Income Tax Appellate Tribunal - Mumbai
Mrs. Sharda J. Rukhana vs Ito on 14 May, 2007
ORDER
Sushma Chowla, Judicial Member
1. This appeal filed by the revenue is against the order of Commissioner (Appeals) - XX, Mumbai, dated 10-9-2003 relating to assessment year 2001-02 against the order under Section 143(3) of the Income-tax, Act 1961.
2. The grounds of appeal raised by the assessee are as under :
1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in dismissing the appeal and that too without even appreciating fully and properly the facts of the case.
2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding that the assessing officer is justified in rejecting the appellant's claim of exemption of Section 54 of the Income Tax Act, 1961.
3. The brief facts of the case are that during the year under consideration, the assessee had sold flat No. 201 in Picasso Co-operative Hsg. Society for a total consideration of Rs. 63 lakhs on 27-11-2000. The assessee had claimed exemption under Section 54 of the Income Tax Act on account of long-term capital gain arising on the sale of Picasso flat against purchase of Flat No. 702 in "Rushabh" Apartment at Khar, Mumbai. The assessee claims to have purchased the said flat for a total consideration of Rs. 68 lakhs vide agreement dated 19-9-2001.
4. The assessing officer while going through the assessment records for the earlier year found that the assessee had claimed exemption under Section 54 of the Income Tax Act on sale of flat No. 94 of Tirupati Towers in assessment year 1998-99 by showing the investment in flat No. 702, 'Rushabh' Apartment at Khar, wherein the assessee had l/3rd share. Accordingly on capital gains of Rs. 1,61,372 on sale of flat in Tirupati Towers exemption was claimed to the extent of Rs. 22,70,000 being 1 /3rd share in 'Rushabh' Apartments. The assessee during the course of assessment proceedings was requisitioned to explain why the claim under Section 54 of the Income Tax Act was again made in the year under consideration. In reply, the assessee stated that she is the sole owner of the flat in 'Rushabh' and the names of her sons were added for convenience and as such the assessee is entitled to the exemption under Section 54 of the Income Tax Act. The assessing officer observed that in the balance sheet filed in assessment year 2000-01, the value of the said flat in 'Rushabh' Apartment was shown as self-occupied property at Rs. 68 lakhs and thus it was in the possession of the assessee in the preceding year. The assessing officer observed that the assessee is not entitled to claim the deduction under Section 54 of the Income Tax Act against sale of 'Picasso' Flat by way of investment in flat in 'Rushabh' apartments. The claim of the assessee was rejected.
5. Before the Commissioner (Appeals), the learned AR for the assessee stressed that in assessment year 1998-99, the assessee along with her two sons had started negotiations with the builder to purchase the new flat in 702 in 'Rushabh' which was under construction but was expected to be completed within two years and in fact the occupancy certificate was issued on 22-7-1999. The learned AR for the assessee further stated before the Commissioner (Appeals) that her sons abandoned the proposal to invest in the said flat and a fresh agreement for sale was executed by the assessee and the names of her two sons are added for convenience only. The assessee claims to have made the final payment of Rs. 8 lakhs on 11-12-2000, i.e., during the year under consideration and subsequent to the sale/transfer of flat 201 at 'Picasso'. The possession of the said flat is claimed to have been taken on 19-9-2001, i.e., within 2 years after the date of transfer of the flat. The learned AR further clarified that as regards claim under Section 54 relating to assessment year 1998-99, the assessee had voluntarily decided to withdraw her claim under Section 54 of the Income Tax Act made during the assessment year 1998-99. Accordingly, a revised return was filed by the assessee and the additional tax was F paid on account of the withdrawal of such claim. The assessee claims to have already filed an application for rectification under Section 154 of the Income Tax Act in assessment year 1998-99. The Commissioner (Appeals) rejecting the claim of the assessee held that the assessee is not entitled to the said exemption claimed under Section 54 of the Income Tax Act as she had already claimed the said exemption against investment in purchase of flat No. 702 in 'Rushabh' in assessment year 1998-99 against sale of residential flat at Tirupati Towers. Rejecting the claim of the assessee that she has with- A drawn her claim of exemption under Section 54 by paying additional taxes for assessment year 1998-99, the Commissioner (Appeals) held that the same was not in order as the return could not be revised after one year from the end of the relevant assessment year. The assessee had revised her return of income on 11-2-2003 which is well beyond time and is non est return. The Commissioner (Appeals) also observed that the capital gains arising out of sale of two houses could not be claimed by investing in one flat. The assessee is aggrieved and hence this appeal.
6. Ms. Arati Vissanji appeared for the assessee and Mr. Ravindra Kumar appeared for the revenue and put forward their rival contentions.
7. We have heard the rival contentions and perused the records including the copies of agreement and other relevant documents filed by the assessee by way of Paper Book during the course of hearing.
8. The assessee had sold flat No. 201 in Picasso and the long-term capital gains arising on the said flat was claimed as exempt under the provisions of Section 54 of the Income Tax Act because of investment in the flat No. 702 in 'Rushabh' Apartments at Khar, Mumbai. The assessee along with her two sons had entered into an agreement with builder by way of letter of allotment dated 1-10-1997 wherein the assessee along with her two sons had contracted to acquire the flat 702 in 'Rushabh' Apartments, Khar, Mumbai. The agreement between the parties is placed at pages 81 -90 of the paper book wherein the terms and conditions agreed D upon between the parties for the purchase of the said flat No. 702 in 'Rushabh' Apartments have been enumerated. Clause 20 of the letter of allotment states as under :
Subject to your agreeing to and confirming the aforesaid, we hereby allot to you a flat bearing No. 702 and containing by admeasurement of 1012 sq. ft. (i.e., sq. meters of carpet area and situate on the 7th floor in the aforesaid building now being built and to be known as 'Rushabh' upon the aforementioned terms, conditions, ambient factors and background at or for the consideration amount/s written in clause number 21 hereinafter appearing.
9. The total consideration for the aforesaid flat was Rs. 68 lakhs which were to be paid as per the terms of clause 21 of the Letter of Allotment as under:
(1) On or before execution hereof Rs. 23,00,000 On or before 30-11-1997 Rs. 8,00,000 On or before 31-3-1998 Rs. 30,00,000 On or before possession Rs. 7,00,000.
10. As per the terms of the clause No. 26 it has been agreed upon between the parties that the purchaser had agreed to purchase the property from the vendor and the vendor have agreed to sell to the purchaser the said flat in 'Rushabh' for total consideration of Rs. 68 lakhs along with ten shares of the society.
Pursuant to the said agreement between the parties, the assessee made the following payments for the purchase of aforesaid flat No. 702 in 'Rushabh' Apartment in instalments as under :
Date Amount (Rs.) 30-12-1996 11,00,000 5-9-1997 2,00,000 30-9-1997 2,00,000 3-12-1997 3,00,000 4-5-1998 5,00,000 25-7-1998 10,00,000 2-9-1998 5,00,000 15-6-1999 4,00,000 14.12.1999 5,00,000 24-1-2000 8,00,000 3-2-2000 2,00,000 13-2-2000 2,00,000 23-5-2000 1,00,000 11-12-2000 8.00,000 Total consideration paid 68,00,000
11. The mode of payment was by way of cheque issued on Vijaya bank by the assessee.
12. The details of payment made by the assessee are furnished at page 146 of the Paper Book along with the mode of payment at page 147 of the Paper Book.
13. The occupancy certificate for the said building was issued by the Municipal Corporation of Greater Bombay on 22-7-1999 as per the letter No. CE/012/WS/AH. The Copy of certificate is furnished at page 139 of the Paper Book.
14. The assessee is filing her return of income for the previous years along with the balance sheet. The assessee files the balance sheet as on the close of the year. In the balance sheet filed as on 31-3-1998, the value of flat at Khar has been shown at Rs.18 lakhs being the amount paid to Parashar Thakkar. The said balance sheet is placed at page 148 of the Paper Book. In the balance sheet as on 31-3-1999 the said investment has been shown at Rs. 38 lakhs as per the copy of the balance sheet filed at page 149 of the Paper Book. In the balance sheet as on 31 -3-2000 relating to assessment year 2000-01 placed at page 150 of the Paper Book under the head 'Assets', the following recital is made, "Flat being S.O. in 'Rushabh' Tower at Khar," at Rs. 68 lakhs. On the liability side payment due for flat at Khar to Parashar Thakkar of Rs. 9 lakhs has been reflected. The balance sheet as on 31-3-2001 placed at page 151 of the Paper Book reflect under the head 'Assets', the "flat being S.O. at 'Rushabh' Tower at Khar at Rs. 73,23,050 with liability of stamp duty payable at Rs. 5,23,050."
15. The assessee claims that it had received the possession of the said flat on 19-9-2001 as per letter placed at page 145 of the Paper Book, which records that vacant and peaceful possession of the flat No. 702 in 'Rushabh' has been handed over to the assessee along with her sons on 19-9-2001 pursuant to the agreement for sale dated 19-9-2001.
16. During the course of argument, the learned AR for the assessee had vehemently argued that originally while furnishing the return of income for assessment year 1998-99, the assessee had claimed exemption under Section 54 of the Income Tax Act against sale of flat in Tirupati Towers by way of purchasing the flat No. 702 in 'Rushabh' Apartments. The copy of computation of income originally filed with the return of income is placed at pages 1 to 3 of the Paper Book. The assessment in the case was completed under Section 143(3) of the Income Tax Act wherein the claim of the assessee under Section 54 was allowed to the assessee. The learned AR for the assessee drew our attention to the revised return filed on 11 -2-2003 wherein the claim of exemption under Section 54 was withdrawn being incorrect and the assessee had decided to revise the return by paying the tax due thereon vide her letter dated 4-1 -2003. The Copy of the letter is filed at page 8 of the Paper Book along with copies of the acknowledgement of filing the revised return and computation of income and proof of payment of tax at pages 4-7 of the Paper Book. Thereafter, the assessee claims to have filed an application for rectification under Section 154 of the Income Tax Act which is placed at page 9 of the Paper Book for withdrawing the E claim under Section 54 of the Income Tax Act. Elaborate arguments were raised by the assessee that the tax paid by the assessee have been appropriated by the Income tax department but no credit for the same has been allowed to the assessee. On a specific query from the Bench, the learned AR for the assessee admitted that there is no provision of the Income Tax Act which empowers the assessee to file the revised return after the completion of the assessment: under Section 143(3) of the Income Tax Act. p The learned DR for the revenue pointed out that the assessment under Section 143(3) for assessment year 1998-99 was completed on 3-11-2000 and the revised return was filed by the assessee on 11-2-2003. Accordingly, the revised return filed by the assessee on 11-2-2003 for assessment year 1998-99 withdrawing its claim under Section 54 of the Income Tax Act is a non est return and the same is rejected.
17. The assessment before us is assessment year 2001-02 which ends on 31st March, 2001 and the return of income for the year under consideration was filed on 23-2-2002 wherein the claim of set off of purchase of flat No. 702 at 'Rushabh' against sale of flat in Picasso under Section 54 of the Income Tax Act was made. The revised return for assessment year 1998-99 was filed as late as 11-2-2003, i.e., even after the filing of return of income for the year under consideration and also after the completion of assessment under Section 143(3) of the Income Tax Act for assessment year 1998-99 on 3-11-2000 wherein the exemption under Section 54F against purchase of Flat at Khar, Mumbai was allowed by the assessing officer. Accordingly the Revised Return filed for assessment year 1998-99 is an invalid return.
18. Now coming to the transaction of purchase of flat No. 702 in Rushabh, the perusal of documents clearly reveal that the assessee had contracted to purchase the said flat on 1 -10-1997. The payments against the purchase of the said flat were made at regular intervals, break up of which is provided in para hereinabove. The assessee though claims that it had contracted to purchase the property as joint co-owner with her two sons, but due to certain difficulties the said property could only be purchased by the assessee herself. The joint co-ownership of the property or sole ownership of the property is an understanding inter se between the family members of the assessee and has no connection with the builder selling the flat. The builder recognizes the assessee and her sons as the owners of the property and the alleged agreement for purchase of the property on 19-9-2001 is also executed in the names of the assessee and her two sons.
19. The assessee claims to have entered into an agreement on 19th day of September, 2001 with the builder for the purchase of the aforesaid flat No. 702 in 'Rushabh' Building at Khar. The copy of the said Agreement in para 20 provides as under :
By and under a tenancy Agreement dated 9-3-2000 and made between the Vendor No. 2 as the Landlord of the One Part and the Purchaser/s as the Tenant of the other Part the Purchaser/s has/ have acquired on the basis ofmonthly tenancy the said Flat No. 702 having 1012 sq. ft. (i.e. equivalent to 94.02 sq. mtrs. Or thereabouts of build up area and situate on the 7th floor of the building called 'RUSHABH' at or for such rent and up on such terms and conditions as are stipulated therein. The draft of the tenancy agreement was submitted to the society for the approval The society hasvlde its letter dated September 4,1999 approved the same. However, upon execution hereof now no rent is payable by the Purchaser/s to the Vendor.
20. In the facts of the case before us, the assessee had entered into an agreement to purchase the said flat No. 702 in 'Rushabh' Apartments as per the letter of allotment dated 1-10-1977, pursuant to which the instalments were paid by the assessee ranging between the period 30-12-1996 to 23-5-2000. The last instalment of Rs. 8,00,000 was paid on 11-12-2000. The assessee hais shown the said flat to be in her self-occupation in the balance sheet filed as on 31-3-2000. Accordingly, the assessee had been put into possession of the property prior to 31-3 -2000. The conveyance of the agreement entered on 19-9-2001 also recognizes the assessee has been put into possession of the property on 9-3-2000, though the parties referred to a tenancy agreement between the vendor and purchaser. Reference is invited to Clause 20 of the agreement dated 19-9-2001 at page 103 of the Paper Book and reproduced in the paras hereinabove. The Clause 20 of the Agreement clearly states that the draft of the tenancy Agreement was submitted at a date which is not clear, but approved by the Society on 4-9-1999. This clearly proves that apartment was ready for occupation prior to 4-9-1999.
21. The provisions of Section 2(47)of the Income Tax Act were amended with effect from 1-4-1998 and Clause (v) was inserted thereafter which provides as under : C
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53 A of the Transfer of Property Act, 1882 (4 of 1882).
22. The provisions of Section 2(47)(v) of the Income Tax Act accordingly provides that where a person receives the possession of immovable property in part performance of the contract of the nature referred to in Section 53A of the Transfer of Property Act, such a person is treated to be the owner of the property as the transfer is deemed to be completed for the purpose of Income Tax Act, though the conveyance of the property by way of registration of the document may take place at a future date.
23. Their Lordships of Apex Court in ITO v. Podar Cement (P.) Ltd. had held as under:
Hence though under the common law 'owner' means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of Section 22 of the Income Tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income Tax Act, namely, to tax the income, 'owner' is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of Section 22 is not warranted.
24. Their Lordships of Hon'ble Supreme Court in Mysore Mineral v. CIT held as under :
Held reversing the judgment of the High Court, that the finding of fact arrived at in the case at hand was that though a document of title was not executed by the Housing Board in favour of the assessee, the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. The assessee was entitled to depreciation in respect of the seven houses in respect of which the assessee had not obtained a deed of conveyance from the vendor although it had taken possession and made part payment of the consideration.
25. Their Lordships of Apex Court in Mysore Minerals Ltd. v. CIT had in turn relied on the decision of Apex Court in CIT v. Podar Cement (P.) Ltd.
26. The provisions of the Income Tax Act are to be read in harmony though the decision of the Apex Court in Podar Cement (P.) Ltd. is for the purpose of taxation of income under the head "Income from property" but similar amendments were made in the definition of transfer by way of insertion of Clause (v) to Section 2(47) of the Income Tax Act wherein the definition of 'transfer' was amended.
27. The occupancy certificate was issued on 22-7-1999, draft for tenancy Agreement was approved by Society on 4-9-1999 and possession was allegedly provided by the builder by 9-3-2000 as referred hereinabove. The agreement for sale dated 19-9-2001 is an agreement executed on the date of registration and has no relevance in view of the provisions of Clause (v) to Section 2(47) of the Income Tax Act. The possession letter dated 19-9-2001 is a fabricated document between the parties and has no relevance to the possession being handed over on the said date. The assessee was put in possession of the said property during the financial year 1999-2000 with specific date of handing over of the possession being not clear from the documents furnished by the assessee, although the draft of the tenancy Agreement was approved by Society on 4-9-1999. In view of the date of handing over of the possession being not clear and also because of the fact that no reliance could be placed on the possession letter issued on 19-9-2001, in view of our comments hereinabove, we are of the view that the assessee is not entitled to the claim of deduction under Section 54 of the Income Tax Act.
28. The Bombay Bench of Tribunal in Smt. Shilavati Agarwal v. Fifth ITO (1993) 46 ITD 230 had held that the investment in the house as stipulated in Section 54(1) of the Income Tax Act requires the person to make the payment of purchase consideration and once the consideration is so paid within the specific period, the assessee shall be deemed to have complied with the requirements of the section even if legal ownership is not acquired. In the facts of the case, the agreement of sale of original asset was entered on 30-1-1980 and in respect of the new asset the agreement for purchase was entered into on 12-3-1974 and it was held that the act of purchase of the new asset was not within the period of one year or before or after the transfer of the original asset.
29. Respectfully following the ratio laid down by the Bombay Bench of Tribunal in Smt. Shilavati Agarwal's case (supra), the agreement for purchase of the property being the Letter of Allotment issued on 1-10-1997, pursuant to which payments were made by the assessee for the purchase of the property falling before the period of one year before or after the date of transfer of flat No. 201 of Picasso on 27-11-2000 falls, we hold that the same does not fall within a period of one year before or after the transfer of the original asset. Accordingly, the requirement of Section 54 of the Income Tax Act which stipulates the assessee to purchase the new asset against which the exemption is claimed within a period of one year before or after the transfer of original asset is not fulfilled and the assessee is not entitled to the claim of exemption under Section 54 of the Income-tax Act. The reliance by the learned AR for the assessee on the decision of Bombay High Court in CIT v. Smt. Beena K. Jain is not applicable to the facts of the case as in the facts of that case the full consideration for the purchase of the property was paid on a much later date than the date of agreement. The Bombay Tribunal in V.M. Dujodwala v. ITO (1991) 36 ITD 130 had held that the relevant date to be taken for the c purpose of applying Section 54 should be the date on which the flat was ready for occupation by the assessee. In the facts of the present case, the occupancy certificate being issued on 22-7-1999, the flat was ready for occupation much before the date of sale of original asset on 27-11-2000 but in view of the discussion in the paras hereinabove, the exact date of possession is not clear as the necessary evidence has not been furnished by the assessee, we reject the claim of assessee with regard to the exemption under Section 54 of the Income Tax Act.
30. In the result, appeal of the assessee is rejected.