DCIT Vs Deepak Shashi Bhusan Roy (ITAT Mumbai)
The coordinate bench of Tribunal in Anita D. Kanjani (supra) held that in order to determine the nature of asset income of section 2(42A), holding period is to be computed from date of issue of allotment letter and not from the date when agreement to sell was registered. The Hon’ble Karnataka High Court in case of CIT Vs A. Suresh Rao (supra) held that it is not necessary; the assessee should be the owner of the asset, with a registered deed of conveyance confirming the title on him. In the light of expanded definition is contained in section 2(47) even when a sale, exchange, or relinquishment or extinguishment of any right, under a transaction the assessee is put in possession of an immovable property or retained the same in part performance of contract under section 53A of Transfer of Property Act, it amounts to transfer. No registered deed of sale is required to constitute a transfer. Further, Hon’ble Delhi High Court in CIT Vs K Ramakrishanan 48 taxmann.com 55 (Delhi) held that in order to determine taxability of capital gain arising from the sale of property, it is the date of allotment of property which is relevant for the purpose of computing holding period and not the date of registration of conveyance deed.
FULL TEXT OF THE ITAT JUDGMENT
1. These cross appeals are directed against the order of Ld. Commissioner
of Income-tax (Appeals)-12 [Ld. CIT(A)], Mumbai dated 24.02.2016 in the assessment order passed under section 143(3) of the Act on 27.03.2014 for Assessment Year 2011-12. The Revenue has raised the following grounds of appeal:
(1) (a) On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding property at Arlington in USA cannot be treated as self occupied property as the said property is occupied by the daughter of the assessee.
(1) (b) On the facts and in this circumstances of the case and in law, the learned Commissioner(Appeals) failed to appreciate that the assessee had exercise his option under section 23(4)(a) and treated his property at Arlington USA as self occupied and the said option could not be changed in the course of assessment proceeding.
2 (a). On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in holding that the assessee had acquired the right in the property at Gurgaon on 19.03.2007 and period of holding on the right in the property has started from 19.03. 2007 to 10.09.2010 which is more than 36 months and, hence, the right in the property is a long-term right and so the capital gain arisen is also long-term capital gain.
(2) (b). On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals)erred in only relying on the letter dated the 19.03.2007 and ignoring the buyers agreement dated 07.11.2007 whereby the assessee was vested with the right in the property at Gurgaon and hence the period from 07.11.2007 to 31.05.2010, when the property was sold by the assessee was less than 36 month, and hence, the assessing officer had rightly taxed the gain on sale of the property at short-term capital gain.
(3) The appellant prays that the order of Commissioner (Appeals) be set aside and the order of assessing officer be restored.
2. The assessee in its cross appeal has raised following grounds of appeal:
(i) The ld. Commissioner (Appeals) erred in not giving the direction to assessing officer to the house property Mumbai as self occupied house property, even though the appellant had during the course of assessment proceeding opted under section 23(4) to treat the said house property in Mumbai as self occupied.
(ii) Having treated the appellant’s house in Arlington USA as deemed and let out the ld. Commissioner (Appeals) erred in rejecting the claim of assessee to treat the house property in Mumbai (in which he actually resides) as self occupied.
(iii) The ld. Commissioner (Appeals) erred in confirming the gross annual value of house property at Mumbai on ad hoc basis of Rs. 74,31,073/-instead of taking house property at Mumbai as self occupied property and taking it’s annual value in its nil.
(iv) The ld. Commissioner (Appeals) erred in confirming the charging of interest under section 234B and 234C of income tax Act.
3. The brief facts of the case are that assessee is Executive Vice Chairman and Chief Executive Officer of Allied Blenders & Distillery Private Limited, Director of De Vin Private Limited and Director of Henkell & Company India Pvt Ltd, deriving his income from ‘Salary’, income from ‘House property’, income from ‘Capital Gain’ and from ‘Other Sources’. The assessee filed his return of income for relevant assessment year on 23 July 2011 declaring taxable income of Rs. 3,30,85,591/-. Return on income was selected for scrutiny and the assessment order was passed on 27th March 2014 under section 143(3). The assessing officer while passing assessment order made addition of Rs. 51,98,928/-on account of annual letting value (ALV) of property at Flat No.11, Rambha Co-operative Group Housing Society, at Nepean Sea Road, Mumbai against the income declared from house property of Rs. 2,797/-. The assessing officer also denied long-term capital loss of Rs. 1,28,94,076/- by treating the same as short-term capital gain at Rs. 80,00,000/-, on his observation that holding period of the asset/ capital right is less than 36 months. On appeal before Commissioner (Appeals) the assessee was allowed long-term capital loss on transfer of asset, however, the action of assessing officer in determining the gross annual value of self occupied property at Mumbai was confirmed. Therefore, aggrieved by the order of Commissioner (Appeals) both the parties have filed their cross appeal raising the grounds of appeal as referred above.
4. We have heard the submission of ld. Representative of the parties and gone through the orders of authorities below. The grounds of appeal raised by assessee and the ground of appeal raised by revenue in its Ground No. (1)(a) & 1(b) are interconnected; therefore, all these grounds are taken together for discussion. The ld Authorised Representative (AR) of the assessee submits that during the year the assessee has two house properties, one at 888 N, Quincy Street, Unit No.1311, Arlington VA 22203, ph 2, Liberty Centre Condo in USA, which is a jointly owned property along with his wife, and other property at Flat No.11, Rambha Co-operative Group Housing Society, at Nepean Sea Road, Mumbai. Both the properties were not to let out during the year. The assessee being resident of India in the current year resided in Mumbai property and travel to USA from time to time. The assessee’s daughter is occupying the USA house. In the return of income the assessee treated the house in USA as self occupied and offered the income from house property as a deemed flat-out in respect of Mumbai property, as he felt that offering the income from house property of Mumbai house would be more beneficial to him. Based on the Municipal rateable value the assessee offered a sum of Rs. 2,797/-as income from house property. The assessee has furnished the computation of income of house property to the assessing officer, copy of which is filed before Tribunal vide page No. 4 of paper book. The assessee has also placed on record the bills related to Municipal taxes at page No. 7 to 10 paper book and the Municipal Corporation Bombay’s bills for the society are also placed on record. The evidences related with the property in USA are also placed on record. The house property in USA was purchased during the assessment year 2010-11 and was shown its self occupied in that period. As there was no scrutiny assessment for assessment year 2010-11. In subsequent year the assessee has revised the return of income and has shown the Mumbai property as self acquired property and has offered the property and USA as let out. The assessee before the assessing officer objected for adoption of fair rental value of similar property in the area as annual letting value (ALV) without any evidence on basis and without prejudice submitted that annual letting value of flat in USA may be taken as deemed to be let out. The assessee also furnished to the assessing officer his calculation regarding the USA property. The assessing officer on the basis of sale consideration of Mumbai property determined the annual letting value of this property at Rs. 6,19,253/-per month on a totally unscientific, arbitrary and on excessive basis. The ld. Commissioner (Appeals) during the First appellate stage held that USA property is occupied by his daughter, therefore it cannot be considered as self occupied and needed to be taxed.
5. The assessing officer/ revenue have also filed his appeal against the treatment of USA properties. The ld. AR of the assessee submits that the assessee should have an option of choosing as deemed to be let out the house property which is more beneficial to him for the purpose of offering income from house property and that assessee should be allowed to changes ‘self occupied property’ to deemed let out property, especially where the assessing officer change the method of computation of annual letting value. The option exercise in the course of assessment proceeding may be directed to be accepted by the assessing officer. In support of his submission the ld. AR of the assessee relied upon the decision of Tribunal in Venkatavarthan N Iyanger Versus ACIT in ITA No. 5616/M/2015 dated 23 May 2018, Asha Bhosle Vs ITO in ITA No. 2552 /M/2010 dated 21 September 2011. In alternative submission the ld. AR submits that municipal rateable value may be accepted as one bonafide rentable value of the property in absence of any other information brought on record by the assessing officer. In support of his submission the ld. AR of the assessee relied upon the decision of Bombay High Court in case of CIT Vs Tip Top Typography 368 ITR 330(Bombay). The ld AR for assessee again submits that the decision of jurisdictional High Court is a binding precedent, however the assessing officer relied on the decision of Ahmedabad Tribunal in Emtici Engineering Ltd Vs ACIT (58 TTJ 27) (Ahd Tri) therefore, the assessing officer is erred in estimating 8% of the total investment is rental income, especially in the city like Mumbai where the capital outlay in purchases of property yield very lower rental income compared to the total investment in the property. The ld AR further submits that reliance on the decision of Gujarat High Court in Jashvidhyaben C Mehta versus CIT (172 ITR 680)(Gujarat) by ld CIT(A) is misplaced. In that case the actual occupant in the property was cousin of the assessee and her family, however, in the case in hand the assessee had retained the house for his own occupation but permitted his own daughter to reside therein.
6. On the other hand the ld. DR for the revenue supported the order of assessing officer. The assessee himself offered the Mumbai Flat for deemed income.
7. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. During the assessment the assessee has declared the income from house property of Mumbai flat at Rs.2797/- as deemed let out. The assessee was asked to justify the income offered by the assessee and the fair rental value of the similar property in the same area. The assessee furnished various details, including the cost of acquisition, rateable value of flat and the other property. The contention of the assessee was not accepted by assessing officer. The assessing officer on the basis of purchased cost estimated the annual letting value (ALV) of Mumbai flat and allowing 30% deduction determined the taxable income at Rs. 51,98,928/-. The contention of the assessee before the assessing officer to treat the USA property for adopting deemed let out was rejected. The ld. Commissioner (Appeals) also held that the USA property is occupied by the daughter of the assessee and cannot be considered as self occupied property. The ld Commissioner (Appeals) instead of considering the substitution of property for the purpose of computing income from house property and holding the USA property is nor self occupied confirmed the action of assessing officer. In our view the ld Commissioner (Appeals) once arrived at a conclusion that the USA property is not self occupied should have considered it for deemed value of consideration for the purpose of computing income from house property.
8. The coordinate bench of Mumbai Tribunal in Venkatavarthan N Iyengar Vs ACIT (supra) considering the grounds of appeal realted to the substitution of property for the purpose of self occupied and deemed let out held as under:
“8. The last issue relates to substitution of Self occupied property for the purpose of sec. 23 of the Act. The assessee was owning three house properties, viz., house located at Juhu, Santacruz (E) and Vasai. The assessee declared notional rental income from Santacruz property. In the return of income, the assessee declared Vasai property as self occupied property. However, before the AO, the assessee sought to substitute Juhu Property as self occupied property. The AO took the view that the change of self occupied property is not permissible at that stage and accordingly rejected the same. The Ld CIT(A) also confirmed the same.
