SMT. SRIDEVI,BANGALORE vs. INCOME TAX OFFICER, WARD-6(3)(3), BANGALORE

O R D E R

Per Shri A.K. Garodia, Accountant Member

by the assessee are as under. “1. The order of the Ld. CIT (A) - 6, Bengaluru is erroneous both on facts and in law to the extent the order is prejudicial to the interest of the assessee.

2. The Ld. CIT(A)-6 erred in upholding the action of AO in calculating capital gain at Rs.49,01,363/- by adopting the Guidance Value of Flat @1210/- per sq.ft.

3. The Ld. CIT(A)-6 ought not to have uphold the application of Guidance value of Flat Rs.1210 per sq.ft for the purpose of fair market consideration.

4. The Ld. CIT(A) has erred in upholding the application of Guidance value of flat for the purpose of working out the consideration without properly appreciating explanation Karnataka Stamp Act 1957 of Article-20 (2) where it relates to {instrument} of conveyance executed by a promoter, a land owner, or a developer by whatever name called , pertaining to premises of 'Flat' as defined in clause (a) of section of the Karnataka ownership Flats (Regulation of the Promotion of construction, sale, management and transfer Act, 1972(Karnataka Act 16 of 1973) or 'Apartment' as defined in clause (a) of section 3 of the Karnataka Apartment of Ownership Act 1972 (Karnataka Act 17 of 1973) or transfer of share by or in favor of co-operative society or Page 2 of 7 company pertaining to premises or unit and the market value of the property which is the subject matter of conveyance. Explanation - (a) " Premises " means and includes undivided interested in the land, building and proportionate share in the common in the areas.

7. The order of the Ld. CIT(A) is erroneous as the judgment of the honorable ITAT, Bangalore in the case of Essae Teraoka Limited (2016) 67 Taxmann.com 147 is not correctly interpreted and applied to the present case.

at any time before or at the time of hearing of the appeal.”

3. The assessee has also raised some additional grounds which are as under. “10. The AO and Ld. CIT(A) ought to have appreciated that the deduction u/s 54F of the Act is applicable in respect of all the 6 flats received by the appellant.

11. The AO and Ld. CIT(A) erred in not considering the fact that 6 flats are to be considered as one whole unit and deduction u/s 54F is to be allowed in respect of all 6 flats.

12. The AO and Ld. CIT(A) ought to have appreciated that after claiming deduction u/s 54F of the, the capital gains in respect of 6 flats works out to NIL.

13. The AO was wrongly taken entire value of 6 Flats to extent of 7235 Sft Guidance value of Flats @Rs.1210/- rather than 50% of the land value. Guidance of Flat as per Karnataka Stamp Act 1957 i.e. Flat includes land, Building, propionates common Areas. As per Karnataka Stamp Act 1957 Where it relates to first instrument of conveyance executed by a promoter, a land owner, or a developer by whatever name called, pertaining to premises of 'Flat' as defined in clause (a) of section 2 of the Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972 (Karnataka Act 16 of 1973) or 'Apartment' as defined in clause (a) of section 3 of the Karnataka Apartment Ownership Act, 1972 (Karnataka Act 17 of 1973) or transfer of share by or in favor of Co- operative Society or Company pertaining to premises or Unit and the Page 3 of 7 market value of the property which is the subject matter of conveyance. Explanation :- (a) "Premises" means and includes undivided interest in the land, building and proportionate share in the common areas: Assessee was given 2400 Sft of land for joint Development and assessee was received 7235 sft construction area received in the A.Y 2009-10. AO was applied 7235 Sft @Rs.1210/- Guidance value Flat rate applied which not correct. Guidance of Flat includes land value also in the above case Assessee was not received any land from Developer only construction was received in the A.Y 2009-10 only not in the A.Y 2008- 2009. AO Applied Guidance value Flat is not correct.

14. The Ld AO ought to have taken into account the market value /guidance value of the asset (i.e. original asset) transferred as on date of JDA for arriving at the capital gain.

15. The Ld AO ought to have fairly appreciated that the appellant has parted with 50%of his land for development in FY 2007-08 therefore 50% of cost of land should have been consider for the sale consideration.

at any time before or at the time of hearing of the appeal.”

4. In course of hearing, it was submitted by ld. AR of assessee that as per para no. 11 of the order of ld. CIT(A), it is noted by ld. CIT(A) that the AO has adopted cost of construction on the basis of expenditure accounted for by builder and the AO made the addition accordingly. He also pointed out that ld. CIT(A) has referred to the Tribunal order rendered in the case of Essae Teraoka Ltd. (2016) 67 taxmann.com 147 (Bangalore-Trib) in para 11 and decided the issue against the assessee. He submitted that the Tribunal order rendered in the case of Sri Venkatarama Raju N Vs. ITO in dated 08.09.2016 is supporting the case of the assessee. He submitted that this Tribunal order is available on pages 1 to 13 of the case law paper book and in particular, our attention was drawn to para no. 19 of this Tribunal order available on page no. 11 of the case law paper book. It was pointed out that in that case, the Tribunal has followed another Tribunal order rendered in the case of Shri N Chandra Reddy and reproduced the relevant portion of this Tribunal order and pointed out that in this Tribunal order, it was held that the matter was restored back to the file of AO to compute the capital gains only on the basis of guidance value of the land. Reliance was also placed on another Tribunal order rendered in the case of Shri N.G. Chandra Reddy (HUF) Vs. DCIT in ITA No. 390/Bang/2015 dated Page 4 of 7 20.07.2016 copy available on pages 14 to 25 of the case law paper book. It was pointed out that the relevant para of this Tribunal order is para no. 11 on page nos. 22 to 25 of the case law paper book. The ld. DR of revenue supported the order of ld. CIT(A).

5. We have considered the rival submissions. We find that in the present case, the AO adopted guidance value of flats received by the assessee for the purpose of computing capital gain whereas the claim of the assessee is this that the guidance value of the land transferred by the assessee should be considered for the purpose of computing capital gain. Para no. 11 of the Tribunal order rendered in the case of Shri N.G. Chandra Reddy (HUF) Vs. DCIT (supra) is relevant and hence, the same is reproduced hereinbelow for ready reference from pages 22 to 25 of the case law paper book. “11. We have considered the rival submissions as well as the relevant material on record. We find that as per the JDA dt.12.5.2004 the assessee has handed over possession to the developer for construction of the residential project though the said JDA and handing over of the possession does not constitute an outright and absolute sale however it would certainly constitute the transfer of the immovable property as per the provisions of section 2(47)(v) of the Act as held by the Hon'ble jurisdictional High Court in the case of Dr.T.K. Dayalu (supra) in para 8 as under : 8. The Hon'ble Supreme Court (sic-Bombay High Court) in Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 180 CTR (Bom) 107 : (2003) 260 ITR 491 (Bom) held that the date relevant for attracting capital gain having regard to the definition under s. 2(47) of the Act is the date on which possession is handed over by the developer and has observed as follows : "Under s. 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 to in s. 53A of the Transfer of Property Act would come within the ambit of s. 2(47)(v). That, in order to attract s. 53A. the following conditions need to be fulfilled. There should be a contract for consideration. It should be in wining; it should be signed by the transferor; it should pertain to transfer of immovable property; the transferee should have taken possession of the properly; lastly, the transferee should be ready and willing to perform his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under s. 2(47)(v). Sec. 2(47)(v) was introduced in the Act from the asst. yr. 1988-89 because prior thereto, in most cases, it was argued on behalf of the assessee that no transfer took place till execution of the conveyance. Consequently, the assessees used to enter into agreements for developing properties with the builders and under Page 5 of 7 the agreement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, s. 2(47)(v) came to be introduced in the Act." The Hon'ble Supreme Court (sic) has referred to the contention of the assessee and the earlier judgments of the Supreme Court cited by him and held that those judgments were prior to introduction of the concept of deemed transfer under s. 2(47)(v) if the Act and if the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability. Therefore, in these appeals, we hold that capital gain is to be taxed in the year 1997-98 and not in the year 2003-04 as contended by the assessee. Accordingly, we answer the substantial questions of law framed in IT Appeal No. 3209 of 2005 in favour of the Revenue and substantial questions of law framed in IT Appeal No. 3165 of 2005 against the assessee and pass the following order : IT Appeal No. 3209 of 2005 is allowed. IT Appeal No. 3165 of 2005 is dismissed." Following the decision of the Hon'ble jurisdictional High Court (supra), we do not find any error or illegality so far as the JDA along with handing over of possession constitute transfer of land in question in terms of section 2(47)(v) of the Act. In the case of K.M. Nagaraj (supra), the Tribunal though taken a different view however the judgment of Hon'ble jurisdictional High Court in the case of Dr.T.K.Dayalu (supra) was not taken into consideration as it was not brought to the notice of the Tribunal. As regards the computation of capital gains, we find that the co-ordinate bench of this Tribunal in the case of Shankar Vittal Motor Co. Ltd. (supra) has held as under : " We have given our thoughtful consideration and rival submissions and facts and circumstances of the case and also gone through the order of the authorities below. As the case referred as Smt Prathima Reddy Vs ITO, Ward- 6(4) (2012) 25 Taxmann.com 264(Hyd.) by the learned DR actually dissimilar to the facts of the present case because in the said case, the controversy was with regard to the assessment year, but the determination of value was not in dispute. However, in the instant case, the main controversy is not with regard to the assessment year, but it is of the valuation of property whether market value as on the date of JDA has to be considered or Construction cost has to be considered. The judgment passed by the jurisdictional High Court in the case of CIT Vs Dr. T.K.Dayalu 292 Taxman.com531 is relevant for deciding the present controversy. We are of the view, because at the time of signing JDA the capital gain has to be computed only on the guidance value of the land. Even otherwise, if any capital gains to be accrued in future in favour of Page 6 of 7 assessee after receiving the possession of the property. Certainly that would also be subject to capital gains. Therefore, in our final conclusion valuation of the capital gain should be appropriate to adopt the FMV/asset as deemed consideration, but not cost of the construction. With the above observation we dismiss the appeal of the revenue." Accordingly in the facts and circumstances of the case, the issue of computation of capital gains is set aside to the record of the Assessing Officer with a direction to compute the capital gains by taking consideration for transfer of the land as on the date of JDA as market value of the asset to be received by the assessee.”

6. In this para, the Tribunal has followed another Tribunal order rendered in the case of ACIT Vs. Shankar Vittal Motor Co. Ltd. in ITA No. 35/Bang/2015 dated 18.03.2016 and reproduced the relevant part of this Tribunal order and thereafter held that the issue regarding computation of capital gain is set aside and restored back to the AO for fresh decision with the direction to compute the capital gain by taking into consideration the market value of land being guidance value of land on the date of JDA. In the present case also, by respectfully following the Tribunal order, we set aside the order of ld. CIT(A) and restore the matter back to the file of AO for fresh decision with the same directions as given by the tribunal in that case that the AO should adopt the guidance value of land transferred by the assessee on the date of JDA for computation of capital gain.