ACIT 19(2), MUMBAI V. JENIFER NOSHIR SANJANA, MUMBAI

ITA 7667/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2793 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 07-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset
• Section: 54F; 2(14); 54; 56; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7667/M/2013 ASSESSMENT YEAR: 2009-10 ACIT 19(2), ROOM NO.322, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012 VS. MS. JENIFER NOSHIR SANJANA, 14, GOLDEN VIEW, SUNDER NAGAR ROAD, KALINA, SANTACRUZ (E), MUMBAI 400 098 PAN: AATPS1077L (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NITESH JOSHI, A.R. REVENUE BY : SHRI JEEVAN LAL, D.R. DATE OF HEARING : 27.06.2016 DATE OF PRONOUNCEMENT : 30.06.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 21.10.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE SOLE ISSUE RAISED BY THE REVENUE IS AS TO WH ETHER THE CONSIDERATION RECEIVED BY THE ASSESSEE ON SALE OF HER RIGHTS TO G ET THE CONVEYANCE OF THE FLAT IN HER FAVOUR IS TO BE TREATED AS CAPITAL GAIN ELIG IBLE FOR CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DURING THE YEAR DECLARED LONG TERM CAPITAL GAINS OF RS.28,05,075/- ON ACCOUN T OF SALE PROCEEDS OF RIGHTS IN O ZONE FLAT ON 27.03.09 FOR RS.69,30,000/-. THE VALUE OF THE ABOVE FLAT AS ON 17.08.04 WAS TAKEN AT RS.34,02,000/- AND THE IND EXED COST AT RS.41,24,925/- AND THE CAPITAL GAINS WERE ARRIVED AT RS.28,05,075/ -. THE SAID AMOUNT WAS ITA NO.7667/M/2013 M/S. JENIFER NOSHIR SANJANA 2 CLAIMED EXEMPT UNDER SECTION 54F OF THE ACT ON THE GROUND THAT THE ENTIRE SALE PROCEEDS OF RS.69,30,000/- HAD BEEN DEPOSITED IN CA PITAL GAIN ACCOUNT SCHEME. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS T HE AO), HOWEVER, NOTICED THAT THE ASSESSEE HAD NOT ACQUIRED THE OWNERSHIP OF THE FLAT IN QUESTION AND THAT THE FLAT IN QUESTION WAS STILL UNDER CONSTRUCTION. NEITHER THE OWNERSHIP OF THE HOUSE NOR THE TRANSACTION OF SALE BY THE ASSESSEE O F HIS RIGHTS IN THE FLAT WAS REGISTERED AS PER THE PROVISIONS OF THE REGISTRATIO N ACT. HE OBSERVED THAT THE AMOUNT PAID BY THE ASSESSEE TO THE BUILDER WAS IN T HE NATURE OF ADVANCE AND SECURITY AND THAT THE SAME WAS NOT THE CONSIDERATIO N FOR THE PURCHASE OF THE FLAT. HE FURTHER OBSERVED FROM THE ALLOTMENT LETTE R THAT THE ALLOTMENT LETTER WAS A TENTATIVE LETTER ONLY EVIDENCING THE MONEY RECEIV ED BY THE DEVELOPER AND THAT THERE EXISTED NO PROPERTY OR RIGHT IN RESPECT OF AN Y TANGIBLE ASSET AS ON THE DATE OF THE SAID ALLOTMENT LETTER. HE FURTHER OBSERVED THAT AS PER PARA 5 OF THE SAID ALLOTMENT LETTER, THE ASSESSEE HAD TO EXERCISE THE OPTION OF HAVING THE PROPERTY IN HER NAME OR IN THE NAME OF HER NOMINEE WHICH WAS TO BE EXERCISED WITHIN 30 MONTHS OF THE DATE OF THE ALLOTMENT LETTER. THA T THE SAID LETTER WAS DATED 31.01.05 AND THE PERIOD OF 30 MONTHS HAD LAPSED ON 31.08.07 AND SINCE THE PERIOD OF 30 MONTHS HAD LAPSED AND THE ASSESSEE HAD NOT ENTERED INTO AN AGREEMENT WITH THE BUILDER FOR THE PURCHASE OF SAID FLAT, HENCE NO RIGHTS HAD ACCRUED TO THE ASSESSEE IN THE SAID FLAT. HE THERE FORE HELD THAT THE ENTIRE RECEIPT ON SALE OF SAID PROPERTY COULD AT THE MOST BE CONSI DERED AS BEING RETURN OF ADVANCE IN NATURE OF INCOME UNDER SECTION 56 OF THE ACT. THAT THERE WAS NO PROPERTY IN EXISTENCE OR RIGHT OF THE ASSESSEE IN S UCH A PROPERTY AND HENCE NO CAPITAL ASSET WAS SOLD BY THE ASSESSEE AND THEREBY NO CAPITAL GAINS HAD BEEN EARNED BY THE ASSESSEE. THEREFORE, THE BENEFIT UND ER SECTION 54F WAS NOT AVAILABLE TO THE ASSESSEE. HE ACCORDINGLY TAXED TH E DIFFERENCE BETWEEN THE AMOUNT PAID AND AMOUNT RECEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCE CALCULATED AT RS.36,57,428/-. AGGRIEVED BY THE ORD ER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). ITA NO.7667/M/2013 M/S. JENIFER NOSHIR SANJANA 3 4. THE LD. CIT(A), CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE AND GOING THROUGH THE EVIDENCES ON THE FILE, ALLOWED THE CLAI M OF THE ASSESSEE OBSERVING AS UNDER: 5.3 THE ABOVE FACTS, THEREFORE, SHOW THAT THE CONS IDERATION AMOUNT OF RS.69,30,000/- WAS RECEIVED BY THE APPELL ANT ON ACCOUNT OF AGREEMENT FOR SALE OF HIS FLAT IN FLAT NO.1202 IN T OWER NO.01 IN 0 ZONE BUILDING VIDE TRIPARTITE AGREEMENT DTD.27.03.2009 B ETWEEN THE DEVELOPER, THE APPELLANT AND THE PURCHASER. THE APP ELLANT'S RIGHT IN THE SAID FLAT HAS BEEN RECOGNISED IN THE ABOVE AGREEMEN T FOR SALE, WHICH IS DULY REGISTERED. THE SAID RIGHT IS ARISING OUT OF BOOKIN G MADE ON 17.06.2004 BEING OPTION MONEY GIVEN BY THE APPELLANT FOR THE ABOVE F LAT IN O ZONE BUILDING AND THE OPTION TO PURCHASE THE SAID FLAT VIDE LETTE R DTD.31.01.2005 FROM THE DEVELOPER FOR A CONSIDERATION OF AMOUNT OF RS.3 4,02,000/-, AGAINST WHICH THE APPELLANT, PRIOR TO THE DATE OF AGREEMENT FOR SALE OF THE ABOVE FLAT, HAD MADE PAYMENT OF RS.32,31,900/-. THE APPELLANT'S RIGHT IN THE SAID PROPERTY, THEREFORE, EXISTS FROM THE DATE OF SIGNING OF THE OFFER LETTER DTD.31.01.2005 TO THE DATE OF AGREEMENT FOR SALE, WHICH IS DTD.27.03.2009, AND, WITHOUT THIS RIGHT, THERE COUL D NOT HAVE BEEN 'AGREEMENT FOR SALE' BETWEEN THE PURCHASER AND THE TRANSFEROR (THE APPELLANT). THE APPELLANT, WAS THUS HOLDING THE ABO VE RIGHT FOR A PERIOD OF MORE THAN 3 YEARS. 5.4 AS FAR AS THE POSITION WHETHER THERE HAS BEEN A TRANSFER OF CAPITAL ASSET IS CONCERNED, UNDER SECTION 2(14) 'CAPITAL AS SET' MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, AND U/S 2(47) 'TRANSFER' IN RELATION TO A CAPITAL ASSET, INCLUDES- (I) THE SALE EXCHANGE OR RELINQUISHMENT OF THE ASSE T OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN... (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT, 1882 OR (VI) ANY TRANSACTION (WHETHER BY WAY O F BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERTIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEME NT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFER RING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. UNDER EXPLANA TION 1 INSERTED BY THE FINANCE ACT 2012, W.R.E.F. 01.04.1962, FOR THE PURP OSES OF SUB-CLAUSES (V) AND (VI), 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEAN ING AS IN CLAUSE (D) OF THE SECTION 269UA. THE MEANING OF IMMOVABLE PROPERTY UN DER SECTION 269UA HAS BEEN DEFINED AS; '(I) ANY LAND OR ANY BUILDING OR P ART OF BUILDING, AND INCLUDES, WHERE ANY LAND OR ANY BUILDING OR PART OF A BUILDIN G IS TO BE TRANSFERRED TOGETHER WITH ANY MACHINERY, PLANT, FURNITURE, FITTINGS OR O THER THINGS, SUCH MACHINERY, PLANT, FURNITURE, FITTINGS OR OTHER THINGS ALSO. E XPLANATION. - FOR THE PURPOSES OF THIS SUB-CLAUSE, 'LAND, BUILDING, PART OF A BUIL DING, MACHINERY, PLANT, FURNITURE, FITTINGS AND OTHER THINGS' INCLUDE ANY R IGHTS THEREIN: (II) ANY RIGHT IN OR WITH RESPECT TO ANY LAND OR ANY BUILDING OR A PA RT OF A BUILDING (WHETHER OR NOT INCLUDING ANY MACHINERY, PLANT, FURNITURE, FITT INGS OR OTHER THINGS THEREIN) WHICH HAS BEEN CONSTRUCTED OR WHICH IS TO BE CONSTR UCTED, ACCRUING OR ARISING ITA NO.7667/M/2013 M/S. JENIFER NOSHIR SANJANA 4 FROM ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER AOP OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OF WHATEVER NATURE), N OT BEING A TRANSACTION BY WAY OF SALE, EXCHANGE OR LEASE OF SUCH LAND, BUI LDING OR PART OF A BUILDING'. 5.5 THE ASSESSING OFFICER HAS CITED THE ITAT DECISI ON IN THE CASE OF LATE VASUDEV (2011) TO HOLD THAT AT THE TIME OF ALLOTMEN T LETTER ISSUED BY THE BUILDER, FLAT NO.1202 DID NOT EXIST AND THE ALLOTME NT LETTER WAS MERELY A SECURITY AGAINST THE ADVANCE MADE BY THE APPELLANT. HOWEVER, IT IS SEEN THAT THE AFORESAID DECISION WAS RENDERED IN A DIFFERENT CONTEXT. THE ISSUE THERE RELATED TO CLAIM OF EXEMPTION U/S 54F, WHICH WAS DE NIED TO THE SAID ASSESSEE ON THE GROUND THAT THE ABOVE CLAIM IS BEING MADE ON THE BASIS OF ALLOTMENT LETTER ONLY AND PROPOSED PLAN OF THE BUILDING AND T HE FLAT WAS NOT IN PLACE. IN THE CASE OF THE APPELLANT, THE CLAIM U/S 54 OF THE ACT, HAS BEEN DISPUTED NOT ON THE GROUND THAT INVESTMENT OF SALE CONSIDERATION HA S BEEN MADE IN A CAPITAL GAIN SAVING SCHEME BUT, WHEN THE OFFER/ALLOTMENT LE TTER DTD.31.01.2005 TO PURCHASE THE ABOVE FLAT WAS MADE BY THE DEVELOPER, THE FLAT DID NOT EXIST. THE ASSESSING OFFICER HAS, THUS, APPLIED THE ABOVE DECI SION ON A REVERSE SITUATION, WHICH WAS NOT BEFORE THE ITAT. 5.6 IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT SA LE CONSIDERATION OF RS.69,30,000/-, IS TO BE COMPUTED UNDER THE HEAD 'L ONG TERM CAPITAL GAIN' AND, AS THE ENTIRE SALE PROCEEDS HAVE BEEN DEPOSITED IN A CAPITAL GAIN ACCOUNT SCHEME, THE APPELLANT IS ELIGIBLE FOR EXEMPTION U/S 54F OF THE ACT. THE APPELLANT'S GROUND OF APPEAL IS, THEREFORE, ALLOWED . 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE LD. CI T(A), THE REVENUE HAS COME IN APPEAL BEFORE US AGITATING THE ACTION OF TH E LD. CIT(A) IN TREATING THE RIGHTS OF THE ASSESSEE IN THE SAID FLAT AS CAPITAL ASSET AND THEREBY ALLOWING OF HER CLAIM UNDER SECTION 54F OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. IT IS NOT DISPUTED THAT THE AMOUNT OF RS.6 9,30,000/- WAS RECEIVED BY THE ASSESSEE ON SALE OF HER RIGHTS IN THE FLAT IN Q UESTION. THE PROPERTY IN WHICH THE ALLEGED RIGHTS WERE SOLD WAS EARMARKED AND DIST INGUISHABLE AS FLAT NO.202 AT 12 TH FLOOR IN TOWER NO.01 ADMEASURING 82.24 SQR. METERS IN THE BUILDING KNOWN AS RUSTOMJEES O ZONE IN LUXMI SINGH COMPLEX. IT IS ALSO NOT DISPUTED THAT AGAINST THE TOTAL CONSIDERATION AMOUN T OF RS.34,02,000/- THE ASSESSEE HAD ALREADY MADE PAYMENT OF RS.32,31,900/- DURING THE PERIOD FROM 17.06.2004 TO 12.04.2008. THE ASSESSEE HAD PAID TW O INSTALLMENTS OF ITA NO.7667/M/2013 M/S. JENIFER NOSHIR SANJANA 5 RS.3,40,200/- EACH AS EARNEST MONEY BEFORE 14.06.04 AND THE REMAINING AMOUNT WAS PAID AS PER THE SCHEDULE OF THE INSTALLM ENTS GIVEN IN THE ALLOTMENT LETTER. THE PERIOD OF THE SAID INSTALLMENTS PAID A S OBSERVED ABOVE WAS RUNNING INTO FOUR YEARS. THE ASSESSEE HAD TO PAY THE INSTA LLMENTS AT THE DIFFERENT STAGES OF THE CONSTRUCTION OF THE PROPERTY/FLAT IN QUESTIO N E.G. ON THE COMPLETION OF FIRST SLAB; ON THE CONDITION OF THIRD SLAB; ON THE COMPLETION OF 11 TH SLAB AND SO ON AND THE LAST INSTALLMENT WAS PAYABLE ON POSSESSI ON OF THE FLAT BEING GIVEN TO THE ASSESSEE. FROM THE ABOVE CIRCUMSTANCES IT CLEA RLY REVEALS THAT WHILE MAKING THE PAYMENT TO THE BUILDER, THE INTENTION OF THE ASSESSEE WAS NOT TO EARN ANY QUICK PROFITS BUT THE PURPOSE WAS OF INVESTMENT . THE ASSESSEE NOT ONLY PAID THE EARNEST MONEY IN THE YEAR 2004 BUT SUBSEQU ENTLY PAID INSTALLMENTS TO THE BUILDER AT CERTAIN STAGES OF THE COMPLETION OF THE CONSTRUCTION. HOWEVER, BEFORE THE POSSESSION OF THE FLAT BEING OFFERED TO THE ASSESSEE, THE ASSESSEE DECIDED TO TRANSFER HIS RIGHTS TO A THIRD PARTY AT SOME PROFIT. THE SAID PROFIT WAS TREATED BY THE ASSESSEE AS CAPITAL GAINS. FROM THE FACTS NARRATED ABOVE IT CLEARLY REVEALS THAT THE PAYMENT MADE BY THE ASSESS EE WAS NOT AN ADVANCE OR SECURITY BUT IT WAS TOWARDS THE CONSIDERATION OF TH E FLAT IN QUESTION WHICH WAS UNDER CONSTRUCTION AND PAYMENT OF THE INSTALLMENTS WERE MADE AT DIFFERENT STAGES OF THE COMPLETION OF THE CONSTRUCTION. THER E ACCRUED A RIGHT TO GET THE POSSESSION/CONVEYANCE OF THE SAID FLAT IN FAVOUR OF THE ASSESSEE FROM THE SAID BUILDER. A TRIPARTITE AGREEMENT WAS EXECUTED VIDE WHICH THE ASSESSEE, WITH THE CONSENT OF THE BUILDER, HAD AGREED TO SALE HIS RIGH TS IN FAVOUR OF THE THIRD PARTY. SO FAR AS THE OBSERVATION OF THE AO THAT THE ASSESS EE HAD TO EXERCISE HIS OPTION WITHIN 30 MONTHS, THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE RELEVANT PART OF THE ASSESSMENT ORDER WHEREIN THE A SSESSEE HAD EXPLAINED TO THE AO THAT THE TIME PERIOD FOR EXERCISE OF OPTION WAS EXTENDED BY THE BUILDER TO 40 MONTHS VIDE ITS LETTER DATED 01.07.07. HOWEVER, THE AO HAS NOT DISCUSSED THAT ASPECT IN THE ASSESSMENT ORDER. EVEN OTHERWIS E, THE ASSESSEE HAD BOOKED THE FLAT, PAID EARNEST MONEY, PAID INSTALLMENTS AT CERTAIN STAGES OF THE COMPLETION OF THE BUILDING AS PER THE SCHEDULE OF T HE ALLOTMENT LETTER, HENCE ITA NO.7667/M/2013 M/S. JENIFER NOSHIR SANJANA 6 UNDER SUCH CIRCUMSTANCES A DEFINITE RIGHT HAD ACCRU ED TO THE ASSESSEE TO GET THE POSSESSION AND CONVEYANCE OF THE FLAT IN HER FAVOUR . THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENTION TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VIJAY FLEXIBLE CONTAI NERS (1990) 186 ITR 693 WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE RIGHT TO OBTAIN CONVEYANCE OF IMMOVABLE PROPERTY IS A CAPITAL ASSET AND GIVING UP OF THE RIGHT TO OBTAIN CONVEYANCE OF IMMOVABLE PROPERTY AMOUNTS TO TRANSFER OF A CAPITAL ASSET. SIMILAR OBSERVATIONS HAVE BEEN MADE IN ANOT HER DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DATA SERV ICES LTD. (1980) 122 ITR 594. 7. IN THE LIGHT OF THE ABOVE DECISIONS AND IN VIEW OF THE FACTUAL ASPECTS AS DISCUSSED ABOVE, WE DO NOT FIND ANY INFIRMITY IN TH E ORDER OF THE LD. CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2016. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.06.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.