K. Vijaya Lakshmi, Hyderabad, Hyderabad V. ACIT,Circle-11(1) Hyderabad, Hyderabad

ITA 1561/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2499 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-01-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Capital asset; Salary income; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 54F; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 1561/HYD/16 2009-10 K. VIJAYA LAKSHMI, HYDERABAD [PAN: AFAPK3416R] ASST. COMMISSIONER OF INCOME TAX, CIRCLE-11(1), HYDERABAD 372/HYD/17 SMT. N. SIREESHA, HYDERABAD [PAN: AVTPS8084Q] FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 31-01-2018 DATE OF PRONOUNCEMENT : 28-02-2018 O R D E R THESE ARE TWO APPEALS BY TWO ASSESSEES AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5 , HYDERABAD, FOR THE AY. 2009-10. SINCE COMMON ISSUES ARE INVOLVED IN BOTH OF THESE APPEALS, THESE ARE HEARD TOG ETHER AND DECIDED BY THIS COMMON ORDER. FOR THE PURPOSE OF CONV ENIENCE, THE FACTS IN ITA NO. 1561/HYD/2016 IN THE CASE OF SMT. K. VIJAYA LAKSHMI ARE ADJUDICATED HERE UNDER: 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL, DERIVI NG INCOME FROM SALARY. ASSESSEE FILED HER RETURN OF IN COME ADMITTING INCOME FROM SALARY AT RS. 2,01,270/- FOR TH E AY. 2009-10 ON 08-06-2009. SHE ENTERED INTO AN AGREEMEN T WITH I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 2 -: M/S. DIAMOND INFRA. SHE WAS THE OWNER OF 270 SQ.YDS. OF LAND SITUATED AT SY.NO.145 (PART), PLOT NO.9, HYDERNAGAR VIL LAGE, BALANAGAR, KUKATPALLY MUNICIPALITY, RANGA REDDY DIS TRICT HAVING ACQUIRED THE SAME FROM THE OWNERS IN THE YEAR 2000. THERE ARE 17 OTHER PERSONS WHO ACQUIRED PLOTS IN THE SAID SURVEY NUMBER FROM THE SAME VENDORS. ALL THE PLOT OWN ERS INCLUDING ASSESSEE ENTERED INTO A DEVELOPMENT AGREEME NT ON 12-05-2008. ACCORDING TO THE DEVELOPMENT AGREEMENT, E ACH LAND OWNER WOULD RECEIVE CONSTRUCTED AREA OF 3365.29 SQ. FT. ASSESSEE IS OF THE VIEW THAT - A) A PERUSAL OF ALL THE TRANSACTIONS WOULD INDICATE THAT THE DEVELOPMENT AGREEMENT IS NOT A TRANSFER WHICH RESULTS IN ANY GAIN TO HER; B) THE LAND IS A LONG TERM CAPITAL ASSET AS THE SAID LAND WAS HELD BY ASSESSEE FOR A PERIOD OF MORE THAN 36 MONTHS; C) THE CAPITAL GAIN DOES NOT ARISE ON THE DATE OF ENTERIN G INTO THE DEVELOPMENT AGREEMENT; D) THE CAPITAL GAIN, IF ANY, WOULD BE EXEMPT IN VIEW OF SECTION 54F OF THE I.T. ACT; ASSESSEE ALSO SUBMITTED THAT: A) ASSESSEE APPROACHED THE LAND OWNERS FOR PURCHASE OF LAND WITH A VIEW TO CONSTRUCT RESIDENTIAL HOUSE; I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 3 -: B) AFTER THE CONSIDERATION WAS PAID, THE LAND OWNERS AND ASSESSEE FACED PROBLEMS WITH REGARD TO MUTATION IN THE REVENUE RECORDS AND THE REGISTRATION OF THE PLOT GO T DELAYED; C) THERE WERE DISPUTES WITH REGARD TO THE LAYOUT AS THE APPROACH ROAD COULD NOT BE PROVIDED TO THE PLOTS; D) THE CONSTRUCTION OF INDEPENDENT HOUSES BECAME IMPOSSIBLE AS THE APPROACH ROAD TO EACH PLOT WAS NOT AVAILABLE; THE PLOT COULD NOT BE SOLD AS THERE WAS NO APPROACH ROAD; E) ALL THE PLOT OWNERS AND THE LAND OWNERS EVOLVED A METHOD OF JOINING TOGETHER THROUGH DEVELOPMENT AGREEMENT AND CONSTRUCTED RESIDENTIAL AREA JOINTLY. 2.1. THE ENTIRE TRANSACTION WOULD INDICATE THAT ASSESSE E INTENDED TO ACQUIRE THE CONSTRUCTED AREA AND GONE THROUGH THE PROCESS. ASSESSEE WAS OF THE VIEW THAT NO CAPITAL GAI N ARISES AS THE ENTIRE PROCESS IS FOR ACQUISITION OF CONSTRUCTED AREA. ALL THESE FACTS WERE PLEADED BEFORE THE AO BUT THE AO DID NOT CONSIDER THE EXPLANATION SUBMITTED. HE PASSED THE ASSESS MENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT ON 09-03-2015 . HE HELD THAT - A) THE ASSET WAS NOT A LONG TERM CAPITAL ASSET BUT IS ONLY A SHORT TERM CAPITAL ASSET. FOR THIS PURPOSE HE RECKONED THE PERIOD OF HOLDING FROM THE DATE OF REGISTRATION IN FAVOUR OF ASSESSEE; I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 4 -: B) THE EXCHANGE VALUE OF THE PROPERTY I.E. THE COST OF CONSTRUCTION WOULD BE RS. 35,97,495/- AND THAT THE COS T OF ACQUISITION OF THE LAND WAS RS.6,48,450/- ACCORDINGLY, THE AO ARRIVED AT THE SHORT TERM CAPITAL GAIN AT RS. 29,49,045/-. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). 3. BEFORE THE LD.CIT(A), ASSESSEE RAISED VARIOUS GROUNDS, MAINLY CONTESTING THE REOPENING OF ASSESSMENT AND ALSO BRINGING TO TAX THE SHORT TERM CAPITAL GAIN DURING THE YEAR CONSIDERATION. LD.CIT(A) AFTER ANALYZING THE LEGA L POSITION, NOTICED THAT THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ONLY AND SINCE DEVELOPMENT AGREEMENT HAS COME TO THE KNOWLEDGE OF THE AO, ASSESSMENT WAS PROPERTY REOPENED , FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUP REME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BR OKERS (P) LTD., [291 ITR 500] (SC). LD.CIT(A) REJECTED THE CON TENTIONS THAT THERE WAS A CHANGE OF OPINION AND ALSO THE CONTENTI ON THAT THERE WAS NO TANGIBLE MATERIAL. LD.CIT(A) NOTED THAT THE INFORMATION HAS COME TO THE KNOWLEDGE OF THE AO AS THERE WERE SURVEY OPERATIONS U/S. 133A OF THE ACT IN THE CASE OF M/S. DIAMOND INFRA, FROM WHOM THE DETAILS OF THE DEVELOPM ENT AGREEMENT AND SALE OF VARIOUS PROPERTIES HAS COME TO TH E KNOWLEDGE. BOTH ON FACTS AND ON LAW, LD.CIT(A) ANALY SED THE ISSUE AND UPHELD THE REOPENING OF ASSESSMENT. 3.1. COMING TO THE ISSUE OF COMPUTATION OF SHORT TER M CAPITAL GAIN, LD.CIT(A) DID NOT ACCEPT ASSESSEES CONTE NTION I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 5 -: AND DISTINGUISHED VARIOUS CASE LAW RELIED UPON AND A FTER ANALYZING THE PROVISIONS OF THE ACT, UPHELD THE ASSESS MENT AS SUCH THEREBY DISMISSING THE APPEAL FILED BY ASSESSEE . IN COMING TO THE CONCLUSIONS LD.CIT(A) ALSO RELIED ON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF POT LA NAGESWARA RAO VS. DCIT [365 ITR 249] (AP). AGGRIEV ED, ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, LD. COUNSEL FOR ASSESSEE ARGUED THAT TH E LD.CIT(A) ERRED IN UPHOLDING THE RE-ASSESSMENT MADE U /S. 147 OF THE ACT WITHOUT THERE BEING ANY NEW MATERIAL ON RECOR D. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT IT IS A SETTLED POSITION OF LAW THAT NO RE-ASSESSMENT CAN BE MADE MER ELY ON CHANGE OF OPINION WITHOUT THERE BEING ANY NEW TANGIBL E MATERIAL ON RECORD. THE ADDITION IS MADE MERELY ON THE BASIS OF DEVELOPMENT AGREEMENT ENTERED BY ASSESSEE. HOWEVER , NOTHING IS HAPPENED IN THE YEAR OF ENTERING DEVELOPM ENT AGREEMENT, EVEN NO PERMISSION WAS OBTAINED FROM GHMC TO START CONSTRUCTION. HENCE, THERE IS NO TRANSFER OF PROPE RTY WHICH WAS EFFECTED IN THE YEAR UNDER CONSIDERATION AN D TERE WAS ESCAPEMENT OF INCOME TO REOPEN THE CASE. LD. COU NSEL ARGUED THAT RE-ASSESSMENT MADE BY AO IS NOT VALID AND UPHOLDING OF SUCH ASSESSMENT BY LD.CIT(A) IS NOT COR RECT. BEFORE US, LD. COUNSEL FOR ASSESSEE ARGUED THAT ASSES SEE WAS UNDER THE BONAFIDE IMPRESSION THAT CAPITAL GAINS DOES NOT ARISE AT THE TIME OF ENTERING INTO THE DEVELOPMENT AGREEMENT BY RELYING ON THE FOLLOWING JUDGMENTS: I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 6 -: I. DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CA SE OF COMMISSIONER OF INCOME TAX-I VS. SMT. NAJOO DARA DEBGOO (2013) [TAXMANN.COM 258] (ALLAHABAD); II. DECISION OF THE HON'BLE ITAT, B-BENCH, HYDERABAD IN THE CASE OF S. RAGHURAMI REDDY VS. ITO, WARD-I, PRODDATU R IN ITA NO. 296/HYD/2003, ORDER DT. 30-07-2011; III. DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ATAM PRAKASH & SONS [219 CTR 164]; IV. DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA VS. CIT [260 ITR 491]; V. DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. PVT. LTD., VS. DCIT AND ANOTHER [271 ITR 269]; VI. DECISION OF THE HON'BLE ITAT, DELHI BENCH IN THE CAS E OF ASHOK KAPUR (HUF) VS. ITO [12 ITD 520]; 4.1. LD. COUNSEL ALSO RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BALBIR S INGH MAINI [86 TAXMANN.COM 94] 323 ITR 588 (SC) TO SUBMIT THAT AGREEMENT THROUGH JDAS DOES NOT GIVE RISE TO CAPITAL GA INS. IT WAS FURTHER SUBMITTED THAT ASSESSEE PURCHASED THE PLOT AS EARLY AS 29-03-2001 WITH PAYMENT OF RS. 3,50,000/- MA DE THROUGH HER HUSBAND. FURTHER, AN AMOUNT OF RS. 1,50,0 00/- WAS PAID ON 29-08-2005 AND SUBSTANTIAL PURCHASE CONSIDERATION WAS PAID MUCH BEFORE THE REGISTRATION. 4.2. LD. COUNSEL ALSO ARGUED THAT IN THE PRESENT CASE , THE POSSESSION IN THE PROPERTY UNDER CONSIDERATION HAS NOT I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 7 -: BEEN TRANSFERRED TO THE DEVELOPER AND THE POSSESSION O F THE IMPUGNED LAND WAS CONTINUOUSLY ENJOYED BY ASSESSEE. THEREFORE, NO CAPITAL GAIN ARISES IN THE YEAR UNDER CONSIDERATION. 4.3. LD. COUNSEL ALSO CONTENDED THAT JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGESWARA RAO VS. DCIT (SUPRA) IS DISTINGUISHABLE. HE ARGUED THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE COMPLETELY DIFFERENT THAN THAT OF THE FACTS OF CASE OF SRI POTLA NAGE SWARA RAO VS. DCIT (SUPRA). IN THE CASE OF SRI POTLA NAGES WARA RAO VS. DCIT (SUPRA), THE HON'BLE HIGH COURT WAS ONLY D EALING WITH THE QUESTION IN RESPECT OF INCIDENCE OF CAPITAL GAINS B ASING ON PASSING OF CONSIDERATION. IN THE CASE OF SRI POTLA NAG ESWARA RAO VS. DCIT (SUPRA), ON THE ISSUE OF TRANSFER OF POS SESSION OF LAND AND PERFORMANCE OF CONTRACT THERE WERE NO DISPUTE S. THE JUDGMENT OF THE HON'BLE HIGH COURT WAS ONLY RESTRICTED I N RESPECT OF CONSIDERATION IN CASE OF JDA. HOWEVER, IN THE PRESENT CASE, THE DISPUTE IS WITH RESPECT TO TRANSFER OF POSSESSION OF PROPERTY AND PERFORMANCE OF THE CONTRAC T. THEREFORE, THE RELIANCE PLACED BY THE AUTHORITIES ON TH E JUDGMENT OF HON'BLE HIGH COURT IS COMPLETELY MISPLACE D . 4.4. LD. COUNSEL FURTHER CONTENDED THAT IN VIEW OF THE AMENDED PROVISIONS OF SECTION 45(5A) BY THE FINANCE A CT, 2017, THE TAXATION OF CAPITAL GAIN IN CASE OF JOINT DEVE LOPMENT AGREEMENT ARISES IN THE YEAR IN WHICH THE LAND OWNER R ECEIVES HIS SHARE OF PROPERTY FROM THE BUILDER AND SAME IS APPLICABLE RETROSPECTIVELY. HENCE, THERE IS NO CAPITAL GAIN ARISE TO ASSESSEE I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 8 -: IN THE YEAR UNDER CONSIDERATION AS THERE IS NOTHING REC EIVED FROM THE BUILDER. IN THIS REGARD LD. COUNSEL PLACED RELIANCE ON THE CASE LAW OF ANSAL LAND MARK TOWNSHIP (P.) LTD VID E [2015] 61 TAXMANN.COM 45 (DELHI). 5. LD.DR, HOWEVER, SUBMITTED THAT ASSESSEE HAS GIVEN POSSESSION OF THE PROPERTY ALSO DURING THE YEAR AND B Y WHICH, THE DEVELOPER HAS TAKEN POSSESSION, OBTAINED PERMISSIO NS AND CONSTRUCTED THE FLATS ALSO, THEREFORE, THERE IS NO MERIT I N THE CONTENTIONS NOW RAISED. 5.1. LD.DR, HOWEVER, OBJECTED THE CONTENTIONS OF LD.A R AND PLACED RELIANCE ON THE FOLLOWING CASE LAW: I. JUDGMENT OF THE HON'BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF POTLA NAGESWARA RAO VS. DY.CIT [365 IT R 249] (AP); II. JUDGMENT OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PARAMJIT SINGH VS. ITO [323 ITR 588] (PUNJAB & HARYANA); 5.2. WITH REFERENCE TO NEW PROVISIONS INTRODUCED IN SECTION 45(5A), IT WAS THE SUBMISSION THAT THE PROVISION IS APPLICABLE W.E.F. 01-04-2018. THEREFORE, THE SAME CA NNOT BE MADE APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR AS I T WAS NOT CLARIFICATORY PROVISION BUT A SUBSTANTIVE PROVIS ION INTRODUCED FOR THE FIRST TIME. I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 9 -: 5.3. QUESTION WAS RAISED WITH REFERENCE TO PERIOD OF HOLDING IT WAS THE SUBMISSION THAT ASSESSEE HAS ORI GINALLY ENTERED INTO AGREEMENT AND PAID ADVANCES TO THE FATHER O F SELLER OF THE PROPERTY. BUT DUE TO INTERNAL ADJUSTMENTS BETWEEN THE FAMILY, THE PROPERTY WAS ULTIMATELY SOLD B Y THE SON, SHRI SRIKANTH AND THE RECITALS CLEARLY INDICATE THE ABOVE NATURE. IT WAS SUBMITTED THAT ADVANCES WERE PAID TO SHRI BALA SWAMY ORIGINALLY AND THEREFORE, AO WAS NOT CORRECT IN HOLDING THE PERIOD FROM THE DATE OF ACTUAL REGISTRATION, WHEREAS ASSESSEE WAS IN POSSESSION OF THE PROPERTY MUCH BEFO RE. IT WAS FAIRLY ADMITTED THAT THESE ASPECTS WERE NOT EXAMINED BY THE AO. FURTHER, IT WAS ALSO CONTENDED THAT THE VALUATION AD OPTED ON THE BASIS OF THE DEVELOPMENT AT THE TIME OF COMPLETION CANNOT BE CONSIDERED AS VALUE FOR BRINGING TO TAX THE CAPITAL GAIN AT THE TIME OF ENTERING JDA AND ON TRANSFER OF 50% OF LAND, IT WAS ALSO CONTENDED THAT AO WRONGLY CONSIDERED THE ENTIRE VALUE RATHER THAN 50% SHARE OF THE LAND. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL PLACED ON RECORD AND CASE LAW RELIED ON . WHILE COMPLETING THE ASSESSMENT, AO CONSIDERED THE PERIOD OF HOLDING OF THE PROPERTY TO BE LESS THAN 36 MONTHS AND TH E GAINS AROSE IN THIS TRANSACTION WAS CONSIDERED AS S HORT TERM ONLY. FURTHER, WHILE VALUING THE PROPERTY TRANSFERRE D, THE AO HAS CONSIDERED THE ENTIRE 267 SQ. YDS., ENTERED INTO A GREEMENT BY ASSESSEE, IGNORING THE FACT THAT ONLY 50% OF THE AB OVE WAS TRANSFERRED, WHEREAS ASSESSEE RETAINED THE BALANCE OF 50%. TO THAT EXTENT, THE ORDER OF AO IS TO BE MODIFIED. I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 10 -: 6.1. COMING TO THE VALUATION ALSO, THE VALUATION TAKEN BY THE AO AT THE DATE OF HIS SURVEY AND AT THE TIME OF COMPLETION OF PROJECT CANNOT BE BASIS FOR CONSIDERING THE SALE CONSIDERATION ON THE DATE OF DEVELOPMENT AGREEMENT. TH ESE ASPECTS WILL BE CONSIDERED AT A LATER POINT OF TIME. 6.2. COMING TO THE ISSUE OF REOPENING CONTESTED BY ASSESSEE, THAT IS NOT VALID, IT IS NOTICED THAT ASSESSEE F ILED RETURN OF INCOME WITHOUT ADMITTING ANY CAPITAL GAIN NOR THERE IS ANY MENTION IN THE RETURN ABOUT THE DEVELOPMENT AGRE EMENT ENTERED BY ASSESSEE. THE INFORMATION HAS COME TO THE KNOWLEDGE OF THE AO CONSEQUENT TO THE SURVEY PROCEEDIN GS IN M/S. DIAMOND INFRA WHICH LED TO THE REOPENING OF ASSE SSMENT U/S. 147 NOT ONLY IN ASSESSEES CASE BUT ALSO IN OTHER CASES, WHERE ALL THE OWNERS HAVE ENTERED INTO DEVELOPMENT AG REEMENT WITH THE SAID PARTY. AFTER EXAMINING THE FACTS, I AM OF THE OPINION THAT THE AO CORRECTLY INVOKED THE PROVISIONS OF SECTION 147 AND THEREFORE, THE PROCEEDINGS ARE VALID IN LAW. I FULLY AGREE WITH THE OPINION OF THE LD.CIT(A) WHO ELABORATEL Y DISCUSSED THE ISSUE BASED ON VARIOUS CASE LAW ALSO. CONSEQUENTLY, THE GROUNDS RAISED ON REOPENING ARE REJ ECTED. 6.3. AS FAR AS THE ISSUE OF BRINGING TO TAX THE CAP ITAL GAINS DURING THE YEAR, IT WAS THE CONTENTION OF ASSESSE E THAT POSSESSION WAS NOT GIVEN AND ASSESSEE RETAINED POSSES SION OF THE PROPERTY THEREBY THE CAPITAL GAINS ARISES IN THE YE AR IN WHICH THE NEW FLATS WERE HANDED OVER. LD. COUNSEL I N HIS ARGUMENTS, ELABORATELY READ OUT VARIOUS PORTIONS OF THE AGREEMENT TO SUBSTANTIATE ASSESSEES CLAIM, WHEREAS THE L D.DR I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 11 -: RELIED ON VARIOUS OTHER CLAUSES TO STATE THAT POSSESSION WAS HANDED OVER. AS FAR AS THE DEVELOPMENT AGREEMENT IS CONCERNED, IT IS NOTICED THAT ASSESSEE DID PERMIT M/S. DIAMOND INFRA TO ENTER INTO THE PREMISES, DO ALL THE NECESSARY THINGS FOR CONSTRUCTION OF APARTMENTS. IT IS THE COMMON AGREEMENT BY MANY PEOPLE, WHO HAS PURCHASED LANDS/PLOTS IN THE DE VELOPED AREA. IT IS ALSO NOTICED THAT THE SAID ASSESSEE WENT TO CONSTRUCT THE APARTMENTS AND HAND OVER THE FLATS AS PER THE SCHEDUL E TO THE RESPECTIVE PERSONS, INCLUDING ASSESSEE. SOME OF TH E AGREEMENT HOLDERS ALSO SOLD THE FLATS IN SEMI-FINISHE D CONDITION OR IN FULLY DEVELOPED CONDITION, WHEREAS FEW LIKE AS SESSEE RETAINED THE FLATS AS SUCH. THEREFORE, I AM OF THE OPI NION THAT ASSESSEE DID HAND OVER THE POSSESSION AND PROVISIONS OF SECTION 2(47) REGARDING TRANSFER CERTAINLY GET ATTRACTED. SINCE THERE IS PART PERFORMANCE OF THE CONTRACT IN THE NATURE RE FERRED TO IN SECTION 53 OF TRANSFER OF PROPERTY ACT, 1882, CL AUSE(V) OF SECTION 2(47) IS CLEARLY ATTRACTED. THEREFORE, I AGREE WITH THE STAND OF AO THAT THE CAPITAL GAINS DID ARISE DURING THE YEAR UNDER CONSIDERATION AS THE AGREEMENT WAS ENTERED ON 12 -05- 2008. ACCORDINGLY, THE ISSUE OF BRINGING TO TAX THE CA PITAL GAINS DURING THE YEAR IS TO BE UPHELD. EVEN THOUGH L D. COUNSEL TRIED TO DISTINGUISH THE JURISDICTIONAL HIGH COU RT JUDGMENT IN THE CASE OF SRI POTLA NAGESWARA RAO VS. DC IT (SUPRA) THAT IT APPLIES TO A CASE, WHERE THERE IS NO SAL E CONSIDERATION AND THE ISSUE IS ON NON-RECEIPT OF SALE CONSIDERATION. I DO NOT AGREE WITH THAT AS THE ISSUE OF TRANSFER IN THE CASE OF DEVELOPMENT AGREEMENT AND CONSEQUENT LE VY OF CAPITAL GAIN IN THE YEAR OF ENTERING INTO DEVELOPMENT AGREEMENT HAS BEEN CRYSTALISED BY THE SAID JUDGMENT OF THE JURISD ICTIONAL I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 12 -: HIGH COURT IN THE CASE OF SRI POTLA NAGESWARA RAO VS. DCIT (SUPRA). LD. COUNSEL RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BALBIR SINGH MAI NI (SUPRA), WHERE THE ENTIRE TRANSACTION OF DEVELOPMENT OF LAND ENVISAGED IN JDA FELL THROUGH. IN THOSE FACTS OF THE CASE, THE HON'BLE SUPREME COURT HELD THAT NO PROFITS OR GAINS ARO SE FROM THE TRANSFER OF CAPITAL ASSET SO AS TO ATTRACT SECTION 45 A ND 48 OF THE ACT. HOWEVER, IN THE PRESENT CASE, THE AGREEMENT HAS BEEN UNDERTAKEN AND HAS BEEN COMPLETED, THEREFORE THE JURISDICTIONAL HIGH COURT DECISION STILL HOLDS GOOD. ACCORDINGLY, I AGREE WITH THE ORDER OF THE CIT(A), CON FIRMING THE CAPITAL GAINS DURING THE YEAR. 6.4. ONE OF THE ARGUMENTS RAISED BY THE LD. COUNSEL IS THAT NEW SECTION 45(5A) HAS BEEN INTRODUCED WHICH DEFE RS THE CAPITAL GAINS TO THE YEAR OF COMPLETION OF THE PROJEC T BY THE FINANCE ACT, 2017. THIS BEING SUBSTANTIVE PROVISION, I AM OF THE OPINION THAT THIS CANNOT BE APPLIED TO THE DEVELOPMEN T AGREEMENT ENTERED INTO EARLIER, IN WHICH 2(47)(V) WO ULD CERTAINLY GET ATTRACTED. IN VIEW OF THAT, I REJECT THE CONTEN TION AND UPHOLD THE TAXABILITY OF THE CAPITAL GAINS IN THE YE AR UNDER CONSIDERATION. 6.5. HOWEVER, THE MATTER DOES NOT END THERE. THERE AR E TWO ISSUES WHICH REQUIRE FURTHER CONSIDERATION. ONE I S THAT WHETHER PROPERTY IS HELD FOR SUFFICIENT PERIOD SO AS TO ATTRACT SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN. THE OTHER IS THE VALUATION OF THE FULL VALUE OF CONSIDERATION. AS FAR AS THE HOLDING PERIOD OF THE IMPUGNED PROPERTY IS CONCERNE D, IT IS THE I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 13 -: CONTENTION OF ASSESSEE THAT THEY HAVE PAID ADVANCES MUCH EARLIER AND TOOK POSSESSION ALSO WHEREAS REGISTRATION WAS COMPLETED ON 10-08-2005. IT IS NOT CORRECT ON THE PART OF AO TO CONSIDER THE DATE OF REGISTRATION ALONE AS THE DATE OF O BTAINING THE PROPERTY. THERE ARE VARIOUS JUDICIAL PRINCIPLES SUPPORTING THE CONTENTIONS THAT REGISTRATION IS ONLY A CONCLUSIVE EVI DENCE BUT OWNERSHIP CAN BE OBTAINED MUCH EARLIER ALSO. AS SEEN FROM THE PURCHASE DEED ALSO, THERE ARE RECITALS THAT SH RI BALA SWAMY, FATHER OF VENDOR HAS HIMSELF DEVELOPED THE PRO PERTY AND THEN OBTAINED PERMISSIONS BUT LATER ON MADE FOUR GI FT SETTLEMENTS TO HIS SON AND AFTER OBTAINING HUDA PERMISSIO NS, HAS REGISTERED THE PROPERTY ON THAT DATE. EVEN THOUGH T HE RECEIPT OF SALE CONSIDERATION DATE-WISE HAS NOT MENTIONE D, IT IS THE CONTENTION THAT ASSESSEES HAVE PAID THE AMOUNTS MUCH EARLIER ALSO. THIS ASPECT HAS NOT BEEN EXAMINED BY TH E AO AT ALL. THEREFORE, IN THE INTEREST OF JUSTICE, I AM OF THE OPINION THAT THE ISSUE OF HAVING POSSESSION OF THE PROPERTY AT THE TIME OF PURCHASE OF PROPERTY BY ASSESSEE, BEFORE REGISTRA TION IS TO BE EXAMINED IN THE LIGHT OF THE PAYMENTS MADE BY ASSESSEE, PERMISSIONS OBTAINED FROM HUDA ETC., SO THAT THE ISSUE C AN BE FINALLY CONCLUDED ON FACTS WHETHER THE PROPERTY HAS TO BE CONSIDERED AS LONG TERM CAPITAL ASSET OR SHORT TERM CAP ITAL ASSET. THEREFORE, THIS ISSUE IS RESTORED TO THE FILE O F AO TO EXAMINE, AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. 6.6. NEXT ISSUE TO BE CONSIDERED IS THE FULL VALUE OF CONSIDERATION, FOR COMPUTATION OF CAPITAL GAINS. AS PE R THE AGREEMENT, ASSESSEE HAS PARTED WITH ONLY 50% OF THE IM PUGNED PROPERTY. HOWEVER, AO HAS TAKEN THE COST OF CONSTRUCTIO N OF I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 14 -: THE PROPERTIES WHICH ARE GIVEN IN LIEU AT THE TIME OF CO MPLETION OF THE PROJECT AND GAVE CERTAIN DISCOUNT SO THAT THE VALUE IS FIXED AT 1097 PER SFT. THIS IS NOT A CORRECT METHOD. SINCE THE AGREEMENT WAS ENTERED INTO IN MAY, 2008 EITHER THE COST OF THE LAND [AT 50% OF 266.66 SQ. YDS.,] SHOULD HAVE BEEN C ONSIDERED FOR SALE CONSIDERATION OR THE PROBABLE VALUE OF THE C OST OF CONSTRUCTION ON THAT DATE HAS TO BE CONSIDERED. IT IS NO T PROPER ON THE PART OF THE AO TO CONSIDER THE SUBSEQUENT COST WHI CH MAY INVOLVE ESCALATION OF COST FROM 2008 TO 2013. TH EREFORE, I DIRECT THE AO TO CONSIDER THE PROBABLE COST OF CONSTRUCTIO N AS ON MAY 2008 OR THE SRO VALUE OF THE LAND-IN-QUESTION O N THE DATE OF AGREEMENT SHOULD BE CONSIDERED AS FULL VALUE OF CONSIDERATION FOR THE PURPOSE OF COMPUTATION OF CAPITA L GAINS ON THE TRANSFER OF 50% OF THE LAND HOLDING FOR DEVELO PMENT. THEREFORE, WHILE UPHOLDING THE REOPENING OF ASSESSME NT AND ALSO BRINGING TO TAX THE CAPITAL GAINS IN THE IMPUGNED YEAR, THE ISSUE WHETHER THE LAND IS SHORT TERM CAPITAL ASSET OR LON G TERM CAPITAL ASSET AND THE VALUE FOR CONSIDERING THE CAPITAL GAINS COMPUTATION IS RESTORED TO THE FILE OF AO FOR FRESH EXAM INATION. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPO RTUNITY. FOR THIS PURPOSE, THE ORDER OF AO AND CIT(A) ON THE AB OVE ISSUES ARE SET ASIDE TO THE RE-DONE AS PER THE FACTS AN D LAW. IN CASE THE PROPERTY WAS HELD TO BE LONG TERM CAPITAL ASSE T, ASSESSEE MAY BE ELIGIBLE FOR CONSEQUENT BENEFIT U/S. 54/54F OF THE ACT, WHICH SHOULD BE CONSIDERED ON THE FACTS OF THE CASE. ASSESSEE IS FREE TO RAISE NECESSARY ARGUMENTS IN THIS REGARD BEFORE THE AO. GROUNDS OF ASSESSEE ARE CONSIDERED PA RTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 15 -: 6.7. IN THE RESULT, APPEAL IN ITA NO. 1561/HYD/2016 IN THE CASE OF K. VIJAYA LAKSHMI IS CONSIDERED PARTLY AL LOWED FOR STATISTICAL PURPOSES. ITA NO. 372/HYD/2017: 7. IN THIS APPEAL, ASSESSEE, SMT. N. SIREESHA FILED RETURN OF INCOME ADMITTING INCOME OF RS. 2,72,400/- FR OM SALARY AND HOUSE PROPERTY ONLY. THE ASSESSMENT WAS R EOPENED U/S. 147 OF THE ACT AND INCOMES WERE ASSESSED ON THE D EEMED TRANSFER OF SITE OF 267 SQ. YDS., BY THE DEVELOPMENT AGREEMENT DT 12-05-2008 WHICH IS COMMON ALONG WITH SMT VIJAYALAKSHMI AND OTHERS. AO HAS PASSED SIMILAR OR DER AS IN THE CASE OF SMT VIJAYALAKSHMI, DETERMINED THE CAPITAL G AIN COMPUTATION. LD.CIT(A) HAS ALSO PASSED A SIMILAR ORDE R CONFIRMING THE REOPENING U/S. 147 OF THE ACT AS WELL A S COMPUTATION OF CAPITAL GAINS DURING THE YEAR UNDER CONSIDERATION. SIMILAR ARGUMENTS WERE RAISED IN THE C ASE DISCUSSED ABOVE. FOR THE DETAILED DISCUSSIONS MADE IN THE ABOVE APPEAL IN THE CASE SMT VIJAYALAKSHMI, I AGREE W ITH THE LD.CIT(A) TO THE EXTENT OF CONFIRMING THE REOPENING OF ASSESSMENT AND COMPUTATION OF CAPITAL GAINS DURING THE YEAR UNDER CONSIDERATION, WHEREAS THE ISSUE OF CAPITAL ASSE T BEING SHORT TERM OR LONG TERM AND ISSUE OF FULL VALUE OF C ONSIDERATION FOR THE PURPOSE OF COMPUTATION ARE RESTORED TO THE FILE OF AO. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPO RTUNITY. FOR THIS PURPOSE, THE ORDER OF AO AND CIT(A) ON THE AB OVE ISSUES ARE SET ASIDE TO BE RE-DONE AS PER THE FACTS AND LAW. IN CASE THE PROPERTY WAS HELD TO BE LONG TERM CAPITAL ASSE T, ASSESSEE MAY BE ELIGIBLE FOR CONSEQUENT BENEFIT U/S. 54/54F OF I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 16 -: THE ACT, WHICH SHOULD BE CONSIDERED ON THE FACTS OF THE CASE. ASSESSEE IS FREE TO RAISE NECESSARY ARGUMENTS IN THIS REGARD BEFORE THE AO. GROUNDS OF ASSESSEE ARE CONSIDERED PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 7.1. IN THE RESULT, APPEAL IN ITA NO. 372/HYD/2017 I N THE CASE OF SMT. N. SIREESHA IS CONSIDERED PARTLY ALLO WED FOR STATISTICAL PURPOSES. 8. TO SUM-UP BOTH THE APPEALS ARE CONSIDERED PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH FEBRUARY, 2018 TNMM I.T.A. NOS. 1561/HYD/2016 & 372/HYD/2017 :- 17 -: COPY TO : 1. SMT. K. VIJAYA LAKSHMI, C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD. 2. SMT. N. SIREESHA, SHOP NO. 18, LENIN COMPLEX, KUKATPALLY, HYDERABAD. 3. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-11(1), HYDERABAD. 4. CIT (APPEALS)-5, HYDERABAD. 5. PR.CIT-5, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.