VASUDEV KATARIA, MUMBAI V. ACIT 13(3), MUMBAI

ITA 859/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78863 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 23-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Capital receipt

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNALF BENCH, MUMB AI .., , ,, , .!.'#$ , ,, , !% !% !% !% ! !! ! & & & & BEFORE SHRI I.P.BANSAL, JM AND SHRI N.K.BILLAIYA, A M ./ I.T.A. NO. 859/MUM/2012 ( ' ' ' ' (' (' (' (' / ASSESSMENT YEAR : 2008-09 ) SHRI VASUDEV KATARIA, 210 ADAMJI BLDG. 413, NARSI NATHA STREET, MASJID BUNDER, MUMBAI-400009 / VS. ACIT-13(3), 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 ) !% ./ PAN : AAEPK3609B ( )* / APPELLANT ) .. ( +,)* / RESPONDENT ) )* - . ! / APPELLANT BY : SHRI C.V.JAIN +,)* - . ! / RESPONDENT BY : SHRI RAVI PRAKASH - /% / DATE OF HEARING : 13/05/2014 01( - /% / DATE OF PRONOUNCEMENT : 13/05/2014 !2 / O R D E R PER I.P.BANSAL, JM: THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECTE D AGAINST THE ORDER PASSED BY CIT(A)13, MUMBAI DATED 02/12/2011 FOR THE ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL READ AS UNDER. 1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE I N LAW THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DECISION OF THE LEARNED ASSE SSING OFFICER (LD. A.O.) OF TREATING THE HALF PORTION OF CAPITAL RECEIPT OF RS. 23,28,000/- RECEIVED ON TRANSFER OF TRANSFERABLE DEVELOPMENT RIGHTS (TDR), THE COST OF ACQUISITION OF WHICH WAS NIL AS LONG TERM CAPITAL GAIN & HAS FURTHER ERRED IN LE VYING TAX THEREON; WHERE AS IN VIEW OF JUDGMENT OF THE HONBLE SUPREME COURT IN CA SE OF B C SRINIVAS SHETTY [128 ITR 294 (SC)] NO CAPITAL GAIN TAX WAS CHARGEABLE AS THERE WAS NO COST OF ACQUISITION. 2. WITHOUT PREJUDICE TO ABOVE THE LD. CIT(A) HAS AL SO ERRED IN UPHOLDING THE DECISION OF THE LD. A.O. OF CONSIDERING HALF PORTIO N OF THE SUM OF RS.5,28,000/- RECEIVED FROM THE DEVELOPER AS COMPENSATION TOWARDS INCONVENIENCE & HARDSHIP CAUSED TO THE APPELLANT FOR SHI9FTING TO A TEMPORAR Y ALTERNATE ACCOMMODATION AS A CONSIDERATION AGAINST SALE OF TDR & HAS FURTHER ERR ED IN CONSIDERING THE SAME AS 2 ITA NO.859/MUM/2012 SHRI VASUDEV KATARIA. . A LONG TERM CAPITAL GAIN WHEREAS THE SAME WAS IN TH E NATURE OF PERSONAL RECEIPT OR A CAPITAL RECEIPT NOT TAXABLE AS AN INCOME UNDER IN COME TAX ACT, 1961. 3. WITHOUT PREJUDICE TO BOTH OF THE ABOVE GROUNDS T HE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE DECISION OF LD. A.O. OF NOT DEDUCT ING A SUM OF RS.50000/- PAID (RE-INVESTED) BY THE APPELLANT TO THE DEVELOPER TOW ARDS STILT CAR PARKING FACILITY TO BE PROVIDED WITH THE REDEVELOPED FLAT. 4.THE APPELLANT THEREFORE PRAYS YOUR HONOUR TO BE K IND ENOUGH TO- I. ADMIT THE APPEAL AND GRANT STAY AGAINST THE RECOVER Y OF DEMAND, II. SET ASIDE THE ORDER OF THE CIT(A), III. DELETE ALL ILLEGAL ADDITIONS AND DISALLOWANCES UPHE LD BY CIT(A), IV. GRANT JUSTICE. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER DELETE, CHANGE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL WHICH ARE INDEPE NDENT & WITHOUT PREJUDICE TO EACH OTHER. 2. LONG TERM CAPITAL GAIN OF RS.8,75,000/- WAS SHOW N BY THE ASSESSEE IN RESPECT OF TRANSFER OF HIS SHARE IN FLAT 1-A, HA RNESS APTS., JVPD SCHEME, MUMBAI. THE ASSESSEE WAS REQUIRED TO EXPLA IN. IN RESPONSE, THE ASSESSEE FILED LETTER DATED 13 TH AUGUST 2010 AND THE COPY OF THE AGREEMENT. FROM THE COPY OF AGREEMENT, IT WAS OBSE RVED BY THE AO THAT PROPERTY IS OWNED BY THE ASSESSEE JOINTLY WITH HIS WIFE NAMELY MRS. MAMTA VASUDEV KATARIA. THE ASSESSEE SOLD THE DEVEL OPMENT RIGHT TO THE DEVELOPER FOR CONSTRUCTING A NEW BUILDING ON THE SA ID PROPERTY BY AVAILING TRANSFERABLE DEVELOPMENT RIGHTS (TDR). IN CONSIDER ATION OF THE ABOVE, THE DEVELOPER AGREED TO GIVE A CORPUS AMOUNT OF RS.18,0 0,000/-. THE DEVELOPER ALSO AGREED TO GIVE THE MEMBER A COMPENSA TION OF RS.20,000/- PER MONTH FOR 24 MONTHS I.E. TOTAL SUM OF RS.5,28,0 00/- FOR INCONVENIENCE AND HARDSHIPS WHICH SHALL BE FACED BY THE MEMBER FO R SHIFTING TO A TEMPORARY ALTERNATE ACCOMMODATION. THUS THE ASSESS EE HAD RECEIVED A TOTAL A SUM OF RS.23,28,000/- ALONGWITH THE CO-OWN ER OF THE PROPERTY NAMELY THE WIFE OF THE ASSESSEE. IT WAS ALSO NOTIC ED BY THE AO THAT THE MARKET VALUATION FOR STAMP VALUATION PURPOSE OF THE TRANSFERABLE DEVELOPMENT RIGHTS WAS DETERMINED AT A SUM OF RS.23 ,28,000/- AND THAT 3 ITA NO.859/MUM/2012 SHRI VASUDEV KATARIA. . AMOUNT ONLY WAS DISBURSED TO THE ASSESSEE BY WAY OF CORPUS FUND OF RS.18,00,000/- AND FOR INCONVENIENCE AND HARDSHIP A NOTHER SUM OF RS.5,28,000/-. 3 IN THIS VIEW OF THE SITUATION, THE AO OBSERVED TH AT BOTH THE AMOUNT WERE PART OF ONE COMPOSITE AGREEMENT AND THUS TOTAL SALE CONSIDERATION FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN IS SUM OF RS.23,28,000/-. THE ASSESSEE WAS ALSO REQUIRED TO EXPLAIN AS TO WHY ONLY A SUM OF RS.8,75,000/- WAS DECLARED IN PLACE OF RS. 9,00,000/- BEING FALLING TO THE SHARE OF THE ASSESSEE ON ACCOUNT OF CORPUS FUNDS. AFTER DISCUSSING ALL THESE THINGS, THE LD. AO HAS ADOPTED TOTAL SALE CONSIDERATION AT RS.23,28,000/- AND AS ASSESSEE HAS INVESTED A TOTAL SUM OF RS.17,50,000/- IN REC BONDS FOR CLAIMING EXEMPTI ON U/S. 54EC AGAINST SALE CONSIDERATION, THE AO HAS GRANTED BENE FIT OF RS.7,75,000/- AND HAS BROUGHT TO TAX A NET AMOUNT OF RS.3,89,000/ -FOR THE PURPOSE OF LONG TERM CAPITAL GAIN. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A) WHO HAS UPHELD THE ACTION OF THE AO. 4. AFTER NARRATING THE FACTS, IT IS THE CASE OF THE LD. AR THAT NO CAPITAL GAIN CAN BE ASSESSED IN RESPECT OF TRANSFER DEVELOP MENT RIGHTS AND THE ACTION OF THE AO IN TREATING ANY PART OF THE SALE C ONSIDERATION BEING LIABLE FOR LONG TERM CAPITAL GAIN SHOULD BE DISCARDED. TO SUPPORT SUCH CONTENTION REFERENCE WAS MADE TO THE FOLLOWING DECI SIONS ACCORDING TO WHICH TRANSFER OF TDR CANNOT BE BROUGHT TO TAX AS N O COST OF ACQUISITION WAS INVOLVED. I. LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. V/S I TO [2012] 28 TAXMANN.COM 196 (MUMBAI-TRIB.). WHEREIN IT HAS BEE N HELD THAT TRANSFERABLE DEVELOPMENT RIGHTS AVAILABLE UN DER DEVELOPMENT CONTROL REGULATION OF GREATER MUMBAI, 1 991, AMOUNTS TO TRANSFER OF A CAPITAL ASSET AND SINCE NO COST OF ACQUISITION CAN BE ASCRIBED TO SUCH A RIGHT, COMPUT ATIONAL PROVISIONS OF SECTION 48 CANNOT BE APPLIED AND, THE REFORE, SUCH 4 ITA NO.859/MUM/2012 SHRI VASUDEV KATARIA. . TRANSFER CANNOT BE SUBJECTED TO TAX UNDER THE HEAD CAPITAL GAIN SIMILAR PROPOSITION HAS ALSO LAID DOWN IN THE FOLLO WING DECISION. II. RITA SUNIL MANAKTALA, MUMBAI VS AO ORDER DATED 09/1 0/2013 IN ITA NO.5271/MUM/2012 FOR THE ASSESSMENT YEAR 200 8-09, COPY PLACED ON RECORD AND GIVEN TO LD. DR. III. DECISION DATED 25 TH JANUARY 2011 IN ITA NO.7209/MUM/2010 IN THE CASE OF KIRANBEN S. SHAH V/S AO ASSESSMENT YEA R 2005-06. IT IS HELD THAT COMPENSATION FOR HARDSHIP AND INCON VENIENCE COST TO ASSESSEE IS NOT LIABLE FOR TAXATION ON THE GROUN D THAT THE SAME DOES NOT REFER TO ANY TRANSFER OR SURRENDER OF RIGH TS BUT IS FOR INCONVENIENCE AND HARDSHIP CAUSED TO THE ASSESSEE D UE TO CONSTRUCTION ACTIVITY IN THE BUILDING AND SUCH A CO MPENSATION CANNOT BE TREATED FOR RIGHT OF ASSET. THEREFORE, NO T LIABLE FOR TAXATION UNDER SECTION 45. ON THE OTHER HAND LD. DR RELYING UPON THE ORDER PAS SED BY THE AO AND CIT(A) SUBMITTED THAT ORDER PASSED BY THE CIT(A ) SHOULD BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE AO, IN THE ASSESSMENT ORDER HA S TREATED ENTIRE AMOUNT RECEIVED BY THE ASSESSEE WHICH IS A SUM OF R S.23,28,000/- BEING LIABLE FOR ASSESSMENT UNDER THE HEAD CAPITAL GAIN . THIS VIEW OF THE AO IS ALSO SUPPORTED BY THE REASON THAT MARKET VALUATION FOR STAMP VALUATION WAS ALSO DETERMINED AT 23,28,000/-. ALL THESE FACT S ARE MENTIONED IN PARA 4 OF THE ASSESSMENT ORDER. IF IT IS SO THEN E NTIRE CONSIDERATION OF RS.23,28,000/- HAS TO BE CONSIDERED ONLY ON ACCOUNT OF TRANSFER OF DEVELOPMENT RIGHTS. THAT BEING SO, RESPECTFULLY FO LLOWING THE AFOREMENTIONED DECISIONS, IT HAS TO BE HELD THAT NO CAPITAL GAIN COULD BE CHARGED ON TRANSFER OF TDR AS NO COST OF ACQUISITIO N CAN BE ASCRIBED TO SUCH A RIGHT. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE. IN THIS VIEW OF THE SITUATION, WE HOLD THAT NO CAPITAL GAIN WAS LIABLE TO BE ASSESSED IN RESPECT OF SALE CONSIDERATION RECEIVED BY THE ASSESSEE FOR 5 ITA NO.859/MUM/2012 SHRI VASUDEV KATARIA. . TRANSFER OF DEVELOPMENT RIGHTS. THUS, A SUM OF RS. 3,89,000/- TREATED BY THE AO AS BEING LIABLE FOR LONG TERM CAPITAL GAIN I S DELETED AND GROUND NO.1 OF THE ASSESSEE IS ALLOWED IN THE MANNER AFORE SAID. 6. SO FAR AS IT RELATES TO THE OTHER GRIEVANCE OF T HE ASSESSEE, WE MAY OBSERVE THAT TOTAL AMOUNT OF INCOME ASSESSED BY THE AO IS SUM OF RS.23,96,690/- OUT OF WHICH A SUM OF RS.20,10,690/- IS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME AND THE ONLY ADDIT ION MADE BY THE AO IS A SUM OF RS.3,89,000/- WHICH IS ASSESSED AS LONG T ERM CAPITAL GAIN. SINCE WE HAVE DELETED THE ADDITION OF RS.3,89,000/- , NO GRIEVANCE OF THE ASSESSEE SURVIVE AS MENTIONED IN THE GROUND NO.2,3, 4 AND 5. THEREFORE OTHER GROUNDS RAISED BY THE ASSESSEE HAVE BECOME IN FRUCTUOUS. IT WAS ALSO THE CONTENTION OF THE ASSESSEE THAT IF THE GRO UND NO. 1 IS DECIDED IN THE FAVOUR OF THE ASSESSEE THEN OTHER GROUND WILL N OT SURVIVE. ACCORDINGLY OTHER GROUNDS ARE DISMISSED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT 13 TH MAY, 2014. !2 - 01( % ! 3 4 5 13/05/ 2014 1 - 6 7 SD/- SD/- ( N.K.BILLAIYA ) ( I.P.BANSAL ) !% / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 4 DATED.- 13/05/2014 F{X~{T? P.S/. . . !2 !2 !2 !2 - -- - +/89 +/89 +/89 +/89 :!9(/ :!9(/ :!9(/ :!9(/ / COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. ; / CIT CONCERNED, MUMBAI 6 ITA NO.859/MUM/2012 SHRI VASUDEV KATARIA. . 5. 9<6 +/ , , / DR, ITAT, MUMBAI E BENCH 6. 6=' / GUARD FILE. !2 !2 !2 !2 / BY ORDER, ,9/ +/ //TRUE COPY// > >> > / ? ? ? ? @ @ @ @ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI