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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI R.C.SHARMA & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
The present appeal is filed by the assessee against the order of CIT(A)-32, Mumbai dated 23.09.2011 on the ground that CIT(A) erred in assessing the Long Term Capital Gain (LTCG) arising out of transfer of residuary right in the land at Rs. 1,28,92,569/- in determining the value of consideration arising out of transfer of capital asset at Rs. 7.00 Crores.
The brief facts of the case are that the assessee is an individual deriving her income from house property, trading in share as well as capital gain, filed her return of income for relevant Assessment Year (AY) on 30.03.2013 declaring total income at Rs. 1,03,39,200/. The return of income was selected for scrutiny and during the assessment, the Assessing Officer (AO) observed that assessee sold plot no. B-16admeasuring 1089 sq yards being part of plot no. 51 in Juhu Scheme, Vile Parle(W), Mumbai along with right to use FSI to Shri Babulal Khandelwal & Ors. The AO further observed that assessee computed LTCG taking sale consideration at Rs. 6,25,00,000/-, however, the registered sale-deed reflect the consideration of Rs. 7.00 Crores, on seeking explanation the assessee submitted that property was her mother gifted to her through registered gift-deed. The mother of assessee entered a joint development agreement dated 05.02.2003 with the purchaser and received an amount of Rs. 75,00,000/- to develop the said property jointly which was offered to tax in the year 2003-04.
The assessee further explained that due to delay the development agreement was converted into sale of said property and the assessee got balance amount of Rs. 6,25,00,000/- which has been offered to tax in the year under consideration. The assessee further submitted that the reference of joint development agreement is duly reflected in conveyance deed and therefore, nothing was concealed from the department. The assessee was asked to furnish the return of income on mother of the assessee but the same was not filed, hence, the LTCG was considered at the sale consideration of Rs. 7 Crores and the AO calculated the LTCG in the assessment order dated 30.12.2010.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). After considering the contention of the assessee, the CIT(A) dismissed the appeal of assessee with following observation: “3.3. I have considered the above arguments of the Ld.AR. The term used in section 48 is 'full value 01 consideration' which in the instant case is 7 Crores as per the registered sale deed executed by the appellant. This full value of consideration cannot be substituted by any other figure unless there is diversion at source by overriding title to the property. It is noted that he property for which the development agreement was entered by mother in Feb 2003 and an advance of Rs.75 lacs was received. There was no part performance by the mother for the Said property as the possession of the property was never given by the mother to the developer and the developer did not get any development rights by paying Rs 75 lacs to mother. There was no transfer u/s 2(47) of the property or any right by the mother to the developer as per the development agreement. After 7 months from the date of development agreement, the mother gifted the property to her daughter i.e. the appellant in Sept 2003 who retained it for more than 4 years before selling it to the same developer. These facts clearly suggest that the earlier development agreement dated 5.2.2003 was not at all implemented and the beneficial interest as well as the dominion and control over the property was with the appellant from Sept 2003 itself till 30.12.2007. Thus it is clear that mother did not Retain the advance of 75 lacs in her own rights because she had gifted the ownership of the property to appellant shortly. If the 75 lacs was were to be retained by the mother in her own right then it would not be a capital receipt because there was no transfer of any rights(capital assets) by the mother to the developer in pursuance to the agreement dated 5.2.2003. Under such circumstances, Rs 75 lacs have been received and retained by mother would amount to a receipt of sum of money without consideration and is liable to De taxed u/s 56(v) of the I.T. Act in hands of the mother as income from other sources. The Ld. AR has not been able to give any evidence even during the appellate proceedings to show mat the mother of the assessee after receiving the advance had offered the 75 lacs as income from other sources. This proves that the amount received by the mother was part of the ‘full
value of sale consideration' as per sale deed which was adjusted against the sale consideration of 7 Crores. Thus it is clear that Rs 75 Lacs was only the application of sale consideration of 7 Crores. If Rs. 75 lacs were not part of sale consideration of the appellant, then the sale consideration should have been mentioned at 6.25 Crores only in the final sale deed and in that case Rs 75 lacs was taxable in hands of mother u/s 56(v). There was no encumbrance created by the donor to the property as no such encumbrance is mentioned in the gift deed also. Even if (without admitting) any encumbrance was created by taking money from the builder, such money having not refunded was taxable in hands of mother u/s 56(v). The appellant being absolute owner of the property was legally entitled to full sale consideration of 7 Crores as per the agreement but by not recovering the said advance of Rs 75 lacs from her mother against the sale consideration of 7 Crores, it is the appellant who has created the charge on sale consideration by her own volition and not due to any overriding title. In case of S. B. Billimoria & Co. 125 ITD 122 (Mum.) the ITAT held that self-imposed obligations being gratuitous were application of income and not a diversion at source of income, hence, not allowable as deduction. In effect, the essence of the transaction would have remained the same if the mother refunded Rs 75 lacs to developer and then the developer paid Rs 7 Crores to appellant or whether the developer paid only net amount of 6.25 Crores after adjusting the earlier advance of 75 lacs made to mother. It was in the nature of a mere family arrangement between appellant and her mother by not recovering the Rs 75 lacs already received by the mother. Thus the adjustment of Rs 75 lacs given by developer earlier as advance against the property to the mother of the appellant is only an application of sale consideration received by applicant and not a diversion at source by virtue of any overriding title over the property. This view is also supported by the ratio of the decisions in case of Motilal chandami lal Jain 190 ITR 1(SC), V S M R Jagadishchandran 227 ITR 240(SC), Sunil J Kinariwala 259 ITR 10(SC), Shree Changdeo Sugar mills Ltd 44 SOT 479(mum).”
We have perused the material available on record and considered the rival contentions of the parties. Authorised Representative (AR) of the assessee has argued that the assessee has received only a sum of Rs. 6.25 Crores which was offered to tax by the assessee. AR of the assessee argued that the amount received by mother of the assessee was offered to tax but no document in respect of filing of return is available with the assessee. No other document which may suggest that the amount so received by the mother of the assessee was offered to tax is placed before us.
We have seen the conveyance deed dated 30.12.2007 executed by assessee in favour of the purchaser which is available in the form of Paper Book. The said conveyance deed is duly witnessed by mother of assessee i.e. Smt. Vimlaben Dwarkadas Sanghvi. 7. We have further seen that the receipt of consideration executed by assessee is for Rs. 7.00 Crores. No documentary evidence was filed by the assessee which may prove the fact that mother of assessee has offered the amount of Rs. 75,00,000/- to tax. 8. The assessee has executed the sale documents as absolute owner and further executed the receipt of Rs. 7.00 Crores as sale consideration. By executing the receipt of consideration of Rs. 7.00 Crores, the assessee acknowledged the consideration/sale price. We have seen
that the said facts were considered and discussed by the CIT(A) in his order. The order of CIT(A) is reasoned one and does not require any interference at our end. 9. In the result, appeal filed by the assessee is dismissed.
Order pronounced in the open court on this 13th April, 2016.