Income Tax Appellate Tribunal - Hyderabad
Dr. Hridaya Mohan Lal, Hyd, Hyderabad vs Assessee on 13 January, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD "B " BENCH, HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI
SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.351/Hyd/2011
Assessment Year: 2005-06.
Dr. Hridaya Mohan Lal, -v- The ITO, Ward-6(2),
Banjara Hills,Hyderabad. Hyderabad.
PAN:AAOPL8178N
(Appellant) (Respondent)
Appellant by Shri A.V. Raghu Ram
Respondent by Shri Solgy Jose T Kottaram
Date of Hearing 08-11-2014.
Date of pronouncement 07-o1-2014
ORDER
PER SAKTIJIT DEY, J.M:
This appeal filed by the assessee is directed against the order dated 13-1-2011 of CIT (A)-IV, Hyderabad passed in appeal No.704/ ITO 6(2)/CIT(A)-IV/09-10 pertaining to the assessment year 2005-06.
2. The assessee in the memorandum of appeal has raised 5 effective grounds relating to the issue of taxability of capital gain in the impugned assessment year. In addition to the main grounds, the assessee has raised two additional grounds at the time of hearing of appeal.
3. We will first deal with the main grounds. Briefly stated the facts are, the assessee is an individual. For the assessment year under dispute the assessee filed his return of income on 1-8-2005 declaring total income of Rs.10,97,210. During the scrutiny assessment proceeding for the assessment year 2006-07, the Assessing Officer noticed that the assessee had shown sale consideration of Rs.1,11,00,000/- from sale of property at 12-13- 2 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad 1271, Tarnaka, Hyderabad and computed long term capital gain of Rs.73,22,658/-. At the same time, the assessee also claimed exemption u/s 54 of the Act towards purchase of a flat at Noida. The Assessing Officer however was of the view that capital gain pertained to the assessment year 2005-06. He therefore issued a notice u/s 148 of the Act reopening the assessment for the impugned assessment year. During the assessment proceedings the Assessing Officer issued a notice to the assessee requiring him to show cause as to why transfer should not be held to have occurred in financial year 2004-05 as the sale deed was registered on 17-12-2004 and 20-2-2006. The assessee in his reply submitted that on 17-12-2004 only GPA was registered and the actual sale deed was registered on 20-2-2006 after payment of balance consideration of Rs.30.50 lakhs. After receiving assessee's reply, the Assessing Officer sought clarification from the SRO on the issue of registration being done twice. The SRO in his letter dated 16-12-2008 clarified that the document No.459/06 executed on 17-12-2004 was kept pending under section 47A of Indian Stamp Act, 1899 for determination of market value and stamp duty to be paid thereon. The Collector, who is the Distt. Registrar determined the market value of the property and the deficit stamp duty of Rs.11,01,645/- was collected and document was registered and returned to the party. He further clarified that as per sec.47 of the Registration Act, 1908, the registered document operated from the date of its execution on 17-12-2004. In addition to the aforesaid clarification received from SRO, the Assessing Officer further noted that a particular clause in the sale deed provided for handing over the possession of the property on payment of balance amount of Rs.50,000 but at the same time it mentions transfer of clear title by way of absolute sale to the purchaser.
3 ITA No.351 /Hyd/2011Doctor Hridaya Mohan Lal, Hyderabad
4. As per the terms of the sale deed the assessee has also authorised the purchasers to undertake the survey, demarcation, leveling and making plans, architectural designs etc. The agreement further provided that the purchasers were conferred all rights, title and interest therein and permitted to divide ownership among 1. M/s. Shanta Sriram Constructions Pvt. Ltd., 2. M/s Sunrise Homes Limited, 3. T. Ashok Kumar and 4. D. Suman. This, according to the Assessing Officer would not be possible without extinguishment of rights of the assessee in the property. The Assessing Officer further noted that more than 99% out of the consideration of Rs.1.11 crore was received by the assessee leaving behind a paltry sum of Rs.50,000/-. On the basis of the aforesaid facts, the Assessing Officer concluded that there is a transfer within the meaning of sec. 2(47)(v) during the year under consideration and computed capital gain accordingly.
5. Being aggrieved of the assessment order, the assessee preferred an appeal before the CIT (A). The CIT (A) also upheld the view of the Assessing Officer by observing that though part of the payment might have been paid belatedly but as per sec. 47 of the Registration Act, 1908 agreement of sale cum GPA is operative from the date of its execution i.e., 17-12-2004. The CIT (A) held that the GPA extinguished all the rights, title and interest of the assessee in the property.
6. The CIT (A) further referring to the agreement of sale cum GPA observed that the said agreement also authorizes the purchaser to undertake survey, demarcation, leveling planning, architecturally designing and determining the structural specification. It also authorizes to seek additional supply of electricity, water supply and sewerage connection required for the proposed building, as also obtaining sanction of plans from Municipal Corporation of Hyderabad. The agreement also authorizes to undertake construction by demolishing the existing 4 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad structure at their own cost and expenses. He further noted that the fact that in terms with the agreement of sale cum GPA, the assessee also handed over all copies of link documents relating to the said property to the purchaser and the four purchasers also decided the manner in which the ownership of the schedule property was to be divided among them. The CIT (A) further noted that by way of said agreement, the assessee also authorized the purchasers to enter into agreements of sale for the scheduled property or any part thereof and to execute sign and present for registration the sale deed for a conveyance and indentures, inter alia conveyed the whole or any part of the scheduled property with or without built up areas. The agreement also provided that the purchasers were received an appropriate sale consideration, advances, rent and other monies and acknowledge and pass receipts therefore from the buyers, lessees and other persons, entering into any kind of transaction in respect of the said property. The purchasers were also entitled to apply for mutations of ownership in concern records of assessments in favour of the prospective purchaser as also to borrow loans, rise advances from any financial institution or banks or private agencies. On considering the argument as a whole, the CIT (A) concluded that though the assessee had in fact transferred all his rights and title in the property under reference, for the mere stipulated balance of Rs.50,000/- it is claimed that the possession was to be delivered after such payment is made.
7. The CIT (A) noted that the agreement makes it clear that the assessee in effect given possession of the property concerned at the time of agreement of sale cum GPA on 17-12-2004 itself. The CIT (A) was of the view that even though as per item No.3 on page No.7 of the possession of the scheduled property will be delivered at the time of original sale deed but it is clear that the assessee has transferred the property at the time of execution of 5 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad the said agreement of sale cum GPA itself in view of the promise of the purchasers to pay the consideration of Rs.1,11,00,000/-. In view of such promise and performance of purchasers, the assessee did not make any effort to rescind the agreement and accepted the consideration stipulated in the agreement in a manner different from that stipulated in the agreement. The CIT (A) further held that the fact that the possession of the property was given to purchasers was also evident because of the fact that the purchasers had been allowed to undertake number of activities thereon which could not have been possible in the absence of possession. The CIT (A) further noted that though the assessee claimed that possession was given later but no substantial evidence could be furnished by the assessee to establish the fact that the purchaser exercised any such rights only after 27-3-2006 when the possession was allegedly given to them. The CIT (A) relying upon a decision of the Authority for Advance Ruling in the case of J S. Sarkaria (294 ITR 196) and a decision of the Income- tax Appellate Tribunal Chennai Bench in case of Kalanidhi (122 TTJ
405) finally concluded that there was a transfer in terms of section 2(47)(v) of the Act and accordingly sustained the view of the Assessing Officer in taxing the capital gains in the impugned assessment year.
8. The learned AR submitted that the agreement of sale cum GPA dated 17-12-2004 is nothing but a document for a sale transaction. The learned AR submitted that on the date of execution of agreement on 17-12-2004 the assessee only received an amount of Rs.70 lakhs thus; the purchaser has not paid the full consideration on the date of execution of agreement f sale cum GPA. The learned AR further submitted that no other condition of the agreement of sale cum GPA was fulfilled until the registration was made on 27-2-2006. The learned AR submitted that the possession of the property was only handed over to the purchaser on 27-3-2006. In this 6 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad context, the learned AR referred to the possession certificate given by the Purchaser, a copy of which at page 39 of the paper book. To substantiate his claim that the full consideration was not received at the time of execution of agreement of sale cum GPA the learned AR referred to a confirmation letter of M/s Shanta Sriram Construction Pvt. Ltd. at page 40 of the paper book. The learned AR submitted that the NOC for the project was also given by the Government on 5-4-2008. The learned AR referring to the Municipal Tax receipt, a copy of which is at 45 of the paper book, and water charges payment receipt submitted that these receipts would prove that the transfer of the property has not taken place in the financial year 2004-05. The learned AR referring to section 54 of Transfer of Property Act, submitted that in case of immovable property, transfer is not complete unless possession of the property is delivered to the purchaser. The learned AR submitted that since no action in terms of the agreement of sale cum GPA was undertaken by the purchaser during the financial year 2004-05 and since the possession was also not delivered to the purchaser, it cannot be said that transfer in terms of section 2(47)(v) of the Act has taken place during the financial year 2004-05. In support of such contention,. The learned AR relied upon a decision of ITAT, Hyderabad Bench in the case of K. Radhika V/s. DCIT(47 SOT180).
9. The learned Departmental Representative, on the other hand, submitted that not only the agreement of sale cum GPA was executed on 17-12-2004 and presented before the SRO but the assessee also received almost 99% of the sale consideration from the purchaser leaving aside a paltry sum of Rs.50,000/-. It was submitted that the terms of the agreement of sale cum GPA also made it clear that the ownership of the property has been transferred to the purchaser. The learned Departmental Representative submitted that the possession certificate given by the purchaser stating that the possession was handed over on 27-3-2006 is only an afterthought to defer the tax liability. The learned Departmental Representative submitted that when the assessee has 7 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad executed the agreement of sale cum GPA and has received almost entire sale consideration, effectively there is a transfer within the meaning of section 2(47) of the Act in the impugned assessment year. In support of such contention, the learned Departmental Representative relied upon the following decision:-
i) Mali Florex Limited V/s. DCIT 19 ITR (Trib.) 791
10. We have considered the submissions of the parties and perused the materials on record as well as the orders of the revenue authorities. The issue before us is whether the capital gain from sale of property arises during the impugned assessment year or in assessment year 2006-07, as claimed by the assessee. It is not disputed that the assessee has entered into an agreement of sale cum GPA with the purchasers on 17-12-2004 and the said document was presented for registration before the SRO. It is also a fact, which is also pretty much evident from the agreement of sale cum GPA a copy of which is at page-5 of the paper book submitted by the assessee, that on the date of execution of the agreement of sale cum GPA the assessee has received almost the entire sale consideration of Rs.1,11,00,000/- leaving aside a balance of Rs.50,000/- only. The recital at page-6 of the said agreement of sale cum GPA also makes it clear that on receipt of the consideration the assessee conveys, transfers, assigns and grants by way of absolute sale to the purchasers the title over the scheduled property. Clasuse-2 at 7 of the agreement also authorizes the purchasers to undertake the survey demarcation, leveling and kae plans, architectural designs, determine the structural specifications and do such other ancillary acts and deeds for construction of the property. Therefore reading of the agreement as a whole gives an impression that the assessee has transferred his right over the property in terms with agreement of sale cum GPA. This becomes further clear from the fact that the agreement of sale cum GPA was presented before the SRO for registration on 17-12-2004 and the registration of the document was 8 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad deferred till 20-2-2006 only because the market value of the property for stamp duty purposes was pending for determination before the District Registrar, Hyderabad and on payment of deficit stamp duty of Rs.11,01,645 the document was registered and returned back to the party. This fact as clarified by the SRO vide his letter dated 16-12-2008 which has been extracted in the assessment order has not been controverted by the assessee. It clearly establishes the fact that there was a transfer of the scheduled property by the assessee to the purchaser for all intent and purposes on 17-12-2004 i.e. during the financial year 2004-05. This coupled with the fact that almost the entire sale consideration was received by the assessee on the date of execution of agreement of sale cum GPA on 17-12-2004 also give credence to the fact that the agreement of sale cum GPA was acted upon. It may be a fact that some of the cheques issued by the purchasers bounced as a result of which the assessee could realise an amount of Rs.80.50 lakhs during the financial year 2004-05 and balance Rs.30.50 lakhs was received subsequently in financial year 2005-06, but that does not in any way dilute the fact that assessee had received the consideration on the date of execution of the agreement and conveyed the property to the purchaser. The certificate issued by the purchaser acknowledging taking possession of the property on 27-3-2006, in the given circumstances, is only a self serving document without having much importance. So far as the payment of municipal tax is concerned, a perusal of the same makes it clear that only after receipt of the notice u/s 148 of the Act the assessee had paid the municipal tax on 9-7-2009 to create an evidence in its favour to show that he was still in possession of the said property.
11. The Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia V/s. CIT (260 ITR 491) held that date of delivery of actual possession cannot be the sole indicator to decide "transfer".If the contract read as a whole indicates passing of or 9 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad transferring of control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability. The ITAT, Hyderabad Bench in case of K. Radhika V/s. DCIT (41 SOT 180) also expressed similar view by holding that if the joint development agreement is acted upon by the developer by performing his part of the contract, then the date of agreement would be considered as the date of transfer. In the case before us, the agreement of sale cum GPA read as a whole coupled with the fact that substantial portion of the sale consideration was paid to the assessee on the date of agreement of sale certainly proves that there has been a transfer within the meaning of section 2(47)(v) of the Act during the financial year 2004-05. The assessee has not been able to prove the contrary by producing supporting evidence which could establish that there was no act on his part to convey, transfer, assign the title of the property to the owner by way of absolute sale as mentioned in the agreement of sale cum GPA dated 17/12/2004. In this view of the matter, we are not inclined to accept the contention of the assessee and accordingly uphold the order of authorities below in charging the capital gain in the year under dispute. The grounds raised are therefore dismissed.
12. The assessee has also raised the following two additional grounds:-
I) On the facts and in the circumstances of the case the learned Assessing Officer and learned CIT(A) failed to appreciate that the appellant is entitled to claim deduction u/s 54F of the I T Act as the sale proceeds were invested in the purchase of new flat at Noida well within the time prescribed under sec. 139(4) of the IT Act. The learned Assessing Officer and CIT(A) failed 10 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad to follow the law laid down by the jurisdictional Tribunal in the case of Chalasani Srionivas in this regard.
ii) The learned A.O and the learned CIT(A) erred in not allowing the deduction of Rs.5 lakhs claimed by the appellant which amount was paid by the appellant to his sisters as compensation for obtaining their consent for the transfer of asset. The authorities below failed to appreciate that since the said expenditure is connected to transfer, the same ought to have been allowed as deduction."
So far as the additional ground No.1 relating to deduction u/s 54F is concerned, it is the contention of the learned AR that the assessee had invested the sale consideration received in purchase of a new flat at Noida by investing an amount of Rs.73,50,000/-. The learned AR further submitted that since the assessee had shown the capital gain in the assessment year 2006-07, he had also claimed deduction u/s 54F of the Act in the return filed for that assessment year. However, since the Assessing Officer has held the capital gain to be chargeable to tax in the assessment year 2005-06, he should also have considered the assessee's claim u/s 54F of the Act as the sale proceeds were invested in the purchase of new flat well within the time prescribed u/s 139(4) of the Act. In support of such contention, the learned AR relied upon the following two decisions of ITAT, Hyderabad Bench:-
1) ITA NO.277/Hyd/2012- dated 29-6-2012 in case of ACIT V/s. Sri T.C. Ashok
2) ITA No.717/Hyd/08 dated 11-7-2008 in case of Chalasani Srinivas V/s. ITO 11 ITA No.351 /Hyd/2011 Doctor Hridaya Mohan Lal, Hyderabad
13. The learned Departmental Representative, on the other hand, submitted that since the assessee has not made any claim of deduction u/s 54F of the Act in the return filed for the impugned assessment year, no deduction can be allowed.
14. We have heard the submissions of the parties and perused the materials on record. A perusal of the impugned assessment order makes it clear that the Assessing Officer has himself mentioned that the assessee has claimed deduction u/s 54F of the Act in the return filed for the assessment year 2006-07. However, the Assessing Officer has held the capital gain to be chargeable to tax in the impugned assessment year i.e. 2005-06. Therefore, while computing the capital gain for the impugned assessment year, the Assessing Officer is required to allow all deductions and benefits permissible under the provisions of the Act and which the assessee is eligible to get. Therefore, if the assessee is eligible for deduction u/s 54F of the Act, the same can be considered by the Assessing Officer. Since the aforesaid issue was neither raised before the Assessing Officer nor the CIT(A) and was raised for the first time before us, we consider it appropriate to remit the issue back to the file of the Assessing Officer who shall decide the same in accordance with law after affording a reasonable opportunity of being heard to the assessee.
15. Ground No.2 of additional ground raised by the assessee is with regard to claim of expenditure of Rs.5 lakhs being the amount paid by the assessee to his sisters as compensation for obtaining their consent for transfer of assets.
12 ITA No.351 /Hyd/2011Doctor Hridaya Mohan Lal, Hyderabad
16. We have heard the submissions of the parties and perused the material on record. It is the contention of the assessee that an amount of Rs.5 lakhs was paid as compensation to his sisters for obtaining their consent for transfer of asset which should have been allowed as expenditure. However, from the discussions made by the CIT(A) in paragraph 8 and 9 of the order it becomes clear that the declarations from his sisters were obtained prior to 17-12-2004 whereas the payment Rs.5 lakhs was made by the assessee only on 2-4-21006. Further, the assessee was not able to substantiate with supporting evidence that the amount of Rs.5 lakhs was paid to his sisters on account of compensation to them for obtaining the sworn declaration. In aforesaid view of the matter, we do not find any infirmity in the order of the CIT(A) which is accordingly confirmed.
17. In the result, the appeal of the assessee is treated as partly allowed for statistical purposes.
Order pronounced in the court on 07-01-2014.
Sd/- Sd/-
(CHANDRA POOJARI) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad,
Dated the January, 2014.
Jmr*
Copy forwarded to:-
1. C/o Sri K. Vasant Kumar, A.V. Raghu Ram, Advocates, 610, 6th
Floor, Babukhan Estate, Basheerbagh, Hyderabad.
2. ITO, Ward-6(2), Hyderabad.
3. CIT (A)-IV, Hyderabad.
4. CIT-III, Hyderabad.
5. The Departmental Representative, ITAT, Hyderabad.
13 ITA No.351 /Hyd/2011Doctor Hridaya Mohan Lal, Hyderabad