BOLINJKAR METAL WORK P.LTD, MUMBAI v. DCIT 5(1), MUMBAI

ITA 2297/MUM/2010 | 2006-2007
Pronouncement Date: 19-01-2011 | Result: Allowed

Appeal Details

RSA Number 229719914 RSA 2010
Assessee PAN AAACB4357Q
Bench Mumbai
Appeal Number ITA 2297/MUM/2010
Duration Of Justice 9 month(s) 27 day(s)
Appellant BOLINJKAR METAL WORK P.LTD, MUMBAI
Respondent DCIT 5(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 19-01-2011
Date Of Final Hearing 16-11-2010
Next Hearing Date 16-11-2010
Assessment Year 2006-2007
Appeal Filed On 23-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 2297/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. BOLINJKAR METAL WORKS P. LTD. DCIT - 5(1) 13/17 PETIT COMPOUND MUMBAI NANA CHOWK GRANT ROAD W) VS. MUMBAI 400007 PAN - AAACB 4357 Q APPELLANT RESPONDENT APPELLANT BY: SHRI N.M. PORWAL RESPONDENT BY: SHRI HARI GOVIND SINGH O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- IX MUMBAI DATED 04.03.2010 IN WHICH ASSESSEE HAS RAISE D THE FOLLOWING FIVE GROUNDS: - 1. THE LD. CIT(A) ERRED IN CONFIRMING INCOME FROM SALE OF INDUSTRIAL SHED AS SHORT-TERM CAPITAL GAINS INSTEAD OF LONG-TE RM CAPITAL GAINS CLAIMED BY THE APPELLANT. THE LD. CIT(A) FAILED TO APPRECIATE THAT RIGHT OF OCCUPANCY WHICH IS A CAPITAL ASSET WAS HEL D BY THE APPELLANT SINCE 20 TH OCTOBER 1972. 2. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE DEF INITION OF CAPITAL ASSET IN SECTION 2(14) READING AS UNDER: - (14) CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINES S OR PROFESSION BUT DOES NOT INCLUDE- 3. THE LD. CIT(A) ERRED IN TAKING FAKIR MARKET VALU E OF THE BUILDING AS ON 1 ST APRIL 1981 AT RS.2 20 951/- AS AGAINST FAIR MARKE T VALUE OF THE BUILDING TAKEN BY THE APPELLANTS REGISTERED VA LUER AT RS.26 88 000/-. THE LD. CIT(A) FAILED TO APPRECIATE THAT CONSTRUCTION OF THE SAID BUILDING STARTED ON 1 ST SEPTEMBER 1969 AND IT CONTINUED UPTO 1 ST APRIL 1981. 4. THE LD. CIT(A) ERRED IN GIVING A FINDING ON THE EFFECT THAT THE APPELLANT COMMENCED CONSTRUCTION OF THE BUILDING ON THE LAND IN THE YEAR 1979 AS AGAINST THE ACTUAL COMMENCING OF C ONSTRUCTION IN ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 2 THE YEAR 1969 AND COMPLETED THE SAME IN THE YEAR 19 79 THUS TAKING ALTOGETHER THEN YEARS TIME TO COMPLETE THE C ONSTRUCTION. 5. THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TH E GOVERNMENT OF MAHARASHTRA VIDE LEASE DEED DATED 20 TH OCTOBER 1982 ALLOTTED THE APPELLANT RIGHT OF OCCUPANCY VIDE ITS LETTER DA TED 5 TH DECEMBER 1969. THIS RIGHT OF OCCUPANCY CONTINUED TO EXIST UP TO 30 TH APRIL 2004 WHEN THE APPELLANT SOLD THE PROPERTY. THUS TH E APPELLANT WAS HOLDING RIGHT TO PROPERTY SINCE 20 TH OCTOBER 1972. 2. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO COMPU TATION OF CAPITAL GAINS INCOME ON SALE OF PROPERTY. THE A.O. HAS PASS ED THE ASSESSMENT ORDER DATED 19 TH DECEMB4ER 2008 FOR A.Y. 2006-07 BRINGING TO TAX T HE TOTAL INCOME OF ` 1 32 05 706/-. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS SOLD ITS PROPERTY SITUATED AT 113 C & D GOVERNMENT INDUSTRIAL ESTATE CHARKOP KANDIVLI (W) MUMBAI FOR A LUMPSUM CONSIDERATION OF ` 1 40 00 000/- AND CLAIMED LONG TERM CAPITAL LOSS OF ` 28 94 819/-. THE PROPERTY CONSISTS OF LAND ALONGWITH THE STRUCTURE T HEREON. THE WORKING OF LONG TERM CAPITAL LOSS WAS BASED ON THE VALUATION REPORT SUBMITTED BY M/S. GENESIS ARCHITECTS 9 NAV-YASHODHAN CHS OPP. CITI MALL SUDARSHAN NAGAR DOMBIVLI (E). THE WORKING OF LONG TERM CAPITAL LOSS IS REPRODUCED BELOW: - FAIR MARKET VALUE OF THE PROPERTY IN THE YEAR 1981 BASED ON THE INDIAN VALUERS DIRECTORY & REFERENCE BOOK 2002 EDITION: VALUE OF DEVELOPED LAND PLUS INDUSTRIAL BUILDING = 4800 SQ.FT. X ` 560/SQ.FT. = ` 26 88 000/- AREA OF VACANT LAND = = 9246 SQ.FT. 4800 SQ.FT. 4446 SQ.FT. VALUE OF THE VACANT LAND (DEVELOPED LAND) = 4446 SQ.FT. X ` 160/SQ.FT. = ` 7 11 260/- TOTAL MARKET VALUE OF THE PROPERTY IN YEAR 1981 IS ` 33 99 360/-. INDEXED COST OF ACQUISITION AS ON 1981 33 99 360 X 497 100 = 1 68 94 819 SOLD ON 2 ND MAY 2004 1 40 00 000 LOSS 28 94 819 ======= ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 3 THE A.O. FOUND THAT THE NATURE OF THE PROPERTY SOLD BY THE APPELLANT IS BUSINESS PROPERTY. EVEN THOUGH THE A.O. HAD ADMITTE D IN THE ASSESSMENT ORDER THAT THE ASSESSEE COMPANY HAS NOT CLAIMED ANY DEPRECIATION ON THE SAID PROPERTY HE HELD THAT PROVISIONS OF SECTION 5 0 OF THE INCOME-TAX ACT 1961 WERE APPLICABLE. THE A.O. COMPUTED THE SHORT T ERM CAPITAL GAINS OF THE ASSESSEE AT ` 1 37 29 278/- AFTER DENYING THE COST INDEXATION AND SUBSTITUTING THE BOOK COST. THE ASSESSEE CLAIMED TH AT THE SAID PROPERTY WAS NEVER USED FOR THE BUSINESS OF THE ASSESSEE. IT HAS NEVER CLAIMED DEPRECIATION FROM THE SAID PROPERTY AND THEREFORE P ROVISIONS OF SECTION 50 OF THE I.T. ACT WERE NOT APPLICABLE. THEREFORE THE GA IN OF THE ASSESSEE ON THE SALE OF THE PROPERTY ARE LONG TERM CAPITAL GAIN AND NOT SHORT TERM CAPITAL GAINS AS PER PROVISIONS OF SECTION 50 OF THE I.T. A CT. ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ADDI TION MADE BY THE A.O. VIDE HIS ORDER DATED 4 TH MARCH 2010 WHILE HOLDING THAT PROVISIONS OF SEC.50 WERE NOT APPLICABLE BUT ON DIFFERENT REASONS. 2.8 ON 2.5.2005 THE APPELLANT HAS SOLD OWNERSH IP RIGHT. IT IS TRUE THAT THE APPELLANT HAS ACQUIRED THE RIGHT OF OCCUPA NCY PRIOR TO 1.4.1981. HOWEVER IN THE CURRENT YEAR THE APPELLANT HAS SOL D THE OWNERSHIP RIGHT IN THE SAID PROPERTY AND NOT THE RIGHT OF OCCUPANCY . SINCE THE APPELLANT HAS ACQUIRED THE OWNERSHIP RIGHT ON 30.4.2004 WHEN THE GOVERNMENT OF MAHARASHTRA TRANSFERRED THE LAND IN THE NAME OF SOC IETY IT CANNOT BE SAID THAT THE APPELLANT HELD OWNERSHIP RIGHT FOR A PERIOD OF MORE THAN 3 YEARS. HENCE CAPITAL GAINS OF THE APPELLANT RELATE D TO TRANSFER OF OWNERSHIP RIGHT OF LAND CANNOT BE TREATED AS LONG T ERM CAPITAL GAINS. 2.9 WITHOUT PREJUDICE TO THE ABOVE IT CANNOT BE SA ID THAT THE APPELLANT HAS ACQUIRED ANY VALUABLE RIGHT WHEN GOVERNMENT OF MAHARASHTRA ALLOWED THE APPELLANT RIGHT OF OCCUPANCY ON 20.10.1 972. THERE IS NO DOUBT THAT RIGHT OF OCCUPANCY IS A CAPITAL ASSET. H OWEVER IF A PERSON CANNOT TRANSFER SUCH RIGHTS IT CANNOT BE SAID THAT SUCH CAPITAL ASSETS HAS ANY VALUE. THE RIGHT OF OCCUPANCY GRANTED BY TH E GOVERNMENT OF MAHARASHTRA TO THE APPELLANT ON 20.10.1972 WAS NOT TRANSFERABLE. IT CANNOT BE SAID THAT ON 2.03.2005 THE APPELLANT HAS TRANSFERRED ANY SUCH RIGHT. HENCE THE ENTIRE CONSIDERATION RECEIVE D BY THE APPELLANT IS FOR TRANSFERRING OWNERSHIP RIGHTS. THEREFORE IT IS HELD THAT APPELLANT HELD THE LAND FOR A PERIOD OF LESS THAN 3 YEARS AND ACCO RDINGLY THE GAINS OF THE APPELLANT ON TRANSFER OF LAND ARE HELD TO BE SH ORT TERM CAPITAL GAINS AND NOT LONG TERM CAPITAL GAINS AS CLAIMED BY THE A PPELLANT. ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 4 AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE R AISED THE GROUNDS. THE ISSUES FOR CONSIDERATION IS ABOUT THE PERIOD OF HOL DING - WHETHER THE GAIN IS LONG TERM OR SHORT TERM AND WHAT IS THE COST OF AC QUISITION FOR COMPUTING CAPITAL GAINS. 3. THE LEARNED COUNSEL SUBMITTED THAT THERE IS NO DISP UTE ABOUT THE PROPERTY BEING A CAPITAL ASSET AND THE ASSESSEE WAS HOLDING TENANCY RIGHTS FROM GOVERNMENT OF MAHARASHTRA VIDE DEED DATED 20 TH OCTOBER 1972. IT WAS SUBMITTED THAT THE RIGHTS OF THE ASSESSEE ARE TO BE TREATED AS CAPITAL ASSET FOLLOWING THE DECISIONS IN THE CASE OF CIT VS. TATA SERVICES LTD. (1980) 122 ITR 594 (BOM) CIT VS. STERLING INVESTMENT CORPORAT ION LTD. (1980) 123 ITR 441 (BOM) AND CIT VS. VIJAY FLEXIBLE CONTAINERS (19 90) 186 ITR 693 697 (BOM). HE SUBMITTED THE FACTUAL POSITION THAT ASSES SEE HAS BEEN ALLOTTED THE PROPERTY VIDE ORDERS OF GOVERNMENT OF MAHARASHTRA D ATED 15 TH DECEMBER 1969 AND 6 TH OCTOBER 1969 AND ASSESSEE WAS IN THE POSSESSION OF THE PROPERTY BY DEED DATED 20 TH OCTOBER 1972. ON THIS PROPERTY THE ASSESSEE STARTED CONSTRUCTING THE FACTORY BUILDING IN DECEMB ER 1971 AND CONTINUED CONSTRUCTION TILL 30 TH DECEMBER 1980 SHOWING THE COST OF CONSTRUCTION OF FACTORY BUILDING AT ` 2 20 951/-. THE PROPERTY WENT INTO DISPUTE BY THIRD PARTY OCCUPYING THE BUILDING AND THE MATTER WAS CON TESTED BEFORE THE HIGH COURT AND THE PROPERTY WAS KEPT UNDER THE POSSESSIO N OF COURT RECEIVER VIDE REPORT DATED 31 ST JULY 1999. THE HON'BLE BOMBAY HIGH COURT VIDE ORDE R DATED 26 TH AUGUST 2002 HAS DECIDED IN FAVOUR OF THE ASSESSEE WHEREIN THE HON'BLE BOMBAY HIGH COURT EXAMINED THE OWNERSHIP OF THE PROPERTY AND HELD VIDE PARA 3 & 4 AS UNDER: 3. THE EVIDENCE OF SHRI ASHOK MORESHWAR CHAPEKAR (P .W.I.) REVEALS THAT THE PLAINTIFFS TOOK THE SUIT LAND ON LEAS FROM THE GOVERNMENT OF MAHARASHTRA UNDER A REGISTERED LEASE DEED DATED 23. 10.1982 (EXHIBIT C) FOR THE PURPOSE OF CONSTRUCTION OF INDUSTRIAL BUILDING. THE SAME WAS CONSTRUCTED AND COMPLETED IN THE YEAR 1979. THE BOMBAY MUNICIPAL CORPORATION ASSESSED THE BUILDING FOR PRO PERTY TAXES. THE ORIGINAL BILLS HAVE BEEN PRODUCED AT EXHIBIT D CO LLECTIVELY. HIS EVIDENCE FURTHER REVEALS THAT BY THE LETTER DATED 2 .5.1985 OCCUPANCY RIGHTS WERE GIVEN TO THE PLAINTIFF-COMPANY BY THE G OVERNMENT OF MAHARASHTRA AND THE PLAINTIFF-COMPANY WAS REQUIRED TO PAY AN AMOUNT OF ` 14 607-05PS. AS THE OCCUPANCY PRICE. THE PAYMENT WA S MADE BY THE PLAINTIFF-COMPANY AS A RESULT OF WHICH THE PLAI NTIFF-COMPANY ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 5 BECAME THE OWNER OF THE OCCUPANCY RIGHTS IN THE SUI T LAND. AS THE PLAINTIFF-COMPANY DID NOT HAVE WATER CONNECTION OR ELECTRIC METER THE PREMISES COULD NOT BE USED. HENCE THEY WERE KEPT LO CKED. 4. IN THE YEAR 1986 THE PLAINTIFFS NOTICED THAT TH E LOCKS WERE BROKEN AND ONE WATCHMAN WAS FOUND IN THE SUIT PREMISES. HE STATED THAT HE WAS EMPLOYED BY DEFENDANT NO. 1 TO GUARD THE SUIT P REMISES. A FIRST INFORMATION REPORT WAS FILED WITH THE KANDIVLI POLI CE STATION AND A CASE WAS REGISTERED UNDER SECTION 145 OF THE CODE O F CRIMINAL PROCEDURE 1973 WHICH HAS NOT YET BEEN DECIDED AS THE DEFENDANTS FILED A SIT BEFORE THE COURT OF THE CITY CIVIL COUR T AT BOMBAY BEING SUIT NO. 6158 OF 1986. A NOTICE OF MOTION WAS TAKEN OUT BY THE DEFENDANTS IN THE SAID SUIT. AD-INTERIM RELIEF WAS NOT GRANTED IN THE NOTICE OF MOTION AGAINST WHICH AN APPEAL WAS PREFERRED BUT TH E SAME WAS DISMISSED. 4. IT WAS HIS SUBMISSION THAT THE GOVERNMENT OF MAHAR ASHTRA HAS GIVEN FULL RIGHTS TO THE ASSESSEE BY PAYMENT OF TRANSFER FEE AND IN SUPPORT OF THAT THE LEARNED COUNSEL PLACED ON RECORD NOTICE DATED 2 ND MAY 1985 AND ISSUE OF NO OBJECTION DATED 19.04.1994 AND COPY OF THE CHALL AN PAYING CONSOLIDATED LAND REVENUE ON 19.04.1994. WITH REFERENCE TO THE A RGUMENT THAT NO OBJECTION CERTIFICATE WAS ISSUED BY THE OFFICE OF T AHSILDAR BORIVALI VIDE LETTER DATED 13.10.2005 FOR TRANSFER PROPERTY IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT THE PROPERTY WAS TRANSFERRED TO THE IN DUSTRIAL DEPARTMENT GOVERNMENT INDUSTRIAL ESTATE KANDIVALI VIDE ORDER DATED 12.05.2005 BY THE GOVERNMENT OF MAHARASHTRA AND THEN ONLY THE INDUSTR IAL ESTATE KANDIVALI WAS FORMED WHICH ISSUED THE NO OBJECTION CERTIFICAT E FOR TRANSFER OF PROPERTY WHEREAS THE PROPERTY IS IN OCCUPATION CONTINUOUSLY FROM 16.09.1969 LEASE DEED WAS EXECUTED ON 23.10.1972 AND THE PROPERTY WA S CONVERTED INTO OWNERSHIP PROPERTY AFTER PAYMENT OF THE FEES ON 28. 04.1994. ACCORDINGLY THE PROPERTY IS IN THE OCCUPATION OF THE ASSESSEE AND I S A LONG TERM ASSET. WITH REFERENCE TO THE FACTORY BUILDING HE REFERRED TO TH E FINDING OF THE CIT(A) AND SUBMITTED THAT THE FACTORY BUILDING WAS COMPLETED A S EARLY AS 1980 THE CONSTRUCTION OF WHICH WAS STATED 10 YEARS BEFORE AN D ACCORDINGLY THE ASSESSEE WAS WELL WITHIN ITS RIGHTS TO VALUE THE PR OPERTY AS ON 01.04.1981 FOR CLAIMING BENEFIT OF INDEXATION. IT WAS HIS SUBM ISSION THAT THE PROPERTY WAS LONG TERM CAPITAL ASSET AND BOTH THE A.O. AND T HE CIT(A) ERRED IN TREATING IT AS SHORT TERM. ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 6 5. THE LEARNED D.R. HOWEVER RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) AND FURTHER SUBMITTED THAT THE ASSESSEE HAS ONLY TENANCY RIGHTS AND CONVERSION OF TENANCY RIGHT INTO OWNERSHIP RIGHTS W AS IN 2004 SO THE A.O. HAS RIGHTLY TREATED IT AS SHORT TERM CAPITAL GAINS. HE RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . DR. D.A. IRANI 234 ITR 850. HE HOWEVER ALSO RELIED ON THE NO OBJECTION C ERTIFICATE GRANTED BY THE TAHSILDAR BORIWALI WITH REFERENCE TO THE OWNERSHIP RIGHTS. 6. WE HAVE EXAMINED THE ISSUE AND CONSIDERED THE RIVAL ARGUMENTS AND THE DOCUMENTS PLACED ON RECORD IN THE PAPER BOOK. I NITIALLY THE A.O. TREATED THE FACTORY BUILDING AS A DEPRECIABLE ASSET AND INV OKED THE PROVISIONS OF SECTION 50 AND TREATED THE CAPITAL GAIN AS SHORT TE RM CAPITAL GAINS AS PER PROVISIONS OF SECTION 50. THE CIT(A) WHILE HOLDING THAT ASSESSEE WAS DISCLOSING BUILDING PROPERTY SINCE 1981 CONSIDERED THAT THERE WAS A BUILDING ON THE PROPERTY BEFORE 1981 AND AS ASSESSE E HAS NOT BEEN CLAIMED ANY DEPRECIATION PROVISIONS OF SECTION 50 CANNOT BE INVOKED. THEREFORE ON THE POINT OF APPLICABILITY OF PROVISIONS OF SECTION 50 THE CIT(A) HELD THAT THE PROPERTY BEING AN ASSET ON WHICH DEPRECIATION WAS N OT CLAIMED THE SAID PROVISIONS ARE NOT APPLICABLE. IT SEEMS THE REVENUE HAS ACCEPTED THIS FINDING AS THERE IS NO CROSS APPEAL BROUGHT TO OUR NOTICE. 7. THE CIT(A) VIDE PARA 2.4 OF HIS ORDER HAS FURTHER E XAMINED AND CONSIDERED THAT THE COST OF CONSTRUCTION OF THE BUI LDING AS PER RECORD WAS ` 2 20 951/- AS ON 31.12.1980 AND THE LAND HOWEVER WAS OCCUPIED BY THE ASSESSEE BY WAY OF LEASE DEED DATED 20.10.1972 AND THE RIGHT OF TENANCY CONTINUED TO EXIST UPTO 30.04.2004. SINCE THE LAND WAS TRANSFERRED TO THE SOCIETY BY THE GOVERNMENT ONLY ON 30.04.2004 THE AS SESSEE WAS STATED TO HAVE BECOME OWNER OF THE LAND ONLY ON 30.04.2004. I N THIS REGARD HE RAISED TWO QUESTIONS AND DETERMINED THE ISSUE VIDE PARA 2. 8 2.9 AND 2.10 AS UNDER: - 2.8 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND GONE THROUGH THE VARIOUS DETAILS FILED BY THE APPELLANT IN THE ASSESSMENT PROCEEDINGS. IT HAS BEEN FAIRLY ADMITTED BY THE AUT HORIZED REPRESENTATIVE OF THE APPELLANT THAT OWNERSHIP RIGH T IS A BUNDLE OF RIGHTS WHICH CONTAINS RIGHT TO USE THE PROPERTY RI GHT TO HOLD THE PROPERTY RIGHT TO TRANSFER THE PROPERTY AND OTHER CONNECTED RIGHTS. ON ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 7 2.5.2005 THE APPELLANT HAS SOLD OWNERSHIP RIGHT. I T IS TRUE THAT THE APPELLANT HAS ACQUIRED THE RIGHT OF OCCUPANCY PRIOR TO 1.4.1981. HOWEVER IN THE CURRENT YEAR THE APPELLANT HAS SOL D THE OWNERSHIP RIGHT IN THE SAID PROPERTY AND NOT THE RIGHT OF OCC UPANCY. SINCE THE APPELLANT HAS ACQUIRED THE OWNERSHIP RIGHT ON 30.4. 2004 WHEN THE GOVERNMENT OF MAHARASHTRA TRANSFERRED THE LAND IN T HE NAME OF SOCIETY IT CANNOT BE SAID THAT THE APPELLANT HELD THE OWNERSHIP RIGHT FOR A PERIOD OF MORE THAN 3 YEARS. HENCE CAPITAL GAINS OF THE APPELLANT RELATED TO TRANSFER OF OWNERSHIP RIGHT OF LAND CANN OT BE TREATED AS LONG TERM CAPITAL GAINS. 2.9 WITHOUT PREJUDICE TO THE ABOVE IT CANNOT BE SA ID THAT THE APPELLANT HAS ACQUIRED ANY VALUABLE RIGHT WHEN GOVE RNMENT OF MAHARASHTRA ALLOWED THE APPELLANT RIGHT OF OCCUPANC Y ON 20.10.1972. THERE IS NO DOUBT THAT RIGHT OF OCCUPANCY IS A CAPI TAL ASSET. HOWEVER IF A PERSON CANNOT TRANSFER SUCH RIGHTS IT CANNOT BE AID THAT SUCH CAPITAL ASSETS HAS ANY VALUE. THE RIGHT OF OCCUPANC Y GRANTED BY THE GOVERNMENT OF MAHARASHTRA TO THE APPELLANT ON 20.10 .1972 WAS NOT TRANSFERABLE. IT CANNOT BE SAID THAT ON 20.03.2005 THE APPELLANT HAS TRANSFERRED ANY SUCH RIGHT. HENCE THE ENTIRE CONSI DERATION RECEIVED BY THE APPELLANT IS FOR TRANSFERRING OWNERSHIP RIGHTS. THEREFORE IT IS HELD THAT THE APPELLANT HELD THE LAND FOR A PERIOD OF LE SS THAN 3 YEARS AND ACCORDINGLY THE GAINS OF THE APPELLANT ON TRANSFER OF LAND ARE HELD TO BE SHORT TERM CAPITAL GAINS AND NOT LONG TERM CAPITAL GAINS AS CLAIMED BY THE APPELLANT. SINCE THE APPELLANT BECAME OWNER OF THE LAND ON 30.04.2004 FOR THE PURPOSE OF COMPUTING CAPITAL GA INS COST PRICE OF THE LAND IS TO BE TAKEN WHICH IS RS.49 711/-. THE A PPELLANT IS NOT ENTITLED TO TAKE FAIR MARKET VALUE OF THE LAND AS O N 1.4.1981. 2.9.1 AS REGARDS THE FAIR MARKET VALUE OF THE BUILD ING AS ON 1.4.1981 THE APPELLANT COULD NOT FILE ANY ACCEPTABLE EVIDENC ES. THE FAIR MARKET VALUE OF THE BUILDING DEPRECIATES WITH TIME. THE RE GISTERED VALUER OF THE APPELLANT HAS ESTIMATED THE VALUE OF THE BUILDING B ASED ON MARKET VALUE OF THE FLATS IN MUMBAI IN 2002. THUS THE REG ISTERED VALUER HAS VALUED THE BUILDING OF THE APPELLANT ON GENERAL DAT A IGNORING THE ACTUAL COST OF CONSTRUCTION WHICH WAS AVAILABLE FROM THE B OOKS OF THE APPELLANT. THE REGISTERED VALUER SHOULD HAVE TAKEN THE COT OF CONSTRUCTION OF THE BUILDING FROM THE BOOKS OF THE APPELLANT. THE COST OF CONSTRUCTION OF THE BUILDING AS PER BOOKS OF THE A PPELLANT IS THE BEST BASIS FOR COMPUTING THE FAIR MARKET VALUE OF THE BU ILDING. FIRST OF ALL THE PERIOD OF CONSTRUCTION IS MORE NEAR TO THE VALU ATION DATE WHICH IS 1.4.1981. SECONDLY THE COST OF CONSTRUCTION IS MOR E NEAR TO THE VALUATION DATE WHICH IS 1.4.1981. SECONDLY THE COS T OF CONSTRUCTION IS THE MORE SUITABLE BASIS FOR ESTIMATION OF FAIR MARK ET VALUE OF BUILDING THAN THE VALUE OF FLATS AS PER READY RECKONER AS TA KEN BY THE REGISTERED VALUER. THIRDLY THE NATURE OF THE BUILDING OF THE APPELLANT IS FACTORY BUILDING AND THEREFORE THE VALUER CANNOT ADOPT THE VALUE AS PER READY RECKONER WHICH IS FOR VALUING FLATS FOR VALUING T HE FACTORY BUILDING. ACCORDINGLY IT IS HELD THAT THE VALUER OF FAIR MAR KET VALUE MADE BY THE REGISTERED VALUE IS NOT RELIABLE ESTIMATE AND THE C OST OF CONSTRUCTION AS ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 8 PER BOOKS OF ACCOUNT OF THE APPELLANT IS MORE A SUI TABLE BASIS FOR COMPUTING THE COST OF BUILDING AS ON 1.4.1981. THE COST OF BUILDING AS ON 30.12.1980 WHICH IS JUST 3 MONTHS BEFORE THE VA LUATION DATE IS RS. 2 20 951/-. AS ALREADY EXPLAINED THE FAIR MARKET V ALUE OF THE BUILDING DEPRECIATES WITH TIME. THEREFORE GIVING BENEFIT TO THE APPELLANT THE FAIR MARKET VALUE OF THE BUILDING AS ON 1.4.1981 IS TAKE N AT ` 2 20 951/-. 2.10 THE BIFURCATION OF THE SALE PROCEEDS BETWEEN T HE LAND AND BUILDING ARE NOT AVAILABLE AS THE ASSESSING OFFICE R HAS TREATED THE ENTIRE SALE CONSIDERATION AS SHORT TERM CAPITAL GAI N OF THE APPELLANT UNDER SECTION 50 OF THE INCOME TAX ACT. SINCE FAIR MARKET VALUE OF BUILDING DEPRECIATES WITH TIME AND ONLY THE VALUE OF LAND INCREASES THE CAPITAL GAINS OF THE APPELLANT AMOUNTING TO RS. 1 37 29 278/- IS THE SHORT TERM CAPITAL GAIN ON SALE OF LAND. IN VIEW OF THESE FACTS ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD THOUGH ON DIFFERENT REASONS AS GIVEN ABOVE. 8. WE ARE UNABLE TO ACCEPT THE ABOVE VIEW OF THE CIT(A ). THE SEQUENCE OF EVENTS REGARDING THE OWNERSHIP OF THE PLOT AS EVIDE NCED BY THE DOCUMENTS ON RECORD INDICATE THAT THE GOVT OFFERED THE OWNERS HIP RIGHTS AS EARLY AS 2 ND MAY 1985.( PAGE 279 OF PAPER BOOK).THE PLOT WAS ORI GINALLY OBTAINED BY WAY OF LEASE FROM THE GOVT. THE OFFICE OF THE ADDITIONA L COLLECTOR BOMBAY VIDE LETTER DATED JULY 1978 ( PAGES 51 52 OF PAPER BOOK) ADDRESSED TO THE ASSESSEE HAS COMMUNICATED AS UNDER: - GENTLEMEN GOVERNMENT HAS AGREED TO GRANT TO YOU THE LEASE HOL D PLOT ON OCCUPANCY RIGHTS SUBJECT TO THE FOLLOWING CONDITION S: - I) THE GRANTEE SHALL PAY THE OUTSTANDING LEASE RENT AR REARS AS ON THE DATE OF SANCTION AND THE OCCUPANCY PRICE OF THE PLOT AS WILL BE FIXED BY GOVERNMENT IN DUE COURSE HEREAFTER AS O N THE DATE OF TRANSFER OF THE PLOT. II) THE GRANTEE WILL NOT DIRECTLY OR INDIRECTLY TRANSFE R ASSIGN ENCUMBER MORTGAGE OR PART WITH HIS INTEREST OR ANY PART THEREOF IN ANY MANNER WHATSOEVER WITHOUT THE PREVIOUS CONSE NT IN WRITING FROM GOVERNMENT. GOVERNMENT WILL BE FREE TO REFUSE SUCH CONSENT OR GRANT IT SUBJECT TO SUCH CONDITIONS INCL UDING A CONDITION REGARDING THE PAYMENT OF PREMIUM AS GOVER NMENT MAY IN ITS ABSOLUTE DISCRETION THINK FIT; III) THE GRANTEE SHALL ABIDE BY THE PREVISIONS OF THE MA HARASHTRA LAND REVENUE CODE 1966 AND RULES MADE THEREUNDER; IV) THE GRANTEE SHALL ABODE BY THE PROVISIONS OF RULES 31 41 42 AND 51 OF THE MAHARASHTRA LAND REVENUE (DISPOSAL OF GOV T. LANDS) RULES 1971 AND SUCH AS OTHER CONDITIONS THE COLLECT OR MAY DEEMED FIT TO IMPOSE. ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 9 YOU ARE THEREFORE REQUESTED TO GIVE YOUR CONSENT IN WRITING ON THE POINT WHETHER YOU DESIRE TO GET TRANSFERRED THE LEA SED PLOT ON OCCUPANCY RIGHTS AND WHETHER YOU AGREE TO PAY THE C URRENT MARKET VALUE OF THE LAND AT THE RATE THAT WILL BE FIXED BY GOVERNMENT AND WHETHER YOU WILL ABIDE BY THE TERMS AND CONDITIONS OF THE GRANT AS GOVERNMENT MAY FINALLY IMPOSE IN ITS SOLE DISCRETIO N. YOU ARE FURTHER INFORMED THAT THE QUESTION OF FIXING THE FINAL VALU ATION OF THE LAND AND DETERMINING THE DETAILED TERMS AND CONDITIONS OF TH E GRANT IS UNDER CONSIDERATION OF THE GOVERNMENT AND THAT THE VALUE OF THE LAND AS FIXED IN THE YEAR 1973-74 WAS ESTIMATED AT THE RATE OF ` 50/- PER SQ. METER FOR THE PLOTS SITUATED ON MINOR LAYOUT ROADS AND TH AT THE CURRENT MARKET VALUE OF EACH PLOT SHALL NOT BE LOWER THAN T HE RATES MENTIONED ABOVE. PLEASE SENT YOUR REPLY WITHIN A FORTNIGHT SO AS TO ENABLE THIS OFFICE TO SUBMIT FINAL REPORT TO GOVERNMENT. 9. VIDE LETTER DATED 2 ND MAY 1985 THE OFFICE OF THE ADDITIONAL COLLECTOR FORT BOMBAY HAS GIVEN NOTICE TO THE ASSESSEE FOR O BTAINING THE OWNERSHIP BY PAYMENT OF CERTAIN FEES THE CONTENTS OF THE ABO VE LETTER IS AS UNDER: - PLOT NO. 113 C.D. AT KANDIVLI GOVERNMENT INDUSTRIAL ESTATE IS GIVEN TO YOU ON LEASE FOR THIRTY YEARS BY THIS OFFICE LET TER DATED 12.2.1969. POSSESSION OF THE SAID PLOT WAS DELIVERED TO YOU ON DATE 16.7.1969. THE AGREEMENT OF THE LEASE WS EXECUTED ON THE DATE 23.10.1972. THE AREA OF THE PLOT GIVEN TO YOU IS 859 SQ. MTRS. UNDE R THE TERMS OF THE LICENCE (AGREEMENT) THE ANNUAL RENT OF THE PLOT IS TO BE CHARGED AT THE REVISED RATE ACCORDING TO THE MARKET RATE AT THE EN D OF EVERY YEAR FROM (THE DATE OF) DELIVERY OF POSSESSION. ACCORDINGLY YOU ARE REQUIRED TO PAY AT THE REVISED RATE FROM THE DATE _______ THE RENT WHICH YOU HAVE BEEN PAYING. FOR CHARGING THE FIRST REVISED RATE THE GOVERNMENT HAS FINALLY APPROVED OF DEPENDS ON THE APPROVAL OF THE GOVERNME NT RS. ______ PER SQ.MTS. AS BEING THE MARKET RTE PREVAILING ON THE D ATE (BLANK). FURTHER IT IS DECIDED TO SELL TO YOU THE PLOT WHICH IS IN YOUR POSSESSION ON OCCUPANCY RIGHT BASIS AT THE RATE OF ` 66/- PER SQ. METRS. FROM DATED 1.1.78 AS PER THE TERMS IN SCHEDULE A HERETO. (SCHE DULE A WHILE FIXING THE ENHANCE INCOME (UNEARNED INCREMENT) ONLY THE MA RKET RATE OF THE LAND WILL BE TAKEN INTO CONSIDERATION. THE REVISED LEASE (RENT) OF THE POT IN YOUR POSSESS ION IS BEING MADE ` ------/- FROM THE DATE -------. AS YOU HAVE PAID TH E RENT AT THE OLD RATE FROM ------ TO DATE ----------- YOU ARE REQUIRED TO PAY THE AMOUNT OF DIFFERENCE RS. ----/- FOR THE SAID PERIOD. BESIDES FROM THE DATE OF THE SAID AMOUNT BECOMING DUE AND PAYABLE TILL THE ENTIR E AMOUNT OF DIFFERENCE IS PAID INTEREST SHALL BE PAYABLE ON TH E SAID AMOUNT AT THE RATE OF EIGHT PERCENT. SIMILARLY THE PRICE OF THE PLOT IN YOUR POSSESSION WILL HAVE TO BE PAID IN FOUR SIX-MONTHLY (HALF YEARLY) INSTALMENTS WHICH AMOUNT COME ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 10 TO RS.56694/- IN ALL AT THE RATE OF RS.66/- PER SQ. METER. AND INTEREST ON THE SAID ENTIRE AMOUNT WILL HAVE TO BE PAID AT THE RATE OF EIGHT PERCENT FROM DATE 1.1.1978. IF YOU PURCHASE THE SAID PLOT YOU SHALL HAVE TO PA Y THE NON- AGRICULTURAL ASSESSMENT AS UNDER FROM THE DATE 1.1. 1978. PERIOD OF NON AGRICULTURAL ASSESSMENT. 1 NON-AGRICULTURAL ASSESSMENT FOR THE YEAR 2 TOTAL AMOUNT OF NON-AGRICULTURAL ASSESSMENT PAYABLE 3 1.11978 TO 31.7.1979 120.25 240.50 1.7.1979 TO 31.7.1984 721.50 3607.50 TOTAL 3848.00 LESS: RENT PAID AT THE OLD RATE FROM 1.1.1978 TO 31.7.1984 3417.45 NET PAYABLE OUT OF THE NON AGRICULTURAL ASSESSMENT 433.55 BESIDES INTEREST WILL HAVE TO BE PAID ON THE BALAN CE AMOUNT AT THE RATE OF EIGHT PERCENT. THE AMOUNT PAYABLE BY YOU IS AS FOLLOWS: - A. FROM DATE TO RUPEES B. AMOUNT OF THE PRICE OF THE PLOT 14173.50 C. BALANCE OF THE NON-AGRICULTURAL ASSESSMENT UPTIL DATE 31.7.194. (AFTER DEDUCTING THE AMOUNT OF RENT PAID AT THE OLD RATE) 433.55 TOTAL 14607.05 NET PAYABLE BY THE END OF 31.7.1984 (EXCLUDING AMOUNT OF INTEREST.) 14607.05 IF THE AMOUNT OF NON-AGRICULTURAL ASSESSMENT RS.721 .50 PAISE BEING THE AMOUNT PAYABLE FOR CURRENT YEAR HAS BEEN PAID IN A DDITION TO THE ABOVE AMOUNT THEN THE SAME (721-50) SHALL BE DEDUC TED AND THE BALANCE OF THE N.A. ASSESSMENT FOR THE CURRENT YEAR SHALL BE PAYABLE. ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 11 IF YOU WISH TO PURCHASE FROM THE GOVERNMENT AS AFO RESAID THE PLOT WHICH IS IN YOUR POSSESSION THEN YOU SHOULD PAY THE AMOUNT AS ABOVE TO THE TAHSILDAR BORIVALI WITHIN TWO MONTHS FROM T HE DATE OF THIS NOTICE I.E. UPTO THE DATE 30.6.1985. OTHERWISE AC TION WILL BE TAKEN TO RECOVER FROM YOU THE AMOUNT OF DIFFERENCE UPTILL NO W IN RESPECT OF THE REVISED LEASE (RENT) AND THE AMOUNT OF THE RE-REVIS ED LEASE AFTER 1978 (IF IT HAS BECOME DUE UNDER THE AGREEMENT) TOGETHE R WITH EIGHT PERCENT INTEREST THEREON WHICH PLEASE NOTE. ONLY AFTER THE AMOUNT DUE AND PAYABLE AS AFORESAID IS RECOVERED THE AMOUNT OF INTEREST THEREON WILL HAVE TO BE PAID IN ONE INTSTALMENT AND ONLY AFTER THE SAID AMOUNT TOGETHER WITH INTERE ST THE FINAL ORDERS TO TRANSFER THE PLOT WHICH IS IN YOUR POSSESSION TO YOU PERMANENTLY (ON OCCUPANCY RIGHT BASIS) WILL BE ISSUED. A COPY OF THE GOVERNMENT ORDER AND SCHEDULE A AR E ANNEXED HERETO CONSEQUENT TO THAT ASSESSEE PAID THE AMOUNTS IN 198 5-86 TOTALLING TO AN AMOUNT OF ` 56 695/- INCLUDING INTEREST AND THE TAHSILDAR BORI VALI HAS GIVEN NO OBJECTION CERTIFICATE TO THE COLLECTOR BOMBAY S UBURBAN DISTRICT B.M.R.A.D.A BUILDING BORIVALI (EAST) MUMBAI( PAGE S284-288). THERE IS ALREADY FINDING FROM THE RECORD THAT ASSESSEE HAS P AID AN AMOUNT OF ` 49 771/- AS ACKNOWLEDGED BY THE CIT(A). VIDE LETTER DATED 28.04.1994 THE OFFICE OF THE TAHSILDAR BORIVALI ADDRESSED TO THE COLLECTOR BOMBAY SUBURBAN DISTRICT BORIVALI HAD ISSUED A NO OBJECTI ON CERTIFICATE WHICH INDICATE AS UNDER: - THE PLOT BEARING NO. (113 CD) ADMEASURING 859 SQ. METERS SITUATE AT VILLAGE KESI HAS BEEN ALLOTTED TO M/S. BOLINJKAR ME TAL WOKS PVT. LTD. THE PARTICULARS OF THE AMOUNTS PAID BY THEM IN RESP ECT OF THE SAID PLOT ARE AS UNDER. 1) THE TOTAL AMOUNT PAYABLE TOWARDS THE POSSESSORY RIGHT AND THE PARTICULARS OF THE AMOUNTS PAID TOWARDS THE POSSESSORY RIGHT RS.56 694.00 DATE CHALLAN AMOUNT PAID RECEIPT NO. AND DATE 1 9 14173.50 25.7.85 2 105 14173.50 16.1.1986 3 4 14173.50 24.9.86 4 12 14173.50 25.12.86 ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 12 TOTAL AMOUNT PAID 56 694.00 2. THE TOTAL AMOUNT PAID TOWARDS NON AGRICULTURAL A SSESSMENT BY THE END OF YEAR 1993-94 RS.4192.70 VIDE CHALLAN BEA RING NO. 58 DATED 25.4.94 RECEIPT NO. 58 DATED 25.4.94 RECEIPT NO. 0784675 DATED 25.4.94. 3. .... 4. AMOUNT OF RS. _____ PAYABLE TOWARDS THE AMOUNT O F THE POSSESSORY RIGHT. A) THE AMOUNT OF INTEREST PAID ON THE AMOUNT OF P OSSESSORY RIGHT RS.37890.50 PAID ON THE DATE 15.4.1994 VIDE CHALL AN NO. 58 RECEIPT NO. 0785675 DATED 25.4.94. 5. AMOUNT OF INTEREST ON THE AMOUNT DUE FROM OUT OF THE NON AGRICULTURAL ASSESSMENT - RS.34.70. A) THE AMOUNT OF INTEREST PAID ON THE AMOUNT OUT O F THE NON- AGRICULTURAL ASSESSMENT RS.34.70 DATED 25.4.94 CHA LLAN NO. 58 RECEIPT NO. 0785675 DATED 25.4.94. 6. ..... 7. ------ 8. ------- (1) ----- THERE ARE NO DUES FROM THE HOLDER OF PLOT NO. 113CD IN RESPECT OF THE SAID PLOT TILL THE END OF YEAR 1993-94. VIDE PARA 8 OF THE THE LETTER ALSO INDICATES THAT T HERE ARE NO DUES FROM THE HOLDER OF THE PLOT 113CD IN RESPECT OF THE SAID BUI LDING TILL THE END OF 1993- 94. 10. THESE INDICATE THAT THE ASSESSEE HAS TAKEN FULL RIG HTS BY PAYING THE AMOUNTS AS EARLY AS APRIL 1994. WHAT THE REVENUE HA S RELIED UPON IS THE POSSESSION RECEIPT DATED 12.05.2005 BY THE KANDIVIL I CO-OPERATIVE INDUSTRIAL ESTATE FROM MAHARASHTRA GOVERNMENT. EVENTHOUGH THE SAID PLOTS WERE ALLOTTED AS EARLY IN 1969 AND ASSESSEE IS IN POSSES SION OF THE PROPERTY FROM THEN ONWARDS BY WAY OF OCCUPANCY RIGHTS SUBSEQUENTL Y FROM 1995 AS FULL OWNER THE KANDIVALI CO-OPERATIVE INDUSTRIAL ESTATE DID NOT TAKE UP THE ENTIRE AREA DEVELOPED AS INDUSTRIAL ESTATE TILL THE FINAL ORDERS ARE ISSUED BY THE MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION AND THESE WERE UNDERTAKEN BY THE ORDER DATED 30.04.2004 AND POSSES SION WAS HANDED OVER TO THE COOPERATIVE INDUSTRIAL ESTATE ON 12.05.2004. THIS POSSESSION RECEIPT ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 13 HAS NO BEARING IN OUR VIEW ON THE OWNERSHIP RIGHT S OF THE ASSESSEE ON THE PLOT 113 CD. SINCE THE PROPERTY IS BEING TRANSFERRE D THE ASSESSEE AGAIN OBTAINED A NO OBJECTION CERTIFICATE FROM THE TAHASI LDAR BORIVALI WHICH WAS ISSUED ON 10.03.2005. THE SEQUENCE OF EVENTS DO IND ICATE THAT ASSESSEE HAS FULL OWNERSHIP RIGHTS ON THE PROPERTY ON PAYMENT OF THE FEES AS DIRECTED BY THE COLLECTOR BOMBAY AND ASSESSEES CONTENTION THA T IT HAS ITS OWNERSHIP RIGHTS AS A LONG TERM ASSET IS TO BE ACCEPTED. NOT ONLY THAT THE SAME FACTS WERE REITERATED BEFORE THE HON'BLE BOMBAY HIGH COUR T IN THE SUIT FILED BY THE ASSESSEE AND RELIED UPON BY THE ASSESSEE IN THE ARG UMENTS. PARA 3 OF THE HIGH COURT ORDER DO INDICATE THAT BY THE LETTER DAT ED 02.05.1985 OCCUPANCY RIGHTS WERE GIVEN TO THE PLAINTIFF COMPANY BY THE G OVERNMENT OF MAHARASHTRA. IT IS ON RECORD THAT ASSESSEE WAS IN P OSSESSION OF THE PROPERTY FROM 1969 LEASE DEEDS WERE ENTERED INTO IN 1972 O WNERSHIP RIGHTS WERE PURCHASED IN 1985 AND THE NO OBJECTION WAS ISSUED I N 1994. THEREFORE THE OBSERVATION OF THE CIT THAT ASSESSEE ACQUIRED OCCUP ANCY RIGHTS IN 2004 HAS NO BASIS. 11. NOT ONLY THAT THE FACTORY BUILDING WAS CONSTRUCTED AS ON 1980. ASSESSEE HAS CLAIMED HIGHER VALUATION ON THE BASIS OF THE VALUATION REPORT W.E.F. 01.04.1981 ON THE PRETEXT THAT THE BUILDING WAS CONSTRUCTED MUCH EARLIER AND THE VALUATION OF THE BUILDING WAS MUCH MORE THAN THE BOOK VALUE. EVEN THE SALE OF FACTORY BUILDING WAS ALSO T REATED AS SHORT TERM CAPITAL GAIN BY THE CIT(A) WITHOUT CONSIDERING THE FACT THAT HE HIMSELF HAS GIVEN A FINDING THAT THE DEPRECIATION WAS NOT CLAIM ED ON THE FACTORY BUILDING AND FACTORY BUILDING WAS IN THE POSSESSION PRIOR TO 1981. WHILE DEALING WITH THE LAND AND BUILDING SEPARATELY AND BY HOLDING THA T LAND WAS WITH OCCUPANCY RIGHTS ONLY IN 2004 THE CIT(A) DIRECTED THE A.O. TO CONSIDER THE WHOLE OF CAPITAL GAINS AS SHORT TERM IGNORING THE F ACT THAT THE BUILDING WAS IN POSSESSION PRIOR TO 1980. THEREFORE THE ORDER O F THE CIT(A) CANNOT BE UPHELD ON THIS ISSUE ACCORDINGLY IT IS SET ASIDE. ON THE BASIS OF THE ABOVE FINDINGS ON THE BASIS OF DOCUMENTS ON RECORD WE HO LD THAT THE ASSESSEE HAS OCCUPANCY RIGHTS IN THE SAID PROPERTY MORE THAN THR EE YEARS BEFORE THE SALE OF PROPERTY AND SO QUALIFIES FOR COMPUTATION UNDER THE HEAD CAPITAL GAINS AS LONG TERM CAPITAL GAINS. ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 14 12. WE ARE ALSO FORTIFIED IN OUR VIEW WITH THE DECISION OF VINOD KUMAR JAIN VS. CIT LUDHIANA 195 TAXMAN 174 (P&H). THE FACTS IN THE ABOVE CASE ARE THAT THE ASSESSEE WAS ALLOTTED A FLAT UNDER THE SCH EME OF DDA ON 27.02.1982 AND DELIVERY OF THE POSSESSION WAS TAKEN ON 15.05.1986 WHEN THE ACTUAL FLAT NUMBER WAS ALLOTTED. THE ASSESSEE S OLD THE FLAT ON 06.01.1989. HE CLAIMED CAPITAL GAINS ARISING OUT OF SALE OF FLAT AS LONG TERM CAPITAL GAIN BUT THE REVENUE CONTENDED THAT IT WAS SHORT TERM CAPITAL GAIN AS THE FLAT WAS ALLOTTED ON 15.05.1986. THE HONBLE HIGH COURT HAS HELD AS UNDER : - A CONJOINT READING OF SECTIONS 2(14) 2(29A) AND 2 (42A) LEADS TO ONE CONCLUSION THAT A CAPITAL ASSET HELD BY THE ASSESSE E FOR 36 MONTHS WOULD BE TERMED AS A LONG-TERM CAPITAL ASSET AND AN Y GAIN ARISING ON ACCOUNT OF SALE THEREOF WOULD CONSTITUTE A LONG-TER M CAPITAL GAIN. CIRCULAR NO. 471 DATED 15-10-1996 ISSUED BY THE CB DT ON WHICH HEAVY RELIANCE HAD BEEN PLACED BY THE ASSESSEE DESC RIBES THE NATURE OF RIGHT THAT AN ALLOTTEE ACQUIRE ON ALLOTMENT OF A FLAT UNDER SELF- FINANCING SCHEME. ACCORDING TO IT THE ALLOTTEE GET S TITLE TO THE PROPERTY ON THE ISSUANCE OF AN ALLOTMENT LETTER AND THE PAYM ENT OF INSTALMENTS IS ONLY A CONSEQUENTIAL ACTION UPON WHICH THE DELIV ERY OF POSSESSION FLOWS. THE PROVISIONS OF SECTIONS 2(14) 2(29A) AND 2(42A) ENCOMPASS WITHIN THEIR AMBIT THOSE CASES OF CAPITAL ASSETS WHICH ARE HELD BY AN ASSESSEE. ONCE THAT IS SO ADVERTING TO THE FACTS O F THE INSTANT CASE THE ASSESSEE WAS ALLOTTED A FLAT ON 27-2-1982 ON PA YMENT OF INSTALMENTS BY ISSUANCE OF AN ALLOTMENT LETTER AND HE HAD BEEN MAKING PAYMENT IN TERMS THEREOF BUT THE SPECIFIC NU MBER OF THE FLAT WAS ALLOCATED TO THE ASSESSEE AND POSSESSION DELIVE RED ON 15-5- 1986. THE RIGHT OF THE ASSESSEE PRIOR TO 15-5-1986 WAS A RIGHT IN THE PROPERTY. IN SUCH A SITUATION IT COULD NOT BE HELD THAT PRIOR TO THE SAID DATE THE ASSESSEE WAS NOT HOLING THE FLAT. ACCORDINGLY CAPITAL GAIN ARISING ON SALE OF FLAT W AS A LONG-TERM CAPITAL GAIN AND THE ASSESSEE WAS ENTITLED TO SET O FF THE SAME UNDER SECTION 54. 13. IN THIS CASE AS ALREADY STATED THE ASSESSEE WAS IN POSSESSION OF THE PROPERTY BY HOLDING TENANCY RIGHTS FROM A LONG PERI OD BY VIRTUE OF LEASE DEED IN 1972 AND SUBSEQUENTLY THESE TENANCY RIGHTS WERE CONVERTED TO OWNERSHIP RIGHTS WHEN ASSESSEE ACCEPTED THE PROPOSAL FOR PURC HASE OF THE PROPERTY MADE VIDE LETTER DATED 2 ND MAY 1985 AND FULL RIGHTS THEREON FROM 28.04.1994 WHEN NO OBJECTION WAS ISSUED BY THE TAHSILDAR BORI VALI AFTER COLLECTING THE ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 15 NECESSARY PAYMENTS. THE LEARNED D.R. IN HIS ARGUMEN TS RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. DR. D.A. IRANI 234 ITR 850 FOR THE PROPOSITION THAT THE ASSE SSEE HAD ONLY TENANCY RIGHTS AND OCCUPANCY RIGHTS CAME ONLY IN APRIL 2004 WHEN THE PROPERTY WAS SOLD AND ANOTHER NO OBJECTION CERTIFICATE WAS OBTAI NED. THE PRINCIPALS ESTABLISHED BY THE ABOVE JUDGEMENT DOES NOT APPLY I N THE PRESENT FACTS OF THE CASE AS THE ASSESSEE OBTAINED THE OWNERSHIP RIG HTS BY PAYING THE RELEVANT AMOUNTS CONSEQUENT TO THE OFFER MADE WAY B ACK IN MAY 1985 AND PAYING THE AMOUNTS IMMEDIATELY THEREAFTER. ACCORDIN GLY THE TENANCY RIGHTS THE ASSESSEE HAD HELD FROM 1972 ONWARDS GOT MERGED INTO OWNERSHIP RIGHT AT LEAST FROM APRIL 1994 ONWARDS IF NOT EARLIER ON THE BASIS OF THE PAYMENT. ACCORDINGLY IT IS TO BE HELD THAT THE OWNERSHIP OF THE LAND WAS EXISTING WITH THE ASSESSEE FROM APRIL 1994.THE GROUNDS 1 2 & 5 A RE ACCORDINGLY CONSIDERED ALLOWED. 14. WITH REFERENCE TO VALUATION OF THE PROPERTY FOR THE PURPOSE OF INDEXATION WE NOTICE THAT THE VALUE OF THE BUILDIN G IN THE BOOKS AS ON 01.04.1981 WAS AT ` 2 20 951/-. ON THIS BASIS THE CIT (A) FIXED THE VAL UE AS ON 01.04.1981 WITHOUT CONSIDERING THE OBJECTIONS OF THE ASSESSEE THAT THE BUILDING WAS EXISTING MUCH PRIOR TO THAT DATE A ND BOOK VALUE CANNOT BE ACCEPTED. THESE OBJECTIONS HOWEVER ARE TO BE E XAMINED AND A FINDING IS REQUIRED ABOUT THE CONSTRUCTION OF THE B UILDING AND ITS COMPLETION AND ITS VALUE AS ON 01.04.1981. ALONG WI TH THE VALUATION OF THE BUILDING THE VALUATION OF LAND IN OCCUPATION O F THE ASSESSEE IS TO BE DETERMINED WITH EFFECT FROM ITS OWNERSHIP RIGHTS T HE ISSUE OF WHICH IS NOT EXAMINED BY THE REVENUE AUTHORITIES. ACCORDINGL Y FOR THE PURPOSE OF DETERMINING THE COST OF ACQUISITION AND INDEXATION THE ISSUE IS RESTORED TO THE FILE OF THE A.O. TO FIX THE VALUE AFTER GIVI NG AN OPPORTUNITY TO THE ASSESSEE TO DETERMINE THE LONG TERM CAPITAL GAINS O F THE ASSESSEE TAKING INTO CONSIDERATION THE FACTS ON RECORD. TO THAT EXT ENT THE ISSUES IN GROUND NOS. 3 & 4 ON COMPUTATION OF CAPITAL GAIN AR E RESTORED TO THE FILE OF THE A.O. TO DETERMINE IT ACCORDING TO THE PROVIS IONS OF LAW. NEEDLESS TO SAY THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY . FOR THIS THE ITA NO. 2297/MUM/2010 M/S. BOLINJKAR METAL WORKS P. LTD. 16 COMPUTATION OF CAPITAL GAIN IS SET ASIDE AND RESTOR ED TO THE FILE OF THE A.O. 15. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 19 TH JANUARY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IX MUMBAI 4. THE CIT V MUMBAI CITY 5. THE DR B BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.