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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI PAVAN KUMAR GADALE
PER OM PRAKASH KANT PER OM PRAKASH KANT, AM These appeals by the These appeals by the Revenue and the assessee and the cross and the assessee and the cross- objection by the assessee are directed against two separate orders objection by the assessee are directed against two separate orders objection by the assessee are directed against two separate orders passed by the Ld. CIT(Appeals)-37, Mumbai [in short 37, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2012 ] for assessment year 2012-13 and 2009-10 10 respectively. Since the issue in dispute involved is common in both the the issue in dispute involved is common in both the the issue in dispute involved is common in both the assessment years, therefore these appeals and cross objection , therefore these appeals and cross objections have , therefore these appeals and cross objection
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been heard together and disposed off by way of this consolidated been heard together and disposed off by way of this consolidated been heard together and disposed off by way of this consolidated order for convenience. order for convenience.
In these appeals, hese appeals, year of taxability on transfer of development year of taxability on transfer of development rights in a plot of land as well as quantum of long rights in a plot of land as well as quantum of long-term capital gain term capital gain thereon, have been disputed. The been disputed. The assessee offered the long assessee offered the long-term capital gain on transfer of capital gain on transfer of part interest in plot of land under part interest in plot of land under development agreement agreement in assessment year 2012 in assessment year 2012-13, whereas according to the Assessing Officer Assessing Officer the transfer took place in fer took place in previous year corresponding to assessment corresponding to assessment year 2009 year 2009-10 and therefore he has assessed the long assessed the long-term capital gain on substantive term capital gain on substantive basis in assessment year 2009 basis in assessment year 2009-10 and on protective basis in the 10 and on protective basis in the assessment year 2012 2012-13. We find that assessment year 2012 . We find that assessment year 2012-13 has been assessed first and thereafter asses has been assessed first and thereafter assessment year 2009 sment year 2009-10 has reopened. The Ld. CIT(A) has also decided the issue in assessment reopened. The Ld. CIT(A) has also decided the issue in assessment reopened. The Ld. CIT(A) has also decided the issue in assessment year 2012-13 and therefore facts have been elaborated in 13 and therefore facts have been elaborated in 13 and therefore facts have been elaborated in assessment year 2012 assessment year 2012-13, accordingly firstly, we are taking are taking up the
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appeal and cross objection for assessment y and cross objection for assessment year 2012 ear 2012-13 for
adjudication. The grounds of the appeal of the adjudication. The grounds of the appeal of the Revenue Revenue in ITA No.
4876/Mum/2017 are are reproduced as under:
On the facts and circumstances of the case and in law, the Ld. On the facts and circumstances of the case and in law, the Ld. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Commissioner of Income-tax(Appeals) has erred in not tax(Appeals) has erred in not considering the considering the fact that Sec. 2(47) (v) with Sec 53A of the fact that Sec. 2(47) (v) with Sec 53A of the Transfer of Property Act, 1882 clearly states that once ingress to Transfer of Property Act, 1882 clearly states that once ingress to Transfer of Property Act, 1882 clearly states that once ingress to the property is handed over to the transferee i.e. Vidhi the property is handed over to the transferee i.e. Vidhi the property is handed over to the transferee i.e. Vidhi Enterprises, the provisions of Sec 53A of Transfer of Property Act Enterprises, the provisions of Sec 53A of Transfer of Property Act Enterprises, the provisions of Sec 53A of Transfer of Property Act are attracted. In th are attracted. In this case, clause 9B, 22(b) and 26 of the DA is case, clause 9B, 22(b) and 26 of the DA clearly establish that the Developer had complete access to the clearly establish that the Developer had complete access to the clearly establish that the Developer had complete access to the property and that he was liable for the actions thereon. property and that he was liable for the actions thereon. property and that he was liable for the actions thereon. Therefore, transfer has been effected in AY 2009 Therefore, transfer has been effected in AY 2009- -10 and not AY 2012-13. 13. 2. On the facts and cir On the facts and circumstances of the case and in law, the Ld. cumstances of the case and in law, the Ld. Commissioner of Income Commissioner of Income-tax(Appeals) has erred in not tax(Appeals) has erred in not considering the fact the amount arrived at for calculating the considering the fact the amount arrived at for calculating the considering the fact the amount arrived at for calculating the consideration on registration of DA was based on the Stamp consideration on registration of DA was based on the Stamp consideration on registration of DA was based on the Stamp Duty paid which is a clear indication Duty paid which is a clear indication of the value attributed by of the value attributed by the Land Revenue Department of the State Government at of the Land Revenue Department of the State Government at of the Land Revenue Department of the State Government at of Rs.18,74,74,699/ Rs.18,74,74,699/- on transfer of the land and therefore the on transfer of the land and therefore the question of TDR question of TDR 3. On the facts and circumstances of the case and in law, the Ld. On the facts and circumstances of the case and in law, the Ld. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Commissioner of Income-tax(Appeals) has erred in dividing the als) has erred in dividing the TDR /FSI and original plot bifurcation for the calculation of TDR /FSI and original plot bifurcation for the calculation of TDR /FSI and original plot bifurcation for the calculation of capital gains stating 50 C is not applicable on TR. However, the capital gains stating 50 C is not applicable on TR. However, the capital gains stating 50 C is not applicable on TR. However, the
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amount arrived at for calculating the consideration on amount arrived at for calculating the consideration on amount arrived at for calculating the consideration on registration of DA was based on the Stamp D registration of DA was based on the Stamp Duty paid which is a uty paid which is a clear indication of the value attributed by the Land Revenue clear indication of the value attributed by the Land Revenue clear indication of the value attributed by the Land Revenue Department of the State Government at of Rs.18,74,74,699/- on Department of the State Government at of Rs.18,74,74,699/ Department of the State Government at of Rs.18,74,74,699/ transfer of the land and therefore the question of TR does not transfer of the land and therefore the question of TR does not transfer of the land and therefore the question of TR does not arise. 3. The sole ground raised in sole ground raised in cross-objection by the assessee in CO on by the assessee in CO No. 312/Mum/2018 in respect of the appeal of the No. 312/Mum/2018 in respect of the appeal of the No. 312/Mum/2018 in respect of the appeal of the Revenue has been withdrawn vide vide letter dated 15/06/22, therefore, same is , therefore, same is dismissed as infructuous infructuous.
3.1 The assessee has also filed appeal separately for assessment assessee has also filed appeal separately for assessment assessee has also filed appeal separately for assessment year 2012-13 13 whi which ch has has been been registered registered as as ITA ITA No. No. 3773/Mum/2017 and and the grounds raised in which the grounds raised in which are reproduced as under:
Ld. CIT(A) erred in holding that cost of construction of 42% of the Ld. CIT(A) erred in holding that cost of construction of 42% of the Ld. CIT(A) erred in holding that cost of construction of 42% of the area exchanged for transfer of appellant's right under area exchanged for transfer of appellant's right under area exchanged for transfer of appellant's right under Development Development Agreement, Agreement, being being computed computed at at 42% 42% of of Rs.18,74,74,699/ Rs.18,74,74,699/- i.e. Rs.7,87,73,911/-, , without without properly properly considering the components of cost of construction as determined considering the components of cost of construction as determined considering the components of cost of construction as determined by District Valuation Officer in its valuation report. Such cost of by District Valuation Officer in its valuation report. Such cost of by District Valuation Officer in its valuation report. Such cost of construction is consisting of: construction is consisting of:
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i Cost of Cost of construction : ₹8,81,46,948/- Incidental charges 10% of above Incidental charges 10% of above : ₹88,14,695/- ii Cost of TDR Cost of TDR : ₹8,89,43,240/- iii Cost of 8 open car parking to be Cost of 8 open car parking to be : ₹15,69,206/- iv provided provided under under Development Development Agreement Agreement ₹18,74,74,089/-
Ld. CIT(A) erred in not Ld. CIT(A) erred in not considering the fact that cost of considering the fact that cost of construction is only construction is only ₹88146948/- and hence consideration under and hence consideration under Development Agreement be computed with reference to said cost Development Agreement be computed with reference to said cost Development Agreement be computed with reference to said cost of construction being 42% there of construction being 42% thereof.
Ld. CIT(A) erred in upholding disallowance of Rs.3,11,920/ Ld. CIT(A) erred in upholding disallowance of Rs.3,11,920/- out of Ld. CIT(A) erred in upholding disallowance of Rs.3,11,920/ interest paid by the appellant during the year on the plea that interest paid by the appellant during the year on the plea that interest paid by the appellant during the year on the plea that loan borrowed from ECL Finance Ltd is being utilised for loan borrowed from ECL Finance Ltd is being utilised for loan borrowed from ECL Finance Ltd is being utilised for improvement of house property to make it fit for earning rent in improvement of house property to make it fit for earning rent in improvement of house property to make it fit for earning rent in future, without properly appreciating the fact of the case and law future, without properly appreciating the fact of the case and la future, without properly appreciating the fact of the case and la applicable thereto. applicable thereto. 3. Ld. CIT(A) erred in upholding the addition made by Ld. A.O. of Ld. CIT(A) erred in upholding the addition made by Ld. A.O. of Ld. CIT(A) erred in upholding the addition made by Ld. A.O. of Rs.1,30,000/ Rs.1,30,000/- made u/s. 69C of the I.T. Act, without properly made u/s. 69C of the I.T. Act, without properly appreciating the fact that 3 payments amounting to Rs.1,30,000/- appreciating the fact that 3 payments amounting to Rs.1,30,000/ appreciating the fact that 3 payments amounting to Rs.1,30,000/ does not relate to the appellant, but to one does not relate to the appellant, but to one of its partner Shri of its partner Shri Suresh Patel and the said amount is not to be considered while Suresh Patel and the said amount is not to be considered while Suresh Patel and the said amount is not to be considered while making the assessment of the appellant. making the assessment of the appellant. 4. The appellant pray that correct cost be determined for arriving at The appellant pray that correct cost be determined for arriving at The appellant pray that correct cost be determined for arriving at the consideration under Development Agreement and other the consideration under Development Agreement and other the consideration under Development Agreement and other additions additions made be deleted.
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Briefly stated facts of the case are that the assessee is a Briefly stated facts of the case are that the assessee is a Briefly stated facts of the case are that the assessee is a partnership firm and during relevant year partnership firm and during relevant year shown income shown income under various heads including various heads including “income from house property house property” and “income from other sources”. The assessee filed return of income for the year . The assessee filed return of income for the year . The assessee filed return of income for the year under consideration on 28/07/2012 declaring total income under consideration on 28/07/2012 declaring total income under consideration on 28/07/2012 declaring total income at ₹8,21,584/- which was revised on 30/07/2012. The return of which was revised on 30/07/2012. The return of which was revised on 30/07/2012. The return of income was further revised on 23/03/2013 declaring total income income was further revised on 23/03/2013 declaring total income income was further revised on 23/03/2013 declaring total income at ₹ 29,30,557/-. The return of income filed by the assessee was . The return of income filed by the assessee was . The return of income filed by the assessee was selected for scrutiny and statutory notices under the selected for scrutiny and statutory notices under the selected for scrutiny and statutory notices under the Income-Tax Act, 1961 (in short ‘the the Act’) were issued and complied with. During ) were issued and complied with. During the year, the assessee disclosed long the year, the assessee disclosed long-term capital gain term capital gain (LTCG) of ₹21,08,973/- on sale of development rights of a plot of land on sale of development rights of a plot of land on sale of development rights of a plot of land. The assessee treated total sale consideration on transfer of interest in assessee treated total sale consideration on transfer of interest in assessee treated total sale consideration on transfer of interest in Development Agreement ( Development Agreement (DA) based on cost of constructed area at based on cost of constructed area at 42% of ₹5,46,27,440/ 5,46,27,440/- including ₹4,28,96,000/- for allowing for allowing loading
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of TDR, which was claimed as exempt. The computation of capital of TDR, which was claimed as exempt. The computation of capital of TDR, which was claimed as exempt. The computation of capital gain of the assessee is reproduced gain of the assessee is reproduced as under:
Amount (₹) Particulars Area (sq ft) Total Land Areas held by the as on Total Land Areas held by the as on 55,166 01/04/1981 The Fair Market Value as on 01/04/1981 The Fair Market Value as on 01/04/1981 24,82,493/ 24,82,493/- Land (FSI) available for out of the above out of the above 13,966 6,28,476/ 6,28,476/- areas) and its FMV as on 01.04.1981 areas) and its FMV as on 01.04.1981 TDR available (as per DCR 1991) TDR available (as per DCR 1991) 51,067 NIL Total Area available for development Total Area available for development 65,033 Out of Land FSI of 13966 13,966 A. Parted to Developers Parted to Developers (58%) 8,100 B. FMV as on 01/04/1981 FMV as on 01/04/1981 3,64,516 3,64,516 Indexed Cost (3,64,516/100*551) Indexed Cost (3,64,516/100*551) 20,08,467 20,08,467 Land FSI to Assessee – (42%) (42%) 5,866 Out of TDR (FSI) of 51067 51,067 Parted to Developer – (58%) (58%) 29,619 TDR FSI to Assessee – (42%) (42%) 21,448 Consideration amount received/receivable Consideration amount received/receivable 5,866 1,17,31,440 1,17,31,440 by by assessee assessee being being cost cost of of areas areas received/receivable by the assessee on received/receivable by the assessee on account of land cost of construction @ account of land cost of construction @ 2,000/- On account of TDR cost of construction @ On account of TDR cost of construction @ 4,28,96,000 4,28,96,000 ₹2,000/- per sq ft 5,46,27,440 5,46,27,440 Less : Consideration on account of TDR FSI Less : Consideration on account of TDR FSI 4,28,96,000 4,28,96,000 Less : Indexed cost of land developer Less : Indexed cost of land developer 20,08,467 20,08,467 Less : Cost of Basement Demolition 8460 Less : Cost of Basement Demolition 8460 76,14,000/- 5,25,18,467 5,25,18,467 sq ft @ 900/- per sq ft Long Term Capital Gain liable for taxation Long Term Capital Gain liable for taxation 21,08,973 21,08,973 4.1 However, in the scrutiny assessment completed under section n the scrutiny assessment completed under section n the scrutiny assessment completed under section 143(3) of the Act on 26/03/2015 on 26/03/2015, the Assessing Officer Assessing Officer held that
taxability of the capital gain arises taxability of the capital gain arises in the assessment year 2009 in the assessment year 2009-10.
