Sri. G. Dasaratharami Reddy, Bengaluru V. The Income Tax Officer, Ward-4(3)(3), Bangalore

ITA 677/BANG/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3029 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-03-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 27-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH GHALE
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Capital asset
• Section: 13

Judgement Text

ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH SMC : BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER ITA NO.677/BANG/2020 ASSESSMENT YEAR: 2012 13 SRI G. DASARATHARAMI REDDY NO.G-1, EDENB-AU-LAC OLD MADRAS ROAD INDIRA NAGAR BANGALORE 560 038. PAN NO : ACZPR1950R VS. ITO WARD 4(3)(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI S.V. RAVI SHANKAR, A.R. RESPONDENT BY : SHRI GANESH GHALE, STANDING COUNSEL DATE OF HEARING : 29.03.2021 DATE OF PRONOUNCEMENT : 18.06.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 18.8.2020 PASSED BY LD.CIT(A)-1, BENGALURU AND IT R ELATES TO THE ASSESSMENT YEAR 2012-13. THE SOLITARY ISSUE URGED BY THE ASSESSEE IS WHETHER THE PROPERTY SOLD BY THE ASSESSEE IS A L ONG TERM CAPITAL ASSET OR NOT. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE ALONG WITH ANOTHER PERSON NAMED SHRI DIWAKAR ASTHAN A HAD ENTERED INTO AN AGREEMENT ON 14.12.2007 FOR PURCHASING A PR OPERTY LOCATED AT NO.17 & 18, LA-OCEANA, PANAJI, GOA FOR A CONSIDE RATION OF RS.1.65 CRORES. IT IS PERTINENT TO NOTE THAT THE STAMP DUTY PAYABLE ON SAID ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU PAGE 2 OF 7 PURCHASE WAS PAID ON THE DATE OF ENTERING OF AGREE MENT TO SELL ITSELF. THE ABOVE SAID PROPERTY WAS SOLD BY BOTH THE PERSON S (ASSESSEE AND OTHER PURCHASER) ON 15.7.2011 FOR A SUM OF RS.1.50 CRORES. THE ASSESSEES SHARE WAS 50% AND ACCORDINGLY, HE COMPUT ED LONG TERM CAPITAL LOSS PERTAINING TO HIS SHARE. 3. FROM THE AGREEMENT TO SELL, IT WAS NOTICED THA T THE PURCHASERS, (I.E, THE ASSESSEE AND SHRI DIWAKAR AST HANA) HAD PAID A SUM OF RS.1.48 CRORES ON THE DATE OF ENTERING INTO THE AGREEMENT TO SELL, I.E., ON 14.12.2007 ITSELF. THE REMAINING AM OUNT OF RS.16.50 LAKHS WAS AGREED TO BE PAID AFTER OBTAINING OCCUPAN CY CERTIFICATE AND GIVING POSSESSION. THE AGREEMENT TO SELL DATED 14. 12.2007 CONTAINED FOLLOWING RECITALS IN THIS REGARD. 13. IT IS SPECIALLY AGREED AND UNDERSTOOD THAT THE POSSESSION OF THE SAID BUNGALOW IS NOT HANDED OVER TO THE PURCHASERS ON EXECUTION OF THIS AGREEMENT, IT WILL BE HANDED OVER ONLY AS PER CLAUS E 2(B) ABOVE. CLAUSE 2(B) PAGE 13 OF THE AGREEMENT OF SALE REA DS AS UNDER: (B) RS.8,25,000/- RS. EIGHT LAKHS TWENTY FIVE THO USAND ONLY) BY DEMAND DRAFT WITHIN 7 DAYS FROM THE DATE OF OBTAINING OCCU PANCY CERTIFICATE TOWARDS THE COMPLETION OF THE SAID BUNGLOW. (C) RS.8,25,000/- RS. EIGHT LAKHS TWENTY FIVE THOU SAND ONLY) BY DEMAND DRAFT SIMULTANEOUSLY ON HANDING OVER POSSESSION OF THE SAID BUNGALOW TO THE PURCHASER WHICH SHALL BE DONE EITHER BY 31.3.20 08 SUBJECT TO AN EXTENSION OF 60 DAYS THERE FROM. 4. THE PROPERTY WAS FINALLY REGISTERED IN THE NAME OF THE ASSESSEE AND OTHER PERSONS ON 13.8.2008 BY EXECUTING A SALE DEED. IT WAS NOTICED BY THE AO THAT THE BALANCE CONSIDERATION OF RS.16.50 LAKHS WAS PAID BY THE PURCHASERS ONLY ON 13.8.2008. IT WAS ALSO NOTICED THAT THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL LO SS BY ADOPTING THE DATE OF PURCHASE OF PROPERTY AS 14.12.2007, I.E ., THE DATE OF ENTERING OF AGREEMENT TO SELL. SINCE THE DATE OF SALE WAS 15.7.2011, IT WAS CLAIMED TO BE A LONG TERM CAPITAL ASSET. TH E AO, HOWEVER, TOOK ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU PAGE 3 OF 7 A DIFFERENT VIEW. SINCE THE BALANCE CONSIDERATION HAD BEEN AGREED TO BE PAID ONLY AFTER OBTAINING OCCUPATION CERTIFICATE AND POSSESSION OF PROPERTY AND SINCE THE ASSESSEE HAS PAID THE ABOVE SAID BALANCE CONSIDERATION ONLY ON THE DATE OF EXECUTION OF SALE DEED IN HIS FAVOUR, I.E., ON 13.8.2008, THE A.O. TOOK THE VIEW THAT TH E ASSESSEE HAS OBTAINED POSSESSION ONLY ON 13.8.2008. SINCE THE S AID PROPERTY WAS SOLD SUBSEQUENTLY ON 15.7.2011, THE A.O. HELD THAT THE PROPERTY WAS HELD BY THE ASSESSEE FOR A PERIOD OF LESS THAN 36 M ONTHS. ACCORDINGLY, THE AO HELD THAT THE PROPERTY IS A SHO RTER TERM CAPITAL ASSET AND ACCORDINGLY HELD THAT LOSS ARISING ON SAL E OF PROPERTY IS A SHORT TERM CAPITAL LOSS. THE LD. CIT(A) ALSO CONFI RMED THE SAME. HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US . 5. THE LD. A.R. SUBMITTED THAT THE PURCHASERS HAD R ETAINED A PART AMOUNT ON THE DATE OF ENTERING OF AGREEMENT TO SEL L, SINCE THE SELLER HAD NOT OBTAINED OCCUPANCY CERTIFICATE AT THAT POIN T OF TIME. HENCE, IT WAS AGREED THAT THE POSSESSION SHALL BE TAKEN AF TER OBTAINING OCCUPANCY CERTIFICATE AND ACCORDINGLY THE BALANCE A MOUNT SHALL BE RELEASED. FURTHER, IT WAS ALSO AGREED THAT THE OCC UPANCY CERTIFICATE SHALL BE OBTAINED AND POSSESSION SHALL BE TAKEN BY 31.3.2008 SUBJECT TO AN EXTENSION OF 60 DAYS THERE FROM. HE SUBMITTE D THAT THE ASSESSEE HAD TAKEN POSSESSION OF THE PROPERTY BY MA RCH 2008 ITSELF THEREAFTER. THE LD A.R. FURTHER SUBMITTED THAT THE A.O. WAS NOT CORRECT IN PRESUMING THAT THE POSSESSION WAS TAKEN BY THE ASSESSEE ON 13.8.2008 ONLY. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD PAID A STAMP DUTY ON PURCHASE OF PROPERTY ON THE DA TE OF ENTERING OF SALE AGREEMENT ITSELF AND THIS FACT HAS BEEN MENTIO NED IN THE SALE DEED AT PAGE NO.5. FURTHER, THE CLAUSE 4 OF THE SA LE DEED CLEARLY STATES THAT THE VACANT AND PEACEFUL POSSESSION OF T HE BUNGLOW HAD ALREADY BEEN HANDED OVER TO THE ASSESSEE EARLIER TO THE DATE OF SALE DEED, MEANING THEREBY THE POSSESSION WAS OBTAINED B Y THE ASSESSEE ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU PAGE 4 OF 7 MUCH EARLIER TO THE DATE OF SALE DEED. ACCORDINGLY THE LD. A.R. SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIE D IN TAKING THE VIEW THAT THE POSSESSION WAS OBTAINED ONLY ON 13.8.2008 I.E. THE DATE OF SALE DEED. 6. THE LD D.R. ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE IS REQUIRED TO PAY RS.16.50 LAKHS ONLY AFTER OBTAINING OCCUPANCY CERTIFICATE AND POSSESSION OF THE BUNGLOW. THE ASS ESSEE HAS PAID THE ABOVE SAID AMOUNT OF RS.16.50 LAKHS ONLY AT THE TIM E OF ENTERING OF SALE DEED, WHICH FACT IS EMANATING FROM CLAUSE 3 OF THE SALE DEED. SINCE THE ASSESSEE HAD PAID THE ABOVE SAID AMOUNT O NLY ON THE DATE OF ENTERING OF SALE DEED, I.E., ON 13.08.2008, THE ASSESSEE COULD NOT HAVE BEEN GIVEN POSSESSION EARLIER. ACCORDINGLY, T HE LD. D.R. SUBMITTED THAT THE TAX AUTHORITIES ARE JUSTIFIED IN TAKING THE VIEW THAT THE POSSESSION OF THE PROPERTY WAS OBTAINED ONLY ON 13.8.2008, IN WHICH CASE, THE PROPERTY SHALL CONSTITUTE SHORT TER M CAPITAL ASSET. 7 IN THE REJOINDER, THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD PAID 90% OF THE SALE CONSIDERATION ON THE DATE OF E NTERING OF AGREEMENT TO SELL AND BALANCE 10% WAS WITHHELD AS A TOKEN AMOUNT IN ORDER TO ENSURE THAT THE SELLER OBTAINED OCCUPAN CY CERTIFICATE WITHIN THE TIME. THE LD. A.R. FURTHER SUBMITTED TH AT THOUGH THE AGREEMENT TO SELL STATES THAT THE BALANCE AMOUNT SHALL BE PAID AFTER OBTAINING OCCUPANCY CERTIFICATE AND ALSO AFTER TAKI NG POSSESSION OF THE BUNGLOW, YET CLAUSE 4 OF THE SALE DEED DATED 13 .8.2008 CLEARLY STATES THAT THE POSSESSION HAS ALREADY BEEN GIVEN T O THE ASSESSEE EARLIER BY THE SELLER. THE LD. A.R. SUBMITTED THAT THE CLAUSE 4 OF THE SALE DEED CANNOT BE IGNORED BY THE TAX AUTHORITIES. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS SOLD THE IM PUGNED PROPERTY SUBSEQUENTLY AND IN THE SAID SALE DEED, IT HAS BEEN STATED THAT THE OCCUPANCY CERTIFICATE WAS OBTAINED ON 17.3.2008. ACCORDINGLY THE ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU PAGE 5 OF 7 LD. A.R. SUBMITTED THAT THERE IS NO REASON TO DISPU TE THAT THE ASSESSEE HAS OBTAINED POSSESSION MUCH PRIOR TO THE EXECUTION OF PURCHASE DEED ON 13.8.2008. THE BUNGALOW WAS SOLD SUBSEQUENTLY ON 15.7.2011. THE ASSESSEE SHOULD HAVE OBTAINED PO SSESSION BY 14.7.2008 IN ORDER TO QUALIFY THE PROPERTY AS LONG TERM CAPITAL ASSET. HE SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF TH E CASE WOULD SHOW THAT THE ASSESSEE HAS OBTAINED POSSESSION PRIO R TO 14.7.2008. ACCORDINGLY, HE SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN TAKING THE VIEW THAT THE PROPERTY SOLD BY THE ASSES SEE IS A SHORT TERM CAPITAL ASSET. 8. I HEARD THE RIVAL CONTENTIONS AND PERUSED THE RE CORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE AGREEM ENT TO SELL DATED 14.12.2007 CONTAINS THE CLAUSE THAT THE BALANCE AMO UNT OF RS.16.50 LAKHS SHALL BE PAID TO THE SELLER AFTER OBTAINING O CCUPANCY CERTIFICATE AND ALSO AFTER GIVING POSSESSION OF THE PROPERTY. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT THAT OCCUPANCY CERT IFICATE WAS OBTAINED ON 17.3.2008, WHICH FACT IS EVIDENT FROM T HE SUBSEQUENT SALE DEED EXECUTED BY THE ASSESSEE ON 15.7.2011. T HERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT THAT THE BALANCE AM OUNT OF RS.16.50 LAKHS WAS GIVE BY THE ASSESSEE ONLY AT THE TIME OF EXECUTION OF SALE DEED ON 13.8.2008. HOWEVER THE FINAL SALE DEED DAT ED 13.8.2008 CLEARLY STATES IN CLAUSE 4 THAT THE POSSESSION OF T HE PROPERTY HAD ALREADY BEEN GIVEN EARLIER TO THE ASSESSEE. THIS C LAUSE MAKES IT CLEAR THAT THE POSSESSION WAS NOT GIVEN ON THE DATE OF SA LE DEED BUT IT WAS GIVEN SOME TIME EARLIER. 9. I ALSO NOTICED THAT THE ASSESSEE HAS PAID STAMP DUTY AMOUNT ON THE DATE OF ENTERING OF AGREEMENT TO SALE ITSE LF IN 2007. FURTHER THE ASSESSEE HAS PAID ALMOST 90% OF THE PURCHASE CO NSIDERATION ON THE DATE OF ENTERING AGREEMENT TO SELL ITSELF. H ENCE THERE IS MERIT IN ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU PAGE 6 OF 7 THE SUBMISSION OF LD A.R THAT THE BALANCE AMOUNT OF RS.16.50 LAKHS WAS WITHHELD ONLY TO ENSURE THAT THE SELLERS OBTAIN ED OCCUPANCY CERTIFICATE. LOOKING AT THE FACTS AND CIRCUMSTANCE S OF THE CASE, I AM OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE POSSESSION OF THE PROPERTY WAS OBTAINED IN BETW EEN PERIOD, I.E., SUBSEQUENT TO THE RECEIPT OF OCCUPANCY CERTIFICATE, WHICH WAS RECEIVED IN MARCH, 2008 AND THE DATE OF EXECUTION O F SALE DEED ON 13.8.2008. IF THE POSSESSION HAD BEEN OBTAINED PRI OR TO 14.7.2008, THE SAME WOULD CONSTITUTE LONG TERM CAPITAL ASSET I N THE HANDS OF THE ASSESSEE. FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT IT IS QUITE POSSIBLE THAT THE ASSESSEE SH OULD HAVE OBTAINED POSSESSION PRIOR TO 14.7.2008, IN WHICH CASE THE PR OPERTY SHOULD BE HELD TO BE LONG TERM CAPITAL ASSET, SINCE THE PROPE RTY HAS BEEN SOLD ON 15.7.2011. ACCORDINGLY, I HOLD THAT THE PROPERTY IS A LONG TERM CAPITAL ASSET IN THE HANDS OF THE ASSESSEE AND HENC E THE LOSS ARISING ON SALE OF PROPERTY SHALL BE COMPUTED AS LONG TERM CAPITAL LOSS. 10. IN VIEW OF THE FOREGOING DISCUSSIONS, I SET ASI DE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO COMPUTE LONG TERM CAPITAL LOSS ON SALE OF THE PROPERTY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2021 SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH JUNE, 2021. VG/SPS ITA NO.677/BANG/2020 SRI G. DASARATHARAMI REDDY, BENGALURU PAGE 7 OF 7 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.