TaxTMI 
TaxTMI 
2016 (3) TMI 178
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.... Term Capital Gain on sale of Land located at Ambattur Industrial Estate, Plot No.40-A(NP) in Saidapet Taluk and Chingleput M.G.R. District in the State of TamilNadu Sale Consideration (As per enclosed agreement for sale 32,325,000 Less : Commission paid on the sale of aforesaid land 1,073,926 Less :- Indexed cost of acquisition (Note 1) Long-term Capital Gain/(Loss) 31,251,074 34,419,420 (3,168,346) Note-1 Indexed cost of acquisition is determined as under :- Estimated Fair market value of Land as on 01-04-1981 (Year of acquisition - 1971) [As per valuation report attached] Indexed cost of acquisition[74,34,000*463/100] 7,434,000 34,419,420 3. The assessee sold the property to Reliance Infocom Ltd., under a sale deed dated 02.12.2003 for a total consideration of Rs. 3,25,00,000. The Sale consideration towards the value of the land and the compound wall was apportioned at Rs. 3,23,25,000 for the value of land and Rs. 1,75,000 towards compound wall. In the computation of long term capital loss, the assessee claimed that it had paid Rs. 10,73,926 as commission for sale of the said plot. The assessee deducted the indexed cost of acquisition i.e.,Rs....
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....nd for business purposes. Later, by a G.O. Ms.N-959 dtd. 23.7.76, the Government of Tamilnadu handed over the management and maintenance of the Industrial Estate at Ambattur to Tamilnadu Small Industries Development Corporation Ltd. and transferred the ownership of the Industrial Estate at Ambattur to the said Corporation by G..O.Ms.N-785 dtd.7.8.88 and the said Corporation became the absolute owner of the Industrial Estate. Thereafter, at the request of the assessee, the said corporation sold the property to the assessee as per the sale deed dtd. 19.04. 1994 for a consideration of 68,800 already paid by the assessee as per the terms of the deed of assignment. In the sale deed, certain conditions were also imposed upon the assessee. One of the conditions was that the purchaser shall not transfer, sell or mortgage the property or change the ownership/constitution/partners/shareholders or directors within five years from the date of allotment without the prior approval of vendor i.e., Tamilnadu Small Industries Development Corporation Ltd.. But, however, beyond five years from the date of allotment, the purchaser was given the right to effect the changes after informing the vendor su....
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....ble to be revised in exercise of his powers of revision u/s.263 of the Act. 8. In reply to the show cause notice as above, the Assessee submitted that the Assessee became owner of the property by virtue of assignment deed dated 3.3.1971 and complied with all the conditions of the assignment and thus became de facto owner of the property much before 1.4.1981 and in terms of Sec.55(2)(b)(i) of the Act, it was entitled to adopt the fair market value of the property as on 1.4.1981. In this regard the Assessee pointed out that the definition of Transfer for the purpose of Sec.2(47) of the Act under clause (v) of Sec.2(47) of the Act also includes "Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882". The Assessee pointed out that Sec.2(14) of the Act defines "Capital Asset" to mean property of any kind "held by an Assessee". The expression "held by an Assessee" only means that "de jure" ownership is not a condition precedent for regarding a person as owner of a capital asset. The Assessee placed reliance on the decision ....
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....de jure ownership and such ownership was acquired by the Assessee only on 19.4.1994 when a registered conveyance was executed in its favour. In coming to the above conclusion, the CIT placed reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Dr.VV Mody 218 ITR 1 (Karn.) wherein the facts were that the assessee, an individual, was allotted a site by the Bangalore Development Authority on the 25th May, 1972 in accordance with the relevant rules of allotment. A lease-cum-sale agreement was executed according to which the assessee was required to pay a certain amount to the Bangalore Development Authority and at the end of the 10th year, secure a conveyance in his favour upon payment of the entire sale consideration. Consequently, a sale-deed was executed in favour of the assessees by the Bangalore Development Authority on the 29th March, 1982, registered on the 13th May, 1982. Shortly, thereafter, on 27th Nov., 1982, the assessee sold the site to a third person for a total consideration of Rs. 1,69,200. The question before the Court was as to whether it can be said that the Assessee "held the property" from the year 1971 or only when the registered con....
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.... by the Assessee was only for the purpose of levy and recovery of property tax in view of clause-7 of the deed of assignment dated 3.3.1971 and that did not confer any ownership rights over the property in favour of the Assessee. With regard to the argument of the Assessee by placing reliance on Sec.2(47)(v) of the Act, the CIT was of the view that those provisions are not applicable when one of the contracting parties was Government. He also held that even otherwise the conditions necessary for application of Sec.53A of the Transfer of Property Act, 1887 were not present in the case of the Assessee. 11. For the above reasons, the CIT set aside the order of the AO in so far as it relates to acceptance of capital loss on sale of the property and directed the AO to frame assessment on the above issue by considering the date of acquisition of the property as 19.4.1994 and further directed the AO to enquire into the actual cost of acquisition and expenditure in connection with the transfer claimed by the Assessee. 12. Aggrieved by the order of the CIT, the Assessee has preferred the present appeal before the Tribunal. 13. We have heard the submissions of the learned counsel for the ....
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....s.- DCIT (2013)[ITA No. 473/Kol./2012]. His further submission was that the only difference between 'short term capital asset' and 'long term capital asset' is the period over which the property has been held by the assessee and not the nature of the title of the property. It was his submission that in the case of the Assessee, possession of land was given to the Assessee in 1970 and by way of sale deed executed in 1994, only improvement of the existing right in the said land has taken place. The said improvement will not have any impact on determination of holding period. He placed reliance upon the decision of Hon'ble Allahabad HC in CIT -vs.- Rama Rani Kalia 358 ITR 499 (All). It was further submitted that depreciation u/ s 32 of the Act is allowable, inter-alia, if the assets are wholly or partly owned by an assessee. Even in such cases, it has been held that legal ownership is not necessary and possession of assets would suffice for allowance of depreciation. Reference was made to the decision of the Hon'ble Apex Court in Mysore Minerals Ltd. -vs.- CIT (1999) 239 ITR 775 (SC) wherein it was held that anyone in possession of property for the time being i....
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....47)(vi) of the Act. 15. The learned DR placed reliance on the order of the CIT and the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Dr.V.V.Modi (supra). 16. We have given a very careful consideration to the rival submissions. Sec.45 of the Act lays down that any profit or gain arising from the transfer of a capital asset effected in the previous year shall be chargable to income tax under the head "capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. Sec.2(47) of the Act defines "transfer" for the purpose of the Act and it reads thus: (47) "transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in trade of a business carried on by him, such conversion or treatment ; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be t....
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....ency, so however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company: Provided further that where long-term capital gain arises from the transfer of a longterm capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted : Provided also that nothing contained in the second proviso shall apply to the longterm capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government : Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer sha....
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.... assessee before the 1st day of April, 1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset as on the 1st day of April, 1981, at the option of the assessee; 19. It can be seen that clause (b)(i) of Sec.55(2)(b) would be attracted only when "the capital asset became the property of the Assessee" before 1st April, 1981. It was the plea of the Assessee that though a registered conveyance in respect of the property was obtained by the Assessee only on 19.4.1994, it became the owner of the property by paying the entire consideration as set out in the deed of assignment dated 3.3.1971 and by complying with the conditions of assignment much before 1.4.1981 and therefore under clause (b)(i) of Sec.55 of the Act, it was entitled to adopt the fair value market value as on 1.4.1981 as cost of acquisition while computing capital gain/loss. 20. The undisputed facts are that the property was assigned by the Tamil Nadu Government through Governor by a deed of assignment dated 3.3.1970. The consideration payable by the Assessee for the assignment of the property was a sum of Rs. 34,400/-. The Asssessee paid Rs. 17,200/- on the date of assignment....
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....14 above. " 22. The deed of assignment does not say what interest over the property that is assigned to the Assignee. Nevertheless some interest is created in favour of the Assignee and that is clear from clause-12 of the deed of assignment. The deed of assignment cannot be construed as conveying absolute ownership/interest over the property in favour of the Assessee because such ownership/absolute interest is conveyed only by deed of sale dated 19.4.1994. The deed of assignment does not confer any right on the Assessee to demand conveyance from the Assignor nor was there any agreement to convey the property to the Assessee. The Assessee was therefore not an agreement holder in possession of the property. In such circumstances, we fail to see as to how the Assessee can lay claim on the basis of Sec.2(47)(v) of the Act. The Assessee in the present case was neither a lessee nor an agreement holder in respect of the property. The capacity in which the Assessee was in occupation of the property prior to the sale deed dated 19.4.1994 was as a permissive user and that did create interest over the property in favour of the Assessee. By the deed of sale dated 19.4.1994 such possessory rig....