2016 (4) TMI 804 - AT - Income Tax

Long term capital gain - Held that - The assessee had no control over the said property. We further note that it conveyance deed was executed in favour of the purchasers of flats through the cooperative society to which the assessee was also confirming party and a sum of 2,47,60,250/- was paid by the flat owners to the builders M/S DCPL and the assessee did not get anything out of the sale consideration. The developer DC PL had paid the income tax on the income resulting from the consideration of ₹ 2,47,60,250/-. So far as the assessment by the AO of long term capital gain based on the sale consideration received by the M/S DCPL is concerned , the action of AO is totally wrong and unacceptable especially when the consideration flowed directly to the builder from the purchasers of the flats and nothing was received by the assessee. It is also an undisputed fact that the builder had paid the due taxes on the profits earned by it and income from the same transaction could not be taxed twice firstly in the hands of developers M/.S DCPL who received the consideration actually and second in the hands of the assessee who was just confirming party to the conveyance deed. In our opinion the assessee must be taxed only in respect of the long-term gain on the lump sum compensation received at the time of leasing of the land ₹ 6,25,000/- being 50% of total compensation received i.e ₹ 12,50,000/- in 1979. Thus, we do not find any infirmity in the order of CIT(A) and uphold the same. We therefore, direct the AO to take the sale consideration at ₹ 6,25,000/- in the hands of the assessee and tax the long term gain accordingly if any. - Decided against revenue.

Summary

Issues:
Cross-appeals against orders related to assessment year 2007-08 - Consideration of non-refundable deposit vs. consideration paid by flat owners to vendors - Taxation of long-term capital gain - Appeal by revenue against CIT(A) order.

Analysis:

1. Consideration Dispute:
The case involved cross-appeals against orders dated 19.4.2012 and 8.8.2013 related to the assessment year 2007-08. The primary issue was the consideration received by the assessee in the form of a non-refundable deposit versus the consideration paid by flat owners to the vendors. The CIT (A) directed to consider the non-refundable deposit as the cost of consideration. However, the assessee contended that the entire consideration was received by the builder directly, and the assessee did not receive any part of it. The AO assessed the long-term gain at a different amount, leading to an appeal by the assessee.

2. Assessment and Appeal:
The assessee, along with his brother, leased out land to a builder for 999 years and subsequently sold it to flat owners through a conveyance deed. The AO assessed the long-term gain based on the consideration received by the builder, despite the assessee not receiving any part of it. The CIT (A) allowed the appeal, considering the non-refundable deposit as the actual consideration received by the assessee. The tribunal upheld this decision, emphasizing that the builder had already paid taxes on the profits from the sale, and taxing the assessee on the same amount would result in double taxation.

3. Taxation of Capital Gain:
The Revenue argued that the assessee should pay capital gain tax on the amount received through the conveyance deed. However, the tribunal noted that the assessee had leased the land and received a lump sum compensation, with the possession handed over to the builder. The tribunal held that the consideration paid by flat owners directly to the builder should not be taxed in the hands of the assessee, as the builder had already paid taxes on the profits. The tribunal directed the AO to tax the long-term gain only on the lump sum compensation received at the time of leasing the land.

4. Cross-Appeal and Dismissal:
In another related appeal and cross-objection, the tribunal directed the AO to treat the 50% compensation as consideration for the transfer of land and upheld the order of the CIT (A). Consequently, the cross-objection was dismissed as infructuous. The tribunal also stated that its decision in the main appeal applied mutatis mutandis to the related appeal and cross-objection. Ultimately, the appeals of the revenue were dismissed, and the cross-objections of the assessee were also dismissed as infructuous.

In conclusion, the tribunal upheld the CIT (A) order, considering the non-refundable deposit as the actual consideration received by the assessee and directing the taxation of long-term gain accordingly. The tribunal emphasized that the builder had already paid taxes on the profits, preventing double taxation on the same amount.