ASST CIT 25(1), MUMBAI V. AKSHAY J DOSHI, MUMBAI

ITA 6206/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1053 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 08-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Business income; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI P K BANSAL, VP & SHRI RAVISH SOOD, JM ITA NO. 6206/MUM/2014 ASSESSMENT YEAR : 2011-12 ACIT 25(1) MUMBAI VS. SHRI AKSHAY J DOSHI, 701, BHOOMI N S ROAD NO.8, JVPD SCHEME, VILE PARLE (W), MUMBAI -400 056 PAN AAHPD2867K (APPELLANT) (RESPONDENT) ITA NO. 6284/MUM/2014 ASSESSMENT YEAR : 2011-12 SHRI AKSHAY J DOSHI, MUMBAI -400 056 PAN AAHPD2867K VS. ACIT 25(1) MUMBAI (APPELLANT) (RESPONDENT) FOR THE REVENUE : SHRI RAJESH KUMAR YADAV FOR THE ASSESSEE : SHRI PRATEEK JAIN DATE OF HEARING : 04 .0 5 .2017 DATE OF PRONOUNCEMENT : 05 .0 5 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORD ER OF THE CIT(A) DATED 24.07.2014. THE ONLY ISSUE INVOLVED IN REVEN UES APPEAL RELATE TO THE DELETION OF THE ADDITION OF RS.2,12,77,710/- MADE B Y THE AO ON ACCOUNT OF INCOME FROM LONG TERM CAPITAL GAIN, WHILE THE ONLY ISSUE INVOLVED IN ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 2 ASSESSEES APPEAL RELATE TO THE NOT EXCLUDING RS.53 ,00,000/- FROM THE SALE CONSIDERATION FOR CALCULATING CAPITAL GAIN. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AO NOTE D THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AMOUNTING TO RS.87,26, 847/- ON THE SALE OF FLAT NO.6, ADMEASURING 572.30 SQ.FT. ON THE FIRST FLOOR, SMRUTI BLDG., 15 TH ROAD, KHAR (W), MUMBAI. THE SAID COMPUTATION HAS BEEN MA DE IN THE FOLLOWING MANNER: THE COMPUTATION OF CAPITAL GAIN IS AS UNDER: A. PURCHASE COST OF FLAT (F.Y. 2005-06) 99,89,6 63 B. SALE OF VALUE OF FLAT (F.Y. 2010-11) 2,17,00,0 00 C. INDEXED COST OF PURCHASE 1,27,03,152 D. PROFIT (B-C) 89,96,848 LESS: EXPENSE INCURRED 2,70,000 CAPITAL GAIN 87,26,847 ON QUESTIONING, THE ASSESSEE SUBMITTED THAT SMRUTI BUILDING IN WHICH ASSESSEE HAD PURCHASED FLAT ON 03.03.2006 WENT ON F OR REDEVELOPMENT AND THE ASSESSEE WAS GIVEN A FLAT IN THE NEWLY DEVELOPM ENT BUILDING KNOWN AS BHOOMI AURA, WHICH WAS SOLD BY THE ASSESSEE VIDE AGREEMENT DATED 24.01.2011. THE AO SPECIFICALLY ASKED THE ASSESSEE TO EXPLAIN WHY PART OF THE SALE CONSIDERATION HAS BEEN PASSED OVER TO THE BUILDER AS SHOWN BY THE ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 3 ASSESSEE AS PER SALE DEED DATED 24.01.2011. IN THE ABSENCE OF ANY EXPLANATION OF THE ASSESSEE, THE AO HAS TAKEN THE S ALE CONSIDERATION WHILE COMPUTING THE CAPITAL GAIN AT RS.4,82,77,700/- BUT ALLOWED THE INDEXED COST OF PURCHASE TO THE ASSESSEE AS HAS BEEN WORKED OUT BY HIM AT RS.1,27,03,152/- AS WELL AS EXPENSES CLAIMED BY HIM AT RS.2,70,000/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND BEFOR E THE CIT(A) THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAD PURCHA SED FLAT NO.6 HAVING CARPET AREA OF 572.30 SQ FT. IN SMRUTI BLDG., 15 TH KHAR ROAD, MUMBAI VIDE PURCHASE DEED DATED 03.03.2006, FOR A CONSIDERATION OF RS.99,89,663/-. THE SAID BUILDING WENT FOR REDEVELOPMENT AND AS PER THE DEVELOPMENT AGREEMENT BETWEEN THE DEVELOPER AND THE HOUSING SOCIETY, EACH FLAT OWNER BECOMES ENTITLED FOR EQUIVALENT AREA IN THE PROPOSED NEW BU ILDING BHOOMI AURA ALONG WITH ALL AMENITIES FREE OF COST. COPY OF THE DEVELOPMENT AGREEMENT WAS ALSO FILED. THE ASSESSEE THEREFORE BECOMES ENT ITLED FOR CARPET AREA OF 658.15 SQ.FT., AS THE ASSESSEE WAS ENTITLED FOR 15% EXTRA AREA FREE OF FSI REGULATION IN ADDITION TO THE EQUIVALENT AREA. THE DEVELOPER HAD ALLOTTED 1470 SQ. FT. TO THE ASSESSEE. THE ASSESSEES SHARE WAS 44.78% WHILE THE DEVELOPERS SHARE WAS 55.22% AND, ACCORDINGLY, THE ASSESSEE HAS ALLOCATED THE TOTAL CONSIDERATION OF RS.4,82,77,700/- INTO TW O PARTS. THE DEVELOPERS SHARE AMOUNTING TO RS.2,65,77,700/- AND ASSESSEES SHARE AT ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 4 RS.2,17,00,000/-. THE ASSESSEE ALSO SUBMITTED THAT HE HAS COMPUTED THE LONG TERM CAPITAL GAIN ACCORDINGLY AS UNDER: SALE CONSIDERATION RS.2,12,77,700/- LESS: EXPENDITURE ON SALE (BROKERAGE) RS. 2,70 ,000/- NET SALE CONSIDERATION RS.2,14,30,000/- LESS: INDEXED COST OF ACQUISITION RS.1,24,03,152 /- LONG TERM CAPITAL GAIN RS. 87,26,847/- THE DEVELOPER HAS OFFERED THE SHARE OF SUCH SALE CO NSIDERATION OF RS.2,65,77,700/- AS BUSINESS INCOME. THE CIT(A) AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AS WELL AS THE DEVELOPME NT AGREEMENT DATED 15.02.2006, BETWEEN THE SOCIETY AND THE DEVELOPER AS WELL AS THE AGREEMENT BETWEEN THE ASSESSEE AND THE SOCIETY, ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE SALE PROCEEDS, WHILE DETERMINING THE CAPITAL GAIN IN THE HANDS OF ASSESSEE, WOULD BE TAKEN AS PER THE AGREEM ENT OF SALE WITH SHRI MUKUND SAPRE AND SMT. SANGEETA SAPRE AND, ACCORDING LY, DELETED THE ADDITION OF RS.2,12,77,700/- AND DIRECTED THE AO TO TAKE THE SALE CONSIDERATION WHILE COMPUTING THE CAPITAL GAIN IN T HE CASE OF THE ASSESSE AT RS.2,70,00,000/- INSTEAD OF RS.2,17,00,000/- TAKEN BY THE ASSESSEE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES B ELOW. WE HAVE ALSO GONE ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 5 THROUGH THE DEVELOPMENT AGREEMENT DATED 15.02.2006 BETWEEN BHATTE SADAN CO-OP SOCIETY AND THE DEVELOPER, A COPY OF WH ICH IS AVAILABLE AT PAGES 40 TO 69 OF THE PAPER-BOOK. WE NOTED FROM PAGE 53, ON WHICH THE LEARNED AR HAS VEHEMENTLY RELIED. THE SAID CLAUSE 3 IN RES PECT OF THE ALLOTMENT AREA TO EACH MEMBER READ AS UNDER: 3. ON CONSTRUCTION OF THE NEW BUILDING, THE DEVELO PER SHALL ALLOT TO EACH MEMBER FLATS OF THE AREAS EQUIVALENT OF THE AREA PRESENTLY OCCUPIED BY EACH MEMBER OF THE SOCIETY AL ONG WITH SUCH AMENITIES FREE OF COST. IN THE STATEMENT ANNEXED H ERETO AND MARKED AS ANNEXURE 2 DETAILS HAVE BEEN SET OUT OF THE NAMES OF EACH MEMBER AND THE AREAS OF FLAT CURRENTLY OCCUPIE D BY THE MEMBER IN THE EXISTING BUILDING. ON THE BASIS OF THIS CLAUSE THE ASSESSEE SHOULD BE ENTITLED IN THE REDEVELOPED BUILDING A FLAT HAVING A CARPET AREA OF 572.30 SQ.F T, BUT THE ASSESSEE WAS ALLOTTED A FLAT HAVING CARPET AREA 1470 SQ. FT., WH ICH WAS SOLD BY THE ASSESSEE ALONGWITH DEVELOPER. WE FURTHER NOTED AS ARGUED BY THE ASSESSEE THAT THE DEVELOPER M/S. BHOOMI SHASHWAT ESTATE PVT. LTD. OFF ERED TO ALL THE FLAT OWNERS EQUIVALENT AREA IN THE NEW DEVELOPED BUILDI NG PLUS 15% OF EXTRA AREA FREE OF FSI REGULATIONS DUE TO REVISED GUIDELINES O F MUMBAI MUNICIPAL CORPORATION. BRIEFLY, THE ASSESSE WAS ENTITLED ONL Y FOR 658.15 SQ. FT AREA IN THE NEW REDEVELOPED BUILDING. SINCE THE AREA OF TH E FLAT ALLOTTED TO THE ASSESSEE IN THE NEW BUILDING WAS 1470 SQ. FT., THER EFORE, THE ASSESSEES SHARE WAS ONLY 44.78% IN THE NEWLY CONSTRUCTED FLAT, WHIL E THE SHARE OF THE DEVELOPER IS 55.22%. WE HAVE ALSO GONE THROUGH THE COPY OF SALE ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 6 AGREEMENT DATED 24.01.2011 BETWEEN THE BUYERS AND T HE ASSESSEE AS WELL AS THE DEVELOPER M/S. BHOOMI SHASHWAT ESTATE PVT. LTD, COPY OF WHICH IS AVAILABLE AT PAGE 1 TO 47 OF THE PAPER BOOK AS WELL AS THE RECTIFICATION DEED DATED 12.12.2012. AS PER PARA (IX) OF THE SALE AGR EEMENT DATED 24.01.2011, PLACED AT PAGE 12 OF THE PAPER-BOOK, IT IS APPARENT THAT THE AGGREGATE SALE CONSIDERATION OF RS.4,82,77,700/- HAD TO BE PAID TO THE FLAT OWNER AND THE DEVELOPER AS UNDER: AKSHAY DOSHI (FLAT HOLDER) RS.2,70,00,000/- BHOOMI SHASHWAT ESTATE PRIVATE LIMITED (DEVELOPER) RS.2,12,77,700/- CLAUSE (X) OF THIS AGREEMENT STATES THAT AT THE REQUEST OF THE FLAT HOLDER THE DEVELOPER HAS AGREED TO JOIN THIS AGREEMENT WHEREBY THE FLAT HOLDER AND THE DEVELOPER HAS AGREED TO SELL TO THE PURCHASER THE S AID FLAT ON THE TERMS AND FOR THE CONSIDERATION MENTIONED HEREUNDER ON THE BASIS OF THIS AGREEMENT, IT IS APPARENT THAT OUT OF THE TOTAL SALE CONSIDERATION RECEIVED OF RS.4,82,77,700/-, BY THE ASSESSEE RECEIVED RS.2,70,00,000/-. THEREFORE, IN VIEW OF THIS FACT, THE SALE CONSIDERATION FOR THE COMPUTATION OF CAPITAL GAIN SHOULD BE RS.2,70,0 0,000/- WHILE WE NOTED FROM PARA 4.1 OF THE ASSESSMENT ORDER THE ASSESSEE HAS COMPUTED THE CAPITAL GAIN BY TAKING SALE CONSIDERATION AT RS.2,17,00,000 /- THE ASSESSEE HAS ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 7 CLAIMED THAT HE HAS REDUCED A SUM OF RS.53 LACS AS EXPENSES PAYABLE TO THE BUILDER TOWARDS CONSTRUCTION COST FROM THE SAID SUM OF RS.2,70,00,000/- AND, THEREFORE, HE HAS TAKEN THE SALE CONSIDERATION IN T HE COMPUTATION OF CAPITAL GAIN AT RS.2,17,00,000/-. SINCE THE AGREEMENT ENTE RED INTO PROVES THAT THE ASSESSEE HAS RECEIVED SALE CONSIDERATION AT RS.2,70 ,00,000/- AND THE BUILDER HAS TO RECEIVE A CONSIDERATION OF RS.2,12,77,700/-, THEREFORE WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT (A) WHILE DIRECTING THE AO TO TAKE THE SALE CONSIDERATION AT RS.2,70,00,000 WHILE COMPUTING THE CAPITAL GAIN IN THE CASE OF THE ASSESSE. 4. NOW THE QUESTION IN ASSESSEES APPEAL RELATE TO THE CLAIM OF RS.53 LACS AS THE ASSESSEE HAS SHOWN SALE CONSIDERATION IN THE COMPUTATION AT RS.2,17,00,000/- THEREBY REDUCING IT BY RS.53 LACS. THE LEARNED AR BEFORE US VEHEMENTLY RELIED ON THE SUBMISSIONS MADE BEFORE TH E CIT(A) AS WELL AS THE PROFIT & LOSS ACCOUNT, BALANCE SHEET AND INCOME & E XPENDITURE ACCOUNT OF THE BUILDER I.E. BHOOMI SHASHWAT ESTATE PVT. LTD. A ND, ACCORDINGLY, ON THE BASIS PAGE 107, 115 TO 135 CONTENDED THAT SINCE THE BUILDER HAS DULY SHOWN THE SUM OF RS.53 LACS AS ITS TRADING RECEIPTS BEING RECEIVED FROM THE ASSESSEE, THEREFORE, IT IS A PAYMENT MADE BY THE AS SESSEE TO THE BUILDER TOWARDS CONSTRUCTION OF THE SAID FLAT AND, THEREFOR E, IT SHOULD BE ALLOWED AS DEDUCTION TO THE ASSESSEE. WE DO NOT AGREE WITH TH IS SUBMISSION OF THE ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 8 ASSESSEE BECAUSE IN THE HANDS OF THE ASSESSEE THE C APITAL GAIN HAS TO BE COMPUTED IN TERMS OF PROVISIONS OF SECTION 48 OF TH E I.T.ACT., WHEREIN THE ONUS IS PLACED ON THE ASSESSEE TO PROVE WHETHER THE SAID AMOUNT WILL FORM AS PART OF ACQUISITION OR AS PART OF THE EXPENSES INCU RRED TOWARDS SALES. WE FURTHER NOTED AS HAS BEEN POINTED OUT BY REFERRING TO PAGE 53 OF THE PAPER- BOOK, WHICH CONTAINS CLAUSE 3 OF THE DEVELOPMENT AG REEMENT BETWEEN THE DEVELOPER AND THE HOUSING SOCIETY. AS PER THIS C LAUSE THE DEVELOPER IS BOUND TO ALLOT EQUIVALENT AREA TO THE ASSESSEE ALON G WITH ALL THE AMENITIES FREE OF COST. IN VIEW OF THIS FACT, NO QUESTION OF PAYING EXTRA COST BY THE ASSESSEE TOWARDS THE AMENITIES IN THE SAID FLAT, WH ICH WAS SOLD ARISE. BUT WE NOTED FROM THE FACTS BEING ON RECORD THAT IN FACT T HE BUILDER HAS ALLOTTED THE ASSESSEE FLAT ADMEASURING CARPET AREA OF 1470 SQ. F T. WHILE HE WAS ENTITLED TO ONLY 658.15 SQ. FT., WHICH CONSISTS OF ORIGINAL ARE A OF 572.2 SQ. FT AS WELL AS 15% EXTRA AREA AS PER REVISED GUIDELINES OF THE MUM BAI MUNICIPAL CORPORATION. THEREFORE, THE SHARE OF THE ASSESSEE IN THE TOTAL SALE CONSIDERATION WAS ONLY 44.78% AND THE ASSESSEE COUL D BE REGARDED TO BE THE OWNER OF THE FLAT TO THAT EXTENT IN THE TOTAL SALE CONSIDERATION OF RS.4,82,77,700/-. AS SUCH, THE ASSESSEE IS ENTITLE D TO RECEIVE RS.2,17,00,000/-. AS PER THE AGREEMENT AS THE ASSES SEE HAS RECEIVED RS.2,70,00,000/- THEREFORE, THE ASSESSEE WOULD HAVE PAID RS.53 LACS OUT OF THAT SALE CONSIDERATION TO THE BUILDER AND ACCORDIN GLY THE CAPITAL GAINS SHOULD ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 9 HAVE BEEN COMPUTED BY TAKING THE SALE CONSIDERATION AT RS.2,17,00,000 INSTEAD OF RS.2,70,00,000/- ON THIS BASIS THE SALE CONSIDERATION RECEIVED IN THE HANDS OF THE ASSESSEE SHOULD HAVE BEEN REDUCED BY RS.53 LACS AND THE ASSESSEE WOULD HAVE PAID THE SAID MONEY TO THE BUIL DER, AS THE ASSESSEE HAD RECEIVED SALE CONSIDERATION MORE THAN HIS ENTITLEME NT. IT IS NOT A CASE OF MAKING EXTRA PAYMENT TO THE BUILDER TOWARDS THE AME NITIES AND THE EXTRA WORK BEING DONE IN THE FLAT. WE ACCORDINGLY, DIR ECT THE AO TO RECOMPUTE THE CAPITAL GAIN BY TAKING THE SALE CONSIDERATION A T RS.2,17,00,000/- INSTEAD OF RS.2,70,00,000/- AND IN THIS MANNER THE ASSESSEE GETS RELIEF OF RS.53 LACS, BY GETTING THE SALE CONSIDERATION REDUCED. ACCORDI NGLY, THE APPEAL OF THE ASSESSEE IS ALSO ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED, WHILE THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DAY OF MAY, 2017. SD/- SD/- (RAVISH SOOD) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED : 5 TH MAY, 2017 SA ITA NOS.6206/MUM/2014 & 6284/MUM/2014 SHRI AKSHAY J DOSHI 10 COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, A BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI