ITO 19(3)(3), MUMBAI V. MEHRUNNISA JAGIRDAR, MUMBAI

ITA 434/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3018 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-04-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANDHIR GUPTADR
• Assessee Lawyers: B N RAO
• Keywords: Capital asset; Gift

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.434/MUM/2013 ASSESSMENT YEAR 2009-10 ITO-19(3)(3), ROOM NO.303, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. MS. MEHRUNNISA JAGIRDAR, MEHRDAD, 35, TURNER ROAD, BANDRA (WEST), MUMBAI-400050 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO. AADPJ9060G / REVENUE BY SHRI RANDHIR GUPTA-DR !'# $ / ASSESSEE BY SHRI B.N. RAO % & $ ' / DATE OF HEARING : 19/10/2015 & $ ' / DATE OF ORDER: 05/11/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 31/10/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED BY THE REVENUE PERTAINS TO D ELETING THE ADDITION OF LONG TERM CAPITAL GAIN OF RS.1,10,7 4,463/- HOLDING THAT NO CAPITAL GAIN AROSE TO THE ASSESSEE. MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 2 2. DURING HEARING, THE LD. DR, SHRI RANDHIR GUPTA, ADVANCED ARGUMENTS, WHICH ARE IDENTICAL TO THE GROU ND RAISED BY CONTENDING THAT FOR A.Y. 2002-03, ON THIS VERY TRANSACTION, THE ASSESSEE HERSELF DECLARED LONG TER M CAPITAL GAIN, WHEN THE ASSESSING OFFICER FOUNDS FLAWS IN HE R COMPUTATION AND THE ASSESSEE HERSELF CLAIMED THAT T HE DATE OF AGREEMENT WAS 25/11/2000, THEREFORE, CAPITAL GAI NS, IF ANY, WOULD BE IN A.Y. 2001-02 AND THE ASSESSEE HAD BEEN CHANGING STAND AS PER HER CONVENIENCE. 2.1. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESS EE, SHRI B.N. RAO, DEFENDED THE CONCLUSION ARRIVED AT I N THE IMPUGNED ORDER BY CONTENDING THAT LONG TERM CAPITAL GAIN WAS RIGHTLY GRANTED TO THE ASSESSEE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED LOSS OF RS.65,672/- IN HER RETURN FILED ON 20/07/2001 BY CLAIMING LONG TERM CA PITAL GAIN ON SALE OF IMMOVABLE PROPERTY. THE ASSESSEE EN TERED INTO A DEVELOPMENT AGREEMENT WITH M/S PEPEYON DEVEL OPERS PVT. LTD. DATED 25/11/2000. STATEMENT OF SHRI MAHE SH SADARANGANI, OF K. RAHEJA UNIVERSAL PVT. LTD. WAS R ECORDED. THE CONTENTION OF THE ASSESSEE WAS THAT THE DEVELOP MENT AGREEMENT WAS NOT HONORED BY THE DEVELOPERS AND AS SUCH THEY DID NOT PAY THE FULL AMOUNT OF 5 CRORES TO THE ASSESSEE AND ONLY RS.2,90,00,000/- WAS PAID AND FURTHER THE DEVELOPER DID NOT CARRY OUT ANY WORK TILL DATE. THE ASSESSING OFFICER HELD THAT CAPITAL GAINS TO THE EXTENT OF MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 3 RS.1,10,74,463/- ACCRUED TO THE ASSESSEE AND THUS A DDITION WAS MADE TO THE INCOME OF THE ASSESSEE. 2.3. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), WHEREIN, IT W AS HELD THAT NO TRANSFER INVOLVED WITHIN THE MEANING OF SEC TION 2(47) R.W.S. 53(A) OF THE TRANSFER OF THE PROPERTY ACT, A S THE ASSESSEE WAS IN THE POSSESSION OF THE PROPERTY AND THE POSSESSION WAS TO BE GIVEN TO THE DEVELOPER ONLY UP ON THE LAST PAYMENT AND TILL THEN THE ASSESSEE HAD A RIGHT TO REVOKE THE AGREEMENT, THEREFORE, IT WAS HELD THAT NO CAPIT AL GAIN AROSE TO THE ASSESSEE. 2.4. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEF ORE THIS TRIBUNAL. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT FINDING RECORDED IN THE IMPUGNED ORDER:- 3.9 I HAVE GIVEN A CAREFUL CONSIDERATION TO THE A FORESAID ARGUMENTS OF THE LD. AR. LOOKING TO THE MATRIX OF F ACTS AND THE LEGAL POSITION, 1 AM OF THE CONSIDERED VIEW THAT TH ERE IS NO 'TRANSFER' INVOLVED WITHIN THE MEANING OF SECTION 2 (47) R.W.S. 53(A) OF THE TRANSFER OF PROPERTY ACT, 1882. THE A PPELLANT WAS ALWAYS IN POSSESSION OF THE PROPERTY AND NEVER TRAN SFERRED THE SAME TO THE DEVELOPER EITHER PHYSICALLY OR IN THE R ECORDS OF THE MUNICIPAL CORPORATION OF GREATER MUMBAI. FURTHER, T HE THEORY OF 'PART PERFORMANCE' AS PER THE TP ACT IS ALSO NOT APPLICABLE IN THE CASE OF THE APPELLANT. FURTHERMORE, THE DEVELOP MENT AGREEMENT DATED 25-11- 2000 HAS BEEN TERMINATED AND THE MATTER IS UNDER LITIGATION BEFORE HON'BLE MUMBAI HI GH COURT, THE A.O. HAS PRESUMED THAT THE DEVELOPMENT AGREEMEN T IS STILL IN-FORCE AND THAT IS WHY HE HAS STARTED THE COMPUTA TION OF MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 4 CAPITAL GAINS WITH THE FIGURE OF RS. 5 CRORES. HOWE VER, THE FACT OF THE MATTER IS THAT THE SAID DEVELOPMENT AGREEMEN T HAS BEEN TERMINATED BY THE APPELLANT. AS REGARDS TO THE ARGU MENT THAT THE SUM OF RS. 2,90,00,000/ - RECEIVED BY THE APPEL LANT IN PURSUANCE OF THE DEVELOPMENT AGREEMENT AND THAT THI S SUM IS STILL LYING WITH THE APPELLANT, WHY THE APPELLANT S HOULD NOT BE TAXED ON ACCOUNT OF LTCG ON THIS AMOUNT? TO' THIS Q UESTION, THE LD. AR HAS DRAWN MY ATTENTION TO THE FACT THAT EVEN IF FOR ARGUMENT SAKE, THIS SUM IS TAXED AS LTCG THERE WOUL D NOT BE ANY TAX LIABILITY AS THE INDEXED COST IS HIGHER THA N (RS. 3,85,70,000/ -) THE CONSIDERATION. 3.10 IN ADDITION TO THE ABOVE, THE ID. AR HAS RELIE D UPON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF GENERAL GLASS CO. (P) LTD. VS. DCIT REPORTED IN (2007) 108 TIJ (MUM) 854 AND DCIT VS. ASIAN DISTRIBUTORS LTD. REPORTED IN (2001) 70 TIJ (MUM) 88. IN THE CASE OF GENERAL GLASS CO., IT IS H ELD THAT' WHERE PAYMENT OF BALANCE CONSIDERATION WITHIN STIPU LATED TIME IS ESSENCE OF THE AGREEMENT OF SALE AND SUCH P AYMENTS ARE NOT MADE IN TIME BY THE TRANSFEREE, SUCH A CONTRACT DOES NOT CONFER ANY RIGHT ON THE TRANSFEREE AS ENVISAGED UND ER S. 53A OF THE TRANSFER OF PROPERTY ACT) 1882) AND PROVISIONS OF S. 2(47)(V) CANNOT BE APPLIED IN SUCH A SITUATION-WHEN TRANSFEREE DEMONSTRATES THAT HE IS UNWILLING TO PERFORM HIS OB LIGATIONS UNDER THE AGREEMENT) THE DATE OF AGREEMENT CEASES T O BE RELEVANT'. IN THE CASE OF ASIAN DISTRIBUTION LTD., IT IS HELD THAT CAPITAL GAINS-TRANSFER-PROPERTY DEVELOPMENT AGREEME NT- ASSESSEE OWNER OF LAND ENTERED INTO CONTRACT WITH D EVELOPERS- UNDER THE: AGREEMENT, POSSESSION OF PROPERTY TO BE GIVEN TO DEVELOPERS ONLY UPON PAYMENT OF LAST INSTALLMENT AN D TILL THEN, ASSESSEE HAD A RIGHT TO REVOKE THE AGREEMENT IN CER TAIN EVENTUALITIES - LAST INSTALLMENT DUE IN MAY, 1988-T RANSACTION IS NOT TRANSFER EITHER UNDER S. 2(47)(V) OF THE IT ACT OR S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882, BUT IS A MERE L ICENCE TO THE DEVELOPERS TO ENTER UPON THE LAND WITHIN THE MEANIN G OF S. 52 OF THE EASEMENTS ACT, 1882-NO TRANSFER OF LAND HAVING TAKEN MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 5 PLACE AS ON 31ST MARCH, 1988, NO CAPITAL GAINS TAX WAS CHARGEABLE IN THE ASST. YR. 1988-89'. ON GOING THRO UGH THE FACTS OF THE CASE AND THE DECISION REFERRED BY THE ID. AR , I AM OF THE OPINION THAT THE CASE LAWS ARE QUITE RELEVANT IN TH E CASE OF THE APPELLANT SINCE, THE POSSESSION OF THE PROPERTY WAS TO BE GIVEN TO THE DEVELOPER ONLY UPON LAST PAYMENT AND TILL TH EN THE APPELLANT HAD A RIGHT TO REVOKE THE AGREEMENT IN CE RTAIN EVENTUALITIES SUCH AS IN THE INSTANT CASE THAT OF O BTAINING NOC FROM THE FLAT OWNERS AND RECEIPT OF TOTAL CONSIDERA TION BY THE APPELLANT. IN VIEW OF THIS ALSO, THERE IS NO TRANSF ER IN TERMS OF SECTION 2(47)(V) OF THE I.T. ACT AND HENCE, NO CAPI TAL GAIN ARISES TO THE APPELLANT. THEREFORE, THE A.O. IS DIRECTED T O RECOMPUTE THE INCOME OF THE APPELLANT ACCORDINGLY. THE GROUND OF APPEAL IS ALLOWED. 2.5. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION, AND ANALYZED, FOLLOWING FACTS ARE EM ERGING:- 1. THE APPELLANT ENTERED INTO DEVELOPMENT AGREEMENT WITH THE DEVELOPER M/ S PAPEYON DEVELOPERS PUT LTD ON OR ABO UT 25.1- 1.2000. COPY OF DEVELOPMENT AGREEMENT IS ALREADY ON YOUR RECORDS AS SUBMITTED IN OUR PAPER BOOK CONTAINING 7 8 PAGES. CLAUSE 8 OF-THE DEVELOPMENT AGREEMENT SPECIFIES CER TAIN TERMS AND CONDITIONS AS TO BE COMPLIED BY THE APPELLANT A ND CLAUSE 9 SPECIFIES ABOUT THE TERMS OF PAYMENT TO BE MADE TO THE APPELLANT BY THE DEVELOPER UPON COMPLETION OF CERTA IN TERMS AND CONDITIONS. 2. THE APPELLANT WAS LEQALOUMER OF THE PREMISES MEN TIONED IN THIRD SCHEDULE TO THE DEVELOPMENT AGREEMENT ADMEASU RING 595.13. SQ MTRS. WHICH IS PART OF LAND MENTIONED IN FIRST SCHEDULE. MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 6 3. THE APPELLANT AGREED TO TRANSFER THE PREMISES AD MEASURING 595.13 SQ MTRS. AS MORE SPECIFICALLY MENTIONED IN T HIRD SCHEDULE TO THE SAID AGREEMENT AND OBTAIN THE NO OB JECTION /CONSENT FROM THE TENANTS OF JAGIR APARTMENTS SO TH AT UNINTERRUPTED CONSTRUCTION ACTIVITY COULD TAKE PLAC E. 4. THE APPELLANT EXPRESSED HER INABILITY TO OBTAIN THE NO CONSENT FROM THE TENANT OF THE PROPERTY AS MORE MEN TIONED IN SECOND SCHEDULE TO THE DEVELOPMENT AGREEMENT. THERE AFTER BY THEIR LETTER DATED 31.5.2004, THE DEVELOPER M/S PAP EYON DEVELOPERS PVT LTD., AGREED TO TAKE THE RESPONSIBIL ITY OF GETTING NOC I CONSENT LETTER FROM THE TENANTS OF JAGIR APAR TMENTS. 5. BY VIRTUE OF THIS, CONDITIONS SPECIFIED IN CLAUS E 8 WERE RELAXED AND THE DEVELOPER WAS OBLIGED TO MAKE PAYMENT AS ME NTIONED IN CLAUSE 9 SINCE THE OTHER CONDITIONS WERE FULFILL ED AND THE CONDITION OF OBTAINING NO OBJECTION I CONSENT FROM THE FLAT OWNERS OF JAGIR APARTMENT WAS RELAXED IN SO FAR AS THE RESPONSIBILITY WAS ACCEPTED BY THE DEVELOPER ABSOLV ING THE APPELLANT FROM THAT TASK I COMPLIANCE. 6. HOWEVER, EVEN AFTER A YEAR HAS PASSED AFTER THIS ARRANGEMENT, THE DEVELOPER HAS NOT COME FORWARD WIT H THE BALANCE PAYMENTS AND HENCE IN MAY 2005, THE APPELLA NT, THROUGH HER ADVOCATE, ISSUED A LEGAL NOTICE TO THE DEVELOPERS TO COMPLY WITH THE TERMS AND CONDITIONS OF THE AGREEME NT FOR WHICH THE DEVELOPERS THROUGH THEIR ADVOCATES WROTE A LETTER TO WITHDRAW AND NO OTHER PAYMENT COMMITMENTS WERE MADE BY THEM. 7. IN LIGHT OF THE FACT THAT THE DEVELOPER HAD NO B ONA FIDE INTENTION OF MAKING PAYMENT TO THE APPELLANT, APPE LLANT TOOK A STRONG STAND OF CANCELING THE AGREEMENT BY ISSUING PUBLIC NOTICES IN AUGUST, 2005 COPIES OF WHICH ARE ALREADY PLACED ON YOUR RECORDS. 8. THE DEVELOPER WAS SUMMONED BY THE ASSESSING OFFI CER DURING THE REOPENED ASSESSMENT PROCEEDINGS WHEREIN THE DEV ELOPER'S MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 7 REPRESENTATIVE ADMITTED THAT THE MATTER IS NOT SETT LED AND IS IN LITIGATION AS ON THE DATE OF HEARING. 9. THE PUBLIC NOTICE WAS ISSUED AND THE PHYSICAL PO SSESSION OF THE PREMISES WAS RETAINED BY THE APPELLANT AND EVEN TODAY THE PHYSICAL POSSESSION IS WITH THE APPELLANT THROUGH H ER SONS TO WHOM THE PROPERTY IS GIFTED TO THEM ON OR ABOUT 23. 08.2005. NO PHYSICAL POSSESSION IS ENJOYED BY THE DEVELOPER I.E., THE TRANSFEREE. COPY OF GIFT DEED IS ENCLOSED FOR YOUR REFERENCE. 10. THE DEVELOPER FILED A WRIT BEFORE THE HON'BLE H IGH COURT AFTER COMPLETION OF MORE THAN THREE YEARS AND HENCE THE APPLICATION. SUFFERS FROM THE BAR OF LIMITATION. 11. SINCE THE APPELLANT HAS RECEIVED PART PAYMENT O F RS. 290 LACS ONLY AS AGAINST THE AGREED VALUE OF RS. 500 LA CS AND A CONSTRUCTED FLAT OF 2400 SQ FT. AREA WITH CERTAIN C OST ATTACHED TO IT, THE APPELLANT WILL BE CERTAINLY LIABLE FOR M AKING GOOD THE PAYMENT EVEN ALONGWITH INTEREST IF THE COURT DIRECT S OR IF THE PARTIES COME TO CONSENT TERMS. BUT CERTAINLY, THE L AND WILL NOT BE PARTED AND WILL BE WITH THE APPELLANT BOTH TRI T ERMS OF LEGAL OWNERSHIP AND CONSTRUCTIVE POSSESSION. 2.6. IF THE TOTALITY OF FACTS ARE ANALYZED, UNDISP UTEDLY, THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT W ITH M/S PAPEYON DEVELOPERS PVT. LTD. TO DEVELOP THE PLOT OF LAND FOR WHICH THE DEVELOPER WAS TO PAY A CONSIDERATION OF R S.5 CRORES AND TO HANDOVER THE FLAT MEASURING 2400 SQ. FT., BU ILT UP AREA, IN THE PROPOSED NEW BUILDING FOR A CONSIDERATION OF RS.25 LAKH. HOWEVER, THE ASSESSEE WAS PAID RS.2,90,00,000 /- ON VARIOUS DATES, PURSUANT TO THE DEVELOPMENT AGREEMEN T BUT THE REMAINING AMOUNT OF RS.2,10,00,000/- REMAINED UNPAI D. THE DEVELOPER NEITHER STARTED THE WORK NOR PAID THE BAL ANCE AMOUNT OF RS.2,10,00,000/-, THEREFORE, THE ASSESSEE ISSUED A LEGAL NOTICE AS WELL AS NOTICE IN THE NEWSPAPERS AN D MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 8 TERMINATED THE AGREEMENT 23/08/2005. THE ASSESSEE SHOWED LONG TERM CAPITAL GAIN IN A.Y. 2002-03 AS NIL AS TH E POSSESSION OF THE PROPERTY IN QUESTION ALWAYS REMAINED WITH TH E ASSESSEE. HOWEVER, THE ASSESSING OFFICER IN VIEW OF THE DEVEL OPMENT AGREEMENT DATED 25/11/2000 HELD THAT THE CAPITAL GA IN TO THE EXTENT OF RS.1,10,74,463/- ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ON APPEAL, THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) DECIDED IN FAVOUR OF THE ASSES SEE, AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. HOWEVER, IF THE AFOREMENTIONED FACTS, REPRODUCED AT PAGES 5 TO 7 OF THIS ORDER ARE ANALYZED, IT CAN BE CONCLUDED T HAT THE PROPERTY WAS NOT TRANSFERRED WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT R.W.S 53A OF THE TRANSFER OF PR OPERTY ACT. EVEN, THE CONDITION OF THE DEVELOPMENT AGREEMENT CO ULD NOT REACH TO FINALITY DUE TO NON-PAYMENT OF SPECIFIED A MOUNTS (CLAUSE-9 OF THE AGREEMENT) BY THE TRANSFEREE, DUE TO WHICH, AGREEMENT WAS UNILATERALLY CANCELED, THEREFORE, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE. OUR VIEW IS FORTIFIED BY THE DECISION IN THE CASE OF GENERAL GLASS COMPANY PVT. LTD. VS DCIT (14 SOT 32) (MUM.) AND ASIAN DISTRIBUTORS LTD. (2001) 70 TTJ (MUM) 88, WHEREIN, IT WAS HELD THAT WHERE TH E PAYMENT OF BALANCE CONSIDERATION WITHIN STIPULATED TIME IS ESSENCE OF THE AGREEMENT OF SALE AND SUCH PAYMENTS ARE NOT MADE WITHIN TIME BY THE TRANSFEREE, SUCH CONTRACT/A GREEMENT DOES NOT CONFER ANY RIGHTY ON THE TRANSFEREE AS ENV ISAGED U/S 53A OF THE TRANSFER OF THE PROPERTY ACT ALONG WITH THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT. SINCE T HE POSSESSION OF THE PROPERTY WAS TO BE GIVEN TO THE DEVELOPER O NLY UPON MEHRUNNISA JAGIRDAR ITA NO.434/MUM/2013 9 FULFILLMENT OF THE CONDITIONS OF THE AGREEMENT I.E. LAST PAYMENT, THEREFORE, THERE IS NO TRANSFER IN TERMS OF SECTION 2(47)(V) OF THE ACT, THUS, WE AFFIRM THE STAND OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19/10/2015. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ( DATED : 05/11/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 1$ ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1$ / CIT(A)- , MUMBAI 5. 34 .$ ! , 0 *+' * ! 5 , % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. / BY ORDER, /3+$ .$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI.