DCIT (International Taxation), New Delhi V. Smt. Manisha Juneja Sawhney, New Delhi

ITA 3444/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9091 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 31-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY WADHWA ADV MS RINKU SINGH
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

1 ITA NO. 3444/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 3444/DEL/20 17 (A.Y 2013-14) DCIT CIRCLE 3(1)(2), INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) VS SMT. MANISHA JUNEJA SAWHNEY W-31, GREATER KAILASH-I, NEW DELHI - 110048 PAN : BIGPS5425N (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 16/11/ 2016 PASSED BY CIT(A)-43, NEW DELHI FOR ASSESSMENT YEAR 2013-14 B Y THE REVENUE. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE SUBJECT MATTER OF TRANSFE R WAS RESIDENTIAL PROPERTY, WHEN THE COLLABORATION AGREEMENT ITSELF MANDATED TH E DEMOLITION OF THE EXISTING STRUCTURE AT THE EXPENSE OF THE BUYER HIMS ELF, THUS LEAVING NO RESIDENTIAL PROPERTY IN EXISTENCE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT AS PER THE COLLABORATION AGREEMENT WHAT WAS SOLD WAS NOT ANY RESIDENTIAL PROPERTY, BUT AT BEST ONLY THE RIGHT TO APPELLANT BY SH. AJAY WADHWA, ADV. RESPONDENT BY MS. RINKU SINGH, SR. DR DATE OF HEARING 04.07.2019 DATE OF PRONOUNCEMENT 10.07.2019 2 ITA NO. 3444/DEL/2017 RETAIN THE MALBA OF THE OLD STRUCTURE AFTER DEMOL ITION. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE MALBA OF THE DEMOLISHED STRUCTURE QUALIFIES AS A LONG-TERM C APITAL ASSET AND A RESIDENTIAL HOUSE WITHIN THE MEANING OF SECTION 54 OF THE ACT. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT EVEN THE EN TIRE SECOND FLOOR AND THE ENTIRE THIRD FLOOR SOLD BY THE ASSESSEE TO THE BUYE R BUILDER IN THE NEW CONSTRUCTION ALONG WITH THE PROPORTIONATE SHARE IN THE COMMON AREAS AND THE PLOT OF LAND WOULD NOT QUALIFY AS LONG-TERM CAPITAL ASSET WITHIN THE MEANING OF SECTION 54 OF THE ACT. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE UNDER T HE PROVISIONS OF SECTION 54 OF THE ACT BY COMPLETELY OVERLOOKING THAT THE CASE NEEDED TO BE EXAMINED UNDER THE PROVISIONS OF SECTION 54F OF THE ACT, AS WHAT WAS TRANSFERRED WAS THE PROPORTIONATE RIGHT IN THE LAND, A LONG-TERM CA PITAL ASSET ALONG WITH THE RIGHT TO MALBA, AND THE TWO NEWLY CONSTRUCTED FLO ORS, WHICH ARE SHORT-TERM CAPITAL ASSETS. 6. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, M ODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF T HE APPEAL. 3. THE ASSESSEE IS NON-RESIDENT INDIAN AND DECL ARED RETURN OF INCOME IN WHICH A LONG TERM CAPITAL GAIN OF RS. 1,84,67,418/- WAS DECLARED ON A TRANSFER OF RESIDENTIAL PROPERTY BEARING NO. W-31, GREATER K AILASH-1, NEW DELHI ADMEASURING 500 SQ. YDS. WHICH SHE HAD PURCHASED FR OM HER BROTHER 09.08.2007 AFTER CLAIMING AN EXEMPTION OF RS. 3,41, 25,000/- U/S 54 OF THE ACT ON THE SAME. ON 18.04.2012, THE ASSESSEE ENTERED IN TO A COLLABORATION AGREEMENT WITH A BUILDER, M/S. PRAGATI BUILDERS & P ROMOTERS IN RESPECT OF 3 ITA NO. 3444/DEL/2017 AFORESAID PROPERTY. AS PER THE COLLABORATION AGREEM ENT, THE ASSESSEE WOULD GIVE A VACANT POSSESSION