9911796707
TMI Blog2024 (11) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... from the owner and thus there was a transfer of ownership by the erstwhile tenant. We agree with the submissions of the assessee that if the assessee had purchased an immovable property, then he would have entered into a Deed of Conveyance, however, in the instant case the parties entered into a Deed for Conversion. The fact that while computing the fair market value of the subject property, the DVO considered 30% of the gross value as the fair market value of the subject property also supports the case of the assessee as in the case of purchase of ownership entire 100% would have been considered as fair market value. Having considered the peculiar facts of the present case in light of the various judicial pronouncements as noted above and also in light of the detailed analysis of the provisions of section 56(2)(x)(b) of the Act, we are of the considered view that since the assessee, being a protected tenant since 1992, has merely acquired an ownership right of the Flat earlier occupied by him as a protected tenant and not any immovable property vide Deed for Conversion dated 05/12/2019, therefore section 56(2)(x)(b) of the Act is not applicable to the present case. Reliance on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, of the case the Ld. CIT(A) erred in not accepting the valuation report of government approved valuer Dadbhawala Architect, Engineers Valuers Pvt. Ltd. as furnished by the Appellant without giving any reasons whatsoever. 6. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in levying interest u/s 234B and 234C of the Act. 7. Your appellant prays that returned income be accepted and the addition made to the declared income be deleted in the interest of justice and/or appropriate relief. 8. The Appellant craves leave to add, amend, alter, delete or modify all or any of the above grounds of appeal. 3. The solitary dispute raised by the assessee is against the addition made under section 56(2)(x) of the Act. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and for the year under consideration filed its return of income on 18/08/2020 declaring a total income of Rs. 12,91,760. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) and section 142(1) were issued and served on the assessee. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has considered the cost of conversion of tenancy rights into ownership rights at 10% of the market value of the property instead of considering 90% of the same after granting a concession of 10%. The AO further held that the purchase transaction, i.e. conversion of tenancy rights into ownership rights are covered under the definition of transfer as provided in section 2(47) of the Act. The AO held that as per the provisions of section 56(2)(x)(b)(B) of the Act, the difference of the fair market value of the purchased or transferred immovable property as adopted/assessed by Stamp duty authority and purchase consideration as mentioned in the purchase deed should be treated as income chargeable to tax under the head income from other sources . The AO held that the assessee has duly received property from an earlier owner and therefore the case of the assessee clearly falls under section 56(2)(x)(b)(B) of the Act, as the assessee has now received absolute rights in the property by way of transfer of the property and has now become the owner of the property. Accordingly, the AO considered a sum of Rs. 1,13,70,000 (i.e. Rs. 1,38,70,000 minus Rs. 25,00,000) as income under the head incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not considered as income of the assessee under the head income from other sources under section 56(2)(x)(b)(B) of the Act. It is the plea of the assessee that section 56(2)(x)(b)(B) of the Act is not applicable to the present case, since the consideration of Rs. 25,00,000 was paid by the assessee merely for the conversion of tenancy rights into ownership rights and he has not received any immovable property during the year under consideration. It is further the claim of the assessee that he has merely secured the balance rights in the property, which was always in his possession since the year 1992. Thus, it is the claim of the assessee that he has not received any immovable property and has only received additional rights in the property. It is further the plea of the assessee that the term immovable property has been defined to mean land or building or both and the same does not include any rights in the land or building. Thus, it was submitted that the conversion of rights is different from the purchase of property. On a without prejudice basis, the assessee furnished the report from an independent valuer, whereby the cost of conversion of tenancy rights into ownership rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from other sources, if the amount of such excess is more than the higher of the amount of Rs. 50,000 and the amount equal to 5% of the consideration. Thus, for the applicability of the provisions of section 56(2)(x)(b)(B) of the Act, it is firstly relevant that the person receives the immovable property on or after 01/04/2017; secondly, the same is received for a consideration which is less than the stamp duty value of such property; and thirdly, such excess should be more than the amount as noted above. Here it is also pertinent to note that while assigning the meaning to the term property in the Explanation to section 56(2)(x) r/w the Explanation to section 56(2)(vii) of the Act, the term immovable property has been defined to mean land or building or both. In our view, it will not cover the improvement of right which is already held by the assessee. Therefore, from the bare reading of the aforesaid provisions of the Act, it is discernible that receipt of immovable property for the purpose of section 56(2)(x)(b) of the Act only includes within its ambit receipt of land or building or both. In other words, section 56(2)(x)(b) of the Act cannot be so exhaustively interpreted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in January 1976. The assessee and his mother, like all other tenants, jointly paid Rs. 46,287 towards the purchase price of the flat in their occupation and thereby became the owner thereof. After about four months of the purchase of the said flat, in May 1976, the assessee and his mother sold the said flat to Mr. Mrs. V.V. Dalal for Rs. 1,80,000 and handed over vacant possession thereof to the said purchasers. In the assessment of the assessee under the Act for the assessment year 1977-78, the ITO computed capital gains from the sale of the said flat at Rs. 1,31,213 by deducting Rs. 46,287, being the purchase price and Rs. 2,500 being legal expenses incurred in connection therewith from the sale consideration of Rs. 1,80,000 and assessed the same as short-term capital gain from the sale of the flat because the flat had been sold within 4 to 5 months of the purchase. The assessee was aggrieved by the above order of the ITO. According to the assessee, the sale of the flat by the assessee comprised of two capital assets, viz., occupancy right and the remaining rights of owner including title. It was contended by the assessee that the tenancy right was acquired by the father of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years and she had purchased said office from the owner through open bidding and not through ownership right, cost of acquisition of office premises would be cost, which was incurred for acquiring it. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: 8.2 After holding that the sale of office amounted to Long Term Capital Gain, the second issue which comes for our consideration is to what would be the cost of acquisition of the said property. The appellant's claim is that, since she was a tenant for the last 30 years, therefore, she had a tenancy right which was exchanged for the ownership right vide agreement dated 10.06.1999 and therefore, the cost of the premises has to be taken by including the tenancy right in the cost of acquisition. Accordingly, the appellant took the market value as on 10.06.1999 as the cost of acquisition, which has been estimated by the approved valuer at Rs. 10,04,475/-. In support of this, heavy reliance has been placed on the judgment of Hon'ble Jurisdictional High Court in the case of Abrar Alvi (supra). First of all, the said judgment cannot be held to be applicable as that was a case where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fact is further evident from clauses 6 and 7 of the Deed for Conversion, forming part of the paper book from pages 86 to 134, wherein it has been provided that the assessee shall have the ownership rights only in respect of the Flat in his occupation and possession and is not entitled to any separate rights in the Land or the Building in any manner whatsoever. Thus, we agree with the submissions of the assessee that if the assessee had purchased an immovable property, then he would have entered into a Deed of Conveyance, however, in the instant case the parties entered into a Deed for Conversion. Further, the fact that while computing the fair market value of the subject property, the DVO considered 30% of the gross value as the fair market value of the subject property also supports the case of the assessee as in the case of purchase of ownership entire 100% would have been considered as fair market value. Having considered the peculiar facts of the present case in light of the various judicial pronouncements as noted above and also in light of the detailed analysis of the provisions of section 56(2)(x)(b) of the Act, we are of the considered view that since the assessee, being ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
