ACIT 21(1), MUMBAI vs. ARVIND KUMAR AGGARWAL, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI R. C. SHARMA, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. No.910/Mum/2015 (निर्धारण वर्ा / Assessment Year: 2011-12) ACIT-21(1) (Erstwhile बिधम/ Shri Arvind Kumar Aggarwal, Flat No.805-806, ACIT-18(1) Room No. 116, Vs. El-Dorado CHSL, VS Road, 1st Floor, Piramal Chambers, Prabhadevi, Mumbai-400028 Parel, Mumbai-400012 CO. No.147/Mum/2016 (ITA. No. 910/Mum/2015) (निर्धारण वर्ा / Assessment Year: 2011-12) Shri Arvind Kumar बिधम/ ACIT-21(1) (Erstwhile Aggarwal, Flat No.805-806, ACIT-18(1) Room No. 116, Vs. El-Dorado CHSL, VS Road, 1st Floor, Piramal Chambers, Prabhadevi, Mumbai-400028 Parel, Mumbai-400012 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACPM2137J (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue by: Shri V. Vidhyadhar (DR) Assessee by: Shri Rajiv Khandelwal सुनवाई की तारीख / Date of Hearing: 06.04.2018 घोषणा की तारीख /Date of Pronouncement: 04.05.2018 आदेश / O R D E R PER AMARJIT SINGH, JM: The Revenue as well as assessee have filed the above mentioned appeals as well as cross objection against the order dated 27.11.2014 passed by the Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011-12. ITA. No.910/M/15 CO. No. 147/M/2016 A.Y. 2011-12

(1).On the facts and in the circumstances of the case and in law, the Ld. CT(A) has erred in: “(i). Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in giving relief of Rs.1,72,40,710/- holding that the gain from sale of property is long term capital gain & not short term capital gain.” (ii). Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the date of transfer of flat was 16.03.2007 and not 30.11.2007 without considering the provisions of Sec. 53A of Transfer of Property Act. (iii). Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the exemption claimed u/s 54 of the I.T. Act, 1961.” 3. The assessee has raised the following cross-objection: - “The following grounds of cross objection are independent of, and without prejudice to, one another; The Commissioner of Income-tax (Appeals') - 33. Mumbai (hereinafter referred to as the Cl f(A» erred in upholding the action of the Assessing Officer in considering the cost of acquisition at Us 42.10.500 m lieu of R-S 70,51 ,S3G. The cross-objector contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have considered the cost of acquisition at Rs.70,5 LB30 per claim of the appellant in the return of income. 2 The C1T(A) erred in alluding the benefit of indexation from the year 2006-07 a against claimed the cross-objector from the financial year 1994-95. The cross-objection contends that on the facts and in the circumstances of the case and i law, the CIT(A) ought to have allowed the benefit of indexation from ITA. No.910/M/15 CO. No. 147/M/2016 A.Y. 2011-12

the financial year 1994-95, being the year in which the flat was booked by the cross-objector by payment Rs 1 lac. 3. The CIT(A) erred in upholding the action of the AO in not allowing the cost of improvement Rs.9,50,000 incurred on the flat transferred/sold during the year and as claimed by the cross-objection in his return of income. The cross-objector contends that the on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the cost of improvement Rs.9,50,000 inasmuch as the same is allowable by virtue of section 48 of the Act. 4. the CIT(A) erred in upholding the action of the AO in ot allowing the loss of Rs.38,46,927 on account of sale of guest house, under the head capital gains, claimed by the appellant during the course of assessment proceedings. The cross-objection contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the loss of Rs,.38,46,927 under the head capital gains.” The brief facts of the case are that the assessee filed original 4. return of income on 30.09.2011 declaring total income to the tune of Rs.1,11,45,892/-. The case was selected for scrutiny through CASS. Therefore, notice u/s 143(2) of the I.T. Act, 1961 dated 01.08.2012 was issued and served upon the assessee. The Notice u/s 142(1) of the I.T. Act, 1961 dated 08.07.2013 was also issued and served upon the assessee. The assessee was the proprietor of Indo Euro Export engaged in exporting of agricultural equipment, hand tools, construction tools and chemicals and engineering goods. During the year assessee declared his income from house property and capital gains and income from business of export. The profit on export

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business was shown to the tune of Rs.3,43,037/- claimed as exempt u/s 10B of I.T. Act. The assessee sold the flat Ansal Height claimed as LTCG. The assessee claimed to have purchased the flat vide agreement dated 10.03.2007 and sold vide agreement dated 20.08.2010 thus treated the long term capital gain. The assessee has booked the flat in F.Y. 1996-97 and paid a sum of Rs.1,00,000/- as booking amount. The assessee has default the payment of Rs.10 lacs to the builder. A dispute arose between the assessee and builder and the allotment was terminated. Subsequently, in consent term was executed on 19.01.2007 and assessee right to purchase a flat was restored vide agreement dated 10.03.2007. The right to purchase a flat was registered in the name of assessee and his wife. The flat was not ready for occupation vide agreement dated 10.03.2007. The assessee has purchased right to acquire the flat. Subsequently, on receipt of occupation certificate from MCGM vide letter dated 17.06.2007 the flat was ready for occupation and accordingly, the assessee received the possession of the flat vide letter dated 30.11.2007. The copy of possession certificate was also issued. The income arise from the sale of the flat was treated as short term capital gain on the basis of the possession of the flat dated 30.11.2007 and sale dated 20.08.2010 the holding period was less than 36 months. Therefore, accordingly, the income of the assessee was assessed as LTCG. The claim of the assessee in connection with the acquisition of the property in a sum of Rs.70,51,830/- was declined. The claim of the assessee was also for ITA. No.910/M/15 CO. No. 147/M/2016 A.Y. 2011-12

the benefit of indexation was required to be reckon for the period of 1994-95. The initially dated of booking was also declined and improvement cost to the tune of Rs.9,50,000/- was also declined and the income of the assessee was assessed to the tune of Rs.2,72,61,210/-. The assessee was not satisfied. Therefore, filed an appeal before the CIT(A) who considered the date of the transfer of flat i.e. 16.03.2007 for considering the long term capital gain because the flat was sold in 20.08.2010 and allowed the claim of the assessee to the extent of Rs.1,72,40,710/- and the CIT(A) declined of other claim of the assessee i.e. in connection with cost of improvement, loss on account of sale of guest house etc. Therefore, the revenue has filed the present appeal as well as the assessee has filed the cross-objection with regard to the relief declined. ISSUE NO. 1(I & III) & cross objection no. 1 & 2:- 5. Under this issue the revenue has contested to consider the date of transfer of the flat on 16.03.2007 the day on which the agreement was executed between parties in spite of 30.11.2007 when the possession was handed over to the assessee without considering the provision of Section 53A of the Transfer of Property Act and the CIT(A) was wrong allowing the claim of the exemption u/s 54 of the I.T. Act, 1961. However, the assessee has filed the cross-objection to treat the allotment of flat in view of allotment letter dated 02.06.1994. Initially flat was allotted to the assessee by virtue of letter dated

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02.06.1994 issued by the Utility Premises P. Ltd. and the assessee agreed to purchase the flat in sum of Rs.56,00,000/- and paid an amount of Rs.1,00,000/- by cheque against part payment of the consideration of the flat. Thereafter, the assessee was in default of payment, therefore, a dispute arose between the builder and the assessee and a consent agreement dated 09.03.2007 was executed between them. On appraisal of the agreement, we noticed that the agreement was in pursuance of allotment of flat on 17th floor by virtue of letter dated 02.06.1994. Thereafter, the remaining payment was made and the sale agreement was executed on 09.03.2007. The said flat was sold on 20.08.2010, thereafter, the assessee purchased the flat by virtue of purchase deed dated 28.07.2011 executed by Eldorado. The AO treated the acquisition of the flat from the date of possession of the flat by virtue of letter dated 30.11.2007 and accordingly assessed the short term capital gain as the flat was sold on 20.08.2010. The CIT(A) considered the date of execution of agreement between the assessee and the builder i.e. 16.03.2007. The contention of the assessee is that the allotment letter is required to be considered in the interest of justice because the agreement dated 16.03.2007 was in pursuance of the allotment letter dated 02.06.1994 and the possession of the flat was also in continuation of the said proceeding which was effected on 30.11.2007. It is to be seen what date is required to be considered for the purpose of indexation of the long/short term capital gain. The facts of the present case is quite similar to the facts of the ITA. No.910/M/15 CO. No. 147/M/2016 A.Y. 2011-12

case titled as CIT-(III) Vs. A Suresh Rao 2014 41 Taxman.com 475 Karnataka High Court. Accordingly, High Court of Karnataka has considered the date of allotment for the purpose of acquisition of property for assessing the same as long/short term capital gain. The Hon’ble High Court of Punjab & Harayana has also held that the allotment of letter is required to be considered and the delivery of possession and payment of balance of instalments, identification of a particular flats and delivery of possession are consequential act, that related back to and arise from the rights conferred by the allotment letter. The Hon’ble ITAT in the case of Richa Bagrodia Vs. DCIT ITA. No. 3601/M/2012 decided on 22.04.2014 has also considered the date of allotment for the purpose of acquisition from the property. Ms. Madhu Kaul Vs. CIT Chandigarh 2014 43 taxman.com 417 (P&H), High Court of Punjab and Haryana has also considered the date of allotment letter for the purpose of indexation of long term capital gain/short term capital gain. In support of the claim, the assessee has also placed reliance upon the law settled in Vinod Kumar Jain Vs. CIT, (2010), CIT Vs. Vimal Lalchand Mutha, Charanbir Singh Jolly Vs. ITO, Ward 13 & Vijay Manikrao Hamilapurkar Vs. DCIT 21(3), Mumbai. Considering the facts and circumstances of the present case in which the date of the allotment of the flat i.e. 2.06.1994 is not in dispute and subsequently on account of failure to pay the installment of the flat and another agreement dated 16.03.2007 is not in dispute which is in pursuance of allotment letter

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dated 02.06.1994 in connection with same property which had subsequently sold by virtue of agreement of sale dated 20.08.2010. Therefore, in view of the said circumstances and in view of the law mentioned above we are of the view that the allotment letter dated 02.06.1994 is liable to be considered for the purpose of indexation of the property in accordance with law. Accordingly, the issue no. 1 (1 & II) is hereby decided in favour of the assessee against the revenue accepting the claim of the cross-objection raised above bearing no. 1 and 2. ISSUE NO. 1 (1& III):-

“34. The above rival contentions have been considered. The first ground on which the AO has denied the exemption u/s 54 to the appellant is that the flat has been purchased by the appellant in the name of his wife Smt. Alpana Aggarwal Since Smt. Alpana Aggarwal was already 100% owner of the said flat, therefore, there is no question of purchasing the same again from his son Raghav Aggarwal. 35. The above contention of the AO cannot be accepted. It is an admitted fact that the above flat no. B-805 was jointly owned by Smt. Alpana Aggarwal and Raghav Aggarwal and was purchased in the year 1998. At the time of purchase of the said flat in 1998 Raghav Aggarwal was minor but the fact cannot be denied that he was joint owner of the property. When the 50% share in the said flat was purchased by Smt Alpana Aggarwal in the year 2010-11, Raghav Aggarwal was major and a qualified

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professional, who had the rights vested in him regarding the ownership of the said flat and he had all the legal rights to dispose of the said property. It is not the case of the AO that no money has been paid by Smt Alpana Aggarwal while purchasing the 50% share of Raghav Aggarwal in the flat. Though the money, for the purchase of the flat, has been paid by her husband Sh. Arvind Aggarwal. yet the fact cannot be denied that Smt. Alpana Aggarwal has paid the money for the purchase of 50% share in the said flat to Raghav Aggarwal and proper sale transaction has taken place by exchange of money through banking channels and the purchase of the flat is documented through a registered sale deed on which stamp duty has been paid as per market value of the property. The fact of stamp duty paid proves that the purchaseof the flat is at prevalent fair market value and the transaction Is at arm’s length. Further, Mr.Raghav Aggarwal has also shown the transaction of the sale o( this property in his return of income filed for the A.Y 2012-13 under the head capital gams and paid the due taxes. The copy of the return of income of Mr. Raghav Aggarwal for theA-Y. 2012-13 has been placed on record. 36. In the case of the Shri. Arvind Aggarwal also, the facts are identical as stated above in respect of flat no. B-B06. which was jointly owned by Sh. Arvind Aggarwal and his minor son Abhinav Aggarwal and was purchased in the year 1998 At the time of sale of the same flat in the year 2010-11, Mr. Abhinav Aggarwal was major and a qualified professional, who had all the rights vested in him regarding the ownership of the said flat and he had all the legal rights to dispose of the property, Sh, Arvind Aggarwal purchased the 50% share in the above flat by making the payment for the same through banking channels and the purchase of the flat is documented through a registered sale deed on which stamp duty has been paid as per the market value of the property. Mr. Abhinav Aggarwal has also shown the transaction of the sale of this property in his return of income filed for the A,Y. 2012-13 under the head capital gains and paid the due taxes. Both the flats purchased by the appellant have a common kitchen and is a single unit.

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• Tax planning is legitimate provided it is within the framework of law. 39. In view of the above broad principles laid down by the Hon'ble Supreme Court for distinguishing the tax planning and tax evasion, it is difficult lo accept the observation of the AO that appellant and his wife by purchasing 50% share in the flats from their own major sons have resorted to colorable device. Such conclusions are not based on any credible evidence of tax evasion. At the most, it can be said to be a tax planning, which is within the frame work of law and the appellant is entitled to take benefit of the same, as outlined in the above principles laid down by the Hon'ble Supreme Court of India. 40. In view of the facts stated above, it is difficult to accept the proposition that no transaction of sale/purchase of property has taken place as both Smt. Alpana Aggarwal Sh, Arvind Aggarwal were already 1 00% owners of the flats in question. 41. The second ground on which he Assessing Officer has denied the exemption u/s54 to the appellant is that he has purchased the property in the name of his wife. As far as buying the property in the name of wife by the appellant is concerned, it is now settled legal proposition that the property purchased in the name of the wife by the husband would qualify of exemption u/s 54. In the instant case, the wife Smt. Alpana Aggarwal did not have the any independent sources of income and her husband Sh. Arvind Aggarwal purchased 50% of the share in the flat no. B-805 by paying on her behalf to their son Raghav Aggarwal. Smt. Alpana Aggarwal has filed an affidavit dated 28/07/2011 in this regard stating that she has not taken any benefit of exemption of capital gains against the purchase of the above house property. Law does not prohibit the purchase of the property in the name of the wife by the husband for taking the benefit of exemption of capital gains tax u/s 54. “Since the wife has not invested any amount, the property is to be treated as purchased in the name of the appellant. The appellant is the actual and constructive owner of the property CIT Vs. Ravender Kumar Arora(2011) 15 taxmann.com 307/203 taxman 289 (Delhi).

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the assessee but the CIT(A) doesn’t find any illegality and irregularity in the transaction. There was no attempt of any kind for tax evasion. Moreover, there may be a tax planning. The CIT)A has placed law settled in Vodafone International Holding B.V. (Vodafons) (SLP (C) no. 26529 of 2010) (SC) and McDowells & Co. VS CTO (154 148), Azadi Bachao Andolan (263 ITR 706) and Walfort Shares & Stock Brokers P. Ld. (41 DTR 233). The husband purchased the property with the name of the wife nowhere disentitled him to get the benefit of the Section 54 of the Act. In this regard the CIT(A) has also relied upon the law settled in CIT Vs. Ravender Kumar Arora(2011) 15 taxmann.com 307/203 taxman 289 (Delhi). CIT Vs. Shri Kamal Wahad, ITA no. 4/2013, the Hon’ble High Court of Delhi of CIT Vs. TN Aravinda Reddy (1979) 120 ITR 46 (SC). The facts are not distinguishable at this stage also. We find no illegality and infirmity in allowing the claim of the assessee in view of the provision of Section 54 of the Act. Accordingly, we decide this issue in favour of the assessee against the revenue. CROSS OBJECTION 3:- 8. Under this cross-objection, the assessee has challenged the confirmation of disallowance of the improvement cost of Rs.9,50,000/- incurred on the flat transferred sold during the year. The Assessing Officer rejected the claim on the ground of that the assessee failed to furnish the evidence in support of the claim. The situation

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was the same before the CIT(A) as no evidence of any kind was placed before him. Even before us no evidence of any kind in connection with cost of improvement of the flat is produced before us. When the claim is not supported by any cogent and convincing evidence on record, therefore, we also refrain us to decide this issue in favour of the assessee. Accordingly, we decide this issue in favour of the revenue against the assessee. CROSS OBJECTION 4:- 9. Under this cross-objection the assessee contested the disallowance of capital loss of Rs.38,46,927/- on account of sale of guest house. The assessee sold the guest house which was included in the fixed assets as depreciable assets. The depreciation was not claimed being the possession of the guest house was not taken. In the year of consideration the property was sold and reduced from the WDV of depreciable assets by the assessee and claim a long term capital loss to the tune of Rs.38,46,927/-. The Assessing Officer disallowed the claim on account of this fact that the same was not claim in the return of income filed for the year of consideration. The contention of the assessee is that the assessee sold the guest house at Gurgaon during the year under consideration which was booked in the year of 2006-07. The property was appearing in the fixed assets schedule but no depreciation was claimed being no possession was taken. It is also contended that the property was sold at cost only

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which was in proprietary business balance-sheet and paid from the business fund. The claim of the assessee was declined by the CIT(A) on the ground of that the sale and purchased document were not produced. It was also considered that when property was sold at cost then there should be no loss. Moreover the balance-sheet was not filed and the claim was not raised before the AO. The Ld. Representative of the assessee has argued that the no doubt the claim was not raised before the AO but the same can be admitted by the Tribunal in view of the law settled in CIT VS. Pruthivi Broker & Shareholder P. Ltd. ITA. NO. 3908 of 2010 dated 21.06.2012 & Rajesh Kumar Aggarwal Vs. CIT Delhi VIII (2017) 78 taxman.com 265 and CIT Calcutta Vs. Britannia Industries Ltd. (2017) 83 taxman.com 365. No doubt the CIT has considered this fact that the assessee did not claim before the AO, therefore, the claim of the assessee is not liable to be considered but the law relied by the Ld. Representative of the assessee i.e. CIT VS. Pruthivi Broker & Shareholder P. Ltd. ITA. NO. 3908 of 2010 dated 21.06.2012 & Rajesh Kumar Aggarwal Vs. CIT Delhi VIII (2017) 78 taxman.com 265 and CIT Calcutta Vs. Britannia Industries Ltd. (2017) 83 taxman.com 365, the Tribunal can admit the claim of the assessee which was not raised earlier before the AO. Accordingly, we admit the claim of the assessee on the this ground and restore this issue before the AO to decide the matter afresh in accordance with law by giving an ITA. No.910/M/15 CO. No. 147/M/2016 A.Y. 2011-12

opportunity of being heard to the assessee. Accordingly, this ground is hereby decided in favour of the assessee against the revenue.

Order pronounced in the open court on 04.05.2018. (R. C. SHARMA) (AMARJIT SINGH) लेखा सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai ददनांक Dated : 04.05.2018 Vijay Pal Singh

आदेश की प्रनिनिनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //// उि/सहधिक िंजीकधर /(Dy./Asstt.