ITO 8(3)(1), MUMBAI V. SHANGRILA GOLF & HELTH RESORTS P. LTD, MUMBAI

ITA 4074/MUM/2009

• Counselvise Citation: 407419914 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 08-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAY KUMAR
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.4074/MUM/2009(A.Y. 2005-06) THE ITO 8(3) (1), ROOM NO.201, 2 ND FLOOR, AAYKAR BHAVAN, MUMBAI 20. (APPELLANT) VS. M/S. SHANGRILA GOLF & HEALTH RESORTS PVT. LTD., LOK CHAMBERS, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI 59. PAN:AABCS 1232N (RESPONDENT) APPELLANT BY : SHRI JAYKUMAR CIT (DR) RESPONDENT BY : SHRI M. SUBRAMANIAN DATE OF HEARING : 08/12/2011 DATE OF PRONOUNCEMENT : 21/12/2011 ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 9.4.2009 OF CIT(A)-XXVIII, MUMBAI, RELATING TO AY 05-06. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING THE SALE OF PROPERTY AS LO NG TERM CAPITAL LOSS INSTEAD OF SHORT TERM CAPITAL GAIN TREATED BY THE A O WITHOUT APPRECIATING THE FACTS OF THE CASE. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BU SINESS OF OWNING, LEASING, LICENSING DEVELOPING GOLD COURSE, HEALTH RESORTS, H OLIDAY RESORTS ETC. IN THE RETURN OF INCOME FILED FOR AY 05-06, THE ASSESSEE H AD DECLARED LONG TERM CAPITAL LOSS OF RS.5,23,66,272/-. THE CLAIM OF THE ASSESSEE WAS THAT GREATER ITA NO.4074/MUM/2009(A.Y. 2005-06) 2 COCHIN DEVELOPMENT AUTHORITY (HEREINAFTER REFERRED TO AS GCDA) HAD INVITED TENDER FOR ALLOTMENT OF A PLOT OF LAND MEASURING 3 ACRES ON LEASE FOR A PERIOD OF 99 YEARS FOR DEVELOPING HOTEL PROJECT IN MARINE DRIVE, COCHIN. ONE MR.OM PRAKASH MONGA ON BEHALF OF A LIMITED COMPANY TO BE FORMED, HAD MADE OFFER OF RS.6,25,000/- PER CENT. AT THE TENDER/AUCTION H ELD ON 28.10.1994, THE OFFER OF MR.OM PRAKASH MONGA WAS ACCEPTED BY GCDA V IDE ITS LETTER DT.4.11.1994. THE ACCEPTANCE OF THE OFFER WAS SUBJ ECT TO CERTAIN CONDITIONS. SOME OF THE CONDITIONS RELEVANT FOR A DECISION IN T HE PRESENT APPEAL ARE THE FOLLOWING 9. THE AMOUNT QUOTED FOR THE PLOT SHALL BE PAID B Y THE ALLOTTEE WITHIN 30 DAYS OF RECEIPT OF ALLOTMENT LETTER FAILING WHIC H EMD WILL BE FORFEITED AND ALTERNATE ARRANGEMENTS MADE FOR THE ALLOTMENT A S THE AUTHORITY DEEMS FIT. IF THE ALLOTTEE DESIRES TO REMIT THE AM OUNT BY INSTALMENTS IT CAN BE PERMITTED ON THE FOLLOWING CONDITIONS: 50% OF THE TOTAL BID AMOUNT HAS TO BE PAID WITHIN 3 0 DAYS OF THE RECEIPT OF THE ALLOTMENT LETTER AND THE REMAINING I N SIX EQUAL MONTHLY INSTALMENTS WITH 21% INTEREST. PENAL INTER ESSST OF 22% WILL ALSO BE CHARGED IF THE INSTALMENT AMOUNT IS NO T REMITTED ON THE DUE DATES. 10.NO EXTENSION OF TIME WILL BE GRANTED FOR REMITTA NCE OF THE TOTAL BID AMOUNT / 50% OF THE TOTAL BID AMOUNT, AS THE CASE M AY BE. THE ALLOTMENT WILL AUTOMATICALLY STAND CANCELLED ON FAI LURE TO REMIT THE TOTAL BID AMOUNT / 50% OF THE TOTAL BID AMOUNT, AS THE CASE MAY BE, WITHIN 30 DAYS OF RECEIPT OF ALLOTMENT ORDER. 3. IT IS NOT IN DISPUTE THAT PAYMENTS WERE MADE TO GCDA IN RESPECT OF THE ABOVE ALLOTMENT BY SHRI. O.P.MONGA AS FOLLOWS:- DATE RECEIPT NO. AMOUNTS. 29.10.1994 132393 RS. 20,00,000/- 08.11.1994 133705 RS.3,00,00,000/- 22.11.1994 134364 RS.3,17,50,000/- 01.12.1994 134499 RS.3,00,00,000/- 03.01.1995 136097 RS. 1,72,97,089/- 20.04.1995 141983 RS.1,72,87,000/- 17.05.1995 141201 RS. 1,72,54,000/- 23.08.1995 144904 RS.1,64,61,000/- 23.08.1995 147905 RS. 33,50,959/- ITA NO.4074/MUM/2009(A.Y. 2005-06) 3 16.01.1998 188668 RS.1,00,00,000/- 17.05.2004 9188 RS.4,03,60,713/- TOTAL RS.21,62,60,761/- AS CAN BE SEEN FROM THE ABOVE DETAILS, 50% OF THE B ID AMOUNT HAD BEEN PAID WITHIN A PERIOD OF 30 DAYS FROM THE DATE OF LETTER OF ALLOTMENT. THOUGH THE ACTUAL AMOUNT PAYABLE WAS ONLY RS.18,75,00,000/- (6 ,25,000 X 300), THE ACTUAL PAYMENT MADE AS ABOVE IS BECAUSE OF INTEREST /PENAL INTEREST ETC. 4. IT IS NOT IN DISPUTE THAT SHRI OM PRAKASH MONGA , HAD BID AT THE AUCTION ON BEHALF OF A COMPANY TO BE FORMED AND THE COMPANY SO FORMED WAS SHANRGI-LA GOLF AND HEALTH RESORTS (P) LIMITED, MUM BAI, VIZ., THE ASSESSEE IN THIS APPEAL. THE ASSESSEE HAD REQUESTED GCDA TO DIVIDE THE ABOVE SAID 12140.87 SQ.M. (3 CRES) PLOT INTO 2 PLOTS HAVING EX TENT OF 5000 SQ.M AND 7140 SQ.M RESPECTIVELY AND TO REGISTER A LEASE DE ED FOR 5000 SQ .M IN THE NAME OF A COMPANY NAMED M/S. CENTURIONS HOUSING AND CONSTRUCTIONS (P) LIMITED. GCDA CONSIDERED THE REQUEST IN ITS GENERA L COUNCIL MEETING HELD ON 27.09.1997 AND RESOLVED TO GRANT THE LEASE HOLD RIGHT IN RESPECT OF THE PLOT ADMEASURING 5000 SQ. M FROM THE TOTAL EXTENT O F 12140.87 SQ. M OF LEND IN FAVOUR OF M/S. CENTURIONS HOUSING & CONSTRUCTION S (P) LIMITED, MUMBAI. THE PROPORTIONATE CONSIDERATION PAYABLE IN RESPECT OF 5000 SQ.MTRS. OF LAND WAS RS.8,84,17,000/-. IT WAS AGREED TO TREAT RS. 8 ,84,17,000/ (EIGHT CRORES EIGHTY FOUR LAKHS AND SEVENTEEN THOUSAND ONL Y) FROM THE AMOUNT ALREADY PAID BY THE ASSESSEE AS THE COST FOR THE SA ID 5000 SQ.M OF LAND AND TO ADJUST THE SAME TOWARDS THE COST (WHICH INCLUDES PRINCIPAL, INTEREST, AND PENAL INTEREST) FOR 5000 SQ.M OF LAND FOR THE PERIO D UPTO 31.08.1997. THE ASSESSEE ALSO AGREED TO PAY THE BALANCE AMOUNT DUE TO THE AUTHORITY (TOWARDS PRICE + INTEREST + PENAL INTEREST) FOR THE 7140.87 SQ. H OF LAND AND ALSO TO PAY THE FUTURE INTEREST THEREON TILL THE DA TE OF REALIZATION. THE ASSESSEE ALSO AGREED THAT IN CASE IT FAILS TO DISCH ARGE THE DUES, THE AUTHORITY WILL BE AT LIBERTY TO REALISE THE DUE AMOUNT WITH F UTURE INTEREST ETC. THEREON ITA NO.4074/MUM/2009(A.Y. 2005-06) 4 BY CHARGING IT FROM THE SAID 7140.87 SQ.M OF LAND ( BALANCE LAND ALLOTTED TO ASSESSEE) EITHER BY WAY OF SALE OF THE SAID PROPERT Y OR THROUGH ANY OTHER MEANS WHICH THE AUTHORITY DEEMS FIT TO MAKE IN THE CIRCUMSTANCES. 5. THUS AFTER THE ALLOTMENT OF AN AREA OF 1.25 ACR ES TO CENTURIONS HOUSING AND CONSTRUCTIONS PVT. LTD. AS REQUESTED BY THE AS SESSEE FROM THE 3 ACRES OF LAND ALLOTTED TO THE ASSESSEE AT COCHIN MARIN DR IVE SCHEME AREA WAS AS FOLLOWS (VIDE GDCAS LETTER DT. 7.10.97 AT PAGE-27 OF PAPER BOOK) 1. TOTAL PRICE OF THE SAID 1.25 ACRES (125 CENTS) O F LAND WAS RS.8,84,17,000/- AS ON 31.8.97( THIS INCLUDES PRICE + INTEREST + PENAL INTEREST AS ON THAT DATE). 2. THIS AMOUNT OF RS.8,84,17,000/ WAS TO BE ADJUST ED FROM THE AMOUNT ALREADY PAID BY THE ASSESSEE. 3. THE BALANCE AMOUNT OF RS.7,74,83,048/- (AFTER D EDUCTING RS.8,84,L7,000) FROM THE AMOUNT ALREADY DEPOSITED BY THE ASSESSEE T OWARDS PRINCIPAL + INTER PENAL INTEREST FOR 3 ACRES OF LAND) WAS TO BE TREA TED AS ADVANCE TOWARDS THE PRICE + INTEREST + PENAL INTEREST FOR THE REMAINING 175 CENTS OF LAND. AS ON 31.8.97, THE BALANCE AMOUNT DUE FROM THE ASSESSEE F OR THE REMAINING 175 CENTS OF LAND TOWARDS PRICE+ INTEREST+ PENAL INTER EST WAS RS.4,63,00,713/- OUT OF THIS, THE ASSESSEE WAS ASKED TO PAY RS.ONE C RORE WITHIN 30 DAYS. THE BALANCE AMOUNT WITH INTEREST AND PENAL INTEREST FOR THE PERIOD FROM 1.9.97 WAS ALSO DIRECTED TO BE PAID SHOULD BE PAID WITHOUT DELAY. 6. IN RESPECT OF THE REMAINING AREA OF 1.75 ACRES OUT OF THE 3 ACRES OF LAND REFERRED TO ABOVE, IN VIEW OF THE FINANCIAL DIFFICU LTY THE ASSESSEE COULD NOT MAKE PAYMENT OF THE BALANCE SUM. THE ASSESSEE THERE FORE DECIDED TO DISPOSE OFF THIS PROPERTY I.E. THE RIGHT ACQUIRED BY THEM F ROM GDCA TO ONE PARTY M/S ABAD CONSTRUCTIONS PRIVATE LIMITED AND AN AGREEMENT DT.30.4.2004 TO THIS EFFECT WAS ENTERED INTO BETWEEN THE ASSESSEE AND TH E SAID PARTY FOR TRANSFER OF THIS RIGHT IN THE PROPERTY FOR A CONSIDERATION O F RS. 10,47,00,000. THE ASSESSEES NET COST OF THIS CAPITAL ASSET WAS RS. 9 ,98,02,527 (AFTER DEDUCTING ITA NO.4074/MUM/2009(A.Y. 2005-06) 5 TRANSFER OF 1.25 ACRES TO CENTURIOUS IN THE YEAR 19 97 FOR RS. 8,84,17,000). BASED ON THE ABOVE FACTS THE ASSESSEE CLAIMED LONG TERM CAPITAL LOSS OF RS. 4,07,38,811 ON THE SALE OF THIS CAPITAL ASSET APPLY ING THE INDEXED COST TO INDIVIDUAL PAYMENTS MADE BY THEM TO GCDA. 7. ACCORDING TO THE ASSESSEE, THE RIGHT OF THE ASS ESSEE IN THE CAPITAL ASSET, VIZ., RIGHTS UNDER THE ALLOTMENT LETTER OF GCDA WAS ACQUIRED IN THE YEAR 1994. THE ASSESSEE RELIED ON THE FACT THAT ON 15.01 .1998 THE ASSESSEE HAD SOLD PART OF ITS RIGHT (1.25 ACRES OUT OF 3 ACRES) IN RESPECT OF PART PROPERTY BY SUBDIVIDING THE WHOLE PROPERTY TO CENTURIAN HOUSING AND CONSTRUCTION PVT. LTD. THE ASSESSEE WAS A PARTY TO LEASE AGREEMENT