Case Law Details
DCIT Vs Ramesh Madhavrao Bhujang (ITAT Mumbai)
It is undisputed fact that the assessee had acquired the right in the property pursuant to allotment letter dated 10/03/2008, a copy of which has been placed on page number-111 of the paper-book. The assessee has made the full payment of Rs.83.30 Lacs by 25/06/2008. The said fact is duly supported by the bank statements as placed on record from where the payments were made by the assessee. The above stated fact demonstrates that the assessee had acquired a identifiable right in a specific property and also made the full payment thereof by 25/06/2008. The registration of purchase documents, in such a case, was to convey the ownership rights to the assessee which already existed in assessee’s favor by way of allotment letter dated 10/03/2008. It is also undisputed fact that the same property has been sold by the assessee during impugned AY. This being the case, we have no hesitation in concurring with the stand of Ld. CIT(A), in this regard. 6. Another aspect of the case is that Ld. AO has added entire sale consideration in the hands of the assessee without deducting there-from the cost of acquisition, which is clearly erroneous. The computations as placed on record by Ld. AR reveal that if the cost of acquisition is allowed to the assessee, the tax effect of the impugned additions shall be below Rs.20 Lacs and the same is squarely covered by the recent low tax effect circular No. 03/2018 dated 11/07/2018 issued by the CBDT and keeping in view of the same, the appeal of the revenue is otherwise not maintainable.
FULL TEXT OF THE ITAT JUDGMENT
1. Aforesaid appeal by revenue for Assessment Year [AY] 2012-13 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-2, Thane [CIT(A)], Appeal No.80/15-16 dated 29/11/2016 by raising the following grounds of appeal:-
1. Whether on facts and circumstances of the case CIT(A) is correct in treating 26/06/2008 (date of full payment) as date of acquisition without appreciating the fact that the date to registered document, i.e. 30/09/2009 is the correct date of acquisition as per the provisions of the IT Act, 1961 and therefore by selling out the property (vide sale agreement dated 29/07/2011), the gain arises in the hands of assessee is in the nature of Short Term Capital Gain.
2. Whether on facts and circumstances of the case CIT(A) was correct in NOT relying upon the case of Gulshan Mlik Vs CIT [2014] 43 com200 (Delhi) wherein the facts and circumstances are similar to the case of assessee.
The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax-Circle-3, Thane [AO] u/s 143(3) on 27/02/2015 wherein the income of the assessee has been assessed at Rs.187.41 Lacs as against returned income of Rs.68.77 Lacs filed by the assessee on 30/07/2012.
2. The assessee being resident individual reflected income from salary, capital gain and other sources during the impugned AY. The only dispute under appeal is nature of capital gain by the assessee from sale of a flat situated at Sarvodaya Heights, Mulund. The aforesaid flat was sold for Rs.118.64 Lacs vide registered sale document dated 02/08/20 1 1. The said flat was purchased by the assessee from Nahur & Seth Enterprises vide allotment letter 10/03/2008, the rights of which were conveyed vide registered agreement dated 30/09/2009. The cost of the property was Rs.87.21 Lacs including registration & stamp duty of Rs.4.27 Lacs. The assessee reflected the consequential gain as Long Term Capital Gain since the duration of period as counted from date of allotment / final payment was more than three years. However, not convinced, Ld. AO opined that the aforesaid gain was in the nature of Short Term Capital Gain since holding period as counted from registered purchase document to sale document was less than three years. Accordingly, the aforesaid income was assessed as Short Term Capital Gain and the benefit of indexation was denied to the assessee.
3. Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 29/11/2016 wherein the matter was concluded in the following manner:-
6. I have carefully considered facts of the case, findings of the AO in the assessment order, submissions of the Ld. AR and material placed on record. From the facts of the case, It is noticed that during the year under appeal, the appellant had sold the right to acquire the flat No. 1202, in Sarvodaya Heights, Mulund vide agreement to sale dated 29.07.2011. Which was registered on 02.08.2011, for total consideration of Rs. 1,18,64,300/-. The said flat was booked with M/s Nahar & Seth Enterprise, by paying Rs. 11,00,000/- on 10.03.2008, for total consideration of Rs.83,30,000/-. The balance amounts of Rs.29,00,000/- on 28.03.2008. Rs.8,00,000/- on 25.06.2008 and Rs.35,30,000/- on 25.06.2008 were also paid. However, the purchase agreement dated 29.09.2009 was registered on 30.09.2009 due to his service/employment compulsion. The appellant accordingly treated the holding period of right in the flat for more than 3 years (10.03.2008/26.06.2008 to 02.08.2011), and determined the resultant LTC Loss at RS. 1,57,414/- against sale of the said flat after taking the benefit indexation of the cost of flat and declared the same in ROI.
6.1 The AO, however, did not accept the above dates i.e. 10.03.2008/26.06.2008 as date of purchase of flat, rather taken the date of registration of purchase agreement i.e.29.07.2009, as date of purchase and accordingly held that the right in the flat was held for period of less than 3 years (02.08.2011 to 29.07.2009), and accordingly determined the STCG (Short Term Capital Gain) at RS. 1, 18,,64,300/- without even deducting the cost of land with the plea that the right was held for period of less than 3 years. The AO further held that on the date of sale, the said building was under construction and assessee had not received the possession of the said flat, therefore, the appellant is not eligible for any indexation.
6.2 From the above facts it is seen hat the right in the flat was allotted on 10.03.2008 and entire payments of Rs. 83,30,000/- against purchase of said flat was made by 26.06.2008. On verification of the bank account of the appellant it is seen that entire amount of Rs.83,30,000/- was paid through banking channels and duly debited in the bank account of the appellant by 26.06.2008. Due to service compulsion, as stated above, the registration of the flat was done on 29.09.2009, by paying the due stamp duty, as applicable on the date of purchase. The right in the said flat was sold for Rs. 1,18,64,300/- on 02.09.2011. In view of these facts, it is seen that the appellant had held the rights in the said flat, for a period of more than 3 years (02.08.2010 to 10.03.2008/26.06.2008). Hence, the contention of the AO is incorrect to treat the said right as Short term asset. It is further noticed that the AO had not even allowed the set off of cost of flat i.e. Rs.83,30,000/- against sale consideration of Rs. 1,18,64,300/-, thereby wrongly assessed the entire sale consideration as STCG. Considering the facts in entirety, CBDT circular no. 471 dated 15.10.1986, various case laws, as relied by the Ld. AR, etc., in my considered view, the appellant had hold the right in the said flat for period of more than 3 years, therefore, the AO is hereby directed to allow the cost of land of Rs.83,30,000/- and determined the correct amount of resultant gain, as per provision of the Act. All the grounds of appeal are allowed, accordingly.
Aggrieved, the revenue is in further appeal before us.
4. The Ld. Authorized Representative [AR], Shri Raj Kumar Singh vehemently supported the stand taken by Ld. CIT(A) which has been controverted by Ld. Departmental Representative [DR], Ram Tiwari by supporting the stand of Ld. AO.
5. We have heard the rival contentions and perused the relevant material on record. It is undisputed fact that the assessee had acquired the right in the property pursuant to allotment letter dated 10/03/2008, a copy of which has been placed on page number-111 of the paper-book. The assessee has made the full payment of Rs.83.30 Lacs by 25/06/2008. The said fact is duly supported by the bank statements as placed on record from where the payments were made by the assessee. The above stated fact demonstrates that the assessee had acquired a identifiable right in a specific property and also made the full payment thereof by 25/06/2008. The registration of purchase documents, in such a case, was to convey the ownership rights to the assessee which already existed in assessee’s favor by way of allotment letter dated 10/03/2008. It is also undisputed fact that the same property has been sold by the assessee during impugned AY. This being the case, we have no hesitation in concurring with the stand of Ld. CIT(A), in this regard. 6. Another aspect of the case is that Ld. AO has added entire sale consideration in the hands of the assessee without deducting there-from the cost of acquisition, which is clearly erroneous. The computations as placed on record by Ld. AR reveal that if the cost of acquisition is allowed to the assessee, the tax effect of the impugned additions shall be below Rs.20 Lacs and the same is squarely covered by the recent low tax effect circular No. 03/2018 dated 11/07/2018 issued by the CBDT and keeping in view of the same, the appeal of the revenue is otherwise not maintainable.
7. On both counts, we concur with the stand of Ld. AR and therefore, confirm the stand of Ld. first appellate authority.
8. Resultantly, the revenue’s appeal stand dismissed.
Order pronounced in the open court on 20th July, 2018
for computing capital gains on residential property,date of registration is to be taken or the date of reviving full consideration