S. NARENDRAKUMAR & CO., MUMBAI V. DCIT CIR 22(2), NAVI MUMBAI

ITA 7080/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2727 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: SHAILESH N DOSHI
• Keywords: Capital asset; Business income; Competent authority
• Section: 54; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 7080/M/2012 ASSESSMENT YEAR: 2009 - 10 M/S. S. NARENDRAKUMAR & CO., 5 TH FLOOR, KRUSHAL COMMERCIAL COMPL EX, G.M. ROAD, CHEMBUR (W), MUMBAI 400 089 PAN: AAAFS 1245B VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 22(2), VASHI RAILWAY STATION COMPLEX, TOWER NO.6, 4 TH FLOOR, VASHI, NAVI MUMBAI 400 703 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SHAILESH N. DOSHI, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 04.11. 201 5 DATE OF PRONOUNCEMENT : 06. 11.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 25.09.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009 - 10. 2. THE SOLE ISSUE RAISED BY THE ASSESSEE THROUGH ITS GROUNDS OF APPEAL IS RELATING TO THE TAXABILITY OF THE INCOME GAINED BY THE ASSESSEE FROM TRANSFER OF THE ASSESSEES RIGHT IN 5 OFFICE PREMISES AS TO WHETHER THE SAME ARE TO BE ASSESSED UNDER THE HEAD LONG TERM CAPITAL GAINS OR AS INCOME FROM O THER SOURCES . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) NOTICED THAT THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAINS OF ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 2 RS.38,26,076/ - ON TRANSFER OF RIGHTS IN THE FIVE OFFICE PREMISES BEARING NO.219, 220, 221, 318 & 319 IN THE BUILDING NAMED PL ATINUM TECHNO PARK , AT VASHI . THE AO ASKED THE ASSESSEE TO FURNISH THE COMPLETE DETAILS IN THIS REGARD. ON PERUSAL OF THE DETAILS, THE AO OBSERVED THAT THE ASSESSEE HAD AGREED TO PURCHASE THE ABOVE MENTIONED OFFICE PREMISE S FOR A CONSIDERATION OF RS.68,64,000/ - AND HAD PAID AN AMOUNT OF RS. 48,02,0 00/ - AS ADVANCE TO THE BUILDER ON 02.09.05. THE ASSESSEE RELIED UPON A PROVISIONAL ALLOTMENT LETTER DATED 02.09.05 ISSUED BY THE BUILDER TO THE ASSESSEE IN THIS RESPECT. THEREAFT ER, THE BUILDER GOT ITS BUILDING PLAN AND SPECIFICATIONS APPROVED FROM NAVI MUMBAI, MUNICIPAL CORPORATION ON 03.08.06 AND THEREAFTER ISSUED A FINAL ALLOTMENT LETTER DATED 04.08.06 TO THE ASSESSEE. THE SAID BUILDING PLATINUM TECHNO PARK WAS BEING BUILT S PECIFICALLY FOR ACTIVITIES RELATED TO INFORMATION TECHNOLOGY AND AS THE ASSESSEE WAS NOT INVOLVED IN THE ACTIVITY RELATED TO INFORMATION TECHNOLOGY , HENCE, IT DECIDED TO SELL/TRANSFER ITS RIGHTS IN THE ABOVE MEN TIONED OFFICE PREMISES. ON 17.1 2.08, IT WAS INFORMED BY THE BUILDER TO THE ASSESSEE THAT THE BUILDER HAD SOLD RIGHTS OF THE ASSESSEE FOR A CONSIDERATION OF RS. 1,18,64,000/ - . THE RESULTANT SURPLUS WAS OFFERED BY THE ASSESSEE AS LONG TERM CAPITAL GAINS . THE AO FROM THE ABOVE FACTS OBSERVED THAT THE ASSESSEE HAD GOT FINAL ALLOTMENT OF THE SAID OFFICE PREMISES ON 04.08.06 AND THE RIGHTS WERE SOLD/TRANSFERRED ON 17.12.08 AND AS SUCH THE HOLDING PERIOD OF THE RIGHTS WAS LESS THAN 36 MONTHS. THE GAINS ARISING THERE FROM HAD TO BE TAXED AS SHORT TERM CAP ITAL GAINS . HE ASKED THE ASSESSEE TO EXPLAIN IN THIS RESPECT. THE ASSESSEE FURNISHED THE NECESSARY EXPLANATION ACCORDINGLY. AFTER CONSIDERING THE EXPLANATION SUBMITTED BY THE ASSESSEE, THE AO OBSERVED THAT THE ASSESSEE HAD NOT ENTERED INTO AN AGREEMENT FOR SALE OF THE ABOVE MENTIONED OFFICE PREMISES WITH THE BUILDER WHICH CAN BE SAID TO HAVE CREATE D AN Y ENFORCEABLE RIGHT S IN THE ASSET. ON THE DATE OF ALLOTMENT LETTER, THE PROPERTY IN QUESTION WAS NOT IN EXISTENCE. THE WHOLE EXERCISE WAS SPECULATIVE I N NATURE ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 3 FOR MAKING QUICK PROFITS. THE ASSESSEE HAD NEVER TAKEN THE POSSESSION OF THE PROPERTY. THE ASSESSEE WAS NOT IN THE BUSINESS OF BUYING AND SELLING OF THE PROPERTIES ALSO. HENCE, THE INCOME EARNED BY THE ASSESSEE FROM THE SAID PROPERTY WAS NOT TH E BUSINESS INCOME OF THE ASSESSEE. HE, THEREFORE, TAXED THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. WITHOUT PREJUDICE TO THE ABOVE, HE HELD THAT EVEN OTHERWISE, IF THE ASSET IS TO BE TREATED AS CAPITAL ASSET, EVEN THEN, THE ASS ESSEE CAN BE SAID TO HAVE ACQUIRED ANY INTEREST IN THE PROPERTY ONLY ON 04.08.06 WHEN FINAL LETTER OF ALLOTMENT WAS ISSUED TO HIM AFTER GETTING NECESSARY APPROVALS BY THE BUILDER FROM THE MUNICIPAL CORPORATION IN RESPECT OF BUILDING PLAN AND COMMENCEMENT C ERTIFICATE ETC. UNDER SUCH CIRCUMSTANCES, THE SAID RIGHT WAS HELD BY THE ASSESSEE FOR LESS THAN 36 MONTHS AND THE RESULTANT GAINS, WOULD, IN THAT EVENT, BE ASSESSABLE AS SHORT TERM CAPITAL GAINS. BEING AGREED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRE D APPEAL BEFORE THE LD. CIT(A). 3. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ALLOTMENT LETTER DATED 02.09.05 RELIED UPON BY THE ASSESSEE HAD A CLAUSE (3) WHEREIN IT HAD BEEN MENTIONED AS UNDER: 3. WE ARE NOT I SSUING THIS FINAL ALLOTMENT LETTER SINCE THE PLANS AND SPECIFICATION ARE NOW DULY APPROVED AND WE HAVE ALSO RECEIVED COMMENCEMENT CERTIFICATE NO. NMMC/TPD/BP CASE NO.A - 5298/2351/2006 DATED 3 RD DAY OF AUGUST, 2006. 4. THE LD. CIT(A) OBSERVED THAT H OW THE ABOVE REPRODUCED CLAUSE ( 3 ) WHICH MENTION ED THAT THE COMMENCEMENT CERTIFICATE DATE 03.08.06 HAS BEEN ISSUED COULD FIND PLACE IN THE ALLOTMENT LETTER DATED 02.09.05. THE FACTS ITSELF SPEAK THAT THE ABOVE STATED ALLOTMENT LETTER DATED 02.09.05 WAS IN FACT WRITTEN/ISSUED BACK DATED AFTER THE ISSUE OF COMMENCEMENT CERTIFICATE DATED 03.08.06. THE LD. CIT(A) FURTHER OBSERVED THAT IN BOTH THE LETTERS DATED 02.09.05 AND 04.08.06 , NOWHERE , THE SCHEDULE OF PAYMENT WAS MENTIONED , BUT , ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 4 IT H AD BEEN SIMPLY ST ATED THAT THE SAME WOULD BE DECIDED IN AGREEMENT OF SALE TO BE EXECUTED IN DUE COURSE. EVEN THE ABOVE LETTERS DID NOT TALK ABOUT TOTAL CONSIDERATION FOR THE ABOVE STATED 5 OFFICES NOR WAS ANY DATE OR TIME LIMIT FOR ENTERING INTO AN AGREEMENT OF SALE SPE CIFIED. THERE WAS NO MENTION OF ANY OBLIGATION ON THE PART OF THE ASSESSEE OR ON THE PART OF THE BUILDER REGARDING THE TRANSACTIONS IN QUESTION. THE LD. CIT(A) FURTHER OBSERVED THAT THERE WAS NEITHER ANY REGISTERED DOCUMENT NOR ANY POWER OF ATTORNEY GIVE N BY THE ASSESSEE TO THE BUILDER FOR TRANSFERRING HIS RIGHTS IN THE PROPERTY IN QUESTION. THE ASSESSEE WAS NOT THE SIGNING PARTY IN ANY DOCUMENT EXECUTED FOR THE TRANSFER OF HIS RIGHT TO FINAL PURCHASER. THE ASSESSEE SIMPLY WROTE TO THE BUILDER TO SELL T HE PROPERTIES AND PAY HIM THE SURPLUS. NO RIGHTS WERE TRANSFERRED BY THE ASSESSEE EITHER IN FAVOUR OF THE BUILDE R OR IN FAVOUR OF ANY ACTUAL PURCHASER OF THE PROPERTY. THE LD. CIT(A) THEREAFTER CONCLUDED THAT THE FIRST LETTER OF 2005 WAS A FABRICATED DOC UMENT AND NO RIGHTS HAD PASSED TO THE ASSESSEE EVEN VIDE THE SECOND ALLOTMENT LETTER OF 2006 AND THERE WAS NO TRANSFER OF ANY RIGHT AS THERE WAS NO MENTION OF ANY OBLIGATION ON THE PART OF RESPECTIVE PARTIES, CONSIDERATION, SCHEDULE OF PAYMENT, DATE OF COM PLETION OF BUILDING AND DATE OF HANDING OVER OF THE POSSESSION ETC. THE NECESSARY INGREDIENTS OF A VALID AGREEMENT I.E. PROPOSAL, ACCEPTANCE, CONSIDERATION ALONG WITH RIGHTS AND OBLIGATIONS OF THE RESPECTIVE PARTIES WAS MISSING. THE LD. CIT(A), THEREFORE , HELD THAT WHATEVER INTEREST/STAKE WAS CREATED BY THE ASSESSEE WAS SOLD BY THE BUILDER AND THE SURPLUS SO EARNED BY THE ASSESSEE IS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APP EAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALSO GONE THROUGH THE RECORDS. BEFORE US, THE ASSESSEE HAS MADE THE FOLLOWING WRITTEN SUBMISSIONS: HUMBLE SUBMISSIONS OF THE APPELLANT ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 5 THE APPELLANT HUMBLY SUBMITS THAT AT THE STAGE WHEN T HE BOOKING IS MADE BY THE INTENDING BUYER WITH THE DEVELOPER THE RIGHT IN THE PROPERTY WOULD COME INTO EXISTENCE WHEN THE DEVELOPER CONFIRMS THE BOOKING AND ISSUES NECESSARY BOOKING RECEIPT AS A CONSEQUENCE TO THE SAID BOOKING TO THE INTENDED BUYER AFTER T HE PROJECT HAS BEEN PROPERLY DESCRIBED AND IDENTIFIED. IN CASE OF INITIAL ADVANCE IF THERE IS COMMITMENT FOR ALLOTMENT BY THE DEVELOPER, THE SAME AMOUNTS TO ACQUISITION OF RIGHTS IN THE PROPERTY. BOOKING RIGHT IN A PROPERTY IS A VALUABLE RIGHT AND IS A PR OPERTY. SUCH PROPERTY THEREFORE, IS HELD BY THE ASSESSEE SINCE THE DATE WHEN THE UNIT/OFFICE/FLAT/SHOP IS BOOKED WITH THE BUILDER. THE BOOKING RECEIPT SPECIFYING THE EXACT LOCATION, UNIT NO. FLOOR ETC. AND THE AMOUNT PAID IRRESPECTIVE OF WHETHER STAMP DUTY IS PAID OR NOT THEREON OR EVEN THOUGH NOT REGISTERED IS AN ENFORCEABLE CONTRACT. THEREFORE, THE PROPERTY IS HELD BY THE ASSESSEE IN SUCH A CASE FROM THE DATE OF BOOKING. THE APPELLANT HUMBLY SUBMITS THAT THE CONTENTION OF THE APPELLANT IS SUPPORTED BY T HE DECISIONS OF CIT V. TATA SERVICES LTD. - 122 ITR 594 (BOM) , CIT V. VIJAY FLEXIBLE CONTAINERS - 186 ITR 693 (BOM), K. R. SHRINATH V. ACIT - 268 ITR 436 (MAD), J.K.KASHYAP V. ACIT - 302 ITR 255 (DEL), CIT V. SMT. LAXMIDEVI RATANI - 296 ITR 363 (M.P.), ACI T V. HANSABEN MEHTA - 90 LTD 44 (MUM) AND JAGDISH CHANDER MALHOTRA V. ITO - 64 LTD 251 (DEL) WHICH CLEARLY HELD THAT EVEN A RIGHT/INTEREST IN A PROPERTY IS A CAPITAL ASSET WITHIN THE MEANING OF SEC.2(14) AND THE GAIN ARISING THERE FROM IS CHARGEABLE TO CAP ITAL GAINS TAX U/S 2(47) R.W.S.45. THE APPELLANT ALSO DRAWS YOUR KIND ATTENTION TO THE DECISION OF JAIPUR ITAT IN JITENDRA KUMAR GUPTA V. ITO - (2008) 8 DTR (JP) (TRIB) 330 WHEREIN THE HONOURABLE BENCH CONCLUDED THAT 'ASSESSEE HAVING ADVANCED A SUM OF RS. 7 LACS FOR PURCHASE OF A FLAT WHICH DEAL COULD NOT FRUCTIFY AND ASSESSEE HAVING RECEIVED CERTAIN AMOUNT BY WAY OF SETTLEMENT THE TRANSACTION INVOLVED TRANSFER OF CAPITAL ASSET BY EXTINGUISHMENT OF RIGHT ACQUIRE THE FLAT HENCE AO WAS JUSTIFIED IN ACCEPTING THE ASSESSEE'S CLAIM OF CAPITAL GAINS AND CIT'S REVISIONAL ORDER OBSERVING THAT THE ISSUE NEEDED RECONSIDERATION COULD NOT BE SUSTAINED.' 6. APART FROM THAT THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT OF RS.48,02,000/ - WAS PAID BY THE ASSES SEE TO THE BUILDER FOR THE PURCHASE OF ABOVE STATED 5 OFFICES BY WAY OF CHEQUE NO.237626 DATED 02.09.05 AND THE BUILDER HAD ISSUED SEPARATE RECEIPTS REGARDING THE ADVANCE RECEIVED IN RESPECT OF THE ABOVE STATED FIVE OFFICES ALL DATED 06.09.05. HE HAS F URTHER SUBMITTED THAT A VESTED RIGHT HAD OCCURRED TO THE ASSESSEE ON THE DATE OF ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 6 BOOKING OF THE OFFICE S IN QUESTION. THE SAID RIGHT WAS SOLD BY THE ASSESSEE AFTER 3 YEARS; HENCE , THE RESULTANT GAINS WERE TAXABLE AS LONG TERM CAPITAL GAINS . ON THE OTHER H AND, THE LD. D.R. HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE FIND THAT THOUGH AS PER THE FINDINGS AVAILABLE ON RECORD , THE AMOUNT HAS BEEN PAID BY THE ASSESSEE TO THE BUILDER VIDE CHEQUE DATED 02.09.05 AND IN LIEU OF WHICH THE 5 RECEIPTS DATED 06.09.05 WERE ISSUED BY THE BUILDER TO THE ASSESSEE. HOWEVER, A PERUSAL OF THE LETTERS DATED 02.09.05 AND DATED 0 4 .0 8 .0 6 REVEALS THAT THE COMMENCEMENT CERTIFICATE AND APPROVAL OF BUILDING PLAN WAS ISSUED BY THE COMPETENT AUTHORITY ON 03.08.06. SUR PRISINGLY, THE FACT OF ABOVE ISSUANCE OF COMMENCEMENT CERTIFICATE DATED 03.08.06 FINDS MENTION IN THE LETTER DATED 02.09.05 WHICH FACT ITSELF PROVES THAT THE LETTER DATED 02.09.05 IS A FABRICATED DOCUMENT WHICH HAS BEEN DRAFTED AFTER THE ISSUANCE OF COMMEN CEMENT CERTIFICATE DATED 03.08.06. HENCE, NO RELIANCE CAN BE PLACED ON THE SAID LETTER. THERE IS ANOTHER PECULIAR FACT OF THE CASE. THE PAYMENT WAS MADE BY THE ASSESSEE VIDE CHEQUE DATED 02.09.05 WHICH WAS TRANSFERRED BY WAY OF CLEARING ON 03.09.05 AS S HOWN BY THE ASSESSEE FROM THE COPY OF THE BANK ACCOUNT STATEMENT , PLACED ON RECORD DURING THE COURSE OF ARGUMENTS , THEREAFTER , THE RECEIPTS OF PAYMENT IN QUESTION HA D BEEN ISSUED BY THE BUILDER ON 06.09.05 , BUT , SURPRISINGLY , THE ALLOTMENT LETTER HAS BEEN SHOWN TO BE ISSUED ON 02.09.05 I.E. ON THE DATE OF ISSUE OF CHEQUE. IF THE BUILDER COULD ISSUE THE ALLOTMENT LETTER ON THE DATE OF ISSUANCE OF CHEQUE, THEN , WE COULD NOT UNDERSTAND , WHAT WAS THE HITCH IN ISSUING THE RECEIPTS OF PAYMENT ON THE SAID DATE 02 .09.05 ITSELF. THE FACTS ITSELF SPEAK THAT WHEN THE AMOUNT WAS TRANSFERRED IN THE ACCOUNT OF THE BUILDER , ONLY THEN THE RECEIPTS DATED 06.09.05 WERE ISSUED BY THE BUILDER. UNDER SUCH CIRCUMSTANCES, THERE ARISES NO PROBABILITY OF ISSUING OF LETTER OF ALLO TMENT ON 02.09.05. EVEN, OTHERWISE, THE ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 7 CONTENTS OF THE LETTER ITSELF SPEAK THAT THE SAME IS A FABRICATED ONE. ADMITTEDLY, NO APPROVAL OF BUILDING PLAN, NECESSARY PERMISSIONS AND EVEN COMMENCEMENT CERTIFICATE WAS ISSUED TO THE ASSESSEE TILL 03.08.06. TH E MUNICIPAL CORPORATION HAD ISSUED COMMENCEMENT CERTIFICATE AND NECESSARY APPROVALS ETC. ONLY ON 03.08.06. THE S O CALLED OFFICE PREMISES WERE NEITHER IN EXISTENCE ON 02.09.05 NOR THERE WAS ANY LIKELIHOOD OF THEIR EXISTENCE ON THE SAID DATE AS NO SITE /BUIL DING PLAN ETC. WERE SANCTIONED BY ANY COMPETENT AUTHORITY. THE WORK HAD NOT COMMENCED ON THE SAID DATE WHICH IN FACT, CAN BE SAID TO HAVE COMMENCED ON 03.08.06 ONLY. MERE MAKING OF PAYMENT BY THE ASSESSEE TO THE BUILDER , EVEN PRIOR TO SANCTION OF THE BUI LDING PLAN ITSELF, CANNOT BE SAID TO HAVE YIELDED IN A VESTED RIGHT IN THE ASSESSEE TO GET A PROPERTY WHICH WAS NEITHER IN EXISTENCE AT THAT TIME NOR ANY PROCESS FOR CONSTRUCTION OF THE SAME HAD ST ARTED. A NOTHER PECULIAR FACT OF THE CASE IS THAT IN THE LE TTERS DATED 02.09.05 AND ALSO IN THE LETTER DATED 04.08.06 WHICH IS VERBATIM COPY OF THE OTHER , I N THE OPENING LINES , IT HAS BEEN MENTIONED THAT THE AUTHORIZED USER OF THE SPACE ALLOTTED IS ACTIVITY RELATING TO INFORMATION TECHNOLOGY ONLY. EVEN I F , WE R ELY UPON THE LETTER DATED 02.09.05 , IT IS CLEAR THAT THE ASSESSEE ON THE DATE OF ISSUANCE OF CHEQUE FOR THE ADVANCE AMOUNT WAS MADE AWARE THAT THE AUTHORIZED USER OF THE OFFICE PREMISES WOULD BE ONLY IN RELATION TO THE ACTIVITY OF INFORMATION TECHNOLOGY AN D NO OTHER ACTIVITY WAS PERMISSIBLE TO BE CARRIED OUT IN THE SAID OFFICES. THE IDENTICAL WORDING HAS ALSO BEEN MENTIONED IN THE AL LOTTED LETTER DATED 04.08.06. T HE ASSESSEE, THEREAFTER WROTE A LETTER DATED 15.11.08 TO THE BUILDER THAT HE HAD BOOKED THE S AID OFFICES SPECIFICALLY FOR EXTENDING HIS BUSINESS AND OPENING OF BRANCH OFFICE IN MUMBAI AREA, HOWEVER SINCE IT HAD BEEN MENTIONED IN THE SAID LETTERS DATED 02.09.05 AND 04.08.06 THAT THE ALLOTTED SPACE COULD BE USED FOR ACTIVITY RELATING TO INFORMATION TECHNOLOGY AND THAT THE ASSESSEE HAD NO SUCH ACTIVITY, HENCE A REQUEST WAS MADE TO THE BUILDER TO SELL, TRANSFER THE RIGHTS OF THE ASSESSEE IN THE SAID OFFICES TO OTHER PARTIES AT THE BEST ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 8 AVAILABLE MARKET PRICE AND REMIT THE PRINCIPAL AMOUNT AND THE GAINS THEREUPON TO THE ASSESSEE. THE BUILDER THEREAFTER VIDE LETTER DATED 17.12.08 INFORMED THE ASSESSEE THAT THE OFFICE PREMISES COULD BE SOLD AT RS.1,18,64,000/ - TO WHICH THE ASSESSEE AGREED AND THE RESULTANT GAINS WERE OFFERED BY THE ASSESSEE AS CAPITAL GAI NS. THE ABOVE FACTS AND CIRCUMSTANCES CLEARLY SHOW THAT THE ASSESSEE HAD NOT ANY INTENTION EITHER TO BUY THE SAID OFFICE PREMISES OR TO GET POSSESSION OF THE SAME . THE ASSESSEE PERHAPS PROVIDED FINANCES TO THE BUILDER AND IN LIEU OF WHICH THE BUILDER OFF ERED HIM RESULTANT GAINS. IF THE ASSESSEE HAD NO BUSINESS ACTIVITY IN THE FIELD OF INFORMATION TECHNOLOGY AND THERE WAS NO USE OF THE SAID OFFICES TO THE ASSESSEE, THE REASONABLE PRESUMPTION WOULD BE THAT THE ASSESSEE NEVER INTENDED TO PURCHASE OR TAKE PO SSESSION OF THE SAID OFFICES. MOREOVER, NEITHER THE PROPERTY WAS IN EXISTENCE ON 02.09.05 NOR ANY PLAN WAS SANCTIONED NOR ANY CONSTRUCTION HAD STARTED AND THERE WAS SUCH NO PROBABILITY OF EXISTENCE OF THE SAME IN NEAR FUTURE. UNDER SUCH CIRCUMSTANCES, NO VESTED RIGHT IN THE PROPERTY HAD PASSED TO THE ASSESSEE ON 02.09.05. EVEN THERE WAS NO AGREEMENT, NO CONVEYANCE DEED EXECUTED BETWEEN THE PARTIES FOR CREATING ANY RIGHT IN THE PROPERTY IN QUESTION. THE RIGHTS IF ANY IN THE PROPERTY COULD BE SAID TO HAVE ACCRUED TO THE ASSESSEE ONLY AFTER THE ISSUANCE OF COMMENCEMENT CERTIFICATE DATED 04.08.06. HENCE, THE RIGHTS IF ANY RELATING TO THE OFFICES IN QUESTION WHICH WERE LIKELY TO BE BUILT BY THE BUILDER HAD ACCRUED TO THE ASSESSEE ONLY ON 04.08.06. HOWEVER, T HERE WAS NO PAYMENT SCHEDULE OF INSTALLMENTS, ANY LIKELY DATE OF COMPLETION OF THE PROJECT OR THE BALANCE CONSIDERATION PAYABLE BY THE ASSESSEE AGREED TO BETWEEN THE PARTIES. EVEN THE ASSESSEE IN ITS BALANCE SHEET, THE COPY OF WHICH HAS BEEN FURNISHED BY THE LD. AR DURING THE COURSE OF ARGUMENTS, HAS SHOWN THE AMOUNT PAID FOR THE PURCHASE OF THE ALLEGED OFFICE PREMISES UNDER THE HEAD LOANS, ADVANCES & DEPOSITS NOT UNDER THE HEAD FIXED ASSETS OR I NVESTMENTS , WHICH ITSELF SHOW THAT THE ASSESSEE NEVER TREATED THE ALLEGED RIGHTS AS ITS CAPITAL ASSET . ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 9 THE LD. A.R. OF THE ASSESSEE HAS STRONGLY RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAM GOPAL [ 2015 ] 55 TAXMAN.COM 536 (DEL.) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT EVEN BOOKING RIGHTS OR RIGHT TO PURCHASE OR RIGHTS TO OBTAIN THE TITLE OF THE PROPERTY IS ALSO A CAPITAL ASSET FOR THE PURPOSE OF PROVISIONS OF SECTION 2(47) READ WITH SECTION 54 OF THE ACT. THE HONBLE DELHI HIGH COURT WHILE HOLDING SO HAS RELIED UP ON THE ANOTHER DECISION OF THE HONBLE DELHI HIGH COURT STYLED AS GULSHAN MALIK VS. CIT (2014) 223 TAXMAN 243 WHEREIN THE HONBLE DELHI HIGH COURT HAD BEEN OF THE OPINION THAT THE CAPITAL ASSET HAS BEEN DEFINED IN EXTREMELY VIDE TERMS. THE HONBLE DELHI HIGH COURT INTERPRETING SECTION 2(47) WHICH DEFINES TRANSFER AND CONSIDERING THE SECOND EXPLANATION TO CLAUSE (V) & (VI) OF THE SECTION OBSERVED THAT THE POSSESSION, ENJOYMENT OF PROPERTY AS WELL AS ANY INTEREST IN ANY OF TRANSFERRABLE CAPITAL ASSET WAS I NCLUDED WITHIN THE AMBIT OF CAPITAL ASSET. THE HONBLE DELHI HIGH COURT HAS HELD THAT EVEN BOOKING RIGHTS OR RIGHTS TO PURCHASE THE APARTMENT OR OBTAIN ITS LETTER WAS ALSO CAPITAL ASSET. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAM GOPAL (SU PRA) HAS ALSO REPRODUCED THE RELEVANT PART OF OBSERVATIONS IN THE CASE OF GULSHAN MALIK VS. CIT (SUPRA) WHICH FOR THE SAKE OF REFERENCE ARE REPRODUCED AS UNDER: '7. IT IS CLEAR THAT A 'CAPITAL ASSET' UNDER THE ACT IS PROPERTY OF 'ANY KIND' THAT IS 'HELD' BY THE ASSESSEE. NECESSARILY, A CAPITAL ASSET MUST BE TRANSFERABLE. THUS, TO UNDERSTAND WHAT KIND OF PROPERTY CAN BE CONSIDERED A CAPITAL ASSET, IT WOULD BE APPOSITE TO REFER TO THE DEFINITION OF TRANSFER IN SECTION 2(47) OF THE ACT. SECTION 2(47)(V) AND (VI), AND EXPLANATION 2 MAKE IT ADEQUATELY CLEAR THAT POSSESSION, ENJOYMENT OF IMMOVABLE PROPERTY, AS WELL AS AN INTEREST IN ANY ASSET ARE ALL TRANSFERABLE 'CAPITAL ASSETS'. THE REFERENCE TO ACQUISITION 'BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER' ESTABLISHES THAT IT IS NOT CONVEYANCE OF PROPERTY OR THE DOCTRINE OF PART PERFORMANCE (ENACTED THROUGH SECTION 53A OF THE TRANSFER OF PROPERTY ACT) WHICH RESULT IN ENFORCEABLE RIGHTS, FOR THE PURPOSES OF THE INCOME TAX. THE SCHEME OF THE ACT PUTS IT BEYOND DOUBT THAT EVEN RIGHTS OR INTERESTS IN A ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 10 PROPERTY ARE KINDS OF PROPERTY THAT ARE TRANSFERABLE CAPITAL ASSETS. THUS, THERE IS NO DOUBT THAT BOOKING RIGHTS OR RIGHTS TO PURCHASE THE APARTMENT OR RIGHTS TO OBTAIN TITLE TO THE APARTM ENT ARE ALSO CAPITAL ASSETS THAT CAN BE TRANSFERABLE.' A CAREFUL READING OF THE ABOVE OBSERVATIONS MADE IN THE CASE OF GULSHAN MALIK VS. CIT (SUPRA) WHICH HAVE BEEN FURTHER RELIED UPON BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAM GOPAL (S UPRA) REVEALS THAT THE HONBLE HIGH COURT HAS HELD THAT A CAPITAL ASSET UNDER THE ACT IS A PROPERTY OF ANY KIND THAT IS HELD BY THE ASSESSEE. THE HONBLE DELHI HIGH COURT GIVING A WIDER INTERPRETATION HAS HELD THAT EVEN THE RIGHTS OR INTEREST IN A P ROPERTY ARE KINDS OF PROPERTY THAT ARE TRANSFERABLE CAPITAL ASSETS. HOWEVER, WE FIND THAT THE ABOVE PROPOSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAM GOPAL (SUPRA) AS WELL AS IN THE CASE OF GULSHAN MALIK VS. CIT ( SUPRA) DOES NOT APPLY TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE. WHAT THE HONBLE DELHI HIGH COURT HAS HELD THAT EVEN THE RIGHTS IN THE PROPERTY ARE TRANSFERABLE CAPITAL ASSET. HOWEVER, FOR THAT PURPOSE, THERE SHOULD BE A PROPERTY IN EXI STENCE OR EVEN GIVING A WIDER INTERPRETATION THERE SHOULD BE A PROPERTY WHICH IS LIKELY AND APPARENTLY COMING INTO EXISTENCE E.G. IF THE CONSTRUCTION OF THE FLAT IS STARTED AND THE FLAT IS LIKELY TO COME IN EXISTENCE. HOWEVER, WHEN THERE IS NO PROPERTY IN EXISTENCE AND NOR ANY DEFINITE PROCESS FOR THE CREATION OF THE SAME HAS STARTED, HOW CAN THE ONE GET A TRANSFERABLE RIGHT OR INTEREST INTO SUCH A FICTIONAL PROPERTY WHICH ITSELF CANNOT BE SAID TO BE EVEN A PROPERTY. THEREFORE, THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE OTHER CASE LAWS RELIED UPON BY THE LD. A.R. AS REFERRED TO IN HIS WRITTEN SUBMISSIONS AS REPRODUCED ABOVE, ARE ALSO RELATED TO THE RIGHTS OR INTEREST IN THE PROPERTY WHICH WERE EITHE R IN EXISTENCE OR THERE WAS NO DISPUTE ABOUT THE VERY EXISTENCE OF THE PROPERTY ITSELF. HOWEVER, IN THE CASE IN HAND AS DISCUSSED ABOVE NEITHER THE PROPERTY IN QUESTION I.E. THE SO CALLED OFFICE PREMISES WAS IN EXISTENCE NOR ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 11 ITS BUILDING PLAN OR SPECIFI CATIONS WERE APPROVED FROM THE MUNICIPAL CORPORATION AND NEITHER ANY CONSTRUCTION ACTIVITY OR COMMENCEMENT OF THE PROJECT HAD STARTED. THERE IS NO DOCUMENT ON THE FILE WHICH MAY SUGGEST THAT THERE WAS EVEN VERY LIKELIHOOD OF THE ALLEGED PROPERTY COMING IN TO EXISTENCE IN THE NEAR FUTURE GIVING ANY RIGHT TO THE SELLER TO SALE ANY INTEREST IN THE SAME OR ANY ACCRUAL OF RIGHT IN FAVOUR OF THE INTENDING PURCHASER. 8. NOW COMING TO THE SALE OF THE SAID RIGHTS. THE EXCUSE GIVEN BY THE ASSESSEE WAS THAT SINCE HE WAS NOT INVOLVED IN ANY ACTIVITY OF INFORMATION TECHNOLOGY, HENCE THE OFFICES BE SOLD TO THE ANOTHER PARTY. AS OBSERVED ABOVE, TH E FACT THAT THE SAID OFFICE PREMISES ALLEGED TO BE ALLOTTED TO THE ASSESSEE COULD BE USED ONLY FOR ACTIVITY OF INFORMATION TECHNOLOGY WAS VERY MUCH IN THE KNOWLEDGE OF THE ASSESSEE ON THE DATE OF MAKING THE PAYMENT I.E. ON 02.09.05 AND EVEN ON 04.08.06 WHEN THE SUBSEQUENT ALLOTMENT LETTER WAS ISSUED. THE ASSESSEE DID NOT REVERT BACK TO THE BUILDER THAT SINCE HE WAS NOT IN TH E ACTIVITY OF INFORMATION TECHNOLOGY, HENCE HIS PRINCIPAL AMOUNT BE REFUNDED. THE FACTS ITSELF SPEAK THAT THE ASSESSEE HAD ADVANCED THE MONEY TO THE BUILDER TO MAKE QUICK PROFITS EITHER BY WAY OF INTEREST OR BY WAY OF SHARE IN THE PROFITS WHICH THE BUILDE R MAY GAIN BY SELLING THE PROPERTIES. THE ASSESSEE NEITHER EXECUTED ANY CONVEYANCE DEED NOR HAD BEEN CONSENTING PARTY TO ANY DEED FOR CONVEYANCE EXECUTED BETWEEN THE BUILDER AND THE ACTUAL PURCHASER OF THE PROPERTY. THE POSSESSION AND OWNERSHIP OF THE OF FICES IN QUESTION ALWAYS REMAINED WITH THE BUILDER. THE ASSESSEE HAD BEEN OFFERED THE AMOUNT OF INTEREST/PROFIT ON THE FINANCES PROVIDED BY THE ASSESSEE TO THE BUILDER. UNDER SUCH CIRCUMSTANCES, THE INCOME ACCRUED TO THE ASSESSEE RELATING TO THE ABOVE TR ANSACTION HAS RIGHTLY BEEN ASSESSED BY THE LOWER AUTHORITIES AS INCOME FROM OTHER SOURCES. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS RESPECT AND THE SAME IS THEREFORE UPHELD. ITA NO.7080/M/2012 M/S. S. NARENDRAKUMAR & CO. 12 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6.11.2015 SD SD ( R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 6 .11 .2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER TRUE COPY DY/ASSTT. REGISTRAR, ITAT, MU MBAI.