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2015 (11) TMI 1010 - ITAT MUMBAI

2015 (11) TMI 1010 - ITAT MUMBAI - TMI - Taxability of the income gained by the assessee from transfer of the assessee’s right in ‘5 office premises’ - whether the same are to be assessed under the head ‘Long Term Capital Gains’ or as ‘Income from Other Sources’? - Held that:- In the case in hand neither the property in question i.e. the so called ‘office premises’ was in existence nor its building plan or specifications were approved from the Municipal Corporation and neither any construction a .....

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offices be sold to the another party. As observed above, the fact that the said office premises alleged to be allotted to the assessee could be used only for activity of information technology was very much in the knowledge of the assessee on the date of making the payment i.e. on 02.09.05 and even on 04.08.06 when the subsequent allotment letter was issued. The assessee did not revert back to the builder that since he was not in the activity of information technology, hence his principal amoun .....

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e assessee had been offered the amount of interest/profit on the finances provided by the assessee to the builder. Under such circumstances, the income accrued to the assessee relating to the above transaction has rightly been assessed by the lower authorities as income from other sources. We do not find any infirmity in the order of the Ld. CIT(A) in this respect and the same is therefore upheld. - Decided against assessee. - ITA No. 7080/M/2012 - Dated:- 6-11-2015 - Shri R. C. Sharma, Accounta .....

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ncome gained by the assessee from transfer of the assessee s right in 5 office premises as to whether the same are to be assessed under the head Long Term Capital Gains or as Income from Other Sources . During the assessment proceedings, the Assessing Officer (hereinafter referred to as the AO) noticed that the assessee had shown long term capital gains of ₹ 38,26,076/- on transfer of rights in the five office premises bearing No.219, 220, 221, 318 & 319 in the building named Platinum .....

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its building plan and specifications approved from Navi Mumbai, Municipal Corporation on 03.08.06 and thereafter issued a final allotment letter dated 04.08.06 to the assessee. The said building Platinum Techno Park was being built specifically for activities related to information technology and as the assessee was not involved in the activity related to information technology, hence, it decided to sell/transfer its rights in the above mentioned office premises. On 17.12.08, it was informed by .....

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pital gains. He asked the assessee to explain in this respect. The assessee furnished the necessary explanation accordingly. After considering the explanation submitted by the assessee, the AO observed that the assessee had not entered into an agreement for sale of the above mentioned office premises with the builder which can be said to have created any enforceable rights in the asset. On the date of allotment letter, the property in question was not in existence. The whole exercise was specula .....

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hen, the assessee can be said to have acquired any interest in the property only on 04.08.06 when final letter of allotment was issued to him after getting necessary approvals by the builder from the Municipal Corporation in respect of building plan and commencement certificate etc. Under such circumstances, the said right was held by the assessee for less than 36 months and the resultant gains, would, in that event, be assessable as short term capital gains. Being agreed by the order of the AO, .....

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(A) observed that how the above reproduced clause (3) which mentioned that the commencement certificate date 03.08.06 has been issued could find place in the allotment letter dated 02.09.05. The facts itself speak that the above stated allotment letter dated 02.09.05 was in fact written/issued back dated after the issue of commencement certificate dated 03.08.06. The Ld. CIT(A) further observed that in both the letters dated 02.09.05 and 04.08.06, nowhere, the schedule of payment was mentioned, .....

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nt nor any power of attorney given by the assessee to the builder for transferring his rights in the property in question. The assessee was not the signing party in any document executed for the transfer of his right to final purchaser. The assessee simply wrote to the builder to sell the properties and pay him the surplus. No rights were transferred by the assessee either in favour of the builder or in favour of any actual purchaser of the property. The Ld. CIT(A) thereafter concluded that the .....

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tive parties was missing. The Ld. CIT(A), therefore, held that whatever interest/stake was created by the assessee was sold by the builder and the surplus so earned by the assessee is to be assessed as income from other sources. Being aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us. 5. We have heard the rival contentions and have also gone through the records. Before us, the assessee has made the following written submissions: HUMBLE SUBMISSIONS OF THE APPELLA .....

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operty. Booking right in a property is a valuable right and is a property. Such property therefore, is held by the assessee since the date when the unit/office/flat/shop is booked with the builder. The booking receipt specifying the exact location, unit no. floor etc. and the amount paid irrespective of whether stamp duty is paid or not thereon or even though not registered is an enforceable contract. Therefore, the property is held by the assessee in such a case from the date of booking. The Ap .....

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sset within the meaning of Sec.2(14) and the gain arising there from is chargeable to capital gains tax u/s 2(47) r.w.s.45. The Appellant also draws your kind attention to the decision of Jaipur ITAT in Jitendra Kumar Gupta v. ITO - (2008) 8 DTR (Jp) (Trib) 330 wherein the honourable bench concluded that "Assessee having advanced a sum of ₹ 7 lacs for purchase of a flat which deal could not fructify and assessee having received certain amount by way of settlement the transaction invol .....

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er had issued separate receipts regarding the advance received in respect of the above stated five offices all dated 06.09.05. He has further submitted that a vested right had occurred to the assessee on the date of booking of the offices in question. The said right was sold by the assessee after 3 years; hence, the resultant gains were taxable as long term capital gains. On the other hand, the Ld. D.R. has relied upon the findings of the lower authorities. 7. We find that though as per the find .....

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letter dated 02.09.05 which fact itself proves that the letter dated 02.09.05 is a fabricated document which has been drafted after the issuance of commencement certificate dated 03.08.06. Hence, no reliance can be placed on the said letter. There is another peculiar fact of the case. The payment was made by the assessee vide cheque dated 02.09.05 which was transferred by way of clearing on 03.09.05 as shown by the assessee from the copy of the bank account statement, placed on record during the .....

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account of the builder, only then the receipts dated 06.09.05 were issued by the builder. Under such circumstances, there arises no probability of issuing of letter of allotment on 02.09.05. Even, otherwise, the contents of the letter itself speak that the same is a fabricated one. Admittedly, no approval of building plan, necessary permissions and even commencement certificate was issued to the assessee till 03.08.06. The Municipal Corporation had issued commencement certificate and necessary a .....

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t in the assessee to get a property which was neither in existence at that time nor any process for construction of the same had started. Another peculiar fact of the case is that in the letters dated 02.09.05 and also in the letter dated 04.08.06 which is verbatim copy of the other, in the opening lines, it has been mentioned that the authorized user of the space allotted is activity relating to information technology only . Even if, we rely upon the letter dated 02.09.05, it is clear that the .....

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ness and opening of branch office in Mumbai area, however since it had been mentioned in the said letters dated 02.09.05 and 04.08.06 that the allotted space could be used for activity relating to information technology and that the assessee had no such activity, hence a request was made to the builder to sell, transfer the rights of the assessee in the said offices to other parties at the best available market price and remit the principal amount and the gains thereupon to the assessee. The bui .....

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ins. If the assessee had no business activity in the field of information technology and there was no use of the said offices to the assessee, the reasonable presumption would be that the assessee never intended to purchase or take possession of the said offices. Moreover, neither the property was in existence on 02.09.05 nor any plan was sanctioned nor any construction had started and there was such no probability of existence of the same in near future. Under such circumstances, no vested righ .....

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e was no payment schedule of installments, any likely date of completion of the project or the balance consideration payable by the assessee agreed to between the parties. Even the assessee in its balance sheet, the copy of which has been furnished by the ld. AR during the course of arguments, has shown the amount paid for the purchase of the alleged office premises under the head Loans, Advances & Deposits not under the head Fixed Assets or Investments , which itself show that the assessee .....

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has relied upon the another decision of the Hon ble Delhi High Court styled as Gulshan Malik vs. CIT (2014) 223 taxman 243 wherein the Hon ble Delhi High Court had been of the opinion that the capital asset has been defined in extremely vide terms. The Hon ble Delhi High Court interpreting section 2(47) which defines transfer and considering the second explanation to clause (v) & (vi) of the section observed that the possession, enjoyment of property as well as any interest in any of transf .....

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the Act is property of "any kind" that is "held" by the assessee. Necessarily, a capital asset must be transferable. Thus, to understand what kind of property 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 possession, enjoyment of immovable property, as well as an interest in any asset are all transferable "capital assets .....

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here is no doubt that booking rights or rights to purchase the apartment or rights to obtain title to the apartment are also capital assets that can be transferable." A careful reading of the above observations made in the case of Gulshan Malik vs. CIT (supra) which have been further relied upon by the Hon ble Delhi High Court in the case of CIT vs. Ram Gopal (supra) reveals that the Hon ble High Court has held that a capital asset under the Act is a property of any kind that is held by the .....

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ven the rights in the property are transferable capital asset. However, for that purpose, there should be a property in existence or even giving a wider interpretation there should be a property which is likely and apparently coming into existence e.g. if the construction of the flat is started and the flat is likely to come in existence. However, when there is no property in existence and nor any definite process for the creation of the same has started, how can the one get a transferable right .....

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nd as discussed above neither the property in question i.e. the so called office premises was in existence nor its building plan or specifications were approved from the Municipal Corporation and neither any construction activity or commencement of the project had started. There is no document on the file which may suggest that there was even very likelihood of the alleged property coming into existence in the near future giving any right to the seller to sale any interest in the same or any acc .....

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