ADDL CIT RG 21(1), MUMBAI V. MANJULA JAMNADAS CHOKSI, MUMBAI

ITA 4492/MUM/2008

• Counselvise Citation: 449219914 RSA 2008
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 30-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-07-2008
• Court: TRIBUNAL
• Department Lawyers: RK GUPTA
• Assessee Lawyers: PRAMOD KUMAR PARIDA
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SMT. ASHA VIJAYARAGHA VAN (JM) I.T.A.NO.4492/MUM/2008 (A.Y.2005-06 ) ASSTT. COMMR. OF INCOME-TAX, RANGE 21(1), MUMBAI. VS. MS. MANJULA J. CHOKSI, ANAND BHUWAN, JVPD SCHEME, VILE PARLE (W), MUMBAI-400 056. PAN:AACPC4461F. APPELLANT RESPONDENT APPELLANT BY SHRI R.K. GUPTA. RESPONDENT BY SHRI P RAMOD KUMAR PARIDA. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 29-04-2008 IN RELATION TO THE ASSTT. YEAR 2005-0 6. THE ONLY ISSUE RAISED THROUGH VARIOUS GROUNDS IS AGAINST THE COMPUTATION OF CAPITAL GAINS. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE SHOWED LONG- TERM CAPITAL GAINS OF RS.37,28,761/- IN HER COMPUTA TION OF INCOME AS UNDER : SALE CONSIDERATION RS. 2,47,50,000 COST OF ACQUISITION RS. 52,26 ,070 INDEXED COST OF ACQUISITION RS. 1,02,22,22 4 LONG TERM CAPITAL GAIN RS. 1,45,27,776 LESS: BROUGHT FORWARD LONG TERM CAPITAL LOSS R S. 1,07,99,015 -------------------- LONG TERM CAPITAL GAIN RS. 37,28,761 =========== THE AO NOTED THAT THERE WAS AIR INFORMATION STATIN G ABOUT THE SALE OF A PROPERTY REGISTERED FIR RS.1,12,50,000/- ON 12-07-2 004 IN WHICH THE ASSESSEE ITA NO.4492/M/08 MS. MANJULA J.CHOKSI 2 WAS A PARTY. ON BEING CALLED UPON TO FURNISH DETAIL S IN RESPECT OF THE AIR INFORMATION, THE ASSESSEE GAVE DETAILED REPLY BY ST ATING THAT SHE PURCHASED PROPERTY IN 1993/94 WHICH WAS LEASED OUT TO M/S. M ICROWARE COMMUNICATION LTD. (HEREINAFTER CALLED MCL) ON 01-09-1994 AGAI NST DEPOSIT OF RS.2,47,50,000/-, OUT OF WHICH A SUM OF RS.2,37,50, 000/- WAS RECEIVED AND RS.10 LAKHS WAS KEPT PENDING. LEASE RENT OF RS.1,80 ,000/- PER ANNUM WAS FIXED FOR A PERIOD OF 3 YEARS. ON 03-04-1995, MCL SHOWED INTEREST IN THE PURCHASE OF PROPERTY AND AN AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE AND MCL FOR THE SALE OF THE PROPERTY FOR A TOTAL CONSIDERATION OF RS.2,47,50,000/- ON THE EXPIRY OF THE LEASE PERIOD. ON 31-08-1997, 3 YEARS LEASE PERIOD ENDED BUT MCL REFUSED TO CONFIRM THE AGREEMENT OF SALE BY WAY OF STALLING THE PAYMENT OF THE REMAINING AMOUNT OF RS.10 LAKHS. THEY UNDERTOOK TO ARRANGE SOME ALTERNATE BUYER. IN THE INTERVENING YEARS, EVEN THOUGH THE SA LE DEED WAS NOT ENTERED INTO NOR THE LEASE PERIOD EXTENDED BEYOND 01-09-1997, MC L CONTINUED TO OCCUPY THE PREMISES AFTER THE EXPIRY OF THE LEASE PERIOD AND K EPT ON PAYING RS.1,80,000/- P.A. AS PER THE EARLIER LEASE AGREEMENT. IT WAS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THAT THE PR OPERTY WAS FINALLY SOLD TO M/S.SANYOG DEVELOPERS (HEREINAFTER CALLED SD), INTRODUCED BY MCL UNDER A TRIPARTITE AGREEMENT FOR A TOTAL CONSIDERATION OF R S.1,12,50,000/- WHICH AMOUNT WAS TAKEN OVER BY MCL AFTER THE PAYMENT OF RS.10 LA KHS TO THE ASSESSEE BY SD AND THE REMAINING AMOUNT TO MCL. THE AO REFUSED TO ACCEPT THE COMPUTATION OF CAPITAL GAINS DECLARED BY THE ASSESSEE. HE OBSERVED THAT THE INITIAL 3 YEARS LEASE AGREEMENT WAS NEVER EXTENDED AND HENCE RS.2,37,50,0 00/- DID NOT HAVE THE CHARACTER OF SECURITY DEPOSIT AFTER 01-09-1997. AS THE AGREEMENT OF SALE DATED 03-04-1995 WAS NEVER EXECUTED, THE AO TOOK THE NON- EXECUTION OF AGREEMENT AS NEGLIGENCE ON THE PART OF THE ASSESSEE. IN HIS OPIN ION, MCL REMAINED A PROPOSED BUYER TILL 31-08-1997 AND BECAME A CONFIRMING PARTY ONLY AT THE TIME OF THE ITA NO.4492/M/08 MS. MANJULA J.CHOKSI 3 TRIPARTITE AGREEMENT. SINCE A SUM OF RS.1,02,50,000 /- WAS PAID BY SD TO MCL ON EXECUTING TRIPARTITE AGREEMENT, THE AO TOOK IT AS A PPLICATION OF ASSESSEES INCOME AS AGAINST DEPOSIT RECEIVED TO THE TUNE OF RS.2.37 CRORES. INVOKING THE PROVISIONS OF SEC. 51, HE HELD THAT THE DIFFERENCE BETWEEN RS. 2.37 CRORES AND RS.1.02 CRORES WAS TO BE TREATED AS FORFEITURE OF ADVANCE. HE FURTHER NOTED THAT THE PROVISIONS OF SEC. 50C WERE APPLICABLE IN THIS CASE AS THE PROPERTY PURPORTEDLY SOLD FOR RS.1,12,50,000/- WAS, IN FACT, VALUED AT R S.1,65,49,240/- BY STAMP VALUATION AUTHORITY. HE, THEREFORE, COMPUTED LONG-T ERM CAPITAL GAINS AS UNDER : SALE CONSIDERATION = RS.1,65,49,240 (AS PER POINT (VI) ABOVE & PROVISION OF SECTION 50C) COST OF ACQUISITION = RS. 52 ,26,070 LESS: RS 1,35,00,000 (AS PER POINT (V) I.E. ------------------ ADVANCE FORF EITED AS (-) RS. 82,73,930 PER SECTION 51 I.E. RS.2,37,50,000 RS.1,02,50,000) INDEXATION FROM 1993-94 IS NOT POSSIBLE AS THE COS T OF ACQUISITION IS NEGATIVE AMOUNT (LESS THAN NIL VALUE). LONG TERM CAPITAL GAIN IS SALE CONSIDERATION IND EXED COST OF ACQUISITION I.E. RS.1,65,49,240 - (82,73,930) = RS.2,48,23,190 LONG TERM CAPITAL LOSS B/FD. = RS.1,07,9 9,015 ----------------- LONG TERM CAPITAL GAIN RS.1,40,24 ,155 ========== 3. THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHO GOT CONVINCED WITH THE SUBMISSIONS ADVANCED ON BEHA LF OF THE ASSESSEE. HE HELD THAT SECTION 51 WAS NOT APPLICABLE IN THE INSTANT C ASE. FURTHER APPLICABILITY OF SECTION 50C WAS DOUBTED AS THE ASSESSEE HAD DECLARE D A HIGHER AMOUNT AS SALE CONSIDERATION THAN THE AMOUNT DETERMINED BY THE STA MP VALUATION AUTHORITY. HE, THEREFORE, SET ASIDE THE ASSESSMENT ORDER ON THIS I SSUE. THE REVENUE HAS COME UP IN APPEAL AGAINST SUCH FINDINGS. ITA NO.4492/M/08 MS. MANJULA J.CHOKSI 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACTS AS RECORDED ABOVE ARE NOT DISPUTE D, AS PER WHICH THE ASSESSEE LEASED OUT HER PREMISES TO MCL IN 1994 FOR PERIOD O F 3 YEARS ON RECEIVING A DEPOSIT OF RS.2.37 CRORES AND RECEIVABLE DEPOSIT OF RS.10 LAKHS. AFTER SOME TIME, MCL AGREED TO PURCHASE THE PROPERTY FROM THE ASSESS EE AT RS.2.47 CRORES. SUBSEQUENTLY, MCL LOST ITS INTEREST IN THE PURCHASE OF THE PROPERTY AND AGREED TO INTRODUCE SOME OTHER BUYER VIZ. SD. A TRIPARTITE AG REEMENT WAS ENTERED INTO BETWEEN THE ASSESSEE, MCL AND SD ON 12-07-2004, A C OPY OF WHICH IS AVAILABLE AT PAGE 55 ONWARDS OF ASSESSEES PAPER BOOK. THE FA CTS AS RECORDED ABOVE HAVE BEEN MENTIONED IN THIS AGREEMENT. CLAUSE (IX) INDIC ATES THAT SD AGREED TO PURCHASE THIS PROPERTY FOR RS.1,12,50,000/- AND PAI D RS.1,02,50,000/- TO MCL AND REMAINING SUM OF RS.10 LAKHS WAS PAID TO THE AS SESSEE COMPANY. IT WAS THIS TRIPARTITE AGREEMENT WHICH WAS EVENTUALLY REGISTERE D AS SALE AGREEMENT ON 12- 07-2004. THESE FACTS INDICATE THAT THE PROPERTY WAS , IN FACT, INITIALLY INTENDED TO BE SOLD BY THE ASSESSEE TO MCL. AS THE SALE WAS NOT COMPLETE BECAUSE OF MCL REFUSING TO PAY RS.10 LAKHS AND GETTING THE SALE DE ED EXECUTED, THIS TRIPARTITE AGREEMENT WAS ENTERED INTO TO EFFECT THE SALE OF TH E PROPERTY IN QUESTION TO SD FOR A CONSIDERATION OF RS.1.12 CRORES ON BEHALF OF MCL. THE ASSESSEE RECEIVED ITS REMAINING PART OF RS.10 LAKHS WHICH WAS DUE FROM MC L AND THE SUM OF RS.1.02 CRORES WAS PAID BY SD TO MCL. IT, THEREFORE, TRANSP IRES THAT TWO TRANSACTIONS TOOK PLACE IN THE INSTANT CASE VIZ., FIRST THE SALE BY THE ASSESSEE TO MCL AND SECOND THE SIMULTANEOUS SALE BY MCL TO SD. AS THE ASSESSEE RECEIVED TOTAL SALE CONSIDERATION OF RS.2.47 CRORES, WHICH WAS PROMPTLY DECLARED AS SUCH, IN OUR CONSIDERED OPINION, THE AO WAS NOT JUSTIFIED IN REJ ECTING SUCH CONSIDERATION AND ADOPTING THE SALE CONSIDERATION AT RS.1.65 CRORES U /S.50C THAT WAS RELATABLE TO THE EVENTUAL TRANSACTION OF SALE TO SD. FURTHER, TH E PROVISIONS OF SEC. 51 ALSO ITA NO.4492/M/08 MS. MANJULA J.CHOKSI 5 CANNOT BE APPLIED IN THE INSTANT CASE AS THE ASSESS EE HAD NOTHING TO DO WITH SD AT THE TIME OF EVENTUAL SALE TO THEM. ITS TRANSACTI ON OF SALE WAS CONCLUDED WITH THAT OF MCL AND THE SIMULTANEOUS SALE TO SD WAS TH AT BY MCL. IT IS FURTHER OBSERVED THAT THE AO TOOK THE COST OF ACQUISITION A T A NEGATIVE FIGURE BY APPLYING THE PROVISIONS OF SEC. 51, WHICH ACTION IS IMPERM ISSIBLE BECAUSE OF THE FACT THAT THERE WAS NO FORFEITURE OF SECURITY DEPOSIT. IT IS STILL FURTHER NOTED THAT THE AO TOOK SALE CONSIDERATION AT RS.1.65 CRORES BY APPLYI NG THE PROVISIONS OF SEC. 50C, WHEREAS THE ASSESSEE HAD SHOWN THE SALE CONSIDERATI ON AT A MUCH HIGHER FIGURE OF RS.2.47 CRORES. KEEPING THE ENTIRE FACTUAL POSIT ION INTO CONSIDERATION, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIED IN HIS FINAL DECI SION. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THE 03RD DAY OF JUNE, 2011. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 03RD JUNE, 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XXI,,MUMBAI. 4 CIT,CITY-21,MUMBAI. 5.DR,B BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.4492/M/08 MS. MANJULA J.CHOKSI 6 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 30-05-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 31-05-11 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 01-06-11 SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON 03-06-11 SR.PS/ 7. FILE SENT TO THE BENCH CLERK 03-06-11 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 *