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According to him, under the registered develop According to him, under the registered development agreement, ment agreement, possession of land was given to the developer in previous year possession of land was given to the developer in previous year possession of land was given to the developer in previous year corresponding to AY 2009 corresponding to AY 2009-10 and therefore in terms of section 10 and therefore in terms of section 2(47) of the Act read with section 53A of Act read with section 53A of Transfer of Property Act of Property Act, the capital gain arises in the capital gain arises in AY 2009-10. He also rejected the He also rejected the computation of LTCG computation of LTCG i.e. the sale consideration and cost of i.e. the sale consideration and cost of acquisition and computed the quantum of LTC and computed the quantum of LTCG at ₹ ₹16,68,07,905/- based on stamp duty value of ased on stamp duty value of ₹18,38,53,000/- and and assessed the same on protective basis. on protective basis. The computation of capital gain by the Ld al gain by the Ld. AO for AY 2012-13 (on protective basis) 13 (on protective basis) is reproduced as under: is reproduced as under:
4.2 The Ld. AO also made addition of . AO also made addition of ₹1,30,000/- for unexplained expenditure based on the documents found during the course of the expenditure based on the documents found during the course of the expenditure based on the documents found during the course of the
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survey carried on 21/11/2012 survey carried on 21/11/2012 at the premises of the assessee firm premises of the assessee firm. The ld. Assessing Officer Assessing Officer also made disallowance of interest paid on allowance of interest paid on loan amounting to ₹15,06, 15,06,920/-as loans not used for the purpose of for the purpose of the business and interest was paid to family members. the business and interest was paid to family members. the business and interest was paid to family members.
4.3 The assessment for AY 2009 The assessment for AY 2009-10 was reopened. As the was reopened. As the valuation of stamp value valuation of stamp value authorities was objected by the assessee, was objected by the assessee, matter of valuation was matter of valuation was referred by the AO to District Valuation by the AO to District Valuation Officer (DVO), who valued the intere Officer (DVO), who valued the interest of the assessee in DA at st of the assessee in DA at ₹10,01,28,000/-. The AO accordingly, a . The AO accordingly, assessed the capital gain at ssessed the capital gain at ₹9,37,03,413/- on substantive basis on substantive basis. The computation of c The computation of capital gain by the AO in para 8.6 of the by the AO in para 8.6 of the assessment order for AY 2009 assessment order for AY 2009-10, is reproduced as under: reproduced as under:
Registered Agreement Value on 26.06.2008 Registered Agreement Value on 26.06.2008 ₹18,38,53,000 Value of Development agreement in view of Development agreement in view of 10,01,28,000 valuation report dated 29.01.2016 valuation report dated 29.01.2016 Indexed cost of land to Developer Cost of basement Indexed cost of land to Developer Cost of basement ₹20,08,467 demolished (58%) ₹44,16,120 Long Term Capital Gains ₹9,37,03,413/-
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The Ld CIT(A) held that capital gai The Ld CIT(A) held that capital gain is taxable in AY 2012 n is taxable in AY 2012-13 rather than in AY 2009 n in AY 2009-10. He held that capital gain is chargeable on 10. He held that capital gain is chargeable on the cost of constructi the cost of construction as contained in the report of contained in the report of the DVO at ₹18,74,74,089/-, being being 42% 42% thereof thereof ₹7,87,73,911/ 7,87,73,911/- and consideration relatable to load consideration relatable to loading TDR will not be liable to capital will not be liable to capital gain. For AY 2009 gain. For AY 2009-10 held that capital gain 10 held that capital gain was taxed on substantiative basis in AY 2 substantiative basis in AY 2012-13, so no separate adjudication 13, so no separate adjudication was required in AY 2009- -10.
Aggrieved, both the assessee and , both the assessee and Revenue are in appeal before are in appeal before us. During the course of the hearing both sides have filed paperbook During the course of the hearing both sides have filed paperbook During the course of the hearing both sides have filed paperbook and written submissions and made and written submissions and made oral arguments.
The ground No. The ground No. 1 of the appeal of the Revenue Revenue relates to the year of the taxability of the capital gain. In year of the taxability of the capital gain. In support of support of the grounds Revenue has submitted that the developer was given complete submitted that the developer was given complete submitted that the developer was given complete access to the property in the previous year corresponding to access to the property in the previous year corresponding to access to the property in the previous year corresponding to
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assessment year 2009 2009-10 and therefore the capital gain was liable to 10 and therefore the capital gain was liable to be taxed in the assessment year be taxed in the assessment year 2009-10.
7.1 The facts in relatio The facts in relation to the issue in dispute have been n to the issue in dispute have been mentioned elaborately by the mentioned elaborately by the Assessing Officer. For understanding . For understanding the issue, brief as how the property came into existence and then the issue, brief as how the property came into existence and then the issue, brief as how the property came into existence and then transferred to the developer transferred to the developer, are summarized as under: ed as under:
(i) Mr. Jethabhai G Shah Jethabhai G Shah was carrying business in the name business in the name and style of M/s Pankaj enterprise style of M/s Pankaj enterprise. He . He was absolute owner of plot No. one of industrial subdivision of survey owner of plot No. one of industrial subdivisi owner of plot No. one of industrial subdivisi No. one and two ad No. one and two admeasuring 5127.36 m². measuring 5127.36 m². M/s Pankaj enterprise was granted exemption in the year 1979 for enterprise was granted exemption in the year 1979 for enterprise was granted exemption in the year 1979 for industrial use of the said property. industrial use of the said property. (ii) In the year 1980, Mr In the year 1980, Mr. Jethabhai entered into an agreement Jethabhai entered into an agreement with M/s Maste with M/s Master Clock and watch works P Ltd ( r Clock and watch works P Ltd (in short ‘the Master clock Master clock’) for forming a partnership for forming a partnership, wherein Mr. Jethabhai agreed to bring said property as his capital Jethabhai agreed to bring said property as his capital Jethabhai agreed to bring said property as his capital
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contribution and contribution and the master clock to bring monetary the master clock to bring monetary capital, which will be required for carrying on the capital, which will be required for carrying on the capital, which will be required for carrying on the partnership business of M/S Pankaj enterprises. On the partnership business of M/S Pankaj enterprises. On the partnership business of M/S Pankaj enterprises. On the execution of the agreement, of the agreement, the said property became the the said property became the asset and property of partnership firm M/s Pankaj asset and property of partnership firm M/s Pankaj asset and property of partnership firm M/s Pankaj enterprises. enterprises. (iii) Subsequent to that by way of different deeds of Subsequent to that by way of different deeds of Subsequent to that by way of different deeds of partnership and deeds of retirement several changes partnership and deeds of retirement several changes partnership and deeds of retirement several changes made in the Constitution of the firm from time to time. made in the Constitution of the firm from time to time. made in the Constitution of the firm from time to time. Accordingly in terms of the last such deed of ngly in terms of the last such deed of ngly in terms of the last such deed of reconstitution of the partnership dated 03/04/2007, the reconstitution of the partnership dated 03/04/2007, the reconstitution of the partnership dated 03/04/2007, the present partners of the partnership firm are the Master present partners of the partnership firm are the present partners of the partnership firm are the clock, Mr. Suresh Ishwarlal Patel and Mr Mr. Nirmal Suresh Patel. (iv) Out of the total plot area of 5127.05 m², Out of the total plot area of 5127.05 m², the land area of the land area of 381.14 m² was under encroachment by illegal occupants 381.14 m² was under encroachment by illegal 381.14 m² was under encroachment by illegal
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and 10% of the area (512.70 m² and 10% of the area (512.70 m²) was to be left open i.e. ) was to be left open i.e. amenity space, and thus the net plot area available for amenity space, and thus the net plot area available for amenity space, and thus the net plot area available for construction of the said property was 4233.21 m². construction of the said property was 4233.21 m². construction of the said property was 4233.21 m². (v) The assessee firm des The assessee firm desired to construct an industrial to construct an industrial estate on the said property and after obtaining approval estate on the said property and after obtaining approval estate on the said property and after obtaining approval in the year 1995 in the year 1995 from the competent competent authorities, commenced construction of industrial building on the commenced construction of industrial building on the commenced construction of industrial building on the said property divided into “Wing A” and “Wing B”. The said property divided into “Wing A” and said property divided into “Wing A” and Wing A was Wing A was built partially comprising of a basement built partially comprising of a basement having net floor area of 8460.80 ft². This portion of Wing having net floor area of 8460.80 ft². This portion of Wing having net floor area of 8460.80 ft². This portion of Wing A which was under construction and not occupied, was A which was under construction and not occupied A which was under construction and not occupied assessed as land under construction under Municipal assessed as land under construction under Municipal assessed as land under construction under Municipal Ward. The Wing B was complete with ground and two Ward. The Wing B was complete with ground and two Ward. The Wing B was complete with ground and two upper floors and occupation pper floors and occupation certificate was issued in certificate was issued in 1999.
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(vi) The partnership firm desire The partnership firm desired to construct and develop to construct and develop information technology park on Wing A information technology park on Wing A admeasuring plot admeasuring plot area having FSI of 6044.1 m², which was worked out as area having FSI of 6044.1 m², which was worked out as area having FSI of 6044.1 m², which was worked out as under:
Plot Area Sq Mtr Total Plot Area t Area 5127.05 Less: Area under encroachment Less: Area under encroachment 381.14 Less: Amenity Space Less: Amenity Space 512.70 Net Plot Area Net Plot Area 4233.21 Total Permissible FSI Total Permissible FSI 8979.21 Less: FSI Consumed in Wing B which is retained by the Less: FSI Consumed in Wing B which is retained by the 2935.00 Less: FSI Consumed in Wing B which is retained by the Owners Balance Plot including FSI Balance Plot including FSI 6044.21 (vii) Thereafter, Thereafter, the assessee i.e. owner of the land i.e. owner of the land, entered into an agreement With M/s V into an agreement With M/s Vidhi Enterprises i.e. idhi Enterprises i.e. Developer, for development of the plot wherein they , for development of the plot wherein they , for development of the plot wherein they agreed to share the constructed property in the ratio of agreed to share the constructed property in the ratio of agreed to share the constructed property in the ratio of 42:58 i.e. the owners will get 42% share of the 42:58 i.e. the owners will get 42% share of the 42:58 i.e. the owners will get 42% share of the constructed property free of cost. This agreement was constructed property free of cost. This agreement was constructed property free of cost. This agreement was entered into in the financial year 2007-08, but was entered into in the financial year 2007 entered into in the financial year 2007 registered in the financial year 2008 registered in the financial year 2008-09.
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(viii) the assessee obtain the assessee obtained possession of its share of possession of its share of constructed property in the previous year corresponding constructed property in the previous year corresponding constructed property in the previous year corresponding to assessment year 2012 assessment year 2012-13. According to the assessee in 13. According to the assessee in view of the possession of the property received in view of the possession of the property received in view of the possession of the property received in assessment year 2012 assessment year 2012-13, the long-term capital gain term capital gain arose in the case of the assessee in assessment year 2012- arose in the case of the assessee in assessment year 2012 arose in the case of the assessee in assessment year 2012 13 and offered accordingly. 13 and offered accordingly.
In background of the above facts, the ound of the above facts, the Assessing Officer Assessing Officer held that long-term capital gain on transfer of development rights should term capital gain on transfer of development rights should term capital gain on transfer of development rights should be charged on the basis of the registered be charged on the basis of the registered development development agreement entered into between the assessee i.e. the owner and M/s Vidhi entered into between the assessee i.e. the owner and M/s Vidhi entered into between the assessee i.e. the owner and M/s Vidhi enterprise i.e. developer se i.e. developer, in the financial year 2008 , in the financial year 2008-09 i.e. the assessment year 2009 assessment year 2009-10. The relevant finding of the nding of the Ld. Assessing Officer is reproduced as under: is reproduced as under:
“Year of Chargeability Year of Chargeability
Pankaj Enterprises 17 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
The assessee in the course of hearing has stated that agreement was executed The assessee in the course of hearing has stated that agreement was executed The assessee in the course of hearing has stated that agreement was executed in the FY 2007-08 and hence the chargeability year should be FY 2007 08 and hence the chargeability year should be FY 2007-08 08 and hence the chargeability year should be FY 2007 relevant to AY 2008-09. 09.
The contention of the assessee is not acceptable as provisions of section 53A of The contention of the assessee is not acceptable as provisions of section 53A of The contention of the assessee is not acceptable as provisions of section 53A of Transfer of Property Act was amended in the year 2001 by which additional ransfer of Property Act was amended in the year 2001 by which additional ransfer of Property Act was amended in the year 2001 by which additional condition of registration of the written agreement was introduced and in the condition of registration of the written agreement was introduced and in the condition of registration of the written agreement was introduced and in the 09 and therefore, the instant case the agreement was registered in the FY 2008 instant case the agreement was registered in the FY 2008-09 and therefore, the chargeability should be FY chargeability should be FY 2008-09 relevant to AY 2009-10. Long 10. Long-term Capital Gain on transfer of development rights should be charged on the basis of Gain on transfer of development rights should be charged on the basis of Gain on transfer of development rights should be charged on the basis of registered agreement entered into between Pankaj Enterprises i.e. the Owner registered agreement entered into between Pankaj Enterprises i.e. the Owner registered agreement entered into between Pankaj Enterprises i.e. the Owner and M/s Vidhi Enterprises in the FY 2008 and M/s Vidhi Enterprises in the FY 2008-09 i.e. AY 2009-10 as the year of 10 as the year of chargeability of income. chargeability of income.
Under Section 2(47) (v),any transaction involving allowing of possession to be Under Section 2(47) (v),any transaction involving allowing of possession to be Under Section 2(47) (v),any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred taken over or retained in part performance of a contract of the nature referred taken over or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act woul to in Section 53A of the Transfer of Property Act would core within the ambit of d core within the ambit of Section 2(47)(v). That, in order to attract Section 53A,the following conditions Section 2(47)(v). That, in order to attract Section 53A,the following conditions Section 2(47)(v). That, in order to attract Section 53A,the following conditions needs to be fulfilled There should be a contract for consideration; it should be in needs to be fulfilled There should be a contract for consideration; it should be in needs to be fulfilled There should be a contract for consideration; it should be in writing; it should be signed by the transferor; it should pertai writing; it should be signed by the transferor; it should pertain to transfer of n to transfer of immovable property; the transferee should have taken the possession of the immovable property; the transferee should have taken the possession of the immovable property; the transferee should have taken the possession of the property lastly, the transferee should be ready and willing to perform his part property lastly, the transferee should be ready and willing to perform his part property lastly, the transferee should be ready and willing to perform his part of the contract. That even arrangements confirming privileges of ownership of the contract. That even arrangements confirming privileges of ownership of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under Section 2(47) (v).Section 2(47) (v) was ransfer of title could fall under Section 2(47) (v).Section 2(47) (v) was ransfer of title could fall under Section 2(47) (v).Section 2(47) (v) was introduced in the Act from the assessment year 1988 introduced in the Act from the assessment year 1988-89 because prior thereto, 89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took in most cases, it was argued on behalf of the assessee that no transfer took in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the place till execution of the conveyance. Consequently, the assessee used to enter conveyance. Consequently, the assessee used to enter into agreements for developing properties with the builders and under the into agreements for developing properties with the builders and under the into agreements for developing properties with the builders and under the arrangement with the builders, they used to confer privileges of ownership arrangement with the builders, they used to confer privileges of ownership arrangement with the builders, they used to confer privileges of ownership
Pankaj Enterprises 18 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
without executing conveyance and to plug that loophol without executing conveyance and to plug that loophole, Section 2(47) (v) e, Section 2(47) (v) came to be introduced in the Act. came to be introduced in the Act.
The scope of Section 2(47) (v) reads as under: The scope of Section 2(47) (v) reads as under:
"2(47)...
(v)(With effect from April 1,1988) any transaction involving the allowing of the (v)(With effect from April 1,1988) any transaction involving the allowing of the (v)(With effect from April 1,1988) any transaction involving the allowing of the possession of any immovable property (as defined) to be taken or retained in possession of any immovable property (as defined) to be taken o possession of any immovable property (as defined) to be taken o part performance of a contract of the nature referred to in Section 53A of the part performance of a contract of the nature referred to in Section 53A of the part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882. Transfer of Property Act, 1882.
(vi) (With effect from April 1, 1988) any transaction (whether by way of (vi) (With effect from April 1, 1988) any transaction (whether by way of (vi) (With effect from April 1, 1988) any transaction (whether by way of becoming a memberof, or acquiring shares in, a co becoming a memberof, or acquiring shares in, a co-operative society ,company ve society ,company or other association of persons or other association of persons or by way of any agreement or any or by way of any agreement or any arrangement or in any other manner whatsoever; arrangement or in any other manner whatsoever; which has the effect of which has the effect of transferring or enabling the enjoyment of, any immovable property(as transferring or enabling the enjoyment of, any immovable transferring or enabling the enjoyment of, any immovable defined)."
The above two clauses were introduced with effect from April 1, 1988. They es were introduced with effect from April 1, 1988. They es were introduced with effect from April 1, 1988. They provide that "transfer" includes ()any transaction which allows possession to "transfer" includes ()any transaction which allows possession to "transfer" includes ()any transaction which allows possession to be taken/retained in part be taken/retained in part performance of a contract of the nature referred to in performance of a contract of the nature referred to in section 53A of the Transfer of section 53A of the Transfer of Property Act, and(in)any transaction entered ct, and(in)any transaction entered into any manner which has the effect of into any manner which has the effect of transferring or enabling the enjoyment transferring or enabling the enjoyment of any immovable property. Therefore, in these two of any immovable property. Therefore, in these two cases, capital gains would cases, capital gains would be taxable in the year in which such transactions are entered be taxable in the year in which such transactions are entered in into, even if the transfer of immovable property is not effective or complete under the general transfer of immovable property is not effective or complete under the transfer of immovable property is not effective or complete under the law.
Pankaj Enterprises 19 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
The assessee in its submission has stated that no rights are being transferred to The assessee in its submission has stated that no rights are being transferred The assessee in its submission has stated that no rights are being transferred developers till such time entire building is constructed as per the terms of the developers till such time entire building is constructed as per the terms o developers till such time entire building is constructed as per the terms o Development Agreement. Development Agreement.
The department would like to state that transfer of developmental rights had The department would like to state that transfer of developmental rights had The department would like to state that transfer of developmental rights had taken place and Sec 2(47) would be applicable and to further corroborate our place and Sec 2(47) would be applicable and to further corroborate our place and Sec 2(47) would be applicable and to further corroborate our point, the extracted portion of the agreement is placed below: portion of the agreement is placed below:
Point No 9B of the Agreement states: B of the Agreement states: The developers shall be liable to The developers shall be liable to remove, settle all legitimate defects, claims to the said property or any part settle all legitimate defects, claims to the said property or any part settle all legitimate defects, claims to the said property or any part thereof received from any person lawfully claiming from the owners at any time any person lawfully claiming from the owners at any time till the entire development project till the entire development project is completed within a period of 30 days of it s completed within a period of 30 days of it becoming known.
Point No. 22 (b) of the agreement states: Point No. 22 (b) of the agreement states: The Developers shall be fully The Developers shall be fully responsible for any contravention, violation, non for any contravention, violation, non-compliance of any laws, rules, compliance of any laws, rules, regulations, terms of sanction/approvals sanction/approvals and for all aspects of the development and for all aspects of the development of the said new building and the of the said new building and the Owners will in no way or manner be concerned Owners will in no way or manner be concerned or be made a party to any such or be made a party to any such contravention, violation/non- -compliance or default even default even if the Developers commits any irregularities if the Developers commits any irregularities and/or and/or defaults/violation in respect thereof. The Developers shall in this respect keep defaults/violation in respect thereof. The Developers shall in this defaults/violation in respect thereof. The Developers shall in this the owners full and effectually indemnified. the owners full and effectually indemnified.
Point No. 26 of the agreement states: Point No. 26 of the agreement states: The aforesaid consideration being The aforesaid consideration being Owners Area is all inclusive consideration for grant of de all inclusive consideration for grant of development rights velopment rights to the Developers in the manner the Developers in the manner envisaged herein in respect of the said property envisaged herein in respect of the said property and nothing further shall be due and er shall be due and payable by the Developers towards the payable by the Developers towards the Developers Area and/or the conveyance of the Developers Area and/or the conveyance of the said property in favour of the said property in favour of the common organization to be formed of all the premises organization to be formed of all the premises purchasers. purchasers.”
Pankaj Enterprises 20 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
Before the Ld. CIT(A), the assessee contested the finding of the Before the Ld. CIT(A), the assessee contested the finding of the Before the Ld. CIT(A), the assessee contested the finding of the Ld. Assessing Officer Assessing Officer on the ground that in assessment year 2009 that in assessment year 2009- 10, only permissive possession was given to the developer for only permissive possession was given to the developer for only permissive possession was given to the developer for carrying out acts and deeds, which w carrying out acts and deeds, which was necessary for development necessary for development of the said property and no possession of the property was given. of the said property and no possession of the property was given. of the said property and no possession of the property was given. The construction of the property was completed only in The construction of the property was completed only in The construction of the property was completed only in financial year 2011-12 and therefore exchange/barter of the property 12 and therefore exchange/barter of the property 12 and therefore exchange/barter of the property happened only in the previous year corresponding to the happened only in the previous year corresponding to the happened only in the previous year corresponding to the assessment year 2012 assessment year 2012-13. Hence, the long-term capital gain was term capital gain was taxable in the assessment year 2012 taxable in the assessment year 2012-13.
9.1 Ld. Ld. CIT(A) CIT(A) after after considering considering vario various us clauses clauses of of the the development agreement , and power of attorney development agreement , and power of attorney executed executed between the assessee and the developer the assessee and the developer, which was registered on , which was registered on 26/06/2008, concluded that there is no transfer of property 26/06/2008, concluded that there is no transfer of property 26/06/2008, concluded that there is no transfer of property in the assessment year 2009 assessment year 2009-10, within the meaning of secti within the meaning of section 2(47) of the Act and the assessee received 42% of the total constructed area and the assessee received 42% of the total constructed area and the assessee received 42% of the total constructed area
Pankaj Enterprises 21 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
in assessment year 2012 in assessment year 2012-13 i.e. in which the exchange took place 13 i.e. in which the exchange took place,
therefore capital gain gain has to be taxed in the assessment year 2012 has to be taxed in the assessment year 2012-
The relevant finding of the Ld. CIT(A) nding of the Ld. CIT(A) is reproduced as under: is reproduced as under:
“5.16 I have gone through the development agreement and find I have gone through the development agreement and find I have gone through the development agreement and find that Clauses 14, 16, 24(c), 24(A), the provision of these clauses are that Clauses 14, 16, 24(c), 24(A), the provision of these clauses are that Clauses 14, 16, 24(c), 24(A), the provision of these clauses are reproduced here below: reproduced here below:-
(i.) CI. 14 of the agreement provides "developer shall be deemed CI. 14 of the agreement provides "developer shall be deemed CI. 14 of the agreement provides "developer shall be deemed to have been allowed to enter upon the said property as developers allowed to enter upon the said property as developers allowed to enter upon the said property as developers for the purpose of construction of said new building thereon in for the purpose of construction of said new building thereon in for the purpose of construction of said new building thereon in accordance with plan to be sanction with amendment thereto if accordance with plan to be sanction with amendment thereto if accordance with plan to be sanction with amendment thereto if any, by the Municipal Corporation of Greater Mumbai". The any, by the Municipal Corporation of Greater Mumbai". The any, by the Municipal Corporation of Greater Mumbai". The developer is allo developer is allowed 10 construct a temporary site-office (CI. 14(in). office (CI. 14(in). The developer is also permitted to put hoarding/sign boards (CH The developer is also permitted to put hoarding/sign boards (CH The developer is also permitted to put hoarding/sign boards (CH 14(iii).
(ii) Cl. 16 provides for execution of power of authority infavour Cl. 16 provides for execution of power of authority infavour Cl. 16 provides for execution of power of authority infavour of developer. Clause 16 "'immediately upon execution of of developer. Clause 16 "'immediately upon execution of of developer. Clause 16 "'immediately upon execution of presents persons the owners have granted in favour of developer or their persons the owners have granted in favour of developer or their persons the owners have granted in favour of developer or their nominees, an irrevocable power of attorney to do all acts nominees, an irrevocable power of attorney to do all acts nominees, an irrevocable power of attorney to do all acts deeds, matters and things as necessary for development of said property matters and things as necessary for development of said property matters and things as necessary for development of said property and which power of attorney shall be registered power of attorney shall be registered simultaneously simultaneously with this development agreement" with this development agreement"
(iii) CI. 24 (c) provides "the developers shall be entitled to put the CI. 24 (c) provides "the developers shall be entitled to put the CI. 24 (c) provides "the developers shall be entitled to put the purchaser of the of the developer's area, in possession of the respective ion of the respective premises as and & when occupation s and & when occupation certificate in respect of the said certificate in respect of the said
Pankaj Enterprises 22 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
new building is obtained by developers, provided ew building is obtained by developers, provided however, the however, the developer shall not handover possession of developer's area to developer shall not handover possession of developer's area to developer shall not handover possession of developer's area to anybody or allow or use the premises in the developers area on any allow or use the premises in the developers area on any allow or use the premises in the developers area on any basis whatsoever, unless and until the developers shall have offe whatsoever, unless and until the developers shall have offered whatsoever, unless and until the developers shall have offe to the owner, the owner's to the owner, the owner's area duly completed in all respect and area duly completed in all respect and contemplated herein in writing and IS days have contemplated herein in writing and IS days have elapsed.
(iv) C1. 24(A) run as 24(A) run as "Immediately upon the owners being "Immediately upon the owners being offered possession of the owner's offered possession of the owner's area, owner shall execute an area, owner shall execute an irrevocable power of authority in favour of developers e power of authority in favour of developers and/or their and/or their nominees to execute the vesting documents/declaration under nominees to execute the vesting documents/declaration under nominees to execute the vesting documents/declaration under Maharashtra Apartment Ownership act". Apartment Ownership act".
5.17 I have also gone through the details of the power of attorney I have also gone through the details of the power of attorney I have also gone through the details of the power of attorney executed by the appellant in favo by the appellant in favour of the builder and the same was ur of the builder and the same was registered on 26/06/08. 26/06/08. Broadly speaking, it turns out that power Broadly speaking, it turns out that power of attorney authorizes the of attorney authorizes the builder to do the following:-
(a) To carry ou (a) To carry out development work on the said property including development work on the said property including construction and completion of construction and completion of building (C1.2)
(b) To represent the appellant before all government/semi (b) To represent the appellant before all government/semi (b) To represent the appellant before all government/semi- government revenue, local or other government revenue, local or other bodies in relation to bodies in relation to development of the said property (C1.6) development of the said property (C1.6)
(c) To file necessary application to Municipal Corporation of To file necessary application to Municipal Corporation of To file necessary application to Municipal Corporation of Bombay, Development Contr Bombay, Development Control Board and to prepare development Board and to prepare development plan and any amendment thereto, to approach the plan and any amendment thereto, to approach the executive engineer and to obtain IOD and CC, to appoint Architect to fuifill the engineer and to obtain IOD and CC, to appoint Architect to fuifill the engineer and to obtain IOD and CC, to appoint Architect to fuifill the condition of commencement certificate (cl.9). commencement certificate (cl.9).
Pankaj Enterprises 23 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
(d) To obtain the necessary FSI, right by way (d) To obtain the necessary FSI, right by way. TDR of other property . TDR of other property and utilise for the purpose and utilise for the purpose of construction (cl. 12).
(e) To represent before the Ministry of Commerce and other ) To represent before the Ministry of Commerce and other ) To represent before the Ministry of Commerce and other departments of Industrial Policy & departments of Industrial Policy & Promotion (Cl.13).
(f) To apply to Municipality for water supply, city survey ) To apply to Municipality for water supply, city survey officer and officer and to obtain the required to obtain the required sanctions and confirmation under sanctions and confirmation under Environment Act, pollution Act, Aviation authority. Environment Act, pollution Act, Aviation authority.
(g) Under C1.31, the developer is allowed to sale on ownership basis (g) Under C1.31, the developer is allowed to sale on ownership basis (g) Under C1.31, the developer is allowed to sale on ownership basis or to grant lease on leave or to grant lease on leave & license, out of his potion of construc & license, out of his potion of construction area, subject to conditions under the development area, subject to conditions under the development agreement agreement.
5.18 It is clear from above facts and judicial decisions that in case It is clear from above facts and judicial decisions that in case It is clear from above facts and judicial decisions that in case of development agreement, if the developer is merely allowed to development agreement, if the developer is merely allowed to development agreement, if the developer is merely allowed to enter the property enter the property for the construction of the building, it cannot be it cannot be deemed to be a possession for the deemed to be a possession for the purposes of Section 2(47) r.w.s. purposes of Section 2(47) r.w.s. 53A of Transfer of Property Act. The terms and 53A of Transfer of Property Act. The terms and conditions of the conditions of the development agreement between the appellant and M/s. Vidhi development agreement between the appellant and M/s. Vidhi development agreement between the appellant and M/s. Vidhi Enterprises clearly indicate that only a permissive Enterprises clearly indicate that only a permissive possession for the possession for the construction work was handed over to the developer, the developer work was handed over to the developer, the developer work was handed over to the developer, the developer was never enjoying rights of was never enjoying rights of ownership over the land as is evident ownership over the land as is evident from the fact that the developer is not from the fact that the developer is not entitled to transfer/sale his entitled to transfer/sale his portion of developed area. It can portion of developed area. It can be safely held that possession of possession of land was not handed over to the bu land was not handed over to the builder in F.Y. 2008 lder in F.Y. 2008-09. The construction was completed in terms of develop construction was completed in terms of development agreement ment agreement only in F.Y.2011 only in F.Y.2011-12 and the exchange of property between the 12 and the exchange of property between the appellant and the developer took appellant and the developer took place in that financial year 2011 in that financial year 2011- 12. The sum and substance can be summarized in 12. The sum and substance can be summarized in following words: following words:-
Pankaj Enterprises 24 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
(a) That the capital assets was converted into stock (a) That the capital assets was converted into stock-in in-trade on 01/04/07
(b) That the development agreement was entered into on 17/04/07 (b) That the development agreement was entered into on 17/04/07 (b) That the development agreement was entered into on 17/04/07 and development agreeme development agreement was registered on 26.06.08.
(c) That neither provi (c) That neither provision of development agreement n sion of development agreement nor of the power of attorney has given right of possession to the developer. attorney has given right of possession to the developer. attorney has given right of possession to the developer. The builder is only The builder is only entitled to enter and do all the necessary entitled to enter and do all the necessary construction.
(d) The right to (d) The right to enter for necessary construction only amount to enter for necessary construction only amount to permissive possession. possession.
(e) The appellant's interest in plot of land is exchanged for (e) The appellant's interest in plot of land is exchanged for (e) The appellant's interest in plot of land is exchanged for constructed area in constructed area in the AY 2012-13.
5.19 After considering the totality of facts, rival submissions, the After considering the totality of facts, rival submissions, the After considering the totality of facts, rival submissions, the applicable law applicable law and on the basis of discussion mentioned above, I on the basis of discussion mentioned above, I find force in the argument of the find force in the argument of the appellant. I am of the clear opinion appellant. I am of the clear opinion that no income accrues in A.Y. 2009 that no income accrues in A.Y. 2009-10 as there is no transfer there is no transfer within the meaning of Section 2(47) of I.T within the meaning of Section 2(47) of I.T Act as no possession Act as no possession has been given in terms of Section 53A of Transfer of Property Act. The ven in terms of Section 53A of Transfer of Property Act. The ven in terms of Section 53A of Transfer of Property Act. The appellant received 42% of the total area constructed by builder in received 42% of the total area constructed by builder in received 42% of the total area constructed by builder in financial year relevant to financial year relevant to AY. 2012-13 i.e. the year in which 13 i.e. the year in which exchange took place. Therefore, capital gains exchange took place. Therefore, capital gains cannot be taxed in cannot be taxed in A.Y. 2009-10 and has to be taxed in A.Y. 2012 10 and has to be taxed in A.Y. 2012-13. In terms of 13. In terms of these findings, Ground Nos. 1 to 3 are hereby allowed. findings, Ground Nos. 1 to 3 are hereby allowed.”
Pankaj Enterprises 25 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
We have heard rival submission of the parties on the issue in have heard rival submission of the parties on the issue in have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The assessee dispute and perused the relevant material on record. The assessee dispute and perused the relevant material on record. The assessee has by way of registered deed of conveyanc way of registered deed of conveyance, which was which was entered into in FY 2008-09 (i.e. (i.e. corresponding to assessment corresponding to assessment year 2009-10), for developing its plot of land into an industrial estate as per the for developing its plot of land into an industrial estate as per the for developing its plot of land into an industrial estate as per the maps/floor approved by the competent authority. maps/floor approved by the competent authority. maps/floor approved by the competent authority. The said industrial estate got constructed in financial year corresponding to industrial estate got constructed in financial year corresponding to industrial estate got constructed in financial year corresponding to assessment year 2012 assessment year 2012-13 i.e. the year under consideration. The 13 i.e. the year under consideration. The dispute between the parties is regarding the year of taxability of dispute between the parties is regarding the year of taxability of dispute between the parties is regarding the year of taxability of capital gain. According to the assessee it is li capital gain. According to the assessee it is liable to be taxed in able to be taxed in assessment year 2012 assessment year 2012-13, but according to the Revenue Revenue the capital gain is liable to be taxed in assessment year 2009 gain is liable to be taxed in assessment year 2009-10. According to 10. According to the Assessing Officer transfer of development right took place under transfer of development right took place under section 2 (47) of the Act Act on the date of development agreement date of development agreement. The department relied upon clause No. 9B, 22(b) and clause no.26 of the department relied upon clause No. 9B, 22(b) and clause no.26 of the department relied upon clause No. 9B, 22(b) and clause no.26 of the development agreement. development agreement. The said clauses of the agreement have uses of the agreement have
Pankaj Enterprises 26 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
been reproduced by the AO in his order, which we have extracted been reproduced by the AO in his order, which we have extracted been reproduced by the AO in his order, which we have extracted above. It is the contention It is the contention of the revenue that while that while part performance of the agreement, possession was handed over to the performance of the agreement, possession was handed over to the performance of the agreement, possession was handed over to the developer and therefore it amounted to tran developer and therefore it amounted to transfer in terms of section sfer in terms of section 2(47)(4) of the Act. Before us, it is the contention of the Before us, it is the contention of the Before us, it is the contention of the Ld. Counsel of the assessee that t only permissible ingress was provided for only permissible ingress was provided for carrying out construction and no ownership rights were transferred carrying out construction and no ownership rights were transferred carrying out construction and no ownership rights were transferred under the development agreement dated 02/04/2006, which was under the development agreement dated 02/04/2006, which was under the development agreement dated 02/04/2006, which was registered on 26/06/2008. The assessee relied on the clauses registered on 26/06/2008. The assessee relied on the clauses registered on 26/06/2008. The assessee relied on the clauses quoted by the Ld. CIT(A) in para 5.16 of the impugned order. It was by the Ld. CIT(A) in para 5.16 of the impugned order. It was by the Ld. CIT(A) in para 5.16 of the impugned order. It was further submitted that in terms of development agreement, a further submitted that in terms of development agreement, a further submitted that in terms of development agreement, a general power of attorney was general power of attorney was executed which was also registered which was also registered on 26/06/2008 and relevant clauses which have been referred by on 26/06/2008 and relevant clauses which have been referred by on 26/06/2008 and relevant clauses which have been referred by the Ld. CIT(A) in para 5.17 of the impugned order CIT(A) in para 5.17 of the impugned order, which we have , which we have extracted above.
Pankaj Enterprises 27 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
10.1 The Ld. counsel in support of the proposition that mere ingress in support of the proposition that mere ingress being allowed for carrying development on plot of land is not being allowed for carrying development on plot of land is not being allowed for carrying development on plot of land is not handing over possession possession within the meaning of section 2(47) of the tion 2(47) of the Act, and hence, no transfer no transfer, relied on following decisions: relied on following decisions:
CS Atwal Vs CIT 378 ITR 244 ( P &H) CS Atwal Vs CIT 378 ITR 244 ( P &H) 2. Binjusari Properties P Ltd. Vs ACIT 164 TTJ 417 (Hyedearbad) Binjusari Properties P Ltd. Vs ACIT 164 TTJ 417 (Hyedearbad) Binjusari Properties P Ltd. Vs ACIT 164 TTJ 417 (Hyedearbad) 3. Dilip Anand Vazirani Vs ITO 167 TTJ 194(Bom) Dilip Anand Vazirani Vs ITO 167 TTJ 194(Bom) Dilip Anand Vazirani Vs ITO 167 TTJ 194(Bom) 4. Shri Sadia Shaikh Tax Appeal No. 11 Shri Sadia Shaikh Tax Appeal No. 11 of 2013 dated 02/12/13 ( of 2013 dated 02/12/13 ( Karnataka) Karnataka) 5. Balveer Singh Maini 398 ITR 531 (SC) Balveer Singh Maini 398 ITR 531 (SC) 6. Faradin Khan 304 CTR 299 (Bom) Faradin Khan 304 CTR 299 (Bom) 10.2 In the case of CS Atwal (supra) CS Atwal (supra), Hon’ble High Court observed , Hon’ble High Court observed legislative intent behind incorporating clause (v) to section 2(47) of legislative intent behind incorporating clause (v) to section 2(47) of legislative intent behind incorporating clause (v) to section 2(47) of the Act. The relevant part of the observation of the Hon’ble High . The relevant part of the observation of the Hon’ble High . The relevant part of the observation of the Hon’ble High Court is reproduced as under: reproduced as under:
“The legislative intent behind incorporating clause (v) to The legislative intent behind incorporating clause (v) to Section The legislative intent behind incorporating clause (v) to 2(47) of the Act from assessment year 1988 of the Act from assessment year 1988-89 as discernible from discernible from CBDT circular is to embrace within its ambit those transactions of CBDT circular is to embrace within its ambit those transactions of CBDT circular is to embrace within its ambit those transactions of sale of property where assessee enters into agreements for sale of property where assessee enters into agreements for sale of property where assessee enters into agreements for developing properties with builders and the seller confers the rights developing properties with builders and the seller confers the rights developing properties with builders and the seller confers the rights and and and privileges privileges privileges of of of ownership ownership ownership to to to the the the buyer buyer buyer w without w
Pankaj Enterprises 28 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
executing/registering a formal conveyance deed in order to avoid executing/registering a formal conveyance deed in order to avoid executing/registering a formal conveyance deed in order to avoid capital gains tax. In order to thwart such tendencies, transactions capital gains tax. In order to thwart such tendencies, transactions capital gains tax. In order to thwart such tendencies, transactions where the possession is given or allowed to be retained in part where the possession is given or allowed to be retained in part where the possession is given or allowed to be retained in part performance of contract of the nature referred to in performance of contract of the nature referred to in Section 53A Section 53A of 1882 Act is held to be "transfer" by fiction of law though under 1882 Act is held to be "transfer" by fiction of law though under 1882 Act is held to be "transfer" by fiction of law though under general law it would not be considered to be "transfer". In other general law it would not be considered to be "transfer". In other general law it would not be considered to be "transfer". In other words, by deeming fiction, "transfer" is assigned extended words, by deeming fiction, "transfer" is assigned extended words, by deeming fiction, "transfer" is assigned extended meaning for taxation purposes by incorporating and including that where for taxation purposes by incorporating and including that where for taxation purposes by incorporating and including that where possession of any immovable property is taken or GURBAX SINGH possession of any immovable property is taken or GURBAX SINGH possession of any immovable property is taken or GURBAX SINGH 2015.07.23 15:30 I attest to the accuracy and integrity of this 2015.07.23 15:30 I attest to the accuracy and integrity of this 2015.07.23 15:30 I attest to the accuracy and integrity of this document High Court Chandigarh document High Court Chandigarh retained in part performan retained in part performance of a contract of the nature referred to in contract of the nature referred to in Section 53A of 1882 Act. of 1882 Act.”
10.3 The Tribunal in the case of in the case of Binusaria properties Private Binusaria properties Private
Limited (supra), held as under: , held as under:
“In the present case, admittedly, what has been executed by the In the present case, admittedly, what has been executed by the In the present case, admittedly, what has been executed by the assessee is a ‘Development Agreement assessee is a ‘Development Agreement-cum-General Power of General Power of Attorney’. A reading of the said agreement indicates that what was Attorney’. A reading of the said agreement indicates that what was Attorney’. A reading of the said agreement indicates that what was handed over by the assessee to the developer is only a ‘permissive handed over by the assessee to the developer is only a ‘permissive handed over by the assessee to the developer is only a ‘permissive possession’. Clause 5 of the said agreement dated 2nd February, ossession’. Clause 5 of the said agreement dated 2nd February, ossession’. Clause 5 of the said agreement dated 2nd February, 2006, on page 3 thereof, specifically provides that ‘First party on 2006, on page 3 thereof, specifically provides that ‘First party on 2006, on page 3 thereof, specifically provides that ‘First party on signing of this agreement has permitted the developer to develop signing of this agreement has permitted the developer to develop signing of this agreement has permitted the developer to develop the scheduled land’ (emphasis added). As per Clause 9 of the the scheduled land’ (emphasis added). As per Clause 9 of the the scheduled land’ (emphasis added). As per Clause 9 of the said agreement, consideration receivable by the assessee from the agreement, consideration receivable by the assessee from the agreement, consideration receivable by the assessee from the developer is ‘38% of the residential part of the developed area……’ developer is ‘38% of the residential part of the developed area……’ developer is ‘38% of the residential part of the developed area……’ (which was later reduced to 33%, by virtue of a supplementary (which was later reduced to 33%, by virtue of a supplementary (which was later reduced to 33%, by virtue of a supplementary agreement executed on 18.10.2007). That being so, it is only agreement executed on 18.10.2007). That being so, it is only agreement executed on 18.10.2007). That being so, it is only upon
Pankaj Enterprises 29 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
receipt of such consideration in the form of developed area by the receipt of such consideration in the form of developed area by the receipt of such consideration in the form of developed area by the assessee in terms of the development agreement, the capital gains assessee in terms of the development agreement, the capital gains assessee in terms of the development agreement, the capital gains becomes assessable in the hands of the assessee. We are supported becomes assessable in the hands of the assessee. We are supported becomes assessable in the hands of the assessee. We are supported in this behalf by the decision of the Third Member in this behalf by the decision of the Third Member Bench of the Bench of the Tribunal in the case of Vijaya Productions Pvt. Ltd. V/s. Addl. CIT Tribunal in the case of Vijaya Productions Pvt. Ltd. V/s. Addl. CIT Tribunal in the case of Vijaya Productions Pvt. Ltd. V/s. Addl. CIT (134 ITD 19).” .”
