JAGDISH C WADHWA, MUMBAI V. ITO WD 25(3)-2, MUMBAI

ITA 5013/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92438 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 27-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: A K SHARMA
• Keywords: Capital asset; Source of fund; Capital receipt
• Section: 54F

Judgement Text

J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ./ I.T.A. NO.5013 & 5014 /MUM/2013 ( / ASSESSMENT YEAR : 2009-2010 MR. JAGDISH C. WADHWA, 1502/03, EKTA MEADOWS, SIDHARTH NAGAR, BORIVLI (E), MUMBAI 400 066. / VS. INCOME TAX OFFICER - WARD 25(3)-2, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. ./ PAN : AAMPW6203D ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI A.K. SHARMA R E SPONDENT BY : SHRI AKHILENDRA YADAV / DATE OF HEARING : 11-03-2015 / DATE OF PRONOUNCEMENT : 24-04-2015 [ !' / O R D E R PER R.C. SHARMA, A.M . : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDERS PASSED BY THE LD. CIT(A) -35, MUMBAI DATED 9-5-2013 AND 10-5-2013 FOR THE A.Y. 2009-10 IN THE MATTER OF ORDER PASSED U/S 143( 3) AND 154 OF THE INCOME TAX ACT, 1961. 2. THE ONLY GRIEVANCE RAISED BY THE ASSESSEE AGAIN ST BOTH THE ORDERS OF LD. CIT(A) RELATES TO NOT GIVING BENEFIT OF DEDUCTION A VAILABLE UNDER SECTION 54F OF THE INCOME TAX ACT, 1961. ITA 5013 & 5014/M/13 2 3. THE GROUND RAISED WITH REGARD TO VALIDITY OF ASS ESSMENT WAS NOT PRESSED BY THE LD. A.R., THE SAME IS THEREFORE DISM ISSED IN LIMINE AS NOT PRESSED. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. ON THE BASIS OF AIR INFORMATION, THE A.O. FOUND THAT ASSESSEE HAS P URCHASED IMMOVABLE PROPERTY ON 1-4-2008. ACCORDINGLY ASSESSEE WAS ASK ED TO GIVE FULL DETAILS OF ACQUISITION OF THE PROPERTY. THE ASSESSEE EXPLAINE D THE SOURCE OF FUNDS PARTLY OUT OF SALE PROCEEDS OF HIS EARLIER HOUSE. IT WAS EXPLAINED THAT THE ASSESSEE HAS BEEN ALLOTTED A FLAT NO. 2202-C ON THE 22 ND FLOOR IN THE C WING IN A NEW BUILDING KNOWN AS EKTA MEADOWS. AS PER THE AGREE MENT EXECUTED, THE ASSESSEE WAS TO MAKE PAYMENT FOR THE SAID FLAT. DU RING THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AS SURRENDERED HIS RIGHT IN THE FLAT AND AGAINST THIS, THE BUILDER HAS MADE PAYMENT TO THE ASSESSEE OVER AND ABOVE THE INVESTMENT MADE BY HIM AND HIS W IFE. IT IS SEEN THAT THE ASSESSEE HAS NOT REGISTERED ANY DOCUMENT IN REGARD TO FLAT NO. 2202-C NOR HAS OCCUPIED THIS PROPERTY FOR A SINGLE DAY, THE A. O. DECLINED THE CLAIM U/S 54F OF THE ACT. ACCORDINGLY ADDITION OF RS. 5,99,46 0/- WAS MADE U/S 69 OF THE ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSES SEE UNDER THE HEAD INCOME FROM OTHER SOURCES. IN APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) ACCEPTED THE RECEIPT OF PAYMENT OUT OF PROCEEDS REC EIVED ON SURRENDER OF EARLIER FLAT. BY RELYING ON THE DECISION OF ITAT MU MBAI AND DELHI BENCHES, HE ACCEPTED THE ASSESSEES CONTENTION THAT THE AMOUNT RECEIVED ON SURRENDER OF FLAT WAS ELIGIBLE FOR INVESTMENT IN THE NEW FLAT. HOWEVER, HE DECLINED THE CLAIM ON THE PLEA THAT ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S 54F OF THE ACT. 5. WITH REGARD TO THE ADDITION OF RS. 5,99,460/-, T HE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS MOBILIZED THE TOTAL EXPENSES OF RS. 36,44,600/- FROM HDFC, ANDHRA BANK AND EKTA BUILDERS AND THE AMOUNT OF RS. 5,55,149/- ITA 5013 & 5014/M/13 3 WAS OUT OF DEBIT BALANCE IN THE ACCOUNT OF EKTA BUI LDERS WHICH WAS DUE TO THE ASSESSEE ON ACCOUNT OF SURRENDER OF EARLIER FLAT. A CCORDINGLY, HE DIRECTED THE A.O. TO DELETE THE ADDITION OF RS. 5,55,149/-. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE ORDERS OF LOWER AUTHORITIES. THE LD. CIT(A) HAS ACCEPTED T HE ASSESSEES CLAIM REGARDING RECEIPT OF SURRENDERED AMOUNT AS CAPITAL RECEIPT IN PLACE OF INCOME FROM OTHER SOURCES AS TREATED BY THE A.O. HOWEVER, ASSESSEES CLAIM FOR DEDUCTION U/S 54F WAS NOT ALLOWED ON THE PLEA THAT ASSESSEE HAS NOT FILED ANY CLAIM OF CAPITAL GAIN U/S 54F BEFORE THE A.O. THE PRECISE OBSERVATION OF THE LD. CIT(A) IS AS UNDER :- 7.3. 1 HAVE CONSIDERED THE STAND OF AO AS WELL AS SUBMISSION OF THE APPELLANT. THE APPELLANT HAS GIVEN ANY DETAILS OF P AYMENT MADE TO EKTA SANKALP BUILDER AS BOOKING AND ACQUISITION OF RIGHT IN FLAT NO.2202 C IN A EKTA MEADOWS WHICH CULMINATED FINALLY IN RECEI PT OF RS.22,67,400/-. I HAVE ALSO GONE THROUGH THE JUDICI AL PRONOUNCEMENTS RELIED UPON THE APPELLANT DURING THE APPELLATE PROC EEDINGS AND HAD COME TO A CONCLUSION THAT THE VARIOUS REASONING GIV EN BY THE AO IN THE ASSESSMENT ORDER HAS NOT FOUND ANY FAVOUR FROM HON' BLE ITAT MUMBAI BENCH AND DELHI BENCH, THEREFORE, THE OBJECTIONS RA ISED BY THE AO CAN BE OVER RULED KEEPING IN VIEW THE DECISION OF HON'B LE ITAT ON THIS ISSUE. ACCORDINGLY, THE APPELLANT CAN BE ALLOWED BENEFIT I N SO FAR AS QUANTUM OF RECEIPT FROM SURRENDER OF RIGHT IN CAPITAL ASSET IS CONCERNED. BUT I AM NOT IN AGREEMENT WITH THE AR THAT AO WAS NOT JUSTIF IED IN SEGREGATING THE AMOUNT PROPORTIONATELY AS PER THE CONTRIBUTION MADE BY THE APPELLANT AND HIS WIFE. THEREFORE, THE AO IS DIRECT ED TO TREAT RS. 20,08,335/- AS INCOME RECEIVED FROM SURRENDER OF RI GHT. AS REGARDS ALLOWING BENEFIT OF CAPITAL GAIN AGAINST THIS AMOUN T CANNOT BE CONSIDERED IN FAVOUR OF APPELLANT BECAUSE NOWHERE I N THE ASSESSMENT ORDER