Sh Manoranjan Kalia, Jalandhar V. The Assistant Commissioner of Income Tax -III, Jalandhar

ITA 360/ASR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5708 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-03-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: J S BHASIN
• Keywords: Capital asset; Cost of acquisition; Non compliance
• Section: 143(3); 54F; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 360/(ASR)/2016 AS SESSMENT YEAR: 2010-11 MANORANJAN KALIA, 158/4 CENTRAL TOWN, JALANDHAR. VS. ASST. CIT-III, JALANDHAR [PAN: ACUPK 8414C] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. J. S. BHASIN (ADV.) RESPONDENT BY: SH. RAJEEV GUBGOTRA (D.R.) DATE OF HEARING: 07.03.2018 DATE OF PRONOUNCEMENT: 22.03.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, JALANDHAR ('CIT(A)', FOR SHORT) DATED 07.04.2016, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING HI S ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 25.10.2012 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE ISSUE ARISING IN THE INSTANT CASE IS THE COR RECT AMOUNT ASSESSABLE AS INCOME UNDER THE ACT FOR THE YEAR UNDER CONSIDERATI ON PURSUANT TO THE WITHDRAWAL OF THE EXEMPTION U/S. 54F, AVAILED BY THE ASSESSEE FOR AY 2007-08 IN THE SUM OF RS.6355702 ON THE DEPOSIT OF RS.66 LACS IN THE CAPI TAL GAINS ACCOUNT SCHEME. ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 2 3. THE ASSESSEE, AS A MEMBER OF A HOUSING SOCIETY H OLDING 21.2 ACRES OF LAND, RECEIVED THE FOLLOWING SUMS CORRESPONDING TO HIS SH ARE-HOLDING THEREIN (I.E., 1000 SQ. YARDS), PURSUANT TO THE TRANSFER OF THE SAID LAND BY THE SAID SOCIETY UNDER A JOINT DEVELOPMENT AGREEMENT (JDA) DATED 25.02.2007: RS.6,00,000/- TOWARDS ADVANCE/EARNEST MONEY (RECEIVED ON 25.02.2007); RS.24,00,000/ -, BEING THE PRICE OF 3.08 ACRES OF LAND TRANSFERRED BY REGISTERED SALE DEED; (RECEIVED ON 25.02.2007) ; AND RS.36,00,000/-, BEING THE PRICE OF 4.62 ACRES OF LAND TRANSFERRED BY REGISTERED SALE DEED (RECEIVED ON 30.04.2007) IN ADDITION, THE ASSESSEE WAS TO RECEIVE TWO RESIDE NTIAL FLATS ADMEASURING 2250 SQ. FT. EACH. THIS WAS AS THE MEMBERS OF THE SOCIETY HA D ALSO SURRENDERED THEIR RIGHTS, ENABLING THE SOCIETY TO ENTER INTO AN AGREEMENT WIT H THE DEVELOPERS AND, EQUALLY IMPORTANTLY, WERE TO BE THE BENEFICIARIES OF THE AG REEMENT, ENTITLED TO RECEIVE THE CONSIDERATION, WHICH WAS STIPULATED AS PARTLY IN CA SH AND PARTLY IN KIND, I.E., THE PROPERTY TO BE DEVELOPED (QUANTIFIED IN TERMS OF SQ . FT.) THE CASH WAS TO BE PAID IN THREE INSTALLMENTS. AT EACH STAGE, LAND CORRESPONDI NG TO THE CONSIDERATION PAID /DISCHARGED (IN CASH OR IN KIND) WAS TO BE CONVEYED PER A REGISTERED SALE DEED. THE ASSESSEE, ALONG WITH OTHERS, RECEIVED THE FIRST TWO (CASH) INSTALLMENTS. THE IMPLEMENTATION OF THE AGREEMENT FELL IN PROBLEM FOR WANT