TaxTMI 
TaxTMI 
2012 (5) TMI 161
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....consideration on transfer of land should be adopted at Rs. 4,90,00,000/- as against Rs. 2,50,00,000/- without appreciating that the original sale consideration was only Rs. 2,50,00,000/- and only by way of correction deed in F Y 2007-08 the consideration was increased and hence, there was no reason to adopt the sale consideration at Rs. 4,90,00,000/- as against Rs. 2,50,00,000/- as determined in the original agreement. 3. The ld CIT(A) erred in holding that the assessee was not entitled to exemption u/s 54EC in respect of the investment in the eligible bonds on the grounds that the assessee had not invested in those bonds within a period of six months from the date of transfer of the land. 3.1 The ld CIT(A) failed to appreciate that the assessee had invested in the eligible bonds within a period of 6 months from the receipt of the sale consideration and accordingly, he was entitled to claim the deduction u/s 54EC . 3.2 The ld CIT(A) erred in not appreciating that if the assessee did not receive the sale consideration within 6 months from the date of transfer, he had no source to invest the amount and accordingly, the benefit of exemption u/s 54EC ought to have been granted....
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....sioner of Income-tax (Appeals). 5. Before the Commissioner of Income-tax (Appeals), assessee filed detailed written submissions assailing the order of the Assessing Officer. In so far as the taxability of capital gain is concerned, the Commissioner of Income-tax (Appeals) agreed with the conclusion of the Assessing Officer that the capital gain is taxable in the year of transfer and the date of entering into the development agreement with the builder is to be treated as date of transfer. He also noticed from the development agreement that the irrecoverable permission for development of the said land was granted by the assessee and the other members of the family, being the co-owners, to the builder and, therefore, the date of development agreement would be treated as the date of transfer. As per the Commissioner of Income-tax (Appeals), merely because the deed was registered in a later assessment year or that the consideration was in accordance with a correction deed made later, would not postpone the date of transfer of an asset. He further observed that capital gain can be charged only once, and it cannot be taxed partly in this year and the remaining part in a later year; sin....
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....ed out that as per clause 5 of the agreement, the assessee had permitted Rohan Builders to enter upon the land and commence the development work alongwith the assessee jointly. Therefore, it is not a case of per se transfer of land/development rights to Rohan Builders as a transferee. In so far as clause 5B is concerned, the same provides that the assessee shall not be entitled to revoke the permission granted to Rohan Builders. In this connection, it is pointed out that the said clause means that if Rohan Builders violates the agreement, assessee could withdraw the permission granted and it is not a case of transfer of rights in the land in favour of Rohan Builders. In support of its plea, reference has also been made to clause 9 of the agreement which states that possession will be passed in favour of the ultimate buyers of the flats and what is allowed as a permission to the Builders is to be accepted as a license to commence construction. Further-more in terms of clause 3 of the agreement the value of the land has been determined at Rs 2,50,00,000/- and apart therefrom, the assessee was entitled to a share in the profits from the development of the land jointly with Rohan Build....
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.... agreement dated 12.7.2005 between the assessee and the builder, M/s Rohan Builders & Developers Pvt. Ltd. In terms of the said joint venture agreement, assessees and the builder decided to undertake a scheme to develop the said land in co-operation with each other. The assessees on their part brought in the land and the builder constructed the flats thereon in terms of the provisions of the agreement dated 12.7.2005. Notably in terms of the said agreement, the consideration for the land was fixed at Rs 2,50,00,000/- which had since been revised upwards to Rs 4,90,00,000/- in terms of a subsequently executed correction deed dated 24.7.2007. The moot question is as to whether in terms of clauses (v) and (vi) of section 2(47) of the Act, an event of 'transfer' had taken place as a result of the execution of the agreement in the instant year on 12.7.2005. That the said agreement indeed envisages a transfer, is not disputed by the assessee, only point disputed is the timing of transfer. The point of contention raised by the assessee is that there is no transfer in terms of giving possession of land to Rohan Builders in this year, inasmuch as such possession is intended only for further....
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....(47)(v) has taken place during the year under consideration. The plea of the assessee that there is no transfer in favour of Rohan Builders as an independent transferee is not relevant to determine the question as to whether qua the assessees, a 'transfer' as envisaged under section 2(47)(v) of the Act has taken place or not. Even if for the sake of argument it is accepted that Rohan Builders have not taken possession of the property as transferee per se, yet there is a transfer resulting on account of handing over possession qua assessee and such possession is taken by Rohan Builders as part of the joint venture, which is again distinct from the assessee. Be that as it may, in our view, the controversy on the timing of the taxability of capital gains in this case is liable to be held in favour of the Revenue, inasmuch as capital gains on transfer of land are liable to be taxed in the instant assessment year on the strength of the agreement dated 12.7.2005. 10. Another aspect disputed by the assessee is with regard to the adoption of full value of consideration for the purpose of computation of capital gain. In this case, in terms of the agreement dated 12.7.2005 the considerati....
