Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMARShri Javed K. Khan,
Appellant by : S/Shri K.Gopal/Jitendra Singh Respondent by: Shri Sudhamshu Shekhar Date of hearing : 12/05/2016 Date of pronouncement : 22/07/2016 ORDER PER MAHAVIR SINGH, J.M:
This appeal by the assessee is arising out of the order of CIT(A)-34 Mumbai in Appeal No.CIT(A)-34/ITO-19(2)(3)/IT-299/13-14 dated 8/12/2014. Assessment was framed by ITO, Ward 19(2)(3) Mumbai u/s 143(3) of the Income Tax Act, 1961 ( in short „the Act‟) for the assessment year 2011-12 vide his order dated 29/11/2013.
At the outset, Ld. Counsel for the assessee filed revised grounds of appeal because the original grounds filed by him were argumentative in nature. To this, Ld. Sr. D.R has not objected. Ld. Counsel for the assessee also filed additional grounds of appeal stating that the CIT (Appeals) erred in not appreciating the fact that the transfer of flat has not taken place in the previous year relevant to the impugned assessment year. For this assessee has raised the following additional ground:-
“The CIT(A) as well as the Assessing Officer have failed to appreciate that the transfer of the impugned asset has not taken place during the previous year relevant to the impugned assessment year. Hence, the capital gains are not taxable in the impugned assessment.”
The assessee‟s revised ground also contain this additional ground as well as other grounds which is running into following four grounds:-
The Ld. CIT (A) erred in confirming the action of the Ld.A.O. of taxing capital gains on account of transfer of flat situated at 3rd floor in the B wing of Ann Ville" as short term capital gains.
2. The Ld. CIT (A) failed to appreciate that the transfer of the flat took place on 14th May, 2011 on handing over the possession to the purchasers in terms of agreement dated 7th January, 2011. Thus, the impugned asset was held by the appellant for a period of more than 36 months. 3. Without prejudice to the above, the Ld. CIT (A) as well as the Ld.A.O. failed to appreciate that the transfer of the impugned asset has not taken place during the previous year relevant to the impugned assessment year. Hence, the capital gains are not taxable in the Assessment Year 2011-12. 4. Without prejudice to the above, the Ld. CIT (A) has failed to appreciate that the Assessing Officer has not properly determined the capital gains as he has ignored to assign any cost towards the tenancy rights surrendered to the land lord to acquire ownership rights in the impugned asset.
Ld. Counsel for the assessee first argued on admissibility of additional ground that transfer of flat has not taken place during the previous year relevant to this assessment year and accordingly capital gain is not chargeable in this assessment year, will go to the root of the matter, hence, the same requires adjudication. For this Ld. Counsel for the assessee relied upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Company vs. CIT (1998) 229 ITR 383(SC) and also Full Bench decision of Hon'ble Bombay High Court in the case of Ahmadabad Electricity Company Ltd. vs. CIT (1993) 199 ITR 351(Bom)(FB). When this was confronted to Ld. Sr. D.R, he stated that this additional ground should not be entertained and for this he also relied on the case law of National Thermal Power Company (supra). He read out the following from the judgment:
“The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.” In reply of the above, Ld. Sr. D.R stated that there is no good reason adduced by the assessee for admission of additional ground.
We find from the above arguments and facts of the case that the facts relating to transfer of asset are very much available on records i.e. on the records of Assessing Officer as well as CIT (A), hence there is no need to investigate the facts, which are on record. This ground raised by the assessee pertains to a legal issue, which will go to the root of the matter and will decide the issue accordingly. Following the case of National Thermal Power Company (supra), we admit the additional ground and allow the plea of the assessee.
Briefly stated facts are that assessee‟s father Mr. Karmaruzzama Ghasi Khan was occupying one Flat 9/B, 3rd Floor, in Ann Ville as a tenant. On 16/04/2008, he entered into an agreement with the owners of the Flat by giving up the tenancy rights and by paying a sum of Rs.33,798/-, he became the owner of the flat. The relevant agreement is enclosed at pages 18 to 77 of assessee‟s paper book. Subsequently, on 29/4/2008 assessee‟s father executed a gift deed, gifting this flat to assessee and this Gift Deed was registered on 30/04/2008. The copy of Gift Deed is enclosed in assessee‟s paper book at pages 97 to 101. Subsequently, on 07/01/2011, assessee entered into an agreement for sale of this flat for a total consideration of Rs.70.00 lacs but whose market value as per Stamp Duty rates was at Rs.1,15,87,600/-. The assessee purchased a new flat No.B/103, Pioneer Heritage Residency at Daulat Nagar, Santacruz on 19/1/2011 for a sum of Rs. 85,00,000/-. During the course of assessment proceedings, the AO on perusal of computation of total cost noted that the assessee has not disclosed any income under the head capital gains nor furnished any computation of claim of deduction under section 54 of the Act. This information for sale of property was received by the AO through AIR information. The AO noted the fact that the agreement for purchase of the flat was entered into by assessee‟s father on 16/04/2008 for a sum of Rs.33,798/- and this was gifted to the assessee by his father on 29/4/2008. This flat was sold by assessee on 7/1/2011 i.e.
within 32nd month and accordingly this is a short term capital gain. Finally the AO assessed the sale proceed from this flat as short term capital gain by observing in Para 4.9 and 4.10 as under:- “4.9 In view of the above discussion, it is held that the property being flat transferred vide agreement dated 7.01.2011 is a short terms capital asset and gain arises on the transfer of the said property is short term capital gain. Accordingly, short term capital gain is worked out applying provisions of section 50C of the Act, as under:- Full value of consideration for the purpose of Section 48 as the value adopted by the stamp Duty authority 1,15,87,600/- Less: Cost of acquisition of property by Previous owner 33,798/- Add: Stamp duty 30,700/- 64,498/- Total short term capital gain 1,15,23,102/- ========== 4.10 Since the assessee has completely failed to disclose the transaction regarding sale of property in the return of income and computation of income and is found to have incorrectly claimed, deduction under section 54F in an undisclosed manner. I am satisfied that the assessee has concealed his income of Rs.1,15,23,102/- being short term capital gain. Therefore, the penalty proceedings for concealment of income are being separately initiated by issue of notice under section. 274 r.w.s. 271(1)(c) of the Income-tax Act, 1961.” Aggrieved against the action of the Assessing Officer, assessee preferred appeal before CIT (Appeals), who confirmed the action of the Assessing Officer for assessing this sale consideration as short term capital gain but partly allowed the claim of the assessee by taking stamp valuation of this property under section 50C of the Act at Rs.81,11,00,500/- instead of value taken by Assessing Officer at Rs.1,15,87,600/-. Aggrieved against the action of the CIT (Appeals) confirming the Assessing Officer‟s order, assessee filed second appeal before the Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. The admitted facts are that the assessee‟s father Mr. Kamruzzaman Ghasi Khan was a tenant of flat No.9, “B” Wing, 3rd floor of “Annville” for more than last ten years. Assessee‟s father converted his tenancy rights in ownership by paying 112 times of the monthly rent to his landlord vide agreement dated 16-4-2008. This flat “B/9” was gifted by assessee‟s father vide registered Gift Deed dated 29-04-2008. Assessee sold this flat on 07-01-2011 for a sum of Rs.70 lakhs (the consideration recorded in the Sale Deed). The stamp valuation as per circle rates as valued by Sub-Registrar was at Rs.1,15,87,600/-. Subsequently, during appellate proceedings before CIT (A), the assessee produced a corrected market value by Sub-Registrar as per circle rate at Rs.81,11,500/- in place of original value at Rs.1,15,87,600/-. According to AO, this property was sold by the assessee within thirty two months which is less than thirty six months, the capital gain earned by the assessee is short term capital gain for the reason that the property by assessee‟s father was purchased by agreement dated 16-04-2008 and assessee sold this property on 07-01-2011. Thereby the holding period is only thirty two months and not thirty six months. The assessee claimed this as long term capital gain and claimed deduction u/s 54F of the Act for the reason that the assessee has purchased a residential house for a sum of Rs.89,22,500/- including stamp duty charges. According to AO this is a short term capital gain and cannot be allowed deduction u/s 54 of the Act. Finally, the CIT (A) also held the transaction as short term capital gain and did not allow deduction u/s 54 of the Act. However, the CIT (A) reduced the fair market value of the property sold by the assessee, as corrected by the Sub- Registrar by adopting circle rates, at Rs.81,11,500/-. Now, the assessee before us claimed by way of additional ground that as per agreement for sale dated 07-01-2011 clause 2(b) (copy of which is enclosed at page 82 of the assessee‟s paper book), the possession of the flat was to be given to the purchaser in the next 10/30 days. And finally the possession of the said flat was granted subsequently on 14-05-2011 with the mutual consent. Before us, learned Counsel for the assessee drew our attention to relevant clause 2(b) of the agreement dated 06-01-2011 and the same reads as under:-
“2. The said consideration will be paid by the Purchaser to the Vendor as follows:- (b) The vacant and peaceful possession of the said Flat will be given by the Vendor to the Purchaser in the next 10/30 days because the vendor is himself shifting to another flat where he is to get possession in the next 10/30 days”. The learned Counsel for the assessee also referred to the factum of possession given on 14-05-2011 to the purchaser by the assessee. The relevant possession letter in continuation to the agreement dated 06-01-2011 (copy of which is enclosed in assessee‟s paper book at page 111), which reads as under:-
“Today, on the 14th day of May 2011 (14/05/2011) (Seller) Mr. Javed Kamruzzama Khan S/o. Mr. Kamruzzama Ghasi Khan has peacefully handed over the possession of Flat No.9, B Wing admeasuring 519 sq. Ft. Carpet area on the 3rd floor of building known as ANNVILLE constructed and lying on plot No.74 of TPS III bearing CTS No.F/769 on village Bandra (W), Taluka Andheri, Banda Subarban to (Purchaser) Mrs. Nilofar Sameer Shaikh W/o. Mr. Mohmed Sadiq Hamid Shaikh and Mrs. Shehnaz Sultan Mohmed Sadiq Saiyed W/o Mr. Mohmed Sadiq Muhamed Safi Saiyed. The above mentioned property was sold to the purchasers by the seller and agreement registered with the sub-registrar on 07/01/2011 vide BDR-1/257/2011. The seller has not paid any remuneration in any form to the purchasers for the period from 07/01/2011 to 14/05/2011. Till today the seller was responsible for all the Govt. taxes, repair costs, electricity bills etc. From today onwards i.e. 14/05/2011, the purchasers having taken legal possession of the above mentioned property will be responsible for all the expenses and costs related to the above mentioned property. The property has been vacated peacefully and is completely vacant. The purchasers have taken complete possession of the above mentioned property peacefully and become the absolute owners of the said flat and now are free to use the said flat in any manner they like. Mr. Javed Kamruzzama Khan has not left behind any furniture, valuables, documents etc. which he can claim later.”
This factum of handing over possession by assessee to the purchaser was before the AO and before the CIT (A) also. There is discussion in the assessment order qua this fact. Now, the question arises whether the handing over of the possession of the property is vital to decide the transfer in term of the provision of Section 2(47) of the Act so as to decide whether the property is held as long term asset or short term asset.
This issue, whether the possession is important for deciding the issue of transfer u/s 2(47) of the Act, has been adjudicated by this Tribunal in the case of Azad Zabarcgabd Bhandari Vs ACIT (2013) 58 SOT 347 (Mumbai Trib.), while considering the decision of the Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia Vs. CIT (2003) 260 ITR 491 (Bom.) as under:-
Article 265 of the Constitution of India postulates that there cannot be levy of tax without authority of law. It is not in dispute that capital gains tax can be levied only in the year when the transfer of immovable property takes place. If the AO is of the firm view that the transfer had taken place on 16.03.2005, for capital gains tax purpose, then it is mandatory to bring to tax, the said income, in A.Y. 2005-06 in which event he ought to have excluded the income offered to tax in A.Y. 2006-07, having observed that reckoned from the date of transfer the assessee has not invested, within six months, the sale proceeds in the long term specified assets. The first appellate authority, in para 3.5, impliedly accepts that in the instant case the date of agreement is different from the date of possession; in his opinion the moot point is whether the date of agreement, i.e. 16.03.2005 or the date of possession, i.e. 20.09.2005 is the relevant date for computing capital gains tax. It is well settled that in order to bring the sale proceeds to tax under the head "Capital Gains" transfer of the property has to take place in the relevant previous year and in order to come to the conclusion that the transfer has taken place within section 2(47)(v) of Income Tax Act r.w.s. 53A of Transfer of Property Act twin conditions have to be satisfied, i.e. execution of the agreement and handing over of possession. It is not necessary that both conditions should be satisfied in one year but at the same time only upon satisfying the second condition also it would amount to transfer. In this case also there is no dispute that the agreement is dated 16.03.2005 whereas with regard to the date of possession the learned CIT (A) Shri Azad Zabarchand Bhandari assumed that it took place on 20.09.2005, which falls in the financial year relevant to A.Y. 2006-07. In the peculiar nature of this case, if at all the plea of the AO has to be accepted, it would amount to holding that the transfer had not taken place in this year and consequently the sale proceeds cannot be assessed in this year, but the AO having not initiated any proceedings with respect to A.Y. 2005-06 till date the impugned income would escape taxability even in A.Y. 2005-06 and it would really be prejudicial to the interest of the Revenue. Under this peculiar circumstance we have to rationally interpret the findings of the AO as well as the CIT(A) in the backdrop of the clauses in the agreement. As rightly pointed out by the learned counsel for the assessee, the Hon'ble Bombay High Court in the case of Chatrubhuj Dwarkadas Kapadia (supra) has decided the issue by reading the terms of the contract as a whole and by specially taking note of the fact that in the guise of agreement of sale a development agreement was contemplated whereby the developer was held to have taken possession on account of the irrevocable licence granted to him to enter upon the property whereas in the instant case no such finding was given by the tax authorities. In fact the learned CIT(A) opined that the date of handing over of possession in the instant case was 20.09.2005, and based on this factual premise it has to be held that the transfer had taken place in the previous year relevant to A.Y. 2006-07. Reckoned from the date of possession, i.e., 20.09.2005, the assessee having invested the money within six months in long term specified asset, the benefit of exemption under section 54EC deserves to be extended to the assessee in the instant case. In substance, we hold that the assessee is entitled to exemption under section 54EC of the Act in the year
under consideration and we direct the AO accordingly. This disposes of ground No. 1, 2 & 3 set, out in the Revised Grounds of Appeal.
Further, the Mumbai Tribunal in the case of ACIT Vs Mrs. Geetadevi Pasari [(2006) 104 TTJ (Mumbai) 375] has laid down the similar proposition as under:-
12. As regards the possession, we have taken note of the copies of bills for telephone and water charges, placed before us at pp. 74 to 78, which evidence the fact that the assessee continued to be in possession of the premises even in the financial year 1996-97. A copy of possession letter dt. 10th April, 1998, at pp. 57 of the paper book, shows that the possession was handed over to the developer on 10th April 1998. In any event, in terms of Clause 9 of the development agreement, the possession was to be delivered only after the complete payment was made. Admittedly, this condition was not complied with till the end of the relevant previous year. In these circumstances, when only a small portion of sale consideration was received as earnest/deposit money and when the developer could not have, therefore, exercised his rights under the contract which were to crystallize on making the payments after the receipt of no objection certificate from the authorities, it cannot be said that there is anything to indicate, leave aside establish, passing of or transferring of complete control over the property in favour of the developer" which is sine qua non for taking the date of contract as relevant for the purpose of deciding the year of chargeability of capital gains. Therefore, on the facts of the present case, the date of development agreement would not really be relevant to decide the year of chargeability.
For the reasons set out above, we are unable to uphold the objections so strenuously argued by the learned Departmental Representative. Even as we do so, we make it clear that whether or not complete control or right to control over the property has passed to developer in the relevant previous year essentially depends on the facts of each case and on, inter alia, the rights which have accrued to the developer under the agreement which, in turn, would also depend upon the extent to which developer has discharged his obligations under the contract. This question is thus to be decided on the totality of facts of each case and in the light of the guidance by the binding precedents. With these observations, and in the light of the above discussions, we confirm the conclusions arrived at by the CIT(A) and decline to interfere in the matter”.
In view of the facts discussed above that in the case of the assessee, who ente3red into agreement to sell dated 07-01-2011 and in this agreement a specifically mentioned Clause 2(b) states that the possession of the flat was to be given to the purchaser in the next 10/30 days and eventually the possession of the said flat was granted on 14-05-2011 with the mutual consent. Reckoned from the date of possession i.e. 14-05-2011 the assessee is entitled for treatment of sale of flat as long term and capital gain will be treated as long term capital gain because the property was acquired by assessee‟s father on 16-04-2008 and assessee handed over the possession to the purchaser only on 14-05-2011, it means the holding period is more than thirty six months. The assessee has invested a sum of Rs.89,22,500/- in purchase of new flat, the proceeds out of sale of the flat. In our view the assessee is entitled for deduction u/s 54 of the Act and assessment of this transaction is to be made in assessment year 2012-13 and not in assessment year 2011-12. We direct the AO accordingly. Appeal of the assessee is allowed partly.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 22/07/ 2016.