Sh. R.b. Mathur , A v. Pr. Commissioner Of Income Tax, Central Circle-2 , Centralrevenue Building, Department Of Income Tax, Statue Circle, C-Scheme, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 346/2017 Sh. R.B. Mathur , A-8, Shyam Nagar, Jaipur. ----Appellant Versus Pr. Commissioner Of Income Tax, Central Circle-2 , CentralRevenue Building, Department Of Income Tax, Statue Circle, C-Scheme, Jaipur. ----Respondent HON'BLE MR. JUSTICE KALPESH SATYENDRA JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS 25/07/2018 Order By way of this appeal, the appellant has challenged thejudgment and order of Tribunal whereby learned Tribunal haspartly allowed the appeal of the assessee. This Court while admitting the appeal on 20.02.2018framed following substantial question/s of law: “Whether the Ld. ITAT was justified underlaw while treating the agreement dated24.07.1994 as a transfer agreement by applyingthe provisions of Section2(47) (v) of the IncomeTax Act, 1961 and Section 53A of the Transfer ofProperty Act 1882 while the said document isnot a sale agreement in view of the expresscondition mentioned in clause 2 of saidagreement and no consideration have beenreceived by the assessee-appellant from thedeveloper-party at the time of execution of thesaid agreement?” “Whether the Ld. ITAT was justified underlaw while sustaining the addition of Rs. 45 lacsin the hands of the assesseeappellant onaccount of capital gain and ignoring the materialfact that the capital gain in respect of theproperty have been disclosed in the returns ofincome of Mrs. Prem Kumari Mathur wife of theAssessee- Appellant and S/Sri Ravi Mathur andAnuj Mathur both sons of the Assessee-Appellant in the Assessment Year relevant to theprevious years in which the flats constructed onthe property were sold?” Counsel for the appellant has taken us to the order of the Tribunal as well as documents tendered by him by Paper-bookwhich reads as under: 1.DevelopmentAgreementDated11.07.1994 7.That since huge sum of money is required tocomplete the project, the first party shall haveno objection in mortgaging the property to anybank, semi govt. or govt. or private agency ifrequired for the arrangement of finances. Thatafter deducting all the expenses in constructingthe said complex and interest paid to anyfinancial agency in case finance is taken fromthem, the net profit/loss shall be divided in theratio of 50:50 between the two parties. 2. ITAT, Jaipur, order dated 28.01.1999. 54. Shri R.B. Mathur applied for grant of termloan of Rs.50 lacs on collateral security of theabove land to the Oriental Bank of commerce,Ajmer Road, Jaipur, when agreement betweenhim and Smt. Prem Kumari Mathur, his wife andproprietor of M/s. DHD & C was executed on24.7.94forconstructingmulti-storiedresidential complex on the above plot. In theabove agreement, the market value of theabove plot vas taken at Rs. 45,00,000/. The AOconsidered and treated the property asindividual property of Shri R.B. Mathur againsttho assessee's claim mentioned above. the AOhas alleged that the purchase deed,application for higher electricity load andapplication for term loan do not indicate thatthe property was purchased in HUF capacity.The AO treated the property to be converted into stock-in-trade on the date when assesseeapplied for term loan. In this regard statementof Shri Ravi Mathur was recorded wherein heoffered to pay capital gains tax to beapportioned between three members. Capitalgains was calculated by taking the considerationof property at Rs.45,00,000/- being theestimated market value shown in application forterm loan. The capital gains was added in thehands of Shri R.B. Mathur on substantive basisand 1/3rd each on protective basis in the handsof Shri Ravi Mathur, Shri Anuj Mathur and Smt.Prem Kumari. 3. Assessment order dated 05.01.1999 ANNEXURE -B into stock-in-trade on the date when assesseeapplied for term loan. In this regard statementof Shri Ravi Mathur was recorded wherein heoffered to pay capital gains tax to beapportioned between three members. Capitalgains was calculated by taking the considerationof property at Rs.45,00,000/- being theestimated market value shown in application forterm loan. The capital gains was added in thehands of Shri R.B. Mathur on substantive basisand 1/3rd each on protective basis in the handsof Shri Ravi Mathur, Shri Anuj Mathur and Smt.Prem Kumari. 3. Assessment order dated 05.01.1999 ANNEXURE -B {A}. CALCULATION OF LONG TERM CAPITAL GAIN[a]. Fair market value of land in 1981 = 2.71 lacs. Add - Cost of stamp paper = 0.11 lacs. Add -Cost of strip of land = 0.83 lacs. 330 sq.m. @ 250/sq.m. ------------ 3.65 lacs. [b]. Indexed cost = 3.05 X 3.65 = 11.13 lacs. [c]. Long term capital gain = 50 – 11.13 = 38.86 lacs. [d]. Long term gain / sft. = 38.86 / 31745 = 122.04 /sft. [e]. Long term gain on sale of 4890 sft.(as per annexure-C)=122.04 X 4890 = 5.96 lacs. [f]. Long term gain / owner = 5.96 lacs / 3 = 199577 say 199580 [g]. Tax @ 20% = 39915/- per owner (Total three owners) The contention of the counsel for the appellant is thatthe partition had already been taken place in 1986 and they areshowing income tax in individual capacity and also in HUF.However, the property was in the name of Shri R.B. Mathur andagreement was entered into between coparceners. However, inview of earlier partition which was not reflected in the revenuerecord but in view of the decision of Hon’ble Supreme Court inCommissioner of Income Tax vs. Poddar Cement (P.) Ltd. Etc., (1997) 226 ITR 0626, wherein it has been observed as under: “The liability under s. 22 is on a personwho receives or is entitled to receive the incomefrom the property in his own right. Therequirement of registration of the sale-deed inthe context of the s. 22 is not warranted.Assuming that there are two possibleinterpretations on s. 22, which is akin to acharging section, it is well settled, that the onewhich is favourable to the assessee has to bepreferred. This view is strengthened/supportedby a subsequent amendment to s. 27. The saidamendment was introduced to s. 27 by theFinance Act, 1987 by substituting cls. (iii), (iiia)and (iiib) in the place of old cl. (iii) w.e.f. 1stApril, 1988. From the circumstances narratedand from the memorandum explaining theFinance Bill, 1987, it is crystal clear that theamendment was intended tosupply an obviousomission or to clear up doubts as to the meaningof the word "owner” in s. 22. In the light of theclear exposition of the position of adeclaratory/clarificatory Act it is not necessary tomultiply the authorities on this point. There is,therefore, no hesitation to hold that theamendment introduced by the Finance Bill, 1988was declaratory/clarificatory in nature so far asit relates to s. 27(iii), (iiia) and (iiib).Consequently, these provisions are retrospectivein operation. In the context of s. 22 havingregard to the ground realities and further havingregard to the object of the IT Act, namely, ‘totax the income’, owner is a person who isentitled to receive income from the property inhis own right.” If contrary two views are possible then view should be taken in favour of assessee. The counsel for respondents has taken us to the para 46 of the Tribunal’s judgment, reads as under: “46. Before parting, we may add that once theapartment complex is fully constructed, sale ofresidential units in such apartment complexwould be a subsequent sale and the assessee If contrary two views are possible then view should be taken in favour of assessee. The counsel for respondents has taken us to the para 46 of the Tribunal’s judgment, reads as under: “46. Before parting, we may add that once theapartment complex is fully constructed, sale ofresidential units in such apartment complexwould be a subsequent sale and the assessee would be at liberty to claim cost of acquisitionagainst such sale, the full value of considerationdeemed as accruing as a result of the transfer ofthe capital asset under Section 45 (2) of the Actwith a view to avoid any double tax.” and contended that though the Tribunal has taken intoconsideration the question of double taxation however, it is for twotransactions; one for development agreement and other as capitalgain. In our considered opinion, if there is double taxation inthe form of sale, on appropriate application being moved by theHUF, the same will be considered. If the property is in the name ofHUF or individual, double taxation is not permitted for the sameproperty or there cannot be any capital gain. Both the issues are answered in favour of department. The appeal stands dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J