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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
आदेश / O R D E R महावीरस िंह, उपाध्यक्ष / PER MAHAVIR SINGH, VP: This appeal of Assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-3, Mumbai, [in short CIT(A)], in NSK (Old 89/15-16/THN) dated 28.02.2017. The assessment was framed by the Asst. Commissioner of Income Tax, Circle-2, Thane (in short ACIT/ITO/ AO) for the A.Y. 2012-13 vide order
The first issue in the appeal of assessee is against the order of CIT(A) confirming the action of Assessing Officer in making addition by invoking the provisions of Section 50C of the Act whereas the transaction under consideration is between the members of AOP, which is governed by the special provisions of Section 45(3) of the Act. For this, assessee has raised the following ground of appeal: -
“1) The learned CIT(A) erred in confirming the additions made by the then AO to the tune of Rs.5,10,47,000/- by invoking the provisions of section 50C without appreciating the fact that the transaction under review is between member of the AOP and AOP which is governed by the special provisions u/s 45(3) and not by section 50C and hence the provisions of section 50C are not applicable to such transfer.”
The assessee has also raised Additional grounds but pressed only ground No. 2 as raised vide additional grounds, which is as under: -
“2) Without prejudice to the above, assuming that the transfer is of capital asset, the Ld. CIT(A) erred in law and in
Briefly stated, facts are that assessee purchased development rights in respect of 7 buildings from Jayraj Devidas and others. This development right in respect of three buildings was shown on the asset side of the Balance sheet under the head ‘Investments’ as on 31.03.2010 relevant to assessment year 2010-11. Subsequently, assessee entered into a Joint Venture agreement and agreed to contribute the said development right as ‘capital contribution’ at an agreed consideration of Rs. 5 crores to Benchmark Properties, i.e. the AOP. The relevant Joint Venture agreement is enclosed in assessee’s paper book at pages 42 to 52. The assessee filed its return of income for assessment year 2012-13 and disclosed the amount of Rs. 5 crores as ‘capital contribution’. The assessee has disclosed development rights in respect of 3 buildings under the asset side of the Balance sheet under the head ‘Investments’ and vide the Joint Venture agreement dated 01.07.2010, assessee has agreed to contribute the said remaining development right as ‘capital contribution’ for an agreed consideration of Rs. 5 crores to the AOP, M/s. Benchmark Properties. The Assessing Officer while framing assessment treated transfer of the development right in the three buildings under Section 50C of the Act inspite of claim made by assessee that provisions of
Aggrieved, assessee preferred appeal before the CIT(A). The CIT(A) also confirmed the action of the Assessing Officer by holding that this is transfer of capital asset covered by provisions of Section 50C of the Act by relying on the decision of ITAT, Lucknow Bench in the case of Carlton Hotels Pvt. Ltd. by observing in Para 7.5 as under :-
“7.5 Another ground taken by the appellant that the transaction under review is covered by section 45 which is a special provision whereas section 50C has been introduced with a different intention to cure malpractices prevailing in property market and is a fictional provision and not wide enough to cover all short of transaction. This issue was examined by ITAT Lucknow in the case of Carlton Hotels Pvt. Ltd. which is infact relied upon by the assessee. The relevant para from the judgment are reproduced below.
On the other hand, where a transfer covered under s. 45(3) is sought to be In view of this discussion, section 50C is applicable as the market value of land at TDR is Rs.10,10,47,000/- as against Aggrieved, assessee preferred appeal before the Tribunal. 6. Before us, the learned counsel for the assessee, Dr. K. Shivram argued that as per the agreement, assessee has acquired total development rights to develop 7 buildings out of which assessee-firm had developed and sold 4 buildings on its own and disclosed the profit earned as business profit in its return of income. The development right in respect of the remaining 3 buildings were shown in the asset
“i) Shri Sarrangan Ashok vs ITO, dated 19.08.2019 for assessment year 2015-16; ii) ACIT vs Moti Ramanand Sagar, dated 28.02.2019 for assessment year 2012-13; and,
The learned counsel stated that even the provisions of Section 50C of the Act are not applicable as there is no transfer of land and building, but merely transfer of development rights which were acquired by entering into Development Agreement dated 11.12.2006 and 28.06.2007 with Jayraj Devidas and others and assessee was never the owner of the land and building and had only acquired simple development rights which was transferred by it to the AOP, M/s. Benchmark Properties. The learned counsel submitted that the assessee has righty declared the transaction in terms of Section 45(3) of the Act instead assessed by Assessing Officer and confirmed by CIT(A) under Section 50C of the Act.
On the other hand, the ld. Senior DR, Ms. Kavita Kaushik heavily relied on the decision of ITAT, Lucknow Bench in the case of Carlton Hotels Pvt. Ltd. (supra). She also relied on the orders of CIT(A) and Assessing Officer.
We have heard the rival contentions and gone through the facts and circumstances of the case.We noted that assessee had acquired development rights emanating from land bearing Serial No. 24 Hissa No. 1 and 2 situated at Mirra Road District, Thane from Mr. Jayraj Devidas and others vide development agreement dated 11.12.2006 and 28.06.2007. We also noted from the agreements that the assessee has acquired total development rights to develop about 7
“45(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes
The learned Counsel for the assessee also drew our attention to the provision of section 50C of the Act which read as under: -
“50C(1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the “Stamp valuation authority”) for the purpose of payment of stap duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.”
In view of the above, the learned Counsel stated that the introduction of development rights by way of capital contribution under “17. What is the profit or gain which can be said to accrue or arise to the assessee when he makes over his personal asset to the partnership firm as his contribution to its capital. The consideration, as we have observed, is the right of a partner during the subsistence of the partnership to get his share of profits from time to time and after the dissolution of the partnership or with his retirement from the partnership to receive the value of the share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges, when his personal asset merges into the capital of the partnership firm a corresponding credit entry is made in the partner’s capital account in the books of the partnership firm, but that entry is made merely for the
The learned Counsel for the assessee specifically relied on the Mumbai Tribunals decision in the case of Voltas Ltd Vs. ITO [2016] 74 taxmann.com 99 (Mumbai), wherein it is held that the provisions of section 50C of the Act could not be applied to sale development rights of land owned by the assessee. We noted that the provisions of section 45(3) provides that when a person transfer his capital asset to a firm
Coming to the additional ground raised by assessee, the same need no adjudication as we have already adjudicated the issue of applicability of provision of section 45(3) of the Act, hence there is no question of adjudication of provision of section 50(C) of the Act