SHRI PRAKASH PILLAI,,BARODA vs. THE INCOME TAX OFFICER, WARD-3(2),, BARODA

SMC-ITA No. 2552/Ahd/2014 Prakash Pillai Vs. ITO Assessment year: 2008-09 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD [ Before Shri Pramod Kumar, Vice President ] ITA No. 2552/Ahd/2014 Assessment Year : 2008-09

Prakash Pillai ......…………......Appellant 9/E, Superman Society, Subhanpura, Baroda-390023 [PAN: AGBPP 8524 L] Vs. Income Tax Officer .......................Respondent Ward 3(2), Baroda Appearances by: SN Divatia for the appellant Jayant Jhaveri for the respondent Date of concluding the hearing : 27.02.2019 Date of pronouncing the order : 24.05.2019 O R D E R

“1.0 The learned Commissioner of Income Tax (Appeals) erred in law and on facts has confirmed additions of Rs.12,00,000/- on account of sale of property on the ground that the appellant is only a confirming party in the sale transaction and not the owner of the property sold.

The learned Commissioner (Appeals) failed to appreciate that the amount of Rs.12,00,000/- was received by the appellant in the capacity of owner of the property and that after considering the indexed cost of acquisition there was a Long Term Capital Loss.

2.0 The learned Commissioner of Income Tax(Appeals) has erred in law and on facts in confirming the charging of interest under section 234B, 234C, etc., of the Income Tax Act, 1961.”

SMC-ITA No. 2552/Ahd/2014 Prakash Pillai Vs. ITO Assessment year: 2008-09 Page 2 of 4 sold a property for Rs.1,40,00,000/-. When the Assessing Officer examined the matter, he found that the assessee had received Rs.12,00,000/- which he brought to tax in the hands of the assessee as business income. Aggrieved, assessee carried the matter in appeal before the CIT(A) and contended that the assessee had entered into agreement to buy with the owner and paid Rs.1 lakh for the same, spent Rs.2.60 lakhs as legal fees, spent Rs.15,000/- as court fee and paid Rs.6,35,000/- to the owner. His cost of acquisition of the rights were thus Rs.10.10 lakhs, and, upon indexing the same, the deal resulted in capital loss. The CIT(A) rejected the claim and observed as follows:-

“4.3 I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. On verification of the submission of the Appellant, it is noticed-that the assessee has only submitted a copy of banakhat wherein an agreement to buy the property from Shri Ratilal D. Parmar was made on 13.08.2002. The assessee has nowhere submitted any proof that the property was actually transferred to him by the original owner Shri Ratilal D. Parmar after the agreement on 13.08.2002 nor any proof of any further payment of Shri Ratilal D. Parmar was submitted despite getting sufficient opportunity. Therefore, the assessee has not furnished the required details to substantiate his claim. The observation of the Assessing Officer that the question of Capital Gain arises only if the owner of the property transfers for any consideration the same to the buyer is correct. In this case, as per the registration deed made on 17.09.2007, Shri. Prakash Pillai is only, a confirming party and not the owner of the property. The owner of the land as per sale deed dated 17.09.2007 is Shri Ratilal D. Parmar. Therefore, the plea of the assessee to calculate his income of Rs.12,00,000/- received as Income from Capital Gain cannot be entertained. In view of the above, the contention of the appellant that it has incurred capital loss, is rejected and addition made by the Assessing Officer is confirmed. The ground taken by the appellant fails.”

“5. This Court, in the decision reported as Gulshan Malik v. CIT [2014] 223 Taxman 243/43 taxmann.com 200 had the occasion to, inter alia, consider what amounted to acquisition of a capital asset - though in the context of a claim that capital gains had accrued due to the sale of the property. The facts

SMC-ITA No. 2552/Ahd/2014 Prakash Pillai Vs. ITO Assessment year: 2008-09 Page 3 of 4 in that case were that the assessee had booked a flat, and was recipient of a provisional allotment letter. Subsequently, the transaction was converted into a written agreement to sell. The Court, noting the contentions of the parties and also, significantly, taking note of the definition of "transfer" and "capital asset", was of the opinion that "capital asset" has been defined in extremely wide terms - A reference to Section 2(47), which defines "transfer", and particularly its second Explanation to Clauses (v) and (vi) made it clear that possession, enjoyment of property as well any interest in any of transferrable capital asset was included within the ambit of "capital asset". The Court held importantly that even booking rights or rights to purchase the apartment or to obtain its letter was also capital asset and has categorised the same as under: '7. It is clear that a "capital asset" under the Act is property of "any kind" that is "held" by the assessee. Necessarily, a capital asset must be transferable. Thus, to understand what kind of property can be considered a capital asset, it would be apposite to refer to the definition of transfer in Section 2(47) of the Act. Section 2(47)(v) and (vi), and Explanation 2 make it adequately clear that possession, enjoyment of immovable property, as well as an interest in any asset are all transferable "capital assets". The reference to acquisition "by way of any agreement or any arrangement or in any other manner whatsoever" establishes that it is not conveyance of property or the doctrine of part performance (enacted through Section 53A of the Transfer of Property Act) which result in enforceable rights, for the purposes of the Income Tax. The scheme of the Act puts it beyond doubt that even rights or interests in a property are kinds of property that are transferable capital assets. Thus, there is no doubt that booking rights or rights to purchase the apartment or rights to obtain title to the apartment are also capital assets that can be transferable.' 6. In the present case the question is not whether the assessee sold the booking rights and was, therefore, entitled to benefit of capital gains. It is, rather, whether his entering into the transaction and acquiring a property for Rs. 73,27,000/- (acquisition cost) amounted to his acquiring a capital asset. In the light of the definitions of "capital asset" under Section 2(14) and "transfer" under Section 2(47) as discussed in Gulshan Malik (supra), this Court has no doubt that the assessee's contentions were merited. The reference to Suraj Lamps Industries (P.) Ltd. (supra), in the Court's opinion, is of no consequence because the Supreme Court, on that occasion had to deal with a property transaction and whether a sale transfer, based upon confirming a GPA, amounted to sale or conveyance. That decision did not consider - rather had no occasion to deal with Sections 2(14) and 2(47) in the context of a claim of acquisition of rights of property and interest in a capital asset, for the purpose of income tax.”

SMC-ITA No. 2552/Ahd/2014 Prakash Pillai Vs. ITO Assessment year: 2008-09 Page 4 of 4 “What is a capital asset is defined in section 2(14) of the Income-tax Act, 1961. Under that provision, a capital asset means property of any kind held by assessee, whether or not connected with his business or profession. The sub- clauses which deal with what property is not included in the definition of capital asset are not relevant. Under section 2(47), a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or the extinguishment of any right therein or the compulsory acquisition thereof under any law. The word "property", used in section 2(14) of the Income-tax Act, is a word of the widest amplitude and the definition has re-emphasised this by use of the words "of any kind". Thus, any right which can be called property will be included in the definition of "capital asset". A contract for sale of land is capable of specific performance. It is also assignable. (See Hochat Kizhakke Madathil Venkateswara Aiyar v. Kallor Illath Raman Nambudhri, AIR 1917 Mad 358). Therefore, in our view, a right to obtain conveyance of immovable property, was clearly "property" as contemplated by section 2(14) of the Income-tax Act, 1961.”

Sd/-

Pramod Kumar (Vice President) Ahmedabad, the 24th day of May, 2019 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad 1. Date of dictation: .....order prepared as per 4 pages manuscripts of Hon’ble VP-attached.......... 2. Date on which the typed draft is placed before the Dictating Member: .... 24.05.2019..... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: .... 24.05.2019...... . 4. Date on which the fair order is placed before the Dictating Member for Pronouncement:… 24.05.2019... 5. Date on which the file goes to the Bench Clerk : ............ 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …… 8. Date of Despatch of the Order: ………………......