AI Drafter 
TaxTMI 
TaxTMI 
2014 (6) TMI 495
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.... in the immediately preceding year and not during the year under consideration. 3. The learned CIT(A) erred in holding that the entire sale consideration is taxable for the year under consideration. The learned CIT(A) ought to have considered the facts that (a) development agreement was entered into much earlier (b) a part of the constructed area was sold in the immediately preceding year; and (c) a part of the balance only is sold during the year. 4. The learned CIT(A) erred in holding that the advances received aggregating to Rs 1,76,36,255/- also forms part of sale consideration. 5. The learned CIT(A) ought to have seen that in the process of computing the capital gain what is to be taxed is the cost of constructed area handed over to the appellant as reduced by the cost of the property provided to the developer. 6. The learned CIT(A) ought to have seen that the amount of advance received should not form part of the subject matter of capital gain particularly when the amount of advances received by the appellant from the developer would never be the part of the capital gain, when capital gain has to be worked out with reference to the constructed area received. 7.....
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....Assessing Officer noticed that the total sales included an amount of Rs 415,33,255/- as receipts from sale of floor space. Moreover there was a variation in the opening stock of the current year vis a vis the closing stock of the earlier period. It was found that the appellant had debited Rs 18,77,094/- towards demolition expenses and Rs 39,35,394/- towards cost of land under the head opening stock. 4. The Assessee had two properties shown as capital assets in its books of account, These properties were given for development in the year 2001-,2002 etc and the developed properties were received back in the current financial year and were also sold. Details of these properties are quoted from the order of the assessing officer as below: A) Property bearing no 6-3-1090/B/1 & 2. Raj Bhavan Road, Hyderabad admeasuring 1156 sq. yards(acquired in 1995 and 2990) which was given for development to M/s Maheshwari Plaza Resorts (P) Ltd for construction of multi stored complex by name Mayank Plaza. Vide development agreement dt 16.3.2001 and supplementary deed dated 23..2002. As per the terms of the agreement the assessee received 50% of the built up area and parking space of the develop....
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.... income from business. Both the assets were held as capital assets of the appellant herein and do not represent the stock in trade of the appellant. The appellant herein is not in the business of real estate and therefore the assessing officer rightly concluded that the income is assessable under the head capital gain. 8. The assessing officer quantified the sale consideration and the cost of acquisition as below: Sale consideration: Having held that the receipts are on account of transfer of capital assets it is necessary to quantity the sale consideration. The break up for the receipts admitted from the floor space is as under; A Mayank Plaza: Sale of floor space Rs 1,12,52,000 Amount received from developer Rs. 1,44,36,255 B. Mayank Towers: Sale of floor space Rs. 1,26,45,000 Rs. 4,00,000 Amount received from developer Rs 28,00,000 Total Rs.4,15,33,255 9. As per the terms of the agreement the assessee was entitled to and also allotted 50% of the built up area in both the projects i.e. 9650 sq.ft and 19136 sq.ft. However the assessee has admitted only receipts from sale of floor space as consideration. Sin....
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....assessee stated that it has received only Rs 31,45,000 which has been admitted by it. However in view of the payments mentioned in the deed the difference amount of Rs 18,55,000 received by the assessee was also taken into account as consideration received for computing the capital gain. 12. Cost of acquisition: Having held that the receipts are subject to long term capital gain the assessee is allowed indexation on the cost of acquisition However the demolition expenses of Rs 18,77,094 claimed by the Assessee was not added to the cost of acquisition. On verification of the ledger accounts it is found that this amount represents write off of depreciation claimed in earlier years on office buildings which were demolished prior to giving of the lands for development Since the cost of acquisition is inclusive of the cost of building the question of allowing deduction towards depreciation written off or demolition expenses separately does not arise Therefore the same is net added to the cost of acquisition. 13. In view of the above discussion the income from capital gains is computed as under: Receipts admitted by the assessed Rs 4,15,33,255 Value of 9693 sq.ft of construct....
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....devi Estates &Jyothi Bio energy Ltd Rs. 32,00,000 4.Advances received from Maheswari Plaza Rs 1,44.36,255 Rs.4,15,33,255 1. Vasundaradevi estates P.Ltd Rs 28,00,000 2. Jyothi Bio energy Ltd 40,00,000 3. Advance received from . Maheswari plaza 1,44,36,255 1,76,36,255 17. This should not have been added to sale consideration by the assessing officer for arriving at the capital gain if this amount is reduced the total receipt works out to only Rs 238,97,000 The said amount in fact is received by the appellant herein as Rs 1,12,52,000 for the sale of Begumpet property and Rs 1,26,45,000 through Rajbhavan properties. Only to this extent sale price is to be considered for arriving at the capital gain Instead the assessing officer considered even the advances received by the appellant here> Therefore the assessing officer ought to have taken into consideration the correct amount of sale consideration after excluding the advances received. 18. The assessing officer while working out the capital gain added the closing stock value of 9693 sq. area left unsold with regard to the Rajbhavan Road property. The appellant humbly submits that the stock rem....
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....sessing officer considered the advance received separately the appellant submits that the assessing officer is not correct in making the addition. If the advances of Rs 176,36,255/- are deducted this amount of Rs 18,55,000/- may be added. 22. During the course of appeal proceedings the appellant gave written submissions and the following additional grounds: 1. The Assessing Officer erred in adopting the receipts on sale of plots at Rs 4,15,33,255/- as against the actual sale consideration of Rs 2,38,97,000/- The Assessing Officer ought to have seen that the said amount adopted by him includes the advances received of Rs 1,76,36,255/- 2. The Assessing Officer erred in taxing the capital gain arising because of the development agreement entered into for the asst. year 2006-07 The Assessing Officer ought to have considered the fact that the development agreement were entered into in the years 1995 and 2000 and therefore they become liable for taxation of capital gain in the respective asst. years and not in the asst. year 2006-07. 23. Being legal grounds touching the very basis of the additions made these additional grounds are hereby admitted. The written submissions and ....
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....said to be transferred If a person owns a piece of land and wants to build a shopping complex on it he has the option of either building it himself or giving a contract to a professional builder to do the same . For this purpose the so called handing over of the piece of land to the contractor does not tantamount to transfer of land. No possession or ownership is transferred once the contractor builds the shopping complex on the land the original owner of the land continues to own the land. With regard to the built up area he has an option to pay cash to the builder or he may transfer some other land which he owned to the builder in lieu of the cash provided this other land has the same value as the cost of construction, The net effect in the above transaction is that the person in question has got an area built. In case the payment has been made through sale of another land then the only sale transaction in question is the sale of this other land. In my conclusions drawn above I am fortified by the decision of the Hon'ble ITAT in the case of Smt.Vasavi prapat Chand vs Dy. CIT (2004 089 ITD 0073, (2004/ 090 TTJ TT) 0217. The next question is as to at what point of time the la....
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.... that date this handing over of possession does not entitle the builder to enjoy a portion or whole of the property. This is done only to allow the construction to take on the property the builder or the purchaser of the land acquires the right to enjoy the property it has purchased only when it has paid consideration for the portion of the property and has obtained legal rights to enjoy the property it has purchased in the current case When the constructed area is handed back to the appellant by the builder at that stage the builder obtains the right to enjoy 50% of the property which it has got in lieu of the construction, The transfer takes place on that date. This is the mandate of the ratio discussed above. Therefore in the case of the appellant transfers with respect to both the properties took place in the current asst. year i.e. when the builders handed over the built up area and as a result received the right to enjoy their portions on the properties This decides additional ground no 2 in favour of the revenue. Coming to the additional ground no 1 the appellant stated that the amount of receipts i.e Rs 4,15,33,255/- included an amount of advance received from various pa....
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....tional ground of appeal is also decided in favour of revenue. Coming to the original grounds of appeal grounds nos 1 and 11 are general in nature and ground no 10 is only consequential in nature. Ground no 9 has already been decided by me in para 5.3.1. above. Ground no 2 relates to the consideration by the assessing ofsfficer of adding the cost of unsold area to the total cost. In this regard the assessing officer has held as already discussed that there were two sale transaction,. The first transaction involved the sale of 50% of the land area to the builders instead of cash the appellant received built up area on its 50% portion of the land. The assessing officer considered this amount to be a receipt in the hands of the appellant. This issue has already been discussed in detail in this order. It has already been held that the first stage of capital gains arose when the land was transferred in lieu of the built up area. Therefore the assessing officer is absolutely correct in holding that the entire value of the built up area whether sold or unsold is the sale consideration in lieu of 50% of the land This ground of appeal is accordingly decided in favour of the revenue. ....
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.... construction and not Rs 900/- per sq.ft. Ground no 5 deals with the application of section 50C on the sale of constructed property by the appellant leading to an addition of Rs 928,951/- During assessment proceedings the assessing officer clearly brought out the difference between the market value of office space sold as per the sale deed vis a vis the lower rate admitted by the appellant as below: Invoking of provisions of sec 50C On verification of the sale deeds in respect of the sales made by the assessee it is noticed that in some of the deeds the market value on which and deficit stamp duty has been paid is higher than the sale consideration admitted. The details of the same are tabulated hereunder: Name of the complex and the purchaser: Mayank Towers Jyothi Bio Energy td: Office space 4 x& 5 1915+126 sq.ft.Regd.value Rs 18,80,804 Market Value Rs 21,02,500/-- CG. Mohan Rao Office space 1 1540 sq.ft. Regd.Value 15,12,500 Market value Rs 16,63,500 N.Padma Rao Office space 2 1066 sq.t. Regd.Value 10,46,965 Market value 11,51,500 N.Bhaskar Rao Office space 3 1079+126 sq.ft. Regd.value 10,59,780 Market value 11,98,500 G.Appala Raju Office sace 501 1055 ....
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.... I have considered carefully the facts and arguments and I find that the contention of the appellant is not substantiated through any evidence The appellant has failed to show the cheque no through which the so called advance was given by the purchasers of the property. The appellant has also not able to co relate the advances received by it if any to the payments stated to have been received. Therefore in the absence of any evidence to support the claim I agree with the decision of the assessing officer that there were no advances received and no adjustments made Rather the entire amount of Rs 50 lakhs was received by the appellant while it has disclosed only Rs 31,45,000/- The balance of Rs 18,55,000/- has been rightly added by the assessing officer. The seventh and eight grounds of appeal relate to the demolition chares This issue has already been adjudicated upon in this order. In the result the appeal is partly allowed." Aggrieved by the order of the CIT(A), the assessee is in appeal before us. 24. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. The facts are that the Assessee had....
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.... liable to be assessed to tax in relation to the capital gains in the year under consideration itself. For this purpose, we place reliance on the decision of the coordinate Benches of this Tribunal in Smt. Maya Shenoy V/s. ACIT (2009)124 TTJ(Hyd) 692). We also find support in this behalf, from the judgment of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkaddas Kapadia V/s. CIT (260 ITR 491), wherein it has been held that S.2(47)(v) read with S.45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law. We also place reliance in this behalf on the ruling of Authority for Advance Rulings in Jasbir Singh Sarkaria In Re (294 ITR 196(AAR), to the following effect - In order to be 'transfer' within the meaning of cl. (v) ofs.2(47), there must be a transaction under which the possession of immovable property is allowed to be taken or allowed to be retained. Secondly, such taking or retention of possession as is well known is a facet of the equitable doctrine of part performance of contract falling within the scope of S.53A of....