REKHA AGGARWAL, MUMBAI V. ITO, Jaipur

ITA 559/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9735 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: H M SINGHVI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 559/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 MRS. REKHA AGARWAL, 1102, VERONA CLIFF AVENUE ROAD , HIRANANDANI GARDENS POWAI, MUMBAI CUKE VS. THE INCOME TAX OFFICER, WARD 4(4), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABSPA 0876 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI H.M. SINGHVI (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16.02.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 17/02/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 28.03.2016 FOR ASSESSMEN T YEAR 2011-12. IN ITS APPEAL, THE SOLE GROUND TAKEN BY THE ASSESSEE IS AS UNDER:- THE LD. AO HAS ERRED IN COMPUTING THE LONG TERM CA PITAL GAIN OF RS.10,72,482/- TO BE TAXED IN THE HANDS OF THE ASSE SSEE BY CONSIDERING SALE CONSIDERATION UNDER SECTION 50C OF THE INCOME TAX ACT, 1961 AND TREATING THE SAME AS INCOME FROM UNDI SCLOSED SOURCES. 2. THE LIMITED ISSUES UNDER CONSIDERATION IS WHETHE R THE ASSESSEE HAS SOLD RIGHT TO ACQUIRE A PROPERTY OR HAS ACTUALLY SO LD THE PROPERTY ITSELF. ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 2 SECONDLY, WHETHER THE PROVISIONS OF SECTION 50C ARE APPLICABLE IN THE CASE OF RIGHT TO ACQUIRE A PROPERTY OR NOT. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO OBSERVED THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL LOSS OF RS .4,90,018/- IN RESPECT OF SALE OF FLAT FOR RS. 33,75,000/- DURING THE YEA R UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO FURNISH REGISTERED SALE D EED OF THE FLAT SITUATED AT MEDICITY, SECTOR 38, GURGAON FOR ADOPTING THE VA LUE OF SALE CONSIDERATION U/S 50C OF THE ACT. THE ASSESSEE VIDE ITS LETTER DATED 12.02.2014 SUBMITTED THAT THE FLAT PURCHASED AT MED ICITY, SECTOR 38, GURGAON, HARYANA WAS UNDER CONSTRUCTION AT THE TIME OF PURCHASE AND THEREFORE, NO PURCHASE DEED WAS EXECUTED AT THAT TI ME AND ONLY PURCHASE THROUGH AGREEMENT WAS MADE. IT WAS FURTHE R SUBMITTED THAT AT THE TIME OF SALE OF THE ABOVE PROPERTY, THE PROPERT Y WAS AGAIN UNDER CONSTRUCTION AND SALE OF THE PROPERTY WAS EXECUTED THROUGH AGREEMENT ONLY AND NO REGISTERED SALE DEED WAS REQUIRED TO BE EXECUTED BECAUSE OF UNDER CONSTRUCTION OF THE PROPERTY. IT WAS ACCORD INGLY SUBMITTED THAT THE SALE VALUE AS MENTIONED IN THE SALE AGREEMENT SHOU LD BE CONSIDERED AS FAIR MARKET VALUE AND PURCHASED VALUE SHOULD BE TA KEN FOR THE PURPOSES OF DETERMINING THE INDEX COST OF ACQUISITION. HOWE VER, THE AO DID NOT AGREE TO THE ASSESSEES CONTENTIONS AND WORKED OUT THE SALE CONSIDERATION AS PER THE DLC RATE PROVIDED BY THE S UB-REGISTRAR, GURGAON AND THE AMOUNT OF RS.32,50,000/- BEING OF THE TOT AL SALE CONSIDERATION OF THE PROPERTY OF RS. 65,00,000/- WAS BROUGHT TO T AX IN THE HANDS OF THE ASSESSEE U/S 50C OF THE ACT. ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 3 2.2 BEING AGGRIEVED, THE ASSESSEEE CARRIED THE MATT ER IN APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED THAT PROVISIONS OF SEC TION 50C ARE NOT APPLICABLE IN THE CASE OF RIGHT TO ACQUIRE A PROPER TY AS IN THIS CASE THE ASSET UNDER CONSIDERATION IS RIGHT TO ACQUIRE A PR OPERTY AND NOT THE PROPERTY ITSELF. IN SUPPORT, THE ASSESSEE PLACED R ELIANCE ON THE COORDINATE BENCH DECISION IN THE CASE OF ATUL G. PURANIK VS. ITO (132 ITD 499). AS PER LD. CIT(A), ON PERUSAL OF THE COPIES OF THE AGREEME NT ON THE BASIS OF WHICH THE SALE AND PURCHASE TOOK PLACE, BOTH THE AGREEME NTS REFERRED TO A FLAT IN THE COMPLEX. THUS WHAT WAS BEING SOLD AND PURC HASED WAS A FLAT AND NOT A RIGHT. ACCORDINGLY, THE PROVISIONS OF SECTION 50C WERE HELD TO BE CORRECTLY APPLIED BY THE AO. 2.3 DURING THE COURSE OF HEARING, THE LD. AR, SHRI H.M. SINGHVI SUBMITTED THAT SECTION 50C REFERS TO LAND OR BUILD ING OR BOTH FOR ADOPTION OF VALUE TO BE ADOPTED BY STAMP VALUATION AUTHORITY . RIGHT IN THE PROPERTY IS A MOVABLE ASSET, HENCE 50C IS NOT APPL ICABLE AND THE VALUE ADOPTED BY AO FOR CALCULATION OF LONG TERM CAPITAL GAIN IS ILLEGAL AND THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) MAY KINDLY BE DELETED. FROM THE READING OF SECTION 50C, IT IS NO TICED THAT IT IS A DEEMING PROVISION AND SECONDLY EXTENDS TO LAND OR BUILDING OR BOTH. IT IS A MANIFEST THAT A DEEMING PROVISION HAS BEEN INCORPORATED TO SUSTAIN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VALUATIO N AUTHORITY IN PLACE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T RANSFER IN CASE THE LATER IS LOWER THAN THE FORMER. IT IS FURTHER TO BE NOTE D THAT MANDATE OF SECTION 50C EXTENDS ONLY TO A CAPITAL ASSETS WHICH IS LAND & BUILDING OR BOTH. THE DISTINCTION BETWEEN A CAPITAL ASSET BEING LAND OR B UILDING OR BOTH AND ANY RIGHT IN ANY LAND OR BUILDING OR BOTH IS WELL RECOG NIZED UNDER THE IT ACT. ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 4 SECTION 54D DEAL WITH CERTAIN CASES IN WHICH CAPITA L ASSETS ON COMPULSORY ACQUISITION OF LAND & BUILDING IS CHARGED. SUB SE C.1 OF SECTION 54D OPENS WITH SUBJECT TO THE PROVISION OF SUB SEC.2 WHERE T HE CAPITAL GAIN ARISES FROM THE TRANSFER BY WAY OF COMPULSORY ACQUISITION UNDER ANY LAW OF A CAPITAL ASSETS BEING LAND OR BUILDING OR ANY RIGHT IN THE LAND OR BUILDING FORMING PART OF INDUSTRIAL UNDERTAKING. FROM ITS READING, IT IS CLEAR THAT THE LAND OR BUILDING IS DISTINCT FROM NY RIGHT I N LAND OR BUILDING. IT WAS FURTHER SUBMITTED THAT THE HONBLE SUPREME C OURT IN THE CASE OF CIT VS. AMAR CHAND N. SHROFF (48 ITR 59) (SC) AND CIT VS. MOTHER INDIA REFRIGERATION INDUSTRIES P. LTD. HAS HELD THAT A DE EMING PROVISION CAN NOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS ENA CTED. THESE JUDGEMENTS HAVE BEEN FOLLOWED IN THE ITAT JUDGEMEN T IN THE CASE OF ATUL G. PURANIK VS. INCOME TAX OFFICER (MUMBAI A BENCH) (141 TTJ 0069) OF ITAT WHEREIN IT IS HELD AS UNDER:- HERE ABOVE IT IS WORTH NOTING THAT A DISTINCTION HAS BEEN DRAWN BETWEEN LAND OR BUILDING ON THE ONE HAND OR ANY RIGHTS IN LAND OR BUILDING ON THE OTHER HAND, CONSIDERING THE FACT THAT WE ARE DEALIN G WITH SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES U/ S 50C WHICH IS A DEEMING PROVISION, THE FICTION CREATED IN THE SEC. CAN NOT BE EXTENDED TO ANY EFFECT OTHER THAN THOSE SPECIFICALLY PROVIDED THERE IN SEC TION 50C APPLIES ONLY TO ANY CAPITAL ASSETS BEING LAND OR BUILDING OR BOTH. IT CAN NOT BE APPLIED ON LEASE RIGHTS IN LAND OR BUILDING OR BOTH. IT IS TH EREFORE, PRAYED THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY CIT(A) MAY KINDLY BE DELETED. 2.4 THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDI NGS OF THE AO. 2.5 IN ORDER TO APPRECIATE FACTUAL MATRIX IT WOULD BE RELEVANT TO GO THROUGH THE AGREEMENT OF CONVEYANCE DATED 06.04.200 7 BY VIRTUE OF WHICH THE SUBJECT PROPERTY WAS ACQUIRED BY THE ASSE SSEE AND THE THE ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 5 AGREEMENT OF CONVEYANCE DATED 29.07.2010 BY VIRTUE OF THE SUBJECT PROPERTY WAS SOLD BY THE ASSESSEE. 2.6 THE AGREEMENT OF CONVEYANCE DATED 06.04.2007 HA S BEEN ENTERED INTO BETWEEN M/S M & R ORIENTAL EXPORT (P) LTD. AN D MR. RAJESH KUMAR AGARWAL HUSBAND OF THE ASSESSEE AND MRS. REKHA AGAR WAL THE ASSESSEE HERSELF. THE SALIENT FEATURE OF THE AGREEMENT ARE REPRODUCED AS UNDER: WHEREAS THE FIRST PARTY IS THE LEGAL ALLOTTEE OF 2500 SQ. FT IN PROJECT KNOWN AS MEDICITY, SECTOR 38, GURGAON, HA RYANA (HEREIN AFTER REFERRED TO AS THE DEMISED PREMISES) VIDE M OU DATED DECEMBER, 22 ND 2004 EXECUTED BETWEEN THE FIRST PARTY AND M/S GLOBAL HEALTH PRIVATE LIMITED THROUGH ITS DIRECTOR DR. NARESH TREHAN AND MR. SUNIL SACHDEVA AND HAVING THEIR OFFICES A T B-4 MAHARANI BAGH, NEW DELHI -110065 THE DEVELOPER OF THE DEMIS ED PROJECT/PREMISES. 1. AND WHEREAS HE FIRST PARTY HAS NOW AGREED TO SELL/ALIENATE/TRANSFER/ASSIGN THE SAME TO THE SEC OND PARTY AT A TOTAL COST OF RS. 37,50,000/- (RUPEES THIRTY S EVEN LACS AND FIFTY THOUSAND ONLY) ON THE FOLLOWING TERMS AND CONDITIONS, AND THE SECOND PARTY HAS AGREED TO PURC HASE THE DEMISED PROPERTY. THAT THE SECOND PARTY HAVE PAID T O THE FIRST PARTY A SUM OF RS. 33,75,000/-(RUPEES THIRTY THREE LACS AND SEVENTY FIVE THOUSAND ONLY) WHICH WAS PAID BY T HE FIRST PARTY TO SECOND PARTY M/S GLOBAL HEALTH (P) LTD. AT THE TIME OF ORIGINAL ALLOTMENT, THE RECEIPT OF WHICH THE FIR ST PARTY HEREBY ACKNOWLEDGES. THAT THE SECOND PARTY UNDERTA KES TO PAY DIRECTLY TO M/S GLOBAL HEALTH (P) LTD. A BALAN CE OF RS. 3,75,000/- (RUPEES THREE LACS SEVENTY FIVE THOUSAND ONLY) IN TERMS OF MOU DATED DECEMBER, 22 ND , 2004 EXECUTED BETWEEN THE FIRST PARTY AND M/S GLOBAL HEALTH (P) LTD. 2. THAT THE FIRST PARTY SHALL GET THE SAID FLAT DULY TRANSFERRED IN FAVOUR OF THE SECOND PARTY AT HIS RISK, COST AND EX PENSES. 3. THAT THE SECOND PARTY HAS READ/GONE THROUGH THE TERMS AND CONDITIONS AS STATED IN MEMORANDUM OF UNDERTAKING DATED DECEMBER, 22 ND , 2004 EXECUTED BETWEEN THE FIRST PARTY AND M/S GLOBAL HEALTH (P) LTD. AND CONFIRMS TO ABIDE BY EACH AND ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 6 EVERY TERM AND CONDITION AS STATED THEREIN AS THE N OMINEE OF THE FIRST PARTY. 4. THAT THE FIRST PARTY HAS ASSURED AND REPRESENTE D TO THE SECOND PARTY THAT THE PROPERTY TO BE SOLD UNDER T HE AGREEMENT OF CONVEYANCE IS FREE FROM ALL KINDS OF ENCUMBRANCES SUCH AS PRIOR SALE, MORTGAGE, LOAN, DI SPUTE, LITIGATION ETC. THAT THE FIRST PARTY HAS HANDED OV ER TO THE SECOND PARTY THE ORIGINAL MEMORANDUM OF UNDERTAKING MENTIONED HEREIN AND ORIGINAL RECEIPT ISSUED BY THE DEVELOPER M/S GLOBAL HEALTH PVT. LTD., THE RECEIPT OF WHICH T HE SECOND PARTY ACKNOWLEDGES AT THE TIME OF SIGNING OF THIS A GREEMENT. 2.7 IT WOULD NOW BE RELEVANT TO GO THROUGH THE MO U DATED 22.12.2004 WHICH FINDS MENTION IN THE ABOVE STATED CONVEYANCE AGREEMENT. THE MOU DATED 22.12.2004 HAS BEEN ENTERED INTO BETWEEN M/S GLOBAL HEALTH (P) LTD. AND M/S M & R ORIENTAL EXPORT (P) LTD. TH E PREAMBLE OF THE MOU PROVIDES THAT M/S GLOBAL HEALTH (P) LTD. IS THE ALL OTTEE OF 43 ACRE LAND FOR SETTING UP OF MEGA SIZE MEDICITY IN SECTOR 38, GUR GAON VIDE ALLOTMENT LETTER NO. 1704 DATED 29.10.2004 AND POSSESSION LET TER ISSUED BY HUDA. IT FURTHER PROVIDES THAT THE COMPANY IS IN T HE PROCESS OF OBTAINING BUILDING PLAN APPROVALS AND RELATED APPROVALS TO DEVELOP ON THE SAID LAND WITH MULTI STORIED CUM MULTI STRUCTURED ME DI CITY. IT FURTHER PROVIDES THAT THE ALLOTTEE HAS SHOWN INTEREST IN T HE COMPLEX AND HAS APPROACHED THE COMPANY FOR ALLOTMENT OF OFFICE SPAC E MEASURING 2500 SQ.FT. SUPER AREA IN THE COMPLEX WHICH IS PRESENTLY BEING PUT UNDER DEVELOPMENT AND HAS SPECIFICALLY OPTED FOR INVESTME NT RETURN PAYMENT PLAN. THEREAFTER, IT CONTAINS SALIENT TERMS AND CO NDITIONS AS MUTUALLY AGREED WHICH INTERALIA INCLUDES THE FOLLOWING: (1) THAT THE COMPANY AGREES TO ALLOT TO THE ALL OTTEE, A PREMISES, MEASURING 2500 SQ. FT. ( 232.26 SQ. MTRS) SUPER AR EA IN THE COMPLEX KNOWN AS MEDICITY, ALONG WITH THE RIGHT TO USE 3 CAR PARKS IN LOWER/ UPPER BASEMENT, BEING CONSTRUCTED @ RS. 1500 /- PER SQ. FT. ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 7 I.E. RUPEES SIXTEEN THOUSAND ONE HUNDRED AND FORTY FIVE AND PAISE SEVENTY ONLY PER SQUARE METER. THE CAR PARKING, AS AFORESAID, SHALL BE IDENTIFIED AND ALLOCATED AT THE TIME OF POSSESSI ON OF THE PREMISES TO THE ALLOTTEE. THE TOTAL AGREED CONSIDERATION ( THE ALLOTMENT CONSIDERATION) FOR ALLOTMENT OF THE PREMISES IS R S. 3,750,000/- (RUPEES THIRTY SEVEN LAKHS AND FIFTY THOUSAND ONLY ) SUBJECT TO ADJUSTMENT AT THE TIME OF FINAL AREA ALLOTMENT AT T HE RATE STIPULATED HEREINBEFORE. (2) THAT OUT OF THE TOTAL AGREED ALLOTMENT CONSIDE RATION, THE ALLOTTEE HAS PAID UPTO THE COMPANY UPON AND/ OR PRIOR TO T HE EXECUTION OF THIS MOU AND AMOUNT OF RS. 3,375,000/- ( RUPEES THI RTY THREE LAKHS AND SEVENTY FIVE THOUSAND ONLY), CALCULATED @ RS. 1 ,350/- PER SQ.FT. ( RUPEES FOURTEEN THOUSAND FIVE HUNDRED AND THIRTY ON E AND PAISE THIRTEEN ONLY PER SQUARE METER) BEING THE 90% ( NIN ETY PERCENT) AMOUNT OF THE TOTAL ALLOTMENT CONSIDERATION OF THE PREMISES, THE RECEIPT WHEREOF THE COMPANY HEREBY ADMITS AND ACK NOWLEDGES AND IN TERMS OF COPY OF THE RECEIPT ANNEXED AS ANN EXURE-1HERETO. (5) THAT THE COMPANY SHALL GIVE FINAL ALLOTMENT T O THE ALLOTTEE AS TO ITS FINAL AREA AND LOCATION, CLEARLY DEMARCATED ON A TO THE SCALE PLAN, ON A DATE NOT LATER THAN 1 ST JANUARY 2006. IN CASE THE COMPANY FAILS TO GIVE FINAL ALLOTMENT BY THE DATE STIPULATED HERE IN, IT SHALL REFUND TO THE ALLOTTEE, AT THE FIRST DEMAND AND DISCRETION OF ALLOTTEE, THE AMOUNTS IT HAS PAID HEREUNDER ALONGWITH PENALTY/ DA MAGES/ COMPENSATION TOGETHER EQUIVALENT TO RS. 3400.00 ( R UPEES THREE THOUSAND AND FOUR HUNDRED ONLY) PER SQ. FT., AFTER DEDUCTING THE UN- PAID AMOUNTS, LATEST BY 31 ST JANUARY 2006 FAILING WHICH AN INTEREST @ 21% ( TWENTY ONE PERCENT) PER ANNUM COMPOUNDABLE QUARTERLY SHALL BECOME PAYABLE BY THE COMPANY TO THE ALLOTT EE. (6) THAT THE PREMISES, PROPOSED TO BE ALLOTTED BY T HE COMPANY, WILL BE CONSTRUCTED AND COMPLETED BY THE COMPANY NOT LATE R THAN 30 MONTHS OF THE SIGNING OF THIS MOU, SUBJECT, HOWEVER TO FORCE MAJEURE CIRCUMSTANCES. IN CASE THE COMPANY FAILS TO COMPLETE THE PREMISES IN THE TIME STIPULATED HEREIN, IT SHALL R EFUND TO THE ALLOTTEE, AT THE FIRST DEMAND AND DISCRETION OF ALL OTTEE, THE AMOUNTS IT HAS PAID HEREUNDER ALONGWITH PENALTY/ DAMAGES/ C OMPENSATION TOGETHER EQUIVALENT TO RS. 3900.00 ( RUPEES THREE THOUSAND AND NINE HUNDRED ONLY) PER SQ.FT. WITHIN ONE MONTHS OF ITS FALLING DUE, ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 8 FAILING WHICH AN INTEREST @ 21% ( TWENTY ONE PERCEN T) PER ANNUM COMPOUNDABLE QUARTERLY SHALL BE PAYABLE BY THE CO MPANY TO THE ALLOTTEE ALONG WITH THE ABOVE. (14) THAT THE PARTY OF THE SECOND PART SHALL HAVE U NRESTRICTED AND UNFETTERED RIGHT TO ASSIGN/NOMINATE ITS RIGHTS UNDE R THIS MOU TO ANY THIRD PARTY AT ANY PRICE IT DEEMS FIT AND PROPE R SUBJECT TO THE TERMS HEREOF. THAT THE PARTY OF THE FIRST PART OR I TS AGENTS/ REPRESENTATIVES SHALL NOT CHARGE ANY AMOUNTS TOWAR DS TRANSFER/ASSIGNMENT/ NOMINATION CHARGES AND SHALL A FFORM TO THIRD PARTY AS THE ALLOTTEE ON THE SAME TERMS AND CONDITI ONS AS AGREED TO HEREIN. ANY ASSIGNMENT SHALL BE ON THE CONDITIONS T HAT THE ASSIGNEE ACCEPTS IN WRITING ALL THE TERMS AND CONDITIONS H EREOF. 2.8 WE NOW REFER TO THE AGREEMENT OF CONVEYANCE (S ALE AGREEMENT) DATED 23.07.2010 WHICH HAS BEEN ENTERED INTO BY MR . RAJESH AGARWAL AND MRS. REKHA AGARWAL WITH S.A.S. SERVIZIO (P) LTD. , A-10/6 VASANT VIHAR, NEW DELHI WHEREIN IT IS PROVIDED THAT THE ASSESSEE IS THE LEGAL ALLOTTEE OF 2500 SQ.FT. IN PROJECT KNOWN AS MEDI CITY, SECTOR 3 8, GURGAON BY VIRTUE OF TRANSFER/ENDORSEMENT DONE IN ITS FAVOUR ON APRIL 6, 2007, VIDE MOU DATED 22.12.2004 EXECUTED BETWEEN THE ORIGINAL AL LOTTEE AND M/S GLOBAL HEALTH (P) LTD. WHICH IS THE DEVELOPER OF THIS PROJ ECT. IT FURTHER PROVIDES AS UNDER:- 1. AND WHEREAS THE FIRST PARTY HAS NOW AGREED TO AL IENATE /TRANSFER/ ASSIGN THE SAME TO THE SECOND PARTY AT A TOTAL COS T OF RS. 37,50,000/- ( RUPEES THIRTY SEVEN LACS FIFTY THOUSA ND ONLY ) ON THE FOLLOWING TERMS AND CONDITIONS, AND THE SECOND PART Y HAS AGREED TO PURCHASE THE DEMISED PROPERTY. THAT THE SECOND PAR TY HAS AGREED TO PAY TO THE FIRST PARTY A SUM OF RS. 33,75,000/- ( RUPEES THIRTY THREE LACS SEVENTY FIVE THOUSAND ONLY) IN FAVOUR R AJESH AGARWAL AND REKHA AGARWAL COLLECTIVELY. THAT THE SECOND PARTY UNDERTAKES TO PAY DIRECTLY TO M/S GLOBAL HEALTH PRIVATE LIMITED A BALANCE RS. 3,75,000/- ( RUPEES THREE LACS SEVENTY FIVE THOUSAN D ONLY) IN TERMS OF THE AGREEMENT OF CONVEYANCE DATED DECEMBER 5, 20 06 EXECUTED BETWEEN THE FIRST PARTY AND M/S SURESH CHAND JAIN & SONS. ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 9 2. THAT THE FIRST PARTY SHALL GET THE SAID DEMISED PREMISES DULY TRANSFERRED IN FAVOUR OF THE SECOND PARTY AT ITS R ISK, COST AND EXPENSES. 3. THAT THE SECOND PARTY HAS READ/GONE THROUGH THE TERMS AND CONDITIONS AS STATED IN MEMORANDUM OF UNDERTAKING D ATED 22 ND DECEMBER 2004 EXECUTED BETWEEN THE FIRST PARTY AND M/S GLOBAL HEALTH PRIVATE LIMITED AND CONFIRMS TO ABIDE BY EACH AND EVERY TERM AND CONDITION AS STATED THEREIN AS THE NOMINEE OF THE FIRST PARTY. 4. THAT THE FIRST PARTY HAS ASSURED AND REPRESEN TED TO THE SECOND PARTY THAT THE PROPERLY TO BE ALIENATE/ TRANSFER/A SSIGN UNDER THIS AGREEMENT OF CONVEYANCE IS FREE FROM ALL KINDS OF E NCUMBRANCES SUCH AS PRIOR SALE, MORTGAGE, LOAN, DISPUTE LITIGAT ION ETC. THAT THE FIRST PARTY HAS HANDED OVER TO THE SECOND PARTY THE ORIGINAL MEMORANDUM OF UNDERSTANDING MENTIONED HEREIN AND OR IGINAL RECEIPT ISSUED BY THE DEVELOPER M/S GLOBAL HEALTH PRIVATE LIMITED, THE RECEIPT OF WHICH THE SECOND PARTY ACKNOWLEDGES AT THE TIME OF SIGNING OF THE AGREEMENT. 2.9 ON CLOSE READING OF THE ABOVE DOCUMENTS, THE EX ISTENCE AND CONTENTS THEREOF HAVE NOT BEEN DENIED BY THE REVENU E, IT IS CLEAR THAT FIRSTLY WHAT HAS BEEN PURCHASED INITIALLY BY THE A SSESSEE ALONGWITH HER HUSBAND IS THE RIGHT OF ALLOTMENT IN THE OFFICE FLA T MEASURING 2500 SQ.FT. IN THE MEDI CITY PROJECT WHICH WAS UNDER DEVELOPMENT A T SECTOR 38, GURGAON. IT IS ALSO CLEAR THAT FROM THE PERUSAL OF THE AGREEMENT OF CONVEYANCE DATED 23.07.2010 THAT WHAT HAS BEEN SOLD IS AGAIN A RIGHT OF ALLOTMENT OF THE SAID FLAT IN THE MEDI CITY PROJECT . THE SAID FACT IS APPARENT FROM THE FACT THAT THE BALANCE 10% CONSIDERATION OF RS. 3,75,000/- WHICH WAS SUPPOSED TO BE PAID TO THE DEVELOPER AT THE TIM E OF POSSESSION OF THE FLAT IN TERMS OF THE ORIGINAL MOU DATED 22.12.2004 HAD STILL NOT BEEN PAID AND IT HAS NOW BEEN AGREED THAT THE SAID 10% BALANC E CONSIDERATION SHALL BE PAID DIRECTLY BY THE PURCHASER NAMELY S.A.S. SE RVIZIO (P) LTD., A-10/6 ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 10 VASANT VIHAR, NEW DELHI. FURTHER, IT HAS BEEN AGRE ED THAT THE PURCHASER HAS GONE THROUGH THE MOU DATED 22.12.2004 AND SHALL AGREE WITH THE CONTENTS THEREOF. FURTHER, WHAT HAS BEEN PHYSICALL Y HANDED OVER TO THE BUYER OF THE PROPERTY IS THE ORIGINAL MOU AS WELL A S THE ORIGINAL PAYMENT RECEIPT ISSUED BY THE DEVELOPER M/S GLOBAL HEAL (P) LTD. ON A COMBINED READING OF ALL THESE CLAUSES WHICH ARE MUTUALLY AG REED UPON BETWEEN BOTH THE PARTIES, IT IS CLEAR THAT WHAT HAS BEEN TR ANSFERRED IS A RIGHT OF ALLOTMENT IN THE PROPERTY WHICH WAS UNDER CONSTRUC TION AND POSSESSION THEREOF WAS NOT TAKEN BY THE ASSESSEE AND HENCE, TH ERE IS NO QUESTION OF TRANSFER OF THE POSSESSION OF THE SAID PROPERTY. F URTHER, OTHER THAN THESE AGREEMENTS AND MOU, THERE IS NOTHING IN TERMS OF AN Y POSITIVE TANGIBLE EVIDENCE WHICH HAS BEEN BROUGHT ON RECORD BY THE RE VENUE TO SUPPORT ITS POSITION THAT IT IS THE FLAT WHICH HAS BEEN TRANSFE RRED BY THE ASSESSEE. AFTER THE ASSESSEE HAS SUBMITTED TO THE AO VIDE ITS LETTER DATED 12.03.2014 THAT THE PROPERTY WAS UNDER CONSIDERATIO N AT THE TIME OF THE SALE AND NO SALE DEED WAS EXECUTED, THE AO HAS NOT CARRIED OUT ANY FURTHER INVESTIGATION WITH THE DEVELOPER TO REFUTE THE CONTENTIONS RAISED BY THE ASSESSEE. IN RESULT, ON PERUSAL OF THE DOCU MENTS AVAILABLE ON RECORD, THE CONTENTION OF THE ASSESSEE REMAINS UNCO NTROVERTED. IT IS THE RIGHT IN THE PROPERTY BY WAY OF RIGHT OF ALLOTMENT WHICH HAS BEEN ASSIGNED BY THE ASSESSEE IN FAVOUR OF THE BUYER AND NOT THE PROPERTY ITSELF. 2.10 THE NEXT QUESTION THAT ARISES FOR CONSIDERATIO N NOW IS WHETHER THE PROVISIONS OF SECTION 50C ARE APPLICABLE IN RESPECT OF RIGHT OF ALLOTMENT IN THE PROPERTY. IN THIS REGARD, WE REFER TO THE PROV ISIONS OF SECTION 50C(1) OF THE ACT WHICH READS AS UNDER: ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 11 WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED, O R ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FO R THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL FOR THE PUR POSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSI DERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. 2.11 ON READING OF SUB SECTION (1) OF SECTION 50C, IT IS CLEAR THAT THE VALUE OF LAND, BUILDING OR BOTH ADOPTED OR ASSESSE D OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY SHALL FOR THE PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR A CCRUING AS A RESULT OF SUCH TRANSFER. IT IS A DEEMING PROVISION AND IT EX TENT ONLY TO LAND, BUILDING OR BOTH. IT THEREFORE FOLLOWS THAT WHERE A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH IS TRANSFERRED AND THE CONSIDERATI ON RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY, THE DE EMING PROVISIONS OF SUB SECTION(1) OF SECTION 50C SHALL BE APPLICABLE. IN THE INSTANT CASE WHAT HAS BEEN TRANSFERRED IS A RIGHT OF ALLOTMENT IN OFF ICE FLAT AND NOT THE OFFICE FLAT ITSELF. IT IS THEREFORE CLEAR THAT A DEEMING PROVISION WHICH IS LIMITED TO LAND, BUILDING OR BOTH CANNOT BE EXTENDED BEYOND T HE PURPOSE FOR WHICH IT IS ENACTED AND IS THEREFORE NOT APPLICABLE IN TH E INSTANT CASE. THE LD. AR HAS RELIED ON THE COORDINATE BENCHS DECISION IN TH E CASE OF ATUL G. PURANIK (SUPRA) WHICH SQUARELY SUPPORTS THE CASE OF THE ASSESSEE. IN THAT CASE, THE ASSESSEE WAS ALLOTTED LEASE RIGHT IN A PL OT FOR A PERIOD OF SIXTY YEARS. THE RELEVANT FINDING OF THE COORDINATE BENC H CONTAIN AT PARA 11.4 OF ITS ORDER IS REPRODUCED AS UNDER: IN VIEW OF THE AFORENOTED JUDGEMENTS RENDERED BY T HE HONBLE APEX COURT AND THAT OF THE HONBLE JURISDICTIONAL H IGH COURT, IT IS ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 12 CLEAR THAT A DEEMING PROVISION CAN BE APPLIED ONLY IN RESPECT OF THE SITUATION SPECIFICALLY GIVEN AND HENCE CANNOT GO BE YOND THE EXPLICIT MANDATE OF THE SECTION. TURNING TO S. 50C, IT IS S EEN THAT THE DEEMING FICTION OF SUBSTITUTING ADOPTED OR ASSESS ED OR ASSESSABLE VALUE BY THE STAMP VALUATION AUTHORITY AS FULL VALU E OF CONSIDERATION IS APPLICABLE ONLY IN RESPECT OF LAN D OR BUILDING OR BOTH. IF THE CAPITAL ASSET UNDER TRANSFER CANNOT B E DESCRIBED AS LAND OR BUILDING OR BOTH, THEN S. 50C WILL CEASE TO APPLY. FROM THE FACTS OF THIS CASE NARRATED ABOVE, IT IS SEEN THAT THE ASSESSEE WAS ALLOTTED LEASE RIGHT IN THE PLOT FOR A PERIOD OF S IXTY YEARS, WHICH RIGHT WAS FURTHER ASSIGNED TO M/S PATHIK CONSTRUCTION IN THE YEAR IN QUESTION. IT IS AXIOMATIC THAT THE LEASE RIGHTS IN A PLOT OF LAND ARE NEITHER LAND OR BUILDING OR BOTH AS SUCH NOR CAN BE INCLUDED WITHIN THE SCOPE OF LAND OR BUILDING OR BOTH. THE DISTIN CTION BETWEEN A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH AN D ANY RIGHT IN LAND OR BUILDING OR BOTH IS WELL RECOGNIZED UNDER THE IT ACT. SEC. 54D DEALS WITH CERTAIN CASES IN WHICH CAPITAL GAIN ON C OMPULSORY ACQUISITION OF LAND AND BUILDING IS CHARGED. SUB-S. (1) OF S. 54D OPENS WITH SUBJECT TO THE PROVISIONS OF SUB-S. (2) , WHERE THE CAPITAL ASSET, BEING LAND OR BUILDING OR ANY RIGHT IN LAND OR BUILDING, FORMING PART OF AN INDUSTRIAL UNDERTAKING... IT IS PALPAB LE FROM S. 54D THAT LAND OR BUILDING IS DISTINCT FROM ANY RIGHT IN L AND OR BUILDING. SIMILAR POSITION PREVAILS UNDER THE WT ACT, 1957 AL SO. SEC. 5 (1) AT THE MATERIAL TIME PROVIDED FOR EXEMPTION IN RESPECT OF CERTAIN ASSETS. CLAUSE (XXXII) OF S/5(1) PROVIDED THAT THE VALUE, AS DETERMINED IN THE PRESCRIBED MANNER, OF THE INTERES T OF THE ASSESSEE IN THE ASSETS ( NOT BEING ANY LAND OR BUILDING OR A NY RIGHTS IN LAND OR BUILDING OR ANY ASSET REFERRED TO IN ANY OTHER CLA USES OF THIS SUB- SECTION) FORMING PART OF AN INDUSTRIAL UNDERTAKING SHALL BE EXEMPT FROM TAX. HERE ALSO IT IS WORTH NOTHING THAT A DIST INCTION HAS BEEN DRAWN BETWEEN LAND OR BUILDING ON ONE HAND AND O R ANY RIGHTS IN LAND OR BUILDING ON THE OTHER. CONSIDERING THE FA CT THAT WE ARE DEALING WITH SPECIAL PROVISION FOR FULL VALUE OF CO NSIDERATION IN CERTAIN CASES UNDER S. 50C, WHICH IS A DEEMING PROV ISION, THE FICTION CREATED IN THIS SECTION CANNOT BE EXTENDED TO ANY ASSET OTHER THAN THOSE SPECIFICALLY PROVIDED THEREIN. AS SEC. 50C APPLIES ONLY TO A CAPITAL ASSETS, BEING LAND OR BUILDING OR BOTH, IT CANNOT BE MADE APPLICABLE TO LEASE RIGHTS IN A LAND. AS THE ASSESS EE TRANSFERRED LEASE RIGHTS FOR SIXTY YEARS IN THE PLOT AND NOT LAND IT SELF, THE PROVISIONS OF ITA NO. 559/JP/16MRS. REKHA AGARWAL VS. THE ITO, WARD 4(4), JAIPUR 13 S.50C CANNOT BE INVOKED. WE, THEREFORE, HOLD THAT T HE FULL VALUE OF CONSIDERATION IN THE INSTANT CASE BE TAKEN AS RS. 2 .50 CRORES. 2.12 IN LIGHT OF ABOVE FACTS AND CIRCUMSTANCES OF T HE CASE AND TAKING INTO CONSIDERATION THE DECISION OF THE CO-ORDINATE BENCH REFERRED (SUPRA) WE ARE OF THE VIEW THAT WHAT HAS BEEN TRANSFERRED BY T HE ASSESSEE IS A RIGHT OF ALLOTMENT IN THE PROPERTY AND NOT THE ACTUAL PROPER TY ITSELF AND IN RESPECT OF SUCH RIGHTS, THE DEEMING PROVISIONS OF SECTION 5 0C ARE NOT APPLICABLE. THE GROUND TAKEN BY THE ASSESSEE IS ACCORDINGLY ALL OWED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/02/ 2017. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 17/02/2017 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- MRS. REKHA AGARWAL, MUMBAI. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD 4(4), JAIPUR 3. VK;DJ VK;QDR@ CIT -2, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 2, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 559/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.