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Income Tax Appellate Tribunal, Kolkata Bench, KOLKATA
Before: SHRI WASEEM AHMED & SHRI S.S.VISWANETHRA RAVI
ORDER Per Waseem Ahmed, AM 1. This is an appeal preferred by the assessee against the order of the Ld. CIT(A)-XX, Kolkata, dt. 17.09.2014 for assessment year 2010-11.
The assessee has raised the following grounds of appeal:
i. That under the facts & circumstances of the case, the Ld. CIT(A) erred in treating a sum of Rs.15,63,394/- as short term capital gain from sale of flats for the year under consideration. The sale deed although executed in Asst. Year 2010-11 but the sale proceeds were finally received in the next year. Thus, the assessee offered the capital gain for taxation in Asst. Year 2010-11 and confirmed by the CIT(A) is unjustified and needs to be deleted. ii. That the Ld. CIT(A) erred in confirming the disallowance of Brokerage paid for sale of the flats. If the sale of the flats needs to be allowed in computing Capital Gain.
2 I.T. A. No. 2231/Kol/2014 Sri Ashish Todi Assessment Years: 2010-11 3. The first issue raised by the Revenue in this appeal is that, the Ld. CIT(A) erred in confirming the order of the AO by treating the gain from the sale of flats as short-term capital, ignoring the facts that the same gain was offered to tax in the subsequent assessment year.
Facts in brief are that the assessee, an individual is deriving its income under the head ‘Salary’ and other sources. The assessee was the owner of 2 flats located at Mumbai which were purchased in the F.Y. 2008-09. Both the flats were sold by the assessee in the year under consideration for a sum of Rs.46,50,000/- & Rs,34,68,237/- respectively. The conveyance deed was also registered in the current year in favour of the transferee. However, the assessee did not offer the gain in the current year on the ground that part payment from the transferee was received in the subsequent year. Therefore, the impugned sale of flats was completed in the subsequent F.Y. i.e. 2010-11. So, the capital gain was offered in the subsequent 2010-12 relevant to the A.Y. 2011-12. However, the AO disregarded the contention of the assessee by observing that the transfer of flat has taken place in the year under consideration as the conveyance deed was registered in favour of the transferee in the F.Y. 2009-10. Accordingly the AO treated the same as current year’s income and added it to the total income of the assessee.
Aggrieved assessee preferred an appeal before the Ld. CIT(A).
The assessee before the Ld. CIT(A) submitted that the consideration was received in the F.Y. 2010-11 and, therefore, the same should be taxed in the A.Y. 2011-12. However, Ld. CIT(A) disregarded the plea of the assessee and confirmed the order of the AO by observing as under:
“4- Ground no. (i) relates to contention of the appellant against charging of short term capital gain on sale of flats. The fact of the case is that the appellant purchased two 2 3 I.T. A. No. 2231/Kol/2014 Sri Ashish Todi Assessment Years: 2010-11 properties (flats) in FY 2008-09. In flat no. 701, Sagar Heights, Andheri (E), Mumbai, the appellant was having 50% share but in flat no. 702 in the same building, he was having 100% share. The first flat i.e. flat no. 701 was sold as per conveyance deed dated 18.02.2010 for a consideration of Rs.42,31,500/- in the flat no. 702 was sold vide conveyance deed dated 14.12.2009 for a consideration of Rs.46,50,000/-. Since both the flats were sold as agreement/conveyance deed signed during the FY 2009-10, the AO concluded that the short term capital gain was chargeable on both the flats during the FY 2009-10 only whereas the appellant had shown capital gain on the same for the AY 2011- 12 on the ground that on both the flats Rs.25,00,000/- each was received during the FY 2010-11. On perusal of the facts, it is gathered that sale agreements/conveyance deed for both the flats were signed during the AY 2010-11. For the flat no. 701, Rs.17,31,500/- was received and for flat no. 702, Rs.21,50,000/- was received during the year under consideration itself. There was no dispute arose with the purchasers with regard to sale, agreement/conveyance deed, sale consideration, mode of payment etc., therefore, as per definition of transfer as provided u/s 2(47) of the I.T. Act, 1961, the appellant had relinquished his right on the said properties as both the flats were sold as per agreement/ conveyance deed signed with the purchaser. Under these circumstances, the AO was justified to tax the same as short term capital gain during the year under consideration. Further, the case law cited by the appellant in the case of CIT vs Najoo Dara Deboo (2013) 218 tax man 473 (All) wherein the Hon'ble High Court of Allahabad has held that the capital gain can be charged only on receipt of sale consideration and not otherwise. However, the facts of the present case are not identical with the facts of the case law relied upon by the appellant. In the present case, the appellant had already received part of sale consideration during the year itself.”
Being aggrieved by the order of the Ld. CIT(A), the assessee is in second appeal before us.
The Ld. AR before us filed a paper book which is running from pages 1 to 255 and submitted that as per the agreement for sale, the assessee was entitled to receive Rs.25,00,000/- from the transferee only after obtaining No Objection Certificate (NOC) from the developer. NOC from the developer was received in the subsequent F.Y. and consequently the payment of Rs.25,00,000/- was received by the assessee.
