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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 27.12.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2015-16.
2 ITA No.1320/M/2 M/s. Deluxe Shipping Agency Pvt. Ltd. 2. The grounds raised by the assesse are as under: “The following grounds of appeal are without prejudice to one another:- 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the AO's action of making an addition of Rs.1,60,90,798/- as short term capital gain despite the fact that there is no transfer of flat during the year under consideration.
On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the AO's action of adopting the stamp duty value as sale consideration instead of agreement value for computation of short term capital gain by invoking the provisions of section 50C of the Income Tax Act, 1961.
On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the AO's action of considering the WDV of flat instead of WDV of block of asset for computation of short term capital gain.
On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the AO's action of disallowing the depreciation on flat of Rs. 2,01,120/- claimed by appellant u/s. 32 of the Income Tax Act, 1961.
The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal.
The appellant prays before the Hon'ble Tribunal to delete the additions made by the AO and to the extent confirmed by the Ld. CIT(A).”
The issue raised in ground no. 1 is against the confirmation of addition of Rs.1,60,90,798/- by ld CIT(A) as made by the AO on account of short term capital gain by ignoring the fact that there was no transfer of flat during the year.
The facts in brief are that assesse filed the return of income on 25.09.2015 declaring an income of Rs.3,55,070/-. The case of the assesse was selected for scrutiny and statutory notices were issued and served upon the assessee. During the assessment proceedings the AO noticed that the assesse has sold a residential flat No.7, 2nd
3 ITA No.1320/M/2 M/s. Deluxe Shipping Agency Pvt. Ltd. floor, Palkhiwala Coop Housing Society Ltd., 296, Shahid Bhagat Singh Raod, Mumbai for a consideration of Rs.1,15,00,000/- to Mr. Bharat T. Suvarna and Mrs. Neeta B. Suvarna vide sale deed dated 02.03.2015 and also registered on the same date however the assesse has not shown any gain on the sale of flat in the profit and loss a/c. Accordingly the assesse was asked to explain the same with documentary evidences. The assesse vide letter dated 18.08.2017 submitted that agreement was executed with the buyer but possession has not been handed over as the necessary conditions for handing over were not fulfilled. The assesse submitted that the possession would be handed over only after payment of full consideration as the assesse was paid only Rs.25,00,000/- and after obtaining no objection and approval Mumbai Port Trust as the property was leased property of Mumbai port Trust . The assesse submitted that the capital gain arising from the sale would be offered to tax only after the sale is complete. The AO however was not satisfied with the plea of the assessee for the reason that the agreement has already been executed and consideration has crystalized and therefore the assesse is liable for capital gain tax. Pertinent to state the flat was part of block of asset and therefore AO calculated short term capital gain. The AO also noted that sale consideration was Rs.1,15,00,000/- whereas stamp duty value was Rs.1,81,62,000/- and thus there was difference of Rs.66,62,000/-. Accordingly, AO issued show cause notice to the assesse as to why the provisions of section 50C of the Act should not be invoked which was replied by assessee by submitting that the property is leased
4 ITA No.1320/M/2 M/s. Deluxe Shipping Agency Pvt. Ltd. property of Mumbai Port Trust and the reconstructed structure has no lift and other amenities, with common toilet and no BMC water supply and therefore the flat fetches lesser price. The AO was not convinced with the reply of the assesse and he accordingly calculated the short term capital gain by substituting the stamp value as deemed sales consideration and after reducing the WDV of Rs.20,71,202/- calculated short term capital gain at Rs.1,60,90,798/- and added the same to income of the assesse in the assessment framed u/s 143(3) of the Act vide order dated 27.12.2017 besides rejecting the claim of depreciation of Rs.2,07,120/- on such premises.
In the appellate proceedings, ld. CIT(A) dismissed the appeal of the assesse on the ground that registration of deed of property has taken place in F.Y.2014-15. The ld CIT(A) rejected the argument of the assessee that in terms of section 2(47)(v) of the Act , possession of property is must for attracting capital. The ld CIT(A) held that as per section 2(47)(v) of the Act possession is not necessary but it speaks of about the transaction allowing possession and makes a further reference to section 53A of Transfer of Property Act. The main reasoning of ld CIT(A) for upholding the order of AO was that the contract for transfer of property was already entered into for a consideration.
We have heard the rival contentions of both the parties and perused the material placed before us. We note that the agreement for sale was registered during the year and the sale consideration was
5 ITA No.1320/M/2 M/s. Deluxe Shipping Agency Pvt. Ltd. Rs.1,15,00,000/- whereas the stamp value of the property was Rs.1,81,62,000/-. The flat was leased property of Mumbai Port Trust and approval of the Mumbai Port Trust was required to be obtained for handing over the possession .We also note that the assesse has received only Rs.25,00,000/- and the balance consideration was still outstanding. Further the assesse was to hand over the possession to the buyer only upon full and final payment of sales consideration and after obtaining NOC from Mumbai Port Trust. So this is undisputed that the possession has not been handed over as certain conditionalities are to be fulfilled like payment of balance consideration and obtaining of NOC. We also note that the Mumbai Port Trust has been applied for issuing the NOC but still the same is awaited. Keeping in view these facts, we are of the opinion that the sale is certainly not complete and it is absolute sale but a conditional sale which would be complete after satisfaction of the above two conditions. Neither AO nor ld CIT(A) have brought on record any substantive evidence to the contrary. So we are not in agreement with the conclusion of the ld CIT(A) that sale is complete. Sale of flat would only be completed after fulfilment of remaining conditions. Under these facts and circumstances we are inclined to set aside the order of ld CIT(A) on this issue and direct the AO delete the addition of short term capital gain. Ground no. 1 is allowed.
The issue raised in ground no. 2 is against the order of ld CIT(A) upholding the order of AO on the issue of invocation of provisions of section 50C of the Act. Since we have decided the ground no 1 in
6 ITA No.1320/M/2 M/s. Deluxe Shipping Agency Pvt. Ltd. favour of the assesse that no capital gain is chargeable during the year as the sale of flat is not complete. Therefore the issue of invoking section 50C of the Act need not be adjudicated at this stage as the same is rendered academic.
Similarly the issue raised in ground no.3 need no adjudication at this stage as the issue is rendered academic.
The issue raised in ground no. 4 is against the order of ld CIT(A) upholding the order of AO in disallowing the depreciation on flat of Rs.2,01,120/-. This issue being consequential to ground no.1 where we have decided the issue in favour of the assessee that transfer is not complete. Consequently the assesse is entitled to depreciation and therefore we set aside the order of CIT(A) on this issue and direct the AO to allow depreciation on the flat. The ground no. 4 is accordingly allowed.
In the result the appeal of the assesse is allowed.
Order pronounced in the open court on 22.11.2021.
Sd/- Sd/- (Amarjit Singh) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 22.11.2021. * Kishore, Sr. P.S.
7 ITA No.1320/M/2 M/s. Deluxe Shipping Agency Pvt. Ltd. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.