NIRUPAMA K SHAH, MUMBAI v. ITO 12(2)(3), MUMBAI

ITA 348/MUM/2010 | 2006-2007
Pronouncement Date: 18-11-2011 | Result: Allowed

Appeal Details

RSA Number 34819914 RSA 2010
Bench Mumbai
Appeal Number ITA 348/MUM/2010
Duration Of Justice 1 year(s) 10 month(s) 3 day(s)
Appellant NIRUPAMA K SHAH, MUMBAI
Respondent ITO 12(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 18-11-2011
Date Of Final Hearing 09-11-2011
Next Hearing Date 09-11-2011
Assessment Year 2006-2007
Appeal Filed On 14-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B : MUMBAI BEFORE SHRI D. MANMOHAN (VICE PRESIDENT [MZ]) AND SHRI RAJENDRA SINGH (ACCOUNTANT MEMBER) ITA NO.348/MUM/2010 ASSESSMENT YEAR : 2006-07 MS. NIRUPAMA K. SHAH 45/46 PODAR CHAMBERS S.A. BRELVI ROAD FORT MUMBAI-400 001. ..( APPELLANT ) P.A. NO. (AMGP 9692 C) VS. INCOME TAX OFFICER WARD-12(2)(3) AAYAKAR BHAVAN MUMBAI-20. ..( RESPONDENT ) APPELLANT BY : DR. K . SHIVARAM RESPONDENT BY : SHRI O. A. MAO DATE OF HEARING : 9.11.11 DATE OF PRONOUNCEMENT : 18 TH NOVEMBER 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.11.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-0 7. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING THE DECISION OF THE AO TO NOT CONSIDER THE EXPENSES INCURRED BY THE ASSESSEE FOR COMPLETING THE FLAT FOR THE PURPOSE OF BENEFIT UNDER SECTION 54F OF THE INCOME TAX ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WHO WAS 50% CO-OWNER WITH HER HUSBAND IN A RESIDENTIAL FLAT AT WALKESHWAR ROAD HAD ITA NO.348/M/10 A.Y:06-07 2 SOLD THE SAME FOR A SUM OF RS.2.30 CRORES AS PER TR ANSFER DEED DATED 15.1.2006. THE ASSESSEE INVESTED THE SALE PROCEEDS IN PURCHASE OF A HOUSE PROPERTY AT RAJKAMAL HEIGHTS PAREL AS PER AGREEMENT DATED 26.5.2006 FOR RS.45.60 LACS. THE ASSESSEE HOWEVER BEFORE COMPL ETION OF THE BUILDING HAD ALSO INCURRED EXPENDITURE OF RS.43.00 LACS AS PER T HREE SUPPLEMENTARY AGREEMENTS DATED 22.4.2006 ENTERED INTO WITH THREE DIFFERENT PARTIES I.E. M/S. DARSHAN ENTERPRISES M/S. TEJAL ENTERPRISES AN D M/S. DEE VEE ENTERPRISES. THE ASSESSEE THEREFORE TREATED THE COST OF THE NEW HOUSE AT RS.88.60 LACS FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 54F WHICH EXEMPTS THE LONG TERM CAPITAL GAIN IF THE SAME IS I NVESTED IN A RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR OR TWO YEARS AFTE R THE DATE OF TRANSFER OR IF THE ASSESSEE HAS CONSTRUCTED A RESIDENTIAL HOUSE WI THIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER. THERE IS NO DISPU TE ABOUT THE CONDITIONS OF SECTION 54F BEING FULFILLED BUT THE ONLY DISPUTE IS ABOUT COST OF NEW HOUSE WHICH SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPU TATION OF EXEMPTION UNDER SECTION 54F. 2.1 THE ASSESSEE HAD EXPLAINED BEFORE AO THAT THE F LAT PURCHASED WAS IN A SEMI-FINISHED CONDITION WITHOUT FLOORING PLUMBING WIRING ETC. THEREFORE FOR PROVIDING THE INTERNAL BASIC AMENITIES AS MENTIONED IN THE AGREEMENT THE ASSESSEE ENTERED INTO SUPPLEMENTARY AGREEMENTS WITH THREE PARTIES WHICH HAD ALSO BEEN SIGNED BY M/S. KAMAL ASSOCIATES THE BUILDER. THE AO HOWEVER OBSERVED THAT THE ASSESSEE COULD NOT ENTER INTO ANY AGREEMENT FOR ANY KIND OF WORK IN RESPECT OF THE PROPERTY BEFORE HE BECAME LEGAL OWNER. HE THEREFORE DID NOT ACCEPT THAT THE AGREEMENT DAT ED 22.4.2006 WHICH WAS ITA NO.348/M/10 A.Y:06-07 3 PRIOR TO THE DATE OF MAIN AGREEMENT WOULD BE PART O F THE MAIN AGREEMENT AS THERE WAS NO MENTION OF THE SAID AGREEMENT IN THE M AIN AGREEMENT. THE AO ALSO OBSERVED THAT ADDITIONAL EXPENDITURE OF RS.43. 00 LACS WAS THE COST OF IMPROVEMENT OF THE FLAT WHICH COULD NOT BE CONSIDER ED FOR THE PURPOSE OF DEDUCTION UNDER SECTION 54F. THE AO FURTHER OBSERV ED THAT THE MAIN AGREEMENT CLEARLY PROVIDED THAT THE BUILDER WAS PRO VIDING THE FLAT WITH ALL BASIC AMENITIES REQUIRED FOR MAKING THE PREMISES HA BITABLE. HE THEREFORE DID NOT ACCEPT THE CLAIM THAT THE ASSESSEE REQUIRED ADDITIONAL EXPENSES OF RS.43.00 LACS TO MAKE THE PREMISES HABITABLE. THE AO CONSIDERED ONLY THE SUM OF RS.45.60 LACS MENTIONED IN THE MAIN AGREEMEN T AS COST OF THE NEW FLAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UN DER SECTION 54F OF THE ACT. 2.2 THE ASSESSEE DISPUTED THE DECISION OF THE AO AN D SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE AFTER SELLING THE RESIDENT IAL FALT ON 15.1.2006 HAD TO MOVE TO A RENTED APARTMENT AS HE WAS NOT HAVING ANY OTHER RESIDENTIAL HOUSE. THE ASSESSEE THEREFORE SELECTED THE APART MENT 503 IN A-WING OF RAJKAMAL HEIGHTS WHICH WAS IN SKELETAL CONDITION. SI NCE ASSESSEE WAS IN URGENT NEED OF THE APARTMENT SELLER SUGGESTED THAT HE SHOULD ENGAGE OTHER CONTRACTORS FOR FINISHING THE WORK. ACCORDINGLY A TRIPARTITE AGREEMENT DATED 22.4.2006 HAD BEEN ENTERED INTO WITH THREE DIFFEREN T CONTRACTORS FOR DIFFERENT TYPES OF WORK. IT WAS BECAUSE OF THIS REASON THAT SUPPLEMENTARY AGREEMENT HAD BEEN ENTERED INTO PRIOR TO THE DATE OF MAIN AGR EEMENT. THE ASSESSEE ALSO REFERRED TO LETTER DATED 29.3.2006 OF BUILDER IN WHICH IT WAS MENTIONED CLEARLY THAT THE FLAT WAS INCOMPLETE AND IT RECOMME NDED SUB CONTRACTING OF THE FINISHING WORK. CIT(A) WAS HOWEVER NOT SATIS FIED BY THE CONTENTION ITA NO.348/M/10 A.Y:06-07 4 RAISED. IT WAS OBSERVED BY HIM THAT THE PURCHASE A GREEMENT DID NOT MENTION ABOUT ANY SUPPLEMENTARY AGREEMENT NOR DID I T MENTION THAT THE FLAT PURCHASED WAS IN AN UNFINISHED CONDITION. IN FACT THE AGREEMENT LISTED THE AMENITIES BEING PROVIDED WHICH INCLUDED BASIC AMENI TIES TO MAKE A FLAT HABITABLE. THE CIT(A) ALSO OBSERVED THAT POSSESSIO N OF THE PROPERTY WAS HANDED OVER ON 15.5.2006 WHICH WAS SUBSEQUENT TO TH E DATE OF SUPPLEMENTARY AGREEMENT WHICH WAS ALSO NOT REGISTER ED. THE CIT(A) THEREFORE AGREED WITH THE AO THAT EXPENDITURE INCUR RED AS PER SUPPLEMENTARY AGREEMENT COULD NOT BE CONSIDERED AS PART OF COST O F THE NEW ASSET. THE EXPENDITURE AT BEST COULD BE CONSIDERED AS COST OF IMPROVEMENT WHICH COULD NOT BE CONSIDERED FOR THE PURPOSE OF DEDUCTION UNDE R SECTION 54F OF THE ACT. CIT(A) THEREFORE CONFORMED THE ORDER OF AO AGGRIE VED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES. IT WAS ARGUED THAT ANY EXPENDITURE INCURRED BEFORE TAKING POSSESS ION OF A NEW ASSET HAD TO BE CONSIDERED AS PART OF COST OF ACQUISITION. IT W AS POINTED OUT THAT THE REGISTERED DEED IN RESPECT OF NEW FLAT WAS DATED 26 .5.2006 ON WHICH DATE ALL THE AMENITIES IN THE FLAT WERE READY AND THEREFORE THE SAME WERE DULY MENTIONED IN THE REGISTERED DEED. HOWEVER TO SAVE TIME THE BUILDER VIDE LETTER DATED 29.3.2006 HAD SUGGESTED TO ENGAGE OTHE R CONTRACTORS FOR FINISHING THE WORK FOR WHICH THE PAYMENT HAD BEEN M ADE BY THE ASSESSEE SEPARATELY. THEREFORE THE EXPENDITURE INCURRED AS PER SUPPLEMENTARY AGREEMENT HAS TO BE CONSIDERED AS PART OF THE COST OF ACQUISITION OF THE NEW ITA NO.348/M/10 A.Y:06-07 5 FLAT. THE LD. AR ALSO SUBMITTED THAT IN CASE IT W AS FELT NECESSARY THE MATTER COULD ALSO BE REFERRED TO THE AO FOR VERIFICATION O F THIS ASPECT THAT WORK HAD ACTUALLY BEEN DONE AS PER SUPPLEMENTARY AGREEMENT. THE LD. DR ON THE OTHER HAND SUBMITTED THAT THE BUILDER HAD PROVIDED ALL BASIC AMENITIES AS PER MAIN AGREEMENT AND THEREFORE ANY SPECIAL AMENITIE S PROVIDED AS PER SUPPLEMENTARY AGREEMENT COULD NOT BE CONSIDERED. I T WAS ACCORDINGLY URGED THAT THE ORDER OF CIT(A) SHOULD BE UPHELD. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING COST OF ACQUIS ITION OF THE NEW FLAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 5 4F. THE ASSESSEE HAD SOLD THE OLD FLAT AND THE SALE PROCEEDS WERE INVEST ED IN THE NEW FLAT. THERE IS NO DISPUTE ABOUT FULFILLMENT OF CONDITIONS OF SECTI ON 54F AS THE ASSESSEE ARE ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. THE ONLY DISPUTE IS REGARDING COST OF ACQUISITION OF THE NEW FLAT. THE ASSESSEE HAD GOT THE NEW FLAT CONSTRUCTED THROUGH M/S. KAMAL ASSOCIATES A BUILDE R. THE POSSESSION OF THE FLAT HAD BEEN TAKEN ON 15.5.2006 AND THEREAFTER REG ISTERED DEED HAD BEEN EXECUTED ON 26.5.2006. THE COST OF ACQUISITION OF THE FLAT IN THE DEED WAS MENTIONED AT RS.45.30 LACS. THE ASSESSEE HAD EARLI ER ENTERED INTO THREE TRIPARTITE AGREEMENTS DATED 22.4.2006 WITH THE BUIL DER AND THREE DIFFERENT CONTRACTORS FOR CARRYING OUT CERTAIN WORK RELATING TO THE FINISHING OF THE FLAT. IN TERMS OF THESE AGREEMENTS THE TOTAL EXPENDITURE INCURRED WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS PART OF THE COST WAS RS. 43.00 LACS. THE ASSESSEE HAD THEREFORE SHOWN TOTAL COST OF THE FLAT AT RS.88 .60 LACS. THE AUTHORITIES ITA NO.348/M/10 A.Y:06-07 6 BELOW HAVE NOT ACCEPTED THE CLAIM OF EXPENDITURE AS PER THE TRIPARTITE AGREEMENT ON THE GROUND THAT THE ASSESSEE COULD NOT ENTER INTO SUCH AGREEMENTS BEFORE TAKING OVER POSSESSION OF THE FLA T. THE CASE OF THE ASSESSEE IS THAT SHE WANTED THE FLAT URGENTLY AND THEREFORE THE BUILDER VIDE LETTER DATED 29.3.2006 HAD SUGGESTED TO ENGAGE OTHE R CONTRACTORS FOR FINISHING THE WORK WHICH THE ASSESSEE HAD DONE AND TO WHICH THE BUILDER WAS ALSO A SIGNATORY. IN OUR VIEW THE CLAIM OF THE ASSESSEE TO INCUR ADDITIONAL EXPENDITURE CAN NOT BE REJECTED ONLY ON THE GROUND THAT THE AGREEMENT HAD BEEN ENTERED INTO PRIOR TO TAKING OVE R POSSESSION OF THE FLAT. THE CLAIM OF THE ASSESSEE TO ENGAGE OTHER CONTRACTO RS TO EXPEDITE THE WORK WHICH WAS ALSO SUGGESTED BY THE BUILDER CAN NOT BE HELD UNJUSTIFIED ON THE FACTS OF THE CASE. IN FACT IN OUR VIEW ALL EXPEN DITURE INCURRED FOR ACQUISITION OF THE NEW FLAT PRIOR TO TAKING OVER POSSESSION HAS TO BE CONSIDERED AS PART OF THE COST. HOWEVER IT IS REQUIRED TO BE SEEN THAT THE ASSESSEE DOES NOT CLAIM ANY BOGUS EXPENDITURE TO INFLATE THE COST SO AS TO CLAIM HIGHER DEDUCTION OR SHOW DOUBLE EXPENDITURE IN RESPECT OF THE SAME TYPE OF WORK. THIS ASPECT IS REQUIRED TO BE VERIFIED. THE AUTHORITIES BELOW HAD REJECTED THE SUPPLEMENTARY AGREEMENTS ONLY ON THE GROUND THAT TH E SAME COULD NOT BE ENTERED BEFORE THE ASSESSEE ACQUIRED THE TITLE OF T HE FLAT WHICH AS POINTED OUT EARLIER IS NOT JUSTIFIED. AS THE CLAIM OF THE ASSESSEE REQUIRES VERIFICATION WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MA TTER TO THE FILE OF THE AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATI ON AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.348/M/10 A.Y:06-07 7 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011 SD/- SD/- (D. MANMOHAN) (RAJENDRA SINGH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 18.11.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.