ACIT, Pune V. Shri Satish R Munda, Pune

ITA 671/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 66849 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI G.S. PANNU, ACCOUNTANT MEMBER. ITA.NO.671/PN/2012 (ASSESSMENT YEAR 2008-09) ACIT, CENTRAL CIRCLE-2, PUNE. .. APPELLANT VS. SATISH R. MUNDRA, FLAT NO.401, CLOVER COURT, OPP: GURU PRASAD SOCIETY, BUND GARDEN ROAD, PUNE. .. RESPONDENT PAN NO.ABFPM 7101E ASSESSEE BY : NONE REVENUE BY : SRI ACHAL SHARMA DATE OF HEARING : 18-04-2013 DATE OF PRONOUNCEMENT : 18-04-2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF CIT(A)-II, PUNE ON FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TREATING CAPITAL GAINS AS LONG TERM CAPITAL GAIN WHEN ASSESSING OFFICER RIGHTLY TREATED AS SHORT TERM CAP ITAL GAIN. 2. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS IN RECEIPT OF SALARY, HOUSE PROPERTY INCOME, TRADING IN SHARES, CAPITAL GAINS A ND INCOME FROM OTHER SOURCES. THE ASSESSEE FILED THE RETURN OF INCOME D ECLARING TOTAL INCOME OF RS.4,95,65,710/- AND SAME HAS BEEN ASSESSED U/S.143 (3) DETERMINING TOTAL INCOME OF RS.5,02,17,170/-. 3. THE ASSESSING OFFICER OBSERVED DURING THE ASSESS MENT PROCEEDINGS THAT ASSESSEE SOLD PROPERTY AT MUMBAI FOR A TOTAL C ONSIDERATION OF RS.1,60,62,500/- ON 17-05-2007 AND OFFERED LONG TER M CAPITAL GAIN OF RS.1,26,11,046/-. HE ALSO FOUND THAT SAID FLAT THO UGH ALLOTTED TO ASSESSEE ON 2 11-03-2003 FOR TOTAL COST OF RS.28 LAKHS PLUS COST OF PARKING. THE SAID PROPERTY WAS REGISTERED IN THE NAME OF ASSESSEE ON 29-10-2004. THE ASSESSING OFFICER SOUGHT EXPLANATION OF THE ASSESSE E REGARDING TAXABILITY OF CAPITAL GAIN AS SHORT TERM CAPITAL GAIN AND IN EXPL ANATION FURNISHED THE ASSESSEE STATED THE SAID FLAT WAS ALLOTTED ON 11-03 -2003, THE FLAT WAS STILL UNDER CONSIDERATION AND THAT HE HAD NOT RECEIVED TH E POSSESSION, SUBSEQUENTLY THE ASSESSEE SUBMITTED THAT RIGHT OF S AID FLAT WAS SOLD ON 11- 05-2003 AND THUS OFFERED LONG TERM CAPITAL GAIN. 4. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND HELD THAT ALLOTMENT LETTER DID NOT HAV E ANY SANCTITY AND TREATED THE LONG TERM CAPITAL GAIN AMOUNTING TO RS.1,26,11, 046/- ON SALE OF FLAT AS SHORT TERM CAPITAL GAIN OF RS.1,32,62,500/-. 5. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED AND CIT(A) HAVING A GREED TO THE CONTENTION OF ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE. SAM E HAS BEEN OPPOSED ON BEHALF OF REVENUE AND INTER ALIA SUBMITTED THAT CIT (A) ERRED IN TREATING THE CAPITAL GAIN AS LONG TERM CAPITAL GAIN WHILE ASSESS ING OFFICER HAS RIGHTLY TREATED THE SHORT TERM CAPITAL GAIN AND ACCORDINGLY REQUESTED TO SET-ASIDE THE ORDER OF THE CIT(A) AND RESTORE THAT OF THE ASSESSI NG OFFICER. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE, SO MATT ER IS BEING DECIDED ON THE BASIS OF THE ARGUMENT OF LD. DEPARTMENTAL RE PRESENTATIVE AND MATERIAL ON RECORD. 7. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD WE FIND THAT ISSUE BEFORE US IS THE TAXABILITY OF CAPITAL G AIN ON SALE OF FLAT AS SHORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL GAIN OFFERED BY THE ASSESSEE. 3 UNDISPUTED FACTS ARE THAT ASSESSEE BOOKED THE FLAT NO.C-10 AT LOKHANDWALA HARMONY, DR. E. MOSES ROAD, OPP: GITA TALKIES, WORL I, MUMBAI ON 11-03- 2003 AND ALLOTMENT LETTER WAS ISSUED BY LOKHANDWALA SHELTERS INDIA PVT. LTD. ON SAME DAY AND EARNEST MONEY TO THE TUNE OF R S.2 LAKHS WAS DEPOSITED VIDE CHEQUE NO.521549 DATED 11-03-2003 DRAWN ON UNI ON BANK OF INDIA, CAMP BRANCH, PUNE. SUBSEQUENTLY, VIDE AGREEMENT FO R SALE DATED 29-10- 2004 REGISTERED PURCHASE AGREEMENT WAS EXECUTED FOR SAID FLAT FOR A SUM OF RS.28 LAKHS AND ENTIRE SUM OF RS.28 LAKHS WAS PAID PRIOR TO EXECUTION OF THE AGREEMENT FOR SALE, I.E. ON 19-04-2003. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE DID NOT HAVE ANY RIGHT ON PROPERTY W.E .F. 11-03-2003, I.E. WHEN ALLOTMENT LETTER WAS ISSUED. 8. STAND OF THE ASSESSEE HAS BEEN THAT REGISTRATION OF FLAT AS ON 29-10- 2004 WAS DONE ONLY AFTER MAKING BALANCE PAYMENT OF RS.26 LAKHS. HOWEVER, IT WAS CLARIFIED THAT THOUGH A PAYMENT OF RS.26 LAKHS WAS PAID ON 19-04-2003. THE DOCUMENT WAS EXECUTED WITH REGARD TO THE PURCHASE OF FLAT IN QUESTION ON 29-10-2004 BECAUSE BY THAT TIME FULL PAYMENT WAS PAID BUT RIGHT OVER THE FLAT WAS CREATED ON 11-03-2003. ALLOTMENT GIVES A RIGHT WHICH IS ALSO CAPITAL ASSET IN TERMS OF SECTION 2(1 4), THEREFORE, THE CLAIM OF CAPITAL GAIN ON SALE OF FLAT AS LONG TERM CAPITAL G AIN HAS RIGHTLY BEEN OFFERED BY THE ASSESSEE. THE TERM PROPERTY USED IN SECT ION 2(14) IS A WORD OF WIDEST AMPLITUDE AND THE DEFINITION REEMPHASISED BY USE OF THE WORDS OF AN ASSET. A RIGHT TO PURCHASE IS NOT A RIGHT IN REM OVER IMMOVABLE PROPERTY. IT IS A CONTRACTUAL RIGHT WHERE A PERSON RECEIVED CONSIDERATION FOR GIVING UP SUCH RIGHT, THE QUESTION RAISED WHETHER T HERE IS A TRANSFER OF PROPERTY IN THE SENSE UNDERSTOOD IN THE DEFINITION OF CAPITAL ASSET U/S.2(14) OF INCOME TAX ACT AND WHETHER THE RELINQUISHMENT WO ULD BE TRANSFER WITHIN 4 THE MEANING OF SECTION 2(47) OF INCOME TAX ACT. TH E RIGHT UNDER AGREEMENT OF SALE IS ALSO A CAPITAL ASSET AND ANY A MOUNT RECEIVED FOR BREACH OF SUCH AGREEMENT WOULD BE LIABLE FOR CAPITAL GAIN AS HELD IN CIT VS. VIJAY FLEXIBLE CONTAINERS REPORTED IN (1980) 122 ITR 594 (BOM.). CBDT CIRCULAR NO.471 DATED 15-10-1986 HAS CLARIFIED THAT ACQUISITION OF FLAT BY A FLAT ALLOTTEE UNDER THE SELF FINANCING SCHEME OF TH E DELHI DEVELOPMENT AUTHORITY (DDA) AMOUNTS TO PURCHASE AS BOARD HAS SA ID THAT ONE ALLOTMENT LETTER IS ISSUED THE ALLOTTEE GETS A TITLE TO THE P ROPERTY. 9. THE ASSESSEE HAVING ACQUIRED SUCH FLAT BY MAKING INITIAL DEPOSIT WITH THE BUILDER AT INITIATE STAGE OF THE CONSTRUCTION A ND COMPLETION OF CONSTRUCTION, POSSESSION THEREOF IS NOT AN ESSENCE AS FAR AS ACQUIRING OF THE ASSET IS CONCERNED. THE RIGHT IN ANY IMMOVABLE PROP ERTY WHICH HAS ALREADY BEEN CONSTRUCTED OR IS YET TO BE CONSTRUCTED IS A CAPITAL ASSET WHICH STARTS FROM THE DATE OF FIRST AGREEMENT. MERE FACT THAT P OSSESSION OF THE FACT WAS RECEIVED SUBSEQUENTLY WOULD LEAD TO THE CONCLUSION THAT ASSESSEE BECAME ENTITLED TO SUCH RIGHT IN THE FLAT ONLY ON THE DATE OF BOOKING. THE POSSESSION IS TAKEN IN PURSUANCE TO BOOKING MADE EARLIER AT TH E STRENGTH OF EARNEST MONEY. SIMILAR VIEW HAS BEEN TAKEN BY BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIMAL LALCHAND MUTHA REPORTED IN 187 ITR 61 3 (MUM). A RIGHT UNDER AGREEMENT OF SALE IS ITSELF AN ASSET AND EVEN COMPENSATION FOR CANCELLATION OF AGREEMENT FOR SALE IS LIABLE FOR CA PITAL GAIN ACCORDINGLY. IT IS SETTLED LEGAL POSITION THAT THE REGISTRATION OF SAL E DEED WILL RELATE BACK TO THE DATE OF AGREEMENT ON WHICH THE IST SALE AGREEMENT W AS ENTERED. 10. IN VIEW OF THE ABOVE, CAPITAL GAIN ARISING OUT OF SALE OF THE PROPERTY IN QUESTION HAS RIGHTLY BEEN HELD AS LONG TERM CAPITAL GAIN AS AGAINST SHORT 5 TERM CAPITAL GAIN BY CIT(A) AND IS JUSTIFIED. THI S REASONED FINDING OF CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHO LD THE SAME. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN AT THE TIME OF HEARING ITSE LF, I.E. ON 18-04- 2013. SD/- SD/- ( G.S.PANNU ) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER SATISH PUNE, DATED THE 18 TH APRIL 2013. COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // PRIVATE SECRETARY, INCOME TAX APPELLATE T RIBUNAL, PUNE.