E NTERED INTO BETWEEN GCDA AND THE CENTURIAN HOUSING AND CONSTRUCTION PVT .LTD. THE CONSIDERATION RECEIVED IN THE YEAR 1998 IN RESPECT OF ASSIGNMENTS OF THESERIGHT WAS TAXED AS CAPITAL GAIN DURING A. Y. 1 998-99. THE ASSESSEE IN THIS REGARD RELIED ON THE FACT THAT IT WAS A PARTY TO THE LEASE DEED WAY BACK IN 1998, WHEREBY PART OF THE PROPERTY WAS ASSIGNED TO CENTURIAN HOUSING AND CONSTRUCTION PVT.LTD. AND THIS FACT ESTABLISHED IT RIGHTS OVER THE ENTIRE PROPERTY, THE BALANCE PART OF WHICH WAS SOLD DURING THE PREVIOUS YEAR. 8. THE AO HOWEVER WAS OF THE VIEW THAT THE ASSESSE E HAS MADE A TENDER APPLICATION DATED 28/10/1994 TO M/S. GCDA. NO CONT RACT WHAT-SO-EVER WAS SIGNED BETWEEN M/S. GCDA AND ASSESSEE COMPANY. FURT HER, THE ASSESSEE COMPANY WAS NEVER HANDED OVER THE POSSESSION OF THE SAID LAND. IN THE CIRCUMSTANCES, THE AO HELD THAT THE OWNERSHIP ON TH E SAID CAPITAL ASSET OF THE ASSESSEE COMPANY WAS NOT CREATED IN THE YEAR 19 94. IN OTHER WORDS, ACCORDING TO THE AO, IT WAS ONLY IN THE YEAR 2004 W HEN THE CONSIDERATION WAS PAID TO GDCA THE RIGHT OF THE ASSESSEE TO PURCH ASE THE PROPERTY BECAME COMPLETE. IN THAT VIEW OF THE MATTER, THE AO HELD THAT THE YEAR OF ACQUISITION OF THE CAPITAL ASSET BY THE ASSESSEE WA S 2004 AND SINCE THE TRANSFER OF THE CAPITAL ASSET TOOK PLACE IN 2004, T HE AO COMPUTED SHORT TERM ITA NO.4074/MUM/2009(A.Y. 2005-06) 6 CAPITAL GAIN ARISING FROM THE PURCHASE AND SALE OF THE SAID PROPERTY IN THE PREVIOUS YEAR AS UNDER :- SALE PURCHASE CAPITAL GAIN SHORT TERM FY 2004-05 104700000 FY 2004-05 99802527 4897473 SALE OF COCHIN PROPERTY 480 305 104700000 99802527 4897473 THUS, A SUM OF RS. 48,97,473/- WAS ADDED BACK TO TH E TOTAL INCOME AS SHORT TERM CAPITAL GAIN FROM THE ABOVE TRANSACTION. THE DIFFERENCE IN COMPUTATION AS DONE BY THE ASSESSEE AND AS DONE BY THE AO IS BE CAUSE OF THE APPLICATION OF COST INDEXATION TO THE COST OF THE PROPERTY FROM THE YEAR 1994. BECAUSE THE AO HELD THAT THE CAPITAL ASSET WAS ACQUIRED BY THE ASSESSEE ONLY IN THE YEAR 2004, THE CAPITAL ASSET WHICH WAS SUBJECT MATT ER OF TRANSFER WAS TREATED AS SHORT TERM CAPITAL ASSET AS IT WAS HELD BY THE A SSESSEE WAS LESS THAN 36 MONTHS FROM THE DATE OF ACQUISITION. 9. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT THE CONCLUSIONS OF THE AO WAS BASED ON THE FOLLOWING REASONS: (I) THE OWNERSHIP OF CAPITAL ASSET WAS NEVER CREATE D IN 1994. (II) GCDA MERELY AGREED TO ALLOT THE IMPUGNED PLOT OF LAND. (THE LEARNED A.O. HE QUOTES GCDAS REPLY DATED 05/11/2007.) (III) THE ASSESSEE MADE FINAL PAYMENT ON 17/05/200 4 OF RS.4,03,60,7 13/- (IV) NO SALE DEED WAS EVER EXECUTED. (V) THE ASSESSEE HAD NEVER TAKEN POSSESSION OF THE LAND. (VI) NO CONVEYANCE WAS MADE AND NO STAMP DUTY PAID ON ACCOUNT OF TRANSFER. THE ABOVE, AS PER LEARNED A.O., SUBSTANTIATED THAT THE IMPUGNED LAND WAS NEVER TRANSFERRED TO THE ASSESSEE AND HENCE IT WAS NOT A CAPITAL ASSET FOR THE ITA NO.4074/MUM/2009(A.Y. 2005-06) 7 ASSESSEE COMPANY IN THE YEAR 1994. THE ASSESSEE GAV E ITS EXPLANATION ON EACH OF THE ABOVE OBSERVATIONS OF THE LEARNED A.O. AS UNDER: - A) THE LEARNED A.O. HAS NOT APPRECIATED AS TO WHAT IS THE CAPITAL ASSET IN THE HANDS OF THE ASSESSEE COMPANY. THE AS SESSEE SUBMITTED THAT BY VIRTUE OF THE ALLOTMENT LETTER ISSUED BY TH E GCDA IN THE YEAR 1994, THE ASSESSEE HAD ACQUIRED THE RIGHT IN THE PL OT ALLOTTED BY GCDA AND IT IS THIS RIGHT WHICH IS THE CAPITAL ASSET. TH E ASSESSEE SUBMITTED THAT THE TERMS OF ALLOTMENT LETTER GAVE A VESTED RI GHT IN FAVOR OF THE ASSESSEE. IT WAS THUS SUBMITTED THAT THE AO WAS NOT RIGHT IN CONCLUDING THAT NO VESTED RIGHT CAME INTO EXISTENCE IN THE YEAR 1994 IN FAVOUR OF THE ASSESSEE. B) IT WAS HIGHLIGHTED THAT THE ALLOTMENT BY GCDA WA S NOT AN AGREEMENT TO ALLOT BUT AN ALLOTMENT. THE ASSESSEE THUS ACQUIRED A RIGHT ON THE DATE OF ALLOTMENT ITSELF. THE ASSESSEE ALSO RELIED ON THE FACT THAT HAD IT NOT BEEN A VESTED RIGHT IN FAVOUR OF THE ASSESSEE, THEN THE ASSESSEE WOULDNT BE A CONFIRMING PARTY IN BOTH THE SALE TRANSACTIONS. (FIRST TRANSACTION WITH CENTURION AND THE SECOND WITH ABAD CONSTRUCTIONS PVT.LTD.) 10. THE CIT(A) HELD AS FOLLOWS: 7. I HAVE CAREFULLY CONSIDERED THE INFORMATION REC ORD. FROM THE CAREFUL READING OF ASSESSMENT ORDER IT IS EVIDENT T HAT THE AO RECOGNIZED THAT THERE WAS A CAPITAL ASSET. IN THE INSTANT CASE, THE CAPITAL ASSET IS RIGHT IN THE PROPERTY. HE ALSO RE COGNIZED THAT THERE WAS TRANSFER OF SUCH RIGHT. THE ONLY ISSUE IS SUCH RIGHT WAS ACQUIRED IN THE YEAR 1994 OR IN THE YEAR 2004? AT THIS JUNC TURE, IT IS NECESSARY TO GO THROUGH THE JUDICIAL PRECEDENTS ON THIS ISSUE . CIT V/S. TATA SERVICES LIMITED (122 ITR 594) BOMBAY HIGH COURT: THE WORD PROPERTY U/S.2(14) IS OF WIDEST AMPLITUDE AND INCLUDES ANY RIGHT WHICH CAN BE INCLUDED IN DEFINITION OF CAPITA L ASSET. PONDS (INDIA) LTD. V/S. DCIT (64 ITD 33) MUMBAI ITA T: THE FACTS OF THE CASE ARE, BY AN AGREEMENT DATED 18 .04.81, THE ASSESSEE AGREED TO PURCHASE IMMOVABLE PROPERTY FROM K AND TOOK THE POSSESSION. BY ANOTHER AGREEMENT DATED 03.01.1991, THE ASSESSEE GAVE UP HIS RIGHTS ACQUIRED FOR CERTAIN CONSIDERATI ON. IT WAS HELD THAT THE COMPENSATION RECEIVED ON GIVING UP RIGHT TO PUR CHASE WAS TREATED AS LONG TERM CAPITAL GAIN. J.K.KASHYAP V/S. ACIT (302 ITR 255) DELHI HIGH COUR T: ITA NO.4074/MUM/2009(A.Y. 2005-06) 8 CAPITAL GAINS TRANSFER-DEFINITION-RELINQUISHMENT OF RIGHT IN CAPITAL ASSET- ASSESSEE MAKING PAYMENT FOR ACQUISITION OF P ROPERTY BY AN AGREEMENT IN 1990 TRANSACTION NOT MATERIALIZING-R ELINQUISHMENT OR RIGHT IN FAVOUR OF NEW VENDEE IN 