Appeal details
Counselvise Citation
617019914 RSA 2008
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 30 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-04-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Next Hearing Date
10-02-2011
Assessment Year
2005-2006
Appeal Filed On
14-10-2008
Judgement Text
1 ITA NO.6170/MUM/2008 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C MUMBAI C MUMBAI C MUMBAI C BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI R V EASWAR, SHRI R V EASWAR, SHRI R V EASWAR, SHRI R V EASWAR, PRESIDENT & PRESIDENT & PRESIDENT & PRESIDENT & SHRI SHRI SHRI SHRI R K PANDA, AM R K PANDA, AM R K PANDA, AM R K PANDA, AM ITA NO. ITA NO. ITA NO. ITA NO. 6170/MUM/2008 6170/MUM/2008 6170/MUM/2008 6170/MUM/2008 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2005 2005 2005 2005- -- -06 0606 06) )) ) CHIRANJEEV LAL KHANNA PLOT NO.8 X ROAD, NO.4 GREATER MUMBAI HOUSING SOC. JUHU MUMBAI 49 VS THE INCOME TAX OFFICER WARD 11(2)(2), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AABPK3888K AABPK3888K AABPK3888K AABPK3888K A SSESSEE BY SHRI S C TIWARI REVENUE BY SHRI P N DEVDASAN-DR PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21.8.2008 OF THE CIT(A) XI, MUMBAI RELATING TO AY 2 005-06. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IS CARRYING ON PROFESSION AS A CHARTERED ACCOUNTANT. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED FROM THE COMPUTATION STATEM ENT THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AS PER ANNEXURE AT NIL . AS PER ANNEXURE TO THE RETURN, THE ASSESSEE INDICATED THAT HE HAS EARNED NET LONG TERM CAPITAL GAIN OF RS. 1,01,73,965/-, WHICH HE CLAIMED AS EXEMPT U/S 5 4 OF THE I T ACT ON ACCOUNT OF INVESTMENT IN NEW FLAT AT RS. 59,17,500/- AND INVES TMENT IN NABARD BONDS FOR RS. 50,00,000/- RESPECTIVELY. THE CAPITAL GAIN HAS ARISEN TO THE ASSESSEE ON ACCOUNT OF TRANSFER OF ASSESSEES 50% SHARE BY VIRT UE OF DEVELOPMENT AGREEMENT DATED 26.2.2004. THE NET LONG TERM CAPITAL GAIN WAS SHOWN AS UNDER: 2 ITA NO.6170/MUM/2008 AMOUNT OF CONSIDERATION RECEIVED FROM VINITA ESTATE P LTD BUILDERS AND DEVELOPERS (WADHWAS) VASU KAMAL, BANDRA (W), MUMBAI 50 ON SURRENDER OFFSI OF LAND PLOT ON 8 CHIRANJEEV BLDG. JVPD SCHEME MUMBAI 400 049 (BUT IN 1985 AND OCCUPIED IN MARCH, 1985) VIDE DEVELOPMENT AGREEMENT DATED 26.2.2004/5.4.2004 (GROSS) RS. 1,09,17,500.00 DEDUCT :COST OF LAND BLDG ON 31.3.2004 (AS PER BALANCE SHEET) RS. (-) 7,43,534,76 NET LONG TERM CAPITAL GAIN (MORE THAN 3 YEARS HOLDING AND USED FOR RESIDENCE) RS 1,01,73,965.25 THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE A DETAILED NOTE ON REDEVELOPMENT OF BUILDING KNOWN AS CHIRANJEEV BUIL DING AND ALSO TO FURNISH COPY OF RELEVANT AGREEMENT FOR DEVELOPMENT. 2.1 THE ASSESSEE, VIDE LETTER DATED 15.9.2006 STATE D AS UNDER: I) THE BUILDING CALLED CHRANJEEV ON PLOT NO.8 IN GREATER BOMBAY CHS LOCATED ON GULMOUR ROAD NO.4 JVPD SCHEME MUMBAI WAS BUILT IN 1985 AND GROUND AND FIRST FLOOR AT THE BUILDING ALONG WITH PLOT OF LAND WAS OWNED BY ASSES SEE ALONG WITH HIS WIFE SMT CHITRA KHANNA. II) THE ABOVE SAID BUILDING WAS DEMOLISHED FOR REDEVELOPMENT VIDE AGREEMENT FOR DEVELOPMENT DT 26. 2.2004 AS ENTERED INTO BETWEEN THE SAID OWNERS AND VINITA ESTATES PVT LTD. III) THE OWNERS OWNED JOINTLY PLOT OF LAND ADMEASUR ING 840 SQ.MTS I.E. 1005 SQ.YARDS. PART OF THE FIRST FLOOR OF THE BUILDING 3 ITA NO.6170/MUM/2008 WAS OCCUPIED BY A TENANT AND THE REST I.E. FULL GRO UND FLOOR AND PART OF THE FIRST FLOOR WAS OCCUPIED BY OWNERS. IV) THE OWNERS ENTERED INTO AGREEMENT WITH SAID DEV ELOPERS TO DEMOLISH THE THEN STRUCTURE AND REDEVELOP THE SAID LAND INTO BUILDING INTO 50% - 50% SHARING BASIS ON THE TERMS AND CONDITIONS SET OUT SPECIFICALLY IN THE AGREEMENT DT 26.2.2004. V) AS PER THE TERMS THE PLOT OF LAND WILL CONTINUE TO BE OWNED BY THE OWNERS AND DEVELOPERS HAVE NO RIGHT AND TITLE O VER IT; THE OWNERS WILL USE THE FSI OF THE PLOT OF LAND PERMISS IBLE BY MUNICIPAL CORPORATION AND THAT PERMISSIBLE FSI WAS 11835 SQ.FT; THE DEVELOPERS AFTER LOADING THEIR SOURCES OF FSI A ND OUT OF TOTAL CONSTRUCTED AREA OF NEW FLATS AND ITS SHARING BETWE EN OWNERS AND DEVELOPERS IS AS PER ANNEXURE-III ATTACHED TO T HE AGREEMENT. VI) IN CONSIDERATION OF THE SAID AGREEMENT THE OWNE RS RECEIVED RS. 2,18,35,000/-. VII) ACCORDINGLY, THE OWNERS RETAINED FSI OF 11835 SQ.FT AND THE SUM AS ABOVE WAS RECEIVED FROM DEVELOPERS IN CONSID ERATION OF THE OWNERS GRANTING IN FAVOUR OF THE DEVELOPERS THE RIGHT AUTHORITY AND POWER TO DEVELOP THE SAID PROPERTY. 3 THE ASSESSING OFFICER PERUSED THE DOCUMENTS AND NOTED THAT THE TRANSACTION AS ARRIVED AT BETWEEN THE PARTIES HAS BEEN REGISTERED AT A MARKET VALUE OF RS, 3,82,50,000/- AS AGAINST AGREEMENT CO NSIDERATION OF RS. 2,18,35,000/- , 50% SHARE OF CONSIDERATION OF W HICH THE ASSESSEE HAS ADOPTED IN THE COMPUTATION. THE ASSESSING OFFICER A SKED THE ASSESSEE TO EXPLAIN AS TO WHY DEEMED CONSIDERATION AS PER MARKET VALUE SHOWN IN THE REGISTRATION DOCUMENTS SHOULD NOT BE ADOPTED AS PER PROVISIONS O F SEC. 50C. THE ASSESSEE, VIDE ITS REPLY DATED 30.10.2007 SUBMITTED THAT THE PROVISIONS OF SEC.50C DO NOT APPLY TO THE ASSESSEE. SINCE THE ASSESSEE HAS RECEI VED ONLY RS.1,09,17,500/- FROM VINITA ESTATE P LTD AS PER DEVELOPMENT AGREEME NT DATED 26.2.2004. THE 4 ITA NO.6170/MUM/2008 REGISTRATION AUTHORITIES HAVE MENTIONED THE MARKET VALUE OF THE PROPERTY AT RS. 3,82,50,000/- FOR STAMP DUTY PURPOSE ONLY. 3.1 HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCE D WITH THE EXPLANATIONS GIVEN BY THE ASSESSEE. ACCORDING TO HIM, THE ASSESS EE IS CLAIMED TO HAVE TRANSFERRED A CAPITAL ASSET AND SHOWN CAPITAL GAIN ON TRANSFER OF THE SAME. SEC. 50C IS A BINDING SECTION ON THE ASSESSING OFFICER AND THEREFORE, THE CAPITAL GAIN HAS TO BE WORKED OUT IN ACCORDANCE WITH THE SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES. 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON BEING ALLOWED AN OPPORTUNITY TO FURNISH THE WORKING KEEPING IN VIEW THE PROVISIONS OF SEC. 50C OF THE ACT, THE ASSESSEE FURNISHED THE REVISED WORKI NG AFTER REDUCING INDEXED COST OF THE PROPERTY AT RS.39,32,160/ AND CALCULATED THE TAXABLE CAPITAL GAIN OF RS. 42,75,340/-, THE DETAILS OF WHICH ARE AS UNDER: 50% OF DEEMED CONSIDERATION OF RS. 3,82,50,000/- 1,91,20,000/- LESS: COST OF PROPERTY RS. 10,2 4,000/- BEING SHARE OF 20,48,000/- AS PER VALUERS REPORT DT 1.6.85. INDEXATION RS. 10,24,000/ X 480/125 39,32,168/- CAPITAL GAIN 1,51,92,840/- EXEMPTION U/S 54 ON NEW FLAT PURCHASED 59,17,500 /- INVESTMENT IN NABAD 1,09,17,500/- BONDS U/S 54EC 50,00,00 0 NET CAPITAL GAIN 42,75,340/- 5 ITA NO.6170/MUM/2008 3.3 THE ASSESSING OFFICER, THEREAFTER, NOTED THAT I N THE CASE OF THE CO-OWNERS HAND, THE CLAIM OF EXISTENCE OF CAPITAL GAIN OUT O F THE SAID AGREEMENT WAS NOT ACCEPTED. THEREFORE, HE ASKED THE ASSESSEE TO EXPLA IN ITS POSITION. 3.4 IT WAS SUBMITTED BY THE ASSESSEE THAT THERE IS TRANSFER OF RIGHT, TITLE AND INTEREST IN THE PLOT OF LAND. THE WORD TRANSFER IN SEC.2 (47) INCLUDES EXTINGUISHMENT RELINQUISHMENT OF RIGHT, TITLE AND INTEREST IN PROPERTY. IT WAS SUBMITTED THAT EVEN THOUGH THERE WAS SALE OF PLOT OF LAND OR TRANSFER OF RIGHT, TITLE AND INTEREST IN THE SAID PLOT OF LAND BUT THE ASSESSEE CONTINUES TO BE THE JOINT HOLDER - OWNER OF PLOT IN THE RECORDS OF THE SOCIETY, IN FACT AND IN SUBSTANCE. THE ASSESSEE IS A HOLDER/OWNER ON PAPER BECAUSE THE PLOT IS NOT OPEN PLOT BUT COVERED WITH A NEW STRUCTURE SHARED BY ASSESSEE AND DEVELOPER AND/OR THEIR NOMINEES TO WHOM DEVELOPER SOLD FLATS PERTAINING TO DEVELOPERS 50% SHARE IN THE BUILDING. FURTHER, THE ASSESSEE CANNOT USE THI S PLOT ALONE AND CANNOT PUT UP ANY CONSTRUCTION OF THEIR OWN EVEN, AS NO PERMISSIB LE OPEN SPACE AVAILABLE FOR SIDEWAYS OR ABOVE 11 TH FLOOR CONSTRUCTION. IT WAS SUBMITTED THAT THE RIGH TS OF SO CALLED PLOT HOLDER OWNERS IN PLOT OF LAND HAVE BEEN SURRENDERED IN FAVOUR OF DEVELOPERS NOMINE, BEING PURCHASERS OF FLATS IN TH E BUILDING WHO ARE NOW JOINT HOLDERS OF PLOT OF LAND ALONG WITH THEIR FLATS ON P ROPORTIONATE BASIS. THE ASSESSEE, IN THE INSTANT CASE HAS NEITHER CHARGED ANY LEASE M ONEY NOR TRANSFER FEE FROM FLAT PURCHASERS BEING FLAT OWNERS. 3.5 IT WAS FURTHER SUBMITTED THAT THE ASSESSEE( CO -OWNER) OF PLOT OF LAND, HAVE IN EFFECT EXTINGUISHED THEIR RIGHTS IN THE PLOT NO. 8 LAND IN FAVOUR OF DEVELOPERS NOMINEES/FLAT PURCHASERS TO BECOPME JOINT INTEREST HOLDERS, AND CEASE TO BE SINGLE HOLDER OF RIGHT, TITLE AND INTEREST IN THE P LOT OF LAND. THE PLOT HOLDER AND FLAT OWNERS HAVE FORMED AN ASSOCIATION CALLED CHIRANJEE V RESIDENTS ASSOCIATION FOR 6 ITA NO.6170/MUM/2008 MANAGING JOINTLY THE DAY-TO-DAY AFFAIRS OF THE BUIL DING AND CONTRIBUTION TOWARDS MAINTENANCE REGULARLY. 3.6 IT WAS FURTHER SUBMITTED THAT THE ASSESSEE CANN OT USE THE PLOT FOR MAKING ANY FURTHER STRUCTURE BEYOND 11 TH FLOOR AND EVEN IF AT A LATER STAGE, BMC ALLOWS FURTHER FSI, NEW ADDITIONAL STRUCTURE CANNOT BE MAD E, UNLESS DEVELOPERS NOMINEES OR FLAT BUYERS GIVE CONSENT TO ASSESSEES F OR JOINT DEVELOPMENT. FREEDOM AND LIBERTY OF SINGLE OWNERSHIP OF PLOT IS TAKEN AWAY AND EVERY USE OF PLOT IS TO BE SHARED WITH OTHER FLAT OWNERS. THE AS SESSEE SUBMITTED THAT SUCH RELINQUISHMENT AND EXTINGUISHMENT OR RIGHT, TITLE A ND INTEREST IN PLOT OF LAND WAS CAPITAL ASSET U/S 2(47) OF THE ACT AND THE RECEIPT OF CONSIDERATION OF RS. 1,09,17,500/- WAS A CAPITAL RECEIPT AND EXIGIBL E TO CAPITAL GAIN TAX AND CONSIDERATION IS NOT INCOME FROM OTHER SOURCES SI NCE IT IS FOR PLOT AND DEVELOPMENT SHARE OF DEVELOPERS. IT WAS STRONGLY C ONTENDED THAT THE CONSIDERATION RECEIVED FROM DEVELOPER UNDER THE DEV ELOPMENT AGREEMENT RELATED TO LAND AND FSI OF PLOT OF LAND BEING CAPIT AL ASSET AND AS SUCH WAS A CAPITAL RECEIPT EXIGIBLE TO CAPITAL GAIN TAX. 3.7 THE ASSESSING OFFICER NOTED THAT THE STRUCTURE ADMITTEDLY CAME INTO BEING IN 1985 AND THEREFORE, THE ASSESSES WORKING OF COS T AS ON 1.4.1981 AS PER VALUERS REPORT WAS NOT CORRECT. ON BEING QUESTIONE D BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED HIS RELY, THE GIST OF WHICH IS AS UNDER: TO FIND OUT COST OF ACQUISITION OF LAND AS ON 1.4. 1981, WE CAN CONSIDER THE VALUE OF THE VALUER VIZ RS. 10,24,000/- AND FROM TH IS AMOUNT ACTUAL COST OF BUILDING AS PER BALANCE SHEET VIZ RS.7,43,534/- CAN BE REDUCED TO FIND OUT COST OF ACQUISITION OF LAND AS ON 1.4.81, EVEN TH OUGH VALUATION BY VALUER WAS MADE ON 31.3.1985 NO APPRECIATION IN LAND PRICE S BETWEEN 1981 TO 1985 WAS NOTED PARTICULARLY AREA SURROUNDING PLOT N O.8 WAS MARSHY LAND. ONLY FEW PLOTS NEAR THE AREA WERE BUILT. THUS, COST OF LAND AS ON 1.4.81 (BEING COST OF ACQUISITION) WOULD BE: 7 ITA NO.6170/MUM/2008 TOTAL VALUE AS PER VALUERS REPOR T RS. 10,24,000/- LESS : COST OF INVESTMENT IN BUIL DING RS. 7,43,534/- BALANCE BEING COST OF LAND ON 1.4 .81 RS. 2,80,466/- RS.280,466/- IS TO BE CONSIDERED AS COST OF ACQUISI TION AGAINST ACTUAL PAYMENT OF RS. 41,605/- MADE AT THE TIME OF PURCHA SE OF LAND IN JULY 1972. THE APPRECIATION IS HARDLY 7 TIMES 700% APPRO X., THE ACTUAL COST ON 1.1.92. DUE TO IMPACT OF BANGALEDESH WAR IN 1971, N O RISE IN AND PRICES COULD BE SEEN AND THIS APPRECIATION OF 7 TIMES/700% APPROX., WAS REASONABLE. THE PRICES OF PROPERTIES ROSE AFTER 198 8 (THERE WERE RIOTS IN 1984 AFTER MURDER OF LATE PM SMT INDRA GANDHI) HENCE RS. 2,80,466/- (AGAINST RS. 41,605/-) IS TO B E CONSIDERED AS COST OF ACQUISITION OF LAND. SUMMARY: A) COST OF ACQUISITION OF LAND RS. 2,80,466/- B) COST OF INVESTMENT IN BUILDING R S. 7,43,534/- TOTAL COST OF ACQUISITION FOR PURPOSE OF INDEXATION U/S 48(II) OF I T ACT RS. 10,24,000/- I FURTHER SUBMIT THAT IN OUR REVISED COMPUTATION OF LONG TERM CAPITAL GAIN (FILED WITH MY LETTER OF REPLY DATED 12.11.200 7, THE VALUE AS PER VALUERS REPORT HAS BEEN TAKEN AT RS. 10,24,000/- AN D IS THE COST OF ACQUISITION BY ASSESSEE FOR THE PURPOSE OF INDEXATI ON U/S 48(II) OF THE I T ACT. THE WORKING OF LONG TERM CAPITAL GAIN SHOWING LONG TERM CAPITAL GAIN AT RS. 42,75,340/- IS CORRECT AND MAY KINDLY B E ACCEPTED BY YOUR HONOUR. 4 HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE. REFERRING TO V ARIOUS CLAUSES OF THE DEVELOPMENT AGREEMENT, HE CAME TO THE CONCLUSION TH AT THE DEVELOPERS WERE GIVEN POSSESSION OF THE LAND FOR DEMOLISHING THE ST RUCTURES AND RE-DEVELOP THE SAME. THEREFORE, THERE IS TRANSFER OF RIGHT OF DEVE LOPMENT WHICH WAS OTHERWISE ENJOYED BY THE OWNERS. RELYING ON THE DECISION OF T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWAKARDAS KAPADIA V S CIT REPORTED IN 260 ITR 491 HE HELD THAT THERE IS TRANSFER OF CAPITAL ASSET ATTRACTING CAPITAL GAIN. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE, HE ADOPTED THE COST OF LAND AT RS. 1,12,186 ONLY. AFTER INDEXING THE SAME, THE ASSESSING OFFICER RECOMPUTED THE CAPITAL GAIN AT RS. 76,64,008/-, DE TAILS OF WHICH ARE AS UNDER: 8 ITA NO.6170/MUM/2008 50% OF DEEMED CONSIDERATION OF RS. 3, 82,50,000/- RS 1,91,20,000 LESS: COST OF PROPERTY TRANSFERRED RS. 1,12,186/- A S DISCUSSED BEING SHARE OF THE SAME I.E. 1,40,233/- AS PER VALUERS REPORT DATED 1.6.85. INDEXATION RS. 112186 X 4 80/100 5,38,492 CAPITAL GAIN 1,85,81,506/ - EXEMPTION U/S 54 ON 59,17,500/- NEW FLAT PURCHASED INVESTMENT IN NABARD BOND U/S 54EC 50,00,000/- 1,09,17,500 NET CAPITAL GAIN 76,64,008 ========== 5 BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE ASSE SSEE CONTINUED TO OWN THE LAND EVEN AFTER DEVELOPMENT. THE OWNERS WOULD USE T HE FSI OF THE LAND FOR CONSTRUCTION AT THEIR COST. THE OWNERS RECEIVED AN AMOUNT OF RS. 2,18,35,000/- TO BE SHARED EQUALLY BETWEEN THE ASSESSEE AND HIS WIFE . IT WAS FURTHER SUBMITTED THAT WHEN THE AGREEMENT WAS PUT UP FOR REGISTRATION , STAMP VALUATION AUTHORITIES TOOK THE VALUE AT RS. 3,82,50,000/- AND THE ASSESSI NG OFFICER HAS INVOKED PROVISIONS OF SEC. 50C TO ADOPT THIS FIGURE OF RS. 3,82,50,000/-. THE ASSESSEE ASCERTAINED THAT THE TRANSFER OF LAND AND BUILDING OR BOTH FALL WITHIN THE AMBIT OF SEC. 50C. HOWEVER, DEVELOPMENT RIGHTS ON LAND AND B UILDING DONT COME UNDER THE PURVIEW OF SEC. 50C. IT WAS SUBMITTED THAT IN THE INSTANT CASE THE RIGHT OF OWNERSHIP CONTINUED TO BE WITH THE ASSESSEE. TRANS FER OF DEVELOPMENT RIGHT SHOULD BE TREATED AT PAR WITH TRANSFER OF TENANCY R IGHTS WHICH IS A CAPITAL ASSET. IT WAS CONTENDED THAT SINCE SECTION 50C DOES NOT CO NTAIN INCLUSIVE DEFINITION OF LAND; NO OTHER MEANING CAN BE IMPUTED. A COUPLE OF DECISIONS WERE ALSO RELIED ON BY THE ASSESSEE BEFORE THE CIT(A) IN SUPPORT OF HIS CONTENTION. 9 ITA NO.6170/MUM/2008 6 THE CIT(A), HOWEVER, WAS NOT CONVINCED WITH THE A RGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF THE ASSESSING OFFICER BY HOLDING AS UNDER: I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MA TERIALS ON RECORD. THE MAIN QUESTION HERE IS WHETHER SECTION 50C IS APPLIC ABLE. SUB-SECTION 1 OF SEC. 50C STATES THAT WHERE THE CONSIDERATION RECEIV ED OR ACCRUING AS A RESULT OF TRANSFER BY THE ASSESSEE OF A CAPITAL ASS ET BEING LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF STATE GOVERNMENT (STAMP VALUATION AUTHORITY), THE V ALUE SO ADOPTED OR ASSESSED SHALL BE USED FOR THE PURPOSE OF SECTION 4 8. THE PROVISION IS CLEAR AND UNAMBIGUOUS. IN THIS CASE ADMITTEDLY, THE VALUE ADOPTED BY THE STAMP AUTHORITY IS HIGHER THAN THE VALUATION SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER HAD NO WAY BUT TO ADOPT THE VALUE AS PER SECTION 50C. THAT BEING THE CASE, THERE IS NO REASON FOR ME TO I NTERFERE WITH THE VALUE ADOPTED BY THE ASSESSING OFFICER. CONSEQUENTLY THE APPEAL DESERVES TO BE REJECTED. IN FINE THE APPEAL FAILS 7 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US WITH THE FOLLOWING GROUNDS: 1 THE ORDER PASSED BY LD CIT(A) IS BAD IN LAW. 2 THE LD CIT(A) ERRED IN NOT PASSING A SPEAKING ORDER ON THE CLAIM THAT DEVELOPMENT RIGHT IS NEITHER LAND NOR BUILDING AND IS NOT COVERED BY SEC. 50C AND THEREFORE STAMP DUTY VALUATION CANN OT BE APPLIED TO DEVELOPMENT RIGHTS. 3 THE LD CITIA) ALSO ERRED IN NOT CONSIDERING THE CLA IM OF APPELLANT THAT IN THE CASE OF HIS SPOUSE WHO IS THE CO-OWNER OF THE PROPERTY NO TAX LIABILITY HAD BEEN ATTACHED AND THEREFORE, T HE APPELLANT BEING THE OTHER CO-OWNER CANNOT BE BURDENED WITH GREATER TAX LIABILITY. 4 THE LD CIT(A) ALSO ERRED IN NOT PASSING APPROPRIATE ORDER ON THE FOLLOWING GROUNDS OF APPEAL RAISED IN FORM NO.35: A) THE LD ITO DID NOT CONSIDER THE COST OF LAND AS ARR IVED BY THE ASSESSEE AT RS. 6,73,118/- VIZ RS. 1,40,233/- (480/ 100) INSTEAD HE HAS ARRIVED AT RS. 5,38,492/- AND THE AMOUNT DED UCTED AT RS. 5,38,492/- RESULTING IN LESSER BY RS. 1,34,626/ - 10 ITA NO.6170/MUM/2008 B) THE LD ITO DID NOT CONSIDER THE INDEXATION OF BUILD ING WHICH IS AS PER BALANCE SHEET IS RS. 7,43,534/- AND THE PLOT FO R DEVELOPMENT INCLUDES THE COST OF BUNGALOW AT THE SIGHT WHICH IS HANDED OVER TO THE BUILDER/DEVELOPERS AND WHOSE ENTIRE DEBRIS, MALABA, ETC., WAS TAKEN BY DEVELOPERS AS PER THE DEVELOPMENT AGRE EMENT AND THE COST SINCE 1980 AND AS ON 31.3.2004IS RS. 7,43, 534/-. IT COMES TO RS. 35,68,961/- OR RS. 37,17,670/-. THE AC CRUAL OF LONG TERM CAPITAL GAINS ON LAND AND BUILDING BE ACCEPTED . C) THE WORKING FILED BY THE ASSESSEE AT RS. 39,32,160/ - MAY KINDLY BE ACCEPTED. THE RECEIPT OF RS. 1,09,17,500/- RECEI VED AS CONSIDERATION INCLUDES THE COST OF THE LAND AND THE BUNGALOW THEREON. D) THE APPELLANT PRAYS THAT THE ORDER OF THE ASSESSING OFFICER MAY KINDLY BE REVISED AND NECESSARY REDUCTION OF LTCG M AY KINDLY BE ALLOWED. 5 THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT OF EACH OTHER AND WITHOUT PREJUDICE TO EACH OTHER. 6 THE ADDITION MAD BY THE AO TO THE APPELLANTS INCOM E MAY B DELETED. 7 THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER, AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 8 CONSEQUENT TO THE RULING OF THE ITAT, MUMBAI AS REP ORTED IN ECONOMICS TIMES DATED 2.1.2009 THAT TAX CANNOT BE L EVIED ON THE MONEY PAID BY A BUILDER TO A HOUSING SOCIETY OR PRI VATE INDIVIDUAL FOR REDEVELOPMENT OF THE PROPERTY (COPY ENCLOSED) T HE AMOUNT OF RS. 1,09,17,500/ RECEIVED BY ME FROM THE DEVELOPER FOR REDEVELOPMENT OF MY PROPERTY MAY BE HELD AS NOT TAX ABLE. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS WHIC H ARE AS UNDER: I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE A PPELLANTS CASE AND IN LAW NO INCOME CHARGEABLE TO TAX UNDER T HE PROVISIONS OF I T ACT 1961HAS ACCRUED OR ARISEN TO THE APPELLANT DURING THE ASSESSMENT YEAR 2005-06 ON AC COUNT OF HIS TRANSACTIONS WITH M/S VINITA ESTATE P LTD II) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE A PPELLANTS CASE AND IN LAW LD CIT(A) HAS ERRED IN CONFIRMING T HE CAPITAL 11 ITA NO.6170/MUM/2008 GAINS AS COMPUTED BY THE ASSESSING OFFICER IGNORIN G THAT NO CAPITAL GAINS WHATSOEVER HAVE ACCRUED OR ARISEN TO THE APPELLANT ON ACCOUNT OF HIS TRANSACTIONS DURING THE ASSESSMENT YEAR 2005-06 WITH M/S VINITA ESTATE P LTD. 8 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E ADDITIONAL GROUNDS ARE BEING TAKEN SINCE THE CIT, IN HIS ORDER U/S 263 DAT ED 30.3.2010 HAS NOW TAKEN THE POSITION THAT THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE BECAUSE THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 54 AMOUN TING TO RS. 59,17,500/- CLAIMED BY THE ASSESSEE AND ALLOWED BY THE ASSESSIN G OFFICER. ON ACCOUNT OF THE CONTROVERSY THUS RAISED BY THE CIT, IT HAS BECO ME PERTINENT AND NECESSARY FOR THE ASSESSEE TO PROTECT HIS INTEREST BY TAKING THE CORRECT LEGAL PLEA THAT ON ACCOUNT OF HIS TRANSFER WITH M/S VINITA ESTATE PVT LTD., NO INCOME CHARGEABLE TO TAX INCLUDING LONG TERM CAPITAL GAINS HAS ARISEN OR ACCRUED TO THE ASSESSEE. THIS LEGAL STAND OF THE ASSESSEE CAN BE ADJUDICATED ON T HE BASIS OF MATERIAL ALREADY ON RECORD AND NO FRESH ENQUIRY IS NEEDED. THIS LEG AL STAND TAKEN BY THE ASSESSEE IS SUPPORTED BY SEVERAL ORDERS OF THE ITAT AND VARIOUS HIGH COURTS INCLUDING THE JURISDICTIONAL HIGH COURT OF BOMBAY. 9 AFTER HEARING BOTH THE SIDES AND FOLLOWING THE DE CISION OF THE OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC REPORTED IN 229 ITR 383 (SC) AND IN THE CASE OF JUTE CORPORATION OF INDIA VS CIT REPO RTED IN 187 ITR 688, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ADMIT TED. 12 ITA NO.6170/MUM/2008 10 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAS NOT ACQUIRED OR RECEIVED ANY CONSTRUCTED AREA OVER AND ABOVE THE AREA OF 11835 SFT., TO WHICH THE ASSESSEE WAS ENTITLED TO. THE ADDITI ONAL FSI WAS ACTUALLY BROUGHT BY THE NEW COMER AND THE ASSESSEE HAS ONLY PERMITTE D THE DEVELOPER TO CONSTRUCT. SINCE NO COST HAS BEEN INCURRED FOR THE ADDITIONAL FSI, THEREFORE, THERE IS NO CAPITAL GAIN. HE FURTHER SUBMITTED THAT SECT ION 50C ALSO CANNOT BE APPLIED TO THE ASSESSEE IN VIEW OF THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS CIT REPOR TED IN 260 ITR 491(BOM) REFERRING TO THE ABOVE DECISION, HE DREW THE ATTENT ION OF THE BENCH TO THE OBSERVATION OF THE HONBLE HIGH COURT AT PAGE 39 O F THE PAPER BOOK, WHICH READS UNDER:. IN THIS CASE, THE AGREEMENT IS A DEVELOPMENT AGREE MENT AND IN OUR VIEW, THE TEST TO BE APPLIED TO DECIDE THE YEAR OF CHARGE ABILITY IS THE YEAR IN WHICH THE TRANSACTION WAS ENTERED INTO. WE HAVE TAK EN THIS VIEW FOR THE REASON THAT DEVELOPMENT AGREEMENT DOES NOT TRANSFER THE INTEREST IN THE PROPERTY TO THE DEVELOPER IN GENERAL LAW AND, THERE FORE, SEC. 2(47)(V) HAS BEEN ENACTED AND IN SUCH CASES, EVEN ENTERING INTO SUCH A CONTRACT COULD AMOUNT TO TRANSFER FROM THE DATE OF THE AGREEMENT I TSELF. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLO WING DECISIONS: I) JETHALAL D MEHTA VS DCIT 2 SOT 422 (MUM) II) MAHESWAR PRAKASH2 COOP HSG SOC. LTD 121 TTJ 641 (MU M) III) ITO VS LOTIA COURT COOP HSG SOC. LTD 118 TTJ 199(MU M) IV) NEW SHAILAJA COOP HSG SOC. LTD VS ITO 121 TTJ 62 (M UM) V) AMBER CROFT COOP HSG SOC. LTD ITA NO.5697/MUM/06 VI) OM SHANTI COOP SOC. LTD VS ITO ITA NO.2550/MUM/08 VII) ITO VS SHRI RAM KUMAR MALHOTRA 2010 TIOL 512 -MUM 10.1 REFERRING TO THE ABOVE DECISIONS, HE SUBMITTED THAT THE ASSESSEE IS NOT AT ALL LIABLE FOR ANY CAPITAL GAIN TAX ON ACCOUNT OF T RANSACTIONS WITH M/S VINITA ESTATES P LTD. 13 ITA NO.6170/MUM/2008 10.2 THE LD DR, ON THE OTHER HAND STRONGLY RELIED O N THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND SUBMITTED THAT THE VARI OUS DECISIONS CITED BY THE LD COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. REFERRING TO PAPER BOOK PAGE 9 (PAGE 8 AND CL.17 OF THE AGREEMENT), HE SUBMITTED THAT THE DEVELOPER IS ENTITLED TO DEMOLIS H THE BUILDING AND THE DEBRIS AND OTHER BUILDING MATERIAL OF THE DEMOLISHED BUILD ING WILL BELONG TO THE DEVELOPER AS THE CONSIDERATION THEREOF IS INCLUDED IN THE AFORESAID CONSIDERATION REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CA SE OF OM SHANTI COOPERATIVE SOCIETY LTD (SUPRA), HE SUBMITTED THAT THERE WAS NO DEMOLITION OF BUILDING AND THERE WAS FURTHER CONSTRUCTION TO THE EXISTING BUIL DING. REFERRING TO THE COPY OF THE AGREEMENT, HE SUBMITTED THAT IT IS NOT CLEAR AS TO HOW THE ASSESSEE AND HIS WIFE ARE OWNERS OF 11835 SQF. FSI. HE FURTHER SUBMI TTED THAT IN THE ASSESSES CASE, THE ENTIRE BUILDING HAS BEEN TRANSFERRED. RE FERRING TO THE VARIOUS DECISIONS CITED BY THE LD COUNSEL, HE SUBMITTED THAT IN ALL T HOSE CASES, THE EXISTING BUILDING WAS NOT DEMOLISHED AND ONLY FURTHER CONSTRUCTION/MO DIFICATIONS WERE DONE TO THE EXISTING BUILDING. HOWEVER, IN THE INSTANT CASE, TH E ENTIRE BUILDING HAS BEEN DEMOLISHED AND NEW CONSTRUCTION TOOK PLACE. THEREFO RE, THE VARIOUS DECISIONS RELIED UPON BY THE LD COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE SUBMITTED THAT THE DOCUMENTS H AVE BEEN REGISTERED BY THE STATE REGISTRATION AUTHORITIES; THEREFORE, THE ASSE SSING OFFICER HAD NO OTHER OPTION BUT TO APPLY PROVISIONS OF SEC. 50C. HERE, THERE IS A BUILDING. THEREFORE, THE LD CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER SINCE IT IS A CLEAR TRANSFER OF CAPITAL ASSET FALLING UND ER THE PROVISIONS OF SEC. 50C.. 10.3 THE LD COUNSEL FOR THE ASSESSEE, IN HIS REJOIN DER SUBMITTED THAT THERE IS NO TRANSFER OF LAND AND THE LAND CONTINUED TO BE BELON GING TO THE ASSESSEE. ONLY THE 14 ITA NO.6170/MUM/2008 BUILDER BROUGHT NEW FSI/TDR AND NO FSI, WHICH WERE ORIGINALLY WITH THE ASSESSEE, HAS BEEN TRANSFERRED TO THE DEVELOPER. THE ASSESSE E HAS ONLY PERMITTED THE DEVELOPER TO CONSTRUCT. THEREFORE, PROVISIONS OF SE C. 50C ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND NO LIABILITY FOR CAPITAL GAIN TAX. AS REGARDS TAKING AWAY OF THE DEBRIS BY THE DEVELOPER, HE SUBM ITTED THAT IT IS A MINOR ISSUE AND WE CANNOT COME TO A CONCLUSION OF THIS MAGNITUD E. HE SUBMITTED THAT WHATEVER COST OF THE DEBRIS - SECTION 54 & 54EC WIL L TAKE CARE OF IT. IT CAN BE USED FOR THAT PART OF THE PROPERTY WHICH HAS COME TO ME. HE SUBMITTED THAT NO FSI WHICH WAS ORIGINALLY BELONGING TO THE ASSESSEE HAS BEEN PASSED OUT. HE SUBMITTED THAT SECTION 50C TALKS OF LAND, BUILDING OR BOTH. IN THE CASE OF THE ASSESSEE, NEITHER OF THE ABOVE HAS BEEN TRANSFERRED AND THE ASSESSEE HAS ONLY PERMITTED THE DEVELOPER TO CONSTRUCT. HENCE, PROVIS IONS OF SEC. 50 ARE NOT APPLICABLE TO THE FACTS F THE PRESENT CASE. 11 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT T HAT AS PER THE COPY OF THE AGREEMENT FILED IN THE PAPER BOOK PAGES 2 TO 32, T HE BUILDING IN QUESTION IS JOINTLY OWNED BY THE ASSESSEE AND HIS WIFE MRS CHI TRA C KHANNA. THERE IS ALSO NO DISPUTE TO THE FACT THAT AS PER THE SAID AGREEME NT, IN CONSIDERATION OF THE SAID LAND IN VIEW OF THE DEVELOPMENT RIGHT/AUTHORITY AND POWER TO DEVELOP THE SAID PROPERTY, THE DEVELOPERS HAVE AGREED TO PAY THE O WNER A CONSIDERATION OF RS. 2,18,35,000/-. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE REGISTRATION AUTHORITIES, FOR THE PURPOSE OF STAMP DUTY, DETERMI NED SUCH VALUE AT RS. 3,82,50,000/-. WE FIND, THE ASSESSING OFFICER I NVOKED THE PROVISIONS OF 15 ITA NO.6170/MUM/2008 SECTION 50C AND ADOPTED THE DEEMED CONSIDERATION OF RS. 3,82,50,000/-. AS THE CONSIDERATION OF 50% SHARE OF THE ASSESSEE COMES T O RS. 1,91,20,000/-, THE ASSESSING OFFICER , AFTER DEDUCTING INDEXED COST OF ACQUISITION OF THE VALUE OF THE LAND DETERMINED SUCH CAPITAL GAIN AT RS. 1,85,81,50 6/-. AFTER ALLOWING EXEMPTION U/S 54/54EC, THE ASSESSING OFFICER BROUGHT TO TAX T HE CAPITAL GAIN OF RS. 76,64,008/- WHICH HAS BEEN UPHELD BY THE CIT(A) . IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT SINCE THERE IS NO TRANSFER OF LAND AND SINCE THE BUILDER/DEVELOPER BROUGHT ADDITIONAL FSI AND SINCE NO PART OF THE FSI BELONGING TO THE ASSESSEE HAS BEEN TRANSFERRED; THEREFORE, IN VI EW OF THE VARIOUS DECISIONS CITED THE ASSESSEE IS NOT LIABLE TO PAY CAPITAL GAI N TAX. IT IS THE SUBMISSION OF THE LD DR THAT THE DECISIONS CITED BY THE LD COUNSEL FO R THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE IN NONE OF THE CASES, THERE IS DEMOLITION OF THE BUILDING AND ON THOSE CASES, THER E WAS ONLY FURTHER CONSTRUCTION OR MODIFICATION TO THE EXISTING BUILDI NG. 12 WE FIND MERIT IN THE ABOVE SUBMISSIONS OF THE L D DR. WE FIND THE ASSESSEE BEFORE THE ASSESSING OFFICER VIDE HIS REPLY DATED 2 7.11.2007 HAS SUBMITTED AS UNDER: THE ASSESSEE ASSERTS THAT THERE IS TRANSFER OF RIG HT, TITLE AND INTEREST IN THE PLOT OF LAND. THE WORD TRANSFER IN SEC. 2(47) I NCLUDES EXTINGUISHMENT RELINQUISHMENT OF RIGHT, TITLE AND INTEREST IN PROP ERTY. IT IS SUBMITTED THAT EVEN THOUGH THERE WAS NO SALE OF PLOT OF LAND OR TR ANSFER OF RIGHT, TITLE AND INTEREST IN THE SAID PLOT OF LAND AND THE ASSESSEE CONTINUES TO BE THE JOINT HOLDER OWNER OF PLOT IN THE RECORD OF THE SOCIETY , IN FACT AND IN SUBSTANCE, THE ASSESSEE IS A HOLDER/OWNER ON PAPER BECAUSE THE PLOT IS NOT OPEN PLOT BUT COVERED WITH A NEW STRUCTURE SHARED BY ASSESSEE AND DEVELOPER AND/OR THEIR NOMINEES TO WHOM DEVELOPER SOLD FLATS PERTAINING TO DEVELOPERS 50% SHARE IN THE BUILDING. FURTHER, THE ASSESSEES CANNOT USE THIS PLOT ALONE AND CANNOT PUT UP ANY CONSTRUCTION OF THEIR OWN EVEN, AS NO PERMISSIBLE OPEN SPACE AVAILABLE FOR SIDEWAYS OR ABOVE 11 TH FLOOR, CONSTRUCTION (BMC CANNOT ALLOW ANY FSI AGAINST DEVE LOPMENT REGULATIONS). IN FACT THE RIGHTS OF SO CALLED PLOT HOLDER OWNERS IN PLOT OF LAND HAVE BEEN 16 ITA NO.6170/MUM/2008 SURRENDERED IN FAVOUR OF DEVELOPERS NOMINEES, BEIN G PURCHASERS OF FLATS IN THE BUILDING WHO ARE NOW JOINT HOLDERS OF PLOT O F LAND ALONG WITH THEIR FLATS ON PROPORTIONATE BASIS. THE ASSESSEES VIZ PL OT HOLDER HAS NEITHER CHARGED ANY LEASE MONEY USING THE PLOT BY NOR TRANS FER FEE FROM FLAT PURCHASERS BEING FLAT OWNERS. THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE (CO- OWNER) OF PLOT OF LAND, HAVE IN EFFECT EXTINGUISHED THEIR RIGHTS IN THE PLO T NO 8 LAND IN FAVOUR OF DEVELOPERS NOMINEES/FLAT PURCHASERS TO BECOME JOINT INTEREST HOLDERS, AND CASE TO BE SINGLE HOLDER OF RIGHT, TITLE AND INTERE ST IN THE PLOT OF LAND. THE PLOT HOLDER AND FLAT OWNERS HAVE FORMED AN ASSO CIATION CALLED CHIRANJEEV RESIDENTS ASSOCIATION FOR MANAGING JOI NTLY THE DAY-TO-DAY AFFAIRS OF THE BUILDING AND CONTRIBUTION TOWARDS MA INT4ENANCE REGULARLY. THE ASSESSEES FURTHER SUBMITS THAT ASSESSEE CANNOT USE THE PLOT FOR MAKING ANY FURTHER STRUCTURE BEYOND 11 TH FLOOR AND EVEN IF AT A LATER STAGE, BMC ALLOWS FURTHER FSI NEW ADDITIONAL STRUCTURE CAN NOT BE MADE, UNLESS DEVELOPERS NOMINEES OR FLAT BUYERS GIVE CONSENT TO ASSESSEES FOR JOINT DEVELOPMENT. FREEDOM AND LIBERTY OF SINGLE OWNERSHI P OF PLOT IS TAKEN AWAY AND EVERY USE OF PLOT IS TO BE SHARED WITH OTH ER FLAT OWNERS. ALL THIS AMOUNTS TO RELINQUISHMENT AND EXTINGUISHME NT OF RIGHT, TITLE AND INTEREST IN PLOT OF LAND IN FAVOUR OF OTHER FLAT OW NERS. THE ASSESSEES FURTHER SUBMITS THAT SUCH RELINQUISHMENT AND EXTINGUISHMENT OF RIGHT, TITLE AND INTEREST IN PLOT OF LAND WAS CAPITAL ASSET, U/S2(47 ) OF THE INCOME TAX ACT, AND THE RECEIPT OF CONSIDERATION OF RS. 1,09,17,500 /- WAS A CAPITAL RECEIPT AND EXIGIBLE TO CAPITAL GAIN TAX (LONG TERM IN OUR CASE) AND SUCH CONSIDERATION AS NOT INCOME FROM OTHER SOURCES, AS IT IS FOR PLOT AND DEVELOPMENT SHARE OF DEVELOPERS. FURTHER THE ASSESSEES FEELS AND FEES STRONGLY THAT CONSIDERATION RECEIVED FROM DEVELOPER UNDER THE DEVELOPMENT AGREEMENT RELA TED TO LAND AND FSI OF PLOT OF LAND BEING CAPITAL ASSET (AND NOT ANY BU SINESS ACTIVITY OR ANY OTHER INCOME EARNING ACTIVITY) AND AS SUCH WAS A CA PITAL RECEIPT (NOT REVENUE RECEIPT) EXIGIBLE TO CAPITAL GAIN TAX. WE FIND CLAUSE (P) AT PAGE 4 OF THE AGREEMENT READ S AS UNDER: CL.(P) CL.(P) CL.(P) CL.(P) SINCE THE OWNERS ARE RETAINING 50% OF THE A REA THE DEVELOPERS ARE ENTITLED TO DEVELOP THE REMAINING 50% AREA AND RETA IN THE SAME. 17 ITA NO.6170/MUM/2008 CL.4.3 AT PAGE 6 AND CLAUSE 17 AT PAGE 8 AND 9 OF T HE AGREEMENT READ AS UNDER: CL.4.3 CL.4.3 CL.4.3 CL.4.3: THE OWNERS HAVE RETAINED FSI OF 11,835 SQ.F T FSI ORIGINATING FROM THE SAID LAND AND THE OWNERS HAVE AGREED TO PAY TO THE DEVELOPERS THE COSTS OF CONSTRUCTION THEREOF FIXED AT RS. 1000/- P ER SQ.FOOT. THE AMOUNT PAYABLE BY THE OWNERS TO THE DEVELOPERS WORKOUT TO RS. 1,18,35,000/- (RUPEES ONE CORE EIGHTEEN LACS THIRTY FIVE THOUSAND ONLY AND THEREFORE EACH OWNER IS LIABLE TO PAY RS. 59,17,500/- I.E ( R UPEES FIFTY NINE LACS SEVENTEEN THOUSAND FIVE HUNDRED ONLY) AGAINST THE R ECEIPT THE BALANCE AMOUNT MENTIONED IN CLAUSE 4.1(B) THE OWNERS WILL P AY THE DEVELOPERS THE SAID COSTS OF CONSTRUCTION IN ADVANCE. CL. CL.CL. CL.17: 17: 17: 17:ON THE LICENSE BEING GRANTED THE DEVELOPERS SHAL L BE ENTITLED TO DEMOLISH THE SAID EXISTING BUILDING. THE DEBRIS KAT MAL BUILDING MATERIAL OF THE EXISTING STRUCTURES WILL BELONG TO DEVELOPERS A S THE CONSIDERATION THEREOF IS INCLUDED IN THE AFORESAID CONSIDERATION. 12.1 A PERUSAL OF THE VARIOUS CLAUSES OF THE AGREEM ENT AND MORE PARTICULARLY THE ABOVE CLAUSES INCLUDING THE SUBMISSION OF THE A SSESSEE BEFORE THE ASSESSING OFFICER, CLEARLY INDICATE THAT THERE IS TRANSFER OF LAND AND BUILDING. THEREFORE, THE PROVISIONS OF SEC 50 ARE CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE VARIOUS DECISIONS RELIED ON BY THE LD COUNSEL FOR T HE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . 12.2 SO FAR AS THE 1 ST SIX DECISIONS MENTIONED IN PARA 10 OF THIS ORDER R ELIED ON BY THE LD COUNSEL FOR THE ASSESSEE WHILE ARGUING TH E ADDITIONAL GROUNDS, WE FIND IN NONE OF THE CASES THERE WAS DEMOLITION OF EXISTI NG BUILDING. IN ALL THOSE CASES, THERE WAS CONSTRUCTION OF ADDITIONAL FLOOR/MODIFICA TIONS ON THE EXISTING STRUCTURE. HOWEVER, IN THE INSTANT CASE, THE LAND AND BUILDING WAS TRANSFERRED AS ASSERTED BY THE ASSESSEE, THE EXISTING BUILDING WAS DEMOLI SHED AND NEW CONSTRUCTION TAKEN PLACE. THEREFORE, THOSE DECISIONS ARE NOT APP LICABLE TO THE FACTS OF THE PRESENT CASE. 18 ITA NO.6170/MUM/2008 12.3 SO FAR AS THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI RAM KUMAR MALHOTRA (SUPRA) IS CONCERNED, WE FIND THE CIT(A) IN THE SAID ORDER HAS DIRECTED THE ASSESSING OFFICER TO CONSIDER THE GAINS ARISING ON TRANSFER OF FSI/TDR RIGHTS AS CAPITAL GAIN FOR WHICH, THE ASSESSING OFFICER W ILL MAKE NECESSARY CALCULATION OF SALE CONSIDERATION AND COST OF ACQUISITION AND/O R IMPROVEMENT. HE HAS DIRECTED THE ASSESSING OFFICER TO ALLOW EXEMPTION U /S 54 AND 54EC. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), REVENUE WAS IN APPEA L BEFORE THE TRIBUNAL AND THE DEPARTMENTS APPEAL WAS DISMISSED BY THE TRIBUNAL. EVEN IN THAT CASE ALSO THERE IS NO MENTION OF DEMOLITION OF EXISTING BUILD ING. THE ASSESSING OFFICER IN THAT CASE HAS TREATED THE INCOME FROM TRANSFER OF T DR RIGHTS AS INCOME FROM OTHER SOURCES AS AGAINST CAPITAL GAIN DECLARED B Y THE ASSESSEE AND THE CIT(A) DIRECTED THE ASSESSING OFFICER TO CONSIDER THE SAME AS CAPITAL GAIN AND ALLOW DEDUCTION U/S 54 AND 54EC. THEREFORE, THAT DECISION , IN OUR OPINION, IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 13 CONSIDERING THE TOTALITY OF THE FACTS OF THE PRE SENT CASE AND CONSIDERING THE FACT THAT THE ASSESSEE IN THE INSTANT CASE HAS TRANSFERRED THE LAND AND BUILDING TO THE DEVELOPER THROUGH A DOCUMENT, WHICH HAS BEEN REGISTERED THROUGH STATE REGISTRATION AUTHORITIES; THEREFORE, THERE IS TRANSFER OF A CAPITAL ASSET, THE CAPITAL GAIN ON WHICH IS CHARGEABLE TO INCOME TAX. IN THIS VIEW OF THE MATTER, BOTH THE ADDITIONAL GROUNDS RAISED BY THE A SSESSEE ARE DISMISSED. 14 NOW COMING TO THE ORIGINAL GROUNDS RAISED BY THE ASSESSEE, WE FIND GROUNDS OF APPEAL NOS 1, 5, 6 &7 ARE GENERAL IN NAT URE AND, THEREFORE, ARE DISMISSED. 19 ITA NO.6170/MUM/2008 16 SO FAR AS GROUNDS OF APPEAL NO.2 IS CONCERNED, W E FIND THE CIT(A) HAS CLEARLY MENTIONED THAT PROVISIONS OF SEC. 50C ARE C LEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE HAVE ALREADY HELD IN THE P RECEDING PARAGRAPHS THAT IN THIS CASE THERE IS TRANSFER OF LAND AND BUILDING TO THE DEVELOPER AND THEREFORE, PROVISIONS OF SEC. 50C ARE CLEARLY APPLICABLE TO TH E FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER, GROUNDS OF APPEAL NO.2 BY THE ASSESSEE, IS DISMISSED. 17 SO FAR AS GROUNDS OF APPEAL NO3 IS CONCERNED, WE FIND THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE BEFORE US TO SUBSTANTIATE THAT IN THE CASE OF SPOUSE, WHO IS A CO-OWNER, NO TAX LIABILITY HAS BEEN FASTENED. WE, THEREFORE, FIND NO MERIT IN THE SUBMISSION OF THE L D COUNSEL FOR THE ASSESSEE THAT HE BEING OTHER CO-OWNER, CANNOT BE BURDEN TO TAX L IABILITY. FROM THE ORDER OF THE CIT(A) ALSO, WE FIND THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE BEFORE HIM. SINCE THE ASSESSEE HAS FAILED TO SUBSTA NTIATE WITH EVIDENCE THAT NO TAX LIABILITY HAD BEEN ATTACHED IN THE CASE OF TH E SPOUSE OF THE ASSESSEE, THEREFORE, THIS GROUND BY THE ASSESSEE IS DISMISSED . 18 SO FAR AS THE GROUNDS OF APPEAL NO.4(A) IS CONCE RNED, ALTHOUGH, THE ASSESSEE HAS VALUED THE COST OF LAND AS ON 1.4.81 A T RS. 1,40,233/-, WE FIND THE SAME IS ON THE BASIS OF VALUERS REPORT IN THE YEAR 1985. THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE BEFORE THE ASSESS ING OFFICER TO ESTABLISH THE ACTUAL COST OF LAND THAT NEEDS DEDUCTION FROM T HE CONSIDERATION RECEIVED. UNDER THESE CIRCUMSTANCES, THE VALUE ADOPTED BY THE ASSESSING OFFICER AT RS. 1,12,186/-, IN OUR OPINION IS JUSTIFIED. ALTHOUGH, THE ORDER OF THE CIT(A) IS SILENT ON THIS ISSUE DESPITE A SPECIFIC GROUND TAKEN BEFORE H IM, WE FIND FROM THE MATERIAL 20 ITA NO.6170/MUM/2008 AVAILABLE THAT THE ASSESSEE HAS NOT GIVEN ANY COGEN T EVIDENCE OR EXPLANATION FOR ADOPTION OF COST OF LAND AT RS. 1,40,233/- AS AGAIN ST RS. 1,12,186/- ADOPTED BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES, THE GROUND OF APPEAL NO.4(A) IS DISMISSED. 19 SO FAR AS GROUNDS OF APPEAL NO.4(B) IS CONCERNE D, WE FIND, ADMITTEDLY, THE BALANCE SHEET OF THE ASSESSEE SHOWS THE VALUE OF TH E BUILDING AT RS. 7,43,534/-. HOWEVER, NO JUSTIFICATION/REASON HAS BEEN GIVEN BY THE ASSESSING OFFICER AS TO HOW AND WHY HE HAS NOT CONSIDERED THE INDEXATION OF THE BUILDING, WHICH IS AS PER THE BALANCE SHEET, WHILE CALCULATING THE CAPITA L GAIN. THE CIT(A) HAS ALSO NOT DEALT WITH THIS ISSUE. UNDER THESE CIRCUMSTANCES, W E DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICE R TO PASS A SPEAKING ORDER ON THIS ISSUE IN ACCORDANCE WITH LAW AND AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDING LY. THE GROUNDS OF APPEAL NO.4(B) IS ACCORDINGLY ALLOWED FOR STATISTICAL PURP OSE. 20 SO FAR AS THE GROUNDS OF APPEAL NO.4(C) REGARDIN G THE WORKING OF CAPITAL GAIN FILED BY THE ASSESSEE AT RS.39,32,160/- IS CON CERNED, IN VIEW OF OUR DECISION IN RESPECT OF GROUNDS OF APPEAL 4(B) WHEREIN WE HAV E RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER, THIS GROUND NEEDS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH COMPUTATION OF CAPITAL GAIN. ACCORDINGLY, GROUNDS OF APPEAL NO.4(C), IS ALLOWED FOR STATISTICAL PURPOSE. 21 GROUNDS OF APPEAL NO.4(D) BEING GENERAL IN NATUR E IS DISMISSED. 21 ITA NO.6170/MUM/2008 22 SO FAR AS GROUNDS OF APPEAL NO.8 IS CONCERNED, W E FIND THE ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF NEW SHAILAJA CO-OP HSG SOC LTD VS ITO VIDE ITA NO.512/MUM/2007DATED2.12.2008 FOR THE ASSESSMENT YEAR 2003-04. IN THAT CASE THE ASSESSEE BECAME ENTITLED TO ADDITI ONAL FSI OF AROUND 11000 SQ,FT DUE TO ITS LAND HOLDING. THE ASSESSEE TRANSFERRED THIS ENTITLEMENT FOR CONSIDERATION OF RS. 48.96 LACS TO THE BUILDER. UN DER THESE CIRCUMSTANCES, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSEE HAS NOT INCU RRED ANY COST OF ACQUISITION IN RESPECT OF THE RIGHT WHICH EMANATED FROM THE 1991 RULES MAKING THE ASSESSEE ELIGIBLE FOR ADDITIONAL FSI. SINCE THERE WAS NO COS T OF ACQUISITION FOR THE ADDITIONAL FSI, THE TRIBUNAL, RELYING ON A COUPLE OF DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF B C SREENIVAS A SHETTY HELD THAT NO CAPITAL GAIN CHARGEABLE TO TAX HAS ARISEN. HOWEVER, IN THE INSTANT CASE, THERE IS A TRANSFER OF EXISTING LAND AND BUILDING. IT WAS DEM OLISHED BY THE BUILDER FOR FRESH CONSTRUCTION. THE DOCUMENTS WERE REGISTERED BY THE STATE REGISTRATION AUTHORITIES. THEREFORE, THE DECISION OF THE TRIBUNA L IN THE CASE OF NEW SHAILAJA CO-OP HSG SO LTD (SUPRA), IN OUR OPINION IS NOT APP LICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER, THE GROU NDS OF APPEAL NO. 8 BY THE ASSESSEE, IS DISMISSED. 23 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 23TH, DAY OF APRIL 2011. SD/- SD/- ( (( ( R V EASWAR R V EASWAR R V EASWAR R V EASWAR ) )) ) PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED:13 TH , APRIL 2011 RAJ* 22 ITA NO.6170/MUM/2008 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI
