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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri P K Bansal, VP & Shri Ravish Sood, JM
O R D E R Per P K Bansal, Vice-President:
These cross appeals have been filed against the order of the CIT(A) dated 24.07.2014. The only issue involved in Revenue’s appeal relate to the deletion of the addition of Rs.2,12,77,710/- made by the AO on account of income from Long term capital gain, while the only issue involved in assessee’s appeal relate to the not excluding Rs.53,00,000/- from the sale consideration for calculating capital gain.
The brief facts of the case are that the AO noted that the assessee has shown Long term capital gain amounting to Rs.87,26,847/- on the sale of flat No.6, admeasuring 572.30 sq.ft. on the first floor, ‘Smruti’ Bldg., 15th Road, Khar (W), Mumbai. The said computation has been made in the following manner:
The computation of Capital Gain is as under:
A. Purchase cost of flat (F.Y. 2005-06) 99,89,663 B. Sale of value of flat (F.Y. 2010-11) 2,17,00,000 C. Indexed cost of purchase 1,27,03,152 D. Profit (B-C) 89,96,848 Less: Expense Incurred 2,70,000 Capital Gain 87,26,847 On questioning, the assessee submitted that ‘Smruti’ Building in which assessee had purchased flat on 03.03.2006 went on for redevelopment and the assessee was given a flat in the newly development building known as ‘Bhoomi Aura’, which was sold by the assessee vide agreement dated 24.01.2011. The AO specifically asked the assessee to explain why part of the sale consideration has been passed over to the builder as shown by the assessee as per sale deed dated 24.01.2011. In the absence of any explanation of the assessee, the AO has taken the sale consideration while computing the capital gain at Rs.4,82,77,700/- but allowed the indexed cost of purchase to the assessee as has been worked out by him at Rs.1,27,03,152/- as well as expenses claimed by him at Rs.2,70,000/-. The assessee went in appeal before the CIT(A) and before the CIT(A) the assessee has contended that the assessee had purchased flat No.6 having carpet area of 572.30 sq ft. in Smruti Bldg., 15th Khar Road, Mumbai vide purchase deed dated 03.03.2006, for a consideration of Rs.99,89,663/-. The said building went for redevelopment and as per the development agreement between the developer and the housing society, each flat owner becomes entitled for equivalent area in the proposed new building “Bhoomi Aura” along with all amenities free of cost. Copy of the development agreement was also filed. The assessee therefore becomes entitled for carpet area of 658.15 sq.ft., as the assessee was entitled for 15% extra area free of FSI regulation in addition to the equivalent area. The developer had allotted 1470 sq. ft. to the assessee. The assessee’s share was 44.78% while the developer’s share was 55.22% and, accordingly, the assessee has allocated the total consideration of Rs.4,82,77,700/- into two parts. The developer’s share amounting to Rs.2,65,77,700/- and assessee’s share at Rs.2,17,00,000/-. The assessee also submitted that he has computed the Long term capital gain accordingly as under:
Sale consideration Rs.2,12,77,700/- Less: Expenditure on sale (brokerage) Rs. 2,70,000/- Net sale consideration Rs.2,14,30,000/- Less: Indexed cost of acquisition Rs.1,24,03,152/- Long Term Capital Gain Rs. 87,26,847/- The developer has offered the share of such sale consideration of Rs.2,65,77,700/- as “business income”. The CIT(A) after considering the contention of the assessee as well as the development agreement dated 15.02.2006, between the society and the developer as well as the agreement between the assessee and the society, accepted the contention of the assessee that the sale proceeds, while determining the capital gain in the hands of assessee, would be taken as per the agreement of sale with Shri Mukund Sapre and Smt. Sangeeta Sapre and, accordingly, deleted the addition of Rs.2,12,77,700/- and directed the AO to take the sale consideration while computing the capital gain in the case of the assesse at Rs.2,70,00,000/- instead of Rs.2,17,00,000/- taken by the assessee.
We have heard the rival submissions and have carefully considered the same along with the orders of the tax authorities below. We have also gone through the development agreement dated 15.02.2006 between Bhatte Sadan Co-op Society and the developer, a copy of which is available at pages 40 to 69 of the paper-book. We noted from page 53, on which the learned AR has vehemently relied. The said clause 3 in respect of the allotment area to each member read as under:
“3. On construction of the new building, the Developer shall allot to each member flats of the areas equivalent of the area presently occupied by each member of the society along with such amenities free of cost. In the statement annexed hereto and marked as Annexure ‘2’ details have been set out of the names of each member and the areas of flat currently occupied by the member in the existing building.” On the basis of this clause the assessee should be entitled in the redeveloped building a flat having a carpet area of 572.30 sq.ft, but the assessee was allotted a flat having carpet area 1470 sq. ft., which was sold by the assessee alongwith developer. We further noted as argued by the assessee that the developer M/s. Bhoomi Shashwat Estate Pvt. Ltd. offered to all the flat owners’ equivalent area in the new developed building plus 15% of extra area free of FSI regulations due to revised guidelines of Mumbai Municipal Corporation. Briefly, the assesse was entitled only for 658.15 sq. ft area in the new redeveloped building. Since the area of the flat allotted to the assessee in the new building was 1470 sq. ft., therefore, the assessee’s share was only 44.78% in the newly constructed flat, while the share of the developer is 55.22%. We have also gone through the copy of sale agreement dated 24.01.2011 between the buyers and the assessee as well as the developer M/s. Bhoomi Shashwat Estate Pvt. Ltd, copy of which is available at page 1 to 47 of the paper book as well as the rectification deed dated 12.12.2012. As per para (ix) of the sale agreement dated 24.01.2011, placed at page 12 of the paper-book, it is apparent that the aggregate sale consideration of Rs.4,82,77,700/- had to be paid to the flat owner and the developer as under:
Akshay Doshi (Flat Holder) Rs.2,70,00,000/- Bhoomi Shashwat Estate Private Limited (Developer) Rs.2,12,77,700/- Clause (x) of this agreement states that “at the request of the Flat Holder the Developer has agreed to join this Agreement whereby the Flat Holder and the Developer has agreed to sell to the Purchaser the said flat on the terms and for the consideration mentioned hereunder”
On the basis of this agreement, it is apparent that out of the total sale consideration received of Rs.4,82,77,700/-, by the assessee received Rs.2,70,00,000/-. Therefore, in view of this fact, the sale consideration for the computation of capital gain should be Rs.2,70,00,000/- while we noted from para 4.1 of the assessment order the assessee has computed the capital gain by taking sale consideration at Rs.2,17,00,000/- The assessee has claimed that he has reduced a sum of Rs.53 lacs as expenses payable to the builder towards construction cost from the said sum of Rs.2,70,00,000/- and, therefore, he has taken the sale consideration in the computation of capital gain at Rs.2,17,00,000/-. Since the agreement entered into proves that the assessee has received sale consideration at Rs.2,70,00,000/- and the builder has to receive a consideration of Rs.2,12,77,700/-, therefore we do not find any illegality or infirmity in the order of the CIT(A) while directing the AO to take the sale consideration at Rs.2,70,00,000 while computing the capital gain in the case of the assesse.
Now the question in assessee’s appeal relate to the claim of Rs.53 lacs as the assessee has shown sale consideration in the computation at Rs.2,17,00,000/- thereby reducing it by Rs.53 lacs. The learned AR before us vehemently relied on the submissions made before the CIT(A) as well as the Profit & loss account, Balance sheet and Income & Expenditure account of the builder i.e. Bhoomi Shashwat Estate Pvt. Ltd. and, accordingly, on the basis page 107, 115 to 135 contended that since the builder has duly shown the sum of Rs.53 lacs as its trading receipts being received from the assessee, therefore, it is a payment made by the assessee to the builder towards construction of the said flat and, therefore, it should be allowed as deduction to the assessee. We do not agree with this submission of the assessee because in the hands of the assessee the capital gain has to be computed in terms of provisions of section 48 of the I.T.Act., wherein the onus is placed on the assessee to prove whether the said amount will form as part of acquisition or as part of the expenses incurred towards sales. We further noted as has been pointed out by referring to page 53 of the paper- book, which contains clause 3 of the development agreement between the developer and the housing society. As per this clause the developer is bound to allot equivalent area to the assessee along with all the amenities free of cost. In view of this fact, no question of paying extra cost by the assessee towards the amenities in the said flat, which was sold arise. But we noted from the facts being on record that in fact the builder has allotted the assessee flat admeasuring carpet area of 1470 sq. ft. while he was entitled to only 658.15 sq. ft., which consists of original area of 572.2 sq. ft as well as 15% extra area as per revised guidelines of the Mumbai Municipal Corporation. Therefore, the share of the assessee in the total sale consideration was only 44.78% and the assessee could be regarded to be the owner of the flat to that extent in the total sale consideration of Rs.4,82,77,700/-. As such, the assessee is entitled to receive Rs.2,17,00,000/-. As per the agreement as the assessee has received Rs.2,70,00,000/- therefore, the assessee would have paid Rs.53 lacs out of that sale consideration to the builder and accordingly the capital gains should have been computed by taking the sale consideration at Rs.2,17,00,000 instead of Rs.2,70,00,000/- On this basis the sale consideration received in the hands of the assessee should have been reduced by Rs.53 lacs and the assessee would have paid the said money to the builder, as the assessee had received sale consideration more than his entitlement. It is not a case of making extra payment to the builder towards the amenities and the extra work being done in the flat. We accordingly, direct the AO to recompute the capital gain by taking the sale consideration at Rs.2,17,00,000/- instead of Rs.2,70,00,000/- and in this manner the assessee gets relief of Rs.53 lacs, by getting the sale consideration reduced. Accordingly, the appeal of the assessee is also allowed.
In the result, the appeal of the Revenue stands dismissed, while the assessee’s appeal is allowed.
Order pronounced in the open court on 5th day of May, 2017.