NILA V. SHAH, MUMBAI V. CIT(A)-XXV, MUMBAI

ITA 3745/MUM/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7591 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: K SHIVARAM
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Valuation report
• Section: 50C; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHIRI G. E. VEERABHADRAPPA, HONBLE PRESIDE NT, AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. : 3745/MUM/2008 ASSESSMENT YEAR : 2005-06 MRS. NILA V. SHAH 401, NEW SHANTI NAGAR, S.V.R. ROAD, BORIVALI (W), MUMBAI-400 092 PAN NO: ABDPS 4721 J VS. COMMISSIONER OF INCOME TAX (APPEALS) XXV C-11, PRATYAKSHA KAR BHAVAN, BANDRA (E), MUMBAI-400 051 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SHIVARAM RESPONDENT BY : SHRI P. C. MAURYA DATE OF HEARING : 29.02.2012 DATE OF PRONOUNCEMENT : 28.03.2012 ORDER PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE APPELLANT AGA INST THE ORDER DATED 17.03.2008, PASSED BY CIT(APPEALS) XXV, MUMBA I FOR THE QUANTUM OF ASSESSMENT U/S.143(3) FOR THE ASSESSMENT YEAR 2005-06. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS OF A PPEALS TO CHALLENGE THE ADDITION CONFIRMED ON ACCOUNT OF CAPITAL GAIN F OR A SUM AMOUNTING TO `. 3,73,128/-. 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS HAS ERRED IN NOT CONSIDERING THE MARKET VALUE AS ON 10. 06.1999 AS COST OF ASSETS. CIT VS. ABRAR ALVI (2001) 247 ITR 312 (BOM). ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 2 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS ERRED IN CONSIDERING THE VALUE ADOPTED BY THE STAMP OFFICE INSTEAD OF AGREEMENT VALUE FOR THE PURPOSE OF SECTI ON 54 EC. 3. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS RIGHTLY UPHELD THE GROUNDS OF APPEAL BY APPLICATION OF SECTION 50 BUT FACTUALLY ERRED IN CONSIDERING THE FINANCIAL YEAR 2001- 02 AS THE YEAR OF COMPLETION OF CONSTRUCTION INSTEA D OF 10.06.1999 WHEN THE TENANT ASSESSEE BECOME OWNER (A S PER THE AGREEMENT). 2. THE MAIN ISSUE ARISING IN THIS APPEAL AS CULLED OUT OF THE GROUNDS OF APPEAL AND BY THE ORDERS OF THE AUTHORITIES BELO W ARE AS FOLLOWS: FIRSTLY, WHETHER THE SALE OF OFFICE (SITUATED AT 303, MANTRI MANSION, 3 RD FLOOR, 17 RAGHUNATH DADAJI LANE, FORT, MUMBAI- 400 001) ON 17.09.2004 AMOUNTS TO LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN; SECONDLY , WHETHER THE COST OF ACQUISITION OF THE SAID PROPE RTY SHOULD BE TAKEN AT `. 4,75,000/- WHICH WAS THE COST INCURRED FOR ACQUIRING THE PROPERTY VIDE AGREEMENT DATED 10.06.1 999 OR THE MARKET VALUE OF THE PROPERTY WHICH AS PER THE APPEL LANT ON THE BASIS OF VALUE GIVEN BY APPROVED VALUER AT `. 10,04,475/-; AND LASTLY, THE SALE VALUE OF THE PROPERTY SHOULD BE TAKEN AS P ER THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIE S U/S.50C AT `. 24,48,128/- OR `. 16,00,000/- WHICH WAS THE ACTUAL SALE VALUE FOR THE PURPOSE OF THE DEDUCTION U/S.54EC. 3. THE FACTS AS ELABORATED IN DETAIL IN THE APPELLA TE ORDER ARE THAT THE APPELLANT WAS HAVING AN OFFICE PREMISES OF 225 SQ. FT. AT 303, MANTRI MANSION, 3 RD FLOOR, 17 RAGHUNATH DADAJI LANE, FORT, MUMBAI-400 001 ON TENANCY BASIS FOR THE LAST 30 YEARS. THIS BUILDING BELONGED TO SHREE SHYAM SUNDERLALJI TEMPLE TRUST, WHEREIN SEVERAL TE NANTS OCCUPIED THE VARIOUS PORTION OF THE BUILDING. AS THE BUILDING WA S 60 YRS OLD, THE ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 3 OWNERS OF THE PROPERTY DESIRED TO SELL THE PROPERTY . AFTER GETTING DUE PERMISSION FROM THE CHARITY COMMISSIONER IN JUNE 19 97, A NOTICE WAS PUBLISHED IN THE DAILY NEWSPAPER, ADVERTISING THAT THE PROPERTY WOULD BE SOLD TO THE HIGHEST BIDDER. THE HIGHEST BIDDER WAS ONE SHRI GEHARILAL HARKALAL RANKA. THIS PROPERTY WAS ACTUALLY PURCHA SED BY THE TENANTS AND SHRI GEHARILAL HARAKLAL RANKA WAS THE CONFIRMED PARTY. THIS WAY THE PROPERTY WAS SOLD TO THE TENANTS THROUGH THIS P ERSON. EACH OF THE TENANTS PAID THEIR SHARE OF PRICE FOR PURCHASING TH E PROPERTY. IN THIS MANNER, THE TENANTS BECAME THE OWNER AFTER LONG NEG OTIATIONS VIDE AGREEMENT DATED 10.06.1999. LATER ON, THIS BUILDIN G WAS DEMOLISHED COMPLETELY AND NEW BUILDING WAS CONSTRUCTED. THE T OTAL COST OF PURCHASE IN THE OLD PROPERTY, DEMOLISHING CHARGES AND THE CO NSTRUCTION OF NEW PROPERTY IN THE HANDS OF THE APPELLANT CAME TO `. 4,75,000/-. THE NEW CONSTRUCTION COMPLETED IN THE YEAR RELEVANT TO ASSE SSMENT YEAR 2002-03 AND THE POSSESSION WAS GIVEN TO ALL THE TENANTS. 3.1 LATER ON, THE APPELLANT SOLD THE PROPERTY ON 17 .09.2004 ON A TOTAL CONSIDERATION OF `. 16,00,000/-. FOR DETERMINING THE COST OF ACQUISITIO N FOR THE PURPOSE OF CALCULATING THE CAPITAL GAINS, T HE APPELLANT GOT THE VALUATION OF THE PROPERTY AS ON 10.06.1999 BY AN AP PROVED VALUER WHO DETERMINED THE MARKET VALUE OF THE PROPERTY AT `. 10,04,475/- AS ON 10.06.1999. ACCORDINGLY, THE APPELLANT CLAIMED THE COST OF ACQUISITION OF THE PROPERTY AT `. 10,04,475/-. 4. THE ASSESSING OFFICER HELD THAT SINCE THE SALE I N QUESTION WAS OF AN OFFICE, HENCE IT WAS A DEPRECIABLE ASSET AND TREATE D THE SAME AS A SHORT TERM CAPITAL GAIN BY VIRTUE OF SECTION 50 OF THE I. T. ACT. HE DID NOT WENT TO THE QUESTION OF DECIDING THE DATE OF ACQUISITION OR THE PERIOD FOR WHICH THE PROPERTY WAS HELD AND RATHER INVOKED THE PROVIS IONS OF SECTION 50 TO COME TO THE CONCLUSION THAT IT WAS A SHORT TERM CAP ITAL GAIN. BEFORE THE ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 4 ASSESSING OFFICER, THE APPELLANT MADE FOLLOWING CA LCULATION OF LONG TERM CAPITAL GAIN AND THE TAXABILITY THERE ON, VIDE LETT ER DATED 04.10.2007 (THE COPY OF WHICH IS PLACED AT PAGE 9 OF THE PAPER BOOK) : MARKET VALUE AS PER STAMP DUTY `. 