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Income Tax Appellate Tribunal - Mumbai

Vijay Manikrao Hamilapurkar, Mumbai vs Dcit 21(3), Mumbai on 4 November, 2016

                IN THE INCOME TAX APPELLATE TRIBUNAL
                           "F" Bench, Mumbai

              Before Shri Jason P. Boaz, Accountant Member
                and Shri Amerjit Singh , Judicial Member

                           ITA No. 6048/Mum/2013
                           (Assessment Year: 2010-11)

     Shri Vijay Manikrao Hamilapurkar      D C I T - 21(3)
     1801/A. Somerset CHS Ltd.             Bandra Kurla Complex
                                       Vs.
     Opp. D-Mart, Hiranandani Garden       Bandra, Mumbai 400050
     Mumbai 400076
                            PAN - AABPH3831K
                  Appellant                       Respondent

                     Appellant by:      Shri Rajesh S. Shah
                     Respondent by:     Shri Ranathir Gupta

                     Date of Hearing:       31.10.2016
                     Date of Pronouncement: 04.11.2016

                                   ORDER

Per Jason P. Boaz, A.M.

This appeal by the assessee is directed against the order of the CIT(A)- 32, Mumbai dated 06.08.2013 for A.Y. 2010-11.

2. The facts of the case, briefly, are as under: -

2.1 The assessee, engaged in dealing in leather, filed his return of income for A.Y. 2010-11 on 07.09.2010 declaring total income of `1,09,81,284/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 28.01.2013; wherein the income of the assessee was determined at `2,24,89,670/-. This was in view of the Assessing Officer (Assessing Officer), inter alia, treating the sale of flat at Torino Building as Short Term Capital Gains (STCG) as against the assessee's claim that it was Long Term Capital Gains (LTCG) and consequently disallowing the assessee's claim for exemption under section 54 of the Act.

Shri Vijay Manikrao Hamilapurkar 2.2 Aggrieved by the order of assessment dated 28.01.2013 for A.Y. 2010-11, the assessee preferred an appeal before the CIT(A)-32, Mumbai which was dismissed vide order dated 06.08.2013.

3. Aggrieved by the order of the CIT(A)-32, Mumbai dated 06.08.20123 for A.Y. 2010-11, the assessee has preferred this appeal, raising the following grounds: -

"1. On the facts and circumstances of the case and in law, the Assessing Officer erred in considering the Capital Gain on sale of flats in Torino Building of Rs.2,47,24,250/- as Short Term Capital Gain arrived before the deduction of cost of acquisition instead of treating it as a Long Term Capital Gain as declared by the appellant.

2. On facts and circumstances of the case and in law, the Assessing Officer erred in not allowing the deduction in respect of indexed cost of Rs.79,42,888/- of Torino Flats.

3. On facts and circumstances of the case and in law, the Assessing Officer erred in not allowing the deduction / exemption under section 54 against sale of Torino Flats though investment was made in acquisition of flat in Amanda CHS Ltd. at Thane of Rs. 73,72,315/-.

4. On facts and circumstances of the case and in law, the Assessing Officer erred in not allowing stamp duty of Rs. 4,28,325/-, registration charges Rs.31,640/- and Rs. 4,19,800!- paid for flat at Amenda CHS Ltd., Thane from the Long Term Capital Gain though the payments were made within the permitted time.

5. On facts and circumstances of the case and in law, the Assessing Officer has erred in considering the payments made in respect of purchase of flat of Rs.2,09,95,000/- instead of agreement value of Rs. 2,17,68,600/- for the purpose of exemption under section 54 of the Act in respect of Long Term Capital Gain on sale of Ambrosia flat and hence wrongly disallowed deduction to the extent of only Rs.7,73,600/-.

6. On facts and circumstances of the case and in law, the Assessing Officer has erred in not allowing Rs.19,03,506/- being stamp duty, registration fees payable in respect of Kandivali Flat from Long Term Capital Gain arrived at in respect of sale of Ambrosia flat.

7. On the facts and circumstances of the case and in law, the A.O. erred in initiating penalty proceeding u/s.271(1)(c) of the act though the provisions of the act are not applicable to the facts and circumstances of the case.

8. The appellant craves leave to add, amend, modify, substitute and/or cancel any of the ground of the appeal."

Shri Vijay Manikrao Hamilapurkar

4. Grounds 1 to 3 4.1 In these grounds (supra), the assessee assails the impugned order of the learned CIT(A) in upholding the AO's view that the capital gains of `2,47,24,250/- on sale of the Flat 1280A&B at Torino Building, Powai as STCG instead of as treating it as LTCG as declared by the assessee. The assessee also challenged the orders of the authorities below in holding that no exemption under section 54 of the Act was allowable against the sale of flat at Torino building, Powai even though he had made investment of `73,72,315/- in acquisition of flat in Amenda CHS Ltd., at Thane.

4.2 The facts of the matter was emanate from the records is that in the course of assessment proceedings, the assessee had declared LTCG of `1,67,81,382/- on sale of flat at Torino Building and claimed exemption of `74,11,110/- under section 54 of the Act on account of investment in a flat at Thane. On examination thereof, the AO did not allow the said capital gains of `1,67,81,382/- on sale of the flat at Torino Building as LTCG as declared by the assessee in the return of income and treated the same as STCG for the reason that the said sold property was not held by the assessee for a period of more than 36 months. Accordingly, the AO computed the capital gains at `1,82,01,530/- and brought the same to tax as STCG. Consequently, the exemption under section 54 of the Act in respect of investment in the new flat at Amenda 'B', Hiranandani Meadows, Thane restricted by the AO to `64,92,50/- as against `74,11,110/- claimed by the assessee, was not allowed. This is the subject matter of appeal in the appeal in grounds 1 to 3 (supra).

4.3 At the outset, the learned A.R. of the assessee mentioned that an identical issue had come up for consideration before a Coordinate Bench of the Tribunal in the case of Richa Bagrodia vs. DCIT, wherein the Coordinate Bench in its order in ITA No. 3601/Mum/2012 dated 24.04.2014, following other Coordinate Bench orders, has decided the issue in favour of the assessee, i.e. that the date of allotment is relevant for computation of capital gains. The learned A.R. of the assessee placed strong reliance on the aforesaid orders of the Coordinate Bench of the 4 ITA No. 6048/Mum/2013 Shri Vijay Manikrao Hamilapurkar Tribunal in support of the proportion that the date of allotment is relevant for computation of 'capital gains'.

4.4 Per contra, the learned D.R. placed strong reliance on the orders of the authorities below.

4.5.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited and relied on. The only issue before us to be decided is whether the date of allotment of the flat at Torino Building, i.e. 29.03.2006 (letter of allotment on page 5-6 of paper book) or the date of agreement/registration, i.e. 28.10.206/30.10.2006 should be considered as the date of computing the holding period of 36 months for the said flat sold on 23.10.2009. On a perusal of the cited order in the case of Richa Bagrodia in ITA No. 3601/Mum/2012, we find that an identical issue came up for consideration before the Coordinate Bench of the Tribunal wherein the Coordinate Bench decided the issue on identical facts in favour of the assessee following the decisions of the Hon'ble Gujarat High Court in the case of Anilaben U. Shah 262 ITR 657 (Guj) and of the Coordinate Bench of the Tribunal in the case of Meera A. Hennani in ITA No. 59989/Mum/2010. In its order in the case of Richa Bagrodia (supra), the Coordinate Bench held as under at paras 6 to 8 thereof: -

"6. We heard both the parties and perused the orders of the Revenue Authorities as well as the judgments of the Hon'ble High Court and the decisions of the Tribunal cited by learned representatives of both the parties. The only issue that is to be decided is whether the date of allotment of the flat or the date of possession of the flat by the assessee should be considered as the date for computing the holding period of 36 months. On perusal of the cited orders of the Tribunal (supra), we find that an identical issue came up for adjudication before the Tribunal in the case of Meena A Hemnani (supra), order dated 17th January, 2014 wherein one of us (AM) is a party and the issue was decided in favour of the assessee by relying on various decisions of the Tribunal as well as the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Anilaben Upendra Shah (2003) 262 ITR 657 (Guj). Relevant discussion is given in paras 3 & 4 of the said order of the Tribunal which read as under:

"3. There are couple of issues raised in this appeal. Rest of the grounds raised in the appeal are either consequential or general in nature. Accordingly, they are dismissed as general or consequential.

Shri Vijay Manikrao Hamilapurkar The issues, which need to be adjudicated in this appeal are (i) if the capital gains earned by the assessee are in the nature of the short term as held by the AO or long term capital gains as offered by the assessee in the return. At the outset, Ld Counsel for the assessee mentioned that the assessee purchased a flat vide the allotment letter dated 9.9.2003 from the builder namely Prestige Estates Projects Pvt. Ltd. There was a construction agreement between the parties dated 1.12.2003 and the registered deed of the same was dated on 22.9.2006. The said flat was sold by the assessee to Bennet Coleman & Company on 10.11.2006. The assessee earned capital gains on this transaction and offered the same as long term capital gains reckoning the date of allotment i.e., 9.9.2003 for the purpose of determining the holding period of three years relevant for the long term capital gains. However, in the assessment proceedings, AO considered the date of registration i.e., 22.9.2006 the date of registration and determined the short term capital gains. Therefore, now the issue to be decided by the Tribunal relates to if the date of allotment should be considered for the purpose of computing the said long term capital gains. In this regard, Ld Counsel filed various decisions to suggest that the date of allotment must be considered for the purpose of computing the long term capital gains instead of date of registration. Ld Counsel filed the order of the Tribunal in the case of ACIT vs. Smt. Vandana Rana Roy vide ITA No.6173/M/2011 (AY 2007-2008) dated 7.11.2012, wherein one of us (AM) is a party, and stated that the "date of allotment"

should be reckoned as relevant date for computing the holding period for the purpose of computing the capital gains. In this regard, Ld Counsel brought our attention to para 7 and 8 of the said order of the Tribunal to support his case. The said judgment was decided considering the judgment of the Gujarat High Court in the case of CIT vs. Anilaben Upendra Shah (2003) 262 ITR 657 (Guj) apart from other decisions of the Tribunal in the case of Jitendra Mohan vs. ITO (2007) 11 SOT 594 (Del) and also another decision of the ITAT in the case of Pravin Gupta vs. ACIT and the relevant propositions are extracted in para 7 of the Tribunal's order dated 7.11.2012. The said paras 7 and 8 from the order of the Tribunal in the case of Smt. Vandana Rana Roy read as under:

"7. We have heard both the parties, perused the cited decisions and we find that there is no dispute on the facts. The only issue that is to be decided is whether date of allotment of the flat or the date of possession of the flat by the assessee should be considered as date of holding for computing the holding period of 36 moths. In alternative, the "date of registration" should be the relevant date. On perusal of the said decisions relied upon by the Ld Counsel, we find that the decisions are relevant and applicable to the facts of the present case. The conclusion of the Hon'ble Gujarat High Court judgment in the case of CIT vs. Jindas Panchand Gandhi reads as under:

Shri Vijay Manikrao Hamilapurkar "Assessee having sold the flat allotted to him by a co-operative housing society after a period of 36 months from the date of allotment, capital gains arising to him were long-term capital gains despite the fact that the physical possession of the flat was given to the assessee much later and, therefore he was entitled to deduction from such gains as per law."

7.1 The conclusion of the Hon'ble Gujarat High Court judgment in the case of CIT vs. Anilaben Upendra Shah reads as under:

"Assessee having held the shares and allotment of a flat in a co-operative housing society for a period of more than 36 moths the capital gain arising from sale of said flat was long-term capital gain and assessee was entitled to benefit of section 80T irrespective of the fact that the assessee did not get possession of the flat in question at the time of allotment and it was constructed later on."

7.2. The conclusion of Hon'ble ITAT, Delhi Bench in the case of Jitendra Mohan vs. ITO reads as under:

"On the facts of the case, assessee held the capital asset (shed) allotted to it on installment basis from 28th December, 1994, the date of payment of second installment and sale thereof on 15th December, 2000, gave rise to long term capital loss even though possession of shed was handed over by DSIDC to assessee on 28th May, 1998."

7.3. The conclusion of Hon'ble ITAT, Delhi Bench in the case of Praveen Gupta vs. ACIT reads as under:

"Assessee can be said to have held the flat when he made the payment to the builder and received the allotment letter, and therefore, benefit of indexation of cost of acquisition of the flat has to be granted to the assessee from the date (1995) when he started making payment to the builder and not from the date of execution of conveyance deed in 2001."

8. All the above decisions are uniform in concluding that the "date of allotment" is reckoned as the date for computing the holding period for the purpose of capital gains. The date of allotment in this case being 19.11.2001 and the date of sale is 23.8.2006, therefore, the holding period is much more than 36 months. In this case, the gains earned by the assessee on the sale of flat have to be computed as capital gains. Without prejudice, even if the date of possession, being 14.8.2003, is considered; the assessee is still entitled to the benefits of the Long Term Capital Gains. Therefore, in our opinion, order of the CIT (A) does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed."

Shri Vijay Manikrao Hamilapurkar

4. Considering the above settled nature of this issue, we are of the opinion that the assessee must succeed on this issue. Accordingly, the relevant grounds of appeal are allowed."

7. From the above settled position of the issue, it can be safely concluded that the "date of allotment" should be reckoned as the date for computing the holding period for the purpose of capital gains. In the instant case, the date of allotment is 11.04.2003 (FY 2003-2004) and the date of sale of the property is 14.10.2007, therefore the holding period is more than 36 months. Therefore, the capital gains earned by the assessee on the sale of the flat have to be treated as 'long term capital gains'. The assesee paid the first installment on 11.4.2003, thereby conferring a right to hold a flat, which was later identified and possession delivered on later date. The Hon'ble Punjab & Haryana High Court in the case of Mrs. Madhu Kaul vs. CIT vide Income Tax Appeal No.89 of 1999, dated 17th January, 2014 held that the mere fact that possession was delivered later, does not detract from the fact that the allottee was conferred a right to hold property on issuance of an allotment letter. Thus, the ld DR's arguments on non-existence of the flat at the time of issuing of allotment letter stands answered by the said judgment of the Hon'ble High Court of Punjab & Haryana (supra). The same view was supported by various decisions of the Tribunal as well as the judgments of the Hon'ble Gujarat High Court and the relevant conclusions were already extracted in the above paragraphs of this order. Regarding the judgments of the Hon'ble jurisdictional High Court relied on by the Ld DR are distinguishable on facts. Therefore, considering the above settled nature of the issue as well as the following the principle of consistency, we are of the considered opinion that the ground no.1 raised by the assessee should be allowed. Accordingly, ground no.1 is allowed."

4.5.2 Following, inter alia, the aforesaid decision of the Coordinate Bench in the case of Richa Bagrodia (supra), it can be safely concluded that the date of allotment should be taken as the date for computing the holding period for computing capital gains. In the case on hand, the date of allotment as per letter of allotment is 29.03.2006 and the date of sale of the said property/flat at Torino Building is 23.10.2009 and therefore it is clear that the holding period is more than 36 months. The assessee paid the first instalment on 29.03.2006, thereby conferring a right to hold a flat, which was identified and the possession of which was given on a later date. In the factual matrix the capital gains earned by the assessee on sale of the said flat has to be treated as LTCG. Following the aforesaid decision of the Coordinate Bench of the Tribunal, we hold that the capital gains of `1,82,01,530/- arising to the assessee on sale of the said flat at Torino Building is to be assessed as LTCG and not as STCG as held by the authorities below.

Shri Vijay Manikrao Hamilapurkar 4.5.3 Consequent to our holding that the capital gains of `1,87,01,530/- arising to the assessee on sale of the said flat at Torino Building is to be treated as LTCG, we hold that the assessee is entitled to be allowed exemption of Rs.64,92,50/- under section 54 of the Act in respect of investment made by him in the purchase/construction of new flat at Amanda 'B', Hiranandani Meadows, Thane as worked out by the AO at para 4.3 of the order of assessment as against the assessee's claim of Rs.73,72,315/-. Consequently, grounds 1 to 3 of the assessee's appeal are partly allowed as indicated above.

5. Grounds 4 to 7 5.1 Before us, the learned A.R. of the assessee submitted that these grounds raised at Sr. Nos 4 to 6 are not being pressed in this appeal. Since these grounds 4 to 6 are not being pressed by the assessee, they are rendered infructuous and accordingly dismissed.

6. Ground No. 8 is general in nature therefore no adjudication is called for thereon.

7. In the result, the assessee's appeal for A.Y. 2010-11 is partly allowed.

Order pronounced in the open court on 4th November, 2016.

                   Sd/-                                    Sd/-
              (Amerjit Singh)                         (Jason P. Boaz)
             Judicial Member                        Accountant Member

Mumbai, Dated: 4th November, 2016

Copy to:

     1.   The   Appellant
     2.   The   Respondent
     3.   The   CIT(A) -32, Mumbai
     4.   The   CIT - 21, Mumbai
     5.   The   DR, "F" Bench, ITAT, Mumbai
                                                          By Order

//True Copy//
                                                      Assistant Registrar
                                              ITAT, Mumbai Benches, Mumbai
n.p.