ITO, Bangalore V. Ms. Keerthi Bhoopalam, Bangalore

ITA 855/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1611 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-02-2011
• Assessment Year: misc
• Appeal Filed On: 30-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: SYED NADEEM AHMED LASANI
• Keywords: Sale consideration of property below Jantri Value
• Section: 50C

Judgement Text

PAGE 1 OF 8 ITA NO.855/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.855/BANG/2010 (ASSESSMENT YEAR 2005-06) THE INCOME TAX OFFICER, WARD-6(2), BANGALORE. - APPELLANT VS MS. KEERTHI BHOOPALAM, NO.402, MOTI APARTMENTS, KUMARA PARK EAST, BANGALORE-20. - RESPONDENT APPELLANT BY : SHRI G V GOPALA RAO, CIT-I RESPONDENT BY : SHRI SYED NADEEM AHMED LASANI, ADVOCATE ORD ER PER GEORGE GEORGE K : THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-III, BANGALORE DATED 8/7/2009. THE ASST. YEAR CONCERNED IS 2005-06. 2. THE EFFECTIVE GROUNDS RAISED READS AS FOLLOWS:- I) THE LEARNED CIT(A) ERRED IN LAW IN HOLDING THAT THE CAPITAL GAIN ARISING FROM TRANSFER OF IMMOVABLE PROPERTY IS ASSESSABLE IN THE ASST. YEAR 2000-01. II) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CAPITAL GAINS ARISING FROM TRANSFER OF PAGE 2 OF 8 ITA NO.855/BANG/2010 2 IMMOVABLE PROPERTY MADE THROUGH A DEED OF CONVEYANCE DATED 7/3/2003 WHICH WAS REGISTERED ON 24.3.2005, IS ASSESSABLE IN THE ASST. YEAR 2005-06. III) WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LEARNED CIT(A) OUGHT TO HAVE IN THE ALTERNATIVE, HELD THAT THE CAPITAL GAIN ARISING FROM THE TRANSFER OF IMMOVABLE PROPERTY IS ASSESSABLE FOR THE AY 2003-04 AS THE DEED OF CONVEYANCE WAS EXECUTED ON 7/3/2003 AND THAT THE PROVISIONS OF SECTION 50C OF THE I T ACT, 1961 ARE APPLICABLE TO THE SALE TRANSACTION UNDER CONSIDERATION. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE WAS A CONJOINT OWNER OF THE PROPERTY BEARING NO.39-40 SITUATED AT SHESHADRI ROAD, BANGAL ORE-9. THE SAID PROPERTY WAS INHERITED AFTER THE DEMISE OF HER FATHER SHRI B R KAPANIPATHY. THE OTHER CONJOINT OWNER OF THIS PRO PERTY IS HER BROTHER SHRI CHANDRAMOHAN. THE ASSESSEE AND HER BROTHER SHRI CHANDRAMOHAN ALONG WITH SEVEN OTHERS CONSTITUTED A PARTNERSHIP U NDER THE NAME AND STYLE OF M/S UDYAN HOTELS (PARTNERSHIP DEED DATED 9 TH DECEMBER, 1999). THE SAID PARTNERSHIP FIRM WAS REGI STERED BEFORE THE REGISTRAR OF FIRMS. A CERTIFICATE DATED 3 RD FEBRUARY, 2000 WAS ISSUED IN FORM NO.C BY THE SAID REGISTRAR, REGISTRAR OF FIRMS. THE REGISTRATION NUMBER ALLOTTED TO THE FIRM IS 1579/19 99-2000. (THIS CERTIFICATE IS ENCLOSED AS PER ANNEXURE-2 OF THE PA PER BOOK FILED BY THE ASSESSEE). FURTHER, A LIST SHOWING THE DETAI LS OF PARTNERS AS PAGE 3 OF 8 ITA NO.855/BANG/2010 3 PER THE SAID REGISTERED PARTNERSHIP DEED ISSUED IN FORM NO.A ISSUED BY THE REGISTRAR OF FIRMS IS ENCLOSED. (ANNEX URE 2A OF THE PAPER BOOK FILED BY THE ASSESSEE). WHILE CONSTITUTING THIS PARTNERSHIP, THE ASSESSEE AND HER BROTHER MR. CHANDRAMOHAN CONTRIBUTED THEIR PROP ERTY BEARING NO.39-04, SHESHADRI ROAD, ANAND RAO CIRCLE, BANGALO RE-9 AS THEIR CAPITAL. A TOTAL SUM OF RS.90 LAKHS WAS CREDITED T O THE CAPITAL ACCOUNT OF THE ASSESSEE AND MR. CHANDRAMOHAN AT RS. 45,00,000/- EACH IN THE BOOKS OF THE FIRM. THE RECITALS IN THE ANNEXED PARTNERSHIP DEED SPECIFY THE CONTRIBUTION OF THE PRO PERTY INTO THE PARTNERSHIP FIRM BY THE ASSESSEE AND HER BROTHER. AS PROVIDED U/S 45(3) OF THE I T ACT, 1961, THE AMOUNT RECORDED IN THE BOOKS OF THE FIRM AT RS.90 LAKHS IS DEEMED AS FULL VALUE OF THE CONSIDERATION FOR SUCH TRANSFER. ACCORDINGLY, CAPITAL GAIN HAS B EEN WORKED OUT IN RESPECT OF EACH OF THE TWO CONJOINT OWNERS OF THE P ROPERTY AND THE SAME HAS BEEN DECLARED IN THEIR RESPECTIVE RETURNS OF INCOME FILED FOR THE ASST. YEAR 2000-01. (A COPY OF THE STATEMENT OF INCOME AND ITS ENCLOSURES FILED FOR THE AY 2000-01 IS ENCL OSED AS ANNEXURE-3 OF THE PAPER BOOK OF THE ASSESSEE). THE BALANCE SHEET OF THE FIRM M/S UDYAN HOTELS AS ON 31 ST MARCH, 2000, ITS STATEMENT OF INCOME, TAX PAID CHALLAN AND INTIMATIO N U/S 143(1)(A) FOR THE ASST. YEAR IN QUESTION ARE ENCLOSED. (ANNEX URE-4 OF THE PAPER BOOK OF THE ASSESSEE). PAGE 4 OF 8 ITA NO.855/BANG/2010 4 THE FIRM M/S UDYAN HOTELS HAD MADE AN APPLICATION BEFORE THE BANGALORE MAHANAGARA PALIKE ON 21 ST AUGUST, 2000 FOR TRANSFERRING THE PROPERTY IN THE NAME OF THE FIRM IN THE REVENUE RECORDS OF THE BANGALORE MAHANAGAR PALIKE. THE ASS ISTANT REVENUE OFFICER, GANDHINAGAR RANGE, BANGALORE MAHANAGAR PAL IKA WAS PLEASED TO TRANSFER THE KHATHA OF THE SAID IMMOVABL E PROPERTY IN QUESTION TO THE NAME OF THE FIRM M/S UDYAN HOTELS AS PER THE CERTIFICATE ISSUED BEARING NO.AR 42 DATED 7 TH SEPTEMBER, 2000. (A COPY OF THE KHATA CERTIFICATE IS ENCLOSED ANNEX URE -5, COPY OF THE ASSESSMENT EXTRACT AS ANNEXURE-5A AND THE MUNIC IPAL TAX PAID BY M/S UDYAN HOTELS FOR THE FINANCIAL YEAR 2000-01 A NNEXURE 5B OF THE PAPER BOOK OF THE ASSESSEE). FURTHER, THE ASSESSEE AND MR. CHANDRAMOHAN RETIRE D FROM THE PARTNERSHIP FIRM ON 27 TH FEBRUARY, 2003. (A RETIREMENT- CUM-RECONSTITUTION DEED DATED 27 TH FEBRUARY, 2003 IS ENCLOSED AS ANNEXURE-6 OF THE PAPER BOOK OF THE ASSESSEE). ON RETIREMENT OF THE ASSESSEE AND HER BROTHER FROM THE PARTNERSHIP I N ORDER TO HAVE A VALID TITLE TO THE IMPUGNED IMMOVABLE PROPERTY BEA RING NO.39-40, SHESHADRI ROAD, ANAND RAO CIRCLE, BANGALORE, THEY P RESENTED A DEED OF CONVEYANCE DATED 7 TH MARCH, 2003 FOR REGISTRATION BEFORE THE OFFICE OF THE SUB-REGISTRAR, GANDHINAGAR ON 7 TH MARCH, 2003. (ANNEXURE-7 OF THE PAPER BOOK). ACCORDING TO THE ASSESSEE, THIS DEED OF CONVEYANCE WHICH WAS PRESENTED FOR REGISTRATION WAS KEPT PENDI NG BY THE SUB- PAGE 5 OF 8 ITA NO.855/BANG/2010 5 REGISTRAR AS PER IGR AND CS BANGALORE CIRCULAR NO.S TD/97/93-94 DATED 16 TH AUGUST, 1999 WITH EFFECT FROM 18 TH AUGUST, 1999. THE REGISTRAR OF STAMPS, GOVERNMENT OF KARNATAKA SUBSEQ UENTLY VALUED THE PROPERTY IN QUESTION AT RS.3,67,05,566/-. WHILE THE ORDER OF THE REGISTRAR OF STAMPS IS DATED 18 TH MARCH, 2005, THIS VALUE OF THE IMMOVABLE PROPERTY IS ADOPTED AS ON 7 TH MARCH, 2003. THE DEED OF CONVEYANCE DATED 7 TH MARCH, 2003 EXECUTED ON 7 TH MARCH, 2003, PRESENTED FOR REGISTRATION BEFORE THE SUB-REGISTRAR ON 7 TH MARCH, 2003 WAS REGISTERED BY THE SAID SUB-REGISTRAR, GANDH INAGAR ON 24 TH MARCH, 2005. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR T HE ASST. YEAR 2005-06 IN THE CASE OF THE ASSESSEE, THE AO HAS INVOKED THE PROVISIONS UNDER SECTION 50C AND ADOPTED THE VA LUE OF THE IMMOVABLE PROPERTY AT RS.3,67,05,566/- AND HAS ASSES SED CAPITAL GAINS ACCORDINGLY. 4. THE ASSESSEE, BEING AGGRIEVED, FILED APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY. 5. THE CIT(A), FOR HIS ELABORATE REASONS MENTIONED IN PARAGRAPHS 7 TO 14 OF THE ORDER, ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. PAGE 6 OF 8 ITA NO.855/BANG/2010 6 7. THE LEARNED DR SUPPORTED THE ORDER OF ASSESSMEN T, WHEREAS THE LEARNED AR REITERATED THE SUBMISSIONS M ADE BEFORE THE INCOME TAX AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACT IS THAT TH E ASSESSEE WAS A PARTNER IN THE FIRM, WHICH WAS CONSTITUTED VIDE DEE D DATED 9/12/99 AND THE SAME WAS REGISTERED WITH THE REGISTRAR OF F IRMS VIDE CERTIFICATE DATED 3 RD FEBRUARY, 2000. AS CAPITAL CONTRIBUTION TO THE FIRM, THE IMPUGNED PROPERTY WAS INTRODUCED AS TH E ASSET OF THE FIRM BY THE ASSESSEE AND HER BROTHER, WHO IS THE CO- OWNER OF THE PROPERTY. AS PROVIDED U/S 45(3), THE AMOUNT RECORDE D IN THE BOOKS OF THE FIRM AT RS.90 LAKHS WAS DEEMED TO BE THE FUL L VALUE OF THE CONSIDERATION OF SUCH TRANSFER. ACCORDINGLY, CAPIT AL GAINS WAS WORKED OUT IN RESPECT OF EACH OF THE CO-OWNERS OF T HE PROPERTY AND THE SAME WAS DECLARED IN THEIR RESPECTIVE RETURNS O F INCOME FILED FOR THE ASST. YEAR 2000-01. THE RETURNS OF INCOME W ERE FILED AND THE RECEIPT FOR THE SAME IS DATED 31 ST JULY, 2001. THE ASSESSMENT FOR THE IMPUGNED YEAR, NAMELY, 2005-06, WAS TAKEN UP MUCH LATER AND IT CANNOT BE SAID THE ASSESSEE HAS DEVISED A SC HEME WHEREBY TO AVOID CAPITAL GAINS BY FILING THE RETURN WAY BACK IN 31 ST JULY, 2001. AS PER THE PROVISIONS OF SECTION 45(3) OF THE I T A CT, FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS, THE DATE O F EXECUTION OF THE PARTNERSHIP DEED I.E. 9/12/99, HAS TO BE CONSID ERED AS THE DATE ON WHICH THE PROPERTY WAS TRANSFERRED AND THE AMOUNT OF RS.90 LAKHS RECORDED IN THE BOOKS OF THE FIRM HAS TO BE C ONSIDERED AS THE PAGE 7 OF 8 ITA NO.855/BANG/2010 7 FULL VALUE OF CONSIDERATION RECEIVED FOR THE TRANSF ER OF THE PROPERTY. 8.1 AS RIGHTLY POINTED OUT BY THE FIRST APPELLATE AU THORITY, WHEN THE ASSESSEE CONTRIBUTED HER PROPERTY TO THE PA RTNERSHIP FIRM ON 9/12/1999, SHE COULD NOT HAVE KNOWN THAT FO UR YEARS LATER A NEW SECTION I.E. SECTION 50C WOULD BE INTRODUCED IN THE INCOME TAX ACT, 1961, WHEREBY FOR THE PURPOSE OF CAPITAL GA INS, THE VALUE FIXED BY THE REGISTRAR OF STAMPS WOULD BE DEEMED TO BE THE CONSIDERATION RECEIVED FOR HER PROPERTY. THEREFORE , WHEN THE SECTION ALLEGEDLY SOUGHT TO BE AVOIDED WAS ITSELF YET TO BE BORNE AT THE TIME SHE TRANSFERRED HER PROPERTY ON 9/12/1999, THE QUESTION OF THE ASSESSEE DEVISING THE TRANSACTION SO AS TO A VOID THE LIABILITY OF SUCH UNBORN SECTION DOES NOT ARISE. THE ASSESSE E ALSO COULD NOT HAVE BEEN AWARE THAT AFTER FOUR YEARS, THE VALUE OF HER PROPERTY WOULD RAISE ASTRONOMICALLY AND THAT CONSEQUENTLY, THE REGISTRAR OF STAMPS WOULD VALUE THE PROPERTY AT RS.3,67,05,566/-. 8.2 WE ALSO RELY ON THE ORDER OF THE TRIBUNAL IN TH E CASE OF M SIVA PARVATHI & OTHERS V INCOME TAX OFFICER 7 ITR (TRIB.) 468 (VISAKHAPATNAM). IN THAT CASE, AGREEMENT TO SEL L THE PROPERTY WAS ENTERED INTO PRIOR TO THE INTRODUCTION OF SECTI ON 50C BUT DUE TO GENUINE REASONS, THE REGISTRATION WAS DELAYED AND THE TRANSACTION WAS COMPLETED AFTER THE INTRODUCTION OF SECTION 50C. IT WAS HELD BY THE TRIBUNAL THAT SECTION 50C WILL NO T HAVE APPLICATION TO THE FACTS OF THE CASE. PAGE 8 OF 8 ITA NO.855/BANG/2010 8 8.3 IN THE LIGHT OF THE ABOVE REASONS, WE HOLD TH AT THE ORDER OF THE FIRST APPELLATE AUTHORITY IS CORRECT AN D IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED ON FRIDAY, THE 4 TH DAY OF FEBRUARY, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/3/2/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.