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TMI Blog2025 (3) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in considering the amount of Rs. 1,48,94,138/- as consideration of transfer of capital asset, without appreciating the fact that there is no transfer of any such property as per sec 2(47) of the Act. 3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in not appreciating the fact that, the appellant has received Permanent Alternative Accommodation against it's own tenanted premises which is as per the Rules of the MHADA and the Maharashtra Rent Control Act, read with Provisions of Development Control Rules and that, there is no surrender of tenancy or extinguishment of rights in the premises. 4. On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred in taking the Long-Term Capital Gain at Rs. 1,48,94,381/- which is the value ascertained for stamp duty, and no such consideration paid by the appellant firm. 5. On the facts and circumstances of the case as well as in law, the Learned CIT(A) as well as the Learned Assessing Officer has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ownership basis' in the new building known as Garner Heights to be constructed. Accordingly, during the AY 2018-19, on 27 July 2017, the appellant had entered into an agreement for PAA with the Garnet Developers and had paid a stamp duty of & 7,45,000 and a registration fee of & 30,000 on the market value of the said flat of & 1,48,94,138. 6. The return of income filed by the appellant for the AY 2018-19 was selected for limited scrutiny for the reason 'Investment in Immovable Property' being the PAA provided by the Garnet Developers and hence, notices under section 143(2) of the Act and section 142(1) of the Act were issued requesting the appellant to furnish information with respect to this PAA. In response to these notices, the appellant had submitted all the details that were called for from time to time. 7. On 23 February 2021, a show cause notice was issued to the appellant proposing to treat the stamp duty value of the new property at Garner Heights of 71,48,94,138 as long-term capital gain on account surrender of tenancy rights in the old premises, as per section 45 of the Act and asking the appellant to furnish its response by 2 March 2021. In respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase price will be the cost of acquisition. In any other case, if it does not fall under the sub-clauses i) to (iv) of sub-clause (1) of section 49, then the cost of acquisition will be treated as nil. In this case, it is an undisputed fact that the appellant has acquired tenancy right by paying a security deposit of Rs. 1080/- in 1954, which is still outstanding in its books, therefore this represents cost attached to the said tenancy right. Hence provisions of section 55(2)(a)(i) is applicable and not 55(2)(a)(ii) as invoked by AO and Ld CIT (A). iii. Further, section 55 of the Act provides that for computation of capital gains, an assessee shall be allowed deduction for cost of acquisition of the asset and also cost of improvement, if any. However, for computing capital gains in respect of an asset acquired before 1 April, 2001, the assessee has been allowed an option of either to take the fair market value of the asset as on 1 April, 2001 or the actual cost of the asset as cost of acquisition. The benefit of indexation is also accorded in such cases as per the provisions of section 48 of the Act. So while calculating capital gains, firstly fair market value as on 1 April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the old premises was to be provided a basement measuring 4,000 sq. ft. along with a commercial premise admeasuring 400 sq. ft. in the new building to be constructed in the same property by the Garnet Developer. If the contention of the AO is to be accepted that there has been a surrender of tenancy rights by the appellant in favour of the Garnet Developer, the relevant event which led to such transfer took place in the AY 2011-12 i.e. the year in which the consent terms were arrived at and agreed to between the concerned parties by the Consent Decree dated 25 October 2010. Thus, the income, if any, from the alleged transfer/ surrender of tenancy rights arose in AY 2011-12 and not in AY 2018-19, the relevant year under consideration. In view of the same, the appellant would like to submit that the addition made by the AO on account of so called income from the alleged transfer/ surrender of tenancy rights in AY 2018-19 is not based on proper appreciation of the facts of the case and no addition on this account is warranted in the relevant year under consideration. ii. In this regard, the appellant would like to draw your Honours attention to the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan Building together with six covered car parking spaces and one open car parking space. As per the Consent Terms, it was also agreed that when the co-operative society would be formed the assessee would be given the full ownership rights of the said premises and till that time the assessee would be treated as the tenant on the monthly rent of Rs. 10,000/-. The Hon'ble High Court passed the Consent Decree as per the Consent terms filed by the coowners and the assessee 29.05.1999. In pursuance of the Consent Decree the assessee vacated the property which was subject matter of the litigation and took the possession of the alternate premises in Shriniketan building. There was an agreement on 4.11.2004 to that effect. When the assessee made the compliance of the Consent Decree and agreement was executed on 04.11.2004, in our opinion, at the most, the transfer can be treated on that day when the effective agreement was executed in pursuance of the consent decree even if said agreement was not registered but subsequently registered on 22.02.2007 by way of Confirmation Deed. So far as plea of the assessee that there was no transfer at all is without any base. The assessee was accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jma Abdul Kadar as well as the Garnet Developers in the Small Causes Court at Mumbai being RAD Suit No. 920 of 2010. 5.1. However, during the pendency of the said Suit, consent terms were arrived at between the parties thereto and thus Garnet Developers had agreed to provide a basement measuring 4,000 sq. feet. along with a commercial premise admeasuring 400 sq. feet in the new building to be constructed to the assessee in lieu of the assessee's tenancy rights in the premises and, therefore, based on these consent terms court has granted decree in favour of the assessee to that effect. 5.1.1. However, due to certain restrictions of constructing the basement in the new building, itwas mutually agreed between the parties i.e., the assessee and the Garnet Developers that the assessee will be provided a Permanent Alternate Accommodation (PAA), free of cost, by way of a flat on the 20th floor being flat no. A-2001, admeasuring 1,453.33 sq. feet inclusive of fungible carpet on 'ownership Basis' in the new building known as Garner Heights to be constructed. Accordingly, during the AY 2018-19, on 27 July 2017, the assessee had entered into an agreement for PAA with the Garnet Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases as per the provisions of section 48 of the Act. Therefore, while calculating capital gains, firstly fair market value as on 1 April 2001 needs to be considered and thereafter indexation is done and then the indexed cost is reduced from the sale consideration. 7. In the present case, in order to ascertain the fair market value as on 1 April 2001, the assessee had obtained a valuation report from M/s. Kishore Karamsey & Co., Government Registered Valuer, copy of which has been placed on record. As per the said valuation report, the fair market value of the said tenancy rights was computed at Rs. 1,33,33,334 as on 1 April 2001. The indexed cost of acquisition comes to Rs. 3,62,66,668 (Rs. 1.33,33,334 * 272/100) and the same needs to be reduced from the full value consideration of Rs. 1,48,94,318 adopted by the AO. Accordingly, this would result in a long term capital loss to the assessee and there would not be income which would be subject to tax as long term capital gains for the relevant year under consideration. 8. The ld. A/R further submitted that the assessee has sold this flat in AY 2021-22 for a consideration of Rs. 3,10,00,000/- and offered capital gain taking cost a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -clauses (i) to (iv) of sub-clause(1) of section 49, then the cost of acquisition will be treated as nil. 13. In this case, it is an undisputed fact that the assessee had acquired tenancy right by paying a security deposit of Rs. 1080/- in 1954, which is still outstanding in its books, therefore this represents cost attached to the said tenancy right. Though cost is not defined in Section 2 or Section 55 the Income Tax Act, however it is being defined in section 43 for the purpose of Section 28 to 41 of the Act, which says the expression "actual cost" means the actual cost of the assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by Government or by any public or local authority. So, therefore, in ascertaining the actual cost, what has to be considered is the actual cost of the assets of the assessee. In this case the deposit paid by the assessee to acquire the tenancy right in 1954 is actual outflow from the pockets of the assessee hence this can very well be taken as cost in its hand. Therefore, in these set of facts, the provisions of section 55(2)(a)(i) is applicable and not 55(2)(a)(ii) as invoked by AO and Ld CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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