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2018 (5) TMI 1842 - AT - Income TaxLong term capital gains - deemed transfer of 60% of the land in favour of the developer as per the scheme of Memorandum of Agreement and Joint Development Agreement executed on the application of section 2(47)(v) in the computation of taxable total income - HELD THAT - The execution of MOU and JDA coupled with two registered GPAs in favour of the developer, we conclude and held that the transfer of the schedule property was taken place on 17.09.2012 in terms of provisions of section 2(47)(v) of the Act and to this extent, the order of the CIT(A) stands sustained. With regard to the computation of long term capital gains, by referring to the para 5 of the written submissions before the Tribunal, the assessee vehemently argued that the assessee has made specific request before the Assessing Officer to refer the valuation of the property under consideration to the Valuation Officer to determine the fair market value of the property and the same was also reiterated during the course of appellate proceedings. The assessee has raised a specific ground before the CIT(A) and reproduced in the appellate order, which reads as under 6. The Assessing Officer ought to have referred the valuation of the properties under consideration to the Valuation Officer as provided for in Sec. 50C(2)(a) and (b) of the IT Act as claimed by the appellant Firm before the AO during the assessment proceedings, particularly considering the steep increase noticed in the guideline values fixed by the Stamp Value Authority in the short period covered. CIT(A) has not given any findings upon the specific ground raised by the assessee. Accordingly, we direct the CIT(A) to adjudicate and decide the above issue in accordance with law after allowing sufficient opportunities of being heard to both the parties. Thus, this ground of appeal is allowed for statistical purposes. Additional ground - Reckoning transfer u/s 2(47)(v) based on JDA - plea of the assessee is that the reckoning of date of transfer should be based on the execution of MOA dated 30.01.2012 - HELD THAT - The execution of MOA alone does not convey transfer of the schedule property to the developer within the meaning of section 2(47(v) because, the MOA is not a registered document and hence it cannot be held as a legally valid document. The execution of MOA and the JDA, which was followed by execution of registered GPAs both on dated 17.09.2012 vide document Nos. 603/2012 and 604/2012, as enunciated in the MOU, the GPA vide document No. 603/2012 dated 17.09.2012 only confers complete right to the developer over the schedule property and absolutely, the date of unregistered MOU dated 30.01.2012 cannot be taken as correct date of reckoning transfer since as on the date of 30.01.2012, no GPA was executed or registered in favour of the developer and moreover, till execution of registered GPA, both the MOU and JDA have no legal value. Therefore, the date of execution and registration of GPA shall only be reckoned as date of transfer i.e., 17.09.2012 and there is no way to take the date of transfer as on 30.01.2012 since the MOU was not registered. Thus, the additional ground raised by the assessee stands dismissed.
Issues Involved:
1. Validity of the taxation of Long Term Capital Gains under section 2(47)(v) of the Income Tax Act. 2. Applicability of section 45(2) concerning the conversion of capital assets into stock-in-trade. 3. Determination of the date of transfer of property for capital gains computation. 4. Proper valuation of the property under section 50C. 5. Compliance with principles of natural justice. Analysis: 1. Validity of the Taxation of Long Term Capital Gains under Section 2(47)(v) of the Income Tax Act: The primary issue was whether the deemed transfer of 60% of the land to the developer under a Joint Development Agreement (JDA) constituted a "transfer" under section 2(47)(v) of the Income Tax Act. The Tribunal observed that the assessee had executed a Memorandum of Agreement (MoA) and a JDA with the developer, along with two registered General Powers of Attorney (GPAs). The Tribunal held that the execution of these registered GPAs conferred complete rights to the developer over the property, thus constituting a transfer under section 2(47)(v). The Tribunal distinguished this case from the Supreme Court decision in CIT v. Balbir Singh Maini, noting that the latter involved unregistered documents, whereas the present case involved registered GPAs. 2. Applicability of Section 45(2) Concerning the Conversion of Capital Assets into Stock-in-Trade: The assessee contended that the land was converted into stock-in-trade in 1996-1997 and thus should be taxed under section 45(2) of the Act. The Tribunal rejected this contention, noting that the assessee was not carrying on any business activity related to the development of the land or construction of buildings. The Tribunal emphasized that the business activity was carried out solely by the developer and not by the assessee. Therefore, section 45(2) was deemed inapplicable, and the relevant provisions were section 2(47)(v) read with section 53A of the Transfer of Property Act. 3. Determination of the Date of Transfer of Property for Capital Gains Computation: The Tribunal held that the date of transfer should be considered as the date on which the registered GPAs were executed, i.e., 17.09.2012. The Tribunal rejected the assessee's contention that the date of the MoA (30.01.2012) should be considered, noting that the MoA was not registered and thus had no independent legal existence until the execution of the registered GPAs. 4. Proper Valuation of the Property under Section 50C: The assessee argued that the Assessing Officer should have referred the valuation of the property to the Valuation Officer under section 50C(2) due to a steep increase in the guideline value. The Tribunal noted that the assessee had raised a specific ground regarding this issue before the Commissioner of Income Tax (Appeals) [CIT(A)], but the CIT(A) had not provided any findings. Therefore, the Tribunal directed the CIT(A) to adjudicate this issue in accordance with the law after allowing sufficient opportunities for both parties to be heard. 5. Compliance with Principles of Natural Justice: The assessee contended that there was no proper opportunity given before the passing of the impugned order, thus violating the principles of natural justice. The Tribunal did not specifically address this issue in detail but implicitly upheld the procedural fairness by directing the CIT(A) to re-examine the valuation issue. Conclusion: The Tribunal upheld the taxation of Long Term Capital Gains under section 2(47)(v) of the Income Tax Act, based on the execution of registered GPAs. It rejected the applicability of section 45(2) and determined the date of transfer as 17.09.2012. The Tribunal directed the CIT(A) to re-examine the valuation of the property under section 50C, ensuring procedural fairness. The appeal was partly allowed for statistical purposes.
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