TMI Blog2008 (1) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... R does not increase the physical area of the land on which Jackers stands. The right to extend construction accrues from the date of purchase of this asset and not from the time the land has been held." 3. Since facts relating to all appeals are similar, the facts relating to the appeal in the case of Farouk Dinshaw Vevaina are being narrated for the sake of convenience. The brief facts, as gathered from the assessment order, are these. All the asses sees belong to a Parsi family known as 'Vevaina Family' which originally consisted of two brothers Dinshaw Cooverji Vevaina and Rustom Cooverji Vevaina. These two were the beneficial owners of property in the nature of a bungalow located at 113, Carter Road, Bandra (West), Mumbai 50. The brothers (Dinshaw and Rustom) had the right to 50 per cent share each in the property. These brothers passed away and the said property devolved on the following legal heirs: The legal heirs of the late Dinshaw Vevaina are: (a) Mrs. Homai Dinshaw Vevaina (wife) (b) Mr. Farouk Dinshaw Vevaina (son and the assessee) (c) Mr. Sohrab Dinshaw Vevaina'(son) (d) Mrs. Tinaz Sohrab Vevaina (daughter-in-law) The legal heirs of the late Rustom Vevain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% of floors 1st, Vevaina 7th and 13th. -------------------------------------------------------------- (6) Mr. Feroze Rustom Vevaina 1/16 25% of 8th floor and 50% of 7th floor. -------------------------------------------------------------- (7) Mrs. Mahrouk Feroze 1/16 75% of the 8th floor. Vevaina -------------------------------------------------------------- (8) Mr. Jamshed Rustom 1/8 Basement, bungalow Vevaina and 50% of 1st floor. -------------------------------------------------------------- (9) Mr. Cyrus Rustom Vevaina 1/8 50% of 13th floor and 100% of 14th floor. -------------------------------------------------------------- For the purpose of constructing the building, the legal heirs approached the HDFC for finance and the same was granted to them. With a view to repay this outstanding liability the legal heirs entered into agreements to sell the following flats located in 'Jackers': (i) Flat No. 601 admeasuring 2250 sq. ft. carpet area for a sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 lakhs from the sale proceeds of the superstructure of Rs. 1.06 crores. The short-term capital gain of Rs. 19 lakhs was apportioned amongst the co-owners and the same was offered for taxation. 5. However, the AO was not satisfied with the working of the assessees for the reasons given at pp. 10 to 12 of the assessment order. The AO reworked out the long-term capital gain as well as the short-term capital gain. It would be appropriate to give the working of the AO which is given in para 4(f) of his order which is being reproduced as under: "4(f). The assessee has valued the sale consideration pertaining to land married to the flats sold at Rs. 4.72 crores and the sale consideration pertaining to the two flats at Rs. 1.06 crores. Vide letter dt. 6th Jan., 2003 filed during assessment proceedings for asst. yr. 2001-02, in the case of Shri Jamshed R. Vevaina, one of the co-owners, the assessee has submitted the method of working out the capital gain. The capital gain according to the assessee is reworked as under: (i) The assessee has submitted a copy of the valuation report of Dr. Roshan Namavati, registered estate valuer dt. 27th April, 2001 along with the return of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the flats itself) = (5,78,00,000 x 25,13,018) / (25,13,018 + 84,36,000) = (14,52,52,44,04,00,000 / 1,09,49,018) = Rs. 1,32,66,253 (x) The sale consideration of the flats itself is therefore Rs. 4,45,33,745 (5,78,00,000 - 1,32,66,253) (xi) The assessee has claimed a sum of Rs. 11,00,000 towards brokerage paid on sale of the flats. During the assessment proceedings in the case of Shri Cyrus R. Vevaina, one of the co-owners, vide letter dt. 19th Oct., 2003, a confirmation of Shri R.S. Sethna, proprietor, M/s R.L. Contractors has been filed. Shri Sethna has also confirmed that brokerage was received @ 2 per cent of the sale value of the flats sold. In view of the above facts, the assessee is allowed deduction to the tune of Rs. 11,56,000 (5.78 crores x 2 per cent). The same is allocated to the sale of land married to the flat and the sale of the flat itself @ 2 per cent of the sale consideration of the two assets as worked out hereinabove. Brokerage on sale of land therefore comes to Rs. 2,65,325 (2 per cent of Rs. 1,32,66,253) and the brokerage allocable to the sale of the flats itself is Rs. 8,90,675 (2 per cent of Rs. 4,45,33,747). (xii) Long-term capital gain accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the location of land which commands great value in the city like Mumbai. The land in posh areas like Malabar Hill, Nepean Sea Road, Bandra Carter Road, commands much more value in comparison to land at Byculla, Parel, Antop Hill, etc. Thus, it is the potential of land which commands more value and naturally sale proceeds attributable to land have to be much more in comparison to the sale proceeds attributable to the superstructure. (b) If AO's working with reference to land component is adopted then it gives totally wrong figure of the profit on construction of superstructure, in the sense on construction cost of Rs. 0.85 crores profit comes to Rs. 3.52 crores which is totally absurd; (c) Moreover, after acquiring transfer of development rights (TDR), considering FSI of 10 per cent of balconies, and staircase, etc., free of FSI, the building has been constructed. This is the potential of land or benefits fastened to the land and hence the value relating to land component has to be much more than that related to the superstructure component; and (d) The appellant has followed Dr. Namavati's report for the purpose of calculating the sale proceeds of land component which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the figures, but the rule of proportion adopted by the AO is inconsistent and does not take into account similar comparison. Thus, I find that the appellant's method of calculating sale proceeds attributable to land component which is based on a scientific method, as per Government approved valuer Dr. Namavati's report is correct. The same is also justified by the fact that it gives fair profit of 22 per cent on construction component. If the AO's determination of sale proceeds of land is accepted, then sale proceeds attributable to superstructure comes to Rs. 4.45 crores and after deducting cost of construction of Rs. 0.85 crores and after deducting brokerage it results in a short-term capital gain of Rs. 3.52 crores. As rightly pointed out by the learned Authorised Representatives, huge profit of Rs. 3.52. crores on construction cost of Rs. 0.85 crores is an absurdity. Because of these reasons, I hold that the determination of sale proceeds attributable to land component at Rs. 4.72 crores as done by the appellant is correct since the same is based on Government approved valuer's report. I also hold that the long-term capital gains arrived at Rs. 3.96 crores by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. The AO took into consideration the FMV as on 1st April, 1981 as per the approved valuer's report for determining the FMV of land on the date of sale which has been not accepted by the CIT(A). The CIT(A) has held that it is the FMV on date of sale which should be taken into consideration while apportioning the sale price between the value of land and value of superstructure. This finding has not been challenged before us in the ground raised by the Revenue. Accordingly, the finding given by the CIT(A) has become final. The ground raised before us, being misconceived, is dismissed. The orders of the CIT(A) are therefore, upheld on this issue. 9. The next issue common to all the appeals of the Revenue relates to the exemption under s. 54F of the Act. The common ground raised by the Revenue reads as under: "On the facts of the case and in law the CIT(A) has erred in holding that the assessee is eligible for relief under s. 54F of the Act without appreciating that the assessee has violated the conditions envisaged in the first proviso to s. 54F(1) of the Act rendering himself ineligible for any relief under the section." In the cross-objections. the assessees have also raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t least to one unit. Reliance was placed on certain decisions which are mentioned at p. 14 of the appellate order. Similar contention was raised on behalf of other assessees. 12. After going through the decisions cited by the assessee, the CIT(A) found the same to be distinguishable on facts for the reasons given by him in para 6.6 of the order. The contention of the assessee that all the three units constituted one residential house was not accepted by the CIT(A). However, he was of the view that the assessee was entitled to exemption with reference to investment in at least one unit inasmuch as the assessee had not purchased or constructed any other residential house other than the property in the building 'Jackers'. It was therefore, held that exemption under s. 54F should be allowed with reference to investment in the construction of anyone residential house as per the choice of the assessee. Aggrieved by the same, the Revenue has preferred these appeals before the Tribunal on the ground that the exemption could not be allowed in view of the proviso to s. 54F(1). On the other hand, the cross-objections have been filed by the assessees contending that exemption should be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was the owner of two flats i.e., flats on 2nd and 3rd floors on the date of the transfer of the flat in dispute. The contention of the assessee's counsel that all the three units constituted one property and therefore, the provisions of, the proviso to s. 54F(1) were not applicable cannot be accepted for the reason that the legislature has specifically used the expression "owns more than one residential house". Though the word 'property' may include more than one house as contended by the learned counsel for the assessee but we are not concerned with the word 'property' since it is not used in the proviso to s. 54F(1). While interpreting the provisions of a statute, the Courts are to look into the language used by the legislature. In the proviso to s. 54F(1). the legislature has denied exemption in those cases where the assessee owns more than one residential house. Therefore, where the assessee owns more than one house on the date of transfer of asset then he shall not be entitled to exemption under s. 54F. Admittedly, the assessee (Farouk D. Vevaina) had more than one residential house on the date of sale of the original asset i.e., flats at 2nd and 3rd floors in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground that all the flats allotted in the new building were in lieu of his 1/6th share in the old property and therefore, all the flats allotted to him constituted one property which was used for self-residence. However, the AO, considering the provisions of s. 23(2)(b) of the Act, was of the view that the assessee was entitled to compute the ALV at nil in respect of one residential house only. Similar view was taken in other cases. However, on appeal, the CIT(A) accepted the stand of the assessee and consequently, the assessee was held to be entitled to compute the ALV at nil in respect of all the flats allotted to them. Aggrieved by the same, the Revenue is in appeal before the Tribunal in all these cases. 19. The learned Departmental Representative, on behalf of the Revenue, has relied on the provisions of s. 23(2)(b) of the Act, while the learned counsel for the assessee has reiterated his contention to the effect that all the flats allotted to the asses sees constituted one property in lieu of their shares in the old property and therefore, the asses sees were entitled to compute the ALV at nil under s. 23(2)(a). 20. Rival submissions of the parties have been conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to the provisions of s. 23(2) of the Act and therefore, the legal finding recorded by the CIT(A) is hereby vacated. Secondly, it is held that the assessee would be entitled to compute ALV in respect of one residential house only. The ground raised by the Revenue is therefore, allowed. 21. Before parting with this issue, we would like to mention that the AO had allowed the assessees to exercise the option under s. 23(2) of the Act to compute the ALV at nil in respect of one residential house. In respect of the remaining house or houses, the AO had computed the ALV which had been disputed before the CIT(A). Since the CIT(A) held that all the houses owned by the assessees could be treated as one property, he did not adjudicate upon the computation of ALV made by the AO which was challenged by the before him. Since it has been held by us that the asses sees are entitled to compute ALV at nil only in respect of one residential house occupied by him for his self-residence, the issue regarding computation of ALV in respect of the other houses remains to be adjudicated. Therefore, the matter is remitted to the file of the CIT(A) with the direction to adjudicate the computation of AL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that if the property is subject-matter of Rent Control Legislation then it is the standard rent which should be adopted as ALV. Secondly, it has been held that municipal rateable value is not conclusive. It may or may not be acceptable considering the factual matrix. It has also been held that if the property is not subject-matter of Rent Control Legislation then the ALV shall be computed on the basis of fair market rent. Accordingly, the matter is remitted to the file of the AO for recomputing the ALV in accordance with the guidelines given by the Tribunal in the case of Makrupa Chemicals (P) Ltd. 25. The next and the last issue relates to whether non-occupancy charges paid by the assessee to the society constitute a valid deduction from the ALV. This issue arises only in the case of Cyrus R. Vevaina. This issue is now covered by the decision of the Tribunal reported as Sharmila Tagore vs. Jt. CIT (2005) 93 TTJ (Mumbai) 483 as well as Realty Finance Leasing (P) Ltd. vs. ITO (2006) 5 SOT 348 (Mumbai) wherein it has been held that non-occupancy charges will have to be deducted in computing the ALV on the principle of overriding title. Following the same, this issue is decided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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