Income Tax Appellate Tribunal - Mumbai
Sherbanoo A Patel, Mumbai vs Assessee on 7 February, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E" MUMBAI
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND
SHRI VIJAY PAL RAO, JUDICIAL MEMBER
ITA No. 853/Mum/2012
Assessment Year 2008-09
Mrs. Sherbanoo A. Patel, Joint Commissioner of
B-103, Fine Touch Building, Income Tax - 15(1),
73, Meghraj Sethi Marg, Aayakar Bhavan,
Agripada, Vs. M.K. Road,
Mumbai - 400 008. Mumbai - 400 020.
PAN: ARQPP 4903 N
(Appellant ) (Respondent)
Appellant by : Shri Rajiv Khandelwal
Respondent by : Shri O.P. Meena
Date of hearing : 07-02-2013
Date of pronouncement : 28-02-2013
ORDER
PER VIJAY PAL RAO, J.M.
This appeal was filed by the assessee against the order dt. 02-12-2011 of the CIT(A)-26, Mumbai for the Assessment Year (AY) 2008-09.
2. The assessee has raised the following Grounds of Appeal:
The following Grounds of Appeal are independent of, and without prejudice to, one another:
1. The Commissioner of Income Tax (Appeals)-26, Mumbai (hereinafter referred to as the CIT(A)) erred in upholding the action of the Assessing Officer in making addition of Rs. 75,05,316/- on sale of a ITA No. 853/Mum/2012 2 Mrs. Sherbanoo A. Patel residential house under the head 'capital gains' on the basis of AIR information received by the Assessing Officer.
The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition of Rs. 75,05,316/- inasmuch as the transfer within the meaning of Section 2(47) of the said property relates to the previous year relevant to the assessment year 2004-05.
The appellant further, contends that the Assessing Officer ought to have referred the matter to the Valuation Officer in terms of the provisions of Section 50C(2) of the Act.
2. The CIT(Appeals) erred in upholding the action of the Assessing Officer in disallowing the claim of payment of stamp duty and registration charges aggregating Rs. 9,76,000/- under section 54 of the Act.
The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in now allowing the claim of payment of stamp duty and registration charges aggregating Rs. 9,76,000/- under section 54 of the Act inasmuch as the said claim is as per the prescription of the provisions of section 54 of the Act.
3. The CIT(Appeals) erred in upholding the action of the Assessing Officer in not allowing the following expenses as in computing the capital gains on sale of residential property on the ground that the same are not genuine -
(i) Brokerage - Rs. 4,50,000/-
(ii) Repair expenses - Rs. 12,76,000/-
(iii) Transfer Charges - Rs. 1,50,000/-
The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in disallowing the claim of the impugned expenses inasmuch as CIT(A) has not appreciated the facts in its entirety before upholding the said disallowance. The disallowance on facts and in law, requires to be deleted.
The appellant craves leave to add to, alter or amend the aforestated grounds of appeal.
3. Ground No.1: Whether the transfer of the property in question took place in the year 2003-04 or during the previous year relevant to AY under consideration and consequently the Capital Gain arising of the said transfer is taxable in the respective year. Assessee is an ITA No. 853/Mum/2012 3 Mrs. Sherbanoo A. Patel individual and filed her return of income for the AY under consideration on 31-03-2009 showing total income at Rs. 1,77,16,585/-. The assessee was in occupation and in possession of the premises bearing No. 5518-A situated at Sajan Compound, Maulana Azad Road, Mumbai as a tenant. In view of the re- development of the said property, the builder/developer M/s. Patel Brothers Construction Company entered into an agreement dt. 31-08- 2001 with the assessee and agreed to provide for permanent alternative accommodation free of cost in lieu of the rented premises occupied by the assessee. The builder/developer had agreed to allot Flat No. 4, 4th Floor, 'D' Wing of approximate area 710 Sq. Ft. situated at Patel Apartment, Maulana Azad Road, Mumbai-400 008. The said flat was handed over to the assessee on execution and registration of the agreement dt. 04-09-2001. Accordingly, assessee became the owner of the Flat No. 4, 4th Floor, 'D' Wing situated at Patel Apartment, Maulana Azad Road, Mumbai, herein after called 'the property in question'. The Assessing Officer (AO) came to notice about the sale of the property in question on receipt of AIR information from Joint Sub-Registrar, Mumbai that the assessee sold the property in question by executing the Deed of Transfer on 11-03-2008. As per the Deed of Transfer of the property in question was sold for Rs. 19,90,000/- and no Capital Gain was offered for taxation towards this transaction. However, as per the information, the sale price of the said property has been shown at Rs. 75,05,316/-. AO vide his letter dt. 22-11-2010, asked the assessee to give the documentary evidence as to how this transaction as was reflected in the return of income. In response to the query, the assessee vide letter dt. 29-11-2010, submitted that the said property was sold way back in the year 2003- 04 for an amount of Rs. 19,90,000/- but the buyer got the same registered only now. It was further stated by the assessee that the total sale proceeds were also received and possession was handed over to the buyer in the year 2003-04. Hence, the assessee contended that it is not a sale in this year and therefore cannot be taxed in the year ITA No. 853/Mum/2012 4 Mrs. Sherbanoo A. Patel just on the basis of registration thereof. The AO did not accept the contention of the assessee and held that the property was sold vide Deed of Transfer dt. 11-03-2008. The sale consideration of the property in question was adopted by the AO as the value adopted or assessed by the Stamp Valuation Authority for the purpose of payment of Stamp Duty at Rs. 75,05,316/-. Since, the property was acquired by the assessee in lieu of surrender of her tenancy rights, therefore, the cost of acquisition of the property in question was taken by the AO at Nil. Hence, the entire amount of Rs. 75,05,316/- was taxed as Long Term Capital Gain by the AO for the year under consideration. On appeal, ld. CIT(A) has concurred with the view of the AO.
4. Before us, ld. Authorised Representative (AR) of the assessee has submitted that the assessee sold the residential flat in question in the previous year relevant to the AY 2004-05 for Rs. 19,90,000/-. The full sale consideration was received in the AY 2004-05 itself and the possession of the said flat was also handed over in the said year itself vide Agreement cum Possession receipt dt. 15-03-2004. The ld. AR has referred the payments received by the assessee as per the receipt Annex to the Registered Deed of Transfer dt. 11-03-2008 and submitted that the entire sale consideration was received by the assessee during the year 2003-04 up to 15-03-2004 on which the possession of the property in question was handed over to the purchaser after receiving the full sale consideration. The ld. AR has thus contended that though there was no registered agreement on 15- 03-2004, however, when the assessee has received the full sale consideration and handed over the possession, then in terms of Section 2(47) of the Income Tax Act, 1961 (Act), the transfer in relation to capital asset is completed when the possession of any immoveable property is handed over in part performance of the contract as referred u/s. 53A of the Transfer of Property Act. Thus, the ld. AR submitted that the transaction of transfer was completed ITA No. 853/Mum/2012 5 Mrs. Sherbanoo A. Patel on 15-03-2004 and not at the time when Deed of Transfer was registered. The ld. AR has further contended that the registration is important but not decisive for transfer of immoveable property as per the provisions of Section 2(47) of the Act. Therefore, non-registration of the document does not act to debar from ownership. In support of his contention, he has relied upon the decision of the jurisdictional High Court in the case of Zuari Estate Dev. & Invest. Co. P. Ltd., [139 Taxmann 209 (Bom)] and submitted that the Hon'ble High Court held that for a transaction to amount to transfer within the meaning of Section 2(47), the minimum requirements are that there has to be an agreement between parties, it should be in writing, signed by the parties, it should pertain to transfer of property and the transferee should have taken possession of the property. The ld. AR has submitted that all these conditions are satisfied in the case of assessee when the assessee received full consideration and handed over the possession of the property in question vide agreement/possession received dt. 15-03-2004. He has also relied upon the decision in the case of Raj Rani Devi Ramna (201 ITR 1032) as well as decision of Hon'ble Gujarat High Court in the case of Balkrishna Harivallabhdas, Arundhati Balkrishna Vs. CIT (138 ITR
245).
5. On the other hand, ld. Departmental Representative (DR) has submitted that the alleged possession received is not an agreement and therefore the conditions as required u/s. 2(47) and more specifically under Section 53A of Transfer of Property Act are not satisfied. Therefore, on the basis of the alleged agreement/possession received, it cannot be said that the transaction of transfer was completed on 15-03-2004. The ld. DR has also questioned the validity of the said possession receipt as it was not properly executed. He has relied upon the orders of the authorities below and submitted that the assessee has not furnished any proof that the sale of the property in question was shown in the AY 2004-05. He has further submitted that ITA No. 853/Mum/2012 6 Mrs. Sherbanoo A. Patel in the Deed of Transfer dt. 11-03-2008, the possession was stated to be handed over at the time of execution of the said Deed and not at the time of the alleged possession receipt. Therefore, in the absence of any written agreement and disclosure of the transaction by the assessee, it cannot be accepted that the transfer of the property in question took place in the AY 2004-05.
6. We have considered the rival submissions as well as perused the relevant material on record. The solitary question arise for consideration and adjudication in respect of Ground No.1 is whether the receipt of full sale consideration and the alleged transfer of possession vide Agreement cum Possession receipt dt. 15-03-2004 constitutes a deemed transfer as per the provisions of Section 2(47) of the Act. Section 2(47) of the Act contemplates various modes of transfer including the deemed transfer in the definition of 'transfer' in case of immoveable property. As per Clause-v of Section 2(47), the deemed transfer is completed when the conditions as prescribed u/s. 53A of the Transfer of Property Act are fulfilled. Section 53A of Transfer of Property Act does not itself talks about the transfer or conditions of the transfer but it provides protection to the Transferee of any immoveable property by a written contract, the terms of which constitute the transfer and can be ascertained with reasonable certainty and the Transferee as part performance of the contract taken the possession of the property. It also contemplates that the Transferee has performed or willing to perform his part of contract then even the said contract though required to be registered, has not been registered and transfer has not been completed in the manner prescribed otherwise by law, the Transferor is barred from enforcing against the Transferee any right in respect of property other than the right expressly provided by the terms of the Contract. Once the provisions of Section 53A of the Transfer of Property Act are satisfied as per the meaning of Section 2(47)(v) of I.T. Act, a capital asset is deemed to have been transferred. This mode of transfer though in the ITA No. 853/Mum/2012 7 Mrs. Sherbanoo A. Patel absence of a properly executed Transfer Deed as otherwise required by law, does not amount to transfer of title, but protects the right of the Transferee to get the contract enforced. However, under the provisions of Section 2(47)(v) it amounts to transfer of a capital asset being immoveable property. It is pertinent to note that the Transfer Deed registered on 11-03-2008, also includes the receipts containing the details of the receipt through various cheques as under:
Date Cheque No. Bank Amount
24-09-2003 750146 DCB Bank 3,00,000.00
01-10-2003 750147 DCB Bank 3,00,000.00
09-10-2003 750148 DCB Bank 5,00,000.00
27-10-2003 750149 DCB Bank 3,00,000.00
27-02-2004 750150 DCB Bank 2,00,000.00
15-03-2004 818501 DCB Bank 3,90,000.00
Total: 19,90,000.00
The total consideration agreed and shown in the Deed of Transfer is Rs. 19,90,000/- which was received by the assessee on various dates up to 15-03-2004. Thus, it is un-disputed fact that the entire sale consideration as agreed by the parties was received up till 15-03-2004 and therefore the parties negotiated and agreed for the transaction of sale and purchase of the property in question between 24-09-2003 to 15-03-2004 when the final payment of sale consideration was received by the assessee and the possession of the property in question was handed over vide possession receipt dt. 15-03-2004. The authorities below have not disputed the receipt of consideration through cheques as mentioned in the receipt and therefore it is manifest from the record that the assessee received the full consideration and for performance of her part, the possession of the property was handed over to the purchaser on 15-03-2004. Though the possession receipt is not duly executed agreement between the parties, however, when the receipt of total consideration is not in dispute then, the transfer of possession by the written document coupled with the facts that the possession was transferred after receiving the full consideration satisfies the condition of deemed transfer within the meaning of ITA No. 853/Mum/2012 8 Mrs. Sherbanoo A. Patel Section 2(47)(v) of the Act. The Transfer Deed on the basis of which the AO has assessed the Capital Gain in the year under consideration is in furtherance of the transaction of transfer of possession against the receipt of full sale consideration on 15-03-2004 and therefore, the execution of Registered Deed of transfer is only the performance of the respective part of the parties to the contract. It further shows that the parties were willing to perform their respective part of contract. The Registered Deed of Transfer further exhibits the acknowledgment of the intention of the parties in the year 2003-04 for transfer of Property and receipt of full consideration. It is settled proposition of law that what is material is the substance and contents of the document and not the form or nomenclature. There is no change or modification either in relation to sale consideration or in respect of the transfer condition from 15-03-2004 to 11-03-2008. Therefore, the Deed of Transfer dt. 11-03-2008 does not de-hors the transfer of possession and receipt of full consideration as on 15-03-2004 but the same is in furtherance of the earlier transaction of transfer of possession and receipt of consideration to complete the requisite requirement as per law for enforciable title of the property in question.
7. In view of the facts and circumstances as discussed above, we hold that the transaction of deemed transfer within the meaning of Section 2(47)(v) of the I.T. Act was completed by 15-03-2004 when the assessee received the full sale consideration and also handed over the possession of the property vide possession receipt dt. 15-03-2004. Accordingly, we set aside the orders of the authorities of below qua this issue and allowed the claim of the assessee.
8. Ground No.2 is regarding dis-allowance of Stamp Duty and Registration charges for deduction u/s. 54. The assessee was also owner of Flat No. 7A, 7th Floor situated at 111, M.K. Road, Churchgate, Mumbai in Sherbanoo Co-operative Housing Society. The said residential flat was sold by executing the Deed of Transfer dt.
ITA No. 853/Mum/20129 Mrs. Sherbanoo A. Patel 07-12-2007 for sale consideration of Rs. 4 Crores. Out of the total sale consideration of Rs. 4 Crores, the assessee made payment of Rs. 1.75 Crores vide two separate agreement for purchase of 2 flats bearing Nos. A-701 and B-701 situated at 28, Souter Street, Mumbai. The purchase price of Flat Nos. A-701 and Flat No. B-701 are Rs. 87,86,000/- and Rs. 87,14,000/- respectively. The payments were made on 17-12-2007 and 12-12-2007. However, the Deed of Transfer for purchase of the flat was executed on 22-10-2010. The expenses of Rs. 9,76,000/- was incurred towards Stamp Duty and Registration charges by the assessee. The assessee claimed deduction u/s. 54 of the Act towards the purchase price of the property at Rs. 1.75 Crores + Rs. 9,76,000/- for Stamp Duty and Registration charges aggregating to Rs. 1,84,76,000/-. The AO noted that the assessee failed to produce any evidence that Rs. 9,76,000/- which were deposited in the scheme, therefore, the said amount does not qualify for any deduction u/s. 54 of the Act. The deduction u/s. 54 was restricted by the AO to Rs. 1.75 Crores only. On appeal, CIT(A), has confirmed the dis-allowance made by the AO.
9. Before us, ld. AR of the assessee has submitted that the purchase consideration along with Stamp Duty and Registration charges were claimed u/s. 54 as it was a composite cost of the new house purchased by the assessee. He has further contended that as per the provisions of Section 54, the total cost of new house is to be apportioned towards the Capital Gain which in case of the assessee includes Stamp Duty and Registration charges. He has referred the provisions of Section 54 and submitted that once the new asset has been purchased, the provisions of Section 2 do not come into pay and the total cost of the new asset is to be considered.
10. On the other hand, ld. DR has relied upon the orders of the authorities below and submitted that the amount of Rs.9,76,000/- was not incurred by the assessee within the time period prescribed ITA No. 853/Mum/2012 10 Mrs. Sherbanoo A. Patel under provisions of Section 54 towards purchase of the new asset. Further, the assessee has also not deposited the said amount in the Capital Gain Bank A/c. Therefore, the assessee failed to comply with the provisions of Section 54.
11. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the expenditure on Stamp Duty and Registration charges of Rs. 9,76,000/- was incurred by the assessee for purchase of the new house but the said expenditure was incurred after the expiry of the time as prescribed u/s. 54 of the Act. It is to be noted that to meet out such a situation and circumstances, the sub-Section 2 of Section 54 facilitates the alternative remedy to the assessee to deposit un-appropriated amount of Capital Gain, in the Capital Gain A/c as per the scheme notified by the Government, which is likely to be incurred by the assessee for acquisition of the new asset. We do not agree with the contention of the assessee that once new property is acquired by the assessee within the prescribed period as per the provisions of Section 54(1), then, the subsequent expenditure incurred in respect of Stamp Duty and Registration which is necessary for acquisition of the property the provisions of sub-Section 2 of 54 would not be applied. If this contention of the assessee is accepted, then the purpose and objective of the provisions of Section 54 to apportion and utilize the Capital Gain within the prescribed period would be defeated. Hence, we do not find any error of illegality of the orders of the authorities below. Hence, the same is upheld.
12. Ground No.3 is regarding dis-allowance of expenses in computing the Capital Gain on sale of residential property. The assessee while calculating the Capital Gain arisen from the sale of Flat No. 7A, 7th Floor situated at 111, M.K. Road, Churchgate, Mumbai has deducted the following expenses under the head 'Transfer Expenses':
ITA No. 853/Mum/201211 Mrs. Sherbanoo A. Patel Transfer Expenses:
Repairs - Rs. 12,76,780/-
Brokerage - Rs. 4,50,000/-
Transfer Expenses - Rs. 1,50,000/-
In order to verify the genuineness of these expense, AO issued notices u/s. 133(6) to M/s. Asiana Constructions and Shri Shashank Joshi with regard to repair expenditure and brokerage which were received back with the postal remark 'not known'. This fact was brought to the notice of the assessee and accordingly, the assessee was asked as to why these expenses should not be dis-allowed for computing the Capital Gain. The assessee vide letter dt. 29-11-2010, submitted that these expenses were instrumental to the sale transaction. AO further observed that the invoice copy of brokers show that Mrs. Aruna Sunil Mishra and Mrs. Meghana Harish Khanduri resides at Kalwa, Thane Dist and therefore what kind of services these alleged brokers could have provided to the assessee for the property sold at Church Gate.
Accordingly, in the absence of satisfactory evidence, these expenses were dis-allowed by the AO while computing the taxable Long Term Capital Gain. On appeal, CIT(A) has confirmed the action of the AO.
13. Before us, ld. AR of the assessee has submitted that these expenses were incurred by the assessee in relation to the transfer of the premises in question therefore the same are deductible as per the provisions of Section 48 of the Act by computing the Capital Gain. As regards the transfer charges of Rs. 1,50,000/-, the ld. AR has submitted that the said charges were paid to the Co-operative Housing Society by a an a/c payee cheque and therefore the genuineness of this payment cannot be doubted. As regards the brokerage charges of Rs. 4,50,000/- the ld. AR has submitted that there were three people who were paid the brokerage on sale of the property. All were paid through account payee cheques for which the Bank Statements were produced before the AO. The confirmation along with the respective PAN numbers were also furnished with respect to all the three ITA No. 853/Mum/2012 12 Mrs. Sherbanoo A. Patel brokers. The ld. AR has further submitted that Income Tax return filed for the respective income being shown was also given by one of the brokers. Thus, the ld. AR has contended that the only reason for dis-allowance of the said expenses was that one of the brokers paid to appear before the AO in response to the notice issued u/s. 133(6) of the Act. The finding of the AO is contrary to the fact and record. He has contended that supporting proof of rendering of services were submitted when the invoice/bills of the brokers were very much on record. In support of his contention, he has relied upon 159 ITR 78 and 239 CTR 78 and submitted that when the assessee has furnished the correct address, confirmation along with the PAN numbers and proof of filing of return of income showing the income in question, then the assessee has discharged his onus of proving the genuineness of the transaction. If the brokers have not appeared before the AO, then the burden cannot be shifted on the assessee. As regard the repair charges of Rs. 12,76,000/-, the ld. AR of the assessee submitted that this amount was paid to M/s. Ashiana Constructions to make the said property fit for use. The complete bill of the said party describing the total work completed by him was given to the AO. The majority of the payments were made by account payee cheques. Even cash payments were supported by withdrawl from bank, which too were on record of the AO. The AO dis-allowed these expenses because the party failed to appear in response to the notice issued u/s. 133(6). Once the assessee has filed the relevant details and material in support of the claim as well as the particulars of the party, then the assessee has discharged the onus of proving the claim. The ld. AR has submitted that until and unless contrary is proved by the AO, the claim of the assessee cannot be dis-allowed.
14. On the other hand, ld. DR has submitted that the assessee failed to prove that the actual services were rendered by the brokers which apparently is not feasible when the two of the brokers belongs to Thane District and the transaction of the sale took in respect of the ITA No. 853/Mum/2012 13 Mrs. Sherbanoo A. Patel properties situated in South Mumbai. He has referred the order of the CIT(A) and submitted that the brokerage of Rs. 4,50,000/- was allegedly paid to 3 brokers where as all the 3 invoices were generated on the same computer though 3 persons reside at different addresses. The CIT(A) has also take note of the fact that the same type of mistake occurring in all the 3 invoices where the brokerage is mis-spelt. As far as the repair charges are concerned, the only evidence submitted by the assessee is copy of bill and the genuineness of the same is challenged by the AO. Therefore, the assessee failed to prove the genuineness of the expenses incurred when the party did not appear before the AO. As regards the society charges, the ld. DR has submitted that the CIT(A) has observed that this amount was paid by the assessee as a donation to the society therefore, the same is not deductible expenditure.
15. We have considered the rival submissions as well as the relevant material on record. As regards brokerage charges paid to the 3 different brokers, the CIT(A) has brought out on record that all three receipts were taken from same computer having the identical mistakes. Though, this itself is enough to create a doubt about the genuineness of the payment and services rendered by the brokers, however, the assessee produced the respective PAN numbers and confirmation of the brokers on the basis of which the AO could have examined the genuineness of the transaction. Since the AO has not proceeded with the further enquiry, after receiving back the notice un- served and disallowed the claim solely on the ground that the parties did not respond to notice u/s. 133(6) as the notices could not be served on the parties. The case may be different when the notices have been duly served on the parties and then the parties failed to appear or otherwise did not submit the satisfactory explanation. In the case in hand when the assessee has furnished the PAN number, confirmation and invoice/receipts then, without bringing on record anything to rebut or contrary to the evidence produced by the ITA No. 853/Mum/2012 14 Mrs. Sherbanoo A. Patel assessee, the dis-allowance by the AO is not justified. As regards the repair expenditure, the assessee filed the bills of the party, who has carried out the repair in the premises. The majority of the payments were stated to have been made by account payee cheques which is not disputed by the AO. The AO dis-allowed the claim of assessee on the ground that the said party did not appear and the notice u/s. 133(6) received back with the remarks 'not known'. It appears that this issue has not been properly examined and the AO stops his enquiry when the notice issued to the party was received back. Accordingly, in the interest of justice, we remit this issue to the record of the AO to re- consider after verification of the relevant evidence to be filed by the assessee.
16. Payment of Transfer charges to the Society: The assessee claimed that these are transfer charges paid to the society necessary for transfer of property in question. However, it is evident from receipt filed by the assessee, that the payment was towards the donation to the society. Accordingly, we do not find any error in the order of the CIT(A) while confirming the dis-allowance. On this account, since this payment of Rs. 1,50,000/- to the society is clearly a donation as evident from the receipt dt. 12-12-2007.
As a result, appeal filed by the assessee is Partly Allowed.
Order pronounced in the open court on 28-02-2013 Sd/- Sd/-
( P.M. JAGTAP ) ( VIJAY PAL RAO )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai,
Date 28th February, 2013
TNMM
ITA No. 853/Mum/2012
15 Mrs. Sherbanoo A. Patel
Copy to:
1. Appellant
2. Respondent
3. The concerned CIT (A)
4. The concerned CIT
5. DR "E" Bench, ITAT, Mumbai
6. Guard File
(True copy)
By Order
Asst. Registrar,
Income Tax Appellate Tribunal,
Mumbai Benches, Mumbai