PARADISE TEXTILES P.LTD, MUMBAI v. DCIT CIR 5(2), MUMBAI

ITA 389/MUM/2015 | 2010-2011
Pronouncement Date: 28-11-2017 | Result: Dismissed

Appeal Details

RSA Number 38919914 RSA 2015
Assessee PAN AAACP7725L
Bench Mumbai
Appeal Number ITA 389/MUM/2015
Duration Of Justice 2 year(s) 10 month(s) 13 day(s)
Appellant PARADISE TEXTILES P.LTD, MUMBAI
Respondent DCIT CIR 5(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 28-11-2017
Date Of Final Hearing 01-03-2017
Next Hearing Date 01-03-2017
First Hearing Date 01-03-2017
Assessment Year 2010-2011
Appeal Filed On 15-01-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI G. MANJUNATHA ACCOUNTANT MEMBER ITA NOS.389 & 4473/MUM/2015 ASSESSMENT YEARS: 2010-11 & 2011-12 M/S PARADISE TEXTILES PVT. LTD. 113-11 TH FLOOR 68 BRIJ KUTIR NEPEAN SEA ROAD MUMBAI-400006 / VS. DCIT CIRCLE-5(2) MUMBAI ( ! /ASSESSEE) ( ' / REVENUE) P.A. NO.AAACP7725L ! / ASSESSEE BY SHRI NARESH KUMAR ' / REVENUE BY SHRI RAJAT MITTAL -DR # '$ % ! & / DATE OF HEARING : 28/11/2017 % ! & / DATE OF PRONOUNCEMENT 28/11/2017 ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH THESE APPEAL ARE BY THE ASSESSEE FOR ASSESSMEN T YEARS 2010-11 AND 2011-12 ONLY CHALLENGING THE IMPU GNED ORDERS DATED 03/11/2014 & 21/05/2014 OF THE LD. FIR ST APPELLATE AUTHORITY MUMBAI WITH RESPECT TO CONFIR MING THE GAIN ON SALE OF RIGHTS OF FLATS NO.1703 AND 1704 AT ASHOK GARDEN AS SHORT TERM CAPITAL GAINS INSTEAD OF LONG TERM CAPITAL GAINS OFFERED BY THE ASSESSEE. NO OTHER GR OUND WAS AGITATED BY THE ASSESSEE. 2. DURING HEARING THE LD. COUNSEL FOR THE ASSESSE E NARESH KUMAR ADVANCED ARGUMENTS WHICH IS IDENTICA L TO THE GROUND RAISED BY EXPLAINING THAT RIGHTS WERE PU RCHASED IN THE FLATS BY THE ASSESSEE AND THE AGREEMENT WAS REGISTERED ON 09/06/2007. IT WAS FAIRLY AGREED THAT POSSESSION OF THE FLATS WAS NOT TAKEN BY THE ASSESS EE AND MERELY RIGHTS WERE SOLD ON 10/12/2009 THEREFORE I T MAY BE TAXED AS LONG TERM CAPITAL GAIN. RELIANCE WAS PLACE D UPON THE DECISION FROM HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF CIT VS VED PRAKASH & SONS (HUF) (1994) 207 ITR 148 (P & H) ALONG WITH CIRCULAR NO.471 DATED 15/10/ 1986. ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 3 FURTHER RELIANCE WAS PLACED UPON THE DECISION IN CI T VS VIMAL LALCHAND MUTHA (1991) 187 ITR 613 AND OTHER DECISIONS OF THE TRIBUNAL AND ALSO HON'BLE GUJARAT HIGH COURT PLACED ON RECORD IN THE PAPER BOOK RUNNING IN TO 48 PAGES. 2.1. ON THE OTHER HAND SHRI RAJAT MITTAL LD. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY PLACING REL IANCE UPON A LATER DECISION FROM HON'BLE DELHI HIGH COURT IN THE CASE OF GULSHAN MALLIK VS CIT (2014) 43 TAXMAN.COM 200(DEL.) BY CONTENDING THAT HON'BLE HIGH COURT HAS DULY CONSIDERED/DISTINGUISHED THE DECISION IN THE CASE O F CIT VS VED PRAKASH & SONS (SUPRA) RELIED UPON BY THE ASSE SSEE AND EVEN THE SLP PREFERRED BY THE ASSESSEE WAS DI SMISSED BY HON'BLE APEX COURT. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. COUNSEL FOR THE ASSESSEE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S IN BRIEF ARE THAT THE ASSESSEE DECLARED INCOME OF RS.96 60 8 60/- IN ITS RETURN FILED ON 13/10/2010 (ASSESSMENT YEAR 200 9-10). LIKEWISE FOR ASSESSMENT YEAR 2010-11 THE ASSESSEE ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 4 DECLARED NIL INCOME IN ITS RETURN FILED ON 30/09/20 11 DECLARING LOSS OF RS.5 87 294/- BUT DECLARED BOOKS PROFIT AT RS.35 80 941/-. BOTH THE RETURNS WERE PROCESSED U/ S 143(1) OF THE INCOME TAX ACT 1961 (HEREINAFTER THE ACT) AND SUBSEQUENTLY SELECTED FOR SCRUTINY CONSEQUENTLY S TATUTORY NOTICES U/S 143(2) AND 142(1) ALONG WITH QUESTIONNA IRE DATED 13/12/2013 WERE SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENT FINANCING IN SHARES AND SECURITIES AND DEALING IN PROPERTIES. THE ASSESSEE BOOKED TWO FLATS IN FINANCIAL YEAR 2004-05 REGISTERED IN FINANCIAL YEAR 2007-08 AND SOLD ON IN DECEMBER 2009. THE ASSESSEE MADE INITIAL PAYMENT O F RS.3 08 810/- ON 05/03/2005 AND FURTHER PAYMENT WAS MADE ON 14/10/2009. THE ASSESSEE MADE TOTAL PAYMENT OF RS.68 78 700/- AND RS.75 06 200/- RESPECTIVELY OF THE FLATS. THE ASSESSEE NEVER OCCUPIED THE FLATS. THE STAND OF THE REVENUE IS THAT AS PER TRANSFER OF PROPERTY ACT SE CTION 53A POSSESSION IS NECESSARY FOR OWNERSHIP PURPOSES. THU S BEFORE ADVERTING FURTHER WE ARE REPRODUCING HEREUN DER THE RELEVANT PROVISION OF SECTION 53A OF THE TRANSFER O F PROPERTY ACT FOR READY REFERENCE:- ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 5 53A. PART PERFORMANCE WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDER ATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON H IS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFE R CAN BE ASCERTAINED WITH REASONABLE CERTAINTY AND THE TRANSFEREE HAS IN PART PERFORMANCE OF THE CONTRACT TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF OR THE TRANSFEREE BEING ALREADY IN POSSESSION CONTINUES IN POSSESSIO N IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT I N FURTHERANCE OF THE CONTRACT AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO P ERFORM HIS PART OF THE CONTRACT THEN NOTWITHSTANDING THAT THE CONTRACT THOUGH REQ UIRED TO BE REGISTERED HAS NOT BEEN REGISTERED OR WHERE THER E IS AN INSTRUMENT OF TRANSFER THAT THE TRANSFER HAS NOT BEEN COMPLET ED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING I N FORCE THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL B E DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMI NG UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE T RANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION OTHER THAN A RIGHT EXPR ESSLY PROVIDED BY THE TERMS OF THE CONTRACT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGH TS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF T HE CONTRACT OR OF THE PART PERFORMANCE THEREOF. THE AFORESAID SECTION IF ANALYZED IT SPEAKS ABOUT TAKING POSSESSION OF THE PROPERTY OR ANY PART THERE OF OR THE TRANSFEREE BEING ALREADY IN POSSESSION WHEREAS I N THE PRESENT CASES NO POSSESSION WAS TAKEN BY THE ASSES SEE AND ONLY RIGHTS WERE SOLD. THE ASSESSEE MADE THE PAYMEN TS IN 2009 AND THEREAFTER HE GOT THE RIGHTS TO SALE THE P ROPERTY THEREFORE PRIOR TO THAT HE WAS HAVING NO RIGHT TO SALE THE SAME. THE REPLY OF THE ASSESSEE VIDE LETTER DATED 12/03/2013 (REPRODUCED IN THE ASSESSMENT ORDER) WAS DULY CONSIDERED. THERE IS NO DISPUTE TO THE FACT THAT T HE FINAL ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 6 PAYMENT WAS MADE BY THE ASSESSEE IN SEPTEMBER 2009 AND SUBSEQUENTLY WITHOUT TAKING THE POSSESSION OF THE FLATS THE RIGHTS WERE SOLD IN THE DECEMBER 2009. THE ASSESSE E RECEIVED THE RIGHTS OR THE FLAT WHEN HE MADE FINAL PAYMENTS TO THE BUILDER IN SEPTEMBER 2009. THUS IN OUR VI EW THE CAPITAL GAIN AROSE ON THE TRANSACTION IN SEPTEMBER 2009 WHICH HAS TO BE TREATED AS SHORT TERM CAPITAL GAIN AS THE HOLDING PERIOD OVER THE FLATS WAS LESS THAN THREE Y EARS. OUR VIEW FIND SUPPORT FROM THE DECISION ON IDENTICAL F ACTS AND THE RATIO LAID DOWN THEREIN BY HON'BLE DELHI HIGH C OURT IN THE CASE OF GULSHAN MALLIK VS CIT (2014) 43 TAXMAN. COM 200(DEL.)/(2014) 223 TAXMAN 243(DEL.). THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER FOR READY REFER ENCE AND ANALYSIS:- THIS IS AN APPEAL FILED AGAINST THE ORDER OF THE I NCOME TAX APPELLANT TRIBUNAL ('ITAT') IN ITA NO. 161/DEL/2012 DATED 27. 02.2013 WHICH UPHOLDS THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ('CIT- A') CONFIRMING THE ASSESSMENT ORDER OF THE ASSESSIN G OFFICER ('AO'). THE SHORT QUESTION OF LAW THAT ARISES IS WHETHER ON FACTS CAPITAL GAINS ARE TAXABLE AS LONG-TERM OR SHORT-TERM CAPITAL GAIN S. THE BRIEF FACTS ARE AS FOLLOWS: 2. THE APPELLANT (THE ASSESSEE) AND HIS WIFE HAD BO OKED AN APARTMENT VIDE AN APPLICATION DATED 31.07.2004 BY PAYMENT OF A BOOKING AMOUNT OF RS. 2 00 000/-ON 3.08.2004 AND CONSEQUENT LY IT IS CLAIMED ACQUIRED RIGHTS OR INTERESTS IN THE SAME. THE BUILD ER DLF UNIVERSAL LIMITED ('DLF') ISSUED A LETTER DATED 6.08.2004 PRO VISIONALLY ALLOTTING THE APARTMENT AND TWO PARKING SPACES STATING SPECI FICALLY THE RECEIPT OF RS. 2 00 000/- (ANNEXURE 3). CONSEQUENT TO THIS REGULAR PAYMENTS WERE MADE PER THE PAYMENT PLAN OF THE BUILDER. A BU YER'S AGREEMENT WAS EXECUTED ON 4.11.2004 BETWEEN DLF AND THE ALLOT TEES I.E. THE APPELLANT AND HIS WIFE. PER THE PAYMENT SCHEDULE A TOTAL PAYMENT OF ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 7 RS. 87 12 500/- WAS MADE FROM 31.07.2004 TO 03.08.2 006 TOWARDS THE PURCHASE OF THE APARTMENT. FOLLOWING THIS THE APPELLANT AND HIS WIFE ENTERED INTO AN AGREEMENT TO SELL DATED 2.11.2 007 TO SELL THEIR BOOKING RIGHTS/RIGHTS OR INTEREST IN THE APARTMENT TO SMT. SRILEKHA NAYAK FOR A SUM OF RS. 1 44 87 500/-. THE PERIOD BE TWEEN ACQUISITION AND SALE OF THE BOOKING RIGHTS IN THE APARTMENT IS CLAIMED TO BE 39 MONTHS AND 2 DAYS THUS GREATER THAN 36 MONTHS I.E . FROM 31.07.2004 TO 02.11.2007. THE APPELLANT SUBSEQUENTLY FILED RET URN OF INCOME ON 31.3.2009 FOR THE ASSESSMENT YEAR 2008-2009 WITH I NCOME DECLARED TO BE RS. 3 84 874/-. IN THE COMPUTATION OF INCOME THE APPELLANT HAD DECLARED A LONG TERM CAPITAL GAIN OF RS. 31 35 740/ - ON THE SALE OF BOOKING RIGHTS/EXTINGUISHMENT OF RIGHTS IN THE APAR TMENT. AN EXEMPTION WAS CLAIMED UNDER SECTION 54 OF THE ACT 1961 AS THE SAME WAS INVESTED IN PURCHASE OF ANOTHER APARTMENT IN JU NE 2008. 3. AFTER THE RETURN WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT AND THE CASE WAS THEREAFTER SELECTED FOR COMPULSORY SCR UTINY AN ORDER OF ASSESSMENT WAS PASSED UNDER SECTION 143(3) OF THE A CT ON 30.12.2010 WHEREBY AN ADDITION OF RS. 28 20 000/- WAS MADE BY THE ASSESSING OFFICER (AO) TO THE INCOME DECLARED BY THE APPELLAN T ON ACCOUNT OF SHORT-TERM CAPITAL GAIN. NO DEDUCTION UNDER SECTION 54 WAS ALLOWED SINCE IT IS AVAILABLE ONLY IN RESPECT OF LONG-TERM CAPITAL GAINS. THE TOTAL INCOME WAS THUS ASSESSED TO BE RS. 32 10 145/-. THE APPEAL AGAINST THE ORDER OF THE AO BEFORE CIT-A WAS DISMISSED BY A N ORDER DATED 25.11.2011 ON THE GROUNDS THAT THE RIGHTS IN THE A PARTMENT ACCRUED TO THE APPELLANT ONLY WHEN THE APARTMENT WAS PURCHA SED BY THE AGREEMENT DATED 4.11.2004. IT WAS ALSO NOTED THAT O NLY RIGHTS IN THE PROPERTY AND NOT TITLE WERE TRANSFERRED VIDE THE AG REEMENT OF 2.11.2007 AS THE ASSESSEE NEVER HAD POSSESSION OF T HE APARTMENT. THE ASSESSEE'S SECOND APPEAL BEFORE THE ITAT WAS ALSO D ISMISSED VIDE ORDER DATED 27.02.2013 ON THE GROUND THAT NO RIGHTS IN THE PROPERTY ACCRUED TO THE APPELLANT/ALLOTTEES ON THE DATE OF F ILING OF THE APPLICATION FOR ALLOTMENT I.E. 31.7.2004 AS NOTES 1 AND 2 ENCLOSED WITH THE CONFIRMATION LETTER DATED 06.08.2004 RECEIVED I N RESPONSE TO THE ALLOTMENT APPLICATION STATES CLEARLY THAT NO RIGHTS TO THE PROPERTY WOULD ACCRUE TO THE ALLOTTEES UNTIL THE BUYER'S AGREEMENT WAS SIGNED AND RETURNED; THE BUYER'S AGREEMENT WAS EXECUTED ONLY O N 4.11.2004. CONSEQUENTLY THE ITAT FOUND THAT THE CAPITAL ASSET WAS SOLD WITHIN A PERIOD OF 36 MONTHS THUS RENDERING THE PROFITS FROM THE SALE TAXABLE AS SHORT-TERM CAPITAL GAINS WHICH DO NOT QUALIFY FOR THE DEDUCTION UNDER SECTION 54. 4. THE QUESTION THAT ARISES FOR CONSIDERATION IS WH ETHER ANY RIGHT ACCRUED TO THE ASSESSEE BY WAY OF THE APPLICATION F OR ALLOTMENT THAT CAN BE CONSIDERED A CAPITAL ASSET; THIS WOULD DETER MINE WHETHER THE DATE OF APPLICATION FOR ALLOTMENT OF THE APARTMENT OR THE DATE OF THE BUYER'S AGREEMENT OUGHT TO BE CONSIDERED THE DATE O F ACQUISITION OF THE CAPITAL ASSET THAT WAS SOLD ON 2.11.2007 AS WEL L AS WHETHER THE CAPITAL GAIN IS TAXABLE AS LONG-TERM OR SHORT-TERM CAPITAL GAINS. 5. THE APPELLANTS SUBMIT THAT BY WAY OF APPLICATION DATED 31.7.2004 FOR ALLOTMENT AND PAYMENT OF THE BOOKING AMOUNT TH E APPELLANT HAD ACQUIRED THE 'RIGHT TO PURCHASE THE PROPERTY'/BOOKI NG RIGHTS WHICH WERE EXTINGUISHED BY EXECUTION OF THE AGREEMENT TO SELL DATED 2.11.2007 IN FAVOUR OF SMT. SRILEKHA NAYAK THUS MA KING HIS BOOKING RIGHTS A LONG-TERM CAPITAL ASSET HELD FOR A PERIOD OF 39 MONTHS AND 2 DAYS. ALTERNATIVELY THE APPELLANT SUBMITS PLACING RELIANCE ON CIT V. ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 8 VED PARKASH & SONS (HUF) [1994] 207 ITR 14873 TAXMAN 70 (PUNJ. & HAR.) THAT RIGHTS IN THE APARTMENT WERE ACQUIRED ON THE DATE OF RECEIPT OF ALLOTMENT LETTER I.E. 6.8.2004 BY WHICH THE APA RTMENT WAS PROVISIONALLY ALLOTTED TO HIM WHICH RIGHTS WERE SO LD ON 2.11.2007 THUS MAKING HIS RIGHT IN THE APARTMENT A LONG-TERM CAPIT AL ASSET. THE TWO GROUNDS FOR THIS SUBMISSION ARE FIRST THAT SECTION 2(47) OF THE ACT WHICH DEFINES 'TRANSFER' IN RELATION TO A CAPITAL A SSET IS A WIDE AND INCLUSIVE DEFINITION THAT ENCOMPASSES EVEN TRANSFER OF A RIGHT IN PROPERTY THUS INCLUDING WITHIN ITS AMBIT TRANSFER OF BOOKING RIGHTS SECOND THAT A COMBINED READING OF SECTIONS 2(14) A ND 2(47) OF THE ACT SHOW THAT TRANSFER OF A CAPITAL ASSET IS NOT RE STRICTED TO TRANSFER OF OWNERSHIP IN IMMOVABLE PROPERTY ALONE. THE LEARNED COUNSEL FOR THE REVENUE ON THE OTHER HAND RELIES ON THE ORDER OF THE LEARNED ITAT MEMBER WHO HELD THAT BOOKING RIGHTS ACCRUED IN THE ASSESSEE ONLY ONCE THE BUYER'S AGREEMENT OF 4.11.2004 WAS SIGNED THUS MAKING THE PROFITS FROM SALE TAXABLE AS SHORT-TERM CAPITAL GAI NS. 6. IT WOULD BE APPROPRIATE TO EXTRACT SECTION 2(14) 2(42A) 2(47) HERE IN RELEVANT PART. SECTION 2 OF THE ACT READS: '2. IN THIS ACT UNLESS THE CONTEXT OTHERWISE REQUI RES (14) 'CAPITAL ASSET' MEANS PROPERTY OF ANY KIND HEL D BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION BUT DOES NOT INCLUDE ** ** ** (42A) 'SHORT-TERM CAPITAL ASSET' MEANS A CAPITAL AS SET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY-SIX MONTHS IMMEDI ATELY PRECEDING THE DATE OF ITS TRANSFER: ** ** ** (47) 'TRANSFER' IN RELATION TO A CAPITAL ASSET IN CLUDES (I) THE SALE EXCHANGE OR RELINQUISHMENT OF THE AS SET ; OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR (III) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR (IV) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO OR IS TREATED BY HIM AS STOCK-IN-TRADE OF A BUSINE SS CARRIED ON BY HIM SUCH CONVERSION OR TREATMENT ; OR (IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON BOND ; OR (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSE SSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 (4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBE R OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY COM PANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREE MENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 9 HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJ OYMENT OF ANY IMMOVABLE PROPERTY. EXPLANATION 1. ** ** ** EXPLANATION 2. FOR THE REMOVAL OF DOUBTS IT IS HER EBY CLARIFIED THAT 'TRANSFER' INCLUDES AND SHALL BE DEEMED TO HAVE ALW AYS INCLUDED DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTERE ST THEREIN OR CREATING ANY INTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER DIRECTLY OR INDIRECTLY ABSOLUTELY OR CONDITIONALLY VOLUNTARIL Y OR INVOLUNTARILY BY WAY OF AN AGREEMENT (WHETHER ENTERED INTO IN INDIA OR O UTSIDE INDIA) OR OTHERWISE NOTWITHSTANDING THAT SUCH TRANSFER OF RI GHTS HAS BEEN CHARACTERISED AS BEING EFFECTED OR DEPENDENT UPON O R FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTER ED OR INCORPORATED OUTSIDE INDIA .' 7. IT IS CLEAR THAT A 'CAPITAL ASSET' UNDER THE ACT IS PROPERTY OF 'ANY KIND' THAT IS 'HELD' BY THE ASSESSEE. NECESSARILY A CAPI TAL ASSET MUST BE TRANSFERABLE. THUS TO UNDERSTAND WHAT KIND OF PROP ERTY CAN BE CONSIDERED A CAPITAL ASSET IT WOULD BE APPOSITE TO REFER TO THE DEFINITION OF TRANSFER IN SECTION 2(47) OF THE ACT. SECTION 2( 47)(V) AND (VI) AND EXPLANATION 2 MAKE IT ADEQUATELY CLEAR THAT POSSESS ION ENJOYMENT OF IMMOVABLE PROPERTY AS WELL AS AN INTEREST IN ANY A SSET ARE ALL TRANSFERABLE 'CAPITAL ASSETS'. THE REFERENCE TO ACQ UISITION 'BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER' ESTABLISHES THAT IT IS NOT CONVEYANCE OF PROPERTY O R THE DOCTRINE OF PART PERFORMANCE (ENACTED THROUGH SECTION 53A OF THE TRA NSFER OF PROPERTY ACT) WHICH RESULT IN ENFORCEABLE RIGHTS FOR THE PU RPOSES OF THE INCOME TAX. THE SCHEME OF THE ACT PUTS IT BEYOND DOUBT THA T EVEN RIGHTS OR INTERESTS IN A PROPERTY ARE KINDS OF PROPERTY THAT ARE TRANSFERABLE CAPITAL ASSETS. THUS THERE IS NO DOUBT THAT BOOKING RIGHTS OR RIGHTS TO PURCHASE THE APARTMENT OR RIGHTS TO OBTAIN TITLE TO THE APAR TMENT ARE ALSO CAPITAL ASSETS THAT CAN BE TRANSFERABLE. HOWEVER EVEN WHIL E THIS COURT AGREES WITH THE SUBMISSIONS OF THE APPELLANT IT IS PERTIN ENT TO NOTE THAT THIS QUESTION DOES NOT ARISE IN THESE FACTS. NEITHER THE CIT-A NOR THE ITAT HAVE HELD THAT A CAPITAL ASSET CAN ONLY BE TITLE TO /OWNERSHIP OF THE APARTMENT. THE ORDER OF THE CIT-A LOCATES THE SOURC E OF THE BOOKING RIGHTS I.E. DATE OF ACQUISITION OF CAPITAL ASSET AS THE BUYER'S AGREEMENT DATED 4.11.2004 WHICH FINDING IS SUBSEQUENTLY CONF IRMED BY THE ITAT BY ADDITIONALLY RELYING ON THE RECEIPTS AT THE TIME OF CONFIRMATION OF ALLOTMENT. THUS IN THESE FACTS THE QUESTION OF WH ETHER THE BOOKING RIGHTS ARE A TRANSFERABLE CAPITAL ASSET IS NOT CONT ENTIOUS. THE JUDGMENT IN VED PARKASH (SUPRA) IS ALSO CONSEQUENTLY OF NO A SSISTANCE IN THIS MATTER SINCE THE REASONING THEREIN TURNS ON WHETHER 'CAPITAL ASSET' REFERS ONLY TO TITLE TO PROPERTY AS OPPOSED TO OTHE R RIGHTS/INTERESTS IN THE PROPERTY. 8. THIS BEING THE CASE THE ONLY QUESTION THAT ARIS ES FOR CONSIDERATION IS WHETHER THE BOOKING RIGHTS TO THE APARTMENT ACCRUED TO THE ASSESSEE ON THE DATE OF APPLICATION FOR ALLOTMENT/CONFIRMATION OF ALLOTMENT OR ON THE DATE OF EXECUTION OF THE AGREEMENT TO SELL I.E. THE BUYER'S AGREEMENT. THIS COURT IS OF THE OPINION THAT A RIGHT OR INTERE ST IN AN IMMOVABLE PROPERTY CAN ACCRUE ONLY BY WAY OF AN AGREEMENT EMB ODYING CONSENSUS AD IDEM. THE NATURE OF THE RIGHT SOUGHT TO BE TRANS FERRED HERE IS THE RIGHT TO PURCHASE THE APARTMENT AND OBTAIN TITLE T ERMED 'BOOKING ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 10 RIGHTS'. ONLY THAT AGREEMENT WHICH INTENDS TO CONVE Y THESE RIGHTS ACCORDING TO BOTH PARTIES CAN BE CONSIDERED AS THE SOURCE OF ACCRUAL OF RIGHTS TO THE ASSESSEE. THE CONFIRMATION LETTER DAT ED 6.8.2004 (ANNEXURE 3) SPECIFICALLY STATES FIRST THAT NO RIG HT TO PROVISIONAL/FINAL ALLOTMENT ACCRUES UNTIL THE BUYER'S AGREEMENT IS SI GNED AND RETURNED TO THE BUILDERS AND SECOND THAT NO RIGHT TO CLAIM TIT LE/OWNERSHIP RESULTS FROM THE CONFIRMATION LETTER ITSELF. THUS IT IS CL EAR THAT THE BUILDERS DO NOT INTEND TO CONVEY ANY RIGHT OF PROVISIONAL/FINAL ALLOTMENT OR ANY RIGHT TO CLAIM TITLE/OWNERSHIP UNDER THE CONFIRMATION LET TER. THERE BEING NO INTENTION TO CONVEY RIGHTS IN THIS DOCUMENT IT WOU LD BE IMPERMISSIBLE FOR THIS COURT TO FIND THAT THE RIGHT TO OBTAIN TIT LE/'BOOKING RIGHTS' EMANATED FROM THE CONFIRMATION LETTER. THESE RIGHTS MAY ONLY BE LOCATED IN THE BUYER'S AGREEMENT AND THUS THE DATE OF ACQ UISITION OF THE CAPITAL ASSET MUST BE CONSIDERED THE DATE OF SIGNING OF SAI D AGREEMENT I.E. 4.11.2004 9. THESE RIGHTS WERE TRANSFERRED BY THE ASSESSEE ON 2.11.2007. THUS THIS COURT IS OF THE OPINION THAT THE CAPITAL ASSET IN THE FORM OF THESE RIGHTS WAS HELD FOR A PERIOD OF 35 MONTHS AND 28 DA YS I.E. A SHORT-TERM CAPITAL ASSET THUS RENDERING THE PROFITS FROM THE T RANSFER OF THIS CAPITAL ASSET TAXABLE AS SHORT-TERM CAPITAL GAINS. 10. VED PARKASH (SUPRA) IN ANY EVENT CAN BE DISTI NGUISHED FROM THE FACTS IN THIS CASE. IN VED PARKASH (SUPRA) THE ASS ESSEE SOUGHT TO CLAIM THAT THE DATE OF ACQUISITION OF THE CAPITAL ASSET W AS THE DATE OF ENTERING INTO THE AGREEMENT TO SELL WITH THE BUILDER BY WHI CH THE ASSESSEE HAD ALSO RECEIVED POSSESSION OF THE PROPERTY. THE DEPAR TMENT ON THE OTHER HAND CLAIMED THAT ACCORDING TO THE CONDITIONS OF T HE AGREEMENT NO RIGHT TITLE OR INTEREST IN THE PROPERTY WOULD BE C ONVEYED TO THE ASSESSEE UNTIL ALL INSTALMENTS DUE AND PAYABLE UNDER THAT AG REEMENT WERE COMPLETED. IT WAS ALSO SOUGHT TO BE ARGUED THAT THE ASSESSEE BECAME THE TITLEHOLDER TO THE PROPERTY ONLY ONCE ALL THE I NSTALMENTS WERE PAID AND THAT TITLE TO THE PROPERTY WAS THE ONLY CAPITAL ASSET THAT COULD BE TRANSFERRED. IT WAS IN THE CONTEXT OF THESE ARGUMEN TS THAT THE COURT HELD FIRST THAT IT IS INCORRECT TO SAY THAT THE ASSESSE E HAD NO RIGHT OR INTEREST IN THE PROPERTY UNTIL THE COMPLETION OF PAYMENT OF ALL INSTALMENTS UNDER THE AGREEMENT AS THE ASSESSEE WAS A BENEFICIAL OWNE R FROM THE DATE OF SIGNING THE AGREEMENT HAVING BEEN PUT IN POSSESSIO N OF THE PROPERTY AS OF THAT DATE AND SECOND THAT SECTION 2(42A) OF THE ACT IN ANY EVENT ONLY USES THE TERM 'HELD' AND NOT 'OWNED' THUS IND ICATING THAT A CAPITAL ASSET NEED NOT ONLY REFER TO FULL TITLE OVER ANY PR OPERTY. VED PARKASH (SUPRA) CAN THUS BE DISTINGUISHED ON TWO GROUNDS F IRST THAT IN THE INSTANT MATTER BOOKING RIGHTS ARE SOUGHT TO BE SOU RCED IN THE ALLOTMENT APPLICATION/CONFIRMATION LETTER AND NOT IN AN AGREE MENT TO SELL SECOND NO RIGHT OF POSSESSION OR SIMILAR BENEFICIAL INTERE ST WAS CONVEYED TO THE ASSESSEE IN THE INSTANT CASE WHEN THE APPLICATION F OR ALLOTMENT WAS MADE/CONFIRMATION LETTER WAS RECEIVED. THE AGREEMEN T TO SELL WAS CONSIDERED TO BE THE SOURCE OF A BENEFICIAL INTERES T TO THE ASSESSEE IN VED PARKASH (SUPRA) ONLY BECAUSE THE RIGHT OF POSSE SSION HAD BEEN TRANSFERRED TO THE ASSESSEE ALONG WITH THE AGREEMEN T TO SELL. THERE CANNOT BE ANY PARITY BETWEEN THE ALLOTMENT APPLICAT ION/CONFIRMATION LETTER IN THE INSTANT CASE AND THE AGREEMENT TO SEL L IN VED PARKASH (SUPRA) SINCE THE CONFIRMATION LETTER SPECIFICALLY STATES THAT NO RIGHT OF PROVISIONAL ALLOTMENT/FINAL ALLOTMENT WILL RESULT F ROM IT TO THE ASSESSEE. ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 11 11. THIS COURT IS THUS OF THE OPINION THAT THERE IS NO LEGAL INFIRMITY IN THE ORDER OF THE ITAT. THE APPEAL IS THUS DISMISSED ALO NG WITH PENDING APPLICATIONS. 2.3. IT IS NOTED THAT IN THE AFORESAID DECISION T HE HON'BLE HIGH COURT DULY CONSIDERED/DISTINGUISHED TH E DECISION IN THE CASE OF CIT VS VED PRAKASH & SONS ( HUF) (SUPRA) WHEREIN IN PARA-8 ONWARDS CLEARLY HELD A S UNDER:- 8. THIS BEING THE CASE THE ONLY QUESTION THAT ARIS ES FOR CONSIDERATION IS WHETHER THE BOOKING RIGHTS TO THE APARTMENT ACCRUED TO THE ASSESSEE ON THE DATE OF APPLICATION FOR ALLOTMENT/CONFIRMATION OF ALLOTMENT OR ON THE DATE OF EXECUTION OF THE AGREEMENT TO SELL I.E. THE BUYER'S AGREEMENT. THIS COURT IS OF THE OPINION THAT A RIGHT OR INTERE ST IN AN IMMOVABLE PROPERTY CAN ACCRUE ONLY BY WAY OF AN AGREEMENT EMB ODYING CONSENSUS AD IDEM. THE NATURE OF THE RIGHT SOUGHT TO BE TRANS FERRED HERE IS THE RIGHT TO PURCHASE THE APARTMENT AND OBTAIN TITLE T ERMED 'BOOKING RIGHTS'. ONLY THAT AGREEMENT WHICH INTENDS TO CONVE Y THESE RIGHTS ACCORDING TO BOTH PARTIES CAN BE CONSIDERED AS THE SOURCE OF ACCRUAL OF RIGHTS TO THE ASSESSEE. THE CONFIRMATION LETTER DAT ED 6.8.2004 (ANNEXURE 3) SPECIFICALLY STATES FIRST THAT NO RIG HT TO PROVISIONAL/FINAL ALLOTMENT ACCRUES UNTIL THE BUYER'S AGREEMENT IS SI GNED AND RETURNED TO THE BUILDERS AND SECOND THAT NO RIGHT TO CLAIM TIT LE/OWNERSHIP RESULTS FROM THE CONFIRMATION LETTER ITSELF. THUS IT IS CL EAR THAT THE BUILDERS DO NOT INTEND TO CONVEY ANY RIGHT OF PROVISIONAL/FINAL ALLOTMENT OR ANY RIGHT TO CLAIM TITLE/OWNERSHIP UNDER THE CONFIRMATION LET TER. THERE BEING NO INTENTION TO CONVEY RIGHTS IN THIS DOCUMENT IT WOU LD BE IMPERMISSIBLE FOR THIS COURT TO FIND THAT THE RIGHT TO OBTAIN TIT LE/'BOOKING RIGHTS' EMANATED FROM THE CONFIRMATION LETTER. THESE RIGHTS MAY ONLY BE LOCATED IN THE BUYER'S AGREEMENT AND THUS THE DATE OF ACQ UISITION OF THE CAPITAL ASSET MUST BE CONSIDERED THE DATE OF SIGNING OF SAI D AGREEMENT I.E. 4.11.2004 9. THESE RIGHTS WERE TRANSFERRED BY THE ASSESSEE ON 2.11.2007. THUS THIS COURT IS OF THE OPINION THAT THE CAPITAL ASSET IN THE FORM OF THESE RIGHTS WAS HELD FOR A PERIOD OF 35 MONTHS AND 28 DA YS I.E. A SHORT-TERM CAPITAL ASSET THUS RENDERING THE PROFITS FROM THE T RANSFER OF THIS CAPITAL ASSET TAXABLE AS SHORT-TERM CAPITAL GAINS. 10. VED PARKASH (SUPRA) IN ANY EVENT CAN BE DISTI NGUISHED FROM THE FACTS IN THIS CASE. IN VED PARKASH (SUPRA) THE ASS ESSEE SOUGHT TO CLAIM THAT THE DATE OF ACQUISITION OF THE CAPITAL ASSET W AS THE DATE OF ENTERING INTO THE AGREEMENT TO SELL WITH THE BUILDER BY WHI CH THE ASSESSEE HAD ALSO RECEIVED POSSESSION OF THE PROPERTY. THE DEPAR TMENT ON THE OTHER HAND CLAIMED THAT ACCORDING TO THE CONDITIONS OF T HE AGREEMENT NO RIGHT TITLE OR INTEREST IN THE PROPERTY WOULD BE C ONVEYED TO THE ASSESSEE UNTIL ALL INSTALMENTS DUE AND PAYABLE UNDER THAT AG REEMENT WERE COMPLETED. IT WAS ALSO SOUGHT TO BE ARGUED THAT THE ASSESSEE BECAME THE TITLEHOLDER TO THE PROPERTY ONLY ONCE ALL THE I NSTALMENTS WERE PAID AND THAT TITLE TO THE PROPERTY WAS THE ONLY CAPITAL ASSET THAT COULD BE ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 12 TRANSFERRED. IT WAS IN THE CONTEXT OF THESE ARGUMEN TS THAT THE COURT HELD FIRST THAT IT IS INCORRECT TO SAY THAT THE ASSESSE E HAD NO RIGHT OR INTEREST IN THE PROPERTY UNTIL THE COMPLETION OF PAYMENT OF ALL INSTALMENTS UNDER THE AGREEMENT AS THE ASSESSEE WAS A BENEFICIAL OWNE R FROM THE DATE OF SIGNING THE AGREEMENT HAVING BEEN PUT IN POSSESSIO N OF THE PROPERTY AS OF THAT DATE AND SECOND THAT SECTION 2(42A) OF THE ACT IN ANY EVENT ONLY USES THE TERM 'HELD' AND NOT 'OWNED' THUS IND ICATING THAT A CAPITAL ASSET NEED NOT ONLY REFER TO FULL TITLE OVER ANY PR OPERTY. VED PARKASH (SUPRA) CAN THUS BE DISTINGUISHED ON TWO GROUNDS F IRST THAT IN THE INSTANT MATTER BOOKING RIGHTS ARE SOUGHT TO BE SOU RCED IN THE ALLOTMENT APPLICATION/CONFIRMATION LETTER AND NOT IN AN AGREE MENT TO SELL SECOND NO RIGHT OF POSSESSION OR SIMILAR BENEFICIAL INTERE ST WAS CONVEYED TO THE ASSESSEE IN THE INSTANT CASE WHEN THE APPLICATION F OR ALLOTMENT WAS MADE/CONFIRMATION LETTER WAS RECEIVED. THE AGREEMEN T TO SELL WAS CONSIDERED TO BE THE SOURCE OF A BENEFICIAL INTERES T TO THE ASSESSEE IN VED PARKASH (SUPRA) ONLY BECAUSE THE RIGHT OF POSSE SSION HAD BEEN TRANSFERRED TO THE ASSESSEE ALONG WITH THE AGREEMEN T TO SELL. THERE CANNOT BE ANY PARITY BETWEEN THE ALLOTMENT APPLICAT ION/CONFIRMATION LETTER IN THE INSTANT CASE AND THE AGREEMENT TO SEL L IN VED PARKASH (SUPRA) SINCE THE CONFIRMATION LETTER SPECIFICALLY STATES THAT NO RIGHT OF PROVISIONAL ALLOTMENT/FINAL ALLOTMENT WILL RESULT F ROM IT TO THE ASSESSEE. IT IS ALSO NOTED THAT THE ASSESSEE CHALLENGED THE AFORESAID DECISION OF HON'BLE DELHI HIGH COURT BEFO RE HON'BLE APEX COURT WHEREIN THE SPECIAL LEAVE TO APPEAL (C) NO(S). 30670/2014 WAS DISMISSED MEANING THEREBY THE CASE WAS DECIDED IN FAVOUR OF THE REVEN UE. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE ASSESSEE. 2.4. SO FAR AS THE DECISION IN THE CASE OF CIT VS VIMAL LALCHAND MUTHA (1991) 187 ITR 0613 (BOM.) IS CONCER NED THE QUESTION BEFORE THE HON'BLE HIGH COURT WAS WITH RESPECT TO VALIDITY OF LONG TERM CAPITAL GAIN WHERE THE AS SESSEE WAS HOLDING RIGHTS FOR MORE THAN 36 MONTHS BEFORE TRANSFERRING THE SAME WHEREAS IN THE PRESENT APPE ALS BEFORE US THE HOLDING PERIOD IS LESS THAN THREE YE ARS/36 ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 13 MONTHS. IT IS ALSO NOTED THAT THE HON'BLE DELHI HIG H COURT AFFIRMED THE DECISION OF THE TRIBUNAL CONSIDERING V ARIOUS ASPECTS INCLUDING SECTION 2(42A) OF THE INCOME TAX ACT 1961 SECTION 2(14) 2(47) ALONG WITH EXPLANATION. THE HON'BLE DELHI HIGH COURT CONSIDERED THE QUESTION W HETHER THE BOOKING RIGHTS TO THE APARTMENT ACCRUED TO THE ASSESSEE ON THE DATE OF APPLICATION FOR ALLOTMENT/CONFIRMATI ON OF ALLOTMENT OR ON THE DATE OF EXECUTION OF THE AGREEM ENT TO SALE I.E. BUYERS AGREEMENT. THE HON'BLE COURT HELD THAT A RIGHT OR INTEREST IN ANY IMMOVABLE PROPERTY ACCRUES ONLY BY WAY OF AN AGREEMENT EMBODYING CONSENSUS AD IDEM. TH E ASSESSEE MADE THE FINAL PAYMENT IN SEPTEMBER 2009 O NLY THEREFORE THE DECISION IN THE CASE OF VED PRAKASH & SONS (HUF) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT APPEALS. THE FINAL PAYMENT WAS MADE IN SEPTEMBER 2009 AND THEREAFTER THE ASSESSEE GOT THE RIGHT TO SALE THE P ROPERTY AND BEFORE THAT HE WAS HAVING NO RIGHT TO SALE THE SAME . SO FAR AS THE OTHER CASES RELIED UPON BY THE ASSESSEE A RE CONCERNED (MADE AVAILABLE IN THE PAPER BOOK) SINCE EITHER THE FACTS ARE DIFFERENT AND NO DECISION FROM HON'BL E APEX COURT WAS CITED WHEREAS AS MENTIONED EARLIER THE SLP ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 14 AGAINST THE DECISION FROM HON'BLE DELHI HIGH COURT IN THE CASE OF GULSHAN MALLIK VS CIT (SUPRA) WAS DISMISSED BY HON'BLE APEX COURT AND FURTHER THE DECISION OF HON' BLE DELHI HIGH COURT IS DATED 14/03/2014 WHEREAS THE DECISI ON IN THE CASE OF VED PRAKASH & SONS (HUF)(SUPRA) WAS REP ORTED IN 1994. THEREFORE RESPECTFULLY FOLLOWING THE SAME WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIO NER OF INCOME TAX (APPEAL) RESULTANTLY; BOTH THE APPEALS OF THE ASSESSEE ARE HAVING NO MERITS THEREFORE DISMISSED . FINALLY THE APPEALS OF THE ASSESSEE ARE DISMISSED . THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 28/11/2017. SD/- (G. MANJUNATHA) SD/- (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; + DATED : 28/11/2017 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. -./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 2 2 # 3! ( - ) / THE CIT MUMBAI. ITA NOS. 389 & 4473/MUM/2015 PARADISE TEXTILES PVT. LTD. 15 4. 2 2 # 3! / CIT(A)- MUMBAI 5. 5'6 0! 2 -& # $ / DR ITAT MUMBAI 6. 7 8$ / GUARD FILE. / BY ORDER 15-! 0! //TRUE COPY// / (DY./ASSTT. REGISTRAR) # $ / ITAT MUMBAI