NARENDRA K SHETH,MUMBAI vs. ITO 5(1)(1), MUMBAI

This appeal by the assessee is directed against the order of CIT(A)- 9, Mumbai in Appeal No. CIT(A)9/ITO 5(1)-1/161/2011-12 vide order dated 05.10.2011. The assessment was framed by ITO, Wd-5(1)-1, Mumbai u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2008-09 vide his order dated 28.12.2010.

The only issue in this appeal of the assessee is against the order of the CIT(A) confirming the action of the AO in treating the gains arising out of sale of assessee’s shop as short term capital gain as against the claim of the assessee as long term capital gain, and consequently denying exemption under section 54F of the Act even though assessee has invested the consideration in purchase of new residential flat.

The CIT(A), after considering the submissions of the assessee, noted the fact that assessee has purchased shop No. 19, Brahma, CBD Belapur vide agreement dated 19.07.1993 but the said agreement was registered only on 18.07.2005, which is the actual date of confirmation of purchase of stamp duty and registration was done on 18.07.2005. According to the CIT(A), this property was sold vide agreement for sale dated 15.05.2007, which was a conditional agreement to sale for the fact that as per clauses 1 & 2 the purchaser has paid Rs.4 lakhs as advance and balance Rs.27.20 lakhs was paid on 15.06.2007 but it was Shri Narendra K. Sheth actually paid by purchaser after receiving bank loan of Rs.27.20 lakhs from Bank of India on 17.07.2007 and paid the assessee on 17.07.2007. According to the CIT(A), the assessee has purchased new flat at Kailash Mahal on 25.05.2006, which is more than one year prior to the date of sale of Shop No. 19, Brahma, CBD Belapur on 17.07.2007. The CIT(A) denied the benefit of long term capital gain to the assessee in respect to sale of property and treated the same as short term capital gain for the reason that sale transaction was complete when the said agreement was registered only on 18.07.2005, which is the actual date of confirmation of purchase of stamp duty and registration was done on 18.07.2005. He also denied the benefit of exemption under section 54F of the Act for investing the sale consideration in purchase of new residential flat. For this, the CIT(A) relied on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Smt. Beena K. Jain (1996) 217 ITR 363 (Bom.). Aggrieved by the action of the CIT(A), assessee now is in second appeal before the Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. Before us the learned counsel of the assessee stated that the assessee has purchased shop No. 19, Brahma. CBD Belapur by an agreement dated 19.07.1993 and sold the same on 15.05.2007. According to the AO, it was purchased on 18.07.2005 when stamp duty was paid and agreement was registered and final payment was made by the assessee. According to the assessee he bought the residential Flat at Kailash Mahal on 25.05.2006, which is an undisputed fact. The assessee replied that the Brahma shop was purchased by agreement for sale dated 19.07.1993 and CIDCO granted occupancy certificate to the assessee on 20.09.1994 and possession was received by assessee on 09.12.1997. The Navi Mumbai Municipal Corporation, vide its letter dated 25.05.1999, has also demanded property tax for and from the year 1994-95 from assessee. The learned Shri Narendra K. Sheth counsel of the assessee has taken us to these documents, which were filed in assessee’s paper book, i.e. occupancy certificate dated 20.06.1994 and payment of Municipal Corporation tax dated 25.05.1999. In view of this the learned counsel of the assessee stated that assessee actually acquired this Brahma property on 19.07.1993 or at the best it can be said that it is acquired when possession was received on 09.12.1997. According to the learned counsel of the assessee if that date is taken as final for the transaction even then the assessee sold this property on 15.05.2007 and it cannot be treated as short term capital asset. It is more than 36 months and it is to be treated as long term capital asset. When these facts were confronted to the learned CIT-DR he only relied upon the orders of the AO and CIT(A).

We have find that the admitted facts are that the assessee made an agreement for purchase of Shop No. 19, Brahma, CBD Belapur vide agreement dated 19.07.1993 for which occupancy certificate was granted by CIDCO on 20.06.1994 and possession was given on 09.12.1997. These facts were never disputed by the learned Sr. DR despite specific query by the Bench. It is also noted from case record that Navi Mumbai Municipal Corporation demanded tax from assessee for and from 1994-95 vide letter dated 25.05.1999. According to us these are sufficient evidence which proves that the property is transferred or acquired in assessee’s name if not earlier then latest by 09.12.1997. Accordingly, we hold that the gain arising out of this transaction is long term capital gain and it is to be taxed accordingly. The AO is directed accordingly.

As regards the second issue of claim of exemption under section 54F of the Act in respect of investment of this long term capital gain in purchase of Kailash Mahal residential flat on 25.05.2006 it is within the time frame of one year as prescribed under section 54F of the Act. We find that the Revenue has disputed the sale of Shop No. 19, Brahma, CBD Belapur by the assessee. The assessee claimed to have sold the Shri Narendra K. Sheth same on 15.03.2007 whereas the Revenue claimed that this was sold vide agreement registered and payment made and also possession given of this shop by assessee to the purchaser only on 17.07.2007 and that the actual date of transfer.

We find from the facts of the case that the assessee has purchased new flat at Kailash Mahal on 25.05.2006, which is not in dispute. But the assessee has actually sold his Shop No. 19, Brahma, CBD Belapur on 17.07.2007, which is clearly after one year from the date of purchase of new flat. We agree with the findings of the CIT(A), who denied the benefit of long term capital gain exemption u/s. 54F of the Act to the assessee in respect to sale of property by treating the same as sale of shop only on 17.07.2007. In view of this reason, we confirm the finding of CIT(A) denying exemption u/s. 54 of the Act. Accordingly, this issue of assessee’s appeal is dismissed.

In the result, appeal filed by assessee is partly allowed. Order pronounced in the open court on 7th April, 2016.