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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI LALIET KUMAR & SHRI MADHUSUDAN SAWDIA
आ.अपी.सं / (निर्धारण वर्ा/Assessment Year:2008-09) Asst. Commissioner of Income Tax, Shri T. Pandu, (L/H Late Lakshmi Vs. Circle 8(1), Hyderabad. Narayana Turairao) Hyderabad. PAN: ADCPT3006G (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri S. Rama Rao, Advocate रधजस् व द्वधरध/Revenue by:: Shri Shakeer Ahmed, DR सुिवधई की तधरीख/Date of hearing: 04/07/2024 घोर्णध की तधरीख/Pronouncement: 30/07/2024 आदेश/ORDER PER SHRI MADHUSUDAN SAWDIA, A.M: This appeal is filed by revenue against T. Pandu, (L/H Late Lakshmi Narayana Turairao)) (“the assessee”) against the order of Learned Commissioner of Income Tax (Appeals)-2, Hyderabad (“Ld. CIT(A)”) dated 08.11.2019 for the AY 2008-09.
At the outset, it is seen that, there is a delay of 29 days in filing of this appeal for which the assessee has filed a condonation petition along with Affidavit explaining the reasons for such delay. After considering the contents of the condonation petition and after hearing the Ld. DR, the delay of 29 days in filing of this appeal is condoned and the appeal is admitted for adjudication.
The grounds raised
by the revenue read as under : “
1. The Ld. CIT(A) erred is erroneous both on fact and law.
2. The Ld. CIT(A) erred in holding that the short term capital gains of Rs.2,10,94,439/- is not chargeable to tax for the assessment year 2008-09.
3. The Ld. CIT(A) erred in not considering the supplementary agreement dated 21.05.2006 through which transfer of 44 flats was effected.
4. Any other ground that may be urged at the time of hearing.”
4. The additional grounds of appeal raised by the revenue are as under : “
1. Whether on the facts and in the circumstances of the case and in law, the1d. CIT (A) erred in holding that the land sold is not a capital asset within the meaning of the Section 2(14) of IT Act, ignoring the fact that the said land fell within 8 Kms from the municipal limits of Hyderabad.
2. Whether on the facts and in the circumstances of the case and in law, the 1d.CIT (A) erred in following decision of Honble ITAT in the case of Srinivas Pandit HUF vs ITO Ward-7(4), Hyderabad ITAT (Order dt. 23.04.2010) ignoring the subsequent decision of Hon'ble ITAT, in the case of Ghousiya Begum and others in to 1027 of Hyderabad/2011 which reversed the above decision.
3. Whether on the facts and in the circumstances of the case and in law, the Id.CIT (A) erroneously held that if the land is treated to be capital asset then the entire Short Term Capital Gain (STCG) should be taxed in the AY 2007-08 but not in AY 2008-09 by squarely ignoring the consolidated documents registered on 18.08.2007 which is the basis for bringing the STCG for taxation.
4. Any other ground that may be urged at the time of hearing..”
5. Learned Department Representative (“Ld. DR”) submitted that the additional grounds filed are admissible in view of the judgement rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co.
Ltd. Vs. CIT (1998) 229 ITR 383. The prayer for admission of additional grounds noted above which are not in Memorandum of appeal are being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objection raised in additional ground are legal in nature for which the relevant facts are stated to be emanating from the existing record.
Brief facts of the case are that the assessee is an individual, filed his return of income for A.Y. 2008-09 on 21.05.2008, declaring total income of Rs.3,71,560/-, constituting pension of Rs.48,844/-, income from house property of Rs.89,880/-, income from business of Rs.49,000/-, income from other sources of Rs.75,915/-, short term capital gain(“STCG”) on sale of flat of Rs.1,07,925/- and agricultural income of Rs.19,450/-. The assessee also earned long term capital gain (“LTCG”) of Rs.19,62,977/- on transfer of land on account of development agreement entered with M/s. Saara Homes, LTCG of Rs.52,81,965/- on transfer of flats received out of development agreement entered with M/s. Saara Homes and LTCG of Rs.9,93,518/- on transfer of land to M/s. Happy Homes Housing and claimed all such LTCG as deduction u/s.54B of the Income Tax Act, 1961 (“the Act”), thereby offered for taxation LTCG of Rs. NIL. The case of the assessee was selected for scrutiny and the assessment was completed by the Learned Assessing Officer (“Ld. AO”) u/s. 143(3) of the Act on 31.12.2010 by treating part of agricultural income of Rs.1,550/- as income from other sources, making addition under STCG of Rs.2,10,94,439/- and after deleting the deduction claimed by the assessee u/s. 54B, calculated LTCG of Rs.3,55,75,077/-.
Aggrieved by the decision of Ld. AO the assessee had filed appeal before Ld.CIT(A), Vijayawada who passed order on 20.03.2014 and against the said order of Ld.CIT(A), Vijayawada the assessee had filed an appeal to ITAT. ITAT in its order dt.15.11.2018 set aside the case to the file of Ld.CIT(A) for de novo assessment. The Ld.CIT(A) after considering the submission of the assessee partly allowed the appeal of the assessee. The observation of the Ld. CIT(A) are contained at page no. 19 to 34 of his order, which is reproduced as under :
“ 6. The Decision: The transactions pertain to the taxability of the sale of land by the appellant and the co-owners sold in various stages from FY. 2003-04 onwards. The issues for adjudication are identical for the appellant and the co-owners, which are under appeal with the undersigned, for AY 2007-08 & 2008- 09. Therefore the common adjudication is made as under: Sri T.Lakshminarayana, Smt.T.Kasturi Bai, Smt. M. Lajwanti are the appellants involved, who alongwith other co-owner M. Gajanand had transferred the land, for the years under consideration, as per the assessing officer and were liable for capital gains for the years under consideration. The above persons were involved in two transactions, according to the AO, for which the capital gain liability was worked out accordingly while passing the assessment order. It will be imortant to note the facts of the case which are brought out as under: 1. The appellant, along with 3 others, were in possession of land admeasuring Ac 4.20 guntas (180 guntas) which was acquired as under: a. Land admeasuring 3 Acres (120 guntas} was originally acquired by the appellant and 11 others vide sale deed dated 30-03-1990 which was registered with SRO, R.R.Dist. Subsequently, vide release deed dated 18- 05-1992 eight members released their 8/12th share in the land for consideration of 1,32,000/-. With this deed Sri T.Lakshminarayana, Smt.T.Kasturi Bai. M.Gajanand, Smt. M .Lajwanti jointly became absolute owners of 3 acres land (equal share of each person). b. Property admeasuring 30 guntas was purchased by Sri T Lakshminarayan and Sri Gajanand through agreement of sale in 1981 which was registered in 2004 with SRO, Rajendranagar. The corresponding purchase deed was only made on 06-10-2005. c. Property admeasuring 30 guntas of land was purchased by Sri T.Lakshminarayana and Sri Gajanand vide sale deed dtd 28-07-2005 which the appellant claimed that the purchase was made in continuation of agreement entered in 1981. Subsequently, with regard to the total land admeasuring Ac 4.20 guntas, the appellant, along with 3 others, had entered into following transactions: 1) Development agreement with M/s Saara Homes with regard to land admeasuring Ac 1.36 guntas on 21.04.2003. 2) Agreement of sale cum irrevocable GPA with M/s Happy homes housing regard to land admeasuring Ac 2.13 guntas on 18.08.2007. The facts and issues pertaining to each of the transactions are discussed as under for the additions made by the A.O in AYS 2007-08 & 2008-09: Development agreement with M/s Saara Homes The appellant, along with 3 others, had entered into development agreement on 21.04.2003 with M/s Saara Homes, wherein the co-owners transferred land admeasuring Ac 1.36 guntas, which was acquired through two deeds dated 30.03.1990 and on 18.05.1992. The consideration for sale of this piece of land was arrived in the form of 38.1% of the constructed area on completion of be construction by the developer. The co-owners, took a deposit of Rs. 15,00,000/- on the date of execution. of the agreement which was to be refunded after the delivery of the constructed area in various stages. The ratio of the share of the owners and the developers was explicitly decided in the ratio 38.1 to 61.9 with respect to all areas including balconies, terraces, parking etc. The possession was to be given with the condition of 90 days from the date of agreement after removing the crops. The property in the schedule was mentioned as, Upparpally village, Rajendra Nagar Mandal, R R District. From the above agreement it is clear that the agreement was executed, the consideration was decided and also a sum of Rs. 15,00,000/- was taken as advance, to be refunded subsequently on the delivery of the constructed area. Thus, the consideration of Rs. 15,00,000/- was taken up front and the possession was to be given latest by 21.07.2003 (being 90 days from the date of agreement). There are two issues which are of relevance for the above transaction, the first being, whether the land falls in the definition of capital asset or not and the second being, whether the above was a transfer within the meaning of section 2(47) of the Income Tax Act for the purpose of chargeability of capital gains in the year of execution of the agreement. The capital gain would only arise, if the asset which has been transferred in question, is a capital asset.
Whether the land in survey no. 18/3 of Upparpally Village, Rajendra Nagar Mandal, R R District would be categorized as an agricultural land or not? The definition of capital asset as per section 2(14) of the Income Tax Act, 1961 is as under:
"2(14)" capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) any stock- in- trade, consumable stores or raw materials held for the purposes of his business or profession; (ii) 3 For personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him. Explanation.- For the purposes of this sub- clause," jewellery" includes- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semiprecious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;] (iii) 5 agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;] The above implies that the agricultural land is not a capital asset if it satisfies, certain distance conditions from conditions from the relevant municipality or cantonment boards etc as specified in the above clauses. The land falls in Rajendra Nagar Mandal. The AO was of the view that the land though it falls in Rajendra Nagar Mandal, which was not notified, but it is within the distance of 8 kms from Hyderabad municipality, which is notified and therefore the land is a capital asset and not an agricultural land as per the Sec. 2(14) (iii) (b) of the Act. The issue thus remains to be interpreted, as to whether the land falling in a particular municipality which is not notified, can be measured for distance purposes from another notified municipality for the purposes of determination as per the Sec. 2(14) (iii) (b) of the Act. Incidentally, the Hon'ble Jurisdictional ITAT in the case of Shri Srinivas Pandit (HUF) Vs. ITO Ward-7(4) for A.Y. 2003-04 in vide order dated 23.04.2010, for the land falling in the same municipality, where the taxability of the present land is under consideration, which was not notified, and held in para 12 as under: “12. In this case also admittedly, the entire transaction was made through Rajendra Nagar Revenue Authorities and not through Hyderabad Revenue Authorities. Therefore, as found by the Coordinate Bench of the Tribunal in the case of Capital Local Area Bank Ltd. (supra), the jurisdictional Municipality is Rajendra Nagar Municipality and not the Hyderabad Municipality. Since Rajendra Nagar Municipality is not admittedly notified by the Central Government, the agricultural land in question cannot be treated as capital asset by taking the distance from the limits of Hyderabad Municipality. By respectfully following decisions of the Coordinate Bench cited supra, we hold that the land in question cannot be treated as capital asset within the meaning of Sec. 2(14)(iii)(b) of the IT Act. Accordingly, Orders of the lower authorities are set aside." The above decision was reversed in the to 1027/Hyd/11 in the cases of Smt. Ghousia Begum & 4 others, Hyderabad & others "But, the question still remains whether the impugned land come within the meaning of "capital asset". The land is situated at Narsing Village of Rajendra Nagar Mandal, R.R. District which is within the municipal limits of Rajendra Nagar. According to the learned counsel for the assessee, Rajendra Municipality is not notified by the Central Government and therefore the agricultural lands which fall under the jurisdiction of the Rajendra Nagar Mandal cannot be considered as capital asset within the meaning of section 2(14) of the Income-tax Act. But, the fact is that this is urban land akin to the Hyderabad Municipality situated within 8 KM from the local limits of Hyderabad Municipal Corporation. In similar circumstances, the jurisdictional High Court in the case of CIT vs. Bola Ramaiah (174 ITR 154) held that the capital gains arising out of sale of land situated within 8 KM of local limits of Hyderabad Municipality, is liable for tax on capital gains irrespective of the fact whether it falls under the limits of Rajendra Nagar Mandal or otherwise. Further, mere fact that the land in question was agricultural land cannot be a ground to claim for exemption under section 2(14) of the Act as the land is situated within the local limits of Hyderabad Municipal Corporation. Further, it was held recently by the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Smt. Anjuna Sehgal (supra) that the expression "from the local limits of any municipality" used in section 2(14)(iii)(b) of the Income-tax Act denotes "any municipality or municipality of the District in which the land is situated". Further, capital gains arising from the transfer of agricultural land situated in municipal or other urban areas or notified adjoining areas will be liable to income-tax. In this view of the matter, and considering the facts and the circumstances of the present case, in our considered view, the lower authorities are justified in determining the land in question, as capital asset liable for income-tax. " The department meanwhile had filed an appeal against the order of Shri Srinivas Pandit (HUF) with the Hon'ble High Court, who adjudicated on the issue vide order dated 04.07.2013 in ITTA No. 195 of 2013 as under: “….....The learned Tribunal while rendering the decision has followed the decision of Amritsar Bench of the tribunal in the case of DCIT Vs. Capital Local Area Bank Ltd., reported in [2009] 123 TTJ(Asr) 918. There is no statement in the appeal papers that the aforesaid judgement and order of the Amritsar Bench of the Tribunal has challenged or upset. Therefore, we cannot admit the appeal to unsettle the settled issue. The appeal is accordingly dismissed. No order as to costs. From the above, it is seen that the Hon'ble AP High Court had adjudicated on the issue, by holding that such land would fall under the category of agricultural land and no capital gain is chargeable on such transfer. The Hon'ble ITAT in the case of Konde Jangaiah Yadav, Banda Mallesh and Banda Nirmala in ITA No. 1010/H/13 vide order dated 21.10.2016 has followed the decision of Hon'ble AP High Court by discussing both the decisions and observing as under: "3. During the current year assessee sold the land which is situated at Peeramcheruvu, Rajendra Nagar Mandal, Ranga Reddy District. All the assessées did not file the return of income stating that the land in question was agricultural land and, therefore, not liable for capital gains. The mute question in these appeals are, whether the agricultural land situated in Rajendra Nagar Municipality, which is admittedly not a notified municipality, but, the above said land is situated within the radius of 8 kilometers of Hyderabad Municipality Corporation. Therefore, it is a notified area as per section 2(14) of the Act.
As per the earlier decision of the coordinate bench of this Tribunal in the case of Srinivasa Pandit (HUF) Vs. ITO, [2010] 39 SOT 350, it was held that the property situated in non-notified area, even though, the land is within 8 kilometers from the notified area is not a capital asset as per section 2(14) of the Act. In the meantime, the coordinate bench of this Tribunal has dealt with similar issue and took an opposite view in the case of Smt. Gousia Begum and others in to 1027/Hyd/2011, vide order dated 16/01/2012. Subsequently, the Department went to High Court in the case of Srinivasa Pandit(HUF) (supra) and in that the case, the Hon'ble High Court has observed as under: "....The learned Tribunal while rendering the decision has followed the decision of Amritsar Bench of the tribunal in the case of DCIT Vs. Capital Local Area Bank Ltd., reported in [2009] 123 TTJ(Asr) 918. There is no statement in the appeal papers that the aforesaid judgement and order of the Amritsar Bench of the Tribunal has challenged or upset. Therefore, we cannot admit the appeal to unsettle the settled issue. The appeal is accordingly dismissed. No order as to costs." From the above observations, the Hon'ble High Court has not discussed anything on the merits, but, it has expressed that "there is no statement in the appeal papers that the aforesaid judgement and order of the Amritsar Bench of the Tribunal has challenged or upset. Therefore, we cannot admit the appeal to unsettle the settled issue". Since the Hon'ble High Court has given its decision in favour of the assessee, applying the principle of Doctrine of Merger, the decision of Tribunal in the case of Srinivasa Pandit (HUF) (supra) will merge in the High Court's order.
Considering the above development, in our view, the decision of the Tribunal in the case of Srinivasa Pandit (HUF) (supra) holds good and applying the ratio laid down in that case, the appeals under consideration are allowed. Since we allowed the main grounds/grievance of the assessees, the other grounds raised
by the assessees are academic in nature. Accordingly, we dismiss the other grounds.
6. In the result, appeals of the assessees, namely, Konde Jangaiah Yadav, Banda Mallesh and Banda Nirmala are partly allowed." In view of the above, the Hon'ble ITAT following the decision of the Hon'ble AP High Court, has decided that the said land is not a capital asset, as the municipality in which the present land was located and was not notified and therefore, the above land would be out of the purview of definition of capital asset and therefore the transfer of the said land would not be liable for capital gains tax. Thus, as the said land is not a capital asset, no question arises to tax the same on its transfer under the head capital gains and the transfer thus is exempt from tax. In view of the above, the transfer of the land in Survey No. 18/3, Upparpally village, Rajendra Nagar Mandal, R.R. District is not taxable for the years under consideration.
2. Without prejudice to the above finding, it is important to note that the co-owners had transferred the land to the developer on 21.04.2003 by taking a deposit of Rs. 15,00,000/- and also agreeing for a consideration being 38.1% of the constructed area and the possession was to be given, latest by 21.07.2003. The said transaction falls in F.Y. 2003-04 and therefore the said transfer took place in A.Y. 2004-05 and the relevant capital gains, if any, will accrue in A.Y. 2004-05.
The above issue of taxability was contentious and there was a prospective amendment in the Income Tax Act from A.Y. 2018-19 as under: "Amendment of section 45.
In section 45 of the Income-tax Act, after sub-section (5) and the Explanation thereto, the following sub-section shall be inserted with effect from the 1st day of April, 2018, namely:-- '(5A) Notwithstanding anything contained in sub-section (1), where the capital gain arises to an assessee, being an individual or a Hindu undivided family, from the transfer of a capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority; and for the purposes of section 48, the stamp duty value, on the date of issue of the said certificate, of his share, being land or building or both in the project, as increased by the consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset: Provided that the provisions of this sub-section shall not apply where the assessee transfers his share in the project on or before the date of issue of said certificate of completion, and the capital gains shall be deemed to be the income of the previous year in which such transfer takes place and the provisions of this Act, other than the provisions of this sub-section, shall apply for the purpose of determination of full value of consideration received or accruing as a result of such transfer. Explanation.--For the purposes of this sub-section, the expression-- (i) "competent authority" means the authority empowered to approve the building plan by or under any law for the time being in force; (ii) "specified agreement" means a registered agreement in which a person owning land or building or both, agrees to allow another person to develop a real estate project on such land or building or both, in consideration of a share, being land or building or both in such project, whether with or without payment of part of the consideration in cash; (iii) "stamp duty value" means the value adopted or assessed or assessable by any authority of Government for the purpose of payment of stamp duty in respect of an immovable property being land or building or both." The above amendment very clearly suggests that this was not the intention of the legislature prior to A.Y. 2018-19 and the jurisdictional ITAT Single Member Bench of the Honourable Hyderabad Tribunal has recently, in the case of K Vijaya Lakshmi v. ACIT [TS-5722-ITAT-2018(Hyderabad)-O], held, inter alia, that Sec. 45(5A) cannot be applied retrospectively as they are substantive provisions. Further the Hon'ble AP High Court in the case of Potla Nageshwar Rao Vs. DCIT vide order dated 09.04.2014 held as under: "In the instant case, on 07.03.2003 an agreement was entered into by the assessee with M/s. Bhavya Constructions Pvt., Ltd., and the plan of the building was approved on 31.03.2003. These dates fall in the previous year 2002-03, relevant to assessment year 2003-04. Thus, in this case, the land being capital asset was transferred by the assessee to the developer during the assessment year under consideration, viz., 2003- 04, for construction and it is enough if the assessee has received the right to receive consideration on a later date, so as to attract eligibility to tax on capital gains during the year under appeal. The definition of transfer under Section 2(47) of the Income Tax Act, 1961, reads as follows:
transfer, in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in- trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. While dealing with the submission of Mr. Vasant Kumar transfer is deemed to have taken place in the year when the consideration has been actually paid, we are of the view that the language of Section 53-A of the Transfer of Property Act, 1882, which has been engrafted in the aforesaid definition of Section 2(47) of the Income Tax Act, 1961, does not contemplate any payment of consideration. We set out Section 53-A, which reads as under: Part performance Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. Therefore, we are of the view, while upholding the learned Tribunals application of law on this fact, that payment of consideration on the date of agreement of sale is not required, it may be deferred for future date. The element of factual possession and agreement are contemplated as transfer within the meaning of the aforesaid section. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the learned Tribunal has rightly held that the appellant is liable to pay tax on the capital gain for the assessment year. Accordingly, we do not find any element of law to admit this appeal. The appeal is therefore dismissed. "
The Hon'ble AP High Court very clearly held that the transfer is complete on the execution of the JDA and thus, this transfer to M/s. Sara Homes was liable to be taxed in A.Y. 2004-05. From the above discussions, it is clear that the amendment is prospective and thus, only from A.Y. 2018-19, the said section is valid and for the prior years, the taxability would arise in the year of execution of the agreement which was in A.Y. 2004-05 in the appellant's case. Thus the first transaction of sale, even if considered a capital asset, would only be liable for taxation in A.Y. 2004- 05 and not for the years under consideration. Subsequent transactions of the sale of constructed area received as consideration:- The appellant and the other co-owners after getting into the agreement on 21.04.2003 for 38.1% of the constructed area, translating into 74 flats (as per AO's order), subsequently, sold 59 flats under construction of which they were absolute owners for a total consideration on 18.08.2005 of Rs. 4,17,73,050/- at the rate of Rs. 725/- per sq.ft. The schedule of payments was also brought out in the agreement along with the receipt of Rs. 20 lakhs. Therefore, in this year the appellant and the co- owners sold the right in property, to the extent of above, which was created in their favour by the JDA. This right is a short term right, which was acquired on 21.04.2003 and was sold on 18.08.2005. The same is liable to be taxed as short term capital gain in A.Y. 2006-07, which does not fall under the present assessment years under adjudication and also cannot be taxed in these years. Subsequently, the aforesaid agreement dated 18.08.2005 was modified by a supplementary agreement on 21.05.2006, according to which only rights pertaining to 44 flats out of 59 flats which were transferred by agreement dated 18.08.2005 for a total consideration of Rs.3,11,44,550/- at the original rate of Rs. 725/- per sq.ft only stood and the sale pertaining to 15 flats were cancelled. The appellant and co-owners over and above the rate decided for 44 flats vide agreement dated 18.08.2005, further received a sum of Rs. 13,55,000/- as receipt from sale of parking and other amenities. Thus, though there was a reversal of sale to the extent of 15 flats as earlier 59 flats were sold and the same were reduced to 44 flats. The rate agreed of Rs. 01 725/- per sq.ft was not disturbed but the appellant and co-owners charged for an extra sum of Rs. 13,55,000/- by the new agreement dated 21.05.2006, which is liable for taxability as short term capital gain accordingly in the relevant proportion of their share for A.Y. 2007-08. The A.O is directed to tax the same accordingly. The appellant also received the consideration on account account of these agreements, other than the sum of Rs. 13,55,000/- in A.Y 2007-08 & A.Y 2008- 09, and has offered the same for taxation under long term capital gains and short term capital gains. The taxability of the same has already been adjudicated on the basis of transfer as per the Act and not on the receipt basis. However, the above adjudication would not result in the reduction of returned income for both the years of the appellants and the same was also conceded by the A.R. Agreement of sale cum irrevocable GPA with M/s Happy Homes Housing The appellant, along with 3 others, sold land admeasuring Ac 2.13 guntas to M/s Happy Homes Housing during the previous year relevant to AY 2007-08 and 2008-09. The appellant had entered into 7 agreements of sale cum GPA with possession, on various dates in F.Y. 2006-07, with the vendee during the previous year relevant to AY 2007-08 for 73.35 guntas and received a consideration of Rs.11,25,00,000/- as per agreements in the same year itself. The transfer, thus was complete in A.Y. 2007-08 with regard to 73.35 guntas as possession was given and consideration was received. The taxability if any, would arise for the sum of Rs. Rs. 11,25,00,000/- in A.Y. 2007-08 as the transfer took place.
Subsequently, a consolidated agreement of sale cum Irrevocable GPA with possession, was entered into for 93.39 guntas with the vendee on 18.08.2007 during the previous year relevant to AY 2008-09 for a total consideration of Rs. 13,75,00,000/-, the said agreement also included 73.35 guntas which was already sold in A.Y 2007-08 and the balance amount of Rs.2,50,00,000/- was received during the previous year relevant to AY 2008-09 for the remaining land. The taxability if any, would arise for the sum of Rs. 2,50,00,000/- in A.Y. 2008- 09 as the transfer took place. It is seen that the appellant offered capital gains on his 1/4th share of Rs.2,81,25,000/- out of consideration received amounting to Rs. 11,25,00,000/- for the AY 2007-08 and 1/4th share of Rs.62,50,000/- out of the balance consideration of Rs.2,50,00,000/- for the AY 2008-09. The appellant had claimed deduction u/s 54B for the both the assessment years which resulted in NIL capital gains for the AY 2007-08 & 2008-09 with respect to sale transaction entered into with M/s Happy homes housing. During the course of assessment proceedings for AY 2007-08, the AO held that the appellant, along with three others, has executed the agreement of sale- cum-irrevocable GPA on 18.08.2007 with M/s. Happy homes housing and as per the submissions of the appellant vide his letter dt.12.11.2008, the possession of the land was transferred only in August, 2007. According to A.O, the sale transaction attained finality only on 18.08.2007 i.e. during the previous year relevant to the assessment year 2008-09, the AO held that the appellant is not entitled for any deduction u/s 54B in the assessment year 2007-08 in respect of the properties sold during the previous year relevant to the assessment year 2008-09. It has already been discussed above, that the possession with regard to 73.35 guntas took place in A.Y 2007-08 and therefore, the finding of the A.O is factually incorrect as the registered documents are to be relied upon which clearly shows the possession being handed over. It is also important to note that the consideration was also received. The agreements entered into by the appellant and the co-owners for the F.Y. 2006-07 being 7 in number pertaining to 73.35 guntas explicitly mention that the possession has been given by the appellant. The deeds are explicit in nature and have been duly registered with possession, therefore, the transfer is considered in the year in which the document was executed with possession and the taxability for 73.35 guntas would lie in A.Y 2007-08 and for the balance in A.Y 2008-09. In this regard, it is to be noted that the land pertains to the same survey no. 18/3, Upparpally Village, Rajendra Nagar Mandal, R R District on which following the decision of jurisdictional High Court order discussed at length in the above paras, it was held that the land in question is an agricultural land not chargeable to tax. In view of the said finding, the land transferred would not be liable for capital gains. It is important to note that the appellant has claimed exemption u/s. 54B on the ground that the same may be allowed as it is a re-investment in the agricultural land. The issue of exemption U/s. 54B becomes infructuous, as the transfer of the land has already been held as a transfer not liable for capital gains as it is not a capital asset. In view of the same, the question of exemption u/s. 54B on the said land does not arise at all as the appellant has been already granted a relief from the taxability of the same. Needless to state that the appellant has itself offered certain incomes under the relevant head while filing the return of income, the adjudication of appeal in no manner would result in the reduction of the returned income of the appellant. However, if the relevant short term capital gain as computed above is higher than the short term capital gain returned by the appellant the same may be charged to tax accordingly.
The above findings deal with the issues under consideration for A.Y. 2007-08 and 2008-09 pertaining to the sale of land and the consequent sale of the consideration received in the form of flats at various stages and the taxability of the same thereof. In the light of above, the grounds are adjudicated accordingly.” 8. Agrrieved by the order of Ld.CIT(A) , the revenue is in appeal before us .
During the appellate proceedings the Ld. AR requested that if their submissions are heard by the bench first and if the bench is convinced on those submissions then deciding the appeal on merits will become academic. Accepting the request of the Ld. AR, bench allowed the Ld. AR to forward his submission.
Ld. AR submitted that the assessee along with three other persons viz. Smt. T. Kasturibai, Mr. M. Gajanand and Smt. M. Lajwanthi (“co- owners”) was owner of 3 acres of land at Rajendra Nagar. Further the assessee along with Mr. M Gajanand was also owner of 1.2 acres of land at Rajendra Nagar. Out of this joint holding land of 1.36 acres was transferred to M/s. Saara Homes through development agreement and land of 2.13 acres was sold to M/s. Happy Homes Housing. As per the terms of the development agreements the assessee along with other Co-owners were to receive 38.10% of the total constructed area from the developer and as a result of which they received total 74 flats from the developer. Out of those 74 flats, the assessee along with the Co-owners sold 44 flats.
Ld. AR further submitted that the capital gain arises at 3 instances; first, at the time of transfer of land to M/s. Saara Homes on entering into development agreement, second, at the time of sale of land to M/s. Happy Homes Housing and third, at the time of sale of 44 flats received from developer. He also submitted that the incidence of capital gain were to be apportioned among all the Co-owners. Therefore the Ld. CIT(A) made a common adjudication as per his observation at page number 19 of his order, which is to the following effect :
“The transactions pertain to the taxability of the sale of land by the appellant and the co-owners sold in various stages from FY. 2003-04 onwards. The issues for adjudication are identical for the appellant and the co-owners, which are under appeal with the undersigned, for AY 2007-08 & 2008-09.”
Ld. AR also submitted that, Ld. CIT(A) while adjudicating the taxability in case of first instance i.e. transfer of land to M/s. Saara Homes on entering into development agreement, the Ld. CIT(A) at page number 29 of his order, reproduced above, concluded that, the land transferred to M/s. Saara Homes through development agreement was not a capital assets within the meaning of section 2(14) of the Act and therefore the transfer was not liable for any taxation under the Act. At page number 30 of his order, reproduced above, the Ld. CIT(A) also concluded that, alternatively even if any capital gain arises on such transfer, then the capital gain will be taxable in A.Y. 2004-05 and not in A.Y. 2008-09. Hence the Ld. CIT(A) held that there was no liability of any taxation in the hand of the assessee as well as the other co-owners on account of transfer of land to M/s. Saara Homes through development agreement.
Ld. AR further submitted that, Ld. CIT(A) while adjudicating the taxability in case of second instance i.e. sale of land to M/s. Happy Homes Housing, the Ld. CIT(A) at page number 33 of his order, reproduced above, concluded that, the land sold to M/s. Happy Homes Housing was not a capital assets within the meaning of section 2(14) of the Act and therefore the transfer was not liable for any taxation under the Act. Hence the Ld. CIT(A) held that there was no liability of any taxation in the hand of the assessee as well as the other co-owners on account of sale of land to M/s.Happy Homes Housing.
Ld. AR further submitted that, Ld. CIT(A) while adjudicating the taxability in case of third instance i.e. sale of 44 flats received from developer, the Ld. CIT(A) at page number 33 of his order, reproduced above, concluded that, the incidence of capital gain was arises in A.Y. 2006- 07 and not in A.Y. 2008-09. The Ld. CIT(A) also concluded that an extra amount was received by the assessee and the other Co-owners amounting to Rs.13,55,000/- by agreement dated 21/05/2006 on account of sale of parking and other amenities was liable for taxation under STCG in the A.Y. 2007-08 in the hands of the assessee and the Co-owners proportionately.
Ld.AR further submitted that the Ld. CIT(A) had given the relief to the assessee along with all the Co-owners also. However the revenue has filed appeal against the assessee only. No appeal has been filed by the revenue against the other Co-owners. He further submitted that the Hon’ble Supreme Court in the case of Union of India v. Kaumudini Narayan Dalal 249 ITR 219 held that “ It is not open to the revenue to accept that judgment in the case of the assessee in that case and challenge its correctness in the case of other assessee without just cause.” He also submitted that the approach of the revenue is not consistent and uniform with regard to filing of appeal in the case of the assessee, therefore the appeal filed by the revenue is bad in law and is required to be dismissed.
Per contra, the Ld. DR relied on the orders of Ld.CIT(A). However, he accepted that no appeal has been filed by the revenue in the case of other co-owners.
We have heard the rival submissions and also gone through the records in the light of the submissions made by either side. The Ld.CIT(A) at page No.19 of his order (reproduced above) has categorically mentioned that the issue for adjudication in the case of the assessee and the other co- owners were identical and made a common adjudication on the issue involved in the case of the assessee and the other co-owners vide his order dated 08.11.2019. Hence there is no dispute about the fact that the issue involved in the case of the assessee were identical with the issue involved in the case of other co-owners and Ld.CIT(A) had taken a common view in all those cases by making a common adjudication as per his order dated 08.11.2019. There is also no dispute about the fact that the revenue has filed appeal in the case of the assessee only and has not filed any appeal against the other co-owners in spite of the fact that the issue and findings of the Ld.CIT(A) was identical in all those cases. Hence, we are of the considered opinion that the approach of the Revenue is required to be consistent and equal treatment is required to be given to all assessees, who are similarly situated. In the present case, as mentioned hereinabove, the Revenue for the reasons best known to it have chosen to file the present appeal against the common / similar order passed by the Id. CIT(A) and have chosen not to file the appeal against the order passed in the case of co- owners to whom similar relief has been granted by the Ld. CIT(A). We cannot countenance the same and approve the conduct of the Revenue. In the light of the decision of the Hon’ble Supreme Court in the case of Union of India v. Kaumudini Narayan Dalal(Supra) and also on account of the above said reasoning, we deem it proper to dismiss the appeal of Revenue and accordingly, the appeal of Revenue is dismissed.
Since we have decided the appeal against the revenue on legal issue, we are not adjudicating on the other grounds raised by the revenue.
In the result, the appeal of the revenue is dismissed.