DCIT 6(2)(1), MUMBAI vs. BHARAT AMBALAL PATEL, MUMBAI

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ITA 84/MUM/2016Status: DisposedITAT Mumbai18 June 2018AY 2009-105 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 50C is not applicable to the transfer of development rights, as it pertains to the transfer of land or building. This decision was based on a prior ITAT ruling in the case of a co-owner.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting an addition made under Section 50C. The addition was based on the stamp duty value of a property jointly owned by the assessee and his brothers, where development rights were transferred.

What were the issues?

The primary issue was whether Section 50C of the Income Tax Act is applicable to the transfer of development rights, and if the transfer of development rights constitutes a transfer of land or building.

Which sections of the Income-tax Act were involved?

Section 50C,Section 2(47)(iv),Section 53A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI R. C. SHARMA, AM & SHRI AMARJIT SINGH, JM

Hearing: 22.03.2018Pronounced: 18.06.2018

O R D E R

PER AMARJIT SINGH, JM:

1.

The revenue has filed the present appeal against the order dated 01.10.2015 passed by the Commissioner of Income Tax (Appeals) - 12, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.

2.

The revenue has raised the following grounds: - " On the facts and circumstances of case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.52,32,667/- made by the AO u/s 50C towards LTCG.

ITA NO.84/M./2016 A.Y. 2009-10

2. On the facts and circumstances of case and in law, the Ld. CIT(A) erred in deleting the addition without appreciating the fact that the transfer of development right, (deemed to be transfer of property), took place in the course of said assessment year, as per Ec.2(47)(iv) r.w.s.53A of the Transfer of Property Act, 1882 and the provision of section 50C of the I.T. Act is applicable in assessee’s case 3. The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the AO be restored. "The appellant craves leave to amend or alter any ground or add a new ground."

3.

The brief facts of the case are that the assessee filed his return of income on 19.06.2009 declaring total income to the tune of Rs.3,60,970/- for the A.Y. 2009-10. A letter dated 29.09.2012 was received from the ITO-6(2)(4), Mumbai wherein the AO stated that information has been received from the CIB regarding sale of immovable property (Jointly) in the in the name of Shri Ashok Patel, Shri Paresh Patel and Shri Bharat Patel co-owners for consideration of Rs.Nil. The market value for stamp purpose was to the tune of Rs.1,56,98,000/-. The AO further stated that two assessee’s namely Shri Ashok Patel and Shri Paresh Patel were assessed in this charge and assessment was completed u/s 143(3) of the Act on 29.12.2011 raising demand of Rs.23,35,145/- in both the cases. In view of the said facts, the assessment for the A.Y.2009-10 of the assessee was reopened in the provision of Section147 of the Act and notice u/s 148 of the Act was issued and served upon the assessee. The assessee filed its return of income u/s 139(1) of the Act dated 19.06.2009. Subsequently, notice u/s 143(2) of the Act was issued and served upon the assessee. Thereafter 1/3rd market value of the strength to the tune of Rs.1,56,98,000/- i.e. 52,32,667/- was added to the income of the assessee and the total income of the ITA NO.84/M./2016 A.Y. 2009-10 assessee was assessed to the tune of Rs.55,93,640/-. The assessee was not satisfied, therefore, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee but the revenue was not satisfied, therefore, the revenue has filed the present appeal before us.

4.

We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the revenue has argued that the provision of Section 50C of the Act is not applicable to the case of the assessee, therefore, the finding of the CIT(A) is wrong against law and facts. However, on the other hand, the Ld. Representative of the assessee has strongly placed reliance upon the order passed by the CIT(A) in question. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: -

“6.1.1 have carefully perused the assessment order and the appellant's written submissions, it is seen that the appellant, Shri Bharat Ambalal Patel is one of the joint owners of tlic property In question 'Mani Bhuvan' along with his two brothers Shri Ashok A. Patel and Shri Paresh A Patel, It is also seen that, here, the A.O, in para 7.3 and 7.4 at Page 10 of his order has taken identical view for the appellant as that taken by the then A.O. (1TO 6(2)14), Mumbai in order passed for AY. 2009-10 in the case of Shri Ashok A Patel. The CIT(A)-I2 vide order dated 3011 2013 in Appeal No, C1T(A)-}2/ITQ-6(2)(4)/l7/ll-12 for A.Y. 2009-10 in case of Shri Ashok A. Patel has held the view that the provisions of section 50C are not applicable and has allowed the appeal. The relevant portion of CIT(A)-12 order is quoted here for ready references. 4.4 "Beside, the contention of the appellant is also that provisions of section 50C is not in its case as there was no transfer of any land or building at all by the who had only given the developer right to construct on the existing building by usage of own TDR. I find that the case laws have been quoted by the appellant dearly support his case. Section 50C is attracted if the capital asset involved

ITA NO.84/M./2016 A.Y. 2009-10 in transfer is land or building or both. Tl\e transfer of right to loud TDR is not transfer of land, and/or building of both. Under the Development Agreement, the land with building continues to remain vested in the society or the members as the case may be. Hence, •prolusions of section 50C of the Income-tax Act cannot be made applicable to the capital gam arising from the grant of right to load TDR, Under the circumstances, it is dear that the provisions of section 50C could not be applied in the case of the appellant for calculating capital gains. 4.5 Therefore, keeping the totality of the facts and circumstances of the appellant’s case in view, it is seen that the grounds of appeal as raised by the appellant would need to be allowed.”

5. The matter of controversy in between the parties is in connection with assessing the long/short term capital gain upon the property which was under ownership was Shri Ashok A. Patel, Shri Paresh A. Patel and Shri Bharat Ambalal Patel. However in the instant case the controversy is confined to the Bharat Ambalal Patel. The matter of controversy has been adjudicated by the CIT(A) in the case of Ashok A Patel which has been reproduced by the CIT(A) in his order above. The CIT has placed reliance upon the finding of one of the share-holders in the property namely Ashok A. Patel and accordingly arrived at this decision that the provision of Section 50C of the Act is not applicable to the facts of the case. Section 50C of the Act is attracted in the capital asset involved in the transfer of development/TDR. Thereafter the revenue filed an appeal against the order of CIT(A) in the case of Ashok A. Patel before Hon’ble ITAT and the Hon’ble ITAT in confirmed the finding of the CIT(A) in the said case i.e. in the case of Ashok A. Patel. The case is now

ITA NO.84/M./2016 A.Y. 2009-10 actually covered by the decision of the Hon’ble ITAT in one of the share-holder Ashok A. Patel. The finding of the CIT(A) is based upon the finding of the Hon’ble ITAT in one of the share-holder case namely Ashok A. Patel. It is quite clear that the finding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, we decide issue nos. 1& 2 in favour of the assessee against the revenue.

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