AJIT M. PENDURKAR, MUMBAI V. ITO 18(2)(1), MUMBAI

ITA 3225/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9206 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KESHAV BHUJLE
• Keywords: Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 3225/MUM/2009 ASSESSMENT YEAR :2005-06 MR. AJIT M. PENDURKAR 8-A, NEW POPATLAL BUILDING, RANADE ROAD, MUMBAI 400 028 PAN NO. AAGPP 1981 R INCOME TAX OFFICER 18(2)(1) PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI KESHAV BHUJLE RESPONDENT BY : SHRI MOHIT JAIN DATE OF HEARING : 10.12.2012 DATE OF PRONOUNCEMENT : 19.12.2012 ORDER PER RAJENDRA SINGH, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 01.01.2009 OF COMMISSIONER OF INCOME TAX (APPEALS), FOR THE ASSESSMENT YEAR 2005-06. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING COMPUTATION OF CAPITAL GAIN FRO M SALE OF PROPERTY. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS EAR LIER TENANT OF THE HOUSE PROPERTY SOLD DURING THE YEAR, SINCE 1984, SU BSEQUENTLY IN TERMS OF THE SCHEME FRAMED BY THE GOVERNMENT, THE ASSESSEE B ECAME OWNER OF THE PROPERTY ON 04.03.2003 ON PAYMENT OF RS.45,062. LATER ON, ON 31.10.2004, THE HOUSE PROPERTY HAD BEEN SOLD BY THE ASSESSEE. THE ITA NO. : 3225/MUM/2009 MR. AJIT M. PENDURKAR, AY.:2005-06 2 ASSESSEE COMPUTED THE GAIN FROM THE SALE AS LONG TE RM CAPITAL GAIN, SINCE IT HAD TENANCY RIGHTS IN RESPECT OF THE PROPERTY SI NCE 1984. 2.1 THE ASSESSING OFFICER, HOWEVER, NOTED THAT THE ASSESSEE HAD BECOME OWNER OF THE PROPERTY ON 04.03.2003 AND IT W AS SOLD WITHIN 20 MONTHS ON 31.10.2004 AND THEREFORE, ASKED THE ASSES SEE TO EXPLAIN AS TO WHY THE GAIN SHOULD NOT BE COMPUTED AS SHORT TERM C APITAL GAIN. THE ASSESSEE CONCEDED THAT IN VIEW OF THE JUDGEMENT OF HONBLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. ABRAR ALVI (247 ITR 312) THE GAIN COULD BE CONSIDERED AS SHORT TERM CAPITAL GAIN. HOWEVER, IT WAS ARGUED THAT THE COST OF ACQUISITION OF THE HOUSE PROPERTY WOULD BE THE MARKET VALUE OF TENANCY RIGHT AS ON 04.03.2003 AND THE PAYMENT MADE BY RS.45,062. IT WAS ALSO SUBMITTED THAT THE MARKET VALUE OF TENANCY RIGHT COULD BE ESTIMATED AT RS.20 LACS. THE ASSESSING OFFICER, HOW EVER, DID NOT ACCEPT THE CONTENTIONS RAISED BY THE ASSESSEE. IT WAS OBSE RVED BY HIM THAT THE TENANCY RIGHT DID NOT SUBSIST ON THE ACQUISITION OF OWNERSHIP, IN VIEW OF THE JUDGEMENT OF HONBLE HIGH COURT OF BOMBAY IN TH E CASE OF CIT VS. DR D.A. IRANI (234 ITR 850). THE ASSESSEE HAD ACQUIRED THE OWNERSHIP RIGHT ON PAYMENT OF RS.45,062. THE ASSESSING OFFICER THER EFORE, HELD THAT COST OF ACQUISITION WOULD BE RS.46,062. ACCORDINGLY, THE ASSESSING OFFICER COMPUTED SHORT TERM CAPITAL GAIN AT RS.24,54,500. 3. THE ASSESSEE DISPUTED THE DECISION OF THE ASSESS ING OFFICER AND SUBMITTED BEFORE THE CIT(A) THAT FAIR MARKET VALUE OF THE PROPERTY, AS ON 04.03.2003, WOULD BE THE COST OF ACQUISITION OF THE HOUSE PROPERTY. ITA NO. : 3225/MUM/2009 MR. AJIT M. PENDURKAR, AY.:2005-06 3 ALTERNATIVELY, IT WAS ALSO SUBMITTED THAT COST OF A CQUISITION WOULD BE THE VALUE OF TENANCY RIGHT AS ON 04.03.2003 AND THE PAY MENT OF RS.45,062. THE ASSESSEE ALSO FILED THE VALUATION REPORT GIVING VALUE OF TENANCY RIGHT AT RS.16,70,328. THE CIT(A) DID NOT ACCEPT THE EXPL ANATION GIVEN. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD BEEN GIVEN TH E OWNERSHIP UNDER THE STATUTORY PROVISIONS OF MHADA AT A PRICE OF RS. 45,062. THEREFORE, CIT(A) UPHELD THE COST OF ACQUISITION AT RS.45,062. THUS, THE COMPUTATION OF SHORT TERM CAPITAL GAIN MADE BY THE ASSESSING OF FICER WAS UPHELD AGGRIEVED BY WHICH ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD.AR REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT THE COST OF ACQUISITION OF THE HOU SE PROPERTY WAS THE SUM TOTAL OF THE MARKET VALUE OF TENANCY AS ON 04.03.20 03 AND THE PAYMENT OF RS.45,062. ALTERNATIVELY, IT WAS ALSO SUBMITTED THAT THE MARKET VALUE THEREOF AS ON 04.03.2003 COULD BE CONSIDERED AS COS T OF ACQUISITION. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND S UPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE RESPECTIVE ORDERS. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING COMPUTATION OF CAPITAL GAIN FROM SALE OF HOUSE PROPERTY. THE ASSESSEE WAS TENANT OF THE PROP ERTY SINCE 1984, SUBSEQUENTLY, AS PER THE SCHEME OF THE GOVERNMENT, THE ASSESSEE WAS GIVEN OWNERSHIP RIGHT OF THE PROPERTY ON PAYMENT OF RS.45,062. THE PROPERTY WAS SOLD ON 31.10.2004. THE ASSESSEE HAD C OMPUTED CAPITAL ITA NO. : 3225/MUM/2009 MR. AJIT M. PENDURKAR, AY.:2005-06 4 GAIN FROM THE SALE OF THE PROPERTY AS LONG TERM CAP ITAL GAIN ON THE GROUND THAT THE PROPERTY WAS HELD SINCE 1984. HOWEVER, WE NOTE THAT IN 1984 THE ASSESSEE HAD ONLY THE TENANCY RIGHT WHICH NO DOUBT WAS AN ASSET, BUT THE SAID ASSET GOT EXTINGUISHED ON 04.03.2003, WHEN THE ASSESSEE WAS GIVEN THE OWNERSHIP RIGHT. THE ASSESSEE HAD SOLD THE HOUS E PROPERTY AS OWNER AND IN RESPECT OF THIS PROPERTY CAPITAL GAIN IS REQ UIRED TO BE COMPUTED. THE OWNERSHIP OF PROPERTY HAD BEEN ACQUIRED ON 04.0 3.2003. THEREFORE, THE SALE BEING WITHIN 36 MONTHS, THE GAIN HAS TO BE COMPUTED AS SHORT TERM CAPITAL GAIN. THEREFORE, THE ORDER CIT(A) OF H OLDING THE GAIN AS SHORT TERM CAPITAL GAIN IS UPHELD. AS REGARDS THE COST OF ACQUISITION OF THE PROPERTY SOLD, THE ASSESSEE HAD GOT THE OWNERSHIP R IGHT IN EXCHANGE OF THE TENANCY RIGHT PLUS ADDITIONAL PAYMENTS OF RS.45 ,062, BECAUSE ON THE ACQUISITION OF OWNERSHIP RIGHT THE TENANCY RIGHT NO LONGER SUBSISTED. THEREFORE, WE AGREE WITH THE SUBMISSION OF THE LD.A R THAT THE COST OF ACQUISITION OF THE PROPERTY WOULD BE THE MARKET VAL UE OF TENANCY RIGHT AS ON 04.03.2003 PLUS THE SUM OF RS.45,062 PAID BY THE ASSESSEE TO GOVERNMENT. WE HOWEVER DID NOT AGREE WITH THE SUBMI SSION OF LD.AR THAT THE COST OF ACQUISITION WOULD BE THE MARKET VALUE O F PROPERTY AS ON 04.03.2003, BECAUSE THE PROPERTY HAD BEEN ACQUIRED UNDER THE SCHEME OF GOVERNMENT WHICH WOULD NOT NECESSARILY BE AT MAR KET PRICE. THOUGH THE ASSESSEE HAD SUBMITTED THE VALUATION REPORT REG ARDING MARKET VALUE OF TENANCY RIGHT, BEFORE CIT(A) THE SAME REMAINED U NEXAMINED. WE THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTOR E THE MATTER TO THE FILE OF ASSESSING OFFICER FOR PASSING A FRESH ORDER AFTE R NECESSARY EXAMINATION ITA NO. : 3225/MUM/2009 MR. AJIT M. PENDURKAR, AY.:2005-06 5 OF THE COST OF ACQUISITION IN THE LIGHT OF OUR OBSE RVATIONS MADE ABOVE AND AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSE. ORDER PRONOUNCED ON THIS 19 TH DAY OF DECEMBER, 2012 - SD/- (VIVEK VARMA) SD/- (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT. : 19.12.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, G - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI RASIKA*