Usha Devi Menon, Trivandrum V. ITO, Trivandrum

ITA 570/COCH/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73820 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 10-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Keywords: Capital asset

Judgement Text

1 ITA NO. 570/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN (AM) I.T.A NO. 570/COCH/2010 (ASSESSMENT YEAR 2007-08) USHA DEVI MENON VS ITO, WD.1(3) USHA KIRON, PTP NAGAR THIRUVANANTHAPURAM TRIVANDRUM PAN : ADNPM7988D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL D NAIR RESPONDENT BY : SMT. LATHA V KUMAR DATE OF HEARING : 31-12-2013 DATE OF PRONOUNCEMENT : 10-01-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-I, TRIVANDRUM DATED 31-08-2010 FOR THE ASSES SMENT YEAR 2007-08. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO ASS ESSMENT OF CAPITAL GAIN. 3. SHRI ANIL D NAIR, THE LD.COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S SKYLINE BUILDERS, TRIVANDRUM 2 ITA NO. 570/COCH/2010 ON 01-02-2006 FOR SALE OF FLAT AND RECEIVED AN AMOU NT OF RS.20 LAKHS ON 24-02-2006. ACCORDING TO THE LD.REPRESENTATIVE, TH E ASSESSEE CLAIMED EXEMPTION U/S 54EC OF THE ACT FOR THE ASSESSMENT YE AR 2006-07 AND THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSE E. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AS RECEIVED ANOTHER SUM OF RS.50 LAKHS AND THE SAME WAS DEPOSITED IN TH E REC CAPITAL GAIN BOND. HOWEVER, THE ASSESSING OFFICER DISALLOWED TH E CLAIM OF THE ASSESSEE FOR EXEMPTION WITH REGARD TO RS.20 LAKHS ON THE GRO UND THAT THE DEPOSIT WAS MADE BEFORE THE DATE OF TRANSFER. THE LD.REPRE SENTATIVE FURTHER SUBMITTED THAT SECTION 2(47) OF THE INCOME-TAX ACT DEFINES TRANSFER. UNDER SUB CLAUSE (V), IF THE PURCHASER WAS ALLOWED TO RETAIN THE POSSESSION OF THE PROPERTY AS PART PERFORMANCE OF T HE CONTRACT, THEN, THERE IS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. THEREFORE, THE ASSESSEE IS LIABLE TO GIVE POSSESSION. ACCORDI NG TO THE LD.REPRESENTATIVE, THE POSSESSION WAS HANDED OVER O N 01-02-2006. THEREFORE, THE TRANSFER TOOK PLACE IN THE ASSESSMEN T YEAR 2006-07 AND NOT IN THE YEAR UNDER CONSIDERATION. HENCE, THE ASSESS MENT OF CAPITAL GAINS DURING THE YEAR UNDER CONSIDERATION IS NOT CORRECT. 4. ON THE CONTRARY, SMT. LATHA V KUMAR, THE LD.DR S UBMITTED THAT THE POSSESSION OF THE PROPERTY WAS NOT HANDED OVER ON 0 1-02-2006. REFERRING TO THE LETTER WRITTEN BY SFS BUILDERS, THE LD.DR SU BMITTED THAT THE 3 ITA NO. 570/COCH/2010 POSSESSION OF THE PROPERTY WAS TAKEN BY THE PURCHAS ER ONLY ON 16-06-2006 I.E. DURING THE YEAR UNDER CONSIDERATION. THEREFOR E, THE CAPITAL GAIN, IF ANY, IS ASSESSABLE ONLY DURING THE YEAR UNDER CONSIDERAT ION AND NOT DURING THE YEAR 2006-07. REFERRING TO THE ADVANCE SAID TO BE RECEIVED ON 01-02- 2006, THE LD.DR SUBMITTED THAT WHAT WAS RECEIVED IS ONLY ADVANCE WHICH HAS TO BE ADJUSTED AGAINST THE PURCHASE PRICE WHEN THE PROPERTY IS TRANSFERRED. THE ADVANCE RECEIVED BY THE ASSESSEE IS NOT INCOME OF THE ASSESSEE. SINCE NO ADDITION WAS MADE FOR THE ASSES SMENT YEAR 2006-07 IT WOULD NOT MEAN THAT THE CLAIM OF CAPITAL GAIN WA S ACCEPTED FOR THE ASSESSMENT YEAR 2006-07. THE LD.DR HAS ALSO SUBMIT TED THAT ON 26-12- 2008 THE ASSESSEE EXPLAINED THAT THE VERY SAME PROP ERTY WAS OWNED BY HER AS ON 31-03-2006. WHEN THE ASSESSEE ADMITS THA T THE PROPERTY WAS OWNED BY HER AS ON 31-03-2006, ACCORDING TO THE LD. DR, THERE CANNOT BE ANY JUSTIFICATION IN CLAIMING NOW THAT THE PROPERTY WAS TRANSFERRED ON 01- 02-206. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH T HE TRANSFER OF PROPERTY EXCEEDING MORE THAN HUNDRED RUPEES REQUIRES REGISTE RED SALE DEED UNDER THE COMMON LAW, THE INCOME-TAX ACT BEING A SPECIAL ENACTMENT PROVIDES A DIFFERENT DEFINITION FOR TRANSFER OF PROPERTY. UND ER SECTION 2(47)(V), IF THE POSSESSION WAS HANDED OVER AS PART PERFORMANCE OF T HE AGREEMENT, THEN, 4 ITA NO. 570/COCH/2010 THERE IS A TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME-TAX ACT, EVEN THOUGH THERE MAY NOT BE A TRANSFER UNDE R THE COMMON LAW. THEREFORE, FOR THE PURPOSE OF TRANSFER UNDER THE INCOME-TAX ACT, AS HAS BEEN CONTENDED BY THE LD.COUNSEL FOR THE ASSESSEE, HANDING OVER OF THE POSSESSION IS MORE ESSENTIAL COMPONENT. IN THIS CA SE, THE LD.COUNSEL FOR THE ASSESSEE CLAIMED THAT THE POSSESSION WAS HANDED OVER ON 01-02- 2006. 6. WE HAVE CAREFULLY GONE THROUGH THE COPY OF THE A GREEMENT SAID TO BE ENTERED INTO BETWEEN THE PARTIES. NOWHERE IN TH E AGREEMENT IS STATED THAT THE POSSESSION WAS HANDED OVER ON 01-02-2006 O N THE DATE OF AGREEMENT. HOWEVER, THERE IS A REFERENCE IN THE AG REEMENT THAT THE POSSESSION WILL BE HANDED OVER TO THE BUILDER AFTER EVICTING THE TENANTS BUT BEFORE OBTAINING THE BUILDING PERMIT. THEREFORE, T HE POSSESSION WAS HANDED OVER ONLY SUBSEQUENT TO THE DATE OF AGREEMEN T. MOREOVER, THE BUILDER HIMSELF ADMITS THAT THE POSSESSION WAS TAKE N OVER ONLY ON 16-06- 2006. THE ASSESSEE ALSO, BY HER LETTER DATED 26-12 -2008 ADMITS THAT AS ON 31-03-2006 SHE WAS THE OWNER OF THE PROPERTY. T HEREFORE, IT IS CLEAR THAT THE POSSESSION WAS NOT HANDED OVER ON 01-02-20 06 AND IT WAS HANDED OVER ONLY ON 16-06-2006. HENCE, THE TRANSFE R OF PROPERTY TOOK PLACE ONLY IN THE ASSESSMENT YEAR 2007-08 AND NOT 2 006-07. 5 ITA NO. 570/COCH/2010 7. NOW REFERRING TO THE ADVANCE SAID TO BE RECEIVED ON 24-02-2006, THE LD.COUNSEL CONTENDS THAT THIS WAS ASSESSED AS CAPIT AL GAIN FOR THE ASSESSMENT YEAR 2006-07. WE ARE UNABLE TO ACCEPT T HE CONTENTION OF THE ASSESSEE. THE ASSESSEE DISCLOSED THE ADVANCE IN TH E RETURN OF INCOME FILED BY HER. SINCE IT WAS AN ADVANCE RELATABLE TO THE CAPITAL ASSET IT WAS NOT TAKEN AS INCOME. THIS ADVANCE SHALL BE ADJUSTE D WHEN THE PROPERTY WOULD BE TRANSFERRED AND THE CAPITAL GAIN COMPUTED. THUS, THE ADVANCE COULD BE ADJUSTED AGAINST THE PURCHASE PRICE WHEN T HE TRANSFER OF THE PROPERTY IS TAKEN PLACE, I.E. IN THE YEAR UNDER CON SIDERATION. 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 54EC OF THE ACT. SECTION 54EC PROVIDES FOR EXEMPTION IN RE SPECT OF CAPITAL GAIN ARISING FROM TRANSFER OF A LONG TERM CAPITAL ASSET IF THE SAME WAS INVESTED AT ANY TIME WITHIN A PERIOD OF SIX MONTHS AFTER THE DATE OF TRANSFER OF THE CAPITAL ASSET. IN THIS CASE, ADMITTEDLY, THE INVES TMENT OF RS.20 LAKHS WAS MADE IN THE FINANCIAL YEAR 2006-07, I.E. BEFORE THE DATE OF TRANSFER. THEREFORE, THE LOWER AUTHORITIES HAVE RIGHTLY FOUND THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 54EC OF THE ACT. THIS T RIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE ORDER OF THE LOWER AUTHORITY IS CONFIRMED. 6 ITA NO. 570/COCH/2010 9. THE ASSESSEE HAS TAKEN ONE MORE GROUND WITH REGA RD TO DISALLOWANCE OF IMPROVEMENT MADE BY THE ASSESSEE. 10. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED A SUM OF RS.18 LAKHS TOWARDS COST OF IMPROV EMENT OF THE FLAT. THE ASSESSING OFFICER ALLOWED THE IMPROVEMENT TO THE EX TENT OF RS.10 LAKHS AND DISALLOWED RS.8 LAKHS. ON APPEAL, THE CIT(A) RESTR ICTED THE COST OF IMPROVEMENT TO RS.5 LAKHS INSTEAD OF RS.10 LAKHS WI THOUT ISSUING ANY NOTICE FOR ENHANCEMENT. ACCORDING TO THE LD.COUNSE L FOR THE ASSESSEE, THE CIT(A) RESTRICTED THE COST OF IMPROVEMENT TO RS.5 L AKHS INSTEAD OF RS.10 LAKHS WITHOUT ISSUING ANY NOTICE FOR ENHANCEMENT. ACCORDING TO THE LD.COUNSEL, WHEN THE CIT(A) RESTRICTED THE COST OF IMPROVEMENT TO RS.5 LAKHS, HE OUGHT TO HAVE ISSUED A NOTICE FOR ENHANCE MENT AS REQUIRED U/S 251(2) OF THE ACT. 11. WE HEARD SMT. LATHA V KUMAR, THE LD.DR ALSO. T HE LD.DR SUBMITTED THAT IN THE ABSENCE OF ANY MATERIAL, THE CIT(A) HAS RIGHTLY RESTRICTED THE COST OF IMPROVEMENT TO RS.5 LAKHS. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT , THE POWER OF THE CIT(A) IS CO-TERMINUS WITH THAT OF THE ASSESSING OF FICER, THEREFORE, THE 7 ITA NO. 570/COCH/2010 POWERS EXERCISABLE BY THE ASSESSING OFFICER CAN AL SO BE EXERCISED BY THE CIT(A). HOWEVER, WHEN THE INCOME OF THE ASSESSEE I S INCREASED, HE HAS TO GIVE A NOTICE OF ENHANCEMENT AND SEEK THE COMMEN TS / RESPONSE FROM THE ASSESSEE AS REQUIRED U/S 251(2) OF THE INCOME-T AX ACT. IN THIS CASE, THE CIT(A) RESTRICTED THE COST OF IMPROVEMENT TO RS .5 LAKHS INSTEAD OF RS.10 LAKHS ALLOWED BY THE ASSESSING OFFICER. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) IS NOT JUSTIFIED IN INCREASING THE INCOME BY RESTRICTING THE COST OF IMPROVEMENT WITHOUT ISSU ING A NOTICE OF ENHANCEMENT. HOWEVER, THIS IS A RECTIFIABLE DEFECT . THEREFORE, THE ORDER OF CIT(A) IS SET ASIDE AND THE ISSUE OF COST OF IMPROV EMENT IS REMANDED BACK TO THE FILE OF THE CIT(A). THE CIT(A) SHALL ISSUE NOTICE OF ENHANCEMENT TO THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACC ORDANCE WITH LAW. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH JANUARY, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 10 TH JANUARY, 2014 PK/- 8 ITA NO. 570/COCH/2010 PCOPY TO: 1. USHA DEVI MENON, USHA KIRON, PTP NAGAR, TRIVANDR UM 2. ITO, WD.1(3), THIRUVANANTHAPURAM 3. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM 4. THE COMMISSIONER OF INCOME-TAX(A)-I, KOWDIAR, TR IVANDRUM-695 003 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH