TaxTMI 
TaxTMI 
2023 (1) TMI 1002
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed diamonds. During the assessment proceedings, Assessing Officer observed that vide Sale Deed dated 19.05.2012 assessee entered with M/s. Veer Gems and sold the office premises bearing No. BC4021 in Bharat Diamond Bourse, Bandra Kurla Complex for a consideration of Rs..1.93 crores. He observed that assessee has declared the computation of income under the head Capital gain relating to above sale transaction as under: - Transfer Price 1,93,00,000 Indexed cost of acquisition (32,91,000*852/351) [1998-99] 79,88,410 Indexed cost of improvement (1,62,000*852/447) [2002-03] 31081779 Indexed cost of improvement (2,43,000*852/463) [2003-041 447,162 Indexed cost of improvement (4,86,000*852/480) (2004-05) 862,650 Indexed cost of improvement (3,97,000*852/497) [2005-061 509,143 Indexed cost of improvement (9,64,800*852/519) 12006-07] 1,583,834 Indexed cost of improvement (1,35,000*852/389) (1999-2000] 295,681 Long Term Capital gain 73,04,341 4. Assessing Officer observed that as per the working submitted by the assessee, assessee has shown acquisition of property in Financial Year 1998-99 and in subsequent few years assessee has carried out improvement in the property. Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....remises, was clearly "property" as contemplated by section 2(14) of the I.T. Act, 1961. Other case law on the same issue favoring the above views of Bombay High Court are as follows 1. CIT v. Sterling Investment Corpn. Ltd. [1980) 103 ITR 441 (Bom.). 2. ITO v. Smt. Kashmiralien M. Parikh (1993) 66 Taxman 31 (Ahd.) (Mag. 3. Tribunal order in ITA No. 3923 (Mum) of 2002 for assessment year 1995-96 in the case of Mrs. Manju Agarwal v. Asstt. CIT, Mumbai C Bench order dated 16-9-2004 4. Jitendra Mohan v. ITO [2001] 11 SO 1 594 (Dell). 5. CIT vs Jindas Parchand Gandhi (2005) 279 ITR 552 (Guj) In our case as allotment letter issued by the BDB in the year 1998-99 gives us the right to obtain office premises so it become an assets under section 2 (14) of the Income Tax Act. 1% 1. Whether Gain on sale of Flat will be short Term or Long Term? An asset which is held for 36 months is a long term asset. Whether it is held for 36 months? Once the right to purchase (ie obtain office premises) proved to be an asset, it is to be seen when was this right vested in the purchase. Hon'ble Andhra Pradesh High Court in the case of M. Syamala Rao v. CIT/1998/234 ITR 140 held that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cost inflation index of that year was to be applied on the total purchase consideration pavable by the assessee as per agreement regardless of the dates of the actual amount paid by her. HELD As per section 2(14), read with section 2(14)(i), the rights in flat, acquired by the assessee on execution of agreement on 7-8-1993, came within the purview of the term capital asset. From the perusal of language used in Explanation (i) to section 48, which provides for manner of computation of indexed cost of acquisition, it is apparently clear that it refers only to date of cost of acquisition of the asset and not actual payments made by the assessee. Hence, there was no merit in the contention of the revenue that the benefit of indexation should he gen on the basis of dates of actual payments made by the assessee. Thus, on merits, the issue was covered in favour of assessee. However, regarding jurisdiction for invoking the provisions of section 263, it was found that the assessee fled necessary details before the Assessing Officer and the Assessing Officer had passed assessment order after taking into consideration the same. Hence, merely for the reason that no specific findings had b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se by them from MMRDA on 31st March, 2010. Thus, the rights cannot be created in a property which is to be constructed in future or which is not even owned by the original transferor. The only right which could generate in respect of payment made for such property is the right to receive back the said payment. This right is the personal right of the assessee over the money it advanced to Bharat Diamond Bourse and not the right over any property as such. The assessee's right over the property came on the date of its allotment by Bharat Diamond Bourse, or at best at the time when the complex was leased by MMRDA to Bharat Diamond Bourse. In any event, the sale of the office space and also the sale of Shares BKC were made by the assessee before the lapse of 3 years from their Allotment to the assessee. Hence, the sale consideration thereof would constitute Short Term Capital Gain as against the Long Term Capital Gains as held by the assessee. Moreover, it is also seen that two parking spaces and 200 equity shares were also allotted to the assessee as against the contribution paid by it to Bharat Diamond Bourse. These Parking Spaces and corresponding 200 shares were not transferred ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t term capital gain. 3) Genuineness of the Long Term Capital Gain: The entire relevant documents to prove the genuineness of long term capital gain such as sale agreement, installment ledger, bank statements, computation of Income which shows the working of LTCG were submitted during assessment proceedings. According to the Installment ledger the total payment made of Rs.62,78,800/- from which the payment of Rs. 55,78,800/- is related to the office premises & Rs 7,00,000/- is related to the parking area Your appellant takes the indexation cost of acquisition by considering the amount of Rs 55,78.800/- which is related to the office premises. Now the question arises as to what else is further required to prove the Long term capital gain in view of the Learned Assessing Officer. There is no tangible material with the income tax department in support of treating such capital gain as short term capital gain instead of long term capital gain. In this regards, the appellant has relied upon the following case laws. 1) Honourable High Court Bombay vide IT Appeal NO. 1459 of 2016 in the case of Pr. Commissioner of Income Tax V/s. Vembu Vaidyanathan (2019-LL-0122-55) 2) Honourabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow up action and taking the delivery of possession is only a formality. CBDT in its later circular No 672 dated 16th December, 1993. In such circular representations were made to the board that in cases of allotment of flats or houses by cooperative societies or other institutions whose schemes of allotment and consideration are similar to those of D.D.A., similar view should be taken as was done in the board circular dated 15th October, 1986 b) The decision pronounced by ITAT, C Bench, Mumbai in case of Sanjaykumar Footermal Jain vs. ITO WD 20(3)(2) Wd. 20(3)(2), Mumbai - ITA No: 4853/Mum/2016 [2018-LL-814-8] In the given judgment, the assessee Shri Sanjay kumar Footermal Jain is individual filed the return of income for AY 2012-13 declaring Total Income of Rs. 6,84,760/- on 17-06-2012, the sources of income are under Capital gain and Income from other sources. In the course of scrutiny assessme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tters to the assessee in 2007 allotting the specific Galas with specific Galas with corresponding galas marked on the floor plan. The assessee sold the said 7 Nos of Galas in FY 2012-13 for an aggregate consideration of Rs. 2,12,00,000/- The Id. AO reckoned the date of possession of the said industrial Galas in the hands of the assessee and accordingly determined the holding period of the same to be less than three years and consequently held the gains arising from the sale of said industrial Galas are to be taxed as only short term capital gains. The Id. AO consequently also denied the benefit of indexation of the cost claimed by the assessee. Accordingly, the Id. AO determined the short term capital gain of Rs. 75,16,750/- while computing the assessment. CIT(A) held that the holding period should be considered from the date of allotment of galas on 22/10/2007. Since these galas were held for more than 36 months before the sale, the resultant gain is Long Term Capital Gain. Therefore, the AO is directed to assess the capital gain on sale of 7 nos. of galas by the appellant as Long Term Capital Gain after computing the same as per isE TAX DEPAR law ITAT confirm the stand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion qua the addition made. The Learned CIT(A) deleted the penalty, holding that the penalty was not leviable on addition made on estimation basis and that it did not stand confirmed that the assessee had willfully submitted inaccurate particulars to conceal its income. The Hon'ble ITAT, in the order deleted the addition made, in toto. Therefore, the very basis of the levy of penalty in question no longer survives. Accordingly, the grievance of the department is rejected and the order of the Ld.CIT(A) deleting the penalty is upheld. In light of the aforesaid facts and all the decided judgments by Hon'ble Supreme Court, various High Courts and Income Tax Appellant Tribunals we hereby humbly pray your honour to consider the premises as long term capital asset & drop the penalty proceedings initated u/s. 271(1)(c) of the Act," 7. After considering the detailed submissions and considering the Assessment Order and discussing the same in detail by the Ld.CIT(A) in his order, Ld.CIT(A) dismissed the appeal filed by the assessee with the following observations: - "[1.5.3] Therefore, on the basis of factuality or factual matrix and legality of the case as per holding period/actua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the property was given in the year 1998. In this regard he brought to our notice Page No. 60 of the paper book which is ledger extract of the assessee company in the books of the Bharat Diamond Bourse wherein it was clearly brought on record that assessee was given a provisional area allotment of 900 sq.ft and it is clearly given details of amount collected by them starting from 31.08.1999 onwards and also it clearly indicated office number as BC4021. 10. Further, with regard to lease deed registered with MMRDA dated 31st March, 2010, he submitted that it is only a renewal of the lease deed. what is relevant is the actual allotment of office space to the assessee which the Bharat Diamond Bourse allotted the same in the year 1999 and assessee has held the right of occupation from the date of such allotment. The final sanction of occupation of area and allotment of shares has happened subsequently. 11. As far as in the given case what is relevant is the right of the assessee held from the date of provisional allotment is relevant. In this regard he submitted that on the similar facts, the Coordinate Bench in the case of M/s. Suresh Brothers v. ACIT in ITA.No. 553/Mum/2016 dated 18.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeal raised in appeal before Coordinate Bench in M/s. Suresh Brothers v. ACIT (supra). The Coordinate Bench has considered and adjudicated exactly similar facts on record and for the sake of clarity it is reproduced below: - "10. We shall now advert to the claim of the revenue that the date of acquisition of the occupancy rights in the property were to be reckoned from 02.08.2010 i.e the date on which occupation rights were vested with the assessee, vide a registered document. As is discernible from the records, the revenue in order to fortify its aforesaid claim, had observed, that as Bharat Diamond Bourse itself had acquired the leasehold rights from MMRDA on 31.03.2010, therefore, the date of acquisition of the occupancy rights in the aforesaid property could not be related to a date prior to the same. We are unable to accept the aforesaid misconceived view of the revenue. Although the "lease deed‟ between Bharat Diamond Bourse and MMRDA was formerly registered on 31.03.2010, but the construction of the property was in progress much before that date. On a perusal of the records, it stands revealed that Bharat Diamond Bourse had entered into two lease agreements in the m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... different concern for transfer of its property was allowed by Bharat Diamond Bourse from the beginning. As such, the aforesaid fact in itself evidences that the said transferor concern on 22.11.2000 was vested with a right which could be transferred in favour of a third party. On the basis of our aforesaid deliberations, we are of the considered view that as the case of the assessee is no different from the aforesaid concern, therefore, it can safely be concluded that pursuant to the final and binding allotment of the office premises i.e EE6011, Bharat Diamond Bourse (built up area of 5,750 sq. ft.) on 03.12.1999, the assessee got vested with the ownership of the rights in respect of the property under consideration. Our aforesaid view is supported by the judgment of the Hon'ble High Court of Bombay in the case of PCIT-3, Vs. Vembo Vaidyanathan (2019) 261 taxman 376 (Bom). Issue raised by the revenue in its appeal before the Hon‟ble High Court was, as to whether the Tribunal was justified in reckoning the acquisition of the property from the date of letter of allotment which though did not lead to creation of any proper and effective right over the capital asset, and not fro....