On the other hand the Ld. DR submitted that the transfer of impugned flat has taken place in the current year within the meaning of the provisions of Sec. 2(47) of the Act. The Ld. DR vehemently supported the order of the authorities below. The Ld. AR in its rejoinder submitted that the agreement for sale will be enforceable only after obtaining the NOC from the Developer.
4 I.T. A. No. 2231/Kol/2014 Sri Ashish Todi Assessment Years: 2010-11 9. We have heard the rival contention and perused the materials available on record. The issue in the instant case relates to the year in which the capital gain is to be taxed. The lower authorities have treated the transfer of the impugned flats in the year under consideration on the ground that the conveyance deed was registered in favour of the assessee to the transferee by registering the sale deed in favour of the assessee. Such sale has been treated as transfer within the meaning of Section 2(47) of the Act which reads as under: "transfer"79, in relation to a capital asset, includes,—
(i) the sale79, exchange79 or relinquishment79 of the asset ; or (ii) the extinguishment of any rights therein79 ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] 80[or] 81[(iva) the maturity or redemption of a zero coupon bond; or] 82[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A83 of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immov-able property. 84[Explanation 1].—For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA.] 85[Explanation 2.—For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;]
A plain reading of the above provisions clearly reveals that the assessee in the instant case has relinquished its right by executing the sale deed in favour of the assessee. Accordingly, we are of the view that the transaction has taken place, therefore, the gain is liable to the taxed in the year under consideration. As such, we find no infirmity in the order of the lower authorities.
5 I.T. A. No. 2231/Kol/2014 Sri Ashish Todi Assessment Years: 2010-11 11. Hence this ground of appeal of the assessee is dismissed.
12. The second issue raised by the assessee in this appeal is that the Ld. CIT(A) erred in confirming the order of the AO by sustaining the disallowances of brokerage expenses for Rs.6,00,000.00. The assessee before the Ld. CIT(A) has claimed brokerage expenses for Rs. 6,00,000.00 which were incurred in connection with the transfer of impugned flats. However, Ld. CIT(A) disallowed the claim of the assessee by observing as under:- “ 5- Ground no. (ii) relates to contention of the appellant for not allowing expenditure of Rs.6,00,000/- claimed on account of brokerage. The appellant submitted that brokerage of Rs.4,00,000/- each was paid for the sale of the flats, thereby, the appellant's share in the one flat was of Rs.2,00,000/- and in other flat it was for Rs.4,00,000/- and the total brokerage was claimed for Rs.6,00,000/-. The appellant submitted that two brokers were engaged by the appellant for sale of two flats, namely M/s Kritika Properties & M/s Achivers Properties. M/s Kritika Properties was paid a sum of Rs.4,00,000/- by M/s MMP Filteration Pvt Ltd. A sum of Rs.2, 00,000/- was paid on 14.06.2010 and the balance amount of Rs.2, 00,000/- was paid on 15.07.2010. As such, a sum of Rs.4,00,000/- was shown in the balance sheet of the appellant as on 31.03.2011 as unsecured loan taken from M/s MMP Filteration Pvt Ltd. The brokerage of Rs.4, 00,000/- to M/s Achivers Properties is yet to be paid. From the facts, it is noticed that no payment to M/s Achivers Properties was made so far. M/s Kritika Properties was made payment only in the AY 2011-12 and that to by M/s MMP Filteration Pvt Ltd and not by the appellant. It is not understood why M/s MMP Filteration Pvt Ltd had made payment to the impugned broker. After going through the facts and circumstances of the case, it is noticed that the claim of expenditure made on account of brokerage was an afterthought and the same is appeared to be a colorable device adopted by the appellant to reduce his tax liability. In this regard reliance is placed on the judgment of Sumati Dayal Vs. CIT reported in 214 ITR 801 (SC) in which the Hon'ble Apex Court has discussed the issue of human probability and surrounding circumstances. It has been held that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. In view of the above, the claim of brokerage is not found to be allowable.”
Being aggrieved by the order of the Ld. CIT(A) the assessee is in second appeal before us.
At the outset, it was observed that the claim of brokerage expenses is not arising from the order of the AO and the Ld. CIT(A) has disregarded the claim of the assessee without referring the same to the AO. Thus from the above it is clear that the issue of brokerage has not been adjudicated by the AO. Therefore, in view of the above and in the interest of justice, we
6 I.T. A. No. 2231/Kol/2014 Sri Ashish Todi Assessment Years: 2010-11 are inclined to restore this issue to the file of the AO for fresh adjudication in accordance with law. Hence this ground of the assessee is allowed for statistical purposes. 15. 16. In the result the appeal of the assessee is partly allowed for statistical purpoes.
Order pronounced in the Court on 2017. [S.S.Viswanethra Ravi] [Shri Wassem Ahmed] Judicial Member Accountant Member Dated : . 03.2017 {SC SPS} Copy of the order forwarded to:
Appellant/Assessee – Sri Ashish Todi,. 22,Madan Mohan Talla Street, Kolkata-700 005.
2. Respondent –I.T.O. Ward-34(2), Kolkata. 3. CIT(A)- Kolkata. 4. CIT – , Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.