TaxTMI 
TaxTMI 
2008 (1) TMI 419
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.... The CIT(A) has failed to appreciate that the TDR does not increase the physical area of the land on which Jackers stands. The right to extend construction accrues from the date of purchase of this asset and not from the time the land has been held." 3. Since facts relating to all appeals are similar, the facts relating to the appeal in the case of Farouk Dinshaw Vevaina are being narrated for the sake of convenience. The brief facts, as gathered from the assessment order, are these. All the asses sees belong to a Parsi family known as 'Vevaina Family' which originally consisted of two brothers Dinshaw Cooverji Vevaina and Rustom Cooverji Vevaina. These two were the beneficial owners of property in the nature of a bungalow located at 113, Carter Road, Bandra (West), Mumbai 50. The brothers (Dinshaw and Rustom) had the right to 50 per cent share each in the property. These brothers passed away and the said property devolved on the following legal heirs: The legal heirs of the late Dinshaw Vevaina are: (a) Mrs. Homai Dinshaw Vevaina (wife) (b) Mr. Farouk Dinshaw Vevaina (son and the assessee) (c) Mr. Sohrab Dinshaw Vevaina'(son) (d) Mrs. Tinaz Sohrab Vevaina (daught....
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....nbsp; and 12th floor. -------------------------------------------------------------- (2) Mr. Farouk Dinshaw 1/6 100% of both 2nd Vevaina (the assessee) and 3rd floor. -------------------------------------------------------------- (3) Mr. Sohrab Dinshaw 1/12 100% of the 4th Vevaina floor. -------------------------------------------------------------- (4) Mrs. Tinaz Sohrab Vevaina 1/12 100% of the 5th ....
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....the effect was signed between the Vevainas and M/s Jay Sharda Realty (P) Ltd., on 21st March, 1998. However, this agreement went into arbitration with Shri Chandravadan Chimanlal Dalain chartered accountant, being the sole arbitrator. The arbitrator vide award dt. 9th Sept., 2002 awarded a sum of Rs. 2.5 crores (to) M/s Jay Sharda Realty (P) Ltd., in full and final settlement and cancellation of the agreement of the sale of flat. The assessee has filed the revised return of income to account for the cancellation of this sale. (ii) Flat No. 901 admeasuring 2250 sq. ft. carpet area for a sum of Rs. 2.89 crores. This agreement is executed on 16th Sept., 1999 with M/s Royal Distillery (P) Ltd. A sum of Rs. 1.45 crores was paid to the legal heirs on 14th Oct., 1998. (iii) Flat No. 1001 admeasuring 2250 sq. ft. carpet area for a sum of Rs. 2.89 crores vide agreement dt. 16th Sept., 1999 with M/s Khemani Distilleries Ltd. Herein again a sum of Rs. 1.45 crores was paid on 14th Oct., 1998. 4. As noted earlier two flats were sold in the year under consideration for a consideration of Rs. 5.78 crores. The assessees obtained the valuation report from Dr. Roshan Namavati, an approved v....
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....r the copies of sale agreements of the two flats, measures 1811.3 sq. mtrs. This translates into 19489.588 sq. ft. (iii) As per the copy of the supplementary MoU entered into by the Vevainas the total FSI available for construction is 51,000 sq. ft. This means that the Vevainas have utilised FSI of 2.616 (2.616 sq. ft. for each square feet of land). (iv) Considering the fact that the built-up area of each of the flat sold is 2812 sq. ft., the floor area utilised for the two flats sold comes to 5624 sq. ft. (v) Therefore, the proportionate area of land married to these two flats is 2149.20 sq. ft. (5624 x 19489.588/51000). (vi) A copy of the valuation report of Dr. Roshan Namavati, registered estate valuer dt. 27th April, 2001 has been filed along with the return of income. As per this report, the land has been valued at Rs. 240 per sq. ft. Vide letter dt. 6th Jan., 2003 filed during the assessment proceedings for asst. yr. 2001-02 in the case of Shri Jamshed R. Vevaina, one of the co-owners, the assessee submitted that the FMV of land as on 1st April, 1981 has been adopted for the purposes of indexation. The FMV consists of the cost. and a component of developers profit....
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....910 (1,32,66,253 - 25,13,018 - 2,65,325). (xiii) Short-term capital gain accruing to the Vevainas is therefore Rs. 3,52,07,072 (4,45,33,747 - 84,36,000 - 8,90,675). (xiv) The shares of each of the Viveainas in this capital gain in the proportion of their interest in the Jackers is: -------------------------------------------------------------- Sl. Co-owners Share in Long-term Short-term No. the capital capital Jackers gain gain -------------------------------------------------------------- (1) Mrs. Homai Dinshaw 1/6 17,47,985 &n....
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....and component has to be much more as compared to the weightage to the superstructure on account of the following reasons: (a) It is the location of land which commands great value in the city like Mumbai. The land in posh areas like Malabar Hill, Nepean Sea Road, Bandra Carter Road, commands much more value in comparison to land at Byculla, Parel, Antop Hill, etc. Thus, it is the potential of land which commands more value and naturally sale proceeds attributable to land have to be much more in comparison to the sale proceeds attributable to the superstructure. (b) If AO's working with reference to land component is adopted then it gives totally wrong figure of the profit on construction of superstructure, in the sense on construction cost of Rs. 0.85 crores profit comes to Rs. 3.52 crores which is totally absurd; (c) Moreover, after acquiring transfer of development rights (TDR), considering FSI of 10 per cent of balconies, and staircase, etc., free of FSI, the building has been constructed. This is the potential of land or benefits fastened to the land and hence the value relating to land component has to be much more than that related to the superstructure component; an....
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..... Because of this difference only there is a need to calculate long-term capital gains and pay tax thereon. I find that there is no dispute on the figures, but the rule of proportion adopted by the AO is inconsistent and does not take into account similar comparison. Thus, I find that the appellant's method of calculating sale proceeds attributable to land component which is based on a scientific method, as per Government approved valuer Dr. Namavati's report is correct. The same is also justified by the fact that it gives fair profit of 22 per cent on construction component. If the AO's determination of sale proceeds of land is accepted, then sale proceeds attributable to superstructure comes to Rs. 4.45 crores and after deducting cost of construction of Rs. 0.85 crores and after deducting brokerage it results in a short-term capital gain of Rs. 3.52 crores. As rightly pointed out by the learned Authorised Representatives, huge profit of Rs. 3.52. crores on construction cost of Rs. 0.85 crores is an absurdity. Because of these reasons, I hold that the determination of sale proceeds attributable to land component at Rs. 4.72 crores as done by the appellant is correct since the same....
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....ispute between the assessees and the AO only related to the apportionment of sale price of the flat between land component and the superstructure. The AO took into consideration the FMV as on 1st April, 1981 as per the approved valuer's report for determining the FMV of land on the date of sale which has been not accepted by the CIT(A). The CIT(A) has held that it is the FMV on date of sale which should be taken into consideration while apportioning the sale price between the value of land and value of superstructure. This finding has not been challenged before us in the ground raised by the Revenue. Accordingly, the finding given by the CIT(A) has become final. The ground raised before us, being misconceived, is dismissed. The orders of the CIT(A) are therefore, upheld on this issue. 9. The next issue common to all the appeals of the Revenue relates to the exemption under s. 54F of the Act. The common ground raised by the Revenue reads as under: "On the facts of the case and in law the CIT(A) has erred in holding that the assessee is eligible for relief under s. 54F of the Act without appreciating that the assessee has violated the conditions envisaged in the first proviso t....
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.... such benefit of exemption under s. 54F was to be given. Alternatively, it was contended that benefit of exemption under s. 54F should be allowed at least to one unit. Reliance was placed on certain decisions which are mentioned at p. 14 of the appellate order. Similar contention was raised on behalf of other assessees. 12. After going through the decisions cited by the assessee, the CIT(A) found the same to be distinguishable on facts for the reasons given by him in para 6.6 of the order. The contention of the assessee that all the three units constituted one residential house was not accepted by the CIT(A). However, he was of the view that the assessee was entitled to exemption with reference to investment in at least one unit inasmuch as the assessee had not purchased or constructed any other residential house other than the property in the building 'Jackers'. It was therefore, held that exemption under s. 54F should be allowed with reference to investment in the construction of anyone residential house as per the choice of the assessee. Aggrieved by the same, the Revenue has preferred these appeals before the Tribunal on the ground that the exemption could not be allowed in ....
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....ly ground for denial of exemption is to the effect that the provisions of the proviso to s. 54F(1) stand violated. In the case of Farouk D. Vevaina, the assessee was the owner of two flats i.e., flats on 2nd and 3rd floors on the date of the transfer of the flat in dispute. The contention of the assessee's counsel that all the three units constituted one property and therefore, the provisions of, the proviso to s. 54F(1) were not applicable cannot be accepted for the reason that the legislature has specifically used the expression "owns more than one residential house". Though the word 'property' may include more than one house as contended by the learned counsel for the assessee but we are not concerned with the word 'property' since it is not used in the proviso to s. 54F(1). While interpreting the provisions of a statute, the Courts are to look into the language used by the legislature. In the proviso to s. 54F(1). the legislature has denied exemption in those cases where the assessee owns more than one residential house. Therefore, where the assessee owns more than one house on the date of transfer of asset then he shall not be entitled to exemption under s. 54F. Admittedly, th....
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....essee was allotted 2nd and 3rd floors in the building 'Jackers' apart from 1/6th share in the flat at 6th floor. The assessee had computed the ALV at nil on the ground that all the flats allotted in the new building were in lieu of his 1/6th share in the old property and therefore, all the flats allotted to him constituted one property which was used for self-residence. However, the AO, considering the provisions of s. 23(2)(b) of the Act, was of the view that the assessee was entitled to compute the ALV at nil in respect of one residential house only. Similar view was taken in other cases. However, on appeal, the CIT(A) accepted the stand of the assessee and consequently, the assessee was held to be entitled to compute the ALV at nil in respect of all the flats allotted to them. Aggrieved by the same, the Revenue is in appeal before the Tribunal in all these cases. 19. The learned Departmental Representative, on behalf of the Revenue, has relied on the provisions of s. 23(2)(b) of the Act, while the learned counsel for the assessee has reiterated his contention to the effect that all the flats allotted to the asses sees constituted one property in lieu of their shares in the ol....
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.... used for residence though the option is with the assessee to choose anyone of the houses owned by him. The order of the CIT(A) on this aspect of the issue is contrary to the provisions of s. 23(2) of the Act and therefore, the legal finding recorded by the CIT(A) is hereby vacated. Secondly, it is held that the assessee would be entitled to compute ALV in respect of one residential house only. The ground raised by the Revenue is therefore, allowed. 21. Before parting with this issue, we would like to mention that the AO had allowed the assessees to exercise the option under s. 23(2) of the Act to compute the ALV at nil in respect of one residential house. In respect of the remaining house or houses, the AO had computed the ALV which had been disputed before the CIT(A). Since the CIT(A) held that all the houses owned by the assessees could be treated as one property, he did not adjudicate upon the computation of ALV made by the AO which was challenged by the before him. Since it has been held by us* that the asses sees are entitled to compute ALV at nil only in respect of one residential house occupied by him for his self-residence, the issue regarding computation of ALV in resp....