TAUQEER FATEMA RIZVI, MUMBAI V. I.T.O. WD.19(3)(4), MUMBAI

ITA 8862/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78836 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 03-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 30-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: VIPUL B SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Surrender of tenancy right
• Section: 131; 54; 143(3); 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBE R . / ITA NO. 8862 / MUM./ 2011 ( / ASSESSMENT YEAR : 200 5 06 ) MRS. TAUQEER FATEMA RIZVI BUNGALOW NO.27, SARASWAT CHS LTD. KALYANI NAGAR, PUNE 411 014 .. / APPELLANT V/S INCOME TAX OFFICER WARD 1 9 ( 3 ) 4, MU MBAI .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AA PPR7311C / ASSESSEE BY : M R . VIPUL B. SHAH / REVENUE BY : MR. ASHOK SURI / DATE OF H EARING 03 . 0 3 .201 4 / DATE OF ORDER 02.05.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 8 TH OCTOBER 2011 , PAS SED BY THE LEARNED COMMISSIONER (APPEALS) XXX, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 200 5 06 . THE SOLE DISPUTE MRS. TAUQEER FATEMA RIZVI 2 IN THIS APPEAL IS, WHETHER OR NOT THE LEARN ED COMMISSIONER (APPEALS) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CHARGING THE LONG TERM CAPITAL GAIN AT ` 27,44,173, WITHOUT CONSIDERING THE COST OF THE PROPERTY AT THE TIME OF ACQUISITION. 2 . FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL WHO HAS SHOWN SALE OF FLAT ON WHICH SHE HAS RECEIVED SALE CONSIDERATION OF ` 38,78,375. THE COST OF ACQUISITION OF THE PROPERTY HAS BEEN TAKEN BY THE ASSESSEE AT ` 3,64,000 . 3 . THE ASSESSEE, BEFORE THE ASSESSING OFFICER HAD SUBMITTED THAT THE FLA T WHICH HAS BEEN SOLD DURING THE YEAR WAS ALLOTTED TO THE ASSESSEE ON 6 TH MAY 1982, AS AN ALTERNATE A CCOMMODATION FOR SURRENDERING HER TENANCY RIGHTS IN THE OLD STRUCTURE BY THE BUILDER . THE ASSESSEE WAS AN OLD TENANT ALONG WITH HER SON IN THE OLD BUILDING ADMEASURING 1,200 SQ.FT. AN AGREEMENT WAS ENTERED INTO WITH THE BUILDER M/S. ABIS CONSTRUCTION, ON 6 TH MAY 1982, WHO HAS UNDERTAKEN THE OLD STRUCTURE FOR DEVELOPMENT. IN LIEU OF THE SURRENDER OF THE TENANCY RIGHTS, T HE BUILDER HAD OFFERED TWO FLATS ADMEAS URING 728 SQ.FT. AND 500 SQ.FT. ON OWNERSHIP BASIS AS PERMANENT ALTERNATE ACCOMMODATION. THE ASSESSEE WAS ALSO REQUIRED TO DEPOSIT ` 2,000 WITH THE BUILDER TOWARDS SOCIETY DEPOSIT. THE ASSESSEE HAS TAKEN THE VALUE OF THE ALLOCATED FLAT AS ON 16 TH MAY 1982, AT ` 3,64,000 @ ` 500 PER SQ.FT. WHICH WAS ON THE BASIS OF SALE AGREEMENT ENTERED INTO BY THE BUILDER IN THE SAME MONTH IN THE SAME BUILDING WITH OTHER PERSONS. HENCE, IT WAS SUBMITTED THAT THE COST OF ACQUISITION OF THE FLAT WHICH WAS ACQUIRED BY WAY OF SURRENDERING OF TENANCY RIGHT SHOULD BE TAKEN AS ` 3,64,000. 4 . HOWEVER, THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION AND HELD THAT UNDER SECTION 48, ONLY THE AMOUNT ACTUALLY INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF CAPI TAL ASSET MRS. TAUQEER FATEMA RIZVI 3 AND THE ACTUAL COST OF ACQUISITION OF THE ASSET CAN BE ALLOWED TO BE DEDUCTED FROM THE FULL VALUE OF CONSIDERATION. THE ASSESSEE HAS NOT PAID ANY CONSIDERATION EXCEPT FOR MAKING DEPOSIT OF ` 2,000 WITH THE BUILDER THAT TO BE TOWARDS SOCIETY DEPOS IT. APART FROM THAT THE ASSESSEE WAS ALSO REQUIRED TO PAY SUM OF ` 218.75 TO THE BUILDER EVERY MONTH FROM THE DATE OF TAKING OF POSSESSION OF THE NEW PREMISE IN THE MANAGEMENT OF THE BUILDING TILL THE PROPERTY WAS HANDED OVER BY THE BUILDER TO THE SOCIETY. HENCE, THE ASSESSING OFFICER TOOK THE COST OF ACQUISITION OF ` 2,000 ONLY. THE ASSESSING OFFICER RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN VARGHESE (K.P.) V/S I TO, [1981] 131 ITR 597 ( SC ) AND HELD THAT NOTIONAL VALUE CANNOT BE ACCEPTED. HE ALSO DISTINGUISHED THE CASE LAWS RELIED UPON BY THE ASSESSEE IN CIT V/S I RANI (D.A.)(DR.), [ 1981 ] 234 ITR 850 ( SC ) AND THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT V/S ABRAR ALVI , [ 2001 ] 247 ITR 312 ( BOM .). ACCORDINGLY , HE REJECTED THE COST OF ACQUISIT ION OF THE FLAT AT ` 3,64,000 AND THE SAME WAS TAKEN AT ` 2,000. THUS, THE LONG TERM CAPITAL GAIN WAS WORKED OUT IN THE FOLLOWING MANNER: SALE CONSIDERATION AS PER MARKET VALUE UNDER SECTION 50C ` 37,78,375 LESS: BROKERAGE ` 35,000 ` 38,43,375 LESS: INDEXED COST OF ACQUISITION AS PER THE ORIGINAL RETURN ` 8,862 LESS: EXEMPTION U/S 54 ` 10,90,340 LONG TERM CAPITAL GAIN ` 27,44,173 5 . THE LEARNED COMMISSIONER (APPEALS) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN ADOPTING THE COST OF ACQUISIT ION AT ` 2,000 INSTEAD OF ` 3,64,000 AND UPHELD THE CALCULATION OF THE LONG TERM CAPITAL GAIN AT ` 27,44,173, WORKED OUT BY THE ASSESSING OFFICER. MRS. TAUQEER FATEMA RIZVI 4 6 . THE LEARNED COUNSEL FOR THE ASSESSEE, AFTER EXPLAINING THE ENTIRE FACTS SUBMITTED THAT THE ASSESSEE HAS GOT THE OWNERSHIP RIGHT OF THE PROPERTY IN EXCHANGE OF TENANCY RIGHTS AS THE ASSESSEE WAS AN OLD TENANT IN THE SAID BUILDING. BECAUSE OF THE SURRENDER OF TENANCY RIGHTS, THE BUILDER OFFERED ALTERNATE ACCOMMODATION ON OWNERSHIP BASIS TO THE ASSESSEE. THUS, THE TENANCY RIGHTS HAVE TO BE VALUED AS ON THE DATE OF AGREEMENT WITH THE BUILDER I.E., 6 TH MAY 1982. THE SAID NEWLY ACQUIRED FLAT WAS SOLD ON 29 TH OCTOBER 2004 AND, THEREFORE, THE LONG TERM CAPITAL GAIN HAS ARISEN TO THE ASSESSEE AND WHILE COMPUTING THE TAX O N LONG TERM CAPITAL GAIN, THE COST OF ACQUISITION ON ACCOUNT OF SURRENDER OF TENANCY RIGHTS HAS TO BE GIVEN. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOLLOWING CASE LAWS: I ) CIT V/S GEORGE HENDERSON & CO. LTD., [1967] 66 ITR 622 (SC) ; II ) CIT V/S ABRAR ALVI, [2001] 247 ITR 312 (BOM.) ; III ) BALMUKUND P ACHARYA V/S ITO [2010] 45 DTR (MUM.) (TRIB.) 281; IV ) ATUL G. PURNAIK V/S ITO, [2011[ 132 ITD 499 (MUM.) 7 . AS REGARDS THE VALUE OF THE FLAT OF ` 3,64,000, HE SUBMITTED THAT THE ASSESSEE HAS TAKEN THE SAID VALUE ON TH E BASIS OF SIMILAR TRANSACTIONS UNDERTAKEN BY THE BUILDER IN THE MONTH MAY 1982, THEREFORE, SUCH A BASIS CANNOT BE REJECTED. 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMM ISSIONER (APPEALS) AND SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY MONEY ON THE ACQUISITION OF THE FLAT AND, THEREFORE, THE A .O. HAS RIGHTLY DENIED THE COST OF ACQUISITION OF FLAT OF ` 3,64,000. 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW. THE ASSESSEE, IN THE MRS. TAUQEER FATEMA RIZVI 5 PRESENT CASE, IS AN OLD TENANT IN A BUILDING WHEREIN , SHE WAS RESIDING WITH HER SON IN THE FLAT AREA ADMEASURING 1,200 SQ.FT. THE SAID PREMISE WAS UNDER THE JOINT TENANCY ALONG WI TH HER SON. ON 6 TH MAY 1982, THE AGREEMENT WAS ENTERED INTO BY A BUILDER , M/S. ABIS CONSTRUCTION, WHEREBY THE BUILDER UNDERTOOK TO DEVELOP THE SAID PROPERTY AND IN ORDER TO REHABILITATE THE TENANTS , HE ALLO CATED TWO FLATS , ONE TO THE ASSESSEE AND OTHER TO HER SON , ADMEASURING 728 SQ.FT. AND 500 SQ.FT. RESPECTIVELY, ON OWNERSHIP BASIS AS A PERMANENT ALTERNATIVE ACCOMMODATION. IN THIS MANNER, THE ASSESSEE GOT THE ACQUISITION OF THE FLAT ON OWNERSHIP BASIS IN THE PROPOSED NEW BUILDING. BESIDES THIS, THE ASSESS EE WAS ALSO REQUIRED TO DEPOSIT ` 2,000 WITH THE BUILDER FOR SOCIETY MEMBERSHIP . THEREAFTER, THE ASSESSEE ON 29 TH OCTOB ER 2004, HAS SOLD THIS PROPERTY AND FOR THE PURPOSE OF SECTION 50C, THE VALUE OF THE SAME WAS TAKEN AT ` 38,78,375. THE REVENUES CASE HA S BEEN THAT THE ASSESSEE HAS NOT INCURRED ANY COST OF ACQUISITION AND, THEREFORE, NO COST CAN BE ATTRIBUTED FOR ACQUIRING THE FLAT , WHEREAS THE ASSESSEES CASE IS THAT THE FLAT WAS ALLOTTED TO HER ON OWNERSHIP BASIS IN LIEU OF SURRENDER OF TENANCY RIGHT AN D, THEREFORE, THE MARKET VALUE OF THE ACQUIRED FLAT SHOULD BE TAKEN AS ON THE DATE OF 16 TH MAY 1982. FOR THE PURPOSE OF ASCERTAINING THE COST, THE ASSESSEE HAS TAKEN THE INSTANCE OF SALE OF SIMILAR KIND OF PREMISE IN THE SAME MONTH WITH THE BUILDER WHICH W AS SOLD FOR ` 3,64,000. IT IS NOW QUITE SETTLED THAT F OR THE PURPOSE OF COST OF ACQUISITION UNDER SECTION 48 AND 49, THE TENANCY RIGHTS I S TO BE TAKEN INTO CONSIDERATION. THIS IS EVIDENT FROM SUB SECTION (2) OF SECTION 55. THE BUILDER HAS GIVEN THE ALTERNA TE FLAT TO THE ASSESSEE ONLY BY VIRTUE OF SURRENDER OF TENANCY RIGHTS BY THE ASSESSEE. HAD THERE BEEN NO TENANCY RIGHT, THE BUILDER WOULD HAVE NOT OFFERED ANY FLAT TO THE ASSESSEE , ON OWNERSHIP BASIS . THUS, IT IS A VALUABLE RIGHT O N WHICH COST OF ACQUISITI ON HAS TO BE DETERMINED. IT IS NOT A CASE THAT THE COST OF ACQUISITION CANNOT BE DETERMINED IN L IE U OF THE SURRENDER OF MRS. TAUQEER FATEMA RIZVI 6 TENANCY RIGHT AT ALL. ONCE THE COST OF ACQUISITION IS DETERMINABLE, THE BENEFIT OF SUCH ACQUISITION HAS TO BE GIVEN WHILE COMPUTING THE TAX ON CAPITAL GAIN. IN THE PRESENT CASE, T HE TENANCY RIGHT GOT CONVERTED INTO ACQUISITION OF A FLAT , WHEN THE ASSESSEE MUST HAVE GOT THE POSSESSION OF NEW FLAT CONSTRUCTED BY THE BUILDER. THUS, THE MARKET VALUE OF THE SAID FLAT AS ON THE DATE OF ITS POSSE SSION WOULD BE THE COST OF ITS ACQUISITION AND, ACCORDINGLY, SUCH COST DEDUCTIBLE WHILE COMPUTING INCOME BY WAY OF CAPITAL GAINS, WHETHER LONG TERM CAPITAL GAIN, AS THE CASE MAY BE. THIS IS AS THE HOLDING PERIOD OF THE CAPITAL ASSETS, BEING THE SAID RESIDE NTIAL FLAT, WOULD ONLY COMMENCE FROM THE DATE THE ASSESSEE IS PUT IN POSSESSION THEREOF AFTER ITS COMPLETION. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO TAKE THE VALUE OF THE FLAT FOR THE PURPOSE OF COST OF ACQUISITION FROM THE YEAR IN WHICH THE ASSESSEE GOT THE ACTUAL POSSESSION OF THE FLAT AND THEN ONLY HE SHALL COMPUTE THE CAPITAL GAIN. THUS, THE ASSESSEES GROUND IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 10 . 1 0 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 2 ND MAY 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 2 ND MAY 2014 SD / - SANJAY ARORA ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 2 ND MAY 2014 MRS. TAUQEER FATEMA RIZVI 7 / COPY OF THE ORDER FORWAR DED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TR UE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI