ITO 19(1)(4), MUMBAI V. SUMEET AHSOK VAZIR, MUMBAI

ITA 521/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93156 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNI
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Capital asset
• Section: 143(3); 2(14)

Judgement Text

SHRI SUMEET ASHOK VAZIR ITA NO. 5 21 /M/201 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 5 21 /MUM/20 1 3 ( ASSESSMENT YEAR: 200 9 - 1 0 ) THE INCOME TAX OFFICER - 19(1) - 4, ROOM NO. 308, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG MUMBAI - 400 012 VS SHRI SUMEET ASHOK VAZIR , 1001, 10 TH FLOOR, NISHANT BUILDING 16, ALTAMOUNT ROAD, GRANT ROAD , MUMBAI - 400 0 07 .: PAN : AABPU 4950 A (APPELLANT) (RESPONDENT) APPELLANT BY : SMT N V NADKARNI RESPONDENT BY : SHRI RONAK G. DOSHI /DATE OF HEARING : 29 - 04 - 2015 / DATE OF PRONOUNCEMENT : 08 - 07 - 2015 ORDER PER AMIT SHUKLA , J.M. : THE A FORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 20 . 11 .201 2 , PASSED BY CIT(A) - 30 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR T HE ASSESSMENT YEAR 200 9 - 1 0 ON THE FOLLOWING GROUND S : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECT ING TO TAX THE INCOME OF RS. 78,69,000/ - AS CAPITAL GAIN AND NOT INCOME FROM OTHER SOURCES AFTER HOLDING THAT THE ENTIRE TRANSACTION FALLS UNDER AMBIT OF SECTION 45(1) OF THE I.T. ACT WITHOUT APPRECIATING THE FOLLOWING FACTS THAT: (A) DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSES HAS STATED THAT HE HAS RECEIVED THE PAYMENT OF RS.78,69,000 / - FROM MR. M. C. SUNNY & ANOTHER IN LIEU OF TRANSFER OF ENTIRE SHARE HOLDING IN M / S. UNITED DEVELOPERS PVT. LTD. WHERE ASSESSEE IS ONE OF THE SHRI SUMEET ASHOK VAZIR ITA NO. 5 21 /M/201 3 2 DIRECTOR! SHAREHOLDER. (B) THIS PAYMENT HAS BEEN MADE BY MR. M. C. SUNNY OF RS.58,69,000 / - FROM HIS SAVING BANK ACCOUNT FROM CATHOLIC SYRIAN BA NK LTD., VASHI BRANCH, WHEREAS PAYMENT OF RS.6,50,000 / - AND RS.8,50,000 / - WAS MADE BY SHRI JATIN TRIVEDI FROM HIS BANK OF STATE BANK OF INDIA, NAVGHAR (BASSEIN ROAD) BRANCH AND HOWEVER, THE ASSESSEE HAS FAILED TO GIVE ANY EXPLANATION OR EVIDENCES IN RESPEC T OF THE BALANCE AMOUNT OF RS.5,00,000 / - . (C) FURTHER, THE ASSESSEE HAS NEITHER ENTERED INTO ANY PURCHASE AGREEMENT FOR PURCHASE OF FLAT AT MERIDIAN APARTMENT NOR MADE ANY SALE AGREEMENT FOR SALE OF THE SAID FLAT. (D) ASSESSEE HAS JUST RECEIVED ALLOTMENT LETTER WI THOUT ANY CAPITAL ASSETS IN HIS POSSESSION AND SHOWN IT AS SOLD BY CANCELLING THE SAID ALLOTMENT LETTER JUST PUTTING CROSS LINE ACROSS THE LETTER WHICH IS NOT FULFILLS THE CONDITIONS OF PROVISIONS OF SECTION 2(14) AND 2(47) OF THE!. T. ACT 1961 (E) HENCE, THE A.O. HAS RIGHTLY ADDED RS.78,69,000 / - TO THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET SIDE AND THAT OF THE AO BE RESTORED. 2. THE MAIN ISSUE INVOLVED IS , WHETHER AO WAS CORRECT IN LAW AND ON FACTS IN TREATING THE SUM OF RS. 78,69,000/ - RECEIVED ON SALE OF CONSIDERATION OF RESIDENTIAL HOUSE ACQUIRED BY THE ASSESSEE BY WAY OF ALLOTMENT LETTER AS INCOME FROM OTHER SOURCES INSTEAD OF LONG - TERM - CAPITAL - GAIN AS OFFERE D BY THE ASSESSEE. SHRI SUMEET ASHOK VAZIR ITA NO. 5 21 /M/201 3 3 3. BRIEFLY STATED THE RELEVANT FACTS ARE THAT VARIOUS SHAREHOLDERS OF UNITED DEVELOPERS P. LTD. INCLUDING THE ASSESSEE HAVE TRANSFERRED THEIR ENTIRE SHAREHOLDING IN THE SAID COMPANY TO MR. M. C. SUNNY AND ANOTHER, VIDE AGREEMENT DATED 0 6.05.2004, IN LIE U OF WHICH THEY HAVE AGREED TO PAY SUM OF RS. 1.61 CORES TO ALL THE SHAREHOLDERS OF THE M/S UNITED DEVELOPERS P. LTD. ALTERNATIVELY, IT WAS AGREED THAT IN LIEU OF THE CONSIDERATION OF RS. 1.61 CRORES, THEY WOULD ALLOT FOUR FLATS AND ONE P E NT HOUSE FOR THE WORTH OF SAME MONEY. THE SHARE OF THE ASSESSEE WAS DETERMINED AT RS. 27,30,150/ - OUT OF THE TOTAL COMPENSATION OF RS. 1.61 CRORES AGAINST THE TRANSFER OF ASSESSEES SHARES TO THE SAID PARTY. INSTEAD OF PAYING SUM OF RS. 27,31,100/ - TO THE ASSES S EE, M.C. SUNNY AND ANOTHER HA VE ISSUED ALLOTMENT LETTER DATED 16 TH APRIL, 2004 FOR A FLAT ADMEASURING 1045 SQ. FT. OF CARPET AREA IN MERIDIAN RESIDENTIAL BUILDING, SECTOR - 6, NERUL, NAVI MUMBAI. THE RELEVANT PARA OF THE ALLOTMENT LETTER HAS BEEN INCOR PORATED AT PAGE 3 OF THE APPELLATE ORDER. THE SAID PARTY ALSO ISSUED LETTER OF ALLOTMENT - CUM - DECLARATION - CUM - IN DEMNITY - BOND DATED 06.05.2004 AND ALSO ISSUED IRREV OCABLE POWER OF ATTORNEY DATED 06.05.2004. LATER ON, THE ASSESSEE DISPOSED OFF HIS INTEREST IN THE SAID FLAT WHICH WAS GIVEN BY WAY OF ALLOTMENT LETTER IN FAVOR OF THE SAME PARTY FOR A SUM OF RS. 78,69,000/ - AFTER A GAP OF MORE THAN FOUR YEARS I.E. BETWEEN THE DATE OF ALLOTMENT LETTER AND PURCHASE MADE BY THE PARTY FROM THE ASSESSEE. THUS, AS PER T HE ASSESSEES CONT ENTION THERE WAS TRANSFER OF A CAPITAL ASSET AND IT IS CHARGEABLE WITHIN THE AMBIT OF SECTION 45(1) AND FURTHER ASSESSEE IS ENTITLED FOR BENEFIT U/S 54. HOWEVER, LD. ASSESSING OFFICER HELD THAT IT IS INCOME FROM OTHER SOURCES AS THERE WAS NEITHER ANY PURCHASE AGREEMENT FOR THE PURCHASE OF FLAT NOR ANY SALE AGREEMENT AND, THEREFORE, CONDITIONS OF THE PROVISIONS OF SECTION 2(14) AND 2(47) DOES NOT FULFILL. 4. BEFORE THE CIT(A), DETAILED SUBMISSIONS WERE MADE ALONG WITH RELIANCE ON VARIO US DECISIONS, WHICH HAS BEEN DEALT BY THE CIT(A) IN DETAIL. T HE LD. CIT(A) ACCEPTED THE ASSESSEES CONTENTION SHRI SUMEET ASHOK VAZIR ITA NO. 5 21 /M/201 3 4 AND HELD THAT THERE IS AN ASSET IN THE FORM OF ALLOTMENT LETTER OF A FLAT WHICH CREATES A RIGHT OF THE ASSESSEE IN THE SAID FLAT, WHICH HAS BEEN S OLD BY THE ASSESSEE FOR A CONSIDERATION OF RS. 78,69,000/ - AND HENCE, THE ASSESSEE HAS RIGHTLY SHOWN IT AS TAXABLE AS CAPITAL GAINS . 5. BEFORE US, THE LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT FIRSTLY, THERE WAS NO PURCHASE AGRE EMENT AND BUT MERE UNDERSTANDING THAT IN LIEU OF THE SHARE OF THE ASSESSEE, A FLAT WOULD BE ALLOTTED. THE SAID FLAT H AS AGAIN BEEN SURRENDERED TO THE SA ME PARTY AND, THEREFORE, IT CANNOT BE HELD T HERE IS A TRANSFER OF A CAPITAL ASSET. 6. ON THE OTHER HAND , LD. AR SUBMITTED THAT ALLOTMENT LETTER IS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) AND TRANSFER OF A RIGHT IN THE CAPITAL ASSET IS TO BE RECKONED AS TRANSFER OF A CAPITAL ASSET AND HENCE IT HAS TO BE TAXED UNDER THE HEAD CAPITAL GAIN AND SECONDLY, THE ASSESSEE IS ENTITLED FOR CLAIM OF EXEMPTION U/S 54. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: SR. NO. CASE LAW HEARD BEFORE 1 CIT V STERLING INVESTMENT CORP LTD.123(ITR 441) - 1979) BOM HC 2 CIT V TATA SERVICES LT D (122 ITR 594)(1979) BOM HC 3 VINOD KUMAR JAIN V CIT (344 ITR 501)(2010) P&H HC 4 CIT V RAM GOPAL (55 TAXMAN.COM 536)(2015) DEL HC 5 MS MADHU KAUL V CIT (43 TAXMAN.COM 417)(2014) P&H HC 6 ACIT V SMT HANSABEN B MEHTA (90 ITD 44)(2004) T. MUM. 7 ACIT V SANJAY KUMATH (63 SOT 90)(2014) T. INDORE 7. WE HAVE HEARD RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER. FROM THE FACTS AS CULLED OUT ABOVE, IT IS AMPLY CLEAR THAT THE ASSESSEE G OT AN ALLOTMENT O F A FLAT ADMEASURI NG 1045 SQ. FT OF CARPET AREA IN MERIDIAN RESIDENTIAL BUILDING, SECTOR 6, NERUL, NAVI MUMBAI , IN LIEU OF COMPENSATION SUM OF RS. 27,30,150/ - WHICH WAS THE SHARE OF THE ASSESSEE. THE SAID ALLOTMENT LETTER WAS DATED 16 TH APRIL, 2004. LATER ON, AFTER A PERIOD OF MORE THAN FOUR YEARS I.E. IN THE YEAR 2008, THE SAID FLA T WAS SOLD I.E. THE RIGHTS OF THE FLAT TO THE SHRI SUMEET ASHOK VAZIR ITA NO. 5 21 /M/201 3 5 SAME PARTY WHO HAD ALLOTTED THE FLAT WAS TRANSFERRED . THUS, THERE WAS A RIGHT IN THE CAPITAL ASSET BELONGING THE ASSESSEE WHICH HAD BEEN TRANSFERRED A ND ACCORDINGLY , THE CONSIDERATION O N SUCH A TRANSFER HAS TO BE TREATED AS TRANSFER OF A LONG - TERM - CAPITAL - ASSET AND CONSEQUENTLY TAXABLE UNDER THE HEAD CAPITAL GAIN. THE LD. CIT(A) HAS PROPERLY APPRECIATED THE FACTS AND THE CORRECT POSITION OF LAW AND AC CORDINGLY THE ORDER OF THE CIT(A) IS UPHELD. THIS CONCLUSION OF THE CIT(A) IS ALSO SUPPORTED BY THE HONBLE HIGH COURT IN CIT VS. STERLING INVESTMENT CORP LTD. ( SUPRA ) WHEREIN, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT A CONTRACTUAL RIGHT IS A VALUABLE R IGHT WHICH COULD BE CONSIDERED AS A PROPERTY AND, THEREFORE, IT IS A CAPITAL ASSET . FURTHER, THIS VIEW IS SUPPORTED BY OTHER DECISIONS OF THE HIGH COURTS AND THE TRIBUNAL, AS HAS BEEN REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, GROUNDS RAISE D BY THE REVENUE ARE TREATED AS DISMISSED. 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JU LY , 2015. SD/ - SD/ - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH JU LY , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 30 , MUMBAI 4) THE CIT CITY XI X / 19 , MUMBAI . 5) , , / THE D.R. E BENCH, MUMBAI. 6) COPY TO GUARD FILE. SHRI SUMEET ASHOK VAZIR ITA NO. 5 21 /M/201 3 6 / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS