JCIT RG12(2), MUMBAI v. RAMAN K SURI, MUMBAI

ITA 4242/MUM/2009 | 2006-2007
Pronouncement Date: 30-04-2010 | Result: Dismissed

Appeal Details

RSA Number 424219914 RSA 2009
Assessee PAN AAAPS6384M
Bench Mumbai
Appeal Number ITA 4242/MUM/2009
Duration Of Justice 9 month(s) 20 day(s)
Appellant JCIT RG12(2), MUMBAI
Respondent RAMAN K SURI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-04-2010
Assessment Year 2006-2007
Appeal Filed On 10-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D BEFORE SHRI J. SUDHAKAR REDDY (AM) & SHRI R.S. PAD VEKAR (JM) I.T.A.NO. 4242/MUM/09 (ASSESSMENT YEAR : 2006-07) ACIT 12(2) ROOM NO. 114 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. SHRI RAMAN K. SURI 10-A DOLPHIN APARTMENT PILOT BUNDER ROAD COLABA MUMBAI-400 005. APPELLANT RESPONDENT PAN/GIR NO. : AAAPS6384M APPELLANT BY : SHRI ANKUR GARG RESPONDENT BY : SHRI F.B. ANDHYARUJUIA ORDER PER J. SUDHAKAR REDDY AM :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 4.5.2009 OF LEARNED CIT(A)-XII MUMBAI RELATING TO A.Y. 2006-07. 2. FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME F ROM SALARY HOUSE PROPERTY AND OTHER SOURCES. DURING THE YEAR I N QUESTION THE ASSESSEE HAD ALSO DERIVED INCOME FROM CAPITAL GAINS . FACTS OF THE CASE ARE BROUGHT AT PARAGRAPH 2.1 OF LEARNED CIT(A)S ORDER WHICH IS EXTRACTED FOR READY REFERENCE :- FACTS OF THE CASE IS THAT THE ASSESSEE AND HIS BROT HER CAPT. PRADEEP RAJ SURI INHERITED THE SAID PROPERTY AS PER THE WI LL OF THEIR MOTHER DATED 11.10.1987 WHO PASSED AWAY ON 12.9.1999. THI S PROPERTY 2 WAS SOLD UNDER A DEED OF CONVEYANCE DATED 14.10.200 5 AT A CONSIDERATION OF RS. 14 CRORES. THE TOTAL CONSIDERA TION WAS SHARED BY THE TWO BROTHER ACCORDING TO MEMORANDUM OF UNDER STANDING (MOU) REDUCED IN WRITING ON STAMP PAPER AND EXECUTE D ON 3.10.2005. THE ASSESSEE DECLARED LTCG BY SHOWING SA LE CONSIDERATION OF RS. 6 CRORES AS PER MOU AND ADJUS TMENTS ON THE POINTS OF COST OF ACQUISITION IMPROVEMENT COST IN CIDENTAL EXPENSES AND EXEMPTION U/S. 54 ETC. THE VARIOUS GRO UNDS REFER TO DISPUTES REGARDING SALE CONSIDERATION AND OTHER ADJ USTMENTS AS INDICATED BELOW :- AS PER ASSESSING OFFICER AS PER ASSESSEE SALE CONSIDERATION 7 37 50 000 6 37 50 000 INDEXED COST OF ACQUISITION 11 07 154 1 18 65 130 INDEXED COST OF IMPROVEMENT 5 50 234 6 05 650 INCIDENTAL EXPENSES 5 52 892 9 07 650 EXEMPTION U/S. 54 1 45 00 000 3 00 00 000 THE ASSESSING OFFICER IN HIS ORDER PASSED U/S. 143( 3) DATED 22.12.2008 RECOMPUTED CAPITAL GAINS AT RS. 5 70 39 520/- AS AG AINST 2 03 71 570/- RETURNED BY THE ASSESSEE. THE ASSESSING OFFICER QUA NTIFIED THE DIFFERENCE IN SALE CONSIDERATION AT RS. 1 CRORE. AT PARAGRAPH 3.2 OF THE OF THE ASSESSMENT ORDER THE ASSESSING OFFICER EXTRACTED P ART OF THE WILL AND CAME TO THE CONCLUSION THAT THE ASSESSEE AND HIS BR OTHER CAPT. PRADEEP RAJ SURI WERE ENTITLED TO EQUAL SHARE IN THE PROPE RTY INHERITED FROM THE MOTHER RAJKUMARI SURI VIDE WILL DATED 11.10.1987. AS THE TOTAL CONSIDERATION WAS RS. 14 CRORES AS PER THE ASSESSI NG OFFICER THE ASSESSEES SHARE IS RS. 7 CRORES AND AS HE HAS TAK EN SALE CONSIDERATION OF ONLY RS. 6 CRORES THE ASSESSING OFFICER HELD THAT THERE IS AN UNDERSTATEMENT OF CONSIDERATION BY RS. 1 CRORE. SH E REJECTED THE MOU ENTERED BETWEEN THE ASSESSEE AND HIS BROTHER ON TH E GROUND THAT THE MOU IS NOT A REGISTERED DOCUMENT AND AMOUNT PARTED OR WHICH IS NOT 3 RECEIVED BY THE ASSESSEE IS APPLICATION TO INCOME A ND NOT A DIVERSION OF INCOME AT SOURCE. HE HELD THAT RS. 1 CRORE IS A PE RSONAL PAYMENT OF THE ASSESSEE AND CANNOT BE DEDUCTED FROM THE NET CONSID ERATION. HE PLACED RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COUR T IN THE CASE OF ASHOK SOI VS. CIT 273 ITR 165 (DEL). HE REJECTED THE ARG UMENT OF THE ASSESSEE THAT THE AMOUNT OF RS. 1 CRORE HAS ALREADY BEEN OFF ERED TO TAX BY THE BROTHER OF THE ASSESSEE. HE COMPUTED CAPITAL GAINS WITH NET CONSIDERATION OF RS. 7 CRORES AS AGAINST RS. 6 CRORES TAKEN BY T HE ASSESSEE FOR TRANSFER OF THE IMMOVABLE PROPERTY. ON THE COST OF ACQUISITI ON THE ASSESSEE CLAIMED INDEXATION ON A FAIR MARKET VALUE AS ON 1.4 .1981 AND THE ASSESSEE FILED VALUATION REPORT DATED 29.11.2005 AND DETERMI NED FAIR MARKET VALUE (FMV) AT RS. 47 74 730/- CONSISTING OF RS. 3 94 730 /- BEING MARKET VALUE OF THE BUILDING AND RS. 44 80 000/- BEING MARKET VA LUE OF LAND. THE ASSESSING OFFICER REJECTED THE VALUATION REPORT ON THE GROUND THAT THE COMPARABLE TAKEN BY THE VALUER IS OF DIFFERENT LOCA LITY AND ALSO ON THE GROUND THAT THE COMPARABLE DOES NOT DISCLOSE AS T O WHETHER THE PROPERTY IS LEASEHOLD PROPERTY OR FREEHOLD PROP ERTY. FOR VARIOUS REASONS GIVEN AT PARAGRAPH 5.5 OF THE ASSESSMENT OR DER THE ASSESSING OFFICER REJECTED THE VALUATION REPORT. FURTHER HE P OINTED OUT THAT THE CLAIM OF THE ASSESSEE IF ACCEPTED WOULD RESULTANT IN TH E LAND RATES BEING INCREASED 28 TIMES OVER A PERIOD OF 6 YEARS FROM 3 1.3.1975 TO 1.4.1981. SHE APPLIED FMV OF LAND AS PER BOOK NABHIS GUIDE TO HOUSE TAX DELHI BASED ON L&DO RATES FROM 1.4.1981 TO 31.3.19 85. ON INDEXATION THE ASSESSING OFFICER HELD THAT THE ASSESSEE BECOM E THE OWNER OF THE ASSET IN 1999 ON HIS MOTHER DEMISE AND HENCE INDEXA TION WOULD BE AVAILABLE FROM THAT DATE. SHE FURTHER MADE CERTAIN ADJUSTMENTS ON INCIDENTAL EXPENSES AND ON COST OF IMPROVEMENT CLA IMED BY THE ASSESSEE. ON THE CLAIM OF DEDUCTION U/S. 54 THE ASSESSING OF FICER AT PARAGRAPH 9.3 HELD THAT THE CONTENTIONS OF THE ASSESSEE ARE NOT A CCEPTABLE AS IT IS AGAINST 4 THE SPIRIT AND INTENT OF SECTION 54. WHEN FLATS A RE PURCHASED THE ASSESSING OFFICER HELD THAT EACH FLAT WAS REGISTER ED AS A SEPARATE UNIT WITH THE SPECIFIED DEED AND DOCUMENT. SHE HELD THA T THE ASSESSEE WAS CALLED UPON TO FURNISH CERTAIN DOCUMENTS AND EVIDEN CE AND AS THE ASSESSEE HAS NOT PRODUCED THESE DOCUMENTS THAT TWO SEPARATE FLATS ARE ACTUALLY CAPABLE OF BEING USED AS ONLY ONE INDEPENDENT INTE GRAL UNIT WITH THE HELP OF ORIGINAL/MODIFIED PLANS APPROVED BY THE LOC AL AUTHORITY AND HENCE EXEMPTION AS CLAIMED CANNOT BE GRANTED. SHE ALLOWED EXEMPTION IN RESPECT OF INVESTMENT IN ONE FLAT I.E. FLAT NO. 416 -A AMOUNTING TO RS. 1 45 00 000/-. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPE AL. 3. FIRST APPELLATE AUTHORITY ON THE ISSUE OF AMOUN T OF SALE CONSIDERATION HELD THAT IT IS NOT PROPER ON BEHAL F OF THE ASSESSING OFFICER TO BRUSH ASIDE THE MOU WHICH IS EXECUTED ON A STAMP PAPER AND ALSO REFERRED TO IN THE SALE DEED WHEREBY APPORTIO NMENT OF SALE CONSIDERATION WAS MADE BETWEEN THE ASSESSEE AND HIS BROTHER. HE ALSO OBSERVED THAT FROM THE DOCUMENT THE ASSESSEE HAD RECEIVED ONLY RS. 6 CRORES TOWARDS SALE CONSIDERATION AND ASSESSEES BR OTHER HAD RECEIVED RS. 8 CRORES TOWARDS HIS SHARE OF SALE CONSIDERATION. THE ASSESSEE HAD NOT PAID ANY CONSIDERATION TO HIS BROTHER. HE HELD THAT THIS NOT AN APPLICATION OF INCOME AND IT IS CASE OF DIVERSION OF SOURCES BY OPERATION OF LAW. HE DISTINGUISHED DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ASHOK SOI (SUPRA) RELIED UPON BY THE A.O. AND INSTEAD APP LIED DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SHITALDAS TIRA THDAS 41 ITR 367 & 374 (SC) AND UPHELD THE CONTENTION OF THE ASSESSEE. 4. ON THE ISSUE OF FMV AS ON 1.4.1981 HE HELD THAT THE ASSESSEE ADOPTED FMV OF LAND ON THE BASIS OF REGD. V.OS R EPORT. AS PER THE LD. 5 C.I.T.(A) THIS REPORT IS FURTHER SUBSTANTIATED BY A COMPARABLE BEING SALE DEED OF A COMPARABLE PROPERTY LOCATED IN THE VICIN ITY OF ASSESSEES PROPERTY. HE APPROVED THE RATE ADOPTED BY THE REGIS TERED VALUER AND FOUND THAT THE ASSESSING OFFICER HAD WITHOUT PINPOINTING ANY DEFICIENCY OR IRRELEVANCE IN THE REGD. V.O S REPORT REJECTED TH E VALUERS REPORT. HE HELD THAT NABHIS GUIDE TO HOUSE TAX AND RATE OF LA ND NOTIFIED THEREIN ARE NOT ACCEPTABLE FOR THE PURPOSE OF CAPITAL GAINS WIT HIN THE MEANING OF SECTION 45 OF THE ACT. FOR THE REASONS GIVEN AT PAR AGRAPH 6.3 OF HIS ORDER HE AGREED WITH THE CONTENTION OF THE ASSESSEE. 5. ON THE ISSUE OF DATE ON WHICH IN INDEXATION HAD TO BE GRANTED LEARNED CIT(A) FOLLOWED THE JURISDICTIONAL TRIBUNAL ORDER AND APPROVED THE CONTENTION OF THE ASSESSEE. 6. ON THE ISSUE OF DEDUCTION U/S.54F HE HELD THAT THE JUDGEMENT OF MUMBAI BENCH OF TRIBUNAL IN THE CASE OF SUSHIL M. JHAVERI 292 ITR 1 (AT) IS APPLICABLE IN THE INSTANT CASE. HE CONSID ERED THE SITE PLAN AS WELL AS CERTIFICATE MITHAL PARK CO-OPERATIVE HOUSING SOC IETY AND HELD THAT FLAT NO. 416-A AND 516-A HAS ONE ENTRANCE GATE AND ONE C OMMON KITCHEN AND ONE COMMON PASSAGE ACQUIRED ON SAME DATE. HE UPHEL D THE CONTENTION. 7. ON THE OTHER ISSUES HE PARTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGGRIEVED WITH THIS ORDER THE REVENUE FILED THIS APPEAL ON THE FOLLOWING GROUNDS :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF CA PITAL GAINS OF RS. 1 CRORE ASSESSED IN THE HANDS OF THE ASSESS EE WITHOUT APPRECIATING THE FACT THAT THE MOU ENTERED INTO BY THE 6 ASSESSEE WITH HIS BROTHER IS NOT A VALID DOCUMENT T O BE RECOGNIZED UNDER THE I.T. ACT AND IT IS A PERSONAL ARRANGEMENT BETWEEN THE BROTHERS. LEARNED CIT(A) HA S FAILED TO APPRECIATE THE FACT THAT THE RELINQUISHME NT OF ASSESSEES SHARE OF RS. 1 CRORE IN FAVOUR OF HIS BR OTHER IS AN APPLICATION OF CAPITAL GAIN INCOME ARISEN TO THE AS SESSEE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE RA TES ADOPTED BY THE ASSESSING OFFICER AS PER NABHIS GUIDE TO HO USE TAX IN DELHI BASED ON L&DO RATES IS MORE IN CONSONANCE WIT H THE FMV IN REALITY. THE LEARNED CIT(A) HAS FAILED TO AP PRECIATE THAT IN THE VALUATION REPORT FILED BY THE ASSESSEE COMPARABLE INSTANCES OF THE SALE OF PROPERTY IN THE SAME LOCAL ITY IN WHICH THE IMPUGNED PROPERTY IS SITUATED IS NOT FURNISHED BY THE REGISTERED VALUER BUT A SALE OF THE PROPERTY IN TH E NEREBY COLONY IS QUOTED WHICH IS OF NO RELEVANCE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE LA ND RATES IN THE LOCALITY OF THE IMPUGNED PROPERTY AT DELHI CANN OT BE INCREASED BY 28 TIMES OVER A PERIOD OF 6 YEARS FROM 31.3.1975 TO 1.4.1981. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE AS SESSEE INHERITED THE PROPERTY AND BECAME THE OWNER OF THE PROPERTY ONLY 1999 AFTER THE DEATH OF HIS MOTHER AND AS PER THE EXPLANATION TO CLAUSE (III) TO SECTION 48 OF THE I. T. ACT LONG TERM CAPITAL GAIN INDEXATION CAN BE GIVEN ONLY FROM THE YEAR 1999 AND NOT FROM 1974. LEARNED CIT(A) HAS ALSO FAI LED TO APPRECIATE THAT THE CLAIM OF THE ASSESSEE THAT THE INDEXATION SHOULD BE ALLOWED FROM 12.3.1974 I.E. THE DATE ON W HICH THE MOTHER OF THE ASSESSEE PURCHASED THE PROPERTY IS IN CORRECT AND NOT SUPPORTED BY THE PROVISIONS OF LAW. 5) THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT TH E ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 54 OF THE I.T. ACT IN RESPECT OF INVESTMENT IN A RESIDENTIAL HOUSE WHEREAS THE ASSE SSEE HAD MADE INVESTMENT IN TWO INDEPENDENT UNITS. 7 6) THE APPELLANT PRAYS THAT THE ORDER OF LEARNED CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 8. SHRI ANKUR GARG LD. SENIOR DR RELIED ON THE ORD ER OF THE ASSESSING OFFICER AND SUBMITTED THAT AS FAR AS SALE CONSIDERA TION IS CONCERNED IT IS A QUESTION OF APPLICATION OF INCOME AND NOT A QUESTIO N OF DIVERSION OF INCOME AT SOURCE. HE POINTED OUT THAT MOTHER HAS GI VEN THE PROPERTY EQUALLY TO BOTH SONS AND THAT SALE CONSIDERATION SH OULD HAVE BEEN EQUALLY SHARED BY BOTH SONS. HE POINTED OUT THAT MOU IS NOT A REGISTERED DOCUMENT AND SHOULD NOT BE GIVEN ANY CREDENCE. HE SUBMITTED THAT MOU IS A COLOURABLE DEVICE AS IT IS NOT DATED NOR R EGISTERED. HE TOOK THIS BENCH TO THE ORDER OF HON'BLE DELHI HIGH COURT IN T HE CASE OF ASHOK SOI VS. CIT 273 ITR 165 (DEL). HE ALSO RELIED ON THE F OLLOWING CASE LAWS :- SMT. INDIRA DEVI VS. CIT210 ITR 537 (MAD) CIT VS. SHRI AND SMT. GANESH G.K. AZRENKAR 217 ITR 148 (BOM) 9. HE SUBMITTED THAT LEARNED CIT(A) HAS NO BASIS WH ATSOEVER TO COME TO A CONCLUSION THAT THERE WAS DIVERSION OF INCOME AT SOURCE BY OPERATION OF LAW. HE PRAYED THAT THE ORDER OF THE ASSESSING O FFICER ON THIS ISSUE SHOULD BE UPHELD AND THAT OF THE LEARNED CIT(A) BE REVERSED. 10. ON GROUND NO. 2&3 HE SUBMITTED THAT NABIS GUI DE TO HOUSE TAX IN DELHI IS BASED ON L&DO RATES PUBLISHED BY MINIS TRY OF FINANCE AND ARE MORE REALISTIC. HE VEHEMENTLY CONTENDED THAT LE ARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE VALUATION REPORT FILE D BY THE ASSESSEE FROM THE REGISTERED VALUER WAS DEFECTIVE AND THE ASSESSING O FFICER HAS DEMONSTRATED THAT COMPARABLE SALE INSTANCE TAKEN BY THE REGISTERED VALUER IS OF GREATER KAILASH-II IN SOUTH DELHI AND IT CANN OT BE APPLIED TO THE THE 8 SITE OF THE ASSESSEE. HE TOOK THIS BENCH TO THE OR DER GIVEN BY THE ASSESSING OFFICER AND SUBMITTED THAT THE SAME SHOUL D BE UPHELD. COMING TO GROUND NO. 4 LEARNED DR THOUGH NOT LEAVI NG HIS GROUND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL AND INDEX ATION SHOULD BE ALLOWED FROM 1.4.1981. 11. COMING TO GROUND NO. 5 LEARNED DR SUBMITTED TH AT FROM THE PAPERS ON RECORD IT IS NOT CLEAR WHETHER THE PROPE RTY IS JOINT PROPERTY OR NOT. HE CONTENDED THAT THE ASSESSEE HAD MADE INVEST MENT IN TWO INDEPENDENT UNITS. 12. LEARNED COUNSEL FOR THE ASSESSEE MR. F.B. ANDHY ARJUIA ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF LEARNED CIT(A) AND SUBMITTED THAT AS FAR AS SALE CONSIDERATION IS CONCERNED IT IS DIVER SION OF INCOME AT SOURCE. ON CONTENTION OF LEARNED DR THAT MOU SHOULD NOT BE CONSIDERED HE SUBMITTED THAT THE MOU IS ON STAMP PAPER AND FINDS MENTIONS IN SALE DEED. HE SUBMITTED THAT THE PURCHASER HAD PURCHASED THE PROPERTY OF THE ASSESSEE FOR RS. 6 CRORES AND THAT OF THE ASSESSEE S BROTHER FOR RS. 8 CRORES. HE POINTED OUT THAT THE BROTHER HAS PAID TA XES FULLY AND THIS FACT HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. COM ING TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ASHOK SOI ( SUPRA) LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS A CA SE WHERE PAYMENT WAS MADE TO THE FATHER WHO HAD NO RIGHT WHATSOEVER TO T HE PROPERTY. HE SUBMITTED THAT IN THIS CASE BOTH THE ASSESSEE AND HIS BROTHER HAVE RIGHTS TO THE PROPERTY AND HENCE THAT CASE LAW IS NOT APPLICA BLE. HE RELIED ON THE ORDER OF THE FIRST APPELLATE AUTHORITY. 9 13. ON GROUND NO. 2&3 HE SUBMITTED THAT THE YARDST ICK TO BE ADOPTED FOR ARRIVING AT FMV AS ON 1.4.1981 IS THE ISSUE AND THAT THE LEARNED CIT(A) WENT BY THE VALUATION REPORT BY THE REGISTER ED VALUER WHICH IS SUPPORTED BY A COMPARABLE SALE INSTANCE AND WHEREAS THE ASSESSING OFFICER RELIED ON THE GUIDANCE VALUE SPECIFIED FOR DETERMINATION OF HOUSE TAX AND HAS NOT COME DOWN WITH ANY COMPARABLE SALE INSTANCE. HE TOOK THIS BENCH TO THE FINDINGS OF FIRST APPELLATE AUTHO RITY AND PRAYED THAT THE SAME IS UPHELD ON GROUND NO. 4 HE SUBMITTED THAT THE ISSUE NOW ST ANDS COVERED BY THE SPECIAL BENCH IN THE CASE OF MANJULA J. SHAH 2009- TIOL-698-ITAT. 14. ON GROUND NO. 5 HE RELIED ON THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE SOCIETY HAS CERTIFIED THAT THE U NIT IS A SINGLE UNIT WITH ONE ENTRANCE COMMON KITCHEN AND ONE COMMON PASSAGE AND ALL THESE DETAILS WERE BEFORE THE ASSESSING OFFICER AND UNDER THESE FACTS AND CIRCUMSTANCES OF THE ORDER OF FIRST APPELLATE AUTHO RITY SHOULD BE UPHELD AS THE ISSUE NOW STANDS COVERED BY THE DECISION OF THE SPECIAL DECISION OF THE TRIBUNAL IN THE CASE OF M/S SHUSHILA M. JHAVERI 29 2 ITR (AT) 1. 15. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDER ATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL O F THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED WE HOLD AS FOLLOWS: 16. THE FIRST GROUND IS ON THE ISSUE AS TO WHETHER THE CIT(APPEALS) WAS RIGHT IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE SALE CONSIDERATION RECEIVED WAS RS.6 CRORES AND THAT THE CAPITAL GAINS IN QUESTION HAS TO BE COMPUTED ON THIS AMOUNT. WE H AVE PERUSED A COPY OF THE SALE DEED DATED 14 TH OCT. 2005 FILED BEFORE US. THE SALE DEED IS 10 EXECUTED BY THE ASSESSEE AND HIS BROTHER PRADEEP RA J SURI IN FAVOUR OF ANUPAM GUPTA. IN THE RECITALS IT IS STATED THAT CON SEQUENT TO DEATH OF SMT. R.K. SURI THE ASSESSEE AND HIS BROTHER BEING THE O NLY LEGAL HEIRS AND LEGATEES UNDER THE WILL OF LATE SMT. R.K. SURI DATE D 11 TH OCT. 1987 BECAME THE ABSOLUTE OWNERS. AT PAGE 14 OF THE SALE DEED IT IS STATED AS FOLLOWS : AND WHEREAS AS PER THE UNDERSTANDING ARRIVED AT BE TWEEN THE VENDORS THEMSELVES THE TOTAL CONSIDERATION SHALL B E APPORTIONED IN THE FOLLOWING MANNER : (I) CAPT. RAMAN KUMAR SURI RS.6 00 00 000/- (II) CAPT. PRADEEP RAJ SURI RS.8 00 00 000/- THAT THE CONTENTS OF THE AFORESAID RECITALS ARE INC ORPORATED THEREIN BY THIS REFERENCES. FROM THE ABOVE IT IS CLEAR THAT THE UN DERSTANDING IN QUESTION HAS BEEN RECORDED IN THE SALE DEED AND THE ARGUMENT OF THE LEARNED DR THAT THIS IS AN UNDATED AND ILLEGAL MOU BETWEEN THE BROTHERS AND THAT IT SHOULD NOT BE GIVEN ANY CREDENCE IS NOT CORRECT. T HE BROTHERS SOLD THE PROPERTY JOINTLY AND ONE OF THE BROTHERS HAS RECEIV ED RS.6 CRORES AND THE OTHER BROTHER HAS RECEIVED RS.8 CRORES DIRECTLY FRO M THE PURCHASER. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD R ECEIVED RS.7 CRORES AND HAD RECORDED ONLY RS.6 CRORES IN THE SALE DEED. ASS ESSMENT CANNOT BE BASED ON THE PERCEPTION OF THE AO THAT THE ASSESSEE SHOULD HAVE RECEIVED RS.7 CRORES AND THAT SHOULD BE TAKEN AS THE DEEMED SALE CONSIDERATION RECEIVED. IN THIS CASE THE ASSESSEE HAS SOLD HIS SH ARE OF PROPERTY FOR RS.6 CRORES ONLY AND THAT ALONE CAN BE CONSIDERED AS THE SALE CONSIDERATION. 17. COMING TO THE JUDGMENT OF THE HONBLE DELHI HI GH COURT IN THE CASE OF ASHOK SOI VS. CIT 273 ITR 165 (DEL) AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE MR. F.B. ANDHYARU JUIA THE FACTS ARE DIFFERENT AS IN THAT CASE THE FATHER HAD NO RIGHT TITLE OR INTEREST IN THE 11 PROPERTY AND IN SUCH A SITUATION CERTAIN AMOUNT WAS PAID TO HIM AND SUCH AMOUNT WAS HELD AS THAT WHICH CANNOT BE REGARDED AS EXPENDITURE INCURRED WHOLLY OR EXCLUSIVELY IN CONNECTION WITH T RANSFER. IT WAS A CASE WHERE A DEDUCTION WAS CLAIMED BY THE ASSESSEE. IN T HIS CASE NO DEDUCTION WAS CLAIMED BY THE ASSESSEE. IT IS NOT A CASE WHERE THE ASSESSEE HAS NO RIGHT TITLE OR INTEREST AS IN THE CASE OF ASHOK SO I. THUS IN OUR CONSIDERED OPINION THE CIT(APPEALS) HAS RIGHTLY HELD THAT THE JUDGMENT IN THE CASE OF ASHOK SOI DOES NOT APPLY TO THE CASE ON HAND. 18. COMING TO THE DECISION OF CIT VS. SHRI AND SMT . GANESH G.K. AZRENKAR 217 ITR 148 THE CASE WAS THAT OF DI VERSION OF INCOME BY OVERRIDING TITLE WHEREIN THE PARTNER HAD EXECUTED A TRUST IN RESPECT OF HIS SHARE OF INCOME. IT WAS HELD THAT UNDER THE LAW OF PARTNERSHIP A PARTNERSHIP ALONE IS ENTITLED TO PROFITS OF THE BUS INESS AND THE INCOME DERIVED FROM THE PARTNERSHIP BELONGS TO THE PARTNER AND THERE IS NO DIVERSION OF INCOME BY WAY OF OVERRIDING TITLE. THI S CASE HAS NO APPLICATION FOR THE REASON THAT THIS ASSESSEE HAS N OT RECEIVED CERTAIN INCOME WHICH IN TURN HE HAS DIVERTED AT SOURCE TO H IS BROTHER. SIMILARLY IN THE CASE OF SMT. INDIRA DEVI VS. CIT 210 ITR 537 T HE HONBLE MADRAS HIGH COURT WAS CONSIDERING THE CASE OF A PARTNER WH O EXECUTED A DEED OF SETTLEMENT BY WHICH A CERTAIN PORTION OF HER SHARE WAS SETTLED IN FAVOUR OF HER MINOR SON OF HER BROTHER IN LAW. THE COURT HEL D THAT IN THE SETTLEMENT DEED IT WAS PROVIDED THAT THE MINOR WOULD HAVE THE RIGHT TO CLAIM THE 6 PAISA SHARE FROM THE ASSESSEE AND NOT FROM THE FIRM AND UNDER THOSE CIRCUMSTANCES THERE IS NO DIVERSION OF INCOME BY O VERRIDING TITLE. ON THE OTHER HAND THE BROTHER OF THE ASSESSEE HAS PAID T AX ON RS.8 CRORES CONSIDERATION AND THE DEPARTMENT ASSESSED HIM ON TH E SAME. 12 19. IN VIEW OF THE ABOVE DISCUSSION WE ARE IN AGR EEMENT WITH THE FINDING OF THE LEARNED CIT(APPEALS) AT PARA 4.3 OF HIS ORDER WHICH IS EXTRACTED FOR READY REFERENCE : 4.3 I HAVE CONSIDERED THE SUBMISSIONS MADE FOR THE APPELLANT AND THE ASSESSMENT ORDER. THE SAID MOU WHICH IS EXE CUTED ON A STAMP PAPER CANNOT BE BRUSHED ASIDE AS IT IS A LEGA L BINDING DOCUMENT AND THE PARTIES INVOLVED ARE BOUND TO HONO UR THE CONTENTS THEREIN. THE SAID MOU IS ALSO REFERRED IN THE SALE DEED WHEREBY THE APPORTIONMENT OF THE SALE CONSIDERATION S WAS MADE BY THE APPELLANT AND HIS BROTHER AS PER THE TERMS OF T HE MOU IT IS ALSO OBSERVED FROM THE DOCUMENTS THAT THE ADDITIONAL SAL E CONSIDERATION OF RS 1 CRORE WAS NEVER RECEIVED BY THE APPELLANT. IT IS ALSO SEEN THAT APPELLANT HAS NOT PAID THIS ADDITIONAL CONSIDE RATION OF RS. 1 CRORE TO HIS BROTHER IT WAS DIRECTLY RECEIVED BY H IS BROTHER PRADEEP RAJ SURI FROM THE PURCHASER AS PER THE SALE DEED. IN THE BACKGROUND OF THESE LEGAL DOCUMENTS IT CANNOT BE H ELD THAT THE APPELLANT HAS PARTED SALE CONSIDERATION OF RS. 1 CR ORE IN FAVOUR OF HIS BROTHER AND IT CANNOT ALSO BE CONCLUDED THAT SU CH PAYMENT WAS PERSONAL IN NATURE. THE CONDUCT AS PER THE MOU AND THE SALE DEED DOES NOT EVIDENCE THE APPLICATION OF INCOME AS IT I S A CASE OF DIVERSION AT SOURCE BY THE OPERATION OF LAW. RELIAN CE IS PLACED IN THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT V/S SITALDAS TIRATHDAS 41 ITR 367 374 (SC). IN THE SA ID DECISION IT WS HELD THAT THE TRUE TEST IS WHETHER THE AMOUNT SO UGHT TO BE DEDUCTED IN TRUTH NEVER REACHED THE APPELLANT AS HIS INCOME. IT IS THE NATURE OF OBLIGATION WHICH IS THE DECISIVE FACT . WHEN THE INCOME IS DIVERTED BY WAY OF OBLIGATION BEFORE IT R EACHES THE APPELLANT IT IS DEDUCTIBLE AND WHEN THE INCOME IS REQUIRED TO BE APPLIED TO DISCHARGE AN OBLIGATION AFTER IT REACHES THE ASSESSEE THEN IT IS NOT DEDUCTIBLE. IN VIEW OF THIS DECISION THE RELIANCE PLACED BY THE ASSESSING OFFICER IN THE CASE OF ASHOK SOI (SUP RA) BECOMES INAPPROPRIATE TO THE APPELLANTS CASE. THEREFORE I T WOULD INDEED BE MOST INCORRECT TO TAX THE APPELLANT ON INCOME WHICH HAS NEITHER ARISEN TO HIM NOR IS RECEIVED BY HIM MERELY BECAUS E HE HAS CARRIED OUT THE OBLIGATION AS PER MOU UNDERTAKEN BY HIM. I T IS DIFFICULT TO IMPOSE LIABILITY TO TAX ON AN ASSESSEE WHO IS BOUND BY LAW TO CARRY OUT HIS OBLIGATION AS PER MOU TO SHARE THE SALE PR OCEEDS OF TOTAL SALE CONSIDERATION OF THE PROPERTY AT THE AGREED PR ICE AND CARRIES OUT UCH AN OBLIGATION AS PER THE MOU. IT IS ALSO OB SERVED FROM THE SUBMISSIONS MADE THAT SHRI PRADEEP SURI BROTHER OF THE APPELLANT 13 HAD OFFERED TO TAX THE ADDITIONAL SUM OF RS. 1 CROR E RECEIVED BY HIM AND THE SAME HAS BEEN DULY ACCOUNTED FOR AS HIS INCOME UNDER THE HEAD CAPITAL GAIN AND TAX HAS BEEN PAID ON SUCH CAPITAL GAINS. IN VIEW OF ABOVE THE SALE CONSIDERATION ADDED TO THE EXTENT OF RS.1 CRORE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 20. COMING TO GROUND NO.2 IT IS WITH REGARD TO DE TERMINATION OF FAIR MARKET VALUE AS ON 01-04-1981. THE FIRST APPEL LATE AUTHORITY HAS ACCEPTED THE VALUATION OF A REGISTERED VALUER WHO HAS TAKEN A COMPARABLE SALE INSTANCE. THE AO HAS GONE BY THE RATES GIVEN I N NABHIS GUIDE BOOKS FOR HOUSE TAX. WE ARE UNABLE TO APPRECIATE AS TO HOW THE LAND RATES GIVEN IN NABHIS GUIDE OF HOUSE TAX CAN BE SU BSTITUTED FOR THE VALUE GIVEN BY A TECHNICALLY QUALIFIED PERSON WHO IS EMPANELLED BY THE INCOME TAX DEPARTMENT FOR SUCH PURPOSES. IN THE NUB HIS GUIDE BOOK RELIED UPON BY THE AO THERE IS NO REFERENCE TO SHA NTINIKETAN AREA WHERE THE ASSESSEES PROPERTY IS SITUATED. THE OTHER CONS IDERATION THAT INFLUENCED THE AO IN THE NUMBER OF TIMES INCREASE IN THE VALU E OF THE LAND WHICH IN OUR OPINION IS NO GUIDE LINES FOR FIXING THE FAIR M ARKET VALUE. UNDER THESE FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED O PINION THAT THE CIT(APPEAL) HAS AT PARA 6.3 RIGHTLY OBSERVED AS FOL LOWS : IN THE INSTANT CASE THE APPELLANT HAD ADOPTED TH E FAIR MARKET VALUE OF LAND ON THE BASIS OF THE REPORT OF THE REG ISTERED VALUER WHEREIN THE VALUE OF LAND HAS BEEN ADOPTED AT RS.44 80 000/-. FURTHER THE APPELLANT HAS JUSTIFIED THE REPORT OF T HE VALUER BY DEMONSTRATING THAT THE RATE ADOPTED BY THE REGISTER ED VALUER WAS ON THE BASIS OF A SALE DEED OF A COMPARABLE PROPERTY L OCATED IN THE VICINITY OF THE APPELLANTS PROPERTY. APART FROM TH IS THE APPELLANT HAD ALSO DEMONSTRATED THAT HIS PROPERTY ENJOYED AN ADVANTAGEOUS POSITION BECAUSE OF ITS LOCATION. THE EVIDENCE LED BY APPELLANT HAD NOT BEEN CHALLENGED TO BE LACKING IN BONAFIDES. MOR EOVER THE VERACITY OF THE RATE ADOPTED BY THE REGISTERED VALU ER COULD NOT BE DOUBTED AS IT IS ELABORATE AND EXPLAINS THE BASIS O F ADOPTING SUCH RATES. IN FACT THE AFORESAID MATERIAL AND EVIDENCE S HAVE BEEN MERELY DISREGARDED BY THE ASSESSING OFFICER WITHOUT PINPOINTING ANY DEFICIENCY OR THEIR IRRELEVANCE IN THE MATTER. THE ONLY POINT 14 MADE OUT BY THE ASSESSING OFFICER IS SUPPORT OF THE VALUE ADOPTED BY HER WAS THE RATE SPECIFIED IN NABHIS GUIDE TO H OUSE TAX. IN THIS CONNECTION IT IS FOUND THAT IN THE FACT OF EVIDENC E SUBMITTED BY THE APPELLANT IT WAS IMPERATIVE FOR THE ASSESSING OFFI CER TO PUT A CASE AS TO WHY SHE PREFERRED THE RATE SPECIFIED IN THE G UIDE BOOK OF NABHI DISREGARDING THE VALUATION REPORT. NO SUCH DI SCUSSION IS DISCERNIBLE FROM THE ORDER OF THE ASSESSING OFFICER . THE NABHIS GUIDE TO HOUSE TAX AND THE RATE OF LAND NOTIFIED TH EREIN ARE NOT APPLICABLE FOR THE PURPOSE OF CAPITAL GAINS WITHIN THE MEANING OF SECTION 45 OF THE ACT. THE PROVISIONS OF CAPITAL GA INS AND THE FAIR MARKET VALUE ETC. ARE GUIDED BY TRANSFER OF PROPER TY ACT. THE REGISTERED VALUER IS NO DOUBT TECHNICAL PERSON HAVI NG SPECIALIZED SKILL AND EXPERIENCE. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIALS TO SHOW THAT THERE ARE ANY DEFICIENCIES I N THE VALUATION REPORT FILED FOR THE APPELLANT. MOREOVER SINCE THE VALUATION ESTIMATED BY REGISTERED VALUER IS SUPPORTED BY SALE INSTANCE @ RS.4 682/- PER SQ. YD. THERE IS HARDLY ANY REASON T O IGNORE THE REPORT OF REGD. VALUER. IT IS WELL SETTLED THAT TRUE VALU ATION OF LAND DIFFERS FROM SIZE LOCATION FRONTAGE ROAD FRONTAGE CORNER PLOT ETC EVEN IN THE SAME LOCALITY. SINCE THE REGD. VALUER AFTER CON SIDERING ALL THESE FACTORS ESTIMATED THE VALUE OF LAND @ RS.5 60 0/- PER SQ. YD. AS AGAINST THE RATE OF RS.4 682/- PER Q. YD. IN RES PECT OF CITED SALE I DO NOT FIND ANY INFIRMITY IN THE VALUATION REPORT. I ALSO FIND THAT ASSESSING OFFICER HAS ALTHOUGH NOT ACCEPTED THE REG ISTERED VALUERS REPORT SO FAR AS IT RELATES TO VALUATION OF LAND AS ON 01/04/81 BUT SHE HAS ACCEPTED THE VALUE BUILDING IN ITS ENTIRETY . HENCE SHE HAS PARTLY RELIED ON THE VALUATION REPORT WHICH IS NOT AS PER LAW. IT IS SETTLED LAW THAT A DOCUMENT CANNOT BE RELIED UPON P ARTIALLY EITHER IT SHOULD BE ACCEPTED OR REJECTED IN TOTALITY. IN VIEW OF THE TOTALITY OF FACTS THE ASSESSING OFFICER IS DIRECTED TO COMPUTE L.T.C.G. BY CONSIDERING F.M.V. AS ON 01/04/1981 AS ESTIMATED BY REGISTERED VALUER AT RS.47 74 730/-. THIS GROUND OF APPEAL IS ALLOWED. WE UPHOLD THE ORDER OF THE CIT(APPEALS) AND DISMISS GROUND NO.2 OF THE REVENUE. 21. COMING TO GROUND NO. 3 IT IS ON THE SAME ISSU E AS IN GROUND NO.2 AND IN VIEW OF OUR FINDING IN GROUND NO. 2 T HIS GROUND NO.3 IS ALSO DISMISSED. 15 22. COMING TO GROUND NO.4 THE ISSUE NOW STANDS CO VERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MANJULA J. SHAH (SUPRA). 23. COMING TO GROUND NO. 5 WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MRS. /SUSHILA M. JHAVERI 292 ITR (AT ) 1 AND AT PARA 10.3 PAGE 20 OF THE ORDER HE HAS HELD AS FOLLOWS : AFTER DUE CONSIDERATION OF THE FACTS AND CIRCUMST ANCES AS WELL AS THE CERTIFICATE OF MITTAL PARK CO-OPERATIVE HOUSING SOCIETY AND THE SITE PLAN I HAVE NO HESITATION TO HOLD THAT FLAT NO. 416A & 516A HAVING ONE ENTRANCE GATE AND COMMON KITCHEN AN D COMMON PASSAGE ACQUIRED ON SAME DATE. IT IS HELD THAT EXEC UTION OF TWO DEEDS DOES NOT MATERIALLY AFFECT THE NATURE OF TRAN SACTION OR THE NATURE OF THE PROPERTY SINCE THE PROPERTY IN QUESTI ON WAS FALLING UNDER THE SAME COMPLEX AS ONE UNIT AND NOT TWO SEPA RATE FLATS. THE DUPLEX FLATS AT 416A AND 516A WERE JOINED AS ONE SI NGLE UNIT BEFORE THE APPELLANT BECAME OWNER OF SAID PROPERTY. IT IS NOT THE CLAIM OF APPELLANT THAT HE HAD ACQUIRED THE PROPERT Y AND THEN JOINED THEM AS ONE SINGLE UNIT. THE AGREEMENT FOR PURCHASE CLEARLY MENTIONS THAT FLAT NO. 416A & 516A ARE INTERCONNECT ED. THE ASSESSING OFFICER ERRED IN ASSUMING THE WORDING USE D IN SECTION 54 TO BE ONE RESIDENTIAL UNIT WHEN IN FACT THE WO RD USED IN SECTION 54 IS A RESIDENTIAL HOUSE. THEREFORE WHAT THE APP ELLANT ACQUIRED WAS ONE LARGE RESIDENTIAL HOUSE CONSISTING OF TWO D UPLEX FLATS. THE FACT THAT TWO REGISTRATIONS ARE MADE IN RESPECT OF TWO FLATS AND TWO NUMBERS ARE ALLOTTED IN RESPECT THEREOF DO NOT MAK E ANY DIFFERENCE TO THE CLAIM OF THE APPELLANT AS IT HAD A COMMON PA SSAGE AND COMMON ENTRANCE. THE ASSESSING OFFICER IS ACCORDING LY DIRECTED TO RE-COMPUTE LTCG BY ALLOWING EXEMPTION U/S. 54 FOR I NVESTMENT IN NEW FLATS AT 416A & 516A BY TREATING THE SAME AS ONE SINGLE UNIT AS ADMISSIBLE UNDER LAW. THIS GROUND OF APPEAL IS ALLOWED. WE FULLY AGREE WITH THESE FINDINGS. WHEN THERE IS O NLY ONE ENTRANCE GATE AND A COMMON KITCHEN AND COMMON PASSAGE IT SHOULD BE CONSIDERED AS ONE RESIDENTIAL UNIT AND THE ASSESSEE SHOULD BE ENT ITLED FOR EXEMPTION U/S 54 OF THE ACT. 24. IN THE RESULT WE UPHOLD THIS FINDING OF THE C IT(APPEALS) AND DISMISS THIS GROUND OF THE REVENUE. 16 25. GROUND NO. 6 AND 7 ARE GENERAL IN NATURE AND R EQUIRE NO ADJUDICATION. 26. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER HAS BEEN PRONOUNCED ON 30 TH THIS DAY OF APRIL 2010. SD/- (R.S. PADVEKAR) JUDICIAL MEMBER SD/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER DATED : 30 TH APRIL 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS