Appeal details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 7225 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-01-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
G
Assessment Year
2015-2016
Appeal Filed On
15-11-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.6528/M/2018 ASSESSMENT YEAR: 2015-16 SHRI SHAILENDRA BHANDARI, E-27, DHANRAJ MAHAL, CHHATRAPATI SHIVAJI MAHARAJ MARG, APOLLO BUNDER, COLABA, MUMBAI 400 001 PAN: AADPB2390K VS. ACIT, CIRCLE-2(2)(1), ROOM NO.545, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PORUS KAKA, A.R. REVENUE BY : SHRI T.S. KHALSA, D.R. DATE OF HEARING : 17.12.2020 DATE OF PRONOUNCEMENT : 21.01.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 12.09.2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2015-16. 2. THE ONLY EFFECTIVE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) UPHOLDING THE ORDER OF AO WHEREBY THE AO HAS REJECTED THE LONG TERM CAPITAL LOSS OF RS.3,37,09,505/- AS MADE BY THE ASSESSEE ON CANCELLATION OF FLAT BOOKED AND TREATING THE COMPENSATION RECEIVED OF RS.2,50,00,000/- AS INCOME FROM ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 2 OTHER SOURCES AS AGAINST THE SAME HAVING BEEN TREATED AS PART OF THE SALES CONSIDERATION BY THE ASSESSEE. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 14.07.2015 DECLARING TOTAL INCOME OF RS.23,55,91,710/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND STATUTORY NOTICES WERE DULY ISSUED AND SERVED UPON THE ASSESSEE. 4. THE FACTS IN BRIEF ARE THAT DURING THE YEAR THE ASSESSEE CANCELLED AN AGREEMENT ENTERED INTO FOR PURCHASE OF FLAT AND RECEIVED RS.2,50,00,000/- AS COMPENSATION ALONG WITH REFUND OF MONEY ALREADY PAID TOWARDS PURCHASE OF FLAT AMOUNTING TO RS.10,75,99,999/-. THE SAID FLAT WAS BOOKED BY THE ASSESSEE AS CONFIRMED BY THE BUILDER VIDE A LETTER OF INTENT DATED 09.02.2010 WHEREIN THE VARIOUS TERMS AND CONDITIONS FOR PURCHASE OF PROPERTY WERE DULY MENTIONED. THE SAID FLAT WAS COMPRISED ON 15 TH FLOOR ADMEASURING 1626 SQ. FT. CARPET AREA IN THE BUILDING KNOWN AS WATERFRONT TOWER TOGETHER WITH A PARKING SPACE AT SHAHID BHAGAT SINGH ROAD, COLABA, WARD A, MUMBAI. THE SAID LETTER OF INTENT HAD TO BE CANCELLED AS THE SELLERS WERE NOT ALLOWED TO RAISE THE BUILDING HEIGHT UPTO A LEVEL ON WHICH THE FLATS WERE TO BE CONSTRUCTED. THE ASSESSEE AFTER GIVING VARIOUS REMINDERS AND LEGAL NOTICES TO THE BUILDERS SUCCEEDED IN GETTING A COMPENSATION OF RS.2,50,00,000/- ALONG WITH REFUND OF MONEY ALREADY PAID AS EVIDENCED BY THE LETTER DATED 29 TH MARCH 2014. PERTINENT TO MENTION THAT THESE RIGHTS WERE TRANSFERRED BY THREE PERSONS NAMELY MRS. VIBHA HEMANT MEHTA, MRS. ANUJA BADAL MITTAL AND MR. SUNNY RAMESH BIJLANI WHO WERE SHAREHOLDERS IN M/S. KUNAL CORPORATION PVT. LTD. WHO WAS THE OWNER OF THE PLOT ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 3 AND WAS TO CONSTRUCT THE BUILDING AFTER OBTAINING NECESSARY PERMISSIONS FROM THE GOVERNMENT AUTHORITIES. IT IS PERTINENT TO STATE THAT THE SAID BUILDERS HAD ALREADY OBTAINED REQUISITE PERMISSION TO CONSTRUCT WATERFRONT TOWER UP TO HEIGHT OF 238 FEET WHICH WAS PROPOSED TO BE RAISED TO 525 FEET THE ENHANCED HEIGHT AND THESE FLATS NAMELY 15A, 15B, 15C & 15D WERE ON THE 15 TH FLOOR ADMEASURING 1626 SQ. FT. CARPET AREA WERE BOOKED BY THE ASSESSEE. ACCORDING TO THE AO, THE ASSET FOR WHICH THE LETTER OF INTENT WAS ISSUED IN FAVOUR OF THE ASSESSEE WAS NOT EXISTING ON THE DATE ON 09.02.2010 WHEN THE LETTER OF INTENT WAS ISSUED IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE AO THE ASSESSEE HAS MERELY MADE A DEPOSIT WITH THE DEVELOPERS WHICH IS REFUNDABLE TO THE ASSESSEE ALONG WITH COMPENSATION SUBJECT TO CERTAIN TERMS AND CONDITIONS. THE AO FURTHER HELD THAT WHEN AN ASSET DOES NOT EXIST IT IS NOT A CAPITAL ASSET AND THEREFORE ASSESSEE IS NOT ENTITLED TO CLAIM THE CAPITAL GAIN ON THE SAME AND ACCORDINGLY THE CLAIM OF THE ASSESSEE WAS REJECTED. THE LONG TERM CAPITAL GAIN AS CALCULATED BY THE ASSESSEE BY SUBTRACTING INDEXED COST OF ACQUISITION AND COST OF IMPROVEMENT OF RS.16,63,09,595/- FROM SALES CONSIDERATION OF RS.13,25,99,999/- WHICH COMPRISED OF RS.10,75,99,999/- AS THE REFUND OF MONEY ALREADY PAID TO THE BUILDER + THE COMPENSATION OF RS.2,50,00,000/- AWARDED BY THE BUILDER UPON CANCELLATION OF THE LETTER OF INTENT VIDE LETTER DATED 02.04.2014 AND A NET LONG TERM CAPITAL LOSS OF RS.3,37,09,596/- WAS CLAIMED BY THE ASSESSEE. THE AO WAS NOT IN AGREEMENT WITH THE ASSESSEES CONTENTIONS AND ADDED THE AMOUNT OF COMPENSATION OF RS.2,50,00,000/- AS INCOME FROM OTHER SOURCES BY HOLDING THAT THE SAID RECEIPT IS NOT FROM TRANSFER OF CAPITAL ASSETS. ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 4 5. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: I HAVE CONSIDERED THE REMAND REPORT OF THE AO AND ALSO THE REJOINDER SUBMITTED BY THE APPELLANT, WITH REGARD TO ADMISSION OF ADDITIONAL EVIENCE, THE AO IN THE REMAND REPORT OBJECTED TO THE ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT THE APPELLANT DID NOT BRING ANY FACT ON RECORD TO SHOW THAT THERE WAS ANY IMPEDIMENT FACED BY THE APPELLANT WHICH PREVENTED HIM TO PRODUCE THE ADDITIONAL EVIDENCE. ON THE OTHER HAND THE APPELLANT CONTENTS THAT HE DID NOT GET OPPORTUNITY TO EXPLAIN THE EXISTENCE OF RIGHT IN THE UNDER CONSTRUCTION PROPERTY AND HENCE HE WAS PREVENTED BY SUFFICIENT CAUSE AND HIS CASE FELL UNDER CLAUSES (A), (B) & (D) OF RULE 4GA OF IT RULES 1962. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE SUBMISSIONS MADE BY THE APPELLANT THAT IT DID NOT GET SUFFICIENT OPPORTUNITY APPEARS TO BE FAIR AND REASONABLE. THUS, IN VIEW OF THESE FACTS THE ADDITIONAL EVIDENCE HAS BEEN ADO-FITTED AND CONSIDERED IN DECIDING THE GROUNDS OF APPEAL OF THE APPELLANT. PRIMARY AND CRUCIAL QUESTION IN THE CASE IS WHETHER THE ASSESSEE AND HIS NATURE OF ACTIVITIES ARE CONCERNED 'THE RIGHT TO SPECIFIC PERFORMANCE TO GET THE 2400 A AND B CLASS SHARES EACH OF KUNOL CORPORATION ALLOTTED ON COMPLETION OF THE BUILDING WATERFRONT IN COLABA, MUMBAI WHICH ENTITLED THE SHARE HOLDER TO THE USE OCCUPATION AND POSSESSION OF FLAT NUMBERS 15A, 15B, 15C AND 15D IN WATERFRONT BUILDING, COLABA MUMBAI' CONSTITUTE A 'CAPITAL ASSET' WITHIN THE MEANING OF SECTION 2(14) OF THE IT ACT 1961 OR NOT AND WHETHER THE ASSESSEE WAS MERELY DEPOSITING MONEYS WITH THE BUILDER CUM DEVELOPER BY WAY OF DEPOSITS IN HOPE FOR FUTURE ASSETS LIKE SHARES WHICH MAY BE ISSUED AND THE BUILDING WHICH THE BUILDER MAY CONSTRUCT DESPITE THE NEWSPAPER ARTICLES APPEARING IN TIMES OF INDIA AND MUMBAI MIRROR FROM TIME TO TIME FROM 2011 ONWARDS. IT IS WORTH NOTING HERE THAT NEITHER THE SO CALLED CLASS A AND CLASS B SHARES WERE IN EXISTENCE NOR THE APPROVED BUILDING PLANS WERE IN EXISTENCE ON THE DATE OF ISSUE OF LOI DATED 9/2/2010. IT IS ALSO WORTH MENTIONING HERE THAT THE BUILDER MENTIONED MEHTA MITTAL AND BIJALANI AS 'INTENDING PURCHASERS AND ALL THE THREE OF THEM, MAY BE BEING DIRECTORS OF THE COMPANY AS ON 9/2/2030 SIGNED THE L01 DATED 9/2/2010 AS WELL, HOWEVER, THESE THREE INTENDING PURCHASERS DID NOT SIGN THE LETTER OF SURRENDER DATED 2/4/2010 WHICH WAS SIGNED BY THE BUILDER AND THE ASSESSEE ONLY. MOREOVER MERE EXCHANGE OF LETTERS FOR MAKING INVESTMENT IF ANY, IN SHARES AND SECURITIES AND/OR FLATS IF ANY BETWEEN THE ASSESSES AND THE BUILDER AND THREE SO CALLED INTENDING PURCHASERS APPEARS TO BE OF DEBATABLE AND DOUBTFUL IN NATURE. IT IS ALSO OBSERVED FROM THE RECORDS THAT (1) ON THE DATE OF ISSUE OF LOI DATED 9/2/2010, NEITHER THE SHARES OF THE COMPANY NOR THE BUILDING WAS IN EXISTENCE AND EVEN THE PLANS FOR THE BUILDING CONSTRUCTION WERE NOT APPROVED BY THE MCQM, (2) COMPANY HAD THE APPROVAL TO CONSTRUCT THE WATERFRONT BUILDING ONLY UPTO THE HEIGHT OF 230 FEET ONLY, AND COMPANY WAS TO CONSTRUCT THE FLATS ON THE 15 THE FLOOR AT A HEIGHT OF 335 TO 346 FEET ONLY AFTER REQUISITE PERMISSIONS FROM THE STATUTORY AUTHORITIES, 3) WHEN THERE WAS NO AGREEMENT FOR SALE, IT WAS NOT REGISTERED AND THE AGREEMENT FOR SALE WAS TO BE EXECUTED AND REGISTERED AT A LATER DATE AND SHARES TRANSFERRED THEREAFTER, 4) CLAUSE 5 OF THE LOI CLEARLY STATES THAT COMPANY SHALL ISSUE THE QUALIFYING SECURITIES CONSISTING OF CLASS A AND B SHARES ONLY AFTER THE OBTENTION OF THE REQUISITE PERMISSION FROM THE AUTHORITIES AND THUS NO RIGHT, TITLE AND INTEREST EITHER IN SHARES AND/OR FOUR FLATS ON THE 15LH FLOOR OF THE WATERFRONT BUILDING LIKELY TO BE CONSTRUCTED, WERE CREATED AND THESE AND WAS CREATED BY THE COMPANY IN FAVOUR OF THE ASSESSEE. MOREOVER, THESE RIGHTS WERE TO BE CREATED ONLY AFTER THE PAYMENT OF TOTAL AMOUNT OF RS. 16,25,00,OOO/- BY THE ASSESSEE WHICH WAS NOT DONE BY THE ASSESSEE, 5 CLAUSE 8 OF THE LOI CLEARLY STATES THAT 'THE LOI IS ISSUED ON AN UNDERSTANDING AND ASSURANCE GIVEN TO THE COMPANY THAT THE ASSESSEE AND THE INTENDING TRANSFERORS SHALL ENTER AN AGREEMENT FOR SALE IN ACCORDANCE WITH THIS LETTER OF INTENT AND THE ASSESSEE UNDERTOOK TO EXECUTE THE AGREEMENT FOR SALE AND PAY NECESSARY STAMP DUTY AND REGISTRATION CHARGES'. MOREOVER, THE COMPANY DID NOT SUBMIT ANY PROOF OF THE SO CALLED SALE OF FOUR FLATS ON THE 15TH FLOOR OF WATERFRONT BUILDING TO BE CONSTRUCTED TO THE ASSESSEE AND IT APPEARS THAT THESE THREE INTENDING PURCHASERS WERE DIRECTLY CONNECTED WITH THE COMPANY AND ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 5 WHEN THEY WERE FULLY AWARE OF ABSENCE OF APPROVALS FROM MCGM AND SHARES AND SECURITIES, THEY COULD NOT HAVE TRANSFERRED ANYTHING WHICH THEY THEMSELVES DID NOT OWN. MOREOVER, THE NATURE OF THE BUSINESS CARRIED ON BY THE COMPANY IS ALSO SUSPECT FROM THE KIND OF BUSINESS ACTIVITY CARRIED ON BY THE COMPANY LATER ON, AS IS EVIDENT FROM INTERNET SEARCH. ASSESSEE'S AUTHORIZED REPRESENTATIVE IN HIS SUBMISSIONS DATED 17/8/2018 HAS NOT BEEN ABLE TO REBUT ANY OF THESE ISSUES BUT HAS MERELY QUOTED JUDICIAL DECISIONS WITHOUT REFERENCE TO THE FACTS OF THE CASE. MOREOVER, TO MAKE SUBMISSIONS THAT 'A SHOW CAUSE NOTICE WAS NOT GIVEN TO THE ASSESSEE FOR TAXING THE INCOME AS INCOME FROM OTHER SOURCES' IS ALSO NOT OF MUCH RELEVANCE SINCE THE IT ACT 1961 DOES NOT MANDATE SUCH ISSUE OF NOTICE BEFORE PASSING ASSESSMENT ORDER. IT IS WORTH NOTING HERE THAT ASSESSEE KEPT ON DEPOSITING MONEYS AND THE BUILDER KEPT ON RECEIVING FUNDS FROM NOVEMBER 2010 TILL SEPTEMBER 2011, MOREOVER ASSESSEE RECEIVED AMOUNT TOTALING RS.7,80,00,000/- FROM THE BUILDER AND THREE INTENDING PURCHASERS IN VARYING AMOUNTS RANGING FROM RS, TEN LAKHS TO RS. ONE CRORCS FROM TIME TO TIME THEREBY INDICATING THAT THE PAYMENTS TOTALING RS.10,75,99,999/- WERE SHARES BY THE BUILDER CUM DEVELOPER AND THE THREE INTENDING PURCHASERS MEHTA MITTAL AND BIJALANI WHEREAS, THE AGREEMENT FOR THE SURRENDER DATED 2/4/2010 WAS SIGNED BY THE BUILDER CUM DEVELOPER KUNAL CORPORATION ONLY. MOREOVER, ASSESSEE BEING A SENIOR EXECUTIVE WITH A COMPANY SIGNING AND ADVANCING CRORES OF RUPEES TO AN UNKNOWN ENTITY BY WAY OF MERE SIGNING OF LETTERS ON PLAIN PAPER AND NOT EVEN REGISTERING THE LOI APPEARS TO BE VERY STRANGE AND UNUSUAL ESPECIALLY WHEN THE LOI AND OTHER LETTERS EXCHANGED BETWEEN THE ASSESSEE AND THE BUILDER CUM DEVELOPER APPEAR TO HAVE BEEN LEGALLY DRAFTED AND APPEAR TO HAVE BEEN VETTED BY LEGAL EXPERTS. THUS IT GOES ON TO PROVE THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE BUILDER KUNAL CORPORATION AND THE THREE 'INTENDING PURCHASERSMEHTA MITTAL AND BIJALANI WERE TO RAISE THE DEPOSITS FROM THE ASSESSEE TOWARDS SECURITIES AND ASSETS TO BE CREATED IN FUTURE WHICH WAS CONTINGENT IN NATURE, INCLUDING CLASS A AND CLASS B SHARES WHICH WERE ALSO ISSUED ON COMPLETION OF CONSTRUCTION. IT IS THEREFORE HELD THAT THE LOI DATED 9/2/2010 WAS AN AGREEMENT FOR ACCEPTING DEPOSITS FROM THE ASSESSEE BETWEEN THE BUILDER AND SO CALLED THREE INTENDING PURCHASERS TO RAISE FUNDS BY MAKING FALSE PROMISES TO THE ASSESSEE OF OFFERING SHARES AND SECURITIES AND ASSETS TO BE CREATED M FUTURE ON HAPPENING OF CERTAIN CONTINGENCIES. IN NUTSHELL, THE LOI DATED 9/2/2010 WAS A DEPOSIT RAISING ARRANGEMENT BY HYPOTHECATING FUTURE ASSETS TO BE CREATED BY THE BUILDER CUM DEVELOPER AND HENCE IT DID NOT CONFER ANY RIGHT OF OWNERSHIP AT ALL AND HENCE THE RIGHT, IF ANY, ARISING FROM THE AGREEMENT CANNOT BE TREATED AS 'CAPITAL ASSET' WITHIN THE MEANING OF SECTION 2(14) OF THE IT ACT 1961 AND HENCE COMPUTATION OF LONG TERM CAPITAL LOSS FROM THE RECEIVING BACK OF FUNDS GIVEN EARLIER ALONGWITH THE ADDITIONAL AMOUNT OF RS.2,50,00,000/- BY WAY OF COMPENSATION CON NOT BE TREATED AS CONSIDERATION FOR THE SALE OF AN ASSET AND HENCE THE AMPUTATION OF RS.37,09,596/- AS LONG TERM CAPITAL LOSS BY ASSESSEE IS PATENTLY ERRONEOUS AND THE REJECTION OF SUCH A CLAIM BY AO IS FULLY JUSTIFIED AND ITS SUBSEQUENT SET OFF AGAINST LONG TERM CAPITAL GAINS OF RS.34381531 BY THE AO IS FULLY JUSTIFIED TAXABILITY OF COMPENSATION OF RS.25000000 REPRESENTS INTEREST AND STANDS CONFIRMED BY LETTER DATED 29/3/2014 SIGNED BY THE BUILDER AND THE SO CALLED THREE INTENDING PURCHASERS MEHTA MITTAL AND BIJALANI. THE ISSUE OF THREE CHEQUES BY MEHTA MITTAL AND BIJALANI ALSO GOES ON TO PROVE THAT THE LOI DATED 9/2/2010 WAS AN LOI FOR 'DEPOSIT OF MONEY ON THE SECURITY OF FUTURE ASSETS OF SHARES AND SECURITIES TO BE CREATED ON COMPLETION OF THE WATERFRONT BUILDING COLABA MUMBAI. HENCE THE ACTION OF THE AO IN DENYING THE CLASSIFICATION OF LOSS OF RS.3,37,09,596/- AS LONG TERM CAPITAL LOSS AND ITS SUBSEQUENT CLAIM FOR ITS SET OFF OF AGAINST LONG TERM CAPITAL GAINS OF RS.3,43,81,531/-AND TAXABILITY OF RECEIPT OF RS.2,50,00,000/- AS INCOME FROM OTHER SOURCES ARE UPHELD AND ASSESSEE'S GROUNDS OF APPEAL NO. 1 TO 9 IN THIS REGARD ARC REJECTED. 5. GROUND NO.10: IT RELATES TO INITIATION OF PENALTY U/S. 271 (L)(C) OF THE IT ACT 1961 AND SINCE NO PENALTY ORDER HAS BEEN PASSED BY THE AO, THE GROUND OF APPEAL NO. 10 IS INFRUCTUOUS AND HENCE DISMISSED. 6. IN THE RESULT, THE ASSESSEE'S APPEAL IS DISMISSED. ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 6 6. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT THE LD. CIT(A) HAS WRONGLY DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE MONEY DEPOSITED BY THE ASSESSEE WITH THREE PERSONS NAMELY MRS. VIBHA HEMANT MEHTA, MRS. ANUJA BADAL MITTAL AND MR. SUNNY RAMESH BIJLANI WAS NOTHING BUT A DEPOSIT MADE BY THE ASSESSEE FOR A CREATION OF PROPERTY WHICH WAS CONTINGENT IN NATURE AND THESE SHAREHOLDERS WERE TO BE ISSUED SHARES ON COMPLETION OF THE CONSTRUCTION. THEREFORE, LD. CIT(A) HAS WRONGLY HELD THAT THE LETTER OF INTENT DATED 09.02.2010 WAS A DEPOSIT RAISING AGREEMENT BY HYPOTHECATING THE FUTURE ASSETS TO BE CREATED BY THE DEVELOPERS AND BUILDERS AND HENCE DID NOT CONFERRED ANY RIGHT OF OWNERSHIP TO ANYONE AND THEREFORE THE SAME CAN NOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. THE LD. A.R. SUBMITTED THAT THE FINDINGS OF LD. CIT(A) THAT RS.2,50,00,000/- RECEIVED BY THE ASSESSEE AS A COMPENSATION UPON CANCELLATION OF LETTER OF INTENT ON 02.04.2014 WAS IN FACT INTEREST ON THE DEPOSIT MADE WITH THESE THREE SHAREHOLDERS OF KUNAL CORPORATION PVT. LTD. THE LD. A.R. DREW OUR ATTENTION TO SECTION 2(47) CLAUSE (VI) AND SUBMITTED THAT TRANSFER IN RELATION TO CAPITAL ASSETS ALSO INCLUDES ANY TRANSACTION WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CORPORATE SOCIETY COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER WHICH HAS THE EFFECT OF TRANSFER OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY. THE LD. A.R. SUBMITTED THAT VIDE LETTER OF INTENT DATED 09.02.2010, THE ASSESSEE HAS BEEN PROMISED TO BE ALLOTTED THE FLATS IN WATERFRONT TOWER ON 15 TH FLOOR WHICH COULD NOT BE MATERIALIZED AS THE NECESSARY PERMISSION WAS NOT GRANTED BY THE ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 7 BMC TO RAISE THE HEIGHT OF THE BUILDING AND THEREFORE AFTER A LOT OF COMMUNICATIONS AND AFTER ISSUANCE OF LEGAL NOTICES, THE LETTER OF INTENT WAS CANCELLED VIDE LETTER DATED 02.04.2014 AND THE ASSESSEE BESIDES GETTING REFUND OF MONEY ALREADY PAID RS.10,75,99,999/- ALSO GOT A COMPENSATION OF RS.2,50,00,000/- FOR LOSS OF OPPORTUNITY CAUSED AND IT WAS AGREED THAT ASSESSEE WOULD NOT HAVE ANY RIGHT TITLE OR INTEREST IN THE SAID UNITS IN TERMS OF LETTER DATED 09.02.2010. THE LD. A.R. SUBMITTED THAT THE AGREEMENT VIDE WHICH THE FLATS WERE BOOKED CERTAINLY CREATE A RIGHT IN FAVOUR OF THE ASSESSEE IN THE IMMOVABLE PROPERTY AND WHICH UPON CANCELLATION WOULD ENTITLE THE ASSESSEE TO RECEIVE COMPENSATION ALONG WITH THE MONEY ALREADY PAID WHICH WOULD BE CONSIDERATION FOR SURRENDER OF THAT RIGHTS IN IMMOVABLE PROPERTY I.E FLATS. THE LD. A.R. SUBMITTED THAT WHATEVER THE ASSESSEE RECEIVED UPON CANCELLATION IS LIABLE TO BE TAXED UNDER THE CAPITAL GAIN HEAD AND WAS RIGHTLY TREATED AND DID SO AS STATED HEREINABOVE. THE LD. A.R. SUBMITTED THAT THE COMPENSATION ALONG WITH THE REFUND OF MONEY WAS TREATED AS SALE CONSIDERATION AND AFTER REDUCING AN INDEXED COST OF RS.16,63,09,595/-, THE LOSS WAS RIGHTLY CLAIMED BY THE ASSESSEE AS LONG TERM CAPITAL LOSS. IN DEFENCE OF HIS ARGUMENTS, THE LD. A.R. RELIED ON A SERIES OF DECISIONS AS FOLLOWS: 1. CIT VS. VIJAY FLEXIBLE CONTAINERS (1990) 48 TAXMAN 86 (BOMBAY) 2. K.R. SRINATH VS. ACIT (2004) 141 TAXMAN 268 (MADRAS) 3. CIT VS. SMT. LAXMIDEVI RATANI (2005) 147 TAXMAN 642 (MP) 4. CIT VS. H. ANIL KUMAR (2012) 20 TAXMANN.COM 430 (KARNATAKA) 5. ACIT VS. ASHWIN S. BHALEKAR ITA NO.6822/M/2016 A.Y. 2012-13 ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 8 7. FINALLY, THE LD. A.R. SUBMITTED THAT IN VIEW OF THE FACT THAT THE ISSUE BEING COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT AND ALSO BY THE DECISIONS OF THE CO-ORDINATE BENCHES OF MUMBAI TRIBUNAL ,THE ORDER OF LD. CIT(A) MAY KINDLY BE SET ASIDE AND AO MAY BE DIRECTED TO ALLOW THE LONG TERM CAPITAL LOSS TO THE ASSESSEE AS CLAIMED. 8. THE LD. D.R., ON THE OTHER HAND, STRONGLY OPPOSED THE CONTENTIONS AND ARGUMENTS OF THE LD. A.R. BY SUBMITTING THAT LETTER OF INTENT FOR TRANSFER OF SHARE IN THE IMMOVABLE PROPERTY, WHICH DID NOT EXIST AS ON THE DATE OF THE LETTER OF INTENT NOR DID THEY EXIST AS ON THE DATE OF CANCELLATION OF THE SAID LETTER OF INTENT, CAN NOT BE SAID TO BE AGREEMENT FOR THE PURPOSE OF TREATING THE COMPENSATION RECEIVED ON CANCELLATION THEREOF AS PART OF THE SALES CONSIDERATION AND THE RESULTANT CAPITAL LOSS. IT IS SUBMITTED THAT IN THE STATE OF MAHARASHTRA, TRANSFER OF FLATS IS CONTROLLED BY THE MAHARASHTRA OWNERSHIP FLATS (REGULATION OF THE PROMOTION OF CONSTRUCTION, SALE, MANAGEMENT AND TRANSFER) ACT, 1963 (MOFA). THE OBJECT OF THIS ACT AS STATED THEREIN IS THAT IT IS AN ACT TO REGULATE IN THE STATE OF MAHARASHTRA, THE PROMOTION OF THE CONSTRUCTION OF, THE SALE AND MANAGEMENT, AND THE TRANSFER OF FLATS ON OWNERSHIP BASIS. SEC. 4(1) OF MOFA, 1963, READS AS FOLLOWS: 4(1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER LAW, A PROMOTER WHO INTENDS TO CONSTRUCT OR CONSTRUCTS A BLOCK OR BUILDING OF FLATS, ALL OR SOME OF WHICH ARE TO BE TAKEN OR ARE TAKEN ON OWNERSHIP BASIS, SHALL, BEFORE, HE ACCEPTS ANY SUM OF MONEY AS ADVANCE PAYMENT OR DEPOSIT, WHICH SHALL NOT BE MORE THAN 20 PER CENT OF THE SALE PRICE ENTER INTO A WRITTEN AGREEMENT FOR SALE WITH EACH OF SUCH PERSONS WHO ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 9 ARE TO TAKE OR HAVE TAKEN SUCH FLATS, AND THE AGREEMENT SHALL BE REGISTERED UNDER THE REGISTRATION ACT, 1908 (HEREINAFTER IN THIS SECTION REFERRED TO AS 'THE REGISTRATION ACT') AND SUCH AGREEMENT SHALL BE IN THE PRESCRIBED FORM. THUS, ENTERING INTO AN AGREEMENT IN THE PRESCRIBED FORM AND REGISTRATION THEREOF IS MANDATED BY MOFA, 1963. A MERE LOI, NEITHER STAMPED NOR REGISTERED, FOR TRANSFER OF NON-EXISTENT SHARES AT SOME FUTURE DATE, WHICH IN TURN WOULD ENTITLE THE ASSESSEE TO A PROPERTY, CANNOT BE REGARDED AS AN AGREEMENT. SINCE THE LAW IN FORCE IN THE STATE OF MAHARASHTRA GOVERNING TRANSFER OF FLATS HAS NOT BEEN FOLLOWED, MERE ISSUE OF LOI CANNOT BE TREATED AS HAVING BEEN CREATED A CAPITAL ASSET OR RIGHT THEREIN. THEREFORE, THE RECEIPT OF CONSIDERATION ON CANCELLATION OF LOI WAS CORRECTLY BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IN VIEW OF THE ABOVE POSITION OF LAW IT IS REQUESTED THAT THE ASSESSMENT ORDER BE UPHELD. AS REGARDS 2 ND PROPOSITION OF THE ASSESSEE, AS PROPOUNDED BY THE LD. COUNSEL DURING THE COURSE OF HEARING, THAT IN CASE THE COMPENSATION RECEIVED ON CANCELLATION CAN NOT BE SUBJECTED TO CAPITAL GAIN PROVISIONS AS THERE IS NO COST OF ACQUISITION, IT IS SUBMITTED THAT THIS PROPOSITION OUGHT TO BE DISMISSED AT INCEPTION ITSELF. THIS PROPOSITION MAY FIND SOME STANDING ONLY IF IT IS ACCEPTED THAT ISSUE OF LOI HAS CREATED A CAPITAL ASSET. IF IT IS ACCEPTED THAT LOI CREATED A CAPITAL ASSET THEN THERE IS NO NEED TO PROCEED TO PROPOSITION-2. BUT IF, IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE LOI DID NOT CREATE A CAPITAL ASSET THEN BOTH ARGUMENTS OF THE ASSESSEE FAIL. THEREFORE, IT IS ONCE AGAIN HUMBLY REQUESTED THAT THE ASSESSMENT ORDER BE UPHELD. ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 10 9. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE ASSESSEE HAS AGREED TO PURCHASE FLAT NO.15A, 15B, 15C & 15D ON 15 TH FLOOR ADMEASURING 1626 SQ. FT. CARPET AREA IN BUILDING KNOWN AS WATERFRONT TOWER VIDE LETTER OF INTENT DATED 09.02.2010. THESE RIGHTS HAVE ACCRUED IN FAVOUR OF THREE SHAREHOLDERS OF THE BUILDER COMPANY NAMELY MRS. VIBHA HEMANT MEHTA, MRS. ANUJA BADAL MITTAL AND MR. SUNNY RAMESH BIJLANI BY VIRTUE OF THEIR SHAREHOLDINGS IN THE BUILDER COMPANY CALLED M/S. KUNAL CORPORATION PVT. LTD. THE LETTER OF INTENT WAS SIGNED BY KUNAL CORPORATION PVT. LTD. AND THESE THREE SHAREHOLDERS ALSO WITH COUNTERSIGNED BY MR. SHAILENDRA BHANDARI AND MRS. RINA SHAILENDRA BHANDARI. A PERUSAL OF THE SAID LETTER OF INTENT DATED 09.02.2010 REVEALS THAT IT CONTAINS ALL THE TERMS AND CONDITIONS FOR PURCHASE OF FLATS INCLUDING TOTAL CONSIDERATION FOR WHICH FLATS WERE TO BE BOUGHT, AMOUNT OF ADVANCE PAYMENT TO BE MADE ON THE EXECUTION OF LETTER OF INTENT ETC AND POSSESSION ETC. THE KUNAL CORPORATION WAS NOT GRANTED PERMISSION TO RAISE THE HEIGHT OF THE BUILDING UP THE TO LEVEL OF 15 TH FLOOR AND FINALLY THE SAID LETTER OF INTENT WAS CANCELLED VIDE CANCELLATION AGREEMENT DATED 02.04.2014. IN THE SAID CANCELLATION AGREEMENT THE ASSESSEE WAS REFUNDED RS.10,75,99,999/- PAID BY THE ASSESSEE TO THE DEVELOPER DURING F.Y. 2009-10, 2010-11 & 2011-12 BESIDE A COMPENSATION OF RS.2,50,00,000/- TOWARDS LOSS OF OPPORTUNITY IN SETTLEMENT OF ALL OTHER CLAIMS WHICH THE ASSESSEE MAY HAVE IN RESPECT OF THE SAID PROPERTIES AND AGREED THAT HE SHALL NOT HAVE ANY RIGHT, TITLE OR INTEREST IN THE SAID FLATS UNDER THE LETTER OF INTENT DATED 09.02.2010. THE ASSESSEE COMPUTED LONG TERM CAPITAL GAIN BY TAKING THE SALES CONSIDERATION AT ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 11 RS.13,25,99,000/- WHICH WAS CALCULATED BY ADDING TOGETHER THE REFUND OF ADVANCE PAYMENT AGAINST THE SAID FLATS RS.10,75,99,999/- AND THE AMOUNT OF COMPENSATION RECEIVED OF RS.2,50,00,000/- UPON TERMINATION OF THE LETTER OF INTENT DATED 09.02.2010. FROM THE SAID CONSIDERATION THE ASSESSEE SUBTRACTED THE INDEXED COST ACQUISITION BY INDEXING THE PAYMENTS MADE TO THE DEVELOPER/SELLERS WHICH CALCULATED AT RS.16,63,09,595/- RESULTING INTO A LONG TERM CAPITAL LOSS OF RS.3,37,09,596/-. THE AUTHORITIES BELOW REJECTED THE CLAIM OF THE ASSESSEE BY TREATING THE LETTER DATED 09.02.2010 AS A DEPOSIT RAISING AGREEMENT FOR CONSTRUCTION OF FUTURE ASSETS TO BE CREATED BY THE BUILDER AND DEVELOPER AND AS SUCH IT DID NOT CONFER ANY RIGHTS OF OWNERSHIP AT ALL AND THEREFORE REFUSED TO TREAT THE SAID RIGHT ARISING OUT OF THE SAID LETTER OF INTENT AS CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(14) OF THE ACT AND TREATED THE COMPENSATION OF RS.2,50,00,000/- AS INCOME FROM OTHER SOURCES AS SAME REPRESENTED THE INTEREST ON THE MONEY DEPOSITED BY THE ASSESSEE WITH THE BUILDER. NOW THE ISSUE BEFORE IS WHETHER THE ASSESSEE HAS ANY LEGAL RIGHT ACCRUED IN HIS FAVOUR VIDE LETTER OF INTENT DATED 09.02.2010 OR NOT AND WHETHER RS.2,50,00,000/- COULD BE TREATED AS PART OF THE SALES CONSIDERATION AS HAS BEEN TREATED BY THE ASSESSEE TO CALCULATE THE LONG TERM CAPITAL LOSS. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS EXTENSIVELY AND FOUND THAT THOUGH THE ASSETS WERE NOT IN EXISTENCE WHICH WERE TO BE BOUGHT BY THE ASSESSEE ON 09.02.2010 NAMELY FLAT NO. 15A, 15B, 15C & 15D ON 15 TH FLOOR. PERTINENT TO MENTION THAT THE ASSESSEE HAS OBTAINED REQUISITE PERMISSION TO CONSTRUCT THE SAID BUILDING NAMELY WATERFRONT TOWER UP TO THE HEIGHT OF 230 FEET ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 12 AND THE COMPANY WAS IN THE PROCESS OF ACQUIRING NECESSARY PERMISSION FROM THE AUTHORITY CONCERNED TO INCREASE THE HEIGHT TO ABOUT 525 FEET. IT IS MENTIONED IN CLAUSE NO.3 THAT IN CASE THE PERMISSION IS DENIED TO THE COMPANY FOR ANY REASON WHATSOEVER THEN THE ASSESSEE WOULD BE OFFERED FLATS AT THE LEVEOL OF 145 FEET HEIGHT SUBJECT TO CHANGES IN THE FLOOR PLAN BY THE SELLERS WHICH MAY BE REQUIRED. WE NOTICE FROM THE PERUSAL OF THIS LETTER OF INTENT THAT IT CONTAINS ALL THE TERMS AND CONDITIONS WHICH ARE CONTAINED IN AN AGREEMENT TO SELL SUCH AS THE DESCRIPTION OF THE PROPERTY TO BE BOUGHT, AMOUNT OF SALE CONSIDERATION, MODE OF PAYMENT OF SALE CONSIDERATION AND THE CLAUSES AS REGARDS SPECIFIC PERFORMANCE OF THE AGREEMENT ETC. IN OUR CONSIDERED VIEW THIS LETTER OF INTENT AS GOOD AS AGREEMENT TO SELL IN ALL RESPECTS AND DEFINITELY IT CREATES A RIGHT IN FAVOUR OF THE ASSESSEE SO FAR AS THE PROPERTY MENTIONED THEREIN IS CONCERNED. WE DO NOT FIND ANY MERIT IN THE CONTENTIONS OF THE LD. D.R. THAT LETTER OF INTENT ISSUED BY THE BUILDER FOR THE PURPOSE OF ALLOTMENT OF FLAT WHICH IS NOT IN EXISTENCE ON THE DATE OF EXECUTION OF LETTER OF INTENT AS WELL AS ON THE DATE OF CANCELLATION OF THE SAID LETTER OF INTENT IS NOT AN AGREEMENT. THE LD. D.R. RELIED ON THE M.H. OWNERSHIP FLATS REGULATION OF PROMOTION, CONSTRUCTION, SALE AND MANAGEMENT AND TRANSFER ACT, 1963 (MOFA). A PERUSAL OF SECTION 4(1) OF MOFA, 1963 REVEALS THAT THE BUILDER SHALL NOT ACCEPT MORE THAN 20% OF THE SALE PRICE UNDER AGREEMENT TO SALE QUA THE FLATS WHICH HE INTENTS TO CONSTRUCT AND SUCH AGREEMENT SHALL BE REGISTERED UNDER REGULATION ACT, 1908 AND SUCH AGREEMENT SHALL BE IN THE PRESCRIBED FORM. ACCORDING TO THE LD. D.R. THE SELLER HAS NOT FOLLOWED THE PROVISIONS OF MOFA WHICH ARE APPLICABLE IN THE ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 13 STATE OF MH AND THEREFORE THE LETTER OF INTENT CAN NOT BE TREATED TO HAVE CREATED ANY INTEREST, RIGHT OR TITLE IN CAPITAL ASSET IN FAVOUR OF THE ASSESSEE. IN OUR VIEW THE PROVISIONS OF MOFA CAN NOT REGULATE THE TAXABILITY OF ANY INCOME IN THE FORM OF LONG TERM CAPITAL GAIN/OSS WHICH MAY RAISE FROM THE CANCELLATION OF ANY LETTER OF INTENT/AGREEMENT WHICH IS NOT REGISTERED. THEREFORE, WE ARE INCLINED TO HOLD THAT THE ASSESSEE HAS RIGHTLY CALCULATED THE LONG TERM CAPITAL LOSS UPON THE CANCELLATION OF LETTER OF INTENT DATED 09.02.2010. WE HAVE ALSO PERUSED THE PROVISIONS OF SECTION 2(47) CLAUSE (VI) AND OBSERVED THAT TRANSFER OF CAPITAL ASSET INCLUDES TRANSFERRING OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY BY WAY OF BECOMING A MEMBER OF OR ACQUIRING A SHARE IN A COMPANY OR BY WAY OF ANY AGREEMENT OR ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VIJAY FLEXIBLE CONTAINERS (1990)48 TAXMAN 86 BOMBAY WHEREIN IT HAS BEEN HELD AS UNDER: A CAPITAL ASSET IS DEFINED BY SECTION 2(14) TO MEAN 'PROPERTY OF ANY KIND HELD BY AN ASSESSEE '. THE -WORD, 'TRANSFER' IN RELATION TO A CAPITAL ASSET IS DEFINED IN SECTION 2(47) TO INCLUDE, THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSET OR THE EXTINGUISHMENT OF ANY RIGHTS THEREIN. THUS, THE RIGHT TO OBTAIN A CONVEYANCE OF IMMOVABLE PROPERTY FELL WITHIN THE EXPRESSION 'PROPERTY OF ANY KIND 'USED IN SECTION 2(14) AND WAS, CONSEQUENTLY, A CAPITAL ASSET. THE ASSESSEE ACQUIRED UNDER THE AGREEMENT FOR SALE THE RIGHT TO HAVE THE IMMOVABLE PROPERTY CONVEYED TO HIM. HE WAS UNDER THE LAW ENTITLED TO EXERCISE THAT RIGHT NOT ONLY AGAINST HIS VENDORS BUT ALSO AGAINST A TRANSFEREE WITH NOTICE OR A GRATUITOUS TRANSFEREE. HE COULD ASSIGN THAT RIGHT WHAT HE ACQUIRED UNDER THE AGREEMENT FOR SALE WAS, THEREFORE, PROPERTY WITHIN THE MEANING OF THE ACT AND, CONSEQUENTLY, A CAPITAL ASSET. HIS GIVING UP OF THE RIGHT TO CLAIM SPECIFIC PERFORMANCE BY CONVEYANCE TO HIM OF THE IMMOVABLE PROPERTY WAS A RELINQUISHMENT OF THE CAPITAL ASSET. THERE WAS, THEREFORE, TRANSFER OF A CAPITAL ASSET WITHIN THE MEANING OF THE ACT. THE ASSESSEE ACQUIRED A CAPITAL ASSET BY REASON OF THE AGREEMENT FOR SALE AND THERE WAS A TRANSFER OF THAT CAPITAL ASSET WHEN THE ASSESSEE ENTERED INTO CONSENT TERMS AND RELINQUISHED IT, AND THAT CAPITAL ASSET HAD BEEN ACQUIRED FOR THE COST OF RS. 17,500 PAID AS AND BY WAY OF EARNEST MONEY UNDER THE AGREEMENT FOR SALE. THUS, THE AMOUNT OF COMPENSATION RECEIVED BY THE ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 14 ASSESSEE MINUS THE EARNEST MONEY PAID AND THE LEGAL AND OTHER EXPENSES, WAS CORRECTLY TREATED BY THE ITO AS CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. 11. THE CASE OF THE ASSESSEE IS ALSO SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. ASHWIN S. BHALEKAR ITA NO.6822/M/2016 A.Y. 2012-13 WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT THE EXTINGUISHMENT OF ASSESSEES RIGHT IN FLAT IN A PROPOSED BUILDING IS ACTUALLY EXTINGUISHMENT OF ANY RIGHT IN RELATION TO CAPITAL ASSETS AND ACCORDINGLY HELD THAT THE COMPENSATION RECEIPT UPON EXTINGUISHMENT OF RIGHT WHICH WAS HELD FOR MORE THAN 3 YEARS FALLS UNDER THE HEAD CAPITAL GAIN UNDER SECTION 45 OF THE ACT BY OBSERVING AND HOLDING AS UNDER: 4. UNDER THE PROVISIONS OF SECTION 54 OF THE TRANSFER OF PROPERTY ACT, 1882, A CONTRACT FOR THE SALE OF IMMOVABLE PROPERTY IS A CONTRACT THAT A SALE OF SUCH PROPERTY SHALL TAKE PLACE ON TERMS SETTLED BETWEEN THE PARTIES AND IT DOES NOT OF ITSELF CREATE ANY INTEREST IN OR CHARGE ON SUCH PROPERTY. SECTION 40 OF THE TRANSFER OF PROPERTY ACT STATES THAT WHERE A THIRD PERSON IS ENTITLED TO THE BENEFIT OF AN OBLIGATION ARISING OUT OF CONTRACT ANNEXED TO THE OWNERSHIP OF IMMOVABLE PROPERTY, BUT NOT AMOUNTING TO AN INTEREST THEREIN OR EASEMENT THEREON, SUCH RIGHT OR OBLIGATION MAY BE ENFORCED AGAINST A TRANSFEREE WITH NOTICE THEREOF OR A GRATUITOUS TRANSFEREE OF THE PROPERTY AFFECTED THEREBY, BUT NOT AGAINST A TRANSFEREE FOR CONSIDERATION WITHOUT NOTICE OF THE RIGHT OR OBLIGATION NOR AGAINST SUCH PROPERTY IN HIS HANDS. THE ILLUSTRATION TO SECTION 40 READS, THUS: 'A, CONTRACTS TO SELL SULTANPUR TO B. WHILE THE CONTRACT IS STILL IN FORCE HE SELLS SULTANPUR TO C, WHO HAS NOTICE OF THE CONTRACT. B MAY ENFORCE THE CONTRACT AGAINST C TO THE SAME EXTENT AS AGAINST A.' 5. IN THE CASE OF RAM BARAN PRASAD V. RAM MOHIT HAZRA AIR 1967 SC 744, THE SUPREME COURT HELD THAT IT WAS MANIFEST THAT A CONTRACT FOR THE SALE OF IMMOVABLE PROPERTY DID NOT CREATE ANY INTEREST IN THE IMMOVABLE PROPERTY. IN SONI LALJI JETHA V. SONI KALIDAS DAVCHAND AIR 1967 SC 978, THE SUPREME COURT CAME TO THE CONCLUSION THAT A CONTRACT FOR SALE OF IMMOVABLE PROPERTY, WHILE IT DID NOT CREATE INTEREST IN IMMOVABLE PROPERTY, CREATED A PERSONAL OBLIGATION OF A FIDUCIARY CHARACTER WHICH COULD BE ENFORCED BY A SUIT FOR SPECIFIC PERFORMANCE NOT ONLY AGAINST THE VENDOR BUT ALSO AGAINST A PURCHASER FOR CONSIDERATION WITH NOTICE. THE MADRAS HIGH COURT IN NOCHAT KIZHAKKE MADATHIL VENKATESWARA AIYAR V. KALLOOR ILLATH ROMAN NAMBUDHRI AIR 1917 MAD. 358, HELD THAT AN EXECUTORY CONTRACT FOR THE CONVEYANCE OF LAND WAS NOT A MERE RIGHT TO SUE. THE RIGHT TO SUE WAS NO DOUBT INVOLVED IN IT ON BREACH OF ITS STIPULATIONS, BUT BEFORE BREACH THERE WAS ALSO THE RIGHT TO HAVE THE LAND CONVEYED. A MERE RIGHT TO SUE WAS APPLICABLE ONLY TO CASES WHERE THERE HAD ITA NO.6528/M/2018 SHRI SHAILENDRA BHANDARI 15 BEEN A BREACH ENDING IN DAMAGES AND WHERE THE SPECIFIC ENFORCEMENT OF THE CONTRACT COULD NOT BE OBTAINED. THE AFORE GOING DISCUSSION LEADS, WE THINK, TO THE CONCLUSION THAT THE RIGHT TO OBTAIN A CONVEYANCE OF IMMOVABLE PROPERTY FALLS WITHIN THE EXPRESSION 'PROPERTY OF ANY KIND USED IN SECTION 2(14) AND IS, CONSEQUENTLY, A CAPITAL ASSET. 12. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT AND THE CO-ORDINATE BENCH OF THE TRIBUNAL SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE ON ACCOUNT OF LONG TERM CAPITAL LOSS. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.01.2021. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 21.01.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.
