2014 (6) TMI 494 - AT - Income Tax

Addition of LTCG transfer / extinguishment of right - Joint property development agreement - Held that - The land is a capital asset was transferred by the assessee to the developer during the AY 2003-04, for construction and it is enough if the assessee has received the right to receive consideration on a later date, so as to attract exigibility to tax on capital gains during the year under appeal - Mere accrual of the consideration, as it is to be received in the subsequent years does not defer the taxability of the capital gains - The assessee being owner of the capital asset, having parted with the possession of the land under a joint development agreement, for construction of residential flats/villas and having handed over the possession of the vacant land to the developer on promise to be handed over four flats equivalent to 40% of the value of the property to be constructed, it was a clear case of transfer by exchange within the meaning of S.2(47)(i) of the Act. Relying upon Chaturbhuj Dwarkaddas Kapadia V/s. CIT 2003 (2) TMI 62 - BOMBAY High Court - S.2(47)(v) read with S.45 indicates that capital gains was taxable in the year in which such transactions were entered into even if the transfer of immovable property is not effective or complete under the general law - the date on which possession was handed over to the developer is relevant for determination of the year in which the capital gains are assessable to tax there was no merit in the contentions of the assessee that there is no taxability of capital gains Decided against Assessee. Addition of undisclosed income u/s 64(1) of the Act - Gifts received by minor children - Held that - The gifts received by the assessee s children cannot be disbelieved in total - even though the claim of the assessee is in relation to gifts aggregating to Rs 29,10,000, actual withdrawals are seen only at Rs. 26,00,000 - there was a receipt of gifts only to the extent of Rs 26,00,000 only because there are withdrawals only to the extent of Rs 26,00,000 from the accounts of Sri. Y. Venkateswar Rao - donor has confirmed having given gifts and donees also claim to have received gifts - the donees have received gifts of Rs 26,00,000 only and accordingly confirmed the view taken by the assessing officer with regard to balance amount of Rs 3,10,000, for which no corroborative evidence was found there was no infirmity in the action of the CIT(A) Decided against Assessee. Determination of capital gain Development agreement between assesee and his children Held that - The agreement for development with M/s Adithya Constructions envisaged the Assessee and other co-owners to transfer 70% interest in the land for 30% of constructed area - the agreement was not fully given effect to and it was subsequently cancelled - some land was utilised by the developer who had constructed 13 houses on the land - the Assessee is liable for tax on capital gains as if the entire development agreement was given Decided against Assessee. Validity of allowance claimed Held that - CIT(A) rightly was of the view that there is no basis for the estimation made by the AO - The Assessee has stood for election as MLC and certain expenses have to be necessarily incurred for canvassing purposes the benefit of doubt is given to the Assessee and the order of the CIT(A) in deleting the addition of Rs. 1,00,000/- made on estimate basis towards unexplained expenditure is upheld Decided against Revenue. Profits from sale of lands - Agricultural land not situated within prescribed limit Capital asset or not u/s 2(14) of the Act Held that - It is not clear as to whether the assessee has converted the land for non-agriculture purposes - The AO has observed that originally the intention of the assessee was to develop the land for commercial purposes as the outer ring road was passing near to the land a part of the same land was given for development for construction of houses and the other part of land which has been entered into agreement with M/.s Amsri Developers P Ltd. has to be proved beyond doubt to be agriculture in nature - Relying upon Smt. Gousia Begum And Others Versus Dy. Commissioner of Income-tax And Others 2013 (9) TMI 559 - ITAT HYDERABAD - the lower authorities are justified in determining the land as capital asset liable for income-tax. Determination of cost of acquisition Held that - As per section 54B of the Act, assessee has to purchase the agricultural land within a period of two years - mere payment of advance does not entitle the assessee for relief u/s 54B of the Act, if ultimately whole transaction of purchase of land was completed within a period of two years as contemplated u/s 54B of the Act, assessee is entitled for relief u/s 54B of the Act thus, the matter is remitted back to the AO for fresh adjudication as to the nature of land i.e., whether the land can be classified as agriculture land and also beyond 8 kms. of any municipality Decided in favour of Revenue.

Summary

Issues Involved:
1. Assessment of Long-Term Capital Gains for AY 2003-04.
2. Assessment of Unexplained Gifts for AY 2004-05.
3. Assessment of Capital Gains from Development Agreement for AY 2008-09.
4. Classification of Land as Agricultural for Capital Gains Exemption for AY 2007-08 and AY 2008-09.

Detailed Analysis:

1. Assessment of Long-Term Capital Gains for AY 2003-04:
The primary issue was the addition of Rs. 18,51,300 towards long-term capital gains. The assessee had entered into a development agreement with M/s Bhavya Constructions Pvt. Ltd. and received 40% of the built-up area as consideration. The Assessing Officer (AO) assessed the capital gains for AY 2003-04 based on the development agreement and the possession handed over to the developer. The CIT(A) confirmed the AO's assessment, stating that the transfer of property occurred in AY 2003-04, making the capital gains taxable in that year. The Tribunal upheld the CIT(A)'s decision, rejecting the assessee's contention that the gains should be assessed in AY 2004-05.

2. Assessment of Unexplained Gifts for AY 2004-05:
The AO added Rs. 15,90,000 and Rs. 19,00,000 as unexplained gifts received by the assessee's minor children, treating them as the assessee's income. The CIT(A) partly accepted the assessee's claim, allowing Rs. 26,00,000 as genuine gifts from Sri. Y. Venkateswar Rao but disallowed Rs. 3,10,000 and Rs. 5,80,000 received from Smt. Y. Vimala. The Tribunal upheld the CIT(A)'s decision, finding no material to substantiate the balance gifts as genuine.

3. Assessment of Capital Gains from Development Agreement for AY 2008-09:
The assessee entered into a development agreement with M/s Aditya Constructions, transferring 70% of the land in exchange for 30% of the constructed area. The AO assessed the capital gains at Rs. 86,25,807, which the CIT(A) recomputed to Rs. 58,39,792. The Tribunal upheld the CIT(A)'s decision, directing the AO to re-examine the assessee's claim for exemption under S.54F of the Act.

4. Classification of Land as Agricultural for Capital Gains Exemption for AY 2007-08 and AY 2008-09:
The AO treated the sale of land as non-agricultural, subjecting it to capital gains tax. The CIT(A) accepted the assessee's claim that the land was agricultural, based on revenue records and certificates from authorities, and exempted it from capital gains tax. The Tribunal set aside the CIT(A)'s decision and remanded the issue to the AO for fresh examination, directing verification of the land's classification and its distance from the nearest municipality.

Separate Judgments by Judges:
The judgment does not mention separate judgments delivered by different judges, indicating a unanimous decision by the bench.

Summary:
The Tribunal addressed multiple appeals involving the assessment of long-term capital gains, unexplained gifts, and the classification of land for capital gains exemption. The decisions upheld the CIT(A)'s findings in some cases while remanding others for further examination by the AO. The Tribunal emphasized the need for proper verification and adherence to legal provisions in assessing the disputed amounts.