ITO WD 21(1)(1), V. CHITRA KHANNA,

MA 417/MUM/2010

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 5281 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: S C TIWARI
• Keywords: Capital asset; Business income; Cost of acquisition; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI. N.V. VASUDEVAN (J.M.) AND SHRI. B. RAM AKOTAIAH (A.M.) MA NO.417/MUM/2010 ARISING OUT OF ITA NO.4518/MUM/2008 ASSESSMENT YEAR : 2004-2005 INCOME-TAX OFFICER, WARD21(1)(1), 6 TH FLR., BANDRA-KURLA COMPLEX, PRTYAKASHKAR BHAVAN, MUMBAI 400 054. VS. MS. CHITRA KHANNA PLOT NO.8, GREATER BOMBAY CHS LTD., GULMOHAR RD. NO.4, JVPD SCHEME, MUMBAI 400 049. PAN : AAGPK6573L (APPELLANT) (RESPONDENT) APPLICANT BY : SHRI. D.SONGATE RESPONDENT BY : SHRI. S.C.TIWARI O R D E R PER N.V. VASUDEVAN, J.M. THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY T HE REVENUE ON THE GROUND THAT THE ORDER OF THE TRIBUNAL DATED 30.12.2 009 IN THE ABOVE APPEAL SUFFERS FROM SOME MISTAKE APPARENT FROM THE RECORD AND REQUIRES FOR CERTAIN RECTIFICATION. 2. THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY THE REVENUE UNDER THE FOLLOWING FACTS AND CIRCUMSTANCES: 2.1 THE ASSESSEE IS AN INDIVIDUAL. SHE ALONG WITH H ER HUSBAND OWNED A PLOT OF LAND IN JUHU ADMEASURING 1005 SQ. YARDS. TH E ASSESSEE AND HER HUSBAND OWNED HALF SHARE EACH OVER THE SAID PROPERT Y. THE AFORESAID PROPERTY WAS PLOT NO. 8, GREATER BOMBAY CHS LIMITED . THE ASSESSEE AND HER HUSBAND WERE LEASEE FOR 999 YEARS AND THE AFORESAID PROPERTY HAVING TAKEN THE PROPERTY ON LEASE IN JULY 1972. IN THE YEAR 198 5, ASSESSEE AND HER HUSBAND HAD CONSTRUCTED A RESIDENTIAL BUILDING OVER THE PLOT OF LAND. ON 26.2.2005, THE ASSESSEE AND HER HUSBAND ENTERED INT O A DEVELOPMENT AGREEMENT WITH A DEVELOPER FOR DEVELOPING AFORESAID PROPERTY. AS PER THE AGREEMENT, DEVELOPER WAS TO DEMOLISH THE EXISTING B UILDING AND CONSTRUCT A MA NO.417/MUM/2010 2 NEW BUILDING. THE PERMISSIBLE FSI OVER THE PLOT OF LAND OWNED BY THE ASSESSEE AND HER HUSBAND WAS 11800 SQ. FT.. DEVELOP ER OWNED TDR TO THE EXTENT OF 11835 SQ.FT. THE DEVELOPER PROPOSED TO CO NSTRUCT 23669 SQ.FT. OF THE BUILDING OVER THE PLOT OF LAND. THE ASSESSEE AN D HER HUSBAND WERE TO BE GIVEN 11835 SQ.FT. AND THE DEVELOPER WAS ENTITLED T O SELL THE REMAINING 11835 SQ.FT. THE DEVELOPER AGREED TO PAY THE ASSES SEE AND HER HUSBAND A SUM OF RS. 2,18,35,000/-. THE ASSESSEE AND HER HUSB AND WERE TO PAY THE DEVELOPER COST OF CONSTRUCTION OF 11835 SQ.FT. AT R S. 1,000/- PER SQ.FT. 2.2 THE ASSESSEE FILED HER RETURN OF INCOME FOR A.Y . 2005-06. THE ASSESSEE TREATED TRANSACTION OF DEVELOPMENT REFERRED TO ABOV E AS GIVING RIGHT TO CAPITAL GAINS ON TRANSFER OF CAPITAL ASSET. THE ASS ESSEE CLAIMED EXEMPTION U/S. 54EC UNDER THE ACT IN RESPECT OF CAPITAL GAIN ON TRANSFER. FOLLOWING WAS THE COMPUTATION OF CAPITAL GAIN :- HALF SHARE OF 2,18,35,000/- PAID BY THE BUILDER I.E. RS. 1,09,17,500 LESS: HALF SHARE IN THE COST OF CONSTRUCTIONOF 11,835 SQ.FT. AT RS. 1000/- PER SQ. FT. RS. 59,17,500 -------------------- CAPITAL GAIN RS. 50,00,000 -------------------- INVESTMENT OF RS. 50,00,000/- IN NABARD BONDS CLAIM ED EXEMPTION U/S. 54EC OF THE ACT. 2.3. THE ASSESSING OFFICER, HOWEVER, WAS OF THE VIE W THAT THE RIGHT, TITLE AND INTEREST OVER THE PLOT OF LAND WERE NOT IN ANY WAY TRANSFERRED BY THE ASSESSEE AND HER HUSBAND. ACCORDING TO THE ASSESSIN G OFFICER, ASSESSEE CONTINUED TO ENJOY PERMISSIBLE FSI OVER THE PLOT OF LAND EVEN AFTER DEVELOPMENT OF A NEW BUILDING. ACCORDING TO THE ASS ESSING OFFICER, WHOLE ARRANGEMENT BETWEEN THE ASSESSEE AND HER HUSBAND ON THE ONE HAND AND DEVELOPMENT WAS TO ENABLE DEVELOPER TO BRING MARKET ABLE TDR AND UTILIZE THE SAME ON THE PLOT OF LAND OWNED BY THE ASSESSEE AND HER HUSBAND. THE DEVELOPER NO DOUBT WAS ENTITLED TO SELL MARKETABLE TDR WHICH HE HAD BY PUTTING UP CONSTRUCTION OVER THE PLOT OF LAND OWNED BY THE ASSESSEE AND HER HUSBAND; BUT THE DEVELOPER COULD NOT CONVEY ANY RIG HT, TITLE OR INTEREST OVER MA NO.417/MUM/2010 3 THE PLOT OF LAND IN FAVOUR OF THE THIRD PARTY PURCH ASER. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT THERE WAS NO TRANS FER WITHIN THE MEANING OF SECTION 45 OF THE I.T. ACT. HE THEREFORE HELD THAT RECEIPTS BY THE ASSESSEE FROM THE DEVELOPER WAS INCOME FROM OTHER SOURCES AN D HE ACCORDINGLY BROUGHT TO TAX A SUM OF RS. 1,09,17,500/- UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. ON APPEAL BY THE ASSESSEE THE CIT(A) WAS OF THE VIEW THAT THERE WAS A TRANSFER OF CAPITAL ASSET AND GAIN ON SUCH TRANSFER WAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. THE CIT(A) HELD THAT THE AS SESSEE PARTED WITH THE RIGHT TO DEVELOP THE PROPERTY WHICH WAS TRANSFER OF A CAPITAL ASSET. THE CIT(A) FURTHER HELD THAT THE ASSESSEE FULFILLED THE CONDITIONS NECESSARY FOR GRANT OF EXEMPTION U/S.54EC AS WELL AS SEC.54 OF TH E ACT AND THEREFORE, DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U /S.54 AND 54EC OF THE ACT AS CLAIMED BY THE ASSESSEE. CONSEQUENTLY, NO CAPIT AL GAIN WAS HELD TO BE ASSESSABLE IN THE HANDS OF THE ASSESSEE. AGAINST THE ORDER OF THE CIT(A) REVENUE FILED AN APPEAL BEFORE THE TRIBUNAL AND TRI BUNAL UPHELD THE ORDER OF THE CIT(A) AND DISMISSED THE APPEAL BY THE REVEN UE. 5. IN THIS MISCELLANEOUS APPLICATION, IT HAS BEEN S UBMITTED BY THE REVENUE THAT, OUT OF TOTAL SALES CONSIDERATION FOR TRANSFER OF RIGHT TO DEVELOP OF ` .2,18,35,000/-, THE ASSESSEE RECEIVED HER HALF SHAR E NAMELY ` .1,09,17,500/-. THE DEVELOPER HAD CONSTRUCTED 11, 835 SQ.FT. CONSISTS OF 1 ST TO 4 TH FLOORS AND 9 TH FLOOR. THE TOTAL COST OF CONSTRUCTION WAS ` .1,18,35,000/- AND THE ASSESSEE HAD TO PAY THE SUM OF ` .59,17,500/- TO THE DEVELOPER AS HER SHARE OF A COST OF CONSTRUCTION OF 11835 SQ.FT. THUS THE COMPUTATION OF CAPITAL GAIN BY THE ASSESSEE WAS DONE IN FOLLOWING MANNER: HALF SHARE OF 2,18,35,000/- PAID BY THE BUILDER I.E. RS. 1,09,17,500 LESS: HALF SHARE IN THE COST OF CONSTRUCTION OF 11,835 SQ.FT. AT RS. 1000/- PER SQ. FT. RS. 59,17,500 -------------------- CAPITAL GAIN RS. 50,00,000 -------------------- MA NO.417/MUM/2010 4 INVESTMENT OF RS. 50,00,000/- IN NABARD BONDS CLAIMED EXEMPTION U/S. 54EC OF THE ACT. 6. ACCORDING TO THE REVENUE SINCE THE NEWLY CONSTRU CTED BUILDING GIVEN TO THE OWNERS OF THE PROPERTY, NAMELY 11,835 SQ.FT. , WAS SPREAD OVER 5 FLOORS I.E. 1 ST TO 4 TH FLOORS AND 9 TH FLOOR, THE SAME CANNOT BE SAID TO BE INVESTMENT OF CAPITAL GAIN IN A RESIDENTIAL HOUSE. IN THIS REG ARD THE REVENUE HAS REFERRED TO THE PROVISIONS OF SEC.54(1) IN THE MISC ELLANEOUS APPLICATION AS UNDER: 54. (1)SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WH ERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TER M CAPITAL ASSET, BEING BUILDINGS OR LANDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE PURCHASED , OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONS TRUCTED, A RESIDENTIAL HOUSE , THEN, INSTEAD OF THE CAPITAL GAIN BEING CHARGED T O INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCORDANCE WITH TH E FOLLOWING PROVISIONS OF THIS SECTION, THAT IS TO SAY, ( I ) IF THE AMOUNT OF THE CAPITAL GAIN IS GREATER TH AN THE COST OF THE RESIDENTIAL HOUSE SO PURCHASED OR CONSTRUCTED (HERE AFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET), THE DIFFEREN CE BETWEEN THE AMOUNT OF THE CAPITAL GAIN AND THE COST OF THE NEW ASSET SHALL BE CHARGED UNDER SECTION 45 AS THE INCOME OF THE PREVIOUS YEAR; AND FOR THE PURPOSE OF COMPUTING IN RESPECT OF THE NEW ASSE T ANY CAPITAL GAIN ARISING FROM ITS TRANSFER WITHIN A PERIOD OF THREE YEARS OF ITS PURCHASE OR CONSTRUCTION, AS THE CASE MAY BE, THE COST SHALL BE NIL ; OR (II) .. 7. ACCORDING TO THE REVENUE, THE PORTION ALLOTTED T O THE SHARE OF OWNERS OF THE PROPERTY WOULD CONSIST OF MORE THAN ONE FLAT . IT WAS ALSO BEEN SUBMITTED THAT ASSESSEE HAS NOT GIVEN ANY PROOF SHO WING THAT THE ENTIRE AREA OF 11835 SQ.FT., ALLOTTED TO IT BY THE DEVELOP ER IS A RESIDENTIAL HOUSE. IT HAS ALSO BEEN SUBMITTED THAT SINCE THE ASSESSING OF FICER CONSIDERED THE ENTIRE RECEIPT ON TRANSFER OF DEVELOPMENT AND RIGHT S AS INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD OF INCOME CAPITAL GAIN, HE DID NOT CONSIDER THE QUESTION AS TO WHETHER ENTIRE AREA OF 11,835 SQ.FT., CONSTITUTED, A RESIDENTIAL HOUSE ENTITLED TO EXEMPTION U/S.54 OF THE ACT. THE REVENUE HAS THEREFORE, PRAYED THAT THE ORDER OF THE TRIBUNA L SHOULD BE MODIFIED AND MA NO.417/MUM/2010 5 THE EXEMPTION U/S.54 OF THE ACT SHOULD BE RESTRICTE D TO ONE UNIT/FLAT OF ASSESSEES CHOICE AND THE BALANCE AMOUNT SHOULD BE BROUGHT TO THE TAX. 8. THE LEARNED DR REITERATED THE STAND OF THE REVEN UE AS REFLECTED IN THE MISCELLANEOUS APPLICATION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED BY THE ASSESSING OFFICER WAS REGARDING THE HEAD OF INCOME UNDER WHICH CONSIDERATION RECEIVED BY THE AS SESSEE ON SALE OF RIGHT TO DEVELOP THE PROPERTY HAS TO BE ASSESSED. THUS T HE ASSESSING OFFICER SHOULD BE PRESUMED TO HAVE ACCEPTED THE CLAIM OF TH E ASSESSEE FOR DEDUCTION U/S.54 OF THE ACT. IT WAS SUBMITTED THAT SINCE THE ASSESSING OFFICER DID NOT DISALLOW THE CLAIM FOR DEDUCTION U/ S.54 IT SHOULD BE PRESUMED THAT HE WAS SATISFIED WITH THE CLAIM OF TH E ASSESSEE, IN CASE, IT IS FOUND THAT INCOME IN QUESTION WAS ASSESSABLE UNDER THE HEAD CAPITAL GAIN. SINCE THE ASSESSING OFFICER HAS NOT MENTIONED IN TH E ORDER OF ASSESSMENT, ABOUT THE ASSESSEES CLAIM FOR DEDUCTION U/S.54 NOT BEING CORRECT, THE REVENUE CANNOT IN THE GARB OF THIS MISCELLANEOUS AP PLICATION SEEK TO PUT FORTH A NEW CASE, WHICH WAS NOT RAISED BY THE ASSES SING OFFICER. IT WAS FURTHER SUBMITTED THAT IT CANNOT SAID THAT THERE IS A MISTAKE APPARENT ON THE FACE OF THE RECORD. IT WAS SUBMITTED THAT THE QUE STION AS TO WHETHER THE 11835 SQ.FT. OF BUILT UP AREA ALLOTTED TO THE OWNER S VIZ., THE ASSESSEE BY THE DEVELOPER WHICH WAS CONSTITUTED OF 1 ST TO 4 TH FLOORS AND 9 TH FLOOR OF THE REDEVELOPED PROPERTY WOULD CONSTITUTE A RESIDENTIA L HOUSE OR NOT WAS A DEBATABLE ISSUE ON WHICH THERE COULD BE TWO POSSIBL E VIEWS. IT WAS ARGUED THAT IN RESPECT OF DEBATABLE ISSUE OR AN ISSUE ON W HICH TWO VIEWS ARE POSSIBLE IT CANNOT BE SAID THAT THERE WAS A MISTAKE APPARENT ON THE FACE OF THE RECORD WITHIN THE MEANING OF SEC.254(2) OF THE ACT. IT WAS ALSO SUBMITTED THAT THE ASSESSEE AT THE TIME OF HEARING HAD RAISED AN ISSUE THAT ANY RECEIPT OF MONEY ON TRANSFER AND DEVELOPMENT RI GHTS IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX AND IN THIS REGARD THE ASSESS EE HAD RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. AMBER CRAFT COOPERATIVE HOUSING SOCIETY LTD. VS. ITO, ITA NO.5697/MUM/2006 ASSESSMENT YEAR 2002-03 WHEREIN IT WAS HELD THAT TH ERE CAN BE NO COST OF ACQUISITION OF TRANSFER OF DEVELOPMENT RIGHT (TDR) AND THEREFORE IT IS NOT POSSIBLE TO COMPUTE CAPITAL GAIN AND THEREFORE THER E CAN BE NO CHARGE TO TAX MA NO.417/MUM/2010 6 OF CAPITAL GAIN. SINCE THIS ISSUE WAS NOT RAISED BEFORE THE LOWER AUTHORITIES THE TRIBUNAL DID NOT GIVE ANY DECISION ON THE SAME NOR DID THE TRIBUNAL REJECT THE STAND TAKEN BY THE ASSESSEE. I T WAS SUBMITTED THAT IF THE REVENUE IS PERMITTED TO TAKE THE PLEA AS PUT FORTH IN MISCELLANEOUS APPLICATION, THE ASSESSEE SHOULD BE PERMITTED TO PU T FORTH THE PLEA THAT ANY RECEIPT ON TRANSFER OF TDR IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX. 9. WE HAVE CONSIDERED THE RIVAL CONSIDERATION. WE FIND THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE CLAIM OF T HE ASSESSEE FOR DEDUCTION EITHER U/S.54 OR U/S.54EC OF THE ACT AS HE WAS OF T HE OPINION THAT THE RECEIPT ON SALE OF TDR WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER HAS ONLY DI SCUSSED AND DECIDED THE ISSUE AS TO WHETHER THE RECEIPT ON SALE OF TDR HAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN OR INCOME FROM OTHER SOURCES. THE ASSESSEE HAD MADE A CLAIM FOR DEDUCTION U/S.54 AND 54EC OF THE A CT. IT WAS INCUMBENT ON THE PART OF THE ASSESSING OFFICER TO HAVE EXAMIN ED THIS CLAIM NOTWITHSTANDING HIS STAND THAT THE RECEIPT ON SALE OF TDR HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE A O OUGHT TO HAVE APPLIED HIS MIND AND REJECTED THE CLAIM OF THE ASSE SSEE FOR EXEMPTION U/S.54 OR 54EC OF THE ACT, IF ACCORDING TO HIM COND ITIONS FOR ALLOW EXEMPTION UNDER THE SAID SECTION IS NOT SATISFIED. ADMITTEDLY, THE ASSESSING OFFICER DID NOT DO SO. THE CIT(A) FOUND THAT THE C ORRECT HEAD UNDER WHICH THE INCOME FROM SALE OF TDR HAS TO BE ASSESSED IS C APITAL GAIN HE ALSO FOUND THAT THE CLAIM FOR DEDUCTION U/S.54 AND 54EC AS MADE TO THE ASSESSEE WAS CORRECT. IN THE GROUNDS FILED BY THE REVENUE BEFORE THE TRIBUNAL, THE REVENUE HAS TAKEN A SPECIFIC PLEA THA T THE CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S.54 AND 54EC OF THE ACT. WHEN THE APPEAL WAS ORIGINALLY HEARD THE REVENUE DID NOT RAISE ANY ARGU MENT AS TO WHY THE DEDUCTION U/S.54 CAN NOT BE ALLOWED TO THE ASSESSEE . IT WAS FOR THE FIRST TIME BY THIS MISCELLANEOUS APPLICATION THAT THE REVENUE HAS SOUGHT TO RAISE A PLEA THAT THE CONDITIONS FOR ALLOWING DEDUCTION U/S .54 WERE NOT SATISFIED. IN OUR VIEW SUCH A STAND CANNOT BE ALLOWED TO BE RAISE D FOR THE FIRST TIME BY WAY OF A MISCELLANEOUS APPLICATION. APART FROM THE ABOVE, THE QUESTION AS TO WHETHER THE BUILT UP AREA GIVEN BY THE DEVELOPER TO THE OWNERS CONSTITUTE A MA NO.417/MUM/2010 7 RESIDENTIAL HOUSE OR NOT IS THE DEBATABLE ISSUE. I N THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE STAND OF THE ASSESSEE THAT THE ASSESSING OFFICER IS DEEMED TO HA VE EXAMINED AND ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/ S.54 IS ALSO A POSSIBLE VIEW. THE LAW IS WELL SETTLED IN RESPECT OF A DEBAT ABLE ISSUE ON WHICH TWO VIEWS ARE POSSIBLE, IT CANNOT BE SAID THAT THERE IS A MISTAKE APPARENT ON A FACE OF THE RECORD WITHIN THE MEANING OF SECTION 25 4(2) OF THE ACT. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE O F THE VIEW THAT THE PRESENT MISCELLANEOUS APPLICATION IS MISCONCEIVED A ND THE SAME IS DISMISSED. 10. IN THE RESULT, MISCELLANEOUS APPLICATION IS DIS MISSED. ORDER PRONOUNCED ON THIS 4 TH DAY OF NOVEMBER, 2010. SD/- (B. RAMAKOTAIAH) (ACCOUNTANT MEMBER) SD/- (N.V. VASUDEVAN) (JUDICIAL MEMBER) MUMBAI, DATED 04.11.2010 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBA I 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUMB AI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI