ITO 16(3)(1), MUMBAI v. MOHAN KUMAR BHOJANIA, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI A.L. GEHLOT ACCOUNTANT MEMBER ITA NO. 769/M/2009 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER 16(3)(1) APPELLANT ROOM NO. 219 MATRU MANDIR TARDEO ROAD MUMBAI 400 007 VS. SHRI MOHAN KUMAR BHOJANIA RESPONDENT PROP. M/S ICON EQUIPMENTS 1 AMAN CHAMBER 113 NEW QUEEN ROAD MUMBAI 400 004. (PAN AAHPN9404G) ITA NO. 842/M/2009 ASSESSMENT YEAR: 2005-06 SHRI MOHAN KUMAR BHOJANIA APPELLANT PROP. M/S ICON EQUIPMENTS 1 AMAN CHAMBER 113 NEW QUEEN ROAD MUMBAI 400 004. (PAN AAHPN9404G) VS. INCOME-TAX OFFICER 16(3)(1) RESPONDENT ROOM NO. 219 MATRU MANDIR TARDEO ROAD MUMBAI 400 007 REVENUE BY : MR. S.S. RANA/MR. AARSI PRASAD RESPONDENT BY : DR. D.K. SHIVRAM/ MR. PARAS S. SALVA ORDER PER A.L. GEHLOT A.M.: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF CIT(A) - XVII MUMBAI PASSED ON 10.11. 2008 FOR THE ASSESS MENT YEAR 2005- 06. ITA NOS. 769/M/09 & 842/M/09 MOHAN KUMAR BHOJANIA 2 ITA NO. 769/MUM/09 APPEAL BY THE REVENUE 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS AP PEAL IS THAT CIT(A) ERRED IN DIRECTING THE AO TO WORK OUT THE CA PITAL GAIN TREATING THE TRANSFER RESULTING INTO LONG TERM CAPITAL GAIN AND TO ALLOW THE EXEMPTION U/S 54F OF THE ACT. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE DECLARED A SUM OF RS. 25 618/- AS LONG TERM CAPITAL GAIN IN RE SPECT OF HIS 25% CO-OWNERSHIP OF RESIDENTIAL PROPERTY ON PLOT NO. 47 9 TH ROAD JUHU MUMBAI AS IT WAS ACQUIRED IN 1979 ALONG WITH HIS T HREE BROTHERS ALSO HOLDING 25% OWNERSHIP RIGHTS EACH. THE AO HELD THAT THE ASSESSEES SHARE OF 25% COMPENSATION WAS RS. 21 25 000/- BEING 25% OF THE ENTIRE AMOUNT OF RS. 85 LAKHS AS WELL AS THE VALUE OF THE FLAT ADMEASURING 2465 SQ.FT. AND VALUED BY HIM AT RS. 45 00/- PER SQ.FT. THE AO RECOMPUTED THE ENTIRE AMOUNT FOR RS. 1 33 07 500/- AND THE SAME WAS TAXED AS INCOME FROM OTHER SOURCES. THE AO DISALLOWED THE DEDUCTION U/S 54 OF THE ACT. THE CIT(A) FOLLOWING THEIR ORDER OF CO- OWNER IN THE CASE OF SHRI RATAN KUMAR BHOJANIA VIDE ORDER DATED 24 TH JULY 2008 AND HELD THAT THE AMOUNT IS ASSESSABLE U NDER THE HEAD LONG TERM CAPITAL GAIN AND THE ASSESSEE IS ENTITLED FOR BENEFIT OF SECTION 54F OF THE ACT. THE CIT(A) DIRECTED THE AO TO RECOMPUTE LONG TERM CAPITAL GAIN. 4. AT THE OUTSET THE LEARNED REPRESENTATIVES OF TH E PARTIES SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF ITAT IN THE CASE OF CO-OWNER MR. RATANKUMAR S. BHOJANIA FOR AY 2005-06 VIDE ITA NO. 6092/M/08 ORDER DATED 15 TH JANUARY 2010 A COPY OF WHICH IS ON RECORD. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ITAT IN THE CA SE OF CO-OWNER MR. RATANKUMAR S. BHOJANIA HELD AS UNDER:- ITA NOS. 769/M/09 & 842/M/09 MOHAN KUMAR BHOJANIA 3 AFTER HEARING THE LEARNED DR WE FIND THAT GRANTING OF DEVELOPMENT RIGHTS IN THE PROPERTY OWNED BY THE ASS ESSEE ALONG WITH THE OTHER CO-OWNERS IS DEFINITELY A TRANSFER O F CAPITAL ASSET RESULTING IN CAPITAL GAIN. THEREFORE WE DECLINE T O INTERFERE WITH THE FINDING OF THE CIT(A) THAT THE SAID INCOME HAS TO BE ASSESSED AS LONG TERM CAPITAL GAIN. HOWEVER AS REGARDS THE CIT(A)S DIRECTION TO THE AO TO ALLOW EXEMPTION U/S 54F OF T HE ACT WE FIND THAT NEITHER THE AO NOR THE CIT(A) HAVE DISCUSSED A S TO WHETHER THE RESIDENTIAL UNITS CONSTRUCTED BY THE DEVELOPER AND HANDED OVER TO THE ASSESSEE CONSISTED OF A SINGLE UNIT OR NUMBER OF RESIDENTIAL UNITS AND ALSO AS TO WHETHER THE ASSESS EE FULFILLS THE CONDITIONS FOR THE GRANT OF EXEMPTION U/S 54F OF TH E ACT. IN VIEW OF THE SAME WE DEEM IT FIT AND PROPER TO REMAND TH IS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE DETAI LS AS REGARDS THE RESIDENTIAL UNITS RECEIVED BY THE ASSESSEE AND AS T O WHETHER THE ASSESSEE FULFILLS THE CONDITIONS PRESCRIBED U/S 54F OF THE INCOME TAX ACT. 6. SINCE THE ITAT HAS DECIDED THE IDENTICAL ISSUE I N THE CASE OF CO- OWNER MR. RATANKUMAR S. BHOJANIA WE RESPECTFULLY F OLLOW THE ORDER OF THE ITAT AND IN THE LIGHT OF THAT WE REMIT THE MATT ER BACK TO THE FILE OF THE AO WITH IDENTICAL DIRECTIONS. THUS THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 842/M/09 APPEAL BY THE ASSESSEE 7. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN THIS APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) ERRED IN WORKING OUT THE LONG TERM CAPITAL GAIN ARI SING OUT OF THE SALE OF DEVELOPMENT RIGHT AT RS. 11 54 411/- INSTEA D OF RS. 25 618/- AS RETAINED BY THE APPELLANT. ON FACTS & C IRCUMSTANCES OF THE CASE & LAW ON THE SUBJECT THE CAPITAL GAIN B E ASSESSED AT RS. 25 618/-. 8. THE CIT(A) WHILE DECIDING THE ISSUE DIRECTED THE AO TO RECOMPUTE THE LONG TERM CAPITAL GAIN AS UNDER:- 7.5.8 IT IS APPARENT FROM THE FACTS OF THE CASE THA T THE APPELLANT HAS RECEIVED COMPENSATION IN LIEU OF TRAN SFER OF EXTRA FSI OBTAINED THROUGH LOADING OF TRANSFERABLE DEVELO PMENT RIGHTS ON THE EXISTING FSI THAT IS TO SAY THE TDR COULD BE LOADED ON THE EXISTING FSI ONLY ON ACCOUNT OF OWNERSHIP OF LAND B Y THE APPELLANT. THUS THE INDEXED COST OF ACQUISITION OF THE PROPERTY AT RS. 20 34 831/- THE COST OF LOADING TDR AT 25% OF RS. 5 32 820/- AND THE 25% OF SOCIETY BETTERMENT CHARGES PAID AT R S. 5 00 000 ITA NOS. 769/M/09 & 842/M/09 MOHAN KUMAR BHOJANIA 4 ARE THE ONLY COSTS WHICH HAVE RESULTED INTO ACQUISI TION OF PERMISSIBLE BASIC FSI OF 655.20 SQ.MTRS. AND TDR FS I 655.20 SQ.MTRS. TO THE FOUR CO-OWNERS. OUT OF THIS 25% IS THE COST RELATES TO THE APPELLANT. THUS TOTAL COST WORKS OUT AT RS. 20 34 831/- + RS. 33 301/- + RS. 31 250/- = RS. 21 99 382/-. SINC E 50% OF FSI HAS BEEN TRANSFERRED THE INDEXED COST OF ACQUISITI ON OF THE TRANSFERRED ASSET IS RS. 11 64 242/-. AS AGAINST TH IS APPELLANT HAS RECEIVED CONSIDERATION OF RS. 21 25 000/-. THE DEVELOPER HAS ALSO AGREED TO PAY 75% OF THE COST OF LOADING THE F DR OF RS. 5 32 820/- AND 75% OF BETTERMENT CHARGES OF RS. 5 0 0 000/-. THIS ALSO FORMS PART OF THE CONSIDERATION IN LIEU O F TRANSFER THE TDR. THUS THE TOTAL CONSIDERATION RECEIVED AGAINST THE SAID TRANSFER IS RS. 21 25 000/- + 25% OF RS. 7 24 615/- = RS. 23 18 653/-. THE AO IS ACCORDINGLY DIRECTED TO WO RK OUT THE CAPITAL GAINS TREATING IT AS LONG TERM CAPITAL GAIN . 9. THE LEARNED AR SUBMITTED THAT COST OF LOADING TD R AND BETTERMENT CHARGES OF RS. 5 00 000/- WHICH IS 25% OF SHARE HAS TO BE BORNE BY THE ASSESSEE THEREFORE THIS AMOUNTS TO E XPENSES INCURRED FOR THE PURPOSE OF TRANSFER OF THE PROPERTY AND THE SAME IS REQUIRED TO REDUCED FROM THE TOTAL CONSIDERATION OR TO BE ALLOW ED AS EXPENDITURE. THE LEARNED AR FILED CALCULATION GIVING TO THAT EFF ECT WHICH IS REPRODUCED BELOW:- AS PER ASSESSEE AS PER CIT(A) CONSIDERATION 21 25 000 21 25 000 25% OF 75% OF RS. 5 32 820/- + 5 00 000/- 10 32 820/- I.E. 25% OF 7 74 615/- 193654 1 93 654 23 18 653/- 23 18 653/- COST: INDEXED COST 20 34 831/- 20 34 831/- 25% OF 25% OF RS. 5 32 820/- + 5 00 000/- 10 32 820/- I.E. 25% OF 2 58 205/- 2 58 205/- 64 551/- 22 93 036/- 20 99 382/- 25 617/- 2 19 271 GAIN 10. ON THE OTHER HAND THE LEARNED DR POINTED OUT R ELEVANT AGREEMENT AND SUBMITTED THAT THE WORKING SUBMITTED BY THE LEARNED AR IS SUBJECT TO VERIFICATION. ITA NOS. 769/M/09 & 842/M/09 MOHAN KUMAR BHOJANIA 5 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. AFTER CONSIDERING THE FACTS OF THE CASE WE REMIT THE MATTER BACK TO THE FILE OF THE AO FOR A LIMITED PURPOSE TO VERIFY THE FACTS AND CALCULATE THE CAPITAL GAIN AS PER DIRECTI ON OF CIT(A) AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 12. IN THE RESULT THE CROSS APPEALS ARE ALLOWED FO R STATISTICAL PURPOSES. PRONOUNCED ON THIS 21 ST DAY OF APRIL 2010 SD/- SD/- (D. MANMOHAN) (A.L. GEHLOT) VICE PRESIDENT ACCOUNTAN T MEMBER DATED: 21 ST APRIL 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 20.4.10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 21.4.10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK ITA NOS. 769/M/09 & 842/M/09 MOHAN KUMAR BHOJANIA 6 9 DATE OF DISPATCH OF ORDER