Case Law Details
Tushin T. Mehta Vs CCIT (Madras High Court)
The writ petitioner’s father late Mr. Tushaar Mehta voluntarily filed his return of income for the assessment year 1996-97 on 28.03.1997 admitting the total income of Rs.11,06,129/-. The assessee had claimed long term capital gains of Rs.3,26,813/- on sale of property made during that year. The property in question was a leasehold property registered in his name. He had entered into a transaction with Mrs.Utility Builders for construction of multi storied structure. An agreement was executed on 06.03.1992. However, the lease deed was registered only on 21.04.1994. The claim of the assessee was that even though the registration was done later, he had taken possession of the land on 06.03.1992 itself, the date when he entered into builders agreement with Mrs.Utility Builders. The property was sold to Mrs.Shriram Asset Management Company Limited by sale deed dated 14.08.1995 for a sum of Rs.11,25,000/-. The consideration mentioned in the builders agreement was Rs.5,20,000/-. Thus, there has been a capital gain of Rs.6,05,000/-.
2.The question that arose was whether it should be treated as short term capital gains or long term capital gains. According to the assessee, he took possession of the land on 06.03.1992 itself. The sale in favour of Shriram Asset Management Company Limited was on 14.08.1995. Thus, the period of holding the asset was more than three years. But, this stand of the assessee was not accepted by the assessing officer. The assessing officer took the view that the construction was done by the builders on behalf of the assessee. There was no purchase of building. The purchase was only in respect of undivided leasehold interest in the land. The interest in the land was assigned by deed that was executed on 20.01.1994 and registered only on 02.03.1994. According to the assessing authority the legal right to use of the property came only on 20.01.1994 with assignment of leasehold interest in the land and not on 06.03.1992. After so reasoning out, the assessment was completed under Section 143(3) of the Income Tax Act, 1961, on 29.10.1998 by treating the capital gains of Rs.6,05,000/- as short term capital gains. The claim of the assessee that it was a long term capital gains was rejected. The assessing officer determined the total income at Rs.17,30,930/- for the said assessment year and demanded a sum of Rs. 5,46,742/- as the total net tax payable. The assessing officer charged interest under Section 234 A of the Act at Rs.45,108/- and under Section 234 B at Rs.1,73,766/- and under Section 234 C at Rs.5,640/-.
3. It is not in dispute that the entire tax as demanded by the assessing officer was paid. The writ petitioner’s father thereafter filed a waiver petition under Section 119(2) (a) of the Income Tax Act on 18.08.2000 for waiver of the interest charged under the aforesaid provisions. The stand taken in the said waiver petition was that on 06.03.1992 he purchased an immovable property at Royapettah High Road for Rs.5,20,000/- vide builders agreement dated 06.03.1992 and that the same was sold vide sale deed dated 14.08.1995 for a sum of Rs.11,25,000/-. Since he was under the bonafide belief that the capital gains yielded by the aforesaid transaction would amount to long term capital gains, he filed his return of income on that basis.
4.The writ petitioner’s father invoked the Circular issued by the Central Board of Direct Taxes in F.No. 400/234/95-IT(B) on 23.05.1996 which provided for waiver of interest under certain circumstances. He pointed out that the filing of return was voluntary without detection by the Income Tax Department. However, by order dated 22.10.2002, the waiver petition was rejected. Challenging the same, the petitioner’s father filed WP No.7940 of 2003. By order dated 22.04.2003, the High Court set aside the rejection order on the ground that proper reasons have not been assigned and that the order was rather laconic. The matter was remitted to the file of the authority with a direction to reconsider the matter and dispose of the application afresh after giving an opportunity of hearing to the assessee. After hearing the assessee, the assessing officer once again rejected the waiver petition and confirmed the levy of interest under the aforesaid provisions. The assessee died in September, 2005 and his son continued the battle and that is how this writ petition came to be filed.
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