IN THE ITAT MUMBAI BENCH ‘B’
Mrs. Nila V. Shah
V/s.
Commissioner of Income-tax (Appeals), XXV
IT APPEAL NO. 3745(MUM.) OF 2008
[ASSESSMENT YEAR 2005-06]
MARCH 28, 2012
ORDER
Amit Shukla, Judicial Member
This appeal has been preferred by the appellant against the order dated 17.03.2008, passed by CIT (Appeals) XXV, Mumbai for the quantum of assessment u/s. 143(3) for the Assessment Year 2005-06. The appellant has raised the following grounds of appeals to challenge the addition confirmed on account of capital gain for a sum amounting to Rs. 3,73,128/-.
“1. The learned Commissioner of Income tax Appeals has erred in not considering the market value as on 10.06.1999 as cost of assets. CIT v. Abrar Alvi [2001] 247 ITR 312 (Bom.).
2. The learned Commissioner of Income Tax Appeals has erred in considering the value adopted by the Stamp office instead of agreement value for the purpose of Section 54 EC.
3. The learned Commissioner of Income tax Appeals has rightly upheld the grounds of appeal by application of Section 50 but factually erred in considering the Financial year 2001-02 as the year of completion of construction instead of 10.06.1999 when the tenant assessee become owner (As per the agreement).”
2. The main issue arising in this appeal as culled out of the grounds of appeal and by the orders of the authorities below are as follows:
Firstly, whether the sale of office (situated at 303, Mantri mansion, 3rd floor, 17 Raghunath Dadaji Lane, Fort, Mumbai-400 001) on 17.09.2004 amounts to Long Term Capital Gain or Short Term Capital Gain;
Secondly, whether the cost of acquisition of the said property should be taken at Rs. 4,75,000/- which was the cost incurred for acquiring the property vide agreement dated 10.06.1999 or the market value of the property which as per the appellant on the basis of value given by approved valuer at Rs. 10,04,475/-; and
Lastly, the sale value of the property should be taken as per the value adopted by the Stamp Valuation Authorities u/s.50C at Rs. 24,48,128/- or Rs. 16,00,000/- which was the actual sale value for the purpose of the deduction u/s. 54EC.
3. The facts as elaborated in detail in the appellate order are that the appellant was having an office premises of 225 sq. ft. at 303, Mantri mansion, 3rd floor, 17 Raghunath Dadaji Lane, Fort, Mumbai-400 001 on tenancy basis for the last 30 years. This building belonged to ‘Shree Shyam Sunderlalji Temple Trust’, wherein several tenants occupied the various portion of the building. As the building was 60 yrs old, the owners of the property desired to sell the property. After getting due permission from the Charity Commissioner in June 1997, a notice was published in the daily newspaper, advertising that the property would be sold to the highest bidder. The highest bidder was one Shri Geharilal Harkalal Ranka. This property was actually purchased by the tenants and Shri Geharilal Haraklal Ranka was the confirmed party. This way the property was sold to the tenants through this person. Each of the tenants paid their share of price for purchasing the property. In this manner, the tenants became the owner after long negotiations vide agreement dated 10.06.1999. Later on, this building was demolished completely and new building was constructed. The total cost of purchase in the old property, demolishing charges and the construction of new property in the hands of the appellant came to Rs. 4,75,000/-. The new construction completed in the year relevant to Assessment Year 2002-03 and the possession was given to all the tenants.
3.1 Later on, the appellant sold the property on 17.09.2004 on a total consideration of Rs. 16,00,000/-. For determining the cost of acquisition for the purpose of calculating the capital gains, the appellant got the valuation of the property as on 10.06.1999 by an approved valuer who determined the market value of the property at Rs. 10,04,475/- as on 10.06.1999. Accordingly, the appellant claimed the cost of acquisition of the property at Rs. 10,04,475/-.
4. The Assessing Officer held that since the sale in question was of an office, hence it was a depreciable asset and treated the same as a Short Term Capital Gain by virtue of section 50 of the I.T. Act. He did not went to the question of deciding the date of acquisition or the period for which the property was held and rather invoked the provisions of section 50 to come to the conclusion that it was a Short Term Capital Gain. Before the Assessing Officer, the appellant made following calculation of Long Term Capital Gain and the taxability there on, vide letter dated 04.10.2007 (the copy of which is placed at page 9 of the paper book) :
