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2015 (11) TMI 1069 - ITAT MUMBAI

2015 (11) TMI 1069 - ITAT MUMBAI - TMI - Gain arising from sale of capital asset - LTCG or STCG - CIT(A) treating the gain arising from sale of capital asset as long term capital gain - whether date of acquisition of capital asset is date of registration under Maharashtra ownership of flats (regulation of promotion of construction, sale, management and Transfer Act 1963) and not the date of allotment of letter? - Held that:- the interest of the assessee accrued right from the date of allotment i .....

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e of allotment is the relevant date for computing capital gains. Thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals) on the issue in hand - Decided against revenue.

Deduction in respect of interest paid on borrowed capital to acquire capital asset - CIT(A) allowed the claim - there is no provision for such deduction, therefore, the conclusion drawn in the assessment order was defended - Held that:- Section 48, which is meant for capital gains c .....

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deduction the expenditure must necessarily have been incurred prior to the passing of title. The Hon’ble Karnataka High Court in Commissioner Of Income-Tax, Karnataka II Versus Maithreyi Pai (1983 (11) TMI 43 - KARNATAKA High Court ) held that interest on borrows is deductible only if is not allowed u/s 57 of the Act, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) on this issue also, therefore, dismissed. - Decided against revenue.

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uch investment was rightly held to be investment in the residential property, thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals), therefore, we find no merit in the impugned ground, raised by the Revenue, consequently, dismissed - Decided against revenue.

Allowing deduction u/s 54 - treating the gain so arrived on transfer of capital asset as long term capital gains instead of short term capital gain - Held that:- Considering the peculiar circ .....

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ided against revenue. - ITA No. 5749/Mum/2013 - Dated:- 24-9-2015 - Shri Joginder Singh, Judicial Member And Shri Ramit Kochar, Accountant Member For the Petitioner : Shri B. Yadagiri-DR For the Respondent : Shri Vijay C. Kothari ORDER Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 29/04/2013 of the ld. First Appellate Authority, Mumbai. 2. The first ground raised by the Revenue pertains to treating the gain arising from sale of capital asset as long te .....

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f to the assessee, the ld. Commissioner of Income Tax (Appeals) did not appreciate the fact that the agreement for purchase was entered in 2006 and the date of sale was in 2008. 2.2. On the other hand, the ld. counsel for the assessee, Shri Vijay C. Kothari, defended the conclusion arrived at in the impugned order by contending that the assessee received allotment letters on 31/12/2004 and the agreement for purchase of the flats was entered into vide agreement dated 02/11/2006 and the MOU for sa .....

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31,36,750/- as short term capital gain which arose on transfer of capital asset, duly disclosed by the assessee in his return. The stand of the Revenue is that it was wrongly disclosed as long term capital gains. The Assessing Officer computed the short term capital gain at ₹ 3,31,84,000/- against the claimed long term capital gain at ₹ 6,31,36,750/-. While doing so, the ld. Assessing Officer opined as under: - i. The period of holding should be computed from the date of conveyance a .....

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nagement and transfer) Act, 1963. v. It is the date of registration that determines the rights of the purchaser and not the date of allotment. The allotment is subject to cancellation and changes but it is only a registered document which is capable of being enforced in a court of law. Hence the contention that date of allotment creates an asset in favour of the assessee is without any basis and devoid of merit. vi. The assessee is not entitled to indexation benefits on the cost of acquisition s .....

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re this Tribunal. 2.5. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we note that, under the facts available on record, the basic question to be adjudicated is whether the gain arising on transfer of capital asset is long term capital gain or short term capital gain. We are of the considered o .....

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5) 198 CTR (MP) 336 c. CIT vs Tata Services ltd. 122 ITR 594 d. CIT vs Vijay Flexible Containers 186 ITR 693 (Bom.) e. CIT vs Mormasji Man Charji Vaid 168 CTR (Guj.)(FB) 565 f. Arundhati Balkrishna vs CIT (1982) 29 CTR (Guj.) 85. 2.6. In view of the above, we are usefully quoting the relevant portion from the decision from Hon ble jurisdictional High Court (122 ITR 594) (supra):- Quote:- What is a capital asset is defined in section 2(14) of the I.T. Act, 1961. Under that provision, a capital as .....

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ot;, used in section 2(14) of the 1. T. Act, is a word of the widest amplitude and the definition has re-emphasised this by use of the words "of any kind" Thus, any right which can be called property will be included in the definition of "capital asset ". A contract for sale of land is capable of specific performance. It is also assignable. (See Hochat Kizhakke Madathil Venkateswara Aiyar v. Kallor Illath Raman Nambudhri, AIR 1917 Mad 358). Therefore, in our view, a right to .....

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transfer of interest in the property mortgage from the mortgagor to the mortgagee. Share of partner in a partnership concern is a capital asset as is transfer will give rise to capital gains. Likewise, a business as a going concern would constitute a capital asset within the meaning of section 45 of the Act. Route permits, for plying buses, issued by authorities under the Motor Vehicle Act, are property for the deprivation of which compensation is payable to the permit holder, hence, such route .....

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kind carries no words of limitation, because it is a wide amplitude and includes every possible interest that a person may hold and enjoy. Our view is fortified by the following decisions:- a. Syndicate Bank Ltd. vs Addl. CIT 155 ITR 681 (Kerala), b. Madthil Brothers vs DCIT (2008) 301 ITR 345 (Madr.) c. CIT vs Tata Services ltd. 122 ITR 594 (Bom.) d. Bafna Charitable Trust vs CIT 230 ITR 864 (Bom.) e. V. Rangaswamy Naidu vs CIT 31 ITR 711 (Mad.) f. Addl. CIT vs Ganpati Raju 119 ITR 715 (AP) g. .....

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the delivery of possession is only a formality. The case of the assessee is further fortified by the ratio laid down in ACIT vs Smt. Sundar Kaur Sujan Singh Gad (3 SOT 206), ACIT vs Smt. Vandana Rana Roy (ITA No.6173/mum/2011) order dated 07/11/2012, holding date of allotment is the relevant date for computing capital gains, Jeetendra Mohan vs ITO (2007) 11 SOT 594 (Del.), Jagmohan Singh Rawat vs ITO (ITA No.3297/Del./2011) order dated 29/02/2012, thus, we find no infirmity in the conclusion of .....

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essee defended the conclusion arrived at in the impugned order. 3.1. The facts, in brief, are that the assessee paid interest on housing loans availed from ICICI Bank and Standard Charter Bank for purchasing impugned flats in Ashok Towers. The interest so paid was for the period when construction of building was in progress. Such interest was treated as cost of acquisition /cost of improvement for the purpose of computing capital gains. Now the issue to be adjudicated by us whether the interest .....

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ncome of the assessee, such interest is deductible while computing capital gains either is cost or is improvement in the asset. The ratio laid down in Addl. CIT vs K.S. Gupta 119 ITR 372 (AP), CIT vs Mithilesh Kumari 92 ITR 9 (Del.), CIT vs M. Pai 152 ITR 247 (Karn.) and Naozar Chenoy vs CIT 234 ITR 95 (AP). Section 48, which is meant for capital gains clearly envisages allowbility of such expenditure which is incurred wholly and exclusively in connection with such transfer and for the purpose o .....

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ra) held that interest on borrows is deductible only if is not allowed u/s 57 of the Act, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) on this issue also, therefore, dismissed. 4. The next ground pertains to deleting the additions made by the Assessing Officer invoking the provisions of section 50C of the Act. The crux of argument on behalf of the Revenue is that while coming to a particular conclusion, the ld. Commissioner of Income Tax (App .....

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ue of flat number 1907 and 1908 at ₹ 2,42,50,000/- and 2,34,50,000 respectively. As per the Stamp Duty Authorities, the market value of flat number 1901 and 1902, as per registered deed was ₹ 2,16,66000 and ₹ 2,24,34,000 respectively. As per valuation adopted by Stamp Duty Authorities, it was ₹ 65,58,440/- and ₹ 67,73,270/- respectively. Now the question arises whether as per the provision of section 50C, the full value of consideration on transfer of capital asset .....

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tion authority adopted or assessed the market value of flat number 1901 and 1902 at ₹ 65,58,440/- and ₹ 67,73,270/- respectively. If the totality of facts are analyzed, there is undisputed fact, emerges from the conclusion of the ld. Commissioner of Income Tax (Appeals), that the market price was lesser than the value on which the assessee transferred flat no.1901 and 1902. It seems that the addition made by the Assessing Officer was on a wrong presumption. Our view is fortified by t .....

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ld. counsel for the assessee defended the conclusion arrived at in the impugned order by submitting that all the payments of interior work were made through account payee cheque/from the bank account of the assessee and list of vendors, to whom the impugned payments totaling ₹ 53,11,335/- were made, along with cheque number, date of cheque issued and copy of invoices were furnished by the assessee. 5.1. We have considered the rival submissions and perused the material available on record. .....

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firmity in the conclusion of the ld. Commissioner of Income Tax (Appeals), therefore, we find no merit in the impugned ground, raised by the Revenue, consequently, dismissed. 6. The last ground pertains to allowing deduction u/s 54 of the Act by treating the gain so arrived on transfer of capital asset as long term capital gains instead of short term capital gain. The crux of argument on behalf of the ld. DR is in support to the assessment order, whereas, the ld. counsel for the assessee defende .....

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deduction u/s 54F of the Act. There is uncontroverted finding in the impugned order that the assessee received allotment letters on 31/12/2004 and the agreement for purchase of flat was entered on 02/11/2006, whereas the sale was executed on 17/05/2008 and 18/07/2008, therefore, the assessee is entitled for deduction, because it is as per the period for prescribed u/s 54F of the Act. The case of the assessee further find support from the decision of the Tribunal in V.M. Dujodwala vs ITO (ITA No. .....

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apital gains for the whole transaction at ₹ 4,12,800 and arrived assessee';s share therein at ₹ 2,06,000 which was treated as the income under the head ';Long Term Capital gains'; and allowed deduction under section 80-TTof the IT Act, 1961. The assessee submitted that he has purchased another house property being Flat No. 62, ';Rambha'; at Petit Hall, Bombay, vide agreement dated 22-10-77 for ₹ 2,80,000. In this property, the assessee';s share was 70% o .....

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₹ 20,780. 23-4-79 Pate of payment of last instalment. 16-5-79 Municipal conditional letter of NOC for occupation. 24-11-79 Date of offer for possession. 9-4-80 Letter from Builder for readiness for completion certificate. 13-5-80 Date of possession. 3. Before the ITO, the assessee contended that though agreement for purchase of a flat was entered on 22-10-77 and payment was also made earlier, only the date when the new flat is ready for occupation should be taken as date of purchase by th .....

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might have taken possession of the same much late on and this amounts to purchase of a flat, since this was done more than 12 months before the sale of the old flat section 54 exemption is not available to the assessee. His claim is therefore rejected." The Commissioner of Income-tax (Appeals) also confirmed the order of the ITO. 4. We have heard the counsels on both side. The Departmental Representative vehemently argued that the exemption under section 54 is not applicable to the assessee .....

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operty on 22-10-1977 on which the reliance is placed by the Department as the relevant date of purchase was in respect of property under construction. The flat intended to be purchased by the assessee was not at all constructed on that date. He placed reliance in support of his contention, to the source of Articles of Agreement dated 22-10-77 which clearly spells out in the recital that the agreement was one in respect of a building still under construction. So he claimed that the Revenue';s .....

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onstruction was completed at a later date and on 24-11-79, the builder expressed his desire to offer the possession of the flat. That is the first date when the property, at best, can be said to be a purchase of residential property. He stressed that even after construction of the building, the flat is not immediately available for residence to the assessee unless it is cleared by the municipal/corporation authorities. Therefore, he submitted that only when the flat construction was completed an .....

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roperty for the purpose of residence within the meaning of section 54 of the IT Act, 1961. Till such time, he had only the right to purchase house property, he added. He relied on the following decisions: (1) CWT v. K.B. Pradhan (1981) 130 ITR 393(Ori.) (2) K.P. Varghese v. ITO (1981) 131 ITR 597(SC) (3) CIT v. Mrs. Shahzada Begum (1988)173 ITR 397/38 Taxman 31 (AP) (4) Purushottam Govind Bhat v. First ITO (1985) 13 ITD 939(Bom.) (5) Damodar Raheja v. Eighth ITO (1984) 10 ITD 75(Mad.). 6. We hav .....

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ar either before or after the date of sale of the first house property. If that is done so, capital gains arising on transfer of the first house property will be exempt to the extent of investment in the second house property as stipulated in section 54. The flat in cities is the most common and a peculiar feature. The builder has to take plans of construction in his own name and sometimes in the names of his vendors and start construction. He invites prospective customers, enters into agreement .....

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to any part of the construction till such time the builder actually gives the possession of a particular flat to the buyer. After the completion of structure, it has to be inspected and cleared by the municipal authorities. Then the flat is ready for occupation which the builder normally intimates to the buyer. The buyer will then take possession and actually enjoy the house property to the exclusion of others. In this flat business, at times, the builder goes financially bad and delays the con .....

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iar type of right which certainly cannot be classified as ownership. To say, therefore, that the assessee. has purchased the property would in law be erroneous. On the contrary, that the assessee has an interest in this flat as much as that of a full owner cannot be denied. The purpose of the assessee getting the flat allotted was to have the benefit of residential accommodation entirely in his control as if he was the full owner. Except, therefore, for a few technical requirements, the assessee .....

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ry, the ownership flats are in fashion. In applying the provisions of section 54 to such a contingency, it would not be, as claimed by the learned counsel for the department, proper to deny the assessee the benefit of section 54. With the increase in the cost of buildings if the technical policy of denying the benefits of section 54 claimed by the learned departmental counsel is accepted, section 54 would almost be an unused section. Certainly that cannot be the purpose of the legislation especi .....

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;purchase'; for the purpose of granting relief under section 54(1) of the Act to that coparcener in whose favour the release is effected. The Supreme Court answered this question in favour of the assessee in extending the benefit of section 54. In the case of Sri Rajaram (supra), the question for determination was whether the payment of consideration is relevant for the purpose of section 54, which the Tribunal rightly held that it is not so, considering the provisions of section 54. Therefo .....

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