SERENA ANTOINETTE FRANKLIN, MUMBAI V. ITO 19(1)(2), MUMBAI

ITA 6543/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9190 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 10-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: MILIN K MEHTA
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 SERENA ANTOINETTE FRANKLIN 7, SEASPRAY, 17, CARTER ROAD, KHAR (W), MUMBAI 400 052 PAN:-AADPF 7202 J VS. ITO- 19(1)(2) R. NO. 313 3 RD FLOOR, PIRAMAL CHAMBERS MUMBAI (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI MILIN K. MEHTA REVENUE BY : SHRI NEIL PHILIP DATE OF HEARING : 10.03.2015 DATE OF ORDER : 25 . 03.2015 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSE E AGAINST ORDER DATED 20.07.2011, PASSED BY LD.CIT-30, MUMBAI FOR T HE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y. 2006-07, MAINLY ON FOLLOWING THE GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE IN LA W, THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIR MING THAT CAPITAL GAIN AROSE TO THE APPELLANT IN RESPECT OF T HE DEVELOPMENT RIGHT OF PROPERTY IN THE YEAR UNDER APPEAL. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE IN LAW , THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIR MING THAT THE COST OF ACQUISITION OF THE SUBJECT PROPERTY AS NIL. ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 2 3. WITHOUT PREJUDICE THE ABOVE AND ON THE FACTS AND CIRCUMSTANCE OF THE CASE IN LAW, THE COMMISSIONER O F INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THE ASSESSMENT OF CAPITAL GAIN OF PROPERTY EVEN THOUGH COST OF ACQUISITION OF PROPERT Y HAS BEEN TAKEN AS NIL. 4. WITHOUT PREJUDICE TO ABOVE AND N THE FACTS AND C IRCUMSTANCE OF THE CASE IN LAW, THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN CONFIRMING THAT RS.22,44,720/- IS FULL VAL UE OF CONSIDERATION. 5. THE APPELLANT PRAY THAT ADDITION OF RS.22,44,720 /- MADE IN RESPECT OF CAPITAL GAIN MAY BE DELETED. 6. THE ORDER OF THE LD. CIT(A) AND THE LD. AO ARE B AD IN LAW AND ON FACTS. BESIDES THIS THE ASSESSEE HAS ALSO RAISED FOLLOWING AS ADDITIONAL GROUND:- WITHOUT PREJUDICE TO OTHER GROUNDS IN APPEAL, THE LEARNED ASSESSING OFFICER ERRED IN FACT AND IN LAW IN NOT A LLOWING EXEMPTION U/S 54F OF THE INCOME TAX ACT, 1961. 2. ASSESSEE IS AN INDIVIDUAL WHO HAS BEEN ASSESSED TO TAX ON CAPITAL GAINS ARISING ON TRANSFER OF HER 1/4 TH SHARE IN THE LAND GIVEN TO DEVELOPER FOR DEVELOPMENT RIGHTS. THE FACTS ARISING FROM THE MATERIAL PLACED ON RECORD ARE THAT ASSESSEE HAD ACQUIRED HER SHARE IN THE PROPERTY AT AMBOLI, ANDHERI (W), OWNED BY HER FATHER, WHO HAD E XPIRED ON 19.08.1975. THEREAFTER, THE PROPERTY DEVOLVED UPON THE MOTHER OF THE ASSESSEE, WHO CONTINUED TO BE THE OWNER UP TILL HER DEATH ON 17.03.1989. THE SAID PROPERTY WAS THEN DEVOLVED UPO N THE ASSESSEE AND HER TWO BROTHERS AND SISTER, EACH HAVING 1/4 TH SHARE IN IT. THE ASSESSEE ALONG WITH OTHER CO-OWNERS OF THE PROPERTY , ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. BUILD WELL CONSTRUC TIONS, VIDE AGREEMENT DATED 08.03.2000. UNDER THE SAID AGREEMEN T THE OWNERS ALLOWED THE DEVELOPER TO DEVELOP THE SAID PLOT FOR CONSTRUCTION OF FLATS. ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 3 IN VIEW OF THE SAID SURRENDER OF RIGHT, A SUM OF RS .80,000/- (RS. 20,000/- EACH) WAS TO BE PAID ON THE DATE OF EXECUT ION OF THE AGREEMENT. IN ADDITION TO ABOVE, THE DEVELOPER WAS ALSO REQUIRED TO PROVIDE THE CO-OWNERS, FOUR FLATS ADMEASURING 700 SQ. FT. EACH, FREE OF COST AND FOUR GARAGES OF 100 SQ. FT EACH. THUS, ASS ESSEE WAS ENTITLED FOR RS.20,000/- CASH AND ONE FLAT OF 700 SQ. FT AND ONE GARAGE OF 100 SQ. FT. PURSUANT TO THE SAID AGREEMENT, THE ASSESSEE WAS AL LOTTED THE FLAT DURING THE FINANCIAL YEAR 2005-06 VIDE DEED DATED 03.12.2005 ON WHICH STAMP DUTY AMOUNTING TO RS.7930/- WAS PAID, VIDE RE CEIPT DATED 02.12.2005. THE ASSESSEE DID NOT OFFER THE LONG TER M CAPITAL GAIN IN THE CURRENT A.Y. 2006-07. THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS HELD THAT ASSESSEE WAS ALLOT TED FLAT DURING THE RELEVANT PREVIOUS YEAR, VIDE DEED DATED 03.12.2005, AND STAMP DUTY WAS ALSO PAID ON 02.12.2005 THEREFORE, THE TRANSFER OF THE PROPERTY WAS COMPLETED ON 03.12.2005 AND HENCE THE LONG TERM CAP ITAL GAIN WILL ARISE IN THE RELEVANT ASSESSMENT YEAR. AFTER RELYING UPON THE DECISIONS OF CIT VS. SIREMAL NAWALAKHA (2001) 251 ITR 108 (SC) AND THULASIMANI AMNAL VS. CIT (2000) 158 CTR 5 (MAD) HE HELD THAT THE CAPITAL GAIN WOULD BE TAXABLE IN THIS YEAR ONLY. HE FURTHER HELD THAT PR OVISIONS OF SECTION 50C ARE NOT ATTRACTED IN THIS CASE AS THE ASSESSEE HAS NOT SOLD THE PROPERTY. WHILE COMPUTING THE LONG TERM CAPITAL GAIN, THE ASS ESSING OFFICER FURTHER HELD THAT, SINCE THE PROPERTY WAS ACQUIRED FROM HER LATE PARENTS, THEREFORE, THE COST OF ACQUISITION WOULD BE TAKEN A T NIL. THEREAFTER, HE TOOK THE MARKET VALUE OF THE FLAT AS PER THE READY RECKONER AND DETERMINED THE VALUE AT RS.22,22,720/-. ACCORDINGLY , THE CAPITAL GAIN WAS WORKED OUT IN THE FOLLOWING MANNER:- ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 4 COST OF ACQUISITION OF OLD FLAT: THE PREVIOUS OWNER NAMELY LYDIA CRASTO, MOTHER OF T HE ASSESSEE HAS RECEIVED THE PROPERTY BY WAY OF INHERITANCE ON 19.08.1975 FROM MR. BASIL CRASTO FAT HER OF THE ASSESSEE. THE ASSET HAS BEEN RECEIVED BY THE ASSESSEE BY WAY OF INHERITANCE FROM HER MOTHER VIZ, LYDIAZ CRASTO ON 17.03.1989. THE COST OF ACQUISITIO N OF THE ASSETTO THE PREVIOUS OWNER IS NIL, HENCE, APPLY ING THE PROVISIONS OF SECTION 49(1)(III)(A). NIL CAPITAL GAINS - SALE CONSIDERATION (I) MARKET VALUE OF FLAT HAVING 636 SQFT AND GARAGE 100 SFT @ RS.3020/- PER SFT. AS PER READY RECKONER @ 32,500 PER SQ. MTS (COPY ENCLOSED FOR REFERENCE) RS.22,22,720 RS.22,22,720 (II) COMPENSATION - CASH AS PER TERMS OF DEVELOPMENT AGREEMENT 20,000 CAPITAL GAINS RS.22,42,720 3. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESS EE SUBMITTED THAT THE DEVELOPMENT RIGHTS WERE GIVEN TO THE DEVELOPER IN THE YEAR 2000 AND CONSIDERATION OF RS. 80,000/- WAS RECEIVED AT T HAT TIME ONLY WHEN THE AGREEMENT WAS EXECUTED. ON THE EXECUTION OF THE AGREEMENT THE CO-OWNERS HAVE HANDED OVER THE PHYSICAL POSSESSION OF THE SAID PROPERTY TO THE DEVELOPER, WHO WAS ENTITLED TO DEVE LOP THE SAID PROPERTY FREELY AND THE POWER OF ATTORNEY WAS ALSO EXECUTED IN THE FAVOUR OF THE DEVELOPERS TO DEVELOP THE SAID PROPERTY. THUS, THE TRANSFER ITSELF HAS TAKEN PLACE IN THE A.Y. 2000-01 AND THEREFORE, SAME CANNOT TAXED IN THE A.Y. 2006-07. RELIANCE WAS PLACED ON THE PROVISIONS OF SECTION 2 (47)(V) ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 5 AND SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 18 83. REGARDING COST OF ACQUISITION THAT IT CANNOT BE TAKEN AT NIL, BECAU SE THE PROPERTY WAS ACQUIRED BY THE PREVIOUS OWNER BEFORE 01.04.1981 AN D THEREFORE, THE COST OF THE PREVIOUS OWNER OR FAIR MARKET VALUE OF THE ASSET AS ON 01.04.1981 HAS TO BE TAKEN. THE ASSESSEE SUBMITTED APPROVED VALUERS REPORT, WHO HAD VALUED THE PROPERTY AS ON 01.04.198 1 AT RS.8,55,950/- HOWEVER, THE LD. CIT(A), CONFIRMED THE ACTION OF TH E AO AND HELD THAT COST OF ACQUISITION OF THE PROPERTY HAS RIGHTLY BEE N TAKEN AT NIL. 4. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT LONG TERM CAPITAL GAIN CANNOT BE TAXED IN THE A.Y. 2006- 07 BECAUSE THE ASSESSEE HAD HANDED OVER TO THE POSSESSION TO THE D EVELOPER IN PURSUANCE OF DEVELOPMENT AGREEMENT WHICH WAS EXECUT ED ON 08.03.2000. UNDER THE SAID AGREEMENT, THE RIGHTS WE RE TRANSFERRED TO THE DEVELOPER FOR DEVELOPMENT OF THE PROPERTY. IN L IEU OF THAT, ASSESSEE HAS ALSO RECEIVED RS.80,000/- (ALONG WITH ALL THE F OUR CO-OWNERS). THUS, THE CAPITAL GAIN IF AT ALL, WOULD BE CHARGEABLE TO TAX IN THE A.Y. 2000-01. MERELY BECAUSE CONSIDERATION IN THE FORM OF FLAT HA S PASSED TO THE ASSESSEE IN THE A.Y. 2006-07, THE SAME CANNOT BE HE LD TO BE THE DATE OF TRANSFER. IN SUPPORT OF HIS CONTENTION, HE DREW OUR ATTENTION TO CLAUSE 1 TO 6 OF THE DEVELOPMENT AGREEMENT. HE FURTHER SUBMI TTED THAT IN THE LATEST DECISION OF THE MUMBAI HIGH COURT IN THE CAS E OF CHEMOSY LTD. ITA NO. 361 OF 2013, VIDE JUDGMENT AND ORDER DATED 11.02.2015, THE HONBLE COURT HAS DISTINGUISHED THE DECISION OF CHA TURBHUJ DWARKADAS KAPADIA VS. CIT 260 ITR 491 (BOM) AND HELD THAT IN RESPECT TO THE PIECE OF LAND FOR WHICH A TRANSACTION WAS ACTED UPON, THE CAPITAL GAIN WOULD ARISE ON THE EXECUTION OF THE DEVELOPMENT AGREEMENT . CATENA OF OTHER DECISIONS OF VARIOUS TRIBUNALS WERE ALSO RELIED UPO N. ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 6 5. REGARDING COST OF ACQUISITION TAKEN AT NIL BY THE AO, HE SUBMITTED THAT THE PROPERTY WAS DEVOLVED UPON THE ASSESSEE IN SUCCESSION FROM HER PARENTS. THE PROPERTY ORIGINALLY BELONGED TO HE R FATHER WHO HAD DIED IN THE YEAR 1975. THEREFORE, BY VIRTUE OF PROVISION S OF SECTION 49(1), THE COST OF ACQUISITION TO THE ASSESSEE SHALL BE CONSID ERED TO BE THE COST OF ACQUISITION TO HER FATHER. SINCE THE PROPERTY WAS A CQUIRED PRIOR TO 1 ST APRIL 1981, THEREFORE, THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1 ST APRIL 1981 IS TO BE SUBSTITUTED. IN SUPPORT OF THE FAIR M ARKET VALUE AS ON 01.04.1981, THE ASSESSEE HAD FILED REGISTERED VALUE RS REPORT, WHO HAD DETERMINED THE COST AT RS.8,55,958/- THE INDEXED CO ST OF WHICH WORKS OUT AT RS.34,57,157/-. FROM THIS VALUE, THE ASSESSE ES 1/4 TH SHARE WORKS OUT TO RS.10,39,989/-. FURTHER IN SUPPORT OF HIS CO NTENTION, HE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF MANJULA J. SHAH REPORTED IN (2013) 355 ITR 474 (MUM). LASTLY HE SUBMITTED THAT THE ASSESSEE SHOULD BE GRANTED THE BENEFIT U/S 54 F , BECAUSE, THE ENTIRE CONSIDERATION WAS INVESTED BY THE ASSESSEE IN THE R ESIDENTIAL HOUSE AND IF IT IS HELD THAT CAPITAL GAIN HAS ARISEN IN A.Y. 2006-07, THEN THE BENEFIT OF SECTION 54F SHOULD BE GIVEN AS THE ENTIRE CONSID ERATION HAS BEEN UTILIZED IN ACQUIRING THE RESIDENTIAL FLAT. 6. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED UP ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT CAPITAL GAIN HAS RIGHTLY BEEN TAXED IN THE A.Y. 2006-07, BECAUSE THE ASSESSEE IN PURSUANCE OF AN AGREEMENT HAD RECEIVED THE PLOT IN YEAR 2005, WHICH IS EVIDEN T BY THE FACT THAT DEED FOR ALLOTMENT OF THE FLAT WAS MADE ON 03.12.20 05 AND STAMP DUTY WAS ALSO PAID IN THIS YEAR. THEREFORE, THE CAPITAL GAIN HAS ARISING IN THIS YEAR ONLY. REGARDING COST OF ACQUISITION, HE RELIED UPON THE ORDER OF THE LD. CIT(A). LASTLY REGARDING CLAIM OF SECTION 54F, HE SUBMITTED THAT THE ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 7 MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A O TO EXAMINE THE SAID ISSUE AFRESH. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD ACQUIRED A SHARE IN THE PROPERTY AT AMBOLI, ANDHERI (W) ALONG WITH OTHER 3 CO-OWNERS FROM HER FATHER. THE PROPERTY WAS OWNED BY THE FATHER WHO HAD EXPIRED ON 19.08.1975 AND THEREAFTER, THE SAID PROPERTY WAS DEVOLVED TO ASSESSEES MOTHER, WHO DIED ON 07.03.19 89. AFTER HER DEATH THE PROPERTY WAS DEVOLVED UPON THE ASSESSEE AND HER BROTHERS AND SISTER EACH HAVING 1/4 TH SHARE. ALL THE 4 CO-OWNERS ENTERED INTO A DEVELOPMENT AGREEMENT, VIDE AGREEMENT DATED 08.03.2 000 TO DEVELOP THE PROPERTY. FOR SUCH A SURRENDER OF RIGHTS, THE 4 CO-OWNERS WERE ENTITLED TO RS.80,000/- (RS. 20,000/- EACH) WHICH W AS TO BE RECEIVED ON THE DATE OF EXECUTION OF THE AGREEMENT AND 4 FLATS ADMEASURING 700 SQ. FT. AND 4 GARAGES ADMEASURING 100 SQ. FT. THE SAID FLAT WAS ALLOTTED TO ASSESSEE VIDE REGISTERED DEED DATED 03.12.2005. THU S, THE CONSIDERATION AS STIPULATED IN THE DEVELOPMENT AGRE EMENT WAS PASSED TO THE ASSESSEE ONLY IN THE A.Y. 2006-07. THE AMOUNT O F RS.80,000/- WAS MAINLY TO ALLOW THE DEVELOPER TO DEVELOP THE SAID P LOT. AS PER THE EXPRESS TERMS OF THE AGREEMENT WITH THE DEVELOPER, THE ASSESSEE IN LIEU OF SURRENDERING THE RIGHTS TO THE DEVELOPER WAS ENT ITLED FOR FLAT ADMEASURING 700 SQ. FT FREE OF COST . THUS, THE CON SIDERATION FOR THE TRANSFER OF RIGHTS WAS HANDING OVER THE FLAT. THIS TRANSACTION HAD TAKEN PLACE IN THE DECEMBER 2005. THUS, WE AGREE WITH THE CONTENTION OF THE DEPARTMENT THAT THE LONG TERM CAPITAL GAIN WILL ARI SE IN THE A.Y. 2006-07. ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 8 8. REGARDING COST OF ACQUISITION, WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT THE SAME CANNOT BE TAKEN AT N IL, BECAUSE THE PREVIOUS OWNER, THAT IS, FATHER OF THE ASSESSEE HAD ACQUIRED THE PROPERTY MUCH BEFORE 01.04.1981. THUS THE MARKET VA LUE AS ON 01.04.1981 HAS TO BE ADOPTED AND ACCORDINGLY THE FA IR MARKET VALUE HAS TO BE ADOPTED AS ON 01.04.1981. THIS PROPOSITION IS NOW WELL SETTLED IN THE JURISDICTION OF MUMBAI HIGH COURT BY THE DECISI ON OF MANJULA J. SHAH (SUPRA). SINCE THE DEPARTMENT HAS NOT ADOPTED ANY F AIR MARKET VALUE AS ON 01.04.1981, THE FARE MARKET VALUE AS DETERMINED BY THE REGISTERED VALUER AS ON 01.04.1981 APPEARS TO BE CORRECT. HOWE VER, THE AO SHALL EXAMINE THE SAID VALUE AS DETERMINED BY THE REGISTE RED VALUER. REGARDING THE SALE VALUE FOR THE PURPOSE OF DETERMI NATION OF LONG TERM CAPITAL GAIN, THE SAME ALSO NEEDS TO BE VERIFIED BE CAUSE THE LEARNED COUNSEL BEFORE US HAS SUBMITTED THAT THE STAMP VALU ATION AUTHORITY HAS DETERMINED THE STAMP VALUE OF THE FLAT AT RS.4,43, 500/-. THUS, THE ISSUE OF DETERMINATION OF FAIR MARKET VALUE AS ON 01.04.1 981 AND THE SALE CONSIDERATION IN THE A.Y. 2006-07 IS SET ASIDE TO T HE FILE TO THE AO WHO SHALL EXAMINE THE CONTENTION OF THE ASSESSEE, THEN DETERMINE THE LONG TERM CAPITAL GAIN. 9. LASTLY, REGARDING CLAIM OF BENEFIT U/S 54F, IT I S SEEN THAT THIS PLEA HAS NOT BEEN TAKEN EITHER BEFORE THE AO OR BEFORE T HE LD. CIT(A). THEREFORE, BEING A LEGAL CLAIM, THE ADDITIONAL GROU ND RAISED BY THE ASSESSEE IS ADMITTED AND THE MATTER IS RESTORED BAC K TO THE FILE OF THE AO, WHO SHALL EXAMINE THE SAME AND ALLOW THE CLAIM OF DEDUCTION/BENEFIT IN ACCORDANCE WITH LAW. THUS, THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURP OSE. ITA NO. 6543/MUM/2011 ASSESSMENT YEAR: 2006-07 9 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH, 2015. SD/- SD/- (D.KARUNAKAR RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.03.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.