ACIT -19(3), Mumbai v. Eldred Joseph Pereira
[Citation -2016-LL-1019-114]

Citation 2016-LL-1019-114
Appellant Name ACIT -19(3), Mumbai
Respondent Name Eldred Joseph Pereira
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 19/10/2016
Assessment Year 2005-06
Judgment View Judgment
Keyword Tags indexed cost of acquisition • residential accommodation • long-term capital gain • residential building • transfer of property • development rights • receivable amount • valuation report • earnest money • legal fees
Bot Summary: During the assessment proceedings in the AY.2008-09, in the assessee s own case, the AO noticed that the assessee along with one of the co-owners had gained right title and interest in one property at Bandra by virtue of being the legal heir of the property owner,that vide development agreement, dated 21/02/2003, the co-owners entered into an agreement with a partnership firm to develop the property by bringing in the transferable and loadable TDR at the cost of the developers, that the consideration for conferring the right for development agreed it was for cheque component of Rs.40 lakhs and non-monetary component of fully constructed area of 763.03 sq. The AO noticed that the acknowledgement of registered and delivered document for the said development agreement showed the market value of the property at Rs. 1.75 crores as against 30 lakhs as earnest money and Rs. 10 lakhs being the receivable amount on approval of the plans. During the assessment proceedings the assessee objected to the value adopted by the registrar which according to him had been erroneously taken because as per the Stamp Duty Ready Recknor and the valuation report from the Registered Valuer the share in the property was at Rs.49.41 lakhs only, that there was no cost to TDR and therefore no question of capital gains in the hands of the assessee, that he had paid Rs. Five lakhs to one of the old tenants of the building to vacate the tenant, he had incurred an expenditure of Rs. 39.40 lakhs for construction of residential accommodation constructed were by the developers, that the developer had constructed flats on the area of 763.03 sq. At Rs. 39.40 lakhs u/s.54 of the Act. Accordingly, the AO considered the amount of Rs.87.62 lakhs as sale consideration and after allowing indexed cost of acquisition at Rs.7.94 lakhs computed the gross consideration at Rs.79.67 lakhs. After considering the assessment order and the submissions of the assessee, the FAA held that the issue in question had been duly considered by the Tribunal in the Case of Jawahar N Ghaia and Hema Sunil Rane. 4.During the course of hearing before us the Departmental Representative(DR) supported the order of the AO. As stated earlier, no one appeared before us, on behalf of the assessee.


Income-tax Appellate Tribunal - E Bench Mumbai Before S/Shri Rajendra,Accountant Member and C.N. Prasad,Judicial Member ITA/4623/Mum/2014, Assessment Years: 2005-06 ACIT -19(3) Shri Eldred Joseph Pereira 305, Piramal Chambers , Lalbaug, El Ron Garden, 73, TPD III, Parel, Mumbai-400 012. Vs. 30th Road, Bandra (W) Mumbai-50. PAN:AAPPP 8882 J ( Appellant) ( Respondent) Revenue by:Shri Sathya Moorthy-DR Assessee by: None Date of Hearing: 20.07.2016 Date of Pronouncement: 19.10.2016 , 1961 254(1) Order u/s.254(1)of Income-tax Act ,1961(Act) PER RAJENDRA, AM- Challenging order,dated 15/04/2014 of CIT (A)-30,Mumbai, Assessing officer(AO) has filed present appeal. Assessee,an individual, filed his return of income on 30/08/2005, declaring total income at Rs.72,430/-.The AO completed assessment, u/s.143 (3) r.w.s. 147 of Act,on 29/12/2011,determining his income at Rs.73.67 lakhs. 2.Effective ground of appeal is about deduction u/s.54 of Act. During assessment proceedings in AY.2008-09, in assessee s own case, AO noticed that assessee along with one of co-owners had gained right title and interest in one property at Bandra by virtue of being legal heir of property owner,that vide development agreement, dated 21/02/2003, co-owners entered into agreement with partnership firm to develop property by bringing in transferable and loadable TDR at cost of developers, that consideration for conferring right for development agreed it was for cheque component of Rs.40 lakhs and non-monetary component of fully constructed area of 763.03 sq. mtrs., that value of both components was declared at Rs. 78.82 lakhs. AO, however, noticed that acknowledgement of registered and delivered document for said development agreement showed market value of property at Rs. 1.75 crores as against 30 lakhs as earnest money and Rs. 10 lakhs being receivable amount on approval of plans.Accordingly,he observed that assessee had offered amount of Rs.59.41 lakhs as his share,that value adopted by registrar of property was Rs. 87.62 lakhs (50% of 1 4623/M/14-Eldred Joseph Pereira Rs. 1.75 crores). Considering above facts he held that there were reasons to believe that income of assessee liable for tax had escaped assessment. Therefore he issued notice u/s.148 of Act. During assessment proceedings assessee objected to value adopted by registrar which according to him had been erroneously taken because as per Stamp Duty Ready Recknor and valuation report from Registered Valuer share in property was at Rs.49.41 lakhs only, that there was no cost to TDR and therefore no question of capital gains in hands of assessee, that he had paid Rs. Five lakhs to one of old tenants of building to vacate tenant, he had incurred expenditure of Rs. 39.40 lakhs for construction of residential accommodation constructed were by developers, that developer had constructed flats on area of 763.03 sq. mtrs. retained by assessee as per agreement that his share was 50%, that he had claimed deduction of 50% on constructed cost of that area calculated at rate of Rs.10,330 per square mtrs. at Rs. 39.40 lakhs u/s.54 of Act. It was further stated that total constructed area for him was 381.52 sq.mtrs. which is 50% of 763.03 sq.mtrs. and area of total plot was 618.07 sq.mtrs, that plan for residential building could not accommodate entire 381.32 sq.mtrs. on one floor, that he was allotted said construction areas by way of four flats i.e. two adjacent flats on sixth floor one flats on third floor and other on second floor. assessee relied upon various case laws to support his argument that on sale of TDR capital gains was not chargeable. After considering submission of assessee, AO rejected claim made by assessee u/s.54 of Act at Rs. 39.40 lakhs in respect of four flats developed against monetary as well as non-monetary consideration received by assessee and held that long-term capital gain was in respect of land that was not residential house, that deduction u/s.54 of Act was not available, that deduction under said section was available only when assessee would purchase new house property, that four flats formed part of consideration received towards transfer of development rights of original house property, that flats had not been considered constructed by assessee, that requirement of section 54 was not fulfilled. Accordingly, AO considered amount of Rs.87.62 lakhs as sale consideration and after allowing indexed cost of acquisition at Rs.7.94 lakhs computed gross consideration at Rs.79.67 lakhs. From that he allowed legal fees paid of Rs.1.70 lakhs and compensation paid to tenants at Rs. 5 lakhs.Finally,he computed long-term capital gain at Rs.72.97 lakhs. 3.Aggrieved by order of AO, assessee preferred appeal before First Appellate Authority (FAA). Before him, assessee made elaborate submissions with regard 2 4623/M/14-Eldred Joseph Pereira to reopening of assessment as well as on merits of case. After considering assessment order and submissions of assessee, FAA held that issue in question had been duly considered by Tribunal in Case of Jawahar N Ghaia (Order Dated 19/11/2013) and Hema Sunil Rane (ITA/4665/Mum/2012). Finally, he held that entire value of non-monetary consideration taken by AO of 635.86 sq.mtrs. of constructed area was eligible for deduction u/s.54 of Act. 4.During course of hearing before us Departmental Representative(DR) supported order of AO. As stated earlier, no one appeared before us, on behalf of assessee. 5. We have perused material available on record. We find that AO had taxed non- monetary benefits of assessee and had denied him benefit of section 54 of Act, that FAA had allowed appeal of assessee. We find that in case of Hema Sunil Rane (supra) tribunal had decided issue as under: 6.8. above issue has been duly considered by ITAT J bench, Mumbai in very recent order dtd. 19.1l.2013, in case of M/s. Jawahar N. Ghia & others (AOP), Dr. Rane (Mrs.Hema Sunil) in A.Y. 2004-05 in ITA No.4665/Mumbai /2012. relevant part of decision is reproduced as under: " ... on issue of allowability of exemption u/ s. 54/54 F , AO has denied exemption u/ s 54/ 54F on ground that assessee has not purchased new residential property s for absorbing this long term capital gain arising out of transfer of property in question. It is relevant to note that development agreement itself emphasizes on area which shall be allowed to beneficiaries in newly constructed building as against their existing areas. said development agreement clearly indicates aforesaid statistics in respect of allotment of areas. This suggests that allotment in newly constructed building under development agreement is adjustment of debts in respect of transfer of property within meaning of development agreement dated 9th November 2003. Considering this fact in light of provisions of section 54, word purchased in section 54 must be interpreted in its ordinary meaning as buying for price or equivalent of price by payment in kind or adjustment towards old debts or for other monetary consideration. said proposition is supported is by decision of Hon'ble Apex court in case of CIT vs V.T.N Arvinda Reddy (120 ITR 46 SC) wherein it has been held that there is no reason to divorce ordinary meaning of word 'purchase' as buying for price or equivalent of price by payment in kind or adjustment towards old debt or for other monetary consideration from its legal meaning in section 54 (1). Undoubtedly, each release in case is transfer of (he releasor's share for consideration to release. In view of mentioned discussion, we are of considered view that assessee is entitled for deduction u/ s 54/ 54F and hence we do not find any justifiable reason to interfere with order of learned CIT(A) on this count. Resultantly, issue of allowability of exemption u/s. 54/54F is decided in favour of assessee and against revenue. Respectfully following above order, such we are of opinion that order of FAA does not suffer from any legal infirmity.So,confirming same we decide effective ground of appeal against AO and hold that assessee was entitled to deduction u/s.54 of Act. As result, appeal filed by AO stands dismissed. 3 4623/M/14-Eldred Joseph Pereira Order pronounced in open court on 19th October, 2016. 19 2016 Sd/- Sd/- Sd/- Sd/ (C.N. Prasad ) ( Rajendra) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 19.10.2016. Jv.Sr.PS. Copy of Order forwarded to : 1.Appellant 2. Respondent 3.The concerned CIT(A) 4.The concerned CIT 5.DR E Bench, ITAT, Mumbai 6.Guard File //True Copy// BY ORDER, Dy./Asst. Registrar ITAT, Mumbai. 4 ACIT -19(3), Mumbai v. Eldred Joseph Pereira
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