10.4 In the case of Dilip Anand Vazirani (supra) Dilip Anand Vazirani (supra), the , the Tribunal held
as under:
"Thus, ITAT had noticed that the Assessee had received advance "Thus, ITAT had noticed that the Assessee had received advance "Thus, ITAT had noticed that the Assessee had received advance amounts much earlie amounts much earlier to the execution of development agreement, execution of development agreement, probably on the strength of the MOU. The property was probably on the strength of the MOU. The property was encumbered encumbered with tenancy rights of many persons and the release of tenancy with tenancy rights of many persons and the release of tenancy with tenancy rights of many persons and the release of tenancy right was completed only in January, 2005. Further, the approval completed only in January, 2005. Further, the approval completed only in January, 2005. Further, the approval from municipal cor from municipal corporation was also got delayed and the plans delayed and the plans were revised subsequent to AY 2000 were revised subsequent to AY 2000-01. The surrounding 01. The surrounding circumstances circumstances show that the developer does not started the work of show that the developer does not started the work of development in the year relevant to AY development in the year relevant to AY 2001-02. As per the terms of 02. As per the terms of development agreement, development agreement, the Assessee had given only license to the Assessee had given only license to enter into the property, meaning thereby the possession was not enter into the property, meaning thereby the possession was not enter into the property, meaning thereby the possession was not given in the year relevant to given in the year relevant to AY 2001-02. In view of the peculiar 02. In view of the peculiar facts narrated above, the Assessee had contended that the facts narrated above, the Assessee had contended that the facts narrated above, the Assessee had contended that the tax authorities was not corr authorities was not correct in holding that the transfer of property ect in holding that the transfer of property took place in the year took place in the year relevant to AY 2001-02. The various case laws 02. The various case laws discussed above also support the view taken by discussed above also support the view taken by the Assessee. Hence, the Assessee. Hence, TAT agreed with the contentions of the Assessee in this regard. TAT agreed with the contentions of the Assessee in this regard. TAT agreed with the contentions of the Assessee in this regard.
Pankaj Enterprises 30 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
Accordingly, ITAT hold that the transfer of property does not took y, ITAT hold that the transfer of property does not took y, ITAT hold that the transfer of property does not took place on the date of executionof development agreement". place on the date of executionof development agreement". place on the date of executionof development agreement". 10.5 In the case of Saida Sh Saida Shaikh (supra), the Hon’ble High court , the Hon’ble High court observed as under:
"'It can thus be seen that Commissioner of Income Tax "'It can thus be seen that Commissioner of Income Tax (Appeals) as (Appeals) as well as the learned Tribunal well as the learned Tribunal upon basis of the factual material upon basis of the factual material placed before it and upon interpretation of the agreement placed before it and upon interpretation of the agreement placed before it and upon interpretation of the agreement entered between the assessee and the developer has found that the assessee between the assessee and the developer has found that the assessee between the assessee and the developer has found that the assessee was liable to pay was liable to pay capital gain in the year 2008-09, in as much as 09, in as much as there was no possession handed over to the there was no possession handed over to the developer under Section developer under Section 53A of the Transfer of Property Act in the assessment year 2003 53A of the Transfer of Property Act in the assessment year 2003 53A of the Transfer of Property Act in the assessment year 2003- 04." 10.6 In the case of Fardin Khan (supra) Fardin Khan (supra), where the Hon’ble High , where the Hon’ble High Court has also consider Court has also considered Balveer Singh Maini (supra) ngh Maini (supra), the assessee entered into development agreement with Godrej assessee entered into development agreement with Godrej assessee entered into development agreement with Godrej properties Ltd. on 20 on 20th April, 2007 and paid ₹13.75 crore as deposit, 13.75 crore as deposit, and further to receive and further to receive ₹550,000,030 percent of the sale proceeds. 550,000,030 percent of the sale proceeds. This agreement was not registered This agreement was not registered and a general power of attorney ral power of attorney was given. The possession of property was given to developer for a possession of property was given to developer for a possession of property was given to developer for a specific purpose to develop the property. The Hon’ble High Court, specific purpose to develop the property. The Hon’ble High Court, specific purpose to develop the property. The Hon’ble High Court,
Pankaj Enterprises 31 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
dismissing the appeal of the dismissing the appeal of the Revenue held that possession possession of the property was given to the dev property was given to the developer for a specific purpose to eloper for a specific purpose to develop the property. develop the property. The amount received was shown as deposit. amount received was shown as deposit. The Hon’ble High Court observed that the agreement makes it clear The Hon’ble High Court observed that the agreement makes it clear The Hon’ble High Court observed that the agreement makes it clear that Godrej properties Ltd that Godrej properties Ltd. has been granted license to enter upon has been granted license to enter upon and develop the property and develop the property and possession of the land continued with and possession of the land continued with the assessee. Further the assessee. Further, the development agreement provided that the development agreement provided that nothing contained in the agreement shall be construed as grant of nothing contained in the agreement shall be construed as grant of nothing contained in the agreement shall be construed as grant of possession in part performance of the agreement under section 2 possession in part performance of the agreement under section 2 possession in part performance of the agreement under section 2 (47)(v) and 2(47)(vi) (47)(v) and 2(47)(vi) of the Act. The Hon’ble High Court held that . The Hon’ble High Court held that tax ability of the capital gain will be examine tax ability of the capital gain will be examined the year in which the the year in which the transfer of the land as a stock in trade has taken place. transfer of the land as a stock in trade has taken place. transfer of the land as a stock in trade has taken place.
10.7 Thus the dispute precipitated Thus the dispute precipitated before us is before us is to whether possession of plot of of plot of land was handed over to the developer within was handed over to the developer within the meaning of section 53A of the the meaning of section 53A of the Transfer of Property Act, of Property Act, at the
Pankaj Enterprises 32 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
time of entering the DA or possession was handed over at the time time of entering the DA or possession was handed over at the time time of entering the DA or possession was handed over at the time of completion of construction of completion of construction of the property.
10.8 The clause 2 of the dev clause 2 of the development agreement provided that elopment agreement provided that subject to retention of FSI retained by the owner, the owner subject to retention of FSI retained by the owner, the owner subject to retention of FSI retained by the owner, the owner appoint developer for construction and development of the said plot. The developer for construction and development of the said plot. The developer for construction and development of the said plot. The clause 5 provides for consideration which will be 42% constructed for consideration which will be 42% constructed for consideration which will be 42% constructed area, including loading of TDR, in lieu of constructed area retained area, including loading of TDR, in lieu of constructed area retained area, including loading of TDR, in lieu of constructed area retained by the developer, which will be 58% along with 58% land area. by the developer, which will be 58% along with 58% land area. by the developer, which will be 58% along with 58% land area. Further, clause 14(1) has provided that “developer shall be deemed clause 14(1) has provided that “developer shall be deemed clause 14(1) has provided that “developer shall be deemed to have been allowed to enter upon the said property developer for een allowed to enter upon the said property developer for een allowed to enter upon the said property developer for the purpose of the construction o the purpose of the construction of the said new building thereon” f the said new building thereon”. The developer was specifically allowed to constru The developer was specifically allowed to construct a temporary site ct a temporary site office only. Further, clause 24C provided that developer shall clause 24C provided that developer shall not give possession to any of the party to whom give possession to any of the party to whom he allotted any ar e allotted any areas out of the developer shares out of the developer shares, without first giving possession of , without first giving possession of owners area to owners and the developer was allowed to give owners area to owners and the developer was allowed to give owners area to owners and the developer was allowed to give
Pankaj Enterprises 33 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
possession only after 15 days thereof . possession only after 15 days thereof . Under the power of au Under the power of authority also authorisation was given only for facilitation of the construction also authorisation was given only for facilitation of the construction also authorisation was given only for facilitation of the construction activity to the developer and no authority was given to exercise activity to the developer and no authority was given to exercise activity to the developer and no authority was given to exercise rights as owner of the land. s as owner of the land.
10.9 In view of the various clauses of the development agreement, it In view of the various clauses of the development agreement, it In view of the various clauses of the development agreement, it transpires that possession possession was given merely for carrying out was given merely for carrying out construction work on the plot of land construction work on the plot of land i.e. the permissible possession the permissible possession and the developer was not authorised to exercise the right as owner and the developer was not authorised to exercise the right as owner and the developer was not authorised to exercise the right as owner thereof and enjoy such plot of land without interference on the part thereof and enjoy such plot of land without interference on the part thereof and enjoy such plot of land without interference on the part of the owner. In such circumstances In such circumstances, provisions of section 2(47)(4) provisions of section 2(47)(4) are not attracted in the case of the assessee. are not attracted in the case of the assessee.
10.10 Further we find that in the case of Further we find that in the case of Infinity Infotech Infinity Infotech Parks Ltd 407 ITR 137( 137(Cal), also possession of the land was given , also possession of the land was given to the developer for construction, wherein the agreement envisaged r for construction, wherein the agreement envisaged r for construction, wherein the agreement envisaged that developer would construct upon the land and in lieu of such that developer would construct upon the land and in lieu of such that developer would construct upon the land and in lieu of such work undertaken by the developer, the developer would be entitled work undertaken by the developer, the developer would be entitled work undertaken by the developer, the developer would be entitled
Pankaj Enterprises 34 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
to retain 61% of the land to retain 61% of the land and the proportionate constructed area and the proportionate constructed area while the balance 39% of the land together with construction e balance 39% of the land together with construction e balance 39% of the land together with construction thereon would belong to the assessee i.e thereon would belong to the assessee i.e. owner of land. In the facts owner of land. In the facts of the above case, Hon’ble High Court held as under: of the above case, Hon’ble High Court held as under:
“There could be rare situations where the transfer may be There could be rare situations where the transfer may be There could be rare situations where the transfer may be simultaneous with the simultaneous with the execution of the agreement, but where the execution of the agreement, but where the owner retains any right in the constructed area that may come up owner retains any right in the constructed area that may come up owner retains any right in the constructed area that may come up in future, it would scarcely be a case of a transfer taking place at in future, it would scarcely be a case of a transfer taking place at in future, it would scarcely be a case of a transfer taking place at the time of the execution of the agreement. The matter may be the time of the execution of the agreement. The matter may be the time of the execution of the agreement. The matter may be viewed from anothe viewed from another perspective. Merely because de facto r perspective. Merely because de facto possession of the land is made over to a mason or a civil engineer possession of the land is made over to a mason or a civil engineer possession of the land is made over to a mason or a civil engineer for the purpose of making a construction thereon, it would not for the purpose of making a construction thereon, it would not for the purpose of making a construction thereon, it would not imply that possession is made over to the mason or the civil imply that possession is made over to the mason or the civil imply that possession is made over to the mason or the civil engineer for their enjoyme engineer for their enjoyment of the property. Such persons would be nt of the property. Such persons would be in de facto possession under the de jure possession of the owner and possession under the de jure possession of the owner and possession under the de jure possession of the owner and only for the purpose of undertaking the construction at the land in only for the purpose of undertaking the construction at the land in only for the purpose of undertaking the construction at the land in question.
Till such time that the construction came up and 39% of the Till such time that the construction came up and 39% of the Till such time that the construction came up and 39% of the constructed area was made over to the assessee, it could not be said cted area was made over to the assessee, it could not be said cted area was made over to the assessee, it could not be said that possession of the balance land, in the sense that the expression that possession of the balance land, in the sense that the expression that possession of the balance land, in the sense that the expression carries in Section 2(47)(v) Section 2(47)(v) of the Act, had been made over by the of the Act, had been made over by the assessee to the developer. ee to the developer.
It is true that the developer could have retained possession of the It is true that the developer could have retained possession of the It is true that the developer could have retained possession of the land and declined to return possession thereof to the assessee since land and declined to return possession thereof to the assessee since land and declined to return possession thereof to the assessee since
Pankaj Enterprises 35 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
the developer was in physical control thereof. But such resistance of the developer was in physical control thereof. But such resistance of the developer was in physical control thereof. But such resistance of the developer would not have the developer would not have been protected under Section 53A Section 53A of the Act of 1882. It was only after the apportionment of the areas the Act of 1882. It was only after the apportionment of the areas the Act of 1882. It was only after the apportionment of the areas upon the construction on the land being completed that the upon the construction on the land being completed that the upon the construction on the land being completed that the developer could have rightfully retained po developer could have rightfully retained possession of the ssession of the developer's 61% share and resisted dispossession by discharging his developer's 61% share and resisted dispossession by discharging his developer's 61% share and resisted dispossession by discharging his obligation under the agreement and seeking refuge in terms obligation under the agreement and seeking refuge in terms obligation under the agreement and seeking refuge in terms of Section 53A Section 53A of the Act of 1882 despite the formal conveyanc of the Act of 1882 despite the formal conveyance pertaining to the developer's entitlement not having being executed. pertaining to the developer's entitlement not having being executed. pertaining to the developer's entitlement not having being executed. In any view of the matter, the right of the developer to retain In any view of the matter, the right of the developer to retain In any view of the matter, the right of the developer to retain possession and protect such possession under possession and protect such possession under Section 53A Section 53A of the Act of 1882 could never have arisen prior to the construction being 1882 could never have arisen prior to the construction being 1882 could never have arisen prior to the construction being completed and the apportionment effected. completed and the apportionment effected.” 10.11 Further we find that Hon’ble Supreme Court in the case of we find that Hon’ble Supreme Court in the case of we find that Hon’ble Supreme Court in the case of Seshasayee Steel (P P) Ltd. 115 Taxman.com 5 (SC) 115 Taxman.com 5 (SC) considered a development agreement gran development agreement granting permission to start advertising, ting permission to start advertising, selling and construction and permitted to execu truction and permitted to execute sale agreements te sale agreements to developer. The Hon’ble court he to developer. The Hon’ble court held that such permission is not ld that such permission is not possession under section 53A of the transfer of property under section 53A of the transfer of property Act. In para under section 53A of the transfer of property 14 the Hon’ble court held that “ court held that “possession within meaning of possession within meaning of section 53A, which is a legal concept and which denotes control over section 53A, which is a legal concept and which denotes control over section 53A, which is a legal concept and which denotes control over the land and not actual physical occupation of the land. This being the land and not actual physical occupation of the land. This being the land and not actual physical occupation of the land. This being
Pankaj Enterprises 36 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
the case, the section 53 of the the case, the section 53 of the Transfer of Property Act Transfer of Property Act cannot possibly be attracted. be attracted.
10.12 Respectfully following the finding of the Hon’ble Supreme Respectfully following the finding of the Hon’ble Supreme Respectfully following the finding of the Hon’ble Supreme Court and other High Court and other High Court, we hold that the capital asset of the the capital asset of the assessee cannot be treated as transfer assessee cannot be treated as transferred under section 2(47)(4) of under section 2(47)(4) of the Act read with section 53A of the read with section 53A of the Transfer of Property Act er of Property Act in assessment year 2009 assessment year 2009-10. We do not find any error in the finding of 10. We do not find any error in the finding of the Ld. CIT(A) on the issue in dispute and accordingly the Ld. CIT(A) on the issue in dispute and accordingly the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same as far as the year of taxability of capital gain is concerned. the same as far as the year of taxability of capital gain is concerned. the same as far as the year of taxability of capital gain is concerned. The ground no. 1 of the appe The ground no. 1 of the appeal of the Revenue is accordingly al of the Revenue is accordingly dismissed.
Now we come to the second issue of quantum of the capital Now we come to the second issue of quantum of the capital Now we come to the second issue of quantum of the capital gain to be taxed in the hand of the assessee gain to be taxed in the hand of the assessee, which has been raised , which has been raised by the revenue in ground No. by the revenue in ground No. 2 and 3 of the appeal as well as raised of the appeal as well as raised by the assessee in ground No. see in ground No. 1 of its appeal.
Pankaj Enterprises 37 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
The assessee in its computation of long The assessee in its computation of long-term capital gain has term capital gain has treated the consideration received in the form of constructed area to treated the consideration received in the form of constructed area to treated the consideration received in the form of constructed area to the extent relatable to loading of TDR a nt relatable to loading of TDR as not taxable. The s not taxable. The Ld. Assessing Officer however considered it to be a taxable item. The Ld. however considered it to be a taxable item. The Ld. however considered it to be a taxable item. The Ld. CIT(A) in para 6.8 of the impugned order following the decision of 6.8 of the impugned order following the decision of 6.8 of the impugned order following the decision of the Tribunal in the case of Voltas Ltd (supra) has held that in the case of Voltas Ltd (supra) has held that in the case of Voltas Ltd (supra) has held that provisions of section 50C are not applicable on transfer of provisions of section 50C are not applicable on transfer of provisions of section 50C are not applicable on transfer of development rights. The said finding of the Ld CIT(A) is reproduced ts. The said finding of the Ld CIT(A) is reproduced ts. The said finding of the Ld CIT(A) is reproduced as under :
“6.8 Recently the Hon'ble ITAT in the Recently the Hon'ble ITAT in the case of Voltas Ltd. ITA case of Voltas Ltd. ITA No.5330/Mum/2009 ITA No.5331 of 2009 vide dated 16 No.5330/Mum/2009 ITA No.5331 of 2009 vide dated 16-09 09-2016 is held that Section 50C be applicable to a transfer by assessee of Section 50C be applicable to a transfer by assessee of Section 50C be applicable to a transfer by assessee of capital assets being "land or ital assets being "land or building" or both. Capital assets building" or both. Capital assets transferred by assessee being development rights transferred by assessee being development rights "in land" and "not "in land" and "not the land", the provisions of Section 50C is inapplicable for said the land", the provisions of Section 50C is inapplicable for said the land", the provisions of Section 50C is inapplicable for said conclusion. Reliance has been placed on Section 269UA by Hon' conclusion. Reliance has been placed on Section 269UA by Hon' conclusion. Reliance has been placed on Section 269UA by Hon'ble ITAT. Under the said provisions "rights in land and building" was the said provisions "rights in land and building" was the said provisions "rights in land and building" was specifically included, as such, specifically included, as such, "right in land and building" have been "right in land and building" have been cleariy understood and treated cleariy understood and treated as independent of "land and independent of "land and building". The Tribunal finally held that "rights in lan building". The Tribunal finally held that "rights in land or d or building" will not be covered u/s.50C. will not be covered u/s.50C.”
Pankaj Enterprises 38 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
12.1 Further in para, , Para 6.9 of the impugned order Para 6.9 of the impugned order, the Ld. CIT(A) has held the consideration corresponding to allowing loading of TDR the consideration corresponding to allowing loading of TDR the consideration corresponding to allowing loading of TDR as not taxable. The relevant finding of the Ld. CIT(A) is reproduced s not taxable. The relevant finding of the Ld. CIT(A) is reproduced s not taxable. The relevant finding of the Ld. CIT(A) is reproduced as under:
“6.9 After considering the totality of facts, rival submissions, the After considering the totality of facts, rival submissions, the After considering the totality of facts, rival submissions, the applicable law applicable law and on the basis of discussion mentioned above, I and on the basis of discussion mentioned above, I find force in the argument of the find force in the argument of the appellant and draw strength from appellant and draw strength from the various decision given by the judicial High the various decision given by the judicial High Court especially Court especially Bombay High Court decision in the case of Sambhaji Co-operative Bombay High Court decision in the case of Sambhaji Co Bombay High Court decision in the case of Sambhaji Co Housing Ltd and decision of Mumbai Tribunal ir the caseof Voltas Housing Ltd and decision of Mumbai Tribunal ir the caseof Voltas Housing Ltd and decision of Mumbai Tribunal ir the caseof Voltas Ltd. ITA No.5330/Mum/2009 ITA No.5331 of 2009 on identical No.5330/Mum/2009 ITA No.5331 of 2009 on identical No.5330/Mum/2009 ITA No.5331 of 2009 on identical facts. The provisions of facts. The provisions of section 50C are deeming provisions. It is ovisions. It is settled law and well accepted rule of settled law and well accepted rule of interpretation that deeming interpretation that deeming provisions are to be construed strictly. Thus, while provisions are to be construed strictly. Thus, while interpreting interpreting deemirg provisions neither any words can be added nor deleted deemirg provisions neither any words can be added nor deleted deemirg provisions neither any words can be added nor deleted from language used expressly. In view of the a language used expressly. In view of the above referred decision bove referred decision of jurisdictional of jurisdictional High Court, I hold that consideration received in High Court, I hold that consideration received in the form of constructed area to the the form of constructed area to the extent relatable to loading extent relatable to loading TDR is not taxable.” ” 12.2 The amount of full value of consideration has been taken by the The amount of full value of consideration has been taken by the The amount of full value of consideration has been taken by the Assessing Officer in assessment year 2012 in assessment year 2012-13 i.e. year under 13 i.e. year under consideration, at registered agreement value by at registered agreement value by at registered agreement value by stamp value
Pankaj Enterprises 39 ITA NO. 3773, 4875 & 4876/M/2017, & Ors ITA NO. 3773, 4875 &
authorities at ₹18,38, 18,38,53,000/-. Subsequently, the Assessing Officer Assessing Officer in assessment year 2009 in assessment year 2009-10 referred the matter to the 10 referred the matter to the Ld. DVO and on the basis of his valuation report full value of consideration has on the basis of his valuation report full value of consideration has on the basis of his valuation report full value of consideration has been taken at ₹10,01, 10,01,28,000/- as per valuation report dated luation report dated 29/01/2016, on substantive basis. 29/01/2016, on substantive basis.
Before the Ld. CIT(A) Before the Ld. CIT(A), the assessee contested for taking 42% of , the assessee contested for taking 42% of the value of the constructed area for determination of cost of e constructed area for determination of cost of e constructed area for determination of cost of consideration. The assessee relied on various decisions. After consideration. The assessee relied on various decisions. After consideration. The assessee relied on various decisions. After considering the decisions, the Ld. CIT(A) determined full value of considering the decisions, the Ld. CIT(A) determined full value of considering the decisions, the Ld. CIT(A) determined full value of consideration as 42% of the cost of construction of the area consideration as 42% of the cost of construction of the area consideration as 42% of the cost of construction of the area exchanged. The Ld. CIT(A) observed that cost of construction on the . CIT(A) observed that cost of construction on the . CIT(A) observed that cost of construction on the basis of the valuation report of the DVO is basis of the valuation report of the DVO is ₹18,74,74, 18,74,74,699/-and therefore 42% of said amount works out to therefore 42% of said amount works out to ₹7,87,73, 7,87,73,911/-. The Ld. CIT(A) accordingly directed the assessee to compute the capital gain CIT(A) accordingly directed the assessee to compute the capital gain CIT(A) accordingly directed the assessee to compute the capital gain after excluding the consideration relatable to loading of the TDR. xcluding the consideration relatable to loading of the TDR. xcluding the consideration relatable to loading of the TDR. The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under: The relevant finding of the Ld. CIT(A) is reproduced as under:
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“7.1 The Delhi ITAT in the case of Vasavi Pratapchand vs. DCIT The Delhi ITAT in the case of Vasavi Pratapchand vs. DCIT The Delhi ITAT in the case of Vasavi Pratapchand vs. DCIT 90 TTJ has discussed the identical issue. The facts of the case are discussed the identical issue. The facts of the case are discussed the identical issue. The facts of the case are that assessee in this case that assessee in this case was owning a plot of land admeasuring was owning a plot of land admeasuring 2.85 acre in Delhi. Assessee entered into a 2.85 acre in Delhi. Assessee entered into a development agreement development agreement with the builder under which assessee got 56% of the total with the builder under which assessee got 56% of the total with the builder under which assessee got 56% of the total constructed area as his share against 44% of the land transferred. constructed area as his share against 44% of the land transferred. constructed area as his share against 44% of the land transferred. The question for The question for consideration was how the consideration for 44% consideration was how the consideration for 44% of the assessee's interest in land of the assessee's interest in land be calculated. The Bench held in be calculated. The Bench held in para 9:-
"As far as consideration part is concerned, we are of the view that "As far as consideration part is concerned, we are of the view that "As far as consideration part is concerned, we are of the view that value of 44 per cent of land was equal value of 44 per cent of land was equal to the cost of construction of cost of construction of 56 per cent built up area. The sale consideration to the seller and 56 per cent built up area. The sale consideration to the seller and 56 per cent built up area. The sale consideration to the seller and cost of acquisition to the buyer are two sides of the same coin. Both acquisition to the buyer are two sides of the same coin. Both acquisition to the buyer are two sides of the same coin. Both the parties to the agreement knew as to what the parties to the agreement knew as to what was being transferred was being transferred and what was being receive and what was being received. In the case of exchange, the price of d. In the case of exchange, the price of both the assets both the assets would be the same. So, when the assessees had would be the same. So, when the assessees had agreed to transfer 44 per cent of land, it must have kept in agreed to transfer 44 per cent of land, it must have kept in agreed to transfer 44 per cent of land, it must have kept in mind the value of construction of 56 per cent of built up area. Therefore, we value of construction of 56 per cent of built up area. Therefore, we value of construction of 56 per cent of built up area. Therefore, we are of the considered opinion sidered opinion that consideration for the transfer of that consideration for the transfer of 44 per cent land was the cost of construction of 56 per cent built up 44 per cent land was the cost of construction of 56 per cent built up 44 per cent land was the cost of construction of 56 per cent built up area which was to be incurred by the builder. This very sum would area which was to be incurred by the builder. This very sum would area which was to be incurred by the builder. This very sum would also amount to investment by assessee also amount to investment by assessee in the construction of flat in the construction of flats and, therefore, the cost of construction of th and, therefore, the cost of construction of the flats by the builder e flats by the builder would also amount to the cost of acquisition of the flats by amount to the cost of acquisition of the flats by amount to the cost of acquisition of the flats by assessees.
7.2 In case of CIT vs. Jai Trikanand In case of CIT vs. Jai Trikanand Rao - 60 SOT 0189(Mumbai). 60 SOT 0189(Mumbai). The Bombay ITAT also considered a similar issue. In this case, In this case, assessee was owning a plot of assessee was owning a plot of land and entered into a development land and entered into a development
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agreement as per which the developer was to agreement as per which the developer was to bear the cost of bear the cost of demolition of old structure and construction of the building and in demolition of old structure and construction of the building and in demolition of old structure and construction of the building and in view thereof the developer agreed to give 50% o view thereof the developer agreed to give 50% of the constructed f the constructed area in the form area in the form of flats in the building. Under development of flats in the building. Under development agreement, a interest free security agreement, a interest free security deposit was given of Rs.1 crore to deposit was given of Rs.1 crore to the assessee which was refundable after giving the assessee which was refundable after giving possession of the possession of the constructed area to the assessee on compl constructed area to the assessee on completion of the building, etion of the building, total constructed area came to Rs.2166.2 Sq. Meter out of which assessee constructed area came to Rs.2166.2 Sq. Meter out of which assessee constructed area came to Rs.2166.2 Sq. Meter out of which assessee got constructed area of Rs.1082.7 Sq. Meter in the forrn of flat. constructed area of Rs.1082.7 Sq. Meter in the forrn of flat. constructed area of Rs.1082.7 Sq. Meter in the forrn of flat. Assessee sold certain Assessee sold certain flats out of such area received. Question for flats out of such area received. Question for consideration was how to c consideration was how to compute taxable income on sale of flats taxable income on sale of flats and developmen and development agreement. The Bench held. in para 11.
"Now coming to the matter in controversy before us, as observed "Now coming to the matter in controversy before us, as observed "Now coming to the matter in controversy before us, as observed above, the 50% of the market above, the 50% of the market value of the total land in question value of the total land in question together with value of additional together with value of additional FSI, if any, on the date of FSI, if any, on the date of agreement would be deemed to be the cost of construction of the agreement would be deemed to be the cost of construction of the agreement would be deemed to be the cost of construction of the constructed ar constructed area which falls in the share of the assessee as per the the share of the assessee as per the development development development agreement. agreement. agreement. Assessee Assessee Assessee thus thus thus is is is entitled entitled entitled 10 10 10 proportionately claim deduction for cost o proportionately claim deduction for cost of construction while f construction while faxing capital gains arrived from faxing capital gains arrived from the sale of two fats."
7.3 In case of CIT vs. Khivraj Motors 380 ITF. 215(Karnataka). In In case of CIT vs. Khivraj Motors 380 ITF. 215(Karnataka). In In case of CIT vs. Khivraj Motors 380 ITF. 215(Karnataka). In this case assessee was occupying the premises as tenant, taken on assessee was occupying the premises as tenant, taken on assessee was occupying the premises as tenant, taken on lease for a long period lease for a long period and agreed to vacate in consideration of in consideration of undivided interest in property and undivided interest in property and constructed area for 65 years of constructed area for 65 years of lease under agreement, the cost of construction lease under agreement, the cost of construction was specified at was specified at Rs.800 Per Square Feet and hence consideration for Rs.22100 Rs.800 Per Square Feet and hence consideration for Rs.22100 Rs.800 Per Square Feet and hence consideration for Rs.22100 Square Feet constructed area received by as Square Feet constructed area received by assessee was taken at sessee was taken at Rs.17,68,800. The Assessing Officer, in principle, accepted the cost of The Assessing Officer, in principle, accepted the cost of The Assessing Officer, in principle, accepted the cost of
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construction as construction as consideration, but on receiving information from consideration, but on receiving information from the developer who informed to the developer who informed to have incurred the construction cost have incurred the construction cost of Rs.19,42,79,237/ of Rs.19,42,79,237/-, calculated cost of construction accordingly. construction accordingly. The court held that cost of construction as per agreement The court held that cost of construction as per agreement The court held that cost of construction as per agreement on the date of development agreement be adopted. Thus on principle, the date of development agreement be adopted. Thus on principle, the date of development agreement be adopted. Thus on principle, the High Court of Karnataka adopted consideration as cost of Court of Karnataka adopted consideration as cost of Court of Karnataka adopted consideration as cost of construction.
7.4 I have duly consi I have duly considered the judicial authorities and have no dered the judicial authorities and have no hesitation in holding that consideration under development holding that consideration under development agreement to be decided based on agreement to be decided based on cost of construction area as cost of construction area as consideration under development agreement. The consideration under development agreement. The consideration for consideration for calculation of capital gain calculation of capital gain to be computed based on cost of to be computed based on cost of construction of area received by appellant under agreement. A construction of area received by appellant under agreement. A construction of area received by appellant under agreement. A reference to the reference to the valuation report of DVO clearly reflects that cost of valuation report of DVO clearly reflects that cost of construction is at construction is at Rs.18,74,74,699/-. Hence, 42% of the cost of . Hence, 42% of the cost of construction of the area e construction of the area exchanged be adopted at Rs.7,87,73,911/ adopted at Rs.7,87,73,911/-. Accordingly, it is hel Accordingly, it is held that consideration received by appellant under development agreement is R 7,87,73,911/ under development agreement is R 7,87,73,911/-. Further, in view . Further, in view of the discussion mentioned in pa the discussion mentioned in paras 6 the consideration relatabl ras 6 the consideration relatable to loading of TDR to loading of TDR is not taxable. The assessing officer is directed to not taxable. The assessing officer is directed to calculate the capital gain calculate the capital gain accordingly. The ground is partly accordingly. The ground is partly allowed.”
Before us, the Ld. counsel Ld. counsel of the assessee submitted that the of the assessee submitted that the
assessee always retained and owned the plot of land and exchanged assessee always retained and owned the plot of land and exchanged assessee always retained and owned the plot of land and exchanged
58% of interest in 1828.80 m² plot with 42% constructed area, 58% of interest in 1828.80 m² plot with 42% constructed area, 58% of interest in 1828.80 m² plot with 42% constructed area,
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which was developed by the developer at its cost, as per terms of which was developed by the developer at its cost, as per terms of which was developed by the developer at its cost, as per terms of DA. The assessee further s DA. The assessee further submitted that it has permitted the ubmitted that it has permitted the developer to load TDR on its pre developer to load TDR on its pre-constructed building on 2785 m² constructed building on 2785 m² plot and got 42% constructed area therefore receipt of 42% plot and got 42% constructed area therefore receipt of 42% plot and got 42% constructed area therefore receipt of 42% constructed area is exchanged exchanged against 58% area of the plot and 42% against 58% area of the plot and 42% plot always belonged and conti plot always belonged and continue to belong to the assessee. nue to belong to the assessee. According to the assessee for evaluating full value of the According to the assessee for evaluating full value of the According to the assessee for evaluating full value of the consideration taxable for transfer under DA will be value of the 42% consideration taxable for transfer under DA will be value of the 42% consideration taxable for transfer under DA will be value of the 42% of the constructed area without any value of the land as land always of the constructed area without any value of the land as land always of the constructed area without any value of the land as land always belongs to the assessee. The to the assessee. The Ld. counsel of the assessee relied on the of the assessee relied on the decision of the Tribunal Tribunal, which have already been considered by the , which have already been considered by the Ld. CIT(A) in the impugned order. Ld. CIT(A) in the impugned order.
The Ld. DR on the other hand DR on the other hand submitted that full value of the submitted that full value of the consideration should be taken consideration should be taken at ₹18,74,74,699/-as that is the value as that is the value at which development rights have been transacted and value which at which development rights have been transacted and value which at which development rights have been transacted and value which
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has been taken by the stamp duty value authorities for a stamp duty has been taken by the stamp duty value authorities for a stamp duty has been taken by the stamp duty value authorities for a stamp duty purposes.
We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that as dispute and perused the relevant material on record. We find that as dispute and perused the relevant material on record. We find that as far as non-applicability of section 50 applicability of section 50C on the development right is C on the development right is concerned, the Ld. CIT(A) has followed the binding preced concerned, the Ld. CIT(A) has followed the binding preced concerned, the Ld. CIT(A) has followed the binding precedent of the Tribunal Mumbai Bench Bench and therefore we do not find any and therefore we do not find any error in the said finding of the Ld. CIT(A). Further regarding holding no the said finding of the Ld. CIT(A). Further regarding holding no the said finding of the Ld. CIT(A). Further regarding holding no capital gain arise on transfer of capital gain arise on transfer of right to permit loading of TDR right to permit loading of TDR , also the Ld. CIT(A) has followed decision of the jurisdictional High Court the Ld. CIT(A) has followed decision of the jurisdictional High Court the Ld. CIT(A) has followed decision of the jurisdictional High Court in the case of Shailja cooperative Housing Society Ltd (supra) Shailja cooperative Housing Society Ltd (supra) Shailja cooperative Housing Society Ltd (supra) in para 6.7 of the impugned order para 6.7 of the impugned order. For ready reference said Para is . For ready reference said Para is extracted as under:
“6.7 The Jurisdictional High C The Jurisdictional High Court approved the decision of ourt approved the decision of Shailaja Co-op. op. Housing Society Ltd (supra). In the said decision, the Housing Society Ltd (supra). In the said decision, the Hon'ble Bench held: Hon'ble Bench held:
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"The assessee was the owner of the land and building and continued "The assessee was the owner of the land and building and continued "The assessee was the owner of the land and building and continued to remain the same even after transfer to remain the same even after transfer of the said capital asset. of the said capital asset. Thus, the cost of the land and building of the existing structure us, the cost of the land and building of the existing structure us, the cost of the land and building of the existing structure could not be attributed to the additional FSI received by means of attributed to the additional FSI received by means of attributed to the additional FSI received by means of 1991 Rules. It is true that such right is a capital asset 1991 Rules. It is true that such right is a capital asset as per the provisions of s. 2(14) but in order to compute capital g provisions of s. 2(14) but in order to compute capital g provisions of s. 2(14) but in order to compute capital gains apart from the existence of capital from the existence of capital asset, there should be sale asset, there should be sale consideration accruing as a result of transfer of capital asset as well consideration accruing as a result of transfer of capital asset as well consideration accruing as a result of transfer of capital asset as well as the cost of acquisition of the asset along with the cost of any of acquisition of the asset along with the cost of any of acquisition of the asset along with the cost of any improvement thereto, if any. Sec. 48 sets out th rovement thereto, if any. Sec. 48 sets out the mode e mode of computation of income under the head capital gains by providing computation of income under the head capital gains by providing computation of income under the head capital gains by providing that the expenditure incurred wholly that the expenditure incurred wholly and exclusively in connection and exclusively in connection with the transfer of a capital asset along with the cost of acquisition with the transfer of a capital asset along with the cost of acquisition with the transfer of a capital asset along with the cost of acquisition and cost of any improvement, if any, shal of any improvement, if any, shall be deducted from the full be deducted from the full value of consideration received or accruing as a value of consideration received or accruing as a result of the result of the transfer of capital asset Transfer of capital asset which does not transfer of capital asset Transfer of capital asset which does not transfer of capital asset Transfer of capital asset which does not have any cost of acquisition have any cost of acquisition does not result into capital gains does not result into capital gains chargeable to lax under s. 45 The le chargeable to lax under s. 45 The legisloture in its wisdom brought gisloture in its wisdom brought out certain categories of capital assets under s. SS(2) as having cost certain categories of capital assets under s. SS(2) as having cost certain categories of capital assets under s. SS(2) as having cost of acquisition at Rs. nil, where such assets of acquisition at Rs. nil, where such assets have not been purchased have not been purchased by the assessee for consideration. The effect of th by the assessee for consideration. The effect of this sub is sub-section is that when the that when the assets so specified in sub-s. (2) of s. 55 are transferred, then the cost of acquisition has been taken at Rs. Nil transferred, then the cost of acquisition has been taken at Rs. Nil transferred, then the cost of acquisition has been taken at Rs. Nil except where the assessee had acquired such assets by means of except where the assessee had acquired such assets by means of except where the assessee had acquired such assets by means of purchasing from the previous owner, and purchasing from the previous owner, and the computation the computation of the capital gain wou capital gain would be done accordingly. There is a difference in the ld be done accordingly. There is a difference in the situation when situation when cost of acquisition is Rs. nil and where the cost of cost of acquisition is Rs. nil and where the cost of acquisition cannot be ascertained or no cost of acquisition cannot be ascertained or no cost of acquisition has been acquisition has been incurred. The items of capi incurred. The items of capital assets specified in s. 55(2) are th 5(2) are those
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for which the cost for which the cost of acquisition shall be taken at Rs. nil for be taken at Rs. nil for computing capital gains. However if the assessee had not computing capital gains. However if the assessee had not computing capital gains. However if the assessee had not incurred any cost of acquisition on a capital asset and such capital asset does any cost of acquisition on a capital asset and such capital asset does any cost of acquisition on a capital asset and such capital asset does not fall in the category of the not fall in the category of the capital assets specified in s. S5(2) then specified in s. S5(2) then no capital gain would be charged. it is abundantly clear that the no capital gain would be charged. it is abundantly clear that the no capital gain would be charged. it is abundantly clear that the assessee had not incurred any cost of acquisition in respect of the assessee had not incurred any cost of acquisition in respect of the assessee had not incurred any cost of acquisition in respect of the right which emanated from the 1991 right which emanated from the 1991 Rules making the assessee Rules making the assessee eligible to additional FSI. The la eligible to additional FSI. The land and building earlier in the nd and building earlier in the possession of the possession of the assessee continued to remain with it as such even assessee continued to remain with it as such even after the transfer of the right to additional FSI for Rs. after the transfer of the right to additional FSI for Rs. 48 96 lakhs. 48 96 lakhs. The Departmental Representative could not point cut any The Departmental Representative could not point cut any The Departmental Representative could not point cut any particular asset as specified particular asset as specified in sub-S. (2) of s. 55, which would , which would include the right to additional FSI. No capital gains conid be include the right to additional FSI. No capital gains conid be include the right to additional FSI. No capital gains conid be charged on tie charged on tie transfer of the additional FSI by the assessee for sale transfer of the additional FSI by the assessee for sale consideration of Rs. 48 consideration of Rs. 48-96 lakhs for the reason that it has no cost of has no cost of acquisition." 16.1 Since the Ld. CIT(A) has followed a binding precedent, Since the Ld. CIT(A) has followed a binding precedent, Since the Ld. CIT(A) has followed a binding precedent, therefore we do not find any infirmity in the finding of the Ld. therefore we do not find any infirmity in the finding of the Ld. therefore we do not find any infirmity in the finding of the Ld. CIT(A) in holding that consideration received in the form of CIT(A) in holding that consideration received in the form of CIT(A) in holding that consideration received in the form of constructed area to the extent relatable to loading of the TDR is not constructed area to the extent relatable to loading of the TDR is not constructed area to the extent relatable to loading of the TDR is not taxable.
16.2 As far as value of the 42% of constructed area is considered, As far as value of the 42% of constructed area is considered, As far as value of the 42% of constructed area is considered, the Ld. DVO has determin DVO has determined the cost of construction at ed the cost of construction at
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₹8,81,46,948/-. The said report of the DVO has been reproduced by The said report of the DVO has been reproduced by The said report of the DVO has been reproduced by the Assessing Officer in assessment order for AY 2009 order for AY 2009-10 on page 8. In clause 13 of said report clause 13 of said report, cost of construction has been reported at cost of construction has been reported at ₹8,81,46,948/-. We respectfully following the decisions cited above, We respectfully following the decisions cited above, We respectfully following the decisions cited above, direct the Ld. Assessing Officer Assessing Officer to restrict the full value of to restrict the full value of consideration received by the assessee at 42% of the cost of consideration received by the assessee at 42% of the cost of consideration received by the assessee at 42% of the cost of construction, which works out to construction, which works out to ₹3,70,21,718/-. The ground No. . The ground No. one of the appeal of the assessee is accordingly allowed. As far as the one of the appeal of the assessee is accordingly allowed. As far as the one of the appeal of the assessee is accordingly allowed. As far as the argument of Ld. DR that prope that property was converted into stock in trade rty was converted into stock in trade in the financial year 2007 in the financial year 2007-08 and therefore should be taxed 08 and therefore should be taxed accordingly, the assessee has already withdrawn its cross objection , the assessee has already withdrawn its cross objection , the assessee has already withdrawn its cross objection and the lower authorities has decided the issue of transfer and the lower authorities has decided the issue of transfer and the lower authorities has decided the issue of transfer considering the property considering the property as capital asset and now the pital asset and now the Ld. DR cannot raise new issue, without any ground of appeal. The arguments of the , without any ground of appeal. The arguments of the , without any ground of appeal. The arguments of the Ld. DR accordingly not DR accordingly not relevant for adjudication of the issue relevant for adjudication of the issue-in-
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dispute. The ground No. 2 &3 of the appeal of Revenue are The ground No. 2 &3 of the appeal of Revenue are The ground No. 2 &3 of the appeal of Revenue are accordingly dismissed. accordingly dismissed.
The Ground No. 2 ( No. 2 (two), the appeal of the assessee relates to the appeal of the assessee relates to the disallowance of interest of of interest of ₹3,11,920/- related to related to ECL Finance Ltd.
The Assessing Officer Assessing Officer disallowed the interest the interest of ₹15,06,920/- holding the same as not holding the same as not incurred for the purpose of the business, the purpose of the business, wherein the Ld. CIT(A) looking to the past history has treated part of wherein the Ld. CIT(A) looking to the past history has treated part of wherein the Ld. CIT(A) looking to the past history has treated part of the interest as allowable under the head income from house s allowable under the head income from house s allowable under the head income from house property, whereas disallowed the amount of property, whereas disallowed the amount of ₹3,11,920 920/- which was used for improvement of the hou used for improvement of the house property to make it fit for se property to make it fit for earning rent in future. earning rent in future. The Ld. CIT(A) has summarised the facts CIT(A) has summarised the facts related to issue in dispute is under: related to issue in dispute is under:
In ground no.9, appellant has challenged disallowance of In ground no.9, appellant has challenged disallowance of In ground no.9, appellant has challenged disallowance of interest of Rs.15,06,920/ interest of Rs.15,06,920/- claimed by the appellant while comp claimed by the appellant while computing the property income. The AO had dealt with the issue in para the property income. The AO had dealt with the issue in para the property income. The AO had dealt with the issue in para-7 of
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the order. It is stated that appellant has claimed interest as being the order. It is stated that appellant has claimed interest as being the order. It is stated that appellant has claimed interest as being paid to (i) ECL Finance Ltd. ECL Finance Ltd. : ₹3,11,920/- - (ii) Shobha M. Desai Shobha M. Desai : ₹6,00,000/- - (iii) Suresh I. Patel (HUF) Suresh I. Patel (HUF) : 5,95,000/- Total ₹15,06.920/ 15,06.920/- The A.O. stated that such loans on which interest is claimed are not The A.O. stated that such loans on which interest is claimed are not The A.O. stated that such loans on which interest is claimed are not used for the used for the purpose of business; therefore the same are purpose of business; therefore the same are disallowable. The appellant, during disallowable. The appellant, during the course of appellate the course of appellate proceedings, stated that appellant proceedings, stated that appellant has claimed deduction has claimed deduction against house property. It is also stated that such interest paid is being house property. It is also stated that such interest paid is being house property. It is also stated that such interest paid is being allowed in all the past years from AY 06 all the past years from AY 06-07 to 11-12. In AY 06 12. In AY 06-07, interest claimed was interest claimed was Rs.12.29 lakhs, in AY 07-08 Rs.13.76 lakhs, and 08 Rs.13.76 lakhs, and in AY 08-09 Rs.7.68 lak 09 Rs.7.68 lakhs, and in 09-10 at Rs.6.05 lakhs. All these 10 at Rs.6.05 lakhs. All these assessments has been completed U/s.143(3) of assessments has been completed U/s.143(3) of the Act. In AY 10 the Act. In AY 10-11, interest claimed is Rs.10.50 lakhs and in AY 11 interest claimed is Rs.10.50 lakhs and in AY 11-12 Rs.10.95 12 Rs.10.95 lakhs. These Returns are accepted u/s.143(1). It is stated that interest These Returns are accepted u/s.143(1). It is stated that interest These Returns are accepted u/s.143(1). It is stated that interest paid to Smt. Shobha Desai of Rs.6 lakhs and Rs.5.95 lakhs to Suresh Shobha Desai of Rs.6 lakhs and Rs.5.95 lakhs to Suresh Shobha Desai of Rs.6 lakhs and Rs.5.95 lakhs to Suresh Patel, HUF is on the Patel, HUF is on the borrowings made in the earlier years and borrowings made in the earlier years and utilized for acquisition of house property. utilized for acquisition of house property. In AY 12 In AY 12-13, fresh borrowings has been made of Rs.2 cr. approx. from M/s.ECL borrowings has been made of Rs.2 cr. approx. from M/s.ECL borrowings has been made of Rs.2 cr. approx. from M/s.ECL Finance Ltd, on which interest of Rs.3,11,9200/ which interest of Rs.3,11,9200/- is being claimed. Funds is being claimed. Funds were borrowed at the faq borrowed at the faq-end of the year and has been spent for end of the year and has been spent for carrying out improvement and finishing of house property acquired improvement and finishing of house property acquired improvement and finishing of house property acquired by the appellant under by the appellant under Development Agreement, to make it fit for Development Agreement, to make it fit for earning house property income in ing house property income in subsequent years. It is submitted subsequent years. It is submitted that no part of the interest is disallowable. that no part of the interest is disallowable.
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18.1 Ld. CIT(A), out of the interest payment of Ld. CIT(A), out of the interest payment of ₹15,06,920/- Ld. CIT(A), out of the interest payment of disallowed the amount of disallowed the amount of ₹3,11,920/-.
Before us, the assessee is not able to subs Before us, the assessee is not able to substantiate tantiate as how the interest paid to ECL finance Ltd is deductible under the income from interest paid to ECL finance Ltd is deductible under the income from interest paid to ECL finance Ltd is deductible under the income from house property. The assessee has failed to house property. The assessee has failed to establish that establish that said borrowing from ECL finance Ltd is incurred for acquisition or borrowing from ECL finance Ltd is incurred for acquisition or borrowing from ECL finance Ltd is incurred for acquisition or construction of house property, income fro construction of house property, income from which m which was offered under the head ‘income from house ‘income from house property’. In absence of any In absence of any such evidence, we do not find any , we do not find any error in the order of in the order of Ld. CIT(A) on the issue in dispute and accordingly uphold the same. the issue in dispute and accordingly uphold the same. the issue in dispute and accordingly uphold the same.
The ground 3 of the appeal relates to addition of of the appeal relates to addition of ₹1,30,000/-. of the appeal relates to addition of The Ld. Assessing Officer Assessing Officer made addition on the basis of made addition on the basis of loose papers impounded during the course of survey action under section 133 impounded during the course of survey action under section 133 impounded during the course of survey action under section 133A of the Act in the case of the assessee, which was carried on in the case of the assessee, which was carried on in the case of the assessee, which was carried on 21/11/2012. The Ld. The Ld. CIT(A) has summarized the ed the factual background of the addition made by the AO as under: background of the addition made by the AO as under: background of the addition made by the AO as under:
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“9. Ground No.10 is related to the addition made of Ground No.10 is related to the addition made of Ground No.10 is related to the addition made of Rs.1,30,000/- u/s.69C of the u/s.69C of the Act. There was a survey action on the Act. There was a survey action on the appellant u/s.133A on 21.11.12 at the appellant u/s.133A on 21.11.12 at the office premises. During the premises. During the course of survey, a diary marked Al was impounded and course of survey, a diary marked Al was impounded and course of survey, a diary marked Al was impounded and based on pg.no.149 of the diary, an addition of Rs 1,30,000/ pg.no.149 of the diary, an addition of Rs 1,30,000/- is being made by is being made by AO. The AO has dealt with the issue in para The AO has dealt with the issue in para-6 cf the order. AO relied 6 cf the order. AO relied upon pg. 149 of upon pg. 149 of the said diary which provided details of following diary which provided details of following payments: (i) Plumber :₹30,000/ 30,000/- (ii) RS :₹50,000/ 50,000/- (iii) Daughter-in- :₹50,000/ 50,000/- law 9.1 A.O. made addition relying on the provisions of Sec.69C of A.O. made addition relying on the provisions of Sec.69C of A.O. made addition relying on the provisions of Sec.69C of the Act. During the Act. During the course of appellate proceedings, Ld.AR has the course of appellate proceedings, Ld.AR has relied upon the statement as upon the statement as recorded of Shri Suresh Patel U/s.133A dtd. recorded of Shri Suresh Patel U/s.133A dtd. 21.11.12. Shri Suresh Patel has 21.11.12. Shri Suresh Patel has described that various notings in the described that various notings in the diary are scribbling, not connected to the diary are scribbling, not connected to the business. During the business. During the course of assessment proceedings, appellant expla course of assessment proceedings, appellant explained the ined the above referred expense of Rs.1.30 lakhs as personal expenditure, referred expense of Rs.1.30 lakhs as personal expenditure, referred expense of Rs.1.30 lakhs as personal expenditure, household expenses of Sures7 Patel were claimed to be reflected in expenses of Sures7 Patel were claimed to be reflected in expenses of Sures7 Patel were claimed to be reflected in the personal books of the personal books of account of Shri Suresh Patel. A copy of account of Shri Suresh Patel. A copy of impounded paper pg.149 is filed in impounded paper pg.149 is filed in compilation at pg. compilation at pg.114. It is stated that RSP stand for the wife of Shri Suresh Patel stated that RSP stand for the wife of Shri Suresh Patel and all these and all these expenses of Rs. 1.30 lakhs are not claimed as business expenses in expenses of Rs. 1.30 lakhs are not claimed as business expenses in expenses of Rs. 1.30 lakhs are not claimed as business expenses in the books of account of appellant and are the personal expenses of books of account of appellant and are the personal expenses of books of account of appellant and are the personal expenses of Shri Suresh Patel, Shri Suresh Patel, which are duly explainable as aimed to be able as aimed to be recorded in the books of account of Shri recorded in the books of account of Shri Suresh Patel.”
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The Ld. CIT(A) rejected the contention of the assessee Ld. CIT(A) rejected the contention of the assessee Ld. CIT(A) rejected the contention of the assessee observing as under:
“9.2 I have duly considered the submissions made by the I have duly considered the submissions made by the I have duly considered the submissions made by the appellant and the facts appellant and the facts found by AO in the assessment order. Shri assessment order. Shri Suresh Patel claimed these expenses to Suresh Patel claimed these expenses to be personal and also claimed be personal and also claimed that these expenses are reçorded in is personal books that these expenses are reçorded in is personal books of account of account and has no connection with the appellant. /However, Shri Suresh and has no connection with the appellant. /However, Shri Suresh and has no connection with the appellant. /However, Shri Suresh Patel, who is also a partner of the who is also a partner of the firm, failed to produce any firm, failed to produce any evidence to substantiate the evidence to substantiate the claim that such expenditure is incurred claim that such expenditure is incurred by him out of explained sources. In view of by him out of explained sources. In view of lack of any such proof lack of any such proof being produced even in appellate proceeding, no fault can be being produced even in appellate proceeding, no fault can be being produced even in appellate proceeding, no fault can be found on this ground in the ass on this ground in the assessment order. Ground no.10 stands essment order. Ground no.10 stands rejected.” 22. We have heard rival submission of the parties on the issue in have heard rival submission of the parties on the issue in have heard rival submission of the parties on the issue in dispute and perused relevant dispute and perused relevant material on record. The assessee has record. The assessee has clearly admitted that that the expenditure of ₹ 1.3 lakh was incurred 1.3 lakh was incurred, therefore, the assessee he assessee was required to explain source of the required to explain source of the said expenditure. The Ld. CIT(A) has noted that assessee failed to expenditure. The Ld. CIT(A) has noted that assessee failed to expenditure. The Ld. CIT(A) has noted that assessee failed to substantiate the actual expenditure incurred out of the explain substantiate the actual expenditure incurred out of the explain substantiate the actual expenditure incurred out of the explained sources. Before us, the us, the assessee has not filed any capital account or assessee has not filed any capital account or
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withdrawal by the assessee and his family members to substantiate withdrawal by the assessee and his family members to substantiate withdrawal by the assessee and his family members to substantiate the source of expenditure. In the circumstances, we do not find any the source of expenditure. In the circumstances, we do not find any the source of expenditure. In the circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and in the order of the Ld. CIT(A) on the issue in dispute and in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. accordingly we uphold the same.
In the result, the a In the result, the appeal of the Revenue for AY 2012 for AY 2012-13 is dismissed and the appeal of the assessee for AY 2012 the appeal of the assessee for AY 2012-13 is partly the appeal of the assessee for AY 2012 allowed. The cross- -objection of the assessee is dismissed as objection of the assessee is dismissed as withdrawn.
As far as appeal of the As far as appeal of the Revenue for assessment year 2009 sment year 2009-10 is concerned, the ground raise is e ground raise is reproduced as under : reproduced as under :
“1. On the facts and circumstances of the case and in law, the Ld. On the facts and circumstances of the case and in law, the Ld. On the facts and circumstances of the case and in law, the Ld. Commissioner of Commissioner of Income-tax(Appeals) has erred in not considering tax(Appeals) has erred in not considering the fact that transfer has been the fact that transfer has been effected in AY 2009-10 as per the 10 as per the provision of Sec provision of Sec.2 (47) (v) of Income-tax Act, 1961 rws 53A of the rws 53A of the Transfer of property Act, 1882 which Transfer of property Act, 1882 which clearly states that once clearly states that once ingress lo the property is handed over to the transferee ie Vidhi the property is handed over to the transferee ie Vidhi the property is handed over to the transferee ie Vidhi Enterprises, the provisions of Enterprises, the provisions of Sec 53A of ToPA are attracted. In this Sec 53A of ToPA are attracted. In this case, clause 9B, 22(b) and 26 of the DA clearly lause 9B, 22(b) and 26 of the DA clearly establish that the establish that the
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Developer had complete access to the property and that he was Developer had complete access to the property and that he was Developer had complete access to the property and that he was liable for the actions thereon. liable for the actions thereon.” 25. The sole ground raised in the appeal of the ground raised in the appeal of the Revenue for ground raised in the appeal of the assessment year 2009 assessment year 2009-10, i.e. the year of taxability, h has already been adjudicated in the appeal for AY adjudicated in the appeal for AY 2012-13, therefore said appeal of 13, therefore said appeal of Revenue is also dismissed. The cross objection of the assessee for also dismissed. The cross objection of the assessee for also dismissed. The cross objection of the assessee for assessment year 2009 assessment year 2009-10 is dismissed as withdrawn. dismissed as withdrawn.
In the result, both In the result, both the appeals of the Revenue for AY 2012 for AY 2012-13 & AY 2009-10 and cross 10 and cross-objections of the assessee for AY 20 objections of the assessee for AY 2012-13 and 2009-10 are dismissed 10 are dismissed, whereas appeal of the assessee for , whereas appeal of the assessee for assessment year 2012 assessment year 2012-13 is partly allowed.
Order pronounced in the Court on ounced in the Court on 06/07/2022. Sd/- Sd/- - (PAVAN KUMAR GADALE PAVAN KUMAR GADALE) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 06/07/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent.
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The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Sr. Private Secretary Sr. Private Secretary) ITAT, Mumbai ITAT, Mumbai