24,48,128 COST OF PREMISES AS ON 10.06.99 10,04,475 AS PER VALUATION REPORT INDEXED COST 480 X 10,04,475 389 12,39,455 COST OF RECONSTRUCTION 4,75,000 17,14,455 NET GAIN 7,33,673 INVESTMENT INTO CAPITAL GAIN BOND 16,00,000 TAXABLE CAPITAL GAIN NIL 4.1. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE APPELLANT BY CONCLUDING FIRSTLY, THAT BY VIRTUE OF SECTION 50 IT IS A SHORT TERM CAPITAL GAIN AND SECONDLY, THE COST OF ACQUISITION IS `. 4,75,000/- WHICH WAS THE COST INCURRED FOR ACQUIRING THE PROPERTY. AFTER GI VING DEDUCTION U/S.54EC, HE CALCULATED THE SHORT TERM CAPITAL GAIN AS UNDER :- SALE VALUE U/S.50C `. 24,48,128/- LESS : COST `. 4,75,000/- `. 19,73,128/- LESS : INVESTMENT IN BOND U/S.54EC `. 16,00,000/- STCG `. 3,73,128/- THE TOTAL INCOME IS THEREFORE COMPUTED AS UNDER INCOME FROM OTHER SOURCES AS PER STATEMENT `. 1,47,263/- STCG AS DISCUSSED ABOVE `. 3,73,128/- TOTAL INCOME `. 5,20,391/- ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 5 5. BEFORE THE CIT(APPEALS) THE APPELLANT CONTENTED THAT AS ON 10.06.1999, THE TENANCY RIGHT IN THE SAID PROPERTY WAS EXCHANGED FOR OWNERSHIP RIGHT AND THUS THE COST OF SAID PREMISES HAS TO BE TAKEN AT THE MARKET VALUE AS ON 10.06.1999 IN VIEW OF THE JUDGME NT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABRAR ALVI REPORTED IN (2001) 247 ITR 312 (BOM). AS FOR THE COST OF ACQUISITION, THE APPELLANT RELI ED UPON THE VALUATION REPORT OF THE APPROVED VALUER WH O HAS DETERMINED THE MARKET VALUE OF THE PROPERTY AS ON 10.06.1999 AT `. 10,04,475/-. 5.1 THE CIT(APPEALS) AFTER CONSIDERING THE VARIOUS CLAUSES OF AGREEMENT DATED 10.06.1999 AND THE ENTIRE FACTS OF THE CASE AND ALSO THE CONTENTION OF THE APPELLANT HELD THAT, FIRST OF ALL , THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABRAR ALVI (SUPRA) IS NOT APPLICABLE IN THE APPELLANTS CASE, AS IN THAT CASE OWNERSHIP RIGHT WAS BOUGHT INSTEAD OF THE PROPERTY AND WHILE IN THE CAS E OF THE APPELLANT THE PROPERTY WAS PURCHASED THROUGH OPEN BIDDING AND NOT THROUGH OWNERSHIP RIGHT. AS REGARDS TO THE COST OF ACQUISI TION, THE CIT(APPEALS) HELD THAT THE SAME WOULD BE AT `. 4,75,000/-, AS THE PROPERTY WAS PURCHASED THROUGH OPEN BIDDING WHICH WAS LATER ON D EMOLISHED AND NEW BUILDING WAS CONSTRUCTED, WHEREIN THE APPELLANTS S HARE OF COST FOR THE PURCHASE AND CONSTRUCTION OF THE PROPERTY ATTRIBUTE D TO `. 4,75,000/- WHICH IS THE ACTUAL COST OF ACQUISITION. HE, THERE FORE, UPHELD THE COST OF ACQUISITION AT `. 4,75,000/-. 5.2 WITH REGARD TO THE YEAR OF ACQUISITION FOR THE PURPOSE OF DETERMINING WHETHER IT IS A LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN, THE CIT(APPEALS) HELD THAT SINCE THE PROPERTY WAS CONSTRUCTED IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 AND POSSESSION WAS GIVEN IN THE SAME YEAR AND WAS SOLD DURING THE YEAR RELEVANT TO ASSESSMENT YEAR 2005-06, THEREFORE, THE PERIOD IS OF LESS THAN ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 6 36 MONTHS. HENCE, IT WAS A SHORT TERM CAPITAL GAIN . LASTLY, HE HELD THAT THE SALE CONSIDERATION WOULD BE TAKEN AS PER T HE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY I.E. `. 24,48,128/- INSTEAD OF `. 16,00,000/- AND SINCE THE APPELLANT HAS ONLY INVEST ED `. 16,00,000/- IN PRESCRIBED BOND U/S.54EC, THE DEDUCTION WOULD BE AL LOWABLE TO THE EXTENT OF `. 16,00,000/-. HE, ACCORDINGLY, TAXED THE SHORT TERM CAPITAL GAIN OF `. 3,23,128/-. 5.3 ON THE ISSUE OF APPLICABILITY OF SECTION 50, TH E CIT(APPEALS) CATEGORICALLY HELD THAT THE SAME WOULD NOT BE APPLI CABLE IN THE CASE OF THE APPELLANT AND, THEREFORE, THE VIEW TAKEN BY THE ASSESSING OFFICER FOR THE PURPOSE OF DETERMINING THE SHORT TERM CAPITAL G AIN IS NOT CORRECT, EVEN THOUGH ON THE FACTS THAT IT WAS A SHORT TERM C APITAL GAIN ONLY. 6. THE LEARNED SR. COUNSEL ON BEHALF OF THE APPELLA NT SUBMITTED THAT ONCE THE CIT(APPEALS) HAS HELD THAT THE PROVISIONS OF SECTION 50 ARE NOT APPLICABLE, THEN THE ISSUE OF SHORT TERM CAPITAL GA IN DOES NOT ARISE AT ALL. HE CONTENTED THAT THE DATE OF AGREEMENT I.E. 10.06.1999 BY WHICH THERE WAS A CONVERSION FROM A TENANCY TO OWNERSHIP WAS THE DATE FROM WHICH THE ISSUE OF ACQUISITION AND THE COST OF ACQU ISITION SHOULD BE DETERMINED. IF, THE SAID DATE IS TAKEN INTO CONSID ERATION, THEN THE SALE MADE IN THE ASSESSMENT YEAR 2005-06 WILL AMOUNT TO LONG TERM CAPITAL GAIN. REGARDING THE COST OF ACQUISITION DETERMINED AT `. 4,25,000/-, HE SUBMITTED THAT SINCE THE APPELLANT WAS A TENANT FOR THE LAST 30 YEARS IN THE ERSTWHILE PROPERTY, HE HAD A TENANCY RIGHT WHIC H ULTIMATELY GOT CONVERTED INTO OWNERSHIP AND IT HAS TO BE DETERMINE D AS PER THE MARKET VALUE. IN SUPPORT OF THIS CONTENTION, HE RELIED HE AVILY UPON THE JUDGMENT OF ITAT MUMBAI BENCH IN THE CASE OF BALMUKUND VS. ITO REPORTED IN (2010) 45 DTR 281 . HE ALSO RELIED UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABRAR ALVI (SUPRA). IN SHORT, ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 7 HIS MAIN CONTENTION ARE THAT FIRSTLY, IT IS A LONG TERM CAPITAL GAIN AND SECONDLY, THE COST OF ACQUISITION SHOULD BE TAKEN A T `. 10,04,475/- AS PER THE VALUE DETERMINED BY THE APPROVED VALUER. IN TH E LAST, HE MADE AN ALTERNATE CLAIM THAT IF THE VALUE OF THE PROPERTY I S TAKEN AS PER SECTION 50C, THEN THE SAME SHOULD BE ALLOWED FOR THE PURPOS E OF DEDUCTION U/S.54EC. 7. ON THE OTHER HAND, THE LEARNED SR. DR RELIED HEA VILY UPON THE FINDINGS OF THE CIT(APPEALS) AND CONTENTED THAT IT IS SHORT TERM CAPITAL GAIN AS THE POSSESSION IN THE NEWLY CONSTRUCTED PRO PERTY WAS ACQUIRED IN THE ASSESSMENT YEAR 2003-04. HE ALSO PLACED RE LIANCE ON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. DR. B.P. SARAF AND A.Y. SAKHARE, JJ. REPORTED IN (2011) 111 TAXMAN 600 (BOM.) FOR THE PROPOSITION THAT EVEN IF THE ASSESSEE WAS TENAN T BEFORE ITS PURCHASE IT WAS WHOLLY IRRELEVANT BECAUSE AT THE TIME OF PURCHA SE TENANCY WAS EXTINGUISHED AND, HENCE, IT HAS TO BE ASSESSED FROM THE DATE OF ACQUISITION OF THE PROPERTY THAT WAS IN THE YEAR RE LEVANT TO ASSESSMENT YEAR 2003-04. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE CIT(APPEAL S) AS WELL AS THE ASSESSING OFFICER. THE FIRST ISSUE FOR ADJUDICATIO N BEFORE US IS, WHETHER THE TRANSACTION OF SALE OF PROPERTY IN QUESTION AMO UNTS TO LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. THE FAC TS WHICH ARE BORNE OUT FROM THE RECORDS ARE THAT THE APPELLANT WAS A TENAN T FOR THE LAST 30 YEARS AS A PROPRIETOR OF M/S. TEJA ENTERPRISES, HAVING OF FICE SPACE ADMEASURING 225 SQ. FT. IN THE BUILDING SITUATED AT 303, MANTRI MANSION, 3 RD FLOOR, 17 RAGHUNATH DADAJI LANE, FORT, MUMBAI. THIS BUILDING BELONGED TO A TRUST SHREE SHYAM SUNDERLALJI TEMPLE TRUST. THE TRUST DESIRED TO SELL THE PROPERTY AND AFTER GETTING DUE PERMISSION FROM THE CHARITY ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 8 COMMISSIONER, THE SAID PROPERTY WAS SOLD TO ALL THE TENANTS WITH ONE SHRI GEHARILAL HARKALAL RANKA, WHO WAS THE CONFIRME D PARTY. ALL THE TENANTS ENTERED INTO AN AGREEMENT ON 10.06.1999, BY WHICH ALL THE TENANTS FORMED COOPERATIVE SOCIETY AND PURCHASED TH E PROPERTY ON THE SAME SPACE. THE SAID BUILDING WAS DEMOLISHED AND N EW BUILDING WAS CONSTRUCTED THEREAFTER. THE TOTAL COST OF PURCHASE AND CONSIDERATION FOR THE NEW PROPERTY IN THE HANDS OF THE APPELLANT WAS DETERMINED AT `. 4,75,000/-. THE POSSESSION WAS GIVEN TO ALL THE TE NANTS IN THE ASSESSMENT YEAR 2002-03 WHEN THE BUILDING WAS COM PLETED WITH THE SAME SPACE AS WAS EXISTING WITH THE TENANTS IN THE OLD BUILDING. FROM A PERUSAL OF AGREEMENT DATED 10.06.1999 (A COPY OF WH ICH IS APPEARING AT PAGE NO. 26 AND 43 OF THE PAPER BOOK), IT IS SEEN T HAT, ALL THE TENANTS THEMSELVES WERE THE PROMOTERS AND ALSO PROPOSED A C O-OPERATING HOUSING SOCIETY IN THE NAME OF MARUTI CO-OPERATING HOUSING LTD., WHEREIN ALL THE TENANTS BECOME THE MEMBERS AND WERE PROMOTED AS PURCHASERS. THUS, THIS AGREEMENT (DATED 10.06.1999 ) ITSELF GAVE INTEREST AND RIGHT IN THE SAID PROPERTY TO THE APPELLANT ALS O. 8.1 THE WORD PROPERTY IS OF WIDEST AMPLITUDE WHIC H ALSO INCLUDES THE RIGHT AND INTEREST OF A PERSON IN A PARTICULAR ASSE T. EVERY POSSIBLE INTEREST WHICH A PERSON CAN CLEARLY HOLD OR ENJOY I N AN ASSET CAN BE TERMED AS PROPERTY WITHIN THE DEFINITION OF CAPIT AL ASSET. THE TRANSFER OF PROPERTY CONNOTES THE PASSING OF THE RIGHTS IN THE SAID PROPERTY. IN THIS CASE, THE AGREEMENT DATED 10.06.1999 CLEARLY GIVES THE INTEREST AND THE RIGHT TO THE APPELLANT IN THE PROPERTY ADMEASURING 225 SQ. FT. TO WHICH SHE WAS ENTITLED TO IN THE NEW BUILDING WHICH WAS T O COME UP AFTER DEMOLITION OF THE OLD BUILDING. THUS, THE DATE OF ACQUISITION IN THE SAID PROPERTY CAN SAFELY BE HELD TO BE ON 10.06.1999. I T IS ALSO AN UNDISPUTED FACT THAT THE SALE WAS MADE ON 17.09.2004, WHICH FE LL INTO ASSESSMENT YEAR 2005-06. THUS FROM THE DATE OF 10.06.1999 TIL L 17.09.2004, THE ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 9 PERIOD IS OF MORE THAN 36 MONTHS, HENCE THE TRANSAC TION IN QUESTION IS CLEARLY A LONG TERM CAPITAL GAIN. THUS THE FIRST ISSUE IS DECIDED IN THE FAVOUR OF THE APPELLANT AND THE FINDING GIVEN BY TH E ASSESSING OFFICER AS WELL AS THE CIT(APPEALS) THAT IT IS A SHORT TERM CA PITAL GAIN IS REVERSED. WE ACCORDINGLY, HOLD THAT THE TRANSACTION OF SALE O F ASSET WAS LONG TERM CAPITAL GAIN. 8.2 AFTER HOLDING THAT THE SALE OF OFFICE AMOUNTED TO LONG TERM CAPITAL GAIN, THE SECOND ISSUE WHICH COMES FOR OUR CONSIDER ATION IS TO WHAT WOULD BE THE COST OF ACQUISITION OF THE SAID PROPER TY. THE APPELLANTS CLAIM IS THAT, SINCE SHE WAS A TENANT FOR THE LAST 30 YEARS, THEREFORE, SHE HAD A TENANCY RIGHT WHICH WAS EXCHANGED FOR THE OWN ERSHIP RIGHT VIDE AGREEMENT DATED 10.06.1999 AND THEREFORE, THE COST OF THE PREMISES HAS TO BE TAKEN BY INCLUDING THE TENANCY RIGHT IN THE C OST OF ACQUISITION. ACCORDINGLY, THE APPELLANT TOOK THE MARKET VALUE AS ON 10.06.1999 AS THE COST OF ACQUISITION, WHICH HAS BEEN ESTIMATED BY TH E APPROVED VALUER AT `. 10,04,475/-. IN SUPPORT OF THIS, HEAVY RELIANCE HA S BEEN PLACED ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. ABRAR ALVI (SUPRA). FIRST OF ALL, THE SAID JUDGMENT CANNOT B E HELD TO BE APPLICABLE AS THAT WAS A CASE WHERE THE OWNERSHIP R IGHT WAS ITSELF BOUGHT INSTEAD OF THE PROPERTY AND IN THE CASE OF T HE APPELLANT, THE PROPERTY ITSELF WAS PURCHASED THROUGH OPEN BIDDING AND NOT THROUGH OWNERSHIP RIGHT. TO THIS EXTENT, THE FINDING OF TH E CIT(APPEALS) ARE CORRECT. AS ALREADY STATED ABOVE, THE APPELLANT HA D PURCHASED THE SAID PROPERTY FOR A SUM OF `. 4,75,000/- WHICH INCLUDED THE PROPORTIONATE COST OF NEW BUILDING. IN SUCH A SITUATION, THE COST OF TENANCY RIGHT CANNOT BE TAKEN INTO CONSIDERATION, FIRSTLY, THERE WAS NO SUR RENDER OF TENANCY RIGHTS AND SECONDLY, AS PER THE SUB SECTION 2 OF SECTION 5 5, THE COST OF ACQUISITION OF TENANCY RIGHT HAS TO BE TAKEN AT NIL . EVEN FROM THE PLAIN READING OF THE AGREEMENT DATED 10.06.1999, IT IS EV IDENT THAT THE ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 10 APPELLANT HAD BOUGHT THE PROPERTY AND NOT THE OWNER SHIP RIGHT AND ONCE THIS IS A FACTUAL POSITION, THEN IT CANNOT BE HELD THAT THE SOME COST SHOULD BE ASSIGNED ON THE TENANCY RIGHT ALSO. THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DR. B.P. SARAF AND A.Y. SAKHARE, JJ. (SUPRA) ALSO GETS SQUARELY APPLICABLE, WHEREIN IT H AS BEEN HELD THAT EVEN IF THE ASSESSEE WAS TENANT BEFORE IT S PURCHASE, IT BECOMES WHOLLY IRRELEVANT BECAUSE AT THE TIME OF PURCHASE, TENANCY GETS EXTINGUISHED AND HENCE THE VALUE HAS TO BE ASSESSED FROM THE DATE OF ACQUISITION OF THE PROPERTY. THEREFORE, THE COST O F ACQUISITION FOR THE PURPOSE OF INDEXATION HAS TO BE TAKEN AT `. 4,75,000/- AND NOT `. 10,04,475/- AS HAS BEEN CONTENTED BY THE APPELLANT. THUS, THE FINDING OF THE CIT(APPEALS) ON THIS ISSUE IS UPHELD. WE AC CORDINGLY HOLD THAT THE COST OF ACQUISITION SHOULD BE TAKEN AT `. 4,75,000/-. 8.3 LASTLY, FOR THE PURPOSE OF DEDUCTION U/S.54EC W HERE THE SALE VALUE SHOULD BE TAKEN AT `. 16,00,000/- WHICH IS THE ACTUAL VALUE OR `. 24,48,128/- WHICH HAS BEEN ADOPTED BY THE STAMP VAL UATION AUTHORITIES U/S.50C. SECTION 54EC PROVIDES FOR EXE MPTION FROM TAX ON LONG TERM CAPITAL GAIN WHEN THE CAPITAL GAIN ARISE FROM THE TRANSFER OF LONG TERM CAPITAL ASSET AND THE WHOLE OR ANY PART O F THE SAID CAPITAL GAIN IS INVESTED IN CERTAIN BONDS WITHIN THE PERIOD OF 6 MONTHS. SECTION 54EC SPEAKS OF THE ACTUAL CAPITAL GAIN WHICH ARISES OUT OF TRANSFER OF LONG TERM CAPITAL GAIN AND NOT DEEMING AMOUNT. WHE REAS SECTION 50C PROVIDES FOR DEEMING FICTION WHERE VALUE OF CONSIDE RATION IS ADOPTED AS PER THE STAMP VALUATION AUTHORITIES OR ANY AUTHORIT Y OF THE STATE GOVERNMENT. EVEN IF THE PROPERTY HAS BEEN SOLD AT A LESSER PRICE BUT UNDER THE DEEMING FICTION OF SECTION 50C, THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIES IS TAKEN AS SALE CONSID ERATION. SUCH A DEEMING FICTION CANNOT BE IMPORTED INTO SECTION 54E C AND HENCE THE DEEMED VALUE CANNOT BE CONSIDERED FOR THE PURPOSE O F EXEMPTION U/S 54EC. ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 11 THUS THE CLAIM OF THE APPELLANT U/S.54EC WOULD BE O NLY `. 16,00,000/- WHICH IS THE ACTUAL INVESTMENT IN THE SPECIFIED BON DS. AT THE SAME TIME, FOR THE WORKING OF THE LONG TERM CAPITAL GAIN, THE SALE CONSIDERATION WILL BE TAKEN UP AS PER THE VALUE DETERMINED U/S.50C WHI CH HERE IN THIS CASE IS AT `. 24,48,128/-. TO SUMMARISE OUR ABOVE FINDINGS, WE H OLD THAT :- I. THE TRANSACTION OF SALE WILL AMOUNT TO LONG TERM CA PITAL GAIN AND NOT SHORT TERM CAPITAL GAIN. II. COST OF THE ACQUISITION OF THE SAID PROPERTY WOULD BE TAKEN AT `. 4,75,000/-. III. THE SALE VALUE FOR THE PURPOSE OF COMPUTATION OF LO NG TERM CAPITAL GAIN WOULD BE TAKEN AT `. 24,48,128/-. IV. FOR THE PURPOSE OF DEDUCTION U/S.54EC, THE SALE VAL UE WOULD BE TAKEN AT `. 16,00,000/- WHICH IS THE ACTUAL SALE CONSIDERATION WHICH HAS BEEN INVESTED IN THE BOND. 8.4 ON THE ABOVE GUIDELINES, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE LONG TERM CAPITAL GAIN. 9. IN THE RESULT, THE APPEAL FILED BY THE APPELLANT IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF MARCH, 2012. SD/- SD/- ( G. E. VEERABHADRAPPA ) ( AMIT SHUKLA ) PRESIDENT JUDICIAL MEMBER MUMBAI, DT: 28.03.2012 ITA NO : 3745/MUM/2008 MRS. NILA V. SHAH 12 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI