ITO-16(1)(4), MUMBAI V. THAKERSHI A. VEERA, MUMBAI

ITA 6553/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2064 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2013
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: V C SHAH
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER I.T.A. NO.6553/M/2013 (AY: 2009 - 2010 ) INCOME TAX OFFICER - 16(1)(4), MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007. / VS. SHRI THAKERSHI A. VEERA, 337/A, AKHIL BHARAT CHAWL BELLASIS BRIDGE ROAD, TARDEO, MUMBAI 400 034. ./ PAN : AAAPV9166E ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA YADAV, DR / RESPONDENT BY : SHRI V.C. SHAH / DATE OF HEARING : 03.11.2016 / DATE OF PRONOUNCEMENT : 11 .11.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 7.11.2013 IS AGAINST THE ORDER OF THE CIT (A) - 27, MUMBAI DATED 7.8.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF SHORT TERM CAPITAL GAIN AND SUSTAINING THE FUTURE CLAIM OF LONG TERM CAPITAL GAIN EVEN THOUGH THE TRANSFER OF FLAT U/S 2(47) HAD TAKEN PLACE AS PER REGISTERED AGREEMENT AND SUBSE QUENT STAMP DUTY PAID BY TRANSFEREE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED TO HOLD THAT THE FLAT WAS LET OUT BY THE ASSESSEE UNDER THE LEAVE AND LICENSE AGREEMENT AND SUCH AGREEMENT DOES NOT PERPETRATE TO BE SALE AGREEMENT AND HENCE, TRANSFER U/S 2(47) HAS NOT TAKEN PLACE EVEN THOUGH 98% OF TOTAL CONSIDERATION WAS PAID BY TRANSFEREE. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE OWNS A FLAT IN A REDEVELOPED BUILDING IN JULY, 2008. THE SAID FLAT WAS RENTED OUT FOR A PERIOD OF THREE YEARS AND EARNED RENT IN ADVANCE VIDE RENTAL AGREEMENT DATED 1.8.2008. THE LEASE PERIO D IS FOR THREE YEARS. THE AGREEMENT IS SIGNED BETWEEN THE ASSESSEE AND SHRI CHETAN R. SHAH (CHETAN) . DURING THE PERIOD OF THIS LICENSE AGREEMENT ON 6.1.2009, ASSESSEE SOLD THE SAID FLAT TO MRS. NEETA CHETAN SHAH (NEETA), WIFE OF SHRI CHETAN R. SHAH, TENA NT OF THE PROPERTY. SHE PAID A SUM OF RS. 49,41,000/ - OUT OF THE TOTAL 2 CONSIDERATION OF RS. 52,11,000/ - IN THE MONTH OF JANUARY, 2009. AT THE TIME OF SALE, THE BUYER OF THE FLAT, MRS. NEETA IS LIVING IN THE SAID FLAT NO.303 IN KINJA HEIGHTS AND ALONG WITH HER HUSBAND (CHETAN). THE BALANCE AMOUNT OF RS. 2,70,000/ - WAS SUBSEQUENTLY PAID AT THE TERMINATION OF LICENSE AGREEMENT PERIOD. ON THESE FACTS, AO CONSIDERED THE DATE OF AGREEMENT TO SALE IE 6.1.2009 IS NOT RELEVANT DATE FOR COMPUTING THE HOLDING P ERIOD OF 36 MONTHS, RATHER AO CONSIDERED THE LAST PAYMENT OF RS. 2.7 LAKHS PAID ON THE TERMINATION OF THE LICENSE AGREEMENT PERIOD AND OFFERED THE GAINS UNDER THE HEAD LONG TERM CAPITAL GAINS AND PAID TAXES ACCORDINGLY. BUT, ASSESSEE IS OF THE VIEW THAT THE D A T E O F POSSESSION OF THE PROPERTY BECOMES RELEVANT LEGALLY IE WHEN THE LICENSE PERIOD OF THREE YEARS ENDS IN 31.7.2011. AS PER THE LICENSE AGREEMENT DATED 12.8.2008, THE THREE YEARS PERIOD STARTS FROM 1.8.2008 AND ENDS ON 31.7.2011. THE LONG TERM CAPITAL GA INS WERE OFFERED BY THE ASSESSEE ON THIS SALE OF FLAT IN THE AY 2012 - 13. IN THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER RESTRICTED HIS ATTENTION TO THE METHOD OF COMPUTING THE HOLDING PERIOD OF THE ASSET AND RELIED HEAVILY ON THE DATE OF SALE AGREEMENT IE 6.1.2009 AND COMPUTED THE GAINS UNDER THE HEAD SHORT TERM CAPITAL GAINS. THIS GAVE RAISE TO THE DISPUTE / LITIGATION BEFORE US. CIT (A) GRANTED RELIEF TO THE ASSESSEE RELYING HEAVILY ON VARIOUS DECISIONS INCLUDING THE JUDGMENT OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT (260 ITR 491) (BOM.) AND ANOTHER DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEETADEVI PASARI (2009) ( 17 DTR 280 ) (BOM.) APART FROM MANY OTHER DECISIONS. PARA 2.4.4 OF THE C IT (A)S ORDER IS RELEVANT IN THIS REGARD. CIT (A) OPINED THAT THE FACTS OF THE PRESENT CASE ARE IN PARIMATERIA WITH THE ABOVE CITED DECISIONS (PARA 2.4.5 IS RELEVANT). HOWEVER, CIT (A) HAS REMARKED THAT THE ASSESSEE HAD PLANNED TO TRANSFER THE FLAT ONLY TO SAVE TAXES AND ALSO HIGHLIGHTED THE AOS FAILURE IN BRINGING SOME FACTS TO THE RECORDS IN THIS REGARD . EVENTUALLY, CIT (A) GRANTED RELIEF AND ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL BEFORE US. 3. AFTER NARRATING THE FACTS OF THE CASE, LD COUNSEL FOR THE ASSESSEE ARGUED THAT THE CIT (A) HAS RIGHTLY RELIED ON THE BINDING JUDGMENTS IN THE CASES OF DWARAKADAS KAPADIA (SUPRA) AND GEETADEVI PASARI (SUPRA). HE ALSO SUBMITTED THAT THE ACTUAL POSSESSION OF THE FLAT IS GIVEN TO THE BUYER (MRS. NEETA) ONLY AFTER THE TERMINATION OF THE LICENSE AGREEMENT AND THE SAME SHOULD MATTER, IN SUBSTANCE, A LOT FOR DECIDING 3 THIS ISSUE OVERRIDING THE OTHER FACTS RELATING TO THE EXTENT OF PAYMENT OF CONSIDERATION AND THE D ATE ON WHICH THE FLAT IS REGISTERED DURING THE OPERATION OF LICENSE AGREEMENT. 4. ON THE OTHER HAND, LD DR FOR THE REVENUE TRIED TO HIGHLIGHT THE VIEW OF THE ASSESSEE IN ENTERING INTO TRANSACTION IN JANUARY, 2009 WHILE THE LICENSE AGREEMENT IS IN PROGRESS. HE ALSO MENTIONED THAT THE FLAT IS ALREADY IN POSSESSION OF THE ASSESSEE, WHO IS THE WIFE OF SHRI CHETAN. MENTIONING THAT THE JUDGMENTS RELIED UPON BY THE CIT (A) AS WELL AS THE ASSESSEE ARE DISTINGUISHABLE ON FACTS, LD DR SUBMITTED THAT THE FLAT NO.303 IS ALREADY RENTED OUT VIDE LICENSE AGREEMENT TO SHRI CHETAN ( HUSBAND OF MRS. NEETA) AND MRS. NEETA, THE BUYER, IS ALREADY RESIDING IN THE SAME PREMISES IN THE CAPACITY OF THE WIFE OF SHRI CHETAN R. SHAH, WHICH MAKES THE DIFFERENCE FROM THE FACTS OF THE CI TED JUDGMENT (SUPRA). IN THOSE CASES, THE AGREEMENT WAS MADE IN 1994 AND THE SELLER COULD NOT HANDOVER THE PROPERTY, WHICH HAPPENED ONLY AFTER THE LAPSE OF THE TIME AND THE DATE OF HANDING OVER OF SUCH PROPERTY WAS HELD RELEVANT DATE, WHEREAS IN THE PRE SENT CASE, THERE IS NO QUESTION OF SUCH HANDING OVER OF THE PROPERTY AS THE ASSESSEE IS ALREADY IN OCCUPATION OF THE SAME, MAY BE AS A SPOUSE F THE TENANT, SHRI CHETAN R. SHAH. THEREFORE, LD DR IS OF THE OPINION THAT THE SAID DECISIONS ARE INAPPLICABLE TO THE INSTANT CASE. THEREFORE, THE DATE OF AGREEMENT OF THE SALE IE 12.1.2009 IS THE DATE, WHICH SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTING THE PERIOD OF HOLDING FOR DETERMINING THE NATURE OF THE CAPITAL GAINS. LD DR ALSO MENTIONED THAT AO HAS RI GHTLY TAXED THE GAINS AS SHORT TERM CAPITAL GAINS. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE JUDGMENTS CITED BEFORE US. THE LIMITED ISSUE IE TO BE DECIDED BY US TODAY RELATES TO THE DATE OF THE P OSSESSION OF THE FLAT NO.303 BY THE BUYER OF THE PROPERTY AND THE SPOUSE OF THE TENANT. TO START WITH, WE HAVE PERUSED THE CITED DECISIONS AND THEIR APPLICABILITY TO THE FACTS OF THE PRESENT CASE IE DWARAKADAS KAPADIA (SUPRA) AND GEETADEVI PASARI (SUPRA) AND THEY ARE RELEVANT FOR THE PROPOSITION THAT THE RELEVANT ASSESSMENT YEAR FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS WILL BE THE ASSESSMENT YEAR IN WHICH THE ASSESSEE WAS ACTUALLY PHYSICALLY PUT IN POSSESSION. CONSIDERING THE ABOVE, WE FIND, THE C IT (A) ERRED IN COMPARING THE FACTS OF THE PRESENT CASE WITH THAT OF THE ABOVE CITED JUDGMENTS DELIVERED IN THE CONTEXT OF ADVERSE POSSESSION OF ASSET & SECTION 53A OF THE TP ACT. T HEREFORE, THE ORDER OF THE CIT (A) REQUIRES TO BE REVERSED. FURTHER, WE FIND THAT 4 THE DATE OF POSSESSION IS UNDISPUTED SOFARAS THE ASSESSEE IS CONCERNED AS SHE IS ALREADY STAYING IN THE PROPERTY IN THE CAPACITY OF THE SPOUSE OF THE TENANT AND THEREFORE, T HE DATE OF AGREEMENT TO SALE IE 12.1.2009 BECOMES RELEVANT FOR DECIDING THE HOLDING PERIOD OF THE PROPERTY IN QUESTION. IN SUMMARY, WE ARE OF THE OPINION, THE ORDER OF THE AO IS REQUIRED TO THE CONFIRMED AND THE ORDER OF THE CIT (A) IS REQUIRED TO BE SET ASIDE. WE ORDER ACCORDINGLY. THUS, THE GROUNDS RAISED BY THE REVENUE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 1 1 T H NOVEMBER, 2016. S D / - S D / - ( RAM LAL NEGI ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 11.11.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI