ITO INTERNATIONAL TAXATION 1(2), CHENNAI vs. MAFAZ MOHAMMED, CHENNAI

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ITA 1759/CHNY/2017Status: DisposedITAT Chennai01 March 2018AY 2014-155 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the taxability of long-term and short-term capital gains arises in the financial year 2006-07, relevant to AY 2007-08, aligning with a previous similar ruling. It also directed the AO to tax gains from the transfer of constructed area only upon actual transfer.

What were the facts?

The assessee entered into a Joint Development Agreement (JDA) for developing a property. The Assessing Officer (AO) determined the taxability of capital gains in AY 2014-15, while the Commissioner of Income Tax (Appeals) [CIT(A)] shifted it to AY 2007-08. The Revenue appealed this decision.

What were the issues?

The primary issues were the correct assessment year for taxing capital gains arising from a JDA and the timing of taxation for gains from constructed areas.

Which sections of the Income-tax Act were involved?

Section 45,Section 48,Section 143(3),Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY

Pronounced: 01.03.2018

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

1.

The appeal by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)- 16, Chennai dated 15.05.2017 in for the assessment year 2014-15 passed U/s.250(6) r.w.s.

143(3) of the Act.

2.

The Revenue has raised several grounds in its appeal however the Ld.AR submitted before us that there are only two issues/grounds arising out of the appeal which was conceded by the Ld.DR and the same are stated herein below for adjudication:-

(i) The Ld.CIT(A) has erred in holding the Long Term Capital Gain on transfer of UDS portion of land to developers through Joint Development Agreement (JDA) is taxable in the Assessment year 2007-08 as against Assessment year

2014-15 held by the Ld.AO. (ii) The Ld.CIT(A) has erred in holding that only gain arising from the sale of built-up area effected in the previous year alone is taxable during the year under consideration.

3.

The brief facts of the case are that the assessee is a non- resident individual filed his return of income for the assessment year 2014-15 electronically on 31.12.2014 declaring taxable income of Rs.1,17,16,770/- and subsequently the assessee has also filed revised return of income admitting taxable income of Rs.2,69,68,400/-. The case was selected for scrutiny and notice U/s.143(2) of the Act was issued on 22.09.2015 and finally assessment was completed on 30.12.2016 wherein the Ld.AO made additions with respect to Long Term and Short Term Capital Gain based on the Joint Development Agreement dated 27.06.2006 entered between the assessee & 13 other co- owners of the property with M/s. PS Srijan Reality for development of their viz., vacant land situated at No.137, Velachery Main Road, Velachery, Chennai – 600042, and the name of the project/building complex to be constructed is “Paramount Grand Mall”.

4.

At the outset the Ld.AR submitted before us that in the case of one of the joint owners of the property Shri Shafiq Mohammed Shah, with respect to the same project and same land, the issues were decided by the Tribunal vide its order dated 11.05.2017 in 945/Mds/2016 for the assessment year 2011-12 in favour of the assessee. The Ld.DR could not controvert to the submission of the Ld.AR on this regard.

5.1 After hearing both sides, we find merit in the submission of the Ld.AR. The issue regarding the year of taxability of long term capital gain, the Tribunal in its order cited supra in page No.37 para No.10 had held that the taxability of long term/short term capital gains arises only in the financial year 2006-07 relevant to the assessment year 2007-08. Since the facts of the case cited by the Ld.AR and the case of the assessee are the same we do not find it necessary to interfere with the order of the Tribunal cited supra. Accordingly we hereby hold in the case of the assessee also that the year of taxability of long term/short capital gain shall only arise in the financial year 2006-07 relevant to the assessment year 2007-08. Accordingly ground No. 2(i) raised by the Revenue is disposed off in favour of the assessee.

5.2 Further the Tribunal in the case cited supra with respect to the joint owner of the property, had decided the other similar ground raised by the Revenue herein above as follows:

11.

Now coming to the computation of short term capital gains on selling of assessee’s share of residential and commercial constructed area, the ld. AR submitted that co-owners of the land have transferred 36,537 sq.ft. of residential area and 4284 commercial area called as Food street during the financial year relevant to the A.Y 2011-12 and the findings of the CIT(Appeals) in para -14 of his order is irrelevant and bad in law. In our considered opinion, the gain on the transfer of the assessee’s share in constructed area is to be brought in tax as short term capital gains after giving due deduction as enumerated in sec.48 of the Act. The Assessing Officer has to consider this issue of computation of capital gains on assessee’s share of construction area along with undivided share in land which was actually transferred by the assessee in this assessment year. In other words, the Assessing Officer cannot bring into tax entire share of constructed area along with undivided share in land only on receipt basis as transferred unless there is actual transfer in terms of Sec.45 of the Act. Accordingly, we direct the Assessing Officer to tax the gains arising from transfer of capital asset effected in the previous year alone in the relevant assessment year 2011-12.

Since in the case of the assessee, facts being the same for the relevant assessment year the same decision of the Tribunal cited supra shall prevail. It is ordered accordingly.

6.

In the result the appeal of the Revenue is dismissed.

Order pronounced on the 01st March, 2018 at Chennai.

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