SUHAS KESHAV DESAI, MUMBAI V. ITO 24(2)(2), MUMBAI

ITA 3595/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55775 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 09-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DATES OF HEARING NOVEMBER
• Assessee Lawyers: D S SUNDER SINGH
• Keywords: Capital asset; Gift; Surrender of tenancy right
• Section: 143(3)

Judgement Text

ITA NO. 3595 /MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI VIJAY PAL RAO (JUDICIAL MEMBER) ITA NO. 3595/MUM/2010 ASSESSMENT YEAR: 2006-07 SUHAS KESHAV DESAI ...APPELLANT 402, SAI VISAVA PLOT NO. 74, GORAI II BORVILI (WEST), MUMBAI 400 092 PAN : ADNPD5780C VS. INCOME TAX OFFICER WARD 24(2)(2), MUMBAI RESPONDENT APPEARANCES: P M PARULEKAR, FOR THE APPELLANT D S SUNDER SINGH, FOR THE RESPONDENT DATES OF HEARING : NOVEMBER 09, 2011 DATE OF PRONOUNCEMENT : NOVEMBER 09, 2011 O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOL DING THE GAINS OF RS 5,50,000, ON SURRENDER OF TENANCY RIGHTS, BEING TAX ED IN THE HANDS OF THE ASSESSEE AS SHORT TERM CAPITAL GAINS AS AGAIN ST ASSESSEES CLAIM THAT THE SAID GAINS CONSTITUTE LONG TERM CAPITAL GA INS. THE ASSESSMENT ITA NO. 3595 /MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 2 OF 6 YEAR INVOLVED IS 2006-07 AND THE IMPUGNED ASSESSMEN T WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPA SS OF MATERIAL FACTS. ON 5 TH AUGUST 2005, I.E. DURING THE RELEVANT PREVIOUS YEA R, THE ASSESSEE HAD RECEIVED A SUM OF RS 5,50,000 ON SURRE NDER OF TENANCY RIGHTS IN A RESIDENTIAL UNIT AT NO. 4, GOPAL KRISHA N DHAM, TARABAGH, 3 RD MAMALETDAR WADI, MALAD WEST, MUMBAI. IN HIS INCOME TAX RETURN, THE ASSESSEE TREATED THIS AMOUNT OF RS 5,50,000 AS LONG TERM CAPITAL GAINS. THE CLAIM OF THE ASSESSEE WAS THAT SINCE THE TENANC Y RIGHTS WERE ACQUIRED IN 1957 WHICH WAS THE YEAR IN WHICH ASSESS EES FATHER BECAME TENANT OF THE RESIDENTIAL UNIT AND THUS HEL D FOR MORE THAN QUALIFYING PERIOD OF 36 MONTHS, THE TENANCY RIGHTS ARE REQUIRED TO BE TREATED AS LONG TERM CAPITAL ASSET. THE ASSESSING OFFICER DID NOT ACCEPT THIS CLAIM. HE WAS OF THE VIEW THAT ON THE DEATH O F ASSESSEES FATHER, THE TENANCY RIGHTS WERE VESTED IN ASSESSEES MOTHER , AND SINCE ASSESSEES MOTHER TRANSFERRED THE TENANCY RIGHTS, B Y THE VIRTUE OF DECLARATION DATED 14 TH JULY 2005, TO THE ASSESSEE, THE ASSESSEE HELD THE ASSET FOR JUST UNDER A MONTH WHICH IS OBVIOUSLY M UCH LESS THAN QUALIFYING PERIOD OF 36 MONTHS. THE ASSET WAS THUS HELD TO BE SHORT TERM CAPITAL ASSET, AND GAINS ON SALE OF THE SAID A SSET WERE, THEREFORE, TREATED TO BE SHORT TERM CAPITAL GAINS. THE EXEMPT ION UNDER SECTION 54, AS CLAIMED BY THE ASSESSEE IN RESPECT OF THIS CAPIT AL GAIN, WAS HELD TO BE INADMISSIBLE. AGGRIEVED, ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. ITA NO. 3595 /MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 3 OF 6 4. WE HAVE NOTED THAT IT IS NOT EVEN THE CASE OF TH E ASSESSING OFFICER THAT TENANCY RIGHTS WERE TRANSFERRED TO THE ASSESSE E, BY HIS MOTHER, FOR A CONSIDERATION. THEREFORE, EVEN IF IT IS A CASE OF TRANSFER OF TENANCY RIGHTS BY MOTHER OF THE ASSESSEE TO THE ASSESSEE, I T IS A CASE OF GIFT OF TENANCY RIGHTS. SIMILARLY, WHEN TENANCY RIGHTS WERE ACQUIRED BY ASSESSEES MOTHER, ON ACCOUNT OF DEATH OF HER HUSBA ND, IT WAS A CASE OF INHERITANCE. IN BOTH OF THESE SITUATIONS, IN VIEW OF SPECIFIC PROVISIONS OF EXPLANATION 1(I)(B) TO SECTION 2 (42 A) READ WIT H SECTION 49(1)(II) AND (III)(A) AND FOR THE PURPOSE OF DETERMINING WHE THER THE ASSET IS A SHORT TERM CAPITAL ASSET OR LONG TERM CAPITAL ASSET , IN DETERMINING THE PERIOD FOR WHICH CAPITAL ASSET IS HELD BY THE ASSES SEE, THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER, REF ERRED TO IN THE RESPECTIVE PROVISION, IS TO BE INCLUDED. WE HAVE AL SO NOTED THAT ASSESSEES FATHER PASSED AWAY ON 4 TH AUGUST 2003 AND, THEREFORE, HER MOTHER IS SAID TO BE OWNER OF TENANCY RIGHTS WITH E FFECT FROM THAT DATE. THE COMPUTATION OF PERIOD OF HOLDING OF ASSET IN TH E HANDS OF ASSESSEES MOTHER WILL INCLUDE THE PERIOD FOR WHICH THE ASSET WAS HELD BY HER LATE HUSBAND, FROM WHOM SHE INHERITED THE SA ID ASSET OF TENANCY RIGHTS, AND , CONSEQUENTLY, THE PERIOD FOR WHICH TH E ASSET OF TENANCY RIGHT WAS HELD BY THE ASSESSEE WILL INCLUDE THE PER IODS FOR WHICH THE TENANCY RIGHT WAS HELD BY ASSESSEES MOTHER AS ALSO HIS LATE FATHER. IN THESE CIRCUMSTANCES, FOR THE PURPOSES OF APPLYING T HE THRESHOLD LIMIT OF HOLDING THE ASSET, THE PERIOD FOR WHICH THE TENANCY RIGHTS WERE HELD BY ASSESSEES MOTHER, WHO IS SAID TO HAVE GIFTED THE T ENANCY RIGHTS TO THE ASSESSEE, AS ALSO THE PERIOD FOR WHICH THE TENANCY RIGHTS WERE HELD BY ASSESSEES FATHER, ON WHOSE DEATH TENANCY RIGHTS WE RE PASSED ON TO ASSESSEES MOTHER, ARE TO BE CUMULATIVELY TAKEN INT O ACCOUNT. 5. WHEN THE ABOVE PROPOSITION WAS PUT TO THE LEARNE D DEPARTMENTAL REPRESENTATIVE, AND LEGAL PROVISIONS EXPLAINED TO T HE LEARNED DEPARTMENTAL REPRESENTATIVE, HE DID NOT HAVE MUCH T O SAY EXCEPT TO ITA NO. 3595 /MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 4 OF 6 PLACE HIS RATHER BLAND RELIANCE ON THE ORDERS OF TH E AUTHORITIES BELOW. IT WAS POINTED OUT THAT THE ABOVE ASPECT OF THE MATTER WAS NOT EXAMINED BY ANY OF THE AUTHORITIES BELOW, NOR DID THE ASSESS EE TAKE UP THE SAID PLEA BEFORE THE AUTHORITIES BELOW. WE SEE NO MERI TS IN THIS DEFENCE. WHEN ALL THE RELATED FACTS ARE ON RECORD, AND THE L EGAL PROVISIONS ARE UNAMBIGUOUS, THERE CANNOT BE ANY GOOD REASON NOT TO APPLY THE CORRECT LEGAL POSITION. ON THE BASIS OF THE DISCUS SIONS IN THE PRECEDING PARAGRAPH ON UNDISPUTED FACTUAL AND LEGAL POSITION, IT IS CLEAR THAT THE ASSET WAS HELD FOR THE QUALIFYING PERIOD, AND, ACCO RDINGLY, THE SAME IS REQUIRED TO BE TREATED AS LONG TERM CAPITAL ASSET. 6. FOR THE REASONS SET OUT ABOVE, WE UPHOLD THE CLA IM OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO TREAT THE GAINS ON SURRENDER OF CAPITAL RIGHTS AS LONG TERM CAPITAL GAINS; ALL THE COROLLARIES OF TREATING THE GAINS, ON SURRENDER OF TENANCY RIGHTS, AS LONG TERM CAPITAL GAINS WILL ALSO FOLLOW. THE ASSESSEE GETS THE RELIEF ACCORDING LY. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERM S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 09TH DAY OF N OVEMBER, 2011. SD/- SD/- (VIJAY PAL RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 09 TH DAY OF NOVEMBER, 2011 . ITA NO. 3595 /MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 5 OF 6 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER , MUMBAI 4. DEPARTMENTAL REPRESENTATIVE, BENCH, MUMBAI 5. GUARD FILE TRUE COPY BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI ITA NO. 3595 /MUM/2010 ASSESSMENT YEAR: 2006- 07 PAGE 6 OF 6 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED (TYPED MY MEMBER IN LAPTOP) 9-11- 2011 AM 2. DRAFT PLACED BEFORE AUTHOR 9-11-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER