PARVATIBEN SOMABAI PATEL, MUMBAI V. INCOME TAX OFFICER WAR-32(2)-5, MUMBAI

ITA 5035/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8167 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 24-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition
• Section: 50C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.5035/M/2017 ASSESSMENT YEAR: 2011-12 SMT. PARVATIBEN SOMABAI PATEL, A/13, 101, SIDDHARTH NAGAR CHS LIMITED, OPP. BHOR INDUSTRIAL ESTATE, KATAV MILLS, BORIVALI (EAST), MUMBAI-400 066 PAN: BYSPP 2663M VS. ITO, WARD 32(2)-5, BANDRA KURLA COMPLEX, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY CHAUDHARY, A.R. REVENUE BY : SMT. N. HEMALATHA, D.R. DATE OF HEARING : 06.11.2017 DATE OF PRONOUNCEMENT : 12.12.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 04.05.2017 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS INFORM ATION WAS RECEIVED BY THE ASSESSING OFFICER (HEREINAFTER REFE RRED TO AS THE AO) THAT THE ASSESSEE HAS SOLD RESIDENTIAL PREMISES ON 04.12.20 10 FOR A CONSIDERATION OF RS.15 LACS AGAINST THE STAMP DUTY VALUE OF RS.24,62,307/-. THE AO INITIATED REASSESSMENT PROCE EDINGS BY ISSUE OF NOTICE U/S 148 OF THE ACT. THE ASSESSEE STATED B EFORE THE AO THAT ITA NO.5035/M/2017 SMT. PARVATIBEN SOMABAI PATEL 2 THE COST OF PURCHASE OF THE PROPERTY IS RS.20,07,30 0/- AND THE INDEXED COST BECOMES RS.27,49,747/-. THUS, THE ASSESSEE ARG UED THAT EVEN IF THE SALE CONSIDERATION AS PER STAMP DUTY VALUATION IS CONSIDERED THE ASSESSEE WILL NOT GET ANY CAPITAL GAIN, RATHER SHE WILL INCUR A CAPITAL TOSS OF RS.2,87,541/-. THE AO HOWEVER, STATED THAT THE ASSESSEE HAD INHERITED THE PROPERTY FROM HER FATHER. THE FATHER OF THE ASSESSEE HAD ONLY A TENANCY RIGHT AND THE COST OF ACQUISITION IN HIS HAND WAS ZERO. THE AO FURTHER STATED THAT SINCE THE PROPERTY IN QU ESTION IS INHERITED PROPERTY THE COST OF ACQUISITION IN THE HANDS OF TH E ASSESSEE WOULD BE THE SAME AS IT WAS IN THE HANDS OF THE PREVIOUS OWN ER. THUS, THE AO TOOK THE COST OF ACQUISITION AS NIL AND COMPUTED LO NG TERM CAPITAL GAIN OF RS.24,49,406/-. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE APPEAL. 4. DURING THE COURSE OF HEARING BEFORE ME THE LD. A .R. HAS CITED THE DECISION OF MUMBAI TRIBUNAL IN ITA NO.8862/M/20 11 WHEREIN THE SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL W HEREIN THE FACTS OF THE CASE WERE THAT ASSESSEE HAD SOLD THE FLAT AL LOTTED TO ASSESSEE ON 16.05.82 AS ALTERNATIVE ACCOMMODATION FOR SURRENDER ING HER TENANCY RIGHTS IN THE OLD STRUCTURE BY THE BUILDER. THE AS SESSEE ENTERED INTO AGREEMENT WITH THAT BUILDER AND THE BUILDER HAS CON STRUCTED THE NEW STRUCTURE ON THIS BUILDING AND ASSESSEE WAS ALLOTTE D THE FLAT IN LIEU OF HER TENANCY RIGHTS. THE ASSESSEE HAS TAKEN THE VAL UE OF THE ALLOCATED FLAT AS ON 16.05.1982 AT RS.3,64,000/- AND THE AO A ND LD. CIT(A) DID NOT AGREE TO IT. THE TRIBUNAL WHILE DECIDING T HIS ISSUE HAD HELD ITA NO.5035/M/2017 SMT. PARVATIBEN SOMABAI PATEL 3 THAT WHEN THE ASSESSEE IS SURRENDERING TENANCY RIGH TS IN A FLAT, WHATEVER THE COST OF THAT NEW FLAT OF ITS ACQUISITI ON SHOULD BE THE COST FOR ACQUISITION AND ACCORDING TO THE CAPITAL GAIN M AY BE CALCULATED. THE LD. A.R. SUBMITTED THAT IN THIS CASE ASSESSEE H AD SOME TENANCY RIGHTS IN OLD BUILDING AND TENANCY RIGHT WAS BEING GIVEN TO MHADA AND MHADA HAS GIVEN THE FLAT. THEREFORE, AO HAS TA KEN THE VALUE OF COST OF ACQUISITION OF THAT FLAT AT THE MARKET R ATE. BUT AFTER REOPENING THE ASSESSMENT ORDER THE AO AND THE LD. C IT(A) HELD THAT ASSESSEE HAD ONLY TENANCY RIGHTS, THEREFORE, THE CO ST OF ACQUISITION OF THE PROPERTY IS O. THEREFORE, ASSESSEE IS AGGRIE VED BY THE DECISION OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THE A PPEAL OF THE ASSESSEE SHOULD BE ALLOWED. 5. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT A S PER THE PROVISIONS OF SECTIONS 48 & 49 THE COST OF ACQUISIT ION IS NIL BECAUSE ASSESSEE AND HIS FATHER HAD TENANCY RIGHTS IN THAT PROPERTY AND THE PROPERTY RIGHT DOES NOT COST ANY VALUE. THEREFORE, THE COST OF ACQUISITION SHOULD BE NIL. 6. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. DURING THE COURSE OF HEARING, THE LD. A.R. WAS ASKED WHAT THE COST OF ACQUISITION OF THE MHADA FLAT IS. THE LD. A.R. WAS DIRECTED TO GIVE THE COST OF MHADA FLAT WHEN ORIGINALLY BUILT IN THA T AREA. LD. A.R. ASKED FOR 15 DAYS TIME. MOREOVER, LD. A.R. WAS NOT ABLE TO GIVE THE SATISFACTORY REPLY. THEREFORE, I AM OF THE OPINION THAT IN ABSENCE OF ANY MATERIAL I AM DECIDING THIS APPEAL ON THE BASIS OF THE DECISION OF ITA NO.5035/M/2017 SMT. PARVATIBEN SOMABAI PATEL 4 MUMBAI TRIBUNAL IN ITA NO.8862/M/2011 WHEREIN THE T RIBUNAL HAS DECIDED SIMILAR ISSUE BY OBSERVING AS UNDER: 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW. THE ASSESSEE, IN THE MRS. TAUQEER FATEMA RIZVI PRESENT CASE, IS AN OLD TENANT IN A BUILDING WHEREI N, SHE WAS RESIDING WITH HER SON IN THE FLAT AREA ADMEASURING 1,200 SQ.FT. THE SAID PRE MISE WAS UNDER THE JOINT TENANCY ALONG WITH HER SON. ON 6TH MAY 1982, THE AGREEMENT WAS ENTERED INTO BY A BUILDER, M/S. ABIS CONSTRUCTION, WHEREBY THE BUILDER UNDERTO OK TO DEVELOP THE SAID PROPERTY AND IN ORDER TO REHABILITATE THE TENANTS, HE ALLOCATED TWO FLATS, ONE TO THE ASSESSEE AND OTHER TO HER SON, ADMEASURING 728 SQ.F T. AND 500 SQ.FT. RESPECTIVELY, ON OWNERSHIP BASIS AS A PERMANENT ALTERNATIVE ACCOM MODATION. IN THIS MANNER, THE ASSESSEE GOT THE ACQUISITION OF THE FLAT ON OWNERSH IP BASIS IN THE PROPOSED NEW BUILDING. BESIDES THIS, THE ASSESSEE WAS ALSO REQUI RED TO DEPOSIT ` 2,000 WITH THE BUILDER FOR SOCIETY MEMBERSHIP. THEREAFTER, THE ASS ESSEE ON 29 TH OCTOBER 2004, HAS SOLD THIS PROPERTY AND FOR THE PURPOSE OF SECTION 50C , THE VALUE OF THE SAME WAS TAKEN AT ` 38,78,375. THE REVENUE'S CASE HAS BE EN THAT THE ASSESSEE HAS NOT INCURRED ANY COST OF ACQUISITION AND, THEREFORE, NO COST CAN BE ATTRIBUTED FOR ACQUIRING THE FLAT, WHEREAS THE ASSESSEE'S CASE IS THAT THE FLAT WAS ALLOTTED TO HER ON OWNERSHIP BASIS IN LIEU OF SURRENDER OF TENANCY RIG HT AND, THEREFORE, THE MARKET VALUE OF THE ACQUIRED FLAT SHOULD BE TAKEN AS ON TH E DATE OF 16TH MAY 1982. FOR THE PURPOSE OF ASCERTAINING THE COST, THE ASSESSEE HAS TAKEN THE INSTANCE OF SALE OF SIMILAR KIND OF PREMISE IN THE SAME MONTH WITH THE BUILDER WHICH WAS SOLD FOR ` 3,64,000. IT IS NOW QUITE SETTLED THAT FOR THE PURP OSE OF COST OF ACQUISITION UNDER SECTION 48 AND 49 , THE TENANCY RIGHTS IS TO BE TAKEN INTO CONSIDERAT ION. THIS IS EVIDENT FROM SUB-SECTION (2) OF SECTION 55 . THE BUILDER HAS GIVEN THE ALTERNATE FLAT TO THE ASSESSEE ONLY BY VIRTUE OF SURRENDER OF TENA NCY RIGHTS BY THE ASSESSEE. HAD THERE BEEN NO TENANCY RIGHT, THE BUILDER WOULD HAVE NOT OFFERED ANY FLAT TO THE ASSESSEE, ON OWNERSHIP BASIS. THUS, IT IS A VALUABL E RIGHT ON WHICH COST OF ACQUISITION HAS TO BE DETERMINED. IT IS NOT A CASE THAT THE COST OF ACQUISITION CANNOT BE DETERMINED IN LIEU OF THE SURRENDER OF MRS. TAUQ EER FATEMA RIZVI TENANCY RIGHT AT ALL. ONCE THE COST OF ACQUISITION IS DETERMINABL E, THE BENEFIT OF SUCH ACQUISITION HAS TO BE GIVEN WHILE COMPUTING THE TAX ON CAPITAL GAIN. IN THE PRESENT CASE, THE TENANCY RIGHT GOT CONVERTED INTO ACQUISITION OF A F LAT, WHEN THE ASSESSEE MUST HAVE GOT THE POSSESSION OF NEW FLAT CONSTRUCTED BY THE B UILDER. THUS, THE MARKET VALUE OF THE SAID FLAT AS ON THE DATE OF ITS POSSESSION WOUL D BE THE COST OF ITS ACQUISITION AND, ACCORDINGLY, SUCH COST DEDUCTIBLE WHILE COMPUTING I NCOME BY WAY OF CAPITAL GAINS, WHETHER LONG TERM CAPITAL GAIN, AS THE CASE MAY BE. THIS IS AS THE HOLDING PERIOD OF THE CAPITAL ASSETS, BEING THE SAID RESIDENTIAL FLAT , WOULD ONLY COMMENCE FROM THE DATE THE ASSESSEE IS PUT IN POSSESSION THEREOF AFTE R ITS COMPLETION. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO TAKE THE VALUE OF THE FLAT FOR THE PURPOSE OF COST OF ACQUIS ITION FROM THE YEAR IN WHICH THE ASSESSEE GOT THE ACTUAL POSSESSION OF THE FLAT AND THEN ONLY HE SHALL COMPUTE THE CAPITAL GAIN. THUS, THE ASSESSEE'S GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.5035/M/2017 SMT. PARVATIBEN SOMABAI PATEL 5 7. RESPECTFULLY FOLLOWING THE SAME, I RESTORE THIS MATTER BACK TO THE FILE OF AO AND AO IS DIRECTED TO TAKE THE VALUE OF THE FLAT FOR THE PURPOSE OF COST OF ACQUISITION FROM THE YEAR IN WHI CH THE ASSESSEE GOT ACTUAL POSSESSION OF THAT FLAT AND TAKE THE VALUE O F MHADA FLAT AS ON DATE OF ACTUAL POSSESSION BY MAKING THE ENQUIRY FROM MHADA OFFICE. THE ASSESSEE IS DIRECTED TO GIVE THE INFOR MATION TO AO REGARDING COST OF FLAT FROM MHADA AUTHORITY AND AO IS DIRECTED TO CALCULATE COST OF ACQUISITION ACCORDINGLY AND CA PITAL GAIN SHOULD BE REWORKED ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 12.12.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.