Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
PER SAKTIJIT DEY, J.M.
The aforesaid appeals relating to two different assessees are directed against separate orders of the learned Commissioner (Appeals)–36, Mumbai, pertaining to the assessment year 2008–09. As the grounds raised in both the appeals are identical, for the sake of convenience, we reproduce the grounds raised by the assessee in its appeal being ITA no.5619/Mum./2012:–
“1.00 Computation of Long Term Capital Gain at Rs. 11,37,154 as against loss of Rs.39,66,613. 1.01 The learned CIT (A) erred in confirming the assessment of long term capital gain on transfer of land vide Conveyance dated 04.05.2007 and 25.04.2007 at Rs. 37,90,5 12 and assessee's share therein at Rs. 11,37,154 as against returned loss of Rs. 39,66,613. 1.02 The learned CIT (A) failed to appreciate the various issues raised in the appeal on this ground and erred in dismissing this Grounds of Appeal. 2.00 Unadjusted Long Term Capital Loss Brought Forward from A.Y. 2007-08 2.01 The learned CIT (A) erred in ignoring this Grounds of Appeal viz., "The learned A.O. erred in ignoring brought forward long term capital loss of Rs. 3,20,830". 3.00 Taxing of Long Term Capital Gains as a part of Regular Total Income 3.01 The learned CIT (A) erred in ignoring this Grounds of Appeal viz., "The learned A.O erred in taxing disputed long term capital gains as a part of total Income instead of at 20% as provided uls.112."
3 M/s. Royal Rich Developers Pvt. Ltd.
At the outset, learned counsel appearing for the assessee expressed his intention not to press grounds no.2 and 3. Hence, these grounds are dismissed.
Thus, the only ground which survives for disposal is ground no.1, relating to computation of long term capital gain on transfer of land.
As the facts are common in both the appeals, for the sake of convenience, we refer to the facts as involved in ITA no.5619/Mum./ 2012.
Brief facts are, the assessee, an individual, is a partner of Sharda Builders. In the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee along with other partners of Sharda Builders have entered into an agreement on 31st October 1984, under which, the land belonging to them were supposed to be given for development to Sharda Builders and Sanmanshree Co–operative Housing Society. On a perusal of the agreement dated 31st October 1984, he found that as per the said agreement, the purchaser shall pay to the vendors, price of land at ` 107 per sq.ft. FSI and the total FSI was of 48,446, on which the sale consideration was worked out at ` 56,33,122. The assessee had also submitted a valuation report of the registered valuer dated 28th September 2007, determining cost of land
4 M/s. Royal Rich Developers Pvt. Ltd. as on 1st April 1981, at ` 65 per sq.ft. The Assessing Officer was of the opinion, as the land was transferred vide agreement dated 31st October 1984, though, unregistered, why indexation should not be restricted from 1st April 1981 to 1st April 1984. He also wanted the assessee to explain why the cost of land should not be determined at ` 28 per sq.ft. on the basis of information provided by Sub–registrar regarding rates of undeveloped land. In response to the show cause notice, the assessee submitted that there was no transfer of development rights in the year 1984 and the land being a developed land, the rate of ` 28 per sq.ft. which is applicable to undeveloped land cannot be applied. The Assessing Officer, however, did not accept the contention of the assessee. He was of the view, as the Sub–registrar has divided the land into developed and undeveloped category in the year 1984, there must be some land which belongs to undeveloped category, hence, ` 28 per sq.ft. has to be applied to those land. As far as indexation is concerned, the Assessing Officer observed, as the transfer in effect took place in the year 1984, though, it might have been registered before the Sub–registrar in the year 2007, the indexation has to be restricted till the year 1984. Accordingly, he completed assessment computing capital gain at ` 11,37,154 as against loss of ` 39,66,613, shown by the assessee. Being aggrieved
5 M/s. Royal Rich Developers Pvt. Ltd. with the assessment order so passed, the assessee preferred appeal before the learned Commissioner (Appeals).
In the course of hearing of appeal before the first appellate authority, the assessee in support of his stand taken before the Assessing Officer submitted, as the land was transferred on 25th April 2007, and capital gain was assessed in the assessment year 2008–09, indexation has to be calculated with reference to assessment year 2008–09. As far as cost of land as on 1st April 1981 is concerned, the assessee again reiterated that since the land transferred was a developed land as per the valuer’s report dated 11th December 2010, the value of land as on 1st April 1981, should be taken at ` 88 per sq.ft. The learned Commissioner (Appeals), after analysing the facts on record and considering the submissions of the assessee, ultimately held that the land originally belonged to assessee’s ancestors and was sold by Shri Shivram Sanman Singh to Shri Gundhari Bachha Singh, who in turn along with some other parties vide agreement dated 29th October 1984, agreed to sale and transfer the remaining 10 plots except plot no.2, to Sharda Builders. Hence, according to the learned Commissioner (Appeals), assessee got back the land only in the year 1984. Therefore, indexation benefit will be available to the assessee only from the year 1984 and not from the year 1981. As far as the cost of asset is concerned, the learned Commissioner (Appeals)
6 M/s. Royal Rich Developers Pvt. Ltd. observed that as per conveyance agreement, no objection certificate to develop the land was given to the competent authority on 8th February 1984, hence, prior to that the land was not developed. He, therefore, upheld the cost of ` 28 per sq.ft. adopted by the Assessing Officer for the purpose of indexation. Thus, the learned Commissioner (Appeals) dismissed the ground raised by the assessee on the issue.
We have considered the submissions of the parties and perused the material available on record. As could be seen from the facts on record and observations made by the learned Commissioner (Appeals) in Para–5.3 of his order, the dispute relating to the computation of capital gain between the assessee and the Department is confined to the following two issues:–
i) From the year from which the assessee is eligible for indexation benefit; and ii) Cost of asset on the date of acquisition.
As far as the first issue relating to the year on which the assessee is eligible for indexation benefit is concerned, the undisputed basic facts are assessee’s ancestral vide conveyance deed dated 25th August 1965, had purchased 10,795 sq. yards of land at Survey no.120, Village Kanjur, Taluka Kurla, Mumbai Suburban District and through a separate conveyance deed dated 25th August 1965,
7 M/s. Royal Rich Developers Pvt. Ltd. purchased 3,248 sq. yards of land in the same survey number. The vendee Smt. Ramkali Das Sanman Singh died leaving behind one son Shri Shivram Sanman Singh and three daughters having share of 25% each. Subsequently, three daughters of Smt. Ramkali Das Sanman Singh gifted their share in the property of the present assessees on 15th July 1985. Subsequently, share of Shri Shivram Sanman Singh, also devolved upon the present assessee upon his death on 21st April 1991. As it appears, Shri Shivram Sanman Singh had earlier entered into a development agreement in October 1984 with Sharda Builders for development of property. However, ultimately, the property was transferred by a deed of conveyance to Sharda Developers on 4th April 2007. The assessee while declaring the capital gain on transfer of property in the important assessment year had computed it by claiming indexation from 1st April 1981 till the date of transfer of property on 4th April 2007. The Assessing Officer, however, while completing the assessment, allowed benefit of indexation from 1st April 1981 to 1984 on the plea that the assessee had entered into a development agreement on 31st October 1984, so effectively, transfer has taken place on that date in terms of section 2(47). The learned Commissioner (Appeals), however, while deciding the appeal of the assessee reversing the decision of the Assessing Officer in restricting the indexation till the year 1984 held that the assessee would be 8 M/s. Royal Rich Developers Pvt. Ltd. eligible to avail the benefit of indexation only from the year 1984 as the assessee became the owner of the land in that year and not from the year 1981.
As far as the findings of the Assessing Officer that the indexation benefit should be allowed to the assessee from 1st April 1981 to 1984, in our view, it is totally unacceptable. If the Assessing Officer on the basis of development agreement dated 29th October 1984, concludes that transfer of property has taken place by virtue of the said agreement then he could not have assessed the capital gain in the impugned assessment year. Therefore, the logical conclusion is, the transfer has taken place in the impugned assessment year. Thus, in terms of section 48 of the Act, the assessee would be eligible for indexation till the date of transfer of property in the year 2007. As far as the observation of the learned Commissioner (Appeals) that the assessee would be eligible for indexation benefit only from the year 1984, we are unable to agree with the same. As could be seen, property in question devolved upon the assessee by way of gift in the year 1985, the department has not disputed the fact that these are ancestral properties of the assessee. Therefore, the issue arises whether the assessee would be eligible for indexation from 1st April 1981 or from the date on which the property devolved upon him. In this context, it is necessary to refer to certain statutory provisions.
9 M/s. Royal Rich Developers Pvt. Ltd. Section 47 of the Act provides, any transfer of capital asset under gift or a will shall not be regarded as transfer for the purpose of section 45. Section 49 of the Act provides that where the capital asset becomes a property of the assessee under gift or will or by succession, inheritance or devolution, then the cost of acquisition shall be deemed to be the cost for which the previous owner of the property acquired it as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee as the case may be. In the present case, admittedly, the previous owner from whom the assessee got the property had acquired the property much prior to 1st April 1981. Therefore, for the purpose of indexation, the cut–off date of 1st April 1981 has to be taken. When in terms of section 47, transfer through gift is not to be treated as transfer and in terms of section 49, in case of a gift, the cost of the previous owner shall be taken as the cost of acquisition for the assessee, logically the assessee would be eligible for indexation from the cut–off date of 1st April 1981, as if no transfer has taken place in between. Therefore, on harmonious construction of statutory provisions, we are of the view that the assessee would be eligible for indexation benefit from 1st April 1981, till the date of transfer of property in the year 2007.
As far as the cost of land as on 1st April 1981 is concerned, 10. undisputedly, the Assessing Officer on the basis of valuation of stamp
10 M/s. Royal Rich Developers Pvt. Ltd. duty authority has taken the rate at ` 28 per sq.ft. by treating the property as undeveloped whereas, the assessee has computed the capital gain by taking the cost of land at ` 65 per sq.ft. by treating the same as developed land. It is the contention of the assessee that the land at the relevant point of time as on 1st April 1981, was a developed property and as per the registered valuer, the cost of land as on 1st April 1981 is ` 88 per st.ft. It has been submitted by the assessee that the layout plan comprising the said land was approved by the Municipal Corporation of Grater Bombay, on 28th July 1973. Therefore, it cannot be said that it is undeveloped land. On a perusal of the District Registrar’s letter dated 29th November 2010, a copy of which is placed at Page–25 of the paper book, it is noticed that in the year 1990, per sq.ft. rate of FSI of developed land is ` 220 and that of undeveloped land is ` 70. Similarly, it is evident from the registered valuer’s report dated 28th September 2008, copy of which is at Page– 51 of the paper book, the land in question abuts a fully developed municipal road of 40 feet wide and amenities such as School, Playground, Dispensary, Hospital, Post Office, Bank, Temple, Cinema, etc., are available within ½ km. radius. Similarly, road and railway transport facility is within reach. The learned Authorised Representative has also stated that as per the definition of undeveloped land only agricultural land or barren land whose layout
11 M/s. Royal Rich Developers Pvt. Ltd. plan is not approved and where road, drainage, electricity and water are not available will be treated as undeveloped land. These facts and evidences brought on record have not been controverted by the Department. In fact, the Department has not given any convincing reply as to on what basis the Assessing Officer has adopted the cost of land at ` 28 per sq.ft. when the assessee had submitted valuation report and other evidence to demonstrate that the land is a developed land. On a perusal of the discussions made by the Assessing Officer in Para–3 of the order it appears that the Assessing Officer on mere presumption and surmises had adopted the rate of ` 28 per sq.ft. as on 1st April 1981 by treating it as undeveloped land, whereas, in our view, the land in question does not fit into the definition of “undeveloped land”. The learned Commissioner (Appeals) has also not decided the issue in the light of documentary evidence brought on record and has merely endorsed the view of the Assessing Officer. In view of the aforesaid, we are unable to approve the impugned order of the learned Commissioner (Appeals). Accordingly, we set aside the order of the learned Commissioner (Appeals) with a direction to the Assessing Officer to compute the long term capital gain of the assessee by adopting the cost of land at ` 65 per sq.ft. as on 1st April 1981, and thereafter allow indexation benefit till the date of transfer in the year 2007. Thus, ground no.1, is considered to be allowed.
12 M/s. Royal Rich Developers Pvt. Ltd.
In the result, assessee’s appeal being ITA no.5619/Mum./2012 is partly allowed.
ITA no.5620/Mum./2012
The facts and circumstances of the effective ground raised in the aforesaid appeal for our adjudication are identical to the ground no.1 raised by the assessee in its appeal being ITA no.5619/Mum./2012, wherein, vide Para–7 and 8, we have allowed similar claim for the reasons stated therein. Following the same, we allow this ground also.
In the result, assessee’s appeal being ITA no.5619/Mum./2012 is also partly allowed.
To sum up, both the appeals are partly allowed. Order pronounced in the open Court on 03.06.2016