CHITTU B. NARSEY, MUMBAI V. ITO WD (1)(1), MUMBAI

ITA 6023/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9205 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 04-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: INDRA G ANAND
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard; Question of law; Cost of acquisition
• Section: 50C; 54F; 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . , . . ! , ' #$ % BEFORE SHRI B.R. MITTAL, JM AND SHRI N.K. BILLA IYA, AM ./I.T.A. NO.6023/MUM/2010 ( & & & & / ASSESSMENT YEAR : 2007-08 SHRI CHITTU B. NARSEY, 21, PAAVAN VITHALNAGAR CO. OP. HSG. SOC., VILE PARLE (W), MUMBAI - 400 049 / VS. THE ITO, WARD (1)(1), MUMBAI $' ' ./ ( ) ./PAN/GIR NO. : AAEPN 4473H ( '* /APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY: SHRI MADHUR AGRAWAL & MS. INDRA G. ANAND +,'* . - / RESPONDENT BY : SHRI RAJARSHI DWIVEDY . /0' / DATE OF HEARING : 13.12.2012 12& . /0' / DATE OF PRONOUNCEMENT :19.12.2012 #3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-32, MUMBAI DT.6.5.2010 PERTAINING TO A.Y. 20 07-08. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND IS PARTNER IN VARIOUS FIRMS AND HAVI NG INCOME BY WAY OF SHARE OF PROFIT FROM REGISTERED FIRM. DURING THE C OURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE ALONGWITH HIS FAMILY MEMBERS ENTERED INTO DEVELOPMENT AGREEMENT W ITH M/S. PAVAN RESIDENCY VIDE REGISTERED AGREEMENT DT. 9.6.2006 BY WHICH THE ASSESSEE ITA NO. 6023/MUM/2010 2 AND HIS FAMILY MEMBERS WOULD GET CARPET AREA OF AB OUT 8260 SQ.FT. AS PER THE TERMS OF THE AGREEMENT, THE ASSESSEE AND OTHER THREE FAMILY MEMBERS WOULD GET RS. 3 CRORES AS CASH COMPONENT + RS. 1.40 CRORES AS COST OF CONSTRUCTION OF FOUR UNITS OF RESIDENTIAL FLATS ADM EASURING CARPET AREA OF ABOUT 8260 SQ.FT. THE AO SOUGHT EXPLANATION FROM TH E ASSESSEE ABOUT SALE/TRANSFER OF IMMOVEABLE PROPERTY AND WORKING OF THE CAPITAL GAINS THEREOF. THE ASSESSEE FILED A DETAILED REPLY EXPLA INING NATURE OF TRANSACTION AND EXPLAINED THAT THE ASSESSEE AND HIS FAMILY MEMBERS OWNED A PLOT AND A BUILDING APPURTENT THEREON WITH 1/4 TH SHARE EACH. THE ASSESSEE AND THE FAMILY MEMBERS SOLD THEIR RIGHTS O N THE SAID PLOT TO DEVELOP THE PROPERTY. THE ASSESSEE AND HIS FAMILY AGREED TO SELL DEVELOPMENT RIGHTS FOR RS. 440 LAKHS. THE PROCEEDS ARE REALIZED IN SUBSEQUENT YEARS AND EXEMPTION U/S. 54 IS BEING CLA IMED. HOWEVER, THE AO WAS OF THE OPINION THAT THE CAPITAL GAINS HAS AR ISEN IN THE YEAR UNDER CONSIDERATION WHEREAS IT WAS THE SAY OF THE ASSESSE E THAT CAPITAL GAINS WOULD ARISE IN F.Y. 2008-09 RELEVANT TO A.Y. 2009-1 0. THE AO PROCEEDED WITH HIS VIEW THAT THE ASSESSEE IS LIABLE FOR TAX O N THE TRANSFER OF DEVELOPMENT RIGHTS DURING THE YEAR UNDER CONSIDERAT ION I.E. A.Y. 2007-08 ADOPTING THE MARKET VALUE ASSESSED BY STAMP DUTY AU THORITIES AT RS. 4,58,44,500/- U/S. 50C OF THE ACT AS THE PROPERTY H AD NIL COST OF ACQUISITION, THE CAPITAL GAINS COMPUTED BY THE AO W AS AT RS. 45,84,400/- AND ASSESSEES 1/4 TH SHARE WAS TAKEN AT RS. 1,14,61,125/-. THE AO TREATED THIS AS LONG TERM CAPITAL GAINS AND COMPLET ED THE ASSESSMENT PROCEEDINGS. 3. THE ASSESSEE AGITATED THIS MATTER BEFORE THE LD. CIT(A). IT WAS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE HAD TO BEAR COST OF CONSTRUCTION OF NEW PREMISES AND ASSESSEES SHARE W AS AT RS. 35 LAKHS. THEREFORE, THE NET CONSIDERATION SHOULD HAVE BEEN R EDUCED BY THIS AMOUNT ITA NO. 6023/MUM/2010 3 BY THE AO. IT WAS ALSO EXPLAINED THAT NOT ONLY THE AO HAS NOT ALLOWED THIS EXPENDITURE ON TRANSFER BUT AT THE SAME TIME H AS DENIED THE CLAIM OF EXEMPTION U/S. 54 OF THE ACT FOR INVESTMENT IN RESI DENTIAL HOUSE. ACCORDINGLY LONG TERM CAPITAL GAIN COMPUTED BY THE AO WOULD BE REDUCED BY THE EXEMPTION CLAIMED BY THE ASSESSEE U/ S. 54 OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DECIDED THE APPEAL AGAINST THE ASSESSEE HOLDING THA T THE CAPITAL GAINS HAS ARISEN IN THE YEAR UNDER CONSIDERATION AND SO FAR A S THE CLAIM OF THE ASSESSEE THAT THE LTCG SHOULD BE REDUCED BY THE AMO UNT CLAIMED TO BE EXEMPT U/.S. 54F WAS REJECTED BECAUSE THE ASSESSEE HAS NOT TAKEN THIS PLEA IN THE GROUNDS OF APPEAL. 4. AGGRIEVED BY THIS FINDING OF LD. CIT(A), THE ASS ESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT HE IS NOT PRESSING GROUND NOS. 1 & 2 WHICH RELATE TO THE YEAR OF TAXABILITY OF LTCG AND APPLICATION OF SEC. 50C OF THE ACT. BOTH THESE GROUNDS ARE ACCORDINGLY DISMISSED. 5. GROUND NO. 3 RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) OUGHT TO HAVE GRANTED EXEMPTION OF 35 LAKHS BEING COST OF CO NSTRUCTION PAYABLE BY THE ASSESSEE AND GROUND NO. 4 RELATES TO THE GRIEVA NCE THAT THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE CLAIM OF EXEMPTION OF RS. 58,30,000/- U/S. 54 OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBM ITTED THAT THE LD. CIT(A) GROSSLY ERRED IN NOT ENTERTAINING ASSESS EES CLAIM FOR HIS SHARE TOWARDS COST OF CONSTRUCTION I.E. RS. 35,00,000/- A ND FURTHER NOT DECIDING ON THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 54 OF THE ACT. ITA NO. 6023/MUM/2010 4 7. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FI NDINGS OF THE LD. CIT(A) AND RELIED UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS D CIT 137 ITD 26 AND SUBMITTED THAT IN THAT CASE, THE SPECIAL BENCH DECL INED TO ENTERTAIN ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THE GR OUND THAT NO SUCH GRIEVANCE WAS RAISED BEFORE THE LD. CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. AS THE LD. COUNSEL FOR T HE ASSESSEE HAS CONCEDED THE YEAR OF TAXABILITY OF LTCG, THEREFORE THIS ISSUE IS NOW ACCEPTED BY BOTH THE PARTIES THAT LTCG IS LIABLE TO BE TAXED IN THE YEAR UNDER APPEAL I.E. A.Y. 2007-08. FURTHER, THERE IS N O DISPUTE IN ACCEPTING THE STAMP DUTY VALUATION OF THE SAID PROPERTY . 9. NOW THE ONLY POINT REMAINS TO BE DECIDED IS WHET HER THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 54 OF THE ACT IS AL LOWABLE OR NOT. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS CLAIMED THIS EXEMP TION BEFORE THE AO AND ALSO BEFORE THE LD. CIT(A). THE DECISION RELIED UP ON BY THE LD. DR IN FACT SUPPORTS THE PLEA OF THE ASSESSEE INASMUCH AS THE TRIBUNAL IN THAT CASE HAS HELD THAT IF A PURE QUESTION OF LAW ARISES FOR WHICH FACTS ARE ON RECORD OF THE AUTHORITIES BELOW, THE QUESTION SHOUL D BE ALLOWED TO BE RAISED IF IT IS NECESSARY TO ASSESS THE CORRECT TAX LIABIL ITY . 10. AFTER CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE OBSERVATIONS OF THE TRIBUNAL (SUPRA), WE FIND THAT THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S. 54 OF THE ACT DESERVE S TO BE ENTERTAINED AS IT GOES TO THE ROOT OF THE ASSESSMENT OF THE TAX LIABI LITY . WE, THEREFORE, RESTORE THIS ISSUE BACK TO THE FILE OF THE AO. THE AO IS DIRECTED TO EXAMINE AND VERIFY THE GENUINENESS OF THE CLAIM M ADE BY THE ASSESSEE ITA NO. 6023/MUM/2010 5 FOR EXEMPTION U/S. 54 OF THE ACT FROM THE LONG TERM CAPITAL GAIN SO COMPUTED BY THE AO. THE ASSESSEE IS DIRECTED TO FI LE NECESSARY DOCUMENTS/DETAILS TO SUBSTANTIATE HIS CLAIM. THE A O IS DIRECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE BEFORE PROCEEDING. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4 /5 4/ . 6 7. 89: 3 $;/ . (/ < ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.2012 . #3 . 2& ' 6 =#5 19.12.2012 2 . > SD/- SD/- (B.R.MITTAL) (N.K. BILLAIYA) #$ /JUDICIAL MEMBER ' #$ / ACCOUNTANT MEMBER MUMBAI; =# DATED 19/12/2012 . . ./ RJ , SR. PS #3 #3 #3 #3 . .. . +/ +/ +/ +/ ?&/ ?&/ ?&/ ?&/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. A> +/ , , / DR, ITAT, MUMBAI 6. >B C / GUARD FILE. #3 #3 #3 #3 / BY ORDER, ,/ +/ //TRUE COPY// 8 88 8 / < < < < ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI