AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1113
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....ved upon the assessee. During the course of reassessment proceedings Ld. A.O observed that there is a transaction of sale of land situated at Khajrana, District, Indore. As per the sale deed dated 31.3.2010 sale consideration of Rs. 14 crores is received by the assessee and the market value of the plot as per the Stamp Valuation Authority was Rs. 16,17,50,000/-. This plot of land was purchased at the cost of Rs. 2,95,98,275/- vide registered deed dated 12.7.2007. As per the Ld. A.O the alleged transaction needs to be taxed under the head Short Term Capital Gain in Assessment Year 2010-11 since the property was owned for less than three years. When the assessee was confronted it was submitted that the alleged transaction is a part of its business activity and it has been duly shown in the return of income for Assessment Year 2011-12 and the net profit from the sale of land at Rs. 8,75,86,752/- have been shown. It was contended that the assessment for Assessment Year 2011-12 stands completed u/s 143(3) of the Act vide order dated 31.1.2014 accepting the alleged profit of sale of subject plot thereby accepting the genuineness of transaction and its is taxability. Ld. A.O however was n....
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....he said land was purchased on 12/07/2007 and sold on 31.03.2010 and the possession was also given on that date.. Hence, 'holding period of the property is. Not more than 36 month further, the registration of sale took place in F.Y. 2009~10. Therefore, it should be taxed as STCG in A.Y. 2010-1l. 5.1.2 The sale deed or agreement has been produced to support the claim mentions that, the registration of plot pas taken place on 31/03/20 O. Further, it is seen that during the course of assessment and appellate proceedings agreement has been produced to establish the terms .and conditions of' the sale or rather the arrangement between the appellant and M/s Media Savy India Ltd. The sale of land or the appellant is specified and the appellant has been-paid the. Money on the basis of agreement Further as pointed out by the AO it is . ascertainable that the land has been sold by the appellant. It is further seen that while working out the capital gain the appellant has treated that the capital gain is to be taxable in the A.Y. 2011-12. 5.1.3 The same plots were purchased on 12/0712007 which is clearly mentioned in the registered sale deed of purchase of plots at pa....
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.... considering the material fact that the appellant having already been assessed to tax in respect of the transfer of the subject plot in a subsequent assessment year i.e. A.Y. 2011-12, under s.143(3) of the Act, there was no escapement of any income chargeable to tax giving rise to invocation of the provisions ofs.148 of the Act." 2. That, without prejudice to the above, both the authorities below have grossly erred in holding that the property transferred by the appellant was held by him as a short-term capital asset whereas having purchased the property on 31-03- 2007 and sold the same on 31-03-2010, even if re-characterization of income from business income to capital gain was warranted, it ought to have been regarded as transfer of a long-term capital asset held by the appellant for a period of more than 36 months in accordance with the provisions of s.2(29A) read with s.2( 42A) of the IncomeTax Act, 1961." 3.That, without prejudice to the above, both the authorities below have grossly erred in invoking the provisions of s.50C of the Act in the appellant's case, by substituting the actual sales consideration of Rs. 14,00,00,000/- with the value adopted by t....
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.... it ought to have been regarded as transfer of a long-term capital asset held by the appellant for a period of more than 36 months in accordance with the provisions of s.2(29A) read with s.2( 42A) of the Income Tax Act, 1961." In this regard, it is submitted as under: 1.01 That, during the previous year relevant to A.Y. 2007-08, the appellant had purchased certain pieces of plots of diverted land admeasuring 69643.08 sq. ft. situated at Survey Nos. 211, 2/2, 2/3, 2/4, 2/5, 2/6, 217 & 2/8, village Khajrana, Tehsil & District Indore, for a total purchase consideration of Rs. 2,95,98,275/- from M/s. City Square Builder & Developers Pvt. Ltd., under a registered purchase deed duly executed between both the parties on 31-03-2007. The purchase deed so executed on 31-03-2007 was duly got registered before the Sub-Registrar of Properties on 12-07-2007. A copy of the purchase deed is placed at page no. 20 to 29 of our Paper Book. 1.02 The entire consideration for purchase of the plots was paid by the appellant through account payee cheques up till 26-03- 2007. As per the clause (2) of internal page no. 4 (kindly refer PB Page No. 23) of the purchase deed dated 31-....
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....m A.Y. 2011-12 to A.Y. 2010-11, has further recharacterized the nature of the income claimed by the appellant as business income to capital gain. According to the AO, the appellant had not carried out any business activity and therefore, the subject plots were held by him only as investment and not as stock-in- trade. 2.02 That, the learned AO, for the purpose of taxability of the capital gain, was of the view that the subject plots were held by the appellant for a period of less than 36 months and therefore, the same would be treated as a short-term capital asset and consequently, any gain arising from transfer of such capital asset would be a short-term capital gain. 3.01 It is submitted that the learned AO, for classifying the plots as 'short-term capital assets', has adopted the date of purchase of plots as 12-07-2007 and date of sale as 31-03-2010. It is submitted that as far as date of sale is concerned, the learned AO has rightly taken the date as 31-03-2010 being the date of execution of the sale deed as well as the date of handing over of the possession by the appellant to the purchasers as per the clause (4) of the sale deed [kindly refer PB Page....
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....08 are reproduced as under: "47. Time from which registered document operates - A registered document shall operate from the time which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration. " 3.04 In the instant case, the possession of the plots was taken by the appellant under the registered purchase deed on 26-03-2007 and the purchase deed was duly executed on 31-03-2007. Undisputedly, as per the registered sale deed, the incidence of handing over of the possession and execution of the sale deed took place on 31-03-2010. Thus, the holding period of the plots by the appellant would start from 26-03-2007. It is submitted that the date when the Deed is finally released from the office of the Sub Registrar of Properties is of no relevance for computing the date of transfer. For such proposition, reliance is placed on the decision of the Hon'ble Delhi High Court in the case of Bharti Gupta Ramola vs. CIT (2012) 72 DTR 387 (Del). 3.05 Likewise, on the same analogy, the date of sale of the plots by the appellant would be adopted as 31-03-2010. In such circumstances, the ....
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....ase, by substituting the actual sales consideration of Rs. 14,00,00,000/- with the value adopted by the Stamp Valuation Authority at Rs. 16, 17,50,000/- without first making a reference to the Valuation Officer in accordance with the provisions of subsection (2) of section 50C of the Act." In this regard, it is submitted as under: 1.01 That, the subject plots have been sold by the appellant for a total sales consideration of Rs.l4,00,00,000/-.. Such fact is clearly evident from internal page no. 4 to 6 [PB Page No. 33 to 35] of the registered sale deed wherein the details of the payments aggregating to a sum of Rs. 14,00,00,0001- made by the buyers to the appellant have been given. 1.02 That, during the course of the assessment proceedings, the appellant claimed that the subject plots were actually sold for a total consideration of Rs.l4,00,00,000/- only. 1.03 That, despite the aforesaid position, the learned AO invoked the provisions of s.50C of the Act by adopting the deemed value of Rs. 16,17,50,000/- as given by Stamp Valuation Authority for the purpose of computing the stamp duty value of the plots sold. 1.04 Since the appellant has....
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.....03 Your Honours, even this Hon'ble Bench, on earlier occasions in various cases, has held that the AO was not justified in invoking the provisions of s.50C of the Act without making reference to the Departmental Valuation Officer under the provisions of subsection (2) of section 50C of the Act. For such proposition, reliance is placed on the following judicial pronouncements: i) Somesh Bhatnagar vs. ACIT (2016) 28 ITJ 398 (Trob.-Indore) ii) Bhopal Motors Pvt. Ltd. vs. ACIT (2016) 27 ITJ 264 (Trib.- Indore) iii) ITO vs. Girish Kumar Jain (2015) 26 ITJ 515 (Trib.-Indore) Since, in the instant case, the learned AO has invoked the provisions of section 50C without first satisfying the mandatory condition enjoined in the section itself and therefore, the addition so made by the learned AO deserves to be deleted on this count too. (iii) ADDITIONAL GROUND NO. 4 "That, without prejudice to the above, both the authorities below have grossly erred in computing the short-term capital gain of the appellant at Rs. 13,21,51,725/- without granting the legitimate deductions under s.48(i) of the Act in respect of payments of stamp duty & re....
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....nd registration expenses at Rs. 1,72,67,070/-.. It shall be observed by Your Honours that even the learned AO, while framing the impugned assessment order, has neither brought on record any adverse material nor made any adverse comment the aforesaid claim of the appellant is inadmissible. Thus, it shall be appreciated by Your Honours that the claim of the appellant as regard to payments of stamp duty and registration expenses deserves to be allowed in accordance with the provisions of s.48(i) of the Act. 3.01 It is further submitted that for effecting the sale of subject plots, the appellant availed the services of some property brokers, who not only identified and searched the prospective buyers of the properties but also played a significant role in the negotiation process, payment process and ultimate completion of the sale deal. In consideration of rendering the services, which obviously related to the transaction of transfer of property by the appellant, the appellant was required to pay a brokerage of Rs. 28,00,000/-, i.e. @2% of the actual sales consideration of Rs. 14,00,00,000/-, to six persons. It shall be pertinent to note that the payment of brokerage has also ....
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....by the AO. In view of the above facts and circumstances of the case, it is submitted that the legitimate deductions in respect of payments of Rs. 1,72,67,070/- and Rs. 28,00,000/- respectively on account of stamp duty & registration expenses and brokerage may kindly be granted to the appellant. (iv) ADDITIONAL GROUND NO. 5 "That, without prejudice to the above, both the authorities below grossly erred in not granting the benefit of indexation of cost of acquisition and cost of improvement to the appellant in accordance with the second proviso to section 48 of the Act as the capital gain derived by the appellant from transfer of the capital asset was in the nature of a long-term capital gain." In this context, it is submitted as under: 1.00 That, in the preceding grounds, we have fully demonstrated beyond all doubts that the subject plots were factually held by the appellant as long-term capital assets only. 2.00 That, since subject plots were in the nature of long-term capital asset and further since, the capital gain accrued to the appellant from transfer of capital asset was in the nature of longterm capital gain, the appellan....
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.... 2011-12, the proportionate income-tax relating to the aforesaid profit of Rs. 8,75,86,752/- would be worked out at Rs. 2,85,13,935/-. 2.00 In respect of the profit on sale of subject plots, the appellant has duly been assessed in the subsequent assessment year, i.e. A.Y. 2011-12, under an order of assessment passed under s.143(3) of the Act by the then JCIT, Range-I, Indore, on 31-01- 2014. A copy of the assessment order is placed at page no. 51 & 52 of our Paper Book. Thus, in other words, in respect of the profit on transfer of subject properties, the appellant has already suffered due tax in a subsequent assessment year. 2.01 Now, on a perusal of the aforesaid statement of computation of capital gain [kindly refer PB Page No. 70], it shall be observed that if the approach of the AO is adopted, there would arise a long-term capital gain of Rs.I0,56,40,329/- to the appellant. It shall further be observed by Your Honours that on such capital gain, the appellant would be required to make the payment of tax liability of Rs. 2,17,61,908/- for the relevant assessment year. 2.02 It shall be appreciated that as against the aforesaid tax liability of Rs. 2,17,6....
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....s to be adopted. So, it is clear enough that the income in the present case is taxable only under one law. By virtue of clause (k) to Article 371 F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act. " [emphasis supplied] 6. Ld. Counsel for the assessee summarising these arguments submitted that without prejudice to the claim of business income offered during Assessment Year 2011-12 the alleged transaction may be treated to have been completed during the Assessment Year 2010-11 since the sale deed was signed by both the parties on 31.3.2010 but the transaction should be taxed under the head "Long Term Capital Gain" as the purchase deed was signed on 31.3.2007 and the possession of the plots was received by the assessee on 26.3.2007. Thus the period of holding of the plots of land by the assessee was for more than three years and therefore it should be taxed under the head "Long Term Capital Gain". He also submitted that the expenses incurred for carrying out thes....
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.... incurred towards stamp duty and registration at Rs. 1,72,67,070/-, brokerage expenses of Rs. 28 lakhs and sundry expenses of Rs,27,47,903/-. Whereas the Ld. A.O took the basis of sale deed executed on 31.3.2010, registered purchase deed dated 12.7.2007 and did not accept the transaction as a part of business income and taxed it as Short Term Capital Gain by taking sale consideration as per the value adopted by Stamp Valuation Authority at Rs. 16,17,50,000/- and after giving the benefit of cost of acquisition of Rs. 2,95,98,275/-, made addition for Short Term Capital Gain at Rs. 13,21,51,575/- for the assessment year 2010-11. 10. Now going through the main grounds and additional grounds of appeal following issues raised by the assessee needs to be addressed. (1) Whether the alleged transaction is to be taxed as business income or capital gain. (2) If the transaction is to be taxed as capital gain whether it is to be taxed in Assessment Year 2010-11 or Assessment year 2011-12 as Short Term Capital Gain or Long Term Capital Gain. (3) Whether the Ld. A.O was justified in applying the value of property as per Section 50C of the Act without referring it to ....
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....d as capital gain whether it is to be taxed in Assessment Year 2010- 11 or Assessment year 2011-12. 14. As per section 47 of the Registration Act 1908, a registration document shall relate back to the date on which it is executed and not from the date on which it has been so registered. The relevant provision of Section 47 of the Registration Act, 1908 is reproduced below:- "47. Time from which registered document operates - A registered document shall operate from the time which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration. " 15. In the light of the above provision, we find that the alleged sale deed was executed on 31.03.2010. This fact is not disputed by both the parties. Though the document has been registered subsequently during the financial year 2010-11 but the sale deed has been signed by both the parties on 31.03.2010. In the course of hearing when the Ld. Counsel for the assessee was confronted with this aspect, he was fair enough to accept that 31.03.2010 may be taken as the date of sale of the plots of land. In these given facts and circumstances, we are of the view that....
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....ng it to the Valuation. 19. The assessee has challenged the application of Section 50C of the Act by the Ld. A.O adopting the fair market value of the immoveable asset at Rs. 16,17,50,000/- adopted by the Stamp valuation authority as against the sale consideration of Rs. 14 crores received by the assessee as per the sale deed. In the preceding paras we have already taken the view that the alleged transaction was not in the nature of business and is to be taxed as Long Term Capital Gain during Assessment Year 2010-11. Assessee has not disputed the fair market value of the property before both the lower authorities. The assessee has contended before the lower authorities that as the alleged transaction was in the nature of business provision of Section 50C of the Act is not applicable. But now since we have decided the issue by treating the gain from alleged transaction as Long Term Capital Gain, this plea of the assessee that Section 50C of the Act is not applicable on the alleged transaction, will not have legs to stand for. In the course of hearing Ld. Counsel for the assessee has challenged the fair market value adopted by the Ld. A.O at Rs. 16,17,50,000/- to be higher and has....
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....f the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed 88[or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed 88[or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 21. Sub Section 1 of Section 50C primarily applies on the instant case. However if the assessee challenges the value adopted by the Stamp Valuation Authority and subsequently adopted by the Ld. A.O to compute the Capital Gain then the Ld. A.O may refer the valuation of the capital asset to Valuation Officer as provided in Section 50C(2) of the Act. Since this issue never came up for consideration before the lower authorities, we being fair to both the parties and in the interest of justice set aside this issue to the file of Ld. A.O with the direction that necessary reference may be made to the Departmental Valuation Officer for valuation of the impugned capital asset and if the same is less than alleged fair market value then apply the same f....