THERE IS ANY WHISPER THAT THE APPELLANT HAD M ADE ANY SUCH CLAIM OF SET OFF OF CAPITAL GAIN BEFORE THE AO AND PROVE THE SOURCE OF RS.3,55,480/~ (RS.26,22,880/- - RS.22,67,400) AS A FURTHER REINVESTMENT IN NEW, FLAT. THE APPELLANT HAS ALSO N OT FILED ANY COPY OF REINVESTMENT OF THE AMOUNT RECEIVED ON ACCOUNT OF T RANSFER OF RIGHT. IN VIEW OF THESE, I AM CONSTRAINED IN NOT ENTERTAINING THE APPELLANTS CLAIM TO ALLOW BENEFIT OF SET OFF OF LONG TERM CAPITAL GA IN U/S 54F OF THE I.T. ACT, 1961. 7. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAD BOOKED A FLAT IN JOINT OWNER SHIP IN EKTA MEADOWS, KANDIVLI (E) COMPRISING OF TWO BED ROOM HALL FLAT ITA 5013 & 5014/M/13 4 BEING FLAT NO.C-2202 AND HAD MADE A TOTAL PAYMENT O F RS.26,22,880/-. SUBSEQUENTLY, THE ASSESSEE AND HIS WIFE SURRENDERED THE RIGHTS IN THE SAID FLAT AND SWITCHED OVER TO A THREE BED ROOM SET IN T HE SAME BUILDING. ON SURRENDERING THE FLAT NO.C-2202, THE ASSESSEE AND H IS WIFE RECEIVED AN AMOUNT OF RS. 11,33,700/- EACH ON ACCOUNT OF APPREC IATION OF ITS VALUE . BOTH, THE ASSESSEE AND HIS WIFE CLAIMED DEDUCTION U NDER SECTION. 54F AS THE ENTIRE GAIN WAS INVESTED IN THE NEW FLAT COMPRISING OF THREE BEDS. ASSESSEE'S WIFE RETURN OF INCOME WAS ACCEPTED AND THE DEDUCTIO N WAS ALLOWED. HOWEVER, IN CASE OF THE ASSESSEE, THE AO REJECTED THE CLAIM ON THE REASONING (1) ASSESSEE HAS NOT REGISTERED THE DOCUMENT (2) THE AS SESSEE HAS NOT OCCUPIED THIS PROPERTY FOR A SINGLE DAY, (3) ASSESSEE HAD NO T OFFERED ANY CAPITAL GAIN AGAINST THIS SURRENDER (4) THE INCOME WAS CALCULATE D IN THE RATIO OF PAYMENTS MADE BY THE ASSESSEE AND HIS WIFE (5) SAME WAS TREA TED AS INCOME FROM OTHER SOURCES. AS PER OUR CONSIDERED VIEW, REGISTRATION O F A DOCUMENT IS NOT A CONDITION PRECEDENT SO FAR AS TAXATION UNDER CAPITA L GAIN IS CONCERNED. FLAT NO.C-2202 WAS ALLOTTED UNDER A VALID LETTER OF ALLO TMENT WHERE BY THE BUILDER HAD SPECIFICALLY ALLOTTED A SPECIFIED PREMISES AND ACCEPTED THE PAYMENT ALSO. FOR ALL PRACTICAL PURPOSES THE ASSESSEE AND HIS WIF E WERE THE CO-OWNERS OF THE SAID FLAT. BY NO MEANS THE BUILDER OR ANYBODY ELSE COULD SNATCH AWAY THEIR RIGHTS AND INTEREST IN THE SAID FLAT FROM THE ASSES SEE AND HIS WIFE. THE ASSESSEE RECEIVED THE APPRECIATION ON ACCOUNT OF SU RRENDER. REGISTRATION OF DOCUMENT WAS NOT NECESSARY MERE SURRENDER OF RIGHT WAS SUFFICIENT TO CLAIM THE APPRECIATION. SO THE REASON THAT THE DOCUMENT W AS NOT REGISTERED DOES NOT PLAY ANY ROLE IN SURRENDERING THE RIGHTS. 8. WITH REGARD TO NON OCCUPANCY OF THE PREMISES, AS PER OUR CONSIDERED VIEW THE OWNERSHIP OR HOLDING THE RIGHTS IN THE PRO PERTY DOES NOT IN ANY WAY EFFECT THE TITLE OF THE' ASSESSEE. SIMPLY, THE REAS ON THAT FLAT WAS NEVER OCCUPIED BY THE ASSESSEE CANNOT DEBAR THE ASSESSEE FROM THE DEDUCTION. THE DEDUCTION IS NOT BASED ON OCCUPANCY BUT THE TRANSFE R OF RIGHTS. THE ASSESSEE ITA 5013 & 5014/M/13 5 TRANSFERRED HIS RIGHTS IN THE PROPERTY FOR A CONSID ERATION IS SUFFICIENT TO CLAIM THE DEDUCTION IF THE GAINS ARE APPROPRIATED AS PER THE LAW. SECTION 54F PROVIDES THAT WHERE THE CAPITAL GAIN ARISES FROM TH E TRANSFER OF ANY LONG TERM CAPITAL ASSET AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE PURCHASED A RESIDENTIAL HOUSE, THE CAPITAL GAIN SHALL NOT BE CHARGED TO TAX IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET CONSIDERATION IN RESPECT O F THE ORIGINAL ASSET. IN THE INSTANT CASE THE ASSESSEE HAS ENTERED INTO AN AGREE MENT WITH THE DEVELOPER FOR PURCHASE OF FLAT TO BE CONSTRUCTED IN EKTA MEAD OWS. THE AGREEMENT WAS EXECUTED ON 27-02-2005 WHEREIN THE BUILDER HAS AGRE ED TO SALE FLAT NO. 2202 ON THE 22 ND FLOOR IN THE C WING ON OWNERSHIP BASIS. THE PRI CE WAS DETERMINED AT RS. 27,48,800/- WHICH WAS TO BE PAID PHASE-WISE MANNER. RS. 1,64,500/- WAS TO BE PAID BEFORE EXECUTION OF THESE PRESENTS, RS. 4,85,420/- WAS TO BE PAID ON COMPLETION OF PLINTH AND INSTALLM ENT OF RS. 74,960/- WAS TO BE PAID ON THE COMPLETION OF EACH SLAB. AS PER THE STATEMENT OF ACCOUNTS PLACED IN THE PAPER BOOK AT PAGE 2, THE ASSESSEE HA S PAID THE AMOUNT OF INSTALLMENTS AS AGREED. HOWEVER, THE FLAT SO ACQUIR ED ON 27-2-2005 WAS SURRENDERED ON 8-3-2008. THE EXCESS AMOUNT ON SURR ENDER WAS ADJUSTED BY THE ASSESSEE AGAINST THE COST OF NEW FLAT TO BE ALL OTTED BY THE BUILDER IN THE VERY SAME BUILDING. THUS WE FIND THAT EXCESS AMOUN T RECEIVED ON SURRENDER OF FLAT WAS AFTER MORE THAN THREE YEARS OF PURCHASE S AND SINCE THE AMOUNT WAS AGAIN REINVESTED IN THE NEW FLAT WITHIN THE STI PULATED TIME, THE ASSESSEE WAS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 54F OF THE ACT. IN VIEW OF THE ABOVE WE DIRECT THE A.O. TO RECOMPUTE AND ALLOW ASSESSEES C LAIM FOR DEDUCTION U/S 54F OF THE ACT. WITH RESPECT TO ASSESSEES APPLICATION U/S 154 OF THE ACT, THE A.O. MAY RE-VERIFY THE FACTUAL MISTAKE IN THE ORDER WHIL E RECOMPUTING THE CLAIM U/S 54F OF THE ACT. ITA 5013 & 5014/M/13 6 10. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2015. !' # $% &! ' 24-04-2015 ( ) SD/- SD/- (I.P. BANSAL) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 24-4-2015 .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 20,, MUMBAI 4. 7 / CIT -9, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI J BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI