Income Tax Appellate Tribunal - Mumbai
Ito 17(2)(4), Mumbai vs Harsha Jitendra Sanghavi, Mumbai on 9 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " F" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM
MA No.15/Mum/2017
(Arising in ITA No. 6732/Mum/2012 for AY 2008-09)
MA No.34/Mum/2017
(Arising in ITA No. 6731/Mum/2012 for AY 2008-09)
&
ITA No.6732/Mum/2012
(A.Y:2008-09)
ITA No.6731/Mum/2012
(A.Y:2008-09)
ITO 17(2)(4) Mrs. Harsha Jitendra Sanghavi
2nd Floor, R.No.220, Shri Jitendra Pranlal Sanghavi
Piramal Chambers, 7, Padmavati Sadan. 270,
Lalbaug, Parel, Mumba i Vs. Deodhar road Matunga (C. Rly)
Mumbai-400 019
PAN No. AAKPS2977C
PAN No. AAEPS6366D
Appellant .. Respondent
Co No.288/Mum/2013
(Arising in ITA No. 6732/Mum/2012 for A.Y:2008 -09)
Co No.289/Mum/2013
(Arising in ITA No. 6731/Mum/2012 for A.Y:2008 -09)
Mrs. Harsha Jitendra Sanghavi Vs. ITO 17(2)(4)
Shri Jitendra Pranlal Sanghavi 2nd Floor, R.No.220, Piramal
7, Padmavati Sadan. 270, Chambers, Lalbaug, Parel,
Deodhar road Matunga (C. Rly) Mumbai
Mumbai-400 019
PAN No. AAKPS2977C
PAN No. AAEPS6366D
Appellant .. Respondent
Revenue by .. Shri Saurabh Kumar Rai, DR
Assessee by .. Shri Vijay Mehta, AR
Date of hearing .. 14-07-2017
Date of pronouncement .. 09-08-2017
MA Nos. 15& 34/Mum/2017
ITA Nos.6731&6732/Mum/2012
CO Nos. 288 & 289/Mum/2013
Mrs. Harsha Jitendra Sanghavi &
Shri Jitendra Pranlal Sanghavi
ORDER
PER MAHAVIR SINGH, JM:
By way of this two Misc. Applications, of different assessee's, the Revenue has requested for recalling of the order to be decided on merits as the Tribunal in this ITA Nos. 6731 & 6732/Mum/2012 and Co Nos. 288 & 289/Mum/2013 for the AY 2008-09 order dated 01-01-2016 dismissed Revenue's appeal on the ground of law tax effect. It was contended in the Misc. Application that in both the cases, the Revenue effect in both the appeals of Revenue is more than 10 lakhs. Hence, the order should be recalled and to be decided on merits. On this, the learned Counsel for the assessee has not contested the issue for recalling of the order and fairly agreed that the order be recalled.
2. However, the learned Counsel for the assessee requested that the issue is squarely covered and can be decide at the first instance. We have recalled orders for both the years. Hence, we took up the appeals and will decide the issue on merits for which the learned SR. DR has not objected to the proposal.
3. The only issue in these appeals in ITA No. 6731 and 6732/Mum/2012 and CO Nos. 288 & 289/Mum/2013 for the AY 2008-09, in the case of two different assessee's, is as regards that the assessment of amount received by the assessee in lieu of development agreement. The AO assessed the same as capital gains and CIT(A) deleted the same. The Revenue has raised identical worded grounds in both the cases and even the quantum is same. We will take the facts and grounds from ITA No. 6731/Mum/2012 in the case of Harsha Jitendra Sanghavi and will decide the issue. The relevant grounds raised by the Revenue i.e. ground Nos. 1 to 5 reads as under: -
"'1. On the facts and in the circumstances of the case and in law, the 14. CIT(A) erred in holding that Page 2 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi no long term capital gain would be chargeable on the sale consideration of Rs.37,00,0001- received by the assessee in cash on transfer of property Padmavati Sadan' by following decisions of Hon'ble Supreme Court in the case of B.C. Sreenivasa Shelly reported in 228 ITR 294 (SC) which is decided on 19.02.198 11 and Hon'ble I7'AT in the case of Ishvarlal Manmohandas Kanakia Vs. ACIT (ITA No. 2765/Mum/2010) without appreciating that the facts of these cases differentiated with that of the assessee's case as decisions cited relates to chargeability of capital gain on goodwill, whereas the present case is based on transfer of right in property.'
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no long term capital gain would be chargeable on the sale consideration of Rs.37,00,0001- received by the assessee in cash on transfer of property 'Padmavati Sadan' by following decision of Hon'ble Supreme Court in the case of B.C. Sreenivasa Shetty reported in 128 IT!? 294 (SC) without appreciating the fact that the said case was decided by the Hon'ble Supreme Court on 19.02. 1981 and thereafter there was amendment in section 45 w.e.f. 01.04. 1988 by introducing sub- section (5) wherein Explanation I is clarification to section that cost of goodwill is taken NIL for the purpose of working the capital gain.'
3. Without prejudice to the grounds taken in (1) & (2) above, on the facts and in the circumstances of the case and in law, the Lat. C!T(A) has further erred in holding that there would be no LTCG Page 3 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi chargeable on the transfer of property 'Padmavati Sadan' to the developer for redevelopment on the - ground that the cost of improvement to the property by way of additional FSJ cannot be ascertained and hence, the computation mechanism fails without appreciating the fact that the cost of right in the old building was determinable and thereby contradicting his own findings that the consideration received by the appellant is for the transfer of his right in the old building as well as in the additional ES! available for construction of new building.'
4. 'On the facts and in the circumstances of the case and in law, the 14. CTT(A) has erred in holding that there would not be any long term capital gain on the estimated cost of construction of flat, office, stilt parking area amounting to Rs. 12,03,3331- as this is part of the total consideration for transfer of assessee's right in the property without appreciating the fact that the cost of construction was worked out on the basis of estimates of Rs. 2,200/- per sq.ft. given by the developers itself and even if the consideration is received in kind, it becomes taxable under the head capita! gain.'
5. 'On the facts and in the circumstances of the case and in law, the 1.4. CIT(A) has erred in holding that non refundable advance rent of Rs. 9,00,000/ -
received was part and parcel of the total consideration for transfer of property and cannot be taxed under the head income from other sources and also there is no long term capital gain on this amount without appreciating the fact that this amount was - received by the assessee for meeting the expenses towards temporary alternate Page 4 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi accommodation during the period of construction and development of the property and the assessee has not yet incurred any expenditure on rent for alternate accommodation and even if assessee incurs rental expenditure that expenditure would amount to application of money."
4. Briefly stated facts are that the assessees, i.e. Smt. Harsha J. Sanghavi had acquired 1/3rd share in the plot No.270 of Dadar Matunga Estate along with building standing known as 'Padmavati Sedan' from his aunty Kalavati B Sanghavi through Madhukar Kuverf I yore & Surendra Laxrnidas Chheda vide agreement dated 14th December, 2001. The said Kalavati B. Sanghavi acquired the right in the above plot on 26.07.1965 along with her sisters in laws Shanta Nagindas Sanghavi and Padmavati P. Sanghavi. The building is very old and entire FS1 of said plot area utilized / consumed and no further extension in the building is possible as on 23.10.1964. Mrs. Kalavati B Sanghavi had sold her share to Madhukar Kuveji Vora & Surendra Laxmidas Chheda on 01.11.2000. But this transfer was contested by Utkal Sanghavi in the court and the City Civil Court at Bombay granted interim relief by staying the said transfer. However, the settlement was arrived out of the court between the assesse and Madhukar Kunverji Vora, Surendra Laxmidas Chheda and Kalavati B. Sanghavi by which 1/3rd share was assigned to the assessee vide agreement dated 14.12. 2001. This is a very old plot and the building was constructed prior to 1964 where entire FSI was consumed. This building contains 19 units out of which 4 residential units admeasuring about 2000 sq. ft. and two commercial units admeasuring about 800 sq. ft. are occupied by the assessee and other joint co-owners. The State Government introduced the policy of giving FSI for redevelopment of cessed buildings in the year 1984. In the year 1991 Government framed development control regulation. Under these Regulations, the Rule No. 33(7) was formed for redevelopment of cessed buildings in the island city Page 5 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi of Mumbai and the provisions of the Policy of 1984 were incorporated in it. However, there was no encouraging response to this scheme from the tenants/landlords. Hence, the Government formed a Committee under the Chairmanship of Shri Sukhtankar, who, submitted the Report of the Sukhtankar Committee, the Government in the year 1999 amended the Development Control Regulation 33(7). The brief highlights of the amended Development Control Regulation 33(7) are as follows:
''In case of redevelopment of 'A' category cessed buildings (constructed before 1940) undertaken by the landlord or Cooperative Housing societies of landlord or occupiers, the total FSJ shall be 2.5 of the gross plot area, or the FSI required for rehabilitation of existing occupiers plus 50% incentive FSI for free sale. Also the policy enables rehabilitation of all occupants on some plot, reducing social dislocation.''
5. Pursuant to DC Control Registration 33(7), the FSI of this plot is increased from 1.33 to 2.5 as per the new regulations adopted by State Government during the period from 1984 to 1999. The assessee along with other family members vide agreement dated 24.09. 2007 agreed to transfer development rights of the said building for a total consideration of Rs.37 Lakhs (1/3rd share of Rs. 1. 11 crores). The assessee claimed exemption from capital gain tax on receipt of Rs.37 laths. The assessee before AO claimed that there is no cost to the assessee for increase in F.S.I. because State Government has increased the F.S.I. through legislation i.e. Development Control Regulation Act, 1991 in order to provide accommodation to more people of Mumbai. Since there is no cost incurred or paid against increase of F.S.I. by the assessee, the said consideration of Rs. 37 lakhs is not chargeable to tax, as held as Hon'ble Supreme Court in the case of CIT v. B.C. Srinivasa Setty (1981) 128 ITR
294. The court held that when an asset has no cost of acquisition, the gains of sale or transfer of same cannot be brought to tax. But the AO Page 6 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi assessed the same as capital gains. Aggrieved, assessee preferred appeal before CIT(A).
5. The CIT(A) allowed the claim of the assessee by observing in Para 4.10 to 4.16 as under:-
"4.10 I have carefully considered the facts of the case, arguments of the AO and the written submissions of the AR of the appellant. Regarding additional grounds of appeal filed by the appellant on 19-4-2012. the AO, in his remand report, has not raised any objection to the admission of the said additional grounds of appeal. It is seen that the adjudication of the additional grounds of appeal does not require any enquiry into new facts, as all therelevant facts on the issue are already on record. In the case of NTPC Ltd. V/s CIT, 229 hR 353 (SC), the Hon'ble Supreme Court has held that a legal ground can be raised at any stage of appeal. Both the additional grounds raised by the appellant are legal grounds, which can be adjudicated on the basis of the facts already on record. Hence, following the decision of NTPC Ltd. Vs CIT (Supra), both the additional grounds of appeal are admitted for adjudication.
4.11 Coming to the issue of taxability of the amount of Rs. 37 lacs received by the appellant from the developer in connection with transfer of all rights in the property 'Padmavati Sadan', in which appellant has 113'd share, the appellants original contention, which was agitated before the AO as well as in the original grounds of appeal before the CIT(A), that the amounts were received from the developer towards transfer/sale of only additional FSI is not Page 7 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi acceptable. The development agreement speaks of redevelopment of the old building 'Padmavati Sadan' by demolishing the old structure and construction of a new building, wherein the appellant would get a fiat, office space as well as parking space of similar area as was being occupied in the old building. Clause '1' of the development agreement provides that the existing building would be demolished and the new building would be constructed by utilizing the FSI contemplated in the agreement. Clause-2(f) of the development agreement provides that if the FSI is available in excess of 2.5 in respect of the said property after the date of entering of the development agreement, their excess FS] beyon3.5 shall be divided between the owners and the developers equally. Hence, in this case there is a transfer/sale of the old property for redevelopment of a new property with FSI of 2.5 as against the earlier FSI of 1.33 fully consumed by the old structure of 'Padmavati Sadan', and the consideration received by the appellant is for the transfer of his right in the old building as well as in the additional FSI available for construction of the new building. Therefore, the appellant's submission that the consideration was received onl for transferal additional FSI is rejected.
In the additional ground of appeal the appellant has contended that as the appellant has not incurred any cost of improvement to the properly against the increase of FSI from 1.33 to 2.5, no Long Term Capital Gain (LTCG) can be computed by applying the ratio of decision of Hon'ble Supreme Court in the case of CIT Vs BC Sreenivasa Setty. 128 ITR 294 Page 8 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi (SC). In support of the additional grounds of appeal, the appellant has relied on the decision of Hon'ble TAT. Mumbai in the case of lshverlal Manmohandas Kanakia Vs ACIT Circle 12(1) in TA No.2550/Murn12010 and the decision of Hon'ble Bombay High Court in case of Evan Fraser & Co.
Ltd. Vs CIT, Bombay City-11 (137 hR 493).
4.13 In the case of lshvartal Manmohandas Kanakia Vs ACIT (Supra), where similar issue was involved, the Hon'bhe liArs decision is quoted below-
in the case of the Assesses entitlement of floor space index was FSI 1.00 in normal course as per Regulation 32 of the Regulations i.e., tight to construct 8400 Sq If of built up area. As a receiving plot owner in forms of Regulation 14 of the Regulations, the Assessee had a tight to load another 8400 Sq, ft of built up area The tight as receiving plot owner is a right which accrued to the Assessee by vitae of the Regulations in the year 1991 Thus this tight was improvement to the *capital asset' held by the Assesses. This right could not be acquired by paying a price The tight to normal FSI has cost of acquisition whereas the right as a receiving plot owner winch is an improvement to the capital asset held by the Assesses has no cost of acquisition nor can it be purchased by paying a pnce Therefore it *S not possible to compute capital gain by giving any value for the cost of improvement to the capital asset held by the Assessee has laid down by the Hon'ble Supreme Court in the case of B C. Snreivas' Shetty (supra) under Sec. 48 of the Act which provides the mode of computation of capital gain vz., deducting from the full valve of the Page 9 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi consideration received or accruing as a result of the transfer of the capital asset 'The cost of acquisition of the capital asset cost of improvement of the capital asset" the asset contemplated in sac 45 of the Act is on asset which possesses the inherent quality of being available on the expenditure of money to a person seeking to acquire it The tight as owner of a receiving plot to load TDR on a plot of land is a tight to which cannot be acquired by just paying money. Therefore, there can be no cost of improvement Sec. 45 which is the charging section and Sec 48 which is the computation provision together constitutes on integrated code. Mien there is a case to which the computation provisions cannot apply at all, such a case to as not intended to fall within the charging section in such a case when the asset is sold and the consideration is brought to tax, what is charged is the capital value of asset and not any profit or gain Thus the charge to capital Bin itself will fail and nothing can be brought to tax."
4.14 In the case of Evan Fraser & Co. Ltd Vs CIT, Bombay City-11 (137 hR 493), The Hon'ble Bombay High Court has held that the income chargeable to capital gains tax is to be computed by deduction from the full value of the consideration 'Cost of acquisition of the capital assets and cost of any improvement thereto". Since the cost of improvement of goodwill cannot be ascertained, gains arising on its transfer would not be liable to tax u/s 12B of I.T Act 1922. While arriving at the above decision, the Hon'ble Bombay High Court Loose sheet submissions marked has relied on the Page 10 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi decision of Honble Supreme Court in the case of CIT Vs BC Sreenivasa Setty 128 ITR 294 (SC).
4.15 The case of ITAT read with decision of Bombay High Court squarely applies to the case of the appellant. As the additional FSI amounts to cost of improvement to the property "Padmavati Sadan", which was acquired by the appellant because of his rights in the old property and the said additional FSI would not otherwise be available to the appellant by spending money, the cost of improvement to the property by way of enhanced FSI cannot be ascertained. Hence, following the earlier mentioned two decisions of Hon'ble Bombay High Court and Hon'ble ITAT, Mumbai, ¶ am of the view that the decision of Hon'ble Supreme Court in the case of B.C. Sreenivasa Setty (supra) would be applicable to the appellant's case. Therefore, there would be no LTCG chargeable on transfer of the property 'Padmavati Sadan' to the developer for redevelopment as the computation mechanism fails. amount of Rs.37,00,000/- received by the appellant from the developer is not liable to LTCG. Similarly, the amount of Rs.12,03,3331 - added by the AO to the total consideration for transfer on account of cost of new flat, office space and parking space is also not liable to LTCG on the same reasoning as this amount of Rs.12,03,333/- is part of the total consideration for transfer of appellant's right in the property.
4.16 Coming to the issue of chargeability of Rs. 9,00,000/- received by the appellant from the developer towards meeting expenses for alternate accommodation during construction of the new Page 11 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi property, I am inclined to accept the appellant's alternate contention that the said amount was received in connection with transfer of the property, as this amount is received as per clause-2(d) of the development agreement towards rent for alternate accommodation and, therefore, the amount received for the said purpose is nothing but a part and parcel of the total consideration for transfer of property. Hence, the AO has erred in assessing the said amount of Rs9,00,000/ - under the head "Income from other sources". The appellant's other claim that the amount of Rs.9,00,000/- is not at all taxable, as the said amount is to be incurred towards rent for alternate accommodation, is not tenable. Firstly. the appellant has not incurred during this year any expenditure on rent for alternate accommodation. Secondly, even if some rental expenditure is incurred by the appellant on alternate accommodation after vacating the old premises, that expenditure would amount to application of income. Therefore, I hold that the amount of Rs, 9,00,000/- is to be included in the total consideration for computation of LTCG on transfer of the property "Padmavati Sadan' However, as I have already held that there would be no LTCG on transfer of the appellant's share in the property "Padmavati Sadan', there would be no LTCG on this amount of Rs.9,00,000/-."
Aggrieved, Revenue came in second appeal before Tribunal.
6. Before us, the learned Sr. DR relied on the assessment order. On the other hand, the learned Counsel for the assessee stated that the issue is squarely covered in favour of assessee by the decision of Hon'ble Page 12 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi Bombay High Court in the case of CIT vs. Chemosyn Ltd., Mumbai in Income Tax Appeal No. 361/2013 dated 11-02-2015
7. We have heard rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee had acquired 1/3rd share in plot no. 270 of Dadar Matunga Estate along with building standing known as 'Padmavati Sadan' from his aunty Shantaben Sanghavi through Madhukar Kuverji Vora and Surendra Laxmidas Cheda vide agreement dated 14.12.2001. The balance shares were held by other co-owners who are family members of the assessee. The assessee entered into an agreement dated 25.09.2007 with the developer, Shri Shantilal Jain and others whereby the assessee along with other co-owners agreed to give full and complete development rights to the developers to develop the said property by demolishing the existing structure standing on the said property. The assessee along with other co-owners received Rs. 1,11,00,000/- (1/3rd share of each co-owner as consideration and Rs. 27,00,000/- (1/3rd share of each co-owner ) as rent compensation. The assessee along with other co-owners will be getting
(i) permanent alternate residential accommodation on ownership basis of 2000 sq. ft (ii) two stilt parking area (iii) one open car parking space in the compound of said building (iv) permanent alternate office accommodation on ownership basis of 800 sq. ft. The power of attorney was executed on 25.10.2007. We find from the facts of the case that the assessee took a stand that no capital gain arose out of the above transaction. The AO was of the view that the assessee had transferred the development rights and was liable to capital gain tax in the current year. Before the lower authorities it was contended that no cost was incurred by assessee for the additional FSI received by it from the State Government and since there is no cost paid by assessee, the computation mechanism fails and the assessee would not be liable to capital gains tax. Reliance was placed on the decision of the Hon'ble Supreme Court in case of CIT v. B.C. Srinivasa Shetty 128 ITR 294. But the AO held that as per the Page 13 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi agreement the assessee has transferred complete development rights to the builder and there is no transfer of additional FSI as claimed by assessee. He accordingly calculated the capital gain tax and made the addition to the income of the assessee. We find that this issue was raised by the assessee in the cross objections filed before the Hon'ble Tribunal, the assessee has raised grounds challenging that there is no transfer of capital asset in the form of land and building during the year as possession of property was not given to the developer. Further, the assessee has not received any real income from the impugned redevelopment agreement for land and building.
8. We find that the assessee entered into an agreement dated 25.09.2007 with the developer, Shri Shantilal Jain and others whereby the assessee along with other co-owners agreed to give full and complete development rights to the developers to develop the said property by demolishing the existing structure standing on the said property. As the developer did not take due steps for development of property in accordance with development agreement dated 25.09.2007, the assessee along with other co-owners vide letter dated 04.10.2011 decided to terminate the agreement dated 25.09.2007 and also revoked the power of attorney dated 25.10.2007 executed in favor of developers. The developers filed an arbitration petition before the Hon'ble Bombay High Court against the termination of agreement. The Hon'ble Bombay High Court vide order dated 01.12.2011 rejected the ad-interim relief claimed by developer but directed the assessee and other co-owners to deposit Rs.1,38,00,000/-in Court prior to entering into any development agreement with third party. Pursuant to this order, the assessee and other co-owners deposited the said amount before the Registrar of Hon'ble Bombay High Court on 22.12.2011. A suit for specific performance was filed by the developer pleading for relief in motion that the above agreement was valid, subsisting and binding on assessee. The Hon'ble Bombay High Court vide order dated 19.11.2012 decided the Page 14 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi issue in favour of assessee. Subsequently the order of the single member judge declining relief in motion was challenged in appeal before the division bench. The matter was disposed off vide order dated 23.09.2013 wherein the Hon'ble Court decided the issue in favour of assessee since the developer had not taken any steps to fulfill their obligations as per the agreement. The assessee entered into another development agreement cum deed of assignment of lease with another developer Voleta Developers Pvt. Ltd on 22.12.2011 assigning and transferring their right, title and interest in impugned property for Rs. 1,38,00000/-. From the above agreement it is clear that the assessee had only given a license to developer to enter the property but no possession was given to assessee and since no possession of land or building was given to the developer, there is no transfer of any property u/s 2(47) of the Act. This argument was raised before CIT(A) and a remand report was called for from the AO, who in the remand report has not objected to the facts stated hereinabove. The AO in the remand report has stated that the property has been transferred in the current year but only the developer has changed and hence the capital gain has been correctly taxed in this year. We find that the fact is that the agreement entered into with the original developer dated 25.09.2007 was cancelled and a fresh agreement dated 22.12.2011 was entered into with the new developer. Hence, it cannot be said that the old agreement still exists and continues only with change in name of developer. The AO would not have arrived at this conclusion if fresh development agreement would have entered into at much higher consideration and moreover he has not denied the fact that the possession of the property was not handed over to the developer.
9. In the given facts and circumstances, we are of the view that the assessee entered into a new development agreement cum deed of assignment of lease with another developer Voleta Developers Pvt. Ltd. on 22-12-2011, which is falling in AY 2012-13 and not in the relevant AY Page 15 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi 2008-09. It is also a fact that the assessee has not parted with the possession of the property till date or has not handed over the possession of the property to the new developer and even the new agreement, which is obviously subject to outcome of litigation has not been acted upon. According to us, the liability for capital gain would arise only in the year in which possession is given and this view of ours is supported by the decision of Hon'ble Bombay High Court in the case of CIT vs. Geetadevi Pasari in Income Tax Appeal No. 861/2017 dated 10- 07-2008, wherein Hon'ble Bombay High Court held as under:-
"4. In the aforesaid Judgment, this Court had clearly taken a view that in the relevant Assessment year for the purpose of computation of capital gains will be the Assessment year in which the assessee was actually physically put in possession and in the instant case, there is no dispute that though the agreement was entered into on 29th March, 1994, the assessee was put in possession only in the year 10th April, 1998.
5. In view thereof, the assessee will be liable for being assessed for capital gains only in the assessment year 1999-00. Under these circumstances we do not find any substantial question of law involved in the above Appeal. The Appeal is devoid of merits and the same stands dismissed."
10. In view of the above decision of Hon'ble Bombay High Court in the case of Geetadevi Pasari (supra), and the fact of the case that no transfer of property took place during the FY relevant to the AY 2008-09 and no possession was handed over to the developer and ultimately the agreement between the assessee and the developer, the assessee cannot be held to be liable for capital gain tax liability. Accordingly, both Page 16 of 17 MA Nos. 15& 34/Mum/2017 ITA Nos.6731&6732/Mum/2012 CO Nos. 288 & 289/Mum/2013 Mrs. Harsha Jitendra Sanghavi & Shri Jitendra Pranlal Sanghavi the Revenue's appeals are dismissed. Since we have dismissed the appeals of Revenue on merits, the COs of the assessee are also dismissed being academic.
11. In the result, both the MAs of Revenue are allowed but appeals of Revenue are dismissed and the COs of the assessee are also dismissed.
Order pronounced in the open court on 09-08-2017.
Sd/- Sd/-
(RAJESH KUMAR) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 09-08-2017
Sudip Sarkar /Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy//
BY ORDER,
Assistant Registrar
ITAT, MUMBAI
Page 17 of 17