OF THE PROPERTY FREE FROM ALL E NCUMBRANCES TO ALLOW THE BUILDER TO DEMOLISH THE EXISTING STRUCTURE AND CONS TRUCT A BUILDING CONSISTING OF BASEMENT, STILT, GROUND FLOOR, FIRST FLOOR, SECO ND FLOOR AND THIRD FLOOR WITH TERRACE. THE ENTIRE COST WAS TO BE MET BY THE BUILD ER FROM ITS OWN SOURCES. THE BUILDER IN TURN WOULD ALSO PAY TO THE ASSESSEE RS. 5,50,00,000/- AND RETAINED ENTIRE SECOND FLOOR, ENTIRE THIRD FLOOR WITH TERRAC E , PROPORTIONATE SHARE IN THE ENTIRE STILT AREA FOR CAR PARKING, USE OF COMMON AR EAS, FACILITIES AND SERVICES SUCH AS DRIVEWAY, LIFT, USE OF STAIRCASE ETC, PROPO RTIONATE UNDIVIDED INDIVISIBLE AND IMPARTIBLE OWNERSHIP RIGHTS IN THE PLOT OF LAND MEASURING 500 SQ. YRS. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143( 3) VIDE ORDER DATED 18.03.2016. THE ASSESSING OFFICER HELD THAT THE PRO PERTY THAT WAS TRANSFERRED BY THE ASSESSEE TO THE BUILDER UNDER COLLABORATION AGREEMENT DATED 18.04.2012 WAS NOT A RESIDENTIAL PROPERTY, BUT THE RIGHTS ON A PIECE OF LAND. HENCE, THE ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION CLAIMED U/S 54 AS PER THE ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER HELD THAT AS SESSEE WAS ALSO NOT ELIGIBLE FOR EXEMPTION U/S 54F SINCE SHE DID NOT SATISFY THE CON DITIONS PROVIDED UNDER PROVISO AT (A) (II) AND (A) (III) OF SUB SECTION (1 ) OF SECTION 54F. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN HO LDING THAT THE SUBJECT MATTER OF TRANSFER WAS RESIDENTIAL PROPERTY, WHEN T HE COLLABORATION AGREEMENT ITSELF MANDATED THE DEMOLITION OF THE EXISTING STRU CTURE AT THE EXPENSE OF THE BUYER HIMSELF, THUS LEAVING NO RESIDENTIAL PROPERTY IN EXISTENCE. THE LD. DR SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THE FACT THAT AS PER THE COLLABORATION AGREEMENT WHAT WAS SOLD WAS NOT ANY R ESIDENTIAL PROPERTY, BUT AT BEST ONLY THE RIGHT TO RETAIN THE MALBA OF THE OLD STRUCTURE AFTER DEMOLITION. THE LD. DR SUBMITTED THAT THE MALBA OF THE DEMOLI SHED STRUCTURE QUALIFIES AS A LONG-TERM CAPITAL ASSET AND A RESIDENTIAL HOUSE W ITHIN THE MEANING OF SECTION 4 ITA NO. 3444/DEL/2017 54 OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT TH E CIT(A) FAILED TO APPRECIATE THE FACT THAT EVEN THE ENTIRE SECOND FLOOR AND THE ENTIRE THIRD FLOOR SOLD BY THE ASSESSEE TO THE BUYER BUILDER IN THE NEW CONSTRUCTI ON ALONG WITH THE PROPORTIONATE SHARE IN THE COMMON AREAS AND THE PLO T OF LAND WOULD NOT QUALIFY AS LONG-TERM CAPITAL ASSET WITHIN THE MEANING OF SE CTION 54 OF THE ACT. THE LD. DR SUBMITTED THAT THE CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 54 OF THE ACT BY CO MPLETELY OVERLOOKING THAT THE CASE NEEDED TO BE EXAMINED UNDER THE PROVISIONS OF SECTION 54F OF THE ACT, AS WHAT WAS TRANSFERRED WAS THE PROPORTIONATE RIGHT IN THE LAND, A LONG-TERM CAPITAL ASSET ALONG WITH THE RIGHT TO MALBA, AND THE TWO NEWLY CONSTRUCTED FLOORS, WHICH ARE SHORT-TERM CAPITAL ASSETS. 6. THE LD. AR SUBMITTED THAT THE ONLY DISPUTE I N THE PRESENT APPEAL AS RELATES TO GROUND NO. 1, 2 AND 3 IS WHETHER THE CAP ITAL ASSET THAT WAS TRANSFERRED TO THE BUILDER UNDER COLLABORATION AGRE EMENT DATED 18.04.2012 WAS THE RESIDENTIAL PROPERTY OF THE RIGHTS ON A PIECE O F LAND. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER AT PARA 3.1 OF THE ASSES SMENT ORDER MENTIONED THAT THE ASSESSEE WAS THE OWNER OF THE PLOT BEARING NO. 31, ADMEASURING 500 SQ YDS AND THE STRUCTURE (RESIDENTIAL BUILDING) THEREON IN BLOCK W OF GREATER KAILASH, DELHI 110048. THE LD. AR SUBMITTED THAT THE ASSES SEE PURCHASED INDEPENDENT RESIDENTIAL HOUSE CONSISTING OF GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR ON 09.08.2007 FROM HER BROTHER. THE TYPE OF P ROPERTY IS MENTIONED AS RESIDENTIAL AT RESIDENTIAL AT PAGE NO. 6 OF THE P URCHASE DEED. CLAUSE 2 AT PAGE NO. 6 OF THE PURCHASED DEED MENTIONED THAT IN CONSI DERATION OF RS. 1,60,00,000/- RECEIVED BY THE VENDOR FROM THE VENDE E, THE VENDOR HEREBY SALES, TRANSFERS, CONVEYS AND ASSIGNS THE FREE HOLD PROPER TY I.E. BUILDING TOGETHER WITH WHOLE OF ITS STRUCTURE, ROOF AND LAND BENEATH THE S AME, BUILT ON RESIDENTIAL PLOT OF LAND BEARING NO. 31 IN BLOCK W, AREA MEASURING 5 00 SQ. YDS. IT IS AN UNDISPUTED FACT THAT THE SUBJECT PROPERTY WAS BEING USED AS RESIDENTIAL HOUSE BY THE ASSESSEE FROM THE PERIOD OF ITS PURCHASE ON 09.08.2007 TO THE DATE OF HANDING OVER ITS VACANT POSSESSION TO THE BUILDER F OR RE-DEVELOPMENT AND 5 ITA NO. 3444/DEL/2017 CONSTRUCTION VIDE COLLABORATION AGREEMENT DATED 18. 04.2012. THE LD. AR FURTHER SUBMITTED THAT FROM THE READING OF THE CLAUSE OF CO LLABORATION AGREEMENT IT CAN BE SEEN THAT WHAT WAS TRANSFERRED / HANDED OVER TO THE BUILDER WAS THE EXISTING STRUCTURE OF THE RESIDENTIAL PROPERTY. THE BUILDER DEMOLISHED AND REDEVELOPED THE OLD RESIDENTIAL PROPERTY INTO NEW R ESIDENTIAL BUILDING CONSISTING OF GROUND FLOOR, 1 ST FLOOR, SECOND AND THIRD FLOOR. WHAT WAS LOST WAS T HE ENTIRE EXISTING STRUCTURE IT COMPRISES RESIDENTIAL HOUSE. THE LD. AR RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF VED PRAKASH RAKHRA [2013] 256 CTR 285 AS WELL AS THE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS. GITA DUGGAL [2013] 357 ITR 153 AND CIT VS. SMT . K.G. RUKMINIAMMA 331 ITR 211 (KAR, H.C.). THE LD. AR HAS GIVEN AN ALTERN ATIVE CONTENTION THAT SINCE THE SHARE OF THE ASSESSEE AND THE BUILDER IN THE NE WLY CONSTRUCTED RESIDENTIAL PROPERTY WAS FIXED AND CERTAIN TERMS WERE DEFINED B Y THE COLLABORATION AGREEMENT ALTERNATIVELY IT CAN BE SAID THAT THE ASS ESSEE WAS PERMANENTLY DISPOSSESSED OF 2 ND FLOOR WITH TERRACE IN OLD RESIDENTIAL BUILDING AS THE BUILDER GOT SECOND FLOOR AND THIRD FLOOR IN THE NEW RESIDEN TIAL PROPERTY, IN EXCHANGE OF BASEMENT, GROUND FLOOR AND FIRST FLOOR IN THE NEW R ESIDENTIAL BUILDING. BY VIRTUE OF COLLABORATION AGREEMENT, THE ASSESSEE PERMANENTL Y LOSS THE SHARE BEYOND THE 1 ST FLOOR IN THE OLD RESIDENTIAL PROPERTY I.E. FROM 2 ND FLOOR ONWARDS. AND IN FACT RECEIVED THE SHARE UP TO THE 1 ST FLOOR IN THE NEWLY CONSTRUCTED RESIDENTIAL BUILDING. SO IN REAL SENSE, THE ASSESSEE WAS PERMAN ENTLY AND FOR ALL TIME DIS- POSSESSED OF 2 ND FLOOR ONWARDS IN OLD AND NEW RESIDENTIAL PROPERTY. THUS, THE ASSESSEE HAS RIGHTLY CLAIMED EXEMPTION U/S 54. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS IT CAN BE SEE N THAT IT IS AN UNDISPUTED FACT THAT THE SUBJECT PROPERTY WAS BEING USED AS RE SIDENTIAL HOUSE BY THE ASSESSEE FROM THE PERIOD OF ITS PURCHASE ON 09.08.2 007 TO THE DATE OF HANDING OVER ITS VACANT POSSESSION TO THE BUILDER FOR RE-DE VELOPMENT AND CONSTRUCTION VIDE COLLABORATION AGREEMENT DATED 18.04.2012. FROM THE CLAUSE OF COLLABORATION AGREEMENT, IT CAN BE SEEN THAT WHAT W AS TRANSFERRED / HANDED 6 ITA NO. 3444/DEL/2017 OVER TO THE BUILDER WAS THE EXISTING STRUCTURE OF T HE RESIDENTIAL PROPERTY. THE BUILDER DEMOLISHED AND REDEVELOPED THE OLD RESIDENT IAL PROPERTY INTO NEW RESIDENTIAL BUILDING CONSISTING OF GROUND FLOOR, 1 ST FLOOR, SECOND AND THIRD FLOOR. THUS, THE ASSESSEE LOST ALL RIGHTS UPON THE ENTIRE EXISTING STRUCTURE WHICH COMPRISES RESIDENTIAL HOUSE. THE RELIANCE UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF VED PRAKASH RAKHRA (SUPRA) AS WELL AS GITA DUGGAL (SUPRA) AND CIT VS. SMT. K.G. RUKMINIAMMA ( SUPRA) ARE APT IN PRESENT CASE. BY VIRTUE OF COLLABORATION AGREEMENT, THE ASS ESSEE PERMANENTLY LOST THE SHARE BEYOND THE 1 ST FLOOR IN THE OLD RESIDENTIAL PROPERTY I.E. FROM 2 ND FLOOR ONWARDS AND IN FACT RECEIVED THE SHARE UP TO THE 1 ST FLOOR IN THE NEWLY CONSTRUCTED RESIDENTIAL BUILDING. SO THE ASSESSEE P ERMANENTLY DIS-POSSESSED OF 2 ND FLOOR ONWARDS IN OLD AND NEW RESIDENTIAL PROPERTY. THUS, THE ASSESSEE HAS RIGHTLY CLAIMED EXEMPTION U/S 54. AS PER THE PROVIS IONS OF SECTION 54, THE ASSESSEE PURCHASED RESIDENTIAL PROPERTY. THE SAID P ROPERTY WAS HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS FROM THE DATE OF ACQUISITION AND IT IS A CASE OF LONG TERM CAPITAL GAIN ON TRANSFER OF RESIDENTIA L PROPERTY. THE SAID RESIDENTIAL PROPERTY WAS SUBJECT MATTER OF COLLABORATION AGREEM ENT DATED 18.04.2012 UNDER WHICH THE POSSESSION WAS TRANSFERRED TO THE D EVELOPER AND THE RIGHTS OF THE PURCHASED PROPERTY WERE LOST. THE CONSIDERATION RECEIVED BY THE ASSESSEE UNDER COLLABORATION AGREEMENT WAS RS. 5.50 CORES AN D ALSO THE COST OF CONSTRUCTION OF THE AREA OF BUILDING COMING TO THE SHARE OF THE ASSESSEE WHICH WAS COMPRISING OF AREA IN BASEMENT, GROUND FLOOR AN D FIRST FLOOR AND THE SAID AMOUNT WAS TO BE TREATED AS SALE CONSIDERATION ON A CCOUNT OF TRANSFER OF THE PROPERTY BY THE ASSESSEE TO THE BUILDER UNDER COLLA BORATION AGREEMENT. THE GAIN ARISING ON THE SAID TRANSFER WAS UTILIZED FOR PURCHASE OF RESIDENTIAL PROPERTY AT GREATER KAILASH-III, NEW DELHI AS PER T HE SALE REGISTRATION DATED 09.07.2013. THUS THE NEW RESIDENTIAL PROPERTY WAS A CQUIRED WITHIN TWO YEARS FROM THE DATE OF TRANSFER OF THE SAID PROPERTY I.E. DATE OF COLLABORATION ON 18.04.2012. THUS, THERE IS NO NEED TO INTERFERE WIT H THE FINDINGS OF THE CIT(A). THE DETAILS HAVE BEEN GIVEN BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THUS, THE ASSESSING OFFICER WAS NOT CO RRECT IN DISALLOWING THE 7 ITA NO. 3444/DEL/2017 CLAIM U/S 54 OF THE INCOME TAX ACT, 1961. THE APPEA L OF THE REVENUE IS DISMISSED. 8. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 10/07/2019 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 3444/DEL/2017 DATE OF DICTATION 0 5 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 0 5 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK