MEENA A. HEMNANI, MUMBAI V. ITO (I.T) 3(1), MUMBAI

ITA 5998/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5767 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 02-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: VIPUL B JOSHI
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO.5998/M/2010 ( / ASSESSMENT YEAR: 2007 - 2008 ) MEENA A HEMNANI, C/O. S.K. BOBRA & CO. GR. FLOOR, HAPPY HOME SOCIETY, PLOT NO.27, JAYWANT SAWANT MARG, DAHISAR (W), MUMBAI 400 068. / VS. ITO - (I.T) - 3(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI. ./ PAN : AAAPH 6311 B ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIPUL B. JOSHI / RESPONDENT BY : SHRI SURENDRA KUMAR, DR / DATE OF HEARING : 9.1.2014 / DATE OF PRONOUNCEMENT :17 .1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 2.8.2010 IS AGAINST THE ORDER OF THE CIT (A) - 10, MUMBAI DATED 18.5.2010 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1.1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO WHEREBY THE AO COMPUTED THE CAPITAL GAIN ARISING ON ACCOUNT OF SALE OF HER FLAT AS SHORT TERM CAPITAL GAINS INSTEAD OF AS LONG TERM CAPITAL GAIN, AS OFFERED BY THE APPELLANT. 1.2. WHILE DOING SO, THE LD CIT (A) ERRED IN (I) FAILING TO APPRECIATE THAT THE APPELLANT HAD HELD THE PROPERTY FOR MORE THAN 36 MONTHS, WITHIN THE MEANING OF SECTION 2(29A) R.W.S 2(42A) OF THE ACT. (II) TAKING INTO ACCOUNT IRRELEVANT AND EXTRANEOUS CONSIDERATIONS; AND (III) IGNORING RELEVANT MATERIAL AND CONSIDERATIONS. 1.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, NO SUCH ACTION WAS CALLED FOR. 2.1. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN NOT GRANTING DEDUCTION OF THE FOLLOWING EXPENDITURE WHILE COMPUTING THE SHORT TERM CAPITAL GAIN TAX LIABILITY; (I) MAINTENANCE CHARGES RS. 1,21,000/ - (II) ASSESSMENT CHARGES RS. 10,000/ - 2 2.2. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 3.1. THE LD CIT (A) ERRED IN DISMISSING THE GROUNDS OF APPEAL REGARDING INTER EST UNDER SECTION 234B. 3.2. THE LD CIT (A) FAILED TO APPRECIATE THE SPECIFIC GROUND OF APPEAL TO THE EFFECT THAT THE AO ERRED IN CHARGING INTEREST UNDER SECTION 234B ON THE ASSESSED TAX, WITHOUT REDUCING TAX PAID UNDER SECTION 140A , FOR THE PERIOD COMMENC ING AFTER THE DATE OF PAYMENT OF SELF - ASSESSMENT TAX TILL THE DATE OF REGULAR ASSESSMENT. 3.3. IT IS SUBMITTED THAT IN LAW INTEREST UNDER SECTION 234B FOR THE PERIOD AFTER THE DATE OF PAYMENT OF SELF - ASSESSMENT TAX TILL THE DATE OF REGULAR ASSESSMENT IS TO BE CALCULATED ON ASSESSED TAX AS REDUCED BY SELF - ASSESSMENT TAX PAID. 3. THERE ARE COUPLE OF ISSUES RAISED IN THIS APPEAL . REST OF THE GROUNDS RAISED IN THE APPEAL ARE EITHER CONSEQUENTIAL OR GENERAL IN NATURE. ACCORDINGLY, THEY ARE DISMISSED AS GENERA L OR CONSEQUENTIAL. THE ISSUES, WHICH NEED TO BE ADJUDICATED IN THIS APPEAL ARE (I) IF THE CAPITAL GAINS EARNED BY THE ASSESSEE ARE IN THE NATURE OF THE SHORT TERM AS HELD BY THE AO OR LONG TERM CAPITAL GAINS AS OFFERED BY THE ASSESSEE IN THE RETURN. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE PURCHASED A FLAT VIDE THE ALLOTMENT LETTER DATED 9.9.2003 FROM THE BUILDER NAMELY PRESTIGE ESTATES PROJECTS PVT. LTD. THERE WAS A CONSTRUCTION AGREEMENT BETWEEN THE PARTIES DATED 1.12.2003 AND THE REGISTERED DEED OF THE SAME WAS DATED ON 22.9.2006. THE SAID FLAT WAS SOLD BY THE ASSESSEE TO BENNET COLEMAN & COMPANY ON 10.11.2006. THE ASSESSEE EARNED CAPITAL GAINS ON THIS TRANSACTION AND OFFERED THE SAME AS LONG TERM CAPITAL GAINS RECKONING THE DATE OF ALLOTMENT I.E., 9.9. 2003 FOR THE PURPOSE OF DETERMINING THE HOLDING PERIOD OF THREE YEARS RELEVANT FOR THE LONG TERM CAPITAL GAINS. HOWEVER, IN THE ASSESSMENT PROCEEDINGS, AO CONSIDERED THE DATE OF REGISTRATION I.E., 22.9.2006 THE DATE OF REGISTRATION AND DETERMINED THE SHORT TERM CAPITAL GAINS. THEREFORE, NOW THE ISSUE TO BE DECIDED BY THE TRIBUNAL RELATES TO IF THE DATE OF ALLOTMENT SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE SAID LONG TERM CAPITAL GAINS. IN THIS REGARD, LD COUNSEL FILED VARIOUS DECISIONS TO SUGGEST THAT THE DATE OF ALLOTMENT MUST BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAINS INSTEAD OF DATE OF REGISTRATION . LD COUNSEL FILED THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS . SMT. VANDANA RANA ROY VIDE ITA NO.6173/M/2011 (AY 2007 - 2008) DATED 7.11.2012, WHEREIN ONE OF US (AM) IS A PARTY, AND STATED THAT THE DATE OF ALLOTMENT SHOULD BE RECKONED AS RELEVANT DATE FOR COMPUTING THE HOLDING PERIOD FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 7 AND 8 OF THE SAID ORDER OF 3 THE TRIBUNAL TO SUPPORT HIS CASE. THE SAID JUDGMENT WAS DECIDED CONSIDERING THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ANILABEN UPEND RA SHAH (2003) 262 ITR 657 (GUJ) APART FROM OTHER DECISIONS OF THE TRIBUNAL IN THE CASE OF JITENDRA MOHAN VS. ITO (2007) 11 SOT 594 (DEL) AND ALSO ANOTHER DECISION OF THE ITAT IN THE CASE OF PRAVIN GUPTA VS. ACIT AND THE RELEVANT PROPOSITIONS ARE EXTRACTED IN PARA 7 OF THE TRIBUNALS ORDER DATED 7.11.2012 . THE SAID PARAS 7 AND 8 FROM THE ORDER OF THE TRIBUNAL IN THE CASE OF SMT. VANDANA RANA ROY READ AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE CITED DECISIONS AND WE FIND THAT THERE IS NO DISP UTE ON THE FACTS. THE ONLY ISSUE THAT IS TO BE DECIDED IS WHETHER DATE OF ALLOTMENT OF THE FLAT OR THE DATE OF POSSESSION OF THE FLAT BY THE ASSESSEE SHOULD BE CONSIDERED AS DATE OF HOLDING FOR COMPUTING THE HOLDING PERIOD OF 36 MOTHS. IN ALTERNATIVE, TH E DATE OF REGISTRATION SHOULD BE THE RELEVANT DATE. ON PERUSAL OF THE SAID DECISIONS RELIED UPON BY THE LD COUNSEL, WE FIND THAT THE DECISIONS ARE RELEVANT AND APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CONCLUSION OF THE HONBLE GUJARAT HIGH COUR T JUDGMENT IN THE CASE OF CIT VS. JINDAS PANCHAND GANDHI READS AS UNDER: ASSESSEE HAVING SOLD THE FLAT ALLOTTED TO HIM BY A CO - OPERATIVE HOUSING SOCIETY AFTER A PERIOD OF 36 MONTHS FROM THE DATE OF ALLOTMENT, CAPITAL GAINS ARISING TO HIM WERE LONG - TERM CAPITAL GAINS DESPITE THE FACT THAT THE PHYSICAL POSSESSION OF THE FLAT WAS GIVEN TO THE ASSESSEE MUCH LATER AND, THEREFORE HE WAS ENTITLED TO DEDUCTION FROM SUCH GAINS AS PER LAW. 7.1 THE CONCLUSION OF THE HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. ANILABEN UPENDRA SHAH READS AS UNDER: ASSESSEE HAVING HELD THE SHARES AND ALLOTMENT OF A FLAT IN A CO - OPERATIVE HOUSING SOCIETY FOR A PERIOD OF MORE THAN 36 MOTHS THE CAPIT AL GAIN ARISING FROM SALE OF SAID FLAT WAS LONG - TERM CAPITAL GAIN AND ASSESSEE WAS ENTITLED TO BENEFIT OF SECTION 80T IRRESPECTIVE OF THE FACT THAT THE ASSESSEE DID NOT GET POSSESSION OF THE FLAT IN QUESTION AT THE TIME OF ALLOTMENT AND IT WAS CONSTRUCTED LATER ON. 7.2. THE CONCLUSION OF HONBLE ITAT, DELHI BENCH IN THE CASE OF JITENDRA MOHAN VS. ITO READS AS UNDER: ON THE FACTS OF THE CASE, ASSESSEE HELD THE CAPITAL ASSET (SHED) ALLOTTED TO IT ON INSTALLMENT BASIS FROM 28 TH DECEMBER, 1994, THE DATE OF PAYMENT OF SECOND INSTALLMENT AND SALE THEREOF ON 15 TH DECEMBER, 2000, GAVE RISE TO LONG TERM CAPITAL LOSS EVEN THOUGH POSSESSION OF SHED WAS HANDED OVER BY DSIDC TO ASSESSEE ON 28 TH MAY, 1998. 7.3. THE CONCLUSION OF HONBLE ITAT, DELHI BENCH IN THE CASE OF PRAVEEN GUPTA VS. ACIT READS AS UNDER: ASSESSEE CAN BE SAID TO HAVE HELD THE FLAT WHEN HE MADE THE PAYMENT TO THE BUILDER AND RECEIVED THE ALLOTMENT LETTER, AND THEREFORE, BENEFIT OF INDEXATION OF COST OF ACQUISITION OF THE FLAT HAS TO BE GRANTED TO T HE ASSESSEE FROM THE DATE (1995) WHEN HE STARTED MAKING PAYMENT TO THE BUILDER AND NOT FROM THE DATE OF EXECUTION OF CONVEYANCE DEED IN 2001. 8. ALL THE ABOVE DECISIONS ARE UNIFORM IN CONCLUDING THAT THE DATE OF ALLOTMENT IS RECKONED AS THE DATE FOR COMPUTING THE HOLDING PERIOD FOR THE PURPOSE OF CAPITAL GAINS. THE DATE OF ALLOTMENT IN THIS CASE BEING 19.11.2001 AND THE DATE OF 4 SALE IS 23.8.2006, THEREFORE, THE HOLDING PERIOD IS MUCH MORE THAN 36 MONTHS. IN THIS CASE, T HE GAINS EARNED BY THE ASSESSEE ON THE SALE OF FLAT HAVE TO BE COMPUTED AS CAPITAL GAINS. WITHOUT PREJUDICE, EVEN IF THE DATE OF POSSESSION, BEING 14.8.2003, IS CONSIDERED; THE ASSESSEE IS STILL ENTITLED TO THE BENEFITS OF THE LONG TERM CAPITAL GAINS. TH EREFORE, IN OUR OPINION, ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4. CONSIDERING THE ABOVE SETTLED NATURE OF THIS ISSUE, WE ARE OF THE OPINION THAT THE ASSESSEE MUST SUCCEED ON THIS ISSUE. ACCORDINGLY, THE RELEVANT GROUNDS OF APPEAL ARE ALLOWED. 5. THE SECOND ISSUE RELATES TO DETERMINING OF COST OF ACQUISITION OF THE SAID FLAT FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ASSESSE E CLAIMED ASSESSMENT CHARGES OF RS. 10,000/ - AND MAINTENANCE CHARGES / CORPUS FUND OF RS. 1,21,000/ - AS PART OF THE COST OF ACQUISITION. IT IS ARGUED THAT THE REVENUE AUTHORITIES HAVE NOT APPRECIATED THE FACT THAT THE SAID MAINTENANCE CHARGES OF RS. 1.21 LAKHS GOES TO THE CORPUS FUND, WHICH IS KEPT IN THE BANK TO EARN INTEREST INCOME, WHICH IS MEANT FOR THE PURPOSE OF UTILIZATION OF THE SAME FOR MEETING THE RUNNING EXPENSES FOR THE MAINTENANCE OF THE FLATS . SIMILAR PAYMENTS ARE CALCULATED BY THE BUILDERS FROM ALL THE FLAT OWNERS AND THE SAID CORPUS CONTRIBUTION IS TRANSFERABLE TO FUTURE BUYERS OF THE FLAT TOO. T HESE ARE NOT THE ROUTINE MAINTENANCE CHARGES AS HELD BY THE LD CIT (A) IN PARA 3.3 OF THE IMPUGNED ORDER. CONSIDERING THE COMPULSORY CONTRIBUTION TOWARDS THE SAID CORPUS, THE SAME CONSISTS OF CAPITAL CONTRIBUTION OR CONTRIBUTION TO CORPUS UNLIKE THE CONCLUSIONS HELD BY THE REVENUE AUTHORITIES. ON THE ASSESSMENT CHARGES OF RS. 10,000/ - , LD COUNSEL MENTIONED THAT THE CIT (A) HAS NOT SPOKEN A WORD AB OUT IT IN CLEAR TERMS AS TO WHY THE SAID AMOUNTS CALCULATED BY THE BUILDERS ARE NOT OF CAPITAL NATURE. IN THIS REGARD, WE HAVE PERUSED THE SIID PARA 3.3. OF THE IMPUGNED ORDER WHICH READS AS UNDER: 3.3. I HAVE CONSIDERED THE FACTS CAREFULLY. IT IS NOTED THAT THE SOCIETY MAINTENANCE CHARGES ARE REVENUE IN NATURE BEING INCURRED FOR YEAR TO YEAR. THEREFORE, THESE CANNOT BE CONSIDERED AS ADDITION FOR COST OF CAPITAL ASSET NOR SUCH E XPENSES ARE ALLOWABLE UNDER THE PROVISIONS OF SECTION 48 OF THE ACT . ACCORDINGLY, THE AO WAS CORRECT IN DISALLOWING THE SAME. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED . 6. FROM THE ABOVE, IT IS EVIDENCED THAT THE FINDING OF THE CIT (A) IS VERY CRYPTIC AND HAS NOT GONE INTO THE RELEVANT FACTS OF THE SAID CONTRIBUTIO NS TO CORPUS FUND AS 5 WELL AS FOR MEETING THE CHARGES, THE ONETIME PAYMENTS IN CONNECTION WITH THE ACQUISITION OF THE SAID FLAT. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THE ASSESSEE HAS A STRONG CASE. HOWEVER, THE CIT (A) HAS NOT ADJUDIC ATED THE ISSUE BY PASSING A SPEAKING ORDER, THEREFORE, FOR WANT OF REASONED ORDER, WE SET ASIDE THE ISSUE TO THE FILES OF THE CIT (A) FOR DECIDING THE ISSUE AFRESH IN A TIME BOUND MANNER I.E., WITHIN A COUPLE OF MONTHS FROM THE DATE OF RECEIPT OF THIS ORDE R. ASSESSEE SHALL BE GRANTED A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE DURING THE SET ASIDE PROCEEDINGS. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 T H JANUARY, 2014. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 17 .1 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI