SUCCESSFUL PROPERTIES P. LTD, MUMBAI V. ITO 4(3)(4), MUMBAI

ITA 9100/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84489 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-10-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: NIRAV SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition
• Section: 50C; 2(14); 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE : SHRI I.P.BANSAL, JM & SHRI R.C.SHARMA , A M ITA NO. 9100 / MUM/20 1 0 ( ASSESSMENT YEAR : 200 5 - 200 6 ) M/S SUCCESSFUL PROPERTIES PVT. LTD., 7 , TALDHWAJ BHAVAN, 3 RD ROAD, PANJRAPOLE, MUMBAI - 400 004 VS. ITO - 4(3)(4), MUMBAI - 20 PAN/GIR NO. : A ADCS 1023 M ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI NIRAV SHAH /REVENUE BY : SHRI VIJAY KUMAR BORA DATE OF HEARING : 1 6 TH OCT . 201 4 DATE OF PRONOUNCEME NT : 11/12/ 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , DATED 29 - 9 - 2010 FOR ASSESSMENT YEAR 200 5 - 0 6 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T. ACT . 2. RIV AL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE C OMPANY IS ENGAGED INTO MAKING INVESTMENTS IN PROPERTIES AND SHARES AS WELL AS UNITS OF MUTUAL FUNDS. THE COMPANY BUYS AND SELLS PROPERTIES FOR INVESTMENTS AND DISPOSES OF INVESTMENTS ONCE THE TARGET OF PROFIT IS ACHIEVED. THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS ON SALE OF SUCH PROPERTY . THE ASSESSEE HAD PREFERRED TO OFFSET SUCH INCOME AGAINST UNABSORBED LOSSES OF EARLIER YEAR. SIMILARLY, THE ASSESSEE ALSO HAD EA RNED PROFIT ON SALE OF SUCH PROPERTY WHERE THE ITA NO. 9100 /1 0 2 ASSESSEE HAD EARNED SHORT TERM CAPITAL 'GAIN. THE ASSESSEE HAD PREFERRED TO SET OFF SUCH SHORT TERM CAPITAL GAINS AGAINST UNABSORBED LOSSES OF EARLIER YEAR. T HE AO HAS NOT ALLOWED ANY SUCH SET OFF OF INCOME AG AINST EARLIER YEARS UNABSORBED LOSSES. THE ASSESSING OFFICER TREAT ED SUCH LOSS AS BUSINESS LOSS AS AGAINST CAPITAL LOSS AND HAD COMPLETED THE ASSESSMENT ON SUCH BASIS O N THE GROUND THAT SUCH ACTIVITY WAS AN ADVENTURE IN THE NATURE OF TRADE AND COMMERCE AND HENCE INCO ME WOULD FALL VIS. 28 AND NOT U/ S. 45 OF THE INCOME TAX ACT, 1961. 3. WITH REGARD TO THE LONG TERM CAPITAL GAIN ON SALE OF FLATS, THE AO OBSERVED THAT CAPITAL GAIN IN RESPECT OF SALE OF SIX FLATS HAVE BEEN INDEXED WITH REFERENCE TO THE COST OF A CQUISITION, BUT WHILE SHOWING THE SALE CONSIDERATION, THE VALUE SHOWN UNDER SECTION 50C HAS NOT BEEN ADOPTED. IF THE SAME IS CONSIDERED, THE POSITION WOULD BE DIFFERENT BECAUSE AS PER THE STAMP DUTY, THE VALUE OF THE SIX FLATS ARE SHOWN AS UNDER AS AGAINST THE ACTUAL CONSIDERATION DECLARED BY THE ASSESSEE. AGAIN, THE ASSESSEE HAS SHOWN BREAK UP OF PAYMENTS IN RESPECT OF EACH FLAT IN DIFFERENT FINANCIAL YEARS WHEREAS THE LAST PAYMENT ONLY COULD BE CONSIDERED AS HAVING RESULTED IN ACQUISITION OF THE CONCERNED FLAT I.E. F.Y.2000 - 01. OFFICE NO. NAME OF BUILDING PURCHASE SALE SEC.50C PROFIT 1. 319 BAWA TOWER, SECTOR 17, VASHI, NAVI MUMBAI 2,10,750 2,50,000 3,61,000 1,50,250 2. 320 - DO - 3,04,790 3,70,000 5,37,000 2,32,210 3. 321 - DO - 2,01,750 2,50,000 3,61,00 0 1,59,250 4. 318 - DO - 2,01,750 2,50,000 4,13,000 2,11,250 5. 322 - DO - 2,01,750 2,00,000 3,00,000 98,250 6. 411 - DO - 3 , 49 , 920 2, 97 , 5 00 4, 47 ,000 97,080 TOTAL: 14,70,710 16,17,500 24,19,000 9,48,290 SINCE T HE PROFIT ON FLAT TRADING HAS BEEN TAKEN BY AO UNDER SECTION 28, THE AMOUNT OF RS. 1,55,790/ - WAS ADOPTED AS SUCH INSTEAD OF RS. 8,489/ - ITA NO. 9100 /1 0 3 CREDITED TO P & L ACCOUNT BY THE ASSESSEE. THUS, NO LONG TERM CAPITAL LOSS WAS ALLOWED SET OF AS CLAIMED BY THE ASSESSEE IN THE COMPUTATION. 4. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF AO, AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT ASSESSEE WAS MAKING INVESTMENT IN FLATS. SINC E THE INVESTMENT WAS HELD FOR MORE THAN 3 YEARS, ON ITS SALE THE ASSESSEE HAS CLAIMED INDEXATION OF COST OF ACQUISITION AND BENEFIT OF LONG TERM CAPITAL GAIN. THE AO FOUND THAT ASSESSEE WAS DEALING IN FLATS, THEREFORE, HELD THAT GAIN WAS BUSINESS PROFIT AN D, THEREFORE, NOT ELIGIBLE FOR SET OFF AGAINST LONG TERM CAPITAL LOSS . AS PER OUR CONSIDERED VIEW, IN CASE INVESTMENT ARE BEING MADE IN LAND AND BUILDING, ON ITS SALE THE ASSESSEE IS ENTITLED TO CLAIM SUCH PROFIT AS CAPITAL GAIN AND BENEFIT OF INDEXATION IS ALSO AVAILABLE TO IT. HOWEVER, AT THE VERY SAME TIME SUCH CAPITAL GAIN IS COMPUTED BY TAKING INTO ACCOUNT THE VALUE OF PROPERTY DETERMINED BY THE REGISTRAR FOR THE STAMP DUTY PURPOSE IN VIEW OF THE PROVISIONS OF SECTION 50C. WHERE THE ASSESSEE IS HOLDIN G LAND AND BUILDING AS ITS STOCK IN TRADE, PROFIT ARISING ON ITS SALE WILL BE LIABLE TO TAX AS BUSINESS INCOME AND ASSESSEE WILL NOT BE ENTITLED FOR ANY INDEXATION AND LOWER RATE OF TAX AS APPLICABLE IN CASE OF LONG TERM CAPITAL GAIN S . HOWEVER, WHERE SUCH GAIN IS ASSESSED AS BUSINESS, PROVISIONS OF SEC.50C WILL NOT BE APPLICABLE FOR COMPUTING SUCH GAINS. THE CONTENTION OF THE ASSESSEE WAS THAT THE LAND AND BUILDING WHICH HAS NOT BEEN FULLY CONSTRUCTED/COMPLETED, CANNOT BE TERMED AS BUILDING/SHOPS AND FOR IN VESTMENT IN SUCH PROPERTY AND RIGHTS INTO THE SAID PROPERTY TILL THE TIMES SUCH PROPERTY COMPLETED CAN NOT BE CALLED BUILDING/SHOPS. AS PER THE ASSESSEE THE SALE OF SHOPS DURING THE YEAR ITA NO. 9100 /1 0 4 UNDER CONSIDERATION SHALL NOT ATTRACT PROVISIONS OF SECTION 50C SINCE ASSESSEE WAS ONLY HOLDING RIGHTS IN THE SHOPS AND NOT THE SHOP ITSELF IN TRUE SENSE OF THE TERM. HOWEVER, WE DO NOT FIND ANY SUBSTANCE IN THIS ARGUMENT OF THE ASSESSEE. THE ASSESSEE HAS PURCHASED A SHOP IN A BUILDING WHICH WAS UNDER CONSIDERATION, ,THERE FORE, EVEN THOUGH CONSTRUCTION WAS NOT COMPLETED THE ASSESSEE WAS OWNER OF THE SHOPS SO PURCHASED. MERELY BECAUSE THE BUILDING WAS UNDER CONSTRUCTION, IN WHICH SHOPS WERE SITUATED, THEY CANNOT BE EXCLUDED FROM THE TERM CAPITAL ASSETS U/S. 2(14) OF THE ACT W HICH MEANS PROPERTY OF ANY KIND. IT APPEARS FROM THE RECORD THAT WHILE DECIDING THE ISSUE THE AO HAS NOT DELIBERATED ASSESSEES CONTENTION WITH REGARD TO THIS ASPECT OF THE MATTER IE. SALES OF RIGHT IN THE SHO PS AND NOT THE SHOPS ITSELF. KEEPING IN VIE W TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE RESTORE THE ENTIRE APPEAL BACK TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH IN TERMS OF OUR ABOVE OBSERVATION. THE AO IS ALSO DIRECTED TO ALLOW SET OFF AND CARRY FO RWARD OF LOSS AS PER PROVIS IONS OF SEC.72 OF THE I.T. ACT. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 / 1 2 / 201 4 . / 1 2 / 2014 S D/ - S D/ - ( ) ( I.P.BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MU MBAI ; DATED 11 / 1 2 /2014 /PKM , PS ITA NO. 9100 /1 0 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//