P.Bharathi Rajaa, CHENNAI V. DCIT, CHENNAI

ITA 659/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96017 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 31-03-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: T T DURAIRAJ KANDIAR
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition
• Section: 50C; 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS.659 AND 660/MDS/2015 / ASSESSMENT YEARS : 2007-08 & 2004-05 SHRI P. BHARATHI RAJAA NO.21, KRISHNA STREET TPO NAGAR, CHENNAI 600 017 VS. THE DY. C OMMISSIONER OF INCOME-TAX NON-CORP. CIRCLE 20(1) CHENNAI [PAN AAEPR 5416 P] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI T.T.DURAIRAJ KANDIAR, CA /RESPONDENT BY : SHRI A.B. KOLI, JCIT / DATE OF HEARING : 20 - 08 - 2015 ! / DATE OF PRONOUNCEMENT : 11 - 09 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-14, CHENNAI, DATED 27.2.2015 AND PERTAIN TO ASSESSMEN T YEARS 2007-08 AND 2004-05. 2. LET US FIRST TAKE UP THE ASSESSEES APPEAL IN I.T.A .NO. 659/MDS/2015 FOR ASSESSMENT YEAR 2007-08. ITA NOS.659 & 660/15 :- 2 -: 3. SHRI T.T. DURAIRAJ KANDIAR, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ENTERED INTO A JOINT VENTURE AGREEMENT FOR DEVELOPMENT OF THE LAND ON 25.6.2000. HOWEVER, ON THE DATE OF THE AGREEMENT, THE PHYSICAL POSSESSION OF THE PROPERTY WAS NOT HANDED OVER TO THE DEVELOPER. SUBSEQUENTLY, A SUPPLEMENTARY AGREEMENT WAS EXECUTED ON 27.1.2003 HANDING OVER TH E PHYSICAL POSSESSION OF THE PROPERTY TO THE DEVELOPER AND A P OWER OF ATTORNEY WAS ALSO EXECUTED ENABLING THE DEVELOPER TO CARRY O UT THE NECESSARY WORK. ACCORDING TO THE LD. REPRESENTATIVE, THE AS SESSEE ENTERED INTO ANOTHER AGREEMENT ON 4.10.2006. BY THIS , THE ASS ESSEE RELINQUISHED 1.90 ACRES OF LAND BEING 92.12% OF THE TOTAL AREA T O THE DEVELOPER AND RECEIVED THE CONSTRUCTED COMMERCIAL AREA OF 11560 S Q FT AND A CASH CONSIDERATION OF ` 276 LAKHS. THE COST OF CONSTRUCTION OF COMMERCIAL BLOCK ALLOTTED TO THE ASSESSEE WAS ESTIMATED AT ` 55 LAKHS. THE ASSESSEE ADMITTED CAPITAL GAINS OF ` 1,03,50,517/- AFTER INDEXATION OF THE COST OF LAND TRANSFERRED TO THE DEVELOPER BY WA Y OF SUPPLEMENTARY AGREEMENT DATED 4.10.2006. THE ASSESSEE CLAIMED B EFORE THE ASSESSING OFFICER THAT COST OF CONSTRUCTION OF COMM ERCIAL AREA ALLOTTED TO THE ASSESSEE TO THE EXTENT OF 11,560 SQ FT WAS ` 34,68,000/-. THE ASSESSEE HAS RECEIVED ` 276 LAKHS IN CASH. AFTER DEDUCTING A SUM OF ` 1,99,87,250/- WHICH WAS ADMITTED IN ASSESSMENT YEAR 2003-04, THE ASSESSEE HAS SHOWN THE LONG TERM CAPITAL GAINS ON T HE JOINT VENTURE ITA NOS.659 & 660/15 :- 3 -: CONSTRUCTION AT ` 1,10,80,750/-. THE ASSESSEE HAS ALSO DEDUCTED ` 7,30,233/- BEING THE COST OF ACQUISITION OF 53 CENT S OF LAND AND ULTIMATELY SHOWN THE LONG TERM CAPITAL GAINS AT ` 1,03,50,517/-. 4. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SEC. 50C OF THE ACT HAS TAKEN THE VALUE OF THE PROPERTY AT ` 699/- PER SQ FT. AND COMPUTED THE CAPITAL GAINS A T ` 1,61,65,773/-. THE LD. REPRESENTATIVE PLACED HIS RE LIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN CIT VS R. SUGA NTHA RAVINDRAN [2013] 352 ITR 488, AND SUBMITTED THAT THE WORD AS SESSABLE WAS INTRODUCED IN SECTION 50C OF THE ACT WITH EFFECT FR OM 1.10.2009. THE MADRAS HIGH COURT FOUND THAT SUCH AN AMENDMENT WOUL D HAVE PROSPECTIVE APPLICATION AND NOT OTHERWISE, THEREFOR E, SEC. 50C IS NOT APPLICABLE TO THE ASSESSEE. 5. ON THE CONTRARY, SHRI A.B. KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT ON 25.6.2000. HOWEVER, THERE IS NO REFER ENCE ABOUT HANDING OVER OF THE PHYSICAL POSSESSION TO THE DEVE LOPER ON THE DATE OF THE AGREEMENT. SUBSEQUENTLY, A SUPPLEMENTARY AG REEMENT WAS EXECUTED ON 27.1.2003 AND THE PHYSICAL POSSESSION O F THE PROPERTY WAS HANDED OVER TO THE DEVELOPER. THE ASSESSEE EX ECUTED ANOTHER SUPPLEMENTARY AGREEMENT ON 4.10.2006 RELINQUISHING HIS RIGHT OVER ITA NOS.659 & 660/15 :- 4 -: 1.90 ACRES OF LAND. THE ASSESSEE ALSO EXECUTED A POWER OF ATTORNEY. REFERRING TO SEC. 50C OF THE ACT, THE LD. DR SUBMIT TED THAT THE VALUE ADOPTED BY THE STATE GOVERNMENT FOR VALUATION HAS T O BE ADOPTED FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. THEREF ORE, THE ASSESSING OFFICER HAS RIGHTLY TAKEN THE VALUE OF THE LAND AT ` 699/- PER SQ FT AS ON 31.3.2007 WHICH WAS ADOPTED BY THE REGISTRATION AUT HORITIES FOR THE PURPOSE OF VALUATION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE AGREEMENT WAS ENTERED INTO BETWEEN THE ASSESSE E AND THE DEVELOPER FOR DEVELOPMENT OF THE PROPERTY ON 25.6.2 000. THE POSSESSION OF THE PROPERTY WAS NOT HANDED OVER TO T HE DEVELOPER ON 25.6.2000. BY WAY OF A SUPPLEMENTARY AGREEMENT DAT ED 27.1.2003 THE ASSESSEE HANDED OVER THE PHYSICAL POSSESSION O F THE PROPERTY TO THE DEVELOPER AND ALSO EXECUTED A POWER OF ATTORNEY . THEREFORE, FOR ALL PRACTICAL PURPOSES, IT HAS TO BE TREATED THAT TRANSFER TOOK PLACE ON 27.1.2003. UNDER COMMON LAW, IT IS SETTLED PRINCIPL ES OF LAW THAT FOR TRANSFER OF A PROPERTY THE VALUE OF WHICH EXCEEDS ` 100/- NEEDS TO BE REGISTERED UNDER THE REGISTRATION ACT. HOWEVER, THE WORD TRANSFER HAS BEEN DEFINED UNDER SEC. 2(47) OF THE ACT. THE INCO ME-TAX ACT, 1961, BEING A SPECIAL ENACTMENT, THE DEFINITION CONTAINED IN SEC. 2(47) WOULD PREVAIL OVER THE OTHER LAWS OF THE LAND WHICH REQUI RES REGISTRATION. IN ITA NOS.659 & 660/15 :- 5 -: OTHER WORDS, UNDER THE INCOME-TAX ACT, 1961 REGISTR ATION OF THE PROPERTY IS NOT MANDATORY. WHEN THE ASSESSEE HAND ED OVER THE PHYSICAL POSSESSION OF THE PROPERTY BY WAY OF AN AR RANGEMENT AND ALLOWED THE DEVELOPER TO RETAIN THE SAME WOULD AMOU NT TO A TRANSFER. THEREFORE, UNDER THE PROVISIONS OF THE INCOME-TAX A CT, 1961, TRANSFER TOOK PLACE ON 27.1.2003 WHICH FALLS IN ASSESSMENT Y EAR 2003-04. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT CAPITAL GAINS, IF ANY, HAS TO BE ASSESSED ONLY FOR THE ASSESSMENT YEAR 2003-04 AND DEFINITELY NOT FOR ASSESSMENT YEAR 2007-08. 7. NOW COMING TO THE CLAIM OF THE ASSESSEE WITH REGAR D TO APPLICATION OF SEC. 50C OF THE ACT, THE PARLIAMENT MADE AN AMENDMENT BY INTRODUCING THE WORD ASSESSABLE BY FINANCE ACT , 2009 WITH EFFECT FROM 1.10.2009. THE MADRAS HIGH COURT WHILE CONSID ERING SEC. 50C IN THE CASE OF R. SUGANTHA RAVINDRAN(SUPRA) FOUND THAT THE WORD ASSESSABLE INSERTED BY FINANCE ACT, 2009 IS NEITH ER CLARIFICATORY NOR AN EXPLANATION TO AN ALREADY EXISTING PROVISION. THE MADRAS HIGH COURT FOUND THAT IT IS ONLY AN INCLUSION OF NEW CLASS OF TRANSACTIONS NAMELY, TRANSFER OF PROPERTIES BEFORE REGISTRATION. BEFORE INSERTION OF THE WORD ASSESSABLE IN SEC. 50C OF THE ACT, THE VALUE ADOP TED OR ASSESSED BY THE STAMP VALUATION AUTHORITY WAS SUBJECT TO SECTIO N 50C. HOWEVER, AFTER INTRODUCTION OF THE WORD ASSESSABLE AFTER THE WORDS ADOPTED OR ASSESSED, SUCH TRANSFERS WHERE THE VALUE ASSESSABL E BY THE STAMP ITA NOS.659 & 660/15 :- 6 -: VALUATION AUTHORITY WERE ALSO BROUGHT INTO THE AMB IT OF SEC. 50C OF THE ACT. THUS, THE INTRODUCTION OF NEW SET OF CLAUSE O F TRANSFER WOULD HAVE PROSPECTIVE APPLICATION AND NOT OTHERWISE. IN VIEW OF THE ABOVE JUDGMENT OF THE MADRAS HIGH COURT IN R. SUGANTHA RA VINDRAN (SUPRA), THE PROVISIONS OF SEC. 50C IS NOT APPLICABLE IN RES PECT OF THE DOCUMENTS WHICH WERE NOT REGISTERED FOR THE ASSESSMENT YEAR 2 007-08. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N COMPUTING THE CAPITAL GAINS BY APPLYING SEC. 50C OF THE ACT. 8. NOW, COMING TO THE APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2004-05 IN I.T.A.NO.660/MDS/2015, THE FIRST GR OUND IS WITH REGARD TO COMPUTATION OF CAPITAL GAINS BY TREATING THE ADV ANCE OF ` 50 LAKHS AS SALE CONSIDERATION. 9. SHRI T.T DURAIRAJ KANDIAR, LD. REPRESENTATIVE SUBMI TTED THAT THE ASSESSEE RECEIVED A SUM OF ` 50 LAKHS DURING THE YEAR UNDER CONSIDERATION OVER AND ABOVE THE AMOUNT RECEIVED IN ASSESSMENT YEAR 2003-04. HOWEVER, THE SAME WAS NOT OFFERED FOR TAX ATION. THE ASSESSING OFFICER INITIATED RE-ASSESSMENT PROCEEDIN GS U/S 147 OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, THE ASS ESSEE RECEIVED THE ABOVE SUM OF ` 50 LAKHS ONLY TOWARDS ADVANCE FOR TRANSFER OF ADDITIONAL LAND AT A FUTURE DATE. THEREFORE, THIS CANNOT BE TREATED AS SALE CONSIDERATION FOR COMPUTATION OF CAPITAL GAINS DURING THE YEAR ITA NOS.659 & 660/15 :- 7 -: UNDER CONSIDERATION. ACCORDING TO THE LD. REPRESEN TATIVE, THE ASSESSING OFFICER TREATED THE SAME AS SALE CONSIDER ATION RECEIVED DURING THE YEAR UNDER CONSIDERATION IN FURTHERANCE OF DEVELOPMENT AGREEMENT. ACCORDING TO THE LD. REPRESENTATIVE, TH E AMOUNT OF ` 1,99,87,250/- WAS OFFERED FOR TAXATION DURING THE A SSESSMENT YEAR 2003-04. WHAT WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS ONLY AN ADVANCE. EVEN OTHERWISE, ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSFER TOOK PLACE ON 27.1.200 3 WHEN THE ASSESSEE EXECUTED A SUPPLEMENTARY AGREEMENT AND HAN DED OVER THE PHYSICAL POSSESSION OF THE PROPERTY. THEREFORE, TH E SUM OF ` 50,000/- HAS TO BE ASSESSED ONLY FOR THE ASSESSMENT YEAR 200 3-04 AND NOT FOR ASSESSMENT YEAR 2004-05. 10. ON THE CONTRARY, SHRI A.B KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME IN THE REGULAR COURSE. THE ASSESSEE HAS RE CEIVED ` 1,99,87,250/- DURING THE ASSESSMENT YEAR 2003-04 AN D OFFERED THE SAME FOR TAXATION UNDER THE HEAD CAPITAL GAINS. ADMITTEDLY, THE ASSESSEE RECEIVED ` 50 LAKHS FROM THE DEVELOPER DURING THE ASSESSMENT YEAR 2004-05. THIS PART OF THE SALE CON SIDERATION WAS FOR TRANSFER OF THE LAND IN FAVOUR OF THE DEVELOPER. T HEREFORE, ACCORDING TO THE LD. DR, THE ASSESSING OFFICER HAS RIGHTLY TR EATED THE SAME AS SALE CONSIDERATION AND COMPUTED THE CAPITAL GAINS A CCORDINGLY. ITA NOS.659 & 660/15 :- 8 -: 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ORIGINAL AGREEMENT FOR JOINT VENTURE DEVELOPMEN T WAS ENTERED INTO BETWEEN THE PARTIES ON 28.6.2000. THE PHYSICAL POS SESSION OF THE PROPERTY WAS NOT HANDED OVER TO THE DEVELOPER ON 28 .6.2000. SUBSEQUENTLY, BOTH PARTIES ENTERED INTO A SUPPLEMEN TARY AGREEMENT ON 27.1.2003 AND THE PHYSICAL POSSESSION OF THE PRO PERTY WAS HANDED OVER TO THE DEVELOPER. THEREFORE, U/S 2(47) OF TH E INCOME-TAX ACT, 1961 THE TRANSFER TOOK PLACE ONLY ON 27.1.2003 WH ICH FALLS IN ASSESSMENT YEAR 2003-04. THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE CAPITAL GAINS, IF ANY, HAS TO BE ASSESSED ONLY IN ASSESSMENT YEAR 2003-04 AND NOT IN ANY OTHER YEARS. THEREFORE , THE COMPUTATION OF CAPITAL GAINS FOR ASSESSMENT YEAR 2004-05 IS NOT JUSTIFIED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTEN T OF ` 50 LAKHS IS DELETED. 12. THE NEXT GROUND OF APPEAL IS ADDITION OF ` 6,93,600/- UNDER THE HEAD CAPITAL GAINS ESTIMATING THE DIFFERENCE IN CAPITAL GAINS ADMITTED DURING THE ASSESSMENT YEAR 2003-04 AND FO R THE YEAR UNDER CONSIDERATION. THE LD. REPRESENTATIVE SUBMITTED TH AT THE ASSESSEE HAS TAKEN THE COST OF CONSTRUCTION OF 11,560 SQ FT COMMERCIAL AREA AT ` ITA NOS.659 & 660/15 :- 9 -: 34,68,000/-. HOWEVER, THE ASSESSING OFFICER FOUND THAT AS PER THE BOOKS OF THE DEVELOPER, THE COST OF CONSTRUCTION CO MES TO ` 41,61,600/-. THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION OF ` 6,93,600/- BEING THE DIFFERENCE IN THE COST OF CONS TRUCTION. ACCORDING TO THE LD. REPRESENTATIVE, THE ADDITION, IF ANY, HA S TO BE MADE ONLY IN ASSESSMENT YEAR 2003-04 SINCE THE TRANSFER OF THE P ROPERTY TOOK PLACE U/S 2(47) OF THE ACT ONLY ON 27.1.2003, THEREFORE, THE ADDITION MADE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS NOT JUSTIFIED. 13. WE HEARD SHRI A.B KOLI, LD. DR ALSO. 14. AS DISCUSSED EARLIER, THE ASSESSEE HANDED OVER THE PHYSICAL POSSESSION OF THE PROPERTY ON 27.1.2003 WHILE EXECU TING THE SUPPLEMENTARY AGREEMENT. THEREFORE, U/S 2(47) OF THE ACT, TRANSFER OF PROPERTY TOOK PLACE ONLY ON 27.1.2003. THEREFOR E, THE CAPITAL GAINS, IF ANY, HAS TO BE ASSESSED ONLY IN ASSESSMENT YEAR 2003-04 AND NOT IN ASSESSMENT YEAR 2004-05. HENCE, THE ASSESSING OFFI CER IS NOT JUSTIFIED IN MAKING ADDITION OF ` 6,93,600/- DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER AUTHO RITIES ARE SET ASIDE AND THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE STA ND ALLOWED. ITA NOS.659 & 660/15 :- 10 -: ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OF SEPTEMBER, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 11 TH SEPTEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF