TaxTMI 
TaxTMI 
2021 (2) TMI 625
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....he provisions of law relating to cost of acquisition and cost of improvement does not specify any time frame for making such payments, as mentioned. Sale Consideration - Commercial Space 5. The Learned CIT (Appeals) erred in confirming the action of the A.O in adopting the Guidance Value for computing capital Gains for commercial area; 6. The Learned CIT (Appeals) erred in confirming the action of the A.0 in adopting the Guidance Value, without appreciating that the transaction in a Joint Development Agreement is one of exchange of asset and hence the value as incurred by the developer will be the cost of construction and not the market value 7. The Learned CIT (Appeals) erred in confirming the action of the A.O in adopting the Guidance Value, without appreciating that 21.94% transfer of land was against 78.06% construction of building and as such cost of construction should have been considered; 8. The Learned CIT (Appeals) erred in confirming the action of the A.O in adopting the Guidance Value, without appreciating that the cost of construction of flat by the builder is equivalent to the cost of acquisition of flat by the appellant. ....
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....ell as the authorities below ought to have appreciated the fact that in the financial year 2011-2012 relevant to the assessment year 2012-2013 the developer has partially handed over the possession of commercial and residential built-up area in lieu of land transferred as per the scheme of JDA dated 08-01-2004 and it cannot, ipso facto, be construed as transfer as per provisions of section 2(47) of the Act. c) The Learned CIT(Appeals) as well as the Authorities below erred in not following the instructions contained in CBDT Circular No. 14 dated 11.04.1955, wherein the subordinate authorities are bound to assess the correct income as per Law despite the fact that the appellant had inadvertently offered to tax the capital gains on receiving the possession of super built up area in lieu of land transferred as per the scheme of JDA, as the transaction per se cannot be construed as transfer within the meaning of section 2(47) of the Act." 4. The ld. AR stated that these are legal grounds arising out of the orders of lower authorities which were inadvertently not raised before the lower authorities and the same may be admitted since there is no involvement of examination or ....
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.... units retained by the Appellant 34,610 3 Office Space: Summit A and Summit B 2,13,694 4 Shopping Arcade 21,370 9. The assessee's case was selected for scrutiny assessment under CASS and Notices u/s 143(2) and 142(1) of the Act were issued and served. The AO after considering the submissions by the assessee, completed the assessment u/s 143(3) of the Act by making the following additions/disallowances: a) Disallowance of Commission paid to M/s Bentely Investment amounting to Rs. 1 Crore. The Appellant had claimed the commission amount as part of cost of acquisition of the property. b) The assessee during the FY 2011-2012 received 235063.5 Sq.ft of commercial space as his share of built-up area in the project and determined the sale consideration at Rs. 1,500/- per Sq. ft, being the builder's cost of construction. To confirm the cost of construction at Rs. 1,500/- per Sq ft, the developer issued a certificate dated 20.09.2014. However, the AO disregarded the submissions of the assessee and adopted Rs. 2,200/- per sq.ft as deemed consideration. The value adopted by the AO is based on the guideline value issued by Government of Karnataka i....
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....n the decision of the Hon'ble Calcutta High Court in the case of Chunnilal Prabhudas & Co., 76 ITR 566 contended that in lieu of land transferred as per the scheme of Joint Development Agreement (JDA) dated 08-01-2004 with M/s Brigade Enterprises Pvt Ltd., has during the FY 2011-2012 taken over the possession of super built-up area of commercial space i.e., Summit A, Summit B and Shopping Arcade measuring 235063.5 Sq.ft. Though the assessee only received capital asset (by way of taking over the possession of the commercial area) in lieu of land transferred, the transactions cannot, ipso facto, be construed as transfer as there is no sale, exchange or relinquishment of rights. 13. As held by the Hon'ble Madras High Court in the case of Cadd Centre 383 ITR 258, in order to bring a transaction under the ambit of capital gains, the receipt or accrual must have originated in a "transfer" within the meaning of section 45(1) read with section 2(47) of the Act. In the assessee's case though there is receipt in the form of super built-up area of commercial space, the receipt is originated out of the transfer which has taken place during the FY 2004-2005 via JDA dated 08-01-2004 a....
