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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. The appeal by the Revenue and the cross objection by Smt. Rekha Pravin Shah for the AY 2009-10 and the appeal by Shri Pravin Nanalal Shah for the AY 2009-10 are directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai and arise out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). As common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake of convenience. Assessment Year: 2009-10 2. The grounds of appeal filed by the Revenue read as under:
1. (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the assessee as tenant of the property and consequently deleting the addition of Rs.85,00,000/- made by the AO as Income from Other Sources as against Capital Receipt claimed by the assessee. (ii) While doing so, the Ld. CIT(A) has failed to appreciate that except family members, no third party is involved in the rent receipts furnished by the assessee in support of her claim as tenant. (iii) The Ld. CIT(A) has also failed to appreciate that husband of the assessee is the owner of the property in question, the assessee resides with him in these premises and, therefore, ration card, telephone bills bearing her name cannot be accepted as evidence of tenancy.
Pravin Nanalal Shah, Smt. Rekha Pravin Shah 3 4140/Mum/2013 & C.O. No. 172/Mum/2014 (iv) The Ld. CIT(A) has erred in not appreciating the fact that even otherwise when the assessee is residing in the same premises with her husband, who is owner of the premises, there is no question of any tenancy in favour of the assessee C.O. No. 172/MUM/2014 (ITA No. 4140/Mum/2014) Assessment Year: 2009-10 3. The Cross Objection filed by Smt. Rekha Pravin Shah read as under:
1. 1. On the facts and in the circumstances of the case, the Ld. Assessing Officer had erred in passing protective assessment and thereby making addition of Rs.85,00,000/- as “Income from Other Sources”.
2. (a) On the facts and in the circumstances of the case, the Ld. CIT(A) correctly held that, the Respondent is the tenant protected under the Rent Act and that the amount of Rs.85,00,000/- received by her is not income from other sources and correctly deleted the same. (b) The Ld. CIT(A) held that the Respondent is tenant of the premises which is substantiated by voluminous evidences which were not accepted by the assessing officer.
3. Without prejudice and as alternative ground the amount of Rs.85,00,000/- received by the Respondent being capital amount and is long term gain and the same be allowed to be exempt u/s 54F/54EC. ITA No. 3891/MUM/2013 Assessment Year: 2009-10 4. The grounds of appeal filed by Shri Pravin Nanalal Shah read as under:
1. The learned CIT(A) erred in taking the taxable long term capital gain at Rs.1,28,71,060/- which is contrary to the facts and evidence on record and Pravin Nanalal Shah, Smt. Rekha Pravin Shah 4 4140/Mum/2013 & C.O. No. 172/Mum/2014 bad in law. The appellant prays that, the capital gain be adopted and accepted as returned by the appellant.
The learned CIT(A) erred in rejecting the voluminous details filed in support of his calculation of capital gain.
The learned CIT(A) erred in taking Rs.2,21,31,000/- as the total consideration under the Development Agreement.
The learned CIT(A) erred in accepting the value of Rs.91,03,221/- arrived at by the Assessing Officer in respect of the flat to be received by the Appellant on redevelopment of the "Africa Cottage" property and should have held that the same could not be added and included in the computation of Capital Gains in the Assessment Year 2009-10.
5. In the alternate and on facts and evidence on record, in respect of the said flat to be received by the appellant the CIT(A) should have added only the amount as determined by the Stamp Duty Valuation Department of Rs.11,37,340/-.
6. Without prejudice to any other contention of the appellant, the learned CIT(A) should have exempted the value of the said flat from computation of Long Term Capital Gains in accordance with the provisions of Section 54/54F of the Income Tax Act, 1961.
The learned CIT(A) erred in stating that the appellant had contended before the Assessing Officer that the present owners became entitled to only half share in the "Africa Cottage" property on death of the original owner in 1977 and the other half share in 1990.
The learned CIT(A) failed to appreciate that, the assessing officer has erred in estimating the Cost of Acquisition of the "Africa Cottage" property as on 1-4- 81 at Rs.2,26,377/- against value returned by the appellant at Rs.5,98,000/- duly supported by the report of the approved valuer.
On facts and circumstances of the case and the evidence on record the learned CIT(A) erred in valuing the Cost of Acquisition of the said property by the present owners at Rs.2,27,000/-.
Pravin Nanalal Shah, Smt. Rekha Pravin Shah 5 4140/Mum/2013 & C.O. No. 172/Mum/2014 10. Without prejudice to the appellant's contention that the learned CIT(A) erred in his valuation of cost of acquisition, he should have allowed indexation benefit for the purpose of computation of Capital Gains.
On the basis of facts and evidence on record the CIT(A) erred in not deducting the investment made by the appellant in acquisition of a residential property in Jaipur in accordance with the provisions of Section 54 of the Income Tax Act, 1961.
The assessee has also filed an additional ground stating that the transfer of development rights cannot be subject to capital gains tax, since the development rights have no cost of acquisitions and as is settled by a plethora of decisions including the direct decision of the jurisdictional High Court in CIT vs. Sambhaji Nagar Co-operative Housing Society Ltd. 370 ITR 325 (Bom).
We begin with the case of Smt. Rekha Pravin Shah. She filed her return of income for the AY 2009-10 on 27.07.2009 declaring total income of Rs.1,56,849/-. Along with the computation of total income, the assessee has filed a working of ‘long term capital gains on sale of tenancy right’. As per the said working, the assessee had received Rs.85,00,000/- on sale of tenancy right and after adjusting long term capital loss on sale/redemption of mutual fund units amounting to Rs.2,81,232/- again the said amount, the assessee worked out the net long term capital gains at Rs.82,18,768/-. However, the assessee has claimed the same as exempt u/s 54 and 54EC on account of purchase of a residential flat at Jaipur and investment in the bonds of Rural Electrification Corporation. Accordingly, in the computation of total income, the assessee has shown the long term capital gains at Rs. Nil.
Pravin Nanalal Shah, Smt. Rekha Pravin Shah 6 4140/Mum/2013 & C.O. No. 172/Mum/2014 During the course of assessment proceedings, the assessee filed before the AO a copy of ‘Deed of Assignment and Transfer of Tenancy’ dated 05.02.2009. The Assessing Officer (AO) noticed that the said Deed had been entered into between the assessee, as the outgoing tenant (first part), Mrs. Gunvanti Nanalal Shah, Mr. Mahendra Nanalal Shah, Mr. Pravin Nalalal Shah, Mr. Lalit Nanalal Shah and Mrs. Leela Shrikant Gudka, as the landlords (Second Part); and M/s Tirupati Traders, as the incoming tenant (Third Part). The assessee claimed that by the said Deed, she had transferred her tenancy rights in respect of the residential flat together with the attached open terrace on the third floor of the building ‘Africa Cottage’, on land bearing C.S. No. 404/10, Plot No. 440, situated at Shraddhanand Cross Road, Matunga, Mumbai for a consideration of Rs.85,00,000/-. The AO noticed that the residential premises in respect of which the assessee claimed to had a tenancy rights was part of the property (land and building ‘Africa Cottage’) transferred by Shri Pravin Nanalal Shah (assessee’s husband) and the other co-owners (mother-in-law, brother-in-law and sister-in-law of the assessee), (who are also parties to the Deed of Assignment and Transfer of Tenancy dated 05.02.2009, as Landlords), by a development agreement dated 25.08.2008. The AO observed that the assessee thus made a claim that she was a tenant of the premises owned by her husband (who held 80% share) and her in- laws. Futher, in terms of the said Deed of Assignment and Transfer of Tenancy dated 05.02.2009, in their capacity as landlords, the assessee’s husband and in-laws had also received a total amount of Rs.5,00,000/. Out of the said amount, an amount of Rs.4,00,000/- had been paid to Pravin Nanalal Shah, Smt. Rekha Pravin Shah 7 ITA No. 3891/Mum/2013, 4140/Mum/2013 & C.O. No. 172/Mum/2014 Shri Pravin Nanalal Shah, the assessee’s husband and the other co- owners were paid an amount of Rs.25,000/- each.
In the case of Smt. Rekha Pravin Shah the AO made an addition of Rs.85,00,000/- on protective basis.
6.1 While making the assessment in the case of Shri Pravin Nanalal Shah (husband of Smt. Rekha Pravin Shah), the AO had made a reference to the District Valuation Officer as per provisions of section 50C(2) for a valuation report with regard to the property [piece or parcel of land or ground with building known as “Africa Cottage” consisting of Ground and three upper floors with garage and servants toilet bearing C.S. No. 404/10, Plot No. 440, situation at Shradanand Cross Road, Matunga, Mumbai 400019 admeasuring 389 Sqyds i.e. 325.25 Sqm.] The said reference is as under: 0. REFERENCE : ITO 13(2)(3), R.No. 425, 4th Floor, AayakarBhavan, Mumbai- 0.1 Referring Officer 400020 0.2 Reference Letter :1) ITO 13(2)(3)/Ref to Valuation cell/2011-12 Dt. 29/08/2011 PAN-AADPS3521K 2) ITO 13(2)(3)/Ref to Valuation cell/2011-12 Dt. 30/08/2011 PAN-AADPS3521K 3) ITO 13(2)(3)/Ref to Valuation cell/2011-12 Dt. 14/11/2011& 25/11/2011 PAN-AADPS3521K 1) To Determine the fair market value of the property as on 0.3 Purpose 01/04/1981 for capital gain tax purpose. 2) To Determine the fair market value of the property as on 25/08/2008 for capital gain tax purpose 3) For valuation of flat admeasuring 850 Sqft to be given to the 04. Act assessee as per 0.5 Date of Valuation Development Agmt Dt. 25/08/2008 : U/s 55A (b)(ii), 50 C(2) of the Income Tax Act, 1961 : 01/04/1981 & 25/08/2008