ITO 16(2)(1), MUMBAI V. JAYSHREE H. JAIN, MUMBAI

ITA 4559/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3550 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 02-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI RAM CHANDRAN
• Keywords: Sale consideration of property below Jantri Value; Benefit of exemption
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI RAM LAL NEG I (JM) ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 THE ITO 16 (2) (1), 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI- 400007. VS. SMT. JAYSHREE H. JAIN, A-1, MATRU ASHISH, 39, NAPEANSEA ROAD, MUMBAI- 400036 PAN- AABPJ5752D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. K.RAVI RAMCHANDRAN RESPONDENT BY : SHRI. NISHIT GANDHI DATE OF HEARING: 07/01/2016 DATE OF PRONOUNCEMENT: 13/01/2016 O R D E R PER JASON P. BOAZ, AM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-27, MUMBAI DT. 28/04/2014 FOR ASST. YE AR 2010-11. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE FILED HER RETURN FOR ASST YEAR 201 0-11 ON 29/07/2010 DECLARING TOTAL INCOME OF RS. 5,05,170/- . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (I N SHORT THE ACT) AND THE CASE WAS TAKEN UP FOR SCRUTINY. THE ASSESS MENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DT. 12/0 3/2013, WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 60,85,170/-. 2 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 ON APPEAL, THE LD. CIT(A) VIDE ORDER DT. 28/04/2014 ALLOWED THE ASSESSEE THE RELIEF CLAIMED BY IT, BY TAXING THE SA LE OF A PROPERTY AS LONG TERM CAPITAL GAINS (LTCG) AND, ALSO BY ALLOWI NG THE ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS-27, MUMBAI DT. 28/04/2014, THE REVENUE HAS PREFERRED THIS APPEAL B EFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN L AW, THE LD. CIT(A) IS RIGHT IN TREATING THE SALE CONSIDERAT ION OF PROPERTY AS LONG TERM CAPITAL GAIN AND ALLOWED THE EXEMPTION U/S 54 OF THE ACT IN SPITE OF KNOWING THE FACT THAT THE AS SESSEE IS HOLDING THE PROPERTY FOR LESS THAN 36 MONTHS WHICH IS MANDATORY TO CLAIM THE EXEMPTION U/S 54 OR 54F OF T HE ACT. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3.2 THE LD DR WAS HEARD IN SUPPORT OF THE GROUNDS R AISED AND PLACED STRONG RELIANCE ON THE FINDINGS IN THE ORDER OF THE ASSESSING OFFICER (AO) ON THE ABOVE ISSUES OF TAXABILITY OF THE SALE OF PR OPERTY AS SHORT TERM CAPITAL GAINS AND DENIAL OF EXEMPTION CLAIMED U/S 5 4F OF THE ACT. 3.2.1 PER CONTRA, THE LD. AR SUPPORTED THE ORDER O F THE LD CIT(A) AS BEING IN ORDER AND PRAYED FOR THE SAME TO BE UPHELD . IT WAS SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN LTCG ON SALE OF