ITO 22(3)(2), MUMBAI V. LILADHAR R. TANDEL, NAVI MUMBAI

ITA 959/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9621 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Gift; Depreciation; Cost of acquisition; Fair market value
• Section: 143(3); 50C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIL MEMBER ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 (ASSESSMENT YEAR: 2008 - 09) ITO 22(3)(2) VASHI RLY. STATION, COMPLEX TOWER NO.6, 3 RD FLOOR, ROOM NO. 307, NAVI MUMBAI . APPELLANT V/S LILADHAR R. TANDEL LAXMI NIWAS, AT KARVE POST NERUL NAVI MUMBAI 400705 PAN AAFPT6631H . RESPONDENT ASSESSEE BY : SHRI. HARI S. RAHEJA REVENUE BY : SHRI. V. JEN ARDHANAN DATE OF HEARING 13.07 .2017 DATE OF ORDER - 22 .09 .2017 O R D E R PER: R.C. SHARMA . THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 2 YEAR 2008 - 09, IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S. 147 OF I.T.ACT. 2. REVENUE HAS TAKEN FOLLOWING GROUNDS IN ITS APPEAL. 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED BY HOLDING THAT THE LEASEHOLD RIGHTS OF THE PLOTS 23B & 23C WERE ACQUIRED VIDE ALLOTMENT LETTERS OF CIDCO DATED 29.08.2003 AND 08.09.2003. THE ALLOTMENT LETTERS WERE MERE AN OFFER AND LEASEHOLD RIGHTS OVER THE SAID PLOTS WERE NOT ACQUIRED. ALSO, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ADOPT THE COST OF ACQUISITION OF PLOT NO. 23B & 23C AS ON AUGUST/SEPTEMBER 2003 AFTER OBTAINING NECESSARY INFORMATION FROM CIDCO LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED BY HOLDING THAT ON TRANSFER OF PLOT NO. 23 B & 23C, PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED BY ADOPTING THE FULL SALE VALUE CONSIDERATION OF THE PLOTS AT RS. 2,27,00,000/ - AS AGAINST VALUE ADOPTED BY THE STA MP DUTY AUTHORITY OF RS. 5,72,94,000/ - IN RESPECT OF PLOT NO. 23B & 23C. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE REVERED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY G ROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS. 1. ON THE FACTS AND CIRCUMS TANCES OF THE CROSS - OBJECTOR'S CASE AND IN LAW THE LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRM ING THE ACTION OF LD. ASSESSING OFFICER'S ORDER IN RE - OPENING THE ASSESSMENT U/S 147 OF THE ACT BY ISSUE OF NOTICE DATED 05.04.2011 U/S 148 OF THE ACT WHICH IS DUE TO CHANGE IN THE OPINION AND THE CONSEQUENTLY ORDER DATED 17.10.2012 PASSED U/S 143(3) R.W.S . 147 OF THE ACT IS BAD IN LAW. LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 3 2. 0N THE FACTS AND CIRCUMSTANCE S OF THE CROSS - OBJECTOR'S CASE AND IN LAW THE LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF LD. ASSESSING OFFICER IN TREATING LONG TERM CAPITAL GAINS ON SALE OF LEA SEHOLD PLOT NO. 23B AND 23C AS SHORT TERM CAPITAL GAINS. 3. THE CROSS OBJECTOR CRAVE LEAVES TO ADD, AMEND, ALTER, MODIFY AND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF CROSS OBJECTION, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. THE CROSS - OBJECTOR PRAYS THIS HON'BLE TRIBUNAL TO DELETE THE DISALLOWANCE/ADDITIONS MADE BY THE A.O TO THE EXTENT CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 4. R IVAL CONTENTION S HAVE BEEN HEARD AND RECORDED PERUSED. 5. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVI DUAL AND HAD FILED HIS RETURN OF INCOME ON 08.01.2009 DECLARING TOTAL INCOME AT RS.5,15,892/ - . ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 14.12.2010 DETERMINING TOTAL INCOME AT RS.7,25,730/ - . THE COMPLETED ASSESSMENT WAS RE - OPENED ON 05.04 .2011. DURING THE COURSE OF THE RE - ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE RECEIVED LEASE HOLD RIGHT IN THE PLOT NO. 23B & 23C ON 3 RD MAY, 2007. THE SAID PLOTS W ERE TRANSFERRED BY THE ASSESSEE TO SEA QUEEN DEVELOPERS ON 19 TH JULY 2007. IN VIEW OF THIS, AO CAME TO THE CONCLUSION THAT ASSESSEE HAS DERIVED SHORT TERM CAPITAL GAINS ON THE SAID TRANSACTION. FURTHER, AO NOTED THAT OUR OF 10 FAMILY MEMBERS OF MR. RAMACHANDRA M TANDEL, HEAD OF THE FAMILY HAVING ORIGINALLY RIGHT IN TH E SAID PROPERTY, ONLY 4 MEMBERS NAMELY LEELADHAR R TANDEL, HEMANT R TANDEL, GAN ESH R LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 4 TANDEL AND NITIN R TANDEL ENTERED INTO LEASE AGREEMENT WITH CID CO ON 3RD MAY 2007. THESE PARTIES WERE REFERRED TO AS LICENSEES IN THE SAID LEASE AGREEMENT WITH CIDCO. THE AO FURTHER NOTED THAT IN THE RETURN OF INCOME A SSESSEE HAD SHOWN THIS GAIN AS LONG TERM CAPITAL GAIN. AO COMPUTED CAPITAL GAIN ON TRANSFER OF THESE PLOTS AS SHORT TERM GAIN AT RS. 1,42,55,136/ - AFTER CONS IDERING ASSESSEES SHARE AT 1/ 4TH OF TOTAL CONSIDER ATION AND BY APPLYING PROVISIONS OF SECTION 50C OF THE ACT. 6. BY THE IMPUGNED ORDER LD. CIT(A) HELD AS UNDER: 3.3 BEFORE I PROCEED TO DECIDE THE MATTER, IT IS NECESSARY TO SET THE RECORD STRAIGHT IN AS MUCH AS THERE ARE CERTAIN FACTUAL INCONSISTENCIES. F IRSTLY, A SSESSEE WAS NOT ALLOTTED THE PLOT OF LAND BY CIDCO ON OWNERSHIP BASIS BUT ONLY ON LEASE BASIS FOR SIXTY YEARS. THE NEXT CRUCIAL FACT THAT THE LEASE RIGHT WAS ALLOTTED TO THE ASSESSEE ON 29TH AUGUST 2003 WITH RESPECT TO PLOT NO 23B AND ON 8TH SEPTE MBER 2003 WITH RESPECT TO PLOT NO 23C. 3.4 THERE IS NO DISPUTE THAT A SSESSEE 'S FATHER LATE SHRI RAMACHANDRA TANDEL WAS OWNER OF CERTAIN PLOT OF LANDS WHICH WAS ACQUIRED BY THE GOVERNMENT OF MAHARASHTRA BY NOTIFICATION NO. LAQ/C/3369 DATED 3RD DECEMBER 1970 AND SUBSEQUENT NOTIFICATION NO. LAQ/C/3369 3 RD MAY, 1972 U/S.6 OF THE LAND ACQUISITION ACT. THE ACTUAL POSSESSION OF THE LAND WAS TAKEN FROM 1982 TO 1986. AS CAN BE SEEN INFRA, IT BECOMES MANIFEST THAT THERE ARE TWO DISTINCT TRANSACTIONS IN THIS CASE. THE FIRST IS THE ACQUISITION OF THE LAND OF ASSESSEE ' S FATHER AGAINST WHICH ASSESSEE WAS IN RECEIPT OF LEASE OF THE PLOT BY CIDCO IN THE FINANCIAL YEAR 2003 - 2004. THIS TRANSACTION WAS COMPLETED WHEN ASSESSEE GOT LEASEHOLD RIGHTS IN THE YEAR 2003 - 2004. THE SECOND LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 5 TRANSACTION IS THE TRANSFER OF SUCH L EASEHOLD RIGHTS BY THE ASSESSEE TO M/S B.M. SHAH & M.C. SUNNY AND SUBSEQUENTLY TO SEA QUEEN DEVELOPERS FOR A CONSIDERATION OF RS.2,27,00,000/ - WHICH EVENT FALLS IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR U NDER CONSIDERATION. IT IS EVIDENT THAT OUT OF THE ABOVE TWO TRANSACTIONS I AM CONCERNED IN THE PRESENT APPEAL ONLY WITH THE SECOND TRANSACTION WHICH TOOK PLACE IN THE YEAR UNDER CONSIDERATION. COST OF ACQUISITION 3.5 ASSESSEE HAD CONSIDERED FAIR MARKET VALUE OF THE LAND AS ON APRIL 1, 1981 AS COST OF ACQUISITION AND FURTHER INDEXED THE SAME TO ARRIVE AT THE TAXABLE LONG TERM CAPITAL GAINS U/S.49(1) OF THE ACT. ON THE OTHER HAND AO CONSIDERED RS. 1,72,568/ - BEING PREMIUM PAID B Y THE ASSESSEE AS COST OF ACQUISITION AND COMPUTED THE GAIN AS SHORT TERM. 3.6 IN ORDER TO ASCERTAIN WHETHER OR NOT SEC. 49(1) IS APPLICABLE TO THE FACTS OF THE INSTANT CASE, IT IS IMPERATIVE TO HAVE A LOOK AT THE LANGUAGE OF THE SECTION, WHICH IS REPRODU CED AS UNDER: '49 (1) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE - (I) ON ANY DISTRIBUTION OF ASSETS ON THE TOTAL OR PARTIAL PARTITION OF A HINDU UNDIVIDED FAMILY; (II) UNDER A GIFT OR WILL; (III) (A) BY SUCCESSION, INHERITANCE OR D EVOLUTION, OR (B) ON ANY DISTRIBUTION OF ASSETS ON THE DISSOLUTION OF A FIRM, BODY OF INDIVIDUALS, OR OTHER ASSOCIATION OF PERSONS, WHERE SUCH DISSOLUTION HAD TAKEN PLACE AT ANY TIME BEFORE THE T= DAY OF APRIL, 1987, OR (C) ON ANY DISTRIBUTION OF ASSETS ON THE LIQUIDATION OF A COMPANY (D) UNDER A TRANSFER TO A REVOCABLE OR AN IRREVOCABLE TRUST, OR LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 6 (E) UNDER ANY SUCH TRANSFER AS IS REFERRED TO IN CLAUSE (IV) OR CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VIA) OR CLAUSE (VIAA) OR CLAUSE (VICA) OR CLAUSE (VICB) OF SECTION 47; (IV) SUCH ASSESSEE BEING A HINDU UNDIVIDED FAMILY, BY THE MODE REFERRED TO IN SUB - SECTION (2) OF SECTION 64 AT ANY TIME AFTER THE 31ST DAY OF DECEMBER, 1969,THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE.' 3.7 A BARE PERUSAL OF THE PROVISION INDICATES THAT WHERE THE CAPITAL ASSE T BECAME THE PROPERTY OF THE ASSESSEE IN ANY OF THE SITUATIONS CONTEMPLATED IN CLAUSES (I) TO (IV) , THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INCREASED BY THE COST OF I MPROVEMENTS, ETC. THE EXPLANATION BELOW SUB - SECTION (1) DEFINES THE EXPRESSION 'PREVIOUS OWNER OF THE PROPERTY' TO MEAN THE LAST PREVIOUS OWNER WHO ACQUIRED IT BY A MODE OF ACQUISITION OTHER THAN THOSE REFERRED TO IN CLAUSES (I) TO (IV) OF THIS SUB - SECTION . THE SUM AND SUBSTANCE OF SEC. 49(1) IS THAT WHERE A CAPITAL ASSET BECOMES THE PROPERTY OF THE ASSESSEE BY ANY OF THE MODES SPECIFIED IN CLAUSES (I) TO (IV), SUCH AS GIFT OR WILL, SUCCESSION, INHERITANCE OR DEVOLUTION, ETC., THE COST OF ACQUISITION OF SUC H CAPITAL ASSET IN THE HANDS OF THE ASSESSEE RECEIVING SUCH CAPITAL ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH IT WAS ACQUIRED BY THE PERSON TRANSFERRING SUCH CAPITAL ASSET IN THE PRESCRIBED MODES. THE RATIONALE BEHIND THIS PROVISION IS THAT THE TRANSF ER OF SUCH ASSET BY THE PERSON RECEIVING IN ANY OF THE MODES PRESCRIBED, SHOULD NOT GO TAX FREE. IN ORDER TO COMPUTE CAPITAL GAIN ON THE TRANSFER OF ANY CAPITAL ASSET, THE EXISTENCE OF COST OF ACQUISITION IS AN ESSENTIAL ELEMENT. IF THERE IS NO COST OF ACQ UISITION AND THE CASE IS NOT COVERED U/S 55(2), THEN THE COMPUTATION PROVISIONS SHALL FAIL AND NO LIABILITY LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 7 TO TAX SHALL ARISE U/S 45. AS NO COST IS ACTUALLY INCURRED BY THE ASSESSEE IN ACQUIRING THE ASSETS UNDER SUCH MODES, AND ON THE FURTHER TRANSFER OF SUCH ASSETS, THE CAPITAL GAIN IS CONTEMPLATED BY THE LEGISLATURE; THE MECHANISM OF SECTION 49 HAS BEEN PUT IN PLACE TO REMEDY THE SITUATION. THIS PROVISION DEEMS THE COST OF ACQUISITION OF THE ASSESSEE AS THE COST FOR WHICH IT WAS ACQUIRED BY THE PREVIOUS OWNER AS INCREASED BY THE COST OF ANY IMPROVEMENTS INCURRED BY THE PREVIOUS OWNER. 3.8 HOWEVER, IN ORDER TO APPLY THE MANDATE OF SEC. 49(1), IT IS SINE QUA NON THAT THE CAPITAL ASSET ACQUIRED BY THE ASSESSEE IN ANY OF THE MODES PRESCRIBED IN CLAUSES (I) T O (IV) SHOULD BECOME THE SUBJECT MATTER OF TRANSFER AND ONLY IN SUCH A SITUATION WHERE SUCH CAPITAL ASSET IS SUBSEQUENTLY TRANSFERRED, THE COST TO THE PREVIOUS OWNER IS DEEMED AS THE COST OF ACQUISITION OF THE ASSET. IT IS APPARENT FROM THE LANGUAGE OF SUB - SEC. (1) ITSELF WHICH OPENS WITH THE WORDS: 'WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE' AND AFTER ENUMERATING CERTAIN SITUATIONS, PROVIDES THAT 'THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS O WNER OF THE PROPERTY ACQUIRED IT.' THE PHRASE 'THE ASSET' USED IN THE LATER PART OF THE PROVISION RELATES TO THE CAPITAL ASSET WHICH BECAME THE PROPERTY OF THE 'ASSESSEE IN THE GIVEN CIRCUMSTANCES. THE NATURAL COROLLARY WHICH, THEREFORE, FOLLOWS IS THAT TH E COST TO THE PREVIOUS OWNER IS CONSIDERED AS THE COST OF ACQUISITION ONLY OF THE CAPITAL ASSET, WHICH BECOMES THE PROPERTY OF THE ASSESSEE IN THE MODES GIVEN IN CLAUSES (I) TO (IV). BUT ONCE SUCH CAPITAL ASSET IS TRANSFERRED AND ANOTHER CAPITAL ASSET IS A CQUIRED, THERE IS NO APPLICABILITY OF SEC. 49(1) TO SUCH CONVERTED ASSET. 3.9 COMING BACK TO THE FACTS OF THE INSTANT CASE, THE VIEWPOINT OF THE AO THAT THE COST OF ACQUISITION IN THIS CASE ON THE ASSIGNING OF RIGHTS IN THE PLOT TO M/S B.M.SHAH/M.C.SUNNY /SEA QUEEN DEVELOPERS SHOULD BE CONSIDERED AS THE AMOUNT OF COMPENSATION ORIGINALLY AWARDED ON THE ACQUISITION OF LANDS LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 8 FROM ASSESSEE'S FATHER, RELYING ON SEC. 49(1), DOES NOT APPEAR TO BE SOUND. THIS PROVISION CANNOT HAVE ANY APPLICATION AT THE STAGE WHEN THE ASSESSEE TRANSFERRED THE RIGHTS IN THE PLOT TO A THIRD PARTY IN THE YEAR IN QUESTION, BECAUSE WHAT HAS BEEN TRANSFERRED IN THIS YEAR IS THE RIGHT IN THE PLOT, WHICH WAS NOT INHERITED BY THE ASSESSEE FROM HIS FATHER. THE ASSESSEE ONLY RECEIVED THE CAPI TAL ASSET IN THE SHAPE OF RIGHT TO RECEIVE COMPENSATION FROM THE GOVERNMENT ON THE DEATH OF HIS FATHER. COST TO THE PREVIOUS OWNER U/S 49(1) WOULD BE RELEVANT AT THE TIME OF COMPUTING THE CAPITAL GAIN IN THE PRECEDING YEAR, WHEN COMPENSATION WAS RECEIVED I N THE SHAPE OF RIGHT IN THE PLOT. ONCE THE FIRST TRANSACTION ON THE ALLOTMENT OF RIGHTS IN THE PLOT CAME TO AN END, THE PROVISIONS OF SEC. 49(1) ALSO CEASED TO OPERATE. IT COULD NOT HAVE BEEN APPLIED TO THE SECOND INDEPENDENT TRANSACTION ON THE SALE OF SUC H RIGHTS TO M/S. B.M.SHAH/M.C.SUNNY/SEA QUEEN DEVELOPERS IN THE YEAR IN QUESTION. I AM THEREFORE, OF THE VIEW THAT AO WAS JUSTIFIED IN NOT ADOPTING FAIR MARKET VALUE OF THE PROPERTY AS ON APRIL 1, 1981 AS DONE BY THE ASSESSEE. 3.10 HAVING HELD THAT SEC. 4 9(1) IS NOT APPLICABLE, THE IMMEDIATE QUESTION THAT NEEDS TO BE ADJUDICATED IS THAT WHAT IS THE COST OF ACQUISITION OF RIGHTS IN THE PLOT TRANSFERRED TO THE DEVELOPERS BY THE ASSESSEE . IT IS WORTH NOTING THE DECISION OF THE HON 'BLE MUMBAI TRIBUNAL IN ACIT VS. NIRMAL BHOGILAL WHICH WAS DELIVERED ON THE IDENTICAL FACTS. IN THE SAID DECISION, THE MARKET VALUE OF SUCH RIGHTS IN THE PLOT WAS CONSIDERED BY THE STATE GOVT. AS COMPENSATION FOR ACQUISITION OF LAND IN EARLIER YEARS. IF SU CH RIGHTS IN THE PLOT HAD NOT BEEN ALLOTTED, THEN THE ASSESSEE WOULD HAVE BEEN GIVEN CASH EQUIVALENT TO THE MARKET VALUE OF SUCH RIGHTS AS COMPENSATION FOR ACQUISITION OF LANDS. AS IT IS A TRANSACTION WITH THE GOVERNMENT, THE QUESTION OF ANY UNDER HAND PAY MENT ALSO STANDS RULED OUT. SECTION 48 DEALS WITH THE MODE OF COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS'. IT PROVIDES THAT SUCH INCOME SHALL BE COMPUTED BY DEDUCTING FROM THE FULL LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 9 VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RE SULT OF THE TRANSFER OF THE CAPITAL ASSET, THE COST OF ACQUISITION OF THE ASSET AND THE COST OF IMPROVEMENT, IF ANY, ALONG WITH THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. THE FULL VALUE OF THE CONSIDERATION RECEIVED O R ACCRUING AS A RESULT OF THE ACQUISITION BY THE GOVT. IS THE AMOUNT GIVEN AS CONSIDERATION FOR SUCH ACQUISITION OR IN THE ALTERNATIVE THE MARKET VALUE OF ANY OTHER CAPITAL ASSET GIVEN TO THE ASSESSEE AGAINST SUCH ACQUISITION. AS IN THE INSTANT CASE THE G OVT. HAS ALLOTTED RIGHTS IN THE PLOT AS THE FULL VALUE OF CONSIDERATION ON THE ACQUISITION OF LANDS BY IT IN THE YEARS 1982/ 1986, THE MARKET VALUE OF SUCH RIGHT IS TO BE CONSIDERED AS FULL VALUE OF CONSIDERATION AT THE TIME OF COMPUTING CAPITAL GAIN ON TH E FIRST TRANSACTION IN THE PRECEDING YEAR. ONCE A PARTICULAR AMOUNT IS CONSIDERED AS FULL VALUE OF CONSIDERATION AT THE TIME OF ITS PURCHASE, THE SAME SHALL AUTOMATICALLY BECOME THE COST OF ACQUISITION AT THE TIME WHEN SUCH CAPITAL ASSET IS SUBSEQUENTLY TR ANSFERRED. THUS, THE FULL VALUE OF CONSIDERATION SHOULD MEAN THE MARKET VALUE OF THE LEASE RIGHTS IN THE PLOT FOR SIXTY YEARS AT THE TIME OF THE FIRST TRANSACTION WHICH WAS COMPLETED IN AUGUST/SEPTEMBER, 2003 AND THE SAME AMOUNT SHALL BECOME THE COST OF AC QUISITION WHEN SUCH RIGHTS IN THE PLOT BECAME SUBJECT MATTER OF TRANSFER IN THE CURRENT YEAR. I, THEREFORE, DIRECT THE AO TO CONSIDER MARKET VALUE OF SUCH LEASE RIGHTS FOR SIXTY YEARS IN THE PLOT .AS ON AUGUST/SEPTEMBER, 2003 AS THE COST OF ACQUISITION FOR THE PURPOSE OF COMPUTING CAPITAL GAIN WHEN IT WAS TRANSFERRED FOR A CONSIDERATION OF RS.2,27,00,000/ - . THE A.O. IS DIRECTED TO OBTAIN NECESSARY INFORMATION FROM CIDCO IN THIS REGARD TO DETERMINE THE COST OF ACQUISITION. 3.11 FULL VALUE OF CONSIDERATION AND SECTION 5 OC: THE A.O. ADOPTE D THE VALUE OF ASSET SOLD AT RS5 ,72,94,000/ - BY APPLYING THE PROVISIONS OF SEC.50C FOR THE PURPOSES OF COMPUTING CAPITAL GAIN. IN ORDER TO LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 10 CORRECTLY DECIDE THIS ISSUE, IT WOULD BE APT TO CO NSIDER THE PRESCRIPTION OF SEC. 50 C (1), WHICH IS AS UNDER: '50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED O R ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE 'STAMP VALUATION AUTHORITY') FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL, FOR THE PURPOSE OF SECTION 48, BE DEEMED TO BE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER 3.12 ON GOING THROUGH THE ABOVE PROVISION, IT TRANSPIRES THAT WHERE THE FULL VALUE OF CONSIDERATION SHOWN TO HAVE BEEN RECEIVED OR ACCRUING ON THE TRANSFER OF AN ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VALUATION AUTHORITY, THE VALUE SO ADOPTED ETC. SHALL, FOR THE PURPOSES OF SEC. 48, BE DEEMED TO BE FULL VALUE OF CONS IDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. THIS SECTION HAS BEEN INSERTED BY THE FINANCE ACT 2002 W.E.F. 01 - 04 - 2003 WITH A VIEW TO SUBSTITUTE THE DECLARED FULL VALUE OF CONSIDERATION IN RESPECT OF LAND OR BUILDING OR BOTH TRANSFERRED BY T HE ASSESSEE WITH THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VALUATION AUTHORITY. BUT FOR THIS PROVISION, THERE IS NOTHING IN THE ACT, BY WHICH THE FULL VALUE OF A CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAND OR BUILDING OR B OTH IS DEEMED TO BE ANY AMOUNT OTHER THAN THAT ACTUALLY RECEIVED. FROM THE LANGUAGE OF SUB - SEC. (1), IT IS CLEAR THAT THE VALUE OF LAND OR BUILDING OR BOTH ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY SHALL, FOR THE PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH A TRANSFER. TWO THINGS ARE NOTICEABLE FROM THIS PROVISION. FIRSTLY, IT IS A DEEMING PROVISION AND SECONDLY, IT EXTENDS ONLY TO LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 11 LAND OR BUILDING OR BOTH. IT IS MANIFEST THAT A DEEMING PROVISION HAS BEEN INCORPORATED TO SUBSTITUTE THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VALUATION AUTHORITY IN PLACE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER, IN CASE THE LATER IS LOWER THAN THE FORM ER. IT IS FURTHER RELEVANT TO NOTE THAT THE MANDATE OF SEC. 5 OC EXTENDS ONLY TO A CAPITAL ASSET WHICH IS 'LAND OR BUILDING OR BOTH'. IT, THEREFORE, FOLLOWS THAT ONLY IF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH IS TRANSFERRED AND THE CONSIDERATION REC EIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY, THE DEEMING FICTION UNDER SUB - SEC. (1) SHALL BE ACTIVATED TO SUBSTITUTE SUCH ADOPTED OR ASSESSED OR ASSESSABLE VALUE A S FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER IN THE GIVEN SITUATION. 3.13 IT IS A SETTLED LEGAL PROPOSITION THAT A DEEMING PROVISION CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS ENACTED. THE HON'BLE APEX COURT IN CIT V. AMARCHAND N. SHROFF (1963) 48 IT 59 (SC) HAS CONSIDERED THE SCOPE OF A DEEMING PROVISION AND CAME TO HOLD THAT IT CANNOT BE EXTENDED BEYOND THE OBJECT FOR WHICH IT IS ENACTED. SIMILAR VIEW HAS BEEN REITERATED BY THE HON'BLE SUPREME COURT IN CIT V S. MOTHER INDIA REFRIGERATION INDUSTRIES P. LTD. (1985) 155 ITR 711 (SC) BY LAYING DOWN THAT 'LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THESE MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THEIR LEGITIMATE FIELD'. IN CIT VS. ACE BUILDERS P. LTD. (2006) 281 ITR 210 (BORN), THE HON'BLE JURISDICTIONAL HIGH COURT CONSIDERED THE FACTS OF A CASE IN WHICH THE ASSESSEE WAS A PARTNER IN A FIRM WHICH WAS DISSOLVED IN THE YEAR 1984 AND THE ASSESSEE WAS ALLOTTED A FLAT TOWARDS THE CREDIT IN THE CAPITAL ASSET WITH THE FIRM. THE ASSESSEE SHOWED THE FLAT AS CAPITAL ASSET IN ITS BOOKS OF ACCOUNT AND DEPRECIATION WAS CLAIMED AND ALLOWED FROM YEAR TO YEAR. IN THE PREVIOUS YEAR RELEVANT TO ASST. YEAR 1992 - 93, THE ASSESSEE SOLD THE FLAT A ND INVESTED THE NET SALE PROCEEDS IN A SCHEME ELIGIBLE U/S.54E OF THE ACT AND ACCORDINGLY DECLARED NIL INCOME LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 12 UNDER THE HEAD 'CAPITAL GAINS'. THE AO FORMED THE VIEW THAT SINCE THE BLOCK OF BUILDING CEASED TO EXIST ON ACCOUNT OF SALE OF FLAT DURING THE YEAR , THE WRITTEN DOWN VALUE OF THE FLAT WAS LIABLE TO BE TAKEN AS COST OF ACQUISITION U/S.54E OF THE ACT. HE FURTHER HELD THAT SINCE THE ASSESSEE HAD AVAILED DEPRECIATION ON SUCH ASSET, WHICH WAS OTHERWISE A LONG - TERM CAPITAL ASSET, THE DEEMING PROVISION U/S. 50 WOULD APPLY AND IT WOULD BE TREATED AS CAPITAL GAIN ON THE SALE OF SHORT - TERM CAPITAL ASSET AND HENCE NO BENEFIT U/S.54E COULD BE ALLOWED. WHEN THE MATTER CAME UP BEFORE THE HONBLE BOMBAY HIGH COURT, IT WAS NOTICED THAT SUB - SECTIONS(1) AND (2) OF SEC. 50 CONTAINED A DEEMING PROVISION AND SUCH FICTION WAS RESTRICTED ONLY TO THE MODE OF COMPUTATION OF CAPITAL GAIN CONTAINED IN SECTIONS 48 AND 49 AND HENCE IT DID NOT APPLY TO OTHER PROVISIONS. THE ASSESSEE WAS HELD TO BE ELIGIBLE FOR EXEMPTION U/S.54E IN R ESPECT OF CAPITAL GAIN ARISING OUT OF THE CAPITAL ASSET ON WHICH DEPRECIATION WAS ALLOWED. 3.14 IN VIEW OF THE AFORENOTED JUDGMENTS RENDERED BY THE HON'BLE APEX COURT AND THAT OF THE HON 'BLE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT A DEEMING PROVISION CAN BE APPLIED ONLY IN RESPECT OF THE SITUATION SPECIFICALLY GIVEN AND HENCE CANNOT GO BEYOND THE EXPLICIT MANDATE OF THE SECTION. TURNING TO SEC. 50C, IT IS SEEN THAT THE DEEMING FICTION OF SUBSTITUTING ADOPTED OR ASSESSED OR ASSESSABLE VALUE BY THE STAM P VALUATION AUTHORITY AS FULL VALUE OF CONSIDERATION IS APPLICABLE ONLY IN RESPECT OF 'LAND OR BUILDING OR BOTH. IF THE CAPITAL ASSET UNDER TRANSFER CANNOT BE DESCRIBED AS 'LAND OR BUILDING OR BOTH', THEN SEC. 50C WILL CEASE TO APPLY. FROM THE FACTS OF THI S CASE NARRATED ABOVE, IT IS SEEN THAT THE ASSESSEE WAS ALLOTTED LEASE RIGHT IN THE PLOT FOR A PERIOD OF SIXTY YEARS, WHICH RIGHT WAS FURTHER ASSIGNED IN THE YEAR IN QUESTION. IT IS AXIOMATIC THAT THE LEASE RIGHT IN A PLOT OF LAND ARE NEITHER 'LAND OR BUIL DING OR BOTH' AS SUCH NOR CAN BE INCLUDED WITHIN THE SCOPE OF 'LAND OR BUILDING OR BOTH'. THE DISTINCTION BETWEEN A CAPITAL ASSET BEING 'LAND OR BUILDING OR BOTH' AND ANY 'RIGHT IN LAND OR BUILDING OR BOTH' IS LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 13 WELL RECOGNIZED UNDER THE I.T. ACT. SEC. 54D D EALS WITH CERTAIN CASES IN WHICH CAPITAL GAIN ON COMPULSORY ACQUISITION OF LAND AND BUILDING IS CHARGED. SUB - SEC.(1) OF SEC. 54D OPENS WITH: 'SUBJECT TO THE PROVISIONS OF SUB - SECTION (2), WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER BY WAY OF COMPULSORY ACQUISITION UNDER ANY LAW OF A CAPITAL ASSET, BEING LAND OR BUILDING OR ANY RIGHT IN LAND OR BUILDING, FORMING PART OF AN INDUSTRIAL UNDERTAKING ..... '. IT IS PALPABLE FROM SEC. 54D THAT 'LAND OR BUILDING' IS DISTINCT FROM 'ANY RIGHT IN LAND OR BUILDING' . SIMILAR POSITION PREVAILS UNDER THE W.T. ACT, 1957 ALSO. SECTION 5(1) AT THE MATERIAL TIME PROVIDED FOR EXEMPTION IN RESPECT OF CERTAIN ASSETS. CLAUSE (XXXII) OF SEC. 5(1) PROVIDED THAT 'THE VALUE, AS DETERMINED IN THE PRESCRIBED MANNER, OF THE INTEREST OF THE ASSESSEE IN THE ASSETS (NOT BEING ANY LAND OR BUILDING OR ANY RIGHTS IN LAND OR BUILDING OR ANY ASSET REFERRED TO IN ANY OTHER CLAUSES OF THIS SUB - SECTION) FORMING PART OF AN INDUSTRIAL UNDERTAKING' SHALL BE EXEMPT FROM TAX. HERE ALSO IT IS WORTH NO TING THAT A DISTINCTION HAS BEEN DRAWN BETWEEN 'LAND OR BUILDING' ON ONE HAND AND 'OR ANY RIGHTS IN LAND OR BUILDING' ON THE OTHER. CONSIDERING THE FACT OF DEALING WITH SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN' CASES U/S.50C, WHICH IS A DEEMING PROVISION, THE FICTION CREATED IN THIS SECTION CANNOT BE EXTENDED TO ANY ASSET OTHER THAN THOSE SPECIFICALLY PROVIDED THEREIN. AS SEC. 50C APPLIES ONLY TO A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IT CANNOT BE MADE APPLICABLE TO LEASE RIGHT S IN A LAND. AS THE ASSESSEE TRANSFERRED LEASE RIGHT FOR SIXTY YEARS IN THE PLOT AND NOT LAND ITSELF, THE PROVISIONS OF SEC.50C CANNOT BE INVOKED. I, THEREFORE, HOLD THAT THE FULL VALUE OF CONSIDERATION IN THE INSTANT CASE BE TAKEN AS RS.2,27,00,000/ - . TO SUM UP, I HOLD THAT CAPITAL GAIN ON THE TRANSACTION OF ASSIGNMENT OF LEASE RIGHTS IN THE PLOT IS TO BE COMPUTED IN THE YEAR IN QUESTION BY ADOPTING THE FULL VALUE OF CONSIDERATION AT RS.2,27,00,000/ - AS AGAINST RS.5,72,94,000/ - CONSIDERED BY A.O AND THE CO ST OF ACQUISITION SHALL BE WORKED OUT AFRESH AS PER LAW BY THE A.O BY TAKING THE MARKET VALUE OF LEASE RIGHTS FOR SIXTY YEARS IN THE PLOT LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 14 AS ON AUGUST/SEPTEMBER, 2003. IT CAN BE SEEN FROM CLAUSE S OF ALLOTMENT LETTER DATED 29.08.2003 AND 08.09.2003 THAT CI DCO WAS TO ENTER WITH AN AGREEMENT AND TO HAND OVER POSSESSION TO THE ASSESSEE AT A FUTURE DATE. THUS NO TITLE OR OWNERSHIP RIGHT STOOD TRANSFERRED TO THE ASSESSEE IN AUGUST/SEPTEMBER, 2003 AND OWNERSHIP RIGHT ACTUALLY STOOD TRANSFERRED ONLY ON 3RD MAY, 20 07 WITH RESPECT OF BOTH THE PLOTS WHEN LEASE AGREEMENT WAS ENTERED INTO AND POSSESSION WAS HANDED OVER TO THE ASSESSEE . IT IS EQUALLY UNDISPUTED FACT THAT AGREEMENT OF LEASE DATED 3RD MAY, 2007 WAS EXECUTED WITH CIDCO WITH RESPECT TO BOTH THE PLO TS CONTAIN ING NAMES OF ASSESSEE AND THREE OTHER MALE MEMBERS OF HIS FAMILY. EVEN TRIPARTITE AGREEMENT WAS EXECUTED ON 19TH JULY 2007 WITH RESPECT TO BOTH THE PLO TS CONTAINING NAMES OF ASSESSEE AND THREE OTHER MALE MEMBERS OF HIS FAMILY. THEREFORE, THE RESULTANT INCO ME WILL BE CHARGE TO TAX UNDER THE HEAD SHORT TERM CAPITAL GAINS. 3.16 BEFORE A.O AND ME ASSESSEE CONTENDED THAT ONLY 1/9 TH SHARE OF CAPITAL GAIN IS TAXABLE IN HIS HANDS AS AGAINST 1/4 TH COMPUTED BY THE AO. LEARNED AR SUBMITTED BEFORE ME THAT ORIGINAL ALLOTMENT LETTER BY CIDCO CONTAINS NAMES OF ALL HEIRS. FURTHER, IT IS SUBMITTED THAT HEIRS HAVING MUTUAL UNDERSTANDING AMONG THEMSELVES HAD ACCEPTED PAYMENTS FROM DEVELOPERS FOR ONE OTHER AN D MUTUALLY SETTLED. IN VIEW OF THIS, SHARE OF OTHER HEIR CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. 3.17 IT IS TRUE THAT ORIGINAL ALLOTMENT LETTERS DATED 23RD AUGUST 2003 AND 8TH SEPTEMBER 2003 ISSUED BY CIDCO BEAR NAMES OF ALL THE LEGAL HEIRS. HOWEV ER, IT IS EQUALLY UNDISPUTED FACT THAT AGREEMENT TO LEASE DATED 3RD MAY 2007 EXECUTED WITH CIDCO WITH RESPECT TO BOTH THE PLOTS CONTAIN NAMES OF ASSESSEE AND 3 OTHER MALE MEMBERS OF HIS FAMILY. EVEN TRIPARTITE AGREEMENT EXECUTED ON 19TH JULY 2007 WITH RESP ECT TO BOTH THESE P LOTS, CONTAIN NAMES OF ASSESSEE AND 3 OTHER MALE MEMBERS OF HIS FAMILY. THE ONLY INFERENCE FROM THESE LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 15 REGISTERED LEGAL DOCUMENTS AR ISES IS THAT ASSESSEE ALONG WITH HIS 3 BROTHERS WERE THE LEGAL OWNER OF THE LEASE HOLD RIGHTS IN THE PLOTS AND, THEREFORE, AO WAS JUSTIFIED IN TAKING 1/4TH SHARE OF THE TOTAL CONSIDERATION AS ASSESSEES INCOME. THIS GROUND OF APPEAL IS DISMISSED. 3.18 IT IS NOTED FROM THE RECORDS AND IT BECOMES CLEAR THAT THERE ARE TWO DISTINCT TRANSACTIONS IN THIS CASE. THE FIRST IS THE ACQUISITION OF LANDS OF THE FATHER OF APP1ICANT BY C IDCO AGAINST WHICH THE ASSESSEE AS LEGAL HEIR WAS GIVEN LEASEHOLD RIGHTS OF THE PLOTS NAMELY 23B AND 23C ON 29/08/2003 AND 08/09/2003 RESPECTIVELY. THE PROFIT AND GAIN ON THESE TRANSACTIONS I S ACCORDINGLY CHARGEABLE TO TAX IN ASSESSMENT YEAR 2004 - 2005 AS I HAVE ALREADY HELD THAT FAIR MARKET VALUE OF THESE PLOTS AS ON 29/08/2003 AND 08/09/2003 IS TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE CAPITAL GAINS ARISING ON TRANSFER OF THESE RIGHTS, A O IS DIRECTED TO EXAMINE WHETHER CAPITAL GAIN OR PROFITS ON TRANSFER OR ORIGINAL ASSETS HAS BEEN OFFERED TO TAX IN ASSESSMENT YEAR 2004 - 05. IF NOT, HE SHOULD TAKE NECESSARY SUITABLE ACTION IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT, 1961. 7. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US AND ASSESSEE HAS ALSO FILED CROSS OBJECTION. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDIC IAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US. 9. FROM THE RECO RD WE FOUND THAT ASSESSEE'S FATHER LATE SHRI RAMACHANDRA TANDEL WAS OWNER OF CERTAIN P LOT OF LANDS WHICH WAS LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 16 ACQUIRED BY THE GOVERNMENT OF MAHARASHTRA BY NOTIFICATION NO. LAQ/C/3369 DATED 3RD DECEMBER 1970 AND SUBSEQUENT NOTIFICATION NO. LAQ/C/3369 3 RD MAY, 1972 U/S.6 OF THE LAND ACQUISITION ACT. THE ACTUAL POSSESSION OF THE LAND WAS TAKEN FROM 1982 TO 1986. THUS, THERE ARE TWO DISTINCT TRANSACTIONS IN THIS CASE. THE FIRST IS THE ACQUISITION OF THE LAND OF ASSESSEE'S FATHER AGAINST WHICH ASSESSEE WAS IN RECEIPT OF LEASE OF THE PLOT BY CIDCO IN THE FINANCIAL YEAR 2003 - 2004. THIS TRANSACTION WAS COMPLETED WHEN ASSESS EE GOT LEASEHOLD RIGHTS IN THE YEAR 2003 - 2004. THE SECOND TRANSACTION IS THE TRANSFER OF SUCH LEASEHOLD RIGHTS BY THE ASSESSEE TO M/S B.M. SHAH & M.C. SUNNY AND SUBSEQUENTLY TO SEA QUEEN DEVELOPERS FOR A CONSIDERATION OF RS.2,27,00,000/ - WHICH EVENT FALLS IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. ASSESSEE HAD CONSIDERED FAIR MARKET VALUE OF THE LAND AS ON APRIL 1, 1981 AS COST OF ACQUISITION AND FURTHER INDEXED THE SAME TO ARRIVE AT THE TAXABLE LONG TERM CAPITAL GAINS U/S.49(1) O F THE ACT. ON THE OTHER HAND AO CONSIDERED RS. 1,72,568/ - BEING PREMIUM PAID BY THE ASSESSEE AS COST OF ACQUISITION AND COMPUTED THE GAIN AS SHORT TERM. I N ORDER TO APPLY THE MANDATE OF SEC. 49(1), IT IS SINE QUA NON THAT THE CAPITAL ASSET ACQUIRED BY THE ASSESSEE IN ANY OF THE MODES PRESCRIBED IN CLAUSES (I) TO (IV) SHOULD BECOME THE SUBJECT MATTER OF TRANSFER AND ONLY IN SUCH A SITUATION WHERE SUCH CAPITAL ASSET IS SUBSEQUENTLY TRANSFERRED, THE COST TO THE PREVIOUS OWNER IS DEEMED AS THE COST OF ACQUISITI ON OF THE ASSET. IT IS APPARENT FROM THE LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 17 LANGUAGE OF SUB - SEC. (1) ITSELF WHICH OPENS WITH THE WORDS: 'WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE' AND AFTER ENUMERATING CERTAIN SITUATIONS, PROVIDES THAT 'THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT.' THE PHRASE 'THE ASSET' USED IN THE LATER PART OF THE PROVISION RELATES TO THE CAPITAL ASSET WHICH BECAME THE PROPERTY OF THE 'ASSESSEE IN THE GIVEN CIRCUMSTANCES. TH E NATURAL COROLLARY WHICH, THEREFORE, FOLLOWS IS THAT THE COST TO THE PREVIOUS OWNER IS CONSIDERED AS THE COST OF ACQUISITION ONLY OF THE CAPITAL ASSET, WHICH BECOMES THE PROPERTY OF THE ASSESSEE IN THE MODES GIVEN IN CLAUSES (I) TO (IV). BUT ONCE SUCH CAP ITAL ASSET IS TRANSFERRED AND ANOTHER CAPITAL ASSET IS ACQUIRED, THERE IS NO APPLICABILITY OF SEC. 49(1) TO SUCH CONVERTED ASSET. IN THE INSTANT CASE BEFORE US PLOT OF LAND ACQUIRED ON LEASE FROM CIDCO IS SUBJECT TO TRANSFER AND NOT THE ORIGINAL LAND OWNED BY FATHER OF ASSESSEE AND WHICH WAS ACQUIRED BY GOVERNMENT OF MAHARASHTRA. ACCORDINGLY ASSESSEES PLEA FOR TAKING THE COST OF ACQUISITION AS ON 01/04/1981 IS NOT SUSTAINABLE. 10. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FO R HOLDING THAT PROVISIONS OF SECTION 49(1) IS NOT APP LICABLE. 11. HOWEVER, THE CIT(A) HA S DIRECTED FOR COMPUTING CAPITAL GAINS BY TAKING COST OF ACQUISITION THE MARKET VALUE OF THE LEASE RIGHTS IN THE PLOT FOR SIXTY YEARS AT THE TIME OF THE FIRST TRANSACT ION WHICH WAS COMPLETED IN AUGUST/SEPTEMBER, 2003 AND THE SAME AMOUNT SHALL BECOME THE COST OF LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 18 ACQUISITION WHEN SUCH RIGHTS IN THE PLOT BECAME SUBJECT MATTER OF TRANSFER IN THE CURRENT YEAR. WE DO NOT FIND ANY INFIRMITY IN THIS DIRECTION OF CIT(A). 12. T H E CIT(A) HAS HELD THAT LEASEHOLD RIGHT S WERE ACTUALLY TRANSFERRED IN FAVOUR OF ASSESSEE ONLY ON 03/05/2007 WHEN LEASE AGREEMENT WAS ENTERED INTO THEREFORE, SHORT TERM CAPITAL GAIN S PROVISIONS WILL BE APPLICABLE IN THE HANDS OF THE ASSESSEE. WE DO NOT FIND ANY MERIT IN THIS CONCLUSION OF CIT(A) IN SO FAR AS VIDE ALLOTMENT LETTER DATED 29/08/2003 AND 08/09/2003. CIDCO HAS ALLOTTED AND GIVEN POSSESSION OF PLOT S TO THE ASSESSEE VIZ., PLOT NO.23 - B AND 23 - C. FORMAL EXE CUTION OF LEASE DEED IS NOT RELEVANT FOR DECIDING THE DATE OF ACQUISITION OF PLOTS SO ALLOTTED BY CIDCO. SINCE SALE BY THE ASSESSEE WAS ON 19/07/2007, THE PLOTS REMAINED IN THE OWNERSHIP OF ASSESSEE FOR MORE THAN THREE YEARS. A S PER OUR CONSIDERED VIEW, AS SESSEE HAS EARNED LONG TERM CAPITAL GAIN WHICH IS TO BE COMPUTED BY TAKING INTO ACCOUNT DATE OF ACQUISITION AS 2 9/08/2003 AND 08/09/2003. PERIOD OF HOLDING SHOULD BE COMPUTED FROM THE DATE OF ALLOTMENT OF THE PROPERTY AS HELD IN THE FOLLOWING JUDICIAL PRON OUNCEMENTS. 1. MADHU KAUL V. CIT (2014) 363 ITR 54 (P&H HC) 2. CIT V. K RAMAKRISHNAN (2014) 363 ITR 59 (DEL HC) 3. CIT V. S R JEYASHANKAR (2015) 373 ITR120 9MAD HC) 4. CIT V. A SURESH RAO (2014) 223 TAXMANN 228 (KAR HC) 5. VINOD KUMAR JAIN V. CIT (2012) 3 44 ITR 501 (P&H_HC) 6. CIT V. JITENDRA MOHAN (2007) 165 TAXMAN 524 (DEL HC) 7. CIT V. PANCHAND GANDHI (2005) 279 ITR52 (GUJ HC) 8. CIT V. ANILABEN UPENDRA SHAH (2003) 262 ITR 657 (GUJ) LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 19 9. LAHAR SINGH SIROYA V. ACIT (2016) 138 DTR 331 (KAR - HC) 10. VIJAY HAR NILAPURKAR V. DCIT ITA NO.6048/M/2013 11. ACIT V. VANDANA RANA ROY ITA NO.6173/M12011 12. MEENA HERNNANI VS ITO ITA NO.5998/M/2010 13. SNEHA BIMAL PAREKH V. CIT ITA NO.5489/M/2015 14. SURNATICHAND TOLAMAL GOUTI V.DCIT ITA NO.2009/M/2013 15. CIRCULAR: NO. 471, DATED 15 - 10 - 1986 162 ITR(ST)41 16. CIRCULAR: NO. 672, DATED 16 - 12 - 1993 205 ITR(ST) 47 13. ACCORDINGLY, WE DIRECT THE AO TO COMPUTE LONG TERM CAPITAL GAIN S ON THE PLOTS SOLD BY ASSESSEE DURING THE YEAR AND NOT SHORT TERM CAPITAL GAIN S AS DETERMINED BY THE AO AND CIT(A). WE DIRECT ACCORDINGLY. 14. IN THIS CASE, CIT(A) HAS HELD THAT SECTION 50C IS NOT APPLICABLE TO TRANSFER OF LEASEHOLD RIGHTS. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF BOMBAY HIGH COURT IN CASE OF GREENFIELD HOTELS & ESTATES (P) LTD., 77 TAXMAN .COM 308 . FURTHERMORE, IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS, THE TRIBUNAL HAVE TAKEN THIS VIEW: - ATUL G. PURANIK VS. ITO (132 ITD 499 (MUM)) PRATAP STEEL RE - ROLLING MILLS P LTD - 155 TTJ 294 (MUM) ACIT VS. NADIR NAZARALI DHANANI (ITA NO. 100/MUM/2013 DATED 09.10.2015) KUMARPAL MOHANLAL JAIN VS. ITO (ITA NO. 7231/MUM/2010 DATED 30.11.2015) ITO VS. HARI OM GUPTA (45 ITR (TRIB) 137) ITO VS. PRADEEP STEEL RE - ROLLING MILLS (P) LTD. (155 TTJ 294) KANCAST P. LTD. VS. ITO (68 SOT 110) (PUNE) M/S. HEATEX PRODUCTS PVT. LTD. VS. ACIT [ITA NO.8197/MUM/2010] DECIDED ON 24.07.2013 LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 20 1 5 . RESPECTFULLY FOLLOWING THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR HOLDING THAT DEEMING PROVISI ONS OF SECTION 50C IS NOT APPLICABLE TO THE CASE OF ASSESSEE. 16. ASSESSEE HAS ALSO TAKEN GROUND FOR REOPENING OF ASSESSMENT, WE DO NOT FIND ANY MERIT IN SO FAR AS SUFFICIENT REASON WAS RECORDED BY AO FOR REOPENING ASSESSMENT. ACCORDINGLY, WE UPHELD THE RE OPENING OF ASSESSMENT U/S.147. 1 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS CROSS OBJECTION OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCE D IN THE OPEN COURT ON 2 2 .0 9 .2017 S D / - S D / - AMARJIT SINGH R.C. SHARMA JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2 2 .09 .2017 COPY OF THE ORDER FORWARDED 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. BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) LILADHAR R. TANDEL ITA NO.959/MUM./2014 C.O NO.153/MUM/2017 21 ITAT, MUMBAI