LATE SMT. JAMANABAI ANANDJI MATANI, MUMBAI v. THE ITO 19(2)(3), MUMBAI

ITA 1909/MUM/2008 | 2002-2003
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 190919914 RSA 2008
Assessee PAN AAMPM3480E
Bench Mumbai
Appeal Number ITA 1909/MUM/2008
Duration Of Justice 2 year(s) 1 month(s) 13 day(s)
Appellant LATE SMT. JAMANABAI ANANDJI MATANI, MUMBAI
Respondent THE ITO 19(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 30-04-2010
Date Of Final Hearing 08-04-2010
Next Hearing Date 08-04-2010
Assessment Year 2002-2003
Appeal Filed On 17-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BEFORE SHRI D.K. AGRAWAL (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO.1909/MUM./2008 ASSESSMENT YEAR : 2002-03 DATE OF HEARING 8.4.2010 LATE SMT. JAMNABAI ANANDJI MATANI L/H SHRI BHUPENDRA MATANI 20 SUSHILABAUG 53 S.V. ROAD SANTACRUZ (W) MUMBAI 54 PAN AAMPM3480E .. APPELLANT VS INCOME TAX OFFICER WARD 19(2)(3) PIRAMAL CHAMBERS LALBAUG MUMBAI BHAVAN M.K. ROAD MUMBAI 400 020 RESPONDENT APPELLANT BY : SMT. AARTI VISSANJI RESPONDENT BY : SHRI L.K. AGRAWAL O R D E R PER PRAMOD KUMAR A.M. BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HAS C HALLENGED CORRECTNESS OF ORDER DATED 7 TH JANUARY 2008 PASSED BY THE LEARNED COMMISSIONER ( APPEALS) XI MUMBAI FOR ASSESSMENT YEAR 2002-03 ON THE FOLLOWING GROUNDS:- ITA NO.1909/MUM./2008 LATE SMT. JAMNABAI ANANDJI MATANI [2] 1. THE LD. A.O. ERRED IN DETERMINING LONG TERM CAP ITAL GAINS AT RS.12 62 619/- EARNED ON INTENDED TRANSFER OF ADDIT IONAL TDR RECEIVED FROM THE SOCIETY AS TAXABLE IN A.Y. 2002-03 INSTEAD OF A.Y. 2003-04 AS SHOWN BY YOUR APPELLANT. 2. THE LD. A.O. ERRED IN DETERMINING LONG TERM CAPITAL GAIN AT RS.12 62 619/- BY TAKING TOTAL RECEIPTS AS CAPITAL AND THIS DENYING BENEFIT OF COST AND INDEXATION TO THE APPELLANT. 3. THE LD. A.O. HAS ERRED IN INITIATING PENALTY PROCEE DINGS U/S 271(1)(C) WITHOUT APPRECIATING FURNISHING OF DETAIL ED WORKING IN A.Y. 2003-04 FOR CALCULATION OF LONG TERM CAPITAL GAIN A ND ALSO PAYMENT OF TAX AS A PRECAUTIONARY MEASURES. 2. ON 2 ND APRIL 2010 THE ASSESSEE HAS MOVED A PETITION SEEK ING ADMISSION OF FOLLOWING ADDITIONAL GROUND OF APPEAL:- THE LD. A.O. ERRED IN ASSESSING AN AMOUNT OF RS.12 62 619/- RECEIVED UPON SALE OF ADDITIONAL TDR AS LONG TERM CAPITAL GA IN. 3. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE RAISED IN THE ADDITIONAL GROUND OF APPEAL IS A PURELY LEGAL ISSUE BASED ON UNDISPUTED FACTS OF THE CASE AND IT COULD NOT BE RAISED EARLIER AS THE ASS ESSEE WAS NOT AWARE OF THE CORRECT LEGAL POSITION AT THE TIME OF FILING APPEAL. LEARNE D DEPARTMENTAL REPRESENTATIVE OPPOSES THE PRAYER OF THE ASSESSEE AND SUBMITS THAT ONCE ASSESSEE HAS ACCEPTED THE TAXABILITY OF RECEIPT IN QUESTION AND DISPUTE IS CO NFINED TO THE YEAR OF TAXABILITY IT CANNOT BE OPEN TO THE ASSESSEE TO CHALLENGE THE VER Y TAXABILITY OF RECEIPT IN QUESTION. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND ALSO TO THE FACT THAT THE ISSUE RAISED BEFORE US IS A PURELY LEGAL ISSUE SET OUT IN UNDISP UTED FACTS WE ADMIT THE ADDITIONAL GROUND OF APPEAL. 5. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASS ESSEE OWNS A HOUSE PROPERTY AT 20 SUSHILA BAUG 53A S.V. ROAD SANTACRUZ (W) MUMBAI . BY THE VIRTUE OF DEVELOPMENT CONTROL RULES APPLICABLE TO THE CITY OF MUMBAI IT WAS IN THE YEAR 1994 THAT THE BUILDING IN WHICH ITA NO.1909/MUM./2008 LATE SMT. JAMNABAI ANANDJI MATANI [3] ASSESSEES FLAT WAS SITUATED AND WHICH WAS OWNED BY SUSHILA BAUG CO-OPERATIVE HOUSING SOCIETY LTD. WAS ENTITLED TO ABOUT 20 880 SQ.FT. O F ADDITIONAL CONSTRUCTION BY TRANSFER OF DEVELOPMENT RIGHTS ON THE SAID BUILDING. THE RIGHT TO CONSTRUCT THIS ADDITIONAL SPACE WAS TRANSFERRED BY THE SOCIETY ALONG WITH THE ASSESSEE TO ONE M/S. K. BHATIA CORPORATION. THE AGREEMENT WAS EXECUTED BY THE ASSESSEE ON 31 ST MARCH 2002 AND AN EARNEST MONEY OF RS.25 000/- TOWARDS SALE OF SUCH RIGHTS WAS ACCEPTE D BY THE ASSESSEE ON THIS DATE. THE TOTAL CONSIDERATION FOR THIS SALE OF RIGHTS WAS RS.12 62 619/- WHICH WAS RECEIVED IN THE FOLLOWING MANNER:- DATE AMOUNT (RS.) 01.02.2002 25 000 31.07.2002 1 73 906 11.12.2002 1 73 906 25.07.2003 1 86 328 18.12.2003 1 86 328 30.04.2004 1 86 328 23.06.2005 3 30 823 TOTAL:- 12 62 619 6. ON THE FACTS THE ASSESSING OFFICER TREATED THE LON G TERM CAPITAL GAIN ON SALE OF RIGHTS OF RS.12 62 619/- FOR THE ASSESSMENT YEAR 2 002-03. THE ASSESSEES CONTENTION WAS THAT BY NO STRETCH OF LOGIC IT CAN BE INCOME OF TH E ASSESSMENT YEAR 2002-03 AS CONDITION PRECEDENT TO TRANSFER OF RIGHTS I.E. OBTAINING OF COMMENCEMENT CERTIFICATE FROM B.M.C. WAS COMPLETED IN PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR 2003-04. IT WAS ALSO SUBMITTED THAT THE SALE CONSIDERATION WAS ALSO RECEIVED IN TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04 AND THAT MERELY BECAUSE AS SESSEE HAS RECEIVED EARNEST MONEY OF RS.25 000/- IT COULD NOT BE SAID THAT TRANSFER WAS TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03. NONE OF THESE SUBMI SSIONS IMPRESSED THE ASSESSING OFFICER WHO TAXED THE LONG TERM CAPITAL GAIN ON SALE OF THE SE RIGHTS AS INCOME OF THE ASSESSMENT YEAR 2002-03. AGGRIEVED THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. ITA NO.1909/MUM./2008 LATE SMT. JAMNABAI ANANDJI MATANI [4] 7. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUS ED THE MATERIAL ON RECORD WE FIND THAT THE ISSUE OF TAXABILITY OF SUCH A RECEIPT IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION OF A CO-ORDINATE BENCH IN THE CASE OF JETH ALAL D. MEHTA VS DCIT 2 SOT 422 WHEREIN THE TRIBUNAL SPEAKING THROUGH ONE OF US (I.E. THE ACCOUNTANT MEMBER) OBSERVED AS FOLLOWS:- 5. WE MAY MENTION THAT AS FAR CADELL WVG. MILL CO. (P) LTD.S CASE (SUPRA) IS CONCERNED THE SPECIAL BENCH DECISION OF THE TRI BUNAL HAS SINCE BEEN REVERSED BY THE HONBLE BOMBAY HIGH COURT IN THE JUDGMENT RE PORTED AS CADELL WVG. MILL CO. (P) LTD. VS. CIT (2001) 166 CTR (BOM) 7 : (2001 ) 249 ITR 265 (BOM). SUFFICE TO SAY THAT FOR THIS REASON ALONE REVENUES REJECTI ON OF ASSESSEES CLAIM BY RELYING UPON CADELL WVG. MILL CO. (P) LTD.S CASE ( SUPRA) IS NO LONGER SUSTAINABLE IN LAW. WE NEED NOT GO FURTHER INTO THIS ASPECT OF THE MATTER. THE ONLY OTHER REASON OF REJECTING THE CLAIM THAT THE ASSIGNMENT O F ADDITIONAL FSI IS THAT ACCORDING TO THE AUTHORITIES BELOW THIS RIGHT HAS COST OF ACQUISITION WHICH CONSISTS OF COST OF PURCHASE OF PLOT COSTS OF GETT ING THE DESIGNS APPROVED AND COSTS OF CONSTRUCTING THE BUILDING. IN THIS CONTEXT HOWEVER WHAT IS NECESSARY TO APPRECIATE IS THAT THE RIGHTS ASSIGNED TO THE DEVEL OPER ARE THE RIGHTS TO RECEIVE AND APPLY THE TRANSFERABLE DEVELOPMENT RIGHTS AND THAT THESE RIGHTS AROSE TO THE ASSESSEE BY THE VIRTUE OF INTRODUCTION OF DCR . UNTIL THE POINT OF TIME THESE DEVELOPMENT REGULATION CAME INTO EXISTENCE THE ASS ESSEE DID NOT HAVE RIGHT TO RECEIVE AND APPLY THE TRANSFERABLE DEVELOPMENT RIGH TS. IT IS THESE RIGHTS ON THE ASSIGNMENT OF WHICH THE ASSESSEE HAS RECEIVED THE I MPUGNED AMOUNT. THEREFORE THE EXPENDITURE INCURRED ON PURCHASE OF PLOT AND CONSTRUCTION THEREON CANNOT BE SAID TO BE THE COSTS FOR ACQUISIT ION OF THESE RIGHTS. THE RIGHTS ARE ACQUIRED BY THE VIRTUE OF BEING OWNER OF THE PL OT IN THE SPECIFIED AREA BUT THAT DOES NOT MEAN THAT THE COST INCURRED ON THE PL OT IS THE COST OF ACQUIRING THESE RIGHTS. THE EFFECT OF THE RIGHTS BEING RELATA BLE TO THE LEASEHOLD RIGHTS IN THE PLOT COULD AT BEST BE THAT THE AMOUNT RECEIVED BY THE ASSESSEE ON ASSIGNMENT OF RIGHTS TO RECEIVE THE TRANSFERABLE DE VELOPMENT RIGHTS ENDS UP REDUCING EFFECTIVE COST OF ACQUISITION OF THE LAND AND BUILDING IN THE SAID PLOT. THEREFORE AS AND WHEN THE ASSESSEE TRANSFERS THE S AID PLOT BUILDING OR ANY PORTION THEREOF AND WHILE DETERMINING CAPITAL GAINS ARISING ON SUCH SALE THE COST OF ACQUISITION MAY STAND REDUCED BY THE AMOUNT RECEIVED BY THE ASSESSEE ON ASSIGNMENT OF RIGHTS TO RECEIVE THE TDRS. THE CI T(A)S OBSERVATIONS THAT THIS RIGHT CANNOT BE SAID TO BE WITHOUT ANY COST OF ACQU ISITION BECAUSE THE TDRS HAVE BEEN RECEIVED ON SURRENDER OF RESERVED PLOT TO THE GOVERNMENT IS EX FACIE INCORRECT INASMUCH AS WHAT WE ARE REALLY CONCERNED WITH IS THE RIGHT TO RECEIVE THE TDR ON THE PLOT OWNED BY THE ASSESSEE AND NOT WITH THE RIGHT TO RECEIVE THE TDR FROM THE GOVERNMENT. THE PERSON GETTING TDRS FR OM THE GOVERNMENT HAS TO SURRENDER THE RESERVED PLOT BUT THE PERSON ON WH OSE PLOT SUCH TDRS CAN BE USED AS IS THE CASE WE ARE IN SEISIN OF DOES NOT DO ANYTHING MORE THAN OWNING THE RECEIVING PLOT. THE COSTS INCURRED BY A THIRD PARTY FOR ACQUIRING THE TDR ITA NO.1909/MUM./2008 LATE SMT. JAMNABAI ANANDJI MATANI [5 ] HAS NOTHING TO DO WITH THE RIGHT TO AVAILING THE SA ID TDR ON ASSESSEES PLOT. SIMILARLY THE COSTS OF PLOT AND COSTS OF CONSTRUCT ION ARE ALSO NOT THE COST OF ACQUISITION OF THESE RIGHTS. WHAT THE ASSESSEE HAS TRANSFERRED IS NOT THE PLOT OR THE BUILDING BUT A RIGHT PARTING WITH WHICH DOES N OT RESULT IN PARTING WITH LAND OR BUILDING. THE COSTS OF OBTAINING BMC APPROVAL FO R THE BUILDING PLAN CAN ALSO NOT BE SAID TO BE THE COSTS OF ACQUISITION OF THESE RIGHTS AS THESE RIGHTS DO NOT ARISE BY THE VIRTUE OF GETTING THESE APPROVALS BUT BY THE VIRTUE OF A LEGAL RIGHT INDEPENDENT THEREOF. THE LAW IS TRITE AND THERE IS NO DISPUTE ON THE SAID POSITION THAT WHEN AN ASSET HAS NO COST OF ACQUISI TION THE GAINS ON SALE OR TRANSFER OF SAME CANNOT BE BROUGHT TO TAX. THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. B.C. SRINIVASA SETTY (SUPRA) CLEARLY HOLDS SO. FOR ALL THESE REASONS WE ARE OF THE CONSIDERED VIEW THAT THE RECEIPTS ON SALE OF ASSIGNMENT OF RIGHTS TO RECEIVE TDRS ARE NOT LIA BLE TO TAX. THE AUTHORITIES BELOW ERRED IN LAW AND ON FACTS IN HOLDING TO THE C ONTRARY. 8. WE HAVE NO REASONS TO TAKE ANY OTHER VIEW OF THE MA TTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. 9. ION VIEW OF THE ABOVE DISCUSSION WE HOLD THAT THE AUTHORITIES BELOW INDEED ERRED IN LAW IS TAXING THE AMOUNT OF RS.12 62 619/- AS INCOM E OF THE ASSESSMENT YEAR BEFORE US. WE LEAVE IT THAT. 10. FOR THE REASONS SET OUT ABOVE WE DIRECT THE ASSESS ING OFFICER TO DELETE THE IMPUGNED ADDITIONS OF RS.12 62 619/-. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 11. IN THE RESULT APPEAL IS ALLOWED IN THE TERMS INDIC ATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF APRIL 2010. SD/- (D.K. AGRAWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI; 30 TH DAY OF APRIL 2010 ITA NO.1909/MUM./2008 LATE SMT. JAMNABAI ANANDJI MATANI [6 ] COPIES OF THE ORDER FORWARDED TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT MUMBAI (4) CIT(A) MUMBAI (5) DR J BENCH (6) GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PRADEEP J. CHOWDHURY MUMBAI BENCHES SR. PRIVATE SECRETARY ITA NO.1909/MUM./2008 LATE SMT. JAMNABAI ANANDJI MATANI [7 ] DATE INITIAL 1. DRAFT DICTATED ON 22.4.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 23.4.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 23.4.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 23.4.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23.4.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 23.4.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 23.4.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER