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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)- II, New Delhi dated 12.06.2014 for the Assessment Year 2007-08. 2. The assessee has raised the following grounds of appeal:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.43,60,704/- as short term capital gain on sell of plot by the assessee whereas assessee has declared long term capital gain at Rs. 1,42,111/- and has further erred in rejecting the claim of Rs.9,25,000/- being expenses incurred by assessee on improvement of the said land and further erred in invoking the provisions of section 50C of the Act and that too without giving show cause notice and impugned addition has been made without considering the submissions of assessee and by recording incorrect facts and findings and without giving adequate opportunity of hearing.
2. That in any case and any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.43,60,704/- as short term capital gain is contrary to law and facts, void ab initio, beyond jurisdiction, and without giving adequate opportunity of hearing, by recording incorrect facts and Page | 1 M/s. Jai Laxmi Developers (P) Ltd Vs. DCIT, (Assessment Year: 2007-08) findings and the same is not sustainable on various legal and factual grounds.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of the Income Tax Act, 1961.”
3. The brief facts of the case is that assessee is a company whose original assessment was completed u/s 143(3) of the Act on 09.11.2009 determining the total income of Rs. 116860/- at the returned income. Subsequently, vide order passed u/s 263 dated 06.09.2011 the ld CIT(A), Central-II, New Delhi cancelled the above assessment. The main reason of such cancellation was that the assessee has received loan from companies where the share holders of the assessee are having substantial interest. This facts was not examined by the ld AO with respect to applicability of section 2(22)(e) of the Income Tax Act, 1961. The ld CIT(A) further noted that the assessee has sold plot No. D-244 in Sector 47, Noida for Rs. 31.50 lacs holding it to be long term capital gain. According to him same should be short term capital gain. Further the ld AO failed to examine the provisions of section 50C of the Act as the market value of the plot was Rs. 63 lacs. He further noted that improvement charges were incurred by the assessee after the date of sale of the plot. Consequent to that the assessment u/s 143(3) read with section 263 of the Act was passed on 22.03.2013 by the ld AO. He made the addition of Rs. 11 lacs u/s 2(22)(e) of the Act. Further, the capital gain of the property was worked out as short term capital gain considering the sale value of Rs. 63 lacs and granting from there the cost of purchase of plot of Rs. 19.39 lacs. Consequently, the income of the assessee was assessed at Rs. 5460704/- instead of Rs. 116860/-.
4. The assessee carried the matter before the ld CIT(A) where he deleted the addition u/s 2(22)(e) of the Act and confirmed the addition on account of short term capital gain of Rs. 43.60 lacs. Therefore, the assessee in appeal before us.
M/s. Jai Laxmi Developers (P) Ltd Vs. DCIT, (Assessment Year: 2007-08) 5. In view of the above facts the solitary issue in the appeal is to examine whether the property is „short term capital asset‟ or „long term capital asset‟ and further whether the cost of improvement incurred by the assessee is allowable or not.
The ld AR submitted that the assessee sold the above property on 02.08.2006. The assessee got right over the property by taking possession on 17.09.2002. He further stated that by the transfer memorandum dated 17.09.2002 for the above plot it was transferred in the name of the assessee. He further stated that as the assessee has purchased this plot on 17.09.2002 and sold on 20.12.2005 the asset was held for more than 36 months and hence, same is a long term capital asset. He relied on the decision in the case of M/s. Madhu Kaul Vs. CIT 363 ITR 0054, Punjab & Haryana High Court, Vinod Kumar Jain Vs. CIT 344 ITR 501 High Court of Punjab and Haryana decision of the Hon'ble Supreme Court in case of Sanjeev Lal Vs. CIT dated 01.07.2014. He further relied upon the decision of the coordinate bench in the case of ACIT Vs. Sanjay Kumath 63 SOT 90 and Jitender Mohan Vs. ITO 11 SOT 594. He therefore, stated that the gain on sale of property is a long term capital gain. With respect to the cost of improvement, he stated that as the plot was not in the good shape and there was a big garbage dump therefore, the above plot was not in saleable condition, therefore, a sum of Rs. 9.25 lacs was spent and claimed as cost of improvement. He therefore, submitted that the revenue authorities failed to consider the above claim. With respect to difference in circle rate and rate at which the above property was sold, he stated that „agreement to sale‟ with the buyer was entered into on 20.12.2005 for total consideration of Rs. 31.50 lacs. He stated that revision in the circle rate from Rs. 7000/- to Rs. 14000/- was after six months of the date of “agreement to sale”. He further stated that actual transfer deed was signed on 02.08.2006, he therefore, stated that when the agreement to sale was made it was at the circle rate and the ld AO is not justified in taking the circle rate as on the M/s. Jai Laxmi Developers (P) Ltd Vs. DCIT, (Assessment Year: 2007-08) date of the transfer deed. He further referred to the decision of the coordinate bench to support his claim that amendment to section 50C(1) is curative in nature and therefore applies with retrospective effect w.e.f 01.04.2003. According to him, the benefit of such amendment which is made to remove the hardship, applies to the case of the assessee.
The ld DR vehemently relied upon the orders of the ld lower authorities. It was vehemently stated that when the assessee has not held the property in its name for more than 36 months, the ld AO has correctly taxed it as short term capital gain. It was further stated that the amendment in section 50C does not fulfill the requisite condition of that proviso as no payment was received at the time of agreement. With respect to the cost of improvement he submitted that, the assessee has failed to provide the requisite details and therefore, the lower authorities have correctly denied the cost of such improvement. In short, he relied upon the orders of the lower authorities.
We have carefully considered the rival contention and perused the orders of the lower authorities. The undisputed facts are that the assessee is a private limited company who is said to have purchased a plot of land No. D-244, Sector 47, Noida Complex. The evidence of the purchase of the plot was shown to be „transfer memorandum‟ issued by Noida for residential plot on 17.09.2002 from one Shri Rishi Pal. This document is transfer permission in respect of residential plots. According to that memorandum, the assessee was to execute lease deed within 30 days from the date of issue of check list. According to clause 6, the assessee was allowed to pay the balance installment of plot on premium along with the interest on the due date. The assessee was also to enjoy the lease hold rights for a period of 90 years from the date of execution of the lease hold deed. The assessee says that date of acquisition of the property is required to be considered from 17.09.2002. The claim of the AO is that on 12.05.2006, the Noida Authority executed the lease deed in favour of the assessee company. Therefore, this is the date on which the M/s. Jai Laxmi Developers (P) Ltd Vs. DCIT, (Assessment Year: 2007-08) assessee acquired the property and hence it should be taken as date of acquisition. Vide agreement dated 20.12.2005, the assessee entered into a “agreement to sale” of the above property with Matrix Investment Pvt Ltd. The agreement to sale was without possession at a total consideration of Rs. 31.50 lacs on 20.12.2005 and assessee was paid a consideration on that date by PO No. 26556 of Union Bank of India, New Delhi of Rs. 25 lacs. However, the agreement was without possession. Subsequently, the above plot was transferred in the name of Matrix Investment by Transfer Memorandum dated 15.06.2006. According to the provisions of section 2(42A) of the Act „short term capital assets‟ means the capital asset „held‟ by the assessee for not more than 36 months immediately preceding the date of its transfer. As according to the assessee, it held the property from 17.09.2002. According to the ld AO its acquired on 15.06.2006. Therefore, period of holding commence from that date only. On reading of provisions of section 2(42A) the capital asset must be „held‟ by the assessee and not be „owned‟ by the assessee for more than 36 months. The Hon'ble Delhi High Court in case of CIT Vs. Frick India Ltd 369 ITR 328 has held that capital asset „held‟ is not confined to or restricted to ownership of a property. It can also consist of rights other than ownership rights in an asset, like leasehold rights, allotment rights etc. The sequitur, therefore, is that the word “HELD or HOLD” is not synonymous with right over the asset as an „owner‟ and has to be given a broader meaning and wider meaning. Similar view has been taken by the Hon'ble madras High Court in 301 ITR 345. In the present case by obtaining the orders of the Noida Authority of transfer memorandum on 17.09.2002, the assessee got a right to get the lease hold right for 90 years from that date. It conferred the right upon the assessee to hold that particular property from that date. Such is also the view taken by the Hon‟ble Punjab and Haryana High Court in case of Madhu Kaul Vs. CIT 368 ITR 148. Therefore, the view taken by the ld AO that the assessee held property only from 05.06.2006 is devoid of any M/s. Jai Laxmi Developers (P) Ltd Vs. DCIT, (Assessment Year: 2007-08) merit. In fact assessee got the right over the property on 17.09.2002. Therefore, the property was held by the assessee for more than 36 months and its transfer resulted into long term capital gain to the assessee. Therefore respectfully following the above decisions, we hold that the assets sold by the assessee is a „long term assets‟.
With respect to the claim of the assessee of deduction of Rs. 925000/- as cost of improvement paid by the assessee for leveling of the land etc., the ld CIT(A) has made a detailed finding vide para No. 5.6 which shows that the assessee has failed to prove incurring of such cost by documentary evidence. The assessee has just supported it by evaluation report merely on information. Therefore, in absence of any information of incurring any cost of improvement deduction cannot be allowed to the assessee. In view of this, we do not find any merit in the argument of the assessee that cost of improvement of Rs. 925000/- should be allowed to the assessee as deduction from the sale consideration.
Now we come to the last issue whether the provision of section 50C applies in the case where agreement to sell of the above property to Matrix Investment for Rs. 31.50 lacs was executed on 20.12.2005 along with a sum of Rs. 25 lacs on that date. In the present case as the consideration has been passed on the same date on which the agreement of sale has been entered into, therefore, stamp duty rate as on the date of agreement shall be applied. We draw support from the order of the coordinate bench in 161 ITD 627 wherein, it has been held that the proviso to section 50C inserted by Finance Act 2016 w.e.f 01.04.2017 applies retrospectively. Therefore, we direct ld AO to take stamp value of the property as on the date of the agreement. In view of this ground NO. 1 and 2 of the appeal of the assessee are partly allowed by holding that assets sold by the assessee is a „long term capital asset‟ and the circle rate if any for the purpose of computing the capital gain in accordance with section 50C, shall be taken as on the date of the agreement entered into by the assessee. However, the claim of the assessee of Rs. 9.25 lacs M/s. Jai Laxmi Developers (P) Ltd Vs. DCIT, (Assessment Year: 2007-08) for deduction of cost of improvement is rejected in absence of any evidence of incurring of those expenses. Accordingly, ground No. 1 and 2 of the appeal are partly allowed. Ground No. 3 is consequential in nature and hence, dismissed.
The appeal of the assessee is partly allowed. Order pronounced in the open court on 19/06/2018.