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.... has already been considered by the AO. The fact that the amounts were received subsequently and the deposits were made in these bonds within a period of 6 months from the date of receipts was not relevant as it is not as per the provisions of the Act. Even the CBDT circulars cited by the appellant were on different issues and in different context and not with reference to the provisions of section 54EC of the Act. Circular No 791 is in context of section 45(2) r.w.s 2(47) of the Act which relates to the conversion of capital assets into stock in trade, whereas the circular No 359 read with reference to the provisions of section 54E, when the consideration is received in advance. Accordingly, the appellant's contention is not found to be acceptable and this ground of appeal is, therefore, dismissed." Aggrieved by such decision, assessee is in appeal before us in terms of the aforestated Ground of Appeal No. 3. 13. Section 54EC of the Ac prescribes that capital gain arising on transfer of a long term capital asset is not chargeable to tax in case the whole or any part of the capital gains is invested in certain specified Bonds. In this case, the bone of contention is the condi....
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....yond the period of 6 months from the date of transfer, i.e. 12.7.2005 and, therefore, it was not possible for the assessee to have invested the amounts in the specified Bonds within a period of 6 months from 12.7.2005. It is pointed out that in so far as the present claim of the assessee for a further relief on the investment of Rs 50 lakhs is concerned, it is evident that such investments have been made within a period of 6 months from the date of receipt of the consideration. The learned Counsel submitted that if a technical interpretation of section 54EC is adopted, assessee would unjustly be denied the relief. As per the assessee, this would be against the purpose and spirit of the section and in this regard he has referred to CBDT Circular No 359 dated 10.5.1983 which is issued with respect to the scheme of exemption under section 54E of the Act. Section 54E of the Act provides for exemption of long term capital gains if the net consideration was invested by the assessee in specified Bonds within a period of 6 months after the date of such transfer. On being approached with the situation where part of the consideration was invested prior to the date of transfer, the CBDT Circu....
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....ths from the date of transfer, i.e. 12.7.2005 because the aforestated consideration was received on subsequent dates, namely, 12.12.2007, 14.5.2007, 19.6.2007 and 3.7.2007. A technical interpretation of section 54EC in this regard would imply that the exemption from tax on capital gains is not available qua the impugned investment of Rs 50 lakhs. So, however, the plea set-up by the assessee is on account of the purpose and spirit of the section and on account of the fact that the right to collect such sale consideration arose after the period of six months from the date of transfer. It is pleaded that the requirement of section 54EC stipulating investment in six months from the date of transfer has to be appropriately understood and applied so as to further the purpose and spirit of the section. 17. In a somewhat similar situation, the requirement of section 54EC to the effect that investment in specified assets is to be made within a period of six months from the date of transfer, was put to some clarification by the CBDT in Circular No 791 (supra). The question arose before the CBDT regarding exemption of a long term capital asset which had arisen on conversion of a capital as....
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.... impugned sum of Rs 50 lakhs invested in specified assets on 3.8.2007 and 27.10.2007. In the present case, admittedly the impugned amount of sale proceeds have been received by the assessee much after the date of transfer i.e. 12.7.2005, so however, it is also emerging from the record that the investments of Rs 12,50,000/- and Rs 37,50,000/- made on 3.8.2007 and 27.10.2007 respectively have been made within six months of receipt of such consideration. Therefore, having regard to the interpretation placed by the CBDT to understand the requirement of making investment within six months from the date of transfer in section 54EC of the Act we are inclined to uphold the plea of the assessee for exemption from tax on capital gains qua impugned amount of Rs 50 lakhs . Therefore on this aspect, assessee has to succeed. Thus, this Ground of appeal is allowed. 19. In the result, the appeal of the assessee (ITA No 594/PN/10) is partly allowed. 20. Similarly other three appeals of the co-owners, namely, ITA Nos 595/PN/10, 596/PN/10 & 597/PN/10 pertaining to the assessment year 2006-07 which are on identical disputes are also disposed off in the aforesaid light and treated as partly allow....
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....iculture purposes. The AO cannot predict that the land will not be used for agriculture purposes and in itself this is not provided in the scheme of the Act. The AO has not brought any material on record which could have shown that after purchase the land was not being used for agriculture purposes. Therefore, the AO's conclusion cannot be sustained in law. The AO is directed to allow the claim u/s 54B, in case the other conditions given in this section are satisfied. This ground of appeal is, therefore, treated to be allowed." Against this finding of the Commissioner of Income-tax (Appeals), Revenue is in appeal before us. 24. Before us, the learned Departmental Representative has submitted that the Assessing Officer observed that the assessee had ventured into a real estate business and, therefore, there was no possibility of the assessee undertaking agriculture on the new land purchased and thus, the claim under section 54B of the Act has been rightly denied. 25. On the other hand, the learned Counsel for the respondent-assessee has defended the action of the Commissioner of Income-tax (Appeals) by pointing out that there is no presumption that a person undertaking real....