Mrs. Rajwinder Kaur Mahal, Yamunanagar V. ITO (TDS), Yamunanagar

ITA 742/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95670 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: TEJ MOHAN SINGH
• Keywords: Capital asset; Cost of acquisition; Fair market value; Valuation report; Capital receipt
• Section: 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.742/CHD/2015 ( ASSESSMENT YEAR : 2012-13) MRS.RAJWINDER KAUR MAHAL VS. THE INCOME TAX OFFICER, W/O LATE SHRI UDAR SINGH MAHAL, WARD 3, VILLAGE & P.O. HANGOLI, YAMUNA NAGAR. TEHSIL MUSTAFABAD,YAMUNA NAGAR. PAN: AQWPM0676N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 04.11.2015 DATE OF PRONOUNCEMENT : 16.11.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA DATED 31.7.2015. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE WAS HAVING 50% SHARE IN FREEHOLD BUILT UP RESIDENTI AL HOUSE NO.526, SECTOR 16D, CHANDIGARH MEASURING 2555.6 SQ. YDS. SHE SOLD HER 50% SHARE IN THE SAID HOUSE TO SMT.SAN TOSH GARG, MODEL TOWN, AMBALA FOR CONSIDERATION OF RS.6 CRORES ON 2 19.5.2011. THIS PLOT WAS ALLOTTED ON 15.2.1954 AND THE CONVEYANCE DEED WAS EXECUTED ON 1.2.1964 AND THE HO USE WAS CONSTRUCTED ON THE PLOT DURING THE YEAR 1973-74 . 3. BEFORE THE ASSESSING OFFICER, THE ASSESSEE FURN ISHED VALUATION REPORT FROM THE APPROVED VALUER, WHO MADE THE FAIR MARKET VALUATION OF HOUSE AS ON 1.4.1981 AT RS.38,1 1,100/- AND THE ASSESSEES HALF SHARE WAS COMPUTED AT RS.19 ,05,550/- ON EARLIER OCCASION IN FINANCIAL YEAR 2010-11, THE ASSESSEE MADE AN AGREEMENT FOR THE SALE OF THIS HOUSE AND R ECEIVED RS.1,24,00,000/- AS ADVANCE MONEY. SINCE THE AGRE EMENT WAS NOT MATERIALIZED AND THE ADVANCE MONEY OF RS.1,24,00,000/- WAS FORFEITED BY THE ASSESSEE. A FTER MAKING THE REFERENCE TO THE PROVISION OF SECTION 51 OF THE ACT THE ASSESSING OFFICER COMPUTED THE LONG TERM CAPITAL GA IN AT RS.5,50,00,000/-, WHERE THE FORFEITED AMOUNT WAS RE DUCED FROM THE FAIR MARKET VALUE AS ON 1.4.1981 AND THE C OST OF THE HOUSE WAS TAKEN AT NIL. WHILE COMPUTING THIS LONG TERM CAPITAL GAIN, CERTAIN ISSUES AS RELATED TO THE INDE XATION OF COST OF ACQUISITION AND EXEMPTION UNDER SECTION 54E C OF THE ACT ALSO AROSE, SINCE THESE ISSUES ARE NOT BEFORE US, WE ARE NOT ELABORATING THE FACT WITH REGARD TO THE SAME. 4. THE ASSESSEE WENT INTO APPEAL BEFORE THE LEARNE D CIT (APPEALS). THE LEARNED CIT (APPEALS) ISSUED A NOTICE FOR ENHANCEMENT UNDER SECTION 251(2) OF THE ACT AND PRO POSED TO TAKE THE COST OF ACQUISITION AS MINUS RS.1,04,94,45 0/- BEING RS.19,05,550/- MINUS RS.1,24,00,000 AND COMPUTED TH E CAPITAL GAIN AT RS.7,04,94,450/-. IN RESPONSE TO THE SAID 3 NOTICE, THE ASSESSEE SUBMITTED THAT THE MONEY FORFE ITED IS A CAPITAL RECEIPT AND IS NOT TAXABLE UNDER ANY HEAD O F THE INCOME. AS PER THE PROVISION OF SECTION 51 OF THE ACT, THE FORFEITED AMOUNT IS TO BE REDUCED FROM THE FAIR MAR KET VALUE OR THE COST OF ACQUISITION. HOWEVER, THE LAW LAID DOWN CANNOT BE TAKEN TO AN EXTENT TO CONSIDER THE COST OF ACQUI SITION AT A NEGATIVE FIGURE. REJECTING THE CONTENTION OF THE ASSESSEE, THE LEARNED CIT (APPEALS) WENT AHEAD AND TOOK THE COST OF ACQUISITION TO NEGATIVE FIGURE OF RS.1,04,94,450/- FOR COMPUTING THE CAPITAL GAIN. 5. AGGRIEVED BY THE SAID ORDER OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS COME UP IN APPEAL BEFOR E US. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESS EE THAT THOUGH FIVE GROUNDS OF APPEAL HAVE BEEN RAISED, THE SUBSTANTIAL GROUND IS ONLY GROUND NO.3, WHEREBY INV OKING OF SECTION 51 OF THE ACT HAS BEEN CHALLENGED. IT WA S SUBMITTED BEFORE US THAT THE LEARNED CIT (APPEALS) HAS TAKEN THE LANGUAGE OF THE SECTION 51 OF THE ACT TO A VERY WEI RD EXTENT, WHEREBY HE HAS TAKEN THE COST OF ACQUISITION TO A N EGATIVE FIGURE. IT WAS ALSO BROUGHT TO OUR NOTICE THAT AN AMENDMENT TO SECTION 56(2) OF THE ACT HAS BEEN BROUGHT IN BY THE FINANCE (NO.2) ACT, 2014 BY INSERTING A CLAUSE (IX) BY WHIC H ANY SUCH FORFEITED ADVANCE IS TO BE TAXED AS INCOME FROM OTH ER SOURCE W.E.F. 1.4.2015. IN VIEW OF THIS, THE AMOUNT CANN OT BE TAXED IN ANY OF THE EARLIER YEARS UNDER ANY OF THE HEADS. APART FROM THE MANDATE GIVEN BY SECTION 51 OF THE ACT, WH EREBY THE SAID AMOUNT IS TO BE REDUCED FROM THE COST OF ACQUI SITION, 4 WHICH THE ASSESSEE HAD DULY DONE BY TAKING THE COST OF ACQUISITION AS NIL. RELIANCE WAS PLACED ON THE OR DER OF I.T.A.T., MUMBAI BENCH IN THE CASE OF SAMITA N.SHA H VS. JCIT (2005), 94 ITD 492 (MUM TRIB.) TO THE EFFECT T HAT WHERE AFTER DEDUCTING THE ADVANCE RECEIVED FOR SALE OF PROPERTY FROM THE COST OF ACQUISITION, THE RESULT WAS IN MINUS FI GURE, THE LEARNED CIT (APPEALS) WAS CORRECT IN TAKING THE COS T OF ACQUISITION AS NIL FOR COMPUTING THE CAPITAL GAINS. ANOTHER ORDER OF THE DELHI BENCH OF THE I.T.A.T. IN THE CAS E OF VIJAY SINGH KADAN VS. ADDL. CIT IN ITA NO.4603/DEL/2011, DATED 12.12.2014 WAS ALSO RELIED UPON TO MAKE IT CLEAR TH AT THE ADVANCE FORFEITED IS TAXABLE AS INCOME FROM OTHER S OURCES ONLY W.E.F. 1.4.2015. FOR ALL THE EARLIER YEARS, THERE IS NO PROVISION UNDER THE INCOME TAX ACT TO TREAT THE AMO UNT SO FORFEITED AS INCOME FROM OTHER SOURCES. WITH THIS , IT WAS PRAYED TO DELETE THE ADDITION MADE BY THE LEARNED C IT (APPEALS). 6. THE LEARNED D.R. RELIED UPON THE ORDER OF THE LEARNED CIT (APPEALS) AND SUBMITTED THAT THE ASSESS EE HAS ACTUALLY RECEIVED AN AMOUNT OF RS.1,24,00,000/- AS ADVANCE ON AN EARLIER OCCASION WHICH HAS BEEN FORFEITED BY HER, WHICH AS PER THE PROVISION OF SECTION 51 OF THE ACT, HAS TO BE DEDUCTED FROM THE COST OF THE PROPERTY. THE LEARN ED CIT (APPEALS) HAS DULY DONE THE SAME. IF THE FIGURE C OMES TO A NEGATIVE AMOUNT, THERE BEING NO AMBIGUITY IN THE PR OVISIONS OF THE ACT, THE SAME HAS TO BE ADDED TO THE SALE CO NSIDERATION RECEIVED BY THE ASSESSEE. 5 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.1,24,00,000/- AS ADVANCE FOR SALE OF PROPERTY, W HICH WAS FORFEITED BY HER AS THE AGREEMENT COULD NOT BE EXEC UTED. ON ULTIMATE SALE OF THE SAME PROPERTY, THE ASSESSEE RE CEIVED AN AMOUNT OF RS.6 CRORES. FOR COMPUTING THE LONG TER M CAPITAL GAIN EARNED ON THE SALE OF THE PROPERTY, THE COST O F ACQUISITION WAS TAKEN BY THE ASSESSING OFFICER AS N IL AS THE FAIR MARKET VALUE OF THE HOUSE WAS RS.19,05,550/- A ND THE FORFEITED AMOUNT BEING MORE THAN THE FAIR MARKET VA LUE, THE COST OF ACQUISITION WAS TAKEN AS NIL. THE LEARNED CIT (APPEALS) HAS TAKEN THE COST OF ACQUISITION AT MINU S RS.1,04,94,450/- WHICH IS THE DIFFERENCE BETWEEN TH E FAIR MARKET VALUE AS ON 1.4.1981 AND FORFEITED ADVANCE M ONEY. NOW THE ISSUE BEFORE US IS WHETHER THE PROVISIONS O F SECTION 51 OF THE ACT CAN BE TAKEN TO AN EXTENT WHEREBY THE AMOUNT OF COST OF ACQUISITION BECOMES NEGATIVE. THE PROVISI ONS OF SECTION 51 OF THE ACT READS AS UNDER : 51. WHERE ANY CAPITAL ASSET WAS ON ANY PREVIOUS OCCASION THE SUBJECT OF NEGOTIATIONS FOR ITS TRANSFER, ANY ADVANCE OR OTHER MONEY RECEIVED AND RETAINED BY THE ASSESSEE IN RESPECT OF SUCH NEGOTIATIONS SHALL BE DEDUCTED FROM THE COST FOR WHICH THE ASSET WAS ACQUIRED OR THE WRITTEN DOWN VALUE OR THE FAIR MA RKET VALUE, AS THE CASE MAY BE, IN COMPUTING THE COST OF ACQUISITION. 6 8. THUS, AS PER THIS SECTION, ANY ADVANCE OR BIANA FORFEITED BY THE ASSESSEE IS TO BE DEDUCTED FROM TH E COST OF PROPERTY. FURTHER, THERE IS AN AMENDMENT BROUGHT IN BY THE FINANCE ACT (NO.2), 2014 BY INSERTING CLAUSE (IX) T O SECTION 56(2) OF THE ACT W.E.F. 1.4.2015, WHICH READS AS UN DER : SECTION 56(2) (IX) ANY SUM OF MONEY RECEIVED AS AN ADVANCE OR OTHERWIS E IN THE COURSE OF NEGOTIATIONS FOR TRANSFER OF A CAPITAL ASSET, IF , (A) SUCH SUM IS FORFEITED; AND (B) THE NEGOTIATIONS DO NOT RESULT IN TRANSFER OF SUCH CAPITA L ASSET. 9. ON SIMULTANEOUSLY READING OF BOTH THE PROVISION S, IT IS QUITE CLEAR THAT BEFORE 1.4.2015, THE AMOUNT SO FORFEITED BY THE ASSESSEE CANNOT BE ASSESSED AS INCOME FROM OTHE R SOURCES. WHAT THE ASSESSING OFFICER COULD DO BEFO RE 1.4.2015, WAS TO TAKE SHELTER UNDER SECTION 51 OF T HE ACT, WHICH PROVIDES FOR DEDUCTION OF THE AMOUNT OF FORFE ITURE FROM THE FAIR MARKET VALUE. TO OUR IMAGINATION, NO SUCH INTERPRETATION OF THE PROVISIONS OF SECTION 51 OF T HE ACT SUCH AS TO CONVERT THE COST OF ACQUISITION TO A NEGATIVE FIGURE, CAN BE TAKEN. RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE ORDER OF THE MUMBAI BENCH OF THE I. T.A.T. IN THE CASE OF SMT.SAMITA N.SHAH (SUPRA) IS NOT OUT O F PLACE, WHEREBY ON EXACTLY SIMILAR SET OF FACTS, THE I.T.A. T. MUMBAI BENCH HELD AS UNDER : 10. IT WAS SUBMITTED THAT THE COST OF ACQUISITION AS WO RKED OUT BY THE ASSESSING OFFICER AMOUNTED TO RS. 9,40,416. THIS IS THE FAIR MARKET VALUE ADOPTED BY THE DVO AS ON 1-4-1981. THE AMOUNT TO BE DEDUCTED AS PER THE PRESCRIPTION OF SECTION 51 OF THE ACT, COMES TO RS. 21,02,000. IF 7 MONEY RETAINED BY THE ASSESSEE IS DEDUCTED FROM THE COST OF ACQUISITION, THE RESULT WILL BE IN MINUS FIGURE. IT WAS ARGUED THAT SHOULD THE RETAINED MONEY BE IGNORED, THE COST OF ACQUISITION WILL BE INDEXED AN D WILL BE WORKED OUT AS PER THE NOTIFICATION REGARDING COST INFLATION INDEX. BUT IF IT COMES IN MINUS FIGURE, IT CANNOT BE WORKED OUT AS PER THE COST INFLATION INDE X. AS SUCH, SECTION 51 OF THE ACT SHOULD BE INTERPRETED WITH REFERENCE TO THE DICTUM: - 'UTRES MAGIS VALEAT QUAMPEREAT', I.E. SUCH A MEANING SHOULD HE G IVEN TO THE STATUTE SO IT COULD CARRY OUT AND EFFECTUATE TO THE FULLEST EX TENT THE INTENTION OF THE LEGISLATURE. 11. INTERPRETATION POSTULATES THE SEARCH FOR THE TRUE M EANING OF THE WORDS USED IN THE STATUTE. IF THE LANGUAGE OF THE STATUTE IS PLAIN, OBVIOUS MEANING IS TO BE APPLIED. RULES OF INTERPRETATION A RE APPLIED ONLY TO RESOLVE THE AMBIGUITIES. THE OBJECT AND PURPOSE OF INTERPRETATI ON IS TO ASCERTAIN THE MENS LEGIS, I.E., THE INTENTION OF THE LAW, AS EVINCED I N THE STATUTE. IF THE PRECISE WORDS USED ARE PLAIN AND UNAMBIGUOUS, WE ARE BOUND TO CONSTRUE THEM IN THEIR ORDINARY SENSE. WORDS MAY BE MODIFIED OR VARI ED WHERE THEIR IMPORT IS DOUBTFUL OR OBSCURE. 12. WE HAVE CAREFULLY PERUSED THE PRESCRIPTION OF S ECTION 51 OF THE ACT. IT TAKES CARE OF THE SITUATION WHERE ANY CAPITAL AS SET WAS NEGOTIATED FOR TRANSFER ON ANY PREVIOUS OCCASION AN D AS A RESULT THEREOF ASSESSEE RECEIVED AND OBTAINED ADVANCE MONEY, IN SU CH EVENTUALITY, SECTION PRESCRIBES THAT THE COST OF TH E ASSET IS TO BE REDUCED TO THE EXTENT OF THE ADVANCE MONEY SO RECEIVED OR RETA INED IN COMPUTING THE COST OF ACQUISITION. NO DISPUTE WAS R AISED IN RESPECT OF FAIR MARKET VALUE ADOPTED BY DVO. THE WORD 'INDEXED COST OF ACQUISITION' IS NOWHERE MENTIONED IN SECTION 51 OF THE ACT. AS SUCH, IT IS BEYOND THE COMPETENCE OF THE COURT TO SUBSTITUTE IT . THE LANGUAGE OF THE STATUTE IS CLEAR AND EXPLICIT. THE WORDS OF THE STATUTE SPEAK THE MENS LEGIS. AS SUCH, RECOURSE CANNOT BE MADE TO THE PURPOSIVE THEORY OF INTERPRETATION. IN OUR OPINION, CIT(A) WAS CORRECT IN TAKING THE COST OF ACQUISITION AT 'NIL' VALUE. WE UPHOLD H IS ORDER PROTANTO. 13. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED. 8 10. SINCE THE FACTS OF THE CASE ARE EXACTLY THE SA ME AS UNDER CONSIDERATION BEFORE THE I.T.A.T., MUMBAI BEN CH IN THE CASE OF SMT.SAMITA N.SHAH (SUPRA), RESPECTFULLY FOL LOWING THE ORDER OF THE COORDINATE BENCH, WE HEREBY DELETE THE ADDITION SO MADE BY THE LEARNED CIT (APPEALS). 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF NOVEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 16 TH NOVEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH