TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 230
X X X X Extracts X X X X
X X X X Extracts X X X X
....) on which no construction is permitted. * The land was next to river having mangroves and was in ecologically sensitive area. * The land was reserved for Economically Weaker Section of Society, * The sale of green belt land was part and parcel of two other sales of land adjacent to the said land. The combined sales consideration exceeded combined stamp duty valuation. * It was not a transfer of land but only transfer of development rights in the land. The appellant was not the owner of the land but only owned development rights in the land. The appellant prays that aforesaid additions made may be deleted. The appellant craves your honour's leave to add, alter or amend any ground of appeal at the time of hearing or before. 3. Brief facts of the case are that the Assessing Officer noted that the assessee was in possession of a piece of land at village Mundhwa, Haveli; Pune, from 03.07.2006 onwards. During the financial year, the said land was sold by it as three plots and three separate sale agreements were executed with the following particulars: (in Rs.) Sr. No Name of Purchasers (Shri) Area of plot Sale Consideration Stamp Duty value i. Avinash Nirvuti Bh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....154 of the Act. 5. The requisite report was received from the DVO vide letter no. VO- SOL/PN/CG/2111/2016-17/90 dated 24.10.2016. The 3rd plot was valued at Rs. 4,12,09,000/- as against the value of Rs. 6,53,27,000/- adopted by the Assessing Officer in the assessment order. Resultantly, the Assessing Officer passed an order under section 154 of the Act on 25.11.2016 substituting the value taken by him by the value now determined by the DVO. Ex- consequenti, the amount in dispute now stood reduced to Rs. 1,62,09,900/- (i.e., Rs. 4,12,09,000/- minus Rs. 2,50,00,000/-). 6. Upon the assessee's appeal, the ld. CIT(A) elaborately dealt with the assessee's objection. He found that the provision of section 50C are fully applicable. We may gainfully refer to his order in this regard as under: Section 50C of the Act, is reproduced below for ready reference: "Special provision on for full/value PJ consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assesses of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a Stats Government (hereafter in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act, Explanation 1. -For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2 - For the purposes of this section, the expression "assessable" means the price which '-the stamp valuation authority would have, notwithstanding anything to the contrary contained in ' any other law for the time being in force, 'adopted or assessed, if it were referred to such authority-for, the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained- under subsection (2) exceeds the value adopted or assessed or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable] by such authority shall, be taken as the full value of the consideration received or accruing as a result of the transfer." 4.1 A bare perusal of the aforesaid shows that the conditionally, as literally evident through plain words, for the successf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se his technical expertise for make an accurate price discovery. Taking any other view runs' the 'unacceptable risk of rendering sub-clause (3) of section. 50C of the Act nugatory. Hence, claims such as the 3rd plot falling in an ecologically sensitive green zone, adjacent to a mangrove-forest lined river, government restrictions prohibiting commercial construction ' and reservation for the Economically Weaker Sections (EWS) cannot be considered or that one party had to grant easement to others. After all, the land was voluntarily sold to multiple persona, in such a configuration that it wanted and if that necessitated inter-ss right-of-way arrangements, then that would have no impact on statutory compliance to section 50C of the Act if otherwise warranted. Further, that the appellant chose to have all the agreements signed on the same day or that the sale agreements referred to the adjacent plots with each being a reciprocally confirming party, are wholly extraneous for determining the applicability of the said section. In other words, it would have made no difference to the legal position if the sale agreements had been entered on. three different dates or that they w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eement are also clearly manifested, there is no occasion for getting into extraneous reasons/causes as to why a particular land sale transaction was valued in a particular way. Many of the arguments deployed by the appellant are factors for the DVO to consider and not by the Assessing Officer-as per express provisions of the Act. This is amply borne out.from the considerable depletion in the fair market value of the 3rd plot as determined by the DVO. Hence, the arguments taken for justifying the deflated sale price, are of little relevance. The cumulative effect of all germane factors such as shape, size, location/ and future potential were duly reckoned in the report of the DVO. 4.6 There is no legal justification seeking the aggregation of the three independent sale agreements for the purpose of benchmarking the separately stated sale consideration with their Stamp Duty value. Accepting such a prayer would confer an undeserved tax advantage. The sale was as per the voluntary will, structure and scheme mutually conceived and devised by the parties concerned. The provisions of the Act must, therefore, apply to the consequences flowing therefrom. The reality is that there was tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had only some rights, with ownership still vested in Radha Raman Co-op Housing Society; is unacceptable. The conduct of the-appellant reveals that it had all the material rights over the land - rights which are vested with an owner. For instance, in the letter dated 27.06.2016 addressed to the DVO, the reference by the appellant was to the sale of a "piece and parcel of land" and not to a 'right1. In the undated correspondence to the Assessing Officer/ the appellant mentions the "cost of land" to be Rs. 22,50,00, 000/-. The appellant stated that in the sale agreements, there was a clause for the sub-division of land as per which ;the buyers shall jointly prepare a pUn for the plot and obtain requisite sanction from the authorities to issue separate 7/12 extracts. This too demonstrates that the property alienated was land itself and not some intangible, since modification of Sand records (7/12 extracts) is associated with land ownership. Accordingly, the aforesaid decision of the Id. Appellate Tribunal, Mumbai, is not on all fours. 4.8 Be that as it may, there is a far more compelling reason, as to why the provision of section 50C of the Act will apply to the transaction ente....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivileges of ownership over land without transfer of.title would still be.'transfer' without waiting for the execution of conveyance. In such a situation, the date of signing the' Development Agreement would ordinarily be the date of the'transfer'. Flowing from this, it can be said with no difficulty that executing a Development Agreement would amount to 'transfer1 contemplated in section 50C of the Act. 4.10 The Id. Appellate Tribunal, Mumbai, in ACIT(OSD)-2(3), MumM vs. Seth Industries (P)'Ltd (ITA 4094/Mum/2013 dated 18.05.2013) held.that 'transfer' of land would.be on the date of executing the registered Development Agreement transferring development rights. It observed as under: "As could be seen from the.-facts on record, assessee has entered into a registered development agreement with MJs. Sanghvi Premises P. Ltd. on 29.10.2005. As per the terms of the agreement, transfer of the land should be concluded on the date of execution 6f the deed. Thus, in terms of Section 2(47)(v) of the Act there was transfer of capital asset insofar as it relates to the land in question."The" ratio laid down by the Hon'ble Jurisdictional High Court in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taken into account all aspects while making the valuation of the property. The assessee has participated in the proceedings before the DVO and accordingly, we do not find any error or illegality in the valuation made by the DVO which is much less to the valuation made fry the Stamp Valuation Authority. The substantial relief has already been given by the DVO as well as by the AO while passing the consequential order as per the DVO's report. Accordingly, the appeals of the assessee are devoid of merits on this issue." 4.12 The Hon'ble Allahabad High Court in Commissioner of Income-tax-II, Agra vs Shimbhu Mehra [2016] reported 65 taxmann.com 142, had two dates to consider. The first was the agreement for .sale date being 04,07.2001 and other Was the execution of Sale deed in April, 2003. It was held as ' under (emphasis added): "14. In the light of the aforesaid provision, it is apparently clear that the moment an agreement to sell is executed between the parties and part consideration is received, the transfer for the purpose of Section 50C of the Act takes places and computation under Section 48 of the Act will start accordingly, for the purpose of calculating the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the rights to develop the property are transferred. We, therefore, reject the contention of the assessee that the provisions of section 50C are not applicable." 4.14 The Id. Appellate Tribunal, Visakhapatriam in DCIT, Circle-2'(1), Vijayaiaadti vs Dr. Chalasani Mallikarjuns Rao [2016] reported in 75 taxmann.com 270, observed that that it was "illogical and improper" on the part of the assessee to say that 'transfer, within the meaning of section 2(47}(v) of the Act took place, but yet there was no application of provisions of section 50C of the Act when the property has been transferred by way of registered un-pqssessory sale-cum-GPA. It noted that the assessee had computed long-term capital gain by adopting sale consideration-shown.in the sale deed. The averments of the appellant are congrupus. The Id. ITAT held as under (emphasis supplied): "In this 'case, admittedly, the assessee himself has admitted long term capital gain on transfer of asset, The moment transfer took place inviting the meaning of section 2(47)(u) of the Act, the . deeming fiction provided u/s.50C of the Act are applicable, when the sale consideration shown in the sale deed is less than the mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansfer7 of an asset "includes disposing of or parting with an asset by way of an 'agreement1. The said Explanation read as under (emphasis supplied): "Explanation 2.- For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, . * or creating any interest-in any asset in any manner whatsoever, directly or indirectly, absolutely or. conditionally, voluntarily or-involuntarily, by way of an agreement (whether entered into in India of outside India) or otherwise, notwithstanding' that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;" As thus seen, there is a catena of judicial authorities holding categorically that 'transfer of land or building' will encompass in its fold transfer of Development Rights. As. a result, even if it is taken that what was transferred was such a right alone, even then the application of section 50C of the Act remains 'intact and unaltered. Needless to add, the debate as to whet....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... part performance referred to in section 53A of the Transfer of Property Act, 1882. Hence, this . does not advance the case of the appellant. 4.19 The final aspect that deserves to be dwelt upon is that the Legislative intent in introducing section 50C of the Act was to curb the deliberate under-valuation of immovable property as a tool of tax-avoidance. Allowing Development Agreements, a widespread modality adopted for transfer of beneficial ownership of immoveable property, to escape the vigil of section 50C of the Act would defeat the aforementioned intent in a substantial way leading to the emasculation of the said section. The appellant has pointed out that section 50C of the Act was a deeming fiction and, hence, ought to be given a restricted, strict meaning. No doubt the provision is a deeming one, but it would be useful to refer to the decision of the Hon'ble Apex Court in A. Madan Mohan vs Kalavakunta Chandrasekhara (1984 AIR 871), where the following observation speaks for itself (emphasis supplied): * . "It is a well settled principle of interpretation of statute that wherever a statute contains stringent provisions they must be literally and strictly construed s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0. Development potential 11. CIT (A) has not dealt with any of the objections of the Assesses while confirming the valuation report of the valuation officer. 12. Valuation report of the valuation officer is not binding on the CIT [A) he has to independently apply his mind and has to decide on merit. 13. In Suresh C. Mehta v. ITO (2013) 144 ITD 427 (Mum)(Trib.) held that, assessee had made various objections to such valuation report before Commissioner (Appeals), Commissioner [Appeals) was bound to look into these objections so as to arrive at proper fair market value. The Commissioner (Appeals) and the Tribunal can entertain objections relating to such valuation and Valuation Officer's valuation is not binding upon them. 14. In CIT v. Prabhu Steel Industries Ltd. (2013) 218 Taxman 290 / (2014) 265 CTR 581 (Bom.)(HC) the Court held that, valuation officer is an independent and distinct statutory forum for resolving controversy regarding determination of market value of property with all necessary powers; its order or report is made binding on Assessing Officer. When report/order of Valuation Officer under section 50C (2) is objected to by assessee, CIT(A) or Tribunal are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no transfer of Development Agreement. Here is a Sale Agreement wherein assessee is a confirming party. 23. In view of the above, the appeal of the Assessee may be allowed. 10. Per Contra, the learned departmental representative relied upon the orders of the authorities below. He pleaded learned CIT appeals has very elaborately dealt with all the issues raised by learned counsel of the assessee. He fully relied upon the case laws mentioned by learned CIT appeal. 11. Upon consideration of the submission of the parties and perusal of the records and case laws, we note that CIT appeals has elaborately addressed the various legal issues raised by the assessee. However, he has not dealt with the merits of the objections of the assessee that there were inherent defects/deficiencies in the said piece of land, due to which the assessee was contesting the valuation. It is not discernible whether the merits of various objections of the assessee to the deficiency in the said piece of land were considered by the DVO in his report. We find that it is necessary in the interest of justice that the various objections on merits of the valuation be dealt with by the learned CIT appeals by a speak....