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TaxTMI 
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2024 (7) TMI 39
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....e rate holding that no business activity has been carried out by the assessee. 3. Any other grounds taken at the time of hearing. 2.1. The revenue has raised the following additional grounds of appeal:- (i) Ld. CIT(A) has erred in allowing deduction u/s 54F on the gain of transfer of lands as arose to the assessee. (ii) Ld. CIT(A) erred in holding Rupam Tower as Residential House and has erred in allowing deduction u/s 54 to the LTCG arising to the assessee. (iii) Ld. CIT(A) erred in accepting the claim of the assessee regarding the cost of construction of the Rupam Tower building. He also erred in accepting the actual period of construction of the building." 3. The assessee has raised the following grounds of appeal in cross-objection:- "1. For that the grounds of cross objection hereto are without prejudice to each other. 2. For that in the facts and circumstances of the case, the learned CIT(A) is fully justified in deleting the addition of Rs. 5,39,15,000/- made by the Assessing Officer on account of alleged sale proceeds of Residential Units by resorting the provisions of section 28(iv) of the I. T. Act, 1961. The learned CIT(A) passed the order after full apprec....
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.... criteria "to examine the sale of property in ITR being less than the sale consideration reported in From 26QB and substantial increase in capital in a year". The ld. Assessing Officer after examining the records as well as the information in his possession noticed that the assessee owned a plot of land and he entered into a land development agreement on 28/04/2010 with his neighbor, namely, Dr. A.B. Prasad, owning the another piece of land. Subsequently, another land development agreement was jointly entered into by the assessee and Dr. A. B. Prasad with M/s. Kashyap Homes Pvt. Ltd. (in short 'M/s. KHPL') on 09/06/2011 to develop the land owned by them. M/s. KHPL agreed to develop the residential project and give certain flats as consideration to both the land owners. The residential complex is named as "Vishwamohini Complex". The ld. Assessing Officer also noticed that the assessee also owned another piece of land nearby the land used for constructing Vishwamohini Complex. In this other land, the assessee made investment and constructed "Rupam Tower" which is a commercial-cum-residential building and five floors of Rupam Towers are rented out to M/s. Vasan Healthcare Pvt. Ltd. an....
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....x received as consideration by the assessee of the ld. Assessing Officer after giving the benefit of cost of acquisition of the land, made addition of Rs. 5,39,15,000/- as business receipt not declared by the assessee. Secondly, for the cost of construction of commercial tower, namely, Rupam Towers, the ld. Assessing Officer applied the prevailing circle rate and observed that unspecified/unascertained expenditure amounting to Rs. 10,32,40,650/- has been made by the assessee out of the undisclosed sources. The crux of the observation of the ld. Assessing Officer are summarised at para 12 to 13.1. of the assessment order and the same is reproduced below:- "12. The assessee entered into registered joint development agreement with builder in the year 2011 (Copy available on record) wherein the value of land measuring 15802 sq.ft. which included 10100 sq.ft. of the assessee & 5702 sq.ft. of Dr Akhouri B Prasad was considered at Rs 2,14,07,000 by the sub- registrar. The assessee has claimed that "the exchange value of the land of the assessee per sq. ft comes to Rs 1,36,82,490 (i.e Rs. 2,14,07,000 / 15,802 sq.ft. x 10,100 sq.ft.). Total carpet area of the seven flats received by the a....
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....t of undisclosed sources, the assessee has derived benefit of ownership of a commercial tower measuring 15,702 sq. feet commercial space in the Rupam Tower / Rupam House. The value of the sane as per prevailing circle-rate for commercial space at the said place is Rs. 6,575/- per sq feet. Therefore, the assessee has derived this benefit valued at Rs. 6,575/-X15,702 i.e. Rs. 10,32,40,650/-. 13. The provisions of Section 28(iv) of the Income Tax Act, 1961 are hereby reproduced as under: Profits and gains of business or profession. 28. The following income shall be chargeable to income-tax under the head "profits and gains of business or profession" - (i) ........... (ii) ........... (iii).............. (iv) the value of any benefit or perquisite, whether convertible into money or not, aising from business or the exercise of a profession;] 13.1 Therefore, the value of the above benefits (out of which some of the part was converted into money by virtue of as many as two sale deeds registered during the year under consideration) is arrived at Rs. 5,39,15,000+ 10,32,40,650/- i.e. Rs. 15,71,55,650/-. Against the same the assessee incurred expenses/divested capital assets t....
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....Rupam Tower at Rs. 10,32,40,650/- which is merely on surmises and conjectures without any evidence in possession of the ld. Assessing Officer and the cost estimated by the registered valuer should only be considered for the purpose of calculating the investment in Rupam Tower. Based on these details and submissions, the ld. CIT(A) found sufficient merit in the contention of the ld. Counsel for the assessee and gave substantial relief to the assessee mainly holding that the assessee has not entered into any business agreement with M/s. KHPL, the assessee is entitled to deduction u/s 54/54F of the Act for the value of flat received in consideration for developing the land. So far as the capital gain from sale of Flat No. 401 & 403 at Vishwamohini Complex is concerned, the ld. CIT(A) held that the capital gain from sale of Flat No. 401 falls under the category of short term capital gain and that from sale of flat No. 403 at Rupam Tower will fall under long term capital gain and, therefore, benefit u/s 54F of the Act would be available only against the sale consideration of sale of Flat No. 403. The ld. CIT(A) also held that the ld. Assessing Officer has exaggerated the cost of investm....
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.... (i) LTCG on transfer of land for getting 7 flats is deductible u/s 54F (ii) LTCG on transfer of flat on 18-07-2014 is deductible u/s 54 4th Ground: Construction of Rupam Chambers as undisclosed stock: Held as follows: Accepted assessee's claim that the investment in Rupam Tower is completely explained as made out of sale of two flats and receipt of advance from another party for sale of a third flat which took place in the immediately following F/Y. Being aggrieved The Department filed an appeal. 1. It is submitted that the legislature through introduction of a new provision of sec 45(5 A) wef. A./Y 2017-18, has made it clear that the gain of land owner through JDA is to be taxed as Capital Gains. Through another amendment made in that provision w.e.f. 01-04-2018 it has made further clear that CG will arise on the date of issue of Completion Certificate by the competent authority and the amount of CG will be the total sum of cash compensation received and the stamp duty vale of the completed structure as received by the land owner less the indexed cost of acquisition of the land. 2. Since the present case is prior to A/Y 2017-18, it is submitted that AO is justifie....
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.... It is noteworthy that the flats of Vishwamohini complex were received and sold by the assessee in A.y.2015-16, while Rupam Tower was already completed in A.Y. 2011-12. 6. Further, he held that LTCG on transfer of land in lieu of flats arose in A/Y 2012-13 on registration of the JDA on 09-06-2011 but chargeable in A/Y 2014-15 as per sec 45(2). This provision is not applicable in A.Y.2015-16. 7. He further erred in holding that such CG is fully covered by deduction u/s 54F as in lieu of the capital gain, the assessee had made investment of equal amount of sum in a residential property. He followed the Anand Basappa caselaw. Factually, the ratio of Anand Basappa was overturned w.e.f. A/Y 2015-16 itself when the word "a" was replaced by the word "one" residential house through the amendment in the provision of sec 54 and also of sec 54F. Even the action of the assessee also clearly shows that the seven flats altogether did not account for a single unit as the assessee himself was negotiating, contracting and selling the units of flats separately as is evident from the facts of the case. Therefore, the assessee should have been denied the benefit of sec 54F altogether of at best ca....
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...., the claim of the assessee as supported by the valuation report that the construction of Rupam Tower took place in F/Y 2013-14, 14-15 and 15-16 is blatant lie and LD CIT(A) completely erred in the facts of the case (b) At numerically marked para 2 at internal page 7 of the supplementary agreement, the assessee agreed to pay Rs. 2000/- per square ft of built up area as compensation to his neighbor for getting 226 sq ft of extra built up area than his legitimate due in the Residential complex. In-stead of blindly accepting the construction cost as claimed by the assessee and the concocted valuation report of the RV made only to suit assessee's stand, the CIT(A) should have reasonably estimated the construction cost at the same rate agreed by the assessee to pay compensation to the neighbor. In such case, construction cost of Rupam Tower should have been reasonably estimated at Rs. 3,50,00,000/- for completion of construction of Rs. 17,500 sq ft of built up area in Rupam Tower, within F/Y 2013- 14; instead of accepting the sum of Rs. 1,28,63,311/- as claimed by the assessee. In such case the investment made by the assessee was beyond explanation as out of sale proceeds of resid....
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....greement of dated 09.06.2011 and final tripartite supplementary agreement the FAR was achieved as 2.27 and accordingly built up area was distributed among both the land lords and builder. It confirms that the distribution of built up area was not performed according to terms and conditions of first agreement of dated 28.04.2010. CIT(A) called for Remand report as well as AO's comments 3 times but AO neither send remand report nor appear but send the case record before CIT(A). (Page-17- appeal order) Issue of Addition of Rs. 5,39,15,000/- (Gr. No-1) 4) The A.O. has considered assessee's share of flat in building received from builder in lieu of relinquishment of his land measuring as 8210 sq.ft., as business income of the assessee u/s 28 (iv) of the Act on the ground that he has made an agreement on 28.04.2010 to construct the residential complex which was clearly not executed and performed as mentioned in the share sharing supplementary agreement and calculated the income of the assessee at the rate of circle rate of a flat which was sold by the assessee during the year @ 6575/- per sq.ft., amounting to Rs. 5,39,15,000/- (6575/- x 8200). It is pertinent to mention that th....
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....the assessment order assessee did not disclose in ITR but assessee submitted during scrutiny that the capital gain arised at the time of execution of development agreement is exempted u/s 54F so has not mentioned in the ITR and has relied on the CBDT Circular No. - 014 (XL - 35) of dated 11.04.1955, for claiming exemption during assessment proceedings. Issue of Section 54 (Additional Gr. No. -2) 14) The assessee sold the 2 flats from his share of flats during the year under consideration. 15) Evidences w.r.t. residential floor (5th Floor) of Rupam Tower, such as Property Tax receipt & SAS issued by Patna Municipal Corporation was submitted before AO (mentioned in para 8.1 on page 20 of A.O.'s order) and also submitted before Hon'ble bench through mail on 18 08-2023. CIT (A) findings on page 43 from para 3 to page 44, 16) Issue under limited scrutiny w.r.t. difference in actual value of sold flat visa- vis stamp duty value. CIT (A) applied the provision of section 50C and directed to compute capital gain accordingly after recording the findings under last 2 para on page 38 of appeal order. 8.1. The ld. Counsel for the assessee also placed reliance on the following....
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.... development of land for constructing Residential complex. The ld. Assessing Officer firstly held that the assessee is carrying out business activity of constructing the flats and it has partly acted upon the agreement dt. 28/04/2010 and secondly the sale consideration of flats received from developer M/s. KHPL was estimated and after giving deduction of cost of land the addition at Rs. 5,39,15,000/- has been made. So was the allegation of the ld. Assessing Officer that the assessee has carried out business activity of converting the land into a residential project, the ld. CIT(A) has held in favour of the assessee observing as follows: - "I have considered the issue. I have also gone through the assessment order, the submissions of the appellant, the various case laws quoted in the same as well as the material on record. The appellant initially entered into a land development agreement on 28.04.2010 with his neighbour Dr. A. B. Prasad who has a piece of land adjoining to the land of the appellant to construct a residential complex on agreement on amalgamated land and subsequently made another 09.06.2011 with builder M/s Kashyap Green Homes Pvt. Ltd. who developed/constructed t....
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....e project was initiated and completed by the builder Kashyap Homes Pvt. Ltd. (b) The sharing of the flats/area was done in accordance with a tripartite agreement duly entered into by all 3 parties in 2014 including Dr. A.B. Prasad. (c) The agreement of 2014 was itself a supplementary agreement to the agreement entered into between the appellant and builder in 2011 and is regulated by the same. (d) The supplementary agreement of 2014 mentions on Page 4 Para 4 & 5 that the agreement of 2010 was not executed and performed and this bears the signature of Dr. A.B. Prasad. Given these facts, the logical conclusion that can be drawn is that the original agreement of 2010 became void and thus the actual nature of the activity of the appellant viz, a viz, Dr. A.B. Prasad is that bf a facilitator and not of business. This is also supported by the ratio of the decision of the Hon'ble Supreme Court in the case of Padma kumara & Ors. Vs. Dasayyan & Ors. Vide (Civil Appeal No(S). 3570 of 2015 drising out of S.L.P. (C) No.1169 of 2008. The A.O. has failed to appreciate this significant point and instead erroneously held on to the original agreement t of 2010 as the basis of the proj....
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....sessee has not done any business transactions, calculated the capital gain into two portions. Firstly, capital gains arising from transfer of land vide agreement dated 09/06/2011 and secondly, capital gains arising from sale of flat nos. 401 & 403. We find it necessary to reproduce below the finding of the ld. CIT(A) which has been arrived at after dealing with the factual aspect and the details filed by the assessee and the same reads as follows:- "Ground No. 4 & 5 of the appellant are related and interlinked and therefore are being discussed together. A perusal of the assessment order gives that the appellant has submitted various costs and sale consideration of the land as well as flats during the course of assessment proceedings. These include, the cost of land of the appellant 09.06.2011 which is determined at Rs. 1,36,82 duty value on that date. The appellant has further mentioned that the actual cost of acquisition of land was Rs. 21,07,504/-. These details were examined by the A.O. during the course of assessment proceedings and are duly mentioned in Para 12 of the assessment order. However, the A.O. has incorrectly concluded the discussion by utilizing these figures fo....
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....ea 1312 sq. ft. were sold by the appellant. The appellant has sold flat No. 401 on 31.05.2014. The date of acquisition of this flat will be the same as the date of transfer of land i.e. 9/6/2011. Therefore the period of investment will be less than 36 months and will attract STCG. Similarly, the appellant has sold flat NO. 403 on 18.07.2014. The date of acquisition of this flat will be the same as the date of transfer of land i.e. 9/6/2011. Therefore the period of investment will be more than 36 months and will attract LTCG. As regards the value of sale consideration of the said flat, although the appellant had sold the flats below the FMV i.e. on litigation of title but no reference has been taken from the DVO. The AO mentioned this in his assessment order that the appellant had requested for reference to DVO but the appellant has not made the course of these proceedings. I am therefore of the view that provisions of s squarely attracted in this situation and direct the Assessing Officer to compute the STCG for flat no. 401 and LTCG for flat no. 403 as provided Act and indexed cost of acquisition claimed by the cost of acquisition per sq. ft. on the basis of the land value o....
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....ir market value of the land as on the date of transfer of land i.e., 09/06/2011 as per the prevailing circle rate comes to Rs. 1,36,82,490/- which thus finally gives rise to net long-term capital gain at Rs. 1,03,64,270/-. Now, whether the assessee is liable to pay any capital gain on long term capital gain of Rs. 1,03,64,270/-. The assessee has claimed that he is eligible for exemption u/s 54F for seven units of residential flats received from the developer. In view of the judgement of the Hon'ble Delhi High Court in the case of Geeta Duggal 357 ITR 153, we find merit in the finding of the ld. CIT(A) that long-term capital gain from transfer of land as on 09/06/2011, has been applied for purchasing the residential house at Vishwamohini Complex and since the total sale consideration i.e., the FMV of the land has been applied for getting the seven flats, the assessee is entitled to deduction u/s 54F of the Act at Rs. 1,03,64,270/-. This finding of the ld. CIT(A) needs no interference. 12.1. Further as regards the two flats bearing no. 401 & 403 sold during the year, the date of acquisition of flats can be considered as 09/06/2011 because it is on this date on which the agreement wa....
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....sidential building Rupam Tower out of the funds available to the appellant. It is also on record that the appellant has let out ground plus four floors to Vasan Eye care Pvt. Ltd. as unfinished and is occupying the fifth floor for residential purpose for himself. It is also duly mentioned in the agreement of 2011 that the construction of Rupam Tower shall be done by the appellant himself out of his own funds/sources. Further the A.O. in Para 5.2 concludes that the contention of the appellant regarding self occupation of 2 floors of Rupam Tower is a "false statement" but brings no evidence for this conclusion on record. Instead in Para 8.1 the A.O. states that ".......it is surprising that the assessee built up huge capital of multi-crores of rupees through investment in a multi-storey property (Rupam Tower having five commercially used floors, rented out to a corporate) and two floors for self-occupation........" A perusal of the assessment order shown that the A.O. had directed the appellant to furnish original bills & vouchers of expenses incurred in construction of Rupam Tower. However the same were not furnished. Instead, the assessment folder on page no. - 508 mentioned th....