AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 37
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....ssment u/s. 143(3) r.w.s. 148 was made on 10-03-2015 on a total income of Rs. 34,04,239/- in which an addition of Rs. 25,41,474/- was made under the head Short Term Capital Gains in respect of Development agreement - cum - GPA entered into by assessee with M/s. Diamond Infra relating to assessee's land of 267 Sq. Yds., bearing Plot No. 20, situated in Survey No. 145/2, Hydernagar Village, Bala Nagar Mandal, Ranga Reddy District, which was registered on 12-05-2008. 3. Before the Ld.CIT(A), assessee raised various grounds, mainly contesting the reopening of assessment and also bringing to tax the Short Term Capital Gain during the year consideration. Ld.CIT(A) after analyzing the legal position, noticed that the return was processed u/s. 143(1) of the Act only and since development agreement has come to the knowledge of the AO, assessment was property reopened, following the principles laid down by the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., [291 ITR 500] (SC). Ld.CIT(A) rejected the contentions that there was a change of opinion and also the contention that there was no tangible material. Ld.CIT(A) noted that the information has co....
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....possession in the property under consideration has not been transferred to the developer and the possession of the impugned land was continuously enjoyed by assessee. Therefore, no capital gain arises in the year under consideration. In support of this contention, Ld. Counsel further relied on the following case law: i. Decision of ITAT 'B' Bench, Hyderabad in the case of Sri Suresh Kumar D. Shah Vs. DCIT, Central Circle-2, Hyderabad in ITA No. 81/Hyd/2016 dt. 10-08-2016; ii. ACIT, Central Circle-5, Hyderabad Vs. R. Srinivasa Rao [2014] 50 taxmann.com 178 (Hyderabad- Trib.); iii. Fibars Infratech (P.) Ltd Vs. ITO, ward-1(2), Hyderabad [2014] 46 taxmann.com 313 (Hyderabad-Trib;); iv. Smt. Bhavya Anant Udeshi Vs. ITO, (International Taxation)-1, Hyderabad [2014] 51 taxmann.com 415 (Hyderabad-Trib.); v. Suraj Lamp and Industries Pvt. Ltd Vs. State of Haryana & Anr dated 11-10-2011 in Special Leave Petition (C) bearing No.13917 of 2009 (Supreme Court); vi. Mr. Parbodh Chander Bali Vs. Rakesh Singh and Others in SLP(C) No. 13917/2009 dated 12-08-2014 (Supreme Court); 4.2. Ld. Counsel also contended that judgment of Hon'ble Jur....
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....tely sold by the Son, Shri Srikanth and the recitals clearly indicate the above nature. It was submitted that advances were paid to Shri Bala Swamy originally and therefore, AO was not correct in holding the period from the date of actual registration, whereas assessee was in possession of the property much before. It was fairly admitted that these aspects were not examined by the AO. Further, it was also contended that the valuation adopted on the basis of the development at the time of completion cannot be considered as value for bringing to tax the capital gain at the time of entering JDA and on transfer of 50% of land, it was also contended that AO wrongly considered the entire value rather than 50% share of the land. 6. I have considered the rival contentions and perused the material placed on record and case law relied on. While completing the assessment, AO considered the period of holding of the property to be less than 36 months and the gains arose in this transaction was considered as short term only. Further, while valuing the property transferred, the AO has considered the entire 267 Sq. Yds., entered into agreement by assessee, ignoring the fact that only 50% of the....
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....s as such. Therefore, I am of the opinion that assessee did hand over the possession and provisions of Section 2(47) regarding transfer certainly get attracted. Since there is part performance of the contract in the nature referred to in Section 53 of Transfer of Property Act, 1882, Clause(v) of Section 2(47) is clearly attracted. Therefore, I agree with the stand of AO that the capital gains did arise during the year under consideration as the agreement was entered on 12-05- 2008. Accordingly, the issue of bringing to tax the capital gains during the year is to be upheld. Even though Ld. Counsel tried to distinguish the jurisdictional High Court judgment in the case of Sri Potla Nageswara Rao Vs. DCIT (supra) that it applies to a case, where there is no sale consideration and the issue is on non-receipt of sale consideration. I do not agree with that as the issue of transfer in the case of development agreement and consequent levy of capital gain in the year of entering into development agreement has been crystalised by the said judgment of the jurisdictional High Court in the case of Sri Potla Nageswara Rao Vs. DCIT (supra). Accordingly, I agree with the order of the CIT(A), conf....
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....sidered is the full value of consideration, for computation of capital gains. As per the agreement, assessee has parted with only 50% of the impugned property. However, AO has taken the cost of construction of the properties which are given in lieu at the time of completion of the project and gave certain discount so that the value is fixed at 1097 per Sft. This is not a correct method. Since the agreement was entered into in May, 2008 either the cost of the land [at 50% of 266.66 Sq. Yds.,] should have been considered for sale consideration or the probable value of the cost of construction on that date has to be considered. It is not proper on the part of the AO to consider the subsequent cost which may involve escalation of cost from 2008 to 2013. Therefore, I direct the AO to consider the probable cost of construction as on May 2008 or the SRO Value of the land-in-question on the date of agreement should be considered as full value of consideration for the purpose of computation of capital gains on the transfer of 50% of the land holding for development. Therefore, while upholding the reopening of assessment and also bringing to tax the capital gains in the impugned year, the is....
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....to raise necessary arguments in this regard before the AO. Grounds of assessee are considered partly allowed for statistical purposes. 7.1. In the result, appeal in ITA No. 1712/Hyd/2016 in the case of Shri Adinarayana Reddy is considered partly allowed for statistical purposes. ITA Nos. 458/Hyd/2017 & 459/Hyd/2017: 8. These two assessees Shri B. Vijaya Bhaskar Reddy and Smt. B. Indira being husband and wife have acquired the properties similarly and also entered into development agreement with the said M/s. Diamond Infra by the agreement dt. 28-07-2018. The AO like in the other cases has considered the date of registration of the property to the date of agreement as short term capital asset and re-computed the Short Term Capital Gain in both the hands taking the value of apartments to be received at 1097 Sq. ft. AO thus, determined the Short Term Capital Gain. Assessee has contested on both the issues- of reopening u/s. 147 as well as bringing to tax during the year under consideration. The ground being similar to the grounds raised in the case of Shri Bali Reddy discussed in detail above, there is no need to separately consider the issues. In these cases assessees howeve....