TaxTMI 
TaxTMI 
2022 (1) TMI 599
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....ain when the terms and conditions of the agreement specify the value of consideration and when the provisions of section 48 specify the "full value of consideration" is received or accrued?" 3. The respondent - assessee is an individual deriving managerial remuneration from M/s PVS Beedies (P) Ltd. The assessee filed return of income for the assessment year under consideration declaring the total income of Rs. 28,39,420/- and subsequently filed revised return of income declaring the income of Rs. 1,02,10,700/- including an additional income of Rs. 73,71,275/- on account of the capital gain. 4. The assessee had entered into a Joint Development Agreement ('JDA' for short) with M/s R&S Turnkey Contractors Private Limited for development of 84 cents of land. As per the JDA dated 21.10.2010, the assessee was entitled to 30% of the total saleable super built up area. In the supplementary JDA dated 26.5.2011 the sharing ratio was revised to 26.89% and 73.11% between the assessee and the developer. The assessing officer had brought to tax Rs. 5,68,19,443/- as capital gains by adopting cost of construction as sale consideration based on JDA between the assessee and M/s R&S Turnkey Con....
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....value of the capital asset shall be deemed to be the full value of consideration received or accruing as a result of such transfer. This provision indicates that the same is clarificatory in nature. Reliance was placed on CIT v. Podar Cement (P) Ltd., reported in (1997) 226 ITR 625 (SC) and CIT v. Vatika Township (P) Ltd, reported in (2014) 367 ITR 466 (SC). It is also argued that when the entire issue being revenue neutral, no addition is required. 8. We have carefully considered the rival submissions made by the learned counsel appearing for the parties and perused the material on record. 9. Section 45 of the Act reads thus: "Capital gains. 45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place." Section 48 of the Act reads thus: "Mode of computation. 48. The income chargeable under the head "Capital gains" shall be computed, by deducting f....
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....s; "Fair market value deemed to be full value of consideration in certain cases. 50D. Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer." 11. Now the main controversy revolves around the determination of full value of consideration. The expression 'full value of consideration' has been dealt by the Hon'ble Supreme Court in the case of Commissioner Of Income-Tax, West V/s. George Henderson And Co. Ltd. [(1967) 66 ITR 622 (SC)] as under: "It is manifest that the consideration for the transfer of capital asset is what the transferor receives in lieu of the asset he parts with, namely, money or money's worth and, therefore, the very asset transferred or parted with cannot be the consideration for the transfer. It follows that the expression "full consideration" in the main part of section 12B(2) cannot be construed....
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....tax Officer must take into account the full value of the consideration for the transfer. Fourthly, a related objection has been raised in Para 9 of your letter dated 02.06.2014. You have stated that, "full value of consideration cannot be construed as having a reference to the market value of the asset transferred."" 12. Learned counsel for the Revenue argued that Section 50C is applicable where the consideration is less than the guidance value and as such the same is not applicable to the facts of the present case. Similarly, Section 50D is also not applicable which has come into force with effect from 01.04.2013; thus, cost of construction would be the appropriate mode. However, we are not inclined to accept the arguments of the Revenue in entirety for the reason that the entire issue is revenue neutral. The Tribunal has categorically observed that "even otherwise, if any capital gains to be accrued in favour of assessee after receiving the possession of the property, certainly that would also be subject to capital gains." It is thus clear that in the event the assessee were to dispose of the built up area, on any part thereof, after receipt of the same from the devel....
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....impugned judgment of the High Court." 13. In the present case, Assessing Officer has adopted the rate of Rs. 1600/- per square feet merely based on the letter given by the developer which is not supported with any particulars. It cannot be ruled out the possibility of the developer giving an inflated figure to suit his requirements in order to gain minimum tax on his profits by inflating his costs. As such, the basis for determination of full value of consideration by the Assessing Officer based on the letter of the developer cannot be appropriate. No doubt at the relevant period, no provision was available in cases where the consideration received or accruing as a result of transfer of a capital asset by an assessee is not ascertainable. Section 50D inserted by Finance Act, 2012 with effect from 01.04.2013 would throw some light on the said issue. As per the memorandum to Finance Bill, 2012, the reasoning for inserting Section 50D of the Act is as under: "Capital gains are calculated on transfer of a capital asset, as sale consideration minus cost of acquisition. In some recent rulings, it has been held that where the consideration in respect of transfer of an asset is....