Income Tax Appellate Tribunal - Mumbai
Kamlesh Laxmichand Parikh, Mumbai vs Department Of Income Tax on 7 November, 2013
आयकर अपीलीय अिधकरण,
अिधकरण "," खंडपीठ मुंबई
INCOME TAX APPELLATE TRIBUNAL,MUMBAI - 'A' BENCH.
सव[ौी बी.
बी.आर.
आर.िमƣ
िमƣल, Ûयाियक सदःय/
सदःय एवं ौी राजेÛि,ले
ि लेखा सदःय
Before S/Sh. B.R. Mittal, Judicial Member & Rajendra, Accountant Member
आयकर अपील सं/.ITA No.2953/Mum/2012,िनधा[
िनधा[रण वष[/Assessment Year-2008-09
ITO 16(2)(2) Kamlesh Laxmichand Parikh
214, 2nd Floor, Matru Mandir, B/40, Patil Estate, 278, Tardeo
Tardswo Road, Vs Road, Tardeo
Mumbai-400007 Mumbai-400007
PAN: ACJPP3008J
(अपीलाथȸ/ Appellant) (ू×यथȸ / Respondent)
िनधा[ǐरती ओर से / Appellant by : Shri K.Singh
राजःव कȧ ओर से/Revenue by : Shri Sanjay Parikh
सुनवाई कȧ तारȣख/ Date of Hearing : 07-11-2013
घोषणा कȧ तारȣख / Date of Pronouncement : 13-11-2013
आयकर अिधिनयम,
अिधिनयम 1961 कȧ धारा ( 1 ) 254 के अ Ûतग[ त आ दे श
Order u/s.254(1)of the Income-tax Act,1961(Act)
PER RAJENDRA, AM:
Challenging the order dated 15.02.2012 of CIT(A)-27,Mumbai,Assessing Officer(AO) has filed following grounds of appeal:
1. On the facts and circumstances and in law, the Ld. CIT(A) has erred in not treating the surrender of tenancy rights as capital assets and consequently not treating the same as L.T.C.G.
2. The appellant craves leave to amend or alter any ground or add ground/s which may be necessary.
The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
Assessee,an individual,engaged in the business of Polishing of diamonds,filed his return on 20.05. 2009,declaring total income at Rs. 1,08,267/-.AO finalised the assessment on 30.12.2010 u/s. 143(3) of the Act determining the total income of the assessee at Rs.1,40,35,750/-.
2.During the assessment proceedings,AO found that assessee had shown Nil income from Long Term Capital Gain(LTCG)ontransfer of tenancy rights,that he was tenant of a self-contained resid
-ential premises on the Ground Floor of Patil Estate,Tardeo Road, Mumbai that Deshbhushan Co- operative Housing Society Ltd.(DCHSL)was the owner of the entire residential accommodations including the premises of the assessee, that as per the terms and conditions of tenancy he was paying rent to DCHSL,that on 09.05.2007Society had entered into a development agreement with Sachinam Estate Developers Pvt. Ltd.(SEDPL)for the developing of the said society premises, that as per the development agreement SEDPL was to demolish the existing structure and had to provide the tenants alternative accommodation in the newly constructed building,that as per the agreement dated 09.05.2007 assessee was to receive two flats initially,that vide another agreement dated 25.7.2007 SEDPL had agreed to give an additional flat on ownership basis to the assessee, that the market value of the said flat as per the stamp duty authorities was Rs. 46.37 lacs. AO was of the opinion that assessee had received properties worth Rs. 1.39 Crores in exchange of tenancy 2 ITA No. 2953/Mum/2012 Kamlesh Laxmichand Parikh .
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right, that the value of tenancy right was Nil. He held that assessee had received LTCG of Rs. 1. 39 Crores.He further held that the only issue about the transaction in question was whether the assessee was entitled for exemption of LTCG on transfer of tenancy rights u/s 54 of the Act. After considering the facts of the case, AO held that assessee had transferred his tenancy rights and had received three residential premises, that as per the provisions of section 2(47) the transfer of tenancy right was sale, that the exchange was nothing but purchase of new property, that the assessee had paid consideration in kind by transferring his tenancy rights,that he had received the consideration for transfer of capita asset in kind i.e. three residential houses, that assessee was not entitled to claim exemption u/s 54 of the Act.Finally, he held that the entire LTCG amounting to Rs.1.39 Crores was taxable in the hands of the assessee.
3.Assessee preferred an appeal before the FAA.After considering the submissions made by the assessee and the documents filed along with the submissions, he directed the AO to file a remand report. AO submitted her report on 13.09.2011. After deliberating upon the remand report and the reply to the remand report filed by the assessee,FAA held that AO lacked clarity in appreciating the legal position of the impugned transaction, that there was only one transaction agreed upon by the assessee and that was surrender on tenancy rights subject to the condition,that assessee was given possession of the alternative accommodation,that it was neither sale of tenancy rights nor purchase of new property by the assessee,that it was not an exchange, that two properties did not existed, that alternate accommodation to be provided to the assessee had to come in to existence, that the agreements were entered into for the purpose of developing the entire property.Referring to the clauses- 7,9 and 16 of the agreement,he held that the agreements dated 09.05.2007 and 25. 07.2007 did not transfer any capital assets. He further held that field visit by the Inspector proved on that on that particular date property was occupied by the assessee as a tenant,that there was no change in his position vis-à-vis the owner,that rent receipts,electricity and MTNL Bills, Passport proved that assessee was in possession of the tenanted premises. FAA also took note of the fact mentioned in Inspector's report about non-completion of alternate accommodation. He further held that assessee was not holding symbolic possession of the property that was to be transferred as per the agreements;but was effectively in true sense occupied the said premises as a tenant, that agreeing upon a condition could not be considered as equivalent to performance of the condition in the eyes of law,that the dominating intention of the parties to the agreement and the assessee in specific,was not to consider the impugned agreement as conclusion of the contract, that a property in existence today could be transferred on a future date,but the property that would come into existence at a future date could not be transferred,that in the present case property was not received by the assessee. Finally,he held that the surrender of tenancy rights, as contemplated in clause-16 of the agreement,had not taken place during the year under consideration, that there was no taxable event giving rise to capital gain on account of the impugned agreement,that there was no taxable capital gain. He deleted the additions made by the AO.
4.Before us,Departmental Representative(DR)supported the order of the AO.Authorised Represen
-tative(AR) submitted that transaction could not take place because of court proceedings,that assessee had not got possession of any of the flats,that he was staying in the same premises till the inspector of income tax had visited him,that no income or gain had accrued to the assessee during the year under consideration.
5. We have heard the rival submissions and perused the material before us.We find that FAA has given categorical finding of facts that the surrender of tenancy rights;as contemplated in clause 16 of the impugned agreement;had not taken place during the year under consideration,that there was no taxable event giving rise to capital gains on account of the impugned agreement,that asssessee had not to pay any tax on alleged capital gains.We further find that inspector of the AO had visited the place and from his on-the-spot-report it was proved,beyond doubt,that till he visited the premises alleged transaction had not fructified.Tax has to be paid by an assessee,if he earns some taxable income or some income accrues to him.An unexecuted agreement does not give rise to 3 ITA No. 2953/Mum/2012 Kamlesh Laxmichand Parikh .
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earning or accrual of income.Tax can be imposed on real income and not on hypothetical income. It is true that a tripartite agreement was entered into among the tenants,including the assessee, developer and the owner of the property.But it is also a fact the because of the orders of the BMC said agreement could not be implemented.Not,only this Hon'ble High Court of Bombay has approved the order of the BMC.Thus,in spite of the impugned agreement status quo remained till the inspector visited the premises occupied by the assessee.Considering the above facts we are of the opinion that order of the FAA does not suffer from any legal or factual infirmity.Therefore, confirming his order we decide the effective ground of appeal against the AO.
As a result,appeal filed by the AO stands dismissed.
पǐरणामतः िनधा[ǐरती अिधकारȣ Ʈारा दाǔखल कȧ गई अपील नामंजूर कȧ जाती है .
Order pronounced in the open court on 13th November,2013.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 13 uoEcj, 2013 को कȧ गई ।
Sd/- Sd/-
बी.आर
बी आर.् िमƣल.B.R.Mittal)
(बी िमƣल राजेÛि/Rajendra)
(राजे ि
Ûयाियक सदःय /JUDICIAL MEMBER लेखा सदःय /ACCOUNTANT MEMBER
मुंबई/Mumbai,Ǒदनांक/Date: 13th November,2013
SK
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. Assessee /अपीलाथȸ 2. Respondent /ू×यथȸ
3. The concerned CIT (A) /संबƨ अपीलीय आयकर आयुƠ, 4. The concerned CIT /संबƨ आयकर आयुƠ
5. DR "A" Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध , खंडपीठ,आ.अ.Ûयाया.मुब ं ई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai