Income Tax Appellate Tribunal - Mumbai
Serena Antoinette Franklin, Mumbai vs Assessee on 25 March, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. 6543/Mum/2011
Assessment Year: 2006-07
Serena Antoinette Franklin ITO- 19(1)(2)
7, Seaspray, 17, Carter Road, R. No. 313 3RD
Khar (W), Mumbai 400 052 Vs. Floor, Piramal
PAN:-AADPF 7202 J Chambers
Mumbai
(Appellant) (Respondent)
Assessee by : Shri Milin K. Mehta
Revenue by : Shri Neil Philip
Date of hearing : 10.03.2015
Date of Order : 25.03.2015
ORDER
PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the Assessee against order dated 20.07.2011, passed by Ld.CIT-30, Mumbai for the quantum of assessment passed u/s 143(3) for the A.Y. 2006-07, mainly on following the grounds:-
"1. On The facts and circumstance of the case in law, the commissioner of Income Tax (Appeal) erred in confirming that capital gain arose to the appellant in respect of the development right of property in the year under appeal.
2. On The facts and circumstance of the case in law, the commissioner of Income Tax (Appeal) erred in confirming that the cost of acquisition of the subject property as nil.ITA No. 6543/Mum/2011
2 Assessment Year: 2006-07
3. Without prejudice the above and on The facts and circumstance of the case in law, the commissioner of Income Tax (Appeal) has erred in confirming the assessment of capital gain of property even though cost of acquisition of property has been taken as nil.
4. Without prejudice to above and n The facts and circumstance of the case in law, the commissioner of Income Tax (Appeal) has erred in confirming that Rs.22,44,720/- is full value of consideration.
5. The appellant pray that addition of Rs.22,44,720/- made in respect of Capital gain may be deleted.
6. The order of the Ld. CIT(A) and the Ld. AO are bad in law and on facts.
Besides this the assessee has also raised following as additional ground:-
"Without prejudice to other grounds in appeal, the learned Assessing Officer erred in fact and in law in not allowing exemption u/s 54F of the Income Tax Act, 1961."
2. Assessee is an individual who has been assessed to tax on capital gains arising on transfer of her 1/4th share in the land given to developer for development rights. The facts arising from the material placed on record are that assessee had acquired her share in the property at Amboli, Andheri (W), owned by her father, who had expired on 19.08.1975. Thereafter, the property devolved upon the mother of the assessee, who continued to be the owner up till her death on 17.03.1989. The said property was then devolved upon the assessee and her two brothers and sister, each having 1/4th share in it. The assessee along with other co-owners of the property, entered into a development agreement with M/s. Build Well Constructions, vide agreement dated 08.03.2000. Under the said agreement the owners allowed the developer to develop the said plot for construction of flats.
ITA No. 6543/Mum/20113 Assessment Year: 2006-07 In view of the said surrender of right, a sum of Rs.80,000/- (Rs. 20,000/- each) was to be paid on the date of execution of the agreement. In addition to above, the developer was also required to provide the co-owners, four flats admeasuring 700 sq. ft. each, free of cost and four garages of 100 sq. ft each. Thus, assessee was entitled for Rs.20,000/- cash and one flat of 700 sq. ft and one garage of 100 sq. ft. Pursuant to the said agreement, the assessee was allotted the flat during the financial year 2005-06 vide deed dated 03.12.2005 on which stamp duty amounting to Rs.7930/- was paid, vide receipt dated 02.12.2005. The assessee did not offer the long term capital gain in the current A.Y. 2006-07. The assessing officer in the course of the assessment proceedings held that assessee was allotted flat during the relevant previous year, vide deed dated 03.12.2005, and stamp duty was also paid on 02.12.2005 therefore, the transfer of the property was completed on 03.12.2005 and hence the long term capital gain will arise in the relevant assessment year. After relying upon the decisions of CIT Vs. Siremal Nawalakha (2001) 251 ITR 108 (SC) and Thulasimani Amnal Vs. CIT (2000) 158 CTR 5 (MAD) he held that the capital gain would be taxable in this year only. He further held that provisions of section 50C are not attracted in this case as the assessee has not sold the property. While computing the long term capital gain, the assessing officer further held that, since the property was acquired from her late parents, therefore, the cost of acquisition would be taken at 'Nil'. Thereafter, he took the market value of the flat as per the ready reckoner and determined the value at Rs.22,22,720/-. Accordingly, the capital gain was worked out in the following manner:-
ITA No. 6543/Mum/20114 Assessment Year: 2006-07 Cost of Acquisition of old flat: NIL The previous owner namely Lydia Crasto, mother of the assessee has received the property by way of inheritance on 19.08.1975 from Mr. Basil Crasto father of the assessee. The asset has been received by the assessee by way of inheritance from her mother viz, Lydiaz Crasto on 17.03.1989. The cost of acquisition of the assetto the previous owner is Nil, hence, applying the provisions of section 49(1)(iii)(a).
Capital Gains-Sale Consideration
(i) Market value of flat having 636 sqft and garage 100 sft Rs.22,22,720 @ Rs.3020/- per sft. as per Ready Reckoner @ 32,500 per sq. mts (copy enclosed for reference) Rs.22,22,720
(ii) Compensation-cash as per terms of development 20,000 agreement Capital Gains Rs.22,42,720
3. Before the first appellate authority, the assessee submitted that the development rights were given to the developer in the year 2000 and consideration of Rs. 80,000/- was received at that time only when the agreement was executed. On the execution of the agreement the co-owners have handed over the physical possession of the said property to the developer, who was entitled to develop the said property freely and the power of attorney was also executed in the favour of the developers to develop the said property. Thus, the transfer itself has taken place in the A.Y. 2000-01 and therefore, same cannot taxed in the A.Y. 2006-07. Reliance was placed on the provisions of section 2 (47)(v) ITA No. 6543/Mum/2011 5 Assessment Year: 2006-07 and section 53A of the Transfer of Property Act, 1883. Regarding cost of acquisition that it cannot be taken at 'Nil', because the property was acquired by the previous owner before 01.04.1981 and therefore, the cost of the previous owner or fair market value of the asset as on 01.04.1981 has to be taken. The assessee submitted Approved Valuer's Report, who had valued the property as on 01.04.1981 at Rs.8,55,950/- However, the Ld. CIT(A), confirmed the action of the AO and held that cost of acquisition of the property has rightly been taken at 'Nil'.
4. Before us, learned counsel for the assessee submitted that long term capital gain cannot be taxed in the A.Y. 2006-07 because the assessee had handed over to the possession to the developer in pursuance of development agreement which was executed on 08.03.2000. Under the said agreement, the rights were transferred to the developer for development of the property. In lieu of that, assessee has also received Rs.80,000/- (along with all the four co-owners). Thus, the capital gain if at all, would be chargeable to tax in the A.Y. 2000-01. Merely because consideration in the form of flat has passed to the assessee in the A.Y. 2006-07, the same cannot be held to be the date of transfer. In support of his contention, he drew our attention to clause 1 to 6 of the development agreement. He further submitted that in the latest decision of the Mumbai High Court in the case of Chemosy Ltd. ITA No. 361 of 2013, vide judgment and order dated 11.02.2015, the Hon'ble Court has distinguished the decision of Chaturbhuj Dwarkadas Kapadia Vs. CIT 260 ITR 491 (Bom) and held that in respect to the piece of land for which a transaction was acted upon, the capital gain would arise on the execution of the development agreement. Catena of other decisions of various Tribunals were also relied upon.
ITA No. 6543/Mum/20116 Assessment Year: 2006-07
5. Regarding cost of acquisition taken at 'Nil' by the AO, he submitted that the property was devolved upon the assessee in succession from her parents. The property originally belonged to her father who had died in the year 1975. Therefore, by virtue of provisions of section 49(1), the cost of acquisition to the assessee shall be considered to be the cost of acquisition to her father. Since the property was acquired prior to 1st April 1981, therefore, the fair market value of the property as on 1st April 1981 is to be substituted. In support of the fair market value as on 01.04.1981, the assessee had filed Registered Valuer's Report, who had determined the cost at Rs.8,55,958/- the indexed cost of which works out at Rs.34,57,157/-. From this value, the assessee's 1/4th share works out to Rs.10,39,989/-. Further in support of his contention, he relied upon the decision of Hon'ble Bombay High Court in the case of Manjula J. Shah reported in (2013) 355 ITR 474 (Mum). Lastly he submitted that the assessee should be granted the benefit u/s 54 F, because, the entire consideration was invested by the assessee in the residential house and if it is held that capital gain has arisen in A.Y. 2006-07, then the benefit of section 54F should be given as the entire consideration has been utilized in acquiring the residential flat.
6. On the other hand, learned DR strongly relied upon the order of the Ld. CIT(A) and submitted that capital gain has rightly been taxed in the A.Y. 2006-07, because the assessee in pursuance of an agreement had received the plot in year 2005, which is evident by the fact that deed for allotment of the flat was made on 03.12.2005 and stamp duty was also paid in this year. Therefore, the capital gain has arising in this year only. Regarding cost of acquisition, he relied upon the order of the Ld. CIT(A). Lastly regarding claim of section 54F, he submitted that the ITA No. 6543/Mum/2011 7 Assessment Year: 2006-07 matter should be restored back to the file of the AO to examine the said issue afresh.
7. We have heard the rival submissions and perused the relevant material placed on record. It is an undisputed fact that the assessee had acquired a share in the property at Amboli, Andheri (W) along with other 3 co-owners from her father. The property was owned by the father who had expired on 19.08.1975 and thereafter, the said property was devolved to assessee's mother, who died on 07.03.1989. After her death the property was devolved upon the assessee and her brothers and sister each having 1/4th share. All the 4 co-owners entered into a development agreement, vide agreement dated 08.03.2000 to develop the property. For such a surrender of rights, the 4 co-owners were entitled to Rs.80,000/- (Rs. 20,000/- each) which was to be received on the date of execution of the agreement and 4 flats admeasuring 700 sq. ft. and 4 garages admeasuring 100 sq. ft. The said flat was allotted to assessee vide registered deed dated 03.12.2005. Thus, the consideration as stipulated in the development agreement was passed to the assessee only in the A.Y. 2006-07. The amount of Rs.80,000/- was mainly to allow the developer to develop the said plot. As per the express terms of the agreement with the developer, the assessee in lieu of surrendering the rights to the developer was entitled for flat admeasuring 700 sq. ft free of cost . Thus, the consideration for the transfer of rights was handing over the flat. This transaction had taken place in the December 2005. Thus, we agree with the contention of the department that the long term capital gain will arise in the A.Y. 2006-07.
ITA No. 6543/Mum/20118 Assessment Year: 2006-07
8. Regarding cost of acquisition, we agree with the contention of the learned counsel that the same cannot be taken at 'Nil', because the previous owner, that is, father of the assessee had acquired the property much before 01.04.1981. Thus the market value as on 01.04.1981 has to be adopted and accordingly the fair market value has to be adopted as on 01.04.1981. This proposition is now well settled in the jurisdiction of Mumbai High Court by the decision of Manjula J. Shah (supra). Since the department has not adopted any fair market value as on 01.04.1981, the fare market value as determined by the registered valuer as on 01.04.1981 appears to be correct. However, the AO shall examine the said value as determined by the registered valuer. Regarding the sale value for the purpose of determination of long term capital gain, the same also needs to be verified because the learned counsel before us has submitted that the stamp valuation authority has determined the stamp value of the flat at Rs.4,43,500/-. Thus, the issue of determination of fair market value as on 01.04.1981 and the sale consideration in the A.Y. 2006-07 is set aside to the file to the AO who shall examine the contention of the assessee, then determine the long term capital gain.
9. Lastly, regarding claim of benefit u/s 54F, it is seen that this plea has not been taken either before the AO or before the Ld. CIT(A). Therefore, being a legal claim, the additional ground raised by the assessee is admitted and the matter is restored back to the file of the AO, who shall examine the same and allow the claim of deduction/benefit in accordance with law. Thus, the ground raised by the assessee is partly allowed for statistical purpose.
ITA No. 6543/Mum/20119 Assessment Year: 2006-07
10. In the result, the appeal filed by the Assessee is partly allowed for statistical purpose.
Order pronounced in the open court on this 25th day of March, 2015.
Sd/- Sd/-
(D.KARUNAKAR RAO) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 25.03.2015
*Srivastava
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR "E" Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.