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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI ABRAHAM P GEORGE & SHRI VIJAY PAL RAOShri S.Shankaranarayan,
Per VIJAY PAL RAO, JM: This appeal by the assessee is directed against the order dated 28/01/2014 of the CIT(A)-LTU, Bangalore, for the assessment year 2005-06.
The assessee has raised the following grounds:
“On the facts and in the circumstances of the case: 1. The learned CIT(A) has erred in law and on facts in upholding the action of the learned AO in treating the gains derived from
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 2 of 10 transfer of land as short term capital gain and denying the claim of the Appellant as Long Term Capital Gains; 2 the learned CIT(A) has erred in upholding the transaction as short term in nature ignoring the fact that the only condition for allotment and possession of land of BDA is to comply with the conditions of payment towards allotment of land; 3 the learned CIT(A) has erred in upholding the action of the learned AO ignoring the fact that the Appellant has complied with all the payment terms of allotment of land thereby amounting to deemed possession of land which BDA has stipulated for allotment of land; 4. In the learned CIT(A) has erred in law and on facts in upholding the action of theAO by merely going on the basis of form of transaction thereby ignoring the spirit of provisions of section 2(47)(v) of the Income Tax Act, 1961. 5. the learned CIT(A) has erred in law and on facts by upholding the action of the learned AO by ignoring the fact that the Appellant has undertaken part performance of the contract inasmuch as by paying the entire consideration as stipulated by BDA for allotment of land thereby registration of land has become a mere formality.
the learned CIT(A) has erred in law and on facts in upholding 6. the action of the AO ignoring the judicial precedents relied upon by the Appellant. ”
The only issue that arises in the appeal of the assessee is whether the capital gain received by the assessee on the transfer of the land in question viz. site No.159, 4th Cross, Dollars Layout, JP Nagar IV Phase, Bangalore, is a Long-term capital gain (LTCG) or Short-term capital gain (STCG). The assessee is an individual and acquired the land in open auction from the Bangalore Development Authority (BDA) on 5/2/2001. Consequently, an allotment letter was issued by the BDA in favour of the assessee on 14/2/2001. The assessee was required to make payment of the entire consideration of Rs.25,13,664/- as per terms and conditions of the allotment.
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 3 of 10 Accordingly, the assessee paid the entire consideration from 15/2/2001 to 28/4/2001. Subsequently, assessee sold the above land on 6/9/2004 for a consideration of Rs.55 lakhs and worked out the LTCG of Rs.22,45,562/-. The assessee invested the entire consideration arising from sale of the land in question in a new residential house and claimed exempt u/s 54F of the IT Act. The Assessing Officer (AO) rejected the claim of the assessee on the ground that capital gain derived by the assessee is STCG because the actual date of acquisition of the property in question is the date on which conveyance deed registered on 23/9/2002 and not the allotment date i.e. 14/2/2001 or the payment date i.e. 28/4/2001. Thus, the AO held that the sale of the property in question on 6/9/2004 is within three years from the date of acquisition i.e. 23/9/2002 and accordingly, treated capital gain on sale of the property as a STCG.
The assessee challenged the action of the AO before the CIT(A) and contended that the date of acquisition was the date of auction on 5/2/2001 when the property was acquired by the assessee from the BDA and the entire consideration was paid through bank account between 15/2/2001 and 28/4/2001 as stipulated in the allotment letter of the BDA. Thus, the assessee argued that the date of acquisition should be treated as the date of auction or date of allotment or the date of final payment of the entire consideration. Registration of the conveyance deed after some time was not in the control of the assessee as it was at the
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 4 of 10 end of the BDA and therefore, registration was mere a formality which does not affect the acquisition of the property by the assessee in the auction. The CIT(A) did not accept the contention of the assessee and confirmed the action of the AO by treating the capital gain arising from sale of the property as STCG.
Before us, learned AR of the assessee has submitted that there is no dispute that the assessee acquired this property in the auction from BDA on 5/2/2001 and accordingly allotment letter was issued to the assessee by the BDA on 14/2/2001. The assessee made payment of the entire consideration from 15/2/2001 to 28/4/2001. He has referred to the provisions of sec.2(42A) and submitted that the term ‘capital asset held by the assessee’ has been interpreted in various decisions by the Tribunal as well as the Hon’ble High Court and therefore, the word ‘held’ occurring in the said section implies that the asset need not be held as a legal owner and therefore, registration of the conveyance deed has nothing to do with the holding of the asset by the assessee. In support of his contention, he has relied upon the following decisions: i) CIT vs. A. Suresh Rao (ITA No.417 2013)(Kar), ii) A.Suresh Rao vs. ITO (ITA No.761/Bang/2011)(Trib) iii) Vinod Kumar Jain vs. CIT (344 ITR 501)(Punjab & Haryana) iv) CIT vs. K.Ramakrishnan (363 ITR 59)(Delhi)
Thus, the learned AR of the assessee has submitted that when the assessee has acquired the property in auction and the allotment letter was issued by the BDA in favour of the assessee, then the said
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 5 of 10 property was held by the assessee on the date of allotment and therefore, on the date of sale, it was a LTCG asset and the capital gain arising from the sale of the property is LTCG.
On the other hand, learned Departmental Representative has relied upon the orders of the authorities below and submitted that the assessee has acquired the legal title over the property only when the conveyance deed was executed and registered on 28/9/2002 and therefore, when the property was sold on 16/9/2004 it was within the period of three years and the capital gain arising from the sale of the property is STCG.
We have considered the rival submissions as well as the relevant material on record. There is no dispute that the assessee has acquired the land viz. site bearing No.159, 4th Cross, Dollars Layout, JP Nagar IV Phase, Bangalore, in an open auction from the BDA on 5/2/2001. Consequent to the successful bidder, allotment letter was issued by the BDA to the assessee on 14/2/2001. As per terms of allotment of the land in question, assessee paid the entire consideration of Rs.25,13,664/- by 28/4/2001. Therefore, as on 28/4/2001, all the other acts and process of acquisition of land in question were completed except registration of the conveyance deed. Since the assessee was allotted the land in question subsequent to the open auction and was issued allotment letter dated 14/2/2001 subject to the payment of consideration which the assessee paid by 28/4/2001 therefore, the date of acquisition would
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 6 of 10 be when the assessee performed his part and complied with terms and conditions of allotment. The capital gain is treated as LTCG if the said asset is held by the assessee held by the assessee for more than 36 months (3 years) as per the provisions of sec.2(42A)/2(42B) of the Act. Therefore, for the purpose of sec.2(42A) and 2(42B), land in question will be regarded to be held by the assessee from the date of allotment on 14/2/2001 subject to payment of the entire consideration within the period stipulated as per allotment conditions. The assessee made entire payment by 28/4/2001, therefore, in any case, the capital asset in question was held by the assessee since 28/4/2001.
An identical issue came for consideration before the Hon'ble jurisdictional High Court in the case of CIT vs. A.Suresh Rao (supra) wherein substantial question framed by the Hon'ble jurisdictional High Court in para.6 is as under:
“Whether in the facts and circumstances of the case, the Tribunal is right in law in holding that the expression ‘held by the assessee’ in section 2(42-A) of the Income Tax Act implies a person in whose favour an allotment of a site made in the first instance, when the entire consideration was paid in pursuance of such allotment?”
Thus it is clear that the question before the Hon’ble High Court was regarding the interpretation of the expression ‘held by the assessee’ in section 2(42A) of the Act whether it is from the date of allotment of site or from the date of execution and registration of the
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 7 of 10 conveyance deed. The Hon’ble High Court has held in para.15 to 18 as under: “15 All the aforesaid judgments relied on by the Revenue are cases arising prior to the amendment to Section 2(47) of the Act. The very same judgments show, in particular the judgment of the Full Bench of the 'Gujarat High Court, the reasons for amendment even in the absence of a registered deed of transfer, if the transaction in question demonstrates the intention of the parties and after paying the entire consideration agreed upon, the purchaser enjoys the property. The fact that the transaction is not completed by execution of the registered sale deed makes no difference in the eye of law for the purpose of taxes. If the Revenue is entitled to collect tax on such capital gains, even in the absence of a registered document, on the same analogy, the assessee, who is liable to pay the capital gains, is also entitled to the exemption granted under the very Act on such capital gains. That is precisely what the Apex Court has said in Smt.Saroj Aggarwal's case (supra) that, facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Too hyper technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. The Courts should place an interpretation making a benevolent and justice oriented inference and the facts must be viewed in the social milieu of a country. Now in this background, let us see the facts of this case. 16.The assessee was allotted a site on 21.9.1988 in R M V Extension Bangalore The assessee paid a sum of Rs 1,11,480/- on such allotment He was also put in possession of the property and possession certificate was issued. On compliance, with other legal requirement, a registered sale deed came to be executed on 6.10.2005 in his name. However, the said site was the subject matter of litigation and therefore, when the assessee was not allowed to enjoy the said property in obedience of the orders passed by the courts, the BDA cancelled the sale deed dated 6.10.2005 by executing a deed of cancellation dated 18.9.2007. Thereafter in lieu of the site, which was cancelled, a fresh allotment was made in Hennur-Banaswadi road. When the assessee after the site being allotted, went to the spot, he found that there was a construction, which was also involved in a legal dispute. In spite of the orders of the court to demolish the structure, it has not been done. When he reported the matter to the authorities, the allotment of site Hennur-Banaswadi road was cancelled on 9 1 2008 and in lieu of the same, the present site was allotted on 15.2.2008. A registered sale deed came to be executed on 27.2.2008. No consideration was paid under the said sale deed. The consideration paid on
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 8 of 10 21.9.1988, which was acknowledged in the sale deed dated 6.10.2005, was treated as a consideration for the same on 27.2.2008. It is thereafter the assessee transferred the site by way of a registered sale deed in favour of a purchaser on 29 5 2008 and received a consideration of Rs. 1 crore 13 lakhs. This site, which was transferred, he was holding it from 21.9.1988, when he paid the consideration on intimation of allotment. Merely because the original site which was allotted was cancelled, yet another site was allotted and the said site was also cancelled and thereafter the present site was allotted, in law would make no difference. Admittedly, the consideration paid on 21.9.1988 is treated as the consideration for the sale dated 27.2.2008. In other words, the cost of acquisition of the asset was paid on 21.9.1988 and no cost was paid either on the date of allotment, on 15.2.2008 or on the date of registered sale deed on 27.2.2008. For the purpose of computing the capital gains under Section 48 of the Act, it is the date: of acquisition of the asset, which is to be taken into consideration and the said cost of acquisition is to be converted as the indexed cost of acquisition as defined in the Explanation to Section 48 of the Act and, the said amount is to be deducted out of the sale consideration to arrive at the capital gain. Accordingly, after deducting the cost of acquisition and the registration fee, the capital gain- after the transfer of the said asset was Rs 1,08,73,892/- as it was a long-term capital gain. He invested an amount of Rs.28 lakhs in Rural Electrification Corporation Limited and an amount of Rs.22 lakhs in the National Highways Authority of India in terms of Section54EC of the Act. Similarly he purchased an apartment at Hebbal, Bangalore, for a sum of Rs 56,03,590/- in terms of Section 54F of the Act and sought an exemption For the balance of Rs 2,70,296/-, he has paid the long-term capital gain Therefore, the assessee has rightly claimed the benefit of exemption under Section 54EC and 54-F of the Act. 17. In that view of the natter, if we look at the facts in a natural perspective, there is no dishonest or improper motive on the art of the assessee in claiming said exemption. The facts seen from the social milieu of our society, it is in natural course of conduct of any law abiding citizen. When capital gain is accrued in him instead of paying tax to the Government, he has invested the money in the aforesaid manner, which gives him the benefit of exemption from payment of capital gains. He satisfies the requirement of the law. By hypertechnical or legalistic approach, such benefit conferred on an assessee cannot be denied. Very fact that the law encourages an assessee to make such investments to avoid payment of tax, such benevolent provision which is meant for such assesses has to be equitably interpreted and justly administered.
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 9 of 10 18. In that view of the matter, we do not see any infirmity committed by the Tribunal in passing the impugned order extending the benefit which the law has extended to an assessee. Therefore', there is-no merit in this appeal. The substantial question of law is answered in favour of the assessee and against the Revenue.”
Respectfully following the judgment of the Hon'ble jurisdictional High Court, we hold that the assessee was holding the land in question from the date of allotment on 14/2/2001 and consequently the capital gain arising from the sale of the property on 16/9/2014 would be LTCG. Accordingly, orders of the authorities below qua the issue are set aside and the claim of the assessee being LTCG is allowed.
Since the AO as well as the CIT(A) have treated the capital gain arising from sale of the property in question as STCG, therefore, the issue of claim u/s 54F has not been examined by the authorities below. Accordingly, in the facts and circumstances and in view of our finding on the nature of capital gain, being LTCG, the AO is directed to examine and decide the claim of deduction u/s 54F.
In the result, the appeal of the assessee is allowed in above terms.
Pronounced in the open court on 23rd September, 2015.
sd/- sd/- (Abraham P George) (Vijay Pal Rao) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore: /09/2015 eksrinivasulu
ITA No.490/Bang/2014 Shri S.Shankaranarayan Page 10 of 10 Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order
Assistant Registrar Income-tax Appellate Tribunal Bangalore