1995- CONSIDERATIO N RECEIVED FOR RELINQUISHMENT OF INTEREST IN PROPERTY-LIABLE LONG TERM CAPITAL GAIN. CIT V/S. VIJAY FLEXIBLE CONTAINERS (186 ITR 693) BO MBAY HJGH COURT: GIVING UP OF THE RIGHT TO OBTAIN CONVEYANCE OF IMMO VABLE PROPERTY AMOUNTS TRANSFER OF A CAPITAL ASSET. CIT V/S. VIMAL LALCHAND MUTHA (187 ITR 613) BOMBAY HIGH COURT: THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR THE OF A FLAT IN NOVEMBER, 1997 AND HAD EXECUTED A FORMAL AGREEMENT IN DECEMBER, 1978. SHE TRANSFERRED HER RIGHT, TITLE AND INTER EST IN THE FLAT BY AN AGREEMENT TO C IN APRIL, 1983. THE TRIBUNAL WAS , THEREFORE, RIGHT IN HOLDING THAT THE RIGHTS UNDER THE SAID TWO AGREEM ENTS OF NOVEMBER, 1977/DECEMBER, 1978, HAD BEEN HELD FOR MORE THAN 36 MONTHS AND THAT THE GAINS ARISING FROM THE TRANSFER OF HER RIG HTS UNDER THE AGREEMENT IN APRIL, 1983, CONSTITUTED LONG-TERM CAP ITAL GAIN. IN VIEW OF THE ABOVE, DISCUSSION, THE ASSESSEES RI GHT IN THE PROPERTY WAS ACQUIRED IN THE YEAR 1994 ITSELF WHICH WAS ALRE ADY RECOGNIZED BY THE GCDA, WHICH IS A GOVT. UNDERTAKING. IT IS ALSO TO BE NOTED THAT SALES CONSIDERATION FOR BOTH THE TRANSACTIONS WAS R ECEIVED- BY THE APPELLANT AND NOT BY GCDA. IN VIEW OF THE ABOVE DIS CUSSION THE A.O. IS DIRECTED TO TREAT THE GAIN AS LONG TERM CAPITAL GAI N. 11. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED D.R. WHO REITERATED THE STAND OF THE AO AS REFLECTED IN THE ORDER OF ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE R EITERATED SUBMISSIONS AS WERE MADE BEFORE CIT(A) AND DISTINGUISHED CASES RELIED UPON BY THE AO IN THE ORDER OF ASSESSMENT. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. U/S . 45 OF THE ACT, ANY PROFIT OR GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSE T SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD CAPITAL GAINS. U/S. 48 OF THE ACT, THE MODE OF ITA NO.4074/MUM/2009(A.Y. 2005-06) 9 COMPUTING THE CAPITAL GAINS HAS BEEN PRESCRIBED. I T IS LAID DOWN THEREIN THAT CAPITAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM TH E FULL VALUE OF THE CONSIDERATION RECEIVED AS RESULT OF TRANSFER OF CAP ITAL ASSET, EXPENDITURE INCURRED IN CONNECTION WITH SUCH TRANSFER AND THE C OST OF ACQUISITION OF THE ASSET AND THE COST OF IMPROVEMENT THERETO. CAPITAL ASSET HAS BEEN DEFINED IN SEC.2(14) OF THE ACT TO MEAN PROPERTY OF ANY KIND H ELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION. THE RIGHT UNDER THE LETTER OF ALLOTMENT BY THE GCDA TO OBTAIN LEASE FOR 99 YEARS 3 ACRES OF LAND AT MARINE DRIVE, COCHIN IS A CAPITAL ASSET. E VEN THE AO DOES NOT DISPUTE THIS FACT. THE AO ALSO DOES NOT DISPUTE TH AT THERE WAS A TRANSFER OF THE RIGHT (CAPITAL ASSET) BY THE ASSESSEE IN FAVOUR OF ABAD CONSTRUCTIONS. THE ONLY DISPUTE IS AS TO THE YEAR IN WHICH THE ASS ESSEE ACQUIRED THE CAPITAL ASSET. THIS IS NECESSARY BECAUSE DEPENDING UPON TH E PERIOD FOR WHICH THE CAPITAL ASSET IS HELD BY AN ASSESSEE, CAPITAL ASSET S ARE CLASSIFIED AS SHORT TERM CAPITAL ASSET AND LONG TERM CAPITAL ASSET. CA PITAL GAIN OR LOSS ARISING FROM TRANSFER OF A SHORT TERM CAPITAL ASSET GIVES R AISE TO STCG AND TRANSFER OF A LONG TERM CAPITAL ASSET GIVES RAISE TO LTCG. THE ASSESSEE WILL BE ENTITLED TO BENEFIT OF INDEXATION ON COST WHEN LTCG IS COMPU TED. NO SUCH BENEFIT IS ALLOWED WHEN STCG IS COMPUTED. THEREFORE THE MAIN ISSUE TO BE DECIDED IN THIS CASE IS AS TO WHETHER THE ASSESSEE ACQUIRED TH E CAPITAL ASSET VIZ., RIGHT TO PURCHASE LEASE HOLD RIGHTS IN THE PROPERTY OF 1. 75 ACRES (WHICH IS PART OF THE 3 ACRES) ON 4.11.1994 WHEN GCDA ISSUED LETTER A CCEPTING THE ASSESSEES BID/OFFER, AS CLAIMED BY THE ASSESSEE OR ON 17.5.20 04 WHEN THE ASSESSEE MADE FINAL PAYMENT IN FULL AND FINAL DISCHARGE OF A LL DUES TO GCDA. ON THIS ISSUE THE CASE LAWS RELIED UPON BY THE AO AS WELL A S THE ASSESSEE ARE NOT OF MUCH RELEVANCE. THE CASE LAWS RELIED UPON BY THE A SSESSEE ARE ON THE ISSUE THAT RIGHT UNDER AN AGREEMENT IS A CAPITAL ASSET AN D ANY GAIN ON RELINQUISHMENT OR TRANSFER OF SUCH RIGHT GIVES RAIS E TO CAPITAL GAIN. THE AO HAS NOT DISPUTED THIS PROPOSITION AT ALL. THE AO H AS RELIED ON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT 260 ITR 491 (BOM) WHICH DEALS WITH THE QUES TION AS TO WHEN ITA NO.4074/MUM/2009(A.Y. 2005-06) 10 TRANSFER CAN BE SAID TO HAVE TAKEN PLACE WHEN PROPE RTY IS GIVEN FOR JOINT DEVELOPMENT TO A BUILDER. THIS DECISION IS NOT OF ANY RELEVANCE TO THE ISSUE BEFORE THE AO. SO ALSO THE DECISION IN THE CASE OF CIT VS. F.X.PERIERA & SONS (TRANVANCORE) PVT.LTD. 184 ITR 461(KER) WHICH DEALS WITH THE ASPECT THAT SALE IS COMPLETE WHEN TITLE PASSES FROM THE PURCHAS ER TO THE SELLER. WE ARE NOT IN THIS CASE DEALING WITH TRANSFER BY WAY OF SA LE OF A CAPITAL ASSET IN THE FORM OF IMMOVABLE PROPERTY BUT WITH A CASE OF TRANS FER OF CAPITAL ASSET VIZ., RIGHTS UNDER AN AGREEMENT. EVEN IN RESPECT OF IMMO VABLE PROPERTY THE DEFINITION OF TRANSFER U/S.2(47) OF THE ACT HAS BEE N AMENDED TO INCLUDE TRANSFER UNDER AN AGREEMENT FOR SALE WHERE POSSESSI ON IS DELIVERED IN PART PERFORMANCE OF AGREEMENT FOR SALE AS ENVISAGED U/S. 53-A OF THE TRANSFER OF PROPERTY ACT, 1887. THE DECISION IN THE CASE OF CI T VS. GRACE COLLIS 248 ITR 323(SC) IS A CASE WHERE THE ISSUE WAS AS TO WHETHER THERE CAN BE EXTINGUISHMENT OF RIGHTS WHERE THE TRANSFER OF CAPI TAL ASSET (SHARES HELD IN A LIMITED COMPANY) IS NOT VOLUNTARY BUT HAPPENS BECAU SE OF AMALGAMATION OF TWO COMPANIES. THE DECISIONS IN THE CASE OF PONDS (INDIA) LTD. VS. DCIT 64 ITD 33 (MUM) AND THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. VIMAL LALCHAND MUTHA 187 ITR 613(BOM) ARE ON THE IS SUE OF WHEN CAPITAL ASSET IN THE FORM OF RIGHTS UNDER AN AGREEMENT CAN BE SAID TO HAVE ACQUIRED. IT HAS BEEN HELD IN THESE CASE THAT THE DATE OF THE AGREEMENT WILL BE THE DATE ON WHICH THE RIGHTS ARE ACQUIRED. 13. WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE ASSESSEE OFFERED TO PURCHASE LEASEHOLD RIGHTS FOR 99 YEARS OF THE PROPE RTY MEASURING 3 ACRES IN MARINE DRIVE, COCHIN FROM GCDA. GCDA BY ITS LETTER DT.4.11.1994 ACCEPTED THE SAID OFFER. AS WE HAVE ALREADY SEEN THE OFFER WAS SUBJECT TO THE CONDITION THAT 50% OF THE COST OF THE PROPERTY SHOULD BE PAID WITHIN 30 DAYS AND THIS CONDITION HAS BEEN DULY COMPLIED WITH BY THE ASSESS EE. THERE HAS THEREFORE BEEN A CONCLUDED CONTRACT BETWEEN THE ASSESSEE AND GCDA. THE PAYMENT OF THE REMAINING CONSIDERATION BY THE ASSESSEE AS SPEC IFIED IN THE AGREEMENT WAS ONLY PERFORMANCE OF THE TERMS OF THE CONTRACT. THE ASSESSEE HAD A RIGHT ITA NO.4074/MUM/2009(A.Y. 2005-06) 11 TO OBTAIN A CONVEYANCE OF LEASEHOLD RIGHT OVER THE PROPERTY BY VIRTUE OF THE LETTER OF ALLOTMENT DATED 4.11.1994. THAT RIGHT WA S TRANSFERRED BY THE ASSESSEEE ON 28.1.2004 WHEN THE ASSESSEE ADDRESSED A LETTER TO GCDA TO TRANSFER THE AREA OF 1.75 ACRES OF LAND TO M/S.ABAD CONSTRUCTIONS PVT.LTD. THE GCDA IN ITS PROCEEDINGS DATED 26.5.2004 ACCEPTE D THE REQUEST OF THE ASSESSEE AND ON 31.5.2004 EXECUTED A REGISTERED DEE D OF CONVEYANCE FOR 1.75 ACRES OF LAND IN FAVOUR OF M/S.ABAD CONSTRUCTI ONS PVT.LTD. IT CANNOT BE THEREFORE SAID THAT THE ASSESSEE ACQUIRED RIGHTS UN DER THE AGREEMENT ONLY ON 17.5.2004 WHEN THE ASSESSEE MADE FINAL PAYMENT IN F ULL AND FINAL DISCHARGE OF ALL DUES TO GCDA. WE THEREFORE HOLD THAT THE RI GHT TO PURCHASE LEASE HOLD RIGHTS IN THE PROPERTY OF 1.75 ACRES (WHICH IS PART OF THE 3 ACRES) WAS ACQUIRED BY THE ASSESSEE ON 4.11.1994 WHEN GCDA ISS UED LETTER ACCEPTING THE ASSESSEES BID/OFFER, AS CLAIMED BY THE ASSESSE E. CONSEQUENTLY, THE LOSS IN QUESTION HAS TO BE ASSESSED AS A LONG TERM CAPIT AL LOSS AS COMPUTED BY THE ASSESSEE. WE MAY ADD THAT THE MANNER OF COMPUT ATION OF LONG TERM CAPITAL LOSS HAS NOT BEEN DISPUTED BY THE AO. FOR THE REASONS GIVEN ABOVE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE A PPEAL BY THE REVENUE. 14. IN THE RESULT, THE APPEAL BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 21 ST DAY OF DEC. 2011. SD/- SD/- ( R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 2ST DEC.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.4074/MUM/2009(A.Y. 2005-06) 12 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 12/12/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 13/12/11 SR.PS/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/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER