DCIT, CHENNAI vs. L.RAJALAKSHMI, CHENNAI

The present bunch of appeals are against respective orders of CIT(A) relating to Assessment Years 2007-08 to 2009-10, against orders passed under section 147 read with section 148 of the Act.

This bunch of appeals were heard through video conferencing.

All these appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. : A.Y. 2007-08 (Assessee’s appeal)

The assessee has raised the following grounds of appeal: “1. The order of the Ld.Commissioner of Income Tax (Appeals)- Central-I, Chennai (herein after referred to as CIT(A)) is erroneous both on facts and in law.

The learned AR for the assessee vide letter dated 16.06.2020 has sought permission to withdraw the present appeal filed by the assessee. The learned DR for the Revenue has no objection to the same.

Hence the appeal is dismissed as withdrawn.

The assessee has raised common issue in both these appeals relating to Assessment Years 2008-09 and 2009-10. However, for the sake adjudication, reference is being made to the facts and issue in assessment year 2008-09. The assessee has raised the following grounds of appeal: , 1679, 1680 :- 4 -: & 1138/Chny/2014 Grounds in “1. The order of the Ld.Commissioner of Income Tax (Appeals)- Central-I, Chennai (herein after referred to as CIT(A)) is erroneous both on facts and in law.

The Ld.CIT (A) erred in upholding the action of assessing officer in invoking the provisions of section 50C of the Act.

The appeals were due to be filed on 06.04.2014, but the same were filed on 13.06.2014, i.e. after a delay of 68 days. In the present facts and circumstances, we find merit in the plea of the assessee and the delay of 68 days is condoned and the appeals are taken up for hearing.

The grounds of appeal no. 1 of the present appeal is general and does not require any adjudication. , 1679, 1680 :- 6 -: & 1138/Chny/2014

The ground of appeal nos. 2 to 5 raised by the assessee are not pressed and hence the same are dismissed as not pressed.

The issue raised in ground of appeal nos. 6 to 9 are against invoking of provisions of section 50C of the Act and consequent addition made in the hands of the assessee in assessment years 2008-09 and 2009-10.

Briefly in the facts of the case, the assessee for the year under consideration had filed the return of income declaring income of Rs. 41,85,43,859/-. The assessee had declared long term capital gain of Rs. 40,86,42,040/- on the sale of urban land at Arcot Road, Saligramam, consequent to joint development agreement with M/s SAS Realtors Private Limited, dated 12.01.2004. The case of the assessee was reopened under section 147/148 of the Act. In the reassessment proceedings, the AO noted that the assessee had sold the aforesaid property during the year. On the perusal of the property transaction, the AO noted that the assessee came in possession of the property during the financial year 2001-02. The assessee for computing the long term capital gain had taken the year 1980-81 as base year for cost indexation, instead of the year 2001-02. The indexed cost taken by the assessee was 5.76 Crores (Approx) instead of Rs. 1.79 Crores (Approx) and difference of Rs. 3.97 Crores (Approx) was added as taxable in the hands of the , 1679, 1680 :- 7 -: & 1138/Chny/2014 assessee. Further the AO also noted that the assessee had taken the sale consideration at Rs. 66,61,31,550/- for 181,644 Sq. Ft; however under section 50C Guidance Rates, sale value for the area worked out to Rs. 68,38,89,660/-. The difference of Rs. 177,38,110/- was added in the hands of the assessee.

The CIT(A) upheld the order of the AO in so far as applicability of provisions of section 50C of the Act were to be applied. With regard to the next issue of indexation of cost of acquisition from 01.04.1981, wherein the AO allowed the same from financial year 2001-02, on the ground that the assessee had inherited the property in that year; the CIT(A) took note of provisions of section 49(1) of the Act and held that since the property was received by way of inheritance from the parents, the cost at which assessee’s parents acquired property would be a cost in the hands of the assessee for the purposes of determining long term capital gains. Coming to the second aspect of indexed cost of acquisition, reference was made to the explanation (iii) under section 48 of the Act and it was held that the indexation had to be allowed from the date of incurring the expenditures by the said “Previous Owner”. Reliance was placed on the special Bench decision of Mumbai in Dy. CIT vs. Manjula J. Shah 2009 318 ITR (AT) 417 (Mum) (SB) and other decisions. The CIT(A) directed the AO to adopt the date on which the assessee (his parents) purchased the property i.e. 01.04.1981 both for adopting , 1679, 1680 :- 8 -: & 1138/Chny/2014 the cost of acquisition and as the date of acquisition, for the purpose of determining the indexed cost of acquisition, while calculating the long term capital gains in the hands of the assessee.

Both the assessee and the Revenue are in appeal before us against the respective directions of the CIT(A).The assessee is in appeal for both the assessment years 2008-09 and 2009-10 for adoption of GLR rate under section 50C of the Act. We shall deal with the grounds raised by the Revenue subsequently.

The learned AR for the assessee after taking us through the factual aspects of the property pointed out that the assessee had entered into a joint development agreement, consequent to an MOU in 2002, for the development of flats, on the piece of land, which was gifted to the assessee by her mother. He then referred to the observations of the AO in the assessment order and pointed out that the sale value shown by the assessee was Rs. 66.61 Crore (Appro) and the value as per GLR rate by invoking the provisions of section 50C of the Act was Rs. 68.38 Crores. He then pointed out that the difference of approximately Rs. 1.78 Crore, worked out to approximately 2.6%. He submitted that since the difference was less than 5% then the provisions of section 50C of the Act were not attracted. He then relied on the third proviso under section 48 of the Act which though was inserted w.e.f. 01.04.2019, but the same was stated to be explanatory in nature and had to be applied , 1679, 1680 :- 9 -: & 1138/Chny/2014 retrospectively. He also pointed out that the difference in value as shown by the assessee and as adopted by the AO in view of section 50C of the Act, in assessment year 2009-10 was only 0.89%. The first argument of the assessee in this regard was that where the difference between the two values i.e. sale value shown by the assessee and sale value adopted by the AO was less than 10%, then there was no merit in invoking the provisions of section 50C of the Act in the hands of the assessee. In this regard, he placed reliance on the decision of Pune Bench of the Tribunal in M/s. Radhika Sales Corporation vs. Additional Commissioner of Income Tax, Pune in relating to A.Y. 2011-12, order dated 16.11.2018. He also placed reliance on the decision of Hyderabad Bench of the Tribunal in Assistant ACIT vs. Smt. S. Suvarna Rekaha in ITA No. 743/Hyd/2009 relating to Assessment Year 2006-07, order dated 29th October, 2010 and other decisions.

The second aspect which he pointed out was that MOU was signed in 2002 and rates of land agreed to be sold were adopted at Rs. 2000/- per sq. ft; however the rates were revised thereafter and the AO has adopted revised rate of Rs. 2061 per sq. ft., as the GLR rate u/s 50C of the Act. In this regard, reliance was placed on various decisions but he emphasized on bunch of appeals with lead order in the case of Sri. Mohd Imran Beg vs. ITO in relating to Assessment Year 2006-07, order dated , 1679, 1680 :- 10 -: & 1138/Chny/2014 27.11.2015. He emphasized that when the agreement was entered into between the parties on anterior date, then the said date is to be taken for adopting the rate of land sold by the assessee.

The learned DR for the Revenue on the other hand relying on the orders of the authorities below, said that the provisions of section 50C of the Act are squarely applicable to the facts of the present case. He pointed out that the third proviso u/s 48 of the Act has been inserted on a later date and cannot be applied retrospectively. His case was that in case the assessee was aggrieved by the adoption of the rate of land than the course of action to be adopted u/s 50C of the Act was reference to DVO. In the said circumstances, he was of the view that the rate u/s 50C of the Act needs to be applied. Another point which was raised by him was that the development agreement was dated 12.01.2004 and on that date the rate of the land under consideration stood revised.

The learned AR for the assessee again made reference to GSR rate of Arcot Road, Saligramam, which earlier were Rs. 1861/- per sq. ft. but were revised to Rs. 2061/- per sq. ft. The relevant documents in this regard are placed at pages 46 to 49 of the paper book. The learned AR for the assessee pointed out that rate of land which was adopted by the assessee for sale was around Rs. 2000/-. He also referred to Development agreement to show the date of MOU. , 1679, 1680 :- 11 -: & 1138/Chny/2014

We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against adoption of rates of land on the sale date for computing the income from long term capital gains. The assessee receives gift from her mother in the year 2001-02 i.e. the land at Arcot Road, Saligramam. The assessee enters into MOU for the development of the said land on 20.09.2002 with M/s SAS Realtors Pvt. Ltd., for the development of the entire property. During the financial year 2002-03 out of total consideration of about Rs. 2.50 Crores, the assessee received sum of Rs. 25 Lac plus 4 Lac on 20.09.2002; Rs. 3 Lac on 21.03.2003; Rs. 30 Lac on 26.03.2003. The development agreement was entered into on 12th January, 2004 on which date sum of Rs. 75 Lac was received by the assessee. Certain amounts were also paid for eviction expenses and other expenses. It may be reiterated herein that the assessee had received the property as gift from her mother in financial year 2001-02. During the year under consideration, the assessee had declared income from long term capital gains. The dispute which arises before us is the sale consideration to be adopted for computing the income under the head long term capital gains. In the computation of the income, the assessee had declared the sale value at Rs. 66.61 Crs however the AO adopted the same at Rs. 68.38 Crs i.e. the 50C guidance land value for the area. The long term capital gains were computed by adding the difference of Rs. 1.78 Crore (Approx). , 1679, 1680 :- 12 -: & 1138/Chny/2014

The first issue which is raised before us is that where the difference between the declared value and 50C guidance value was about 2.6%, can the same be adopted for computing the income from long term capital gains. Similarly in the succeeding year i.e. 2009-10, the difference in the value shown by the assessee and 50C guidance value adopted by the AO, was 0.89%. The MOU between the parties as referred in the para above was entered on 20.09.2002 and the rate declared by the assessee as sale consideration was above 50C guidance value at the relevant time. The rates were revised in 2003, which difference in the value was adopted by the AO on the ground that Development agreement was entered into on 12.01.2004. In this regard, we have referred to SR rate as notified by the Tamil Nadu Government for Arcot Road, Saligramam, which initially was Rs.1861/- per sq. ft. and was revised to Rs. 2061/- per sq. ft. The assessee had declared the sale value at around Rs. 2000/- per sq. ft. Once the assessee had entered into an agreement, the MOU, on 20.09.2002 then the rates as available on the date of actual transaction are to be adopted since, the assessee had received substantial amount on the date of entering into an agreement. Undoubtedly the development agreement was executed on 12.01.2004 but as is clear from the terms of the transaction, the assessee had already received substantial amount of consideration before 12.01.2004. Hence, we find no merit in the order of the AO in adopting the revised SR value as in 2004 for computing the income , 1679, 1680 :- 13 -: & 1138/Chny/2014 under the head long term capital gains, as the date of MOU (20.09.2002) is the relevant date for computing the terms of agreement between the parties.

The Hyderabad Bench of the Tribunal in bunch of matters with lead order of Sri. Mohd Imran Beg vs. ITO (Supra) had laid down similar proposition of applying the SR rate on the date of agreement to sell and not on the date of sale deed if, there was gap between the two dates.

Now coming to the second proposition raised by the learned AR for the assessee that in case the difference between the sale value declared by the assessee and sale value adopted by the AO is less than 5%, then there is no merit in applying the 50C guidance value. It is a settled proposition of law that in case the difference between the value shown by the assessee and the valuation done by the Revenue authorities is less than 10%, where the value worked out by the Revenue authorities is estimated, then actual sale consideration is to be adopted for computing the income in the hands of the assessee. Such is the proposition laid down by the Hyderabad Bench of the Tribunal in ACIT vs. Smt. S. Suvarna Rekaha (Supra) and Pune Bench of the Tribunal in M/s. Radhika Sales Corporation vs. ACIT. The objection of the learned DR at this juncture was that in case valuation had been referred to DVO as under the provisions of section 50C of the Act then, such , 1679, 1680 :- 14 -: & 1138/Chny/2014 proposition could be applied. We find no merit in the plea of the Revenue in this regard. The AO has applied 50C guidance value for computing the income from long term capital gains. There is no merit in the said exercise carried on by the AO and we reverse the same. The income from long term capital gains declared by the assessee is to be accepted. The ground of appeal nos. 6 to 9 raised by the assessee in assessment years 2008-09 and 2009-10 are allowed.

Now coming to the appeal of the Revenue in . The Revenue has raised the following grounds of appeal:- “1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case.

The limited issue which is arising in the present appeal is the rate to be adopted for indexation of cost of acquisition of the property. The assessee had received gifts from the mother in the financial year 2001-02. The said property was owned by the mother for past many years and hence the rate on 1.4.1981 was adopted as cost of acquisition. There is no dispute to the same. The assessee had adopted the indexation index from 1981-82, whereas the AO adopted the same from 2001-02. The CIT(A) allowed the claim of the assessee inturn relying on the decision of the Special Bench of the Tribunal in Dy. CIT vs. Manjula J. Shah (Supra).

We find that the said issue now stands settled by the decision of Hon’ble Bombay High Court in CIT vs. Manjula J. Shah 16 Taxman 42 (Bom), wherein it has been held that indexed cost of acquisition has to be computed with reference to the year in which the previous owner has held the asset. Applying the said parity of the reasoning, we find no merit in the case of the Revenue and the grounds of appeal raised by the Revenue are dismissed.

In the result, the appeal in is dismissed as withdrawn, appeal in ITA No.1679 and , 1679, 1680 :- 16 -: & 1138/Chny/2014 1680/CHNY/2014 of the assessee are allowed and appeal in Revenue is dismissed.