JAYANTILAL MEGHJI POKAR, MUMBAI V. DCIT 22(1), NAVI MUMBAI

ITA 7574/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3629 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2013
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Keywords: Capital asset; Benefit of exemption
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ./ ITA NO. 7574 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 10 - 11 ) JAYANTI M. POKAR, 603, SARA RESIDENC, JETHBHAI LANE, GHATKOPAR (E), MUMBAI - 400077 VS. DCIT - 22(1), MUMBAI ./ ./ PAN/GIR NO. : A GLPP 4960 B ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : MS. VASANTI PATEL /REVENUE BY : SHRI B. YADAGIRI / DATE OF HEARING : 0 3 /0 2 /2016 / DATE OF PRONOUNCEMENT 13/05 /201 6 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AG AINST THE ORDER OF CIT(A) - MUMBAI, FOR THE ASSESSMENT YEAR 20 10 - 11 , ON THE FOLLOWING GROUNDS : - 1. (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HAS ERRED IN CONSIDERING THE LONG TERM CAPITAL GAINS AS SHOR T TERM CAPITAL GAINS. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DENYING EXEMPTION UNDER SECTION 54 OF THE INCOME TAX ACT, 1961. (C) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT ALLOWING EXEMPTION UNDER SECTI ON 54 F OF THE INCOME TAX ACT, 1961, CONSIDERING THE FACTS. 2. ON THE FACTS AND CIRCUMSTANCES, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING INTEREST PAID TO THE TUNE OF RS. 13,50,113/ - FROM THE HEAD - INCOME FROM OTHER SOURCES. W ITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ALLOWING THE DEDUCTION OF INTEREST OF RS. 13,50,113/ - FROM THE HEAD - INCOME FROM HOUSE PROPERTY. ITA NO. 7574 /1 3 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FAC TS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNER IN FOUR FIRMS AND DECLARED INCOME FROM REMUNERATION AND INTEREST FROM THE FIRMS, REN TAL INCOME AND INTEREST INCOME AND LONG TERM CAPITAL GAINS. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO FOUND THAT AS SESSEE HAS BOOKED A PREMISE ON 30 - 9 - 2004 VIDE ALLOTMENT LETTER ISSUED BY M/S DINSHA DEVELOPERS. HOWEVER, FORMAL PURCHASE AGREEMENT WAS ENTERED ON 10 - 9 - 2009 AND POSSESSION OF THE SAID PREMISES WAS ALSO OBTAINED ON 10 - 9 - 2009, WHICH WAS SOLD BY THE ASSESSEE ON 1 - 10 - 2009. AS PER THE AO THE ASSESSEE WAS OWNER OF THE PREMISE FOR A PERIOD OF LESS THAN 36 MONTHS, THEREFORE, NOT ELIGIBLE FOR LONG TERM CAPITAL GAINS. AS PER THE AO SINCE POSSESSION WAS TAKEN ON 10 - 9 - 2009, THE ASSESSEE REMAINED OWNER OF THE PREMISES O NLY FOR A PERIOD OF ONE MONTH. ACTION OF THE AO WAS CONFIRMED BY CIT(A) . AGAINST, WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT ASSESSEE WAS ALLOTTED FLAT BY M/S DINSHA DEVELOPERS VIDE LETT ER DATED 30 - 9 - 2004. CLAUSE 5 OF THE ALLOTMENT LETTER READS AS UNDER : - 5. AS PER YOUR REQUEST, WE HEREBY INTEND TO RESERVE FOR YOU A FLAT NO.B - 1103 - BUILDING KNOWN AS KSHITIJ BEING CONSTRUCTED ON PLOT NO.3, SECTOR 19, SANPADA, NAVI MUMBAI OF APPROXIMATELY BUILT UP AREA 72.970 SQ. MTRS. INCLUSIVE OF CHARGEABLE LOFTS, THE FACILITIES AND PROPORTIONATE PASSAGE, WALLS, STAIRCASE, LIFT WALLS, OTLA, OPEN SPACE, BALCONY, FOR THE LUMP SUM PRICE OF RS.2105538/ - (RUPEES TWENTY ONE LAC FIVE THOUSAND FIVE HUNDRED THIRT Y EIGHT ONLY) WHICH SUM SHALL BE PAID BY YO U TO US. HOWEVER, THE AO RELIED ON THE CLAUSE - 8 OF THE ALLOTMENT LETTER ACCORDING TO WHICH, IN CASE OF ANY VIOLATION ON THE PART OF THE ASSESSEE FOR PAYMENT OF INSTALMENT, THE ALLOTMENT MADE BY M/S DINSHA DEVELOP ERS SHALL BE ITA NO. 7574 /1 3 3 CANCELLED AND THE INSTALMENT MONEY SO PAID WILL N OT BE REFUNDED WITHOUT ANY INTEREST. IN VIEW OF THE ABOVE, THE AO DID NOT GIVE ANY COGNIZANCE TO THE ALLOTMENT LETTER AND HELD THAT SINCE THE POSSESSION WAS GIVEN ONLY ON 10 - 9 - 2009, WHICH WAS SO LD ON 1 - 10 - 2009, THE ASSESSEE WAS HELD ONLY SHORT TERM CAPITAL ASSET, PROFIT THEREON IS LIABLE TO TAX AS SHORT TERM CAPITAL GAIN UNDER PROVISIONS OF SECTION 2 SUB - SECTION 14. HOWEVER, RIGHT IN A PROPERTY VIDE AN ALLOTMENT LETTER IS ALSO A CAPITAL ASSET. TH E AO HAS ALSO AGREED THAT RIGHT IN THE PRO PERTY WAS GIVEN TO THE ASSESSEE VIDE ALLOTMENT LETTER. AS PER CIRCULAR NO.471 DATED 15 - 10 - 1986 READ WITH CBDT CIRCULAR NO.672 DATED 16 - 12 - 1993, T HE ALLOTTEE GETS TITLE TO THE PROPERTY ON ISSUANCE OF ALLOTMENT LETTE R AND SUBSEQUENT PAYMENTS IS MERELY A FOLLOW UP ACTION AND TAKING POSSESSION IS MERELY A FORMALITY. MAKING AGREEMENT AT A LATER DATE OR TAKING POSSESSION AT A LATER DATE CANNOT BE HELD AS A RIGHT DISTINCT FROM THE ONE PROCURED BY WAY OF ALLOTMENT LETTER. 5 . WE FOUND THAT AT THE TIME OF ALLOTMENT THE ASSESSEE HAS ALSO MADE PAYMENT OF RS.2 LAKHS VIDE DD NO. 641073, DATED 8 - 12 - 2003 AND RS.8 LAKHS VIDE DD NO.641074 DATED 20 - 12 - 2003. FURTHER THE PAYMENT WAS MADE BY ASSESSEE ON 5 - 2 - 2004 VIDE DD NO.309531 DATED 5 - 2 - 2004 AMOUNTING TO RS.10 LAKHS AND RS.24 LAKHS VIDE DD NO.028138 DATED 9 - 2 - 2004. WE HAD ALSO VERIFIED THE BANK STATEMENT WHICH CONFIRMS THE PAYMENTS MADE BY THE ASSESSEE. THE HONBLE MADRAS HIGH COURT IN THE CASE OF S.R.JEYASHANKAR, 373 ITR 120, HELD THAT WHERE THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH BUILDER FOR PURCHASE OF UNDIVIDED SHARE OF LAND AND CONSTRUCTION, THE DATE OF ALLOTMENT OF UNDIVIDED SHARE IN LAND ITA NO. 7574 /1 3 4 WAS TO BE ADOPTED AS DATE OF ACQUISITION FOR COMPUTING CAPITAL GAIN INSTEAD OF DATE OF SALE DEED. SIMILARLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF K. RAMAKRISHNAN, 363 ITR 59, HELD THAT LETTER OF ALLOTMENT GIVEN BY HUDA IS RELEVANT FOR THE PURPOSE OF COMPUTING HOLDING PERIOD AND NOT DATE OF REGISTRATION OF CONVEYANCE DEED. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF MS. MADHU KAUL , 363 ITR 54, HELD THAT IMMEDIATELY ON ALLOTMENT ON WHICH ASSESSEE PAID FOR INSTALMENT, EVEN THOUGH POSSESSION OF FLAT WAS DELIVERED ON A LATER DATE, THE CAPITAL GAIN ARISING FROM SALE OF FLAT WAS A LONG TERM CAPITAL GAIN . SIMILAR VIEW HAS BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF MRS. HILLA J.B.WADIA, 216 ITR 376. 6. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES IN NOT TA KING COGNIZANCE TO THE ALLOTMENT LETTER ISSUED TO THE ASSESSEE DULY MENTION ING THE FLAT NUMBER, AREA AND OTHER DESCRIPTIONS AND FOR WHICH DUE INSTALMENTS WAS PAID. ACCORDINGLY, WE DIRECT THE AO TO COMPUTE THE CAPITAL GAIN AS LONG TERM CAPITAL GAIN ARISING OU T OF SALE OF FLAT AND GIVE DUE BENEFIT OF EXEMPTION U/S.54 & 54F OF I.T.ACT. 7. THE ASSESSEE IS ALSO AGGRIEVED FOR NOT ALLOWING DEDUCTION OF INTEREST PAID WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES . WE HAVE CONSIDERED RIVAL CONTEN TIONS AND FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED INTEREST INCOME OF RS.15,79,970/ - AGAINST WHICH ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.13,50,113/ - . THE AO DECLINED TO REDUCE INTEREST EXPENDITURE WHILE ITA NO. 7574 /1 3 5 COMPUTING INTER EST INCOME UNDER THE HEAD OF INCOME FROM OTHER SOURCES. WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES, INSOFAR AS INTEREST EXPENDITURE WAS INCURRED FOR EARNING THE INTEREST INCOME, THEREFORE, NET INTEREST INCOME OF RS.3,36,623/ - IS LIABLE TO BE BROUGHT ON TAX. WE DIRECT ACCORDINGLY. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 13/05 / 201 6 . SD/ - ( AMARJIT SINGH ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 13/05 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORD ER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE R ESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//