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2019 (11) TMI 1113 - AT - Income TaxCharacterization of income - gain on sale of plots of land - capital gain or business income - HELD THAT - No documentary evidence placed before us which could show that the assessee has been carrying out the business of purchase and sale of land in the past. Not proved that the alleged land was held as stock-in-trade in books by the assessee in the preceding year. No tax audit report has been filed demonstrating the system of accounting and valuation of stock. Audited Profit Loss Account and Balance sheet also do not indicate about the preceding year details and only the single transaction of sale of land has been claimed to have been completed in the course of business. In our considered view it is not figuring out that the assessee is into the business of purchase and sale of land. Computation of income for Assessment Year 2011-12 shows that the assessee had earned Long Term Capital Gain from sale of plots of land at Piplia and they were not shown as part of business activity. Assessee could not throw any light on this aspect that when the assessee was engaged in business why some other transaction have not shown under the head Capital Gain.Claim of the assessee made before the A.O that it is carrying out the business of purchase and sale of land has no merit and the alleged gain from transaction of sale of land needs to be taxed as capital gain. Thus this issue is decided against the assessee. Capital gain to be taxed in Assessment Year 2010- 11 or Assessment year 2011-12 - HELD THAT - Alleged sale deed was executed on 31.03.2010. This fact is not disputed by both the parties. Though the document has been registered subsequently during the financial year 2010-11 but the sale deed has been signed by both the parties on 31.03.2010. In the course of hearing when assessee was confronted with this aspect, he was fair enough to accept that 31.03.2010 may be taken as the date of sale of the plots of land. In these given facts and circumstances, we are of the view that the sale transaction was completed on 31.03.2010 and thus the incidence of tax falls in Assessment Year 2010-11. Whether the gain from the transaction from sale of land is to be taxed as Short Term Capital Gain or Long Term Capital Gain during Assessment Year 2010-11 - Relevant dates of purchase and sale of land and the handing over of the possession will be crucial. As far as the date of sale is concerned the date of sale is 31.03.2010 and in the sale deed itself the handing over of the possession is on 31.03.2010 has been accepted by the seller and buyer. So the date of handing over of the possession and the date executing the sale deed is 31.03.2010 and part of the sale consideration was received by the assessee on and before these dates. So we can safely conclude that the date of sale is 31.03.2010 for the purpose of computing the capital gain. Other limb is the date of purchase. The purchase deed is executed on 31.03.2007. The possession of the land was taken by the assessee on 26.03.2007 since the total purchase consideration was paid on and before 26.03.2007. Taking the same analogy which we have adopted for accepting the date of sale i.e. the date of execution of the deed, the date of purchase in this case is 31.03.2007. Though the revenue authorities have adopted the date of registration of the purchase date of 12.07.2007 as the date of purchase, we do not find any merit in the finding of CIT(A). Taking a step forward, we find that the date of taking possession i.e. 26.03.2007 is also not disputed before us. For the purpose of Section 2(47) of the Income Tax Act the transfer was completed in favour of the assessee on 26.03.2007 itself. So the date of purchase to be adopted is 26.03.2007 and counting from this date till 31.03.2010, the period is more than 36 months. Since the assessee has sold the plot of land after holding it for more than 36 months the gain raising from sale of the impugned land needs to be taxed as Long Term Capital Gain for Assessment Year 2010-11 after giving benefit of cost indexed of acquisition and other transfer expenses. This issue is thus decided in favour of the assessee. The additional Ground No.2 is allowed. Justification for applying the value of property as per Section 50C without referring it to the Valuation - HELD THAT - Sub Section 1 of Section 50C primarily applies on the instant case. However if the assessee challenges the value adopted by the Stamp Valuation Authority and subsequently adopted by the A.O to compute the Capital Gain then the A.O may refer the valuation of the capital asset to Valuation Officer as provided in Section 50C(2). Since this issue never came up for consideration before the lower authorities, we being fair to both the parties and in the interest of justice set aside this issue to the file of Ld. A.O with the direction that necessary reference may be made to the Departmental Valuation Officer for valuation of the impugned capital asset and if the same is less than alleged fair market value then apply the same for computation of Long Term Capital Gain. Whether the assessee is eligible to get the claim of expenses for stamp duty, registration and brokerage by computing income of AY 2010-11 even though the amount have been incurred during AY 2011-12? - These expenses were claimed as business expenditure during Assessment Year 2011-12 which were appearing in the audited financial statements. Since we have already decided the issue that the incidence of tax will fall in Assessment Year 2010-11 the alleged expenses of registration and stamp duty and brokerage which very much relates to the transaction taken place during Assessment Year 2010-11 and the quantum was ascertainable as on 31.03.2010, the assessee needs to be given the benefit of deduction of the Stamp duty and Registration expenses of ₹ 1,72,67,070/- and brokerage expenses of ₹ 28 lakhs in the computation of Long Term Capital Gain for Assessment Year 2010-11 irrespective of the fact that the alleged amount has been paid during Assessment Year 2011-12. Ld. A.O is directed to give the deduction as decided above. In the result additional Ground No.4 is allowed in favour of assessee. Whether the assessee is eligible to get the benefit of tax credited during the year 2010-11 for the tax paid for the income from alleged transaction shown for Assessment Year 2011-12? - In the preceding paras we have decided that the alleged gain from sale of land needs to be taxed under the head Long Term Capital Gain to be computed after adopting the valuation of the impugned property at lower of the value computed by the Departmental Valuation Officer or the value adopted by Stamp Valuation Authority and after giving deduction for cost of acquisition, stamp duty, registration charges and brokerage expenses, same transaction cannot be taxed twice i.e. during Assessment Year 2010-11 and Assessment Year 2011-12. The assessee is required to pay tax on Long Term Capital Gain for Assessment Year 2010-11 as indicated above. In our considered view the assessee is eligible to get the credit of tax paid on the net profit of ₹ 8,75,86,752/- shown in the return of income for Assessment Year 2011-12 against the tax liability arising in Assessment year 2010-11. Ld. A.O is accordingly directed to do the needful. This issue raised by the assessee in Additional Ground No.6 is allowed.
Issues Involved:
1. Whether the alleged transaction is to be taxed as business income or capital gain. 2. If the transaction is to be taxed as capital gain, whether it is to be taxed in Assessment Year 2010-11 or Assessment Year 2011-12 as Short Term Capital Gain or Long Term Capital Gain. 3. Whether the Assessing Officer (A.O) was justified in applying the value of the property as per Section 50C of the Income Tax Act without referring it to the Valuation Officer. 4. Whether the assessee is eligible to get the claim of expenses for stamp duty, registration, and brokerage by computing income of Assessment Year 2010-11 even though the amounts were incurred during Assessment Year 2011-12. 5. Whether the assessee is eligible to get the benefit of tax credited during the year 2010-11 for the tax paid for the income from the alleged transaction shown in Assessment Year 2011-12. Detailed Analysis: 1. Whether the alleged transaction is to be taxed as business income or capital gain: The tribunal observed that the assessee had shown the transaction of sale of land as business income for Assessment Year 2011-12. However, no documentary evidence was provided to show that the assessee was engaged in the business of purchase and sale of land in the past. The assessee had not held the land as stock-in-trade in the books of the preceding year. The tribunal concluded that the assessee was not in the business of purchase and sale of land and, therefore, the gain from the transaction should be taxed as capital gain. This issue was decided against the assessee. 2. If the transaction is to be taxed as capital gain, whether it is to be taxed in Assessment Year 2010-11 or Assessment Year 2011-12 as Short Term Capital Gain or Long Term Capital Gain: The tribunal referred to Section 47 of the Registration Act, 1908, which states that a registered document shall operate from the time it would have commenced to operate if no registration thereof had been required or made. The sale deed was executed on 31.03.2010, and thus, the incidence of tax falls in Assessment Year 2010-11. The date of purchase was considered as 26.03.2007, when the possession of the land was taken by the assessee. Since the holding period was more than 36 months, the gain from the sale of the land was to be taxed as Long Term Capital Gain for Assessment Year 2010-11. This issue was decided in favor of the assessee. 3. Whether the A.O was justified in applying the value of the property as per Section 50C of the Income Tax Act without referring it to the Valuation Officer: The tribunal noted that the assessee had not disputed the fair market value of the property before the lower authorities. However, since the tribunal decided that the gain from the transaction should be taxed as Long Term Capital Gain, the application of Section 50C was relevant. The tribunal directed the A.O to refer the valuation of the capital asset to the Departmental Valuation Officer and apply the same for computation of Long Term Capital Gain if it was less than the fair market value. This issue was allowed for statistical purposes. 4. Whether the assessee is eligible to get the claim of expenses for stamp duty, registration, and brokerage by computing income of Assessment Year 2010-11 even though the amounts were incurred during Assessment Year 2011-12: The tribunal observed that the expenses for stamp duty, registration, and brokerage were genuine and related to the transaction that took place during Assessment Year 2010-11. Therefore, the assessee was entitled to the deduction of these expenses in computing Long Term Capital Gain for Assessment Year 2010-11. This issue was decided in favor of the assessee. 5. Whether the assessee is eligible to get the benefit of tax credited during the year 2010-11 for the tax paid for the income from the alleged transaction shown in Assessment Year 2011-12: The tribunal noted that the assessee had already offered the profit from the sale of the land for taxation in Assessment Year 2011-12 and had paid due taxes. Since the same transaction cannot be taxed twice, the assessee was eligible to get the credit of tax paid for Assessment Year 2011-12 against the tax liability arising in Assessment Year 2010-11. This issue was decided in favor of the assessee. Conclusion: The appeal of the assessee was partly allowed for statistical purposes, with directions to the A.O to refer the valuation of the capital asset to the Departmental Valuation Officer and to grant the benefit of expenses and tax credits as discussed.
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