2011 (4) TMI 643 - AT - Income Tax

Computation of capital gain - Under section 50C - Assessee has made a statement at the time of hearing that in respect of transfer of asset during the year under consideration, the value disclosed by the assessee was accepted by the stamp valuation authority and the assessee was not required to pay any extra stamp duty. Once a document is registered with the stamp duty authority, the value adopted/assessed by him for the purpose of payment of stamp duty in respect of such transfer has to be considered as value for the purpose of (b) - The Assessing Officer cannot substitute the value which the stamp duty authority ought to have adopted for the purpose of stamp duty - However, whether the value disclosed by the assessee was accepted by the stamp valuation authority, for the purpose of stamp duty needs verification at the end of the Assessing Officer - Therefore set aside the order of the authorities below with regard to the computation of the capital gain and restore the matter back to the file of Assessing Officer - The value adopted/assessed by the stamp valuation authority shall be considered for the purpose of computing capital gain as per section 50C of the IT Act. long-term capital loss - shares transaction - find that the assessee has given the copy of the transfer deed, share certificate as well as shareholders registered. These documents clearly show that the assessee has transferred 60,000 shares of ACPL to Smt. Poonamben Ashokbhai Patel on 18-10-2003 - The shares were sold at the rate of Rs. 5 per share. That Mukund K. Patel & Co, Chartered Accountant have valued the shares at Rs. 4.73 per share - The copy of the valuation is given at page No. 51A of the assessee s paper book - find that he valued the shares by adopting the market value of the asset as per the Schedule-III to Wealth Tax Act. No infirmity in the working of the auditor is pointed out - The assessee has sold the shares at a value slightly higher than the market value determined by the auditor - The assessee has also explained the circumstances in which he sold the shares - Decided in favour of assessee. Capital gains from the sale of land - As per the agreement to sell dated 3-4-1999, the assessee was given the possession of the property and the assessee had also made part payment of the consideration and has also issued the post-dated cheques for the remaining consideration - Therefore, the CIT(A) has rightly held that the asset would be deemed to be transferred to the assessee on 3-4-1999 - The assessee sold the land on 4-4-2003/2-5-2003. Therefore, the asset was long-term capital asset and capital gain arising therefrom would be long-term capital gain - Decided in favour of assessee.

Summary

Issues Involved:
1. Applicability of Section 50C to the development agreement.
2. Classification of land sold at Tarsali for residential purposes.
3. Rate applicable per square meter for commercial property.
4. Addition of long-term capital gain in respect of land at Kotali & Dumad.
5. Disallowance of brokerage and commission paid towards land sold at Dumad and Kotali.
6. Rejection of long-term capital loss claim for shares transferred to Ashvika Construction Pvt. Ltd.
7. Classification of capital gains from the sale of land at Tarsali as long-term or short-term.

Issue-wise Detailed Analysis:

1. Applicability of Section 50C to the Development Agreement:
The assessee contested the applicability of Section 50C, arguing that the stamp duty authority had accepted the declared value without requiring additional stamp duty. The tribunal noted that Section 50C mandates the consideration of the value adopted or assessed by the stamp valuation authority for stamp duty purposes. The tribunal observed that the Assessing Officer (AO) should rely on the value actually adopted by the stamp valuation authority and not substitute his own valuation. The tribunal remanded the matter to the AO to verify the value adopted by the stamp valuation authority and compute the capital gain accordingly.

2. Classification of Land Sold at Tarsali for Residential Purposes:
The CIT(A) had held that the land at Tarsali was not for residential purposes. The tribunal did not provide a separate analysis for this issue, suggesting it was intertwined with the Section 50C applicability.

3. Rate Applicable per Square Meter for Commercial Property:
The CIT(A) applied a rate of Rs. 3500 per square meter for commercial property, which the assessee contested. The tribunal's decision to remand the issue of Section 50C applicability inherently required reconsideration of the applicable rate per square meter based on the stamp valuation authority's assessment.

4. Addition of Long-term Capital Gain in Respect of Land at Kotali & Dumad:
The assessee raised additional grounds regarding the addition of Rs. 29,375 and Rs. 11,70,031 for land at Kotali & Dumad, arguing that the stamp duty authority accepted the declared value. The tribunal remanded this issue along with the Section 50C applicability to the AO for verification of the stamp valuation authority's assessment.

5. Disallowance of Brokerage and Commission Paid Towards Land Sold at Dumad and Kotali:
The assessee did not press this ground during the hearing, leading the tribunal to reject this claim.

6. Rejection of Long-term Capital Loss Claim for Shares Transferred to Ashvika Construction Pvt. Ltd.:
The assessee claimed a long-term capital loss of Rs. 4,39,651 from the sale of shares in Ashvika Construction Pvt. Ltd. The tribunal found that the shares were genuinely transferred during the relevant accounting year, with the sale price supported by an auditor's valuation. The tribunal allowed the assessee's claim for long-term capital loss, rejecting the AO's disallowance.

7. Classification of Capital Gains from the Sale of Land at Tarsali as Long-term or Short-term:
The Revenue argued that the land should be considered a short-term capital asset since the title was transferred by a registered sale deed within three years of the sale. The tribunal upheld the CIT(A)'s view that the land was 'held' by the assessee from the date of the agreement to sell (3-4-1999) and not from the date of the registered sale deed (15-5-2000). The tribunal noted that possession and part payment were made on the agreement date, thus qualifying the land as a long-term capital asset. The tribunal rejected the Revenue's appeal, affirming the classification of the capital gain as long-term.

Conclusion:
The tribunal partially allowed the assessee's appeal for statistical purposes by remanding the Section 50C applicability issue to the AO for verification. It upheld the CIT(A)'s decision on the long-term capital gain classification for the Tarsali land and allowed the assessee's claim for long-term capital loss on the sale of shares. The Revenue's appeal was dismissed.