AI Drafter 
TaxTMI 
TaxTMI 
2014 (4) TMI 399
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....f the Revenue in this appeal relates to the year of assessability of capital gains in respect of a property which has been subject matter of a development agreement. 3. Facts of the case in brief are that the assessee is an individual. He filed return of income for the assessment year 2004-05 on 20.11.2004 admitting total income of Rs.76,200. The assessment was ultimately completed on 24.12.2010 under S.143(3) read with S.147 of the Act, on a total income of Rs.45,23,400, after bringing to tax the short term capital gains of Rs.44,47,200. In the course of the said assessment, the Assessing Officer noted that the assessee has given his land to the extent of 1184 sq. yards for development to M/s. Yashoda Builders and Developers, vide development agreement dated 24.7.2003. It was further noted that the assessee has handed over the possession of the property within one week of the development agreement, and the developer was authorised to construct and has got the right over the 50% built up area in exchange for the 50% built up area to be constructed and handed over by the developer to the assessee. Considering this factual background, the Assessing Officer arrived at the capital g....
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....ee-owner has been handed over to the assessee. Though it was initially held by various benches of the Tribunal that capital gains are to be assessed in the year in which development agreement has been entered into between the owner and the developer, considering the fact that in many cases, the development agreement was not acted upon by the developer, different views have to be expressed, as to the year of assessability, based on the facts and circumstances of each case. This position has been examined at length in the light of case-law on the point, in the case of Smt. K.Radhika and others (supra) and it was ultimately held by the coordinate bench of this Tribunal as follows- "48. We are in considered agreement with the views so expressed in this commentary on the provisions of the Transfer of Property Act. It is thus clear that 'willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are t....
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.... record by authorities to show that there was development activity in the project during the assessment year under consideration and cost of construction was incurred by the builder/developer. Hence it is to be inferred that no amount of investment by the developer in the construction activity during the assessment year in this project and it would amount to non-incurring of required cost of acquisition by the developer. In the assessment year under consideration, it is not possible to say whether the developer prepared to carry out those parts of the agreement to their logical end. The developer in this assessment year had not shown its readiness or having made preparation for the compliance of the agreement. The developer has not taken steps to make it eligible to undertake the performance of the agreement which are the primary ingredient that make a person eligible and entitled to make the construction. The act and conduct of the developer in this assessment year shows that it had violated essential terms of the agreement which tend to subvert the relationship established by the development agreement. Being so, it was clear that in the year under consideration, there was no tran....
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.... to perform', as stipulated by and within meanings assigned to this expression under Section 53A of the Transfer of Property Act, its contractual obligations in this previous year relevant to the present assessment year, it is only a corollary to this finding that the development agreement dt. 11.5.2005 based on which the impugned taxability of capital gain is imposed by the AO and upheld by the CIT(A), cannot be said to be a "contract of the nature referred to in Section 53A of the Transfer of Property Act" and, accordingly, provisions of Section 2(47)(v) cannot be invoked on the facts of this case Chaturbhuj Dwarkadas Kapadia v. CIT's case (supra) undoubtedly lays down a proposition which, more often than not, favours the Revenue, but, on the facts of this case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of Section 53A of the Transfer of Property Act. Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis. 50. That is....
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....could be brought to tax in the hands of the assessee in the year under appeal. We are, therefore, of the view that the CIT(A) was justified in deleting the addition made by the Assessing Officer in that behalf. We accordingly uphold the order of the CIT(A), and reject the grounds of the Revenue in this appeal. Cross Appeals for Assessment year 2007-08 ITA No.896/Hyd/13 of the Revenue ITA No.853/Hyd/13 of the Assessee 7. Facts of the case in brief leading to the filing of the present appeals are that the assessee, in the return filed for the assessment year 2007-08 on 14.8.2008, declared inter-alia short term capital gains of Rs.1,41,770. Assessee had purchased a plot of land at Jubilee Hills, Hyderabad admeasuring 1184 sq. yards in May, 2 003. He had 1/3rd share of this plot of land, which was given to M/s. Yashoda builders and Developers for the construction of a residential apartments in July,2003 vide development agreement dated 24.7.2003. As per this agreement 50% of the area was to be given to the developer in lieu of the development work while the other 50% of the area alongwith the developed apartments would belong to the assessee. The assessee's share consisted ....
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....aken as per the SRO rate of Rs.41,27,040. Excluding therefrom, an amount of Rs.2.71 lakhs, towards the only minor deficiency as to the completeness of the flat, he worked out the sale consideration for the flat at Rs.38,56,040. He did not find merit in the contentions of the assessee with regard to the cost of improvement claimed, and accordingly rejected the contentions of the assessee in that behalf. The CIT(A), thus directed the Assessing Officer to recompute the capital gains adopting the sale consideration for the flat at Rs.38,56,040 and without giving any set off towards the cost of improvement claimed. 9. While Revenue preferred against the order of the CIT(A), contesting the relief granted, the assessee contested the findings of the CIT(A) with regard to the determination of sale consideration at Rs.38,56,040 and the rejection of the claim with regard to cost of improvement. 10. The Learned Departmental Representative submitted that the sale consideration should be taken at Rs.70 lakhs only, since the purchaser has clearly stated that Rs.22,68,000 has been paid to flat owner and the balance amount of Rs.47,32,000 has been paid to M/s. M. Bhoopal Reddy and Co., toward....
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.... cannot be sustained as the CIT(A) has adopted the sale consideration, taking the SRO rate at Rs.41,27,040. While the course thus adopted by the CIT(A) is partly as per the provisions of S.50C, since the assessee was disputing the adoption of anything other than the disclosed sale consideration of Rs.22,68,000 for the semi-finished apartment sold, and thus disputing the SRO rate as per S.50C, in terms of sub-section (2) of S.50C, the CIT(A) should have directed the Assessing Officer to refer the matter to the Valuation Officer. Having failed to do so, the order of the CIT(A) cannot be sustained. We draw support in respect of this proposition, from the decision of the coordinate Bench dated 29.1.2010 in the case of Dy. CIT Circle 7(1), Hyderabad V/s. Khaja Kutubuddin Khan, Hyderabad in ITA No.1451 & 1452/Hyd/2008, a copy of which has been furnished before us by the learned counsel for the assessee. While doing so, the CIT(A) has not adhered to the procedure as per S.50C in its totality, which mandated, in the event of dispute by the assessee as to the adoption of value as per SRO, a reference to the valuation cell. That apart, there is a dispute with regard to the nature as to the c....