TaxTMI 
TaxTMI 
2021 (1) TMI 230
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which a major portion was occupied by green belt (7,873 sq metres) 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r that whenever the DVO report was received, the Stamp Duty value would be replaced by the value so determined through a rectification order passed under section 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sub-section (1.) and sub-sections (6) and (7) of section 23 A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such 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 assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons as to why the 3rd plot was sold for Rs. 2.50 crores as against the Stamp Duty value of Rs. 6.53 crores. Without an iota of doubt, a consideration of this aspect is not within the competence of the Assessing Officer. Had this been so, there would have been, no occasion for. the Legislature to call upon the DVO to use 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o his prime plot. It may be gainfully noticed that there is nothing akin to rule 6DD of the Income-tax Rules, 1962, being exceptions/mitigating circumstances for section 40A(3) of the Act that have been engrafted in section 50C of the Act. When the plain words of the statute are clear and where the dimensions of the sale agreement 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 wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regard 'land' and Development Rights' as different class of capital assets and terms that were not amenable to be used interchangeably, then the same should be consistently reflected in its representation across the taxation/accounting spectrum and not only in appeal. Thus, the stand taken now that it never acquired 'land' but 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 no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adia v. CIT reporte.4 in 260 IT,R.491,; the mie import of sectipit2(47)(v) of the Act was elucidated,This provision, introduced from 1st April, 1988, is at the. core of the taxability of capital .gains, particularly in the context of Development Agreements. Elaborating the scope thereof the Hon'ble Bombay High Court held that arrangements that confer the privileges 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 develop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sfer by way of execution of sale deed, the .transaction is to be completed. The transfer of capital asset is completed if the certain conditions of section 53A of the Transfer of Property Act is satisfied. Accordingly we do not find any reason to interfere in the order of the lower authorities on this issue. As far as, demerits attacked to the property are concerned, the DVO has, already 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, 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, the ownership has a characteristics of inter- determinate in duration and also ownership has residuary character. When the . development rights, which, are residuary, are transferred, it is nothing but right to exploit the said property in favour of the developer and same is covered under clause (i) to section 2(47) i.e relinquishment of asset. We are, therefore, of the opinion that the provisions of section 50C are * applicable when 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e been transferred, 21. Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would atnount to transfer of a capital asset. 4.16 Moreover, the insertion of Explanation 2 to section 2(47) of the Act by the Finance Act, 2012, with retrospective effect from April 01, 1962 unambiguously provides that 'transfer7 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 flowin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the erstwhile Chapter-XXC of the Act ("Purchase By Central Government Of Immoveable Properties 1$ Certain Cases of Transfer") and resorted to only when there was a significant under-valuationln the. Agreement of Sale for evading tax. Definitions, including the one relied upon, were specially drafted for the purpose of the Chapter and would/ consequently, fail to have any relevance beyond its confines. That said, the definition of "transfer" in this Chapter too included allowing possession of property in 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 50....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it was situated on the green belt. 5. All the three sale transactions are part and parcel of a composite sale transaction. The combined sales consideration of Rs. 54.50 Cr far exceeds the combined stamp duty valuation of Rs. 43.18 Grand there can be no question of addition u/s. 50C of the Act. 6. No independent approach road to the third plot of land which the development right was obtained. 7. Land cannot be developed. 8. Comparable sale instances referred by the valuation officer, but no actual sale instances are referred. 9. Green Zone-Objections 10. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t applicable as the same are to be applied only where there is transfer of land or building or both. In the case of the assessee, there were only development rights in the said land available to the assessee and such transfer of development rights does not establish the case of the Revenue that it amounts of transfer of land or building or both." 21. The Bombay High Court in the case of CIT v Greenfield Hotels & Estates Pvt Ltd. (2016) 389 ITR 68 (Bom), it was held that Section 50C will not be applicable while computing capital gains on transfer of leasehold rights in land and buildings. 22. Decision relied by the CIT (A) is not relevant to the present case as there is 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 ....