SUKHIBAI GANESHMAL, MUMBAI V. ITO 17, MUMBAI

ITA 3837/MUM/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7269 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: SURESH C PATNI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI V. DURGA RAO (JM) I.T.A. NO. 3837/MUM/2010 (A.Y. 2005-06) SMT. SUKHIBAI GANESHMAL, 234/35, NAIGAON CROSS ROAD, DADAR (E), MUMBAI-400 014. PAN: AEBPJ 6842 G VS. COMMISSIONER OF INCOME-TAX-17, PIRAMAL CHAMBERS, LOWER PAREL, MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI SURESH C. PATNI RESPONDENT BY SHRI G.P. TRIVEDI. DATE OF HEARING 01-08-2011 DATE OF PRONOUNCEMENT - 08-2011 O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT U/S.263 ON 24-03-2010 IN RELATION TO THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS OWNER OF A BUILDING WHICH WAS OCCUPIED BY VARIOUS TENANTS. THE ASSESSEE ENTERED INTO RE- DEVELOPMENT AGREEMENT WITH A DEVELOPER BY NAME M/S. NANSEE CONSTRUCTIONS PVT. LTD. THE CAPITAL GAIN ARISING OUT OF THIS TRAN SACTION WAS DISCLOSED IN THE INSTANT YEAR. ON PERUSAL OF THE RECORD, IT WAS FOUN D BY THE LD. CIT THAT THE ASSESSEE HAD RECEIVED THE SALE CONSIDERATION FROM T HE DEVELOPER FROM TIME TO TIME AS UNDER : AMOUNT OF CONSIDERATION F.Y. RS. 1,01,000/- 2001-02 RS.37,00,000/- 2002-03 RS.35,00,000/- 2003-04 RS.22,00,000/- 2004-05 ITA NO.3837/M/2010 SMT. SUKHIBAI GANESHMAL 2 IT WAS OBSERVED BY THE LD. CIT THAT WHILE COMPUTING THE CAPITAL GAIN THE AO APPLIED THE PROVISIONS OF SEC. 50C. IN HIS OPINION, THE AO DID NOT CARRY OUT INQUIRIES IN THE LIGHT OF THE PROVISIONS OF SEC. 51 . ON A SHOW CAUSE NOTICE ISSUED BY THE LD. CIT, THE ASSESSEE CONTENDED THAT SEC. 51 WAS NOT APPLICABLE INASMUCH AS THERE WAS NO PREVIOUS NEGOTIATION FOR TRANSFER O F THE CAPITAL ASSET UNDER CONSIDERATION. IT WAS ONLY FOR THE FIRST TIME THAT THE ASSESSEE NEGOTIATED THE DEAL WITH M/S.NANSEE CONSTRUCTIONS PVT. LTD. AND PURSUAN T TO THE DEVELOPMENT AGREEMENT THE DEVELOPER PAID AMOUNTS FROM TIME TO T IME AGAINST THE SALE CONSIDERATION. IT WAS STATED THAT THE DELAY OCCURRE D DUE TO NEGOTIATIONS WITH THE TENANTS. IT WAS ONLY IN THE YEAR IN QUESTION THAT T HE DEAL WAS FINALIZED AND THE PROPERTY WAS HANDED OVER TO THE DEVELOPER. THE LD. CIT NOTICED THAT THE SALE PROCEEDS WERE RECEIVED BY THE ASSESSEE OVER A PERIO D OF 4 YEARS AND HENCE IT WAS NECESSARY TO EXAMINE THE PROVISIONS OF SEC. 51 WHICH THE AO DID NOT DO. HE, THEREFORE, HELD THE ASSESSMENT ORDER TO BE ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE ASSESSMENT ORDER WAS, THE REFORE, CANCELLED WITH A DIRECTION TO THE AO TO PASS A FRESH ASSESSMENT ORDE R AFTER CONSIDERING THE PROVISIONS OF SEC. 51 OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. BEFORE WE PROCEED FURTHER, IT WOULD BE APT TO CONSIDER THE MANDATE OF SECTION 51 WHICH IS AS UNDER : 51. WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION THE SUBJECT OF NEGOTIATIONS FOR ITS TRANSFER, ANY ADVANCE OR OTHER MONEY RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE D EDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR T HE WRITTEN DOWN VALUE OR THE FAIR MARKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION. ITA NO.3837/M/2010 SMT. SUKHIBAI GANESHMAL 3 A BARE PERUSAL OF THE ABOVE PROVISION BRINGS TO LIG HT THAT IT IS APPLICABLE ONLY WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASIO N THE SUBJECT MATTER OF NEGOTIATIONS FOR ITS TRANSFER. IN THAT SITUATION TH E ADVANCE OR OTHER MONEY RECEIVED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIA TIONS SHALL BE REDUCED FROM THE COST OF ACQUISITION. THE EFFECT OF SEC. 51 IS T O REDUCE THE COST OF ACQUISITION OF A CAPITAL ASSET AT THE TIME OF ITS TRANSFER BY AN A MOUNT WHICH THE ASSESSEE EARLIER RECEIVED AS ADVANCE OR EARNEST MONEY ETC. AND DID N OT RETURN BECAUSE THE TRANSFER OF CAPITAL ASSET DID NOT TAKE PLACE ON SUC H EARLIER OCCASION AND SIMULTANEOUSLY LEAVING THE ASSESSEE RICHER BY SOME EARNEST MONEY ETC. FORFEITED. IT, THEREFORE, TRANSPIRES THAT ONLY WHERE THE CAPIT AL ASSET WAS SUBJECT MATTER OF TRANSFER, WHICH DID NOT MATERIALIZE DUE TO ONE REAS ON OR THE OTHER, THE AMOUNT RETAINED BY THE ASSESSEE SHALL GO TO REDUCE THE COS T OF ACQUISITION OF SUCH CAPITAL ASSET. THIS SECTION HAS NO APPLICATION TO A CASE WH ERE THERE WAS ON NO EARLIER OCCASION THE CAPITAL ASSET BECAME SUBJECT MATTER OF TRANSFER AND THROUGH THE ONLY TRANSACTION, TRANSFER HAS TAKEN PLACE BY WHICH SALE CONSIDERATION IS RECEIVED IN PARTS. OBVIOUSLY, THE INSTANT ASSESSEE TRANSFERRED THE CAPITAL ASSET TO M/S. NANSEE CONSTRUCTIONS PVT. LTD. AND RECEIVED THE SAL E CONSIDERATION OVER A PERIOD AS EXTRACTED ABOVE. THESE AMOUNTS DO NOT REPRESENT ANY EARNEST MONEY FORFEITED BY THE ASSESSEE ON ACCOUNT OF TRANSFER OF THE CAPITAL ASSET. WE, THEREFORE, HOLD THAT THE LD. CIT WAS NOT JUSTIFIED IN HOLDING OTHERWISE. THE IMPUGNED ORDER IS, THEREFORE, SET ASIDE. 4. IN THE RESULT, THE APPEAL IS ALLOWED. - ITA NO.3837/M/2010 SMT. SUKHIBAI GANESHMAL 4 ORDER PRONOUNCED ON THE 05TH DAY OF AUGUST, 2011. SD/- SD/- (V. DURGA RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 05TH AUGUST , 2011. NG: COPY TO : 1. ASSESSEE. 2. DEPARTMENT. 3 CIT-17,MUMBAI. 4 ADDL.CIT,RANGE-17(1),MUMBAI. 5.DR,E BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.3837/M/2010 SMT. SUKHIBAI GANESHMAL 5 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 01-08- 2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 01-08- 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 *