Shri D R Kumaraswamy , Bangalore V. The Income Tax Officer Ward-3(3)(4), Bangalore

ITA 2958/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3336 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-02-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 31-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Keywords: Capital asset; Salary income; Capital Gains
• Section: 143(3); 54F; 2(14); 201; 72; 13

Judgement Text

ITA NO. 2958 (B)/201 8 1 IN THE INCOME TAX APPELLATE TRIBUNAL B A NGAL ORE BENCHES : A , B ANG A LORE BEFORE SHRI P RADIP KUMAR KEDIA, AM & SMT.BEENA PILLAI, J M ITA NO. 2 958 (BANG)/201 8 (ASSESSMENT YEAR : 201 2 - 13 ) SHRI D.R.KUMARASWAMY, NO.419/10, 17 TH CROSS, 11B MAIN, 5 TH BLOCK, JC NAGARA, BANGALORE - 560 0 41 PAN NO. A SAPK22535Q APPELLANT VS . THE INCOME T AX OFFICER , WARD - 3(3)(4), BANGALORE RESPONDENT APPE LLANT BY : S MT. SHEETAL BORKAR, A DVOCATE REVENUE BY : SHRI B.R.RAMESH, J CIT DATE OF HEARING : 2 6 - 0 2 - 20 20 DATE OF PRONOUNCEMENT : 06 - 0 3 - 2020 O R D E R PER PRA DIP KUMAR KEDIA : A M THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 , B ENGALURU [CIT(A) IN SHORT ] DATED 31 - 08 - 2018 ARISING IN THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE I NCOME TAX ACT, 1961 ( THE ACT ) RELATING TO ASSESSMENT YEAR 2012 - 13 . ITA NO. 2958 (B)/201 8 2 2. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE REVENUE IN REJECTING THE STAND OF THE ASSESSEE THAT THE ENTIRE CAPITAL GAINS IN QUESTION SHOULD BE TREATED AS LONG TERM CAPITAL GAINS AND CONSEQUENT BENEFIT U/S 54F OF THE ACT SHOULD BE GIVEN IN FULL AS CLAIMED BY THE ASSESSEE . 3. BRIEFLY STATED, THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY , HOUSE PROPERTY AND OTHER SOURC ES . FOR THE ASSESSMENT YEAR 2012 - 13, THE ASSESSEE HAS ALSO DERIVED INCOME UNDER THE HEAD CAPITAL GAINS . THE RETURN OF INCOME DECLARING TOTAL INCOME BY THE ASSESSEE AT RS.4,31,040/ - WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF SCRUTINY ASSESSMENT, THE AO INTER ALIA DISPUTED THE CLAIM OF THE ASSESSEE TOWARDS LONG TERM CAPITAL GAINS ARISING ON TRANSFER OF CERTAIN PARCEL OF LAND (SITE NO.37) DURING THE YEAR . THE AO HELD THE INCOME ARISING FROM SALE OF LAND AT SITE NO. 37 TO BE IN THE NATURE OF SHORT TERM CAPITAL GAINS. CONSEQUENTLY, THE AO DENIED THE BENEFIT OF EX E MPTION CLAIMED UNDER S. 54F OF THE ACT . 4. THE CIT(A) IN FIRST APPEAL ENDORSED THE AC T ION OF THE AO. 5 AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUN AL. 6. WHEN THE MATTER WAS CALLED FOR HEARING BEFORE THE TRIBUNAL, THE LD. COUNSEL FOR ASSESSEE SUBMITTED A BRIEF BACKGROUND FACTS RELATING TO THE TRANSACTION RESULTING TO CAPITAL GAINS AS FOLLOWS 6.1 THE ASSESSEE WAS ORIGINALLY ALLOTTED A SITE BEARING NO.37 A ( SITUATED AT DOMLUR II STAGE, BANGALORE) BY BANGALORE DEVELOPMENT AUTHORITY (BDA) ON MARCH 27, 2003 OUT OF THE DISCRETIONARY QUOTA OF THE GO V ERNMENT OF KARNATAKA FOR A CONCESSIONAL C ONSIDERATION OF RS.6,48,480/ - . THE SITE MEASURED 370.56 SQ.MTRS. (3,987SQ.FT.). THE CONSIDERATION WAS PAID BY THE ASSESSEE ON 15 TH OCTOBER, 2003. THEREAFTER, ITA NO. 2958 (B)/201 8 3 THE A SSES S EE AGAIN APPROACHED THE BDA REQUESTING THEM TO ALLOT YET ANOTHER ODD LY SHAPED ADDITIONAL MARGINAL AREA (SITE NO.37) INTEGRALLY ATTACH E D TO THE SITE NO.37A MEASURING 70.40 SQ.MTS. (758 SQ.FT.) ON THE GROUND THAT THE SAID SIDE 37 CANNOT POSSIBLY BE USED FOR ANY OTHER PURPOSES BY THE BDA. THE BDA ACCEPTED THE REQUEST OF THE ASS ESSEE AND ALLOTTED THE ADDITIONAL AREA (SITE NO.37) ALSO TO THE ASSESSEE ON JANUARY 2, 2008 FOR THE THEN PREVAILING CONSIDERATION OF RS.28,18,605/ - . THE CONSIDERATION WAS ACTUALLY PAID BY THE ASSESSEE ON A PRIL 3, 2009 . T HE BDA ULTIMATELY EXECUTED THE SALE DEED IN FAVOUR OF THE ASSESSEE ON NOVEMBER 26, 2009. THE BDA ALLOTTED A SINGLE PID NO. TO BOTH SITES TOGETHER AS 72 - 30 - 37 - 37A . 6.2 THE ASSESSEE SOLD BOTH THE SITES (SITE NO.37 AND 37A) TOGETHER A S A SINGLE PLOT MEASURING 440.96 SQ.MTS. (4,745 SQ.FT.) F O R A SALE CONSIDERATION OF RS. 2,80,00,000/ - O N NOVEMBER, 21, 2011. THE ASSESSEE REINVESTED THE SALE PROCEEDS IN A NEW HOUSE TO THE EXTENT OF RS.2,79,25,124/ - BY AUGUST 2 1 , 2014 AND CLAIMED DEDUCTION U/S 54F WHILE COMPUTING THE CAPITAL GA I NS. 6.3 IN THE CONTEXT OF ABOVE BACKGROUND FACTS, THE L D. COUNSEL SUBMITTED THAT T HE AO HAS DISPUTED THE CLAIM OF LTCG ON TRANSFER OF THE SITE NO. 37 HAVING REGARD TO THE PERIOD OF HOLDING. THE AO COMPUTED THE PERIOD OF HOLDING OF CAPITAL ASSET AT S ITE NO.37, WITH REFERENCE TO THE DATE OF SALE DEED EXECUTED IN FAVOUR OF THE ASSESSEE ON 26 - 11 - 2009 AND REGARDED THE GAIN ARISING FROM SALE OF THE PLOT BY THE ASSESSEE ON 21 - 11 - 2011 TO BE SHORT TERM CAPITAL GAINS . 6.4 THE L D. COUNSEL STRONGLY SUBMITTED THA T THE LAND BEARING SITE NO. 37, WHICH WAS ODDLY S HAPED AND CONNECTED TO SITE NO.37A, WAS ACTUALLY HELD IN POSSESSION OF THE ASSESSEE SINCE 2003. THE DEVELOPMENT AUTHORITY HAS ACCEPTED THE C A SE OF THE ASSESSEE FOR FORMAL TRANSFER OF THE ODD SHAPED SITE (SITE NO.37A) AND ISSUED THE ALLOTMENT LETT E R DATED 02 - 01 - 2008 FOR A ITA NO. 2958 (B)/201 8 4 CONSIDERATION DETERMINED AT RS.28,18,605/ - FOR AN AREA OF 70.40SQ.METRS. (758.SQ.FT). IT WAS SUBMITTED THAT IN PURSUANCE OF ALLOTMENT LETTER, THE AS S ESSEE HAS MADE THE PAYMENT OF THE EXACT AMOUNT TO THE AUTHORITY ON 03 - 04 - 2008 AS PER STIPULATED TERMS OF THE ALLOTMENT . IT WAS THUS CONTENDED THAT CONSEQUENT ON FULFILLMENT OF TERMS OF PAYMENT, THE ALLOTMENT LETTER BECAME EFFECTIVE AND THE RIGHTS ACCRU ED THE REFROM STOOD VESTED WITH THE ASSESSEE FROM TH E DATE OF ACCEPTANCE OF PAYMENT . IT WAS ALSO POINTED OU T THAT A FORMAL REGISTRATION O F THE SITE NO.37 ALSO OCCURRED IN FAVOUR OF THE ASSESSEE ALBEIT ON 26 - 