By JAGDISH D. SHAH I JAGDISH T. PUNJABI
Chartered Accountants
FACTS
In the course of assessment
proceedings of MIG Group III Co-operative Housing Society Ltd. (society), it is
noticed that the society has entered into a development agreement with Suyog
Happy Homes (developer) on 30.4.2008 and the members of the society have
received payments from the said developer.
The details revealed that the assessee has received Rs. 40,75,302 and
had not filed return of income for assessment year 2009-2010. Accordingly, reasons were recorded and a
notice u/s. 148 of the Act was issued and served upon the assessee. In response to the notice, the assessee filed
return of income declaring total income of Rs. 1,94,290.
The society, of which the assessee
was a member, was the owner of property consisting of 9 buildings with 80
members. The society, on 30.4.2008, entered into an agreement with the
developer for development of the property in such a manner that each member of
the society shall receive a new flat in exchange of surrender of old flat
depending upon the size of the old flat along with interest in the additional
FSI allotted by MHADA. The property and the additional FSI would be with the
name of the society. All the expenses, costs and charges for the proposed
project of redevelopment of the said property including for purchase of
additional FSI from MHADA etc., were to be borne by the Developers alone and
the society and members were not liable to pay or contribute any amount towards
the same.
As per the agreement, the developer
was to pay the society being lawful owner of the property and the members an
aggregate monetary consideration of Rs.39.10 crore which was to be distributed
among the members of the society being shareholders depending upon the size of
their old flat.
During the year under
consideration, the assessee, as a shareholder of the society, received an
amount of Rs.40,75,302/- being consideration for surrender of his old flat
along with his interest in the additional FSI allotted by MHADA etc. The
developer issued the cheques in the name of the individual members which were
handed over to the society and in turn, the society diverted the same at source
to the members/shareholders. Thus, the said amount of Rs.39.10 crore never
routed through the books of accounts of the society though these cheques were
in the custody of the society before handing over to the individual members
being shareholder.
The said activity was treated as
commercial activity and the receipt of the amount of Rs.40,75,302/- was
considered as revenue receipt by AO and accordingly taxed as Income from Other
Sources.
Aggrieved by the order, the
assessee filed an appeal before the CIT(A) contending that the amount of corpus
money/hardship allowance is a capital receipt not chargeable to tax. The CIT(A) treated the said receipt as long
term capital gain.
Aggrieved, the assessee preferred
an appeal to the Tribunal on the ground that the amount of corpus
money/hardship allowance received by the assessee is a capital receipt not
chargeable to tax and without prejudice contending that the CIT(A) ought to
have appreciated that the Appellant has purchased a new house at Dahisar for
Rs.21,68,180/- out of the capital gains of Rs.31,68,313/- and hence the
proportionate deduction u/s. 54 ought to have been granted by the CIT (A).
HELD
At the time of argument, the
assessee did not contest that the amount of corpus money/hardship allowance
constitutes capital receipt not chargeable to tax but only argued that the
CIT(A) has treated the receipt of Rs.40,75,302/- as capital gain and the
assessee has also acquired new flat, therefore, the benefit u/s. 54 of the Act
is required to be given. The Tribunal observed that the Assessing Officer
treated the receipt as income from other sources whereas the CIT(A) has treated
the said receipt as long term capital gain. It is not in dispute that the
assessee has also acquired a new flat in lieu of his old flat. The receipt to
the tune of Rs.40,75,302/- has been treated as long term capital gain.
Undoubtedly, the claim u/s. 54 of the Act was not raised earlier before the
revenue. Anyhow, since the receipt to the tune of Rs.40,75,302/- has been
treated as long term capital gain, therefore, in the said circumstances, the
claim u/s. 54 of the Act is also liable to be considered in accordance with
law.
The Tribunal remanded the alternate
ground raised (viz. claim for deduction u/s. 54) before the AO for consideration
in view of the provision u/s. 54 of the Act in accordance with law after giving
an opportunity of being heard to the assessee. This ground of appeal was
allowed.
The appeal filed by the assessee
was allowed.
Contributor’s Note: The grounds of appeal state that the claim
u/s.54 ought to have been allowed in respect of flat purchased by the assessee
in Dahisar but the operative portion of the ITAT order refers to assessee
having acquired a new flat in lieu of old flat.
