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Income Tax Appellate Tribunal, “C” Bench, Mumbai
Before: Shri G. Manjunatha & Shri Ravish SoodShri Prem Ashok Bhatia, A-
सुनवाई की तायीख / : 30.01.2019 Date of Hearing घोषणा की तायीख / : 30.04.2019 Date of Pronouncement आदेश / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-41, Mumbai, dated 31.10.2017, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short „I.T Act‟), dated 11.03.2016 for P a g e | DCIT Vs. Shri Prem Ashok Bhatia A.Y. 2013-14. The revenue assailing the order of the CIT(A) has raised before us the following grounds of appeal:-
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in accepting the Long Term Capital Gain offered by the assessee amounting to Rs. 42,99,858/- plus Cost of Acquisition on the alleged plea that the assessee has transferred capital assets during the year under consideration without considering the facts and circumstances of the case.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the receipt of Rs. 1,95,00,000/- on account of transfer of right or interest in property as Long Term Capital Gain, without considering the facts and circumstances of the case and allowing deduction u/s 54F of the I.T. Act, 1961.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the assessee was not the owner of the land and hence question of transferring of right does not arise. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that the order of the AO be restored. The appellant craves leave to amend or alter any ground or add new ground, which may be necessary.”
Briefly stated, the assessee had e-filed his return of income for A.Y. 2013-14 on 30.07.2013, declaring total income of Rs. 45,20,540/- The return of income filed by the assessee was processed as such under Sec.143(1) of the I.T Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2).
3. During the course of the assessment proceedings it was observed by the A.O that the assessee had in his return of income offered for tax „Long Term Capital Gain‟ (for short „LTCG‟) of Rs. 42,99,858/- on sale of land, as under :-
Sale Consideration received Rs. 1,95,00,000/- Less Cost of land : Indexed cost of land Rs. 7500/- (01/02/1984) Rs. 55,086/- (-) Rs. 1,36,825/- Rs. 68,212/- (01/04/2010) Rs. 81,739/- Total long term capital gains Rs. 1,93,63,175/- P a g e | DCIT Vs. Shri Prem Ashok Bhatia Exemption u/s 54F Rs. 1,50,63,317/- Taxable long term capital gains Rs. 42,99,858/-
The facts to the extent relevant for the disposal of the present appeal are culled out as under :
(i) That two persons viz. (i) Late Sh. Ashok Bhatia (deceased father of the assessee); and (ii) Sh. Kishore B. Dalal, had vide an „Agreement‟ dated 02.02.1984 purchased a plot of land bearing Survey No. 72, CTS 339, Village Maliwani, Malad, Mumbai, wherein both of them had equal 50% undivided share in right, title and interest in the said land.
(ii) Sh. Kishore B. Dalal had by virtue of a „Memorandum of Understanding‟ (for short „MOU‟), dated 29.03.2008 agreed to sell, transfer and convey his 50% undivided share, right, title and interest in the property to one Sh. Abrar Husain Tauqeer Husain Syed (hereinafter referred to as „Sh. Abrar‟) for a consideration of Rs. 1,25,00,000/-. As per the terms of the MOU, Sh. Abrar had paid an amount of Rs. 5,00,000/- by cheque and an amount of Rs. 11,000/- in cash to Sh. Kishore B. Dalal. Further, Sh. Kishore B. Dalal in lieu of the aforesaid arrangement had executed irrevocable General Power of Attorneys in favour of Sh. Abrar on 29.03.2008, 01.04.2010 and 07.04.2010. (iii) Sh. Ashok Bhatia expired intestate as on 06.07.2012 leaving behind his legal heirs viz. Mrs. Kavita Ashok Bhatia (widow of the deceased) and two sons S/sh. Prem Ashok Bhatia (i.e the assessee) and Gaurav Bhatia. After the death of Sh. Ashok Bhatia the aforesaid land was jointly held by the legal heirs of P a g e | DCIT Vs. Shri Prem Ashok Bhatia the assessee viz. Sh. Prem Ashok Bhatia along with Smt. Kavita Bhatia (mother of the assessee) and Sh. Gaurav Bhatia (brother of the assessee) as co-owners and successors in interest in equal proportion on the one hand AND Sh. Kishore B. Dalal on the other hand.
(iv) Sh. Kishore B. Dalal vide a conveyance deed dated 07.09.2012 sold his undivided share in the land for which the assessee viz. Sh. Prem Ashok Bhatia along with his mother and brother had given their “No Objection Certificate” (hereinafter referred to as „NOC‟). Accordingly, the aforesaid conveyance deed dated 07.09.2012 was executed between viz. (i). Sh. Kishore B. Dalal (Vendor) (ii). Mrs. Kavita Ashok Bhatia and S/sh. Prem Ashok Bhatia (assessee) and Gaurav Bhatia (jointly referred to as „First confirming party‟) (iii). Sh. Abrar („Second confirming party‟) AND (iv). Sh. Rajesh Singh, Sh. Omprakash Kumawat, Sh. Harinarayan Singh and Sh. Joseph Mudliyar (jointly referred to as „Purchasers‟).
(v) As per the conveyance deed the aforementioned purchasers had acquired 50% undivided share, interest and title in the land belonging to Sh. Kishore B. Dalal for a consideration of Rs. 8,00,00,000/-. The purchase consideration as per the registered conveyance deed was shared between the parties, as under :
Name of Party Amount Paid Sh. Kishore B. Dalal Rs. 89,00,000/- Mrs. Kavita Ashok Bhatia and S/sh. Prem Ashok Rs. 5,85,00,000/- Bhatia (assessee) and Gaurav Bhatia, L/heirs of Late Sh. Ashok Y. Bhatia (first confirming parties)
P a g e | DCIT Vs. Shri Prem Ashok Bhatia Sh. Abrar Husain Tauqeer Husain Syed Rs. 1,26,00,000/- (second confirming party) Total Rs. 8,00,00,000/- As is discernible from the details tabulated hereinabove, the assessee viz. Sh. Prem Ashok Bhatia, Smt. Kavita Ashok Bhatia (mother of the assessee) and Sh. Gaurav Bhatia (brother of the assessee) who were having equal share in the right, title and interest in the aforesaid property had received an amount aggregating to Rs. 5,85,00,000/-. As such, the 1/3rd share of the assessee in the total consideration received by the legal heirs of Late Sh. Ashok Bhatia worked out at an amount of Rs. 1,95,00,000/-.
5. The assessee had treated his share of receipt of Rs. 1,95,00,000/- as his income under the head „Long Term Capital Gain‟ (for short „LTCG‟). Further, after claiming exemption of Rs.1,15,69,758/- under Sec. 54F the assessee had offered the balance amount of LTCG of Rs. 42,99,858/- for tax. The A.O holding a conviction that the consideration of Rs. 1,95,00,000/- received by the assessee did not involve any transfer of a „capital asset‟ as envisaged in Sec. 2(47) of the I.T Act, thus called upon him to explain as to why the same may not be brought to tax in his hands under the head “Income from Other Sources”.
6. In reply, it was submitted by the assessee that his father Sh. Ashok Bhatia along with Sh. Kishore B. Dalal had way back vide an „agreement‟ dated 02.02.1984 purchased the land under consideration admeasuring 1,25,599.36 Sq. Mtrs. bearing Survey No. 72, CTS 339, Revenue Village, Malwani, Malad, Mumbai for a consideration of Rs. 45,000/-, wherein both of them had equal 50% undivided share in the P a g e | DCIT Vs. Shri Prem Ashok Bhatia right, title and interest in the said land. It was the claim of the assessee that as the entire purchase consideration of Rs. 45,000/- was paid to the seller i.e. Sh. Ajiwal Alic Gracius by his father viz. Sh. Ashok Bhatia, therefore, the possession of the entire property had exclusively remained with him during his lifetime. It was submitted by the assessee that after the death of Sh. Ashok Bhatia the possession of the entire land had remained with him alongwith Smt. Kavita Ashok Bhatia (mother) and Sh. Gaurav Bhatia (brother). In the backdrop of the aforesaid facts, it was the claim of the assessee that as he had received the amount of Rs. 1,95,00,000/- towards his 1/3rd share of consideration for transfer of his “Possessory Rights” of the land under consideration, thus the same was rightly offered for tax under the head “Capital Gains”. It was submitted by the assessee that the fact as regards holding of the possessory rights by him along with Smt. Kavita Ashok Bhatia (mother) and Sh. Gaurav Bhatia (brother) was acknowledged in the registered conveyance deed, dated 07.09.2012 in order to avoid any kind of litigation between the vendor i.e. Sh. Kishore B. Dalal and the purchasers on the one hand AND the first confirming party i.e. the assessee viz. Sh. Prem Ashok Bhatia, Smt. Kavita Ashok Bhatia (mother) and Sh. Gaurav Bhatia (brother) on the other hand. In sum and substance, it was the claim of the assessee that as the exclusive possessory rights of the land were collectively held by him along with his mother and brother, hence it was mutually agreed to pay consideration to them which was substantially more than the amount that was being paid to the vendor viz. Sh. Kishore B. Dalal. In the backdrop of the aforesaid facts, it was submitted by the assessee that he along with his mother and brother by collectively entering as a confirming party in the deed of conveyance dated 26.09.2012 had extinguished their right in the said property in favour of the purchasers. As such, it was the claim of the assessee that as P a g e | 7 AY: 2013-14 DCIT Vs. Shri Prem Ashok Bhatia the consideration received by him was for transfer or extinguishment of his share of possessory rights in the land under consideration, thus the same was rightly subjected to tax under the head „capital gain‟.
The A.O after deliberating at length on the contentions advanced by the assessee was however not persuaded to accept the same. It was observed by him that the claim of the assessee that his father viz. Sh. Ashok Bhatia had paid the entire purchase consideration of Rs. 45,000/- was not substantiated on the basis of any documentary evidence. In fact, it was noticed by him that the indenture dated 02.02.1984 provided that the sum of Rs. 4,500/- paid as earnest money and balance amount of Rs. 40,500/- was received by the seller from the purchasers. In the backdrop of the aforesaid facts the A.O was of the view that the consideration of Rs. 45,000/- was equally paid by both the purchasers i.e. Sh. Kishore B. Dalal and Sh. Ashok Bhatia. Apart there from, the A.O was also not inspired by the claim of the assessee that the exclusive possession of the land had earlier remained with Sh. Ashok Bhatia and after his death the same had passed over to his legal heirs. It was observed by the A.O that the assessee had heavily relied on Clause 17 of the conveyance deed dated 07.09.2012, wherein it was stated that the entire plot of land during the lifetime of Late Sh. Ashok Bhatia was fully occupied by him to the exclusion of the vendor and after his death the occupation and possession of the same had collectively remained with his legal heirs viz. the assessee Sh. Prem Ashok Bhatia along with his mother and brother. It was also observed by the A.O that the records in the Court of Additional Collector and Competent Authority (ULC), Greater Bombay, dated 04.07.1986 recorded that Sh. Ashok Bhatia had acted as a constituted attorney for Sh. Ajiwal Gracious and Sh. Kishore B. Dalal, and resultantly was solely responsible for clearing and settling P a g e | DCIT Vs. Shri Prem Ashok Bhatia the litigation pertaining to the land under consideration. The A.O was not persuaded to subscribe to the claim of the assessee on the basis of his following observations:
(i) As per the original purchase deed, dated 31.01.1984 Sh. Kishore B. Dalal and Sh. Ashok Bhatia were the purchasers, wherein both of them had equal 50% undivided share, title, right and interest in the land inclusive of the possession of the land. Insofar the details of payment were concerned, it was noticed by the A.O that the same were not submitted by the assessee.
(ii) On a perusal of Clause 37(e) of the „MOU‟, dated 29.03.2008 that was entered between Sh. Kishore B. Dalal and Sh. Abrar, it was stated that Sh. Kishore B. Dalal was in joint use, occupation and possession of the property as a co-owner. Apart there from, as per Clause 37(k) of the „MOU‟, dated 29.03.2008, it was stated that Sh. Kishore B. Dalal was in full right, power and absolute authority to sell, assign or transfer to the purchasers his 50% undivided share, right, title and interest in the property, and that he had not done or committed or omitted to do any act, deed, matter or thing whereby his ownership and possession or transfer of ownership, possession and/or occupation of the said property to the purchasers may be rendered illegal and/or unauthorised for any reason on any account. On the basis of the aforesaid contents of the „MOU‟, dated 29.03.2008, the A.O was of the view that Sh. Kishore B. Dalal was in possession of the land along with the other co-owner.
(iii) The A.O observed that a perusal of the power of Attorneys, dated 29.03.2008, 01.04.2010 and 07.04.2010 revealed that Sh.
P a g e | DCIT Vs. Shri Prem Ashok Bhatia Kishore B. Dalal was 50% owner of the undivided share, title, interest and right in the land and that the property was jointly owned and possessed by him along with Sh. Ashok Bhatia.
(iv) It was noticed by the A.O that the deed of confirmation dated 14.05.2009 between Sh. Kishore B. Dalal and Sh. Abrar also stated that Sh. Kishore B. Dalal as a vendor was seized and possessed of and otherwise well and sufficiently entitled to 50% of all that piece and parcel of NDZ land.
(v) The A.O observed that as per the extract of the land records which formed part of the conveyance deed, dated 07.09.2012, as was certified by the Talati of Village Malvani, Tehsil Borivali, the possession (kabza) of land was with Sh. Kishore B. Dalal and the assessee i.e. Sh. Prem Ashok Bhatia along with the latters mother and brother.
(vi) It was further noticed by the A.O that the title search report of Mr. M.S. Rodrigues, Advocate certified that the property under consideration was in the name of Sh. Kishore B. Dalal and others.
(vii) The A.O also observed that as per Clause 10 of the conveyance deed dated 07.09.2012 Sh. Kishore B. Dalal and Sh. Ashok Bhatia were the co-owners having equal 50% undivided share in the right, title and interest in the property under consideration.
On the basis of his aforesaid observations, it was concluded by the A.O that the fact that the land under consideration was in possession of both the co-owners stood established. Insofar reliance that was placed by the assessee on Clause 17 of the conveyance deed dated P a g e | DCIT Vs. Shri Prem Ashok Bhatia 07.09.2012 was concerned, the A.O was of the view that as the same was not backed by any basis or evidence, hence the same was of no consequence. The A.O held a conviction that the land under consideration had remained in the possession of both the co-owners till its disposal by way of the conveyance deed dated 07.09.2012, and no material was produced by the assessee to prove to the contrary that the said land was in exclusive possession of his father viz. Sh. Ashok Bhatia, which after his death had passed over to his legal heirs. Apart there from, it was observed by the A.O that Clause 36 of the „MOU‟ dated 29.03.2008 in no way established that the possession of the land had exclusively remained with Sh. Ashok Bhatia. Insofar Clause 38 of the „MOU‟ dated 29.03.2008 was concerned, it was observed by the A.O that the same did not establish that the land under consideration was in exclusive possession of Sh. Ashok Bhatia. It was also observed by the A.O that Clause 15 of the conveyance deed, dated 07.09.2012 stated that the „MOU‟, dated 29.03.2008 and the irrevocable general power of attorneys dated 29.03.2008, 01.04.2010 and 07.04.2010 were still valid and binding and subsisting between the parties and neither Sh. Kishore B. Dalal nor any person had raised any objection, complaint or protest against the said „MOU‟ and the said three irrevocable general power of attorneys. It was thus observed by the A.O that all the participants of the conveyance deed had agreed that the terms of „MOU‟ and irrevocable general power of attorneys were valid. On the basis of his aforesaid deliberations, it was observed by the A.O that the fact that the land was never in exclusive possession of Sh. Ashok Bhatia till his death and thereafter with his legal heirs stood clearly established. In the backdrop of his aforesaid observations the A.O concluded that the claim of the assessee that he had received amount for surrender of his possessory right in the land which was transferred by Sh. Kishore B.
P a g e | DCIT Vs. Shri Prem Ashok Bhatia Dalal was a baseless claim which was not supported by any documentary evidence. In fact, it was observed by the A.O that as the assessee along with his mother and brother continued to hold their 50% undivided share, interest and right in the land which they had inherited as legal heirs of Sh. Ashok Bhatia, thus it could safely be concluded that there was no transfer of capital asset in the hands of the assessee and his mother and brother. It was finally concluded by the A.O that both the co-owners were having undivided share in the property and were entitled to sell their respective undivided share to a third party without consent of the other party. On the basis of his aforesaid observations the A.O concluded that the claim of the assessee that he along with his mother and brother had received consideration for transfer of their possessory rights in the land that was transferred by Sh. Kishore B. Dalal was factually incorrect. As per him, the amount received by the assessee, his mother and brother was for giving their „NOC‟ for the transfer of 50% undivided share of right, title and interest in the land that was owned and possessed by Sh. Kishore B. Dalal. The A.O thereafter taking support of certain judicial pronouncements concluded that as the 50% undivided share in the right, interest, title and possession of the land held by the assessee along with his mother and brother had not been transferred and remained with them, therefore, the amount received by them was not liable to be subjected to tax under the head „capital gain‟. Thus, taking support of his aforesaid conviction the A.O concluded that the amount received by the assessee viz. Sh. Prem Ashok Bhatia, Smt. Kavita Ashok Bhatia (mother) and Sh. Gaurav Bhatia (brother) for giving NOC was liable to be taxed as “Income from other sources” under Sec. 56 of the I.T Act. On the basis of his aforesaid deliberations the A.O recharacterized the receipt of Rs. 1,95,00,000/- as the income of the P a g e | 12 AY: 2013-14 DCIT Vs. Shri Prem Ashok Bhatia assessee from “other sources” and assessed his income at Rs. 1,97,20,680/-.
Aggrieved, the assessee assailed the assessment framed by the A.O in appeal before the CIT(A). The CIT(A) after deliberating at length on the contentions advanced by the assessee was persuaded to subscribe to the same. The CIT(A) was of the view that the amount of Rs. 1,95,00,000/- received by the assessee on account of transfer of rights or interest in the property was rightly shown by him as taxable under the head LTCG. On the basis of his aforesaid view the CIT(A) allowed the appeal.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The Ld. Departmental representative (for short „D.R‟) took us through the facts of the case as were discernible from the orders of the lower authorities. It was submitted by the Ld. D.R that the assessee had received an amount of Rs. 1,95,00,000/- without transfer of any right which could be construed and brought within the definition of a „capital asset‟. It was further submitted by him that as the assessee was not vested with any possessory rights as regards the property under consideration, therefore, there could have been no occasion for him to have received any consideration for transfer of such rights. The Ld. D.R in order to buttress his contention that a mere possession of a property cannot be considered as a „capital asset‟ under Sec. 2(14) relied on the order of the ITAT, Mumbai Bench “B” in the case of ITO-21(3)(1), Mumbai Vs. Bhagwan T. Fatnani (2015) 154 ITD 207 (Mum). It was further submitted by the Ld. D.R that as per Sec. 6(e) of the Transfer of Property Act, 1882 a right to sue was not to be construed as a capital asset. The Ld. D.R in order to fortify his contentions that the assessee P a g e | DCIT Vs. Shri Prem Ashok Bhatia was not in exclusive possession of the property under consideration relied on the observations of the A.O. It was submitted by the Ld. D.R that there was no material available on record which would substantiate the claim of the assessee that the entire consideration for purchase of the property under consideration, vide agreement dated 02.02.1984 was paid by Sh. Ashok Bhatia. It was submitted by the Ld. D.R that the MOU dated 29.03.2008 entered into between Mr. Kishore B Dalal and Sh. Abrar revealed that Mr. Kishore B Dalal in his status as that of a co-owner was in joint use, occupation and possession of the property under consideration. The Ld. D.R further drawing our attention to Clause 37(k) of MOU, dated 29.03.2008 submitted that Sh. Kishore B Dalal was clearly stated to be vested with full right, power and absolute authority to sell, assign or transfer to the purchaser his 50% undivided share, right, title and interest in the property. Apart there from, it was averred by the Ld. D.R that the power of attorneys dated 29.03.2008, 01.04.2010 and 07.04.2010 drawn by Sh. Kishore B Dalal in favour of Sh. Abrar clearly mentioned that Sh. Kishore B Dalal was 50% owner of the undivided share, title, interest and right in the property which was jointly owned and possessed by him along with Sh. Ashok Bhatia. Further, the Ld. D.R also took support of the deed of confirmation, dated 14.05.2009 between Sh. Kishore B Dalal and Sh. Abrar which stated that the former was seized and possessed of and otherwise well and sufficiently entitled to 50% of all that piece and parcel of NDZ land. The Ld. D.R further relied on the observations of the A.O to drive home his contention that Sh. Ashok Bhatia and thereafter his legal heirs were not in exclusive possession of the land under consideration. The Ld. D.R further adverting to Clause 17 of the conveyance deed, dated 07.09.2012 wherein it was stated that the possession of the entire land had during the life time of late Sh. Ashok Bhatia remained with P a g e | 14 AY: 2013-14 DCIT Vs. Shri Prem Ashok Bhatia him and after his death had passed over to his legal heirs, submitted that as the same was without any basis or evidence, hence the same was of no relevance. Further, the Ld. D.R rebutting the contents of sub-clauses (a) to (c) of Clause 36 of the MOU, dated 29.03.2008 submitted that the same in no way established that the possession of land was exclusively with Sh. Ashok Bhatia. In fact, the Ld. D.R took support of Clause 15 of the conveyance deed, dated 07.09.2012. It was submitted by the Ld. D.R that in the aforesaid clause it was specifically stated that MOU dated 09.03.2008 and the irrevocable general power of attorneys dated 29.03.2008, 01.04.2010 and 07.04.2010 were still valid and binding between the parties thereto and Sh. Kishore B Dalal and no person had raised any objection, complaint or protest against the said MOU or the aforementioned three irrevocable general power of attorneys. It was thus the claim of the Ld. D.R that the participants of the conveyance deed had agreed that the terms of the MOU and irrevocable general power of attorneys were valid. The Ld. D.R drawing support from the aforesaid facts submitted that now when the aforementioned documents i.e. MOU and irrevocable general power of attorneys mentioned that the land was always co-owned and co-possessed by Sh. Kishore B Dalal and Sh. Ashok Bhatia (till his death) and thereafter by Sh. Kishore B Dalal and the legal heirs of late Sh. Ashok Bhatia, therefore, the claim of the assessee to the contrary that Sh. Ashok Bhatia had remained in the exclusive possession of the property did fall to ground. In the backdrop of the aforesaid facts, it was submitted by the Ld. D.R that as the assessee along with the other legal heirs of Sh. Ashok Bhatia had received the consideration not for transfer of any right but for giving a „no objection‟, therefore, the amount falling to the share of the assessee was rightly brought to tax under the head “Income from Other Sources”.
P a g e | DCIT Vs. Shri Prem Ashok Bhatia
Per contra, the Learned Authorized Representative (for short „A.R‟) for the assessee relied on the order of the CIT(A). It was submitted by the Ld. A.R that the CIT(A) appreciating the facts of the case in the right perspective had correctly concluded that the amount received by the assessee was rightly offered by him to tax as LTCG. The Ld. A.R drawing our attention to Clause 19 of the conveyance deed dated 07.09.2012, submitted that as mentioned therein the actual and physical possession of the property under consideration had since the date of purchase remained vested with Sh. Ashok Bhatia and thereafter with his legal heirs. It was submitted by the Ld. A.R that in order to avoid any litigation between the vendor i.e. Sh. Kishore B Dalal and the purchasers on the one hand AND the “first confirming party” i.e. the legal heirs of late Sh. Ashok Bhatia on the other hand, wherein the latter were vested with the exclusive possession of the property under consideration, it was mutually agreed to pay a consideration aggregating to Rs. 5,85,00,000/- to the legal heirs of Sh. Ashok Bhatia, in lieu whereof the latter had handed over the actual and physical possession of the property under consideration to the purchasers. The Ld. A.R taking us thorough Clause 19 of the registered conveyance deed submitted that keeping in view the factual aspect of physical and actual use, occupation and possession of the land which remained with the legal heirs of late Sh. Ashok Bhatia that the purchasers had agreed with the consent of the vendor i.e. Sh. Kishore B Dalal to pay more consideration to them i.e. a sum of Rs. 5,85,00,000/-, in lieu whereof the said legal heirs pursuant to such arrangement had delivered the actual and physical possession of the property to them. In sum and substance, it was averred by the Ld. A.R that now when the fact that the physical and actual use, occupation and possession of the property under consideration was transferred by P a g e | DCIT Vs. Shri Prem Ashok Bhatia the legal heirs of late Sh. Ashok Bhatia to the purchasers was duly acknowledged by all the concerned partie and formed part of the registered conveyance deed, therefore, there remained no occasion for drawing of any doubts as regards the said factual position. Insofar the MOU, dated 29.03.2008 and the general power of attorneys, dated 29.03.2008, 01.04.2010 and 07.04.2010 entered into and drawn by Sh. Kishore B Dalal in favour of Sh. Abrar were concerned, it was submitted by the Ld. A.R that the arrangements referred in the said documents were entered into by Sh. Kishore B Dalal at the back of Sh. Ashok Bhatia who remained absolutely unaware of the same. Apart there from, it was submitted by the Ld. A.R that as the MOU and the POA‟s were unregistered documents to which Sh. Ashok Bhatia was not a party, hence the contents of the same would not have any superseding effect on the contents of the registered conveyance deed, dated 07.09.2012. In fact, it was submitted by the Ld. A.R that both Sh. Kishore B Dalal and Sh. Abrar had in the conveyance deed, 07.09.2012 accepted the fact that the possession of the entire property under consideration had always remained with Sh. Ashok Bhatia and thereafter with his legal heirs. The Ld. A.R also assailed the validity of the transaction entered between Sh. Kishore B Dalal and Sh. Abrar on the ground that no valid transfer transaction of an immovable property would materialize on the basis of a general power of attorney. In support of his aforesaid contention the Ld. A.R had relied on the judgment of the Hon‟ble Supreme Court in the case of Suraj Lamp and Industries P. Ltd. Vs. State of Haryana [SLP(C) No. 13917 of 2009, dated 11.10.2011]. Insofar, the confirmation dated 14.05.2009 between Sh. Kishore B Dalal and Sh. Abrar as was relied upon by the A.O for claiming that Sh. Kishore B Dalal was in possession of the property under consideration was concerned, it was averred by the Ld. A.R that as the same was also an unregistered document to which the P a g e | 17 AY: 2013-14 DCIT Vs. Shri Prem Ashok Bhatia assessee was not a party, hence the same would not have any overriding effect on the contents of the registered conveyance deed, dated 07.09.2012 wherein both Sh. Kishore B Dalal and Sh. Abrar had accepted the fact that possession of the entire property had always remained with Sh. Ashok Bhatia and thereafter with his legal heirs. As regards the support drawn by the A.O from the extract of the land records maintained as per the land revenue records, it was submitted by the Ld. A.R that the same did not certify about the actual physical possession of the land and only stated that Sh. Kishore B Dalal was 50% owner as per the records. Adverting to the title search report of Mr. M.S Rodrigues, Advocate, it was submitted by the Ld. A.R that the fact that the property under consideration was co- owned by S/sh. Kishore B Dalal and Ashok Bhatia was not disputed, and in fact was acknowledged by all the parties in the conveyance deed dated 07.09.2012. The Ld. A.R further rebutting the observations of the A.O on the basis of Clause 10 of the conveyance deed, dated 07.09.2012 submitted that the same in no way dislodged the claim of the assessee that he along with the other legal heirs of late Sh. Ashok Bhatia had the exclusive possession of the property under consideration. In fact, it was submitted by him that the said fact was also recognized in the MOU Para 36(a) and (f) by both S/sh. Kishore B Dalal and Abrar Ahmed. In sum and substance, it was the contention of the Ld. A.R that now when the fact that the assessee along with the other legal heirs had transferred their exclusive possessory rights of the property for an aggregate consideration of Rs. 5,85,00,000/- was duly acknowledged by all the parties and was borne from the registered conveyance deed dated 07.09.2012, hence the same could not be dislodged or doubted by taking support of the contents of certain unregistered documents to which the assessee was not a party. It was thus the claim of the Ld. A.R that the CIT(A) duly P a g e | DCIT Vs. Shri Prem Ashok Bhatia appreciating the facts in the backdrop of the settled position of law had rightly concluded that the amount of Rs. 1,95,00,000/- received by the assessee towards his share on account of transfer of the possessory rights of the property under consideration was rightly offered by the assessee for tax under the head “Capital gains”.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material and the judicial pronouncements relied upon by them. We find that our indulgence in the present appeal has been sought by the revenue to adjudicate as to whether the CIT(A) is right in law and facts of the case in concluding that the amount of Rs. 1,95,00,000/- received by the assessee was rightly offered by him for tax under the head “Capital gains”. As is discernible from the order passed by the CIT(A), the latter after deliberating at length on the contentions advanced by the assessee in the backdrop of the facts was persuaded to accept the same, observing as under :-
““8. I have carefully considered the submission of the appellant in the light of findings of the AO in the assessment order, various supporting documents and the judicial decisions relied upon by the appellant and the AO. My observations are as under. 8.1 The issue to be decided here is whether the consideration received by the appellant on account of issuance of “No Objection Certificate” by the appellant alongwith his mother and brother or being a confirming party in the said conveyance deed will constitute capital assets and whether the same is being transferred during the year under consideration. In this regard, I find that identical issue was there in the case of Shri Gaurav Ashok Bhatia, brother of the appellant for A.Y. 2013-14 who was also a confirming party in the same conveyance deed and received the same amount of Rs. 1,95,00,00/- from the same vendor and invested in another property with claim of deduction u/s 54F of the I.T. Act. The appeal in the case of Shri Gaurav Ashok Bhatia appeal has been decided in appeal No. CIT()-41/IT/454/2015-16 dated 31.10.2017 by the undersigned. In the said order, the under signed has held that : 1. On bare reading of the provision of section 2(14) and sections 2(47), it is clear that the expression „property of any kind‟ used in s. 2(14) is of wide connotation. When this expression is read along with expression defined in s. 2(47)(ii), which includes sale, exchange or relinquishment of the assets of extinguishment of any rights therein, in my considered opinion, giving up of right to claim specific performance by the P a g e | DCIT Vs. Shri Prem Ashok Bhatia assessee to get conveyance of immovable property in lieu of specified consideration resulted in extinguishment of right in property, thereby attracting the provisions of s. 2(14) rws 2(47) of the I.T. Act. In other words, the action on the part of assessee in giving up his right over the property and accepting the money compensation is a clear case of relinquishment of a right in the property resulting in transfer as defined in s. 2(47) of the Act.
2. In this context, if the facts of this case is analysed, it is found from the conveyance deed that the purchasers i.e. Mr. Rajesh J Singh, Mr Omprakash H Kumawat, Mr. Harinarayan L Singh, Mr. Joseph Mudaliyar have independently agreed to purchase undivided half share of Mr Kishore B Dalal through Mr. Abrar Hussain. The AO has raised the objection that Mr Kishore B Dalal is the owner of the property and he was also holding possession of the said property, being sold. In such circumstances, if the argument of the AO is accepted, there was no reason to taking “no objection certificate” (NOC) from the appellant alongwith his mother and brother who are owners of other part of the land. And if NOC has been taken, this makes it abundantly clear that the appellant along with his family members had interest in the said piece of land being sold. Further the total consideration agreed to be paid for the sale portion was Rs. 8,00,00,000/- out of which a major share of Rs. 5.85 Crores was paid to the appellant and his relatives and only Rs. 1.25 Crore and Rs. 89 lakhs were paid to Shri Abrar Hussain the vendor respectively. In this context, I find relevance of the judgment of Hon‟ble Supreme Court in case of CIT Vs. Durga Prasad More (84 ITR 540) herein it is held that taxation law does not prescribe any measurement to judge a particular case but one has to consider surrounding circumstances of each case. In the instant case, the fact that the appellant has fetched the highest portion of the consideration for NOC to be issued makes it certain that he was vested with some interest of rights in the said property which was got transferred. No person would receive an amount to the tune of Rs. 5.85 crore just for issue of NOC without having any right or interest in the property. If it is considered that the payments were made in proportion to the rights held in the property and looking to the fat the amount received by the appellant and his relatives are much more than the legal owners of the property, it clearly indicate that the appellant along with his family members had dominant interest in the property.
Now the question arises, what was the right that has been transferred by the appellant under the deed of conveyance. In this regard, paras 16,17 & 19 of the deed of conveyance are found relevant which have been reproduced in the order of Shri Gaurav Ashok Bhatia.
4. From the clauses of the deed of conveyance, it is found that all the parties to the said deed of conveyance have duly acknowledged the fact that use and possession of the property from the date of purchase was initially with Shri Ashok Bhatia and after his demise with his legal heir. On the basis, as per clause 19 higher payment of consideration was paid to the First confirming party i.e. the appellant and his family. At least from the conveyance deed, it is found that the consideration was received by the appellant for transfer of his right of possession in favour of the purchaser and not only for issue of “No objection certificate”. Since the payer or purchaser party must have considered this right vested with the appellant being of greater importance, higher consideration was paid to the appellant & his P a g e | DCIT Vs. Shri Prem Ashok Bhatia family members. In this regard, I had agreed with the Ld. AR of the appellant that such rights of interest in the property will be of capital in nature as held in a no. of landmark judgments.
It is found that the AO solely relied upon the MOU between Shri Kishor B Dalal and Shri Abrar Hussain which states that Shri Kishore B Dalal is in joint use, occupation and possession of the property as co-owners. He has also referred to the power of attorney given by Shri Kishore B Dalal to Shri Abrar Hussain which states that Shri Kishore B Dalal is in possession and occupation of the said undivided share in property. It is also noticed that the AO has referred to the clause 15 of the deed of conveyance dated 07.09.2012, which states that the MOU and POA are still valid and binding on the parties therein and Shr. Kishore B Dalal or any other has not raised any objection, complain or protest against the said MOU and POA. Based on this clause, the AO has concluded that all the parties to the deed of conveyance have agreed to the clauses of MOU and POA. Accordingly, he came to the conclusion that once the appellant agrees to the terms of MOU and POA, he cannot say that possession had remained with the appellant‟s family.
In my considered opinion, the AO has failed to appreciated that the said MOU as well as POA are unregistered documents, entered between the parties at their convenience. In clause 36 of the MOU, Shri Kishore B Dalal has acknowledged the right of Shri Ashok Bhatia over his share. Further regarding clause 15 of the deed of conveyance deed, in my view, once the interest of appellant and his family members are taken care of by paying highest share in the consideration, there remains no reason for any objection in acknowledging existence of the said MOU and POA. One cannot ignore a specific clause in the deed of conveyance, which is a registered document that acknowledges that the use and possession of the land under consideration, since the date of purchase, has remained with Shri Ashok Bhatia and a higher consideration was paid to him and his family members in lieu of the relinquishment of some right vested with the said land. Since clause 15 as well as clause 16-19 all are part of the same deed., one cannot simply overlook these clauses rather than to draw an inference from an indirect clause. Therefore, I do not find any merit in the above conclusion drawn by the AO.
7. It has also been found that the decision of Hon‟ble ITAT, Ahmadabad bench as relied upon by the AO, is distinguishable on facts as in that case the confirming party was not holding any right in the property and the consideration was paid only to avoid any possible future dispute. Therefore, the said decision has no applicability in the instant case, wherein the appellant is holding right in the said property, as elaborate d in the registered conveyance deed, which has duly acknowledged by all the concerned parties. Apart therefrom that nowhere in the assessment order, the AO has ever doubted that the rights linked with the land is not a capital asset, therefore there is no scope to tax the said income in any head other than capital gain, which is a specific head to tax such income. On the contrary, the ratio of the judgment in the case of J K Kashyap Vs. ACIT (302 ITR 255) (Del. HC) is fully applicable in the instant case, wherein the Hon‟ble High Court has clearly laid down the principal of taxability of such receipts as capital gain in nature. Considering the totality of the facts and circumstances of the issue involved, in my considered opinion, the said receipts of Rs. 1,95,00,000/- by the appellant on account of transfer of P a g e | DCIT Vs. Shri Prem Ashok Bhatia rights or interest in the property is taxable under the head Long Term Capital Gain. Accordingly, the grounds of appeal
no. 1, 2 and 3 are allowed. 8.2 Since facts of the instant case in identical to the facts of Shri Gaurav Ashok Bhatia for A.Y. 2013-14 decided in dated 31.10.2017, it is held that the receipt of Rs. 1,95,00,000/- by the appellant and not as income Other Sources, as held by the A.O on account of transfer of rights or interest in the property is taxable under the head Long Term Capital Gain and not as income from other sources, as held by A.O. Hence, the grounds of appeal Nos. 1, 2 and 3 are allowed.
9. Regarding ground No.4 about not granting of deduction of cost of acquisition against sale proceeds, since the appellant has failed to produce evidence of payment of such cost either during the assessment proceedings or during the appellate proceedings, the said claim is hereby rejected. Accordingly, this ground of appeal is dismissed.
10. Lastly ground No. 5 is about non granting deduction of section 54F of the Act. Once the income is held to be taxable under the head Long Term Capital Gain in the preceding paragraphs and A O has not pointed out any contravention of provisions of section 54F of the ACT, the benefit u/s 54F will be allowed as claimed in the return of income. Accordingly this ground of appeal is allowed.
11. In the result, the appeal of the appellant for A.Y. 2013-14 is partly allowed.”
Admittedly, the assessee i.e. Sh. Prem Ashok Bhatia along with Smt. Kavita Ashok Bhatia (mother of the assessee) and Sh. Gaurav Bhatia (brother of the assessee) had in equal shares received an amount aggregating to Rs. 5,85,00,000/- in terms of Clause 19 of the registered conveyance deed dated 07.09.2012. As is discernible from a perusal of the registered conveyance deed, the purchasers had after considering the fact that the physical and actual use, occupation and possession of the plot of land remained vested with the assessee and the other two legal heirs viz. Smt. Kavita Ashok Bhatia and Sh. Gaurav Bhatia, had thus agreed with the consent of the vendor i.e. Sh. Kishore B Dalal to pay a consideration aggregating to Rs. 5,85,00,000/- to them. The legal heirs of Late Sh. Ashok Bhatia viz. the assessee i.e Sh. Prem Ashok Bhatia, Smt. Kavita Ashok Bhatia (widow) and Sh. Gaurav Bhatia (son), had in lieu of the aforesaid consideration of Rs. 5,85,00,000/- handed over the actual and P a g e | DCIT Vs. Shri Prem Ashok Bhatia physical possession of the plot of land therein described in the “third schedule” forming part of the registered conveyance deed to the aforementioned purchasers. Apart there from, the vendor i.e. Sh. Kishore B Dalal had agreed with the legal heirs of late Sh. Ashok Bhatia and the purchasers of the property that the aforesaid factual aspect would not be disputed by him. In fact, as is further discernible from the registered conveyance deed the legal heirs of late Sh. Ashok Bhatia only pursuant to the aforesaid arrangement had agreed to join hands as a party to the aforesaid registered deed of conveyance.
Insofar the reliance placed by the A.O on certain documents in his attempt to dislodge the claim of the assessee that the possession of the property under consideration had remained with Sh. Ashok Bhatia during his lifetime and thereafter with his legal heirs is concerned, we find substantial force in the contention advanced by the Ld. A.R that as the said respective documents were unregistered documents to which the assessee was not a party, therefore, the same would not have any superseding or overriding effect over the contents of the registered conveyance deed. In sum and substance, the contents of the aforementioned unregistered documents will have to give way to the contents of the registered conveyance deed. Our aforesaid view is fortified by the judgment of the Hon‟ble Supreme Court in the case of CIT Vs. Charanjit Singh Atwal (SLP No. 1565 of 2016), wherein it has been held that after amendment of Registration Act, 2001 an unregistered document will have no evidentiary value. On a similar footing the validity of the general POA‟s dated 29.03.2008, 01.04.2010 and 07.04.2010 and the contents thereof in context of the purported transfer that was sought to be effected can also safely be gathered in the backdrop of the judgment of the Hon‟ble Supreme Court in the case of Suraj Lamp and Industries P. Ltd. Vs. State of Haryana [SLP(C)
P a g e | DCIT Vs. Shri Prem Ashok Bhatia No. 13917 of 2009, dated 11.10.2017]. In the aforesaid judgment the Hon‟ble Apex Court has held that no transfer of a property can be validly carried out on the basis of general power of attorneys.
Apart there from, we are also persuaded to be in agreement with the contention advanced by the Ld. A.R that as the assessee was neither a party to the MOU dated 29.03.2008 or the general power of attorneys dated 29.03.2008, 01.04.2010 and 07.04.2010 entered into and drawn by Sh. Kishore B Dalal in favour Sh. Abrar, which as observed hereinabove were executed not to his knowledge, therefore, the contents of the said documents could not be pressed into service for drawing of adverse inferences and dislodging the claim of the assessee that Sh. Ashok Bhatia and thereafter his legal heirs had remained in exclusive possession of the property under consideration. Insofar the confirmation dated 14.05.2009 between Sh. Kishore B Dalal and Sh. Abrar stating that Sh. Kishore B Dalal was having the possession of the property under consideration is concerned, we find that as the said facts are also borne out from an unregistered document to which the assessee was not a party, thus in the backdrop of our aforesaid reasoning in context of validity of unregistered documents executed at the back of the assessee, the same too will have to give way to the contents of the registered conveyance deed. As regards the extract of the land records as per the land revenue records and the title search report of Mr. M.S Rodrigues, Advocate, we are of the considered view that as the said documents only affirm the undisputed fact of co-ownership of the property by Sh. Kishore B Dalal and Sh. Ashok Bhatia/his legal heirs, therefore, the same would in no way assist for either supporting or dislodging the claim of the assessee that the actual physical possession of the property under P a g e | DCIT Vs. Shri Prem Ashok Bhatia consideration had remained with Sh. Ashok Bhatia and thereafter with his legal heirs.
As observed by us hereinabove, the Clause 19 of the registered conveyance deed categorically evidences the fact that the assessee along with the other two legal heirs of late Sh. Ashok Bhatia viz. Smt. Kavita Bhatia (mother of the assessee) and Sh. Gaurav Bhatia (brother of the assessee) had in equal shares received an amount aggregating to Rs. 5,85,00,000/- in lieu of handing over the actual and physical possession of the property under consideration to the purchasers who had agreed to pay the said amount to the legal heirs after obtaining the consent of the vendor i.e. Sh. Kishore B Dalal. In our considered view, it would be relevant to cull out Clause 19 of the registered conveyance deed which contemplates the reason for making of the payment of Rs. 5,85,00,000/- by the purchasers of the property to the legal heirs of late Sh. Ashok Bhatia, as under :-
19. Taking into consideration the actual and physical possession of the said plot and since the date of purchase it was initially with the deceased Ashok Bhatia and thereafter it is with the heirs of the deceased Ashok Bhatia, and with an intend to avoid the litigation by and between the Vendor and the Purchasers on the one hand and the First Confirming Party on the other hand, it has been mutually agreed that considering the factual aspect of physical and actual use, occupation and possession of the plot of land the purchasers have agreed with the consent of the Vendor to pay more consideration to the First Confirming Party i.e. the sum of Rs. 5,85,00,000/- (Rupees Five Crores Eighty Five Lakhs only), in lieu thereof the First Confirming party has handed over the actual and physical possession of the plot of land more particularly described in the Third Schedule hereunder written, a sum of Rs. 1,26,00,000/- (Rupees One Crore Twenty Six Lacs Only) to the second Confirming Party and sum of RS. 89,00,000/- (Rupees Eighty Nine Lakhs Only) to the Vendor towards transfer of his right, title and interest in the described in the Third Schedule hereunder written plot of land. The Vendor has agreed with the First Confirming Party and the Purchasers not to dispute this factual aspect. On the assurances and the representations of the Vendor and the Purchaser having accepted the factual aspect of occupation and possession of the First Confirming Party and there upon the purchasers having agreed to pay more consideration to the First Confirming Party, the P a g e | DCIT Vs. Shri Prem Ashok Bhatia First Confirming Party have agreed to join their hands to the Deed of Conveyance.
We thus in the backdrop of our aforesaid observations are of the considered view that the CIT(A) had rightly observed that as was discernible from the registered conveyance deed, assessee who as acknowledged by all the concerned parties held a possessory right in the property under consideration had received the amount of Rs. 1,95,00,000/- on account of transfer of such rights or interest in the property under consideration, therefore, the same was rightly offered for tax by him under the head “Capital Gains”. In the backdrop of our aforesaid observations, we thus not finding any infirmity in the order passed by the CIT(A) who had rightly arrived at the aforesaid conclusion after deliberating on the facts of the case and distinguishing the judicial pronouncements relied upon by the A.O, uphold the same.
The appeal of the revenue is dismissed in terms of our aforesaid observations.