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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI PAWAN SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2015-16. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-3, Thane [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
Sujauddian Kasimsab Sayyed 2. The grounds of appeal filed by the assessee read as under:
1. The order dated 09.08.2018 bearing No. 10278-THN/2017-18 by the CIT(A)-3, Thane is arbitrary, against natural justice, unlawful, against the provisions of Income Tax Act, 1961, invalid and therefore liable to be quashed.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A)-3 Thane has erred in confirming the addition of Rs.1,00,14,951/- made by the Assessing Officer u/s 56(2)(vii)(b) of the Income Tax Act, 1961 under the head ‘Income from Other Sources’.
3. Briefly stated, the facts of the case are that the Assessing Officer (AO) on perusal of the purchase deed dated 10.09.2014 filed by the assessee noticed that the Government value for stamp duty purpose of the immovable property was more than the actual value as per the deed. The AO issued a show cause notice dated 10.11.2017 to the assessee stating that as per the purchase deed dated 10.09.2014, the assessee had purchased flat No. 2901 on 29th Floor, C-Wing, in the building named as Metropolis, Andheri (West), Mumbai admeasuring area of 123.36 sq. mtrs (carpet area) for a consideration of Rs.88,30,008/- (excluding stamp duty and registration/other charges), whereas the Government value for stamp duty purpose is at Rs.1,88,44,959/-. Therefore, the AO asked the assessee to explain why the difference of Rs.1,00,14,951/- shall not be treated as income from other sources u/s 56(2)(vii)(b) of the Act. The assessee filed a reply before the AO. However, the AO was not convinced with the said reply for the reason that the assessee had himself paid amount more than the Government valuation for the said property.
Sujauddian Kasimsab Sayyed The assessee had borrowed loans of Rs.89,28,920/- from Dewan Housing Finance Corporation Ltd. (DHFL), Mumbai. Referring to the bank statement for the relevant period, the AO came to a finding that the actual cost of the property was more than what the assessee had shown. In the assessment order dated 30.11.2017, the AO has also noted that the assessee vide order sheet noting dated 16.11.2017 agreed for the proposed addition of Rs.1,00,14,951/-. Since the Government value of the property is more than consideration, the AO made an addition of Rs.1,00,14,951/- u/s 56(2)(vii)(b) of the Act.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). During the course of appellate proceedings, the Authorized Representative (AR) of the assessee submitted before the Ld. CIT(A) that the assessee had booked the said flat with M/s Housing Development & Infrastructure Ltd. (in short HDIL) on 27.04.2012 and an advance payment of Rs.3,00,000/- was made on 27.04.2012 and the said date false in the AY 2013-14. In this regard, the AR filed a copy of the receipt of Rs.3,00,000/- as well as allotment letter issued to the assessee by HD & IL. Thus it was stated by him that the above dates do not fall in the AY 2015-16. Mentioning that the provision of section 56(2)(vii)(b) was introduced by the Finance Act, 2013 w.e.f. 01.04.2014, it was contended before the Ld. CIT(A) that the amended provisions are not applicable to AY 2015-16. However, the Ld. CIT(A) was not convinced with the above explanation of the assessee for the reason that (i) as per the purchase agreement dated 10.09.2014, the payment of Rs.3,00,000/- on Sujauddian Kasimsab Sayyed 27.04.2012 was just an earnest money deposit paid before the execution of these presents and Rs.14,66,001/- at the time of execution of these presents, making an aggregate of Rs.17,66,001/- i.e. (Rs.3,00,000/- + Rs.14,66,001/-) and Rs.70,64,007/-, being the balance of the purchase price to be paid by the purchasers in the manner and by instalments mentioned therein, (ii) the advance payment on 27.04.2012 cannot be considered as the date of transfer for purchase of flat, as it was just an earnest money deposit and the real execution of purchase of flat has been entered on 10.09.2014 by a registered deed, (iii) the construction of the building in which the assessee has invested money had not commenced on 27.04.2012, but it commenced vide registered agreement dated 10.09.2014. On the basis of the above facts, the Ld. CIT(A) further observed that in any purchase or sale agreement deed of immovable property to be covered u/s 53A of the Transfer of Property Act, is required to be a registered instrument for enforcing civil law rights, therefore, in absence of registration, the transaction will not fall u/s 2(47)(v) of the Act. The Ld. CIT(A) also referred to the order of the ITAT in Saamag Developers Pvt. Ltd. [TS-26-ITAT-2018(DEL) order dated 12.01.2018] wherein it is held that registration u/s 17(1A) of the Registration Act, 1908 is a pre- requisite to give effective section 53A on the Transfer of Property Act. Further reliance was placed by him on the decision in Anil D. Lohana [TS-466-ITAT-2017(MUM) order dated 25.09.2017], wherein it is held that the holding period of the property is to be reckoned from the Sujauddian Kasimsab Sayyed date on which the assessee got right over the property by virtue of sale agreement. The Ld. CIT(A) finally noted that the assessee has never doubted the valuation of stamp duty, as he has never sought for another valuation with DVO u/s 50C(2) of the Act in the assessment as well as in appellate proceedings. In view of the above reasons, the Ld. CIT(A) dismissed the appeal filed by the assessee.
Before us, the Ld. counsel of the assessee files a Paper Book (P/B) containing (i) Written submissions filed with CIT(A), (ii) Photocopy of receipt of advance payment dated 27.04.2012 from Housing Development and Infrastructure Ltd. (HDIL) of Rs.3,00,000/-, (iii) Photocopy of letter of allotment dated 27th April, 2012 issued by HDIL, (iv) Photocopy of agreement for sale dated 10.09.2014 between the appellant and HDIL and (v) Photocopy of bank statement evidencing advance payment of Rs.3,00,000/-. It is certified by the Ld. counsel that the aforesaid documents were filed before the AO and CIT(A), except the written submission mentioned at Sr. No 1 filed before the CIT(A). The Ld. counsel submits that the provision of section 56(2)(vii)(b) was introduced by the Finance Act 2013 w.e.f. 01.04.2014 and hence, the amended provision is not applicable to the case of the assessee, since he was entitled to the immovable property during the AY 2013-14. It is Sujauddian Kasimsab Sayyed stated that in the case of the assessee, the property was not acquired without consideration and therefore, the provisions of section 56(2)(vii)(b) is not applicable. As the effective date of agreement is 27.04.2012, which pertains to the AY 2013-14, it is argued by him that no addition should have been made in the impugned assessment year, as the provisions are not applicable during the AY 2013-14. Referring to section 2(h) of the Indian Contract Act, it is stated that a contract is an agreement made between two or more parties which is enforceable in law. The Ld. counsel submits that in the case of the assessee, the letter of allotment was executed with the builder on 27.04.2012, which gives the right to obtain the conveyance of the said flat, so it becomes an asset u/s 2(14) of the Act and therefore, the date of letter of allotment should be considered as a date of receipt of immovable property. Since allotee gets title to the property on issuance of an allotment letter and that the payment of instalments is only a consequential action upon which the delivery of possession follows, it is stated that the assessee was having right in the property since 27.04.2012 i.e. the date of allotment. In view of the above submissions, it is stated by the Ld. counsel that the assessee had received the immovable property as on 27.04.2012 (date of execution of agreement) and not on 10.09.2014 (date of registration). It is stated that as provisions of section 56(2)(vii)(b) were not applicable for the AY 2013-14, the addition made by the AO during AY 2015-16 is to be deleted.
Sujauddian Kasimsab Sayyed 5.1 The Ld. counsel of the assessee files a copy of the order of the of the Tribunal in the case of Babulal Shambhubhai Rakholia v. ACIT (ITA No. 338/Rjt/2017 for AY 2014-15), Sanjay Kumar Gupta v. ACIT (ITA No. 227/JP/2018 for AY 2014-15), Anita D. Kanjani v. ACIT (2017) 79 taxmann.com 67 (Mumbai-Trib), DCIT v. Deepak Shashi Bhusan Roy (2018) 96 taxmann.com 648 (Mumbai-Trib). Further, the Ld. Counsel files a copy of the decision in Pr. CIT v. Vembu Vaidyanathan (2019) 101 taxmann.com 436(Bombay HC) and ACIT v. Shri Keyur Hemant Shah (ITA No. 6710/Mum/2017 for A.Y. 2013- 14 dated 02.04.2019)(Mumbai ITAT). During the course of clarification, the decision in the case of CIT v. Balbir Singh Maini 86 taxmann.com 94 (SC) was brought to the notice of the Ld. counsel. In response to it, the Ld. counsel submits that in that case the issue was “whether for want of permissions, entire transaction of development of land envisaged in Joint Development Agreement (JDA) fell through, there would be no profit or gain which arose from transfer of capital asset, which could be brought to tax u/s 45 r.w.s.48” and thus distinguishable from the present case.
On the other hand, the Ld. DRs submit that the Ld. CIT(A) has rightly confirmed the order of the AO on the reason that the advance payment of Rs.3,00,000/- on 27.04.2012 cannot be considered as the date of transfer of the purchase of flat, as it was just an earnest money deposit and the real execution of purchase of flat has been entered on 10.09.2014 by registered deed. Relying on the decision in Saamag Developers Pvt. Ltd.
Sujauddian Kasimsab Sayyed (supra) and Anil D. Lohana (supra), the Ld. DRs submit that the order passed by the Ld. CIT(A) be confirmed.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The sum and substance of the arguments of the Ld. counsel are that (i) in the case of the assessee, the letter of allotment was executed with the builder on 27.04.2012, which gives the right to obtain the conveyance of the said flat, so it becomes an asset u/s 2(14) of the Act and therefore, the date of letter of allotment should be considered as a date of receipt of immovable property, (ii) since the allotee gets title to the property on issuance of an allotment letter and that the payment of instalment is only a consequential action, upon which the delivery of possession follows, (iii) the assessee had received the immovable property as on 27.04.2012 (date of execution of agreement) and not on 10.09.2014 (date of registration), (iv) as provisions of section 56(2)(vii)(b) were not applicable for the AY 2013-14, the addition made by the AO during the AY 2015-16 is against the provisions of the Act and therefore, the same deserves to be deleted. 7.1 At this moment, we discuss the case-laws filed and relied on by the Ld. Counsel. In the decision in Babulal Shambhubhai Rakholia (supra), it is held that the stamp papers were purchased on or before 30.03.2013, the transferor and the transferee both put signature on the sale deed on 30.03.2013 and therefore, section 56(2)(vii)(b) will not be applicable in the case of the assessee.
Sujauddian Kasimsab Sayyed In the instant case, the dispute is in respect of receipt of the immoveable property i.e. between ‘’ Letter of Allotment” dated 27.04.2012 issued by HDIL and “Agreement for Sale’ between the assessee and HDIL dated 10.09.2014. That being so, the finding in the above case is not applicable here. In Sanjay Kumar Gupta (supra), as recorded by the Tribunal the assessee had claimed to have purchased the property in question vide agreement dated 28.03.2013. Though the said agreement is not registered but only attested by the Notary, however, the payment of part sale consideration on 28.03.2013 is duly mentioned in the sale deed dated 26.04.2013. The AO considered the date of transaction as the sale deed dated 26.04.2013. Accordingly, the AO made the addition as per section 56(2)(vii)(b) of the Act by adopting the stamp duty value of the property as purchase consideration and the difference was assessed to tax. The Tribunal held that in the facts and circumstances of the case, when the agreement to sell dated 28.03.2013 has not been held to be bogus then the transaction would be treated to have been completed on 28.03.2013 and consequently the same would not fall in the year under consideration. Once the transaction of purchase of property in question is completed in the preceding year, then the provisions of section 56(2)(vii)(b) of the Act cannot be invoked on such transaction. The Tribunal deleted the addition made by the AO. However, it made it clear that the AO is not remediless so far as the assessment of any income even for the earlier assessment year i.e. 2013-14.
Sujauddian Kasimsab Sayyed We find that section 56(2)(viii)(b)(ii) clearly stipulates that where any immoveable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50000/-, the stamp duty value of such property as exceeds such consideration , shall be chargeable to tax in the hands of the individual or HUF as income from other sources. It is applicable from A.Y. 2014-15. In the case of Anita D. Kanjani (supra), it is held that in order to determine nature of asset in terms of section 2(42A), holding period has to be completed from date of issue of allotment letter and not from the date when agreement to sell was registered. In the case of Deepak Shashi Bhusan Roy (supra), it is held that in order to determine taxability of capital gain arising from sale of property, it is the date of allotment of property which is relevant for purpose of computing holding period and not date of registration of conveyance deed. In the case of Vembu Vaidyanathan (supra), the assessee had filed the return of income for the AY 2009-10 and claimed LTCG arising out of capital asset in the nature of a residential unit. The controversy between the assessee and the revenue revolves around the question as to when the assessee can be stated to have acquired the capital asset. The assessee argued that the residential unit in question was acquired on the date on which the allotment letter was issued by the builder which was on 31.12.2004. The AO however contended that the transfer of the asset in favour of the assessee would be complete only on the date of agreement Sujauddian Kasimsab Sayyed which was executed on 17.05.2008. The Hon’ble High Court referring to the CBDT Circular No. 471 dated 15.10.1986 and No. 672 dated 16.12.1993 held that “it can thus be seen that the entire issue was clarified by the CBDT in its abovementioned two Circulars dated 15.10.1986 and 16.12.1993. In terms of such clarifications, the date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by DDA. In that view of the matter, CIT(A) and Tribunal correctly held that the assessee had acquired the property in question on 31.12.2004 on which the allotment letter was issued.” In the instant appeal, the issue is not the allotment in construction scheme promised by the builder which is materially same as the terms of allotment and construction by DDA. Thus the case of the assessee in the instant case is distinguishable from the decision in Vembu Vaidyanathan (supra) relied on by the Ld. counsel. In the case of Shri Keyur Hemant Shah(supra), the assessee had acquired the rights in a duplex flat on 12th & 13th floor front facing the road admeasuring 1961.75 sq.ft and terrace measuring 881.5 sq.ft. as per the attached layout plan along with 4 car parking in building known as Tapovan vide allotment letter dated 26.02.2008 issued by DSD Builders & Developers Pvt. Ltd for total consideration of Rs. 371 lacs. The said allotment is not a conditional allotment and does not envisage cancellation of the allotted property, in any manner. Therefore, the Sujauddian Kasimsab Sayyed assessee has acquired right in a specific property which is clearly earmarked in the layout plan. The full payment of the same has been made by the assessee by 24.07.2008, which is evident from assessee’s letter containing payment details . Subsequently, agreement of sale has been executed in assessee’s favour on 25.03.2010 which was nothing but mere improvement in assessee’s existing rights to acquire a specific property and part and parcel of the same transaction. As mentioned earlier, in the instant case, the dispute is in respect of receipt of the immoveable property i.e. between ‘’ Letter of Allotment” dated 27.04.2012 issued by HDIL and “Agreement for Sale’ between the assessee and HDIL dated 10.09.2014. That being so, the finding in the above case is not applicable here. 7.2 We mention below the “Letter of Allotment” dated 27.04.2012 which reads as under: “Re: Booking of Flat No. 2901 on 29th Floor in “C”Wing of the building “Metropolls Residences” situated at C.T.s. No. 866/B, Village Ambivali, Andheri(West), Mumbai This is to confirm and record that we have agreed to allot on your request Flat No. 2901 on 29th Floor in “C” Wing in “Metropolis Residences” for the aggregate value of Rs. 88,30,000/- (Rupees Eighty Eight Lacs thirty Thousand only) exclusive of all other charges & deposits etc., as applicable. You will also have to pay Stamp Duty and Registration Charges separately. In case, if the area of the Flat is altered / charged (increased or decreased) then in that event you shall pay to use for the area increased and in case if the area of the Flat decreased, we shall refund you the amount of the area decreased.”
Sujauddian Kasimsab Sayyed 7.3 The following facts are clearly evident in the instant case. As per the ‘Agreement for Sale” dated 10.09.2014, the payment of Rs.3,00,000/- on 27.04.2012 was an earnest money deposit paid before the execution of these presents and Rs.14,66,001/- at the time of execution of these presents, making an aggregate of Rs.17,66,001/- i.e. (Rs.3,00,000/- + Rs.14,66,001/-) and Rs.70,64,007/-, being the balance of the purchase price to be paid by the purchasers in the manner and by instalments mentioned therein. The ‘Agreement for Sale” dated 10.09.2014 stipulates at para 4 the following: “4. The Purchaser/s hereby agree/s to purchase from the Developer and the Developer hereby agrees to sell FLAT No. 2901 admeasuring 123.36 Sq.Mtrs., (Carpet Area) (Which is inclusive of carpet area of Balconies and internal passage) on 29th Floor of C Wing, (hereafter called the “Said Flat”) together with open stilt /stack/under stilt Parking space no. _____ (hereinafter called the “said parking Space”) in the Building/Complex known as “Metropolis” under construction on the said property, and the said Flat and the Said Parking Space is hereinafter collectively referred to as the “Said Premises” for the price of Rs. 8830008/- (Rupees Eighty Eight Lakhs Thirty Thousand Eight Only), which prices shall be paid by the purchaser/s to the Developers as under: - (a) Rs. 300000/- (Rupees three lakhs Only) as earnest money deposit paid before the execution of these presents and Rs. 1466001 (Rupees Fourteen Lakhs Sixty six thousand and one only ) at the time of execution of these presents, making arrangement of Rs. 1766001/- (Rupees Seventeen lakhs sixty six thousand and only only) (the payment and receipt whereof the Developer doth hereby admit and acknowledge).
Sujauddian Kasimsab Sayyed (b) Rs. 7064007/- (Rupees Seventy Lakhs sixty four thousand seven only) being the balance of the purchase price to be paid by the Purchaser/s in the maner and by the instalments mentioned hereunder: (i) Rs. 883000/- (Rupees Eight Lakhs eighty three thousand only) on casting of the 3rd basement/slab i.e. plinth Slab: (ii) Rs. 6937861/- On casting of 3rd Floor slab: .......... .......... .......... ..........” .......... .......... 7.4 Sale agreement is different from sale-deed. Sale agreement contains agreed upon terms and conditions between seller and buyer for the sale of property. It also specifies the date by which the transaction will be completed. Sale agreement is a road-map how property transaction will be completed. On the other hand, sale deed is executed at the time of actual transfer of property i.e. transfer of ownership from the seller to the buyer. 7.5 In the written submission filed before the Ld. CIT(A), the Authorised Representative(AR) of the assessee, referring to the decision in Gurbax Singh v. Kartar Singh & Ors; Govt. of Karnataka v. Ragini Narayan (Civil Appeal No. 8895 of 2012); Ved Nath v. Indra Vikram Alias Chhote Singh, has explained that in view of the provisions of section 47 of the Registration Act, 1908, it is well settled that a document on subsequent registration will take effect from the date when it was executed and not from the time of its registration. We refer here to page 5 of the P/B. In fact, we follow the above ratio in subsequent paras.
Sujauddian Kasimsab Sayyed In the instant case, there is no dispute that the “Agreement for Sale” is dated 10.09.2014. The “Letter of Allotment” dated 27.04.2012 can not be considered as the date of execution of agreement by any stretch of imagination. Immovable property is not conveyed by delivery of possession, but by a duly registered deed. Further, it is the date of execution of registered document, not the date of delivery of possession or the date of registration of document which is relevant. In the case of Alapati Venkataramiah v. CIT (1965) 57 ITR 185 (SC), CIT v. Podar Cements Pvt. Ltd. (1997) 226 ITR 625 (SC), it is held that once the executed documents are registered, the transfer will take place on the date of execution of documents and not on the date of registration of documents. 7.6 Section 56(2)(viii)(b)(ii) clearly stipulates that where any immoveable property is received for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50000/-, the stamp duty value of such property as exceeds such consideration , shall be chargeable to tax in the hands of the individual or HUF as income from other sources. It is applicable from A.Y. 2014-15. 7.7 In National Cement Mines Industries Ltd. v. CIT [1961] 42 ITR 69 , Justice J.C. Shah (as His Lordship then was) speaking for the Hon’ble Supreme Court emphasized the principles of interpretation to be adopted by the Court in construing a commercial transaction : "the true nature and character of the transaction have to be ascertained from the covenants of the contract in the light of the surrounding circumstances."