Income Tax Appellate Tribunal - Mumbai
Minoo Krishnalal Choksi, Mumbai vs Department Of Income Tax on 25 April, 2013
आयकर अपीलीय अिधकरण,
अिधकरण मुंबई Ûयायपीठ 'बी' मुंबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, MUMBAI
सव[ौी बी.आर.िमƣल, Ûयाियक सदःय एवं नरे Ûि कुमार ǒबãलैáया, लेखा सदःय के सम¢
BEFORE SHRI B.R. MITTAL, JM AND SHRI N.K. BILLAIYA, AM
आयकर अपील सं./I.T.A. No.2437/Mum/2012
( िनधा[रण वष[ / Assessment Year : 2008-09
The ITO 16(2)(2), बनाम/
बनाम Shri Minoo Krishnalal Chokshi,
214, 2 n d Floor, Matru Mandir, Vs. C/o Hansa Clinic,
Tardeo Road, 166-B, Tardeo Road, Tardeo,
Mumbai-400 007 Mumbai-400 034
ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. :ADDPC 1910D
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से/ Appellant by: Shri Mohit Jain
ू×यथȸ कȧ ओर से/Respondent by : Shri Sanjay N. Kapadia
सुनवाई कȧ तारȣख / Date of Hearing : 25.04.2013
घोषणा कȧ तारȣख /Date of Pronouncement : 25.4.2013
आदे श / O R D E R
PER N.K. BILLAIYA, AM:
Revenue has preferred this appeal against the order of the Ld. CIT(A)-27, Mumbai dt. 201.2012 pertaining to assessment year 2008-09. The sum and substance of the grievance of the Revenue is that the Ld. CIT(A) erred in not treating the surrender of tenancy rights as capital assets liable to long term capital gains and further the Ld. CIT(A) erred in allowing relief u/s. 54F of the Act.
2. The assessee is an individual. For the year under consideration, the assessee has shown income from business at Rs. 1,44,413/-, short term capital gain of Rs. 46,698/- and income from other sources at Rs. 713/-.
2 ITA No. 2437/M/2012During the course of the assessment proceedings and as per the details received through AIR, the Assessing Officer observed that the assessee is a tenant of self contained residential premises occupying approximately 630 Sq. ft of Carpet area on the ground floor of Patil Estate of Malabar and Cumballa Hill Division, off. Tardev Road, Mumbai. The said residential premises were owned by Deshbhushan CHS Ltd., a Co- operative Hsg. Soc. The assessee was paying Rs. 54.50 per month as rent. The AO found that on 9.5.2007, the society has entered into a development agreement with Sachinam Estate Developers Pvt. Ltd for the development of the said society premises. As per this development agreement, the developer was to demolish the existing structure and to give the tenants alternative accommodation in the newly constructed building. The AO further observed that as per this agreement, the assessee was going to receive two flats at 18th floor admeasuring total 630 Sq.ft of Carpet area. Vide another agreement dt. 25.7.2007, in lieu of the tenancy rights in the same property, the developer has agreed to give additional premise on ownership basis to the assessee. The market value of the said flat as per Stamp Duty Authorities comes to Rs. 46,37,160/-. The AO was of the firm belief that the assessee has received 3 properties worth Rs. 1,39,11,480/- in exchange of tenancy rights in his old property since the assessee has incurred Nil cost of acquisition. As regards tenancy rights is concerned, the AO was of the opinion that the assessee has received long term capital gain of Rs. 1,39,11,480/-. The AO further proceeded on the belief that the assessee is not entitled for exemption u/s. 54F on transfer of the tenancy rights. The AO has given reasons at para-8 page-3 of his order stating that the assessee has received two flats vide agreement dt. 9.4.2007 and another flat vide agreement dt. 25.7.2007 since the assessee has received three residential properties that itself is in contravention to the provisions of Sec. 54F of the Act. Therefore, the 3 ITA No. 2437/M/2012 benefit of Sec. 54F is not available to the assessee. The AO went on to compute the taxable income of the assessee by taking long term capital gain on transfer of tenancy right at Rs. 1,39,11,480/-.
3. The assessee carried this matter before the Ld. CIT(A) and strongly submitted that the action of the AO is erroneous and not according to the facts of the case. The main contention of the assessee before the Ld. CIT(A) was that he has not received any alternate accommodation and he is still a tenant of the alleged residential premises. Whatever has been stated by the AO is a future event to take place at a future date. To substantiate, the assessee filed copies of rent receipt of the tenanted property to show that he is still in the possession of the tenanted property. In order to ascertain this fact, the Ld. CIT(A) directed the AO to make a field enquiry and submit the report. The Office Inspector of the AO visited the impugned property and furnished the report vide his letter dt. 24.11.2011. The Officer Inspector confirmed that the assessee is residing on the given address. The Office Inspector further stated that he could not visit new building since building construction work is at standstill and incomplete. After considering the entire facts brought on record and also the remand report of the AO and Office Inspector, the Ld. CIT(A) thus held as under:
"At the outset, The AO lacks clarity in appreciation of the legal position of the impugned transaction. As can be seen from the extract of the assessment order at paras 3.3 and 3.4, AO considers that there was a transfer involved by sale of tenancy rights and the alternate accommodation to be received in exchange is nothing but purchase of a new property. In other words AO considers that there are two separate transactions involved in this regard, the first event resulting in the capital gains and the second event resulting in examination of the appellant's entitlement or otherwise of relief u/s 54F. On considering the relevant clauses of the agreement I hold that there is only one transaction agreed upon i.e., the surrender of tenancy rights subject to the condition that the 4 ITA No. 2437/M/2012 appellant is given possession of the alternate accommodation as stated in the agreement. It is neither a sale of tenancy rights nor purchase of new property by the appellant. Secondly t is also not an exchange since an exchange presupposes existence of two properties to be exchanged and the alternate accommodation was not in existence on the date of agreement. Now coming to the contents of the impugned agreement, apparently the AO has either not gone through the entire agreement or conveniently ignored the relevant portions. I note that the impugned agreement was entered for the purpose of developing the entire property for which it is essential to demolish the tenanted structures as and when required and the construction plans need to be approved in advance. Therefore, the developer had to enter into an agreement with the tenants which is a tri-parte agreement among the owners, developer and the tenants which provides for surrender of tenancy rights on handing over and putting the tenants in the alternate accommodation as agreed therein. At clause 7 of the agreement it is clearly agreed that the tenant shall cease to pay rent only on being handed over the vacant possession of alternate accommodation. Further clause 16 states that tenancy rights shall stand surrendered simultaneously on handing over the vacant possession of the alternate accommodation to the tenant. Further vide clause 9 of the agreement the tenant shall not be required to shift to alternate accommodation unless it is complete in all respects including obtaining of the occupation certificate. Thus while the event of surrendering the tenancy rights is governed by clause 16, the owner and tenant are protected by provisions of clause 7 and 9 of the agreement against any arbitrary action of the developer. Further as noted from the report of the inspector who made the field visit of the impugned property the appellant still occupies the tenanted property and there was no change in his position vis-à-vis the owner. All the documents placed on record in the form of rent receipts, LIC/MTNL bills paid, Bank accounts operated and the Aadhaar card issued etc., with the address of the tenanted property would go to establish the appellant's claim beyond doubt that he continues to be in the possession of the tenanted premises. The inspector's report further states that the construction of the alternate accommodation is not complete as on date. Appellant also stated that the matter stand still due to the pending litigation.
Further, settlement of terms between the parties is one of the conditions essential for the completion of a contract and there was 5 ITA No. 2437/M/2012 no concluded contract between the parties till such time. Therefore, agreeing upon a condition cannot be considered as equivalent to performance of the condition in the eyes of law, devoid of the factual matrix. In the factual back ground discussed above, it appears clearly that the dominant intention of the parties to the agreement and the appellant in specific was not to consider the impugned agreement as conclusion of the contract. In the transfer of property Act the word 'transfer of property' is defined as "transfer of property means an act by which a living person conveys property, in present or in future, to one or more other living persons or to himself, or to himself one or more living persons; and to transfer property is to perform such act. In other words, a transfer is contemplated that of a property which is in existence and not that of a future property. A property in existence today can be transferred with effect from a future date, but a property that comes into existence at a future date cannot be transferred today. In the present case, the property that was to be received by the appellant in the form of constructed flats and the rights therein can accrue to the appellant only from the date on which terms of the impugned agreement are fulfilled by both the parties i.e., upon fulfillment of the conditions of the contract by both the parties viz., handing over the tenanted property/surrender of tenancy rights to the developer by the appellant and completion of the construction of alternative accommodation and handing it over to the appellant there upon by the developer. As noted from clause 16 of the impugned agreement, the contract contemplates that surrender of tenancy rights shall take place on terms settled between the parties. The impugned agreement does not, of itself create any interest in the property viz., alternative accommodation and agreement is merely a document creating a right to obtain another document of conveyance on fulfillment of terms and conditions specified therein. In fact the impugned agreement creates a right in favour of the developer to get the tenant vacated/ dispossessed of tenanted property once the construction is complete and the alternative accommodation is ready for occupation with all necessary clearances and in so far as appellant is concerned it only protects him not to vacate the tenanted property till such time and it does not give any right to the tenant to force the developer to complete the construction. Thus the clause 9 of the impugned agreement on which AO placed reliance in the assessment as well as the remand proceedings only acts as a negative covenant against the developer in protecting the appellant's rights and does not give the right to the appellant for 6 ITA No. 2437/M/2012 insisting any time bound specific performance by the builder. Even Section 54 of the transfer of property Act, in which sale is defined, states that 'a contract of sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties'. Further even in case of a part performance, the essential conditions required to be fulfilled for the purchaser to defend or protect his possession u/s.53A of the Transfer of Property Act is that the purchaser must have done some act in furtherance of the contract and must have performed his part of contract. In the present case the developer has not completed the construction of alternate accommodation. Therefore, in my considered opinion, there is neither a full performance nor a part performance of the impugned agreements. In other words, having regard to the facts brought on record and also the position of law it is beyond doubt that the tenancy rights were not surrendered on the date o agreement i.e., either on 9/5/2007 or 25/7/2007.
In view of the above discussion I am of the considered opinion that the surrender of tenancy rights as contemplated in clause 16 of the impugned agreement has not taken place during the year under consideration. The logical corollary to this finding is that there is no taxable event giving rise to capital gains on account of the impugned agreement. Accordingly I hold that there are no taxable capital gains and the addition made by the AO cannot survive. Appellant succeeds on this ground."
4. Aggrieved by this order of the Ld. CIT(A), Revenue is in appeal before us.
5. The Ld. Departmental Representative strongly relied upon the order of the AO. Per contra, the Ld. Counsel for the assessee relied upon the decision of the Ld. CIT(A).
6. We have carefully perused the orders of the lower authorities. After considering the facts discussed at the time of assessment and also considered at the time of first appellate stage and in the light of the categorical finding of the Ld. CIT(A), we are of the considered view that the entire exercise of assessment is pre-mature and not relevant for the 7 ITA No. 2437/M/2012 year under consideration. We are in firm agreement with the finding of the Ld. CIT(A) that there is no taxable event giving rise to capital gains for the year under consideration. We therefore do not find any reason to tamper with the findings of the Ld. CIT(A). This ground of the Revenue is dismissed.
7. The second grievance of the Revenue is that the Ld. CIT(A) has erred in allowing relief u/s. 54F of the Act.
8. A perusal of the order of the Ld. CIT(A) show that at para-10, the Ld. CIT(A) has categorically stated that relief claimed by the assessee u/s. 54F is infructuous. Therefore, we do not see any merit in this grievance of the Revenue when the Ld. CIT(A) has not allowed any relief u/s. 54F of the Act.
9. In the result, the appeal filed by the Revenue is dismissed.
पǐरणामतः राजःव कȧ अपीलɅ खाǐरज कȧ जाती है ।
Order pronounced in the open court on 25.4.2013 आदे श कȧ धोषणा खुले Ûयायालय मɅ Ǒदनांकः 25.4.2013 को कȧ गई ।
Sd/- Sd/-
(B.R. MITTAL ) (N.K. BILLAIYA)
Ûयाियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; Ǒदनांक Dated 25.4.2013 व.िन.स./ RJ , Sr. PS 8 ITA No. 2437/M/2012 आदे श कȧ ूितिलǒप अमेǒषत/Copy षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. आयकर आयुƠ(अपील) / The CIT(A)-
4. आयकर आयुƠ / CIT
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड[ फाईल / Guard file.
आदे शानु ानुसार/ ार BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai