HARKISON C. DESAI HUF, MUMBAI V. ITO 19(2)(3), MUMBAI

ITA 6259/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6391 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 19-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JITENDRA YADAVDR PER R K
• Assessee Lawyers: A E KHASGIWALA
• Keywords: Capital receipt

Judgement Text

1 ITA NO.6259/MUM/2010 (ASST YEAR 2005-06) 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 SMC BENCH MUMBAI SMC BENCH MUMBAI SMC BENCH MUMBAI SMC BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI R K PANDA, BEFORE SHRI R K PANDA, BEFORE SHRI R K PANDA, BEFORE SHRI R K PANDA, A AA ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER ITA NO.6259/MUM/2010 ITA NO.6259/MUM/2010 ITA NO.6259/MUM/2010 ITA NO.6259/MUM/2010 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) HARKISON C DESAI HUF 7 ABHAY APARTMENT DATTATTARYA ROAD SANTACRUZ (W) MUMBAI 54 VS THE INCOME TAX OFFICER WARD 19(2) (3), MUMBAI (APPELANT) (APPELANT) (APPELANT) (APPELANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO.AAAHH003 PAN NO.AAAHH003 PAN NO.AAAHH003 PAN NO.AAAHH0033 33 3E EE E ASSESSEE BY SHRI A E KHASGIWALA REVENUE BY SHRI JITENDRA YADAV/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 AGAI NST THE ORDER DATED14.6.2010 OF THE CIT(A)-30, MUMBAI RELATING TO ASSESSMENT YEAR 2005-06. 2 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IN ITS RETURN OF INCOME CLAIMED TO HAVE RECEIVED RS. 2,42,880/- AS SHARE PR EMIUM FROM THE SOCIETY WHICH IS EXEMPT BEING CAPITAL RECEIPT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A COPY OF LETTER FR OM THE SOCIETY REGARDING FORWARDING OF CHEQUE TO THE ASSESSEE OUT OF MONEY R ECEIVED FROM THE DEVELOPER M/S SUNRISE DEVELOPER. IT WAS SUBMITTED THAT THE SOCIETY HAS GIVEN RIGHT TO DEVELOP THE SOCIETY PREMISES INTO MULTI-STOREYED BU ILDING BY UTILIZING FSI AVAILABLE WITH THE SOCIETY AND ALLOWING DEVELOPER T O BUY ADDITIONAL FSI FROM THE 2 ITA NO.6259/MUM/2010 (ASST YEAR 2005-06) MARKET FOR THE CONSIDERATION OF RS. 70,07,288/-. O UT OF THIS MONEY, WHICH IS RECEIVED BY THE SOCIETY, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 2,42,880/-. 2.1 HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCE D WITH THE EXPLANATIONS GIVEN BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER SINCE THE ASSESSEE IS A MEMBER OF THE COOPERATIVE HOUSING SOCIETY AND THE SOCIETY HAS SOLD ITS FSI AND OPEN SPACE TO THE BUILDER/DEVELOPER TO CONSTRUC T A MULTI-STOREYED BUILDING, IT IS A COMMERCIAL TRANSACTION RESULTING IN CAPITAL GAINS TO THE SOCIETY AND ITS MEMBERS. ACCORDING TO HIM, MONEY RECEIVED BY THE A SSESSEE IS TAXABLE AS CAPITAL GAIN IN THE HANDS OF THE SOCIETY. SIMILARLY , ANY AMOUNT RECEIVED BY ITS MEMBERS IS ALSO TAXABLE IN THE HANDS OF THE MEMBERS OF THE SOCIETY BECAUSE THE SOCIETY CONSISTS OF MEMBERS AND IF THE MEMBERS GIVE CONSENT TO THE SOCIETY THEN ONLY THE SOCIETY CAN ENTER INTO AGREEMENT WITH THE BUILDER TO ALLOW HIM TO DEVELOP THE SOCIETY BUILDING. IT IS THE RIGHT, WH ICH EACH MEMBER HAVE IN THE SOCIETY, WHICH HE SURRENDERED BY ALLOWING THE SOCIE TY TO DEVELOP THE BUILDING, WHICH IS CAPITALIZED/COMPENSATED BY GIVING HIM THE LUMP SUM AMOUNT RECEIVED FROM THE DEVELOPER AND THIS AMOUNT IS TAXABLE IN TH E HANDS OF THE MEMBERS. THE ASSESSING OFFICER, ACCORDINGLY TREATED THE AMOUNT O F RS. 2,42,880/- AS LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 2.2 IN APPEAL, THE CIT(A) UPHELD THE ACTION OF THE AO BY HOLDING AS UNDER: I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDE R, THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND OTHER RELEVANT MATERIAL ON RECORD. I FIND CONSIDERABLE FORCE IN THE ARGUMENT OF THE AO T HAT THE PREMIUM PAID BY THE SOCIETY TO ITS MEMBERS IS TAXABLE IN THEIR H ANDS AS LONG TERM CAPITAL GAINS. THE AO HAS GIVEN ADEQUATE REASONS IN THE ASSESSMENT ORDER FOR TAXING THE INCOME OF RS. 242,880/- IN THE HANDS OF THE APPELLANT HUF. FURTHER THE AO HAS ALSO MENTIONED IN THE ASSESSMENT ORDER THAT THE 3 ITA NO.6259/MUM/2010 (ASST YEAR 2005-06) SOCIETY WHICH HAS ENTERED INTO AGREEMENT WITH THE D EVELOPER HAS NOT FILED ANY RETURN OF INCOME OFFERING THE CONSIDERATION REC EIVED FROM THE BUILDER/DEVELOPER. THEREFORE, THERE IS ALL THE MORE REASON FOR TAXING THE SUM OF RS. 242,880/- RECEIVED BY THE APPELLANT FROM THE SOCIETY. IN VIEW OF THE ABOVE DISCUSSION THE ADDITION MAD DE BY THE AO OF RS. 242,880/- IS ACCORDINGLY CONFIRMED. THE GROUND OF A PPEAL ARE DISMISSED.. 3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL BY TAKING THE FOLLOWING GROUND S: THE PREMIUM PAID BY THE SOCIETY TO ITS MEMBERS IS T AXABLE IN THEIR HANDS AS LONG TERM CAPITAL GAIN AND CONFIRMED THE ORDER O F THE ASSESSING OFFICER TAXING THE SUM OF RS. 242,880/- RECEIVED BY THE APPELLANT FROM THE SOCIETY. 3.1 THE ASSESSEE HAS ALSO TAKEN AN ADDITIONAL GROUN D WHICH READS AS UNDER: THE APPELLANT IS HAVING CARRIED FORWARD LOSS ON LON G TERM CAPITAL GAIN OF ` 245658.50 ON SALE OF SHARES AND ` 31959.05 ON SALE OF DIAMOND IN THE ASSESSMENT YEAR 2000-2001. THESE LOSS OF LONG TERM CAPITAL GAIN SHOULD BE SET OFF AGAINST IN CASE ANY PROFIT ON LONG TERM CAPITAL GAIN. 4 AFTER HEARING BOTH THE PARTIES, THE ADDITIONAL GR OUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION. 5 THE LD COUNSEL FOR THE ASSESSEE REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF MAHESHWAR PRAKASH-2 CO-OPERATIVE HSG SO CIETY LTD VS ITO REPORTED IN 24 SOT 366(MUM) SUBMITTED THAT AFTER CONSIDERING VARIOUS DECISIONS INCLUDING THE DECISION IN THE CASE OF CIT VS B C SHRINIVASA SHETTY REPORTED IN 128 ITR 294, THE TRIBUNAL HAS HELD THAT THE AMOUNT RECEIVED BY THE CO-OPERATIVE SOCIETY ON ACCOUNT OF SALE/SURRENDER OF TDR IS NOT CHARGEABLE TO TAX. IN VIEW OF THE ABOVE DECISION SINCE THE AMOUNT IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE COOPERATIVE SOCIETY; THEREFORE, ANY AMOUNT RECEIVED BY ITS MEMBERS OUT OF SUCH RECEIPT IS ALSO NOT CHARGEABLE TO TAX. 4 ITA NO.6259/MUM/2010 (ASST YEAR 2005-06) 5.1 IN HIS ALTERNATE CONTENTION, THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS HAVING CARRY FORWARD LONG TERM CAPI TAL LOSS OF RS. 2,45,658.50 ON SALE OF SHARES AND RS. 31,959.05 ON SALE OF DIAM OND IN THE ASSESSMENT YEAR 2000-01. IN CASE ANY PROFIT ON LONG TERM CAPITAL GA IN DETERMINED BY THE CIT(A) IS UPHELD THEN THE LONG TERM CAPITAL LOSS SHOULD BE SE T OFF FROM SUCH LONG TERM CAPITAL GAIN. 5.2 THE LD DR, ON THE OTHER HAND SUPPORTED THE ORDE R OF THE CIT(A). 7 I HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY B OTH THE PARTIES. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS REC EIVED AN AMOUNT OF RS. 2,42,880/- FROM THE SOCIETY WHICH HE CLAIMED AS EXE MPT FROM TAX. IT IS THE CONTENTION OF THE LD COUNSEL FOR THE ASSESSEE THAT THE SOCIETY HAS RECEIVED COMPENSATION OF RS. 70,07,288/- FROM THE DEVELO PERS AND HAS GIVEN AN AMOUNT OF RS. 2,42,880/- TOWARDS THE SHARES OF THE ASSESSEE. ACCORDING TO THE LD COUNSEL FOR THE ASSESSEE, SINCE THE AMOUNT IS EX EMPT IN THE HANDS OF THE CO- OP SOCIETY, THEREFORE, THE SAME IS NOT TAXABLE IN T HE HANDS OF ITS MEMBERS. 7.1 IT IS THE ALTERNATE CONTENTION OF THE LD COUNSE L FOR THE ASSESSEE THAT IN CASE THE AMOUNT IS TREATED AS LONG TERM CAPITAL GAIN THE N IN VIEW OF THE CARRY FORWARD LONG TERM CAPITAL LOSS OF RS. 2,45,658.50 ON ACCOUN T OF SALE OF SHARES AND AN 5 ITA NO.6259/MUM/2010 (ASST YEAR 2005-06) AMOUNT OF RS. 31,959.05 ON ACCOUNT OF SALE OF DIA MOND IN THE AY 2000-01, THIS LONG TERM CAPITAL LOSS SHOULD BE SET OFF FROM THE LONG TERM CAPITAL GAIN. 8 I FIND FORCE IN THE ALTERNATE CONTENTION OF THE L D COUNSEL FOR THE ASSESSEE RAISED IN THE ADDITIONAL GROUND AND THE SAME IS ACC EPTABLE. I, THEREFORE, SET ASIDE THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER WITH THE DIRECTION TO VERIFY THE BROUGHT FORWARD LONG TERM CAPITAL LOSS A ND SET OFF THE CAPITAL GAIN FROM SUCH BROUGHT FORWARD LONG TERM CAPITAL LOSS. I HOL D AND DIRECT ACCORDINGLY. 9 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 26 TH , DAY OF NOV 2010. SD/- ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 26 NOV 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI