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2016 (8) TMI 60 - ITAT MUMBAI

2016 (8) TMI 60 - ITAT MUMBAI - TMI - Exemption u/s 54 - Transfer u/s 2(47) - whether the handing over of the possession of the property is vital to decide the transfer in term of the provision of Section 2(47) of the Act so as to decide whether the property is held as long term asset or short term asset? - Held that:- As in the case of the assessee, who entered into agreement to sell dated 07-01-2011 and in this agreement a specifically mentioned Clause 2(b) states that the possession of the fl .....

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ing period is more than thirty six months. The assessee has invested a sum of ₹ 89,22,500/- in purchase of new flat, the proceeds out of sale of the flat. In our view the assessee is entitled for deduction u/s 54 of the Act and assessment of this transaction is to be made in assessment year 2012-13 and not in assessment year 2011-12. We direct the AO accordingly. Appeal of the assessee is allowed partly in favour of assessee. - ITA No. 98/MUM/2015 - Dated:- 22-7-2016 - Shri Mahavir Singh, .....

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tset, Ld. Counsel for the assessee filed revised grounds of appeal because the original grounds filed by him were argumentative in nature. To this, Ld. Sr. D.R has not objected. Ld. Counsel for the assessee also filed additional grounds of appeal stating that the CIT (Appeals) erred in not appreciating the fact that the transfer of flat has not taken place in the previous year relevant to the impugned assessment year. For this assessee has raised the following additional ground:- The CIT(A) as w .....

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of flat situated at 3rd floor in the B wing of Ann Ville" as short term capital gains. 2. The Ld. CIT (A) failed to appreciate that the transfer of the flat took place on 14th May, 2011 on handing over the possession to the purchasers in terms of agreement dated 7th January, 2011. Thus, the impugned asset was held by the appellant for a period of more than 36 months. 3. Without prejudice to the above, the Ld. CIT (A) as well as the Ld.A.O. failed to appreciate that the transfer of the impu .....

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t argued on admissibility of additional ground that transfer of flat has not taken place during the previous year relevant to this assessment year and accordingly capital gain is not chargeable in this assessment year, will go to the root of the matter, hence, the same requires adjudication. For this Ld. Counsel for the assessee relied upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Company vs. CIT (1998) 229 ITR 383(SC) and also Full Bench decision of Ho .....

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good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. In reply of the above, Ld. Sr. D.R stated that there is no good reason adduced by the assessee for admission of additional ground. 4. We find from the above arguments and facts of the case that the facts relating to transfer of asset ar .....

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a Ghasi Khan was occupying one Flat 9/B, 3rd Floor, in Ann Ville as a tenant. On 16/04/2008, he entered into an agreement with the owners of the Flat by giving up the tenancy rights and by paying a sum of ₹ 33,798/-, he became the owner of the flat. The relevant agreement is enclosed at pages 18 to 77 of assessee s paper book. Subsequently, on 29/4/2008 assessee s father executed a gift deed, gifting this flat to assessee and this Gift Deed was registered on 30/04/2008. The copy of Gift De .....

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al cost noted that the assessee has not disclosed any income under the head capital gains nor furnished any computation of claim of deduction under section 54 of the Act. This information for sale of property was received by the AO through AIR information. The AO noted the fact that the agreement for purchase of the flat was entered into by assessee s father on 16/04/2008 for a sum of ₹ 33,798/- and this was gifted to the assessee by his father on 29/4/2008. This flat was sold by assessee .....

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lying provisions of section 50C of the Act, as under:- Full value of consideration for the purpose of Section 48 as the value adopted by the stamp Duty authority 1,15,87,600/- Less: Cost of acquisition of property by Previous owner 33,798/- Add: Stamp duty 30,700/- 64,498/- Total short term capital gain 1,15,23,102/- 4.10 Since the assessee has completely failed to disclose the transaction regarding sale of property in the return of income and computation of income and is found to have incorrect .....

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Officer for assessing this sale consideration as short term capital gain but partly allowed the claim of the assessee by taking stamp valuation of this property under section 50C of the Act at ₹ 81,11,00,500/- instead of value taken by Assessing Officer at ₹ 1,15,87,600/-. Aggrieved against the action of the CIT (Appeals) confirming the Assessing Officer s order, assessee filed second appeal before the Tribunal. 6. We have heard the rival contentions and gone through the facts and c .....

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consideration recorded in the Sale Deed). The stamp valuation as per circle rates as valued by Sub-Registrar was at ₹ 1,15,87,600/-. Subsequently, during appellate proceedings before CIT (A), the assessee produced a corrected market value by Sub-Registrar as per circle rate at ₹ 81,11,500/- in place of original value at ₹ 1,15,87,600/-. According to AO, this property was sold by the assessee within thirty two months which is less than thirty six months, the capital gain earned .....

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g to AO this is a short term capital gain and cannot be allowed deduction u/s 54 of the Act. Finally, the CIT (A) also held the transaction as short term capital gain and did not allow deduction u/s 54 of the Act. However, the CIT (A) reduced the fair market value of the property sold by the assessee, as corrected by the Sub- Registrar by adopting circle rates, at ₹ 81,11,500/-. Now, the assessee before us claimed by way of additional ground that as per agreement for sale dated 07-01-2011 .....

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lows:- (b) The vacant and peaceful possession of the said Flat will be given by the Vendor to the Purchaser in the next 10/30 days because the vendor is himself shifting to another flat where he is to get possession in the next 10/30 days . The learned Counsel for the assessee also referred to the factum of possession given on 14-05-2011 to the purchaser by the assessee. The relevant possession letter in continuation to the agreement dated 06-01-2011 (copy of which is enclosed in assessee s pape .....

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kh and Mrs. Shehnaz Sultan Mohmed Sadiq Saiyed W/o Mr. Mohmed Sadiq Muhamed Safi Saiyed. The above mentioned property was sold to the purchasers by the seller and agreement registered with the sub-registrar on 07/01/2011 vide BDR-1/257/2011. The seller has not paid any remuneration in any form to the purchasers for the period from 07/01/2011 to 14/05/2011. Till today the seller was responsible for all the Govt. taxes, repair costs, electricity bills etc. From today onwards i.e. 14/05/2011, the p .....

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s, documents etc. which he can claim later. This factum of handing over possession by assessee to the purchaser was before the AO and before the CIT (A) also. There is discussion in the assessment order qua this fact. Now, the question arises whether the handing over of the possession of the property is vital to decide the transfer in term of the provision of Section 2(47) of the Act so as to decide whether the property is held as long term asset or short term asset. 7. This issue, whether the p .....

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tax can be levied only in the year when the transfer of immovable property takes place. If the AO is of the firm view that the transfer had taken place on 16.03.2005, for capital gains tax purpose, then it is mandatory to bring to tax, the said income, in A.Y. 2005-06 in which event he ought to have excluded the income offered to tax in A.Y. 2006-07, having observed that reckoned from the date of transfer the assessee has not invested, within six months, the sale proceeds in the long term specif .....

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levant previous year and in order to come to the conclusion that the transfer has taken place within section 2(47)(v) of Income Tax Act r.w.s. 53A of Transfer of Property Act twin conditions have to be satisfied, i.e. execution of the agreement and handing over of possession. It is not necessary that both conditions should be satisfied in one year but at the same time only upon satisfying the second condition also it would amount to transfer. In this case also there is no dispute that the agreem .....

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s with respect to A.Y. 2005-06 till date the impugned income would escape taxability even in A.Y. 2005-06 and it would really be prejudicial to the interest of the Revenue. Under this peculiar circumstance we have to rationally interpret the findings of the AO as well as the CIT(A) in the backdrop of the clauses in the agreement. As rightly pointed out by the learned counsel for the assessee, the Hon'ble Bombay High Court in the case of Chatrubhuj Dwarkadas Kapadia (supra) has decided the is .....

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and based on this factual premise it has to be held that the transfer had taken place in the previous year relevant to A.Y. 2006-07. Reckoned from the date of possession, i.e., 20.09.2005, the assessee having invested the money within six months in long term specified asset, the benefit of exemption under section 54EC deserves to be extended to the assessee in the instant case. In substance, we hold that the assessee is entitled to exemption under section 54EC of the Act in the year under consi .....

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e premises even in the financial year 1996-97. A copy of possession letter dt. 10th April, 1998, at pp. 57 of the paper book, shows that the possession was handed over to the developer on 10th April 1998. In any event, in terms of Clause 9 of the development agreement, the possession was to be delivered only after the complete payment was made. Admittedly, this condition was not complied with till the end of the relevant previous year. In these circumstances, when only a small portion of sale co .....

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ant for the purpose of deciding the year of chargeability of capital gains. Therefore, on the facts of the present case, the date of development agreement would not really be relevant to decide the year of chargeability. 13. For the reasons set out above, we are unable to uphold the objections so strenuously argued by the learned Departmental Representative. Even as we do so, we make it clear that whether or not complete control or right to control over the property has passed to developer in th .....

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