Smt. Y.S. Mythily, Bangalore V. ITO, Bangalore

ITA 235/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5264 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Question of law; Fair market value
• Section: 148

Judgement Text

ITA.235/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL, JUDICIAL MEMBER I.T.A NO.235/BANG/2016 (ASSESSMENT YEAR : 2006-07) SMT. Y. S MYTHILY, NO.8, 3 RD MAIN, 5 TH CROSS, BEML LAYOUT, 5 TH STAGE, RAJARAJESHWARI NAGAR, BENGALURU 560 098 .. APPELLANT PAN : BCTPM8476L V. INCOME-TAX OFFICER, WARD 2(1), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. H. GURUSWAMY, ITP REVENUE BY : SMT. SWAPNA DAS, JCIT HEARD ON : 01.05.2017 PRONOUNCED ON : 09.06.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE, AGAINST T HE ORDER OF THE CIT (A)-3, BENGALURU, DT.25.12.2015, FOR THE ASSESSMENT YEAR 2006-07. ITA.235/BANG/2016 PAGE - 2 02. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL : 1. THE IMPUGNED APPELLATE ORDER DATED: 25-12-2015 PASSED BY THE LD. CIT(A), BANGALORE-3 IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE CONSIDERATION DETERMINED BY THE AO AMOUNTING TO RS. 1,08,13,930/- AT THE RATE OF 1238/- PER SQ.FT AS PE R THE COST OF CONSTRUCTION PROVIDED BY THE BUILDER IN THEIR LETTE R DATED: 10-03- 2014 AS AGAINST THE FMV OF THE 55% OF THE LAND AS O N THE DATE OF JDA. 3. THE LD. CIT(A) OUGHT TO HAVE NOT HELD THE BUILDE RS COST AS BASIS FOR DETERMINATION OF THE CONSIDERATION OF THE 55%OF THE LAND TRANSFERRED MEASURING 3153 SQFT WITHOUT APPRECIATIN G THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE FMV A S ON THE DATE OF JDA BASED ON THE VALUE OF SUB-REGISTRAR WAS THE CONSIDERATION IN RESPECT OF THE 55%OF LAND TRANSFER RED IN FAVOR OF DEVELOPER AND NOT THE DEVELOPER'S COST OF CONSTRUCTION. 5. THE LD. CIT(A) OUGHT TO HAVE NOT HELD THAT THE F ACTS OF THE APPELLANT'S CASE WERE DIFFERENT THAN THE FACTS IN THE CASE OF VED PRAKASH RAKARA MEALY ON THE GROUND THAT NO PRI CE WAS MENTIONED IN THE JDA IGNORING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT, WHEREIN IT WAS CATEGORICALLY HELD THAT THE BUILDERS COST CANNOT B E THE BASIS FOR DETERMINATION OF CONSIDERATION OF THE LAND TRANSFE RRED IN THE SCHEME OF JDA 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND DELETE ANY OF THE GROUNDS AT THE TIME OF HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT T HE TIME OF HEARING, THE APPELLANT RESPECTFULLY PRAYS THAT YOUR HON'BLE ITA.235/BANG/2016 PAGE - 3 AUTHORITY BE PLEASED TO PASS ORDERS DELETING THE CA PITAL GAIN AMOUNTING TO RS. 88,96,056/- ON THE BASIS OF THE CO NSIDERATION OF RS. 1,08,13,930/- DETERMINED BY THE AO ON THE BASIS OF THE BUILDERS COST AT THE RATE OF RS. 1238/- PER SQ.FT O F BUILT-UP AREA MEASURING 8735 SQ.FT AND FURTHER BE PLEASED TO PASS SUCH OTHER ORDERS GRANTING SUCH OTHER RELIEF THAT YOUR HON'BLE AUTHORITY MAY DEEM FIT IN THE INTEREST OF EQUITY AND JUSTICE. 03. THE ASSESSEE HAD OWNED A VACANT SITE BEARING NO . 22, 3RD CROSS, SULTANPALYA (B.B.M.P WARD NO. 95) MEASURING 5733 SQ.FT., THE ASSESSEE HAD ENTERED INTO A JDA, DATED 23-07-20 05 WITH A DEVELOPER M/S. SAI DWARAKA BUILDERS AND DEVELOPERS REPRESENTED BY ITS MANAGING PARTNER SRI. G. PREM KU MAR REDDY FOR CONSTRUCTION OF RESIDENTIAL FLATS ON THE ABOVE SITE. 04. THE ASSESSEE SUBMITS THAT AS PER THE TERMS OF J DA THE ASSESSEE HAD AGREED TO TRANSFER 55% OF THE UNDIVIDED PORTION OF LAND MEASURING 3153 SQ.FT OUT OF THE TOTAL EXTENT OF 573 3 SQ.FT AND THE REMAINING UNDIVIDED PORTION OF LAND MEASURING 2580 SQ.FT WAS RETAINED BY THE ASSESSEE. THE PROPOSED BUILT-UP ARE A WAS ABOUT 19836 SQ.FT., OUT OF WHICH THE ASSESSEE WAS ENTITLE D TO 45% OF THE BUILT-UP AREA MEASURING 8735 SQ.FT., IN EXCHANGE OF 3153 SQ. FT OF UNDIVIDED PORTION OF LAND AND THE DEVELOPER WAS ENTITLED TO 5 5% OF BUILT-UP AREA MEASURING 11100 SQ.FT. ITA.235/BANG/2016 PAGE - 4 05. THE LD. AO ISSUED A NOTICE U/S. 148 OF THE ACT , IN ORDER TO ASSESS THE INCOME OF THE ASSESSEE. IN THE COURSE OF THE SC RUTINY ASSESSMENT PROCEEDINGS, THE AO PROPOSED TO ADOPT THE COST OF CONSTRUCTION INCURRED BY THE BUILDER AS CONSIDERATION FOR THE EX CHANGE OF 55% OF THE UNDIVIDED PORTION OF LAND MEASURING 3153 SQ. FT. THE COST OF CONSTRUCTION AS STATED BY THE AO ON THE BASIS OF TH E INFORMATION PROVIDED BY THE DEVELOPER WAS OF RS. 1,238/- PER SQ .FT., AND ACCORDINGLY, THE CONSIDERATION WAS DETERMINED BY TH E AO AT RS. 1,08,13,930/- IN RESPECT OF 55% OF THE UNDIVIDE D PORTION OF THE LAND TRANSFERRED IN FAVOUR OF THE DEVELOPER. 06. THE ASSESSEE SUBMITS THAT THE LD. AO HAS NOT FO LLOWED THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT OF KARNATAKA IN THE CASE OF SRI. VED PRAKASH RAKHRA (2015) 370 ITR 762 (KAR) THAT THE COST OF CONSTRUCTION INCURRED BY THE BUILDER CA NNOT BE THE CONSIDERATION FOR EXCHANGE OF LAND IN THE SCHEME OF JOINT DEVELOPMENT IN DETERMINING THE CONSIDERATION AT RS. 1,08,13,930/-. 07. THE CONSIDERATION OF RS. 1,08,13,930/- DETERMIN ED BY THE AO BASED ON THE BUILDER'S COST WAS OPPOSED TO THE L AW AND FACTS OF ITA.235/BANG/2016 PAGE - 5 THE CASE IN VIEW OF THE DECISION OF THE HON'BLE HIG H COURT OF KARNATAKA (SUPRA) AND THEREFORE, THE ASSESSEE HAVIN G BEEN AGGRIEVED WITH THE ASSESSMENT ORDER HAS FILED AN AP PEAL BEFORE THE LD. CIT(A)-3, BANGALORE. 08. THE LD. CIT(A) HAS PASSED AN APPELLATE ORDER DA TED: 25-12- 2015 AND DISMISSED THE APPEAL ON THE GROUND THAT TH E DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF V ED PRAKASH RAKHRA (2015) 370 ITR 762 (KAR) WAS NOT APPLICABLE SINCE THE FACTS OF THE ASSESSEES CASE ARE DISTINGUISHABLE FRO M THE FACTS IN THE CASE OF VED PRAKASH RAKHRA (2015) 370 ITR 762 (KAR) . 09. THE LD. CIT(A)-3 GOT MISDIRECTED BY MIS-READING THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN T HE CASE OF VED PRAKASH RAKHRA (2015) 370 ITR 762 (KAR). THE LD . CIT(A) HAS MIS-READ THE FACTS OF THE ASSESSEES CASE AND E RRONEOUSLY HELD THAT THE FACTS OF THE ASSESSEES CASE ARE DIFF ERENT FROM THE FACTS IN THE CASE OF VED PRAKASH RAKHRA (2015) 370 ITR 762 (KAR), IGNORING THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF KARNATAKA. THE LD. CIT(A) HAS HELD THAT THE FACTS O F THE ASSESSEES CASE WERE DIFFERENT THAN THE FACTS IN THE CASE OF VED ITA.235/BANG/2016 PAGE - 6 PRAKASH RAKHRA WHEREIN THE CONSIDERATION WAS SPECIF IED IN THE JDA BUT IN THE CASE OF ASSESSEE NO SUCH CONSIDERATI ON WAS MENTIONED IN THE JDA. 10. THE ASSESSEE BEGS TO REPRODUCE HEREWITH, THE RELEVANT SUBSTANTIAL QUESTION OF LAW FORMULATED BY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF VED PRAKASH RAKHRA (2015) 370 ITR 762 (KAR) AS UNDER RELATING TO THE DETERMIN ATION OF THE CONSIDERATION ATTRIBUTABLE TO THE EXCHANGE OF L AND IN THE SCHEME OF JDA: '(II) WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THA T THE ESTIMATED COST OF CONSTRUCTION OF RS. 66 LAKHS SHOWN IN THE J OINT DEVELOPMENT AGREEMENT FOR THE DEVELOPMENT OF THE PR OPERTY SITUATED AT AGA ABBAS ALL ROAD, BANGALORE, SHOULD B E TAKEN INTO ACCOUNT AND NOT 50 PERCENT.(1.43 CRORES) OF RS. 2.8 6 CRORES ACTUALLY SPENT BY THE BUILDER IN WORKING OUT THE SA LE CONSIDERATION FOR THE PURPOSE OF SECTION 45 OF THE ACT ?' 11. THE ASSESSEE SUBMITS THAT A QUESTION OF LAW FOR MULATED AS STATED ABOVE WAS ANSWERED BY THE HON'BLE HIGH COURT OF KAR NATAKA BY LAYING DOWN THE RATIO WHICH IS REPRODUCED AS HEREUNDER: 'HELD, (I) THAT THE EXCHANGE VALUE AS SPECIFIED IN THE PROJECT DEVELOPMENT AGREEMENT COULD BE TAKEN AS THE BASIS F OR COMPUTATION OF THE CONSTRUCTION IN THE JOINT DEVELOPMENT. THE COST INCURRED BY THE DEVELOPER NEE D NOT NECESSARILY REPRESENT COST OF CONSTRUCTION. THE DET AILED ITA.235/BANG/2016 PAGE - 7 PARTICULARS WERE NOT GIVEN. THE TRANSACTION OF THE JOINT DEVELOPMENT IS ONE OF EXCHANGE. THE CONSIDERATION S PECIFIED IN THE DOCUMENT REPRESENTS THE MARKET VALUE ON THE DATE OF ENTERING INTO THE AGREEMENT. THEREFORE, THE ESTIMAT ED COST OF CONSTRUCTION SHOWN IN THE JOINT DEVELOPMENT AGREEMENT FOR DEVELOPMENT OF THE PROPERTY SHOULD BE TAKEN INTO ACCOUNT IN WORKING OUT THE SALE CONSIDERATION FOR PURPOSES OF SECTION 45 AND NOT THE SUM ACTUALLY SPE NT.' 12. THE ASSESSEE SUBMITS THAT THE NON-MENTIONING OF THE PRICE OF THE LAND TRANSFERRED COULD NOT HAVE BEEN HELD AS GROUND TO HOLD THE DIFFERENTIATION IN FACTS. THE ASSESSEE SUBMITS EVEN THOUGH NO SPECIFIC PRICE WAS MENTIONED IN JDA, THE FMV AS ON THE DATE OF JDA SHALL BE THE CONSIDERATION FOR THE EXCHANGE OF 55% OF LAN D. THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS THAT THE CONSIDERATION OF RS.66,00,000/- MENTIONED IN THE CASE OF VED PRAKASH RAKHRA REPRESE NTED THE FMV AS ON THE DATE OF JDA AND SIMILARLY THE LD. CIT (A) OUGHT TO HAVE HELD THAT IN THE ABSENCE OF CONSIDERATION IN THE JD A, THE FMV AS ON THE DATE OF JDA SHOULD HAVE BE CONSIDERED FOR QUANTIFYI NG THE CONSIDERATION OF THE LAND TRANSFERRED. 13. THE ASSESSEE SUBMITS THAT THE AO AND THE CIT(A ) HAVE RELIED UPON THE INFORMATION PROVIDED BY THE DEVELOPER WHER EIN THE COST OF RS. 1238/- PER SQ.FT WAS REPORTED BY THE BUILDER AND TH E SAME WAS ADOPTED BY THE AO AND CONFIRMED BY THE CIT(A) FOR QUANTIFI CATION OF THE ITA.235/BANG/2016 PAGE - 8 CONSIDERATION WHICH WAS DETERMINED AT RS. 1,08,13,9 30/- DETERMINED BY THE LD. AO. THE FINDINGS OF THE CIT(A) AS REGAR DS ADOPTION OF BUILDERS COST OF RS. 1238/- PER SQ.FT IS COMPLETELY OPPOSED TO THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF KARNATAKA. 14. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDER PASSED BY THE LOWER AUTHORITIES AND HAS ALSO RELIED ON THE JU DGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VED PRAKAS H RAKHRA (SUPRA). IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DR PLE ADED THAT THE ORDER PASSED BY THE AUTHORITIES BELOW IS REQUIRED TO BE U PHELD. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD. RELEVANT CLAUSES, VIZ., 2(F), (G), 4.1, 4.2, 5.1 TO 5.6, 6.1, 8.1 TO 8.3 AND 12.1 TO 12.3 OF THE JDA ARE REPRODUCED HEREUNDE R FOR THE PURPOSES OF RECORD , AS NEITHER AO NOR THE CIT (A) HAD ADJUDI CATED AS TO THE DATE OF TRANSFER I.E AS TO WHEN THE PROPERTY WOULD BE TRAN SFERRED AFTER BUILT UP TO THE ASSESSEE IN TERM OF JDA. IN OUR OPINION, PRIM A FACIE THE PROPERTY WOULD NOT BE TRANSFERRED TO THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IN TERMS OF JDA, WE ARE NOT ADJUDICAT ING THIS ISSUE ON MERIT AS THIS HAS NOT BEEN URGED BEFORE US . ITA.235/BANG/2016 PAGE - 9 CLAUSE 2(F) & (G) : ITA.235/BANG/2016 PAGE - 10 ITA.235/BANG/2016 PAGE - 11 ITA.235/BANG/2016 PAGE - 12 19. FOR THE PURPOSES OF DETERMINING THE COST OF CON STRUCTION, IN IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF VED PRAKASH RAKHRA (SUPRA), HAS HELD THAT THE DATE OF ENTERING INTO JDA WOULD BE THE DATE FOR THE PURP OSES OF ARRIVING AT THE COST OF TRANSFER I.E. COST OF STRUCTURE AS ON THE D ATE OF AGREEMENT WOULD BE THE COST OF TRANSFER INSTEAD OF COST OF ACTUAL CONS TRUCTION IN TERM OF JDA. WE ARE BOUND TO FOLLOW THE LAW LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT (SUPRA). 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9TH DAY O F JUNE, 2017. SD/- SD/- (INTURI RAMA RAO) (LALI T KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR