GULREZ NASHIT CHORGHAY,MUMBAI vs. INCOME TAX OFFICER - WARD 4(4), MUMBAI

In the present case, the Assessee purchased Flat No. 301, in Building No. 58, situated on the third floor of Oshiwara Centre View Co- operative Housing Society Ltd., Patliputra Nagar, New Link Road, Jogeshwari (West), Mumbai–400102, admeasuring 470 sq. ft., for a total consideration of Rs. 20,00,000/-, vide an agreement dated 12.02.2011, stated to have been duly registered/notarised. The entire consideration was paid through banking channels, the details of which are as under:

Subsequently, the seller executed a registered agreement for sale dated 20.06.2016 and acknowledged the receipt of the aforesaid consideration by way of a receipt annexed to the said agreement.

Thereafter, the Assessee sold the property under consideration for a consideration of Rs. 52,40,000/- vide a duly registered agreement dated 23.08.2016. Consequently, the Assessee computed long-term capital gain at Rs. 39,74,293/- and claimed exemption under section 54 of the Income-tax Act, 1961 (“the Act”).

The stamp-duty value of the property as on the date of registration, i.e., 27.06.2016, was Rs. 38,26,400/-. The Assessing Officer (“AO”), however, treated 27.06.2016 as the date, on which the property was acquired and 27.08.2016 as the date, on which it was sold. Accordingly, the AO determined the period of holding at 58 days only and treated the resultant capital gain, as short-term capital gain.

The AO adopted the cost of acquisition as on 27.06.2016 at Rs. 38,26,400/-, being the stamp-duty value of the property, and the sale 2 consideration as on 24.08.2016 at Rs. 65,50,000/-. On that basis, the AO computed short-term capital gain at Rs. 27,23,600/- and added the same to the total income of the Assessee.

The Assessee thus, being aggrieved by the aforesaid determination and disallowance, preferred an 1st appeal before the Ld. Commissioner. However, the Assessee could not get any relief in respect of the exemption claimed under section 54 of the Act.

The Ld. Commissioner affirmed the action of the AO in treating the capital gain as short-term capital gain and in making the consequential addition of Rs. 27,23,600/-. The Ld. Commissioner further took into consideration the value of the property as on 27.06.2016, when the agreement was registered, at Rs. 38,26,400/-, and treated the differential amount of Rs. 18,26,400/-, being the difference between Rs. 38,26,400/- and Rs. 20,00,000/-, as also part of the cost of acquisition of the property.

Having heard the parties and given thoughtful consideration to the claim lodged by the Assessee, we accept the contention of the Assessee that the property under consideration had been purchased for a total consideration of Rs. 20,00,000/- which was fully paid through banking channels by making payments of Rs. 2,00,000/-, Rs. 8,00,000/- and Rs. 10,00,000/- on 29.01.2011, 29.01.2011 and 09.02.2011, respectively. The receipt of the entire consideration has duly been acknowledged by the seller vide receipt dated 12.02.2011. And therefore, the addition/disallowance of Rs. 27,23,600/- made by the AO, is unsustainable, and hence the same is deleted.

Since we have accepted the Assessee’s claim regarding the acquisition of the property in the year 2011 and have consequently allowed the exemption claimed by the Assessee, the impugned addition of Rs. 27,23,600/- made by the Ld. Commissioner, also does not survive. Accordingly, the same is deleted. 3

In the result, Assessee’s appeal is allowed.