MAY FLOWER ENERPRISES PRIVATE LIMITED,COIMBATORE vs. ACIT CENTRAL CIRCLE, COIMBATORE

ITA 443/CHNY/2026Status: DisposedITAT Chennai23 September 2026AY 2017-1816 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had only a right to seek specific performance of the agreement, not the land itself, as no sale deed was registered and the vendor remained the owner. This right to specific performance is a capital asset, and its extinguishment is a transfer under Section 2(47). However, Section 50C is applicable only to the transfer of 'land or building or both' and cannot be extended to the transfer of a right in land or building. The Tribunal distinguished the case of Vidarbha Veneer Industries Ltd. (supra) as it involved a registered leasehold interest, unlike the assessee's bare contractual right. Therefore, Section 50C was not applicable. The AO was not justified in invoking Section 50C for recomputing LTCG. The Tribunal directed the AO to delete the addition. The issues regarding the bifurcation of consideration and the variance within the tolerance band were subsumed. The contention that no transfer occurred in the year under consideration was left open as the assessee succeeded on the Section 50C issue.

What were the facts?

The assessee, May Flower Enterprises Private Limited, is appealing an order from the CIT(A) for Assessment Year 2017-18. The dispute centers on the re-computation of long-term capital gain (LTCG) by the Assessing Officer (AO). The assessee had claimed an LTCG of Rs.1,17,80,684/-. The AO noted the assessee had entered into a sale agreement for land with Shri H. R. Ravichandra, paid Rs.1,40,40,000/-, but the transaction did not materialize. Subsequently, Shri H. R. Ravichandra paid Rs.2,00,00,000/- to the assessee for relinquishing rights. The AO treated Rs.1,08,00,000/- as reimbursement of development expenses and the remaining Rs.92,00,000/- as consideration for land sale. Applying Section 50C, the AO used the stamp duty valuation of Rs.2,16,00,000/- to recompute LTCG at Rs.1,42,89,230/-, adding it to the assessee's income. The CIT(A) upheld this.

What were the issues?

1. Whether 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 and re-computing Long Term Capital Gain, specifically concerning the applicability of Section 50C of the Income-tax Act, 1961. Assessee's Contentions: - The order of the CIT(A) is contrary to law and facts. The AO's order was without jurisdiction. - No transfer within the meaning of Section 2(47) took place in the relevant year, hence no capital gain arises. - Section 50C is not invocable as the assessee only extinguished its rights under an agreement dated 22.08.2005, not transferred land or building. - The agreement was composite for land and development. Even if Section 50C applied, the AO should have considered the entire Rs.2,00,00,000/-, where the variance with stamp duty was within 10%. - The assessee had paid land and development charges at the time of purchase and entered into a composite contract. - The assessee requested reference to the DVO for property valuation. Revenue's Contentions: - The assessee's contention that no transfer took place is not tenable as the assessee declared LTCG in its return. - The agreement clearly segregated payments for land and development charges, so it's not a consolidated payment. - The assessee paid the entire consideration for land purchase, and the amount received was correctly considered by the AO for recomputing LTCG under Section 50C.

Which sections of the Income-tax Act were involved?

Section 2(47),Section 50C,Section 2(14)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI

For Respondent: Mr. K. Shivalingam, Addl. CIT

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income-tax (Appeals) (in short “CIT(A)”), Chennai-20, passed us/. 250 of the Income-tax Act, 1961 (in short “the Act”) dated 07.11.2024 for the AY 2017-18. The assessee raised the following grounds of appeal: May Flower Enterprises Pvt Ltd :2:

“1. For that the order of the Commissioner of Income Tax (

The order continues below.

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