RITA SUNIL MANAKTALA, MUMBAI V. ITO 19(3)(4), MUMBAI

ITA 5271/MUM/2012

• Counselvise Citation: 527119914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 21-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: S C TIWARI; NATASHA MANGAT
• Keywords: Capital asset; Business income; Salary income; Cost of acquisition
• Section: 234B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . . .. . , ,, , !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. I.P. BANSAL,JUDICIAL MEMBER & RAJENDRA ,ACCOUNTANT MEMBER /. ITA NO.5271/MUM/2012 , $ $ $ $ % % % % / ASSESSMENT YEAR-2008-09 RITA SUNIL MANAKTALA C/O, KUMAR METAL INDUSTRIES, 101, KAKAD BHAVAN, 30 TH ROAD, BANDRA (W), MUMBAI-400050 VS. ITO 19(3)(4) MUMBAI. PAN:AAOPM0374K ( &' / APPELLANT) ( ()&' / RESPONDENT) &' &' &' &' * * * * ' '' ' / APPELLANT BY : SHRI S.C.TIWARI & MS. NATASHA MANGAT ()&' + * ' / RESPONDENT BY : SHRI S.K.SINGH $ $ $ $ + ++ + , , , , / DATE OF HEARING : 09-10-2013 -.% + , / DATE OF PRONOUNCEMENT : 09-10-2013 $ $ $ $ , 1961 + ++ + 254(1) ' '' ' ,/, ,/, ,/, ,/, '0 '0 '0 '0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM CHALLENGING THE ORDER DATED 20-06-2012 OF THE CIT(A )-30MUMBAI ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER LEARNED CIT(A) HAS ERRED IN TREATING THE NET AMOUNT OF RS. 20,41,667/- BEING THE AMOUNT RECEIVED FROM THE DEVELOPERS FOR AGREEIN G TO THE REDEVELOPMENT, FOR ALLEVIATING HARDSHIP OF SHIFTING/RESHIFTING AND AGREEING TO SHARE THE CO MMON AREA WITH MORE PERSONS AFTER REDEVELOPMENT; AS INCOME FROM OTHER SOURCES. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING THE JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE CHARGEABILITY OF THE INTEREST UNDER THE PROVISI ONS OF SECTION 234A, 234B AND 234C OF THE ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL. 2. ASSESSEE,AN INDIVIDUAL,FILED HER RETURN OF INCOME O N 25.03.2009 DECLARING TOTAL INCOME AT RS. NIL. ASSESSMENT WAS FINALISED ON 21.12.2010 BY THE ASSES SING OFFICER (AO) DETERMINING THE TOTAL INCOME AT RS.20,41,770/-.DURING THE ASSESSMENT PROC EEDINGS, AO FOUND THAT ASSESSEE WAS A MEMBER OF CO-OPERATIVE HOUSING SOCIETY (CHS) NAMELY ARYAVARATA CHS,THAT SHE OWNED FLAT NO.3 AT THE FIRST FLOOR OF THE SAID SOCIETY ADMEASURING 562.66 CARPET AREA,THAT THE SOCIETY HAD ENTERED INT O AN AGREEMENT WITH A DEVELOPER NAMELY EKTA SUPREME C ORPORATION VIDE AGREEMENT DATED 28.03.2007 WHICH WAS REGISTERED ON 02.04.2007 FOR REDEVELOPMEN T OF THE SOCIETY BUILDING,THAT AS PER CLAUSE- THREE OF THE SAID AGREEMENT BUILDER HAD BEEN GIVEN PERMISSION FOR DEVELOPING THE SAID SOCIETY BY 2 ITA NO.5271/MUM/2012 RITA SUNIL MANAKTALA . UTILISING ADDITIONAL FSI/TDR AVAILABLE,THAT THE SOC IETY RESERVED THE RIGHT TO THE EXTENT OF 8440 SQ. FT. CARPET AREA OUT OF THE TOTAL AREA OF SOCIETY TO BE CONSTRUCTED, AS PER THE CLAUSE 4 OF THE AGREEME NT THE DEVELOPER HAD TO PAY THE SOCIETY RS. 5 LACS,THA T AS PER CLAUSE 5 OF THE AGREEMENT DEVELOPER HAD AGREED TO PAY THE MEMBERS OF THE SOCIETY AGGREGATE AMOUNT OF RS.2.45CRORES,THAT DEVELOPER PAID THE SAID AMOUNT DURING THE AY UNDER CONSIDE -RATION , THAT DEVELOPER HAD ENTERED INTO AN AGREEMENT WITH THE MEMBERS AS WELL AS THE SOCIETY,THAT AS PER THE ANNEXURE-B TO THE AGREEMENT ASSESSEE WAS ENTITLED TO RECEIVE AN AMOUNT OF RS.20.41 LACS ON T HE EXECUTION OF THE SAID AGREEMENT,THAT THE ASSESSEE HAD RECEIVED RS. 20,41,667/- FROM THE DEVE LOPER, THAT THE AMOUNT RECEIVED BY HER WAS NOT OFFERED FOR TAXATION, THAT SHE HAD DEPOSITED THE AM OUNT IN QUESTION IN HER BANK ACCOUNT MAINTAINED WITH THE INDIAN OVERSEAS BANK.AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT RECEIVED FROM THE DEVELOPER SHOULD NOT BE TREATED AS TAXABLE RECEIPT AS PER THE PROVISIONS OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,AO HELD THAT AMOUNT RECEIVED BY THE ASSESSEE WAS NOT EXEMPT FROM TAX. HE FURTHER HELD THAT AMOUNT RECEIV ED FROM THE DEVELOPER WAS TAXABLE IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SO URCES. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORD ER,FAA HELD THAT AMOUNT RECEIVED FROM THE DEVELOPER WAS TAXABLE UNDER THE HEAD INCOME FROM OT HER SOURCES,THAT THE ACT DID NOT PROVIDE EXEMPTION FOR HARDSHIP COMPENSATION, THAT THE RESID UARY SECTION (56) OF THE ACT PROVIDED FOR TAXING AN ITEM OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IF ANY INCOME WAS NOT FALLING UNDER THE HEADS OF INCOME SUCH AS SALARY INCOME, HOUSE PR OPERTY INCOME, BUSINESS INCOME AND CAPITAL GAINS ETC. FINALLY, HE HELD THAT AO WAS JUSTIFIED I N TAXING A SUM OF RS. 20.41 LACS AS INCOME FROM OTHER SOURCES. 3.1. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT AMOUNT RECEIVED BY THE ASSESSEE WAS NOT AT ALL TAXABLE UNDER ANY OF THE HEADS OF INCOME ,THAT THE RECEIPT WAS OF CAPITAL NATURE. HE RELIED UPON THE CASES OF RITA S. MANAKTALA(ITA.NO. 255/MU M/2013),SHRI RAM KUMAR MALHOTRA(ITA NO. 48432/MUM/ 2009),JETHALAL D. MEHTA(2 SOT 422), MAHE SHWAR PRAKASH -2 COOPERATIVE HOUSING SOCIETY LTD.( 24 SOT366),OM SHANTI COOPERATIVE SOCI ETY LTD.( ITA NO. 2550/MUM/2008),PARIMISETTI SEETHARAMA- MMA(57ITR532 ),NALINIKANT AMBALAL MODY(61ITR428). 4. WE FIND THAT ISSUE IS COVERED IN FAVOUR OF THE ASSE SSEE BY VARIOUS DECISIONS DELIVERED BY THE DIFFERENT BENCHES OF THE ITAT.IT HAS BEEN HELD IN T HESE CASES THAT AMOUNT RECEIVED ON TRANSFER OF FSI-TDR BY AN ASSESSEE IS NOT TAXABLE UNDER ANY HEA D OF INCOME.WE FIND THAT IN THE CASE OF RAMKUMAR MALHOTRA (SUPRA) D BENCH OF MUMBAI TRIBUNA L HAS DISCUSSED THE ISSUE AT LENGTH AND HAS HELD AS UNDER: 10.WE HAVE HEARD BOTH THE PARTIES. IN THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF NEW SHAILA JA CO.OPERATIVE HSG,SOC. LTD. VS ITO IN ITA NO. 512/M/ 07 = (2009-TIOL-58-ITAT-MUM) , THE TRIBUNAL HAS OBSERVED AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS ACID PERUSED T HERE/EVA,IT MATERIAL ON RECORD.THE CONCEPT OF T.D.R(TRANSFER DEVELOPMENT RIGHT) AS NOTED BY THE A O ON PAGE 9OF THE ORDER WAS INTRODUCED IN MUMBAI IN THE DEVELOPMENT CONTROL RULES, 1991 OF TH E BOMBAY MUNICIPAL CORPORATION.THESE RIGHTS ARE GIVEN IN THE FORM OF A DEVELOPMENT RIGHT CERTIFICATE (DRC) WHICH IS ISSUED BY THE MUNICIPAL CORPORATION TDR MEANS THE DEVELOPMENT POT ENTIAL,THE FSI OF A PLOT OF LAND IS SEPARATED FROM THE PLOT AND IS ALLOWED TO BE TRANSFERRED. TDR CAN BE USED BY THE PERSON/OWNER/LESSEE IN WHOSE FAVOUR IT IS GRANTED ON HIS LAND IN THE RECEIVING Z ONE. HE CAN USE IT FULLY OR PARTLY OR SELL IT FULLY OR PARTLY AT WILL.ADVERTING TO THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE BECAME ENTITLED-TO THE ADDITIONAL FSI OF AROUND 11,000 SQ.FT. DUE TO ITS L AND HOLDING. THE ASSESSEE TRANSFERRED THIS ENTITLEMENT FOR A CONSIDERATION OF RS. 48.96 LAKHS TO M/S. O.K. BUILDERS. 11.AGAIN THE TRIBUNAL IN THAT CASE HELD AS UNDER: COMING BACK TO THE FACTS OF THE INSTANT CASE IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE HAD NOT INCURRE D ANY COST OF ACQUISITION IN RESPECT OF THE RIGHT WHI CH EMANATED FROM THE 1991 RULES MAKING THE ASSESSEE ELIGIBLE TO ADDITIONAL FSI. THE LAND AND B UILDING EARLIER IN THE POSSESSION OF THE ASSESSEE 3 ITA NO.5271/MUM/2012 RITA SUNIL MANAKTALA . CONTINUED TO REMAIN WITH IT AS SUCH EVEN AFTER THE TRANSFER OF THE RIGHT TO ADDITIONAL FSI FOR RS.48.9 6 LAKHS. THE LEARNED D.R.COULD NOT POINT OUT ANY PART ICULAR ASSET, AS SPECIFIED IN SUB-SECTION (2) OF SECTION 55, WHICH WOULD INCLUDE THE RIGHT TO ADDITI ONAL FSI. IN OUR CONSIDERED OPINION, NO CAPITAL GAIN CAN BE CHARGED ON THE TRANSFER OF THE ADDITION AL FSI BY THE ASSESSEE FOR SALE CONSIDERATION OF RS.48.96 LAKHS FOR THE REASON THAT IT HAS NO COST O F ACQUISITION.OUR VIEW IS FORTIFIED BY THE ABOVE REFERRED ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN JETHALAL D MEHTA VS. DY. CIT WHICH WAS ALSO CITED BEFORE THE LD. CIT(A).NO MATERIAL HAS BE EN BROUGHT TO OUR NOTICE TO SHOW THAT THE SAID ORDER HAS BEEN MODIFIED OR REVERSED BY THE HONBLE HIGH COURT.FURTHER,THE LD.D.R. COULD NOT POINT OUT ANY CONTRARY DECISIONS.RESPECTFULLY FOLLOWING T HE PRECEDENT, WE ACCEPT THIS GROUND OF APPEAL. THE TRIBUNAL IN THE ABOVE MENTIONED CASE WAS DEALIN G WITH TRANSFER OF ADDITIONAL FSI. IN THE INSTANT CASE THE FACTS ARE SIMILAR WHERE THE ASSESSEE HIS T RANSFERRED 50% OF THE FSI THEY ARE ENTITLED TO IN FAVOUR OF THE DEVELOPER.THE LAND CONTINUES TO BE WI TH THE ASSESSEE. THUS, THERE IS NO TRANSFER OF LAND BY THE ASSESSEE IN FAVOUR OF THE DEVELOPERS.THE ASS ESSEE HAS RECEIVED CONSIDERATION ONLY FOR GRANTING RIGHT TO UTILISE 50% OF THE FSI AND CONSTRUCT BUILD ING AND DEAL WITH THE SAME.THEREFORE, THE RATIO OF THE TRIBUNAL DECISION STATED SUPRA WILL BE EQUALLY APPLICABLE TO THE INSTANT CASE ALSO.IN THAT CASE, I T HAS BEEN HELD THAT THERE IS NO COST OF ACQUISITION FOR THE FSI TRANSFER TO THE DEVELOPER AND HENCE THE RE IS NO TAXABLE CAPITAL GAINS. APPLYING THE RATIO OF THE TRIBUNAL, THERE WILL BE NO LIABILITY TO CAPITAL GAINS AS THERE IS NO COST OF ACQUISITION OF THE ASS ET TRANSFERRED.IN THE CIRCUMSTANCES,THE ADDITION OF RS.76,64,008/- MADE BY THE AO IS DELETED. THE ASSES SEES APPEAL IS ALLOWED ON THIS ISSUE. 12.SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF ITO V SLOTIA COURT CO.OP. HSG. SOC.LTD.(2008)12 DTR 396 =(2008-TIOL-404-ITAT-MUM),JETHALAL D.MEHTAVS DY. CI T 2 SOT 422 (MUM) AND MAHESHWAR PRAKASH 2 C.H.S. VS ITO 20 DTR 269 (MUM).THEREFORE FOLLOWING THE AFORESAID DECISIONS, WE ARE OF THE OPINION THAT THE LD. CIT(A) WAS RIGHT IN ASSESSING THE TRANSFER OF F SI/TDR UNDER THE HEAD CAPITAL GAIN INSTEAD OF ASSES SING THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES .HOWEVER, AS THERE IS NO COST OF ACQUISITION OF THE ASSET TRANSFERRED, THERE WILL BE NO LIABILITY TO CA PITAL GAINS. RESPECTFULLY FOLLOWING THE ABOVE ORDER AS WELL AS T HE OTHER ORDER OF THE COORDINATING BENCH, WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. GROUND NO.3 IS ABOUT CHARGABILITY OF INTEREST U/S. 234 OF THE ACT. AS THE ISSUE OF CHARGING OF INTEREST U/S.234 IS CONSEQUENTIAL IN NATURE SO,THE GROUND FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 1 2 $1, 3 4 !5 + !, 67. ORDER PRONOUNCED IN THE OP EN COURT ON 9 TH OCTOBER,2013. '0 + -.% ' 8 9: 5 9: 5 9: 5 9: 5 9 , ,, , 2013 . + /. SD/- SD/- ( . .. . . .. . , ,, , / I.P.BANSAL ) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, ;$ /DATE: 09.10 .2013 SK '0 '0 '0 '0 + ++ + (,< (,< (,< (,< ='<%, ='<%, ='<%, ='<%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT(A)/ > ? , 4. THE CONCERNED CIT / > ? 5. DR D BENCH, ITAT, MUMBAI / <@/ (,$ . , . . . 4 ITA NO.5271/MUM/2012 RITA SUNIL MANAKTALA . 6. GUARD FILE/ / A )<, (, //TRUE COPY// '0$ / BY ORDER, B / 6 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI