Income Tax Appellate Tribunal - Mumbai
Eldred Joseph Pereira, Mumbai vs Asst Cit Cir 19(3), Mumbai on 1 September, 2017
आयकर अपील
य अ धकरण "E" यायपीठ मंब
ु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 759 6/Mum/2014
( नधा रण वष / Assessment Year : 2008-09)
Eldred Pereira, बनाम/ Assistant Commissioner of
C/o S.M. Lasrado & Co., Income Tax - Circle -
v.
Chartered Accountants, 19(3),
Silver Symphon y, 1st floor, 3 r d floor, P iramal
37, Church Ave nue, Chambers,
Santacruz (W), Lalb aug,
Mumbai - 400 054. Mumbai - 400 012.
थायी ले खा सं . /P AN : AAPPP8882J
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by : Shri Vishwas V. Mehendale
Revenue by : Shri Ravi Tiwari, Senior AR
&
Shri Sanjay Singh,DR
ु वाई क तार ख / Date of Hearing
सन : 27.07.2017
घोषणा क तार ख /Date of Pronouncement : 01-09-2017
आदे श / O R D E R
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being ITA No. 7596/Mum/2014, is directed against the appellate order dated 26.09.2014 passed by learned Commissioner of Income Tax (Appeals)- 18, Mumbai (hereinafter called "the CIT(A)"), for assessment year 2008-09, appellate proceedings before learned CIT(A) has arisen from the assessment order dated 27.12.2010 passed by learned Assessing Officer (hereinafter called "the AO") u/s 143(3) of the Income-tax Act, 1961 (hereinafter called "the Act") .
2 ITA 7596/Mum/2014
2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the Tribunal") read as under:-
"1. On the facts and circumstances of the case and in law, Hon. CIT-A erred in confirming addition of STCG amounting to Rs. 81,85,476/-.'
2. On the facts and circumstances of the case and in law, Hon. CIT-A erred in making assessment of LTCG at Rs.18,82,280/- as against appellant's computation of Rs.30,60,539/-.
3. On the facts and circumstances of the case and in law, Hon. CIT-A erred in not allowing deduction of Legal Fees of Rs.42,079/- against LTCG and Rs.65,955/- against STCG while computing Taxable Capital Gains.
4. On the facts and circumstances of the case and in law, Hon. CIT-A erred in ignoring the Valuation Report of Govt. Approved Valuer for determining the Fair Market Value as on 01-04-1981."
3. The brief facts of the case are that the assessee and one Mr. Ronald Stephen Pereira had gained right, title and interest in a property described as the piece and parcel of land and ground bearing C.T.S. No. F/675 of Village Bandra , corresponding F.P. No. 73 of T.P.S. III of 30th Road, Bandra,Mumbai by virtue of being the legal heirs to the erstwhile owner of the property. The said property was called as Elron as it existed then consisted of piece and parcel of land and a structure thereon admeasuring about 618.7 sq. meters. The said property enjoyed an FSI of 1 and was eligible for loading of additional TDR FSI of 1. Vide a development agreement dated 21-02-2003, the assessee alongwith Mr. Ronald Stephen Pereira, referred to as 'owners' assigned in the said document to Orion partners, a partnership firm to develop the said property by bringing in the transferable and loadable TDR at the cost of the developers. The consideration for conferring or assigning the 3 ITA 7596/Mum/2014 right for the development is shown to be cheque of Rs. 40 lakhs to be paid in the manner as discussed in the said document, and the fully constructed area of 763.03 sq.mtrs., the value of which was shown at Rs.78,82,100/- and the assessee's share in the said property was 50%, the consideration in the assessee's hands was accordingly worked out at Rs.59,41,000/- . It was observed by the AO that while the income arising from assignment of development rights as discussed above was declared by the assessee as capital gains for the A.Y. 2005-06, as under -
"LONG TERM CAPITAL GAINS Particulars Quantity Cost cost indexed sale sale indexed book gain/ Date value/index cost date value gain/loss loss ........................................................................................................................................................................
Residence at Bandra (50% share) 1.4.81 165600 480/100 794880 28.3.05 5940000 5145120 5774400
165600 794880 5940000 5145120 5774400
1.Residence at Bandra(50% share)
Less-Expenses incurred on assets
As Legal fees paid 170000
Compensation paid to Tenant as per C 500000
670000
Net capital gains 4475120
Less-Amount exempt under the sections
54 Profit on sake of property used for residence
Purchases/Constructed/invested 3940000
Net capital gain 4475120
Least of the above two 3940000
TOTAL EXEMPTIONS 3940000
TOTAL CAPITAL GAINS 535120"
A perusal of the said development agreement however showed the market value of the said property at Rs.1,75,25,000/- as against Rs.30 lakhs as earnest money and Rs.10 lakhs to be shown receivable on approval of the plans and the four constructed residential units admeasuring 763.03 sq.mtrs. Thus, the A.O. observed that the assessee had offered an amount of Rs. 59,40,000/- as his share , as against the value adopted by the Registrar
4 ITA 7596/Mum/2014 which was at Rs. 87,62,500/- i.e 50% of Rs. 1,75,25,000/-). The A.O. also observed that the valuer's report filed by the assessee clearly indicated that the owners are not selling or transferring any FSI of the plot. It was also observed by the AO that they are also consuming 17.11 sq. mtrs of TDR FSI for themselves . The A.O. observed that the plot of 618.7 sq. mtrs enjoys a permissible FSI of 1 , which translates to 618.7 mtrs of built up area, while the assessee and said Mr Ronald Periera were given 763 square meters.. Thus , the AO observed that the entire FSI of the plot have been retained by the assessee and Mr. Ronald Periera but they have also consumed additional FSI from marketable TDR brought in by the developer. It was observed by the AO that the valuer has certified that there is no transfer of land or FSI and what the assessee has gained by way of development right is on account of sufferance of inconvenience borne by him by way of development or construction and enabling the developer to bring in marketable TDR and utilize the same for construction and sale of it. It was observed by the AO that there is no sale, transfer or extinguishment of right, title and interest on the property i.e. land and its inherent FSI , the value of monetary consideration and in kind. Thus, the A.O. brought to tax constructed area of 381.52 sq. mtrs for which the value was shown at Rs. 39,41,050/- under the head 'income from other sources'.
The A.O. also observed that vide declaration dated 04-07-2005 u/s 2 of Maharashtra Apartment Ownership Act, 1970, the assessee along with Mr. Ronald Stephen Pereira and the developers Orion Partners have converted the property comprising of the land and the building which was under
construction then into a condominium of determinate family units as enlisted therein and this act of conversion of a property being land and structure thereon into a condominium is in fact conversion of the property into a business asset as this act of conversion enabled the developer to transfer his share of developed area in the constructed structure to his prospective
5 ITA 7596/Mum/2014 buyers. Thus, the A.O. held for the previous year relevant to the impugned assessment year , the assessee had sold and transferred his right, title and interest in respect of the family unit No. 302 admeasuring area of 72.86 sq. mtrs for a consideration of Res. 1.10 crores.
Thus, the A.O. computed the income of the assessee as under:-
"A.Y. 2005-06 The working of the capital gain shown in the enclosures to the Return of Income and in the Assessee's A.R. dated 06-12-2010 shows the total consideration in respect of transfer of development rights.
TOTAL RECEIPTS FOR REDEVELOPMENT Rs.20,00,000 AND Value of Constructed Area of 381.52 sq.mtrs. Rs.39,41,000 (being Assessee's share) Therefore the cost of construction in respect of the proposed new building is 3941000/381.52 = Rs.10,330 per sq.mt.
Therefore the cost of construction of 72.86 sq.rntrs. = Rs.7 ,52,624/-[A] From the enclosures to the Return of Income for the year 2005-06, it is seen that the value of Assessee's share in land is taken at Rs. 1,65,600/- as on 01.04.1981.
Value of land of 381.52 sq. mtrs. as on 1.4.1981= Rs.1,65,600/-[B] Therefore the value of land admeasuring 72.86 sq. mtrs as on 1.4.1981 works out to 72.86/381.52 x 165600 = Rs.31,510 (C) Indexed Value of 72.86 sq.mtrs. relevant to F.Y. 07-08 = 5.51 x 31510 (Cost Inflation Index for F.Y. 07-08 is 551) = Rs.1,73,620/- --- [D]
6 ITA 7596/Mum/2014 Total Consideration received for the residential unit No.302 admeasuring 72.86 sq.mtrs. is Rs.1,10,00,000/-.
Therefore, the total cost of the apportioned land (land attributable to the sold residential unit of 72.86 sq.mtrs) and the cost of constructed area of the said flat works out to Rs.173620 + Rs. 752624 = Rs. 9,26,244/-.
The ratio of the sale receipts of Rs. 1,10,00,000/- attributable to the land element and the constructed cost is as computed here under - 173620 / 926244 x 11000000 = Rs.20,61,900/ - , which is the Sale proceeds attributable to land element and the balance viz. 11000000 - 2061900 = Rs.89,38,100/- is the sale proceeds attributable to the construction cost.
As discussed in the preceding paragraphs and consequent thereupon, the difference of the sale proceeds attributable to the land and cost element thereon, which is Rs.20,61,900 - Rs.1,73,620 = Rs.18,88,280/- is the LTCG.
The difference of the sale proceeds attributable to the construction cost and cost element, which is Rs.8938100 - Rs.752624 = Rs.81,85,476/- is the STCG.
Penal proceedings u/s 271(1) (c) of the Act are separately initiated for furnishing inadequate particulars.
Subject to the above discussions, the income of the Assessee is recomputed as under-
INCOME FROM HOUSE PROPERTY Rs. Rs.
7 ITA 7596/Mum/2014
A) Self Occupied .....
B) Let out 2,17,886 2,17,886
CAPITAL GAINS
A) STCG - On property 81,85,476
B) LTCG - On property 18,88,280 1,00,73,756
INCOME FROM OTHER SOURCES
Interest from Banks 1,00,668 1,00,668
GROSS TOTAL INCOME 1,03,92,310
Less: DEDUCTION UNDER CHAPTER VI A of the ACT
U/S 80C
PUBLIC PROVIDENT FUND 15,000
Equity Linked Savings Schemes 90,000 1,05,000
Total (a) + (b) 1,05,000
Total amount 1,05,000 but restricted to 1,00,000
TOTAL DEDUCTIONS 1,00,000
TOTAL INCOME 1,02,92,310
Rounded off to 1,02,92,300"
4. Aggrieved by the assessment order dated 27-12-2010 passed by the A.O. u/s 143(3) of the 1961 Act, the assessee carried the matter by filing first appeal before the ld. CIT(A) , wherein the assessee submitted as under before learned CIT(A):
"The issues involved in this appeal are basically regarding the determination/apportionment of sale proceeds on land and construction cost. Therefore, it is necessary to look into the AO's decision for A.Y. 2005-06 and CIT -A decision against the grounds raised by appellant the same. In AY 2005-06, AO assessed capital gains on the basis of the total sale consideration of Rs. 87,62,500/- as per S. 50C of the Act and has made her own calculation of capital gains which has been reproduced on pages 5&6 of the assessment order of AY 2008-09. AO appears to have followed some of the calculations of the appellant for AY 2005-06 8 ITA 7596/Mum/2014 for determination of the cost of construction of the flat sold during this assessment and also taken the indexed cost on the basis of the same mentioned in AY 2005-06. However, for apportionment of sale proceeds on land and flat, she has followed her own method.
After the receipt of the CIT -A, 30, Mumbai order dated 15.04.2014 appellant has to submit that the AO's calculation on pages 5 &6 of the Assessment order need to be re-worked as under:-
1. AO has relied upon the cost of construction as mentioned by appellant in the return of income filed for AY 2005-06. However, the same could be followed provided the total sale proceeds of the entire property were considered at Rs. 59,41,000/- as computed by Appellant. Now, as per CIT -A order for AY 2005-06 , the total Consideration is accepted at Rs. 87,62,500/-. Therefore, the value of construction could be taken at Rs. 67,62,500/- as against Rs.
39,41,000/- and the per sq. mtr. Cost and the cost of construction of the sold flat needs revision.
It is submitted that the said costs are entirely notional as appellant has neither actually received nor paid anything for the construction cost. He has only received cash component of Rs. 20,00,000/-. Therefore, the balance remaining of Rs. 67,62,500/- should be taken as the Cost of Construction for the Four Flats. Accordingly, the working should be as given below;
Total value of construction AO Appellant
Total separate consideration receipts 2,000,000 2,000.000
for Re Development
3,941,000 6,762,500
Value of Construction
Total Consideration 5,941,000 8,762,500
As a consequence of the above, the 10329.734 17725.152
Cost of Construction per sq.mtr.
should be = 67,62,500/-
381.52 (Total area) 10,330 17,725
Accordingly, the total cost of 752,644 1,291,444
construction of sold area
72.86 sq. mtr should be
9 ITA 7596/Mum/2014
2. Regarding the F.M.V. as on 1.4.1981, appellant has to submit that AO has taken the value of land as a proportion of Rs. 1,65,600/- by dividing the sold area (72.86 sq. mt) by total area (381.52 sq. mt). The value of Rs. 1,65,600/- is the FMV as per appellant's calculation for AY 2005-06. However, the same is not supported by any valuation report from Regd. Valuer. For AY 2008-09, appellant had filed the valuation report for determining FMV of the sold area. However, AO has totally ignored the same without giving any reasons. As per the valuation report , the value is certified at Rs. 2,14,500/-. After considering the valuation as per the said valuation report, the Indexed Cost should be as under:-
F.M.V. of land as on 01.04.1981 Accordingly fair market value as on 31,625 214,500 01.04.1981 The indexed cost as per calculation 173,938 1,179,750 given above should be
3. Regarding the apportionment of Total Sale Proceeds of Rs. 1,10,00,000/- on Land and Flat, it is submitted that the AO has determined the Proportionate Sale Proceeds of Land and Flat in the same proportion of the Values of Land and Cost of Construction as computed above by her. However, the same should have been as per the Valuation Report of N.R. Varindani , Govt. Approved Valuer as the same is based on the prevailing Market Rates. Thus, the calculation should be as under:-
Sale proceeds of land should 2,061,897 4,255,163 be And sale proceeds of flat 2,061,900 4,255,163 should be Or as per AO"s method of 5,251,409 calculation it should be [i.e.1,10,00,000 *11,79,750/ (11,79,750 + 12,91,444] Accordingly, the Sale Proceeds 8,938,100 6,744,837 of flat should be or alternatively as calculated above 5,748,591 10 ITA 7596/Mum/2014 Accordingly LTCG on sale of 1,888,280 3,075,413 land should be 4,071,659 or STCG on sale proceeds of flat 8,185,456 5,453,394 should be 4,457,148 or
4. Regarding the deduction of incidental expenses, it is submitted that , AO has further erred in not giving deduction of incidental expenses of Rs. 1,08,034/- as claimed in the Return of income. Appellant also provided the copies of the vouchers/bills for the same. AO has not given any reasons for such rejection. The same being incidental to the sale agreement should be allowed."
The ld. CIT(A) after considering the submissions of the assessee, rejected the same by holding as under:-
"I have considered the submissions of the appellant, order of the AO and facts of the case carefully. It is noticed that the issue involved in this case is relating to the computation of long term capital gains and short term capital gains and also the consideration of registered valur's report submitted before the AO. The assessee has also raised grounds relating to not allowiung deduction of legal fee on long term capital gains and short term capital gains and the value of the property was worked out at Rs. 1,75,25,000/- by the registration authorities. The AO has adopted this valuation as per the provisions of section 50C of the IT Act and the share of ther assessee was determined at Rs. 87,51,500/- in place of Rs, 59,40,000/- declared on the basis of agreement. Secondly the AO has adopted the figures of total receipts for development on the basis of agreement filed by the assessee for AY 2005-06. The cost of construction and the value of land as on 1.4.1981 was determined on the basis of the figures given by the assessee in the return filed for AY 2005-06. The indexed value and cost inflation index was for AY 2007-08 was also confirmed by the AO on the basis of these figures. After giving the detailed computation in para 12, page 4,5 and 6 of the assessment order. The AO has computed the long term capital gains at Rs. 18,88,280/- and the short term capital gains at Rs. 81,85,476/-.
11 ITA 7596/Mum/2014 On the other hand the AR of the appellant has submitted that the AO has computed the long term capital gains on the sale of property by adopting the value as per the registration authorities u/s 50C and also adopting the figures as given in the return for AY 2005-06. The AR of the appellant has raised objection that during the assessment proceedings the registered valuer's report was foiled which were not considered and the AO has relied on the details given in the A.Y.2005-06 and has wrongly determined the long term capital gains and short term capita' gains on that basis. The A'O has computed the total consideration at Rs. 39,41,000/- while the appellant has computed at Rs. 67,62,500/-. The cost of construction was computed by the AO at Rs. 10,330/- per sq. metre while the appellant worked out at Rs.17,725/-. Thus it was argued that the total cost of sold area 72.86 sq. metre should be Rs. 12,91,444/- when the AO has computed it at Rs. 7,52,644/-. The fair market value of land as on 1.4.1981 was taken at Rs. 2,14,500/- in place of Rs. 13,625/- adopted by the AO. The indexed cost is adopted at Rs. 11,79,750/- in place of Rs. 1,73,938/- taken by the AO. Thus, the AR has argued that the long term capital gain should be computed at Rs. 40,71,659/- in place of Rs. 18,88,280/- taken by the AO and the short term capital gains was computed at Rs. 54,53,394/- in place of Rs. 81,85,456/- taken by the AO.
From the perusal of the submissions and facts of the case it is noticed that the dispute is relating to whether the AO should adopt the figures given by the appellant itself in its return of income for AY 2005-06 or should consider the valuation report prepared during the assessment proceedings. The AO has adopted the figures as given by the appellant. In the AY 2005-06 because on that basis of these figures the assessment and the appellate order has has been passed by the CIT(A). This valuation report was never submitted by the assessee during the assessment proceedings for AY 2005-06. Secondly the sale value as per section 50C of the I.T. Act has to be adopted on the basis of stamp duty valuation which the AR of the appellant has not objected. Keeping in view the facts 'and circumstances I am of the view that the AO has made computation short term capital gains and long term capital gains by adopting the figures of the assessee submitted for AY 2005-06 and taken the value as per stamp duty valuation which in my view is correctly adopted because the assessee has not submitted its valuation report for AY 2005-06. Moreover, the CIT(A) has also upheld the order of the AO on this 12 ITA 7596/Mum/2014 issue for AY 2005-06. Regarding the allowability of legal expenses, it is noticed that the AO has not made any disallowance in the assessment order which means this issue has not been originated from the assessment order hence cannot be entertained. In totality of facts and circumstances it is held that the A.O. has rightly computed the long term capital gains and short term capital gains by adopting the figures given by the assessee itself for A.Y. 2005-06 and also adopted the valuation as per stamp duty valuation u/s 50C therefore, no interference is called for to the order of the AO. Thus ground of appeal is dismissed."
5. Aggrieved by the appellate order dated 26-09-2014 passed by the ld. CIT(A), the assessee is in appeal before the Tribunal.
6. The ld. counsel for the assessee submitted that the tribunal in assessee's own case for A.Y. 2005-06 has decided this issue in favour of the assessee in ITA No. 4623/Mum/2014 for A.Y. 2005-06 vide orders dated 19.10.2016 and dismissed the appeal of the Revenue , by holding as under:-
"Challenging the order, dated 15/04/2014 of the CIT (A)- 30,Mumbai, the Assessing officer (AO) has filed the present appeal. Assessee an individual, filed his return of income on 30/08/2005, declaring total income at Rs.72,430/-.The AO completed the assessment, u/s.143 (3) r.w.s. 147 of the Act, on 29/12/2011 determining his income at Rs.73.67 lakhs.
2.Effective ground of appeal is about deduction u/s.54 of the Act. During the assessment proceedings in the AY.2008-09, in the assessee's own case, the AO noticed that the assessee along with one of the co-owners had gained right title and interest in one property at Bandra by virtue of being the legal heir of the property owner , that vide development agreement, dated 21/02/2003, the co-owners entered into an agreement with a partnership firm to develop the property by bringing in the transferable and loadable TDR at the cost of the developers, that the consideration for conferring the right for development agreed it was for cheque component of Rs.40 lakhs and non-monetary component of fully constructed area of 763.03 sq. mtrs., that the value of the both the components was declared at Rs. 78.82 lakhs. The AO, however, noticed that the acknowledgement of registered and delivered 13 ITA 7596/Mum/2014 document for the said development agreement showed the market value of the property at Rs. 1.75 crores as against 30 lakhs as earnest money and Rs. 10 lakhs being the receivable amount on approval of the plans. Accordingly he observed that the assessee had offered an amount of Rs.59.41 lakhs as his share, that the value adopted by the registrar of the property was Rs. 87.62 lakhs (50% of Rs. 1.75 crores). Considering the above facts he held that there were reasons to believe that income of the assessee liable for tax had escaped assessment. Therefore he issued a notice u/s.148 of the Act. During the assessment proceedings the assessee objected to the value adopted by the registrar which according to him had been erroneously taken because as per the Stamp Duty Ready Recknor and the valuation report from the Registered Valuer the share in the property was at Rs.49.41 lakhs only, that there was no cost to TDR and therefore no question of capital gains in the hands of the assessee, that he had paid Rs. Five lakhs to one of the old tenants of the building to vacate the tenant, he had incurred an expenditure of Rs. 39.40 lakhs for construction of residential accommodation constructed were by the developers, that the developer had constructed flats on the area of 763.03 sq. mtrs. retained by the assessee as per the agreement that his share was 50%, that he had claimed deduction of 50% on constructed cost of that area calculated at the rate of Rs.10,330 per square mtrs. at Rs. 39.40 lakhs u/s.54 of the Act. It was further stated that total constructed area for him was 381.52 sq.mtrs. which is 50% of 763.03 sq.mtrs. and the area of the total plot was 618.07 sq.mtrs, that the plan for residential building could not accommodate the entire 381.32 sq.mtrs. on one floor, that he was allotted the said construction areas by way of four flats i.e. two adjacent flats on the sixth floor one flats on the third floor and the other on the second floor. The assessee relied upon various case laws to support his argument that on sale of TDR capital gains was not chargeable. After considering the submission of the assessee, the AO rejected the claim made by the assessee u/s.54 of the Act at Rs. 39.40 lakhs in respect of four flats developed against the monetary as well as non-monetary consideration received by the assessee and held that the long-term capital gain was in respect of the land that was not a residential house, that deduction u/s.54 of the Act was not available, that deduction under the said section was available only when an assessee would purchase a new house property, that four flats formed part of consideration received towards transfer of development rights of the original house property, that the flats had not been considered constructed by the assessee, that the requirement of section 54 14 ITA 7596/Mum/2014 was not fulfilled. Accordingly, the AO considered the amount of Rs.87.62 lakhs as sale consideration and after allowing indexed cost of acquisition at Rs.7.94 lakhs computed the gross consideration at Rs.79.67 lakhs. From that he allowed legal fees paid of Rs.1.70 lakhs and compensation paid to tenants at Rs. 5 lakhs. Finally, he computed the long-term capital gain at Rs.72.97 lakhs.
3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, the assessee made elaborate submissions with regard to the reopening of the assessment as well as on the merits of the case. After considering the assessment order and the submissions of the assessee, the FAA held that the issue in question had been duly considered by the Tribunal in the Case of Jawahar N Ghaia (Order Dated 19/11/2013) and Hema Sunil Rane (ITA/4665/Murn/2012). Finally, he held that the entire value of non-monetary consideration taken by the AO of 635.86 sq.mtrs. of constructed area was eligible for deduction u/s.54 of the Act.
4.During the course of hearing before us the Departmental Representative(DR) supported the order of the AO. As stated earlier, no one appeared before us, on behalf of the assessee.
5. We have perused the material available on record. We find that the AO had taxed the non-monetary benefits of the assessee and had denied him the benefit of section 54 of the Act, that the FAA had allowed the appeal of the assessee. We find that in the case of Hema Sunil Rane (supra) the tribunal had decided the issue as under:
"6.8. The above issue has been duly considered by the ITAT 'J' bench, Mumbai in a very recent order dtd. 19.11.20J3, in the case of Mls. Jawahar N. Ghia & others (ADP), Dr. Rane (Mrs. Hema Sunil) in A. Y. 2004-05 in ITA No.4665lMumbai 12012. The relevant part of the decision is reproduced as under:
..... on the issue of allowability of exemption u/s. 54/54 F, the AO has denied the exemption u/s 54/54F on the ground that assessee has not purchased new residential propertys for absorbing this long term capital gain arising out of transfer of property in question. It is relevant to note that the development agreement itself emphasizes on the area which 15 ITA 7596/Mum/2014 shall be allowed to the beneficiaries in newly constructed building as against their existing areas. The said development agreement clearly indicates the aforesaid statistics in respect of allotment of areas. This suggests that the allotment in newly constructed building under the development agreement is an adjustment of debts in respect of transfer of property within the meaning of development agreement dated 9th November 2003. Considering this fact in the light of the provisions of section 54, the word purchased in section 54 must be interpreted in its ordinary meaning as buying for a price or equivalent of a price by payment in kind or adjustment towards old debts or for other monetary consideration. The said proposition is supported is by the decision of the Hon'ble Apex court -in the case of CIT vs v. T.N Arvinda Reddy (120 ITR 46 SC) wherein it has been held that there is no reason to divorce the ordinary meaning of the word 'purchase' as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration from its legal meaning in section 54(1). Undoubtedly, each release in the case is a transfer of the releasor's share for consideration to the release. In view of the mentioned discussion, we are of the considered view that the assessee is entitled for the deduction u/s 54/54F and hence we do not find any justifiable reason to interfere with order of the learned CIT(A) on this count. Resultantly, the issue of allowability of exemption u/s. 54/54F is decided in favour of the assessee and against the revenue."
Respectfully following the above order, such we are of the opinion that the order of the FAA does not suffer from any legal infirmity. So, confirming the same we decide the effective ground of appeal against the AO and hold that assessee was entitled to deduction u/s.54 of the Act.
As a result, appeal filed by the AO stands dismissed."
The ld. counsel submitted that the tribunal in assessee's own case for AY 2005-06 in ITA no. 4623/Mum/2014 vide orders dated 19-10-2016 has upheld the order of learned CIT(A) and dismissed the appeal of Revenue wherein learned CIT(A) had held that the entire value of non-monetary consideration taken by the AO of 635.86 square meters of constructed area 16 ITA 7596/Mum/2014 was eligible for deduction u/s 54 of the 1961 Act . The said order of the tribunal is placed in paper book/page 29-32. Similarly, the assessee has submitted the valuation report by government registered valuer before the A.O. and ld. CIT(A) , but both the authorities have not taken cognizance of the said valuation report as submitted by the assessee. The learned counsel submitted that said report is filed before the tribunal also which is placed in paper book/page 14-29. It is submitted that assessee has disputed the stamp duty valuation adopted by Stamp duty valuation authorities which was adopted by the AO for computing capital gains, but the authorities below did not call for DVO report as is mandated u/s 50C(2). Thus, it is submitted before the tribunal that directions may be issued to the authorities below to consider the valuation report submitted by the assessee before deciding the issue on merits as well to consider the tribunal order for AY 2005-06 , both of which have direct bearing on the issues arising from this appeal.
7. The ld. DR has also fairly agreed that the tribunal order for AY 2005-06 as well as the valuation report needs to be considered by the authorities below before adjudication of this appeal and if so required the AO can call for DVO report. Thus it is fairly agreed by learned DR that issues may be set aside to the file of the AO for denovo determination of all the issues arising in this appeal.
8. We have considered rival contentions and also perused the material available on record. We have observed that the assessee and one Mr. Ronald Stephen Pereira gained right, title and interest in a property described as the piece and parcel of land and ground bearing C.T.S. No. F/675 of Village Bandra corresponding F.P. No. 73 of T.P.S. III of 30th Road, Bandra by virtue of being the legal heirs to the erstwhile owner of the property. The said property called as Elron as it existed then consisted of piece and parcel of land and a structure thereon admeasuring about 618.7 sq. mtrs. The said 17 ITA 7596/Mum/2014 property enjoys an FSI of 1 and is eligible for loading of additional TDR -FSI of
1.The assessee has submitted the valuation report by government registered valuer before the authorities below which is emanating from the orders of authorities below . The assessee has challenged the valuation adopted by the AO of the said property being valuation as adopted by stamp duty valuation authorities as is referred to in provisions of Section 50C of the Act by the AO , which valuation is not accepted by the assessee . Under these circumstances, we are of considered view that provisions of Section 50C(2) will come into play and the AO is required to refer the matter to DVO for determining the value of the said property , which the AO in the instant appeal did not do so. We have also observed that The tribunal has decided the quantum appeal in assessee's own case with respect to the A.Y. 2005-06 and the decision of the Tribunal for AY 2005-06 in ITA No.4623/Mum/2014 vide orders dated 19-10- 2016 has a direct bearing on adjudicating the issues in this appeal. The tribunal has dismissed the appeal of the Revenue in AY 2005-06 and confirmed the order of learned CIT(A) wherein learned CIT(A) has held that the entire value of non-monetary consideration taken by the AO of 635.86 square meters of constructed area was eligible for deduction u/s 54 of the 1961 Act . Both the parties before us have fairly agreed based on peculiar factual matrix of the case that the issues in this appeal need to be set aside and restored to the file of the AO for de-novo adjudication on merits in accordance with law after considering the tribunal order in assesse's own case for AY 2005-06 wherein learned CIT(A) has held that the entire value of non-monetary consideration taken by the AO of 635.86 square meters of constructed area was eligible for deduction u/s 54 of the 1961 Act as also the AO has to consider the valuation report submitted by the assessee from government registered valuer and if the AO contemplates adopting the value as adopted by stamp duty authorities for stamp duty purposes by invoking provisions of Section 50C and the assessee challenges the said valuation as adopted by the AO, then AO has to refer the matter to DVO for valuation as contemplated 18 ITA 7596/Mum/2014 u/s 50C(2) of the 1961 Act. Under these circumstances keeping in view the factual matrix of the case, we are inclined to set aside and restore all the issues in this appeal back to the file of the A.O. for de-novo determination of the issue's on merits in accordance with law after considering the valuation report submitted by the assessee and the afore-stated order of the Tribunal for AY 2005-06. Needless to say that proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law. The AO shall allow the assessee to file all necessary evidences and explanations in its defense which shall be admitted by the AO in the interest of justice. We would like to clarify that we have not commented on the merits of the issues involved in this appeal and the AO shall determine the issues in denovo set aside proceedings in accordance with law. We order accordingly.
9. In the result, appeal of the assessee in ITA No. 7596/Mum/2014 for A.Y. 2008-09 is allowed for statistical purpose.
Order pronounced in the open court on Ist September, 2017. आदे श क घोषणा खुले #यायालय म% &दनांकः 01-09-2017 को क गई ।
Sd/- sd/-
(SAKTIJIT DEY) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; &दनांक Dated 01-09-2017
[
व.9न.स./ R.K., Ex. Sr. PS
19 ITA 7596/Mum/2014
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु:त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आय:
ु त / CIT- Concerned, Mumbai
5. =वभागीय 9त9न?ध, आयकर अपील य अ?धकरण, मुंबई / DR, ITAT, Mumbai "E" Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या=पत 9त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai