ASST CIT 19(3), MUMBAI V. EIDRED JOSEPH PEREIRA, MUMBAI

ITA 4623/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2406 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATHYA MOORTHYDR
• Keywords: Cost of acquisition
• Section: 54F; 54

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/4623/MUM/2014, /ASSESSMENT YEARS: 2005-06 ACIT -19(3) 305, PIRAMAL CHAMBERS , LALBAUG, PAREL, MUMBAI-400 012. VS. SHRI ELDRED JOSEPH PEREIRA EL RON GARDEN, 73, TPD III, 30 TH ROAD, BANDRA (W) MUMBAI-50. PAN:AAPPP 8882 J ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI SATHYA MOORTHY-DR ASSESSEE BY: NONE / DATE OF HEARING: 20.07.2016 / DATE OF PRONOUNCEMENT: 19.10.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 15/04/2014 OF THE CIT ( A)-30,MUMBAI, THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL. ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 30/08/2005, DECLARING TOTAL INCOME AT RS.72,430/ -.THE AO COMPLETED THE ASSESSMENT, U/S.143 (3) R.W.S. 147 OF THE ACT,ON 29/12/2011,DET ERMINING HIS INCOME AT RS.73.67 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DEDUCTION U/S.5 4 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS IN THE AY.2008-09, IN THE ASSESSEES OW N CASE, THE AO NOTICED THAT THE ASSESSEE ALONG WITH ONE OF THE CO-OWNERS HAD GAINED RIGHT TI TLE AND INTEREST IN ONE PROPERTY AT BANDRA BY VIRTUE OF BEING THE LEGAL HEIR OF THE PROPERTY O WNER,THAT VIDE DEVELOPMENT AGREEMENT, DATED 21/02/2003, THE CO-OWNERS ENTERED INTO AN AGR EEMENT WITH A PARTNERSHIP FIRM TO DEVELOP THE PROPERTY BY BRINGING IN THE TRANSFERABLE AND LO ADABLE TDR AT THE COST OF THE DEVELOPERS, THAT THE CONSIDERATION FOR CONFERRING THE RIGHT FOR DEVELOPMENT AGREED IT WAS FOR CHEQUE COMPONENT OF RS.40 LAKHS AND NON-MONETARY COMPONENT OF FULLY CONSTRUCTED AREA OF 763.03 SQ. MTRS., THAT THE VALUE OF THE BOTH THE COMPONENT S WAS DECLARED AT RS. 78.82 LAKHS. THE AO, HOWEVER, NOTICED THAT THE ACKNOWLEDGEMENT OF REGIST ERED AND DELIVERED DOCUMENT FOR THE SAID DEVELOPMENT AGREEMENT SHOWED THE MARKET VALUE OF TH E PROPERTY AT RS. 1.75 CRORES AS AGAINST 30 LAKHS AS EARNEST MONEY AND RS. 10 LAKHS BEING TH E RECEIVABLE AMOUNT ON APPROVAL OF THE PLANS.ACCORDINGLY,HE OBSERVED THAT THE ASSESSEE HAD OFFERED AN AMOUNT OF RS.59.41 LAKHS AS HIS SHARE,THAT THE VALUE ADOPTED BY THE REGISTRAR O F THE PROPERTY WAS RS. 87.62 LAKHS (50% OF 4623/M/14-ELDRED JOSEPH PEREIRA 2 RS. 1.75 CRORES). CONSIDERING THE ABOVE FACTS HE HE LD THAT THERE WERE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE LIABLE FOR TAX HAD ESCAPED A SSESSMENT. THEREFORE HE ISSUED A NOTICE U/S.148 OF THE ACT. DURING THE ASSESSMENT PROCEEDIN GS THE ASSESSEE OBJECTED TO THE VALUE ADOPTED BY THE REGISTRAR WHICH ACCORDING TO HIM HAD BEEN ERRONEOUSLY TAKEN BECAUSE AS PER THE STAMP DUTY READY RECKNOR AND THE VALUATION REPO RT FROM THE REGISTERED VALUER THE SHARE IN THE PROPERTY WAS AT RS.49.41 LAKHS ONLY, THAT TH ERE WAS NO COST TO TDR AND THEREFORE NO QUESTION OF CAPITAL GAINS IN THE HANDS OF THE ASSES SEE, THAT HE HAD PAID RS. FIVE LAKHS TO ONE OF THE OLD TENANTS OF THE BUILDING TO VACATE THE TENAN T, HE HAD INCURRED AN EXPENDITURE OF RS. 39.40 LAKHS FOR CONSTRUCTION OF RESIDENTIAL ACCOMMO DATION CONSTRUCTED WERE BY THE DEVELOPERS, THAT THE DEVELOPER HAD CONSTRUCTED FLAT S ON THE AREA OF 763.03 SQ. MTRS. RETAINED BY THE ASSESSEE AS PER THE AGREEMENT THAT HIS SHARE WAS 50%, THAT HE HAD CLAIMED DEDUCTION OF 50% ON CONSTRUCTED COST OF THAT AREA CALCULATED AT THE RATE OF RS.10,330 PER SQUARE MTRS. AT RS. 39.40 LAKHS U/S.54 OF THE ACT. IT WAS FURTHER S TATED THAT TOTAL CONSTRUCTED AREA FOR HIM WAS 381.52 SQ.MTRS. WHICH IS 50% OF 763.03 SQ.MTRS. AND THE AREA OF THE TOTAL PLOT WAS 618.07 SQ.MTRS, THAT THE PLAN FOR RESIDENTIAL BUILDING COU LD NOT ACCOMMODATE THE ENTIRE 381.32 SQ.MTRS. ON ONE FLOOR, THAT HE WAS ALLOTTED THE SAI D CONSTRUCTION AREAS BY WAY OF FOUR FLATS I.E. TWO ADJACENT FLATS ON THE SIXTH FLOOR ONE FLATS ON THE THIRD FLOOR AND THE OTHER ON THE SECOND FLOOR. THE ASSESSEE RELIED UPON VARIOUS CASE LAWS T O SUPPORT HIS ARGUMENT THAT ON SALE OF TDR CAPITAL GAINS WAS NOT CHARGEABLE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO REJECTED THE CLAIM MADE BY THE ASSESSEE U/S.54 OF T HE ACT AT RS. 39.40 LAKHS IN RESPECT OF FOUR FLATS DEVELOPED AGAINST THE MONETARY AS WELL AS NON -MONETARY CONSIDERATION RECEIVED BY THE ASSESSEE AND HELD THAT THE LONG-TERM CAPITAL GAIN W AS IN RESPECT OF THE LAND THAT WAS NOT A RESIDENTIAL HOUSE, THAT DEDUCTION U/S.54 OF THE ACT WAS NOT AVAILABLE, THAT DEDUCTION UNDER THE SAID SECTION WAS AVAILABLE ONLY WHEN AN ASSESSEE WO ULD PURCHASE A NEW HOUSE PROPERTY, THAT FOUR FLATS FORMED PART OF CONSIDERATION RECEIVED TO WARDS TRANSFER OF DEVELOPMENT RIGHTS OF THE ORIGINAL HOUSE PROPERTY, THAT THE FLATS HAD NOT BEE N CONSIDERED CONSTRUCTED BY THE ASSESSEE, THAT THE REQUIREMENT OF SECTION 54 WAS NOT FULFILLE D. ACCORDINGLY, THE AO CONSIDERED THE AMOUNT OF RS.87.62 LAKHS AS SALE CONSIDERATION AND AFTER ALLOWING INDEXED COST OF ACQUISITION AT RS.7.94 LAKHS COMPUTED THE GROSS CONSIDERATION A T RS.79.67 LAKHS. FROM THAT HE ALLOWED LEGAL FEES PAID OF RS.1.70 LAKHS AND COMPENSATION P AID TO TENANTS AT RS. 5 LAKHS.FINALLY,HE COMPUTED THE LONG-TERM CAPITAL GAIN AT RS.72.97 LAK HS. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM, THE ASSESSEE MADE ELABORATE SUBMISSIONS WITH REGARD 4623/M/14-ELDRED JOSEPH PEREIRA 3 TO THE REOPENING OF THE ASSESSMENT AS WELL AS ON TH E MERITS OF THE CASE. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSE E, THE FAA HELD THAT THE ISSUE IN QUESTION HAD BEEN DULY CONSIDERED BY THE TRIBUNAL IN THE CAS E OF JAWAHAR N GHAIA (ORDER DATED 19/11/2013) AND HEMA SUNIL RANE (ITA/4665/MUM/2012) . FINALLY, HE HELD THAT THE ENTIRE VALUE OF NON-MONETARY CONSIDERATION TAKEN BY THE AO OF 635.86 SQ.MTRS. OF CONSTRUCTED AREA WAS ELIGIBLE FOR DEDUCTION U/S.54 OF THE ACT. 4.DURING THE COURSE OF HEARING BEFORE US THE DEPART MENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO. AS STATED EARLIER, NO ONE APPEARED BEFORE US, ON BEHALF OF THE ASSESSEE. 5. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD . WE FIND THAT THE AO HAD TAXED THE NON- MONETARY BENEFITS OF THE ASSESSEE AND HAD DENIED HI M THE BENEFIT OF SECTION 54 OF THE ACT, THAT THE FAA HAD ALLOWED THE APPEAL OF THE ASSESSEE. WE FIND THAT IN THE CASE OF HEMA SUNIL RANE (SUPRA) THE TRIBUNAL HAD DECIDED THE ISSUE AS UNDER : 6.8. THE ABOVE ISSUE HAS BEEN DULY CONSIDERED BY THE ITAT JBENCH, MUMBAI IN A VERY RECENT ORDER DTD. 19.1L.2013, IN THE CASE OF M/S. JAWAHAR N. GHI A & OTHERS (AOP), DR. RANE (MRS.HEMA SUNIL) IN A.Y. 2004-05 IN ITA NO.4665/MUMBAI /2012. THE RELEVANT P ART OF THE DECISION IS REPRODUCED AS UNDER: ' ... ON THE ISSUE OF ALLOWABILITY OF EXEMPTION U/ S. 54/54 F , THE AO HAS DENIED THE EXEMPTION U/ S 54/ 54F ON THE GROUND THAT ASSESSEE HAS NOT PURC HASED NEW RESIDENTIAL PROPERTY S FOR ABSORBING THIS LONG TERM CAPITAL GAIN ARISING OUT OF TRANSFE R OF PROPERTY IN QUESTION. IT IS RELEVANT TO NOTE THAT THE DEVELOPMENT AGREEMENT ITSELF EMPHASIZES O N THE AREA WHICH SHALL BE ALLOWED TO THE BENEFICIARIES IN NEWLY CONSTRUCTED BUILDING AS AGAI NST THEIR EXISTING AREAS. THE SAID DEVELOPMENT AGREEMENT CLEARLY INDICATES THE AFORESAID STATISTIC S IN RESPECT OF ALLOTMENT OF AREAS. THIS SUGGESTS THAT THE ALLOTMENT IN NEWLY CONSTRUCTED BUILDING U NDER THE DEVELOPMENT AGREEMENT IS AN ADJUSTMENT OF DEBTS IN RESPECT OF TRANSFER OF PROP ERTY WITHIN THE MEANING OF DEVELOPMENT AGREEMENT DATED 9TH NOVEMBER 2003. CONSIDERING THI S FACT IN THE LIGHT OF THE PROVISIONS OF SECTION 54, THE WORD PURCHASED IN SECTION 54 MUST B E INTERPRETED IN ITS ORDINARY MEANING AS BUYING FOR A PRICE OR EQUIVALENT OF A PRICE BY PAYM ENT IN KIND OR ADJUSTMENT TOWARDS OLD DEBTS OR FOR OTHER MONETARY CONSIDERATION. THE SAID PROPOSI TION IS SUPPORTED IS BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS V.T.N AR VINDA REDDY (120 ITR 46 SC) WHEREIN IT HAS BEEN HELD THAT THERE IS NO REASON TO DIVORCE THE O RDINARY MEANING OF THE WORD 'PURCHASE' AS BUYING FOR A PRICE OR EQUIVALENT OF PRICE BY PAYMEN T IN KIND OR ADJUSTMENT TOWARDS AN OLD DEBT OR FOR OTHER MONETARY CONSIDERATION FROM ITS LEGAL MEA NING IN SECTION 54 (1). UNDOUBTEDLY, EACH RELEASE IN THE CASE IS A TRANSFER OF (HE RELEASOR' S SHARE FOR CONSIDERATION TO THE RELEASE. IN VIEW O F THE MENTIONED DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTION U/ S 54/ 54F AND HENCE WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH ORDER OF THE LEARNED CIT(A) ON THIS COUNT. RESULTANTLY, THE ISSUE OF ALLOWABILITY OF EXEMPTION U/S. 54/54F IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. RESPECTFULLY FOLLOWING THE ABOVE ORDER, SUCH WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.SO,CONFIRM ING THE SAME WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO AND HOLD THAT ASSES SEE WAS ENTITLED TO DEDUCTION U/S.54 OF THE ACT. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. 4623/M/14-ELDRED JOSEPH PEREIRA 4 . ORDER PRONOUNCED IN TH E OPEN COURT ON 19 TH OCTOBER, 2016. 19 , 2016 SD/- SD/- SD/- SD/ ( . . / C.N. PRASAD ) ( ! / RAJENDRA ) '' #' / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 19.10.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.