2010 (12) TMI 91 - AT - Income Tax

Tribunal affirms valuation of development rights under IT Act, provides relief to assessee

The Tribunal upheld the application of section 50C of the IT Act to the transfer of development rights, affirming the valuation by the Stamp Valuation ... Transfer of development rights - application of section 50C - Held that: - When the assessee has received the sale consideration and handed over the possession of the property in question vide development agreement then the condition prescribed u/s 53A of the Transfer of Property Act are satisfied and accordingly, as per the provisions of section 2(47)(v) of the IT Act the transaction of transfer is completed. Accordingly, we do not findany merit or substance in the contention of the assessee. Merely because the name of the assessee still stand in the record of the municipal record does not change the nature of transact ion. Even otherwise the mutat ion of the property in the Property tax record of Municipal Authority does not give any title of ownership. Once, undisputedly, the assessee has handed over the possession of the property to the developer against the payment of share of sale consideration then the property is deemed to have been transferred as per the deeming provisions of sect ion 2(47) of the IT Act . - Provisions of section 50C are applicable. Issues:- Applicability of section 50C of the IT Act to transfer of development rights- Determination of valuation for capital gain calculation- Interpretation of transfer under the Income Tax Act and Transfer of Property ActAnalysis:Issue 1: Applicability of section 50C of the IT Act to transfer of development rightsThe case involved the transfer of development rights of a property by the assesses along with co-owners to a developer. The Assessing Officer (AO) invoked section 50C of the IT Act based on the valuation by the Stamp Valuation Authority. The assessee contended that section 50C should not apply as it was a transfer of development rights, not the property itself. The AR argued that the stamp valuation was for registration purposes, not a sale or transfer of the property. However, the DR argued that the capital gain was admitted by the assesses, and the DVO had considered all relevant factors in valuing the property. The Tribunal found that the transfer of development rights constituted a transfer under the IT Act, and the valuation by the Stamp Valuation Authority was upheld.Issue 2: Determination of valuation for capital gain calculationThe AO adopted the stamp valuation as the full value of sale consideration, leading to a higher capital gain compared to the consideration admitted by the assessee. The Tribunal noted that the AO proportionately calculated the capital gain based on the assessee's share in the property. The DVO's valuation was considered more accurate, resulting in a lower valuation than the Stamp Valuation Authority. The Tribunal upheld the valuation by the DVO, providing relief to the assessee in terms of lower capital gain calculation.Issue 3: Interpretation of transfer under the Income Tax Act and Transfer of Property ActThe Tribunal analyzed the definition of transfer under the Income Tax Act, particularly the inclusion of transactions fulfilling conditions under section 53A of the Transfer of Property Act. It was clarified that the transfer of development rights satisfied the conditions under section 53A, leading to a deemed transfer under the IT Act. The Tribunal emphasized that possession and consideration exchange constituted a transfer, regardless of property ownership records. The Tribunal rejected the argument that the transfer was incomplete due to the absence of a sale deed, emphasizing the completion of the transaction under the deeming provisions of the IT Act.In conclusion, the Tribunal dismissed the appeals of the assessees, upholding the application of section 50C, the valuation for capital gain calculation, and the interpretation of transfer under the relevant Acts.