2016 (8) TMI 853 - AT - Income Tax

Lease rent estimation - Determination of the value as assessed by Stamp Valuation Officer - Held that - It is clear that full value of consideration of the impugned asset has been determined at ₹ 3,22,334/- based upon value as was assessed by the stamp valuation authority. The action of Ld. CIT(A) has been accepted by the assessee. Under these circumstances, once the amount of sales consideration has been determined keeping in view particular provisions of law which were applicable in a given situation, then no further question arises of estimating the value of consideration once again. Thus, in our view, the action of Ld. CIT(A) in estimating lease rent was not only self-contradictory but also beyond the provisions of law. The assessee firm gave said land to charitable trust that could run school effectively. It is further noted that the said lease was approved by the BMC and Maharashtra Government. The property records were still in the name of the assessee firm, indicating that the assessee firm did not transfer full-fledged rights and interest in the said land to the lessee. Detailed discussion in this regard has been made by us at Para 7.1. of this order, which should read here also. Thus, keeping in view these facts also, we find that estimation of lease rent in substitution of actual lease rent received by the assessee was not justified in the given facts and circumstances of the case. Keeping in view the decision of Ld. CIT(A) in determining the full value of consideration of the asset at ₹ 3,22,334/-, we find that action of the Ld. AO in estimating the lease rent at ₹ 13,74,353/- was self contradictory and unjustified, and therefore the same is reversed - Decided in favour of assessee Guenity of lease transactions entered into by the assessee with Shradha Gyanpeeth Trust - Held that - T(A) has recorded detailed findings for holding that impugned transaction was a transactions of lease only. Taking into account facts on record, it has been noted by the Ld. CIT(A) that lease deed is properly registered and stamp duty was paid as per Bombay Stamp Act, 1958. The lease deed was approved by BMC and State Government Authorities. The title of the property continued to remain in the name of the assessee. Nothing has been brought before us to negate the detailed findings of the Ld. CIT(A). The transactions cannot be held to be sham merely on the basis of some doubts and apprehensions. Duly registered documents cannot be brushed aside or rewritten by the revenue authorities that too without bringing any contrary material on record. It is further noted that as per terms of the lease deed, if any additional TDS/FSI is allowed by the Government on the said land, then, the same shall be within the exclusive right and ownership of the lesser assessee. All these facts indicate that the absolute title has not yet been transferred by the assessee to the lessee. - Decided against revenue Adoption of market value of the property on the basis of stamp value of the lease deed as was assessed by the Stamp Valuation Authority as per Bombay Stamp Duty Act, 1958 - Held that - Lease Deed has been registered on which Stamp Valuation Officer has assessed the value for the purpose of ascertaining amount of stamp duty payable and therefore the same value should be adopted in the case before us. The clear mandate of the law is that the value adopted or assessed by the Stamp Valuation Authority shall be adopted for determining full value of consideration. Even, otherwise the word assessable has been added w.e.f. 01.10.2009, and the case before us pertains to A.Y. 2003-04 i.e. prior to 01.10.2009 and therefore only preamended law shall be applied in the case before us. Thus action of Ld. CIT(A) in adopting the value as adopted by the Stamp Valuation Authority under the Bombay Stamp Act 1958, for the purpose of determining full value of consideration is justified. - Decidd against revenue Eligibility of claim of deduction u/s 80- IB(10) - Held that - It is well known fact that no project can be started without requisite approval. Under these circumstances, it has been held by the Ld. CIT(A) that it cannot be inferred that housing project was commenced prior to 1st October 1998. During the course of hearing before us, Ld. Counsel has drawn our attention to the commencement certificate exhibited in the paper book showing that the same was granted by the local authority on 15.03.2002 and a separate notice was given to BMC thereafter only. It has been further shown to us that the land was earlier an agricultural land, which was got converted to non-agricultural land, vide permission dated 15th September 2001. Thus, development and constructions work was not permissible unless such conversion was done. It has been further shown to us that development/construction expenses were incurred from A.Y. 2002-03 on words. It is further shown that payment to BMC or property tax or architect fee etc. have been incurred only after the commencement, development and construction of the project. We find that findings recorded by the Ld. CIT(A) are in accordance with law and facts on this issue. During the course of hearing before us it has been submitted that the requirement of the law is that project should be on the size of plot of land of minimum one acre, and here the area project means project as proved by the local authority. It was shown to us on the basis of the document enclosed in the paper book that entire plot admeasuring 8612.40 sq. mts. was approved by the local authority as housing project , and commencement certificate was issued in respect of the entire plot. It was further shown to us that plot was sub-divided by BMC and some portion out of the total land was segregated for the purpose of common amenities in terms of rules and regulations of a local body. It was submitted that when a portion has been earmarked as per the mandate of the law for the purpose of common amenities then that portion of land should also to be considered as part of the project. It has been further submitted that limits on the extent of commercial area of housing project was inserted w.e.f. 01.04.2005 and does not apply to projects approved before that date, and since project of the assessee was approved prior to 01.04.2005, therefore, these restrictions were not applicable on the case of the assessee. - Decided against revenue

Summary

Issues Involved:
1. Applicability of Section 50C on lease transactions.
2. Estimation of lease rent by the Assessing Officer (AO).
3. Classification of lease rental as income from house property.
4. Whether the lease transaction was genuine or a sham.
5. Determination of full value of consideration under Section 50C.
6. Eligibility for deduction under Section 80-IB(10).
7. Assessment of sales proceeds from a residential housing project.

Detailed Analysis:

1. Applicability of Section 50C on Lease Transactions:
The assessee challenged the application of Section 50C on lease transactions. However, during the hearing, the assessee expressed satisfaction with the decision of the CIT(A), and thus, this ground was dismissed without further deliberation.

2. Estimation of Lease Rent by the AO:
The AO estimated the lease rent at Rs. 13,74,353/- against the actual amount received by the assessee. The CIT(A) upheld the AO's estimation based on fair market value. However, the Tribunal found this estimation self-contradictory and beyond the provisions of law, as the full value of consideration was already determined by the Stamp Valuation Officer at Rs. 3,22,334/-. The Tribunal reversed the AO's estimation, allowing the assessee's appeal on this ground.

3. Classification of Lease Rental as Income from House Property:
The assessee's cross-objection challenged the classification of lease rental as income from house property under Section 22. Since the Tribunal reversed the AO's estimation of lease rental, this cross-objection was treated as infructuous and dismissed.

4. Whether the Lease Transaction was Genuine or a Sham:
The Revenue challenged the genuineness of the lease transaction, alleging it was a sham. The CIT(A) found the transaction genuine, noting that the lease deed was properly registered, stamp duty was paid, and the title remained with the assessee. The Tribunal upheld the CIT(A)'s findings, dismissing the Revenue's appeal on this ground.

5. Determination of Full Value of Consideration under Section 50C:
The Revenue argued that the value for transfer should be as if it was a sale, not a lease. The Tribunal disagreed, stating that Section 50C's deeming fiction should be applied strictly and literally. The value adopted by the Stamp Valuation Authority for the lease deed should be used. The Tribunal upheld the CIT(A)'s decision to adopt the stamp value of Rs. 3,22,334/- as the full value of consideration, dismissing the Revenue's appeal on this ground.

6. Eligibility for Deduction under Section 80-IB(10):
For A.Y. 2007-08, the Revenue challenged the CIT(A)'s decision to allow the deduction under Section 80-IB(10). The Tribunal found that the CIT(A) had correctly analyzed the facts and documentary evidence, concluding that the project met the requirements of Section 80-IB(10). The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

7. Assessment of Sales Proceeds from a Residential Housing Project:
The assessee argued that the sales proceeds from the residential housing project should be assessed in A.Y. 2007-08, as the project was completed in December 2006. The Tribunal admitted this legal ground and sent it back to the AO for fresh adjudication, directing the AO to provide an opportunity for hearing and consider the assessee's submissions.

Conclusion:
The Tribunal allowed the assessee's appeal on the estimation of lease rent and dismissed the Revenue's appeals on the genuineness of the lease transaction and the determination of full value of consideration. The Tribunal also upheld the CIT(A)'s decision on the eligibility for deduction under Section 80-IB(10) and sent back the issue of assessing sales proceeds from the residential housing project to the AO for fresh adjudication.