ITO Wd. 13(2)(3), MUMBAI V. Sri. ARVIND T. THAKKAR, MUMBAI

ITA 7338/MUM/2005

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48621 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 07-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 15-12-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAV
• Assessee Lawyers: F V IRANI
• Keywords: Depreciation; Capital Gains
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, H, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) INCOME TAX OFFICER WARD 13(2)(3), 425, 4 TH FL. AAYAKAR BHAVAN M K ROAD, MUMBAI-400020 .APPELLANT VS ARVIND T THAKKAR C/O M/S LAXMI TRADING CO., 340 SAMUEL ST., MUMBAI-400003 ..RESPONDENT PAN: AABPT1637P APPELLANT BY : SHRI R S SRIVASTAV RESPONDENT BY: SHRI F V IRANI O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 19.09.2005 OF CIT(A) FOR THE ASSESSMEN T YEAR 2002-03. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAD ERRED IN ALLOWING THE CLAIM OF EXEMPTION U/S 54 AT RS.42,18,200/- AS AGAINST THE RESTRICTED ALLOWABLE DEDUCTION AS ALLOWED BY AO OF RS.15,31,060/- ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAD ERRED IN ALLOWING TRANSFER FEES OF RS.1,35,000/- WHILE ARRIVING AT THE COST OF ORIGINA L ASSET 3. THE GROUNDS OF APPEAL NO.1 IS REGARDING EXEMPTIO N U/S 54 AGAINST CAPITAL GAIN OF RS.45,85,860 FROM SAL E OF THE PROPERTY. 3.1 THE ASSESSEE COMPUTED ITS LONG TERM CAPITAL GAI N ON RS.45,85,860/- FROM SALE OF THE PROPERTY. THE ASSE SSEE CLAIMED DEDUCTION AT RS.45,92,480 U/S 54 OF THE AC T AS THE ASSESSEE PURCHASED THE NEW RESIDENTIAL UNIT AT NEPE ROL TOWER. THE AO ALLOWED THE DEDUCTION OF RS.15,31,0 60/- U/S 54 OF THE ACT BECAUSE THE ASSESSEE PURCHASED THE NE W RESIDENTIAL UNIT IN THE JOINT NAME OF HIS WIFE AND SON, THEREFORE, THE AO HELD THAT THE ASSESSEE IS ENTITLE D FOR DEDUCTION ONLY TO THE EXTENT OF 1/3 RD PRICE OF THE RESIDENTIAL PROPERTY PURCHASED. WHILE DOING SO, THE AO REJECT ED THE CONTENTION OF THE ASSESSEE THAT THE PAYMENT TO THE EXTENT OF RS.42,18,200/- FOR PURCHASE OF NEW RESIDENTIAL HOUS E WAS MADE BY THE ASSESSEE AND THE BALANCE AMOUNT OF RS,3,75,000/- WAS MADE BY HIS SON AND NO PAYMENT WA S MADE BY HIS WIFE. 3.2 BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE DEDUCTION U/S 54 SHOULD BE ALLOWED TO THE ASSESSEE ATLEAST TO THE EXTENT OF RS.42,18,200/- I.E. THE PAYMENT M ADE BY THE ASSESSEE FOR PURCHASE OF NEW RESIDENTIAL UNIT. THE CIT(A) ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 3 ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.42,18,200/- BEING THE AMOUNT UTILIZED TO PURCHAS E OF THE NEW RESIDENTIAL HOUSE. 3.3 BEFORE US, THE LEARNED DR HAS SUBMITTED THAT T HE NEW RESIDENTIAL PROPERTY HAS BEEN PURCHASED IN THE JOI NT NAME OF WIFE AND HIS SON AND THE ASSESSEE ACQUIRED ONLY 1/3 SHARE IN THE SAID HOUSE AND THEREFORE THE DEDUCTION U/S 54 C ANNOT BE GRANTED MORE THAN 1/3 OF SHARE PURCHASED BY THE ASS ESSEE IN THE NEW RESIDENTIAL UNIT. HE HAS RELIED UPON THE O RDER OF THE AO.. 3.4 ON THE OTHER HAND, THE LEARNED AR REITERATED T HE CONTENTIONS AS RAISED BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAS INVESTED IN THE NE W RESIDENTIAL HOUSE OUT OF LONG TERM CAPITAL GAIN FRO M THE SALE OF THE OLD RESIDENTIAL HOUSE. THE NAME OF WIFE AND SON OF THE ASSESSEE HAS BEEN INCLUDED IN THE PURCHASE AGREEMEN T ONLY FOR CONVEYANCE. THEREFORE, WHEN THE INVESTMENT BY T HE ASSESSEE IS NOT IN DISPUTE IN PURCHASE OF THE NEW HOUSE THEN THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 5 4 AT LEAST TO THE EXTENT OF THE INVESTMENT MADE. HE HAS REFERRED THE PROVISIONS OF SECTION 45 OF TRANSFER OF PROPERTY A CT AND SUBMITTED THAT THE SHARE OF THE ASSESSEE IN THE PRO PERTY WILL DEPEND ON THE AMOUNT CONTRIBUTED BY THE ASSESSEE IN THE PURCHASE CONSIDERATION. HE HAS FURTHER CONTENDED T HAT SINCE THE WIFE OF THE ASSESSEE HAS NOT CONTRIBUTED ANYTHI NG IN THE ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 4 PURCHASE CONSIDERATION SHE CANNOT HAVE INTEREST IN THE PROPERTY AND THE SHARE OF THE SON WILL BE TO THE E XTENT OF PAYMENT MADE BY HIM. HE HAS RELIED UPON A DECISIO N OF A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF J CIT V. SMT. ARMEDA K. BHAYA (2005), 95 ITD 313 3.5 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE H AS INVESTED RS.42,18,200/- IN PURCHASE OF HOUSE PROPERTY IN TH E JOINT NAME OF ASSESSEE, HIS WIFE AND SON. IN VIEW OF TH ESE FACTS, AT THE OUTSET, WE NOTE THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JCIT V. SMT. ARMEDA K. BHAY A (SUPRA) HAS DECIDED THE ISSUE IN PARAGRAPH 5 WHICH IS REPRO DUCED BELOW: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE CASE HAVE BEEN ELABORATELY DISCUSSED ABOVE. THE TERM 'PURCHASE' IS NOT DEFINED IN THE I.T. ACT. THEREFORE THE SAME IS TO BE UNDERSTOOD AS IN COMMON PARLANCE. IT IS EVIDENT THAT THE ASSESSEE PAID THE ENTIRE PURCHASE CONSIDERATION TOGETHER WITH ALL THE EXPENSES. THE MOTHER AND FATHER HAVE DEPOSED THAT THEY HAVE NO RIGHT, TITLE OR INTEREST IN THE IMPUGNED FIAT AND THAT THEIR NAMES HAVE BEEN ADDED FOR VARIOUS LEGAL CONVENIENCES MENTIONED ABOVE. SECTION 45 OF THE TRANSFER OF PROPERTY ACT IS DISCUSSED ABOVE, WHICH GIVES IMPORTANCE TO THE RATIO OF PAYMENT MADE BY RESPECTIVE OWNERS AND REFERS TO ANY CONTRACT TO THE CONTRARY, WHICH MAY BE IN EXISTENCE. AS THE FACTS EMERGE, IT IS IMPLICITLY CLEAR FROM THE CONDUCT OF THE PARTIES THAT THERE WAS AN AGREEMENT IN EXISTENCE THAT THE FLAT WILL BE THE PROPERTY OF THE ASSESSEE AND MOTHER AND FATHER WILL HAVE NO RIGHT, TITLE OR INTEREST THEREI N ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 5 AND THE PURCHASE CONSIDERATION WITH EXPENSES WILL BE BORNE BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE CAN BE TREATED AS PURCHASER OF THE PROPERTY IN TERMS OF SECTION 54. OUR VIEW IS FURTHER FORTIFIED BY THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF PODAR CEMENT PVT. LTD. CITED SUPRA FOR THE PROPOSITION THAT THE CONCEPT OF 'CONSTRUCTIVE OWNERSHIP' HAS TO BE APPLIED TO INCOME-TAX PROCEEDINGS. THE ISSUE BEFORE HON'BLE SUPREME COURT WAS OF DEPRECIATION. NEVERTHELESS, IT LAYS DOWN A GENERAL PROPOSITION OF LAW THAT IN INCOME-TAX PROCEEDINGS THE CONCEPT OF 'CONSTRUCTIVE OWNERSHIP' CAN BE APPLIED CONSIDERING THE FACTS OF THE CASE. WE ARE OF THE VIEW THAT THE FACTS OF THE PRESENT CASE CONFORM TO BE SEEN FROM THE GLOSS OF THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF PODAR CEMENT PVT. LTD. (SUPRA), WHICH ALSO HELPS THE CASE OF THE ASSESSEE. IN CONSIDERATION OF ALL THE ABOVE FACTS, OBSERVATIONS AND CASE LAWS, WE HOLD THAT THE ASSESSEE IS PURCHASER OF THE FLAT AND THE ENTIRE AMOUNT SPENT BY HER HAS TO BE CONSIDERED TOWARDS THE PURCHASE PRICE PAID BY HER FOR THE NEW FLAT ENTITLED TO BE COMPUTED WHILE ALLOWING DEDUCTION UNDER SECTION 54. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE CASE HAVE BEEN ELABORATELY DISCUSSED ABOVE. THE TERM 'PURCHASE' IS NOT DEFINED IN THE I.T. ACT. THEREFOR E THE SAME IS TO BE UNDERSTOOD AS IN COMMON PARLANCE. IT IS EVIDENT THAT THE ASSESSEE PAID THE ENTIRE PURCHASE CONSIDERATION TOGETHER WITH ALL THE EXPENSES. THE MOTHER AND FATHER HAVE DEPOSED THAT THEY HAVE NO RIGHT, TITLE OR INTEREST IN THE IMPUGNED FIAT AND THAT THEIR NAMES HAVE BEEN ADDED FOR VARIOUS LEGAL CONVENIENCES MENTIONED ABOVE. SECTION 45 OF THE TRANSFER OF PROPERTY ACT IS DISCUSSED ABOVE, WHICH GIVES IMPORTANCE TO THE RATIO OF PAYMENT MADE BY RESPECTIVE OWNERS AND REFERS TO ANY CONTRACT TO THE CONTRARY, WHICH MAY BE IN EXISTENCE. AS THE FACTS EMERGE, IT IS IMPLICITLY CLEAR FROM THE CONDUCT OF THE PARTIES THAT THERE WAS AN AGREEMENT IN EXISTENCE THAT THE FLAT WILL BE THE PROPERTY OF THE ASSESSEE AND MOTHER AND FATHER WILL HAVE NO RIGHT, TITLE OR INTEREST THEREIN AND T HE PURCHASE CONSIDERATION WITH EXPENSES WILL BE BORNE BY THE ASSESSEE. UNDER THESE ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 6 CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE CAN BE TREATED AS PURCHASER OF THE PROPERTY IN TERMS OF SECTION 54. OUR VIEW IS FURTHER FORTIFIED BY THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF PODAR CEMENT PVT. LTD. CITED SUPRA FOR THE PROPOSITION THAT THE CONCEPT OF 'CONSTRUCTIVE OWNERSHIP' HAS TO BE APPLIED TO INCOME-TAX PROCEEDINGS. THE ISSUE BEFORE HON'BLE SUPREME COURT WAS OF DEPRECIATION. NEVERTHELESS, IT LAYS DOWN A GENERAL PROPOSITION OF LAW THAT IN INCOME-TAX PROCEEDINGS THE CONCEPT OF 'CONSTRUCTIVE OWNERSHIP' CAN BE APPLIED CONSIDERING THE FACTS OF THE CASE. WE ARE OF THE VIEW THAT THE FACTS OF THE PRESENT CASE CONFORM TO BE SEEN FROM THE GLOSS OF THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF PODAR CEMENT PVT. LTD. (SUPRA), WHICH ALSO HELPS THE CASE OF THE ASSESSEE. IN CONSIDERATION OF ALL THE ABOVE FACTS, OBSERVATIONS AND CASE LAWS, WE HOLD THAT THE ASSESSEE IS PURCHASER OF THE FLAT AND THE ENTIRE AMOUNT SPENT BY HER HAS TO BE CONSIDERED TOWARDS THE PURCHASE PRICE PAID BY HER FOR THE NEW FLAT ENTITLED TO BE COMPUTED WHILE ALLOWING DEDUCTION UNDER SECTION 54. 3.6. RESPECTFULLY FOLLOWING THE DECISION OF A CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JCIT V. SMT. ARMEDA K. BHAYA WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSE E. 4. THE GROUNDS OF APPEAL NO.2 IS REGARDING TRANSFER FEE OF RS.1,35,000/-. FROM THE CAPITAL GAIN THE ASSESSEE H AS REDUCED RS.1,35,000/- BEING TRANSFER FEE. THE AO D ISALLOWED THIS CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAILED TO PROVIDE ANY EVIDENCE IN SUPPORT OF THE C LAIM SO MADE. ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 7 4.1 ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE OF THE EXPENDITURE OF RS.1,29,775 BEING PROPORTIONATE SHARE OF THE ASSESSEE, IN THE TOTAL A MOUNT OF RS.2,85,500/- INCURRED FOR THE PROPERTY SOLD. THE CIT(A) RECORDED BY RECORDING THAT THE ASSESSEE HAS PLACE D ON RECORD THE PAYMENT MADE TO THE SOCIETY OF RS.25,00 0/- TOWARDS TRANSFER FEE AND THE OTHER AMOUNT OF RS.2 ,60,000/- TOWARDS SOCIETY STRUCTURES REPAIRS AND MAINTENANCE FUND. 4.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND R ELEVANT RECORD. WE NOTE THAT THE CIT(A) HAS DECIDED THE IS SUE AFTER CONSIDERING THE DETAILS IN PARAGRAPHS 14 OF HIS O RDER WHICH READS AS UNDER : 14. THE LAST GROUND IS THAT THE AO HAS ERRED IN DISALLOWING TRANSFER FEES OF RS.1,35,000/- WHILE ARRIVING AT THE COST OF ORIGINAL ASSET. IT FURTH ER PLEADS THAT ALL THE DETAILS WERE FILED BEFORE THE AO AND FILES A COPY OF THE LETTER TO THE AO WHICH WAS FILED DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT ALSO PRODUCED COPIES OF PAYMENT TO COOPERATIVE HOUSING SOCIETY. THE COPIES OF THE RECE IPT SHOWS THAT TWO PAYMENTS WERE MADE ON 29.05.2001. THERE AS PAYMENT OF RS.25,000/- TOWARDS TRANSFER F EE OF FLAT NO.83. THE OTHER AMOUNT OF RS.2,60,000/- W AS TOWARDS SOCIETYS STRUCTURAL REPAIRS AND AMENITIES FUND. AS FAR AS THESE PAYMENTS ARE CONCERNED I HAVE TO AGREE WITH THE APPELLANT THAT THIS IS AN EXPENDI TURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF PROPERTY. THE PAYMENT FOR SUCH FEES WA S ALSO MENTIONED IN THE CONVEYANCE DEED ALSO. WITHOUT SUCH PAYMENT IT WOULD NOT HAVE BEEN POSSIBLE TO TRANSFER THE SHARES OF THE CO-OPERATIVE SOCIETY TO THE TRANSFEREE. HENCE, 45.45% OF THIS AMOUNT HAS TO BE TAKEN AT COST OF TRANSFER AS PER PROVISIONS OF SECT ION 48*1) OF THE IT ACT. HENCE I DIRECT TO CONSIDER4 45.45% OF RS.2,85,000/- AS THE EXPENDITURE FOR THE ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 8 PURPOSE OF SECTION 48(I) OF THE IT ACT. SUCH AMOUN T COMES TO RS.1,29,775/- THE COMPUTATION OF LONG TERM CAPITAL GAINS IS AS BELOW: SALE PROCEEDS RS.51,81 ,300 LESS INDEXED COST RS. 3,19,500/- COST U/S 48(1) RS.1,29,775 /- RS.4,49,275 GROSS LONG TERM CAPITAL GAIN RS.46,32,175 LESS :DEDUCTION U/S 54 RS.42,18,200 NET LONG TERM CAPITAL GAIN RS.4,13,975 THE AO IS DIRECTED TO RECOMPUTE THE LONG TERM CAPITAL GAIN AS MENTIONED ABOVE 4.3 AS EVIDENT FROM THE FINDINGS OF THE CIT(A) THA T THE ASSESSEE PRODUCED RELEVANT RECORD IN SUPPORT OF TH E CLAIM OF THE EXPENDITURE. NOTHING HAS BEEN BROUGHT BEFORE US CONTRARY TO THE FINDING OF HE CIT(A). ACCORDINGLY, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT (A). 4.4. THE GROUNDS OF APPEAL NO.2 IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2011 SD SD (J.SUDHAKAR REDDY) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 29 TH DAY OF APRIL, 2011 ITA NO. 7338/MUM/2005 (ASSESSMENT YEAR- 2002-03) 9 SRL:18411 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI