Case Law Details
ITAT has held that right to receive a property is a valuable and a transferable right and falls within the ambit of “capital asset” and hence profit earned on sale of allotment right (without physical possession of the property) is taxable as Capital Gains and not as Income from other sources.
Full Text of the ITAT Order is as follows:-
This appeal of the assessee arises from the order of learned CIT(A)- XIX, New Delhi, vide order dated 21.06.2016 for the assessment year 2010-11.
2. The assessee has raised as many as eleven grounds of appeal. As a matter of fact the learned counsel for the assessee, Ms. Ananya Kapoor, Adv. press only ground nos. 3, 4 and 5 which pertained to one issue only and the said grounds are reproduced herein below.
“3. That the CIT(A) has erred in law and on facts in holding that no cognizance can be taken of the claim made by the assessee that sale of property be treated as ital gain and indexation benefit should be allowed to the assessee. The action of the CIT (A) in rejecting the claim is illegal and bad in law.
4. That the CIT (A) has erred in law and on facts in holding that the assesssee did not acquire any capital asset and hence did not acquire any rights over the property.
5. The interpretation given by the CIT(A) is illegal, bad in law, contrary to the judgment and well settled principles of law. Moreover the CIT(A) has failed to examine the material on record in a judicious manner.”
3. The brief facts of the case are that the assessee had transferred the allotment right in respect of flat allotted to him. The possession of the flat was never taken by the assessee. The flat did not come into existence and the full cost of the flat was also not paid by the assessee. In view of the above facts, the benefit of indexation was not given. Moreover allotment of flat is not covered in the definition of capital asset.
4. Before the learned CIT(A), the assessee submitted additional evidences and the remand report was called from the AO. Learned CIT(A) confirmed the action of the AO after considering the submission of the assessee and the remand report.
5. I have heard the rival contentions and perused the facts of the case. As a matter of fact the assessee claimed the profit and sale of allotment right under the head “other sources” and during the course of the assessment proceedings same has claimed by way of computation as income under .the head “Long Term Capital Gains” which was rejected by both..the authOrities below. Learned counsel, Miss Ananya Kapoor argued that the claim made-before the AO during the course of assessment proceedings is well within the law and held by Hon’ble Jurisdictional High Court in the case of CIT vs. Sam Global Securities Ltd. in ITA No.214/2013 dated 2.9.2013. The said decision dated 2nd September, 2013 of Hon’ble Jurisdictional High Court is reproduced hereinbelow:
“Revenue in this appeal, which pertains to assessment year 2001-02, rely upon judgment of the Supreme Court in Goetze (India) Ltd Vs. CIT (2006) 284 ITR 323 (SC). The contention is that the respondent-assessee should be denied deduction under Section 10 (35)(a) of the Income Tax Act, 1961(Act) and claim of bussiness loss of Rs.85,18,854/- should be rejected as no revised return was filed under Section 139(5) of the Act.
2. It is an accepted position that the assessee had not claimed the said deduction or business loss in the return of income filed on 31st October, 2001, declaring taxable income of Rs.1,72,910/-. Subsequently, notice for scrutiny assessment under Section 143(2)(ii) was issued. During the course of the assessment proceedings, the respondent-assessee had filed revised computation of income vide letter dated 12th January, 2004, claiming that dividend of Rs. 80,48,977/- from the units of mutual fund was exempt under Section 10(33) of the Act and loss on sale of units amounting to Rs.85,18,583/- was a business loss and not speculative loss.
3. The claims were rejected by the Assessing Officer on three grounds that the respondent-assessee had not filed a revised return within the time allowed under Section 139(5) of the Act; dividend was received from Sun F&C Mutual Fund, which was not included in the specified list of mutual funds approved by SEBI; and as the assessee was dealing with shares, income/loss from shares/units was speculative loss and not business loss.
4. CIT (Appeals) dismissed the appeal of the assessee, but on remand the matter was restored to the first appellate authority. Thereupon, vide order dated 16th February, 2009, CIT (Appeals) held that Sun F&C Mutual Fund was duly approved mutual fund under Section I0(23D). He observed that dividend from the units of mutual and was exempt under Section 10 (35)(a). Similarly with regard to the loss, he observed that units of mutual funds were sold and not shares, and therefore, the adverse effect of Explanation to Section 73 was not applicable. Reliance was placed upon decision of the Supreme Court in Apollo Tyres Ltd. Vs. CIT, (2002) 255 ITR 283 (SC). Inspite of the said observations, the CIT (Appeals) did not allow the appeal on the ground that the assessee had not filed a revised return within the time allowed under Section 139(5) of the Act, but had only filed a revised
5. The tribunal has reversed the said findings after referring to the factual matrix. Reference was made to the decision of the Supreme Court in CIT Vs. Mr. P. Firm, (1965) 56 ITR 67 (SC) and Circular No. 114 XL-35 of 1955 issued by the Central Board of Direct Taxes on 11th April, 1955, that an officer must not take advantage of ignorance of the assessee as to his rights. Judgment of the Supreme Court in Goetze India Ltd. (supra) was distinguished on the ground that the said case was limited to the power of the assessing authority and did not impinge upon the power of the tribunal. The matter was remanded to the Assessing Officer to consider the case on merits and decide accordingly.
6. In Commissioner of Income Tax Vs. Jai Parabolic Springs Ltd., [2008] 306 ITR 42 (Delhi), a Division Bench of this Court made reference to the following passage from National Thermal Power Co. Ltd. Vs. CIT, [1998] 229 ITR 383 (SC):-
“The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of Commissioner of Income Tax (Appeals). Both the assesses as well as the department have right to file an appeal/crossobjections before Tribunal. We fail to see why the Tribunal should be prevented from considering questions of low arising in assessment proceedings although not raised earlier.”
7. Reference was also made to an earlier decision of the Supreme Court in Jute Corporation of India Ltd. Vs. CIT, [1991] 187 ITR 688 (SC), wherein it has been held as under:-
“An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justij) curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessed in seeking modification of the order of assessment passed by the Income Tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessed to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.”
8. Decision in the case of Goetze (India) l td. (supra) was distinguished in Jai Parabolic Springs Ltd. (supra) in the following words:-
“In Goetze (India) Ltd. V. CIT [2006] 284 ITR 323 (SC) wherein deduction claimed by way of a letter before the Assessing Officer, was disallowed on the ground that there was no provision under the Act to make amendment in the return without filing a revised return. Appeal to the Supreme Court, as the decision was upheld by the Tribunal and the High Court, was dismissed making clear that the decision was limited to the power of the assessing authority to entertain claim for deduction otherwise than by a revised return, and did not impinge on the power of the Tribunal.”
9. In CIT Vs. Natraj Stationery Products (F) Ltd., (2009) 312 ITR 222 reliance placed on Goetze (India) Ltd. (supra) by the Revenue was rejected, as the assessee had not made any „new claim” Put had asked for re-computation of deduction under Section 80-IB. The said decision may not. be squarely applicable but the Courts have taken a pragmatic view and not the technical view as what is required to be determined is the taxable income of the assessee in accordance with the law. In this sense, assessment proceedings are not adversarial in nature.
10. In Commissioner of Income Tax Vs. Rose Services Apartment Ind P. Ltd., [2010] 326 ITR 100 (Delhi) relying upon the decision of the Supreme Court in National Thermal Power Co. Ltd.(supra ), a Division Bench of this Court rejected the plea of the Revenue that the tribunal could not have entertained the plea, holding that the tribunal was empowered to deal with the issue and entitled to determine the claim of loss, if at all, under one section/Provision or other.
11. Decision in Goetze (India) Ltd. (supra) was relied upon by the Revenue in CIT vs. Jindal Saw Pipes Ltd., [2010] 328 ITR 338 (Delhi) but the contention was not accepted, observing that the tribunal”s jurisdiction is comprehensive and assimilates issues in the appeal from the order of the CIT (Appeals) and the tribunal has the discretion to allow a new ground to be raised.
12. In view of the aforesaid discussion, we are not inclined to interfere with order passed by the tribunal. The appeal is dismissed.”
5.1 In view of the facts and decision of Hon’ble Jurisdictional High Court in the case of Sam Global Securities Ltd. (supra), the claim made during the assessment proceedings is held to be valid and I find no defect in the same.
6. As regards the claim made for selling of the right, the question arises whether the right to receive in the flat is a property which comes in the ambit of capital asset or not has been scrutinized by the Hon’ble Bombay High Court in the case of CIT vs. Data Services Ltd. reported in 122 ITR 594 (Born.). The copy of the judgment of Hon’ble Bombay High Court in the said case is placed at paper book pages 8 to 13 and the relevant paragraph read by the learned counsel is reproduced hereinbelow:
“What is capital asset is defined in section 2(14) of the Income Tax Act, 1961. Under that provision, a capital asset means property of any kind held by assessee, whether or not connected with his business or profession. The sub-clauses which deal with what property is not included in the definition of capital asset are not relevant. Under section 2(47), a transfer in relation to a capital asset is defined as including the sale, exchange or relinquishment of the asset or the extinguishment of any right therein or the compulsory acquisition thereof under any law. The word ‘property’ used in section 2(14) of the Income Tax 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 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 vs. Kallor Illath Rahman Nambudhri. AIR 1917 Mad 358). Therefore, in our view, a right to obtain conveyance of immovable property, was clearly “property” as contemplated by section 2(14) of the Income Tax Act, 1961″
7. The said decision has been followed by Hon’ble Mumbai Bench of Tribunal in the case of ACIT vs. Hansaben M. Mehta reported in (2004) 90 ITD 44 (Mum). In view of the facts in the present case and the decision relied upon by the learned counsel for the assessee more than 90% of the payments made for the said property will tantamount to a right which is transferrable and will be termed as a capital asset. The total payment having been made for Rs.89,50,000/- whereas on transfer the assessee received Rs.1,19,32,000/- fetching about 30 lakhs profit which has been offered under the head “capital gains”. The findings of the learned CIT(A) cannot be approved in view of my findings hereinabove, and therefore, in the circumstances and facts of the case, ground no.3, 4 and 5 of the assessee are allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this day 19th April 2017
