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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri G.S. PANNU, HON’BLE & SHRI LALIET KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad BEFORE Shri G.S. PANNU, HON’BLE PRESIDENT AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA No.1039/Hyd/2019 Assessment Year: 2013-14 Smt. Kolla Gowri, Vs. The Income Tax Officer, Ward – 2, R/o.Chennai. Chittoor. PAN : AOEPG6939E. (Appellant) (Respondent) Assessee by: Shri C.A. Sumitra Nandan, Revenue by: Ms. Swapna. Sr.A.R. Date of hearing: 24.11.2022 21.12.2022 Date of pronouncement:
O R D E R PER LALIET KUMAR, J.M.
The appeal of the assessee for A.Y. 2013-14 arises from the order of Commissioner of Income Tax (Appeals), Tirupati dt.25.04.2019 invoking proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, “the Act”).
“1. The order of the Commissioner (Appeal) is bad in law and on facts of the case. 2. The learned Commissioner (Appeals) erred in confirming the addition of Rs.70,80,340/- as short-term capital gains made by the Assessing Officer.
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The Commissioner (Appeals) failed to see that the Assessing Officer erred in calculating the capital gains by taking into the proposed cost of construction, which is against the provisions of section 50D of the Income Tax Act, 1961. 4. The Commissioner (Appeals) failed to see that a transfer of some rights for limited purpose cannot be regarded as transfer of capital asset in the context of capital gains. There should not be a situation of contingent transfer which can be reverted back on some contingencies. The transfer must be full and final. In light of the above grounds and such other grounds that may be raised at the time of hearing, it is prayed that the Hon'ble Tribunal may allow the appeal and delete the addition made and render justice.
Briefly the facts of the case are that as per the information received, it is revealed that, the appellant, as a land owner entered into a joint development agreement cum general power of attorney (JDA) vide document No.1388/2012 dated 30/04/2012 for Rs.2,48,20,000/- in favour of Sri Dhanalakshmi Constructions (Developer/ Builder with reference to the undivided share of land admeasuring 446 Sq. Yds. in Sy.No. 386-1, 384-2 & 385 situated at 77, Gandlapalle, Chittoor.
2.1. The appellant did not admit any capital gains on account of this JDA. Hence, in order to verify these issues, the AO issued notice u/s. 148 of the Act dated 15.12.2016 and served upon the appellant on 16.12.2016. The appellant in response to the notice has filed a letter dated 19.01.2017 stating that return filed on 27.01.2014 may be treated as the return filed in response to the notice issued. The appellant admitted income in the said return at
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Rs. 89,130/-. Subsequently, appropriate notices were issued upon the appellant.
2.2. During the course of assessment proceedings, the appellant, in response to the show cause notice filed detailed objections against the taxation of capital gains at the time of JDA. It was also stated that the developer has not handed over the possession of the building and also not issued occupancy certificate and hence capital gains was not admitted. The appellant stated that the builder was not given out right possession of the land but given license to enter into the land for the specific V purpose i.e., constructing buildings. Hence, provisions of Sec. 2(47) of the Act do not apply. It was contended that the JDA is not resulting into sale, exchange or relinquishment of right to attract Sec. 2(47) of the Act. It was further contended that there is no monetary consideration as such there is no sale to attract capital gains provision.
2.3. The AO rejected the contentions of the appellant and completed the assessment relying on the decisions of the Hon'ble Supreme Court in the case of Alapati Venkatramaiah (57 ITR 185) and other relevant cases considered JDA as transfer in terms of Sec. 2(47) of the Act and also on Sec. 53A of Transfer of Property Act. The Assessing Officer held that appellant is eligible to receive future profits on the day of execution of JDA on 30.04.2012 i.e., in the financial year 2012-13 relevant to AY 2013-14 and hence the capital gains is calculated for the AY. 2013-14 itself.
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2.4. The AO calculated short term capital gains of Rs.70,80,340/- on the consideration of Rs. 77,80,000/- received by the appellant in lieu of forgoing 65% share of land by virtue of JDA after reducing the cost of acquisition of Rs. 6,99,660/- on account of 65% of the value of land surrendered. The appellant acquired the land on 29.07.2009 and entered into JDA on 30.04.2012. Hence, the AO considered it as short term capital gains.
2.5. Further, the AO treated the agricultural income offered by the appellant as income from other source as the appellant has not admitted of having any asset of agricultural land in the balance sheet but admitted an income of Rs. 1,67,914/- as agricultural income. The Assessing Officer notes that asset mentioned in the balance sheet is agricultural land (Factory) and upon verification of document it is noted no agricultural activity has been done in the said land. Hence, land is considered as non-agricultural land. Since, the appellant has not furnished any bills/vouchers/ receipts as a proof for agricultural income, the AO treated the agricultural income admitted as income from other sources and added to the income returned.
Aggrieved by the order of AO, the appellant preferred an appeal before the CIT(A).
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Before the CIT(A), the assessee filed elaborate written submissions, which were extracted by the CIT(A) in his order at pages 4 to 10 pages and summarized the same as under:
“During the course of appellate proceedings, the appellant stated that, a JDA was entered on 30.04.2012 for sharing the built up area in the ratio of 65% : 35%. The appellant contended that she has extinguished her right in the 65% of the land and retained only 35% of the land. By surrender of 65% of the land, the appellant is entitled to get 07 flats with 7,280 sq. ft and 500 sq. ft of car parking area / the constructed area. The appellant contended that value/consideration adopted by the AO considering the JDA is incorrect. Instead, the AO should have adopted the SRO value as on the date of JDA to work out the capital gains. It was contended that where the consideration received/accruing as a result of transfer of capital asset is not ascertainable, then, fair market value of the capital asset should be adopted as full value of consideration. The appellant relied on Sec. 50D of the Act which was inserted by Finance Act, 2012 and came into being with effect from A.Y. 2013-14 and stated that in the facts of the case, the fair market value should have been taken by the AO instead of values mentioned in the JDA. The appellant raised so many arguments vide submissions supra including the argument that the JDA value is on the basis of future cost which should not have been applied by the AO. The appellant relied on the several decisions and requested to delete the addition. It was also stated that after taking possession of the flats, capital gains. Were offered in the A.Y. 2017-18, hence, requested to delete the addition made by the AO.”
After considering the submissions of the assessee, the CIT(A) confirmed the order of the AO, by observing as under:
“I have carefully considered the submissions of the appellant and material facts of the case. The main contention of the appellant is that the AO should have taken the SRO value of the land portion which was surrendered to the builder on the date of JDA to workout capital gains. The value mentioned in the JDA is only tentative one and it may vary depending on certain factors, hence, the same should not have been adopted by the AO for working out the capital gains. As per Sec. 45 of the Act, any profits or gains arising from the transfer of a capital asset affected in the previous year shall be chargeable to tax under the head capital gains subject to the other conditions. Sec. 48 of the Act gives mode of computation by which the capital gains chargeable to tax can be
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deduced. To work out the capital gains what is required is a capital asset and transfer of the same for a consideration. The consideration can be received or accrued so as to work out the capital gains. In the present case, the appellant has a land which is a capital asset and there is no dispute about this. Out of the land possessed by the appellant by virtue of JDA, the appellant surrendered 65% to get 07 flats with other benefits as discussed above. The appellant contended that there is no transfer until the flats were received. This contention appears to be incorrect. The JDA is a registered document and the builder was allowed to construct the project which means the possession was handed over by the appellant, hence, this is nothing but a transfer u/s. 2(47) of the Act. The Registration Act, 1908 and Transfer of Property Act amended with effect from 24.09.2001. By virtue of these amendments requirement of registration of agreement was made mandatory. Considering these amendments, Hon'ble Supreme Court in the case of Balbir Singh Maini (252 taxmann 202) held that subsequent to the amendments to the said Acts, unless the agreement is registered, the same cannot be treated as transfer u/s. 2(47) of the Act. In the present case, the JDA was a registered document and the same was executed on 30.04.2012, hence, these amounts to transfer as per Sec. 2(47) of the Act. From the above, it is to be noted that the appellant was having a capital asset and the same was transferred to the builder and now we should see whether any profit or gain arising from such transfer. To arrive at profit or gain, one has to have consideration on account of transfer of capital asset. In the present case, the appellant contends that the SRO value of the land portion surrendered to the builder; is the consideration. The AO considered the JDA value as consideration. In the light of this fact, one should see the appropriate method to work out the capital gains. Considering the SRO value is also a method to work out the capital gains. The JDA value can also be taken to work out the capital gains. When these two values are available, it is to be seen the reasonable and fair value to work out the capital gains. The JOA is a registered document and the said document was executed on mutual agreement between the builder and the appellant. The project value was taken into consideration for the purpose of stamp duty. This is in my opinion is a authentic and appropriate consideration when compared to the SRO value of the land. The appellant is going to get flats/constructed area in lieu of land and hence it is the consideration/value mentioned in the JOA which is appropriate value to work out capital gains. In view of this, the figures mentioned in the JOA have to be considered as the consideration.
Now the three ingredients required for computing capital gains are available and hence the capital gains worked out by the AO is on the right footing. The arguments put forth by the appellant are rejected.
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The appellant argued that the consideration received or accruing is not ascertainable and relying on the Sec. 500 of the Act, SRO value being fair market value should be adopted. In this connection, it is to be seen that the JDA mentioned the consideration and hence, the consideration is ascertainable. Invoking the provisions of Sec. 50D of the Act does not arise as the consideration is clearly mentioned in the JDA. Hon'ble ITAT, Ahmedabad, in the case of Gujarat Flurochemicals Ltd. (97 Taxmann.com 10) held that for invoking Sec.50D of the Act, consideration in respect of transfer of an asset should not be determinable or ascertainable. The appellant argued that the JDA may fell through hence, considering the value is improper. This is only a hypothetical argument. The JDA entered was accomplished and share of the flats were received by the appellant and offered capital gain in the A. Y. 2017- 18. Hence, this argument is also rejected. Hon'ble High Court of Andhra Pradesh in the case of Potla Nageswara Rao (50 taxmann.com 137) held that when transfer of capital asset is complete, sale consideration has to be taken into consideration for purpose of assessment even though payment of consideration deferred till other assessment year. In view of this, as the JDA was entered by the appellant, the capital gain has to be charged in the year under consideration only. The Hon'ble ITAT Hyderabad in the case of K. Vijayalakshmi (ITA No.1561/Hyd/2016) held that once the development agreement allows the developer to enter into the premises and to do all the necessary things for construction 01 apartment and the project is completed, then Sec.2(47)(5) is attracted. In view of this, considering the JDA and completion of the project it has to be held that transfer was complete to attract capital gains in the year under consideration. Hon'ble ITAT, Hyderabad, in the case of Mrs. Adeebunnisa Begum & ors., (ITA No.816 to 820/Hyd/2017) held that the cost 01 constructed area received by the assessee should be taken as consideration in lieu of development agreement and not SRO value. In view of this decision, it is to ,be noted that the cost of construction to the builder and the value in the JDA has to be treated as consideration for working out the capital gains. Respectfully following the above decisions and also considering the material facts, all the arguments raised by the appellant are hereby rejected and the value adopted by the AO is hereby confirmed. The ground raised by the appellant is hereby dismissed.”
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Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us.
Ld. AR further submitted earlier appeal of the assessee was dismissed by the Tribunal on 30.11.2021 on account of the non-appearance of the assessee. However, the said order of the Tribunal was recalled vide order dt.05.08.2022. Ld. AR has drawn our attention to the order passed by the ld.CIT(A) wherein the ld.CIT(A) had dismissed the claim of the assessee whereby the assessee had claimed that the short-term capital gain should be calculated on SRO value of the alleged land transferred pursuant to the Joint-Development Agreement. Besides that ld.AR had submitted that ld.CIT(A) had failed to adjudicate the specific ground of non-transfer of land within the meaning of section 2(47) of the Act. It was the contention of ld.AR that the matter may kindly be remitted back to the file Assessing Officer for afresh adjudication on the above aspects.
Per contra, Ld. DR relied upon the decision of the Hon’ble Coordinate Bench of the Tribunal in the case of Smt. K. Vijayalakshmi vs. ACIT in ITA No.1561/Hyd/2016 dated 28.02.2018.
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We have heard the rival contentions and perused the material available on record. In the assessment order as well as the order of ld CIT(A), the necessary jurisdictional facts relating to transfer of land on account of Joint Development Agreement entered into between the parties have not been mentioned. Though, in the assessment order, it was mentioned that the Joint Development Agreement cum Power of Attorney was executed on 30.04.2012 in favour of Shri Dhanalakshmi Constructions, however, the assessee in her reply had submitted that the Developer neither handed over the possession of the building nor issued the occupancy certificate to her. Further we find lower authorities had nor mentioned as to when the possession of the building / land was handed over to the assessee by the developer or developer by the assessee. We further notice that the lower authorities have not given any specific finding as to when transfer of land had been affected, which is subject matter of present appeal. In the absence of adjudication of the above noted facts, i.e. whether any transfer of land in terms of sec 2(47) of the Act was taken place or not, it is impermissible to decide that short- term capital gain has arisen to the assessee.
In the light of the above, we remand back the matter to the file of the Assessing Officer with a direction to decide the issue afresh after affording reasonable opportunity of being heard. Needless to say that the assessee shall file all the documents and evidence to support her contentions before the Assessing Officer.
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In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 21st December, 2022.
Sd/- Sd/- (G.S. PANNU) (LALIET KUMAR) PRESIDENT JUDICIAL MEMBER Hyderabad, dated 21st December, 2022. TYNM/SPS
Copy to:
S.No Addresses 1 Mrs. Kolla Gowri, Ground Floor, Door No.10A, North Boag Road, T. Nagar, Chennai. 2 Income Tax Officer, Ward – 2, Chittoor. 3 CIT(A) – Tirupati. 4 Pr.CIT, Tirupati. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order