SMT. SHASHI GUPTA,GHAZIABAD vs. ITO, GHAZIABAD

O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :

This appeal, at the instance of the assessee, is directed against the order of the Commissioner of Income-tax (Appeals), Ghaziabad dated 10.09.2012 for the assessment year 2007-08.

2. The revised grounds raised

by the assessee are as under :- “1. The order passed by the Hon'ble CIT(A) is bad in law, wrong on facts and against the principles of natural justice.

2. (a) The Ld CIT(A) has erred in confirming the disallowance of exemption of Capital Gains u/s 54 of the Income Tax Act made by the Ld. AO amounting to Rs.20,40,600/- claimed by the appellant in respect of investment in new residential house on 04.08.2005 which is within one year of sale of her share in residential house on 16.04.2006 instead considering the date of sale as 05.09.2006.

(b) The Ld CIT(A) has failed to appreciate that the appellant has transferred all the rights in 1/4th share of the property to Mr. Ramesh Chand Kalra and the possession was handed over on 16.04.2006 vide agreement to sell dated 16.4.2006. (c) The LD CIT(A) has wrongly concluded that the Agreement to sell dated 16.4.2006 is not a genuine document ignoring the fact that even the buyers i.e Ashok Seth and Poonam Seth in sale deed executed on 05.09.2006 has acknowledged that sum of Rs.20 lacs was paid by Sh. Ramesh Chand Kalra to the applicant Smt. Shashi Gupta who were nominees of Sh. Ramesh Chand Kalra pursuant to agreement dt.16.4.2006.

3 (a) The Ld CIT(A) has erred in concluding that the exemption u/s 54 in respect of amount of Rs.933950/- representing cost of construction of the new house in finishing the house cannot be allowed as the house was purchased beyond the period of one year before the sale of the old house.”

However, the AO disagreed with the said contention of the assessee and rejected her said claim. On appeal by the assessee, the CIT (A), however, turned down the appeal and upheld the disallowance on the ground that there are many glaring contradictions as well as inconsistencies in the argument and documents presented by the assessee, to the extent that this document i.e. agreement to sell i.e. 16.04.2006 appears to be concocted just for the purpose to meet the valid objections raised by the AO.

6. Before us, the ld. AR filed a Synopsis wherein he has submitted as under :-

“(a) The assessee namely-Shashi Gupta was married in the reputed family of Shri Om Prakash Gupta in the year 05.02.1972 with one of Shri Narendra Prakash Gupta who had died on 27.06.1998.

(b) Smt. Kiran Devi w/o Shri Om Prakash Gupta purchased property at Plot No. 30, Block-B, Lok Sewak Co-operative House Building Society Ltd at Village Begumpur (Geetanjali Enclave), Lado Sarai, New Delhi in the year 1975. Smt. Kiran Devi expired on 02.06.1984 and after expiry as per Hindu Law the afore said residential property devolved in favour of Shri

Om Prash Gupta (Husband), Shri Mahendra Prakash Gupta, Shri Narendra Prakash Gupta, Shri Shiv Prakash Gupta, Shri Ram Prakash Gupta (Sons) and Smt Pushpa Aggarwal, Smt Phool Gupta, Smt Veena Gupta, Smt Suman Gupta (Daughters). (c) Smt Pushpa Aggarwal, srnt Phool Gupta, Smt Veena Gupta and Smt Suman Gupta, the daughter of Late Smt. Kiran Devi the legal heirs relinquished/released all their rights, titles, interests, claims and share in the said property in favour of Shri Om Prakash Gupta, Shri Mahendra Prakash Gupta, Shri Narendra Prakash Gupta, Shri Shiv Prakash Gupta and Shri Ram Prakash Gupta the other legal heirs on 05.02.1990. There after the said property mutated, transferred and substituted in join name of Shri Om Prash Gupta, Shri Mahendra Prakash Gupta, Shri Narendra Prakash Gupta, Shri Shiv Prakash Gupta and Shri Ram Prakash Gupta on 09.04.1990 and each member has 1I5th undivided share in the said property.

(d) On 27.06.1998 Shri Narendra Prakash Gupta died leaving behind Smt. Shashi Gupta (Wife), Mr. Shailendra Gupta, Mr. Nitin Gupta (Sons) and Ms. Seema Gupta (Daughter) the legal heirs. Also on 15.04.1999 Shri Om Prakash Gupta died intestate leaving behind Shri Mahendra Prakash Gupta, Shri Shiv Prakash Gupta, Shri Ram Prakash Gupta (Sons) and Smt Pushpa Aggarwal, Smt Phool Gupta, Smt Veena Gupta, Smt Suman Gupta (Daughters) and Smt. Shashi Gupta (Daughter-in law [wife of predeceased son Shri Narendra Prakash Gupta)], Mr. Shailendra Gupta, Mr. Nitin Gupta (Grand-Sons) and Ms. Seema Gupta (Grand-Daughter) the legal heirs.

(e) Mr. Shailendra Gupta, Mr. Nitin Gupta, and Ms. Seema Gupta relinquished/released all their rights, titles, interests, claims and shares in the said property in favour of their mother Smt. Shashi Gupta on 29.03.2000.

(f) Smt Pushpa Aggarwal, Smt Phool Gupta, Smt Veena Gupta and Smt Suman Gupta, relinquished / released all their rights, titles, interests, claims and shares in the said property in favour of Shri Mahendra Prakash Gupta, Shri Shiv Prakash Gupta, Shri Ram Prakash Gupta and Smt. Shashi Gupta on 29.03.2000.

(g) Accordingly the said property mutated, transferred and substituted in the joint names of Shri Mahendra Prakash Gupta, Shri Shiv Prakash Gupta, Shri Ram Prakash Gupta and Smt. Shashi Gupta and each member has 1/4th undivided share.

(h) All the four Co-owner having equal share agreed to sell the said property to Shri Ramesh Chandra Kalra s/o Shri K. L. Kalra, B-49, Shivalik Colony, New Delhi and Shri Ashish Rajpal s/o Shri G. D. Rajpal, B-1/53, Malviya Nagar, New Delhi-17 for a sum of Rs.1.98 Crores and as per the terms and conditions mentioned in agreement dated 16.04.2006 copy of the same at page 77 to 79 of the paper Book. The relevant para of the agreement is reproduced here as under:-

" WHEREAS the second party paid certain amount to the first party for purchase of the said property for total sale consideration of Rs.1.98 Crores. The said property is owned by the first party.

AND whereas the payment made by second party to first party as per details below:

Rs.20,00,000/- vide cheque No.759207 dated 16.01.2005 drawn on I.C.I.C.I Bank, Saket, New Delhi, by Sh. Ramesh Chander Kalra in favour of Smt. Shashi Gupta. Rs.3,50,000/- vide cheque No.759210 dated 16.01.2005 drawn on ICICI Bank, Saket, New Delhi, by Sh. Ramesh Chander Kalra in favour of Sh. Shiv Prakash Gupta.

Rs.3,50,000/- vide cheque No.759208 and dated 16.01.2005 drawn on ICICI Bank, Saket, New Delhi by Sh. Ramesh Chander Kalra, in favour of Sh. Mahendra Prakash Gupta.

Rs.3,50,000/- vide cheque No.759209 and dated 16.01.2005 drawn on ICICI Bank, Saket, New Delhi, by Sh. Ramesh Chander Kalra, in favour of Sh. Ram Prakash Gupta.

And whereas the balance sale consideration has been agreed to be paid by the second party to the first party, time to time or at the time of sale transaction within six months of this date and whereas Smt. Shashi Gupta one of the ownered the said property (first party) handed over the vacant possession of her ¼ share of the property to the second party today / on this date.

Now this agreement witness as under:

1. That the second party shall pay the balance sale consideration of Rs.1 crore 67 lacs 50 thousands to the first party as follows:

1. Shri Mahendra Gupta Rs.46 lacs 2. Shri Shiv Prakash Gupta Rs.46 lacs 3. Shri Ram Prakash Gupta Rs.46 lacs 4. Smt. Shashi Gupta Rs.29.5 lacs

2. That the sale transaction shall be concluded on/or before 01.10.06 by that time, second party shall pay the remaining consideration amount of Rs.1 Crores 67 Lacs 50 thousands to the first party and the first party shall simultaneously execute the sale deed with respect to the said property in favour of the second party or his nominee(s) and shall also handover the vacant and peaceful % balance possession of the said property to the second party or their nominee(s).”

(i) The assessee had ¼ share in the property B-30, Geetanjali Enclave, New Delhi-30 which was sold to Sh. Ramesh Chander Kalra vide agreement dated 16.04.2006. She has already received an advance of Rs.20,00,000/- vide cheque number 759207 on 16.01.2005 drawn on ICICI Bank, Saket, New Delhi as part consideration for her ¼ share in the property.

(j) The sale deed could not be registered because of family dispute and the balance consideration could not be received. The assessee had purchased a new residential house property B- 195, Ramprastha Surya Nagar, Gaziabad for Rs.20,00,000/- + 40600/- vide registered deed dated 04.08.2005. Therefore the money received from Sh. Ramesh Chandra Kalra as part sale consideration was invested in purchase of new house property B-195, Ramprasta Surya Nagar, Gaziabad.

(k) As already mentioned above, vide agreement dated 16.04.2006 all the family member (Four member having equal share in the property B-30, Geetanjali Enclave, New Delhi) agreed to sell the said property to Sh. Ramesh Chandra Kalra s/o K. L. Kalra, R/o B-49, Shivalik Colony, New Delhi and Shri Ashish Rajpal S/o Sh. G. D. Rajpal, R/o B-1/53, Malviya Nagar, New Delhi for total consideration of Rs.1.98 Crores. (l) That Mr. Kalra had taken the possession from the assessee on the terms and conditions as specified in agreement dated 16.04.2006 and committed to the assessee that the balance amount of Rs.29,50,000/-will be paid on or before 6 months from 16.04.2006 and/or on registered deed in favour of the Sh. Ramesh Chander Kalra and Sh Ashish Rajpal or their nominee(s) whichever is earlier.

(m) On 4.09.2006 the assessee had received the balance amount of Rs.29,50,000/- i.e. Rs.19,50,000/- vide pay orders No.039172 dated 04.09.2006 and Rs.10,00,000/- vide bankers cheque No. 394334 dated 04.09.2006 and signed the registered deed on S.09~2006 which is registered in the name of Sh. Ashok Seth and Smt. Poonam Seth who are the nominee(s) of Sh. Ramesh Chander Kalra and Sh. Ashish RajpaL Therefore, the transaction of sale was completed in the following manner:-

(i) Firstly, the assessee has received an advance of Rs.20,00,000/- on 16.01.2005 from Mr. Ramesh Chandra Kalra which was invested in purchase of new house property at Ghazibad on 04.08.2005.

(ii) Secondly, on 16.04.2006 an' agreement was signed between the assessee along with other joint holders of the property B-30, Geetanjali Enclave, New Delhi and Sh. Ramesh Chander Kalra and Sh Ashish Rajpal the purchaser of the property. In this agreement and Mr. Ramesh Chandra Kalra assured the assessee to pay balance amount for her share in the property ie the effective date of sale of share in the property of the assessee.

(iii) Thirdly, the registered sale deed was signed on 05.09.2006 and the assessee has received the balance sale consideration amount of Rs.29,50,000/-.

Therefore, the sale transaction was within assessment year 2007-08 and hence the assessee had declared it in her return of income and shown Long Term Capital Gain of Rs.1,53,065/- after taking the benefits as provided in section(s) 54 and 54EC of the Income Tax Act, 1961.”

(i) Received cheque no.759207 dt. 16.01.2006 Rs.20,00,000/- (ii) Received DD no.039172 dt. 04.09.2006 Rs.19,50,000/- (iii) Received cheque no.394334dt. 04.09.2006 Rs.10,00,000/- From the aforesaid facts, it is apparent that substantial consideration was received by the assessee even 15 months prior to the agreement of sale dated 06.04.2006. Moreover, the agreement dated 16.04.2006 is signed by all the four co-owners and the Vendee, Shri Ramesh Kalra and also is duly witnessed. The agreement further specifically states as under :- “And whereas the balance sale consideration has been agreed to be paid by the second party to the first party. Time to time or at the time of sale transaction within six month of this date and whereas Smt. Shashi Gupta one of the ownered the said property (first party) handed over the vacant possession of her ¼ share of the property to the second party today / on this date. NOW this agreement witnesses as under : 1. That the second party shall pay the balance sale consideration of Rs.1 Crore 67 Lacs 50 thousands to the first party as follows: 1. Shri Mahendra Prakash Gupta Rs.46 Lacs 2. Shri Shiv Prakash Gupta Rs.46 Lacs 3. Shri Ram Prakash Gupta Rs.46 Lacs 4. Smt. Shashi Gupta Rs.29.5 Lacs

However, the ld. CIT (A) has stated that such an argument is outlandish as property is a joint property and there is no meaning in one of the Vendors giving possession to the purchaser (vendee). However, such an observation is a non-issue because what is relevant is the question of fact whether the possession regarding 1/4th share of the assessee has been taken possession or not, thus the factum that such an arrangement has any meaning or not is irrelevant. It was for the purchaser to satisfy and having so accepted by the vendee, it cannot be suggested validly that the possession has not been handed over, more particularly when in an affidavit the Vendee has specifically affirmed as under :- “I. R.C. Kalra S/o K.L. Kalra R/o B-49, Shivalik Colony, Malviya Nagar, New Delhi do hereby confirm as under :-

1. 1. That vide agreement to sale dated 16.4.2006 between me and Smt. Shashi Gupta and others for purchase of ¼ share of her portion in the house located at B-30, Geetanjali Enclave, New Delhi.

2. I have taken possession of ¼ share of the house as on 16.4.2006 against consideration as agreed upon detailed in the sale agreement dt.16.4.2006.

3. That I have option to get the sale deed executed in my name or in the name of my nominee as per cl.2 of the referred agreement.”

The observation of CIT (A) that in the sale deed, the possession of the property was taken on 05.09.2006 cannot be seen in isolation because in the agreement to sale on 16.04.2006 suggested by the affidavit of the Vendee clearly buttress the claim of the assessee, that she has handed over her share of the property to Vendee. Having regard to the above factual position, we are of the opinion that possession of the property stood handed over on 16.04.2006. Furthermore on facts of the case, the Hon’ble Apex court held that registration of the transfer in accordance with the agreement to sale cannot be termed as the “date of transfer” as envisaged by Section 50C read with section 2(47) of the Act (Sanjeev lal & Anr. Vs. CIT & Anr. (2014) 365 ITR 389(SC)), wherein, it was held as under:-

“In normal circumstances by executing an agreement to sell in respect of an immoveable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word “transfer” in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word “transfer” is as under:

“2(47) “transfer”, in relation to a capital asset, includes,- .... (ii) the extinguishment of any rights therein; or………”

Now in the light of definition of “transfer” as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset.”

Having regard to the above binding precedent, we reject the conclusion of the ld. CIT (A) that agreement to sell is a mere start of the sale and cannot become the act of sale for section 54 of the Act. Moreover, it needs to be appreciated here that a hyper technical approach cannot be adopted to an incentive granting provision. Here is a case, where the assessee is a widow who has received advance in June 2005 against sale of her share and thereafter, purchased a residential property in August 2005, but yet exemption is not held eligible on the ground that the sale is in September 2006. According to the Revenue, had the sale deed be executed in August 2006, everything will be in order. We do not subscribe to such a pedantic application of the incentive provision. It was on account of such an approach, the Hon‘ble Apex Court in Sanjeev lal & Anr. Vs. CIT & Anr.

(supra) has held as above. Thus, in view of the aforesaid, we allow the ground raised by the assessee.

“ The assessee further claimed that it had incurred Rs.9,33,950/- to make the house purchased habitable one and therefore in computation, benefit of investment of Rs.9,33,950/- should be given.

Since entitlement of exemption u/s 54 has already been denied; this ground of appeal is discussed on merits only as an alternative scenario; in case, benefit of section 54 is allowed to the assessee for any reason.

The A.O. has mentioned the nature of work done in the assessment order itself on page 5. I find that many aspects for example, marble flooring, part of wood work, POP work, part of wall finishing etc. may not be treated as "necessary" for making the house inhabitable; rather these are for betterment or up-gradation of the looks and facilities of the house and hence cannot be treated as cost incurred which was necessary for inhabitable house; while various portions of expenditure are normally required before making the house worth 'habitable'.

On a reasonable estimate basis, I hold that out of expenditure of Rs.9,33,950/- claimed, expenditure to the extent of Rs.4 Lac needs to be disallowed. Thus assessee will get a part relief.

However, since, as of now, no exemption u/s 54 is available; this ground of appeal is treated as rejected.”

“3. Although the assessee's further claim of Rs.9,33,950/- as cost of repair & renovation on residential property no. 195, Block-B. Sector-12, THA colony, Ram Prastha Colony, Ghaziabad stand rejected. However, its allowabllity also needs to be discussed, independently from the observation made above in Para 2.4. The assessee has claimed Rs.9,33,950/- as cost of repair & renovation, as per Bill dated 16.04.2006 of M/s Madhukar Promoters & Developers Pvt. Ltd. The perusal of the bill 16.04.2009 show that the payments have been made for the work performed as under:-

S.No. Description Amount (in Rs.) Finishing work at Ground Floor & First Floor 6 Bed Rooms, 2 Dining Room, 2 Kitchen, 6 Bathrooms, 2 Sote and Stairs.