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....Muar reported in 56 ITR 67(SC) held as under:- "If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income." 18. It was submitted that the transaction of the asse is not taxable under the Income Tax Act, 1961, as the assessee's transaction of taking over the possession of super built-up area cannot be considered as transfer as per provisions of section 2(47) of the Act and hence, it is not exigible to tax under the taxing statute. 19. The ld. AR further submitted that Article 265 of the Constitution of India provides that no tax shall be levied or collected except by the authority of law. The Income Tax Authority does not have an unbridled power to tax the income which is not chargeable to tax. As a corollary, if the income is not chargeable to tax, then the retention of tax paid on such income shall be breach of provisions of Article 265 of the Constitution of India. The transaction of ....
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.... that the dictum laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra), the assessee is not required to file a revised return of income to make the above claim as the assessee is not making any claim before the Assessing Officer but raising issues based on the same set of facts. 23. Also, the Finance Act, 2017 introduced sub-section (5A) to section 45, wherein it is explicitly stated that the year of chargeability in the case of JDA is the year in which certificate of completion for the whole or part of the project is issued by the competent authority. Unlike section 45(5A), which is an exception to section 45(1) of the Act, in the AY 2012-2013 there was no akin provision to tax the income on capital gains vis-a-vis handing over possession of super built-up area of commercial space by the developer or on issuance of completion certificate by the competent authority. Section 45(5A) cannot be read retrospectively as the legislature intends to tax the capital gains from the specified agreement entered into on or after 01.04.2017. 24. The ld. AR submitted that the facts of the case in the latest decision of the Hon'ble Supreme Court....
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....d till completion of development and sale of built-up area. The act of assessee and developer, can beyond any doubt of uncertainty, be concluded as a contract within the meaning of section 53A of the Transfer of Property Act, 1882. The assessee has given the possession and the willingness to perform the contract was established since the structure of the building/s got completed and there were no encumbrances to disrupt the terms and condition of JDA so as to draw a compromise deed to ratify the terms of JDA. For the aforementioned reasons, the judgment of Sehasayee Steels (supra) is distinguishable from the facts of the present case. 27. Under the above facts and circumstances of the case, it was prayed that the consideration declared by the assessee and subsequently enhanced by the AO and confirmed by the CIT(Appeals) amounting to 40,09,49,500/- be deleted in the interest of justice. 28. On the other hand, the ld. DR submitted that the assessee has already taken possession of his share of construction area and also entered into sale agreement or sale deed with various parties in respect of commercial as well as residential space, as such there is no difference between the r....
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....these are to be performed, it cannot be said that the provisions of section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer u/s 2(47)(v) of the I.T.Act. Thus, let us consider whether the transferee, on the facts of the present case, can be said to have `performed or is willing to perform' its obligations under the agreement. 30. We have carefully gone through the JDA dated 08.01.2004 entered into between the assessee and M/s. Brigade Metropolis Project. As per this agreement, it was specifically mentioned in clause No.(1) and (2) as follows:- 1) PERMISSION TO DEVELOP : 1.1 The First Party hereby permits the Second Party to enter upon the Schedule Property for development of the Schedule Property in terms of this Agreement. 1.2 The Second Party is hereby authorized and empowered by the First Party to develop the Schedule Property and to construct Buildings therein and the First Party shall not revoke the rights so g....
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....velop Schedule Property and to take up, commence and complete the construction of the buildings thereon and development shall be that of the Second Party. The development charges and other charges and levies and all sums demanded by the authorities in relation to sanction, development and construction shall be paid by Second Party. The First Party shall have no liability whatsoever in this behalf. 2.3 The Second Party shall make available to the First Party one set of sanctioned plans and photo copies of other permissions / clearances / orders received and agree to make available photo copies of other permissions / clearances / orders received hereafter from time to time. 2.4 The First Party has executed a Power of Attorney to enable the Second Party to secure plans, licences and other permissions and for purposes connected with the development and sale of the Schedule Property which shall be in force until Joint development and transfer of Second Party's share of land and building are completed in all respects unless otherwise revoke for reasons set out in this Agreement. In addition thereto the First Party shall sign and execute such other documents, papers and ....
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....curity deposit of Rs. 10,00,00,000, which is interest free. Further, the plan and licence to be obtained by the vendee within two months from the date of receipt of Khata schedule property from City Municipal Council. The assessee not shown that whether the vendee acted upon within the stipulated time to secure the building plan. 32. We have also gone through Clause No.7, which reads as under:- 7. COMMENCEMENT AND COMPLETION OF CONSTRUCTION : 7.1 The Second Party shall commence construction of the buildings in the schedule property within Ninety days from the date of sanction of licence and plan and all other permissions. The second party shall under normal conditions and in the absence of any restrictions, shall complete the construction of OWNER'S CONSTRUCTED AREA within five years from the date of commencement of construction and issue of commencement certificate by Bangalore Development Authority and / or other sanctioning authorities which period does not include the time taken for obtaining of the Occupancy certificate / completion certificate from the Bangalore Development Authority or other authorities and Electrical water and sanitary connections from ....
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....ncur any liability for any delay in delivery of OWNER'S CONSTRUCTED AREA if the performance of its obligations hereunder is delayed or prevented by conditions constituting force majeure. All periods, hereunder fixed shall be deemed to have been extended by the periods equal to the periods of delay on account of the force majeure conditions. In any of the aforesaid events, the Second Party shall be entitled to corresponding extension of time for delivery of the said OWNER'S CONSTRUCTED AREA. In the event of any such occurrence the Second Party shall give written notice of such occurrence to the First Party within Fifteen days thereof and in the absence of such intimation the same will not affect this Agreement. If the delay is more than Twelve months from the date of expiry of the period, the First Party shall be entitled to deal with the incomplete construction of OWNER'S CONSTRUCTED AREA and provide all access and facilities and recover the entire cost incurred from Second Party. The Second Party will be liable and responsible for all the claims and demands arising out of default by second party and also the claims of persons with whom the first party would have contracte....
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.... plan in the assessment year 2005-2006 was approved or produced before us, we cannot hold that the transfer took place in the assessment year 2005-2006. Nothing is brought on record by the assessee to show that there was a development activity in the impugned project during the assessment year 2005-2006 and any cost of construction was incurred by the builder. It is to be inferred that no amount of investment by the developer in the construction activity during the assessment year 2005-2006. Hence, we are of the opinion that transferee was not willing to perform his part of obligations as stipulated in the JDA, in the assessment year 2005-2006 within the meaning as expressed in section 53A of the Transfer of Property Act. As such, the contractual obligation of the developer was not met with in the assessment year 2005- 2006. Being so, the conditions laid down in section 2(47)(v) of the I.T. Act cannot be invoked so as to bring the capital gains into tax in the assessment year 2005-2006 and thus the very foundation of the assessee's case is devoid of merits and not tenable and more so there is a specific clause in the JDA as enumerated earlier that the assessee is only permitted to ....
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....it as prescribed U/s 48(1) and 55(1)(b) of the Act; d) such expenditure was not indicated in the return of income; e) such transaction should have reflected as receivable in the books of M/s Bentley; and f) the transaction did not suffer TDS and payment was not supported by any agreement. 37. The CIT(Appeals) has not adjudicated the issue even when there was a specific ground (Ground No. 4). The assessee had filed a confirmation letter from M/s Bentley Investment for having acknowledged the commission amount. However, the CIT(A) rejected the contentions of assessee. 38. The ld. AR relying on the decision of Tribunal in the case of Pradeep Kar, Bangalore vs ACIT, Bangalore in ITA No.596/Bang/2014 dated 11.05.2016 submitted that the provisions of section 48 or 55(1)(b) do not stipulate time frame within which the payment has to be made. The assessee has paid the commission amount exclusively for the purchase of property and cost of acquisition includes all the expenses incurred by way of commission or brokerage towards purchase of a capital asset. The finding of the AO that tax must be deducted at source on payment of commission amount is absurd as th....
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....oubted by the AO. However, the AO disallowed the payment of commission while computing the cost of acquisition of the property on the following reasons:- (a) The assessee's contention that the purported commission has to be treated as cost of improvement is factually incorrect and legally untenable, as it is, as claimed the assessee himself, commission claimed to have been paid for the services rendered in acquiring the property by the assessee, but not for anything done to improve the value of the property after its acquisition by the assessee. (b) On one hand, the assessee claims that he is not engaged in any business activity in real-estate but has only transferred his property to the Developer for the purpose development and hence receipts arising out the transaction can not be treated as business receipts, but only as capital receipts; and on the other hand claims to have agreed to make certain payment as commission not at the time of he acquiring the property, but only after he starts receiving the fruits of his subsequent transfer to the Developer. Obviously, the latter claim indicates that the intention of the assessee purchasing the said property was ....
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....rty to the Developer, as and when the assessee received such returns. Further, such payments of commission, on the basis of an agreed arrangement, to Mr. Abubakar were subjected to TDS. (h) In conspectus, taking into account the assessee's claim of not engaging in any real-estate business and the significant quantum of capital gain arising out of the transaction which is liable to tax, it emerges that the claim of payment of the commission to M/s Bently, after the transfer of the property by the assessee to the Developer, for the purported services rendered before the acquisition of the property by the assessee, is only an afterthought and device to reduce the taxable capital gains, with indexed cost of improvement. Thus, it appears that after the agreement with Mr. Abubakar related to transfer of property to the Developer, the assessee attempted to reduce the taxable capital gains with similar claim that can be related to the acquisition of the property also. in this context, it needs to be noted that the assessee did not have much time left from the date of acquisition of the property to the date of transfer of the same to the Developer to car out/claim any improveme....
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....on given the developer and hence, determined the consideration at Rs. 2,200 per Sq.ft being the Guideline value. The Learned CIT(Appeals) confirmed the additions made by the Learned Assessing officer held that the Appellant has retained the commercial space for his own and therefore, he was duty bound to take the value fixed Government of Karnataka. 48. It was submitted that the CIT(A) without assigning any valid reasons for rejection of assessee's grounds has gone by the observations made by the AO. The CIT(A) held that provisions of section 50C of the Act is applicable and hence confirmed the additions made. The ld. AR submitted that the provisions of section 50C applies where the consideration received or accruing as a result of "transfer" of capital assets, being land or building or both is less than the value adopted for the purpose of payment of stamp duty. Therefore, applying the provisions of section 50C is irrational as the assessee has received the constructed area in lieu of JDA and the same cannot be considered as "transfer" for the purpose of invoking provisions of section 50C of the Act. 49. It was further submitted that the authorities below have grossly erred ....
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.... the value fixed by any authority of a State Govt. for the purpose of payment of stamp duty, the AO has to adopt such value fixed by State Govt. for the purpose of computation of capital gain. According to the ld. DR, the assessee has retained commercial space for his own use and therefore the AO was duty bound to take the value fixed by the State Govt. for the purpose of stamp duty. He thus supported the orders of lower authorities. 53. The contention of the learned AR is that as per section 48, the consideration received by the assessee is nothing but the cost of construction incurred by the builder on the assessee's share of constructed area because the assessee would receive constructed area in lieu of transfer of land belonged to developers share. Whatever is the expenditure incurred by the developer for constructing the area earmarked for assessee / land owners share, as the consideration received by the assessee. The Assessing Officer estimated this consideration at Rs. 2,200 per sq.ft. being the guideline value adopted for registration by State Registration Authority. The assessee adopted at Rs. 1,500 per sq.ft. being the cost of construction incurred by the developer. F....
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....t assessee during the FY 2011-2012 sold certain residential flats and offered the same to tax as Long-Term Capital Gains. The agreement to sell/booking advances in respect sales reflected in the FY 2011-2012 were entered into in the FYs 2006-2007 and 2007-2008. The consideration apropos agreement to sell/booing advances was received by proper banking channel, The AO applying the provisions of section 50C held that the guideline value as on the date of execution of sale deed needs to be considered and not the guideline value prevailing at the time of execution of agreement to sell/booking date. The AO in page 12 and 13 of the assessment order has tabulated the details of flat sold where the consideration is less than the guideline value and has worked out the difference between guideline value and the sale consideration at Rs. 2,22,52,725/-. The assessee's share in the sale consideration is 21.94% and accordingly, a sum of Rs. 48,82,428 (Rs. 2,22,52,725 x 21.94%) was added to the agreed consideration. 56. The CIT(Appeals) confirming the additions of the AO held that booking of flats cannot be construed as transfer of flats because in many cases the buyers are susceptible to cance....
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....Limited Vs. CIT, New Delhi [2000 (245) ITR 3], CIT Vs. Amrid Banaspati Company Limited [2002 (255) ITR 114] and CITvs. Alom Enterprises [2009 (319) ITR 306] and held that the new proviso should be given retrospective effect from the insertion on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment. Thus by taking note of the above decisions, we have no hesitation to hold that the proviso to Section 50C(1) of the Act should be taken to be retrospective from the date when the proviso exists" (b) Smt Kausalya Madanagopal and Ors. Vs ITO in ITA No.322/Bang/2019 dtd: 29-02-2020, wherein it was held as under:- "We have considered the rival submission. We find that there is no dispute on these facts that Agreement of sale was entered on 12.08.1995 because this fact is noted by CIT (A) also in Para 5.3 of his order dated 05.01.2016 in the case of Shri V. M Harikrishna. In the same para of his order, this is also noted by CIT (A) that against the agreed sale consideration of Rs. 15 lacs for 1/3rd share, total ....
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....r in which the sales were effected in view of the proviso to section 50C(1) of the Act, which was inserted by the Finance Act, 2016 with effect from 01.04.2017, which reads as under:- "Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer." 61. The contention of the learned DR is that this provision is only prospective and not retrospective and cannot be applied to the assessment year 2012-2013. As discussed earlier, the sale agreement actually entered in the financial years 2006-2007 and 2007-2008. In such circumstances, the guideline value prevailing in the financial year 2011-2012 could not be applied to the agreement entered into earlier assessment years. In all fairness, the guideline value prevailed in the relevant assessment year to be considered as a consideration so as to bring the capital gains into taxation. Since there is no dispute regarding the fact that the ....
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....essed by any authority for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration. In other words, the full value of consideration mentioned in section 48 is to be replaced by the consideration on which the value of the property was adopted for the purpose of payment of stamp duty. 28. In the present case, the AO applied the provisions of section 50C of the Act on the basis of Sale Deed executed by the assessee on 9.3.2007. At this stage, it is appropriate to observe that there was an Agreement of Sale executed by assessee on 8.3.1993 and total payment of Rs. 9,79,455 was made to the Vendor by the Purchaser out of total consideration of Rs. 9,80,500 and pending balance was only Rs. 1,005 and the entire payment was made by cheque and the same was mentioned in the Sale Deed dated 9.3.2007. Further, the possession of property was also handed over to the Purchaser mentioning Sale Agreement as on 8.3.1993. It is also brought on record that this property has been mentioned as address of R.K. Sipani as evident from Form 32 filed by Sipani Automobi....
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....alue changes, the guidance value as on the date of Agreement has to be considered as the full consideration of the capital asset. In the present case, the enforceable agreement was entered into on 8.3.1993 by payment of major portion of the Sale Consideration and only formal Sale Deed was executed on 9.3.2007. The assessee has produced all the relevant documents for demonstrating the authenticity of the Sale Agreement with corroborative evidence in the form of Katha Certificate in the name of M/s. KPCBPPL dated 1.7.1997, the address of R.K. Sipani, Sipani Automobiles Ltd. in Form 32 before the Registrar of Companies on 17.12.1996 and the payment details through Cheques. The payment mentioned in the Sale Deed towards sale consideration clearly demonstrated that these payments have been passed between the parties vide Sale Agreement dated 8.3.1993 and possession of property has already been handed over on 24.10.1989. Therefore, transfer has taken place vide Sale Agreement dated 8.3.1993 and full value of consideration for the purpose of computing long term capital gain in the hands of the assessee has to be adopted on the basis of guidance value of this property as on the date of Sal....