2021 (6) TMI 512 - AT - Income Tax

Capital gain computation - transfer in the case of appellant and See 50C applicability - AO after giving deduction for indexed cost of acquisition arrived at the long term capital figure - HELD THAT - At the time hearing before us, the learned AR submitted that dispute with regard to the receipt of sale consideration by the assessee is pending before Civil Court and accordingly, prayed for keeping this appeal in abeyance till the disposal of the dispute by the Civil court on the aspect of consideration as the same would have a bearing on the impugned issues. With the consent of both the parties before us, we deem it fit and appropriate to remand this appeal to the file of the learned Assessing Officer for denovo adjudication to decide the issue in dispute in accordance with law and based on the final outcome of the dispute before the Civil Court from time to time. The assessee is also directed to report the status of proceedings before the Civil Court to the learned Assessing Officer from time to time. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues Involved:
1. Assessment of total income.
2. Authorization to purchase land on behalf of the company.
3. Payment of funds for acquisition of agricultural lands.
4. Transfer of land on behalf of the company.
5. Receipt of consideration by the appellant.
6. Applicability of Section 50C of the Income Tax Act, 1961.
7. Purchase of agricultural land due to legal restrictions.
8. Nature of the land (agricultural vs. non-agricultural).
9. Taxability of gains from the sale of land.

Issue-wise Detailed Analysis:

1. Assessment of Total Income:
The appellant contested the assessment of his total income at ?2,09,98,370/- for the A.Y. 2011-12 by the CIT(A), Thane. The appellant argued that the total income assessed was incorrect due to several factors related to the acquisition and transfer of agricultural land.

2. Authorization to Purchase Land on Behalf of the Company:
The appellant claimed that he was authorized by RMP Infotech Pvt. Ltd. to purchase agricultural land on behalf of the company due to revenue laws in India. This authorization was granted via a special power of attorney dated 12th August 2005.

3. Payment of Funds for Acquisition of Agricultural Lands:
The appellant argued that all funds for acquiring the agricultural lands were provided by the company, and he did not pay any amount towards the acquisition. The company transferred funds to M/s. Raj System for this purpose.

4. Transfer of Land on Behalf of the Company:
The appellant contended that he transferred the land on behalf of the company and did not receive any consideration in cash or kind. He argued that the land was purchased in his name due to legal restrictions but was intended for the company.

5. Receipt of Consideration by the Appellant:
The appellant maintained that he did not receive any consideration for the transfer of the land, and thus, the transaction should not be considered a transfer in his hands.

6. Applicability of Section 50C of the Income Tax Act, 1961:
The appellant argued that Section 50C, which deals with the valuation of the sale consideration, should not apply to him as he did not receive any consideration. The learned Assessing Officer, however, computed the capital gains based on the value determined under Section 50C.

7. Purchase of Agricultural Land Due to Legal Restrictions:
The appellant reiterated that the lands were purchased in his name due to restrictions imposed by law on the acquisition of agricultural land in India. The lands were later converted to non-agricultural (N.A.) land, and all expenses for this conversion were borne by the company.

8. Nature of the Land (Agricultural vs. Non-Agricultural):
The appellant claimed that the lands were agricultural and situated beyond 8 Kms of the municipal limits. However, during appellate proceedings, it was admitted that the land was never cultivated, and the intention was to convert it to N.A. land for sale. The CIT(A) concluded that the appellant was engaged in trading land for profit, not investment.

9. Taxability of Gains from the Sale of Land:
The CIT(A) observed that the appellant had sold various pieces of land but did not offer any income from these sales, claiming the lands were purchased on behalf of the company. The appellant later changed his stance, arguing the lands were agricultural and not taxable. The CIT(A) did not accept this claim, noting the appellant's intention to profit from converting and selling the land. The appeal was remanded to the Assessing Officer for a de novo adjudication based on the outcome of a pending civil court dispute regarding the receipt of sale consideration.

Conclusion:
The appeal was allowed for statistical purposes, and the case was remanded to the Assessing Officer for reconsideration in light of the pending civil court proceedings. The appellant was directed to keep the Assessing Officer informed of the status of the civil court case. The decision was pronounced in the open court on 15.06.2021.