ANIL R. AGARWAL, MUMBAI V. ASST CIT CIR 4(2), MUMBAI

ITA 7641/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2601 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Keywords: Capital asset; Share purchase agreement; Earning of tax free income; Cost of acquisition
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER& SHRI RAM LAL NEGI, JUDICIAL MEMBER. ITA NO. 7641 /MUM/2013 (ASSESSMENT YEAR : 2010-11) ANIL R. AGARWAL, RAJMAHAL, 3 RD FLOOR, 13, BHULESHWAR ROAD, MUMBAI 400002 PAN: AAAPA 5449F ... APP ELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIR.4(2), AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI ISHWER PRAKASH RATHI RESPONDENT BY : MS. C. TRIPURA SUNDARI DATE OF HEARING : 30/09/2015 DATE OF PRONOUNCEMENT : 13/07/2016 ORDER PER G.S.PANNU, A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORDE R PASSED BY CIT(A)- 8, MUMBAI DATED 1/10/2013, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 24/12/201 2. 2. IN THIS APPEAL, ASSESSEE HAS RAISED TWO ISSUES , WHICH WE SHALL DEAL IN SERIATIM. THE FIRST SUBSTANTIVE DISPUTE IS WIT H REGARD TO THE MANNER OF CALCULATION OF LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE ON SALE 2 ITA NO. 7641 /MUM/2013 (ASSESSMENT YEAR : 2010-11) OF PROPERTY. IN THE RETURN OF INCOME ASSESSEE HA D DECLARED LONG TERM CAPITAL GAIN ON SALE OF PROPERTY AT RS.29,02,270/ - AFTER CONSIDERING THE INDEXED COST OF ACQUISITION AT RS.19,93,232/-. TH E DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE IS IN THE MANNER OF C ALCULATING INDEXED COST OF ACQUISITION. AS AGAINST RS.19,93,232/- CAL CULATED BY THE ASSESSEE, THE ASSESSING OFFICER DETERMINED THE SAME AT RS.15,22,158/-. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT ASESSE E, AN INDIVIDUAL BECOME MEMBER OF A HOUSING SOCIETY SOMEWHERE IN 1993 AND H E WAS ALLOTTED A FLAT IN 1994. THE HOUSING SOCIETY CONSTRUCTED AND ALLOTTED FLATS TO ALL THE MEMBERS. THE ASSESSEE CLAIMED THAT RIGHT FROM 1994 , HE WAS PAYING THE PROPORTIONATE COST OF CONSTRUCTION AS AND WHEN CALLED UPON BY THE SOCIETY. AS PER TABULATION OF PAYMENTS, REPRODUCED IN PARA 3.1 OF THE CIT(A)S ORDER, ASSESSEE MADE PAYMENTS OF RS.12,50 ,000/- ON VARIOUS OCCASIONS FROM 26/09/1994 TO 30/12/2006. WHILE C ALCULATING INDEXED COST OF ACQUISITION, ASSESSEE ADOPTED THE COST INFL ATION INDEX, CORRESPONDING TO THE YEAR OF EACH OF THE PAYMENT. IN THIS MANNER, THE INDEXED COST OF ACQUISITION WAS DETERMINED AT RS.1 9,93,232/-. THE ASSESSING OFFICER AND THEREAFTER CIT(A) HOWEVER HEL D THAT PROPERTY TAX ASSESSMENT BILL ISSUED BY THE MUNICIPAL CORPORATION SHOWED THAT THE SAID FLAT WAS ASSESSED TO PROPERTY TAX FROM 01/01/2 007 AND, THEREFORE, THE DATE OF ACQUISITION OF THE PROPERTY WAS TO BE T AKEN AS 01/01/2007. ACCORDINGLY, INDEXED COST OF ACQUISITION WAS DETERM INED BY ADOPTING 01/01/2007 AS THE DATE OF ACQUISITION OF THE FLAT. THIS RESULTED IN A REDUCED INDEXED COST OF ACQUISITION BY A SUM OF RS. 4,71,074/-, WHICH IS THE SUBJECT MATTER OF DISPUTE BEFORE US. 3 ITA NO. 7641 /MUM/2013 (ASSESSMENT YEAR : 2010-11) 3. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT ASSESSEE WAS DULY ALLOTTED THE FLAT IN 1994 AN D PAYMENTS WERE MADE ON VARIOUS DATES UPTO 30/12/2006 AND, THEREFOR E, THE INDEXED COST OF ACQUISITION HAS TO BE GRANTED TO THE ASSES SEE RIGHT FROM 1994 WHEN HE STARTED MAKING PAYMENTS AND NOT MERELY 01/0 1/2007 WHEN THE PROPERTY WAS SUBJECT TO PROPERTY TAX ASSESSMENT . IN SUPPORT, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISIONS:- (1) PRAVEEN GUPTA VS. ACIT, 52 DTR (DEL)(TRIB) 334. (2) MS. NITA A. PATEL VS. ITO, 128 ITD 24(MUM) 4. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE DEFENDED THE ORDERS OF THE AUTHORITIES BELOW BY POINTING OUT THAT PROPERTY CAN BE SAID TO BE ACQUIRED BY THE ASSESSEE ONLY WHEN THE F INAL REGISTRATION DEED IS MADE AND, THEREFORE, THE ADOPTION OF THE DA TE OF 01/01/2007 AS THE RELEVANT DATE IS QUITE JUSTIFIED. THEREFORE, INDEXED COST OF ACQUISITION HAS BEEN RIGHTLY CALCULATED BY THE LO WER AUTHORITIES. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THIS CASE, THERE IS NO DISPUTE THAT ASSESSEE WAS A MEMBER OF H OUSING SOCIETY CALLED CHARKOP SAJAWAT CHS, WHO WAS ALLOTTED A PLOT OF LAND FOR CONSTRUCTION OF RESIDENTIAL FLATS FOR ITS MEMBERS. THE DISCUSSION IN THE ORDERS OF AUTHORITIES BELOW REVEALS THAT THE SAID S OCIETY WAS ALLOTTED A PLOT BY MHADA AND CONVEYANCE DEED WAS MADE IN FAVOU R OF THE SOCIETY IN 1994. BEING A MEMBER OF THE SAID SOCIETY, ASSES SEE WAS ALLOTTED A FLAT AND WAS ISSUED THE SHARE CERTIFICATE IN 1994, A COPY OF WHICH IS ALSO PLACED IN THE PAPER BOOK FILED BEFORE US. FURTHE R, ON 30/06/1995, 4 ITA NO. 7641 /MUM/2013 (ASSESSMENT YEAR : 2010-11) ASSESSEE WAS ALSO ISSUED AN ALLOTMENT LETTER FOR TH E SPECIFIC FLAT, A COPY OF WHICH IS PLACED AT PAGES 8 TO 10 OF THE PAP ER BOOK. IN THE MEANWHILE, THE ASSESSEE MADE PAYMENTS TO THE SOCIET Y AS AND WHEN CALLED UPON TO DO SO AND THE SAID SCHEDULE OF PAYME NTS HAVE BEEN REPRODUCED BY CIT(A) IN PARA 3.1 OF HIS ORDER. THE PAYMENTS HAVE BEEN MADE ON VARIOUS DATES UPTO 20/12/2006 CUMULATING TO RS.12,50,000/-, WHICH IS STATED TO BE THE COST OF ACQUISITION. THE INDEXED COST OF ACQUISITION IS SOUGHT TO BE CALCULATED BASED ON THE COST INFLATION INDEX OF THE EACH YEAR OF PAYMENT. IN THE AFORESAID BACKG ROUND, IN OUR VIEW, IT IS NOT NECESSARY THAT ASSESSEE MUST BECOME OWNER BY WAY OF CONVEYANCE DEED FOR THE PURPOSES OF COMPUTING CAPIT AL GAINS. OSTENSIBLY, ASSESSEE ACQUIRED A RIGHT TO OBTAIN A P ARTICULAR FLAT IN THE SOCIETY IN 1994 ITSELF, BEING ITS MEMBER, AND HE W AS ALLOTTED A SPECIFIC FLAT. IN ANY CASE, SUCH RIGHT ITSELF IS A CAPITAL ASSET AND, THEREFORE, THE INDEXATION OF THE COST OF ACQUISITION OF THE FLAT H AS TO BE GRANTED WITH RESPECT TO THE INITIAL DATE OF 26/09/1994, SUBJECT OF COURSE TO THE ADOPTION OF INDEXATION FACTOR CORRESPONDING TO THE DATES OF PAYMENTS. EVEN OTHERWISE, WE FIND NO REASON TO DENY THE CLAIM OF THE ASSESSEE, WHICH IN CONSONANCE WITH THE DECISION OF THE DELH I BENCH OF THE TRIBUNAL IN THE CASE OF PRAVEEN GUPTA(SUPRA), WHICH COVERS AN IDENTICAL SITUATION. BEFORE US, NO DECISION TO THE CONTRARY HAS BEEN BROUGHT OUT AND, THEREFORE, WE FIND AMPLE FORCE IN THE PLEA OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET-ASIDE A ND THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE CAPITAL GAIN BY ADOPTING INDEXED COST OF ACQUISITION AT RS.19,93,232/- AS AGAINST RS .15,22,158/- CONSIDERED EARLIER. THUS, ON THIS ASPECT, ASSESSE E SUCCEEDS. 5 ITA NO. 7641 /MUM/2013 (ASSESSMENT YEAR : 2010-11) 6. THE OTHER ISSUE ARISES FROM A DISALLOWANCE OF RS .2,000/- MADE BY ASSESSING OFFICER BY INVOKING SECTION 14A OF THE AC T. IN THIS CONTEXT, BRIEF FACTS ARE THAT ASSESSEE WAS FOUND TO HAVE EAR NED DIVIDEND OF RS.7,440/- AND INTEREST ON PPF OF RS.2,618/-, WHICH WERE CLAIMED AS EXEMPT. THE ASSESSING OFFICER DISALLOWED A SUM OF RS.2,000/- UNDER SECTION 14A OF THE ACT ON THE GROUND THAT THE SAID SUM RELATED TO THE EARNING OF EXEMPT INCOME. THE CIT(A) AFFIRMED THE ACTION OF THE ASSESSING OFFICER. 7. WE FIND THAT BEFORE THE LOWER AUTHORITIES AS WEL L AS BEFORE US ASSESSEE HAS BEEN ASSERTING THAT NO EXPENSES HAVE B EEN CLAIMED BY THE ASSESSEE AT ALL AND, THEREFORE, THE QUESTION OF DIS ALLOWANCE UNDER SECTION 14A OF THE ACT WOULD NOT ARISE. THE AFORES AID FACTUAL ASSERTION, WHICH HAS BEEN CONSISTENTLY MADE BY THE ASSESSEE, H AS BEEN MERELY BRUSHED ASIDE AND NOT CONTROVERTED BY THE LOWER AUT HORITIES. EVEN BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE HAS NOT CONTROVERTED THE FACTUAL ASSERTIONS OF THE ASSESSEE. IN OUR CONSIDE RED OPINION, IN VIEW OF THE AFORESAID FACTUAL POSITION, WHICH HAS NOT BEEN DISPUTED, THERE IS NO JUSTIFICATION FOR MAKING ANY DISALLOWANCE UNDER SEC TION 14A OF THE ACT, IN AS MUCH AS, NO EXPENSES ARE STATED TO HAVE BEEN CLAIMED WHILE COMPUTING THE TOTAL INCOME. ACCORDINGLY, THE DISA LLOWANCE IS HEREBY DIRECTED TO BE DELETED. 8. IN THE RESULT, APPEAL OF THE ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 13/07/201 6 SD/- SD/- (RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOU NTANT MEMBER MUMBAI, DATED 13/07/2016 6 ITA NO. 7641 /MUM/2013 (ASSESSMENT YEAR : 2010-11) VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI