AMIR A KAPASI, MUMBAI V. ITO 15(2)(2), MUMBAI

ITA 6984/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8106 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: SANJAY DEEPCHANDANI
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value; Surrender of tenancy right
• Section: 50C; 54

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM) . . , , ./I.T.A. NO.6984/MUM/2012 ( / ASSESSMENT YEAR : 2007-08) AMIR A KAPASI, C/O M/S KAPASI TRADING CO., BARA IMAM ROAD, TWO TANKS, MUMBAI-400003 / VS. INCOME TAX OFFICER, 15(2)(2), MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 ( / APPELLANT) .. ( / RESPONDENT) ./ ! ./PAN/GIR NO. :AFWPK8302E ' / APPELLANT BY SHRI SANJAY DEEPCHANDANI # ' /RESPONDENT BY SHRI PITAMBAR DAS $ % # &' / DATE OF HEARING : 11.8.2014 () # &' /DATE OF PRONOUNCEMENT : 17.10.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 17.8.2012 PASSED BY LD CIT(A)-26, MUMBAI AND IT REL ATES TO THE ASSESSMENT YEAR 2007-08. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETH ER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE COST OF ACQUISITION O F FLAT SOLD BY ASSESSEE SHOULD BE TAKEN AS NIL. I.T.A. NO.6984/MUM/2012 2 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE WAS HOLDING TENANCY RIGHT IN A BUILDING. HE ACQUIRED A FLAT ON 27.6.2003 BY SURRENDERING HIS TENANCY RIGHT. IN THE RETURN OF I NCOME FILED FOR THE ASSESSMENT YEAR 2004-05, HE DECLARED FAIR MARKET VALUE (FMV) OF THE TENANCY RIGHT AS ON THE DATE OF ACQUISITION OF THE FLAT AT RS.19,36,1 05/- AND OFFERED THE SAME TO TAX. HOWEVER, THE ASSESSEE DID NOT PAY ANY TAX ON THE AB OVE SAID AMOUNT, SINCE HE CLAIMED EXEMPTION U/S 54 OF THE INCOME TAX ACT, 19 61 (THE ACT) IN RESPECT OF THE FLAT ACQUIRED BY HIM. THE ASSESSEE HAD PAID ST AMP DUTY OF RS,1,70,647/- AND ACCORDINGLY THE ASSESSEE DETERMINED THE COST OF ACQUISITION OF NEW FLAT AT RS.21,06,752/-(RS.19,36,105/- +RS.1,70,647/-). 4. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE SO LD THE FLAT FOR A SUM OF RS.28,00,000/-. SINCE SALE CONSIDERATION DISCLOSED IN THE CONVEYANCE DEED WAS LESS THAN THE VALUE DETERMINED BY THE SUB-REGISTRAR FOR THE STAMP DUTY PURPOSES AND SINCE THE ASSESSEE REQUESTED THE AO TO REFER TH E MATTER FOR VALUATION OF FLAT TO DISTRICT VALUATION OFFICER (DVO), THE AO REFERRE D THE MATTER TO DVO. THE DVO FIXED THE MARKET VALUE OF THE FLAT AS ON THE DATE O F ITS SALE AT RS.30,62,400/- AND THE SAID VALUE WAS ADOPTED AS SALE CONSIDERATION B Y AO IN TERMS OF SECTION 50C OF THE ACT. WHILE COMPUTING THE CAPITAL GAIN, TH E ASSESSEE HAD TAKEN THE COST OF ACQUISITION OF THE FLAT AT RS.21,06,752/- AS STA TED ABOVE AND AFTER INDEXATION, THE INDEXED COST WAS DETERMINED AT RS.23,61,564/-, WHICH WAS CLAIMED AS DEDUCTION AGAINST THE SALE CONSIDERATION IN ORDER TO ARRIVE AT LONG TERM CAPITAL GAIN (LTCG). HOWEVER, THE AO TOOK THE VIEW THAT COST OF ACQUISITION SHOULD BE CONSIDERED AS NIL, SINCE THE ASSESSEE DID NOT OFFER ANY AMOUNT AT THE TIME OF SURRENDERING OF TENANCY RIGHT, I.E. ACCORDING TO TH E AO, THE ASSESSEE HAS AVOIDED THE PAYMENT OF TAX BY AVAILING EXEMPTION U/S 54 OF THE ACT AND HENCE THE CLAIM OF OFFER TO TAXATION OF AMOUNT OF TENANCY RIGHT IS NOT IONAL ONE. ACCORDINGLY, THE AO TOOK THE COST OF ACQUISITION OF FLAT AT NIL, WHILE COMPUTING THE CAPITAL GAINS. THE LD. CIT(A) ALSO CONFIRMED THE VIEW TAKEN BY THE A O. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. ON ASSIMILATION THE FACTS PREVAILING IN THE INSTANT CA SE, WE NOTICE THAT THE ASSESSEE HAS CARRIED OUT TWO TYPES OF PROPERTY TRANSACTIONS, VIZ., : I.T.A. NO.6984/MUM/2012 3 A) SURRENDERING OF TENANCY RIGHT AND ACQUISITIO N OF NEW FLAT IN THE ASSESSMENT YEAR 2004-05; AND B) SALE OF FLAT IN ASSESSMENT YEAR 2007-08. 6. IT IS A FACT THAT THE ASSESSEE, IN THE ASSESSMEN T YEAR 2004-05, HAD ESTIMATED FMV OF THE TENANCY RIGHT AT RS.19,36,1 05/- AND OFFERED THE SAME FOR TAXATION. SINCE THE ASSESSEE NOTICED THAT HE IS EL IGIBLE FOR EXEMPTION U/S 54 OF THE ACT IN RESPECT OF COST OF ACQUISITION OF A NEW FLAT, HE CLAIMED THE SAME AS DEDUCTION U/S 54 AGAINST THE FMV OF THE TENANCY RIG HT, WHICH RESULTED IN OFFERING OF NIL AMOUNT FOR TAXATION. THERE IS NO DISPUTE TH AT THE RETURN OF INCOME FILED BY THE ASSESSEE FOR AY 2004-05 HAS BEEN ACCEPTED. 7. SINCE THE ASSESSEE DID NOT PAY ANY TAX ON TH E TRANSACTION RELATING TO TENANCY RIGHT IN VIEW OF THE DEDUCTION CLAIMED U/S 54 OF THE ACT, THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE ASSESSEE, IN REALITY, DID NOT OFFER TO TAX ANY AMOUNT ON SURRENDER OF TENANCY RIGHTS. WE ARE UNABLE TO AGREE WITH THE SAID VIEW. THE DEDUCTION ALLOWED U/S 54 IS AN INCENTIVE PROVISION AND BY VIRTUE OF CLAIMING THE SAME, IN OUR VIEW, IT CANNOT BE SAID T HAT THE ASSESSEE DID NOT OFFER THE FMV OF TENANCY RIGHT SURRENDERED BY HIM FOR TAX ATION. IF AT ALL THE TAX AUTHORITIES HAD ANY DOUBT, THEY COULD HAVE EXAMINED THE VALIDITY OF CLAIM MADE U/S 54 OF THE ACT. SINCE THE ASSESSEE HAS OFFERED THE AMOUNT OF FMV OF TENANCY RIGHT FOR TAXATION IN THE ASSESSMENT YEAR 2004-05 A ND SINCE IT HAS BEEN ACCEPTED BY THE REVENUE, IN OUR VIEW, THE ASSESSEE WAS JUSTI FIED IN ADOPTING THE FMV OF TENANCY RIGHT TOGETHER WITH THE AMOUNT OF STAMP DUT Y PAID FOR ACQUISITION OF NEW FLAT AS THE COST OF ACQUISITION OF NEW FLAT. 8. AS STATED EARLIER THE SALE OF THE FLAT IS A SEPA RATE TRANSACTION AND IN OUR VIEW IT CANNOT BE LINKED WITH THE SURRENDERING OF T ENANCY RIGHTS. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW THAT THE ASSESSEE WAS JUSTIFIED IN CLAIMING THE FMV OF THE TENANCY RIGHT OFFERED BY HIM FOR ASSESSM ENT YEAR 2004-05 TOGETHER WITH THE AMOUNT OF STAMP DUTY PAID FOR ACQUISITION FOR ACQUIRING THE NEW FLAT, AS COST OF ACQUISITION OF NEW FLAT. ACCORDINGLY, WE S ET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO COMPUTE THE CAPITAL GAI N BY ADOPTING THE COST OF ACQUISITION OF THE FLAT AS PER DISCUSSION MADE SUP RA. I.T.A. NO.6984/MUM/2012 4 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17TH OCT , 2014. () $ * +,17TH OCT, 2014 ) # 1% 2 SD SD ( / VIVEK VARMA) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER $ % MUMBAI: 17TH OCT,2014. . . ./ SRL , SR. PS !'# $#%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ 3& ( ) / THE CIT(A)- CONCERNED 4. $ 3& / CIT CONCERNED 5. 41 &5 , ' 5 , $ % / DR, ITAT, MUMBAI CONCERNED 6. 16 7% / GUARD FILE. 8 $ / BY ORDER, TRUE COPY 9 (ASSTT. REGISTRAR) ' 5 , $ % /ITAT, MUMBAI