TaxTMI 
TaxTMI 
2026 (10) TMI 272
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....ent Charges 3. For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowance of development charges of Rs. 1,08,00,000/- claimed by the appellant as cost of acquisition. 4. For that the Commissioner of Income Tax (Appeals) erred in upholding the re-computation of Long Term Capital Gain. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had paid land and development charges to the seller of the property at the time of purchase. 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had entered into a composite contract at the time of purchase of property. 7. For that the Commissioner of Income Tax (Appeals) erred in concluding that the development charges amounting to Rs. 1,08,00,000/- paid by the appellant has been returned by the vendor. Invocation of Section.50C is not warranted in the facts and circumstances of the case 8. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provision of Section 50C are not invocable in the facts and circumstances of the case. 9. For that the Co....
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....000/- was received towards reimbursement of development expenses originally paid by the assessee. The AO held the balance amount received amounting to Rs. 92,00,000/- as consideration towards sale of land and since the valuation of land for stamp duty purposes was Rs. 2,16,00,000/- considered the same as the deemed the consideration u/s. 50C of the Act. Accordingly, the AO recomputed the long-term capital gain at Rs. 1,42,89,230/- and added the same to the income of the assessee. Aggrieved the assessee filed further appeal before the CIT(A). The assessee before the CIT(A) contended that no transfer within the meaning of section 2(47) took place during the financial year relevant to the year under consideration and therefore no capital gain is arising in the hands of the assessee. With regard to the consideration deemed u/s. 50C of the Act, the assessee submitted that the said section is applicable only where there is transfer of capital asset in the form of land or building or both, whereas in the instant case the assessee has only extinguished its rights as per the agreement dated 22.08.2005. Without prejudice to the said contentions the assessee submitted that it is a composite a....
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....arising out of the said transfer has to be assessed in the year under consideration. 6.13. The second issue raised by the appellant is that the amount of Rs. 1,08,00,000/-paid towards Development charges ought to have been included in the cost of acquisition. For ready reference, the relevant paragraphs of the sale agreement dated 22.08.2005 is reproduced as under: "AND WHEREAS, the vendor as absolute owner of the schedule property and for certain legal necessities and also to invest in alternate property has decided to sell the schedule property for a total sale consideration amount of Rs. 32,40,000/-(Rupees Thirty Two Lakhs and Forty Thousand Only) towards the site value and Rs. 1,08,00,000/-(Rupees One Core Eight Lakhs Only) towards the development charges i.e., Drainage, Sewerage, Electricity, Water storage Tank, Tar Road, Plantation with Concrete Tree Guards, Club House, Swimming Pool in the layout and individual Water and Sewerage connection in respect of schedule property, in all a total sale consideration of Rs. 1,40,40,000/-(Rupees One Crore Forty Lakhs and Forty Thousand Only) free from all encumbrances, charges, litigations, etc. AND WHEREAS, t....
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.... 6.14. The third issue raised by the appellant is that it has transferred only rights in the property and provisions of section 50C of the Act does not apply to transfer of rights. There is no dispute that the provisions of section 50C of the Act are applicable for transfer of a capital asset, being land or building or both. In this regard, it is noted that as per section 2(47) of the Act, "Transfer" includes the extinguishment of any rights in capital asset. Further, it is noted that the capital asset, in which the appellant has extinguished its right, is a land. Meaning thereby, the appellant has relinquished its rights in the "land" and the said transaction is covered under 'Transfer" of capital asset. Hence, I am of the opinion that the said transfer of land is squarely covered by the provisions of section 50C of the Act. Reliance is also placed on the decision of the Hon'ble High Court of Bombay in the case of Vidarbha Veneere Industries Ltd. v. ITO in ITA No. 34/2022 dated 01.04.2025 wherein it was held that the manner in which a property was held, would be immaterial, for purpose of applicability of section 50C of the Act. The above decision is squarely applicable....
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....uation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. 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: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer. (2) Without prejudice to the provisions of sub-section (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under su....
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.... authority exceeds the fair market value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer. Thus, it is clear from section 50C(2) of the Act, that the AO may refer the property to a Valuation Officer, provided that the assessee makes claim before the AO. However, in the present case, there is no such mention in the assessment order that the appellant had made any objection before the AO. Even during the appeal proceedings also, the appellant has neither claimed that it had made any such objection before the AO nor furnished any evidence to prove that it had made any objection before the AO. Thus, since the appellant had not made any objection during the assessment proceedings, the AO is not bound to make a reference to the Valuation Officer and may proceed to make addition as per section 50C(1) of the Act. Further, it is also noted that the appellant has also not made any submission as to explain why the value of the said property is less that the value adopted by the stamp valuation authority. Thus, it is held that this issue raised by the appellant is without any merits. 6.17. On the basi....
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....apply only where there is a transfer of land or building or both and in the given case it is the right to specific performance that is transferred to which the provisions of section 50C cannot be applied. The ld.AR also drew our attention to the receipts issued by the assessee to Shri. H. R. Ravichandra towards receipt of money where it is clearly stated that the amount is received towards cancellation of the agreement dated 22.08.2005. The ld.AR accordingly argued that the AO is not correct in invoking the provisions of section 50C for recomputing the long-term capital gain. It is submitted that right to specific performance is a capital asset as held by the Hon'ble Madras High Court in the case of K. R. Srinath vs ACIT (2004) 141 Taxman 268 (Mad), where it is held that: "12. As seen already, the assessee had a right to insist on specific performance, gave up the right readily and received a sum referred to supra. There can be no doubt that by termination of the earlier agreement and by allowing the vendor to sell the said property to any person at any price, the assessee had given up or relinquished his right of specific performance and as consideration for relinquishing....
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....hand submitted that the contention of the assessee that no transfer took place during the year under consideration is not tenable since the assessee itself has declared the long-term capital loss while filing the return of income. The Ld. DR further submitted that in the agreement dated 22.08.2005 the amount paid by the assessee to the vendor is properly segregated as towards land and development charges and therefore, the argument that it is a consolidated payment cannot be accepted. The Ld. DR also argued that the assessee vide the above agreements has paid the entire consideration towards purchase of land and therefore, the amount received has been correctly considered by the AO for recomputing the long-term capital gain by invoking provisions of section 50C of the Act. Accordingly, the Ld. DR supported the orders of the lower authorities. 9. We heard the parties and perused the materials available on record. We notice that as per clause 4.7 of the agreement of sale dated 22.08.2005, the only remedy available to the assessee on default by the vendor was to institute a suit for specific performance of the agreement. We further notice that no sale deed was ever registered in fa....