TaxTMI 
TaxTMI 
2019 (2) TMI 1055
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....earned CIT(A) erred in not appreciating the explanation to Sec.45(5). 4. In the facts and circumstances of the case and in law the assessment is bad in law as the notice under sec. 143(2) was served on the appellant on the 1st day of August 2006 i.e. beyond the statutory period." 2. The brief facts of the case are that the assessee has filed her return of income for ay 2007-08 on 30-07-2007 declaring total income of Rs. 3,40,29,760, consisting of income from long term capital gain from sale of property at Rs. 3,34,83,700 and income from other sources. The assessee is a daughter of late Shri Anoopchand Dungaji. Late Shri Anoopchand Dungaji owned certain agricultural land at Shirwane. The land owned by late Shri Anoopchand Dungaji was compulsorily acquired by Government of Maharashtra under the Land Acquisition Act on 28-12- 1965 for purpose of developing New Mumbai for which compensation has been paid. Late Shri Anoopchand Dungaji died on 12-02-1972. Government of Maharashtra has passed a resolution on 28-12-1994 to grant plot equivalent to 12.5% of the land compulsorily acquired by the government to all project affected persons in New Mumbai city under development as ad....
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....ce amount of Rs. 5.10 crores has been paid to M/s Perfect Associates. The assessee has opposed application of provisions of section 50C of the I.T. Act, 1961 to argue that what was transferred is a leasehold right in the property but not a land and building, therefore, the provisions of section 50C has no application. The assessee also has taken an alternative argument to the effect that what was received from CIDCO is an additional compensation for compulsory acquisition of land and when the land was originally acquired, it was an agricultural land consequently, additional compensation awarded by CIDCO is also an acquisition of agricultural land which is not taxable, therefore, the return of income filed by the assessee by mistakenly admitting long term capital gain on transfer of property may be substituted by Nil income from transfer of property. The assessee also has taken another argument inasmuch as that on transfer of leasehold rights to M/s Metro Developers, M/s Perfect Associates is one of the parties to the transactions and differential amount of Rs. 5.10 crores has been paid to the confirming party, M/s Perfect Associates for rendering certain services in connection with....
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....ts shall be allowed as deduction. The Ld.CIT(A)-29, relying upon the case of AR Dahiya vs ACIT (2004) 269 ITR 542 (P&H) held that the question whether an asset is a capital asset or not has to be determined in the year in which the asset is acquired or any compensation or part thereof is first received. Since the land in question when acquired by the government is an agricultural land, and it was not a capital asset, the additional compensation relates back to the original asset, will also not be taxable. However, it was further held that since the assessee has already offered the capital gain for tax as per return of income relying upon the case of Goetze India Ltd 284 ITR 323 (SC) held that in absence of any revised return filed by the assessee, assessee's income cannot go below taxable income. Against the order of the Ld.CIT(A), the assessee as well as the revenue are in appeal before the ITAT. The ITAT, on consideration of the legal ground taken by the assessee in the light of Hon'ble Supreme Court in the case of Goetze India Ltd (supra) has set aside the issue to the file of the CIT(A) to pass a fresh order on merit, considering the legal ground taken by the assessee. 7. Du....
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....ase was that the original agricultural land_was not a capital asset u/s 2(14)(iii), and hence the said plot from CIDCO also did not become capital asset u/s 2(14)(iii) and hence the section 45 did not apply to assignment of said leasehold plot. It was held by Hon'ble Tribunal in said case that the leasehold land transferred was a capital asset within the meaning of section 2(14), and the cost of acquisition of said capital asset is to be taken at the market value of leasehold rights in the Plot for sixty years at the time of the first transaction which was completed on 16-8- 2004. However, regarding taxability of capital gain of the market value of plot allotted on 16-8-2004, the Hon'ble Tribunal in Para 9.4 of said order held as under:- "9.4 Adverting to the facts of the instant cose, once the assessee acquired rights in the Plot, which in itself is admittedly not an agricultural land, there is no question of considering it to be an agricultural land on the premise that it was allotted to the assessee against acquisition of agricultural land. Further the question whether the lands acquired by the Govt. in the years 1970/72 were agricultural land or not is beyond o....
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....nsfer of a capital asset, being a transfer by way of compulsory acquisition of land, ....". The said sub-section applies only where there is a transfer of capital asset originally (by way of compulsory acquisition). In present case, the original transfer in year 1964 was admittedly not of a capital asset (being agricultural land), hence the provisions of said section has no implications in present case. 4.6 In view of above, it is held that the Market Value of land allotted by CIDCO is to be considered as full value of consideration for the purpose of computing capital gain on transfer of right inherited by assessee from his father, which is at Rs. 9,14,40,000/-. The AO has taxed the entire amount of Rs. 9,14,40.000/- as long term capital gain. I however notice that the assessee has spent an amount of Rs. 79.37S/- towards lease premium paid on getting the said land allotted to it, which should be allowed towards cost of acquisition. Hence, the assessee is chargeable to Long Term Capital Gain on Rs. 9,14.40,000- 79.375 - Rs. 9.13,60,6257-. The appeal is decided accordingly." 8. The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in coming to the conclusion ....
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....n 01-04-1981, therefore, taking a plea that additional compensation received for compulsory acquisition of agricultural land in the year 1965 is not taxable, is not in accordance with law. The Ld.DR further submitted that the issue before the AO was the full value of consideration received as a result of transfer, but not the issue of taxability of compensation received on compulsory acquisition of land. When the AO has pointed out the difference in market value of land and consideration shown in sale deed, the assessee has come out with an innovative argument to escape from the taxability of capital gain, therefore, the Ld.CIT(A) has rightly apprised the facts to recompute long term capital gain by adopting market value of the land. 10. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. This is the second round of litigation. In the first round of litigation, the ITAT has set aside the issue to the file of CIT(A) with a direction to admit legal ground taken by the assessee in the light of decision of Hon'ble Supreme Court in the case of Goetze India Ltd vs CIT (supra). Other than this, there is no differenc....
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....me-tax Act, 1961. The additional compensation received consequent to acquisition of original asset relate back to the nature of asset and accordingly, additional compensation received in subsequent years will also need to be exempt if original compensation received by the assessee is exempt from tax. There is no dispute with regard to the ratio laid down by the Hon'ble Punjab & Haryana High Court. When an original asset acquired is an agricultural land and consequent compensation is exempt from tax, obviously, enhanced compensation received in subsequent year is also exempt from tax. But the issue before the lower authorities is not the question of taxability of additional compensation received by the assessee. The issue before the AO is with regard to the determination of full value of consideration in respect of transfer of a capital asset. The assessee has transferred her capital asset for a consideration of Rs. 4,60,37,500. When the AO has invoked the provisions of section 50C in order to find out the market value of the property, then the assessee came out with an alternative argument inasmuch as the enhanced compensation received on account of compulsory acquisition of agricu....
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....ditional compensation received from CIDCO in form of re-allotment of land under 12.5% scheme is taxable under the head 'capital gain'. We have already made it clear that once the original asset when it was acquired is not a capital asset, then additional compensation received in subsequent years will also not be chargeable to tax under the head, 'capital gain' in the light of decision of Hon'ble Punjab & Haryana High Court in the case of A.R. Dahiya vs ACIT (supra). The second question needs to be resolved is computation of long term capital gain from transfer of leasehold rights. The assessee has transferred leasehold rights for a consideration of Rs. 4,60,37,600. The market value of the land as on the date of transfer is at Rs. 14,40,000. Since the provisions of section 50C has come into operations for the year under consideration, the difference between sale consideration and market value of the land shall be added to the full value of consideration. Therefore, we find that there is no error in the findings of the Ld.CIT(A) in adopting the full value of consideration of Rs. 9,14,40,000 as a result of transfer of asset. 12. Having said so, what is the cost of acquisition for t....