2024 (5) TMI 219 - AT - Income Tax

Capital gain arising on transfer of land - STCG arising out of the transfer of non-agricultural land - real owner - main foundation of the argument of the assessee in the instance case is that he was the director of the said company and the said land was purchased by him through registered deed - Whether the appellant assessee purchased the said land on behalf of the company? - HELD THAT - A perusal of this deed shows that the said land was purchased from about 10 persons on the name of the appellant assessee as sole vendee for the consideration - According to Para 4 of the registered deed it transpires that the consideration was paid by the company through different cheques to the different vendors to the extent of their shares in the respective piece of land but does not contain any citation in the deed that the said land was purchased on behalf of the company only. The English translation copy of registered development agreement dated 23.03.2016 written in Marathi language shows that this document is titled at its top as To Develop Property to sell purpose Agreement . Appellant assessee has been described as owner and in possession over the said land and after converting the land in question from agricultural to non-agricultural purposes appellant assessee executed the said agreement in favour of the company by the delivery of possession along with rights of construction in order to prepare plots with intent to sell to third party purchasers. Para 3 of aforesaid agreement further states that the appellant owner also executed power of attorney with irrevocable rights in favour of the company on the same date i.e on 23.03.2016 itself. However no such power of attorney is on record. The perusal of the entire contents of the aforesaid development agreement shows that it contains all ingredients of a sale. None of the aforesaid two documents speak as to whether the appellant assessee was authorized by the said company to purchase the said land on behalf of the company. The account books of the company merely indicate the name of the appellant along with 4 others with different amount as long term borrowings and do not clarify the above fact in specific terms. Undisputedly the Maharashtra State Laws agricultural land could be acquired only by farmers. The appellant assessee purchased the said land as a farmer on 23.03.2016. The appellant could not show any memo of understanding with the company so as to infer that he purchased the said land on behalf of the company. The facts of the referred cases of this Tribunal in Voltas 2016 (10) TMI 936 - ITAT MUMBAI and the facts order in Ram Kumar Duhan 2018 (2) TMI 981 - PUNJAB AND HARYANA HIGH COURT are not identical to the facts of the instant case. The first point is accordingly decided in negative against the appellant assessee. Applicability of section 50C - Whether short term capital gain arising out of such transfer of land be computed only with regard to the actual consideration received by the assessee and section 50C of the Act is not applicable? - HELD THAT - The facts of M/s Dattan Development and Bharat Raojibhai Patel were decided by the coordinate benches of this tribunal are similar to the facts of the instant appeal. The short term capital gain cannot therefore be computed on the basis of actual consideration which is too less than the value assessed by the state valuation authority. The AO has thus rightly determined the short term capital gain for the relevant AY 2016-17 as Rs. 1, 45, 60, 000/- exclusive of stamp duty of Rs. 5, 00, 000/- and registration fee of Rs. 30, 000/- which has been arrived at for the purpose of section 48 of the Act in accordance with the aforequoted section 50C(1) of the Act. Hence section 50C of the Act is clearly applicable in the facts of the instant case. The second point is thus decided in negative against the appellant assessee. We do not find any error of fact or law in the impugned order passed by the Ld. CIT(A) in confirming the addition as short-term capital gain arising out of the transfer of non-agricultural land by the appellant assessee. The impugned order dated 02.08.2023 is accordingly confirmed. The appeal is liable to be dismissed.

Summary

Issues Involved:
1. Whether the appellant assessee purchased the said land on behalf of the company.
2. Whether short-term capital gain arising out of such transfer of land should be computed only with regard to the actual consideration received by the assessee and whether section 50C of the Act is applicable.

Summary:

Issue I: Purchase of Land on Behalf of the Company

The appellant argued that he, being a director of the company, purchased the land on behalf of the company, and the entire consideration was paid by the company. The development agreement executed on 23.03.2016 handed over possession to the company for development purposes. However, the Tribunal noted that the registered deed dated 29.11.2013 showed the land was purchased in the appellant's name without any indication that it was on behalf of the company. The development agreement and the company's account books did not clarify this fact. The Tribunal concluded that there was no evidence to support the claim that the land was purchased on behalf of the company and decided this point against the appellant.

Issue II: Applicability of Section 50C

The appellant contended that section 50C of the Act should not apply, and the short-term capital gains should be computed based on the actual consideration received. The Tribunal examined section 50C, which states that if the consideration received is less than the value assessed by the state valuation authority, the latter shall be deemed as the full value of consideration for the purposes of section 48. In this case, the consideration of Rs. 2,51,000/- was significantly lower than the government valuation of Rs. 1,66,60,000/-. The Tribunal referred to similar cases and concluded that section 50C was applicable. The short-term capital gain was rightly determined by the AO as Rs. 1,45,60,000/-, exclusive of stamp duty and registration fees. This point was also decided against the appellant.

Conclusion:

The Tribunal found no error in the order passed by the Ld. CIT(A) confirming the addition of Rs. 1,45,60,000/- as short-term capital gain. The appeal was dismissed.

Order Pronounced in open court on 02.05.2024.