11 - 2009 . IT WAS HOWEVER INSISTED THAT WHERE THE SITE WAS IN ACTUAL POSSESSION AND T HE ALLOTMENT WAS CARRIED OUT IN JANUARY 2, 2008 WHICH BECAME EFFECTIVE IN APRIL 3, 2 008 , THE PERIOD OF HOLDING NEEDS TO BE COUNTED FROM THE DATE OF ALLOTMENT OR FROM THE DATE OF PAYMENT IN CONSEQUENCE THERETO AND ONCE THIS IS DONE, THE PERIOD OF HOLDING WOULD EXCEED PERIOD OF 3 YEARS AND THE CAPITAL ASSET (SITE NO. 37) WOULD BE REGARD AS LON G TERM CAPITAL ASSET PRIOR TO ITS TRANSFER. 6.5 IN SUPPORT OF THE ITS CLAIM THAT GAINS ARISING ON SALE OF SITE NO. 37 IS REQUIRED TO BE HELD AS LTCG AS CLAIMED ( AND NOT STCG AS HELD BY AO), IT WAS CANVASSED THAT A DEFINITE RIGHT ON THE CAPITAL ASSET HA D ACCRUED IN FAVOUR OF THE AS S ESSEE AND EFFECTIVE POSSESSION WA S ALSO LYING WITH THE ASSESSEE AND THEREFORE , THE DATE OF ALLOTMENT LETTER OR AT BEST DATE OF PAYMENT IN PURSUANCE OF SUCH ALLOTMENT LETTER SHOULD BE RECKONED FOR THE PURPOSE OF DETERMINATION OF PERIOD HOLDING TO ASCERTAIN NATURE OF CAPITAL GAINS . IT WAS SUBMITTED THAT ALTHOUGH REGISTRATION DEED HAS BEEN EXECUTED AT A LATER DATE IN NOV. 200 9, THE RIGHT HAD ACCRUED TO THE ASSESSEE ON ALLOTMENT OF LAND IN ITS FAVOUR AND THEREFORE MERE DELAY IN REGISTRATION WOULD NOT TAKE AWAY THE RIGHTS OF THE ASSESSEE TO CLAIM THE CAPITAL GAINS TO BE OF LONG TERM NATURE. ITA NO. 2958 (B)/201 8 5 6.6 THE LD. AR THUS SUBMITTED THA T THE REVENUE AUTHORITIES HAVE COMMITTED ERROR IN IGNORING THE FACTUM OF DEFINITE ALLOTMENT IN FAVOUR OF THE ASSESSEE AND HAVE RELIED UPON THE DATE OF SALE DEED EXECUTED AT A LATER DATE AND THUS, WRONGLY DENIED THE BENEFIT ACCRUING FROM SALE OF LONG TERM C APITAL ASSET. THE LD. AR ACCORDINGLY URGED THAT THE ACTION OF THE REVENUE AUTHORITIES BE REVERSED AND THE PO SITION CLAIMED BY THE ASSESS E E TOWARDS LTCG BE RESTORED . 7. THE LD. DR ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO AND THE CIT( A) AND SUBMITTED THAT UNASSAILABLE RIGHT HAS ACCRUED IN FAVOUR OF THE ASSESSEE ONLY ON REGISTRATION OF SALE DEED IN FAVOUR OF THE ASSESSEE TOWARDS SITE NO.37 IN QUESTION. THE PERIOD OF HOLDING WHEN RECKONED FROM THE DATE OF SALE DEED, IT COMES TO LESS THA N 3 YEARS AND THUS SITE NO.37 CANNOT BE BRANDED AS LONG TERM CAPITAL ASSET UNDER S.2(29A) OF THE ACT AND THUS NOT ELIGIBLE FOR CONSEQUENTIAL BENEFITS UNDER LAW. THE LD. DR RELIED UPON THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS V. V.MODI ..281 ITR 1, (1996) (KAR.) FOR THE PREPOSITION THAT OWNERSHIP IS CONFERRED ON THE ASSESSEE ONLY FROM THE DATE OF EXECUTION OF SALE DEED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE S HORT ISSUE PLACED FOR OUR DETERMINATION IS WHETHER THE PERIOD OF HOLDING OF CAPITAL ASSET FOR THE PURPOSES OF CLASSIFICATION OF CAPITAL GAINS IS TO BE SEEN WITH REFERENCE TO DATE OF ALLOTMENT OF LAND OR FROM THE DATE OF FORMAL EXECUTION OF SALE DEED FOR REGISTRATION . WHEREA S IT IS THE C A SE OF THE ASSESSEE THAT THE LETTER OF ALLOTMENT ISSUED BY BDA IN RESPECT OF LAND PARCEL (SITE NO. 37) IN QUESTION HAS GIVEN EFFECTIVE RIGHT TO THE ASSESSEE TO ASSERT ITS COMMAND ON THE ASSE T WHICH RIGHT IS INCLUDIBLE IN THE EXPRESSION PROPERTY FOR THE PURPOSE OF S.2(14) OF THE A CT , DEFINING THE EXPRESSION CAPITAL ASSET , THE REVENUE ON THE OTHER HAND, SEEKS TO ADVANCE AN ARGUMENT THAT THE ALLOTMENT LETTER BY ITSELF DOES NOT GENERATE ANY RIGHT , TITLE , INTEREST IN THE ITA NO. 2958 (B)/201 8 6 ASSET AND THE EFFECTIVE RIGHT ON THE LAND GET VESTED FROM THE DATE OF EXECUTION OF SALE DEED AND NOT PRIOR THERETO. 8.1 IN THE CONTEXT OF THE ISSUE INVOLVED, WE OBSERVE AT THE OUTSET THAT THE EXPRESSION CAPITAL ASSET UNDER S. 2(14) OF THE ACT HAS A WIDE CONNOTATI ON. THE ISSUE WHETHER LETTER OF ALLOTMENT WOULD GIVE EFFECTIVE RIGHT OVER THE CAPITAL ASSET PENDING EXECUTION OF FORMAL AGREEMENT SPELLING OUT ALL THE EXACT TERMS AND CONDITIONS FOR ACQUISITION HAS BEEN COMPREHENSIVELY SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. VEMBU VAIDYANATHAN 101 TAXMANN.COM 436(BOM.) THE HON BLE BOMBAY HIGH COURT HAS TAKEN NOTE OF CBDT CIRCULAR NO. 471 DATED 15 TH OCTOBER 1986 AS WELL AS CBDT CIRCULAR 672 DAT E D 16 TH DEC. 19 93 AND CONCLUDED THAT THE ASSESSEE SHALL BE DEEMED TO HAVE ACQUIRED RIGHTS IN THE PROPERTY ON THE DATE OF ISSUE OF ALLOTMENT LETTER FOR THE PURPOSES OF EXPRESSION CAPITAL ASSET . THE SLP AGAINST THE AFORESAID DECISION HAS BEEN DISMISSED BY THE HON BLE SUP REME COURT IN 108 TAXMAN N.COM 3 3 9 (2019). 8.2 ON FACTS, THE ASSESSEE IN THE INSTANT CASE HAS NOT ONLY BEEN ISSUED ALLOTMENT LETTER, HE HAS ALSO MADE FULL PAYMENT TO THE AUTHORITY CONCERNED IMMEDIATELY THEREAFTER. TH US , TH E ASSET IS REQUIRED TO BE HELD AS LONG TERM CAPITA L ASSET EVEN IF THE LATER D ATE OF PAYMENT IS RECKONED. HENCE, THE GAINS ARISING ON SALE OF SUCH ASSET HAS BEEN CORRECTLY CLAIMED AS LONG TERM CAPITAL GAINS . CONSEQUENTLY, ALL THE BENEFITS FLOWING FROM SUC H GAINS WOULD BE ENTITLED TO THE ASSESSEE. 8.3 THE DECISION RELIED UPON BY THE RE V ENUE IN THE CASE OF V.V.MODI (SUPRA) IS DISTINGUISHABLE . THE MATTER IN THAT CASE RELATES TO ASSESSMENT YEAR 1982 - 83 . AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSESSEE, THE PROVISIONS OF SECTION 2(47) RELATING TO DEFINITION OF TRANSFER OF CAPITAL ASS ET HAS UNDERGONE A CHANGE AND SUB - CLAUSE ( V) HAS ACT HAS BEEN INSERTED ITA NO. 2958 (B)/201 8 7 WHICH ADDRESSES THE PRESENT SITUATION. THE RATIO OF DECISION IN V V MODI IS THUS NO LONGER APPLICABLE IN FACT SITUATION. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 6 TH MARCH 2020. SD/ - SD/ - (BEENA PILLAI) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: B ANG A LORE DATED: 06 - 03 - 2020 * AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6 .GUARD FILE BY ORDER ASST. REGISTRAR ITA NO.155(B)/2017 8