HOUSE PROPERTY, I.E. FLAT NO. 702, CENTRAL AVENUE, MUMBAI CENTRAL, MUMBAI VIDE AGREEMENT DT. 11/12/2009, FOR A CONSIDERATION OF RS. 82,83,000/-. AFTER CLAIMING EXEMPTION U/S 54 / 54F OF THE ACT FOR THE ENTIRE LTCG COMPUTED AT RS. 37,00,000/- ON ACCO UNT OF INVESTMENT 3 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 IN THE PURCHASE OF , ANOTHER RESIDENTIAL PROPERTY A T JOGESHWARI (E) MUMBAI, THE CAPITAL GAINS WERE WORKED OUT AT NIL. I T IS SUBMITTED THAT THE AFORESAID FLAT NO 702, MUMBAI CENTRAL WAS ACQUI RED FOR A TOTAL CONSIDERATION OF RS. 32,31,000/- FROM M/S PAREKH HO LDINGS. AT THE TIME OF ALLOTMENT OF THE FLAT NO. 702 BY THE BUILDE RS VIDE ALLOTMENT LETTER DT. 18/10/2005, THE ASSESSEE HAD ALREADY PAID ON AM OUNT OF RS. 10,00,000/- AND THE BALANCE WAS TO BE PAID SUBSEQUE NTLY IN INSTALLMENTS TILL POSSESSION. THE LD. AR SUBMITTED THAT THE AO DID NOT ACCEPT THE ASSESSEES COMPUTATION OF LTCG AS HE WAS OF THE VIEW THAT SINCE THE AGREEMENT FOR PURCHASE OF THE SAID THAT F ROM PAREKH HOLDINGS WAS DT. 27/02/2009, THE ASSESSEE COULD BECOME THE O WNER AND OBTAIN POSSESSION OF THE BUILDING ONLY AFTER PAYMENT OF TH E FULL CONSIDERATION FOR PURCHASE FROM THAT DATE I.E. 27/02/2009. IN THA T VIEW OF THE MATTER, THE AO HAD PROCEEDED TO REJECT THE ASSESSEES COMPU TATION OF LTCG, AND RE-COMPUTED THE SAID TRANSACTION AS SHORT TERM CAPITAL GAIN (STCG). THE AO ALSO REJECTED THE ASSESSEES CLAIM FOR EXEMPTION U/S 54F OF THE ACT, ON THE GROUND THAT THE CLAIM WAS WR ONGLY MADE BY THE ASSESSEE U/S 54 OF THE ACT. 3.2.2 THE LD AR SUBMITTED THAT AS PER SETTLED LAW ON THIS ISSUE, THE DATE OF PURCHASE OF FLAT NO. 702, MUMBAI CENTRAL, F ROM M/S PAREKH HOLDINGS IS 18/10/2005; I.E THE DATE ON WHICH THE BUILDER ISSUED THE LETTER OF ALLOTMENT OF THE SAID FLAT UPON PAYMENT O F RS. 10,00,000/- ON 02/09/2005 BY THE ASSESSEE. THE SAID FLAT/PROPERTY WAS SOLD BY THE ASSESSED VIDE AGREEMENT DT. 11/12/2009 FOR RS. 70,0 0,000/-(50C VALUE WAS RS. 82,83,000/-) AND THEREFORE ACCORDING TO THE LD. AR THE ASSESSEE HAD HELD THE SAID PROPERTY FOR MORE THAN 36 MONTHS BEFORE ITS SALE(I.E. FROM 18/10/2005 TO 11/12/2009). THEREFORE, ACCORDIN G TO THE LD. AR THE ASSESSEES COMPUTATION OF LTCG WAS CORRECT. IT IS CONTENDED BY THE LD. AR THAT, AS RIGHTLY HELD BY THE LD. CIT(A), AND ALSO AS PER JUDICIAL PRECEDENTS, THE PERIOD OF HOLDING IS TO BE RECKONE D FROM THE DATE OF 4 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 ALLOTMENT AND NOT FROM THE DATE OF AGREEMENT WITH T HE BUILDER AND ACCORDINGLY THE SAID PROPERTY WHEN IT WAS SOLD IS A LONG TERM CAPITAL AMOUNT . IN SUPPORT OF THE ABOVE PROPORTION, THE LD . AR FOR THE ASSESSEE PLACED RELIANCE, INTER ALIA, ON THE DECISIONS OF: (I) MS. MADHU KAUL VS. CIT (2014) 363 ITR 54(P &H) (II) CIRCULAR NO. 471 DT. 15/10/1986; (III) SMT. VANDANA RANA ROY (ITA NO. 6173/MUM/2011 DT. 07/11/2012; (IV) B.R. ASSOCIATES PVT. LTD. (ITANO.2003/DEL/2013 DT 30/06/2014) 3.2.3 IN THE LIGHT OF THE ABOVE JUDICIAL PRECEDENT S AND FACTS OF THE CASE ON HAND, IT WAS PRAYED THAT THE IMPUGNED ORDER OF T HE LD. CIT(A) HOLDING THAT SINCE THE AFORESAID PROPERTY WAS TRANS FERRED BY THE ASSESSEE AFTER FOR HOLDING IT FOR A PERIOD EXCEEDI NG 36 MONTHS, THE ASSESSEE WAS ENTITLED TO CLAIM LTCG AND THE ATTENDA NT BENEFIT OF EXEMPTION U/S 54F OF THE ACT. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL DECISIONS CITED. FROM THE DETAILS ON RECORD, WE FIND THAT THE ASSES SEE SOLD THE SAID PROPERTY AT FLAT NO. 702, MUMBAI CENTRAL ON 11/12/2 009; COMPUTED LTCG THEREON, AND CLAIMED EXEMPTION U/S 54F OF THE ACT ON THE INVESTMENT MADE IN PURCHASE OF ANOTHER PROPERTY, WH EREBY THE TAXABLE CAPITAL GAINS WAS WORKED OUT AT NIL. THE PERIOD OF 36 MONTHS WAS RECKONED BY THE ASSESSEE FROM 18/10/2005, THE DATE OF ALLOTMENT TO 11/12/2009 THE DATE OF SALE. ON THE OTHER HAND, THE AO WAS OF THE VIEW THAT SINCE THE DATE OF AGREEMENT WITH THE BUILDER W AS 19/02/2009, THE PERIOD OF HOLDING THE PROPERTY BY THE ASSESSEE BEIN G LESS THAN 36 MONTHS, THE SAID TRANSACTION WOULD BE LIABLE FOR ST CG. THE ISSUE FOR CONSIDERATION BEFORE US IN WHICH DATE SHOULD BE TAK EN AS THE DATE OF PURCHASES OF THE SAID PROPERTY FOR THE PURPOSE OF C ALCULATING 36 MONTHS 5 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 PERIOD BEFORE THE SALE THEREOF FOR THE PURPOSE OF C OMPUTING CAPITAL GAINS. THE LD. AR FOR THE ASSESSEE FILED A COPY OF THE ALLOTMENT LETTER DT. 18/10/2009 ISSUED BY THE BUILDER, M/S PAREKH HOLDIN GS TO THE ASSESSEE ALLOTTING HER FLAT NO. 702, 7 TH FLOOR, CENTRAL AVENUE (OPP. NAVJIVAN SOCIETY) MUMBAI CENTRAL, MUMBAI. IN THIS ALLOTMENT LETTER, THE BUILDERS HAVE CONFIRMED TO THE ASSESSEE THAT PENDI NG FORMAL SALE AGREEMENT, FLAT NO. 702 IN THE AFORESAID PREMISES H AS BEEN RESERVED FOR THE ASSESSEE AND HAVE ALSO RECORDED THAT IN THIS REGARD THEY HAVE RECEIVED AN AMOUNT OF RS. 10 LAKHS VIDE CHEQUE NO: 0888570 DT. 02/09/2005 DRAWN ON OBC BANK AS PART PAYMENT. 3.3.2 WE FIND THAT A SIMILAR FACTUAL MATRIX AS IN THE CASE ON HAND HAS BEEN CONSIDERED AND ADDRESSED BY THE CO-ORDINATE BE NCH OF THE ITAT DELHI BENCH IN THE CASE OF B.R. ASSOCIATES PVT. LTD ., IN ITA NO. 2003/DEL/2013 DT. 30/06/2014 WHEREIN AT PARAS 19 & 20 THEREOF, AFTER CONSIDERING VARIOUS JUDICIAL PRECEDENTS IN THE MATT ER, THE BENCH HELD AS UNDER:- 19 WE HAVE HEARD BOTH THE PARTIES AND HAVE P ERUSED THE CASE LAWS CITED BY BOTH THE SIDES. THE AO HAS HELD THAT THE GAIN OF THE ASSESSEE FROM THE SALE OF THE SAID FLAT TO BE SHORT- TERM CAPITAL-GAIN ON THE REASON THAT THE SALE OF FL AT ON 16.07.2009 WAS ONLY AFTER THE ASSESSEE HAD OBTAINED THE POSSESSION OF THESE FLATS ON OR AFTER 27.06.2008. T HE SAID BASIS ADOPTED BY THE AO CANNOT BE COUNTENANCED BECA USE OF THE LAW LAID DOWN BY VARIOUS JUDICIAL PRECEDENTS ON THE SUBJECT IN HAND AND ALSO IT IS FACTUALLY INCORRECT TO STATE THAT THE FLATS WERE TAKEN ON POSSESSION BY THE ASSESSEE ON OR AFTER 27.06.2008, FOR THE SIMPLE REASON THAT A PERUSAL OF THE SALE AGREEMENT ITSELF WOULD REVEAL THAT THE FLATS WERE S OLD BEFORE THE SAME WERE TAKEN ON POSSESSION BY THE ASSESSEE. 6 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 20 IN THE LIGHT OF THE AFORESAID CASE LAWS, IT IS CLEAR THAT IN ORDER THE CALCULATE THREE YEARS FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN, ONE HAS TO TAKE INTO ACCOUNT THE DATE OF ALLOTMENT OF THE FLAT FROM THE BUILDER TO THE ASSES SEE, AND IT IS PERTINENT TO TAKE NOTE THAT FROM THAT DATE ONWARDS THE RIGHT TO THE SAID PROPERTY IS ACQUIRED BY THE ASSESSEE. IN T HIS CASE WE FIND THAT THE ASSESSEE HAD MADE THE 1 ST PAYMENT FOR THE FLATS (702 AND 703) ON 15.04.2006 AND THE SAID FACT IS CO RROBORATED BY THE LETTER WRITTEN BY THE BUILDER TO THE ASSESSE E DATED 21.05.2006, WHICH CLEARLY REFERS TO THE PROGRESS IN THE CONSTRUCTION OF FLAT NO. 702; AND IT IS ALSO REMIND ER TO THE ASSESSEE TO REMIT THE REST OF THE PART PAYMENT, WHI CH CLEARLY GOES ON TO SUBSTANTIATE THE CONTENTION OF THE ASSES SEE THAT FLAT NO. 702, WAS IN FACT ALLOTTED TO IT AND ALSO T O THE FACT THAT THE CONSTRUCTION OF THE SAID FLAT BEGAN SOON AFTER THE FIRST INSTALLMENT WAS PAID BY THE ASSESSEE ON 15.04.2006. THUS WE FIND THAT THE APPELLANT HAD ACQUIRED THE VALUABL E RIGHT, TITLE AND INTEREST IN PROPERTY ON 15.04.2006 FOR FLAT NO. 702. THEREFORE WE DIRECT THE AO TO ALLOW THE CLAIM OF LO NG TERM CAPITAL LOSS ON SALE OF RIGHT IN FLAT NO. 702. 3.3.3 THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MS. MADHU KAUL (2014) 363 ITR 54 (P& H) WE FIND WAS ON SIMILAR FACTS AS IN THE CASE ON HAND. IN TH IS CASE, THE ASSESSEE WAS ALLOTTED A FLAT ON 07/06/1986 AND PAID THE FIRST INSTALLMENT ON 04/07/1986. POSSESSION OF THE FLAT W AS GIVEN SUBSEQUENTLY. THE ASSESSEE THEN SOLD THE FLAT ON 0 5/07/1989. IN THE RETURN OF INCOME THE ASSESSEE DISCLOSED THE CAP ITAL GAIN ARISING FROM THE SALE OF FLAT AS LTCG. THE AUTHORIT IES BELOW TREATED THE CAPITAL GAIN ARISING THERE FROM AS STCG . THEIR LORDSHIPS HELD THAT THE CAPITAL GAINS ARISING FROM THE SALE WAS 7 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 LTCG. AT PARA 7 THEREOF, THEIR LORDSHIPS HAVE OBSER VED THAT WHEN THE ASSESSEE PAID THE FIRST INSTALLMENT ON 04/07/19 86 AFTER ALLOTMENT ON 07/06/1986, THIS ACT CONFERRED UPON TH E ASSESSEE A RIGHT TO HOLD THE FLAT. THE MERE FACT THAT POSSESSI ON OF THE FLAT WAS DELIVERED LATER DOES NOT DETRACT FROM THE FACT THAT THE ALLOTMENT WAS CONFERRED WITH A RIGHT TO HOLD THE PROPERTY ON ISSUANCE OF AN ALLOTMENT LETTER. THE HONBLE COURT FURTHER OBSERVE D THAT THE PAYMENT OF BALANCE INSTALLMENTS AND DELIVERY OF POS SESSION ARE CONSEQUENTIAL ACTS THAT RELATE BACK TO AND ARISE FR OM THE RIGHTS CONFERRED BY THE ALLOTMENT LETTER. IN THIS VIEW OF THE MATTER, THE TRANSACTION WAS HELD TO LTCG. 3.3.4 THE FACTS OF THE CITED CASES, I.E. MS. MADHU KAUL (SUPRA) AND B.R. ASSOCIATES PVT. LTD.(SUPRA) IN OUR VIEW, ARE SIMILAR AND APPLICABLE TO THE FACTUAL MATRIX OF THE CASE ON HAN D. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MS. MAD HU KAUL (2014) 363 ITR 54 AND THAT OF THE ITAT DELHI BENCH IN THE CASE OF B.R. ASSOCIATES PVT. LTD, (SUPRA), WE HOLD THAT THE CAPITAL GAINS ARISING FROM SALE OF THE SAID FLAT NO. 702, MUMBAI CENTRAL, MUMBAI BY THE ASSESSEE IS TO COMPUTED AS LTCG AS T HE PERIOD OF 36 MONTHS IS TO BE TAKEN FROM 18/10/2005, I.E. THE DATE OF ALLOTMENT TO 11/12/2009 I.E. THE DATE OF SALE. WE ACCORDINGLY UPHOLD THE ORDER OF THE LD.CIT (A) ON THIS ISSUE AN D DISMISS THE GROUNDS RAISED BY REVENUE IN THIS REGARD. 3.3.5 AS REGARDS REVENUE AVERMENTS THAT THE ASSESSE E IS NOT ENTITLED TO EXEMPTION U/S 54F OF THE ACT SINCE THE CLAIM BY THE ASSESSEE WAS MADE U/S 54 OF THE ACT. WE HAVE HEARD BOTH PARTIES AND PERUSED THE RECORD AND THE JUDICIAL DECISIONS A ND CBDT CIRCULAR NO.14 (XI-35) OF 1955 DT. 11/04/55 CITED B Y THE 8 ITA NO. 4559/MUM/2014 ASSESSMENT YEAR: 2010-11 ASSESSEE. ON AN APPRECIATION OF THE SAME, WE CONCUR WITH THE VIEW OF THE LD. CIT (A) THAT THERE ARE A NUMBER OF JUDICIAL PRONOUNCEMENTS WHEREIN IT HAS BEEN HELD THAT IT IS OBLIGATORY ON THE PART OF THE AO TO DRAW THE ASSESSEES ATTENTION TO THE LAWFUL RELIEF AVAILABLE AND THAT IF SUCH EXEMPTION /DEDUCT ION WAS OTHERWISE AVAILABLE TO THE ASSESSEE, THE SAME SHOUL D BE ALLOWED. FINDING NO REASON TO INTERFERE WITH THE ORDER OF TH E LD. CIT (A) IN THE MATTER, WE DISMISS THE GROUND RAISED BY REVENUE . 4. IN THE RESULT, REVENUES APPEAL FOR ASST. YEAR 2010-11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2016 SD/- SD/- ( RAM LAL NEGI ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 13/01/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &'( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA