TaxTMI 
TaxTMI 
2016 (8) TMI 762
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.... facts the learned Assessing Officer had erred in holding the exchange of plots between the appellant and Vatsalabai Dattatray Charitable Trust without any monetary consideration as transfer of capital asset and charged tax on the capital gain as per stamp duty valuation." 3. The brief facts of the case are that it was observed by the AO during the course of assessment proceedings u/s. 143(3) read with Section 143(2) of the Act from the AIR information that the assessee had purchased immovable property of Rs. 1,30,89,000/- on 3rd June, 2008 and sold the same for Rs. 94,51,000/-on 11th June, 2008. The return of income filed by the assessee with the Revenue was not accompanied with any Profit and Loss Account , or Balance Sheet. Details were called by the AO from the assessee whereby the assessee submitted that the assessee had acquired a piece of land as stock- in-trade in the year 2000 for an amount of Rs. 4,50,000/-. The said plot was exchanged with the plot owned by a Trust namely Vatsalabhai Dattatray Charitable Trust on 3rd June, 2008 and there was no monetary consideration moved from either side, hence, there is no profit or loss which can be brought to tax under the provis....
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....to evict the said premises for various social and moral reasons, hence, the intention of the assessee was very clear that that they do not want to hold the same piece of land as investment and to earn capital gain thereon. It was also submitted by the assessee that the market value as per section 50C of theAct considered at Rs. 1,30,89,000/- consists of the land of 136 Square meters and the structure of 387.55 square meters Hence the market value of the land of 136 square meters @ Rs. 22,680/- comes to Rs. 30,84,480/- , and the building of 387.55 square meters@ Rs. 25,815/- comes to Rs. 1,00,04,520/-, which aggregates to Rs. 1,30,89,000/- . It was submitted that the Building was owned by the Trust namely Vatsalabhai Dattatray Sawant Charitable Trust which got transferred to the same trust, therefore, there is no transfer of ownership of the building as it was already owned by the said Trust which was running school on the said plot. It was also submitted by the assessee that the land which was received in exchange was with many problems such as encroachment of 20 hutments, no approach road etc. for which the cost needs to be incurred to remove the defects. The stamp duty valuation ....
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....rcation was the market value of the land of 136 square meters @ Rs. 22,680/- per square meters which comes to Rs. 30,84,480/- and the building of 387.55 square meters @ Rs. 25,815/- per square meters which comes to Rs. 1,00,04,520/-, aggregating to Rs. 1,30,89,000/- , which is not acceptable . It was observed by the AO that the basis of computation of the cost of land and building was not known. The entire property has been transferred to Vatsalabai Dattatray Charitable Trust. It was observed that even if it is assumed that only land is valued at Rs. 30,84,480/- by the assessee, is transferred then in exchange the assessee has got property worth Rs. 94,51,000/-, which is highly improbable. Further, the contention of the assessee that the land received in exchange has encroachments is not supported by any evidence. Hence, the A.O. treated the sale value consideration at Rs. 1,30,89,00/- as per the provisions of Section 5OC of the Act as long term capital gain and brought to tax by the AO vide assessment order dated 28.12.2011 passed by the AO u/s 143(3) of the Act. Without prejudice, it was held by the AO that the transfer has been an arrangement with the sole purpose of avoiding ta....
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....s subsequently improvised by the trust as the place was insufficient to accommodate the students of the school. Thus there was a school building on the plot of HUF. * Thus the trust was owning a plot which it could not develop for school activities due to encroachment and other problems. And HUF was owning a plot where the trust was carrying its school. Mr. Sawant and his family members were in the business of the building and development. Taking into consideration these situations it was felt appropriate to exchange the plots between the Trust and the HUF. Mr. D. N. Sawant, Karta of HUF being a philanthropic person extended his kind consent for the same. The plots were exchanged without any monetary consideration. Since the HUF had acquired the plot for development purpose, (please refer page no.4 of the agreement where it was specifically mentioned that the plot was acquired for the development purpose.) it was a stock in trade. As there was no monetary consideration, there was no business profit which could have offered for taxation. * The fact that the HUF had not acquired the plot as an investment. Hence there was no capital gain. Hence Section 50C of the Inc....
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....for which cost required to be incurred to remove the defects. The Market value for stamp duty purpose is decided on the predetermined standard rate and does not necessarily consider all these aspects. The Exchange Deed takes a value of total property to be transferred as Rs. 1,30,89,000 as detailed below- 1. Land 136 Sqr. Mtr. And 2. Structure 387.55 Sqr. Mtr Thus you will find that the area of the land is only 136 Sq Mtr which was owned by the HUF. Considering the rate Rs. 22680 per sq. Mtr. stated above the valuation works out to be Rs. 30,84,480/. Therefore without prejudice to the fact that the land was a business asset of HUF, in case the capital gain is to be worked out, it should be on the value of the land taking into consideration the value as Rs. 30,84,480/-. Even the process of purchase has initiated in 1996 and the entire consideration was paid in 2001. Due to some technical formalities the agreement was registered in 2006. Therefore while applying the indexation for capital gain the Assessing officer has erred in taking indexation of 2006." The learned CIT(A) after going through the order of the A.O. and the subm....
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....rust , whereby only offer received was from the said school run by Janakalyan Seva Sanstha Charitable Trust . The order of Charity Commissioner states that the offer given by Janakalyan Seva Sanstha Charitable Trust being reasonable was beneficial to the trust was accepted and sanctioned by the Jt. Charity Commissioner. The order of Jt. Charity Commissioner relied upon valuation report issued by Registered valuer fixing the value at Rs. 3,58,350/- and since the assessee has agreed to pay total amount of Rs. 4,50,000/- , the Joint Charity Commissioner sanctioned the Bai Zaverbai Purshottam Nathu Charitable Trust with the permission to alienate the trust property to sell it to Janakalyan Seva Sanstha Charitable Trust. The assessee has sold the plot with school building constructed by it only in this plot no 68 to Vatsalabai Dattaray Chatitable Trust. The ld. CIT(A) observed that the said exchange is a transfer of land within the meaning of section 2(47) of the Act and gains arising on exchange of land is chargeable to tax u/s 45 of the Act. The ld. CIT(A) also rejected the contention of the assessee that the assessee purchased the land for the benefit of consumption of said land e....
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.... CIT(A) held that the land has to be taken as capital asset of the assessee. With regard to the taxation of surplus amount, it was observed by the learned CIT(A) that the assessee has not given the basis of his working , when the stamp duty valuation of Rs. 1,30,89,000/- was not objected by the assessee on which stamp duty was paid and the whole property consisting of land and structure was sold as an asset of the assessee only and the learned CIT(A) rejected the contentions of the assessee to bifurcate the same in two components i.e. land and building. Hence, the A.O.'s stand was upheld by the ld. CIT(A) vide appellate orders dated 11.01.2013 passed by learned CIT(A). With respect to the grievance of the assessee with respect to allowing date of acquisition to be treated in the year 2001 as the entire sale consideration was given in the year 2001 while the AO took the date of acquisition to be the year 2006, while the learned CIT(A) held that the Joint Charity Commissioner granted approval to sell land to the assessee on 06-05-2004 and hence the cost inflation index is to be allowed w.e.f. 2004 i.e. from assessment year 2005-06 and not from the year 2001 as held by the AO , as ....
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....essee with the plot owned by the Vatsalabai Dattatray Charitable Trust. It was submitted that the said plot of land which was exchanged by the assessee with the plot owned by the Trust, was owned by the assessee as stock-in-trade.Since the same was held as business asset being stock-in-trade ,Section 50C of the Act is not applicable and the stamp duty value as determined by stamp duty authorities cannot be adopted The valuation was done by the Registered valuer and the approval of Charity Commissioner was obtained to exchange the plots. The assessee has allowed the Trust to run school on the said property owned by the assessee which is now transferred to the Vatsalabai Dattatray Charitable Trust under exchange without any monetary consideration. The plot owned by the Trust which is now taken by the assessee under exchange was encroached by some 20 hutments. This is a family arrangement and the family members are coparceners of HUF. He submitted that the on 3rd June, 2008 the value of the property was Rs. 1,30,89,000/- being stamp duty valuation as determined by stamp duty authorities was not objected by the assessee as it constituted land and building . If at all income is to be as....
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.... were exchanged and the Trust plot although encroached by 20 hutments was taken by the assessee so that the same can be developed , thus this family arrangement cannot be brought within the ambit of taxability under the Act. It was submitted that Karta Sh. Dattaray Namdev Sawant was engaged in business which is evident by copy of acknowledgement of return of income for assessment year 2001-02 which is placed at page 132-133 of paper book filed with the Tribunal. The learned counsel for the assessee also drew our attention to the assessment order u/s 143(3) of the Act dated 08-03-2004 passed in the case of Sh. Dattaray N. Sawant for the assessment year 2002- 03 to contend that the said Sh. Dattaray N. Sawant was engaged in business which is placed in paper book page 134-135. Similarly assessment orders dated 27-12-2012 u/s 143(3) of the Act passed by the AO in case of M/s Rajendra Dattaray Sawant , partnership firm for assessment year 2010-11 is placed on record to show that the said firm is in construction of residential projects and hence the Karta of the assessee is in business of land development and builders. Thus, it was contended that it is genuine and bona-fide family settle....
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.... were not submitted before the authorities below which are placed in separate paper book containing additional evidences running into 37 pages and the authorities below have not verified these additional evidences. 9. We have considered the rival contentions and also perused the material available on record including the case laws relied upon . We have observed that Sh Dattatray Namdev Sawant , Karta of the assessee without the permission and/or authority of Bai Zaveribai Purshottam Nathu Charitable Trust ( who were the lawful owner of the Plot of land at Bhatwadi , Village Karol, Ghatkopar(West) in Greater Mumbai bearing survey number 24, Hissa No. 4(part) and 6(part) and city survey number 68(part) admeasuring 100 square yards equivalent to 83.61 square meters (PB/page11) in 1990) constructed a structure consisting of ground floor and one upper floor in and around 1990(PB/page11) and thereafter permitted the said structure to be used by a Primary School known as Dnyan Prakash Vidyalaya then run by Jankalyan Sevasanstha , a Public Chaitable Trust duly registered under Bombay Public Trust Act,1950 . The said Bai Zaveribai Purshottam Nathu Charitable Trust was finding difficulty ....
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....ence that the assessee was reflecting the said plot of land as stock-in-trade. No evidence is brought on record that the assessee was engaged in the activity of builder, trader of land or in construction business or in the real estate business, The perusal of the computation of income reveals that the sources of income of the assessee is rental income which has been shown under the head 'income from other sources' apart from nominal interest income from bank. The circumstances surrounding the acquisition of the plot of land clearly reveals that the assessee acquires the same as capital asset and not as trader or stock-in-trade or business asset as the possession of the said plot of land along with the structures thereupon ( now comprising ground floor and four floors when deed of conveyance was registered in 2006) was occupied by the Primary School run by Jankalyan Sevasanstha , a Public Charitable Trust duly registered under Bombay Public Trust Act,1950. The said Public Trust Jankalyan Sevasanstha got amalgamated with Vatsalabhai Dattatray Sawant Charitable Trust, another Public Charitable Trust registered under Bombay Public Trust Act, 1950 in the year 2004 with the approval of C....
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....t in the year 2004, which building consisting of ground floor and four floors were existing on the said plot of land on the date of exchange on 03-06-2008. The assessee has produced certain approvals from BMC being obtained by Trust / Sh D N Sawant with respect to construction of certain floors for school building as additional evidences which need verification by the authorities below to conclusively prove and establish about the ownership of building structures as no cogent/conclusive material has been brought on record such as Balance Sheets of the Trusts , construction invoices , proof of payment vide bank statements etc to prove conclusively that the structures/building were in-fact owned by the said Trusts , in the assessment proceedings as well appellate proceedings before the learned CIT(A) as well before the Tribunal. The onus was on the assessee to bring on record cogent and conclusive material to substantiate and prove its contentions. While on the other hand perusal of the deed of exchange of properties dated 03- 06-2008 (Page 96/PB) between the assessee and M/s Vatsalabhai Dattatray Sawant Charitable Trust clearly reveals that structure having area of 387.55 square met....
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....see. We order accordingly. Next issue is with respect to the contention of the assessee that the afore-stated 'exchange' of properties between assessee and Vatsalabhai Dattatray Sawant Charitable Trust vide deed of exchange dated 03-06- 2008 cannot be considered as transfer within the meaning of 'transfer' as contemplated u/s 2(47) of the Act and hence not exigible to capital gains tax u/s 45 of the Act on the grounds that this a family settlement/ arrangement as coparcener of the assessee are Trustees of Vatsalabhai Dattatray Sawant Charitable Trust. We are afraid that this contentions of the assessee cannot be accepted . On the first blush this proposition advance by the learned counsel for the assessee looks very attractive but on deeper analysis soon it looses its sheen. The said Vatsalabhai Dattatray Sawant Charitable Trust is a Public Charitable Trust which is created for charitable objectives as laid down in its trust deed and is registered under Bombay Public Trust Act,1950 . The said Trust is also registered u/s 12AA(1)(b)(i) of the Act w.e.f 01-04-2006 . The said Public Trust exists for public charitable and welfare purposes and is not existing for welfare of Trustee's....
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....to tax u/s 45 of the Act :- "Definitions. 2. In this Act, unless the context otherwise requires,- **** **** **** (47) ["transfer"in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or ***** *****" Next contentions of the learned counsel for the assessee was that stamp duty valuation of the property transferred by it is at Rs. 1,30,89,000/-- as on 03-06-2008 i.e. the date of execution of deed of exchange by stamp duty valuation authorities for stamp duty valuation which is excessive as in the year 2006 on 27-03-2006 when the property was conveyed in favour of the assessee by Bai Zaverbai Purushottam Charitable Trust , the stamp duty valuation authorities valued the property at Rs. 17,76,500/- while now on 03-06-2008 when the same property was exchanged by the assessee with Vatsalabhai Dattatray Sawant Charitable Trust the stamp duty valuation authorities valued the same property at Rs. 1,30,89,000/-with in short span of period of merely 2 year, this argeument of learned counsel for the assessee suffers from basic fallacy as in the year 2006 the stamp dut....