PRADYOT B. BORKAR, MUMBAI V. ACIT 19(3), MUMBAI

ITA 4070/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8777 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH RATNAPARKHI
• Keywords: Capital asset; Capital receipt
• Section: 72; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 4070 /MUM. /2016 ( ASSESSMENT YEAR : 20 11 12 ) PRADYOT B. BORKAR 179 C, MIG COLONY BANDRA (E), MUMBAI 400 051 PAN AADPB2722R . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 19(3), MUMBAI . RESPONDENT ASSESSEE BY : SHRI SUBHASH RATNAPARKHI REVENUE BY : S MT. JOTHILAKSHMI NAYAK DATE OF HEARING 06 .01.2020 DATE OF ORDER 17.01.2020 O R D E R PER SAKTIJIT DEY, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING ORDER DATED 14 TH MARCH 2016, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 33, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2011 12. 2. THE DISPUTE IN THE PRESENT AP PEAL IS CONFINED TO THE ADDITION OF ` 53,80,500, UNDER THE HEAD INCOME FROM OTHER SOURCES . 2 PRADYOT B. BORKAR 3. BRIEF FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSME NT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 5 TH APRIL 2012, DECLARING TOTAL INCOME OF ` 32,30,000. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE AS SESSEE HAS OFFERED LONG TERM CAPITAL GAIN OF ` 31,12,638, TOWARDS SALE OF RESIDENTIAL FLATS AT C 20, 179, MIG, BANDRA, MUMBAI, AND HAS SIMULTANEOUSLY CLAIMED DEDUCTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ), CALLED UPON THE ASSESSEE TO FURNISH ALL RELEVANT DETAILS RELATING TO THE ACCRU AL OF CAPITAL GAIN. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE WAS OWNING A FLAT IN THE HOUSING SOCIETY WHICH WAS GIVEN FOR DEVELOPMENT UNDER A SCHEME OF RE DEVELOPMENT. AS PER THE TERMS OF THE DE VELOPMENT AGREEMENT BETWEEN THE HOUSING SOCIETY AND MEMBERS OF THE SOCIETY , IN ADDITION TO RECEIVING A NEW RESIDENTIAL FLAT AFTER RE DEVELOPMENT EACH MEMBER WAS ALSO ENTITLED TO RECEIVE AN AMOUNT OF ` 53,80,500, COMPRISING OF THE FOLLOWING: ` 25,00,000 COMPENSATION FOR NON ADHERENCE BY THE RE DEVELOPER TO THE EARLIER AGREED TERMS AND THAT THE MEMBER SHOULD BE REQUIRED TO VACATE THE OLD FLAT. ` 28,50,500 BENEFICIAL RIGHT AND INTEREST IN CORPUS AND INCOME OF THE SOCIETY AND NUISANCE ANNOYANCE AND HARDSHIP THAT WILL BE SUFFERED BY THE MEMBERS DURING THE DEVELOPMENT. ` 30,000 MOVING OF SHIFTING COST 3 PRADYOT B. BORKAR 4. THE ASSESSING OFFICER, AFTER EXAMINING THE NATURE OF PAYMENT RECEIVED BY THE ASSESSEE, WAS OF THE VIEW THAT NONE OF THE AFORESAID AMOUNT S WAS PAID TO THE ASSE SSEE FOR ACQUISITION OF THE OLD FLAT, BUT WAS PAID TOWARDS COMPENSATION . THEREFORE, THE AMOUNT RECEIVED IS NOT ANY WAY RELATED TO TRANSFER OF CAPITAL ASSET GIVING RISE TO CAPITA GAIN. THUS, ULTIMATELY, HE CONCLUDED THAT THE AMOUNT OF ` 53,30,500, HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 5. BEFORE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE WITH OUT PREJUDICE TO HIS SUBMISSION THAT THE AMOUNT OF ` 53,50,5 00, IS ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAIN , SUBMITTED THAT THE AMOUNT OF ` 53,50,500, IS IN THE NATURE OF CAPITAL RE CEIPT, HENCE, NOT LIABLE TO TAX. THEREFORE , HAS TO BE REDUCED FROM THE COST OF THE NEW FLAT. L EARNED COMMISSIONER (APPEALS), HOWEVER, DID NOT FIND MERIT IN ANY OF THE SUBMISSIONS MADE BY THE ASSESSEE AND ACCORDINGLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE AMOUNT OF ` 53,50,500, WA S RECEIVED BY THE ASSESSEE ON ACCOUNT OF HANDING OVER THE OLD FLAT FOR THE PUR POSE OF RE DEVELOPMENT AND IN LIEU , EACH OF THE MEMBERS OF THE HOUSING SOCIETY IS TO RECEIVE A NEW FLAT AND AN AMOUNT 4 PRADYOT B. BORKAR OF ` 53,50,000. HE SUBMITTED , THUS IT IS VERY MUCH CLEAR THA T THE AMOUNT OF ` 53,50,500, WAS RECEIVED IN CONNECTION WITH THE HANDING OVER OF THE OLD FLAT FOR RE DEVELOPMENT IN LIEU OF WHICH THE ASSESSEE RECEIVED THE NEW FLAT. THUS, IT IS CONNECTED TO THE TRANSFER OF CAPITAL ASSET, HENCE, CHARGEABLE TO CAPITAL GAIN. WITHOUT PREJUDICE, HE SUBMITTED , IN CASE THE REVENUE TREATS THE AMOUNT RECEIVED AS COMPENSATION, IT HAS TO BE TREATED AS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX, HENCE, HAS TO BE REDUCED FROM THE COST OF NEW FLAT. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) KAUSHAL K. BANGIA V/S ITO, [2012] 18 TAXMANN.COM 31 (MUM.); II) JITENDRA KUMAR SONEJA V/S ITO, [2016] 72 TAXMANN.COM 318 (MUM.) (TRIB.); AND III) RAJNIKANT D. SHROFF V/S ACIT, ITA NO.4424/M./2014, DATED 23.09.2016. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) SUBMITTED , THE DEVELOPMENT AGREEMENT WAS BETWEEN THE HOUSING SOCIETY AND THE DEVELOPER AND AS PER THE TERMS OF THE DE VELOPMENT AGREEMENT , ANY CAPITAL GAIN ACCRUING AS A RESULT OF RE DEVELOPMENT IS TO BE ASSESSED AT THE HANDS OF THE HOUSING SOCIETY. SHE SUBMITTED , THE COMPENSATION RECEIVED BY THE M EMBERS OF HOUSING SOCIETY IS IN NO WAY CONNECTED TO THE ACCRUAL OF CAPITAL GAIN AND IS A 5 PRADYOT B. BORKAR COMPLETELY DISTINCT AND SEPARATE PAYMENT MADE TO THE MEMBERS DUE TO CERTAIN OTHER FACTORS. THEREFORE, IT CANNOT BE CONSIDERED AS CAPITAL GAIN. FURTHER, SHE SUBMITTED , THE CLAIM OF THE ASSESSEE THAT IT IS IN THE NATURE OF CAPITAL RECEIPT IS AL SO NOT ACCEPTABLE IN VIEW OF THE REASONING OF LEARNED COMMISSIONER (APPEALS). 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGHT OF THE DECISIONS RELIED UPON AND PERUSED THE MATERIAL ON RECORD . UNDISPUTEDLY, IN THE RETURN OF INCOME THE ASSESSEE HAS OFFERED THE AMOUNT OF ` 53,50,500, AS INCOME FROM LONG TERM CAPITAL GAIN. WHEREAS, THE ASSESSING OFFICER HAS HELD THAT THE AFORESAID AMOUNT RECEIVED BY THE ASSESSEE IS IN THE NATURE OF COMPENSATION RECEIVED DUE TO SOME SPECIFIC FACTORS AN D NOT RELATED TO TRANSFER OF CAPITAL ASSET. HE HAS OBSERVED THAT AS PER THE TERMS OF THE DEVELOPMENT AGREEMENT, ANY CAPITAL GAIN ARISING DUE TO RE DEVELOPMENT WOULD ACCRUE TO THE HOUSING SOCIETY. THEREFORE, THE COMPENSATION RECEIVED OF ` 53,50,500, CANNOT BE TREATED AS CAPITAL GAIN. FROM THE FACTS ON RECORD, IT IS CLEAR THAT THE AMOUNT OF ` 53,50,500 WAS RECEIVED BY THE ASSESSEE ONLY BECAUSE OF HANDING OVER THE OLD FLAT FOR THE PURPOSE OF RE DEVELOPMENT. THEREFORE, THE AMOUNT OF ` 53,50,500, RECEIVED BY THE ASSESSEE IS INTEGRALLY CONNECTED WITH THE TRANSFER OF HIS OLD FLAT TO THE DEVELOPER FOR RE DEVELOPMENT IN LIEU OF WHICH HE RECEIVED THE AMOUNT OF ` 53,50,500, AND A NEW RESIDENTIAL FLAT. THEREFORE, THE AMOUNT OF ` 53,50,500, HAS TO BE TREATED AS INCOME UND ER THE HEAD CAPITAL GAIN . THE DECISION OF 6 PRADYOT B. BORKAR THE CO ORDINATE BENCH IN RAJNIKANT D. SHROFF V/S ACIT, ITA NO.4424/MUM./ 2014, DATED 23 RD SEPTEMBER 2016, SUPPORTS THIS VIEW. IN VIEW OF THE AFORESAID, WE HOLD THAT THE AMOUNT OF ` 53,50,500, HAS TO BE ASSESSED U NDER THE HEAD CAPITAL GAIN . IT IS RELEVANT TO OBSERVE , IN COURSE OF HEARING THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED BEFORE US THAT IN CASE ASSESSEES CLAIM THAT THE AMOUNT OF ` 53,50,500 IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN , IS ACCEPTE D, THE ALTERNATIVE CLAIM THAT THE AMOUNT IS IN THE NATURE OF CAPITAL RECEIPT, HENCE, NOT TAXABLE WOULD NOT BE CONTESTED . CONSI DERING THE AFORESAID SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE, WE DO N OT FIND THE NECESSITY TO DELIBERATE ON THE NATURE OF RECEIPT. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.01.2020 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, D ATED: 17.01.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI