JAYSHREE B LALWANI, MUMBAI v. ITO 19(1)(3), MUMBAI

CO 136/MUM/2014 | 2006-2007
Pronouncement Date: 12-11-2014 | Result: Dismissed

Appeal Details

RSA Number 13619923 RSA 2014
Assessee PAN ABEPL3045R
Bench Mumbai
Appeal Number CO 136/MUM/2014
Duration Of Justice 3 month(s) 28 day(s)
Appellant JAYSHREE B LALWANI, MUMBAI
Respondent ITO 19(1)(3), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 12-11-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 12-11-2014
Date Of Final Hearing 16-10-2014
Next Hearing Date 16-10-2014
Assessment Year 2006-2007
Appeal Filed On 15-07-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI SANJAY ARORA ACCOUNTANT MEMBER ITA NO. 3160/MUM/2013 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER-19(1)(3) VS. SMT. JAYSHREE B. LALWANI ROOM NO. 314 3 RD FLOOR PIRAMAL CHAMBERS PAREL LALBAUG MUMBAI 400012 FLAT NO. 501 RAJRISHI BUILDING PLOT NO. 694 15 TH ROAD KHAR (W) MUMBAI 400052 PAN - ABEPL3045R APPELLANT RESPONDENT CO NO. 136/MUM/2014 (ASSESSMENT YEAR: 2006-07) SMT. JAYSHREE B. LALWANI VS. INCOME TAX OFFICER-19(1)(3) FLAT NO. 501 RAJRISHI BUILDING PLOT NO. 694 15 TH ROAD KHAR (W) MUMBAI 400052 ROOM NO. 314 3 RD FLOOR PIRAMAL CHAMBERS PAREL LALBAUG MUMBAI 400012 PAN - ABEPL3045R CROSS OBJECTOR APPELLANT IN APPEAL REVENUE BY: SHRI VIVEK P. PERAMPURNA ASSESSEE BY: S/S. VIPUL JOSHI NISHIT GANDHI & ABHISHEK TILAK DATE OF HEARING: 22.10.2014 DATE OF PRONOUNCEMENT: 12.11.2014 O R D E R PER D. MANMOHAN V.P. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-22 MUMBAI AND THEY PERTAIN TO AY 2006-07. 2. FACTS NECESSARY FOR DISPOSAL OF THE APPEALS ARE STA TED IN BRIEF. ASSESSEE IS AN AGENT OF LIFE INSURANCE CORPORATION OF INDIA. VIDE AGREEMENT DATED 13.05.1999 ASSESSEE ACQUIRED A FLAT IN RAJRIS HI BUILDING SITUATED IN KHAR (W) FOR A CONSIDERATION OF ` 27 LAKHS. INCLUDING THE COST OF IMPROVEMENT AND STAMP DUTY THE TOTAL COST OF THE FLAT WAS ` 30 30 132/-. THE SAID BUILDING HAS 12 MEMBERS/OCCUPANTS. DUE TO CHANGE IN THE DEVE LOPMENT CONTROL ITA NO. 3160/MUM/2013 SMT. JAYSHREE B. LALWANI 2 REGULATIONS THE MEMBERS OF THE BUILDING BECAME ENTI TLED TO ADDITIONAL FLOOR SPACE INDEX (FSI) BY PURCHASE OF TDR (TRANSFERABLE DEVELOPMENT RIGHT). ASSESSEE RECEIVED COMPENSATION ON FLAT RECONSTRUCTI NG (FREE) TDR ON WHICH ASSESSEE DID NOT DECLARE LONG TERM CAPITAL GAIN. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS ASKED TO GIVE R EASONS AS TO WHY THE VALUE OF NEW FLAT RECEIVED AS CONSIDERATION IN LIEU OF OLD FLAT SHOULD NOT BE ADDED TO THE MONETARY CONSIDERATION FOR COMPUTING C APITAL GAINS. 3. THE CASE OF THE ASSESSEE IS THAT THE TDR AND FSI EN TITLEMENT HAD NO COST OF ACQUISITION WHICH CAME INTO THE HANDS OF TH E MEMBERS OF THE SOCIETY DUE TO THE CHANGE IN DEVELOPMENT CONTROL REGULATION S ACT 1991. THE MEMBERS IN TURN DECIDED TO UTILISE THIS ENTITLEMENT FOR THEIR BENEFIT BY CONSTRUCTING ADDITIONAL FLOORS ON THE EXISTING BUIL DING ACCORDING TO THEIR INDIVIDUAL ENTITLEMENT. AS PER THE THEN PREVAILING POLICY OF THE MUNICIPAL CORPORATION THE RESIDENTS ARE NOT PERMITTED TO CONS TRUCT ADDITIONAL FLOORS ON THE EXISTING BUILDING; THE EXISTING BUILDING HAD TO BE DEMOLISHED AND RECONSTRUCTED TO AVAIL THE BENEFIT OF TDR FSI. THE MEMBERS ENTRUSTED THE WORK TO A CONTRACTOR WHEREBY EACH OF THE MEMBER DEC IDED TO SELL/TRANSFER 75% OF THE SAID TDR FSI ENTITLEMENT TO A DEVELOPER FOR THEIR BENEFIT SO THAT IN THE NEW BUILDING TO BE CONSTRUCTED EACH MEMBER GETS CARPET AREA EQUIVALENT TO THE CARPET AREA OF HIS/HER EXISTING F LAT PLUS 25% ADDITIONAL CARPET AREA. AS PER THE DEVELOPMENT AGREEMENT DATED 07.09.2005 EACH MEMBER SOLD HIS/HER TDR FSI ENTITLEMENT TO THE CONT RACTOR AND IN TURN RECEIVED THE NEW FLAT. 4. THE AO WAS HOWEVER OF THE OPINION THAT THE ASSESS EE EXCHANGED THE OLD FLAT AND IN CONSIDERATION HAS RECEIVED ONE NEW FLAT AND CONSIDERATION OF ` 10 LAKHS. IN THE OPINION OF THE AO EXCHANGING CANN OT BE EQUATED TO PURCHASE OF NEW RESIDENTIAL HOUSE AND HENCE BENEFIT S OF SECTION 54(1) ARE NOT AVAILABLE TO THE ASSESSEE. HE FURTHER OBSERVED THAT THE APPELLANT HAVING NOT PAID ANY MONEY FOR OBTAINING THE NEW FLAT IT C AN BE INFERRED THAT THE ASSESSEE HAS NOT PURCHASED THIS FLAT. HE THUS REJEC TED THE CONTENTION OF THE ASSESSEE WITH REGARD TO AVAILABILITY OF EXEMPTION U NDER SECTION 54 AND PROCEEDED TO COMPUTE THE LONG TERM CAPITAL GAIN. ITA NO. 3160/MUM/2013 SMT. JAYSHREE B. LALWANI 3 5. AGGRIEVED ASSESSEE CONTENDED BEFORE THE CIT(A) THA T THE ASSESSEE SOLD/TRANSFERRED THE TDR FSI ENTITLEMENT AND THE AM OUNT RECEIVED WAS ON ACCOUNT OF TRANSFER OF CAPITAL ASSET WHICH DID NO T HAVE ANY COST OF ACQUISITION AND HENCE DID NOT RESULT INTO CAPITAL G AINS CHARGEABLE TO TAX UNDER SECTION 45 OF THE ACT. WITHOUT PREJUDICE IT WAS ALSO CONTENDED THAT THE TOTAL CONSIDERATION WAS INVESTED IN IMPROVEMENT OF THE EXISTING FLAT ADDING ADDITIONAL AREA TO THE EXISTING FLAT AND THE BALANCE AMOUNT OF ` 10 LAKHS WAS INVESTED IN 54EC BONDS AND HENCE THE ASSE SSEE IS ENTITLED TO EXEMPTION UNDER SECTION 54 OF THE ACT. 6. THE LEARNED CIT(A) HAS NOT ACCEPTED THE MAIN PLEA O F THE ASSESSEE AND OBSERVED THAT THE AGREEMENT ENTERED INTO BETWEEN TH E ASSESSEE AND THE DEVELOPER/CONTRACTOR WOULD FALL WITHIN THE MEANING OF EXPRESSION TRANSFER UNDER SECTION 2(47) OF THE ACT. HE HOWEVER AGREED THAT THE COST OF ACQUISITION OF THE CAPITAL ASSET SHOULD BE TAKEN AT ` 30 20 132/-. FURTHER TAX SHOULD BE CHARGED AT 20% AS LONG TERM CAPITAL GAINS . HE ALSO NOTICED THAT AS PER THE AGREEMENT THE EXISTING BUILDING HAS TO BE D EMOLISHED TO CONSTRUCT THE NEW BUILDING ON BEHALF OF THE SOCIETY AND ITS MEMBE RS AND HENCE THE FLAT RECEIVED BY THE ASSESSEE IN LIEU OF THE OLD FLAT WI LL BE CONSIDERED AS CONSTRUCTED BY THE ASSESSEE AND HENCE THE ASSESSEE IS ENTITLED FOR EXEMPTION IN THE LIGHT OF THE DECISION OF THE ITAT IN THE CAS E OF ITO VS. ABBAS ALI SHIRAZ 5 SOT 422. THEREFORE HE ACCEPTED THE PLEA OF THE ASS ESSEE THAT PROVISIONS OF SECTION 54 ARE APPLICABLE AND THE ASSESSEE IS ENTIT LED TO EXEMPTION. 7. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) REVEN UE IS IN APPEAL BEFORE US. THE MAIN PLEA OF THE ASSESSEE THAT IT IS NOT A CAPITAL ASSET AND HENCE CAPITAL GAIN TAX CANNOT BE LEVIED HAVING NOT BEEN ACCEPTED THE ASSESSEE PREFERRED A CROSS OBJECTION. 8. THE CASE OF THE REVENUE IS THAT THE LEARNED CIT(A) ERRED IN GRANTING EXEMPTION UNDER SECTION 54 OF THE ACT FOLLOWING THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF SHRI JATINDER KUMAR MAD AN (ITA NO. 6921/MUM/2010 DATED 25.04.2012) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT IN PRINCIPLE. THE CASE OF THE DEPARTMENT IS THAT SECTION 54 IS APPLICABLE ONLY WHEN THERE IS PURCHASE OF NEW HOUSE PROPERTY WHEREAS IN ITA NO. 3160/MUM/2013 SMT. JAYSHREE B. LALWANI 4 THE INSTANT CASE THERE WAS EXCHANGE OF OLD FLAT AGA INST NEW FLAT WHICH CANNOT BE TREATED AS TRANSFER OF PROPERTY SINCE THE ASSESSEE HAD NEITHER PURCHASED NOR CONSTRUCTED HOUSE PROPERTY. IN SHORT THE REVENUES CONTENTION IS THAT THE EARLIER ORDERS OF THE TRIBUN AL ON THIS ISSUE ARE NOT ACCEPTED IN PRINCIPLE BY THE REVENUE AND HENCE TO K EEP THE MATTER ALIVE APPEAL IS PREFERRED. AT THE TIME OF HEARING THE BEN CH WANTED TO VERIFY AS TO WHETHER ANY APPEAL HAS BEEN PREFERRED BY THE REVENU E IN THE CASE OF SHRI JATINDER KUMAR MADAN. THE LEARNED D.R. CONTACTED TH E AO AND OBTAINED THE INFORMATION THAT NO APPEAL WAS PREFERRED BEFORE THE HIGH COURT IN VIEW OF THE FACT THAT TAX EFFECT IS BELOW THE SPECIFIED LIMIT. 9. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE TRIBUNAL HAD TAKEN A CONSISTENT VIEW IN TH E FOLLOWING CASES AND HELD THAT EXCHANGING OLD FLAT WITH NEW FLAT CONSTRU CTED BY BUILDER WOULD BE SUFFICIENT FOR THE ASSESSEE TO CLAIM EXEMPTION UNDE R SECTION 54 OF THE ACT: - I) JATINDER KUMAR MADAN VS. ITO 51 SOT 583 (MUM) II) SMT. VEENA GOPE SHROOF VS. ITO 58 SOT 36 (MUM) III) ITO VS. ABBAS ALI SHIRAZ 5 SOT 422 (BANG) IV) M. VIJAYA KUMAR VS. ITO 122 ITD 15 (BANG) V) ITO VS. LATE JAMEELUNNIA BEGUM ITA NO. 273/PN/12 DA TED 28.05.2013. VI) RAJENDRA KUMAR S. HEMANI ITA NO. 8708/MUM/2010 DATE D 22.03.2013. 10. IT APPEARS THAT IN SOME OTHER CASES THE DEPARTMENT CHALLENGED THE ORDERS PASSED BY THE ITAT BY PREFERRING APPEALS BEF ORE THE HON'BLE BOMBAY HIGH COURT. HOWEVER THE FACT REMAINS THAT VARIOUS BENCHES OF THE TRIBUNAL HAVE CONSISTENTLY TAKEN A STAND UNDER IDENTICAL CI RCUMSTANCES THAT EXCHANGE OF FLAT WHEREIN THE BUILDER HAS TO CONSTRU CT A NEW FLAT WOULD AMOUNT TO CONSTRUCTION OF NEW FLAT AND THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 54 OF THE ACT. 11. THE LEARNED D.R. COULD NOT PLACE ANY CASE LAW WHERE IN A CONTRARY VIEW IS TAKEN. CONSISTENT WITH THE VIEW TAKEN BY THE ITA T IN THE ABOVE CITED ASSESSEE WE ARE OF THE VIEW THAT THE ASSESSEE IS E NTITLED TO EXEMPTION UNDER SECTION 54 OF THE ACT VIS-A-VIS COST OF NEW FLAT AN D THE AMOUNT OF ` 10 LAKHS RECEIVED IF THE ASSESSEE SATISFIES THAT IT HAS REI NVESTED THE AMOUNT IN BONDS. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE ITA NO. 3160/MUM/2013 SMT. JAYSHREE B. LALWANI 5 LEARNED CIT(A) AND THUS DISMISS THE APPEAL FILED THE REVENUE. BY VIRTUE OF DISMISSAL OF THE APPEAL FILED BY THE REVENUE THE CR OSS OBJECTION FILED BY THE ASSESSEE BECOMES ACADEMIC AND INFRUCTUOUS THEREFOR E IT IS DISMISSED. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH NOVEMBER 2014. SD/- SD/- ( SANJAY ARORA ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATED: 12 TH NOVEMBER 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 22 MUMBAI 4. THE CIT 19 MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.