TMI Blog2015 (2) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the said flat to the purchaser and receipt of balance sale consideration? - Held that:- The assessee acquired the flat in the society on September 8, 2003 and transferred all rights in the said flat including the right to acquire the newly constructed flat vide agreement dated October 21, 2004, therefore, the capital asset has been transferred by the assessee within the period of 36 months from the date of purchase and hence the profit/gain on said asset will be short-term capital gain and not long-term capital gain. The deferment in payment of sale consideration for the reason of enforcement of the terms and conditions of the agreement and right of the parties is not material when there was no subsequent transfer of title either intended or actually taken place. In view of the above discussion and facts and circumstances of the case we hold that the transaction of transfer of capital asset in question was completed vide agreement dated October 21, 2004. It is not the case where in the case of the brother of the assessee was examined for the assessment year 2005-06 and accepted the claim that no capital gain arose in the said assessment year. In fact, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961 (the Act) dated March 20, 2013 ; b. The learned Commissioner of Income-tax (Appeals) erred in confirming the total income of the appellant at ₹ 49,91,250 ; c. The learned Commissioner of Income-tax (Appeals) erred in confirming the capital gain arising on sale of residential flat in Roshni apartment in the assessment year 2005-06 as short-term capital gain against offered by the assessee in the assessment year 2008-09 as long- term capital gain ; d. The learned Commissioner of Income-tax (Appeals) further erred in holding that the date of allotment is the date when the right of conveyance gets vested by agreement, dated October 21, 2004, which is capital asset under section 2(14) of the Act. Hence, the gain arising on the sale of the said property is to be considered as short-term capital gain and rightly assessed in the assessment year 2005-06 as against offered by the appellant in the assessment year 2008-09 ; e. The learned Commissioner of Income-tax (Appeals) further erred in following the decision of the Bombay High Court in the case of CIT v. Tata Services Ltd. [1980] 122 ITR 594 (Bom) and various other decisions cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been dismissed by the Commissioner of Income-tax (Appeals). 3. Before us, the learned authorised representative of the assessee reiterated the submissions made before the Commissioner of Income-tax (Appeals) in paragraphs 2.3.1 and 2.3.2 as under : 2.3.1. The appellant's written submission : 1. The Assessing Officer issued notice under section 148 dated March 30, 2012. Thereafter, notice under section 142(1) dated June 28, 2012, was issued along with the reasons for reopening. In the reasons, the Assessing Officer mentioned that he has reason to believe that the income chargeable to tax of ₹ 1,55,00,000 has escaped assessment copy of the reasons enclosed (pages 51 to 4). A perusal of the reasons would reveal that though it has been stated that the Assessing Officer had formed belief of escapement of income on account of non-filing of the return of income, the Assessing Officer has completely ignored the fact that the capital gain on appellant's share out of sale of the said immovable property was already offered for tax in the assess ment year 2008-09. Thus, there is no question of escapement of income as alleged by the learned Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment in view of the non-filing of the Income-tax return for the previous year relevant to the assessment year 2005-06. Copy of the return of income filed in pursuant to notice under section 148 is annexed herewith (pages 41 to 50) The learned Assessing Officer assessed the capital gain on the impugned transaction as short-term capital gain of ₹ 47,30,850 in the assessment year 2005-06 and passed the assessment order under section 144 read with section 147 of the Act dated March 20, 2013, assessing the income of the appellant at ₹ 49,91,250 resulting into harsh gross Income-tax demand of ₹ 32,32, (incl. interest under section 234A ₹ 47,931 and 234B ₹ 15,33,792). The impugned appeal before your honour is against the assessment of short-term capital gain by the learned Assessing Officer in the order under section 144 read with section 147 of the Income-tax Act, 1961, in the assessment year 2005-06 ignoring the fact that said income is already offered as long-term capital gain in the assessment year 2008-09. 4. The only objection of the assessee against the reopening is that the assessee has offered capital gain from the sale of immovable property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the validity of reopening of assessment. Grounds Nos. 1(b) to (e). 7. The assessee purchased flat No. 3 in Roshni Co-operative Housing Society, Plot No. 380, 15th Road, Bandra (W), Mumbai vide agreement dated September 8, 2003. The said society building comprising of ground plus 2 upper floors consisting of 12 flats. Subsequently the society vide its general body meeting held on November 2, 2003, decided to redevelop the said property by constructing a new building by using and consuming the full development potential of the said property, i.e., FSI and transferable development rights (TDR). It was resolved that each of existing member entitled to a flat in the new building of the actual area presently occupied by them and in addition thereto further area equivalent to the proportionate share of the member in the transferable development rights. Accordingly, the society under the redevelopment plan allotted a flat in the new building to the assessee to be developed by Sapphire Land Developers Pvt. Ltd. The redevelopment was approved under the Urban Land Ceiling Act vide order dated December 30, 2003. The commencement certificate was issued on June 8, 2004. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nated in the year under consideration. In support of his contention he has relied upon the decision of the hon'ble High Court in the case of Zuari Estate Development and Investment Co. P. Ltd. v. J. R. Kanekar, Deputy CIT (Assessment) [2004] 271 ITR 269 (Bom). The learned authorised representative has referred to various clauses of the agreement and submitted that as per the condition of agreement, the assessee/vendors to ensure the construction of the said building is and will be carried out and completed as per the sanctioned plan. The vendors shall be responsible for ensuring that there should be no breach of any rule or regulation of the construction by the contractor while constructing the building. He has further submitted that as per the clause 10 of agreement it is agreed that the vendors upon full payment, having been made by the purchaser, shall sign, execute and deliver all necessary applications, papers and writing to be made to the said society for accepting and recognising the purchaser as member of the society. It was also agreed upon between the parties that till the full payment is made by the purchaser to the vendors, the purchaser shall not be entitled to dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and isolate one of these integrated and inextricably connected rights in the capital asset. The assessee was having only ownership of the flat in the society and what was agreed to transfer is the flat and not the right to obtain conveyance. The ingredients and conditions of section 2(14)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act, have not been fulfilled, therefore, there is no transfer of capital asset during the year under consideration specifically when the assessee has not received the full consideration and the possession of the flat was to be handed over on receipt of full consideration on a future date. 10. On the other hand, the learned Departmental representative has relied upon the orders of the authorities below and submitted that what has been transferred by the assessee, is the right to obtain flat in the society undergoing construction and, therefore, by way of agreement dated October 21, 2004, the assessee transferred the said right in favour of the purchaser. She has relied upon the decision in the case of Tata Services Ltd. [1980] 122 ITR 594 (Bom), and submitted that the hon'ble High Court has held that the word proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said agreement for transfer of the title of the flat in question. Therefore, when there was no subsequent transfer or intention to execute any transfer deeds in respect of the flat in question then the parties accepted and understood the transfer of the flat by way of the said agreement dated October 21, 2004. Certain terms and conditions required to be fulfilled to give effect to the said agreement and to enforce the respective rights of the parties. It is to be noted that it was not open to the parties of the agreement not to transfer the capital asset in the shape of the flat to be constructed in the society. The rights and obligations in the agreement are unambiguous that the assessee is entitled to receive the full sale consideration as agreed between the parties and the purchaser is entitled to get all other requisite documents to be signed by the assessee for transfer of membership in the society. Apart from these respective rights and obligations of receipt of full consideration and membership in the society, there was no discretion or option with the parties to refuse to sale or purchase as the case may be, the capital asset in question. The learned authorised representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enial that the right to acquire flat is a capital asset and, therefore, the profit on transfer of such right will be assessed as capital gain. In the case in hand, the assessee acquired the flat in the society on September 8, 2003 and transferred all rights in the said flat including the right to acquire the newly constructed flat vide agreement dated October 21, 2004, therefore, the capital asset has been transferred by the assessee within the period of 36 months from the date of purchase and hence the profit/gain on said asset will be short-term capital gain and not long-term capital gain. The deferment in payment of sale consideration for the reason of enforcement of the terms and conditions of the agreement and right of the parties is not material when there was no subsequent transfer of title either intended or actually taken place. In view of the above discussion and facts and circumstances of the case we hold that the transaction of transfer of capital asset in question was completed vide agreement dated October 21, 2004. 14. As regards the case of the brother of the assessee, we note that the capital gain offered by the brother of the assessee for the assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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