Income Tax Appellate Tribunal - Mumbai
Manjula Jamnadas Choksi, Mumbai vs Department Of Income Tax on 3 April, 1995
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "B",MUMBAI
BEFORE SHRI R.S. SYAL (AM) & SMT. ASHA VIJAYARAGHAVAN (JM)
I.T.A.No.4492/Mum/2008
(A.Y.2005-06 )
Asstt. Commr. of Income-tax, Ms. Manjula J. Choksi,
Range 21(1), Anand Bhuwan, JVPD Scheme,
Mumbai. Vile Parle (W), Mumbai-400 056.
Vs. PAN:AACPC4461F.
Appellant Respondent
Appellant by Shri R.K. Gupta.
Respondent by Shri Pramod Kumar Parida.
O R D E R
PER R.S. SYAL, AM :
This appeal by the Revenue arises out of the order passed by the CIT(A) on 29-04-2008 in relation to the asstt. year 2005-06. The only issue raised through various grounds is against the computation of capital gains.
2. Briefly stated, the facts of the case are that the assessee showed long- term capital gains of Rs.37,28,761/- in her computation of income as under :
"Sale consideration Rs. 2,47,50,000
Cost of acquisition Rs. 52,26,070
Indexed cost of acquisition Rs. 1,02,22,224
Long Term Capital Gain Rs. 1,45,27,776
Less: Brought forward Long Term Capital loss Rs. 1,07,99,015
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Long Term Capital Gain Rs. 37,28,761"
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The AO noted that there was AIR information stating about the sale of a
property registered fir Rs.1,12,50,000/- on 12-07-2004 in which the assessee 2 ITA No.4492/M/08 Ms. Manjula J.Choksi was a party. On being called upon to furnish details in respect of the AIR information, the assessee gave detailed reply by stating that she purchased property in 1993/94 which was leased out to M/s. Microware Communication Ltd. (hereinafter called "MCL") on 01-09-1994 against deposit of Rs.2,47,50,000/-, out of which a sum of Rs.2,37,50,000/- was received and Rs.10 lakhs was kept pending. Lease rent of Rs.1,80,000/- per annum was fixed for a period of 3 years. On 03-04-1995, MCL showed interest in the purchase of property and an agreement was entered into between the assessee and MCL for the sale of the property for a total consideration of Rs.2,47,50,000/- on the expiry of the lease period. On 31-08-1997, 3 years lease period ended but MCL refused to confirm the agreement of sale by way of stalling the payment of the remaining amount of Rs.10 lakhs. They undertook to arrange some alternate buyer. In the intervening years, even though the sale deed was not entered into nor the lease period extended beyond 01-09-1997, MCL continued to occupy the premises after the expiry of the lease period and kept on paying Rs.1,80,000/- p.a. as per the earlier lease agreement. It was in the previous year relevant to the assessment year under consideration that the property was finally sold to M/s.Sanyog Developers (hereinafter called "SD"), introduced by MCL under a tripartite agreement for a total consideration of Rs.1,12,50,000/- which amount was taken over by MCL after the payment of Rs.10 lakhs to the assessee by SD and the remaining amount to MCL. The AO refused to accept the computation of capital gains declared by the assessee. He observed that the initial 3 years lease agreement was never extended and hence Rs.2,37,50,000/- did not have the character of security deposit after 01-09-1997. As the agreement of sale dated 03-04-1995 was never executed, the AO took the non-execution of agreement as negligence on the part of the assessee. In his opinion, MCL remained a proposed buyer till 31-08-1997 and became a confirming party only at the time of the 3 ITA No.4492/M/08 Ms. Manjula J.Choksi tripartite agreement. Since a sum of Rs.1,02,50,000/- was paid by SD to MCL on executing tripartite agreement, the AO took it as application of assessee's income as against deposit received to the tune of Rs.2.37 crores. Invoking the provisions of sec. 51, he held that the difference between Rs.2.37 crores and Rs.1.02 crores was to be treated as forfeiture of advance. He further noted that the provisions of sec. 50C were applicable in this case as the property purportedly sold for Rs.1,12,50,000/- was, in fact, valued at Rs.1,65,49,240/- by stamp valuation authority. He, therefore, computed long-term capital gains as under :
"Sale consideration = Rs.1,65,49,240 (as per point (vi) Above & provision of section 50C) Cost of acquisition = Rs. 52,26,070 Less: Rs 1,35,00,000 (as per point (v) i.e.
------------------
Advance forfeited as
(-) Rs. 82,73,930
per section 51
i.e. Rs.2,37,50,000 -
Rs.1,02,50,000)
Indexation from 1993-94 is not possible as the cost of acquisition is negative amount (less than Nil value).
Long Term Capital Gain is Sale consideration - Indexed cost of acquisition i.e. Rs.1,65,49,240 - (82,73,930) = Rs.2,48,23,190 Long Term Capital loss b/fd. = Rs.1,07,99,015
-----------------
Long Term Capital Gain Rs.1,40,24,155
=========="
3. The assessee preferred appeal before the first appellate authority, who got convinced with the submissions advanced on behalf of the assessee. He held that section 51 was not applicable in the instant case. Further applicability of section 50C was doubted as the assessee had declared a higher amount as sale consideration than the amount determined by the Stamp Valuation authority. He, therefore, set aside the assessment order on this issue. The Revenue has come up in appeal against such findings.4 ITA No.4492/M/08 Ms. Manjula J.Choksi
4. We have heard the rival submissions and perused the relevant material on record. The facts as recorded above are not disputed, as per which the assessee leased out her premises to MCL in 1994 for period of 3 years on receiving a deposit of Rs.2.37 crores and receivable deposit of Rs.10 lakhs. After some time, MCL agreed to purchase the property from the assessee at Rs.2.47 crores. Subsequently, MCL lost its interest in the purchase of the property and agreed to introduce some other buyer viz. SD. A tripartite agreement was entered into between the assessee, MCL and SD on 12-07-2004, a copy of which is available at page 55 onwards of assessee's paper book. The facts as recorded above have been mentioned in this agreement. Clause (ix) indicates that SD agreed to purchase this property for Rs.1,12,50,000/- and paid Rs.1,02,50,000/- to MCL and remaining sum of Rs.10 lakhs was paid to the assessee company. It was this tripartite agreement which was eventually registered as sale agreement on 12- 07-2004. These facts indicate that the property was, in fact, initially intended to be sold by the assessee to MCL. As the sale was not complete because of MCL refusing to pay Rs.10 lakhs and getting the sale deed executed, this tripartite agreement was entered into to effect the sale of the property in question to SD for a consideration of Rs.1.12 crores on behalf of MCL. The assessee received its remaining part of Rs.10 lakhs which was due from MCL and the sum of Rs.1.02 crores was paid by SD to MCL. It, therefore, transpires that two transactions took place in the instant case viz., first the sale by the assessee to MCL and second the simultaneous sale by MCL to SD. As the assessee received total sale consideration of Rs.2.47 crores, which was promptly declared as such, in our considered opinion, the AO was not justified in rejecting such consideration and adopting the sale consideration at Rs.1.65 crores u/s.50C that was relatable to the eventual transaction of sale to SD. Further, the provisions of sec. 51 also 5 ITA No.4492/M/08 Ms. Manjula J.Choksi cannot be applied in the instant case as the assessee had nothing to do with SD at the time of eventual sale to them. Its transaction of sale was concluded with that of MCL and the simultaneous sale to SD was that by MCL. It is further observed that the AO took the cost of acquisition at a negative figure by applying the provisions of sec. 51, which action is impermissible because of the fact that there was no forfeiture of security deposit. It is still further noted that the AO took sale consideration at Rs.1.65 crores by applying the provisions of sec. 50C, whereas the assessee had shown the sale consideration at a much higher figure of Rs.2.47 crores. Keeping the entire factual position into consideration, we hold that the ld. CIT(A) was justified in his final decision.
5. In the result, the appeal is dismissed.
Order pronounced on the 03rd day of June, 2011.
Sd/- Sd/-
(SMT. ASHA VIJAYARAGHAVAN) (R.S. SYAL)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai: 03rd June, 2011.
NG:
Copy to :
1. Department.
2.Assessee.
3 CIT(A)-XXI,,Mumbai.
4 CIT,City-21,Mumbai.
5.DR,"B" Bench,Mumbai.
6.Master file.
(TRUE COPY)
BY ORDER,
Asst.Registrar, ITAT, Mumbai.
6 ITA No.4492/M/08 Ms. Manjula J.Choksi
Details Date Initials Design
ation
1. Draft dictated on 30-05-11 Sr.PS/
2. Draft Placed before author 31-05-11 Sr.PS/
3. Draft proposed & placed before the Second Member JM/AM
4. Draft discussed/approved by Second Member JM/AM
5. Approved Draft comes to the Sr.PS/PS 01-06-11 Sr.PS/
6. Kept for pronouncement on 03-06-11 Sr.PS/
7. File sent to the Bench Clerk 03-06-11 Sr.PS/
8. Date on which the file goes to the Head clerk
9. Date on which file goes to the AR
10. Date of dispatch of order
*