HARKISION C. DESAI HUF, MUMBAI V. ITO WD 19(2)(3), MUMBAI

ITA 7085/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7774 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A F KHASGIWALA
• Keywords: Cost of acquisition; Capital receipt

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) ITA NO.7085/M/2010 ASSESSMENT YEAR 2006-07 HARKISON C. DESAI (HUF) THE ITO WARD 19(2)(3), VIJAY HARKISON C.DESAI (KARTA) ROOM NO.311, 3 RD FLOOR, 7, ABHAY APARTMENT, DATTATRAY ROAD PIRAMAL CHAMBE RS SANTACRUZ (W), MUMBAI 400 054. PAREL LALBAUG, MUM BAI 400 012. PAN : AAAHH 0033 E APPELLANT RESPONDENT ASSESSEE BY : SHRI A.F.KHASGIWALA REVENUE BY : SHRI R.K.GUPTA O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 9.7.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ASSE SSEE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GROUNDS. 2. THE FIRST DISPUTE IS REGARDING ASSESSMENT OF LON G TERM CAPITAL GAIN OF RS.1,60,417/- ON THE SALE OF TDR BY THE SOCIETY TO THE DEVELOPER. IT APPEARS THAT THE SOCIETY IN WHICH THE ASSESSEE WAS MEMBER H AD RECEIVED RS.70,07,288/- FOR SURRENDERING RIGHT IN TDR OF SOC IETY. THE SAID AMOUNT WAS DISTRIBUTED AMONGST THE MEMBERS IN THE PROCESS OF W HICH THE ASSESSEE RECEIVED A SUM OF RS.1,60,417/-. THE ASSESSEE CLAIM ED THE SAID AMOUNT AS CAPITAL RECEIPT EXEMPT FROM TAX. THE ASSESSING OFFI CER OBSERVED THAT THE DEVELOPMENT OF THE BUILDING COULD NOT TAKE PLACE WI THOUT THE CONSENT OF THE 2 SOCIETY MEMBER AND THEREFORE ANY MONEY RECEIVED BY THE SOCIETY WAS TAXABLE IN THE HANDS OF THE MEMBER. HE ACCORDINGLY CHARGED THE SUM OF RS.1,60,417/- AS LONG TERM CAPITAL GAIN IN THE NAME OF THE ASSESS EE. IN APPEAL THE ASSESSEE SUBMITTED THAT THE DEVELOPMENT RIGHTS WERE VESTED W ITH THE SOCIETY AND THE AGREEMENT FOR DEVELOPMENT WAS ALSO BETWEEN THE DEVE LOPER AND THE SOCIETY AND THE PREMIUM HAD ALSO BEEN RECEIVED BY THE SOCIE TY AND THEREFORE THE CAPITAL GAIN IF ANY COULD BE TAXED ONLY IN THE NAME OF THE SOCIETY AND NOT IN THE NAME OF INDIVIDUAL MEMBERS. IT WAS ALSO SUBMITTED T HAT NO CAPITAL GAIN SHOULD BE CHARGED ON ACCOUNT OF SURRENDER OF TDR. CIT(A) W AS HOWEVER NOT SATISFIED BY THE EXPLANATION GIVEN. HE AGREED WITH THE REASON ING OF THE AO THAT THE INCOME HAD TO BE ASSESSED IN THE NAME OF THE ASSESS EE. IT WAS ALSO OBSERVED BY HIM THAT THE SOCIETY HAD NOT DISCLOSED ANY INCOM E ON THIS ACCOUNT IN ITS NAME. ACCORDINGLY CIT(A) CONFIRMED THE ORDER OF TH E AO AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.1 BEFORE ME THE LEARNED AR FOR THE ASSESSEE REITE RATED THE SUBMISSION MADE BEFORE CIT(A) THAT INCOME COULD BE TAXED IN TH E HANDS OF THE SOCIETY. ALTERNATIVELY IT WAS ALSO SUBMITTED THAT ANY GAIN O N ACCOUNT OF SURRENDER OF TDR WAS NOT TAXABLE AS CAPITAL GAIN. RELIANCE WAS P LACED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN CASE OF MAHESHWAR P RAKASH II COOPERATIVE HOUSING SOCIETY LTD. VS ITO (24 SOT 366). THE LEARN ED DR PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 2.2 I HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING CHARGEABILITY O F CAPITAL GAIN ON ACCOUNT OF SURRENDER OF TDR. THE TDR HAD BEEN SURRENDERED BY T HE SOCIETY OF WHICH THE ASSESSEE WAS A MEMBER AND THE SHARE OF THE ASSESSEE IN THE TOTAL AMOUNT 3 RECEIVED BY THE ASSESSEE WAS RS.1,60,417/-. THE ISS UE IS WHETHER THE SAID AMOUNT CAN BE TAXED IN CASE OF THE ASSESSEE. I FIND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN CASE OF MAHESHWAR PRAKASH II COOPERATIVE HOUSING SOCIETY LTD. VS ITO (SUPRA). IN THAT CASE THE ASSESSEE SOCIETY HAD RECEIVED ADDITIONAL TRANSFERAB LE DEVELOPMENT RIGHT (TDR) AFTER THE BOMBAY MUNICIPAL CORPORATION HAD RELAXED THE DEVELOPMENT REGULATIONS IN THE YEAR 1991. THE ASSESSEE HAD TRAN SFERRED THE TDR TO THE BUILDER FOR A SUM OF RS.42 LACS FOR CONSTRUCTION OF ADDITIONAL FLOORS. THE AO HAD TAXED THE AMOUNT AS CAPITAL GAIN TAKING THE COST OF ACQUISITION AS NIL IN TERMS OF THE PROVISIONS OF SECTION 55(2). THE TRIBUNAL HOWEV ER OBSERVED THAT THE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS AND THERE FORE RIGHT TO CONSTRUCT ADDITIONAL FLOORS WAS NOT COVERED BY ANY OF THE ASS ETS MENTIONED IN SECTION 55(2). THEREFORE THE AMENDED PROVISIONS AS PER WHIC H THE COST OF ACQUISITION WAS TO BE TAKEN AS NIL WERE NOT APPLICABLE. ACCORDI NGLY IT WAS HELD THAT THE AMOUNT RECEIVED WAS NOT TAXABLE AS CAPITAL GAIN. FO LLOWING THE SAID DECISION NO CAPITAL GAIN CAN BE CHARGED IN CASE OF THE ASSESSEE . I THEREFORE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 3. THE SECOND DISPUTE RAISED BY THE ASSESSEE IS REG ARDING SET OFF OF CARRIED FORWARD LONG TERM CAPITAL LOSS ON SALE OF SHARES AN D DIAMONDS. I FIND THAT NO SUCH GROUND HAD BEEN RAISED BEFORE CIT(A) NOR THIS ISSUE ARISES FROM THE ORDER OF CIT(A). THE LEARNED AR ALSO SUBMITTED THAT IN CA SE THE GROUND NO.1 IS ALLOWED IN FAVOUR OF THE ASSESSEE, THIS GROUND WOUL D BECOME INFRUCTUOUS. SINCE I HAVE ALREADY ALLOWED GROUND NO.1 IN FAVOUR OF THE ASSESSEE, THIS GROUND IS DISMISSED HAVING BECOME INFRUCTUOUS. 4 4. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 5. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 31.03.2011. SD/- (RAJENDRA SINGH) ACCOUNTANT MEMBER DATE : 31.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR SMC BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK