SUDESH KUMAR GUPTA, MUMBAI V. ITO WD 20(3)(3), MUMBAI

ITA 3547/MUM/2009

• Counselvise Citation: 354719914 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: S C TIWARI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 50C

Judgement Text

1 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE J. SUDHAKAR REDDY (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 3547/MUM/2009 ASSESSMENT YEAR- 2005-06 SHRI SUDESH KUMAR GUPTA F/101, CRYSTAL SUNDERVAN COMPLEX, LOKHANDWALA ROAD, ANDHERI(W), MUMBAI-400 053 PAN NO: AABPG7730J VS. ITO WD 20(3)(3) PIRAMAL CHAMBERS, LOWER PAREL, MUMBAI-400 012 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. C. TIWARI RESPONDENT BY : SHRI G. P. TRIVEDI DATE OF HEARING : 29/06/2011 DATE OF PRONOUNCEMENT : 12/08/2011 O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 20.02.2009 PASSED BY THE LD. CIT(A)-XXXII, MU MBAI FOR THE ASSESSMENT YEAR 2005-06. 2. THE RETURN OF INCOME WAS FILED ON 26.10.2005, DE CLARING A TOTAL INCOME OF RS.3,42,963/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND THE AO ASSESSED THE TOTAL INCOME AT RS.32,04,265/-, AFTER MAKING CERTAI N ADDITIONS TO THE RETURN INCOME OF THE ASSSESSEE. THE ASSESSEE IS AN INDIVID UAL, THE INCOME FOR THE YEAR IN APPEAL INCLUDES INCOME EARNED ON SALE OF PL OT AT MULUND, JOINTLY CO- OWNED WITH HIS BROTHER AND INHERITED FROM HIS FATHE R. THE PLOT OF LAND SOLD IS FREE HOLD LAND AND SITUATED IN A LOWER MIDDLE CLASS LOCALITY AT MULUND. THEREFORE, THE LAND IS NOT AMENABLE FOR DEVELOPMENT , OTHERWISE THAN FOR 2 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA WHICH IT IS RESERVED. CONSIDERING THESE RESTRICTION S ON THE SAID PLOT OF LAND, IT WAS SOLD FOR RS.73,00,000/- AS AGAINST THE VALUATIO N FOR THE PURPOSES OF STAMP DUTY WHICH WAS TO THE TUNE OF RS.1,54,68,000/ -. 3. AS PER REPORT OF GOVT. REGISTERED VALUER, THE FA IR MARKET AS ON 17.04.2004 WAS RS.56,17,250/- (ASSESSEES SHARE) WHICH WAS CLAIMED IN THE RETURN OF INCOME FILED BY THE ASSESSEE. THE REP ORT OF THE GOVT. REGISTERED VALUER FOR FAIR MARKET VALUE AS ON 01.04.1981 AND A S ON 17.12.2004 WAS SUBMITTED TO THE AO. THE AO NOT AGREEING WITH THE S AID VALUE, REFER THE MATTER TO THE VALUATION OFFICER TO ASCERTAIN THE FA IR MARKET VALUE AS ON 01.04.1981 AND ALSO TO ASCERTAIN THE VALUATION OF L AND IN TERMS OF PROVISIONS OF SECTION 50C(2)(A) OF THE I.T. ACT. ACCORDINGLY, THE VALUATION OFFICER AS PER THE VALUATION REPORT VALUED THE LAND AT RS.63,66,98 1/- BEING THE FAIR MARKET VALUE AS ON 17.12.2004. HOWEVER, THE AO IGNORING TH E SPECIFIC VALUE AS PER THE PROVISIONS OF SECTION 50(2)(A) DONE BY THE DEPA RTMENTAL VALUER HAS TAKEN THE GROSS VALUE OF RS.81,67,500/- THEREBY IGNORING THE METHOD OF VALUATION ADOPTED BY THE DEPARTMENTAL VALUATION OFFICER FOR A RRIVING AT THE FAIR MARKET VALUE OF THE LAND BEING THE VALUE WHICH IT WOULD FE TCH IN THE OPEN MARKET AND THUS ACCORDINGLY CALCULATED THE CAPITAL GAINS TAKIN G THE VALUE AT RS.81,66,500/-. 4. BEING AGGRIEVED THE ASSESSEE FILED AN APPEAL BEF ORE THE LD. CIT(A). 5. THE LD. CIT(A) HELD AS FOLLOWS : 8. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AS WELL AS FACTS OF THE CASE. THE ONLY QUESTION TO BE DECID ED IN THE CASE OF THE APPELLANT IS FAIR MARKET VALUE OF THE PLOT SOLD AS ON DATE OF TRANSFER. THE APPELLANT HAD ITSELF ADOPTED THE PROV ISIONS OF SECTION 50(C) AND COMPUTED THE CAPITAL GAIN BASED ON THE RE PORT OF REGISTERED VALUER WHILE FILING THE RETURN OF INCOME . THEREFORE, THE ARGUMENT OF THE APPELLANT THAT PROVISIONS OF SECTIO N 50(C) ARE NOT APPLICABLE IN RESPECT OF TDR, ARE INVALID AND THE S AME CANNOT BE 3 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA REMEDIED. THEREFORE, THE ARGUMENT OF THE APPELLANT REGARDING NON APPLICABILITY OF PROVISIONS OF SECTION 50(C) ARE HE REBY REJECTED. 9. SO FAR AS THE COMPUTATION OF CAPITAL GAINS IN RE SPECT OF THE PLOT SOLD BY THE APPELLANT THROUGH TDR IS CONCERNED , PROVISIONS OF SECTION 50(C) ENTITLE THE ASSESSEE TO OBJECT TO THE VALUATION ADOPTED BY THE STAMP DUTY AUTHORITY. THE APPELLANT HAS DISP UTED THE SAME AND FURNISHED A REPORT OF REGISTERED VALUER IN THIS REGARD. HOWEVER, THE AO HAS NOT ACCEPTED THE SAME AND REFER RED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER. THE D EPARTMENTAL VALUATION OFFICER HAS VALUED THE PROPERTY AT RS.63, 66,981/-. THEREFORE, THE AO SHOULD HAVE ADOPTED THIS VALUE OF THE PROPERTY BASED ON THE DEPARTMENTAL VALUATION OFFICERS REPOR T AS ON THE DATE OF TRANSFER FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE AO WAS NOT JUSTIFIED IN REJECTING THE VALUATION OF THE DEPARTMENTAL VALUATION OFFICER AT RS.63,66,981/- BECAUSE IN THAT CASE THE PROVISIONS OF SECTION 50(C)(2) WOULD BECOME REDUNDA NT. HENCE, I AGREE TO THE WITHOUT PREJUDICE ARGUMENTS OF THE APP ELLANT IN THIS REGARD. WHEN THE AO HIMSELF REFERRED THE MATTER OF VALUATION TO THE DEPARTMENTAL VALUATION OFFICER, THE MARKET VALUE OF THE PLOT AS ON THE DATE OF TRANSFER SHOULD HAVE BEEN ADOPTED BY HI M AS PER VALUATION OFFICERS REPORT. I, THEREFORE, HOLD THAT THE MARKET VALUE OF THE APPELLANTS SHARE IN THE SAID PROPERTY IS RS.63 ,66,981/- AND THE CAPITAL GAIN SHOULD BE COMPUTED BY TAKING THIS VALUE TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF THE SAID PROPERTY. LONG TERM CAPITAL GA IN WILL THEREFORE, BE RS.28,38,621/-. AFTER DEDUCTION OF BASIC EXEMPTI ON OF RS.15,00,000/- U/S.54EC, THE NET TAXABLE CAPITAL GA IN WORKS OUT TO RS.13,38,621/-. THE AO IS DIRECTED ACCORDINGLY T O TAX THE CAPITAL GAIN AT RS.13,38,621/- AFTER VERIFICATION OF CORREC TNESS OF THESE FIGURES. 6. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE PREFERRED THE GROUNDS OF APPEAL WHICH ARE AS FOLLOWS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE OF THE APPELLANT AND IN LAW, LEARNED CIT(A) HAS ERRED IN N OT HOLDING THAT THE APPELLANT HAD SOLD TDR TO M/S. MAYFAIR HOUSING AND, THEREFORE, THE CONSIDERATION FOR SALE RECEIVED BY T HE APPELLANT IS NOT LIABLE TO CAPITAL GAINS TAX. 2. THAT WITHOUT PREJUDICE TO GROUND OF APPEAL NO.1 ABOVE AND IN THE ALTERNATIVE, LEARNED CIT(A) HAS ERRED IN NOT HOLDING THAT THE 4 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA TRANSACTION OF THE APPELLANT NOT BEING TRANSFER OF LAND DID NOT FALL WITHIN THE PURVIEW OF THE PROVISIONS OF SECTION 50C OF THE ACT. 7. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE S ERIES OF DECISIONS WHEREIN IT HAS BEEN HELD THAT THE TRANSFER OF TDR R IGHTS GRANTED BY THE DEVELOPMENT CONTROL REGULATIONS, QUALIFYING FOR EQU IVALENT FLOOR SPACE INDEX HAVING NO COST OF ACQUISITION AND, THEREFORE, THE S ALE OF THE SAME DOES NOT GIVE RISE TO TAXABLE CAPITAL GAINS. 8. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE F OLLOWING DECISIONS :- 1. JETHALAL D. MEHTA V. DY. CIT 2 SOT 422 (MUM) 2. ITO V. LOTIA COURT CHS LTD. 118 TTJ (MUM) 641 3. NEW SHAILAJA CO.OP HSG. SOC. LTD. V. ITO 121 TTJ ( MUM) 62 4. M/S. AMBER CROFT CO.OP HSG. SOC. LTD. ITA NO.5697/M /06 9. WITHOUT PREJUDICE TO THE STAND OF APPEAL AS RAIS ED BY THE ASSESSEE, THE ASSESSEE HAS CHALLENGED THE APPLICABILITY OF SECTIO N 50C WITH RESPECT TO TRANSACTION OF THE ASSESSEE, WHICH ACCORDING TO THE ASSESSEE IS NOT TRANSFER OF LAND. 10. THE LD. DR OBJECTED TO THE GROUND RAISED BY THE ASSESSEE AND RELIED ON THE DECISION OF CHATURBHUJ DWARKADAS KAPADIA V. CIT - 260 ITR 491 (BOM). 11. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ARIF HUSSAIN DAS HAS DE CIDED AS FOLLOWS : 9. THE MAIN CONTENTION OF THE LEARNED AR I S THAT THE DEVELOPMENT RIGHTS DOES NOT AMOUNT TO TRAN SFER OF LAND OR BUILDING AND THEREFORE THE PROVISIONS OF SEC T ION 50C ARE NOT APPLICABLE. IT IS TO BE NOTED THAT THE DEF INIT ION OF TRANSFER IN THE INCOME TAX ACT , IS NOT SIMILAR TO THAT OF DEF INIT ION UNDER THE TRANSFER OF PROPERTY ACT. APART FROM 5 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA VARIOUS MODE OF TRANSFERS PROVIDED UNDER THE TRANSFER OF PROPERTY ACT , THE INCOME TAX ACT , ALSO P ROVIDES A DEF INIT ION OF TRANSFER AS DEEMED TRANSFER U/S 2(47) (V). THE DEEMED TRANSFER IS APPLIED WHEN THE CONDITION PRESCRIBED U/S 53A OF TRANSFER OF PROPERTY ACT ARE FULFI LLED SECT ION 53A OF THE TRANSFER OF PROPERTY ACT DOES NOT PROVI DE THE CONDITION FOR TRANSFER BUT IT PROVIDES PROTECT ION TO THE TRANSFEROR OF ANY IMMOVABLE PROPERTY BY A WRITTEN CONTRACT, THE TERMS OF WHICH CONSTITUTE THE TRANSFER AND CAN BE ASCE RTAINED WITH REASONABLE CERTAINTY AND THE TRANSFEREE AS PAR T PERFORMANCE OF THE CONTRACT TAKEN THE POSSESSIONS OF T HE PROPERTY AND HAS PERFORMED OR WILLING TO PERFORM HIS PAR T OF CONTRACT , THEN EVEN THE SAID CONTRACT THOUGH REQUIRED T O BE REGISTERED HAS NOT BEEN REGISTERED AND THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFORE B Y LAW, THE TRANSFEROR IS BAR RED FROM ENFORCING AGAINST THE TRANSFEREE ANY RIGHT IN RESPECT OF THE PROPERTY OTHER THA N THE RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTR ACT. UNDER THE INCOME TAX ACT , 1961 BY INSERTING CLAUSE (V) TO SECT ION 2(47), THE DEF INIT ION OF THE TERM TRANSFER INCLUDES THE TRANSACT ION WHICH FULFILS THE CONDITIONS PROVIDED U/S 53A OF TRANSFER OF PROPERTY ACT . THUS, THE PROVISIONS O F SECT ION 53A OF TRANSFER OF PROPERTY ACT DOES NOT PROVIDE ANY TRANSFER BUT IT TALKS ABOUT THE SITUATION WHEN THE RIGH T CREATED IN FAVOUR OF THE TRANSFEREE CANNOT BE DEFEATED OTHERW ISE THAN THE TERMS AND CONDITIONS EXPRESSLY PROVIDED IN THE CONTRACT ITSELF . WHEN THE ASSESSEE HAS RECEIVED THE SALE CON SIDERATION AND HANDED OVER THE POSSESSION OF THE PROPERTY IN QUESTION VIDE DEVELOPMENT AGREEMENT THEN THE CONDITION PRE SCRIBED U/S 53A OF THE TRANSFER OF PROPERTY ACT ARE SATISFIED AND ACCORDINGLY, AS PER THE PROVISIONS OF SECT ION 2(47)(V) OF THE IT ACT THE TRANSACT ION OF TRANSFER IS COMPLET ED. ACCORDINGLY, WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE CONTENT ION OF THE ASSESSEE. MERELY BECAUSE THE NAME OF THE ASSESSEE STILL STAND IN THE RECORD OF THE MUNICIPAL RECORD DOES NOT CHANGE THE NATURE OF TRANSACT ION. EVEN OT HERWISE THE MUTATION OF THE PROPERTY IN THE PROPERTY TAX RECORD OF MUNICIPAL AUTHORITY DOES NOT GIVE ANY T I T L E OF OWNERSHIP. 6 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA ONCE, UNDISPUTEDLY, THE ASSESSEE HAS HANDED OVER THE POSSESSION OF THE PROPERTY TO THE DEVELOPER AGAINST THE PAYMENT OF SHARE OF SALE CONSIDERATION TH EN THE PROPERTY IS DEEMED TO HAVE BEEN TRANSFERRED AS PER T HE DEEMING PROVISIONS OF SECT ION 2(47) OF THE IT ACT. W HEN THE CONDITIONS OF SECT ION 53A OF TRANSFER OF PROPERTY AC T IS FULFILLED IRRESPECTIVE OF THE FACT THAT IT IS NO T ABSOLUTE TRANSFER BY WAY OF EXECUTION OF SALE DEED, THE TRANSAC T ION IS TO BE COMPLETED. THE TRANSFER OF CAPITAL ASS ET IS COMPLETED I F THE CERTAIN CONDITIONS OF SECT ION 53A OF THE TRANSFER OF PROPERTY ACT IS SATISFIED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE L OWER AUTHORITIES ON THIS ISSUE. AS FAR AS, DEMERITS ATTACHED TO THE PROPERTY ARE CONCERNED, THE DVO HAS AL READY TAKEN INTO A CCOUNT AL L ASPECTS WHILE MAKING THE VALUATION OF THE PROPERTY. THE ASSESSEE HAS PARTICIPATED IN THE PROCEEDIN GS BEFORE THE DVO AND ACCORDINGLY, WE DO NOT FIND ANY E RROR OR ILLEGALITY IN THE VALUATION MADE BY THE DVO WHICH IS MUCH LESS TO THE VALUATION MADE BY THE STAMP VALUATION A UTHORITY. THE SUBSTANTIAL RELIEF HAS AL READY BEEN GIVEN BY THE DVO AS WELL AS BY THE AO WHILE PASSING THE CONS EQUENTIAL ORDER AS PER THE DVOS REPORT . ACCORDINGLY, THE AP PEALS OF THE ASSESSEE ARE DEVOID OF MERITS ON THIS ISSUE 12. IN THIS CASE, THE LD. CIT(A) HAS HELD AS FOLLOW S : THE MARKET VALUE OF THE PLOT AS ON THE DATE OF TRA NSFER SHOULD HAVE BEEN ADOPTED BY HIM AS PER VALUATION OFFICERS REPO RT. I, THEREFORE, HOLD THAT THE MARKET VALUE OF THE APPELLANTS SHARE IN THE SAID PROPERTY IS RS.63,66,981/- AND HAS DIRECTED THE AO TO WORK OUT THE CAPITAL AND GAIN TAKING THE MARKET VALUE ADOPTED BY THE VALUATION OFFICER AT RS.13,38, 621/-. WE CONFIRM THE ORDER OF THE LD. CIT(A) AS PROVISIONS OF SEC. 50C A RE APPLICABLE IN THIS CASE AND DIRECT THE AO TO CALCULATE CAPITAL GAINS TAKING THE MARKET VALUE ADOPTED BY THE VALUATION OFFICER AT RS.13,38,621/- AND ARRI VE AT THE CORRECT FIGURE IN DETERMINING THE CAPITAL GAIN. 7 ITA NO. 3547/MUM/2009 SHRI SUDESH KUMAR GUPTA 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESEE IS DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST, 2011 SD/- SD/- ( J. SUDHAKAR REDDY) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATED : 12/08/2011 ROSHANI COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, D - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI