Sh. Amit Malhotra, New Delhi V. ACIT, New Delhi

ITA 6631/DEL/2013

• Counselvise Citation: 663120114 RSA 2013
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y KAKKAR
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A: NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUN TANT MEMBER ITA NO. 6631/DEL/2013 ASSESSMENT YEAR 2010-2011 SHRI AMIT MALHOTRA, VS. ACIT , CIRCLE 33 (1) 19, PUSA ROAD, NEW DELHI. NEW DELHI. PAN: AAGPM0758H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL AGARWAL, ADVOCATE, SHRI SAILESH GUPTA, CA ASSESSEE BY : MS. Y. KAKKAR, SR. DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASESEE HAS QUESTIONED FIRST APPELLATE OR DER ON THE FOLLOWING GROUNDS :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN ASSESSING THE LON G TERM CAPITAL GAIN DECLARED BY THE ASSESEE APPELLANT IN RESPECT OF SAL E OF PROPERTY SITUATED AT GURGAON, AS SHORT TERM CAPITAL GAIN AMOUNTING TO RS . 80,08,520/- AND THEREBY DENYING THE BENEFIT OF INDEXATION TO THE AP PELLANT. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THE BASIC FACTS THAT THE APPELLANT HA D ACQUIRED A RIGHT TO GET A PARTICULAR FLAT FROM THE BUILDER AND THAT RIGHT O F THE ASSESSEE ITSELF CONSTITUTED A CAPITAL ASSET AND THUS, CONSTRUING TH E PERIOD OF HOLDING FROM THE DATE OF ALLOTMENT THE SAID ASSET SHOULD HAVE BE EN HELD AS LONG TERM CAPITAL ASSET AND CLAIM OF THE ASSESSEE WITH REGARD TO INDEXATION OF COST SHOULD HAVE BEEN ALLOWED AS SUCH. 1.2 THAT THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) HAS FURTHER ERRED IN PLACING RELIANCE ON THE JUDGMENT S WHICH ARE WHOLLY INAPPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT ASSESSEE AND AS SUCH, DESERVES TO BE IGNORED. ITA NO. 6631/DEL/13 2 2. THAT THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING A DISALLOWANCE IN RESPECT OF PAYMENT OF SALES TAX FOR ASSESSMENT YEARS 2006-07 A ND 2007-08 AMOUNTING TO RS. 52,880/- WHICH STOOD CRYSTALLIZED DURING THE ASSESSMENT YEAR IN QUESTION. 3. THAT THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) HAS FURTHER ERRED IN SUSTAINING THE LEVY OF INTEREST U /S 234A AND 234B OF THE ACT, WHICH ARE NOT LEVIABLE ON THE FACTS OF THE APPELLANT. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENT S ADVANCED BY THE PARTIES IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW, MATERI AL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. IN GROUND NOS. 1 TO 1.2 THE ISSUE INVOL VED IS AS TO WHETHER THE CAPITAL GAIN AMOUNTING TO RS. 80,08,520/- CAN BE TREATED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN FOR THE PURPOSE OF CHARGING OF TAX. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE A PROPRIETOR OF M/S. DINE TIME MARKETING IS ENGAGED IN TRADING OF CROCKERY ITEMS. IT DERIVES INCOME FROM HOUSE PROPERTY, BUSINESS CAPITAL GAINS AND OTHER SOURCES. THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN (LTCG) ON THE SALE OF NIRVANA COU NTRY PROPERTY NO. 95, SOUTH CITY-2, GURGAON, HARYANA. THE ASSESSEE HAD ACQUIRED THIS PROPERTY ALONGWITH HIS WIFE VIDE CONVEYANCE DEED DATED 18.1.2007 AND SOLD IT ON 5.10.2009. THE ASSESSEE TOOK THE ALLOTMENT DATE OF 14.8.2004 AS TH E DATE OF ACQUISITION OF THE PROPERTY AND ACCORDINGLY WORKED OUT LTCG AT RS. 17 ,71,218/- ON THE SALE OF THE PROPERTY BY TAKING INSTALLMENT PAYMENT AS THE COST OF ACQUISITION ON THAT DATE ITA NO. 6631/DEL/13 3 AND APPLYING THE INDEXATION TO THAT. THE AO DID NOT AGREE WITH THE CLAIM OF LTCG BY THE ASSESSEE ON THE PREMISE THAT THE ASSESSEE SO LD PHYSICAL PROPERTY AND NOT HIS RIGHT IN THE PROPERTY AND THEREFORE THE DATE OF ACQUISITION OF PROPERTY IS 18.1.2007 ON WHICH DATE THE ASSET WAS PHYSICALLY AC QUIRED AND NOT 14.8.2004 AS TAKEN BY THE ASSESEE. THE AO THUS CONCLUDED THAT TH E HOLDING PERIOD OF THE PROPERTY IS LESS THAN 36 MONTHS (PERIOD FROM 18.1.2 007 TO 5.10.2009) ACCORDINGLY HE WORKED OUT SHORT TERM CAPITAL GAIN ( STCG) AT RS. 80,08,520/- ON THE SALE OF NIRVANA COUNTRY PROPERTY OBSERVING THAT SINCE THE ASSESEE DID NOT SALE THE RIGHT IN THE PROPERTY AND THEREFORE THE DA TE OF RIGHT IN THE PROPERTY I.E. 14.8.2004 COULD NOT BE TAKEN AS THE DATE OF ACQUISI TION OF THE PROPERTY IN PHYSICAL FORM. IN THIS REGARD THE AO PLACED RELIANC E ON THE DECISION OF HONBLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JAIMAL K. SHAH IN ITA NO. 6966/MUM/2010. THE AO ALSO DISALLOWED THE CLAIM OF SALES TAX PAYMENT OF RS. 52,880/- FOR THE YEAR 2006-07 AND 2007-08 HOLDING P RIOR PERIOD EXPENSES. THE LD. CIT(A) HAS UPHELD THE ACTION OF THE AO QUESTION ED BEFORE HIM, HENCE THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE B EFORE THE TRIBUNAL. 5. IN SUPPORT OF THE GROUND THE LD. AR SUBM ITTED THAT THE DECISIONS RELIED UPON BY THE AUTHORITIES BELOW ARE NOT HELPFUL TO TH E REVENUE SINCE THEY ARE HAVING DISTINGUISHABLE FACTS. THE LD. AR SUBMITTED THAT THE ALLOTMENT OF THE SAID PROPERTY WAS MADE BY UNITECH LTD. ON 14.8.2004, WHE N CHEQUE FOR RS. 12,70,000/- DRAWN ON STANDARD AND CHARTERED BANK WAS REMITTED TO THEM. THE ITA NO. 6631/DEL/13 4 APPLICATION FOR ALLOTMENT WAS FILED ON 14.8.2004 AN D UNITECH LTD HAD ISSUED ALLOTMENT LETTER ON 16.8.2004. THE BUYER AGREEMENT WAS MADE WITH UNITECH LTD. ON 7.10.2004 AND THE ASSESSEE WAS PAYING THE INSTAL LMENTS AS PER THE AGREEMENT AND THE TOTAL AMOUNT PAID TO UNITECH LTD. AS PER PAYMENT PLAN WAS ANNEXED WITH THE BUYER AGREEMENT. HE SUBMITTED THAT THE POSSESSION OF THE SAID PROPERTY WAS TENTATIVELY DELIVERED TO THE ASSESSEE IN AUGUST, 2005 AS PER BUYER AGREEMENT. THUS THE DATE OF ALLOTMENT I.E. 16.8.200 4 IS A VERY IMPORTANT DATE FOR CALCULATING THE LONG TERM CAPITAL GAIN. HE SUBMITT ED THAT THE DATE OF ALLOTMENT ON 16.8.2004 WAS TAKEN FOR COMPUTATION OF THE CAPIT AL GAIN AS THE PROPERTY WAS SOLD ON 5.10.2009 I.E. THE HOLDING PERIOD WAS MORE THAN 36 MONTHS. THE LD. AR REFERRED PAGE NOS. 22 TO 59 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE WHICH ARE COPIES OF APPLICATION FOR ALLOTMENT OF RE SIDENTIAL HOUSE, ALLOTMENT LETTER DATED 16.8.2004 ISSUED BY UNITECH LTD. TO THE ASSES SEE, BUYERS AGREEMENT WITH UNITECH LIMITED DATED 7.10.2004, CONVEYANCE DEED W ITH UNITECH LTD. DATED 18.1.2007 AND SALE DEED DATED 5.10.2009. THE LD. AR ALSO REFERRED CBDT CIRCULAR NO. 471 DATED 15.10.86 AND CIRCULAR NO. 67 2 DATED 16.12.93, COPIES OF WHICH HAVE BEEN MADE AVAILABLE AT PAGE 60 AND 61 OF THE PAPER BOOK. THE LD. AR POINTED OUT THAT IN WIFES CASE ALONG WITH WHOM THE ASSESSEE HAD BOOKED THE PROPERTY AND ALLOTMENT LETTER WAS ISSUED, RETURN OF INCOME FILED BY HER HAS ALREADY BEEN PROCESSED U/S 143(3) OF THE ACT, WHERE IN THE REVENUE HAS ACCEPTED ITA NO. 6631/DEL/13 5 THE CLAIM OF THE LTCG. THE LD. AR ALSO PLACED RELIA NCE ON THE FOLLOWING DECISIONS :- 1. CIT VS. R.L. SOOD 245 ITR 727(DELHI) 2. CIT VS. VED PRAKASH AND SONS (HUF) 207 ITR 148 (P&H) 3. VINOD KUMAR JAIN VS. CIT 344 ITR 501 (P&H) 4. PRAVEEN GUPTA VS. ACIT 137 TTJ 307 (DELHI) 5. JITENDRA MOHAN VS. ITO 11 SOT 594 (DELHI) 6. THE LD. SR. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW. SHE SUBMITTED THAT UNDISPUTEDLY THE PROPERTY WAS NOT IN EXISTENCE WHEN ALLOTMENT LETTER AGAINST THE SAID UN CONSTRUCTED PROPERTY ON PAYMENT OF BOOKING AMOUNT WAS ISSUED BY THE BUILDER TO THE ASSESSEE. THE PROPERTY WAS THEREAFTER CONSTRUCTED AND ON PAYMENT OF FULL INSTALMENT AS AGREED UPON, THE PROPERTY WAS HANDED OVER TO THE ASSESSEE ONLY ON 18.1.2007 VIDE CONVEYANCE DEED TO THE ASSESSEE. THE ASSESSEE SOLD THIS PROPERTY ON 5.10.2009. THE AO WAS THUS JUSTIFIED IN COMPUTING THE PERIOD O F HOLDING OF THE PROPERTY BY THE ASSESSEE FROM THE DATE OF CONVEYANCE DEED DATED 18.1.2007 TILL THE DATE 5.10.2009 WHEN THE PROPERTY WAS SOLD AND FROM THE D ATE 14.8.2004 WHEN ALLOTMENT LETTER REGARDING THAT PROPERTY WAS ISSUED TO THE ASSESEE. SINCE THE HOLDING PERIOD WAS LESS THAN 36 MONTHS, THE AO HAS RIGHTLY HELD THAT IT WAS A ITA NO. 6631/DEL/13 6 CASE OF SHORT TERM CAPITAL GAIN AND NOT A CASE OF L ONG TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE FROM THE DATE OF ALLOTMENT LETTER. SHE SUBMITTED THAT ON 14.8.2004 THE FLAT WAS NOT CONSTRUCTED AND IN ABSEN CE OF CONSTRUCTION OF THE ALLOTTED FLAT, THE LAND ONLY WAS AVAILABLE TO THE B UILDER ON WHICH ON A SUBSEQUENT DATE THE BUILDER CONSTRUCTED THE FLAT AND HANDED OV ER TO THE ASSESSEE. IN SUPPORT SHE REFERRED CLAUSE I AT PAGE NO. 27A OF THE PAPER BOOK I.E. COPY OF THE AGREEMENT DATED 7.10.2004 WHEREIN IT HAS BEEN MADE CLEAR THAT THE PURCHASER (S) HAD APPLIED TO THE VENDORS ON 18.9.2004 TO PURC HASE THE BUILT-UP HOUSE HAVING SUPER AREA OF APPROXIMATELY 2130 SQ. FT. TO BE CONSTRUCTED ON PLOT ADMEASURING 474.66 SQ. YARDS SITUATED AT NIRVANA CO UNTRY, GURGAON, HARYANA. SHE FURTHER REFERRED CLAUSE NO. 3 OF THE SAID AGREE MENT MAKING IT CLEAR THAT IN THE EVENT OF ANY INCREASE IN THE SAID RATE I.E. RS. 415/- PER SQ. YARDS, THE SAME SHALL BE TO THE ACCOUNT OF THE PURCHASER(S) AND PR OVISION TO THIS EFFECT SHALL BE INCORPORATED IN THE SALE/CONVEYANCE DEED TO BE EXEC UTED. THE LD. DR ALSO REFERRED COPY OF THE CONVEYANCE DEED DATED 18.1.200 7 MADE AVAILABLE AT PAGE NO. 36 TO 54 OF THE PAPER BOOK WHEREIN IN PARA NO. 10 IT HAS BEEN MENTIONED THAT THE POSSESSION OF THE HOUSE HAS BEEN HANDED OV ER TO THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THEM AFTER SATISFYING THE MSELVES. SHE SUBMITTED FURTHER THAT THE DECISIONS RELIED UPON BY THE ASSES EE HAVING DISTINGUISHABLE FACTS ARE NOT APPLICABLE IN THE PRESENT CASE AND CITED TH E DECISIONS FOLLOWED BY THE AUTHORITIES BELOW. ITA NO. 6631/DEL/13 7 7. HAVING GONE THROUGH THE DECISIONS RELIED UPON BY THE PARTY, WE FIND THAT THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DE LHI IN THE CASE OF CIT VS. R.L. SOOD (SUPRA) AND HONBLE P & H HIGH COURT IN THE CA SES OF CIT VS. VED PRAKASH & SONS (SUPRA), AND VINOD KUMAR JAIN VS. CIT (SUPRA ) UNDER ALMOST SIMILAR FACTS OF THE CASE IS HELPFUL TO THE ASSESSEE. THERE IS NO DISPUTE ON FACT IN THE PRESENT CASE THAT ALLOTMENT LETTER DATED 18.8.2004 WAS ISSU ED TO THE ASSESSEE BY THE BUILDER AGAINST THE BOOKED PROPERTY AGAINST THE AGR EED PAYMENT OF RS. 12,70,000/- DRAWN AT STANDARD AND CHARTERED BANK LT D. TO THE BUILDER, THE POSSESSION OF THE SAID PROPERTY ON PAYMENT OF THE A GREED INSTALMENTS AND ON PAYMENT OF TOTAL CONSIDERATION WAS HANDED OVER VIDE CONVEYANCE DEED DATED 18.1.2007 TO THE ASSESSEE AND THE SAME PROPERTY WAS SOLD BY THE ASSESSEE ON 5.10.2009. SIMILAR ARE THE FACTS BEFORE THE HONBLE P & H HIGH COURT IN THE CASE OF CIT VS. VED PRAKASH AND SONS (HUF) (SUPRA). IN THAT CASE ALSO THE ASSESSEE ENTERED INTO AN AGREEMENT ON 29.5.1970 WITH BUILDER FOR PURCHASE OF A FLAT IN A MULTISTORIED BUILDING. PURSUANT TO THIS AGREEMENT A SSESEE WAS PUT IN POSSESSION AND WAS ALSO BEING ASSESSED FOR HIS INCOME BY DEPAR TMENT. AS PER STIPULATION, ASSESSEE WAS TO PAY AMOUNT DUE IN INSTALLMENTS AND FINAL AMOUNT WAS PAID ON 10.2.1973. THE ISSUE BEFORE THE HONBLE HIGH COURT WAS AS TO WHETHER FOR COMPUTATION OF PERIOD OF 24 MONTHS STATED IN SECTIO N 2 (42A) AS IT STOOD AT RELEVANT TIME, THE ASSESSEE HAD TO BE TREATED AS OW NER OF PROPERTY W.E.F. 29.5.1970 AND HENCE CAPITAL GAINS ARISING TO HIM FR OM THE SALE OF THE AFORESAID ITA NO. 6631/DEL/13 8 FLAT WERE TAXABLE AS LONG TERM CAPITAL GAINS. AFTER DISCUSSING THE ISSUE IN DETAIL THE HONBLE HIGH COURT WAS PLEASED TO ANSWER THE QU ESTION IN AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE. SIMILARLY IN THE CASE OF VI NOD KUMAR JAIN VS. CIT (SUPRA) BEFORE THE HONBLE P & H HIGH COURT ASSESSEE WAS AL LOTTED A FLAT UNDER SCHEME OF DDA ON 27.2.1982. DELIVERY OF POSSESSION OF SAID FLAT TOOK PLACE ON 15.5.1986 WHEN ACTUAL FLAT NUMBER WAS ALLOCATED TO ASSESSEE. THE ASSESSEE SOLD SAID FLAT ON 6.1.1989. HE CLAIMED THAT CAPITAL GAINS ARISING ON SALE OF FLAT WAS A LONG TERM CAPITAL GAIN BUT ACCORDING TO REVENUE AUTHORITIES, FLAT WAS ALLOTTED ON 15.5.1986 AND THEREFORE CAPITAL GAIN WAS SHORT TERM CAPITAL G AIN. THE FOLLOWING ISSUES WERE FRAMED :- 1. WHETHER UNDER SELF-FINANCING SCHEME AN ALLOT TEE GETS TITLE TO PROPERTY ON ISSUANCE OF AN ALLOTMENT LETTER AND PAYMENT OF INST ALMENTS IS ONLY A CONSEQUENTIAL ACTION UPON WHICH DELIVERY OF POSSESS ION FLOWS? 2. WHETHER THEREFORE, RIGHT OF ASSESEE PRIOR TO 1 5.5.1986 WAS A RIGHT IN PROPERTY AND EVEN PRIOR TO SAID DATE ASSESSEE WAS H OLD SAID FLAT? AND 3. WHETHER THEREFORE CAPITAL GAIN ARISING ON SA LE OF SAID FLAT WAS A LONG TERM CAPITAL GAIN AND CONSEQUENTLY ASSESSEE WAS ENTITLED TO SET OFF SAME U/S 54? 8. AFTER DISCUSSING THE ISSUES IN DETAIL BY REFERRING PROVISIONS OF THE RELATED LAW, CBDT CIRCULAR NO. 471 DATED 15.10.96 A ND SEVERAL DECISIONS, THE HONBLE HIGH COURT HAS BEEN PLEASED TO ANSWER ALL THE ABOVE ISSUES IN ITA NO. 6631/DEL/13 9 AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE. IN THE CONCLUDING PARA NO. 16 OF THE JUDGMENT THE HONBLE HIGH COURT HAS BEEN PLEASED TO CONCLUDE AS UNDER :- THE PROVISIONS OF SECTION 2(14), 2(29A) AND 2(42A) ENCOMPASS WITHIN THAT AMBIT THOSE CASES OF CAPITAL ASETS WHICH ARE H ELD BY THE ASSESSEE. ONCE THAT IS SO , ADVERTING TO THE FACTS OF THE PRE SENT CASE THE ASSESEE WAS ALLOTTED A FLAT ON 27.2.1982. 9. THE ISSUE RAISED BEFORE THE HONBLE HI GH COURT OF DELHI IN THE CASE OF CIT VS. R.L. SOOD (SUPRA) WAS AS TO WHETHER ON PAY MENT OF SUBSTANTIAL AMOUNT IN TERMS OF PURCHASE AGREEMENT WITHIN FOUR DAYS OF SALE OF HIS OLD HOUSE, ASSESSEE ACQUIRED SUBSTANTIAL DOMAIN OVER NEW RESID ENTIAL FLAT WITHIN SPECIFIED PERIOD, IT COULD BE SAID THAT ASSESSEE COMPLIED WIT H REQUIREMENTS OF SECTION 54 AND FURTHER ISSUE WAS AS TO WHETHER MERELY BECAUSE BUILDER FAILED TO HAND OVER POSSESSION OF FLAT WITHIN SPECIFIED PERIOD, ASSESSE E COULD BE DENIED BENEFIT OF BENEVOLENT PROVISION OF SECTION 54. THE HONBLE HIG H COURT WAS PLEASED TO ANSWER THE ISSUES IN AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE RATIO OF THESE DECISIONS WE HOLD THAT THE ASSESSEE WAS JUSTIFIED IN CLAIMING THE LONG TERM CAPITAL GAIN IN QUESTION IN THE PRESENT CASE. GROUND NOS. 1 TO 1.2 ARE THUS DECIDED IN FAVOUR OF THE ASSESSEE AND ARE THUS ALLOWED. GROUND NO. 2 10. IT IS AGAINST THE DISALLOWANCE MADE IN RE SPECT OF PAYMENT OF SALES TAX FOR ASSTT. YEAR 2006-07 AND 2007-08 AMOUNTING TO RS. 52 ,880/- WHICH HAS NOT BEEN ITA NO. 6631/DEL/13 10 PRESSED BY THE LD. AR DURING THE COURSE OF HEARING OF THE APPEAL. THE SAME IS ACCORDINGLY REJECTED AS WITHDRAWN. 11. GROUND NO. 3 IS AGAINST SUSTAINING THE LEV Y OF INTEREST U/S 234A AND 234B OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE HENCE NEED INDEPENDENT ADJUDICATION AT THIS STAGE. IN THE RESULT APPEAL IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 9 TH MAY, 2014. SD/- SD/- (T.S. KAPOOR) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 9 TH MAY, 2014 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT