IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH “ A ”,MUMBAI
BEFORE
SHRI SHRI R.K. GUPTA & SHRI J. SUDHAKAR REDDY
ITA NO.7160/Mum/2008
(A.Y. 2004-05 )
Income-tax Officer-17(3)(1),
R.No.621, 6th floor,
Aaykar Bhavan, M.K.Rd.,
Mumbai-400 020.
Shri Arvind P.Jobanputra,
511-B, Arvind House,
R.P.Masani Rd., Matunga CR,
Vs. Mumbai-400 019.
PAN: AACPJ3673N
Respondent
Appellant
Appellant by
Respondent by
Shri Mahua Sarkar.
Shri Sanjay Parikh.
ORDER
PER R.K. GUPTA, JM :
This is an appeal by the
department against the order of CIT(A)-XVII,
Mumbai, pertaining to asst. year 2004-05.
2.
The following ground of appeal has been taken by the department:
“On the facts and in the circumstances of the case and in law, the
Ld. CIT(A) erred in directing the Assessing Officer to compute the
capital gain on transfer of land and building by substituting the
market value of land as on 01.04.1981 without appreciating the fact
that provisions of section 55(2)(a)(ii) are applicable.”
The brief facts of the case are that the assessee is an individual and his main
source of income is “income from other sources”. During the relevant year, the
assessee has shown capital gain on sale of land and building at plot no.511B,
Dadar, 21 Omkar CHS, vide agreement for sale dated 22-5-2003 for a
consideration of Rs.70 lakhs. The capital gain as per provisions of the Act was
computed and the same was shown in the return.
3.
On verification of the sale agreement, the AO observed that the land and
structure with tenants sold by the assessee is leasehold land. The said land was
transferred in the name of the assessee on death of his father late Premji
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Shri Arvind P.Jobanputra.
Trikamji Jobanputra on 23-3-2000. The AO also observed that for calculation of
capital gain and for indexation, the cost/value of the land with structure and
tenants as on 1-4-1981
is taken at Rs.11,99,679/- by the assessee which is
based on the valuation report of M.B. Sabnis & Co. The AO observed that since
the land is leasehold and akin to tenancy rights, the assessee was asked to
explain why the benefit of substituting fair market value as on 1-4-1981 in
respect of leasehold land should not be disallowed and taken as nil as per the
provisions of sec.55(2)(a)(ii). It was explained before the AO that the lease of
the land was acquired in the year 1954. The said lease was for a period of 999
years which is also referred to as “perpetual lease”. The same is acquired by
paying premium of Rs.42,501/- and yearly rent of Re.1/-. In view of the above,
the assessee stated that the land having perpetual lease
is different from
tenancy rights as provided in sec. 55(2)(a) of the Act and the same is covered
under ‘any other capital asset’ as provided in sec. 55(2)(b) and accordingly
benefit of substituting fair market value as on 1-4-1981 is available. It was also
submitted that the fair market value has been determined by the Govt. approved
valuer on the basis of flat rate in the surrounding vicinity and therefore breaking
up of the value into the value of land and value of construction does not arise.
However, the AO, after taking into consideration the explanation of the assessee,
did not find the same acceptable. He noted that
the land sold along with
structure is leasehold land and akin to tenancy rights in as much as in the instant
case of the assessee sec. 55(2)(a)(ii) is clearly applicable. The AO further noted
that due credit is necessary to be given in respect of cost of owners occupied
premises of 1092.31 sq.ft. which has been valued at Rs.7,10,001/- as on 1-41981. The AO noted that since it is a leasehold land the construction cost on 1-41981 could not be more than Rs.300/- per sq. ft. and the value of occupied
premises cannot be more than Rs.3,27,693/-. Accordingly, he calculated the
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Shri Arvind P.Jobanputra.
capital gain at Rs.32,76,878/- against the capital gain shown by the assessee at
Rs.13,47,689/-.
4.
Detailed submissions were filed before the CIT(A). The contentions raised
before the AO were reiterated before the CIT(A). The provisions of sec. 2(47)
read with sec.269UA were explained. After considering the submissions and
perusing the material on record, the CIT(A) agreed with the explanation filed on
behalf of the assessee. Accordingly, he allowed the appeal of the assessee.
5.
Now, the department is in appeal here before the Tribunal.
6.
The ld. D.R. placed reliance on the order of AO.
7.
On the other hand, the counsel of the assessee placed reliance on the
order of CIT(A).
8.
After considering the orders of AO and CIT(A), we find no infirmity in the
order of CIT(A). The findings of CIT(A) have been recorded at pages 5 & 6 of his
order as under :
“I have gone through the facts of the case, submission made and
also the assessment order. On reasonable consideration of facts, I
am inclined to agree with the appellant’s submission. The appellant
had inherited the rights in the property on death of his father on
23/3/2000 as per his will. The appellant’s father had acquired the
said land vide Deed of Assignment dt. 30/11/1954 by paying
premium of Rs.42,501/- and on annual rent of Rs.1/- per annum.
The said Deed of Assignment provides the perpetual lease granted
by Mumbai Municipal Corpn. Vide ‘Lease in Perpetuity’ dt.
23/4/1937. The appellant thus is entitled to the land and building in
which the land is on perpetual lease granted. The perpetual lease is
equivalent to the ownership right as would be evidence from the
lease deed and therefore, equating the same with the tenancy rights
by the A.O. is not correct. I also find that the A.O. has wrongly
treated the ‘lease in perpetuity’ with the ‘tenancy rights’ and denied
the benefit of substituting fair market value as on 1/4/1981. I
therefore, direct the A.O. to compute the capital gain on transfer of
land and building by substituting the market value of land as on
1/4/81.”
The above findings are findings of fact which do not require any interference.
Therefore, we confirm the findings of ld. CIT(A).
ITA 7160/M/08
Shri Arvind P.Jobanputra.
4
9.
In the result, the appeal of the department is dismissed.
Order pronounced on 24th day of
Feb. , 2010 .
Sd/(J.SUDHAKAR Reddy)
ACCOUNTANT MEMBER
Mumbai:
Sd/(R.K. Gupta)
JUDICIAL MEMBER
24th Feb., 2010.
Copy to :
1. Assessee.
2.Department.
3 CIT(A)-XXVII,Mumbai.
4 CIT, City-17,Mumbai.
5.DR,”A” Bench,Mumbai.
(TRUE COPY)
BY ORDER,
NG:
Asst.Registrar, ITAT, Mumbai.