MODEL INDUSTRIAL COLONY, MUMBAI V. ASST CIT CIR 20(2), MUMBAI

ITA 5234/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1022 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 147; 27

Judgement Text

ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5234/MUM/2011 FOR ASSESSMENT YEAR: 2006-07 M/S. MODEL INDUSTRIAL COLONY, GLADIOLI APARTMENTS, B WING, 5 TH FLOOR, OFF, YARI ROAD, VERSOVA, MUMBAI -400061 VS. ACIT, CENTRAL CIRCLE-20(2) MUMBAI-400020 (APPELLANT) (RESPONDENT) ITA NO.5235/MUM/2011 FOR ASSESSMENT YEAR: 2006-07 SH. SUNNY A. PATEL, A/503, GLADIOLI , A WING, FLOOR, OFF, ANDHERI (WEST), VERSOVA, MUMBAI -400061 VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-20(2) MUMBAI-400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VIPUL JOSHI -AR REVENUE BY : SH. SUMAN KUMAR (DR) DATE OF HEARING : 12.04.2017 DATE OF ORDER : 28.04.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO APPEALS UNDER SECTION 253 OF THE INCOME T AX ACT (THE ACT) BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. COMM ISSIONER OF INCOME TAX (APPEALS)-31, FOR SHORT CIT (A), MUMBAI, AND DATED 06.05.2011 FOR ASSESSMENT YEAR 200-6-07. IN BOTH THE APPEALS THE F ACTS ARE COMMON AND THE GROUNDS OF APPEAL ARE CONNECTED THUS BOTH THE APPEA L WERE HEARD AND ARE ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 2 DECIDED BY CONSOLIDATED ORDER TO AVOID THE CONFLICT ING DECISIONS. IN ITA NO. 5234/M/2011 THE ASSESSEE HAS RAISED FOLLOWING G ROUNDS OF APPEAL; (1) THE GROUNDS OF APPEAL THAT FOLLOWS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. (2) NON-APPLICABILITY OF THE PROVISIONS OF SECTION 50C OF INCOME TAX ACT. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDING THAT THE PROVISIONS OF SECTION 50C COULD BE INVOKED IN RESPECT OF FLOOR SPACE INDEX (F SI) TRANSFERRED BY THE APPELLANT. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) FAILED TO UNDERSTAND THE TRU E NATURE OF AGREEMENT AND HAS FAILED TO APPRECIATE THE FACTS THAT THE APPELLANT H AD MERELY ASSIGNED ITS RIGHT TO LOAD FSI ON THE EXISTING PLOT OF LAND (ON IS A SENIOR IS BASIS) WITH A RIGHT TO CONSTRUCT ADDITIONAL UPPER FLOORS IN THE SAID PREMISES BY UTI LISING THE AND UTILISED FSI. THAT THE LEARNED COMMISSIONER (APPEALS) FAILED TO APPRE CIATE THE FACTS THAT THE ASSIGNMENT OF THE AFORESAID RIGHT TO LOAD FSI DID N OT CONSTITUTE LAND OR BUILDING, SO AS TO COME WITHIN THE PURVIEW OF SECTION 50 C. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN NON-ADJUDICATING UP ON THE ADDITIONAL GROUND RAISED BY THE APPELLANT FILED WITH THE COMMISSIONER (APPEALS) UNDER COVERING LETTER DATED FEBRUARY 2, 2009 WITH REGARD TO THE DETERMINA TION OF THE FAIR MARKET VALUE OF THE AFORESAID RIGHTS, AS DETERMINED BY DISTRICT VAL UATION OFFICER. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPR ECIATE THE FACTS THAT THE VALUATION ARRIVED BY THE DISTRICT VALUATION OFFICER WAS VERY MUCH ON THE HIGHER SIDE, HAVING REGARD TO THE LOCATION CONDITION OF TH E PROPERTY AND THE CIRCUMSTANCES LEADING TO THE ASSIGNMENT OF THE AFORESAID RIGHTS. FURTHER VIDE APPLICATION DATED 11 TH MARCH 2013 THE ASSESSEE RAISED FOLLOWING ADDITIONAL GROUNDS OF APPEAL; (3) THE ASSESSING OFFICER ERRED IN TAXING THE GAIN ARIS ING ON TRANSFER OF UNUTILISED FSI WITHOUT CONSIDERING THE FACTS THAT SUCH RIGHT HAVE NO COST OF ACQUISITION, AND THEREFORE, IN THE LIGHT OF SUPREME COURT DECISION I N CIT VERSUS B.C. SRINIVASA SETTY [1981] 128 ITR 294(SC), THE GAIN ARISING ON TRANSFE R OF THESE RIGHTS CANNOT BE TAXED. (4) WITHOUT PREJUDICE TO THE ABOVE GROUND, IF THE CONTE NTION OF COMMISSIONER OF INCOME TAX (APPEALS) IS ACCEPTED THAT THE APPELLANT TRANSF ERRED LAND ALONG WITH UNUTILISED FSI ATTEST TO THE LAND, IT IS SUBMITTED THAT CIT (A PPEAL)S ERRED IN NOT ALLOWING THE INDEXED COST OF ACQUISITION/IMPROVEMENT OF RENT. IN APPEAL ITA NO. 5235/M/2011 THE ASSESSEE HAS RAIS ED FOLLOWING GROUNDS OF APPEAL; ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 3 (1) ADDITION TO LONG-TERM CAPITAL GAIN ON THE APPELLANT S 1/6 TH CO-OWNERSHIP SHARE IN RESPECT OF SALE OF RIGHTS TO LOAD FLOOR SPACE INDEX (FSI) AND PROPERTY SITUATED AT MODEL INDUSTRIAL COLONY: (1.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN ACCEPTING THE ASSES SING OFFICERS CONTENTION THAT THE CAPITAL GAINS ARISING IN RESPECT OF APPELL ANTS 1/6 TH CO-OWNERSHIP SHARE IN THE PROPERTY AT MODEL INDUSTRIAL COLONY BE TAKEN AT RS.29,76,066/- VIS--VIS A SUM OF RS. 15,03,333/-OFFERED BY THE APPELLANT IN HIS RETURN OF INCOME. (1.2) THAT THE AFORESAID ADDITION ON ACCOUNT OF LONG-TERM CAPITAL GAINS MADE IN THE HANDS OF THE APPELLANT IS CONTINGENT UPON THE OUTCO ME OF THE APPEAL FILED BEFORE THE ALL BUILT TRIBUNAL IN CASE OF MODEL INDUSTRIAL COLONY, AN ASSOCIATION OF PERSONS, WHICH HELD THE FSI RIGHTS 2. FOR APPRECIATION OF FACTS FIRST WE ARE REFERRING TH E FACTS AS CULLED OUT FROM APPEAL ITA NO.5234 /M/2011. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A ASSOCIATION OF PERSONS (AOP), FILED I TS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 30 JUNE 2006 DECLARING TOTAL INCOME OF RS. 92,53,444/-. IN THE RETURN OF INCOME ASSESSEE BESID ES THE OTHER INCOME HAS SHOWN THE INCOME FROM LONG-TERM CAPITAL GAINS ON SA LE OF FSI. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN C APITAL GAIN OF RS.90,20,000/- ON SALE OF FSI AFTER DEDUCTING THE L EGAL AND PROFESSIONAL FEES OF RS. 80,000/- AGAINST THE SALE CONSIDERATION OF R S. 91,00,000/-. ON FURTHER PERUSAL OF AGREEMENT TO SELL FOR SALE OF FSI THE AS SESSING OFFICER NOTICED THAT MARKET VALUE OF THE SAID FSI AS PER THE STAMP VALUATION IS RS.4,14,20,000/-. THE ASSESSING OFFICER IN THE COUR SE OF ASSESSMENT PROCEEDING REFERRED THE COPY OF SAID AGREEMENT TO D ISTRICT VALUATION FOR DETERMINATION OF FAIR MARKET VALUE UNDER SECTION 50 C OF INCOME TAX ACT. THE DISTRICT VALUATION OFFICER SENT ITS VALUATION R EPORT VIDE REPORT DATED 26.12.2008. ACCORDING TO DVO THE VALUE OF SAID FSI WAS AT RS.1,79,54,400/-. ACCORDINGLY, THE ASSESSING OFFICE R AFTER MAKING THE DEDUCTION OF PROFESSIONAL CHARGES OF RS. 80,000/-WO RKED OUT THE LONG-TERM CAPITAL GAIN OF AOP/ASSESSEE AT RS. 1,78,74,400/-. THE ASSESSING OFFICER BIFURCATED THE SHARE IN THE AOP/ASSESSEE IN THE FOL LOWING MANNER; ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 4 DIVIDEND AMONG CO-OWNERS U/S 27 SHARE LONG-TERM CAPITAL GAIN IN RS. NIRJA M. PATEL 1/ 12 14,89,533/- NIKHIL M.PATEL 1 /12 14,89,533/- RACHANA D. PATEL 1/12 14,89,533/- PRANAV D.PATEL 1/12 14,89,533/- SAVITABEN H. PATEL 1/3 59,58,133/- NEIL P. PATEL 1/6 29,79,067/- SUNNY A. PATEL 1/6 29,79,067/- TOTAL 1,78,74,400/- ON APPEAL BEFORE COMMISSIONER (APPEALS) THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. AGGRIEVED, BY THE ORDER OF COMMISSIO NER (APPEALS) THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. 3. NOW, WE SHALL EXAMINE THE FACTS OF APPEAL ITA NO.52 34/M/2011. THE ASSESSEE IN THE PRESENT APPEAL IS ONE OF THE MEMBER OF AOP ( IN ITA NO5234). THE ASSESSEE FILED RETURN OF INCOME FOR RE LEVANT ASSESSMENT YEAR ON 28 JULY 2006 DECLARING INCOME AT RS.15,08,260/-. THE ASSESSMENT WAS PROCESSED UNDER SECTION 143(1) ON 13 FEBRUARY 2007. SUBSEQUENTLY, THE CASE WAS REOPENED UNDER SECTION 147 FOR THE REASONS THAT IN CASE OF MODEL INDUSTRIAL COLONY, IN WHICH THE ASSESSEE IS ONE OF THE BENEFICIARIES. THE ASSESSMENT OF AOP/MODEL INDUSTRIAL COLONY WAS COMPL ETED BY ASSESSING OFFICER WHO REOPENED THE CASE OF ASSESSEE. THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE DECLARED CAPITAL GAIN IN RESPECT OF 1/6 TH ON SALE OF PROPERTY/(FSI) OF RS.15,03,333/- IN AOP. HOWEVER, T HE LONG-TERM CAPITAL GAINS ON SALE OF FSI, WHILE FRAMING ASSESSMENT IN C ASE OF AOP, CHARGEABLE AT THE HAND OF ASSESSEE IS OF RS.29,79,067/-. THUS, THE ASSESSING OFFICER HAS TAKEN THE LONG-TERM CAPITAL GAIN OF RS.29,79,066/- INSTEAD OF RS. 15,03,333/- WHILE PASSING ASSESSMENT ORDER UNDER SE CTION 143(3) RWS 147 OF THE ACT. ON APPEAL BEFORE COMMISSIONER (APPEALS) TH E ACTION OF ASSESSING ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 5 OFFICER WAS CONFIRMED. HENCE, FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE FILED PRESENT A PPEAL BEFORE US. 4. WE HAVE HEARD THE LEARNED AR OF THE ASSESSEE AND TH E LEARNED DR FOR THE REVENUE AND WITH THEIR ASSISTANCE PERUSED THE RECOR D OF THE CASES. THE LEARNED AR OF THE ASSESSEE ARGUED THAT ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL BEFORE THIS TRIBUNAL CHALLENGING T HE VERY TAXABILITY OF THE CAPITAL GAIN ON THE TRANSFER OF FSI/TDR. THE LEARNE D AR OF THE ASSESSEE FURTHER SUBMITTED THAT ADDITIONAL GROUND OF APPEAL RAISED IN BOTH THE APPEALS ARE PURELY LEGAL IN NATURE AND THE FACTS RELATED TO THE ADDITIONAL GROUNDS ARE AVAILABLE ON RECORD. IN ENTERTAINING THE ADDITIONAL GROUNDS THE TRIBUNAL WILL NOT REQUIRE TO INVESTIGATE INTO ANY FRESH FACTS, WH ICH ARE NOT AVAILABLE ON RECORD. THE LEARNED AR OF THE ASSESSEE FURTHER REL IED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT V ERSUS SHAMBHAJI NAGAR CO-OPERATIVE HOUSING SOCIETY [2015] 370 ITR 325(BOM BAY) DATED 11 DECEMBER 2014. THE LEARNED AR OF THE ASSESSEE FURTH ER ARGUED THAT THE LD CIT(A) WAS NOT HAVING THE BENEFIT OF DECISION OF HO NBLE HIGH COURT AT THE TIME OF CONSIDERING THE GROUNDS OF APPEAL OF THE AS SESSEE. IT WAS PRAYED BY LEARNED AR THAT MATTER MAY BE REMANDED BACK TO THE FILE OF ASSESSING OFFICER/CIT(A) TO CONSIDER THE DECISION OF JURISDIC TIONAL HIGH COURT ON THE ISSUE INVOLVED IN THE PRESENT APPEAL AND DECIDE THE ISSUE AFRESH. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. THE LEARNED DR FOR THE REVENUE A RGUED THAT THE ADDITIONAL GROUNDS OF APPEAL WERE RAISED AFTER THRE E YEARS OF FILING THE APPEALS BEFORE THE TRIBUNAL. HOWEVER, THE LD DR NOT DISPUTED THE DECISION OF HONBLE HIGH COURT. THE LD DR HAS NO OBJECTION I F BOTH THE APPEAL ARE RESTORE TO THE FILE OF ASSESSING OFFICER AS BOTH TH E CASE ARE CONNECTED WITH EACH OTHER. ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 6 5. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE QUESTION FOR CONSI DERATION RAISED IN THE ADDITIONAL GROUND IN BOTH THE APPEALS IS, AS TO WHE THER THE INITIAL COST OF ACQUISITION OF THE ASSET (FSI/TDR) WAS CAPABLE OF A SCERTAINMENT OR NOT FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS. HON BLE JURISDICTIONAL HIGH COURT IN CIT VERSUS SHAMBHAJI NAGAR CO-OPERATIVE HO USING SOCIETY (SUPRA), WHILE CONSIDERING THE SIMILAR GROUNDS HAS HELD AS UNDER; ONLY AN ASSET WHICH IS CAPABLE OF ACQU ISITION AT A COST WOULD BE INCLUDED WITHIN THE PROVISIONS PERTAINING TO THE HEAD CAPITAL GAINS A S OPPOSED TO ASSETS IN THE ACQUISITION OF WHICH NO COST AT ALL CAN BE CONCEIVE D. IN THE PRESENT CASE AS WELL, THE SITUATION WAS THAT THE FSI/TDR WAS GENERATED BY THE PLOT ITSELF. THERE WAS NO COST OF ACQUISITION, WHICH HAS BEEN DETERMINED AND ON THE B ASIS OF WHICH THE ASSESSING OFFICER COULD HAVE PROCEEDED TO LEVY AND ASSESS THE GAINS DERIVED AS CAPITAL GAINS. IT MAY BE THAT SUBSECTION (2) OF SECTION 55 CLAUSE (A) HAVING BEEN AMENDED, THERE IS A STIPULATION WITH REGARD TO THE TENANCY RIGHTS. HOWE VER, EVEN IN THE CASE OF TENANCY RIGHT, THE VIEW TAKEN BY THE HONBLE SUPREME COURT, AFTER THE PROVISION WAS SUBSTITUTED W.E.F. 1ST APRIL, 1995, IS AS ABOVE. TH E FURTHER ARGUMENT IS THAT THE TENANCY RIGHTS NOW CAN BE BROUGHT WITHIN THE TAX NE T AND IN THE PRESENT CASE THE ASSET OR THE BENEFIT IS ATTACHED TO THE PROPERTY. I T IS CAPABLE OF BEING TRANSFERRED. ALL THIS MAY BE TRUE BUT AS THE HONBLE SUPREME COURT H OLDS IT MUST BE CAPABLE OF BEING ACQUIRED AT A COST OR THAT HAS TO BE ASCERTAINABLE. IN THE PRESENT CASE, ADDITIONAL FSI/TDR IS GENERATED BY CHANGE IN THE D. C. RULES. A SPECIFIC INSERTION WOULD THEREFORE BE NECESSARY SO AS TO ASCERTAIN ITS COST FOR COMPUTING THE CAPITAL GAINS. CONSIDERING, THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND SINCE THE ISSUE GOES TO THE ROOT OF MATTER, WE DEEM IT AP PROPRIATE TO ADMIT THE ADDITIONAL GROUND AND RESTORE THE CASE TO THE FILE OF ASSESSING OFFICER TO CONSIDER THE CASE(S) AFRESH AND PASS THE ORDER AFRE SH IN ACCORDANCE WITH LAW. NEEDLESS, TO SAY THAT BEFORE PASSING THE ORDER THE ASSESSING OFFICER SHALL PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FULLY COOPERATE WITH A SSESSING OFFICER AND TO PROVIDE NECESSARY INFORMATION TO THE ASSESSING OFFI CER. AS WE HAVE RESTORED THE CASE TO THE FILE OF ASSESSING OFFICER ON THE PRELIMINARY ISSUE, HENCE, THE DISCUSSION ON OTHER GROUNDS OF APPEAL IS NOT BEING MADE AND THE ITA NO- 5234/M/2011 ITA NO- 5235/M/2011 7 SAME IS ALSO SHALL BE RE-EXAMINED BY THE AO AS PER LAW. WITH THE ABOVE DIRECTION BOTH THE APPEALS OF THE ASSESSEE ARE ALLO WED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEES A RE ALLOWED FOR STATISTICAL PURPOSE. ORDER ANNOUNCE IN THE OPEN COURT ON 28 TH DAY OF APRIL 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 28/04/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/