AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 651
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.... offered the capital gains arising out of development agreement in the assessment year 2004-05, i.e., in the year in which the assessees got their share. However, the assessing officer held that the Capital gain is assessable in the financial year 1999-2000 relevant to the assessment year 2000-01, i.e., in the year in which MOU was signed. The AO further noticed that the compensation originally granted to the assessees was enhanced subsequently. Accordingly, the AO assessed the capital gain arising on original compensation on substantive basis in assessment year 2000-01 and on protective basis in assessment year 2004-05. However, the AO assessed the capital gain arising on enhanced compensation on substantive basis in assessment year 2004-05. The Ld CIT(A) also confirmed the view taken by the assessing officer. 3. Hence the principal issue urged before us relates to the determination of the assessment year in which the Capital gains is assessable. Further the assessee is aggrieved in respect of the following issues also:- (a) Determination of the value of Sale consideration. (b) Determination of cost as on 1.4.1981. (c) Denial of exemption claimed u/s 54 of the Act. 4. We shal....
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....the financial year 2003-04 and handed over the possession of the constructed areas to the assessees in that year. 7. The assessees offered the Capital gains arising on account of the MOU in assessment year 2004-05. However, as stated earlier, the assessing officer assessed the capital gains computed as per the initial compensation in AY 2000- 01 and the capital gains computed on enhanced amount in AY 2004-05. As stated earlier, the capital gains assessed in AY 2000-01 on substantive basis was also assessed on protective basis in AY 2004-05. The Ld CIT(A) also confirmed the order of the assessing officer. 8. The main contention of the assessee was that the developer did not comply with the terms and conditions of the MOU and hence the date of MOU cannot be considered as date of transfer. To substantiate this contention, the assessee has submitted the following points:- (a) The developer did not start the construction immediately as per the terms of MOU (b) The payments were not made by the developer in accordance with the terms agreed upon. (c) The assessees had to serve a legal notice to the developer in order to compel him to adhere to the terms and conditions of MOU (d) The....
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...., the assessees have got possession of the constructed areas and also received the agreed amount, which shows that the terms of MOU has been complied with even though there was some delay. Hence, in our view, the tax authorities are justified in placing due reliance on the MOU, since it has ultimately been given effect to. 10. We notice that the Ld CIT(A) has considered all these points and accordingly has rendered his decision. For the sake of convenience, we extract below the operative portion of the order passed by Ld CIT(A) on this issue:- "5. I have gone through the assessment order and the written submissions filed by the appellant during the course of appellate proceedings. After examining all the relevant facts of the case and the legal position on various issues involved in this appeal, the grounds of appeal taken by the appellant are being considered and disposed off as under: Ground of Appeal No -1 In the first ground of appeal, the appellant has challenged the AO's action of taxing the long term capital gains on transfer of residential land to the developer in the AY 2000-01 on substantive basis and in AY 2004-05 on protective basis. The facts have been explaine....
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.... High Court and eventually the developers were able to get the go ahead signal from the TMC on 19/10/2001 to complete the project as per the originally sanctioned plan. This intervening period (from 02/12/2000 to 19/10/2001 ) delayed the implementation of the project by the developer and had its impact on the payment schedule of the consideration. In spite of this serious problem and the financial crisis resulting therefrom, the developers did their best to pay substantial amount, i.e. more than 50 % of the consideration to the appellant by February, 2002. The appellant was all the time aware of the problems being faced by the developers. The appellant has contested that the MOU did not confer any 'legal ownership' or any 'beneficial ownership' on the developers. It has also been contested that there was a clause in the MOU which empowered the appellant and other co-owners to terminate the MOU in the event of non compliance of its clauses by the developers. It has been argued that this particular clause in the MOU makes it a contract that is not covered under the provisions of Section 53A of the Transfer of Property Act. I do not agree with the arguments of the app....
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....on the development project, that we sought more time to comply with our obligations under the said Memorandum of Understanding and your clients were kind enough to agree to the same. We have at all times apprised your clients of the developments taking place and your clients have all along been kind enough to accommodate us. Your clients are fully aware of the stage of the construction and your clients calling upon us at this stage of the development project despite being fully aware of the facts to comply with the requisitions is not justified.With reference to your said letter dated 24" March, 03, we have to state that our client has already made substantial payments of more than Rupees One Crore which have been accepted by your clients. Further, the time taken in making payments has been due to circumstances which your clients are very well aware of. We require more time till 15th June, 2003, to make payment of the balance outstanding amount. The construction of the building on the said property is substantially completed and we will be in a position to hand over the possession of the premises to be handed over to your clients by 31" May, 2003. It is not correct to state that we....
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.... perform his part of the contract in terms covenanted there under. The willingness of the transferee has to be absolute, unconditional and unqualified. In the instant case, as discussed above, the developers were always ready and willing to perform their part of the contract and their bonafide in this respect could not be doubted even by the appellant. The developers' commitment to the project was absolute unconditional and unqualified. The minor difference in payment schedule crept in because of the writ petition filed in the Bombay High Court. This situation was beyond the control of the developers and the co-owners of the land were aware of the situation. This cannot be taken as a tool to doubt the intentions of the developers. The developers have complied with all the provisions of the contract i.e. the MOU. This fact is proved by their reply dated 28/03/03 given to the appellant and other coowners. The appellant and the other co-owners were fully satisfied with the reply given by the developers as no further action was taken against the developers by the appellant and other co-owners after receipt of the reply. By following the decision of the Bombay High Court in the case....
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....lating to validity of reassessment proceedings on the ground that the assessing officer has reopened the assessment without recording reasons. We notice from the order of the Ld CIT(A) that the first appellate authority has given a finding that the assessing officer has explicitly discussed about assessing Capital gain in the assessment order relating to AY 2004-05 and has also recorded the same reasons before issuing notice u/s 148 of the Act for AY 2000-01. Before us, the assessee could not produce any material to contradict the findings given by the Ld CIT(A). Accordingly we do not find any merit in the grounds relating to validity of reassessment and accordingly dismiss them. 13. The next issue relates to the determination of sale consideration. We notice that the assessing officer has determined the value of constructed areas allotted to the assessee by adopting the Fair Market Value (FMV) determined by the Stamp authority for stamp duty purposes. The same was also confirmed by the Ld CIT(A). Before us, the Ld A.R submitted that the value of constructed area allotted to the assessees should be determined as per the cost of construction of the proposed building. In support of ....