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Facts
The assessee, Estin Tie Up Pvt. Ltd. (ETPL), a real estate company, filed its return declaring capital gains from land transfer for AY 2013-14. The land was originally held by BFM Industries Ltd., transferred to ETPL via a demerger, and subsequently, ETPL became a 100% subsidiary of Avani Infra. ETPL entered into joint development agreements with Avani Infra, revalued its land twice (first at ₹8.50 Crore, then ₹90 Crore), and reported long-term capital gains based on actual consideration and ₹8.50 Crore cost. The AO applied Section 50C, taking ₹90 Crore as consideration and recomputed a much higher capital gain. The CIT(A) partially allowed the assessee's appeal, holding the transfer took place in 2009 and directed re-computation with a cost of acquisition of ₹1 Crore and actual consideration received.
Held
The Tribunal found significant discrepancies and lack of clarity regarding the actual ownership of the land (which was never registered in assessee's or developer's name), the precise date of transfer, the correct sale consideration, cost of acquisition, and whether the income should be classified as capital gains or business income/income from other sources. Noting that the demerger was not a 'tax demerger' and that neither the tax authorities nor the assessee had presented a clear and complete factual position, the Tribunal set aside the CIT(A)'s order and remanded the entire matter for fresh adjudication to determine these critical aspects.
Key Issues
1. Determination of the correct date of transfer of the land for capital gains assessment. 2. Correct computation of the sale consideration and cost of acquisition, considering revaluations and Section 50C/Section 49. 3. Whether the income is assessable as capital gains or business income/income from other sources. 4. Identification of the actual owner of the land and the impact of its unregistered nature.
Sections Cited
143(3), 50C, 49(1)(iii)(c), 55A, 49, 47, 48, 14, 149
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: SHRI DUVVURU RL REDDY & SHRI RAKESH MISHRA
order : 20-November-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: These cross appeals filed by the assessee as well as the Revenue are against the order of the Commissioner of Income Tax (Appeals)-20, Kolkata [hereinafter referred to as Ld. 'CIT(A)'] of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2013-14 dated 15.11.2019. 1.1. Both the appeals were heard together and are being decided vide this common order for the sake of convenience and brevity.
The assessee is in appeal before the Tribunal raising the following grounds of appeal: ITA Nos.: 32 & 141/KOL/2020 Assessment Year: 2013
14. M/s. Estin Tie Up Pvt. Ltd. I.
1. : “1. For that the Ld. CIT(A) having held that the transfer of the property did not take place during the year and no capital gain was assessable during the year, was not justified in further directing the AO to recompute the capital gain by considering the cost of acquisition of the land at Rs. 1 Crore.
2. For that the Ld. CIT(A) was perfectly justified in holding that the transfer of the property did take place in the year 2009 only, exceeded his jurisdiction in directing the AO to determine the capital gain on the basis of actual consideration received from Avani Infra.
3. For that on the facts and circumstances of the case the direction of the Ld. CIT(A) to recompute the capital gain by considering the cost of acquisition at Rs. 1 Crore.
4. For that the order of the Ld. CIT(A) in so far as it relates to the directions for computation of capital gain is concerned may be deleted.” II.
“1. Ld. CIT(A) has erred in law as well as on facts of case in relying merely on assessee's submission without appreciating the fact that the actual intention of the assessee was to increase the value of the property from Rs. 8.50 crores to 90 crores with subsequent act of counter balancing through bonus share in the F.Y. 2012-13.
2. Ld. CIT(A) has erred in law as well as on facts of case by assuming the cost of acquisitions of land in the hands of BFM Industries amounting to Rs. 1 crores as per provisions of sec 49(1)(iii)(c) arbitrarily without any basis or what so ever.
Ld. CIT(A) has erred in law as well as on facts of case by considering the cost of acquisition at Rs. 1 crore without referring the matter to the DVO u/s 55A of the I.T. Act-1961 read with 1st proviso & 2nd proviso of section 50C(1) for determining the value of the property as on 20/01/2009 as well as F.Y. 2012-13 for the purpose of cost of acquisition and sale value consideration.
Ld. CIT(A) has erred in law as well as on facts of case to appreciate that the revalued cost of Rs. 90 crores would be the actual value of the property which the assessee would get if the property was sold in the open market in F.Y.-2012-13 relevant to the A.Y.-2013-14.
The appellant crave leaves to add or amend any one or more of the grounds of appeal
s, as stated above, as and when need to doing so arises with prior permission of the Court.” ITA Nos.: 32 & 141/KOL/2020 Assessment Year: 2013-14 M/s. Estin Tie Up Pvt. Ltd.
3. Brief facts of the case are that the assessee is a private limited company engaged in the business of real estate as mentioned in the assessment order and had filed its return of income on 24.09.2013 showing total income of ₹90,34,390/- which included capital gains of ₹89,11,086/- besides other income. Subsequently, the return was selected for scrutiny and order u/s 143(3) of the Act was passed wherein the Assessing Officer (hereinafter referred to as Ld. 'AO') made an addition of ₹76,04,62,428/- on account of long-term capital gains on transfer of land, leading to the assessed income of ₹76,05,98,310/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who noted that the only issue involved was regarding the dispute of capital gains on the transfer of land. He went through the facts of the case and gave certain reliefs to the assessee and the appeal was partly allowed. The transfer of land was treated as transferred in 2009 only and not in the year relevant to the current assessment year. The grounds taken by the assessee were allowed and the entire addition made by the Ld. AO by treating the consideration of ₹90 Crore was treated as totally incorrect and hence needed to be deleted as is mentioned on page 7 para 7 of the appeal order. However, in the subsequent paragraphs he has mentioned that the Ld. AO is directed to recompute the capital gains by considering the cost of acquisition of the land at ₹ One Crore instead of ₹8,50,00,000/- and the full value of consideration should be taken as the actual consideration received from Avani Infra. The appeal of the assessee was thus partly allowed.
4. Aggrieved with the order of the Ld. CIT(A), both the assessee as well as the Revenue have filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made and the details filed have been examined. We will take up the Nos.: 32 & 141/KOL/2020 Assessment Year: 2013-14 M/s. Estin Tie Up Pvt. Ltd. 32/KOL/2020 first. Before adverting to the issue, it is essential to go through the background of the case and the relevant details as culled out from the assessment order and from the order of the Ld. CIT(A) are as follow. 5.1 During the year under consideration, the assessee company had claimed capital gains of ₹89,11,086/- which was claimed as long-term capital gains in the computation of income. The Ld. AO asked the assessee to furnish the details of the same and the facts that emerged under the heading ‘background of the case’ in the assessment order are that the assessee reported long-term capital gains to the extent of ₹89,11,086/- as per computation of income submitted, out of which a sum of ₹88,98,508/- was reported to have been against the sale of land. On examination of Schedule 6 of the Audited Balance Sheet as submitted, it was found that there was deduction of gross block of ₹4,95,31,979/- towards and being part of the capital asset shown as land having gross value of ₹90 Crore. In view of the same, the assessee’s details of capital asset and transfer in the light of the provision of section 50C of the Act were examined and the Ld. AO noted that the assessee had revaluation reserves of ₹81.50 Crore as on 31.03.2012 which was converted to equity in the form of bonus shares in the relevant assessment year. The land was the ostensible tangible fixed asset which had attracted the revaluation process from original carrying cost of ₹8,50,00,000/- to ₹81,50,00,000/- Crore which indicated that the cost of land to the assessee was very low at ₹8,50,00,000/- and the assessee himself was convinced that the value of land had arisen multi-fold times in the light of revaluation affected. The submissions of the assessee were considered. The plot of land was reported to be of 236 Cuttahs in measure (1 cuttah =720 sq feet) i.e. 1,69,920 sq ft. purchased on ITA Nos.: 32 & 141/KOL/2020 Assessment Year: 2013-14 M/s. Estin Tie Up Pvt. Ltd. 17.05.2006 which was transferred under a development agreement dated 01.06.2007 wherein a sum of ₹1,00,000/- per annum was determined towards commercial exploitation of the said developer and which was further amended from time to time providing for annual payout of ₹5,00,000/- towards commercial exploitation and further quantified as payout consideration based on the built up area of 6,02,691 sq ft. @ ₹500/- per sq ft. culminating into ₹30,10,00,000/- in terms of sale proceeds vide agreement dated 20.01.2009 against the reported revalued amount of ₹90,00,00,000/- i.e. 33.44% of the revalued amount. During the relevant assessment year, a sum of ₹1,65,84,710/- was reported as consideration based on 33,169 sq ft. of built-up area claimed as first reported sale worked out @ ₹500/- sq ft of built-up area. The assessee was required to explain why the provisions of section 50C of the Act should not be applicable. In response, the assessee stated that the provisions of section 50C of the Act were not applicable as the agreement was entered into on 01.06.2007, so there was no assessable value. The show cause notice was issued in which it was mentioned to the assessee that the audited financial statement in the schedule of fixed assets show at a revalued figure of ₹90 Crore from the book value of ₹8,50,00,000/- effected during the FY 2011-12 and the subsequent act was of counter balancing through usage as bonus shares which was inconsistent with the provisions of Companies Act, 1956 and the assessee was required to show cause— a. Why the transfer of land admeasuring 236 Cuttahs should not be subjected to capital gains in the relevant assessment year when the shopping mall project was completed and the sale of individual units had begun, as admitted in the computation and in the light of the fact that the land being an inseparable part of the shopping ITA Nos.: 32 & 141/KOL/2020 Assessment Year: 2013-14 M/s. Estin Tie Up Pvt. Ltd. mall project, had been completely developed and the character of the same had changed signifying transfer. b. Why the revalued figure of ₹90 crore, as admitted by it, should not be treated as fair value in terms of the provision of section 50C of the Act . c. Why the said transfer should not be treated as deemed transfer as a whole on the first sale itself i.e. in the FY 2012-13 when the same was not treated as transfer on the date of agreement made earlier. 5.2 The assessee responded by stating that the provisions of section 50C of the Act were not applicable since the agreement determining the price was executed on 20.01.2009 when the amendment in section 50C of the Act to consider even the agreement for sale for the purpose of section 50C of the Act came into effect w.e.f. 01.09.2009. It also stated that the said agreement was a mere supplementary agreement and was in continuation of the earlier agreements. The proposed amendment in section 50C of the Act by the Finance Bill, 2016 suggests that if the consideration is paid by cheque at the time of entering into agreement, the market price as on that date is to be considered for the purpose of section 50C of the Act. 5.3 The submission of the assessee was not found to be tenable on the facts mentioned in the assessment order and since the contention was not tenable, the first date of transfer was treated as transfer as a whole and the market value as determined on revaluation was treated as the deemed consideration. Hence, ₹90 Crore was the consideration and capital gains was calculated accordingly. The cost of acquisition of the land was taken at ₹8.50 Crore and the indexed cost of acquisition ITA Nos.: 32 & 141/KOL/2020 Assessment Year: 2013-14 M/s. Estin Tie Up Pvt. Ltd. of the land was worked out at ₹13,95,37,572/- and the total consideration u/s 50C of the Act was adopted at ₹90 Crore making the total long-term capital gains of ₹76,04,62,428/- which was added as long term capital gains along with the income from business and profession shown at ₹1,23,304/- and the income from short-term capital gains at ₹12,578/- and the total income was assessed at ₹76,05,98,310/-. Aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who vide the impugned order partly allowed the appeal. Before the Ld. CIT(A) the assessee stated the facts as under: “3. BFM industries Ltd (A company of SREI group) was holding a piece of land admeasuring 236 Kottah. A demerger exercise took place in 2005 by which the land was transferred to a newly formed company (Estin Tie up Pvt Ltd., assessee co., hereinafter referred as ETPL). The Calcutta High Court approved the demerger on 18.1.2007. By virtue of demerger, the company acquired the land being 236 kathas at 32, Jagat Banerjee Ghat Road, Ward No. 35, Boro No. 4 Shibpur, Howrah. The land at Howrah was transferred by BFM Industries Ltd. (hereinafter to be called 'BFM') to the appellant company on 01-05-2006. The above land was recorded in the books of appellant company at Rs. 8,50,00,000/-. From the record submitted during the course of proceeding, it was noted that just prior to the demerger on 09-08-2005, the demerging company i.e. BFM revalued the land to Rs. 8,50,00,000/-.
4. Subsequently, Avani Projects and Infrastructure Private Limited (hereinafter to be referred as "Avani Infra") purchased the shares of ETPL from shareholders of BFM Industries. In other words, instead of directly purchasing land from the BFM Industries, Avani Infra purchased shares of ETPL. Subsequently, the appellant company entered into three joint development agreements with its 100% parent company, Avani Infra which are as follows: On 01-06-2007, 1st Joint Development Agreement was made where a consideration of Rs. 1,00,000/-. Fixed for development of 236 Kottah land. On 01-09-2008, the 1st agreement was modified and supplementary agreement was made where consideration was fixed at Rs. 5,00,000/- ITA Nos.: 32 & 141/KOL/2020 Assessment Year: 2013-14 M/s. Estin Tie Up Pvt. Ltd. On 20-09-2009 (*the date is 20.01.2009 as per the agreement), another supplementary agreement was entered into for consideration fixed at Rs. 500/- per square feet. By the virtue of the said agreements the appellant granted exclusive right of development of the said land to Avani Infra along with the right to sale the entire developed constructed areas to the intending buyers. Based on the 2nd supplementary agreement dated 20-01-2009, the appellant was entitled to Rs 500/- per square feet at the time of sale of the developed area on the land comprising in such sale.
5. During the year under consideration (FY2012-13), Avani infra developed the said land into property for selling it to the third party. Based on the 2nd supplementary agreement dated 20-01-2009, the appellant was entitled to Rs 500/- per square feet at the time of sale of the developed area on the land comprising in such sale. Accordingly, 33,169 square feet of land was sold and the appellant received Rs. 1,65,84,710/- as consideration for his share as decided in the agreement. It was on that basis the appellant computed the capital gains of Rs. 88,98,508/- which was included while computing the total income. The capital gains computed by the appellant is as follows: Particulars Amount Amount (Rs.) (Rs.) Full Value Consideration 1,65,84,710 Proportionate cost of acquisition 46,82,027 [33169/602691x8,50,73,872] Less: Indexed Cost acquisition 76,86,102 [46,82,027 x 852/519] Long Term Capital gains 88,98,508