ITO 16(2)(2), MUMBAI V. KAMLESH LAXMICHAND PARIKH, MUMBAI

ITA 2953/MUM/2012

• Counselvise Citation: 295319914 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PARIKH
• Assessee Lawyers: K SINGH
• Keywords: Capital asset; Surrender of tenancy right
• Section: 54; 143(3)

Judgement Text

, , ,, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH. . .. . . .. . , ,, , / !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RAJENDR A, ACCOUNTANT MEMBER /. ITA NO.2953/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR-2008-09 ITO 16(2)(2) 214, 2 ND FLOOR, MATRU MANDIR, TARDSWO ROAD, MUMBAI-400007 VS KAMLESH LAXMICHAND PARIKH B/40, PATIL ESTATE, 278, TARDEO ROAD, TARDEO MUMBAI-400007 PAN: ACJPP3008J ( &' / APPELLANT) ( ()&' / RESPONDENT) $*+ $*+ $*+ $*+ , , , , ' '' ' / APPELLANT BY : SHRI K.SINGH ! - , ' / REVENUE BY : SHRI SANJAY PARIKH $ $ $ $ - -- - +. +. +. +. / DATE OF HEARING : 07-11-2013 /0% - +. / DATE OF PRONOUNCEMENT : 13-11-2013 $ $ $ $ , 1961 - -- - 254 )1( ' '' ' +1+ +1+ +1+ +1+ '2 '2 '2 '2 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM: CHALLENGING THE ORDER DATED 15.02.2012 OF CIT(A)-27 ,MUMBAI,ASSESSING OFFICER(AO) HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT TREATING THE SURRENDER OF TENANCY RIGHTS AS CAPITAL ASSETS AND CONSEQUENTL Y NOT TREATING THE SAME AS L.T.C.G. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD GROUND/S WHICH MAY BE NECESSARY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ASSESSEE,AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF P OLISHING OF DIAMONDS,FILED HIS RETURN ON 20.05. 2009,DECLARING TOTAL INCOME AT RS. 1,08,267/-.AO FI NALISED THE ASSESSMENT ON 30.12.2010 U/S. 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF T HE ASSESSEE AT RS.1,40,35,750/-. 2. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASS ESSEE HAD SHOWN NIL INCOME FROM LONG TERM CAPITAL GAIN(LTCG)ONTRANSFER OF TENANCY RIGHTS ,THAT HE WAS TENANT OF A SELF-CONTAINED RESID -ENTIAL PREMISES ON THE GROUND FLOOR OF PATIL ESTAT E,TARDEO ROAD, MUMBAI THAT DESHBHUSHAN CO- OPERATIVE HOUSING SOCIETY LTD.(DCHSL)WAS THE OWNER OF THE ENTIRE RESIDENTIAL ACCOMMODATIONS INCLUDING THE PREMISES OF THE ASSESSEE, THAT AS PER THE TERMS AND CONDITIONS OF TENANCY HE WAS PAYING RENT TO DCHSL,THAT ON 09.05.2007SOCIETY HAD ENTERED INTO A DEVELOPMENT AGREEMENT WITH SACHINAM ESTATE DEVELOPERS PVT. LTD.(SEDPL)FOR THE DEVELOPING OF THE SAID SOCIETY PREMISES, THAT AS PER THE DEVELOPMENT AGREEMENT SEDPL WAS TO DEMOLISH THE EXISTING STRUCTURE AND HAD TO PROVIDE THE TENANTS ALTERNATIVE ACCOMMODATION IN TH E NEWLY CONSTRUCTED BUILDING,THAT AS PER THE AGREEMENT DATED 09.05.2007 ASSESSEE WAS TO RECEIVE TWO FLATS INITIALLY,THAT VIDE ANOTHER AGREEMENT DATED 25.7.2007 SEDPL HAD AGREED TO GIVE AN ADDITIO NAL FLAT ON OWNERSHIP BASIS TO THE ASSESSEE, THAT THE MARKET VALUE OF THE SAID FLAT AS PER THE S TAMP DUTY AUTHORITIES WAS RS. 46.37 LACS. AO WAS OF THE OPINION THAT ASSESSEE HAD RECEIVED PROPERTIE S WORTH RS. 1.39 CRORES IN EXCHANGE OF TENANCY 2 ITA NO. 2953/MUM/2012 KAMLESH LAXMICHAND PARIKH . . RIGHT, THAT THE VALUE OF TENANCY RIGHT WAS NIL. HE HELD THAT ASSESSEE HAD RECEIVED LTCG OF RS. 1. 39 CRORES.HE FURTHER HELD THAT THE ONLY ISSUE ABOUT THE TRANSACTION IN QUESTION WAS WHETHER THE ASSESSEE WAS ENTITLED FOR EXEMPTION OF LTCG ON TRAN SFER OF TENANCY RIGHTS U/S 54 OF THE ACT. AFTER CONSIDERING THE FACTS OF THE CASE, AO HELD THAT ASS ESSEE HAD TRANSFERRED HIS TENANCY RIGHTS AND HAD RECEIVED THREE RESIDENTIAL PREMISES, THAT AS PER TH E PROVISIONS OF SECTION 2(47) THE TRANSFER OF TENANCY RIGHT WAS SALE, THAT THE EXCHANGE WAS NOTHI NG BUT PURCHASE OF NEW PROPERTY, THAT THE ASSESSEE HAD PAID CONSIDERATION IN KIND BY TRANSFER RING HIS TENANCY RIGHTS,THAT HE HAD RECEIVED THE CONSIDERATION FOR TRANSFER OF CAPITA ASSET IN KIND I.E. THREE RESIDENTIAL HOUSES, THAT ASSESSEE WAS NO T ENTITLED TO CLAIM EXEMPTION U/S 54 OF THE ACT.FINAL LY, HE HELD THAT THE ENTIRE LTCG AMOUNTING TO RS.1.39 CRORES WAS TAXABLE IN THE HANDS OF THE ASSE SSEE. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND THE DOCUMENTS FILED ALONG WITH THE SUB MISSIONS, HE DIRECTED THE AO TO FILE A REMAND REPORT. AO SUBMITTED HER REPORT ON 13.09.2011. AFTE R DELIBERATING UPON THE REMAND REPORT AND THE REPLY TO THE REMAND REPORT FILED BY THE ASSESSEE,F AA HELD THAT AO LACKED CLARITY IN APPRECIATING THE LEGAL POSITION OF THE IMPUGNED TRANSACTION, THA T THERE WAS ONLY ONE TRANSACTION AGREED UPON BY THE ASSESSEE AND THAT WAS SURRENDER ON TENANCY RIGH TS SUBJECT TO THE CONDITION,THAT ASSESSEE WAS GIVEN POSSESSION OF THE ALTERNATIVE ACCOMMODATION,T HAT IT WAS NEITHER SALE OF TENANCY RIGHTS NOR PURCHASE OF NEW PROPERTY BY THE ASSESSEE,THAT IT WA S NOT AN EXCHANGE, THAT TWO PROPERTIES DID NOT EXISTED, THAT ALTERNATE ACCOMMODATION TO BE PROVIDE D TO THE ASSESSEE HAD TO COME IN TO EXISTENCE, THAT THE AGREEMENTS WERE ENTERED INTO FOR THE PURPO SE OF DEVELOPING THE ENTIRE PROPERTY.REFERRING TO THE CLAUSES- 7,9 AND 16 OF THE AGREEMENT,HE HELD THAT THE AGREEMENTS DATED 09.05.2007 AND 25. 07.2007 DID NOT TRANSFER ANY CAPITAL ASSETS. HE FUR THER HELD THAT FIELD VISIT BY THE INSPECTOR PROVED ON THAT ON THAT PARTICULAR DATE PROPERTY WAS OCCUPI ED BY THE ASSESSEE AS A TENANT,THAT THERE WAS NO CHANGE IN HIS POSITION VIS--VIS THE OWNER,THAT REN T RECEIPTS,ELECTRICITY AND MTNL BILLS, PASSPORT PROVED THAT ASSESSEE WAS IN POSSESSION OF THE TENAN TED PREMISES. FAA ALSO TOOK NOTE OF THE FACT MENTIONED IN INSPECTORS REPORT ABOUT NON-COMPLETIO N OF ALTERNATE ACCOMMODATION. HE FURTHER HELD THAT ASSESSEE WAS NOT HOLDING SYMBOLIC POSSESS ION OF THE PROPERTY THAT WAS TO BE TRANSFERRED AS PER THE AGREEMENTS;BUT WAS EFFECTIVELY IN TRUE S ENSE OCCUPIED THE SAID PREMISES AS A TENANT, THAT AGREEING UPON A CONDITION COULD NOT BE CONSIDERED A S EQUIVALENT TO PERFORMANCE OF THE CONDITION IN THE EYES OF LAW,THAT THE DOMINATING INTENTION OF THE PARTIES TO THE AGREEMENT AND THE ASSESSEE IN SPECIFIC,WAS NOT TO CONSIDER THE IMPUGNED AGREEMENT AS CONCLUSION OF THE CONTRACT, THAT A PROPERTY IN EXISTENCE TODAY COULD BE TRANSFERRED ON A FUTURE DATE,BUT THE PROPERTY THAT WOULD COME INTO EXISTENCE AT A FUTURE DATE COULD NOT BE TRANSFERRED ,THAT IN THE PRESENT CASE PROPERTY WAS NOT RECEIVED BY THE ASSESSEE. FINALLY,HE HELD THAT THE SURRENDER OF TENANCY RIGHTS, AS CONTEMPLATED IN CLAUSE-16 OF THE AGREEMENT,HAD NOT TAKEN PLACE DURI NG THE YEAR UNDER CONSIDERATION, THAT THERE WAS NO TAXABLE EVENT GIVING RISE TO CAPITAL GAIN ON ACC OUNT OF THE IMPUGNED AGREEMENT,THAT THERE WAS NO TAXABLE CAPITAL GAIN. HE DELETED THE ADDITIONS M ADE BY THE AO. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.AUTHORISED REPRESEN -TATIVE(AR) SUBMITTED THAT TRANSACTION COULD NOT TA KE PLACE BECAUSE OF COURT PROCEEDINGS,THAT ASSESSEE HAD NOT GOT POSSESSION OF ANY OF THE FLATS ,THAT HE WAS STAYING IN THE SAME PREMISES TILL THE INSPECTOR OF INCOME TAX HAD VISITED HIM,THAT NO INC OME OR GAIN HAD ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT FAA HAS GIVEN CATEGORICAL FINDING OF FACTS THAT THE SURREND ER OF TENANCY RIGHTS;AS CONTEMPLATED IN CLAUSE 16 OF THE IMPUGNED AGREEMENT;HAD NOT TAKEN PLACE DURIN G THE YEAR UNDER CONSIDERATION,THAT THERE WAS NO TAXABLE EVENT GIVING RISE TO CAPITAL GAINS ON AC COUNT OF THE IMPUGNED AGREEMENT,THAT ASSSESSEE HAD NOT TO PAY ANY TAX ON ALLEGED CAPITAL GAINS.WE FURTHER FIND THAT INSPECTOR OF THE AO HAD VISITED THE PLACE AND FROM HIS ON-THE-SPOT-REPORT I T WAS PROVED,BEYOND DOUBT,THAT TILL HE VISITED THE PREMISES ALLEGED TRANSACTION HAD NOT FRUCTIFIED.TAX HAS TO BE PAID BY AN ASSESSEE,IF HE EARNS SOME TAXABLE INCOME OR SOME INCOME ACCRUES TO HIM.AN UNE XECUTED AGREEMENT DOES NOT GIVE RISE TO 3 ITA NO. 2953/MUM/2012 KAMLESH LAXMICHAND PARIKH . . EARNING OR ACCRUAL OF INCOME.TAX CAN BE IMPOSED ON REAL INCOME AND NOT ON HYPOTHETICAL INCOME. IT IS TRUE THAT A TRIPARTITE AGREEMENT WAS ENTERED INTO AMONG THE TENANTS,INCLUDING THE ASSESSEE, DEVELOPER AND THE OWNER OF THE PROPERTY.BUT IT IS A LSO A FACT THE BECAUSE OF THE ORDERS OF THE BMC SAID AGREEMENT COULD NOT BE IMPLEMENTED.NOT,ONLY TH IS HONBLE HIGH COURT OF BOMBAY HAS APPROVED THE ORDER OF THE BMC.THUS,IN SPITE OF THE IMPUGNED AGREEMENT STATUS QUO REMAINED TILL THE INSPECTOR VISITED THE PREMISES OCCUPIED BY THE ASSESSEE.CONSIDERING THE ABOVE FACTS WE ARE OF THE OPINION THAT ORDER OF THE FAA DOES NOT SUFFER F ROM ANY LEGAL OR FACTUAL INFIRMITY.THEREFORE, CONFIRMING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEA L FILED BY THE AO STANDS DISMISSED. * +3 $*+ . 4 5 - 1 $ !6 - !+ 78. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER,2013 . '2 - /0% ' 9 :$ 13 UOECJ UOECJ UOECJ UOECJ , 2013 0 - 1 ; SD/- SD/- ( . < < < < . . B.R.MITTAL) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, :$ /DATE: 13 TH NOVEMBER,2013 SK '2 '2 '2 '2 - -- - (+= (+= (+= (+= >'=%+ >'=%+ >'=%+ >'=%+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / ? @ , 4. THE CONCERNED CIT / ? @ 5. DR A BENCH, ITAT, MUMBAI / =A1 (+$ , ,, , , . . . 6. GUARD FILE/ 1 B )=+ )=+ )=+ )=+ (+ (+(+ (+ //TRUE COPY// '2$ / BY ORDER, C / 7 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI