Case Law Details
Brief about the case
In the case of Asstt. Commissioner of Income Tax Vs Late Gopal V. Gorwani, the following issues were taken up by the ITAT Mumbai.
ISSUE 1: Whether Flats to be constructed by the vendee on behalf of the co–owners is the non–monetary consideration received by them on account of sale of the property?
On the basis of a survey conducted in the business premises of Gorwani Builders, a partnership firm where the assessee was a partner, assessment of the assessee for the impugned assessment year was re–opened under section 147. During the re–assessment proceedings, the Assessing Officer found that in the relevant previous year, the assessee along with his brother Shri Srichand Gorwani, who were the joint owners of a property named “Gorwarni House” sold it to Queen’s Villa Developers Pvt. Ltd. through a deed of conveyance dated 25th January 2005 for a recorded sale consideration of Rs. 8.15 crore. On a perusal of the deed of conveyance, it was noticed by the Assessing Officer that as per the arrangement made with the vendee, two residential flats in 9th and 10th floor are to be constructed by the vendee for the vendors. The terms of the deed further provided that amount of Rs. 15 lakh each towards the cost of construction of each land is to be adjusted from the sale consideration of Rs. 8.15 crore. The Assessing Officer, on perusing the aforesaid terms of the agreement was of the view that flats to be constructed by the vendee on behalf of the co–owners is the non–monetary consideration received by them on account of sale of the property. He, therefore, quantified non–monetary consideration on pro–rata basis for each flat at Rs. 93,50,000 and treated it as part of sale consideration and computed long term capital gain accordingly. Being aggrieved by the addition of Rs. 93,50,000 to the sale consideration, the assessee challenged the same in an appeal preferred before the learned Commissioner (Appeals).
Thus, it was held by the learned Commissioner (Appeals) that since one cannot sell to self, non–monetary consideration considered by the Assessing Officer is erroneous. Therefore the CIT (A) decided in favour of the assessee. Being aggrieved, Revenue knocked the door of Mumbai ITAT.
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