ACIT, CIR-22, KOLKATA, KOLKATA vs. MRS SHEELA CHOPRA, KOLKATA

आदेश /O R D E R

PER Waseem Ahmed, Accountant Member:-

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-XIV, Kolkata dated 28.10.2013. Assessment was framed by ITO Ward-22(1), Kolkata u/s 143(3)/147) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.12.2011 for assessment year 2006-07.

Shri P.K. Mondal, Ld. Departmental Representative represented on behalf of Revenue and Shri R.P. Agarwal, Ld. Senior Advocate and Shri Nira Seth, Ld. Authorized Representative appeared on behalf of assessee.

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 2 2. First issue raised by the Revenue in ground number (i) to (iii) is that ld CIT(A) erred in directing the AO to treat the capital gain as long term capital gain although the AO treated the same as short term capital gain.

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 3 “8.3.4 The AR of the appellant has also argued that the AO has erred is considering the capital gain as short term in nature, instead of long term. The said flat has been allotted to the appellant on 28.09.2000 by ‘West Bengal Housing Board’, which has been later on registered by the appellant on 14.03.2005. The AO has considered 14.03.2005 as date of purchase and computed capital gain accordingly in the assessment order. In this connection the Ld. A/r has cited judgment in the case of CIT vs. Jindas Panchand Gandhi. I have duly considered the appellant’s submissions, cited case laws, AO observation in the assessment order the AO has not given any comment on the issue in the remand report. Thus, I am of the opinion that as the property in question has been allotted to the appellant on 28.09.2000, the appellant has received on rights on the flat on the date of the date of allotment. Thus, I admit and direct accordingly that date of registration of the flat is not of significance in the instant case and date of allotment is to be considered as the date of purchase which computing capital gain on sale of the flat at Çalcutta Green’. 8.3.5 During the course of appellate hearing, the AR of the appellant has also contended that interest paid in aggregate of Rs.5,15,010/- on such flat has not been allowed in the earlier assessment years. The AO has been given opportunity to submit his comments on the same through remand report. However, the AO has not made any comments. Thus, considering the submissions made by the appellant, I admit that interest paid on such flat should form art of cost of purchase of flat. Thus, I direct AO to consider purchase price of flat at Rs.29,12,056/- (Rs.23,97,046/- + Rs.5,15,010/-) and compute long term capital gain accordingly.”

Being aggrieved by the order of ld CIT(A) Revenue came in second appeal before us.

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 4 6. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the period of holding of the capital assets. The AO has taken the date of purchase which was in the purchase deed. However, the ld CIT(A) has taken the date of purchase which is based on the allotment letter issued by the West Bengal Housing Board. Admittedly, the flat was allotted to the assessee on 28.09.2000, vide letter No. 9114 as evident from the allotment letter which is placed on page 23 of the paper book. The first application money was paid on 28.09.2000, thereby conferring a right upon the assessee to hold a flat, which was later identified and possession delivered on a later date. The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter. Thus, in our view the date of allotment should be taken as the date of purchase of the impugned flat. While holding so we also find guidance and support from the following judgments.

1) CIT, Salary Circle, Chennai v. S.R.Jeyashankra (2015) 53 taxmann.com 107 (Mad) wherein it was held as under : “8. The Delhi High Court has also observed in the decision, which has been extracted in the order of the Tribunal in paragarph 7.1 of the order, holding that the date of allotment of the flat to the assessee by the promotor should be adopted as the date of acquisition of the immovable property. In the present case, the right to the property flows from the date of agreement with the builder, viz., 22.2.2005. Over a period of time payments have been made and the transaction was concluded in accordance with the terms of the agreement by registering the Undivided share in land and handing over the flat. Therefore, the assessee had a right consequent on the agreement dated 22.2.2005 in respect of the property sold by the assessee on 10.4.2008. Therefore, it exceeds the period of 36 months and the assessee has rightly claimed the benefit of long term capital gains. 9. Circular No.471 dated 15.10.1986 is also on the same lines. It speaks about the right of an allottee over a property that has been allotted. The other issues like payment of balance instalments, delivery of possession,

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 5 which takes place after the allotment only, relates back to the original allotment, in the present case, agreement. Therefore, the principle on which long term capital gains should be determined has been clearly indicated in the circular. For better clarity, Circular No.471 dated 15.10.1986 reads as follows: "Circular No.471 Capital gains tax - Whether investment in a flat under the Self-Financing Scheme of the Delhi Development Authority would be construction for the purpose of ss.54 and 54F of the IT Act, 1961 15/10/1986 Capital Gains Sections 54, 54F, Secs. 54 and 54F of the IT Act, 1961, provide that capital gains arising on transfer of a long term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available if the investment is made within a period of one year before or after the date on which the transfer took place and in case of construction of a house, the benefit is available if the investment is made within three years from the date of the transfer. 2. The Board had occasion to examine as to whether the acquisition of a flat by an allottee under the Self-Financing Scheme of the Delhi Development Authority amounts to purchase or its construction by the Delhi Development Authority on behalf of the allottee. Under the Self-Financing Scheme of the Delhi Development Authority the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled or the allottee withdraws from the Scheme. The allotment is cancelled only under exceptional circumstances. The allottee gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow-up action and taking the delivery of possession is only a formality. If there is a failure on the part of the Delhi Development Authority to deliver the possession of the flat after completing the construction, the remedy for the allottee is to file a suit for recovery of possession. 3. The Board have been advised that under the above circumstances, the inference that can be drawn is that the Delhi Development Authority takes up the construction work on behalf of the allottee and that the transaction involved is not a sale. Under the Scheme, the tentative cost of construction is already determined and the Delhi Development Authority facilitates the payment of the cost of construction in instalments subject to the conditions that the allottee has to bear the increase, if any, in the cost of the construction. Therefore, for the purpose of capital gains tax, the cost of the new asset is tentative cost of construction and the fact that the amount was allowed to be paid in instalments does not affect the legal position stated above. In view of these facts, it has been decided that cases of allotment of

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 6 flats under the Self-Financing Scheme of the Delhi Development Authority shall be treated as cases of construction for the purpose of capital gains." 10. In the light of the above-said decisions and the Circular, we do not find any reason why the same principle should not be applied to all transactions based on agreements in respect of capital asset. It has been correctly pointed out by the Commissioner of Income Tax (Appeals) as well as the Tribunal following the decision of the Punjab and Haryana High Court that the breach of agreement would only give right to the beneficiary for enforcing the right over the property. We find no reason to differ with the said reasoning.” 2) Ms. Madhu Kaul v. CIT (2014) 43 taxmann.com 417 (P&H) wherein it was held as under : “7. We find no distinction between the opinion recorded in the aforesaid judgment and the controversy in the present case. Admittedly, the flat was allotted to the appellant on 07.06.1986, vide letter conveyed to the assessee on 30.06.1986. The assessee paid the first installment on 04.07.1986, thereby conferring a right upon the appellant to hold a flat, which was later identified and possession delivered on a later date. The mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. The payment of balance installments, identification of a particular flat and delivery of possession are consequential acts, that relate back to and arise from the rights conferred by the allotment letter. 8. In view of what has been recorded hereinabove, we have no hesitation in holding that the Income Tax Appellate Tribunal has erred in holding that the transaction does not envisage a long term capital gain. Consequently, we allow the appeal, set aside order dated 15.02.1999 and answer the substantial questions of law in favour of the assessee.” 3) Vinod Kumar Jain v. CIT (2010) 195 taxmann 174 (P & H) wherein it was held as under : “Para 2 of Circular No. 471, dt. 15th Oct., 1986 describes the nature of right that an allottee acquires on allotment of flat under self-financing scheme. According to it, the allottee gets title to the property on the issuance of an allotment letter and the payment of instalments is only a consequential action upon which the delivery of possession flows. The assessee was allotted flat on 27th Feb., 1982 on payment of instalments by issuance of an allotment letter and he had been making payment in terms thereof but the specific number of the flat was allocated to the assessee and possession delivered on 15th May, 1986. The right of the assessee prior to 15th May, 1986 was a right in the property. In such a situation, it cannot be held that prior to the said date, the assessee was not holding the flat. Therefore, the flat allotted to the appellant vide allotment letter dt. 27th Feb., 1982 which was sold on 6th Jan., 1989 was a long-term capital asset and the investing of sale proceeds thereof for the purchase of another house was exempted under s. 54.—CIT vs. Ved

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 7 Parkash & Sons (HUF) (1993) 115 CTR (P&H) 63 : (1994) 207 ITR 148 (P&H) followed.”

Taking a consistent view and relying on the aforesaid judgments of Hon'ble High Courts and facts of the present case, we find no infirmity in the order of ld. CIT(A). In the instant case letter of allotment is on 28.09.2000 and accordingly the right was acquired on that date. The assessee sold the property which was acquired by way of letter of allotment dated on 11.05.2005. Accordingly, the period of holding exceeds 36 months in the present case. So the period of holding in the instant case exceeds 36 months and income arising on the sale of said property will be treated as LTCG. However, admittedly the case law cited by the ld. DR i.e Gulshan Malik (Supra) is in favour of Revenue but we find that the Hon’ble Apex Court directs that in case two different orders on the grounds of appeal favoring and against to the assessee are there then the view favorable to the assessee should be taken. The principal was laid down by the Apex court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). The relevant extract is reproduced below : “On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognised by this Court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in s. 271(1)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty.”

In view of above, we find no reason to interfere with the findings arrived by the Ld. CIT(A). Under the circumstances, this issue of Revenue’s appeal is dismissed. 7. Next issue raised by Revenue in ground number (iv) to (vii) has challenged the value determined by the ld CIT(A) under the provisions of section 50C of the Act.

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 8 8. The assessee, in the year under consideration has sold her flat located at Calcutta Green which was purchased from West Bengal Housing Board. The assessee claimed to have sold the impugned flat for Rs. 33 lacs in terms of its sale deed executed dated 11th May 2005. However, the AO observed that the ADSR has valued the impugned flat for Rs. 59.28 lakh as on 2nd May 2005. Accordingly, the AO has adopted the sale value for Rs.59.28 lakh for the purpose of capital gains in terms of the provisions of section 50C of the Act. Accordingly, the capital gains worked out by the AO which was added to the total income of the assessee.

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 9 consider sales consideration at Rs.33,00,000/- for computation of Capital Gain u/s. 50C of the Income Tax Act.”

Being aggrieved by the order of ld CIT(A) Revenue came in second appeal before us. 10. Before us ld. DR vehemently relied on the order of Assessing Officer and he left the issue to the discretion of the Bench. On the other hand the ld. AR drew our attention on page 93 of the paper book where the letter from the office of the Registrar of Assurances, Kolkata was placed. As per this letter the market value of the impugned property is of Rs.33 lacs in the year 2005 and which is the sale price of the property as per sale deed. He relied on the order of ld CIT(A).

11.1 At this juncture we find important to reproduce the provisions of section 50C of the Act which reads as under: Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

From the reading of Section 50C, it is evident that Section 50C is a deeming provision and it extends only to land or building or both. Section 50C can come into play only in a situation where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both is less than the value adopted or assessed or assessable for

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 10 the purpose of payment of stamp duty in respect of such transfer. It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and, hence, cannot go beyond the explicit mandate of the section. In the instant case, we find that both the lower authorities have taken a different deemed sale consideration as provided under section 50C of the Act. None of the lower authorities has confirmed the same by issuing a notice u/s 133(6) of the Act to Stamp Valuation Authorities to determine the actual stamp valuation. In the absence of any confirmation from the Stamp Valuation Authorities, we are inclined to restore this issue to the file of AO for fresh adjudication in accordance with law and in the light of above stated discussion. Hence, this ground of Revenue’s appeal is allowed for statistical purposes.

"48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :— (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto:"

ITA No.169/Kol/2014 A.Y. 2006-07 ACIT, Cir-22, Kol. Vs. Mrs Sheela Chopra Page 11 After perusing the above said provisions, we are of the opinion there is no doubt that the interest in question is indeed a expenditure in acquiring the asset. Therefore, the assessee in the instant case is certainly entitled to include the interest amount at the time of computing capital gains u/s 48 of the Act. Therefore, the Ld CIT(A) has rightly accepted the assessee's contention and deleted the addition made by the AO. Hence, qua this ground, we uphold the order of the Ld. CIT(A).