ANNAPURNA AGARWAL, MUMBAI V. ITO WD 9(2)(2), MUMBAI

ITA 655/MUM/2011

• Counselvise Citation: 65519914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 26-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: SATISH R MODY
• Keywords: Business income; Cost of acquisition
• Section: 54; 2; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 655 / / 2011 A.Y. 2007-08 ITA NO. : 655/MUM/2011 (ASSESSMENT YEAR: 2007-08) ANNAPURNA AGARWAL, 601/602, DEVKI BLDG., SANYAS ASHRAM ROAD, VILE PARLE (WEST), MUMBAI -400 056 .: PAN: AETPA 9180 J VS ITO/WD. 9(2)(2), AAYAKAR BHAVAN, M. K. ROAD, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH R. MODY RESPONDENT BY : SHRI O.P. SINGH /DATE OF HEARING : 26-09-2013 !' / DATE OF PRONOUNCEMENT : 09-10-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 20, MUMBAI, DATED 27.12.2010, WHEREIN, THE FOLLOWING GROUNDS HA VE BEEN TAKEN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN ASSESSING THE SALE CONSIDERATION OF RS. 1, 00,51,000/- RECEIVED BY THE APPELLANT ON THE SALE OF THE RESIDENTIAL PRE MISES UNDER THE HEAD BUSINESS INCOME OF CAPITAL GAINS AS OFFERED BY THE APPELLANT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE BASIC INTENT ION OF ENTERING INTO THE AGREEMENT WITH THE OWNER WAS TO ACQUIRE THE RESIDEN TIAL FLAT FOR SELF OCCUPATION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) OUT TO HAVE APPRECIATED THE FACT THAT THE A.Y. 2003 2004 APPELLANTS CLAIM UNDER SECTION 54F WAS ACCEPTED AGAINST THE PU RCHASE OF THE SAID RESIDENTIAL FLAT AND ALSO NO BUSINESSMAN WOULD HOLD THE STOCK IN TRADE ANNAPURNA AGARWAL ITA NO. 655/MUM/2011 2 FOR SO MANY YEARS BEFORE SELLING IT AND OUGHT TO HA VE ASSESSED THE SAID AMOUNT UNDER THE HEAD CAPITAL GAINS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER IN ASSESSING THE COST OF ACQUISITION OF THE SAID PREMISES AT RS. 25, 79,904/- WITHOUT ALLOWING THE BENEFIT OF INDEXATION TO THE APPELLANT . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER IN NOT INCLUDING THE AMOUNTS OF RS. 15,18,880/-, RS. 3,48,000/- AND RS. 1,66,342/- BEING THE AMOUNT PAID TO ACQUISITION OF T.D.R., PAYMENT T O BMC AND INTEREST RESPECTIVELY IN THE COST OF ACQUISITION. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFI CER IN NOT ALLOWING THE BENEFITS TO THE PROVISIONS OF SECTION 54 TO THE APP ELLANT FOR THE RESIDENTIAL PREMISES PURCHASED BY THE APPELLANT AGA INST THE SALE OF THE SAID RESIDENTIAL PREMISES. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE ALONG WITH HE R HUSBAND, MR. BHAGWANDAS M. AGARWAL ENTERED INTO A MOU DATED 08.0 8.2002 WITH M/S JAY BUILDERS, OWNER OF PROPERTY KNOWN AS DEVKI BUILDING AT SANYAS ASHRAM ROAD, VILE PARLE (WEST), MUMBAI, TO CONSTRUCT 5 TH , 6 TH & 7 TH FLOORS, ON 50:50 AT THEIR COST AND PERIL, ALONG WITH THE TD R, WHICH THE OWNER HAD ACQUIRED. AFTER THE CONSTRUCTION WAS OVER, THE ASSESSEE SOLD HER SHARE IN THE FLATS, I.E. FLAT NO. 502 ON 24.0 1.2007, WHEREIN SHE DECLARED LONG TERM CAPITAL GAINS OF RS. 61,34,165 /- AND CLAIMED EXEMPTION UNDER SECTION 54 ON THIS AMOUNT. 3. THE AO, WHILE TAKING UP THE ASSESSMENT PROCEEDINGS, E NQUIRED ABOUT THE DETAILS OF THE TRANSACTION ALONG WITH DOCUMENT S AS EXECUTED, BY THE ASSESSEE AND THE OWNERS. 4. ON CONSIDERATION OF THE REPLIES, THE AO COMPUTED THE L TCG AS RS. 70,99,506/- AS AGAINST RS. 61,34,165/- COMPUTED BY THE ASSESSEE . 5. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), WHO NO T ONLY NEGATED THE CLAIM OF THE ASSESSEE ON EXEMPTION, BUT TREA TED THE TRANSACTION AS A BUSINESS VENTURE AND SENT THE PROPOS AL FOR ENHANCEMENT. THE ASSESSEE REITERATED THE ARGUMENTS MA DE BEFORE THE AO. THE CIT(A), THEREFORE, REJECTED THE CONTENTIONS OF THE ASSESSEE AND TREATED THE TRANSACTION AS A BUSINESS VENTURE AND NE GATED ALL CLAIMS OF THE ASSESSEE. ANNAPURNA AGARWAL ITA NO. 655/MUM/2011 3 6. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 7. BEFORE US, THE AR SUBMITTED THAT GROUNDS NO. 1, 2, 3 & 4 PERTAIN TO THE SINGLE ISSUE AND BRIEFLY TOOK US THROUGH THE FACTS OF THE CAS E AND SUBMITTED THAT THE INTENTION OF THE ASSESSEE, HAS FIRST TO BE EXAMINED, I.E. THE PROPERTY IN QUESTION HAS BEEN READY AND IN OCCUP ATION OF THE ASSESSEE SINCE 2005 AND THE ASSESSEE SOLD HER PORTION, LEAVING THE HUSBANDS PORTION, WHERE THEY ARE STILL RESIDING. THE AR PO INTED OUT, HAD THERE BEEN ANY INTENTION FOR THE CONDUCT OF BUSINESS , THE ASSESSEE WOULD NOT HAVE WAITED FOR OVER THREE YEARS AFTER GETTING SANCTIONS FOR OCCUPATION. HE SUBMITTED THAT THE CIT(A) PROCEEDED TO AS SESS THE TRANSACTION AS A BUSINESS, BECAUSE IN THE AGREEMENT EN TERED INTO BY THE ASSESSEE AND THE OWNERS JAY BUILDERS, THE EXPRESSIO N USED FOR THE ASSESSEE WAS DEVELOPER. ACCORDING TO HIM NO OTHER EXP RESSION COULD HAVE BEEN USED BECAUSE THE FURTHER CONSTRUCTION AS ALLO WED BY THE OWNER AND ACQUISITION OF THE TDR WAS IN THE NAME OF THE OWNER AND THE ASSESSEE ALONG WITH HER HUSBAND COULD HAVE ACQUIRED THE SAME FROM THE OWNER ONLY. BASICALLY, THE FACT REMAINS THAT THE ENTIRE FURTHER CONSTRUCTION WAS UNDERTAKEN BY THE ASSESSEE AND HER HUSBAND AFTER UTILIZING THE APPROVALS AND THE TDR ACQUIRED BY THE OWNER. 8. THE AR FURTHER PLEADED THAT THE FACT THAT THE ASSES SEE AND HER HUSBAND STILL OCCUPY THE FLATS ON 6 TH FLOOR GOES TO PROVE THAT THE INTENTION WAS ALWAYS TO RETAIN THE INVESTMENT AND, NOT T O BECOME A TRADER. 9. THE AR, THEREFORE PLEADED THAT THE CIT(A) HAD ERRED IN TREATING THE ASSESSEE AS A TRADER AND ALSO THE AO TO HAVE NEG ATED THE ASSESSEE WITH THE FULL DEDUCTION, AS CLAIMED BY HER. 10. THE DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THOUGH THE MOU IS SHORT, BUT IT GIVES THE SCENT OF AN ADVENTURE IN NATURE OF TRADE. THE DR POINTED OUT THAT T HE BASIC INTENTION OF THE ASSESSEE AND HER HUSBAND HAD BEEN TO DO ANNAPURNA AGARWAL ITA NO. 655/MUM/2011 4 DEVELOPMENT BUSINESS AND BECAUSE OF WHICH, THEY UNDERTOO K TO BUILD AND DEVELOP 5 TH , 6 TH & 7 TH FLOOR AND ALSO THAT THE ASSESSEE PURCHASED THE TDR, ALL THIS SHOWS AND INDICATE THAT THE INTENTION OF T HE ASSESSEE HAD BEEN TO ENTER A TRADE TRANSACTION. THE DR, THEREFO RE, SUBMITTED THAT THE VIEW TAKEN BY THE CIT(A) TO HOLD THAT THE TRAN SACTION AS SUCH WAS IN THE NATURE OF TRADE WAS CORRECT, ALONG WITH DENIAL OF BENEFITS UNDER THE HEAD CAPITAL GAINS. 11. IN THE REJOINDER, THE AR INSISTED THAT INTENTION OF T HE ASSESSEE WAS ALWAYS TO BE AN INVESTOR AND NOT A TRADER AND ALS O THAT NO TRADER WOULD HOLD ITS SIT FOR SUCH A LONG PERIOD. 12. THE AR, THEREFORE, PLEADED THAT THE ORDER OF THE CIT(A) AS INFIRM. 13. WE HAVE HEARD THE ARGUMENTS OF THE CONTESTING PAR TIES AND HAVE MINUTELY PERUSED THE AGREEMENTS ENTERED INTO BY THE A SSESSEE AND THE OWNER, M/S JAY BUILDERS. WHEN WE LOOK INTO THE RELEVANT C LAUSES, WHICH ARE BEING REPRODUCED HEREUNDER : 2. THE DEVELOPERS SHALL CONSTRUCT THE AFORESAID TW O FLOORS I.E. FIFTH AND SIXTH FLOORS IN AGGREGATE ADMEASURING ABOUT 2600 SQ UARE FEET AT THEIR OWN COSTS AND EXPENSES AND THE SAME SHALL BE SHARED IN THE RATIO OF 50:50 OF THE CONSTRUCTED AREA. THE DEVELOPERS SHALL BE ENTITLED FOR THE ENTIRE SIXTH FLOOR AND THE OWNERS SHALL BE ENTITLED FOR THE ENTIRE FIFTH FLOOR. 3. THE OWNERS GOT THE PLANS SANCTIONED FROM THE MUN ICIPAL CORPORATION OF GREATER MUMBAI AND OTHER CONCERNED AUTHORITIES AND HAS OBTAINED I.O.D. AND C.C. AT HIS OWN COSTS AND EXPENSES THROU GH THEIR OWN ARCHITECTS AND OTHER CONSULTANTS. 4. IT IS EXPRESSLY AGREED THAT IN THE EVENT THE CON STRUCTION OF SEVENTH FLOOR IS PERMISSIBLE THEN THE SAME SHALL BE CONSTRUCTED B Y THE DEVELOPERS AS AFORESAID AND THE OWNERS SHALL BE ENTITLED FOR 50% OF THE CONSTRUCTED AREA AND THE DEVELOPER NO. 2 SHALL BE ENTITLED FOR 50% OF THE AREA CONSTRUCTED ON SEVENTH FLOOR, EITHER ON SEVENTH FLO OR OR FIFTH FLOOR AS AGREED BY BOTH THE PARTIES. AND FURTHER, AFTER GETTING THE TDR, AGREEMENT DATED 25.10 .2005, THE RELEVANT CLAUSES ARE 2. THE DEVELOPERS HAVE COMPLETED THE CONSTRUCTION O F THE SAID BUILDING AND PROVIDED TO THE OWNERS AS AFORESAID 1 FLAT BEAR ING NO. 501 ON THE FIFTH FLOOR AND 2 FLATS VIZ. FLAT NOS. 701 & 702 ON THE 7 TH FLOOR AND THE DEVELOPER NO. 1 I.E. SHRI BHAGWANDAS AGRAWAL HAS RE TAINED WITH HIM 2 FLATS BEARING NOS. 601 & 602 ON THE 6 TH FLOOR AND THE DEVELOPER NO. 2 I.E. SMT ANNAPURNA AGARWAL HAS RETAINED WITH HER FL AT NO. 502 ON THE 5 TH FLOOR ANNAPURNA AGARWAL ITA NO. 655/MUM/2011 5 3. THE DEVELOPERS HAVE COMPLETED THE CONSTRUCTION O F THE SAID 3 FLOORS AND HANDED OVER THE POSSESSION OF THE 3 FLATS AS AFORES AID TO THE OWNERS AND PROVIDED USUAL AMENITIES AND THE OWNERS HEREBY CONFIRM HAVING TAKEN POSSESSION OF THE 3 FLATS AS AFORESAID AND TH EY ARE FULLY SATISFIED WITH THE QUALITY OF THE CONSTRUCTION AND AMENITIES PROVIDED THEREIN AND THEY HAVE NO CLAIM OF WHATSOEVER NATURE AGAINST THE DEVELOPER. 4. THE DEVELOPER NO. 1 I.E. SHRI BHAGWANDAS AGARWAL HAS 2/3 SHARE AND THE DEVELOPER NO. 2 I.E. SMT. ANNAPURNA BHAGWANDAS AGARWAL HAS 1/3 SHARE IN THE AFORESAID DEVELOPMENT. 5. THE OWNERS HAVE REPRESENTED TO THE DEVELOPER THA T THEY HAVE PAID THE ENTIRE CONSIDERATION PRICE IN RESPECT OF THE AFORES AID DRC FOR THE CONSTRUCTION OF ADDITIONAL 3 FLOORS AND BY WAY OF T DR AND GOT THE PLANS SANCTIONED FROM MUNICIPAL CORPORATION OF GREATER MU MBAI AND OTHER CONCERNED AUTHORITIES AND PAID NECESSARY DEPOSITS, CHARGES, FEES PAYABLE TO THE MUNICIPAL CORPORATION OF GREATER MUM BAI AND ALSO PAID THE PROFESSIONAL FEES OF THE ARCHITECTS AND OTHER P ROFESSIONALS AND THE DEVELOPERS SHALL NOT RESPONSIBLE OR LIABLE FOR THE PAYMENT THEREOF. 6. THE DEVELOPERS HEREBY CAUSE THE SOCIETY TO BE FO RMED BY THE OCCUPANTS OF THE SAID BUILDING KNOWN AS DEVAKI TO ADMIT THEM AS MEMBERS OF THE SOCIETY AND WILL EXECUTE NECESSARY CONVEYANCE IN FA VOUR OF THE SOCIETY. 14. WHEN WE EXAMINE THE TWO AGREEMENTS, BOTH THE AGRE EMENTS POINT TO THE DIRECTION THAT THERE IS AN ELEMENT OF PROFIT AND TRADE INVOLVED. THE SHARING OF THE CONSTRUCTED PART, THAT TOO O N THE PREMISES NOT OWNED BY THE ASSESSEE AND HER HUSBAND, GOES TO IN DICATE TRADE. IN CASE, THE PREMISES BELONGED TO THE ASSESSEE AND IN SUCH A SITUATION, THE ARGUMENT OF THE AR WOULD HAVE BORNE SOME WEIGHT. ON A SPECIFIC QUERY FROM US, THE AR INFORMED THAT THE ASSESSEE AND HER HUSBAND A RE IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. 15. ANOTHER FACT INDICATING THE TRADE INTENTION COMES FROM THE READING OF CLAUSE 6 OF THE AGREEMENT DATED 25.10.2005, WHICH READS, 6. THE DEVELOPERS HEREBY CAUSE THE SOCIETY TO BE F ORMED BY THE OCCUPANTS OF THE SAID BUILDING KNOWN AS DEVAKI TO ADMIT THEM AS MEMBERS OF THE SOCIETY AND WILL EXECUTE NECESSARY CONVEYANCE IN FA VOUR OF THE SOCIETY. THIS CLAUSE CLEARLY SHOWS THAT THE ASSESSEE AND HER HU SBAND WOULD FORM THE SOCIETY OF THE RESIDENTS, WHICH ONLY DEVELOPER DO ES, AFTER IT HAS SOLD ITS STOCK TO THE INCUMBMENTS. 16. WITH THESE OBSERVATIONS, WE CAN ONLY INFER THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS IN THE NATURE OF TRAD E. IN THESE CIRCUMSTANCES, WE DO NOT INTEND TO DISTURB THE FINDINGS OF THE CIT(A), WHICH WE SUSTAIN. ANNAPURNA AGARWAL ITA NO. 655/MUM/2011 6 17. GROUNDS NO. 1, 2, 3 & 4 ARE THEREFORE REJECTED. 18. GROUND NO. 5 PERTAINS TO EXCLUSION OF RS. 15,18,880; RS . 1,66,342/- AND RS. 3,48,000/- FROM THE COST OF ACQUISITION. 19. SINCE WE HAVE HELD THAT THE TRANSACTION WAS IN THE NATURE OF TRADE, THESE COSTS WOULD HAVE A DIFFERENT COMPLEXION, WHICH THE CIT(A) HAVE TAKEN INTO CONSIDERATION. 20. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE IN T HE ORDER OF THE CIT(A), HENCE THE GROUND IS REJECTED. 21. GROUND NO. 6 PERTAINS TO THE CLAIM OF BENEFIT UNDER SECTION 54. 22. THIS ISSUE HAS BECOME INFRUCTUOUS, SINCE WE HAVE HELD THAT THE TRANSACTION WAS NOT UNDER THE HEAD CAPITAL GAINS. WE SUS TAIN THE ORDER OF THE CIT(A), FOR WITHDRAWING THE BENEFIT UNDER SECT ION 54, AS WE DO NOT FIND ANY INFIRMITY. 23. THE GROUND IS THEREFORE, REJECTED. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH OCTOBER, 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 9 TH OCTOBER, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. ANNAPURNA AGARWAL ITA NO. 655/MUM/2011 7 3) & & ' ( ) - 20 MUMBAI / THE CIT (A)-20, MUMBAI. 4) & & ' 9, MUMBAI / THE CIT -9, MUMBAI, 5) )*+ , & , & , , -. / THE D.R. I BENCH, MUMBAI. 6) +/ 0 COPY TO GUARD FILE. &12 / BY ORDER / / TRUE COPY / / [ 3 / 4 5 & , , -. DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *784 . . * CHAVAN, SR. PS