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2016 (12) TMI 494 - AT - Income TaxSale of land - Nature of the amount received by the assessee - whether the income or loss arising thereof is to be computed under the head Capital Gains or as Income from other sources - Held that - The nature of the amount received by the assessee as to whether the income or loss arising thereof is to be computed under the head Capital Gains or as Income from other sources . Admittedly, the amount in question was received by the assessee on account of sale of land and further that the assessee is not in the business of sale and purchase of lands. Hence, under the circumstances the income of the assessee is to be computed under the head Capital gains . Year of taxability - Held that - Though the lower authorities have themselves held that in fact such an income was required to be taxed in the assessment year 2002-03 itself, yet, the fact remains that the transfer of the land was not affected in the records. The ownership of the land was standing in the name of the assessee up to the assessment year 2010-11. There was no means or ways for the Revenue Authorities to note that the assessee has sold the land in the year 2001. It was only when the assessee himself disclosed the sale in the assessment year 2010-11 on execution of the sale deed that the matter came to the knowledge of the Revenue Authorities. The assessee himself has shown the capital gain/loss treating that the transfer has taken place in the assessment year 2010-11. Now the assessee is estopped from his own act and conduct to say that the transfer has taken place in the year 2001 relevant to assessment year 2002-03. Moreover, no one can be allowed to take the benefit of his own wrong. It is not the case of the Revenue that the assessee has received any amount over and above the said amount of ₹ 45,50,000/-. Hence, we do not find any merit in the findings of the Ld. CIT(A) that the sale consideration of the land should be taken as market value of the said land under section 50C of the Act. Indexation benefit - Held that - If the transfer is to be treated as dated back to year 2001, no tax can be levied on the assessee for the year under consideration neither on account of capital gains nor under the head Income from other sources . As observed above, if we treat the transfer being done in the financial year 2009-10 relevant to assessment year 2010-11, then the assessee is entitled to the indexation cost up to the date of transfer. Entire sale consideration has been received by the M/s. Darshan Builders and they have offered the said amount for taxation as per the provisions of law. So far as the consideration of ₹ 45,50,000/- of land received by the assessee is concerned that was not on account of any part of sale of land. The assessee was the owner of the entire land which was transferred by the assessee as per the terms of the agreement dated 29.06.01. Under the circumstances it is not a case of single transaction of sale. It is in fact a case of two transactions of sale. The first sale transaction made by the assessee to the M/s. Darshan Builders is for a consideration of ₹ 45,50,000/-. Second sale transaction is done by M/s. Darshan Builders to M/s. Tulsi Gruh Nirman & Associates for a sum of ₹ 1.71 crores. So far as the second transaction is concerned, the said M/s. Darshan Builders has already offered the entire consideration of ₹ 1.71 crores for taxation as per the provisions of law. So far as the first transaction is concerned which was not relating to any part of the land but was in relation to the sale of rights of the assessee in the entire land, hence, the assessee was entitled to the indexed cost in relation to the entire land and not 27% of the total consideration relating to the second transaction. No justification on the part of the authorities either taxing the sale consideration received by the assessee as income from other sources or in restricting the indexation benefit to the assessee up to assessment year 2002-03 or up to the 27% of the sale consideration.
Issues Involved:
1. Addition to the income on account of consideration received from the sale of development rights. 2. Taxability of the income as Long Term Capital Gain versus Income from Other Sources. 3. Indexation benefit for the cost of the land. 4. Levy of interest under section 234B of the Income Tax Act, 1961. 5. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: 1. Addition to the Income on Account of Consideration Received from the Sale of Development Rights: The assessee sold development rights in a piece of land to M/s. Darshan Builders on 29-06-2001. The Assessing Officer (AO) noted that the assessee received a total consideration of ?45,50,000/- for the sale of these rights. However, the AO treated this amount as "Income from Other Sources" instead of "Capital Gains" and added it to the income of the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this decision, stating that the land was transferred in 2001, and the capital gains should have been offered to tax in the assessment year 2002-03. Since the assessee did not offer the income in that year, the CIT(A) concluded that the amount should be treated as income from other sources for the assessment year 2010-11. 2. Taxability of the Income as Long Term Capital Gain versus Income from Other Sources: The Tribunal held that the amount received by the assessee on account of the sale of land should be computed under the head "Capital Gains" and not as "Income from Other Sources." The Tribunal noted that the assessee was not in the business of sale and purchase of lands, and the amount was received as consideration for the sale of land. Therefore, the income arising from this transaction should be treated as "Capital Gains." 3. Indexation Benefit for the Cost of the Land: The Tribunal addressed the issue of the year of taxability and the indexation benefit for the cost of the land. It was noted that the development agreement and possession transfer occurred in 2001, but the registered sale deed was executed in the financial year 2009-10. The assessee computed the capital loss by indexing the cost up to the assessment year 2010-11. The Tribunal concluded that if the transfer is considered to have taken place in the financial year 2009-10, the assessee is entitled to the indexation cost up to the date of transfer. 4. Levy of Interest under Section 234B of the Income Tax Act, 1961: The CIT(A) did not pass any order on the ground raised by the assessee disputing the levy of interest under section 234B. The Tribunal did not specifically address this issue in the judgment. 5. Initiation of Penalty Proceedings under Section 271(1)(c) of the Income Tax Act, 1961: Similarly, the CIT(A) did not pass any order on the ground raised by the assessee disputing the initiation of penalty proceedings under section 271(1)(c). The Tribunal did not specifically address this issue in the judgment. Conclusion: The Tribunal allowed the appeal of the assessee, concluding that the income arising from the sale of development rights should be treated as "Capital Gains" and not as "Income from Other Sources." The assessee was entitled to the indexation benefit up to the date of transfer. The additions made by the lower authorities were ordered to be deleted. The judgment emphasized that the assessee should not be penalized for the delay in offering the income to tax and that the correct head of income should be applied based on the facts of the case. The Tribunal's order was pronounced in the open court on 09.12.2016.
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