Jayadayal Prannath Kapur, CHENNAI V. ACIT, CHENNAI

ITA 1486/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7870 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 05-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 25-05-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: K MEENAKSHISUNDARAM ITP
• Keywords: Cost of acquisition

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NOS.1486 TO 1488 /MDS./2016 ( / ASSESSMENT YEARS :2006-07 TO 2008-09) M/S.JAI DAYAL PRANNATH KAPUR, 52,TAYLORS ROAD, KILPAUK, CHENNAI 600 010. VS. ACIT, BUSINESS CIRCLE VIII, CHENNAI. PAN AAAFJ 3186 G ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : MR.K.MEENAKSHI SUNDARAM, ITP $% ! ' # / RESPONDENT BY : MR.A.V.SREEKANTH,JCIT, D.R & ' ' ( ) / DATE OF HEARING : 07.12.2016 *+ ' ( ) /DATE OF PRONOUNCEMENT : 07.12.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE APPEALS ARE FILED BY THE ASSESSEE, AGGRIEV ED BY THE DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INC OME TAX(A)-13, CHENNAI DATED 29.02.2016 PERTAINING TO ASSESSMENT Y EARS 2006- 07,2007-08 & 2008-09. ITA NO. 1486 TO 1488/MDS/2016 2 2. THE COMMON GROUND IN ALL THESE APPEALS IS WITH REGARD TO COMPUTATION OF LONG TERM CAPITAL GAINS IN RESPECT O F SALE OF PROPERTY U/S.144 OF THE ACT. BUT THE SAME ISSUE WAS SUBJECTE D TO SHORT TERM CAPITAL GAINS IN EARLIER ASSESSMENT YEARS. 3. SINCE THE ISSUE IS SIMILAR IN ALL THESE APPEALS , WE HAVE CONSIDERED THE FACTS AS NARRATED IN ITA NO.1486/MDS ./2016(A.Y. 2006-07). 3.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE HA D ENTERED INTO A JOINT VENTURE AGREEMENT ON 02.08.2002 WITH M/S. IND IRA FOUNDATIONS PVT LTD., NO.19 (OLD NO.4B), GOVINDAN STREET, AYYAV OO COLONY, AMINJIKARAI, CHENNAI TO JOINTLY DEVELOP RESIDENTIAL COMPLEX IN ASSESSEER PROPERTY AT NO.52 (OLD NO.61), NARASIMHAL U STREET, VADA AGARAM, AMINJIKARAM, CHENNAI ADMEASURING 24,664 SQ. FT., AS PER THE TERMS OF JOINT VENTURE AGREEMENT ASSESSEE HAS CONVE YED 55% UNDIVIDED SHARE IN THE SAID LAND AND IN RETURN ASSE SSEE WAS SAID TO RECEIVE 45% OF CONSTRUCTED AREA (INCLUSIVE OF COMMO N AREA) AS SALES CONSIDERATION. TOTAL CONSTRUCTED AREA BEING 45,935 SQ.FT THE ITA NO. 1486 TO 1488/MDS/2016 3 ASSESSEES SHARE WORKS OUT TO 20670 SQ.FT. (45% OF 45935). SUBSEQUENTLY, THE FLATS WERE SOLD TO THE ULTIMATE B UYERS AND 45% OF THE SALE CONSIDERATION RECEIVED FROM THE CUSTOMERS WAS GIVEN BY THE BUILDER (M/S. INDIRA FOUNDATIONS) TO THE ASSESSEE. THE CONSIDERATION RECEIVED BY ASSESSEE FROM M/S. INDIRA FOUNDATIONS P VT LTD., FINANCIAL YEAR WISE IS GIVEN BELOW (AS PER LETTER DATED 22.12 .2006 OF M/S. INDIRA ARCADE AND ESTATES ALIAS M/S. INDIRA FOUNDATIONS): FINANCIAL YEAR AMOUNT RECEIVED (RS.) 2003 - 04 12833257 2004 - 05 6011979 2005 - 06 6043760 2006 - 07 13546778 TOTAL 38435774 HENCE, IT FOLLOWS THAT, THIS RS.3,84,35,774/- REPRE SENTS THE SALE PRICE OF 45% OF THE TOTAL CONSTRUCTED AREA. CALCULATION OF SALE PRICE PER SG.FT OF CONSTRUCTED AREA: SALE PRICE OF 20670 SQ.FT = RS.3,84,35,774 HENCE, SALE PRICE OF TOTAL CONSTRUCTION AREA = 3,84 ,35,774 * 45935 20670 ITA NO. 1486 TO 1488/MDS/2016 4 = RS.854 15930 HENCE, SALE VALUE PER SQ.FT = 85415930 45935 = RS .1859.50/- THOUGH THE ASSESSEE RECEIVED SALE CONSIDERATION OVE R A PERIOD OF YEARS, FROM THE TERMS OF JOINT VENTURE AGREEMENT TH E FOLLOWING OBSERVATIONS ARE MADE: POSSESSION WAS HANDED OVER T O M/S. INDIRA FOUNDATIONS PVT. LTD., FROM THE DATE OF AGREEMENT; THE COST OF CONSTRUCTION INCLUSIVE OF ALL AMENITIES AND OTHER E XPENSES WAS TO BE BORNE BY THE M/S. INDIRA FOUNDATIONS PVT. LTD: M/S. INDIRA FOUNDATIONS PVT LTD., SHALL HAVE THE RIGHT TO MORTGAGE 55% OF T HE UNDIVIDED SHARE IN THE LAND AND ALSO RIGHT TO ENTER DIRECTLY INTO A GREEMENT FOR SALE IN RESPECT OF 55% UNDIVIDED SHARE OF LAND. AGREEMENT F URTHER STATES THAT AN ADVANCE OF RS.96,50,000/- WAS PAID TO ASSESSEE. HENCE IT FOLLOWS THAT FOR ALL PRACTICAL PURPOSES TRANSFER TOOK PLACE ON THE DATE OF JOINT AGREEMENT I.E., 02.08.2002. ACCORDING TO A.R, AS P ER SEC.45 OF IT ACT 1961, CAPITAL GAINS SHALL BE TAXED ONLY IN THE YEAR OF TRANSFER, WHICH HAPPENS TO BE AY 2003-04 IN ASSESSEES CASE. THE SA LE CONSIDERATION RECEIVED/RECEIVABLE BY ASSESSEE SHALL BE COST OF CONSTRUCTION OF 4 5% OF CONSTRUCTED AREA. ITA NO. 1486 TO 1488/MDS/2016 5 3.2 SUBSEQUENTLY WHEN THE CONSTRUCTED FLATS ARE SO LD TO THE CUSTOMERS, CAPITAL GAINS WILL ARISE FOR A SECOND TI ME WHERE COST OF CONSTRUCTION OF THE SOLD AREA WILL BE TAKEN AS THE COST OF ACQUISITION FOR THE PURPOSE OF CAPITAL GAINS COMPUTATION. DETAI LS OF COST OF CONSTRUCTION OF THE PROJECT WAS CALLED FOR FROM M/S . INDIRA FOUNDATION PVT. LTD., AND FROM THE SUBMISSION MADE BY THE M.D OF M/S. INDIRA FOUNDATION PVT. LTD. ON 15.03.2013 THE TOTAL COST OF CONSTRUCTION OF THE PROJECT (45935 SQ.FT) WAS RS.39473000- (RECORDE D IN THE ORDER SHEET OF ASSESSMENT FOLDER FOR AY 2008-09). HENCE, COST OF CONSTRUCTION PER SQ.FT WORKS OUT TO RS.859/- (RS.39 473000/45935 SQ.FT). SALE OF CONSTRUCTED AREA TO CUSTOMERS YEAR WISE IS GIVEN BELOW, AS PER THE SUBMISSION OF MR. KANNAN, M.D OF M/S. INDIRA FOUNDATIONS PVT. LTD., FINANCIAL YEAR ASSESSMENT YEAR TOTAL AREA SOLD (SG.FT) 2003 - 04 2004 - 05 27190 2004 - 05 2005 - 06 10260 2005 - 06 2006 - 07 910 ITA NO. 1486 TO 1488/MDS/2016 6 2006 - 07 2007 - 08 6275 2007 - 08 2008 - 09 1300 TOTAL 45935 ACCORDINGLY, FOR THE FLATS SOLD DURING FY 2005-06 ( AY 2006-07), CAPITAL GAIN ACCRUING WILL BE TAXED AS SHORT TERM C APITAL GAIN AS THEY ARE SOLD WITHIN 3 YEARS OF ACQUISITION (WHICH IS TH E DATE OF JOINT VENTURE AGREEMENT) (ONLY ONE FLAT WAS SOLD IN FY 20 05-06 ON 09.06.2005). COMPUTATION OF CAPITAL GAINS : A. TOTAL CONSTRUCTED AREA SOLD DURING FY 2005-06 - 910 SFT. 409.5 SFT. B. ASSESSEES SHARE @ 45% -409.5 SQ. FT. C. SALE CONSIDERATION FOR 409.5 SFT. (409.5 SFT * RS.1859.50) = RS.7,61,465/- D. COST OF CONSTRUCTION FOR 409.5 SFT (RS.859*409.5 SFT) = RS.3,51,760/- E. SHORT TERM CAPITAA GAINS = RS.4,09,705/- HENCE, RS.4,09,705/- IS ADDED BACK TO THE RETURNED INCOME. ITA NO. 1486 TO 1488/MDS/2016 7 3.3. THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD .CIT(A). ON APPEAL, LD.CIT(A) CONFIRMED THE ORDER OF LD. ASSESS ING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE LD.A.R PRAYED THAT THE AO PASSED EXPARTE ORDER WITHOUT PARTICIPATION OF THE ASSESSEE AND THE LD.CIT(A) CONFIRMED THE ASSESSMENT ORDER IN A SUMMARY MANNER WITHOUT DISCUSSING ALL THE GROUNDS OF THE APPEAL BEFORE HIM . 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND ALSO GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. ADMITTEDLY, IN THESE CASES, ASSESSMENT ORDERS PASSE D U/S.144 OF THE ACT WITHOUT PARTICIPATION OF THE ASSESSEE IN ALL TH ESE THREE APPEALS, EVEN THE ORDER OF THE LD.CIT(A) WAS CRYPTIC IN NATU RE, THEREBY HE CONFIRMED THE ORDER OF AO. IN THESE CIRCUMSTANCES, I AM OF THE OPINION THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF LD.CIT(A) FOR FRESH ADJUDICATION AND HE IS DIRECTED TO PASS SPEAKING ORDER AFTER AFFORDING REASONABLE OPPORTUNITY OF HEA RING TO THE ITA NO. 1486 TO 1488/MDS/2016 8 ASSESSEE AND HE SHALL CONSIDER THE SAME IN ACCORDA NCE WITH LAW AND DECIDE IT AFRESH. 5. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07 TO 2008-09ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 07 TH DECEMBER, 2016 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 07 TH DECEMBER, 2016. K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF