THE SAID THREE APARTMENTS BACK BY THE DEV ELOPER SHRI O.P. SHARMA AND THE CONSEQUENT SUIT INSTITUTED BY SHRI O.P. SHARMA AGAI NST THE VENDORS FOR SPECIFIC PERFORMANCE IN THIS REGARD AND THE SUBSEQUENT COMPR OMISE BETWEEN THE VENDORS ITA NO. 2605/MUM/2011 ITA NO. 3111/MUM/2012 RAJANI K IYER RAVIKUMAR A. KRISHNAMURTHY ASSESSMENT YEAR: 2007-08 4 AND THE DEVELOPER THEREOF WITHDRAWING THE SUIT AND ALLOWING THE VENDORS TO DISPOSE THE SAID THREE FLATS BY WAY OF SALE TO MR. LADHO KA NAYALAL WADHWA AND MRS. MALA LADHO WADHWA, BEING THE PROSPECTIVE PURCHASERS OF T HE SAID THREE FLATS. IN THE ABOVE BACKGROUND, THE SAID THREE FLATS, THE FIRST F LAT SITUATED PARTLY ON THE GROUND FLOOR AND PARTLY ON THE FIRST FLOOR AND THE OTHER T WO FLATS SITUATED FOURTH AND FIFTH FLOORS RESPECTIVELY (REFERRED TO AS IMPUGNED PROPER TY FROM NOW) WERE AGREED TO BE SOLD TO WADHWAS BY WAY OF A SALE AGREEMENT DATED 4 TH SEPTEMBER, 2006, WHICH WAS SIGNED BY THE VENDORS, INCLUDING THE ASSESSEES, REF ERRED TO OWNERS OF THE FIRST PART AND SHRI OMPRAKASH SHARMA REFERRED TO AS BUILDER OF THE SECOND PART AND WADHWAS REFERRED TO AS PURCHASERS OF THE OTHER PART. THE CO NSIDERATION AGREED UPON THEREIN FOR THE IMPUGNED PROPERTY WAS FOR RS.3,33,25,500/-. BOTH THE ASSESSEESS SHARE OF 1/3 RD EACH THEREIN WAS ARRIVED AT RS.1,11,08,500/-. WHIL E WORKING OUT THE CAPITAL GAINS ON THE SALE OF IMPUGNED PROPERTY, THE ASSESSE ES ADOPTED COST INFLATION INDEX FROM THE YEAR 1986-87 ON THE GROUND THAT THE RIGHT TO RECEIVE THE PROPERTY WAS ESTABLISHED BETWEEN THE DEVELOPER AND ASSESSEES BY THE AGREEMENT DATED 26.09.1986. HOWEVER, THE AO IN HIS ASSESSMENT ORDER U/S. 143(3) OBSERVED THAT THE ASSESSEE, MRS.RANJANI K IYER GOT HER RIGHT FOR THE FLAT IN THE FIFTH FLOOR I.E. IMPUGNED PROPERTY ONLY IN JULY, 2003, OWING TO THE MODIFICAT ION AGREEMENT REFERRED ABOVE AND THEREFORE HER RIGHTS OVER THE FLAT SOLD IN THE FIFT H FLOOR COMMENCE FROM JULY, 2003 ONLY. ACCORDINGLY, THE AO HAD ADOPTED THE COST INFL ATION INDEX FROM THE YEAR 2003 FOR THE PURPOSE OF COMPUTING LTCG ARISING IN THE IM PUGNED TRANSACTION. ON APPEAL IN THE CASE OF THE ASSESSEE, MRS. RAJANI K IYER, TH E LD.CIT(A) CONFIRMED THE ORDER OF THE AO. IN THE CASE OF THE ASSESSEE, SHRI RAVIKUMAR A. KRISHNAMURTHY, THE LD.CIT PASSED AN ORDER U/S 263 OF THE INCOME TAX ACT AGAIN ST THE ASSESSMENT ORDER OF THE AO ACCEPTING THE CLAIM OF SHRI RAVIKUMAR A. KRISHNA MURTHY AND THEREBY DETERMINED THE COST INFLATION INDEX FROM THE YEAR 2003. AGGRIE VED BY THE RESPECTIVE IMPUGNED ORDERS, THE ASSESSEES HAVE FILED THEIR APPEALS BEFO RE US AGAINST THE RESPECTIVE ORDERS. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS OBSERVED THAT THE VENDORS INCLUDING THE ASSESSEES, BY VIRTUE OF THE OPERATION OF THE AGREEMENT DATED 26.09.1986 WERE ENTITLED TO RECEIVE ONE FLAT PARTLY ON THE GROUND ITA NO. 2605/MUM/2011 ITA NO. 3111/MUM/2012 RAJANI K IYER RAVIKUMAR A. KRISHNAMURTHY ASSESSMENT YEAR: 2007-08 5 FLOOR AND PARTLY ON THE FIRST FLOOR ALONG WITH ATTA CHED GARDEN OF NOT LESS THAN 400 SQ.FT AND THE OTHER TWO FLATS ON THE SECOND AND THI RD FLOORS RESPECTIVELY ALONG WITH TWO CAR PARKING SPACES FOR EACH FLAT, THE THREE FLA TS TOGETHER HAVING A TOTAL SUPER BUILT UP AREA OF 415 SQ.FT APPROXIMATELY. SUBSEQUEN TLY, BY WAY OF A LETTER DATED 23.07.2003 ADDRESSED BY THE VENDORS TO THE DEVELOPE R, IT WAS AGREED THAT IN PARTIAL MODIFICATION OF THE AGREEMENT DATED 26.09.1986, THE ASSESSEES WERE TO GET FLATS ON THE FOURTH AND FIFTH FLOOR OF THE BUILDING IN THE P LACE OF THE FLATS ON 2 ND AND 3 RD FLOORS OF THE SAID BUILDING, AS PROVIDED IN THE AGREEMENT DATED 26.09.1986. NOW THE ISSUE TO BE DECIDED BY US IS WHETHER THE RIGHT TO RECEIVE THE FLATS ON THE FOURTH AND FIFTH FLOOR OF THE BUILDING HAS ACCRUED TO THE ASSESSEES BY VIRTUE OF THE OPERATION OF THE AGREEMENT DATED 26.09.1986 OR BY THE MODIFICATION A GREEMENT DATED 23.07.2003. IN THIS CONNECTION, IT IS PERTINENT TO MENTION THAT AS PER THE ORIGINAL AGREEMENT, THE ASSESSEES ARE ENTITLED FOR THE SECOND/THIRD FLOOR F LATS AND THE SUBSEQUENT MODIFICATION THEREOF ALLOWING THE ASSESSEES TO RECE IVE THE FLATS ON FOURTH/FIFTH FLOOR INSTEAD OF SECOND/THIRD FLOOR FLATS WILL ONLY SUBST ITUTE THE ASSESSEES EXISTING RIGHT TO RECEIVE THE CONSTRUCTED PROPERTY. ACCORDINGLY, THE ASSESSEES RIGHT TO RECEIVE THE FOURTH/FIFTH FLOOR FLATS HAVE BEEN ACCRUED TO THEM ON 26.09.1986 ITSELF I.E., THE ORIGINAL DATE OF AGREEMENT. IN VIEW OF THAT MATTER, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN ADOPTING THE INDEXATION COST FROM THE YEAR 2003 ON THE GROUND THAT TRANSFER HAS TAKEN PLACE IN THE SAID YEAR. THEREFOR E, IN OUR CONSIDERED VIEW, BOTH THE ASSESSEES ARE ENTITLED FOR CLAIMING THE INDEXED COS T OF ACQUISITION FROM THE YEAR 1986 ONWARDS. ACCORDINGLY, WHILE WE ALLOW THE CLAIM OF BOTH THE ASSESSEES THAT THE INDEXED COST OF ACQUISITION IS TO BE ALLOWED FROM T HE YEAR 1986 ONWARDS, THE ORDER PASSED BY THE LD.CIT U/S 263 OF THE ACT IN THE CASE OF SHRI RAVIKUMAR A. KRISHNAMURTHY ALSO STANDS QUASHED. 5. IN THE RESULT, THE APPEALS FILED BY THE ABOVE NA MED ASSESSEES ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DAY OF MARCH, 2014. SD/- SD/- ( / RAJENDRA ) ( ' ' ' ' . . # # # # . . !$ !$ !$ !$ / DR. S.T.M. PAVALAN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI, 4$ /DATED: 07.03.2014. $ . ./ P.S.*SRIVASTAVA ITA NO. 2605/MUM/2011 ITA NO. 3111/MUM/2012 RAJANI K IYER RAVIKUMAR A. KRISHNAMURTHY ASSESSMENT YEAR: 2007-08 6 COPY TO: () / THE APPELLANT *+() / THE RESPONDENT 5 6 / THE CIT, CONCERNED, MUMBAI 5 6 / THE CIT(A) CONCERNED, MUMBAI 7!89 *-$ /THE DR D BENCH 9 & : / GUARD FILE. +7- *- //TRUE COPY// 2$ / BY ORDER ; / < DY/ASSTT. REGISTRAR, , / ITAT, MUMBAI.