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Income Tax Appellate Tribunal, JAIPUR BENCHES “A”, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 823/JP/2019
C.O. No. 29/JP/2019 (Arising out of (Assessment Year: 2012-13) Shri Ravindra Mittal, cuke D.C.I.T., Vs. 804, Akshat Niley Apartment, Circle-6, Hawa Sarak, Civil Lines, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AEXPM 9057 N Objector Respondent jktLo dh vksj ls@ Revenue by: Shri Ambrish Bedi (CIT-DR) fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajiv Sogani (CA) lquokbZ dh rkjh[k@ Date of Hearing : 22/02/2021 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/03/2021 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M. The appeal filed by the revenue and the cross objection filed by the assessee arise against the order of the ld. CIT(A)-2, Jaipur dated 26/03/2019 for the A.Y. 2012-13. The grounds taken in the revenue’s appeal and assessee’s C.O. are as under:
2 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal “Grounds of Revenue’s appeal: 1. Whether in the facts and circumstances of the case and in law, the CIT(A) is justified in considering the value of 35% land area transferred to developer as Long Term Capital Gain instead of business income of the assessee without appreciating the fact that the assesse has entered into development agreement for real estate business as well as MOU? 2. Whether in the facts and circumstances of the case and in law, the CIT(A) is correct in allowing the deduction u/s 54EC from the business income of the assesse? 3. Without prejudice to the above, whether in the facts an circumstances of the case and in law, the ld. CIT(A) is justified in holding that the land to the extent of 35% only is transferred whereas entire land has been transferred to the developers for which the assesse has received consideration of 65% of constructed area. Hence, on given facts, whether the ld. CIT(A) was not required to direct the computation of capital gains on the sale consideration pertaining to 65% of the constructed area i.e. 19916.83 Sq.ft? The appellant craves its right to add, amend or alter any of the grounds on or before the hearing.” “Grounds of assessee’s C.O.: 1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in holding that for the purpose of computing Long Term capital gain and short term capital gain, deduction of cost is to be worked out on the basis of floor-wise valuation according to stamp/revenue authorities. The directions of the ld. CIT(A) are contrary to the legal position in this regard for the determining the indexed cost of acquisition. Relief may please be granted by directing to work out the Long term capital gain and short term capital gain after allowing cost of acquisition as per law.
3 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal 2. The assesse craves his rights to add, amend or alter any of the grounds on or before the hearing.” 2. The hearing of the appeal and C.O. were concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
The brief facts of the case are that the assesse e-filed its return of income on 13/07/2012 on a total income of Rs. 20,82,610/- which was revised by filing revised return of income on 01/08/2013 declaring total income in revised return at Rs. 5,57,60,990/-. The case was selected for scrutiny and notices were issued to the assesse. The A.O. after discussing all the facts and circumstances as well as the documents placed before him passed assessment order U/s 143(3) of the Income Tax Act, 1961 (in short, the Act) determining total income of assessee at Rs. 8,81,03,620/-.
Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties as well as material placed before him, given relief to the assesse. Against the order of the ld. CIT(A), the revenue is in appeal challenging the order of the ld. CIT(A) and the assessee is in cross objection challenging the order of the ld. CIT(A) for computing Long Term capital gain and short term capital gain, deduction of cost is to be worked out on the basis of floor-wise valuation according to stamp/revenue authorities.
4 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal 5. Ground No. 1 and 2 of the revenue’s appeal is interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in considering the value of 35% land area transferred to developer as Long Term Capital Gain instead of business income of the assessee without appreciating the fact that the assesse has entered into development agreement for real estate business as well as MOU and allowing the deduction u/s 54EC from the business income of the assesse. The ld. CIT- D.R. appearing on behalf of the Revenue has relied on the order of the A.O. and submitted that the impugned order passed by the ld. CIT(A) is not proper and passed without application of mind. The ld. CIT-DR has relied on the following decisions of this Tribunal:
(i) Sh. Pradeep Vantrana Vs DCIT, Cir-2, Alwar, dated 27/02/2018 and (ii) ITO, Dausa Vs Sh. Ram Swaroop Saudagar, ITA No. 329/JP/2017 dated 22/02/2018.
On the other hand, the ld. AR appearing on behalf of the assesse has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the impugned order. The ld. AR has also submitted that the case laws referred to by us including the decision of the Jurisdictional High Court in the case of CIT v. Sohan Khan Mohan Khan 304 ITR 194 (Raj.) have been found to be directly applicable in this case. The ld. CIT(A) after appreciating the fact of terms & conditions of the 5 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal Development Agreement contained in paras 10. 11, 12, 13 and 14 and appreciating the legal position has held the gain to be chargeable to tax under the head Capital Gains. The ld. AR has further submitted that ld. CIT(A) has appreciated the following facts:
(i) The land was not purchased by the assessee but was inherited by the assessee from his father on 11/04/1994. Development Agreement was entered into even after lapse of around 12 years thereafter in 2006. (ii) Merely sale without purchase cannot result into business. (iii) Developer had all the obligation of execution of work. (iv) The assessee was debarred from interfering in the working of the Developer. (v) No funds of assessee were deployed rather he received security deposit from the Developer. The ld. AR has also submitted that provisions of section 45(5A) inserted by Finance Act, 2017 wherein gain arising to an individual or HUF from the transfer of a capital asset being a land or building or both under a specified agreement is chargeable to tax as Capital Gains. The "specified agreement' referred to in section 45(5A) is equivalent to the Development Agreement in the present appeal. The specified agreement is defined as under in the explanation (ii) to section 45(5A), which reads as under: "(ii) "specified agreement" means a registered agreement in which person owning land or building or both, agrees to allow another 6 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal person to develop a real estate project on such land or building or both in consideration of a share being land or building or both in such project, whether with or without payment of pail of the consideration in cash."
We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. From perusal of the record, we noticed that the ld. CIT(A) has dealt with the issue in para 2.3 of her order by holding as under:
“2.3 Ground no. 01 to 04 are interconnected and being taken up together. I have perused the facts of the case, assessment order and the submission of the appellant. It is seen that appellant was owner of property at C-94, Subhash Marg, Jaipur measuring 1978.88 Sq. yd. which devolved upon him on 11.04.1994 by will of his father. Thereafter the assessee entered into a developer agreement with M/s Anukampa Builders Pvt. Ltd. and builder agreed to share 65% of the total constructed area with proportionate land. The construction of the building was completed during the year and assessee received 65% of his share. Further, the assessee sold part of this area for Rs. 24,00,000/- on which he has shown long term capital gain Rs. 15,51,425/- and short term capital gain Rs. 2,38,996/-. He claimed deduction of Rs. 14,00,000/- under section 54EC on account of investment in bonds.
7 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal Thereafter, the assessee revised the return of income and offered long term capital gain of Rs. 5,23,66,528/- and short term capital gain of Rs. 13,11,857/- arising out of assessee's parting with 35% of land to the builder, as well as direct sale (as per page no. 95 to 99 of paper book filed by the assessee).
Assessing Officer observed that since the assessee has entered into developer agreement and therefore assessee is engaged in real estate business. Accordingly, on the value of 35% of land transferred to builder income is assessable under the head business. He worked out the area sold to the builder at 692.60 Sq. yd. On this, by DLC rate, he worked out total value at Rs. 5,05,80,470/- and after allowing deduction for proportionate land cost the business income is computed at Rs. 5,03,81,694/-.
The Assessing Officer also observed that out of 65% of his share, the assessee has sold 4129.37 Sq. ft. to the builder and 367.74 Sq. ft. sold to other person for Rs. 24 Lakhs. The stamp authority valued the same at Rs. 29,14,062/-. On this basis Assessing Officer worked out rate of 7925 Sq. ft.
On this basis he computed the business income at Rs. 3,56,39,319/- on constructed area sold to builder and other person.
The Assessing Officer further held that since the income from sale of property is assessed under the head income from business, the deduction under section 54EC is not allowable. On perusal of overall facts, it is seen that the 1st issue is whether the deemed sale proceeds on 35% land area transferred to developer is to be taxed under which head. 2nd
8 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal issue is whether the total area is 692.60 Sq. yd. or 639.33 Sq. yd.
So far as area is concerned I find that the Assessing Officer, in remand report, accepted that 35% of the land is to be taken at 639.33 Sq. yd. Therefore, the same is accepted and taken at 639.33 Sq. yd.
So far as nature of income is concerned, I find force in arguments of Authorized Representative that he sold the capital asset. He has not carried out any development activity on the land. He has received the property on will and never engaged in business of real estate. Assessee entered into only one transactions of property.
Various cases referred by Authorized Representative also support his case. Therefore, the Assessing Officer is directed to assess the gain on transfer of 35%share in the land under the head long term capital gain. From this, the Assessing Officer allowed deduction for proportionate cost of land without allowing indexation as he had allowed the deduction under the head business income. But since I have held land to be assessed under head of Capital Gain, Assessing Officer is directed to allow the indexed cost of acquisition as claimed by assessee at Rs. 14,40,380/- as claimed by the assessee as against of Rs. 1,98,776/-,allowed by Assessing Officer. The 2nd issue is whether provisions of section 50C are applicable. Since in earlier para, I have held that the income from sale of property is to be taxed under the head long term capital gain, therefore provisions of section 50C are applicable. Accordingly, the value substituted by Assessing Officer with 9 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal value u/s 50C is confirmed. The Assessing Officer has brought to tax, the area sold to other person (367.74 Sq. ft.) and area transferred to builder (4129.37 Sq. ft.) as income from business, however, this too is to be taxed as Capital Gains for reasons given by me supra. Since, the assessee has acquired those constructed areas in exchange for land, it is held that land underneath this constructed area is to be treated as long term, being held by assessee for more than 36 months and the buildup area as above, shall be short-term, as claimed. Cost of acquisition shall be allowed in the proportion of built up area sold/surrendered to builder as bears to total built up area acquired by assessee from developer in lieu of 35% land. In 3rd issue, the assessee is whether deemed sale value of land transferred and value of constructed area transferred is to be taxed or not as such constructed area was received in exchange of 35% land only.
On perusal of the order it is seen that the Assessing Officer considered only the area transferred to the builder i.e. 4129.37 Sq. ft. and not the total area. Since, the assessee transferred these constructed areas to the builder the same is liable to be taxed. On such sale, income is to be computed under the head capital gain comprising of long term capital gain on property land area and short term capital gain on constructed area. Against this, the Assessing officer only took the estimated sale value as per DLC rate at Rs. 3,27,25,257/- without any deduction of cost which is wrong. The Assessing officer is therefore directed to consider the sale value under the head capital gain and work out proportionate long term capital gain in respect of land and 10 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal short term capital gain in respect of construction after allowing deduction for cost as held above. The Assessing Officer is directed to adopt floorwise valuation according to stamp/revenue authorities to work out cost for computing long term capital gain and short term capital gain.”
From perusal of the impugned order, we observed that assessee was owner of property at C-94, Subhash Marg, Jaipur measuring 1978.88 Sq. yd. which devolved upon him on 11.04.1994 by Will of his father. Thereafter the assessee entered into a developer agreement with M/s Anukampa Builders Pvt. Ltd. and builder agreed to share 65% of the total constructed area with proportionate land. The construction of the building was completed during the year and assessee received 65% of his share. Further, the assessee sold part of this area for Rs. 24,00,000/- on which he has shown long term capital gain Rs. 15,51,425/- and short term capital gain Rs. 2,38,996/-. He claimed deduction of Rs. 14,00,000/- under section 54EC on account of investment in bonds. Thereafter, the assessee revised the return of income and offered long term capital gain of Rs. 5,23,66,528/- and short term capital gain of Rs. 13,11,857/- arising out of assessee's parting with 35% of land to the builder, as well as direct sale which is at page no. 95 to 99 of paper book. The ld. CIT(A) has held in the impugned order that the 1st issue is whether the deemed sale proceeds
11 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal on 35% land area transferred to developer is to be taxed under which head. 2nd issue is whether the total area is 692.60 Sq. yd. or 639.33 Sq. yd. So far as area is concerned, we observed that the Assessing Officer, in remand report, accepted that 35% of the land is to be taken at 639.33 Sq. yd. Therefore, the same was accepted and taken at 639.33 Sq. yd. We also found from the records that the assessee himself had never carried out any development activities and had only received the property under will and never engaged in business of real estate but had only entered into only one transaction of property. Therefore, while finding support from the decision of Hon’ble Jurisdictional High Court in the case of Sohan Khan Mohan Khan (supra) we also found that in the present case, there is nothing to show that the land was purchased with the intention to sell at a profit or with requisite intention to bring it within the para meters of “stock-in-trade”. Further it is not shown that the assessee is a regular dealer in real estate. Rather, it appears that the land was not purchased by the assessee, but was inherited by him from his father and the development agreement was entered into even after lapse of around 12 years thereafter. As per the Development Agreement, the developer had all the obligation of execution of work. Even the assessee was debarred from interfering in the working of the developer. On the contrary, no funds of the assessee were deployed rather he received
12 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal security deposit from the developer. Therefore, after considering the terms and conditions as contained in Development Agreement and following the decisions referred above, we are also of the view that the gains in the present case is to be chargeable to tax under the head “capital gains”.
The ld. DR had also relied upon the decisions of the Coordinate Bench of this Tribunal in the cases of Sh. Pradeep Vantrana Vs DCIT, Cir- 2, Alwar, dated 27/02/2018 and ITO, Dausa Vs Sh. Ram Swaroop Saudagar, ITA No. 329/JP/2017 dated 22/02/2018, but after going through the facts contained in the cited cases, we found that the same are not found to be applicable to the facts of the present case as the pari materia contained in those cases are altogether different from the facts of the present case. In the cited cases, the assessee has taken series of steps for carrying out development activities from time to time on various occasions and had sought several different sorts of approvals by completing nature of the land under one head to another head and had also got the land use changed on different occasions. In those cases, the assessee had taken affirmative steps and actions where he had got the land use changed from agricultural to resort and to residential stock in trade of his business of selling the plots of land for earning profit. Therefore, the cited cases ae of no help to the Revenue. In the present
13 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal case, it has no where been shown that the land was purchased by the assessee with the intention to sell at a profit or with requisite intention to bring it within the parameters of “stock-in-trade”. Therefore, after considering the factual position as enumerated hereinabove, we found that the ld. CIT(A) has rightly concluded that the gains are to be charged to tax under the head “capital gains”. No new facts or circumstances have been brought before us by the ld. DR in order to controvert or rebut the findings so recorded by the ld. CIT(A), therefore, we find no reason to interfere into or deviate from the findings of the ld. CIT(A). Accordingly, we uphold the same.
We found from perusal of the record that the ld. CIT(A) further held that the 2nd issue is whether provisions of section 50C are applicable, she held that that the income from sale of property is to be taxed under the head long term capital gain, therefore provisions of section 50C are applicable. The Assessing Officer has brought to tax, the area sold to other person (367.74 Sq. ft.) and area transferred to builder (4129.37 Sq. ft.) as income from business. Since, the assessee has acquired those constructed areas in exchange for land, it is held that land underneath this constructed area is to be treated as long term, being held by assessee for more than 36 months and the buildup area as above, shall be short-term, as claimed. Cost
14 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal of acquisition shall be allowed in the proportion of built up area sold/surrendered to builder as bears to total built up area acquired by assessee from developer in lieu of 35% land. The ld. CIT(A) has further held that in 3rd issue, the assessee is whether deemed sale value of land transferred and value of constructed area transferred is to be taxed or not as such constructed area was received in exchange of 35% land only. On perusal of the order it is seen that the Assessing Officer considered only the area transferred to the builder i.e. 4129.37 Sq. ft. and not the total area. Since, the assessee transferred these constructed areas to the builder the same is liable to be taxed. On such sale, income is to be computed under the head capital gain comprising of long term capital gain on property land area and short term capital gain on constructed area. Against this, the Assessing officer only took the estimated sale value as per DLC rate at Rs. 3,27,25,257/- without any deduction of cost which is wrong. Considering the totality of facts and circumstances, we found that the ld. CIT(A) has passed a speaking and reasoned order discussing all the details of the case of the assesse, therefore, we do not find any reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) and we uphold the same. Both these grounds of the Revenue’s appeal are dismissed.
15 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal 11. Ground No. 3 raised by the revenue relates to challenging the order of the ld. CIT(A) in holding that the land to the extent of 35% only is transferred whereas entire land has been transferred to the developers for which the assessee has received consideration of 65% of constructed area.
The ld. CIT-DR has relied on the order of the A.O. whereas on the contrary, the ld AR appearing on behalf of the assesse has stated that the department is raising altogether new issue in this ground. The AO had admitted the transfer of the land to the extent of 35% (as declared by the Assessee in his return of income) and not to the extent of 100%. Now raising a ground for treating the transfer to the extent of 100% is neither justified on merits nor the same can be raised by the Department at this stage.
Having considered the rival contentions and from perusal of the record, we found that the revenue is raising a new issue at this stage. It is undisputed fact that the AO had admitted the transfer of the land to the extent of 35%, as has been declared by the assessee in his return of income and not to the extent of 100%. Considering the totality of facts and circumstances, we hold that now raising a ground for treating the transfer to the extent of 100% is neither
16 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal justified on merits nor the same can be raised by the revenue at this stage. Accordingly, we dismiss this ground of appeal raised by the revenue.
14. Now we take the assessee’s cross objection wherein the assessee has challenged the order of the ld. CIT(A) in holding that for the purpose of computing Long Term capital gain and short term capital gain, deduction of cost is to be worked out on the basis of floor-wise valuation according to stamp/revenue authorities.
The ld. AR appearing on behalf of the assesse has reiterated the same arguments as were raised before the ld. CIT(A) and submitted that there is no provision under the law to work out that deduction on the basis of valuation adopted by the Stamp Duty Authority as the capital gain has to be calculated by allowing deduction for cost of acquisition/indexed cost of acquisition as per provisions of law whereas the ld. CIT(A) has erred in directing to allow deduction for cost on the basis of floor wise valuation accordingly the Stamp Valuation Authorities. 16. On the contrary, the ld. CIT-DR has relied on the order of the Revenue authorities. 17. Having considered the rival contentions and perused the material placed on record. From the record, we found that the ld.
17 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal CIT(A) while holding that the gains to be chargeable to tax under the head ‘capital gains’ be directed to allow deduction for cost on the basis of floor wise valuation whereas there is no provision under the law to work out that deduction on the basis of valuation adopted by the Stamp Duty Authorities. Therefore, we modify the order of the ld. CIT(A) to the extent that the A.O. is directed to consider the sale value under the capital gains and worked out proportionate long term capital gain in respect of land and short term capital gain in respect of construction by allowing the deduction for cost of acquisition/indexed cost of acquisition as per provisions of law. Therefore, with this modification, we uphold the other operative portion of the ld. CIT(A) and restore this issue back to the file of the A.O. for deciding the issue as per directions given in this para, as stated above. We order accordingly.
In the result, appeal of the Revenue is dismissed and the cross objection of the assessee is allowed for statistical purposes. Order pronounced in the open court on 17th March, 2021. Sd/- Sd/- ¼foØe flag ;kno½ ¼lanhi x®lkÃa½ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 17/03/2021
18 ITA 823/JP/2019 & CO 29/JP/2019_ DCIT Vs Ravindra Mittal *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The D.C.I.T., Circle-6, Jaipur. 1. izR;FkhZ@ The Respondent- Shri Ravindra Mittal, Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 823/JP/2019 & CO 29/JP/2019) 6. vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत