Income Tax Appellate Tribunal - Mumbai
Devanand Chaturvedi, Navi Mumbai vs Department Of Income Tax on 21 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "D",
MUMBAI
BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI T.R.SOOD (A.M)
ITA NO.6343/MUM/2009 (A.Y. 2006-07)
The ITO 22(2)1, Mumbai Shri Devanand Chaturvedi,
Room No.419, 4th Floor, 61, Green Garden Apartment,
Tower No.6, Vashi Rly. Station Vs. Acharya Nagar, Deonar,
Complex, Vashi, Mumbai 400 088
Navi Mumbai 400 705 PAN: AABPCT 8871A
(Appellant) (Responent)
Appellant by : Shri G.P.Trivedi
Respondent by : Shri Piyush Chaturvedi
Date of hearing : 21/09/2011
Date of pronouncement : 28/09/2011
ORDER
PER N.V.VASUDEVAN, J.M,
This is an appeal by the revenue against the order dated 23/9/2009 of CIT(A)-33, Mumbai relating to assessment year 2006-07. The grounds of appeal raised by the revenue read as follows.
"1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs. 15.57 lakhs made by the AO on account of Long Term Capital Gain from sale of property without appreciating the fact that the assessee was holding 50% share in the property along with his brother as per sale agreement and both the owners have entered in to sale agreement with the purchaser and hence the resultant Long Term Capital Gain was taxable in his hands.
2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) failed to appreciate the facts that the Assessing Officer has rightly treated the gift as an invalid gift since gift declaration was not registered with the Sub-Registrar and as per Transfer of Property Act, the gift was incomplete unless the ownership / right of the property is transferred from one person to another."2 ITA NO.6343/MUM/2009 (A.Y. 2006-07)
2. The facts and circumstances giving rise to the present appeal by the revenue are as follows.
The assessee is an individual. He is a Chartered Accountant by profession. For assessment year 2006-07 he filed a return of income declaring total income of Rs. 3,87,969/-. In the course of assessment proceedings the AO on the basis of annual information report came to know that the assessee and his brother Mr. N.K.Chaturvedi were the joint owners of a property at Kurla, Mumbai and had sold part of the property during the previous year for a sale consideration of Rs.55.00 lacs. The AO further noticed that the assessee had not declared long term capital gains on sale of the property representing his half share. When the assessee was confronted with the above facts the assessee explained that it was true that the assessee had sold alongwith his brother Mr. N.K.Chaturvedi the property at Kurla for a consideration of Rs. 55,08,000/-. The assesse also submitted that the property was jointly purchased in the name of his brother Mr. N.K.Chaturvedi and the assessee. At the time of purchase the assessee had made a payment of Rs. 4,77,625/-. It was further submitted that the assessee was content with receiving a sum of Rs. 5.00 lacs. The assessee submitted that there was a family arrangement whereby it was agreed that the assessee will give up his rights to his share of the property that was sold after receiving the amount which was actually given by the assessee at the time of purchase of the property. It was also submitted that the family settlement was arrived at somewhere in April 2005 and pursuant to the said family arrangement assessee had given up his share of right, title and interest over the property in favour of his brother Mr. N.K.Chaturvedi. The assessee also submitted that Mr. N.K.Chaturvedi had declared capital gain on sale of the properpty after excluding the sum of Rs. 5.00 lacs received by the assessee and the same has been accepted by the revenue. It was thus argued that the capital gain in question has already been taxed in the hands 3 ITA NO.6343/MUM/2009 (A.Y. 2006-07) of Mr. N.K.Chaturvedi and cannot be again brought to tax in the hands of the assessee in respect of the half share of the sale consideration.
3. The AO did not accept the plea of the assessee. According to him the family arrangement pleaded by the Assessee could not be accepted because the assessee's brother, N.K. Chaturvedi, has incurred heavy long term capital loss in the shares and the long term capital gain on sale of property was set off against capital loss on sale of shares. According to the AO if the Assessee did not have any rights over the property because of the family arrangement then there was no need to sign the instrument of transfer by which the property was sold. According to the AO pursuant to the family arrangement there was no mutuation of N.K.Chaturvedi's name as owner of the property in public documents, municipal or other Government authorities. According to the AO there was no valid transfer of Assessee's interest over the property in favour of N.KChaturvedi. For the above reasons, the AO that the Assessee has deliberately and with malafide intention prepared a story and evaded the tax on sale of property. The AO held that the assessee Used colourful device to defraud the revenue. The AO referred to the decision of the Hon'ble Supreme Court in the case of Mc Dowell & Co. Ltd. Vs. CTO 1985 (154 ITR 148) and held that tax planning may be legitimate provided it is within the framework of law. According to him colourful devices cannot be part of tax planning and it was wrong to encourage or entertain the belief that it was honourable to avoid payment of tax by resorting to dubious method. The AO therefore brought capital gain pertaining the Assessee's share to tax as follows:
4 ITA NO.6343/MUM/2009 (A.Y. 2006-07)The LTCG from sale of property is computed @ 50% share of property sold i.e. .. Rs.27,50,000/-
Less: Indexed cost = 477625 x 497 .. Rs. 11,92.862/-199
Long Term Capital GaIn .. Rs.15,57,1381-
=============
Accordingly LTCG of Rs.15,57,1381- was added to the income.
4. On appeal by the assessee the CIT(A) held that the entire capital gain had already been taxed in the hands of the assessee's brother and, therefore, there was no question of tax avoidance. The CIT(A) also held that the family arrangement pleaded by the assessee was bona fide and that it does not require any registration or conveyance. The CIT(A) also held that the AO has not held that the documents submitted by the assessee was not genuine but proceeded only on the basis that same was not legal. The CIT(A) also held that the assessee signed the conveyance deed to give a clear title to the purchaser and that will not be a ground to hold that the assessee had right, title or claim over the property. The CIT(A) held also that as laid down in several judicial pronouncements family arrangements entered into for the purpose of resolving family disputes which is voluntarily and not induced by fraud, coercive or undue influence does not require registration. In this regard the CIT(A) relied on the decision of the Hon'ble Supreme Court in the case of Kale & Others vs. Dy.Director of Consolidation AIR 1976 SC 807. The CIT(A), therefore, held that the action of the AO in brining long term capital gains to tax in respect of half share in the hands of the assessee was not proper and the same was directed to be deleted.
4. Aggrieved by the order of the CIT(A) the revenue is in appeal before the Tribunal.
5 ITA NO.6343/MUM/2009 (A.Y. 2006-07)5. We have heard the submissions of the ld. D.R, who relied on the order of the AO. We are of the view that the order of the CIT(A) does not call for any interference. The transfer giving rise to the capital gain in question had taken place on 31/3/2006. The instrument of transfer by which the property was sold is no doubt executed by both the Assessee and his brother N.K.Chaturvedi. Even prior to the sale of the property, as early in April, 2005, there was a family arrangement between the Assessee and his brother N.K.Chaturvedi. The Assessee and N.K.Chaturvedi, were sons of late Shri B. N. Chaturvedi. N.K.Chaturvedi and the Assessee were owners of one half share each of the residential property situated at 64, Green Garden Apartments, Acharya Nagar, Deonar, Mumbai 400 088, (hereinafter referred as said bungalow no 64). This is property which was sold giving raise to capital gain the chargeability of which is in dispute in this appeal. While acquiring the said bungalow N.K.Chaturvedi had contributed Rs. 5,67,625/- and the Assessee had contributed Rs 4,77,625/-. There was another house in the same society i.e. bungalow No.61, Green Garden Apartments, Acharya Nagar, Deonar, Mumbai 400 088, which is owned by Mr. B.N. Chaturvedi and Mrs. Ramavati Chaturvedi jointly, who were the parents of the Assessee and Mr.N.K.Chaturvedi. Mr.N.K.Chaturvedi as legal heir had a share in bungalow No.61. Prior to acquiring bungalow no. 64, the family consisting of the Assessee, N.K.Chaturvedi and another brother and their family together with the parents lived in bungalow no. 61. However after acquisition of bungalow no. 64 N.K.Chaturvedi with his family shifted to bungalow no. 64 whereas the Assessee and the other brother Mr. Vivekanand along with their family and the parents continued to reside in bungalow no. 6. Since N.K.Chaturvedi was residing at 64, Green Garden Apartments, Acharya Nagar, Deonar, Mumbai 400 088, which is jointly owned by him and the Assessee and since the Assessee and the other brother Vivekanand Chaturvedi were residing in 61, Green Garden Apartments, Acharya Nagar, 6 ITA NO.6343/MUM/2009 (A.Y. 2006-07) Deonar, Mumbai 400 088, the other property owned by the parents, it was decided, after death of the parents, it was decided that the Assessee and Mr.N.K.Chaturvedi would realign their interest in the two bungalows. It was agreed that the Assessee will given up his rights over Bunglow No.64 in favour of N.K.Chaturvedi and in return N.K.Chaturvedi would return to the Assessee the principal amount contributed by him of Rs. 4,77,625/-at the time of purchase of the property. In turn N.K.Chaturvedi gave up his rights over Bunglow No.61 in favour of the Assessee so that he can continue to reside there without any hassle whatsoever.
6. The above family arrangement was entered sometime prior to 11/4/2005 and these facts have been affirmed in an affidavit dated 11/4/2005 by Mr. N.K.Chaturvedi. The law is well settled that family arrangement entered into with a view to resolve family disputes, which is bonafide, voluntary and not induced by fraud, coercion or undue influence does not require registration. Such family arrangements by itself would convey right, title and interest in immovable property without any further requirements. Thus when the property was sold on 31/3/2006, the assessee had no right whatsoever in the property but was entitled to receive only the contribution made by him at the time of purchase of the property. In the sale deed dated 31/3/206 by which the property was sold the fact that the assessee was paid Rs. 5.00 lacs (which is in accordance with the family arrangement) is duly recorded. Though the sale deed does not refer to the family arrangement it is clear from the circumstances that the assessee received only Rs. 5.00 lacs which is duly recorded in the sale deed, that the family arrangement had been acted upon. It is also seen that Mr. N.K.Chaturvedi had offered the entire capital gain on sale of the property to tax and has been taxed on such capital 7 ITA NO.6343/MUM/2009 (A.Y. 2006-07) gain. In these circumstances we are of the view that the order of the CIT(A) does not call for any interference. We, therefore, confirm the order of the CIT(A) and dismiss this appeal by the revenue.
6. In the result, the appeal by the revenue is dismissed.
Order pronounced in the open court on the 28th day of Sept., 2011.
Sd/- Sd/- (T.R.SOOD ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated. 29th Sept.2011
Copy to: 1. The Appellant 2. The Respondent 3. The CIT City -concerned
4. The CIT(A)- concerned 5. The D.R"D" Bench.
(True copy) By Order
Asst. Registrar, ITAT, Mumbai Benches
MUMBAI.
Vm.
8 ITA NO.6343/MUM/2009 (A.Y. 2006-07)
Details Date Initials Designation
1 Draft dictated on 21/9/11 Sr.PS/PS
2 Draft Placed before author 22/9/11 Sr.PS/PS
3 Draft proposed & placed JM/AM
before the Second Member
4 Draft discussed/approved by JM/AM
Second Member
5. Approved Draft comes to the Sr.PS/PS
Sr.PS/PS
6. Kept for pronouncement on Sr.PS/PS
7. File sent to the Bench Clerk Sr.PS/PS
8 Date on which the file goes to
the Head clerk
9 Date of Dispatch of order