ASST CIT 19(3), MUMBAI V. AKHAND ABHAR CO OP HOUSING SOCIETY LTD, MUMBAI

ITA 3220/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2289 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 06-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition
• Section: 2(14); 133A; 147

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.3220/MUM/2014 ASSESSMENT YEAR: 2002-03 ACIT-19(3), ROOM NO.305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. M/S AKHAND ABHAR CO-OP. HOUSING SOCIETY LTD. PLOT NO.332, 21 ST ROAD, TPS-III BANDRA (WEST), MUMBAI-400050 ( / REVENUE) ( ! ' /ASSESSEE) PAN. NO. AAAAA6279N # $ % ' & / DATE OF HEARING : 03/12/2015 % ' & / DATE OF ORDER: 03/12/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDERS BOT H DATED 21/02/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTA INS TO ! / REVENUE BY MOHAMMED RIZWAN ! ' ! / ASSESSEE BY SHRI S.M. BANDI AKHAND ABHAR CO-OP HOUSING SOCIETY ITA NO.3220/MUM/2014 2 DELETING THE PENALTY OF RS.24,96,503/- IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) 2. DURING HEARING OF THIS APPEAL, THE LD. DR, SHRI MOHAMMED RIZWAAN, ADVANCED ARGUMENTS, WHICH IS IDEN TICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LD. CO UNSEL FOR THE ASSESSEE, SHRI S.M. BANDI, INVITED OUR ATTENTIO N TO THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSEL F (ITA NO.2494/MUM/2011) FOR A.Y. 2002-03 ORDER DATED 20/10/2015, WHEREIN, ON QUANTUM ADDITION, THE APPEA L WAS DECIDED IN FAVOUR OF THE ASSESSEE. THIS FACTUAL MAT RIX WAS NOT CONTROVERTED BY THE LD. DR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION OF THE ORDER OF THE TRIBUNAL DATED 20/10/2015 FOR READ Y REFERENCE, PASSED BY THE CO-ORDINATE BENCH.:- THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF THE CIT(A) -30, MUMBAI, DATED 25.01.2011 P ERTAINING TO A.Y. 2002-03. 2. THE ASSESSEE HAS RAISED AS MANY AS EIGHT GROUNDS OF APPEAL, HOWEVER, THE SOLE ISSUE RELATES TO THE TAXING OF SU M OF RS.77,15,157/- AS LONG TERM CAPITAL GAINS U/S. 45 O F THE I.T. ACT ON TRANSFER OF FSI/TDR. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A HOUSING SOCIETY. A SURVEY ACTION U/S. 133A OF THE ACT WAS C ONDUCTED ON 31.03.2001 IN THE CASE OF THE ASSESSEE SOCIETY. IT WAS FOUND THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S . DIVINE CONSTRUCTION CO., THE DEVELOPER VIDE WHICH THE ASSE SSEE HAD SOLD AKHAND ABHAR CO-OP HOUSING SOCIETY ITA NO.3220/MUM/2014 3 THE DEVELOPMENT RIGHTS FOR A CONSIDERATION OF RS.1. 40 CRORES. ON THE BASIS OF THE SAID SURVEY ACTION, ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT. DURING THE COURSE OF REASSESSMENT P ROCEEDINGS, THE AO NOTICED THAT THE ABOVE STATED AMOUNT OF RS.1.40 CRORES WAS RECEIVED BY THE SOCIETY ON TRANSFER OF DEVELOPMENT RIGHTS/TDR. HOWEVER, THE ASSESSEE SOCIETY CONTENDED THAT THE SA ID AMOUNT WAS NOT TAXABLE IN THE HANDS OF THE SOCIETY SINCE T HE SAME WAS DISTRIBUTED EQUALLY AMONG THE SOCIETY MEMBERS. THE AO HOWEVER, HELD THAT THE TRANSFER OF FSI IN THE FORM OF TDR WA S AVAILABLE TO THE SOCIETY AND NOT TO THE MEMBER. THE SOCIETY HAD TRANSFERRED THE RIGHT IN THE PROPERTY TO THE DEVELOPER. THE RIG HTS SUCH AS EXCESS FSI/TDR WERE IN THE NATURE OF INTANGIBLE RIG HTS, WHICH ARE EMBEDDED AND FIRMLY ROOTED TO THE RIGHTS IN THE OWN ERSHIP OF THE LAND. SUCH RIGHTS BASICALLY FLOW AND EMANATE OUT OF THE RIGHT OF OWNERSHIP OF THE LAND. ANY GAIN ARISING FROM THE SA LE/TRANSFER OF SUCH TDR/ FSI WOULD BE FULLY ATTRIBUTABLE TO THE OW NERSHIP RIGHT. THUS, THE CAPITAL GAIN WILL BE CHARGEABLE TO THE AS SESSEE ON TRANSFER OF TDR/FSI BEING INTANGIBLE PROPERTY AND W OULD FALL WITHIN DEFINITION OF SECTION 2(14) OF THE ACT. HE F URTHER OBSERVED THAT THE RIGHTS CREATED BY THE DEVELOPMENT CONTROL REGULATION OF 1991 WERE ATTACHED TO THE LAND OWNED BY THE ASSESSE E SOCIETY WHICH WAS ACQUIRED FOR VALUE GIVEN OR MONEY PAID. T HE OWNERSHIP OF THE PLOT ENTITLES THE ASSESSEE TO CONSUME THE PE RMISSIBLE FSI. THE TDR RULES EXTEND THE PERMISSIBLE FSI LIMIT OF T HE ASSESSEES PLOT OF LAND. THE EFFECT OF THIS EXTENSION WAS TO S PREAD THE ORIGINAL COST OF LAND OVER INCREASED FSI PROVIDED BY THE DEV ELOPMENT CONTROL REGULATION OF 1991. HE THEREFORE HELD THAT THE PRINCIPLE, WHICH IS APPLICABLE TO BONUS SHARES WILL BE APPLICA BLE IN THE CASE OF ADDITIONAL FSI, IF ANY, GRANTED TO THE SOCIETY U NDER THE AMENDED RULES. HE THEREFORE ESTIMATED THE COST OF ACQUISITI ON OF THE TDR ON THE BASIS THAT THE SAME WAS EMBEDDED IN THE OWNERSH IP RIGHT OF THE PROPERTY AND TOOK THE VALUE AS ON 01.04.1191 AN D COMPUTED CAPITAL GAIN OVER IT. BEING AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), BUT WITHOUT ANY SUCCESS. THUS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. THE TDR WAS TRANSFERRED BY THE SOCIETY TO THE BUILDER AND THE AMOUNT IN LIE U THEREOF WAS RECEIVED BY THE ASSESSEE SOCIETY WHICH WAS FURTHER DISTRIBUTED AMONG THE MEMBERS OF THE SOCIETY. HENCE, IT IS THE ASSESSEE SOCIETY WHICH TRANSFERRED THE TDR FOR CONSIDERATION HENCE, THE ENTIRE AMOUNT HAS TO BE CONSIDERED AS RECEIPT IN THE HANDS OF THE ASSESSEES SOCIETY. AKHAND ABHAR CO-OP HOUSING SOCIETY ITA NO.3220/MUM/2014 4 5. NOW COMING TO THE ISSUE WHETHER THE CAPITAL GAIN S RECEIVED BY THE ASSESSEE IN LIEU OF TRANSFER OF TDR CAN BE ASSE SSED UNDER SECTION 45 OF THE ACT OR NOT, THE BASE DECISION IN THIS RESPECT IS IN THE CASE OF CIT V. B.C. SRINIVASA SHETTY (1981) 128 ITR 294; (1981) 2 SCC 460 WHEREIN THE HONBLE SUPREME COURT HAS HEL D THAT ALL TRANSACTIONS ENCOMPASSED BY SECTION 45 MUST FALL WI THIN THE COMPUTATION PROVISIONS OF SECTION 48. IF THE COMPUT ATION AS PROVIDED UNDER SECTION 48 COULD NOT BE APPLIED TO A PARTICULAR TRANSACTION, IT MUST BE REGARDED AS 'NEVER INTENDED BY SECTION 45 TO BE THE SUBJECT OF THE CHARGE'. THE HONBLE SUPRE ME COURT IN THE CASE OF PNB FINANCE LTD. VS. CIT (2008) 307 ITR 75 HAS REITERATED THE ABOVE PROPOSITION OF LAW. IN THE CASE OF CIT V. B.C. SRINIVASA SHETTY (SUPRA) THE COURT WAS CONSIDERING WHETHER A FIRM WAS LIABLE TO PAY CAPITAL GAINS ON THE SALE OF ITS GOOD WILL TO ANOTHER FIRM. THE COURT FOUND THAT THE CONSIDERATION RECEIV ED FOR THE SALE OF GOODWILL COULD NOT BE SUBJECTED TO CAPITAL GAINS BECAUSE THE COST OF ITS ACQUISITION WAS INHERENTLY INCAPABLE OF BEING DETERMINED. THEREAFTER SECTION 55 (2) WAS AMENDED T O PROVIDE THAT THE COST OF ACQUISITION OF, INTER ALIA, A TENA NCY RIGHT, GOOD WILL ETC. WOULD BE TAKEN AS NIL. HOWEVER, THE RIGHTS OBT AINED BY WAY OF ADDITIONAL TDR HAVE NOT BEEN INCLUDED IN THE PROVIS ION NEITHER IN THE CHARGING SECTION 45 NOR IN THE SECTION 48 WHICH PROVIDES MODE OF COMPUTATION. THOUGH THE PARLIAMENT HAS MADE AN A MENDMENT THAT IN CERTAIN TYPE OF ASSETS LIKE GOODWILL, TENAN CY RIGHTS ETC., THE COST OF ACQUISITION WOULD BE TAKEN AS ACTUAL COST I NCURRED AND IF NO COST INCURRED, THE SAME BE TAKEN AT NIL, HOWEVER THE SAID DEEMING SECTION IS APPLICABLE TO THE ASSETS WHICH H AVE BEEN SPECIFICALLY BROUGHT WITHIN THE PURVIEW OF THE SAID PROVISION. THE ASSETS OR THE RIGHTS WHICH DO NOT FIND MENTION IN T HE RELEVANT PROVISION, CANNOT BE BROUGHT WITHIN THE AMBIT OF CH ARGING SECTION, IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT. SO FAR AS THE QUESTION THAT THE COST OF ADDITIONAL TDR IS DET ERMINABLE OR NOT, THE ISSUE IS NOW SQUARELY COVERED BY THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. S HAMBAJI NAGAR CO-OPERATIVE HOUSING SOCIETY LTD. 370 ITR 32 5, WHEREIN HONBLE BOMBAY HIGH COURT WHILE RELYING UPON THE PR OPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE C ASE OF CIT V. B.C. SRINIVASA SHETTY (SUPRA) HAS HELD THAT IN THE CASE OF THE SOCIETY ,THE RECEIPT IN LIEU OF TRANSFER OF TDR RIG HTS CANNOT BE SUBJECTED TO CAPITAL GAINS TAX. 6. THE HONBLE HIGH COURT AGREED WITH THE VIEW OF T HE TRIBUNAL THAT THE ASSESSEE HAS NOT INCURRED ANY COST OF ACQU ISITION IN RESPECT OF RIGHT WHICH EMANATED FROM THE RELEVANT R ULES/ AKHAND ABHAR CO-OP HOUSING SOCIETY ITA NO.3220/MUM/2014 5 DEVELOPMENT CONTROL REGULATION MAKING THE ASSESSEE ELIGIBLE TO ADDITIONAL FSI. EVEN AFTER THE TRANSFER OF THE RIGH T OR THE ADDITIONAL FSI, THE POSITION DID NOT UNDERGO ANY CH ANGE. HENCE, NOCOST OF ACQUISITION WAS INCURRED BY THE ASSESSEE IN RESPECT OF THE TDR OR EVEN THE SAME WAS NOT DETERMINABLE. 7. WE FURTHER FIND THAT IDENTICAL ISSUE HAS BEEN DE CIDED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF L AND BRIDGE CO- OPERATIVE HOUSING SOCIETY LTD VIDE ORDER DATED SEP TEMBER 14, 2012 REPORTED AS (2013) 21 ITR TRIB. 467 (MUM.) WHE REIN IT HAS BEEN HELD THAT THOUGH THE TRANSFERRABLE DEVELOPMENT RIGHT AMOUNTS TO TRANSFER OF CAPITAL ASSET BY THE SOCIETY , HOWEVER, THE SAME COULD NOT BE SUBJECTED TO TAX UNDER THE HEAD CAPITAL GAINS FOR THE REASONS THAT THERE WAS NO COST OF ACQUISITI ON IN ACQUIRING THE RIGHT WHICH HAD BEEN TRANSFERRED AND, THEREFORE , THE COMPUTATIONAL MODE GIVEN IN SECTION 48 THUS FAILS. THE MATTER WAS CARRIED BY WAY OF APPEAL BY THE REVENUE TO THE HONBLE BOMBAY HIGH COURT. THE HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 11.03.2015 PASSED IN ITA NO.334/2013 ST YLED AS CIT VS. LAND BRIDGE CO-OPERATIVE HOUSING SOCIETY LTD. WHILE RELYING UPON THE ANOTHER DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. SHAMBAJI NAGAR CO-OPERATIVE HOUSING SOCIET Y LTD. 370 ITR 325 UPHELD THE ORDER OF THE TRIBUNAL. HENCE, TH E SAME ANALOGY WILL ALSO APPLY TO THE CASE OF THE ASSESSEE SOCIETY. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT, IT IS HELD THAT THE TDR RECEIPTS IN THE HAND S OF THE ASSESSEE ARE NOT TAXABLE. 8. IN THE RESULT, THE APPEAL IS ALLOWED. 2.2. IF THE CONCLUSION DRAWN IN THE AFORESAID ORDE R IS ANALYZED, WE FIND THAT THE ISSUE BEFORE THE EARLIER BENCH WAS WITH RESPECT TO TAXING SUM OF RS.77,15,157/- AS LON G TERM CAPITAL GAINS U/S 45 OF THE ACT ON TRANSFER OF FSI/ TDR. FINALLY, THE CO-ORIDNATE BENCH AFTER FOLLOWING DECI SION FROM HONBLE JURISDICTIONAL HIGH COURT IN CIT VS SAMBHAJ I NAGAR CO-OPERATIVE HOUSING SOCIETY LTD. 370 ITR 325 (BOM. ) ALONG WITH THE DECISION FROM HONBLE APEX COURT IN PNB FI NANCE LTD. VS CIT (2008) 307 ITR 75 (SC) AND ALSO CIT VS B/C. AKHAND ABHAR CO-OP HOUSING SOCIETY ITA NO.3220/MUM/2014 6 SRINIVASA SHETTY (1981) 128 ITR 294 HELD THAT THE T DR RECEIPTS IN THE HANDS OF THE ASSESSEE ARE NOT TAXAB LE AND THUS GAVE RELIEF TO THE ASSESSEE. 2.3. IN VIEW OF THE ABOVE, SINCE, THE QUANTUM ADDI TION HAS BEEN DELETED BY THE CO-ORDINATE BENCH ON THE BA SIS OF WHICH PENALTY WAS IMPOSED, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. OUR VIEW FINDS SUPPORTS FROM THE DECI SION OF THE TRIBUNAL IN M/S PARLE BOTTLING PVT. LTD. (ITA NO.1209/MUM/2014) ORDER DATED 23/11/2015 AND THE RA TIO LAID DOWN IN CIT VS S.P VIZ CONSTRUCTION COMPANY 17 6 ITR 47 (PATNA) AND K.C. BUILDERS VS ACIT 265 ITR 562 (S UPREME COURT). WE ARE OF THE VIEW THAT WHERE THE PENALTY F OR CONCEALMENT OR FURNISHING INACCURATE PARTICULARS WA S LEVIED AND AFTER DELETING THE QUANTUM ADDITION, THERE REMA INS NO BASIS AT ALL FOR LEVYING THE PENALTY. ORDINARILY, PENALTY CANNOT STAND IN ITSELF IF THE ADDITION MADE IN THE ASSESSMENT ITSELF IS SET ASIDE OR CANCELLED BY THE SUPERIOR AUTHORITY/COURT. THE PENALTY CANNOT STAND BY ITSEL F BECAUSE FALSE RESULT MAY BE PRODUCED BY THE FALSITY OF ONE OR MORE OF THE CONSTITUENT ITEMS IN THE RETURN. THE WORD INA CCURATE PARTICULARS WOULD COVER FALSITY IN THE FINAL FIGUR E AND ALSO THE CONSTITUENT ELEMENTS OR ITEMS. THEY SIMPLY WOULD M EAN INACCURATE IN SOME SPECIFIC OR DEFINITE RESPECT WHE THER IN THE CONSTITUENT OR SUBORDINATE ITEMS OF INCOME OR THE E ND RESULT. CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IM PLIES SOME DELIBERATE ACT ON THE PART OF THE ASSESSEE IN WITHHOLDING AKHAND ABHAR CO-OP HOUSING SOCIETY ITA NO.3220/MUM/2014 7 THE TRUE FACTS FROM THE AUTHORITIES. SINCE, THE BA SIS OF LEVYING PENALTY REMAINS NO MORE IN EXISTENCE, AFTER DELETIO N OF QUANTUM ADDITION, THEREFORE, FROM THIS ANGLE, THE S TAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFI ED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES, AT THE CONCLUSION OF THE HEARING ON 03/12/2015. SD/- SD/- ( RAJENDRA ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER # $ MUMBAI; ( DATED : 03/12/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. # 1' ( *+ ) / THE CIT, MUMBAI. 4. # 1' / CIT(A)- , MUMBAI 5. 34 .' , *+& * 5 , # $ / DR, ITAT, MUMBAI 6. 6 7$ / GUARD FILE. ! / BY ORDER, /3+' .' //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI