TaxTMI 
TaxTMI 
2017 (10) TMI 777
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....Officer erred in disallowing expenses in connection with transfer viz. transfer fees of Rs. 25,000/- and brokerage of Rs. 30,000/- incurred in connection with sale of residential flat. Ld. CIT-A erred in confirming the disallowance. 2. On facts and in circumstances of the case and in law, learned A.O. erred in disallowing exemption u/s. 54 and consequently adding Long Term Capital Gains of Rs. 22,42,887/- to the total income of the appellant. Ld. CIT-A erred in confirming the disallowance. 3. Against confirmation of above additions, the appellant is in appeal before the Hon'ble Tribunal with a prayer to delete such additions." 3. The brief facts of the case are that the assessee is an individual engaged in the business of estate agency. 3.2 During the previous year under consideration, the assessee has sold immovable property being residential flat at Sahyadri Apartment, Pimpri Pada on 17.02.2009 for a consideration of Rs. 30,35,000/- and while computing long term capital gains on sale of the aforesaid flat , the assessee had claimed expenses of Rs. 25,000/- as transfer fee of Rs. 30,000/- as brokerage , which was disallowed by the AO as the assessee nei....
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....hen assessee is liable to get capital gain tax exemption u/ s. 54 as laid down in income tax act. Further as assessee is out of town we will get further information regarding any agreement or MOU for the new property in next week. We request you to give adjournment date 16.11.2011 to produce further evidence." The assessee also submitted letter from M/s. Neeta Developers that they have received payment of Rs. 26,00,000/- as earnest money towards purchase of Flat no. 203-B Wing, 2nd Floor, Gulraj Building, Nehru Nagar, Kurla East, Mumbai-24. 3.4 The AO rejected contentions of the assessee . As per A.O., the assessee is required to purchase the residential unit within two years from date of sale transaction i.e. on or before 17th February, 2011 or the assessee has to construct the flat within three years from the date of said transfer, for which the AO observed that the assessee has not submitted conclusive documentary evidences. The A.O disbelieved that after lapse of 28 months of payment to the builder of Rs. 26,00,000/- out of total cost of Rs. 30,37,500/- , the assessee has not executed registered purchase agreement with builder and as per A.O the assessee may have provided....
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.....07.2009, copy of which was available on record. The booking of the flat no. H-104 was done on 03.03.2011, nearly 19 months after the cancellation of flat no. B- 203 and after 2 years from the date of sale of transaction of property at Sahyadri Apartment on 17.02.2009. Therefore the assessee was not entitled for deduction as per the provision of section 54 of the Act. iv. He further observed that the assessee had made payment of Rs. 26 lacs on 29.07.2009 booking of flat no. H-I04 and that money was lying with the developer for more than 17 months. He further observed that even during the course of assessment proceedings, the AR of the assessee vide letter dated 24.11.2011 submitted details in respect of the flat no. B-203 which was reported to have been cancelled on 30.07.2009. v. The.AO further mentioned that the assessee has yet not submitted copy of purchase agreement of new flat H-104 even if it was unregistered. This itself belies the claim of the assessee that he intended to purchase of property. Copy of receipt of payment of service tax was not conclusive proof especially since no agreement seems to have been executed between the assessee and the developer.....
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....case that assessee booked a flat no. B-203, 2nd floor, Gulraj Building, Nehru Nagar, Kurla(E), Mumbai on 28.07.2009. It is also the fact that towards this booking the assessee made payment of Rs. 26 lacs vide his cheque dated 29.07.2009. Subsequently the appellant vide his letter dated 30.07.2009 requested the builder to cancel allotment of the flat and for the purposes, the appellant surrendered original receipt and allotment letter to the builder / developer. Copy of this letter addressed to the builder M/s. Neeta Developers was enclosed by the AO alongwith his remand report. It is further seen that in this letter dated 30.07.2009 of the assessee, there is nothing mentioned in respect of the request for change of flat etc. It is letter for cancellation of the booking of flat No. B-203 in the said scheme. iii. The aforesaid chronology of the facts makes it is clear that within the span of 3 days of booking done on 28.07.2009, payment was made on 27.09.2009(sic.29-07-2009) and on the next very day payment made i.e. on 30.07.2009, the assessee requested for cancellation of the allotment of the flat no. B-203 in the said scheme, together with surrender of allotment letter an....
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....ther been registered in the name of the assessee nor has been handed over to the assessee as completed. It is further the fact of the case that the assessee sold his flat in Sahyadri Appts. on 17.02.2009 and the flat no. H-104 was booked by him on 03.03.2011, and as such the event of booking of this flat is beyond the period of two years from the sale of original flat in Sahyadri Appts. Accordingly it cannot be said that the flat No. H-104 was 'purchased 'within the period of two years from the date of sale of the original flat no.17.02.2009. Therefore deduction under section 54 of the Act is not available to the assessee even toward the flat no. H 104. ix. The assessee has claimed that the payment made to the builder for acquisition of flat should be considered towards the construction of flat through the developer and therefore the time limit of 3 years from the date of sale of original property as provided in the section 54 should be applied and deduction should be allowed. In support of such contention of the assessee, the assessee has relied upon the CBDT Circular no. 471 and 672. In this respect it is stated that such circulars are in respect of self financing scheme....
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....in respect of such flat could be construction linked and payment linked but the payment of service tax in respect of H-104 does not tantamount to the completion of construction of flat. It has been hereinabove mentioned that the flat no. H-104 has not been completed and has not handed over to the assessee till date and further the subject flat has been registered in the name of the assessee till date. xiii. In view of the aforesaid facts and circumstances of the case it is clear that the first flat viz. Flat no B-203 against which the assessee has claimed deduction u/s.54 in his return of income actually was cancelled by the assessee within 2 days of booking i.e. on 30.07.2009 and therefore the appellant should not have been made any claim of deduction u/s.. 54 of the Act in respect of this flat in his return of income filed on 18.02.2010. The facts in respect of the other flat viz. H-104 have been discussed hereinabove. Such flat was booked on 03.03.2011 and till date it neither has been handed over to the assessee nor has been registered in his name. Further there is no claim of deduction in respect of this flat in the return of income of the assessee and further there w....
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....for the said flat . Further letter of allotment dated 15.10.2011 issued by Neeta Developer is also placed in paper book/page 79 wherein the said payment of Rs. 26,00,000/- is converted into part consideration for purchase of the said residential flat bearing number CTS No. 6(Pts.) , Nehru Nagar, Kurla (East), Mumbai-24 by the Builder-Neeta Developer. The assessee placed reliance on the decision of the ITAT , Mumbai in the case of Mukesh G Desai (HUF) v. ITO (2009) 120 TTJ 792 (Mumbai). It was submitted that there was no mala fide by the assessee and the said amount of payment of Rs. 26,00,000/- continued with the Neeta Developers since July 2009 although initially flat was cancelled and later new residential flat being constructed by the said builder was purchased within three years from the date of sale in lieu of earlier cancelled flat. It was submitted that strict law of evidence is not applicable to incometax proceedings. It was submitted that payment of Rs. 26,00,000/- was made to the Builder on 29.07.2009 itself which flat was cancelled on 30-07-2009 and money was shifted from one flat to the another and builder has given another flat to the assessee within three years from t....
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....ished by the assessee to his counsel for onward submissions to the AO. It is well settled proposition of law that when technicalities are pitted against substantial justice, the courts will always lean towards promoting the cause of substantial justice unless malafide is writ large from the conduct of litigating party seeking admission of additional evidences at the appellate stage. The litigating party is not likely to gain any benefit from non production of such evidences which support and promotes its contentions and cause to seek relief rather non production of said evidences can lead Court to draw presumption against the said litigating party. The explanation offered by the assessee that he was not informed by his AR about requirement of furnishing these documents before the AO and hence he did not furnish said evidences at the assessment stage is an plausible explanation which cannot be rejected at threshold to be not a reasonable or bonafide reasonable explanation more-so on perusal of invoices for both these expenses which are placed in paper book/page 72-74 the payments were made by the assessee through cheque/banking channel. The powers of learned CIT(A) is co-terminus wi....
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.... Rs. 26 lacs paid by the assessee as EMD for booking aforesaid flat continued to be retained with the builder as is emerging from records. The assessee made fresh booking of fresh residential flat with Builder Neeta Developers bearing flat no. 104 in Wing H(A) on the 1st Floor having area of 455 sq. Ft in the proposed building at plot no. 6(pt.) situated at Nehru Nagar, Kurla East, Mumbai-400024. The builder -Neeta Developer allotted said new residential flat to the assessee on 3rd March, 2011 and acknowledged receipt of Rs. 26.00 lacs as EMD towards the said residential flat (page 78/pb). The Builder Neeta Developer issued allotment letter dated 15-10-2011 and appropriated Rs. 26 lacs as part consideration towards said new residential flat as against total consideration of Rs. 32.76 lacs (page 79/pb). The said builder also issued one receipt dated 25-07-2012 of Rs. 66,950/- towards service tax w.r.t. above flat which was paid by the assessee vide cheque issued from his Allahabad bank (page 80/pb). The assessee has also produced approval letters from Slum Rehabilitation Authority issued in favour of Neeta Developers dated 17-07-2007 and 27-07-2011 for approval for development permi....
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.... builders/societies for satisfying their housing need in city of Mumbai . These middle income and lower income group people did not have much bargaining power vis-a-vis builders while buying residential houses , while builders hold a dominating position keeping in view financial resources of builder as well as acute shortage of housing in Mumbai. No doubt presently the real estate demand and supply position has changed which is tilted in favour of buyers and there is also an advent of stringent laws like establishment of Real Estate Regulatory Authorities to protect buyers from unscrupulous builders. Under these circumstances buyers in that era wherein regulation over builders were not stringent had to accept standard conditions imposed by the builders , wherein flat buyers has to sign on the standard documentation, agreements , contracts as prepared by the builder and the timing of registration was also decided by the builders due to their strong dominating positions vis-a-vis middle income and low income group buyers , wherein it was not uncommon that builders used to delay delivery of homes to the buyers. Thus to read Section 54 which is a beneficial provision in an absolutely s....
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.... and circular no 672 dated 16-12-1993 issued by the CBDT supports the contention of the assessee . The circular no 471 dated 15-10-1986 issued by CBDT is reproduced hereunder : "CIRCULAR : NO. 471 [F. NO. 207/27/85-IT(A-II)], DATED 15-10-1986 1. Sections 54 and 54F provide that capital gains arising on transfer of a long-term capital asset shall not be charged to tax to the extent specified therein, where the amount of capital gain is invested in a residential house. In the case of purchase of a house, the benefit is available if the investment is made within a period of one year before or after the date on which the transfer took place and in case of construction of a house, the benefit is available if the investment is made within three years from the date of the transfer. 2. The Board had occasion to examine as to whether the acquisition of a flat by an allottee under the Self-Financing Scheme (SFS) of the D.D.A. amounts to purchase or is construction by the D.D.A. on behalf of the allottee. Under the SFS of the D.D.A., the allotment letter is issued on payment of the first instalment of the cost of construction. The allotment is final unless it is cancelled....
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....ated 15-10-1986, such cases may also be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act." The allotment of flat by the Builder under self financing scheme has to treated as construction and period of three years window will be available for availing deduction u/s 54. The assessee has invested Rs. 26 lacs in new residential flat at 'H'wing on 03-03-2011 i.e. within three years from the date of sale/transfer of flat on 17-02-2009 wherein substantial cost of the said flat was paid by the assessee as total cost was Rs. 32.76 lacs . The Builder later issued fresh letter of allotment on 15-10-2011 wherein the builder treated Rs. 26 lacs as part consideration towards said residential flat at 'H' Wing , which is again within three years from the date of sale of flat at Sahayadri Apartments by the assessee on 17-02-2009 on which income from long term capital gain arose. The assessee also paid through the builder service tax on the said payment of Rs. 26 lacs to the government which is duly acknowledged by the Builder. The Revenue also made direct enquiry with the builder and it could not be shown that these transactions are not genuine or ar....