TaxTMI 
TaxTMI 
2017 (12) TMI 260
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.... since she is a senior citizen, the affairs of the property are looked after by her son, Mr. G. Madhav Prasad and that on receipt of the order of the CIT (A), she had handed over the same to her son, and they were under the impression that the appeals in respect of the A.Ys 2006-07 and 2011-12 are not required to be filed in view of the fact that the assessee's appeal No.716/Hyd/2015 for the A.Ys 2007-08 is pending before the Tribunal and if the relief sought for in the A.Y 2007-08 is granted, it would apply to these A.Ys as well and therefore, the appeals were not filed. It is further stated that the assessee's son had thereafter left for their native place and after returning from the native place and after discussion with the assessee's Counsel, they realized that the appeals have to be filed for these years also and therefore, the appeals were filed before the Tribunal on 14.03.2016 resulting in the delay of 38 days. Therefore, she prayed that the delay may be condoned. 3. The learned DR however, opposed the condonation of the delay stating that the assessee has failed to explain the reasonable cause for the delay of 38 days. 4. Having regard to the rival contentions and the ....
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....he relevant P.Y only on execution of the development agreement, there is a transfer in the relevant financial year and that the capital gains arising therefrom has to be brought to tax in this year. Thereafter, he proceeded to accept the share of the constructed area to the land owners at 43% as per the supplementary agreement and calculated 1/6th share of the assessee thereon. For the purpose of computing the sale consideration for transfer of land, he adopted the SRO value being Rs. 2200 per sq. yard and determined the short term capital gain at Rs. 19,24,956. 7. Aggrieved, the assessee preferred an appeal before the CIT (A), challenging (i) the validity of the reopening of the assessment; (ii) the year of the taxability of the capital gain; and (iii) the adoption of the SRO value as the sale consideration. The CIT (A) confirmed the validity of the re-assessment proceedings by holding that the assessee has failed to offer the capital gains to tax in the year of transfer and further that the return was only processed u/s 143(1) of the Act and no scrutiny assessment was undertaken. 8. As regards the year of taxability, he considered the decision of the Hon'ble Bombay High Cou....
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....en though, there is no escapement of income in the hands of the assessee for the A.Y under consideration as the assessee has admitted the income arising under the development agreement in the year of delivery of the flats in A.Y 2011-12. The assessee has also challenged the A.Y 2006-07 as the year of the taxability and the computation of the capital gain by the CIT (A) and disallowance of the claim of expenditure of Rs. 80.00 lakhs by the CIT (A). 11. In addition to these grounds of appeal, the assessee has also raised an additional ground of appeal contending that in view of the clarificatory amendment brought in by Finance Act of 2017, by way of insertion of sub-section (5A) to section 45 of the I.T. Act, 1961, the orders of the authorities below bringing the capital gains to tax in the A.Y under consideration is erroneous and unsustainable. In the application seeking admission of the additional ground, it is stated that this provision has been brought in by the Finance Act, 2017 and that, it being a legal ground, should be admitted and remanded to the file of the AO as per the law laid down by the Hon'ble Supreme Court in the case of CIT vs. NTPC (229 ITR 393). The learned ....
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....ciples of 'Interpretation of Statutes'. Vis-àvis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre[3], a retrospective legislation is contrary to the general principle that legislation by which the conduct of manki....
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....tively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. 32. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as "declaratory statutes". The circumstances under which a provision can be termed as "declaratory statutes" is explained by Justice G.P. Singh[7....
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....on (5A) to section 45 is declaratory or clarificatory. The notes on clauses and memorandum of Finance Bill of 2017 would shed some light on this aspect. The relevant portion of the bill reads as under: "Special provisions for computation of capital gains in case of joint development agreement. Under the existing provisions of section 45, capital gain is chargeable to tax in the year in which transfer takes place except in certain cases. The definition of 'transfer', inter alia, includes any arrangement or transaction where any rights are handed over in execution of part performance of contract, even though the legal title has not been transferred. In such a scenario, execution of Joint Development Agreement between the owner of immovable property and the developer triggers the capital gains tax liability in the hands of the owner in the year in which the possession of immovable property is handed over to the developer for development of a project. With a view to minimise the genuine hardship which the owner of land may face in paying capital gains tax in the year of transfer, it is proposed to insert a new sub-section (5A) in section 45 so as to provide that in case....
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....ut the purpose of insertion of the subsection. Thus, the clear intention of the Legislature is not to cure any defect, but it is to give benefit prospectively. 15. The Special Bench of the Tribunal at Mumbai in the case of M/s. Bharati Shipard Ltd, in ITA No.2404/Mum/2009 (SB) dated, 9.9.2011 has considered the retrospective and prospective effect of a substantive provision while considering the effect of amendment to section 40(a)(ia) by Finance Act of 2010 and at Paras 35 to 41 has culled the principles as under: "35. From the above discussion it is crystal clear that retrospective effect to a provision cannot be ordinarily given by judicial or quasi judicial authorities unless it is expressly given by the legislature. There may be certain situations requiring the giving of retrospective effect. The scope for the courts to validly give retrospective effect to a provision, despite not being clearly given so by the legislature, is limited. It extends to cases where the legislative intent has later been made explicit which was earlier implicit in the provision or the existing provision led to the unintended consequences and made the intention of the legislature unworkable. Any am....
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....ation did not bring in a new provision but clarified that the position was so since the introduction of the provision itself. In this category of clarificatory or explanatory amendments to the substantive provisions, the object is always to clarify the intention of the legislature as it was there at the time of insertion of the original provision. That is the reason for which the clarificatory amendments are always retrospective irrespective of the date from which effect has been given to them by the legislature. 37. The second category includes the cases in which there was no ambiguity in the language of the provision at the time of its introduction and the object sought was fully attainable. But while making the provision workable, besides the desired results, certain unintended consequences also crop up. In other words, the section was introduced originally with a particular purpose but while giving effect to the provision in the attainment of that purpose, certain outcomes which were never desired or intended by the legislature, also follow. Any amendment to remove such unintended effects, is also always considered to be retrospective from the date of the insertion of the ma....
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.... to be caused, then a subsequent amendment to reduce such hardship from a higher level to lower level, cannot be considered as retrospective unless expressly stated. The reason is obvious that in such cases the hardship which was faced by the assessees at the time of introduction of the provision was very much intended and foreseen and the subsequent amendment is reduction in the intended hardship and not the removal of unintended hardship. 40. On the contrary where the amendment is carried out to the provision with the purpose of adding some additional burden or reducing the existing burden of the assesses, it is always prospective unless expressly stated to be retrospective or falling within the exceptions discussed above such as clarificatory or to remove the unintended hardship. The case of Reliance Jute and Industries Ltd. (supra) deals with a situation in which the amendment was carried out to the substantive provision taking away certain benefit to the assessees in terms of extended period for setting off of the brought forward losses. The case of Varadaraja Theatre Pvt. Ltd. (supra) is based on facts in which the subsequent amendment granted a benefit to the assessee whi....
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....ed to confer the benefit only from 1.4.2018. Therefore, we are of the opinion that this ground, though is a legal ground cannot be admitted at this stage as no useful purpose would be served in remanding the issue to the file of the AO as the sub-section itself is not applicable for the relevant A.Y. The additional ground of appeal raised by the assessee under Rule 11 of the ITAT Rules is accordingly rejected. 18. As regards the validity of the re-assessment proceedings, we find that the assessee has filed the return of income but has not offered the capital gains arising out of the development agreement in her return of income for the relevant A.Y. Therefore, the AO had the material to form a reasonable belief that the income of the assessee has escaped assessment. Therefore, we uphold the validity of the re-assessment proceedings. As regards the year of the taxability, we find that this issue is now covered in favour of the Revenue by the decision of the Hon'ble jurisdictional High Court in the case of Shri Potla Nageswara Rao vs. DCIT in ITTA No. 245 OF 2014 Dated 09-04- 2014. Therefore, the assessee's grounds of appeal on the year of taxability are rejected. 19. As regard....
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....tered into a development agreement cum GPA with M/s. Vertex Homes Pvt. Ltd as per which the total built up area was worked out at 1,25,000 square feet and the estimated market value of the property was Rs. 6,00,00,000/-. As per the deed, the owners were entitled to 46% share in the constructed area while the developer was entitled to 54% share. The AO noticed that the assessee has not offered the capital gains arising out of the above development agreement cum GPA for the A.Y 2007-08. Therefore, observing that there is an escapement of income pursuant to the above transactions, the AO issued a notice u/s 148 to reopen the assessment u/s 147. In the re-assessment proceedings the AO called for the assessee's explanation as to why the capital gain should not be brought to tax in the hands of the assessee, the assessee submitted that the assessee has offered the capital gains in the year when the built up area was actually handed over to the assessee. The AO was however, not convinced and brought the long term capital gains to tax by adopting the SRO value @ 35174/- per sft as the sale consideration. Aggrieved, the assessee preferred an appeal before the CIT (A) both on account of reop....
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.... that pursuant to the development agreement cum GPA entered into during the financial year 2005-06 relevant to the A.Y 2006-07, the assessee has offered capital gains to tax in the A.Y 2011-12 on the ground that she has received actual possession of the built up area in the first instalment. The AO observed that for the A.Y 2006-07, the AO has already held that the capital gain is to be taxed in the year of execution of the agreement of sale. However, since the assessee itself has offered the long term capital gain in the A.Y 2011-12, the AO has brought it to tax along with the capital gains on sale of the flats. While computing the long term capital gains on sale of land and on sale of the flats, the AO disallowed the claim of expenditure on brokerage. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the AO. Aggrieved, the assessee is in second appeal before us against the taxing the capital gain and also the disallowance of the claim of expenditure of Rs. 80.00 lakhs being the brokerage paid by the assessee. 30. The learned Counsel for the assessee submitted that the capital gain has been brought to tax in both the A.Y 2006-07 as well as ....