OF THE NECESSARY APPROVALS/PERMISSIONS FOR THE DEVELOPMENT. THE REVE NUE, IN THE INSTANT CASE, BROUGHT THE ENTIRE SALE CONSIDERATION, RECEIVED AND RECEIVABLE AS PER THE JDA, FOR AY 2007-08, I.E., EVEN AS RETURNED BY THE ASSESSEE. THE MATTER TRAVELLED TO THE HON'BLE HIGH COURT, AND THEN TO THE HON'BLE APEX CO URT, WHICH FINALLY HELD THAT THE AGREEMENT (JDA), BEING NOT REGISTERED, AS REQUI RED TO BY THE REGISTRATION AND OTHER RELATED LAWS (AMENDMENT) ACT, 2001, NO TRANSF ER U/S. 2(47)(V) COULD, IN VIEW OF THE REGISTRATION ACT, 1908, AS AMENDED, HOL D, AS THE PROTECTION U/S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 WOULD NOT BE AVA ILABLE TO A TRANSFEREE. THE ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 3 HON'BLE COURT ALSO NOTICED THE AMENDMENTS TO THE RE GISTRATION ACT, 1908, ALSO EFFECTED SIMULTANEOUSLY. FURTHER, SECTION 2(47)(VI) WOULD ALSO NOT APPLY AS THE ARRANGEMENT DOES NOT ENABLE THE TRANSFEREE/S TO ENJ OY THE PROPERTY AS THE PURPORTED OWNER THEREOF. IN CONSEQUENCE, THE ASSESSEE, WHO HA D BEEN ASSESSED (UNDER THE HEAD CAPITAL GAINS) ON THE ENTIRE TRANSFER CONSID ERATION (RS.367.50 LACS), WAS GIVEN RELIEF PER THE ORDER GIVING APPEAL EFFECT DAT ED 24.08.2015 BY THE REVENUE, DELETING THE ENTIRE CAPITAL GAINS, COMPUTED (AT RS. 291.13 LACS) AS UNDER, CHARGEABLE ON THE BASIS OF THE JDA DATED 25.02.2007 AS CONSTIT UTING A TRANSFER: CONSIDERATION RECEIVABLE IN CASH : RS. 1,65,00,000 /- VALUE OF TWO FLATS (2250 X 2 X 4500) RS. 2,02,50,00 0/- FULL VALUE OF THE CONSIDERATION RS. 3,67,50,000/- LESS: INDEXED COST OF ACQUISITION RS. 13,60,29 4/- LONG TERM CAPITAL GAIN RS. 3,54,68,276/- LESS: DEDUCTION U/S. 54F RS. 63,55,702/- TAXABLE LONG TERM CAPITAL GAIN RS. 2,91,12,574/- ( *) [(*) THE CORRECT AMOUNT APPEARS TO BE RS.2,90,34,00 4/-] TOWARD THIS, THE LD. AUTHORIZED REPRESENTATIVE (AR) , THE ASSESSEES COUNSEL, WOULD PLACE ON RECORD A COPY OF THE ORDER GIVING APPEAL E FFECT FOR AY 2007-08 ; FURTHER EXPLAINING THAT THE TRANSFER OF THE LAND ALREADY EF FECTED (PER SALE DEEDS), AND AGAINST WHICH SALE CONSIDERATION STANDS RECEIVED, W OULD NOT BE IMPACTED, I.E., EVEN AS PER THE DECISIONS BY THE HON'BLE COURTS. THE ASS ESSEE HAD DEPOSITED THE ENTIRE AMOUNT RECEIVED (RS.66 LACS) IN THE CAPITAL GAINS A CCOUNT SCHEME, AVAILING TAX EXEMPTION (ON CAPITAL GAINS) U/S. 54F TO THE PROPOR TIONATE EXTENT (FOR AY 2007-08). THIS EXEMPTION, BEING WITHDRAWN FOR THE CURRENT YEA R, ON ACCOUNT OF THE NON COMPLIANCE OF THE CONDITIONS OF SECTION 54F, COULD NOT THEREFORE EXCEED THE CAPITAL ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 4 GAINS CHARGEABLE FOR AY 2007-08, I.E., IN TERMS OF THE DECISION OF THE HON'BLE HIGH COURT. THE SAME WORKS TO RS.55.06 LACS, COMPUTATION OF WHICH STANDS ADDUCED BEFORE THE LD. CIT(A), WHO THOUGH WAS OF THE VIEW T HAT THE ENTIRE AMOUNT OF RS.66 LACS, I.E., INCLUSIVE OF THE ADVANCE OF RS.6 LACS R ECEIVED ON 25.02.2007, HAS TO BE TAKEN IN TO ACCOUNT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS CHARGEABLE U/S. 45 FOR AY 2007-08, I.E., AT RS.63.55 LACS, AS ORIGI NALLY COMPUTED, SO THAT THE CAPITAL GAINS CHARGEABLE TO TAX U/S. 45 (READ WITH SECTION 54F) ON THE WITHDRAWAL OF EXEMPTION U/S. 54F FOR THE CURRENT YEAR WOULD BE RS .63.55 LACS, EVEN AS RETURNED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN SECO ND APPEAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE MAY BEGIN BY DELINEATING THE POSITION OF LAW. AN ASSESSEE, ON THE INVESTMENT OF THE (NET) CONSIDERATION ON THE TRANSF ER OF A LONG TERM CAPITAL ASSET (OTHER THAN A RESIDENTIAL HOUSE) - THE ORIGINAL AS SET HEREINAFTER, IN A RESIDENTIAL HOUSE WITHIN A SPECIFIED TIME OF THE SAID TRANSFER, IS, SUBJECT TO THE FULFILLMENT OF CERTAIN CONDITIONS, ENTITLED U/S. 54F TO A PROPORTI ONATE (I.E., IN PROPORTION TO THE CONSIDERATION INVESTED) DEDUCTION OF THE CAPITAL GA INS CHARGEABLE U/S. 45. THE ASSESSEE COULD, PENDING THE PURCHASE OR CONSTRUCTIO N OF A NEW RESIDENTIAL HOUSE (THE NEW ASSET), DEPOSIT THE CONSIDERATION IN A CAP ITAL GAINS ACCOUNT, WITHDRAWING FUNDS THERE-FROM FROM TIME TO TIME FOR THE PURPOSE OF THE INVESTMENT IN THE NEW ASSET, AND YET BE ENTITLED TO THE BENEFIT U/S. 54F. HOWEVER, WHERE INVESTMENT IS NOT MADE, THE ENTIRE CAPITAL GAINS (OR TO THE PROPORTIO NATE EXTENT) IS CHARGEABLE AS A LONG TERM CAPITAL GAIN ON THE EXPIRY OF THREE YEARS - THE PERIOD UP TO WHICH THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE IS TO BE U/S. 54F COMPLETED. THE ASSESSEE RETURNED CAPITAL GAINS ON THE TOTAL CONSIDERATION ( RS.367.50 LACS) FOR AY 2007-08 ON THE BASIS OF THE JDA. THE EXEMPTION U/S. 54F WAS CLAIMED AND ALLOWED AT RS.63.55 LACS ON THE BASIS OF THE DEPOSIT OF RS.66 LACS IN THE CAPITAL GAINS ACCOUNT, ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 5 RESULTING IN CHARGEABLE CAPITAL GAINS AT RS. 290.34 LACS (AS AGAINST THE STATED AMOUNT OF RS.291.13 LACS). HOWEVER, IN VIEW OF THE DECISION BY THE HON'BLE JURISDICTIONAL HIGH COURT, AND CONSIDERING THAT THE ASSESSEE HAD INVESTED THE TOTAL AMOUNT RECEIVED (RS.66 LACS), THE ENTIRE LONG TERM CAPITAL GAINS BROUGHT TO TAX EARLIER (RS.291.13 LACS), WAS WITHDRAWN, AS UNDER, ASSESSING THE INCOME AT RS.1,62,690, I.E., AS ORIGINALLY RETURNED U/S. 139 (FOR AY 2007-08): PARTICULARS AMOUNT (RS.) ASSESSED INCOME AS PER ORDER U/S. 143(3)/147 DATED 29.12.2011 2,92,75,260 LESS: RELIEF ALLOWED BY HON'BLE HIGH COURT OF PUNJAB & HARYANA VIDE ORDER DATED 22.07.2015 PASSED IN ITA NO. 297 OF 2013 2,91,12,574 BALANCE INCOME 1,62,686 ROUNDED OFF 1,62,690 SURELY, IT IS THE CAPITAL GAINS CHARGEABLE FOR AY 2 007-08, ALLOWED EXEMPT U/S. 54F, BE IT RS.63.55 LACS OR ANY OTHER, AS COMP UTED FOR THAT YEAR, THAT WOULD STAND TO BE BROUGHT TO TAX AS LONG TERM CAPITAL GAI N FOR THE CURRENT YEAR, I.E., ON THE WITHDRAWAL OF THE EXEMPTION U/S. 54F, APPARENTLY AL LOWED AT RS.63,55,702 (FOR AY 2007-08). IT IS NOT WITHIN OUR PURVIEW TO EXAMINE O R COMMENT ON THE CORRECTNESS OF THE ASSESSMENT OF THE CAPITAL GAINS, INCLUDING THE AMOUNT CLAIMED AND ALLOWED EXEMPT U/S. 54F, FOR THAT YEAR (AY 2007-08). HOWEVE R, THERE IS NO SPECIFICATION OF THE REVISED CAPITAL GAIN PURSUANT TO THE DECISION B Y THE HON'BLE HIGH COURT IN THE ORDER GIVING APPEAL EFFECT AND, NOR CONSEQUENTLY, T HE AMOUNT ALLOWED EXEMPT U/S. 54F IN RESPECT OF THE DEPOSIT OF RS.66 LACS IN THE CAPITAL GAINS ACCOUNT SCHEME (CAGS). THIS MAY PERHAPS BE, AS EXPLAINED BY THE LD . COUNSEL, MR. BHASIN, ADVOCATE, DUE TO THE ENTIRE CAPITAL GAINS CHARGEABL E, CONSEQUENT TO THE DECISION BY ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 6 HON'BLE HIGH COURT, BEING EXEMPT U/S. 54F IN-AS-MUC H AS THE ASSESSEE HAD DEPOSITED THE ENTIRE AMOUNT RECEIVED (DURING FY 200 7-08, AND EVEN FY 2008-09) UNDER CGAS. IT IS DUE TO THIS NON-SPECIFICATION OF THE RELIEF ALLOWED U/S. 54F PURSUANT TO THE DECISION BY THE HON'BLE HIGH COURT, THAT THE ISSUE OF DETERMINATION OF THE INCOME CHARGEABLE AS CAPITAL GAINS FOR AY 20 07-08 AND, FURTHER ALLOWABLE U/S. 54F, ARISES FOR THE CURRENT YEAR, AND WHICH WE INDULGE IN FROM THE LIMITED STANDPOINT OF THE RELIEF EXIGIBLE U/S. 54F UNDER TH E GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, I.E., IN CONSONANCE WITH THE LAW. NOW, CLEARLY, AND EVEN AS FOLLOWS FROM THE DECISION BY THE HON'BLE APEX COURT, NO COGNIZANCE OF THE JDA DATED 25.02.2007, B EING AN UNREGISTERED DOCUMENT, COULD BE TAKEN FOR THE PURPOSE OF RECKONI NG TRANSFER IN TERMS OF SECTION 53A OF THE TP ACT AND, THUS, SEC. 2(47)(V) OF THE A CT. THE CONTROVERSY BEFORE THE HIGHER COURTS, AND IN FACT ADDRESSED BY THEM, IS ON LY IN RESPECT OF THAT PART OF THE LAND NOT ACTUALLY CONVEYED (PER REGISTERED SALE DEE DS), AND WHICH THE APEX COURT CLARIFIED TO BE NOT IN DISPUTE (AT PARA 6 OF ITS JU DGMENT), STATING OF THE SAME HAVING BEEN SUBJECT TO ASSESSMENT AS CAPITAL GAINS (FOR AY S. 2007-08 AND 2008-09). THE PARTIES IN THE PRESENT CASE HAVE PROCEEDED ON THE B ASIS OF THE ENTIRE INCOME CHARGEABLE ON THE TRANSFER OF LAND (ON THE BASIS OF THE CONVEYANCE DEEDS) AS ARISING FOR AY 2007-08. ELSE, A PART OF THE CAPITAL GAINS W OULD STAND CHARGEABLE U/S. 45 READ WITH SECTION 54F FOR AY 2008-09 AS WELL. THIS IS ALSO BORNE OUT BY THE ASSESSEE RETURNING THE ENTIRE EXEMPTION LIABLE FOR WITHDRAWAL, COMPUTED AT TOTAL OF RS.63.55 LACS, FOR THE CURRENT YEAR (AY 2007-08). W E HAVE ALREADY STATED THAT WE CANNOT EXAMINE THE CORRECTNESS OF THE CAPITAL GAINS CHARGEABLE FOR AY 2007-08 IN THE PROCEEDINGS FOR THE CURRENT YEAR. SO, HOWEVER, ONLY THE SALE CONSIDERATION STATED IN THE TRANSFER (CONVEYANCE) DEEDS, DULY REG ISTERED, COULD BE REGARDED, FOR THE PURPOSE OF SECTION 48, AS THE FULL VALUE OF THE CONSIDERATION ARISING ON THE TRANSFER. THAT IS, EXCLUSIVE OF THE ADVANCE, IF THE SAME IS NOT ADJUSTABLE THERE- ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 7 AGAINST. IN OTHER WORDS, THE QUESTION OF INCLUSION OF RS.6 LACS RECEIVED ON 25/2/2007, WHERE IT DOES NOT PART OF THE TRANSFER C ONSIDERATION, DOES NOT ARISE IN-SO- FAR AS THE COMPUTATION OF CAPITAL GAINS IS CONCERNE D. THE AMOUNT DEPOSITED UNDER CGAS WOULD NEVERTHELESS CONTINUE TO BE AT RS.66 LAC S (THOUGH, WITHOUT DOUBT, THE AMOUNT EXEMPT U/S. 54F COULD NOT EXCEED THE CAPITAL GAINS OTHERWISE CHARGEABLE). THAT IS, THE ASSESSMENT OF RS.6 LACS (RECEIVED ON 2 5.02.2007) FOR THE CURRENT YEAR HAS TO BE INDEPENDENTLY EXAMINED, AND HAS NOTHING T O DO WITH THE WITHDRAWAL OF THE EXEMPTION U/S. 54F WHERE THE SAME DOES NOT PART OF THE TRANSFER CONSIDERATION, FORMING THUS A PART OF THE COMPUTATION OF CAPITAL G AINS. NO SUCH EXAMINATION, I.E., INDEPENDENT OF THE COMPU TATION OF CAPITAL GAINS ON TRANSFER OF THE SUBJECT LAND, HAS BEEN MADE BY T HE REVENUE. THE ONUS TO EXHIBIT THAT IT (RS. 6 LACS) IS TAXABLE FOR THE CURRENT YEA R IS ON THE REVENUE. AS CORRECTLY OBSERVED BY THE LD. COUNSEL DURING HEARING, THE SAM E COULD BE TAXABLE ONLY AS PER LAW, AND TOWARD WHICH HE CITES SECTION 56(IX) (INSE RTED BY FINANCE (NO.2) ACT, 2015, W.E.F. 01/4/2015) AND SECTION 51. WE HAVE ALR EADY NOTED THAT NO CASE FOR BRINGING THE SAME - A RECEIPT IN THE NATURE OF A CA PITAL RECEIPT, TO TAX FOR THE CURRENT YEAR, OTHER THAN AS CAPITAL GAINS, HAS BEEN ATTEMPT ED/MADE BY THE REVENUE. WE, THEREFORE, SUBJECT TO THE SAME, AS STATED BY THE AS SESSEE, NOT FORMING - AS STATED BY THE ASSESSEE, PART OF THE SALE CONSIDERATION (BY BE ING ADJUSTABLE THERE-AGAINST OR OTHERWISE) PER THE SALE DEEDS UNDER REFERENCE (ON W HICH WE OBSERVE NO FINDING BY THE REVENUE OR OTHERWISE ANY MATERIAL ON RECORD), F IND NO BASIS FOR BRINGING THE SAME TAX FOR THE CURRENT YEAR. WE DECIDE ACCORDINGLY. THE REVENUE IS AT LIBERTY TO VERIFY THE CORRECTNESS OF THE CAPITAL GAINS CHARGEABLE U/S. 45, COMPUTED AT R S.55.06 LACS BY THE ASSESSEE, AT WHICH AMOUNT THEREFORE THE AMOUNT CHARGEABLE U/S. 4 5 R/W S.54F FOR THE CURRENT YEAR SHALL BE RESTRICTED. ITA NO.360 (ASR)/2016(AY 2010-11) MANORANJAN KALIA V. ASST.CIT 8 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 22, 201 8 SD/- SD/- [ (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 22.03.2018. /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: MANORANJAN KALIA, JALANDHAR (2) THE RESPONDENT: ASSISTANT CIT - III, JALAND HAR (3) THE CIT(APPEALS)-2, JALANDHAR. (4) THE CIT CONCERNED. (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER