TaxTMI 
TaxTMI 
2019 (5) TMI 427
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.... A) erred in facts and in law. 2. The Ld. CIT(A) erred in holding that the impugned lands is not capital asset and also that there was no transfer of asset, which is contrary to the facts of the case?" 3. The Ld. CIT(A) erred in relying upon the decision of the Hon'ble High Court in the WP No. 2148 of 2015 in the case of M/s. Kohinoor Hatcheries Pvt Ltd, when the facts of the petitioner are different and distinguishable from the facts of the present case? 4. The Ld. CIT(A) ought to have appreciated that the issue before the Hon'ble High Court was validity of the re-opening of proceedings u/s. 147 in the case of the petitioner company and not whether the lands are agricultural or not and that being so, the CIT(A) erred in applying the ratio of the decision in the said case to the facts of the present case, which are distinguishable? 5. The Ld. CIT(A) ought to have observed that in the present case, no assessment was completed u/s. 143(3) and the return was only processed and therefore there was no occasion to examine whether the impugned lands are agricultural or not? 6. The Ld. CIT (A) also erred in holding that there was no tran....
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....e Assessing Officer further noted that as the assessee did not show any income from capital gain in his return of income filed for the A.Y. 2009-10, on the deemed sale consideration received on its share of land given for development, income to the tune of Rs. 5,22,18,475/- chargeable to tax escaped assessment under the head 'capital gains'. Accordingly, the assessee's case was reopened. A notice under section 148, dated 30/03/2015 was issued. In response, the assessee filed a letter dated 22/04/2015 stating that the return filed on 31/07/2009 may be treated as filed in response to the notice issued u/s. 148. Subsequently, the Assessing Officer has issued notice under section 143(2) & 142(1) dated 06/10/2015. In response, the AR of the assessee appeared and submitted that as per the development agreement-cum-GPA, no possession was handed-over on the date of agreement and there is no transfer of capital asset and there is no capital gain chargeable to tax arising out of the said document. The Assessing Officer after considering the explanation of the assessee and by following the decision of the Hon'ble Jurisdictional High Court in the case of Potla Nageswara Rao Vs. DCIT in I.T....
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.... possession of the land was handed over to the developer as per the terms of the development agreement-cum-GPA and the developer has not taken steps in fulfilment of the terms of agreement and held that the Hon'ble Jurisdictional High Court in the case of Potla Nageswara Rao (supra) has no application to the facts of the assessee's case and gave a finding that neither the land under consideration is a capital asset nor there was no transfer of the asset as per the terms of development agreement-cum-GPA and accordingly, the addition made by the Assessing Officer was deleted. For the sake of convenience, the relevant portion of the order of the ld.CIT (A) is extracted as under:- "6.4 I have carefully considered the issue, the submissions made by the AR the assessment order and the case records. The return of income filed by the appellant has been processed 143(1). During the course of assessment proceedings of M/s.Kohinoor Hatcheries Private Limited for the AY 2012-13, in which the appellant is a Director, it came to the notice of the AO that the above mentioned DAGPA was entered by the company along with two other Directors namely Sri D.Venkateswara Rao and Sri D. Ragha....
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....High Court in W.P.No.2148/2015 vide order dated 16.8.2016 allowed the appeal and set aside. Para-27 of the order is as follows:- "27. Therefore, the respondents cannot shy away from the fact that there was a full and true disclosure of all material facts necessary for assessment. This case will not fall under the category of mere product/of of books of accounts and other records. This case very dearly falls under the category of true and full disclosure, upon which the first assessment order was passed on the opinion that the lands sold were agricultural lands. Therefore, to say after 4 years that the lands were sold to a Real Estate Company for the purpose of forming a Special Economic Zone, would undoubtedly tantamount to a change of opinion, which is not permitted by law." 7.1 From the aforesaid facts on record and the order of the Hon'ble High Court, it is evident that the lands which were subject matter of capital gains is not a capital asset in terms of provisions of Section 2(14) of the Act. 7.2 Coming to the issue whether there was any transfer of capital asset in terms of Section 2(47) of the Act, my conclusions are as under:- As per....
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....M/s. Kohinoor Hatcheries Pvt. Ltd. It is further submitted that the issue before the Hon'ble Jurisdictional High Court is in respect of validity of reopening of the proceedings under section 147 of the Act and therefore applying the ratio laid down by the Hon'ble High Court in that case to the present case, is not correct. It is further submitted that the ld. CIT(A) is not correct in holding that there was no transfer of capital asset for the reason that the development agreement was still in force and the same was not cancelled. He relied on the decision of the Hon'ble Jurisdictional High Court in the case of Potla Nageswara Rao (supra) and also relied on the decision of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs CIT [(2003) 180 CTR 107 (Bom.)] and strongly supported the order passed by the Assessing Officer. 8. Ld. Authorised Representative for the assessee has submitted that the Assessing Officer simply taken into consideration of the date of agreement and came to an erroneous conclusion that the capital gain has to be assessed in the hands of the assessee without considering the explanation and subsequent developments, and submit....
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....ason that in that case, the possession not handed over to the developer, therefore the Assessing Officer is not correct in applying the ratio of the said judgment to the assessee's case. He relied on the following case-laws:- 1) CIT Vs. Geetadevi Pasari [(2009) 17 DTR 280 (Bom.)] 2) ACIT Vs. R. Srinivasa Rao 9(2015) 152 ITD 887 (Hyd.)] 3) Binjusaria Properties Pvt. Ltd. Vs. ACIT [(2015) 40 ITR 230 (Trib. - Hyd.) 4) Fibars Infratech Pvt. Ltd. Vs. ITO [(2014) 98 DTR 281 (Hyd.)] 5) S. Ranjith Reddy Vs. DCIT [(2013) 95 DTR 283 6) P. Prathima Reddy Vs. ITO [(2012) 54 SOT 409] 9. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. 10. The issue involved in this appeal is whether there is a transfer of capital asset or not under section 2(14) of the Act. In this case, the assessee-Sri D. Venkateswara Rao is a Director of M/s. Kohinoor Hatcheries Pvt. Ltd. along with Sri D. Raghava Rao has entered into a development agreement, dated 19/05/2008 for development of the land to the extent of 28 Acres 18 guntas situated in survey Nos. 549, 550 & 551 at Kolthur Villa....
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....n has been handed over. He also submitted before the Assessing Officer by another letter dated 14/12/2015 that with regard to status of the development agreement, possession of the property is with the assessee and no development has taken place and the assessee is carrying poultry business. To support his argument, he has submitted the relevant details, such as renewal of registration certificate under the Andhra Pradesh Shops and Establishment Act, 1988 issued by the Government of Telangana dated 27/02/2015. The power bills issued by the Power Distribution Company and also inspection report submitted by the Electrical Inspector which are placed at page Nos. 37 to 47 and also property tax paid by the assessee at page No. 48. The Assessing Officer in the assessment order, simply held that as per the development agreement entered on 19/05/2008 as per clause (3), the assessee (first party) shall give a vacant possession of the property from 8th month of the date of execution of this deed and once agreement has been entered into, there is a transfer of property has taken place. We find that the assessee has submitted before the Assessing Officer that the second party M/s. IPL Infraser....
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....the Assessing Officer has not made any enquiry and not examined the details submitted by the assessee, simply he came to the conclusion that there is an agreement therefore according to the agreement, the assessee has to give possession, therefore capital gains has to be taxed. Accordingly, taxed. So far as taxing the capital gains of Rs. 5,22,18,475/-, he has not given any basis for that amount and he simply referred the development agreement. As per the development agreement only the assessee has to receive 35% of the developed area, 65% has to go to the developer. We do not know how the Assessing Officer came to the above figure. The paper book at page No. 51 dated 02/12/2015, the Assessing Officer has issued a letter to the Principal Officers of M/s. IPL Infraservices Pvt. Ltd. under section 133(6) of the Act calling various details in respect of scrutiny proceedings in the case of M/s. Kohinoor Hatcheries Pvt. Ltd. and asked the development agreement-cum-GPA entered into with M/s. Kohinoor Hatcheries Pvt. Ltd., D. Venkateswara Rao and D.Raghava Rao and called the details of the development carried subsequent to the agreement entered into with the above parties and furnish the ....
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....ing assessed for capital gains only in the A.Y. 1999-2000. From the above it is very clear that though there is an agreement was entered into in the year 1994 and actual possession is handed over to the developer in the year 1998 though capital gains has to be taxed in the A.Y. 1999-2000. In the present case, no such possession has been handed over therefore the Assessing Officer is not correct in taxing the capital gains. 12. In the case of ACIT Vs. R. Srinivasa Rao (supra), the Hyderabad Bench of the Tribunal has observed that "unless there is willingness on the part of the developer to perform his part of the contract, there cannot be a transfer of capital asset as envisaged u/s 2(47)(v) r.w.s. 53A of the Transfer of Property Act. The department has failed to controvert the finding of the ld.CIT(A) by brining material on record to show that the developer has taken any steps towards development activity. Further, we may observe, though the Assessing Officer referring to the development agreement has inferred that possession of the property was handed over to the developer, however, on going through the pleadings and prayer of the plaintiffs in the plaint filed in civil cour....