Dr. E.S. Krishnamoorthy Vs ITO (ITAT Chennai)
The facts with regard to ownership of property by three co-owners and their respective share in right and interest in the property is not in dispute. As admitted by the assessee himself, he owned 42.5% share in the property. The land owners have received two flats measuring 4092 sq.ft. each plus 2.25 Crs. non-refundable deposit from the developer in lieu of 50% UDS sold to the developer. From the above, what is clear is that three co-owners have specified share in the property and as a natural corollary, full value of consideration received as a result of transfer of property in pursuant to JDA should be considered in the hands of three co-owners according to their share in the property. Since, the assessee has 42.5% share in the property, the AO is right in considering 42.5% of consideration in the hands of the assessee for the purpose of computation of long term capital gains as a result of transfer of property in pursuant to JDA. The arguments of the assessee that, he had received consideration separately, as specified in the JDA, we find that receipt of entire non-refundable deposit by the assessee’s father and one flat each by the assessee and his wife is an internal arrangement and which is nothing to do with computation of capital gains by adopting respective share of full value of consideration. As per law, when a property transferred, consideration received or accrued as a result of transfer should be taken into account according to their share in the property, but not as per the internal arrangement between the parties. Hence, the arguments of the assessee is rejected.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-2, Chennai, dated 31.07.2017 and pertains to Assessment Year 2012-13.
2. The assessee has raised the following grounds of appeal:
Grounds w.r.t. adding back of book depreciation twice
i. Book depreciation has been incorrectly added back twice, solely on the ground that the inasmuch as the original return dt. 30-Mar-13 was belated, the correction made in the revised return dt. 29-May-13 could not be considered.
ii. The appellant cannot be precluded from correcting/rectifying an error apparent on the record.
iii. Even if the appellant had not rectified the same through his return dt.29-May-13, the department, on its own was bound to process the return by adjusting the apparent error in the return.
iv. The CIT(A) has nowhere stated that the claim in incorrect and hence not allowable. Where on merits the assessee is entitled to the claim, the same cannot be defeated on hyper-technical grounds.
v. In any case, in as much as the assessment had been taken up for scrutiny, all issues are opened up.
Grounds w.r.t. computation of capital gains
vi. The CIT(A) failed to understand the nature of the transaction involving transfer of UDS and purchase of constructed flats in return.
vii. The CIT(A) erred in holding that the sum of Rs. 2.25 crores formed the sale consideration in the hands of the “owners” i.e. the appellant, appellant’s father and the appellant’s wife, when the said sum was solely to the account of, and payable by the developer only to the appellant’s father.
viii. The said Rs.2.25 crores was rightly offered to tax by the appellant’s father and same as also accepted by the department; taxing the same in the hand’s of the appellant would be double taxation.
ix. The CIT(A) erred in giving a lesser deduction u/s. 54, when the appellant was entitled to the full value of one flat received by him as deduction.
3. The brief facts of the case are that the assessee is a Medical Practitioner filed his return of income for the AY 2012-13 on 30.03.2013 declaring total income of Rs.14,43,930/- and said return has been subsequently, revised on 29.05.2013 declaring total income of Rs.13,00,840/-. The case was taken up for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee is a joint owner (along with his wife and father) of the property being a residential house bearing Old No.3, New Dr.No.22, South Mada Street, Srinagar Colony, Saidapet, Chennai. The property was originally belonged to the assessee’s grandfather who purchased the said property in the year 1962. The grandfather of the assessee executed a Will and bequeathed the life interest in the property to his wife (Grandmother of the assessee) and vested remainder to his son Dr.Krishnamoorthy Srinivas (Father of the assessee). The assessee’s father Dr.Krishnamoorthy Srinivas, got the Will probated subsequent to the death of his father. Later, Dr.Krishnamoorthy Srinivas executed a Settlement Deed on 03.03.2008 in respect of the property to the assessee. Therefore, the assessee become the absolute and sole owner of the property by virtue of Settlement Deed dated 03.03.2008. The assessee has been subsequently executed a Settlement Deed on 05.09.2011, and out of natural love and affection to his wife and father, settled a portion of the property in their favour. Thus, post the execution of the Settlement Deed, the ownership of the property pertaining to the house stood as follows:
