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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI P.K. BANSAL & SHRI PAWAN SINGH
PER P.K. BANSAL, AM :
The respective assessees have taken the following common grounds of appeal except for the change in figure in ground no. 1 in :-
“1) The Ld. CIT (A) erred in law and on facts in confirming the disallowance of loss claimed by the assessee on sale of shares of M/s Rochem Separation Systems (India) Private Limited without appreciating the authenticity of the share sale transaction on bonafide needs and that under section 48 of the Act, the full value of consideration cannot be substituted with any hypothetical figure. Thus, the disallowance made by assessing officer of Rs. 53,64,049/- and confirmed by the Ld. CIT (A) must be deleted.
2) The Ld. C1T (A) erred in law and on facts in stating that the loss claimed is artificial and manipulated without appreciating that it is a strategic business decision of the assessee to sell the shares of M/s Rochem Separation Systems (India) Private Limited to M/s Concord Enviro Systems Private Limited to make M/s Concord Enviro Systems Private Limited as the holding company of M/s Rochem Separation Systems (India) Private and was not to create any artificial loss. Thus, the disallowance made for the loss claimed must be deleted.
3) The Ld. CIT(A) erred in law and on facts in not allowing exemption u/s 54 of the Act for acquiring new residential property without appreciating that the flat 302, Dheeraj Dhan was transferred through an agreement to sell on 06/05/2009 by giving possession to the buyer and receiving part payment towards the sale though which was registered on 01/10/2009. Thus, the exemption claimed by the assesse HUF u/s. 54 of the Act must be allowed.”
3 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014
In the assessee has taken the following grounds of appeal :-
“1. The CIT(A) erred in law and on facts in confirming reduction in the cost of acquisition of the property at 101, Dheeraj Dhan, Bandra West, Mumbai sold during the relevant assessment year from Rs.80,25,015/- to Rs.55,37,260/- without appreciating: i) That the total cost of property including the interior and renovation work and stamp duty on it was Rs.1,28,60,395/- and out of which the appellant invested Rs.80,25,015/- and remaining Rs.48,35,380/- was spent by Rochem Separation System (India) Pvt. Ltd. which has to be considered accordingly in the respective hands. ii) That the cost to the appellant of the bare structure was Rs.80,25,015/- and which cannot be further reduced in proportion to the ownership of the property between assessee and M/s Rochem Separation System (India) Pvt. Ltd. iii) In holding that there was no clinching evidence to prove any nexus between the bogus purchases found at the time of search by M/s Rochem Separation Systems (India) Pvt. Ltd. and the purchase of the property under consideration jointly with the appellant HUF and also giving various whimsical reasons to deny the claim of the appellant in respect of the cost and joint ownership of the property. iv) That the amount paid to the developer was for the bare structure which was completed and finished from the amount of Rs. 46 lacs spent by M/s Rochem Separation Systems (India) Pvt. Ltd. while in possession with the developer. v) And by ignoring that the Hon'ble ITAT in its order for the AY 2003-04 has accepted the utilization by M/s Rochem Separation Systems (India) Pvt. Ltd. of Rs. 46 lacs out of the bogus purchases surrendered by it.
4 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 Thus, the Long Term Capital Gain declared by the appellant should be accepted and the increase in the same due to reduction in the acquisition cost must be deleted.
2. The CIT(A) erred in law and on facts in not allowing exemption u/s 54 of the Act for acquiring new residential property without appreciating that the above property was transferred through an agreement to sell on 16/07/2009 by giving possession to the buyer and receiving part payment towards the sale though which was registered on 26/10/2009. Thus, the exemption claimed by the assesse HUF u/s. 54 of the Act must be allowed.
3. Without prejudice to the above claim the CIT(A) ought have granted exemption u/s 54 of the Act at least on the amount alleged by him to be sale consideration of 31 % co-ownership share in the property sold to Rochem Separation Systems (India) Pvt. Ltd. on 19/12/07 as the new property was acquired within the specified period thereafter.”
Both the parties agreed that ground nos. 1 and 2 in all the appeals, i.e., 7107 & 7108/Mum/2014 be decided on the basis of the facts involved in ITA No. 7106/Mum/2014. Ground no. 3, it was submitted, is an alternate ground in ITA Nos. 7106 & 7107/Mum/2014 while in ITA No. 7108/Mum/2014, ground no. 3, is alternate as well as a substantive ground. We, therefore, decided to dispose of ground nos. 1 & 2 on the basis of facts involved in ITA No. 7106/Mum/2014.
The brief facts in respect of ground nos. 1 & 2 are that the assessee was holding shares of M/s. Rochem Separation Systems (India) Pvt. Ltd. (in short ‘RSSIPL’) which was sold by the assessee @ Rs.1,200/share to M/s. Concord Enviro Systems Pvt. Ltd. (in short ‘Concord’). The assessee, thus, claimed capital loss of Rs.53,64,049/-.
5 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 The loss so claimed in was Rs.31,42,569/-. The number of shares sold was 18000. Assessee has submitted the return by setting off the loss so incurred against the long term capital gain arising to the assessee due to sale of immoveable property being Flat no. 302, Dheeraj Dhan, Bandra (W), Mumbai. The Assessing Officer noted that the assessee is the Director/shareholder of RSSIPL, which is closely held by the family of the assessee. Assessee is also the Director/shareholder of Concord, another closely held family controlled company of the assessee and, therefore, he was of the view that the assessee has arbitrarily fixed the consideration and that the transaction was mainly covered by the transactions listed in Sec. 47 of the Income Tax Act, 1961 (in short ‘the Act’). He, therefore, computed the long term capital loss at NIL and consequently brought the long term capital gains on sale of immoveable property to tax in full. He also rejected the claim of assessee made during the course of hearing that in case the Assessing Officer is not satisfied, assessee be allowed exemption u/s 54 of the Act in respect of purchase of Flat at Eben Ezer. The alternate claim of assessee was also rejected by the Assessing Officer mentioning that the claim was made by the assessee by filing a letter during the course of the assessment proceedings, and not made by filing income tax return. The Assessing Officer while rejecting the alternate claim of assessee u/s 54 of the Act relied on the decision of the Hon'ble Supreme Court in the case of M/s. Goetz (India) Ltd., 284 ITR 323 (SC). Thus, the addition towards long term capital gains was made in the case of Mr. Prayas K. Goel at Rs.32,80,185/-; Mr. Prerak K. Goel at Rs.32,80,185/-; and, in the case Pushpa Goel at Rs.62,28,308/- under the head ‘Long Term Capital Gain’ and Rs.6,25,000/- under the head
6 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 ‘Short Term Capital Gain’. When the matter went before the CIT(A), CIT(A) confirmed the order of Assessing Officer and dismissed the appeal of assessee.
We heard the rival submissions and carefully considered the same alongwith the order of tax authorities below. Now, the question before us is whether the Assessing Officer can substitute the apparent consideration, as has been agreed, and at which the shares have been transferred by the respective assessees, with any other consideration? The ld. AR before us, in this regard, relied on the decisions of the Hon'ble Supreme Court in the case of Gillanders Arbuthnot & Co., 87 ITR 407 (SC) and K.P. Varghese, 131 ITR 597 (SC). We have gone through the decisions as relied by the ld. AR. We noted that the sale consideration u/s 48 of the Act can only be the sale consideration which has been received by the assessee. The ld. DR even though relied on the order of the authorities below, but could not place before us or bring to our knowledge any evidence which may prove that the assessee has received consideration much more than for which the transaction has been entered into by the assessee. Sec. 48 of the Act lays down the provisions for computation of capital gains. It contemplates ascertaining the full value of consideration received or accruing as a result of the transfer of capital asset. This provision does not contain words to the effect “fair market value” etc. There is no evidence on record that the assessee had received amount more than the stated consideration. In view of this fact, we are of the view that the income was to be computed by the Assessing Officer on the basis of consideration actually received. We have also gone through the 7 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 provisions of Sec. 47 of the Act on the basis of which the Assessing Officer has totally ignored the capital loss incurred by the assessee. The ld. DR even though relied on the order of tax authorities below vehemently, but could not bring to our knowledge any of the sub- clauses of Sec. 47 of the Act which may apply to the transaction for sale of shares between the assessee and Concord. Sec. 47 of the Act no doubt lays down the various transfers to which provisions of Sec. 45 of the Act will not apply. We have gone through the provisions of Sec. 47 of the Act. We do not find that any of the sub-clauses laid down u/s 47 of the Act is applicable in the case of assessee. We, therefore, set aside the order of CIT(A) on this issue and allow ground nos. 1 & 2 in the case of assessee and delete the addition of Rs.53,64,049/- in & 7107/Mum/2014 and Rs.31,42,569/- in ITA No. 7108/Mum/2014.
Ground no. 3 in & 7107/Mum/2014 is an alternate ground. Since we have already allowed ground nos. 1 & 2, therefore, ground no. 3 in ITA Nos. 7106 & 7107/Mum/2014, in our opinion, becomes infructuous.
Now, coming to ground no. 3 which is substantive in the brief facts are that the assessee has shown long term capital gain on sale of immoveable property at Dheeraj Dhan of Rs.65,60,372/- and claimed deduction of Rs.36,72,253/- u/s 54 of the Act in the original return of income. During the course of assessment proceedings, assessee filed a revised computation of capital gains and reduced the claim u/s 54 of the Act to Rs.30,85,739/- after claiming set off of balance amount against the long term capital loss on sale of 8 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 shares of RSSIPL and RIPL. The Assessing Officer did not allow the set off of the loss on sale of shares of RSSIPL. When the Assessing Officer asked for the basis of claim of deduction u/s 54(1) of the Act, assessee explained that assessee jointly with other family members sold the property bearing Flat no. 302 admeasuring 1235 sq. ft. (carpet area) on 3rd floor of the building known as Dheeraj Dhan, Bandra (W), Mumbai for Rs.2,70,00,000/- on 6.5.2009 and not on 29.9.2009. It was submitted that the purchaser made payment of Rs. 11,00,000/- out of the total value and the assessee allowed possession of the said flat to the purchaser. Thereafter, a registered sale deed was executed on 29.9.2009. Thus, the assessee submitted that the sale of the residential house was within one year after purchase of the new property at Eben Ezer, Tagore Road, Santacruz (W), Mumbai. The assessee also submitted an Affidavit that the Agreement to Sale was dated 6.5.2009 and a cheque was issued at that time of Rs. 11,00,000/- towards the part payment of the sale consideration. In the Affidavit, it is mentioned by the said person that the possession of the property was also handed over to him on 6.5.2009. The assessee also submitted that he has purchased flat at Eben Ezer vide agreement dated 27.8.2008, which was registered on 2.9.2008. The Assessing Officer took the view that the sale in this case got registered only on 29.9.2009 and the purchase of the new property was by registered deed dated 2.9.2008. The purchase was beyond the prescribed time limit of one year and, therefore, the assessee was not eligible for exemption u/s 54 of the Act. When the matter went before the CIT(A), CIT(A) confirmed the order of the Assessing Officer as according to him the Agreement to Sale is not a 9 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 valid instrument in the eyes of law as the transaction in respect of immoveable property has to be mandatorily registered.
We heard the rival submissions and carefully considered the same alongwith the order of tax authorities below. We noted that in this case the assessee sold the house property being Flat no. 302, Dheeraj Dhan, Bandra (W), Mumbai. The Agreement to Sale has been executed on 6.5.2009 by taking advance of Rs.11,00,000/-. The assessee got the No Objection certificate from the society on 2.8.2009. The registration of the Sale Deed took place on 29.9.2009. The assessee has claimed exemption u/s 54 of the Act as he claims that the Capital Gain earned on the sale of the said flat was invested within one year from the purchase of Flat no. 101, Eben Ezer, Tagore Road, Santacruz (W), Mumbai. The agreement for the purchase of the said flat was entered into on 27.8.2008 but the registration of the purchase of flat has taken place on 2.9.2008. The assessee claims that even though assessee has entered into Agreement to Sale dated 6.5.2009, but could not get the registration of Sale Deed immediately as he could not get No Objection from the society. Until and unless the No Objection certificate is received from the society, the registration could not take place. The ld. DR vehemently relied on the order of CIT(A) as well as that of Assessing Officer. According to him, the sale has taken place on 29.9.2009 and assessee could have made the investment of the Capital Gain in the new flat being Flat no. 101, Eben Ezer, Tagore Road, Santacruz (W), Mumbai within one year prior to the date of sale, therefore, assessee is not entitled for exemption u/s 54 of the Act. We have gone through the decision of the Hon'ble Supreme Court in the 10 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 case of Sanjeev Lal vs. CIT, Chandigarh, 365 ITR 389 (SC). We noted that under similar circumstances, Hon'ble Supreme Court has held as under:-
“17. Upon plain reading of Section 54 of the Act, it is very clear that so as to avail the benefit under Section 54 of the Act, one must purchase a residential house/new asset within one year prior or two years after the date on which transfer of the residential house in respect of which the long term capital gain had arisen, has taken place.
In the instant case, the following three dates are not in dispute. The residential house was transferred by the appellants and the sale deed had been registered on 24th September, 2004. The sale deed had been executed in pursuance of an agreement to sell which had been executed on 27th December, 2002 and out of the total consideration of Rs.1.32 crores, Rs. 15 lakhs had been received by the appellants by way of earnest money when the agreement to sell had been executed and a new residential house/new asset had been purchased by the appellants on 30th April, 2003. It is also not in dispute that there was a litigation wherein the Will of late Shri Amrit Lal had been challenged by his son and the appellants had been restrained from dealing with the house in question by a judicial order and the said judicial order had been vacated only in the month of May, 2004 and therefore, the sale deed could not be executed before the said order was vacated though the agreement to sell had been executed on 27th September, 2002.
If one considers the date on which it was decided to sell the property, i.e. 27th December, 2002 as the date of transfer or sale, it cannot be disputed that the appellants would be entitled to the benefit under the provisions of Section 54 of the Act because long term capital gain earned by the appellants had been used for purchase of a new asset/residential house on 30th April, 2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain.
11 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014
The question to be considered by this Court is whether the agreement to sell which had been executed on 27th December, 2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word “transfer” in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word “transfer” is as under:
“2(47) “transfer”, in relation to a capital asset, includes,- (i) ……. (ii) the extinguishment of any rights therein; or …”
Now in the light of definition of “transfer” as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforestated definition, let us look at the facts of the present case where an agreement to sell in respect of a capital asset had been executed on 27th December, 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between Shri Ranjeet Lal on one hand and the appellants on the other as Shri Ranjeet Lal had challenged the validity of the Will under which 12 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014
the property had devolved upon the appellants. By virtue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law- abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term “transfer”, one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had also paid Rs.15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand.
In addition to the fact that the term “transfer” has been defined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The 13 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014
intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income Tax Act and it is also said that equity and tax are strangers to each other, still this Court has often observed that purposive interpretation should be given to the provisions of the Act. In the case of Oxford University Press v. Commissioner of Income Tax [(2001) 3 SCC 359] this Court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. It has also been said that harmonious construction of the provisions which subserve the object and purpose should also be made while construing any of the provisions of the Act and more particularly when one is concerned with exemption from payment of tax. Considering the aforestated observations and the principles with regard to the interpretation of Statute pertaining to the tax laws, one can very well interpret the provisions of Section 54 read with Section 2(47) of the Act, i.e. definition of “transfer”, which would enable the appellants to get the benefit under Section 54 of the Act.
Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immoveable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed.
Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the 14 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014
vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated.
In view of the aforestated peculiar facts of the case and looking at the definition of the term ‘transfer” as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house.
The appeals are, therefore, allowed with no order as to costs. The impugned judgments are quashed and set aside and the Authorities are directed to re-assess the income of the appellants for the Assessment Year 2005-2006, after taking into account the fact that the appellants were entitled to the relief, subject to fulfilment of other conditions.”
From the aforesaid decision, it is apparent that the facts involved in the said case are similar to the facts involved in the case of the assessee. The decision of the Hon'ble Supreme Court is binding on us. We, therefore, respectfully following the decision of the Hon'ble Supreme Court set aside the order of CIT(A) and direct the Assessing Officer to allow deduction to the assessee u/s 54 of the Act in respect of investment made in Flat no. 101, Eben Ezer, Tagore Road, Santacruz (W), Mumbai.
Ground nos. 1 & 3 relate to the issue regarding the claim of assessee in respect of cost of the share in the property amounting to 15 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 Rs.80,25,015/-, which has been taken by the Assessing Officer at Rs.55,37,260/- instead of Rs.80,25,015/- taken by the assessee and thereby computing the long term capital gain at Rs.59,71,033/-. The facts relating to these grounds are that the Assessing Officer noted that the assessee has shown profit on sale of assets at Rs.57,74,985/- and worked out the long term capital gain on account of such sale at Rs.24,53,670/-. The assessee explained that he purchased Flat no. 101 admeasuring 1175 sq. ft. situated in the building known as Dheeraj Dhan, Bandra (W), Mumbai vide registered agreement dated 24.7.2002 for a total cost of Rs.72,00,000/- against which stamp duty of Rs.7,65,680/- and other expenses of Rs.59,335/- were incurred. The assessee claimed the cost of said property while computing capital gain at Rs.80,25,015/-. According to the assessee, assessee had entered into registered agreement with RSSIPL on 19.12.2007 for transferring 31% share in the said property to the latter for a consideration of Rs.46,00,000/-. The assessee since sold the said property alongwith the said company to Shri Vinay D. Bajaj and Shri Damodarlal C. Bajaj vide registered agreement dated 26.10.2009 for a consideration of Rs.2,00,00,000/-, assessee offered Rs.1,38,00,000/- as the full value of consideration, being 69% in his hand and correspondingly claimed the cost of acquisition, which was indexed at Rs.80,25,015/-. The Assessing Officer did not accept the contention of assessee that the company, RSSIPL had incurred expenditure towards renovation and interior amounting to Rs.46,00,000/- for which the assessee had transferred 31% interest in the said property on 19.12.2007. The Assessing Officer has taken the cost of acquisition while computing the capital gain to be 16 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 69% of Rs.80,25,015/- and not Rs.80,25,015/-. When the matter went before the CIT(A), CIT(A) confirmed the order of Assessing Officer.
We heard the rival submissions and carefully considered the same alongwith the order of tax authorities below. The ld. DR before us vehemently relied on the order of the authorities below, but agreed that the Assessing Officer has accepted 69% share in Flat no. 101, Dheeraj Dhan, Bandra (W), Mumbai sold by assessee for Rs.2,00,00,000/- and thus accepted the sale consideration at Rs.1,38,00,000/-. We noted that the only dispute before us is with regard to the cost of acquisition. The Assessing Officer has taken the cost of acquisition of said flat while computing the capital gain at Rs.55,37,260/-, i.e., 69% of Rs.80,25,015/-. We noted that during the course of search, a document was seized in the premises of RSSIPL and as per the said document, copy of which is placed at pg. 1, a sum of Rs.46,00,000/- has been shown to have been paid in cash in respect of the agreement signed on 8th July. The said company surrendered a sum of Rs.6,99,56,158/- and has shown the utilization of funds, copy of which is available at pg. 13 of the paper book, which includes a sum of Rs.46,00,000/- being invested by the said company in respect of Flat no. 101, Dheeraj Dhan, Bandra (W), Mumbai. This fact has been accepted by the Tribunal in its order in and at page 10 of the order, this Tribunal has held as under :-
“5. We have heard the rival submissions of the parties. We have also carefully considered the facts as are placed before us. The quantum of Rs. 46 lacs has not been disputed. The assessee took the consistent stand that the flat in respect of which, the payment of Rs.
17 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014
46 lacs was made was jointly owned by the assessee (HUF) and M/s. RSSIPL, one of the Group Company. The assessee also tried to justify the said stand by executing the agreement in respect of the ownership of the said flat between the assessee and M/s. RSSIPL dt. 19.12.2007. The said agreement is executed after round about 2 years from the date of search. Moreover, there are also contradictions in the statement given by Shri KK Goel, Karta of the assessee (HUF) in respect of the shares/ownership in the said flat. Shri K.K. Goel has stated in the statement as well as in the affidavit that the assessee (HUF) is having 60% share and M/s. RSSIPL is have 40% share of ownership in the said flat, but, as per the agreement executed dt. 19.12.2007, there was difference in the shares pattern that was 69% and 31 % respectively. To that extent, in our opinion, the findings of the CIT(A) is correct that it was after thought by the assessee company as admittedly Shri K.K. Goel is also Chairman of M/s. RSSIPL and just to skip off the provisions of Section 269SS, the assessee has tried to show that M/s. RSSIPL had paid the amount to the assessee as the said Company was having partial ownership in the said flat. But, in this case, admittedly, the amount of Rs. 46 lacs has been taxed in the hands of M/s. RSSIPL in the A.Y. 2003-04 and that has not been controverted by the Revenue. Once the said amount is taxed in the hands of M/s. RSSIPL, in our opinion, the same again cannot be taxed in the hands of the assessee as the source of the said amount has been explained by the assessee. In our opinion, so far as the addition u/s. 69B is concerned, no interference is called for in the order of the CIT(A). Accordingly, the Ground No. 1 is dismissed.”
The said finding of Tribunal clearly accepts that RSSIPL has invested a sum of Rs. 46,00,000/- in the flat for acquiring its share, being 31%, vide agreement which was executed on 19.12.2007. We have gone through the copy of agreement, which is available at pgs. 89 to 95 of paper book, duly registered with the Sub-Registrar and we noted that as per the said agreement, the assessee-HUF had transferred 31% of its share in the flat for a consideration of Rs.46,00,000/- being Flat no. 101,
18 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 Dheeraj Dhan, Bandra (W), Mumbai. This fact is also clear from the reply to question no. 15 raised while recording the statement of Shri Kamlesh Goel on 11.8.2005, copy of which is available at pgs. 148 to 150 of the paper book. From all these evidences, it is apparent that the company, namely RSSIPL, has become co-owner to the extent of 31% in the said property which has been sold by the assessee and for which separate sum of Rs.46,00,000/- has been spent by the said company. It is also a fact that the said sum of Rs.46,00,000/- has been spent by the said company for the interior and furnishing of the said flat, which was bought by the assessee for a sum of Rs.80,25,015/-. Now, the question arises what is the cost of acquisition in the hands of the assessee ? On the basis of these evidences, it is apparent that the company, RSSIPL has become owner of 31% share in the said property against a consideration of Rs.46,00,000/- plus whatever cost has been incurred for stamp duty as well as registration charges and the cost of acquisition in the hands of the assessee remains at Rs.80,25,015/- for 69% of his share in the said flat, which the assessee had originally incurred for acquiring the raw flat. In view of this fact, we set aside the order of CIT(A) and direct the Assessing Officer to take the cost of acquisition in respect of 69% share of assessee in Flat no. 101, Dheeraj Dhan, Bandra (W), Mumbai while computing the capital gain in his hand and indexation should be done in respect of the said cost of acquisition while computing the long term capital gain in the hands of the assessee.
Ground no. 2 relates to claim of deduction u/s 54 of the Act in respect of Flat no. 302 at Eben Ezer, Santacruz West, Mumbai. Both parties agreed that this ground is similar to ground no. 3 taken in ITA
19 Mr. Prayas K. Goel & 3 Ors. to 7108 & 1863/Mum/2014 No. 7108/Mum/2014 in the case of Pushpa Goel and whatever view the Tribunal may take in the case of Pushpa Goel in same view may be taken in the case of assessee. In the preceding paragraphs while disposing of appeal in ITA No. 7108/Mum/2014 we have already allowed ground no. 3 in the case of Pushpa Goel. Respectfully following our aforesaid order in the case of Pushpa Goel, we set aside the order of CIT(A) on this issue and allow the said ground in the case of assessee. Thus, ground no. 2 is allowed.
In the result, the appeals filed by the assessees are allowed.
Order pronounced in the open court on 13th January, 2017.