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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: D.T. GARASIA & SHRI RAJESH KUMAR
Per D.T. GARASIA, Judicial Member:
The above titled appeals have been preferred by two assessees against the order dated 03.11.2014 of the Commissioner of Income Tax (Appeals) 37, Mumbai [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11. 2. The common ground in both these appeals taken by the assessee as under:- “Without prejudice to the generality in the above ground, the learned Commissioner (Appeals), in denying the said deduction u\s 54, more particularly
2 A.Y.2010-11 erred in losing sight of the vital circumstance that the date of purchase of the new residential house ought to be construed from the date on which the Appellant obtained domain over the same in terms of the provisions of the Maharashtra Apartment Ownership Act, 1970 and that therefore, the decisions relied by learned Commissioner (Appeals) in dismissing the Appellant's appeal were clearly distinguishable and not applicable to the facts of his case.”
The assessee has received the order of Commissioner within time but the assessee was not present at a relevant time. Therefore, assessee received this order late. Therefore, there was a delay in filing the appeal. Therefore, he requested to condone the delay.
The Ld. D.R. objected to it.
Having gone through the affidavit filed by the employee one Ms. Kirti Bhanudas Gajur it is found that assessee has reasonable cause for delay. Therefore, we condone the same.
The short facts of the case are as under:- The assessee has filed the return of income disclosing total income of Rs.56,34,640/- was filed on 12.10.2010, claiming exemption u/s.54 of Rs.1,58,79,304/-. The assessee had residential property held by the assessee jointly with his wife Krishna Sharma was sold for a consideration of Rs.5,30,00,000/- on 24.08.2009. The assessee’s share was 50% at Rs.2,65,00,000/- and 50% of his wife. After deducting the indexed cost of Rs.1,06,20,696/-, the net capital gain was computed at Rs.1,58,79,304/-. The exemption was claimed u/s.54 in respect of purchase of new house property for Rs.6,50,00,000/- in which the assessee and his wife had 50% share each. The Assessing Officer noted date of sale of old property was 24.08.2009 and date of registration of agreement for purchase of new house property was 02.11.2007. The Assessing Officer noted that new house property was purchased more than one year before the date of sale of the property giving rise to capital gains. Hence, the claim of deduction u/s.54 was 3 A.Y.2010-11 wrongly claimed. The assessee claimed that though the agreement for purchase of new property was registered on 02.11.2007, the possession was received on 26.09.2008. The Assessing Officer noted that total payment were made by the assessee to the builder as on 02.11.2007 and there was no amount payable thereafter exempt for maintenance. The Assessing Officer made enquiries from the developers of the project in which the new property was purchased. As per the agreement, the developers agreed to handed over the possession by 15.12.2007. The assessee claimed that the possession letter the developer has said that the formal possession would be given on receipt of occupation certificate and occupation certificate was received on 19.03.2008 and therefore claim for deduction u/s.54 is in order.
The Assessing Officer also noted that the assessee had submitted a letter to the secretary of the Condominium on 02.05.2008 for permission to install telephone connection. The Assessing Officer noted that the last possession letter in respect of the flats in the new building was on 14.05.2008, therefore he claimed that full occupation certificate was issued by BMC on 19.03.2008, therefore claim may be allowed. Therefore, Assessing Officer was of a view that Condominium letter was given on 26.09.2008 but that is not a legal one, therefore the AO and CIT(A) did not allow the claim of Section 54.
The learned AR submitted that assessee has taken the possession of flat under Maharashtra Apartment Ownership Act, 1970 under which the Condominium was formed, was different from the Housing Co-operative Housing Society Act. The possession of flat without the builder giving the possession over the undivided interest in the land does not complete the acquisition. Even, after the apartment owner has exclusive possession over his flat, till his specific percentage in the undivided land and other common areas is not carved out and also possession of the land and common areas is not given, his property rights is inchoate. The assessee is relied upon the decision
The learned DR relied upon the order of revenue authorities.
The learned DR submitted that the assessee had sold the property on 24.08.2009 and as per the provisions of section 54 of the Act required within one year to purchase the property but date of sale of old property was 24.08.2009 whereas the date of registration of agreement for purchase of new property was 02.11.2007 and thus the new property was purchased more than a year before the date of sale giving rise to capital gain. The assessee has purchased the property and possession was given on 21.12.2007. In the new building the last possession was given on 14.05.2008, therefore, assessee is not entitled for any deduction u/s.54 of the Act. Therefore, revenue authorities is justified for rejecting the claim.
We have heard the rival contentions of both the parties and perused the relevant material placed before us. The undisputed facts of the case are as under:- (a) Date of sale of residential flat – 24-08-2009. (b) Date of possession of new flat for carrying furniture work (c) Date of signing of declaration under MAO Act 30-3-2009. Declaration is registered on 1-4-2009. (d) Date of the builder handling possession of land i.e. date of final conveyance on 17-4-2010.- being date of final conveyance The assessee sold the residential property jointly owned with his wife Krishna Sharma for a consideration of Rs.5,30,00,000/-. The assessee’s share was Rs.2,65,00,000/-. After deducting the indexed cost of Rs.1,06,20,696/-, the net capital gain worked out to Rs.1,58,79,304/-. Assessee and his wife has earlier
5 A.Y.2010-11 entered into agreement dated 02.11.2007 for acquiring a new residential premises in building for total consideration of Rs.6,50,00,000/-. The said flat was acquired by the assessee under condominium as per Maharashtra Apartment Ownership Act, 1970. Under the Maharashtra Apartment Ownership Act, 1970, the land and building is directly owned and held by the flat owners and not by a corporate entity like a co-operative society. And the flat owner acquires exclusive ownership right over his individual flat plus an undivided share in the land and common areas of the building. There is marked difference in the mode of ownership and holding of properties under the co-operative society mode and the condominium mode under Maharashtra Apartment Ownership Act, 1970. Under the society mode the land and building is owned and held by the co-operative society as a corporate entity distinct from its member and the member has only transferable occupancy rights in the flat allotted to him by the society. But in contrast, when the property is purchased under the condominium mode, the purchaser is owner of the land and building and not the condominium. The condominium is not a corporate entity and is just collective name given to all purchasers addressed together. The condominium cannot hold property as it is not a legal entity. The purchaser under the MAO Act is legally compelled to hold both his exclusive ownership right in the flat and the undivided share in the land and common areas together as one composite property. His residential house, for the purposes of section 54, constitutes this exclusive ownership right over the flat plus undivided share in the land and common areas of the building as one single composite property. Domain over the property is achieved when he is in control over both his flat and land portion. Possession over the flat only does not complete the domain. After all the property purchased is both the flat and land portion and not the flat only. In city like Mumbai, the major part of the cost of the residential premises is in the land and therefore, domain over land is significant as the substantial portion of investment is in land . Also, till the 6 A.Y.2010-11 declaration under section 2 under MAO Act 1970 is not executed and registered, the extent of the undivided share in land and common areas of a purchaser is also not known. The undivided share is confirmed only in the instrument of declaration registered and not before. Therefore, even if possession of flat is given to the purchaser before the execution of the declaration, the purchaser does not have domain over the land because his undivided share is not ascertained and also possession of this undivided share in land is pending. The possession of the land and common areas was given on 17.04.2010. Under this Act land and building is not directly owned and held by the society own right as a corporate entity distinct from its members. Each flat owner acquires exclusively right for his own individual flat in common area of building as per Maharashtra Co-operative Ownership Act. The residential premises are acquired by agreement to purchase the premises from builders but the land may not given to buyer. In this regard, assessee has made declaration that he will get land and building both and therefore, buyer exclusive ownership is in the flat and in common area of building including land. If we consider the condominium mode then assessee has got the possession and acquired the possession of land on 07.12.2010 being final deed. Therefore assessee is entitled for exemption u/s.54 of the Act. In the instant case the date of sale of flat is 24.08.2009 and date of declaration is 30.03.2009 and handing over of possession of land is 07.10.2010 being final date of conveyance and consequently the assessee is entitled for deduction u/s.54.Moreover these are beneficial provisions and should be construed in a liberal manner. We find that similar issue had come up before Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Mrs. Hilla J. B. Wadia wherein the Hon’ble High Court has held that section 54 of Act has to be considered construed in the context of the manner in which residential properties are now being constructed in a city like Bombay where, looking to the cost of land, co-operative housing societies are being formed for 7 A.Y.2010-11 constructing a building in which flats are allotted members. This must also be viewed as a method of constructing residential tenements. What we have to see is whether the assessee has acquired a right to a specific flat in such a building which is being constructed by the society and whether he has made a substantial investment within the prescribed period which will entitle him to obtain possession of the flat so constructed and in which he intends to reside. The Hon’ble High Court has relied upon the Central Board of Direct Taxes circular no.471, dated October 18, 1986. We find that similarly in this case the assessee has agreed to purchase a flat on 02.11.2007 by way of agreement. The assessee, thereafter acquired the possession of the flat but not undivided share in land and common areas. Thereafter, there was a declaration of signing the declaration as per Maharashtra Apartment Ownership Act, 1970. We find merit in the submissions of the Ld. A.R. that the assessee obtained domain over his residential house either on the date of registration of declaration u/s 2 of Maharashtra Apartment Ownership Act, 1970 which occurred on 01.04.2009 on which date the assessee’s undivided share in the land and the common areas became ascertained or on 17.04.2010 when the builder handed over possession of land on executing final conveyance of the deed and the assessee acquired the complete domain over the complete property building as well as land on that date. Thus, both these dates i.e. 01.04.2009 as well as 17.04.2010 fall within the exemption period u/s 54 of one year before and two years after the date of sale of old flat which is in the present case is 24.08.2009.
In view of the above facts and circumstances, we are of the considered view that assessee has rightly claimed the exemption under section 54 of the Act and therefore we hereby set aside the order of Ld. CIT(A) and allow both the appeals of the assessee.
Order pronounced in the open court on 17.11.2017.