ARDIN FABRICS PVT. LTD., MUMBAI V. ITO - RANGE 4(1)-(3), MUMBAI

ITA 7118/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2631 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LALCHAND CHOUDHARY
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value
• Section: 143(3); 50C; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI ASHWANI TANEJA , A CCOUNTANT MEMBER ITA NO. : 7117 /MUM/201 3 (ASSESSMENT YEAR: 200 6 - 0 7 ) M/S ARUN KUMAR SYNTHETICS PVT LTD , ARDIN FABRICS PVT LTD. , SANJAY BUILDING NO. 5/B, GALA NO.265, 2 ND FLOOR, MITT AL INDUSTRIAL ESTATE, ANDHERI EAST, MUMBAI - 400 059 PAN: AA AC A 9759 M VS INCOME TAX OFFICER, RANGE 4(1) - (3), 6 TH FLOOR, AAYAKAR BHAVAN, ROOM NO.637, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ITA NO. : 7118 /MUM/201 3 (AS SESSMENT YEAR: 200 6 - 0 7 ) ARDIN FABRICS PVT LTD. , SANJAY BUILDING NO. 5/B, GALA NO.265, 2 ND FLOOR, MITTAL INDUSTRIAL ESTATE, ANDHERI EAST, MUMBAI - 400 059 PAN: AA AC A 9757 F VS INCOME TAX OFFICER, RANGE 4(1) - (3), 6 TH FLOOR, AAYAKAR BHAVAN, ROOM NO.637, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI LALCHAND CHOUDHARY REVENUE BY : SHRI GANESH BARE /DATE OF HEARING : 14 - 0 7 - 201 6 / DATE OF PRONOUNCEMENT : 29 - 07 - 2016 ORDER , : PER AMIT SHUKLA , J M: 2 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD THE AFORESAID APPEAL S HA VE BEEN FILED BY THE ABOVE NAMED ASS ESS E E S AGAINST SEPARATE IMPUGNED ORDER S OF EV EN DATE , 05.09 .201 3 , PASSED BY LD. CIT(A PPEALS ) - 8 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) R.W.S. 254 FOR THE ASSESSMENT YEAR 2006 - 07. SINCE SIMILAR ISSUE IS INVOLVED IN BOTH THE APPEALS ARISING OUT OF IDENTICAL SET OF FACTS, THERE FORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. FOR THE SAKE OF READY REFERENCE, WE WILL FIRST TAKE - UP APPEAL IN ITA NO.7117/MUM/2013 VIDE WHICH FOLLOWING GROUND HAS BEEN RAISED: - 1. ON FACTS AND IN LAW, THE CI T(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF TREATING THE CAPITAL GAIN ARISING ON SALE ON AN INDUSTRIAL GALA AS SHORT TERM CAPITAL GAIN INSTEAD OF LONG TERM CAPITAL GAIN CLAIMED BY THE APPELLANT. 2. FACTS IN BRIEF ARE THAT, ORIGINALLY THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 31.12.2008 , BY ASSESSING THE LONG - TERM - CAPITAL - GAIN OF RS.17,82,519/ - ARISING OUT OF SALE OF A INDUSTRIAL GALA IN CHANDIVILI, SAKI NAKA ROAD, ANDHERI (EAST), MUMBAI SHOWN BY THE ASSESSEE AS SHORT - TERM - C APITAL - GAIN (STCG). THE ASSESSEE HAD WORKED OUT THE LONG - TERM - CAPITAL - GAIN IN THE COMPUTATION OF INCOME AT RS.2,82,520/ - IN THE FOLLOWING MANNER: B LONG TERM CAPITAL GAINS SALE CONSIDERATION OF INDUSTRIAL GALA >(A) 20,70,000 LESS: INDEXED COST (TOT AL COSTS RS.910,481/ - ) >(B) - 16,87,480 LONG TERM CAPITAL GAINS (A B) 3,82,520 LESS: DEDUCTION U/S 54 E C AMOUNT INVESTED RS.550,000/ - - 382,520 NIL 3 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD THE DETAILS OF PAYMENT FOR THE ACQUISITION OF THE PROPERTY MADE TO THE BUILDER WAS DISCLOS ED IN THE FOLLOWING MANNER: - 1 INITIAL PAYMENT AT THE TIME OF BOOKING OF THE INDUSTRIAL GALA 02/06/1993 4,00,000 2 2 ND PAYMENT 01/08/1993 90,000 3 3 RD PAYMENT 01/08/1994 1,00,000 4 4 TH PAYMENT 01/02/1995 52,590 5 5 TH PAYMEN T 05/05/1995 46,000 6 6 TH PAYMENT 26/08/1995 46,000 7 FINAL PAYMENT FY 1998 - 99 139,510 TOTAL 874,000 8 MUNICIPAL TAX PAID DIRECTLY TO THE BOMBAY MUNICIPAL CORPORATION 04/02/2005 36,481 TOTAL 910,481 ALL THESE PAYMENTS W ERE ALSO SHOWN IN THE AUDITED BALANCE SHEET S , RIGHT FROM FINANCIAL YEAR S 1993 - 94 TO 1998 - 99. THE AO APPLIED THE PROVISION OF SECTION 50C AND CONSIDERED THE SALE CONSIDERATION OF RS.31,58,200/ - . AFTER OBJECTIONS RAISED BY THE ASSESSEE WITH REGARD TO THE FMV AS PER STAMP VALUE, THE MATTER WAS REFERRED TO THE VALUATION OFFICER WHO VALUED THE PROPERTY AT RS.26,93,000/ - . THE SHORT - TERM CAPITAL GAIN WAS THUS COMPUTED AT RS.17,82,519/ - , THAT IS, (26,93,000 - 9,10,481). IN THE FIRST APPELLATE STAGE, THE OBJECTION OF SHORT - TERM - CAPITAL GAIN STOOD CONFIRMED. IN THE SECOND APPEAL FILED BEFORE THE TRIBUNAL, THIS ISSUE WAS SET ASIDE TO THE FILE OF THE AO FOR VERIFICATION AND EXAMINATION OF THE DOCUMENTS, MAINLY OCCUPATION CERTIFICATE FROM THE BOMBAY MUNICIPAL CORPORATION (BMC), DATED 10.03.1998 WHICH WAS A VITAL EVIDENCE PRODUCED BEFORE THE TRIBUNAL. 3. NOW IN PURSUANCE OF THE ORDER OF THE TRIBUNAL, THE AO INITIATED THE ASSESSMENT PROCEEDINGS ON THE ISSUE OF DETERMINATION OF LONG - TERM - CAPITAL - GAIN / SHORT - TERM - CAPITAL - 4 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD GAIN. IN THE SET ASIDE PROCEEDINGS ALSO, THE AO, COMPLETED THE ASSESSMENT WITHOUT ANY CHANGE AND THE SHORT - TERM - CAPITAL - GAIN HAS BEEN COMPUTED AT THE SAME INCOME. THE ASSE SSEES CONTENTION HAS BEEN THAT THE ENTIRE PAYMENT WAS MADE IN TH E YEAR 1998 ITSELF AND OCCUPATION CERTIFICATE WAS ALSO OBTAINED FROM BMC ON 03.08.1998 , THEREFORE, WHEN THE PROPERTY WAS SOLD IN THE RELEVANT FINANCIAL YEAR, THAT IS, FY 2005 - 06, THEN IT HAS TO BE TREATED AS LONG - TERM - CAPITAL - GAIN. THE AOS CASE HAS BEEN T HAT, ASSESSEE HAS GOT THE POSSESSION OF THE INDUSTRIAL GALA ONLY ON 01.01.2005 , THAT IS, MUCH AFTER THE OCCUPATION CERTIFICATE WAS ISSUED AND, THEREFORE, IT HAS TO BE TREATED AS STCG. THE RELEVANT OBSERVATION AND FINDING OF THE AO HAVE BEEN SUMMARIZED IN PARA 8 OF THE ASSESSMENT ORDER, WHEREIN HE HELD THOUGH THE PROPERTY CAME INTO HAND ON 10.03.1998 AND OCCUPATION CERTIFICATE WAS ALSO GIVEN , BUT IT DOES NOT IN ANY WAY CHANGE THE SITUATION IN SO FAR AS THE NATURE OF CAPITAL GAIN IS CONCERNED, BECAUSE ASSES SEE GOT THE FINAL POSSESSION ONLY ON 01.01.2005 , WHEN KEY WAS HANDED TO THE ASSESSEE BY THE BUILDER. 4. BEFORE THE LD. CIT(A), THE DETAILED SUBMISSIONS WERE MADE WHICH HAS BEEN INCORPORATED BY THE CIT(A) FROM THE PAGES 5 TO 10 OF THE APPELLATE ORDER. HOWE VER, HE SUMMARILY REJECTED ASSESSEES CONTENTION AFTER OBSERVING AND HOLDING AS UNDER: - I HAVE CONSIDERED THE FACTS OF THE CASE AND CONTENTION OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICERS ORDER IS PERFECTLY IN ORDER. IT IS NOT THE OCCUPANCY CERTI FICATE THAT WILL DECIDE THE POSITION OF THE APPELLANT. THE POSITION OF 5 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD THE APPELLANT IS DETERMINED FROM THE DATE WHEN IT TOOK OVER THE PROPERTY BY A REGISTERED DEED. THE SAID DATE IS 01/01/2005 I.E. MUCH AFTER THE OCCUPANCY CERTIFICATE WAS ISSUED. THEREFOR E, THE RIGHT OF OWNERSHIP WAS ACQUIRED BY THE APPELLANT IS ON THAT DATE. IT IS RIGHT OF OWNERSHIP THAT STANDS TRANSFERRED AND NOT THE RIGHT TO POSSESSION. THEREFORE, THE RIGHT OF OWNERSHIP WAS ACQUIRED BY THE APPELLANT IS ON THAT DATE. IT IS OF OWNERSHIP T HAT STANDS TRANSFERRED AND NOT THE RIGHT TO POSSESSION. THEREFORE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER AND THE SAME IS CONFIRMED AND THE GROUNDS OF APPEAL ARE DISMISSED. 5. BEFORE US, THE LD. COUNSEL AFTER EXPLAINING THE ENTIRE FACTS A N D THE BACKGROUND OF THE CASE SUBMITTED THAT TH E INDUSTRIAL GALA IN QUESTION WAS ACQUIRED IN PURSUANCE OF REGISTERED SALE AGREEMENT DATED 27.03.1994 FOR A TOTAL CONSIDERATION OF RS.6,90,000/ - WITH THE BUILDER AND ENTIRE AMOUNT OF PURCHASE CON SIDERATION AS WELL AS PAYMENT FOR OTHER OUTGOINGS OF RS.1,84,000/ - , AGGREGATING TO RS.8,74,000/ - WAS MADE FROM TIME TO TIME RIGHT FROM FINANCIAL YEAR 1993 - 94 TILL FINANCIAL YEAR 1998 - 99 . THERE WAS NO FURTHER AGREEMENT FOR SECURING THE POSSESSION. THE DELIV ERY OF THE POSSESSION HAS BEEN RECEIVED ONLY IN PURSUANCE OF SALE AGREEMENT DATED 27.07.1994 , THEREFORE, ALL THE RIGHTS OF THE ASSESSEE FLOW FROM THE REGISTERED SALE AGREEMENT DATED 27.03.1994 ONLY . THE BUILDER HAS MERELY HANDED OVER THE KEYS ON 01.01.2005 . HE CLARIFIED THAT, THERE WAS AN OBLIGATION C A ST UPON THE BUILDER AND ASSESSEE UNDER 6 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD CL A USE 14 OF THE R EGISTERED SALE DEED WHICH IS APPEARING AT PAGE 12 OF THE PAPER BOOK , WHEREIN IT HAS BEEN STATED THAT, ASSESSEE WILL GET DEEMED LEGAL POSSESSION OF THE PROPERTY ON EXPIRY OF 7 DAYS FROM THE NOTICE FROM THE BUILDER OF HAVING RECEIVED OCCUPATION CERTIFICATE FROM BMC. AFTER RECEIPT OF SUCH NOTICE, THE ASSESSEE WAS REQUIRED TO MAKE THE FINAL PAYMENT INCLUDING ADVANCE MAINTENANCE CHARGES FOR 2 YEARS. THE ASSE SSEE HAS MADE THE FINAL PAYMENT IN FY 1998 - 99 ONLY AND OCCUPATION CERTIFICATE WAS ALSO ISSUED ON 10.03.1998 . O NCE THE FINAL PAYMENT WAS MADE IN 1998 - 99 AND POSSESSION WAS GIVEN, THEN IT IS AT THE MOST THIS DATE SHOULD AT LEAST BE TREATED AS RELEVANT DATE , BECAUSE THE ASSESSEE BECAME ABSOLUTE OWNER OF THE SAID PROPERTY FROM THE DATE OF POSSESSION. THE KEYS WERE WITH THE BUILDER ONLY FOR THE PURPOSE OF MAINTENANCE FOR WHICH THE ASSESSEE HAD ALSO PAID MAINTENANCE AMOUNT. SINCE THE BUILDER COULD NOT TAKE CA R E O R PROPERLY MAINTAIN THE PROPERTY , THEN IT WAS DECIDED THAT KEYS SHOULD BE TAKEN FROM THE BUILDER WHICH WAS RECEIVED ON 01.01.2005. THUS, MERE HANDING OVER THE KEY BY THE BUILDER TO THE ASSESSEE CANNOT BE RECKONED AS THE DATE FOR CONSIDERING THE PERIOD OF H OLDING OF THE PROPERTY. 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS MATERIAL PLACED BEFORE US. THE SHORT IS SUE INVOLVED IS , WHETHER THE INDUSTRIAL GALA SOLD BY THE ASSESSEE WOULD BE 7 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD TAXED AS STCG OR LTCG AND THEN ONLY CONSEQUENT DEDUCTION UNDER SECTION 54EC WILL FLOW. IT IS AN UNDISPUTED FACT FROM THE PERUSAL OF THE RECORD THAT, ASSESSEE HAD ACQUIRED THE INDUST RIAL GALA BY WAY OF REGISTERED SALE AGREEMENT DATED 27.03.1994 FOR A TOTAL CONSIDERATION OF RS.6,90,000/ - . AS PER THE PAYMENT OF D EMAND S CHEDULE, THE ENTIRE PAYMENT OF RS.8,74,000/ - INCLUD ING THE SALE CONSIDERATION AS WELL AS OTHER OUTGOINGS WAS TO BE DO NE UPTO FINANCIAL YEAR 1998 - 99. THE ENTIRE PAYMENT AS PER THE AGREEMENT WAS IN FACT MADE BEFORE FINANCIAL YEAR 1998 - 99 . OCCUPATION CERTIFICATE WAS ALSO ISSUED ON 10.03.1998. THUS, THE PROPERTY WAS NOT ONLY COMPLETE BUT ALSO OCCUPATION CERTIFICATE WAS ISSUE D. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT, ONLY FOR THE MAINTENANCE PURPOSE, THE KEYS WERE HANDED OVER TO THE BUILDER WITH WHOM THE CONTRACT FOR MAINTENANCE WAS SIGNED FOR THE PERIOD OF 3 YEARS WHICH LATER ON WAS NOT RENEWED. WHEN THE BUILDER WAS UNABL E TO COOPERATE WITH THE MAIN TENANCE, THE KEYS WERE TAKEN BAC K BY THE ASSESSEE ON 01.01.2005. ON THESE FACTS, IT CANNOT BE HELD THAT THE EFFECTIVE DATE OF OWNERSHIP AND RIGHT IN THE PROPERTY IN THE ASSESSEE SHOULD BE RECKONED FROM 01.01.2005, THAT IS, WHEN THE KEYS WERE GIVEN BY THE BUILDER TO THE ASSESSEE. IN FACT, WHEN THE REGISTERED SALE AGREEMENT WAS EXECUTED ON 27.03.1994, THE ASSESSEE HAD ACQUIRED THE RIGHT IN THE PROPERTY AND SUCH RIGHT GOT FURTHER FORTIFIED BY THE FULFILLMENT OF THE COVENANTS IN THE AGREEMENT BY MAKING THE PAYMENT AS PER THE TIME SCHEDULE. THIS FURTHER THE POSSESSION WAS ALSO GIVEN BY ISSUANCE OF OCCUPATION CERTIFICATE ON 10.03.1998. THUS, IN ALL THE ASPECT, THE ASSESSEE NOT ONLY BECAME THE 8 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD OWNER OF THE PROPERTY BUT ALSO HAD ALL THE R IGHTS IN THE SAID PROPERTY MUCH PRIOR TO 01.05. 2005 IN FACT EVEN PRIOR TO FINANCIAL YEAR 1998 - 99. MERE HANDING OVER THE KEYS BY THE BUILDER TO THE ASSESSEE DOES NOT IN ANY MANNER PREJUDICE OR JEOPARDIZED THE ASSESSEES RIGHT IN THE PROPERTY WHEN THE BUILDE R HA S RECEIVED THE FULL CONSIDERATION IN FY 1998 - 99 AND HANDED OVER THE PROPERTY WITH ALL RIGHTS AND POSSESSION AND WAS MERELY CARETAKER OF THE PROPERTY. THUS, ON THE FACTS OF THE CASE, WE HOLD THAT THE ASSESSEE NOT ONLY HA D RIGHT IN THE PROPERTY FOR MORE THAN 3 YEARS , BUT ALSO WAS ACTUALLY OWNER OF THE PROPERTY, THEREFORE, THE SALE OF THE PROPERTY IN THE YEAR 2005 HAS TO BE TREATED AS SALE OF LONG - TERM CAPITAL ASSETS AND GAIN HAS TO BE ASSESSED AS LONG - TERM - CAPITAL - GAIN AND THE COMPUTATION OF LONG - TERM - CA PITAL - GAIN AS SHOWN BY THE ASSESSEE HAS TO BE ACCEPTED. ONCE THE COMPUTATION OF LTCG IS BEING ACCEPTED THEN CONSEQUENTLY DEDUCTIONS WILL FOLLOW. WITH THIS DIRECTION, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. NOW WE WILL TAKE ITA NO.6252/MUM/2012 FO R AY 2006 - 07, WHETHER EXACTLY SIMILAR GROUND HAS BEEN RAISED WHICH HAS BEEN ADMITTED BY BOTH THE PARTIES THAT THE FACTS AND ISSUE ARE IDENTICAL THEREFORE, OUR FINDING HEREINABOVE WILL APPLY MUTATIS MUTANDIS IN THIS APPEAL ALSO. IN VIEW OF OUR FINDING GIVEN ABOVE, THE APPEAL OF THE ASSESSEE IS THUS TREATED AS ALLOWED. 9 ITA NO.7117/MUM/2013 M/S ARUN KUMAR SYNTHETICS PVT LTD ITA NO. : 7118 /MUM/201 3 ARDIN FABRICS PVT LTD 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2016 . SD/ - SD/ - ( ) ( ) ( ASHWANI TANEJA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 29 TH JUL Y, 2016 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3 ) THE C IT 39 , MUMBAI . 4 ) THE C IT CENT - II , MUMBAI 5 ) , , / THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / B Y ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS