2023 (2) TMI 839 - AT - Income Tax

Long term capital gains - transfer u/s 2(47) - exchange of land - determination of full value of consideration and cost of acquisition - application of section 50C - applicability of provisions of section 2(47) of the Act for exchange of lands - Assessee argued there is no consideration involved in exchange of land and further, the appellant had also explained the reasons for executing sale deed in exchange of other lands - HELD THAT - Once, the impugned transfer or sale of land in exchange comes within the definition of transfer as defined u/s. 2(14) then capital gains arising out of transfer of said land needs to be computed in accordance with law by taking into account full value of consideration. In this case, the assessee had computed capital loss by taking into account market value of land transferred by him in exchange of market value of land received from other persons, and computed capital loss. AO has computed long term capital gains by taking into account full value of consideration accruing as a result of transfer by applying provisions of section 50C and has adopted guideline value of the property as on the date of transfer. AO has allowed cost of acquisition in accordance with law and has arrived net capital gains in respect of both the properties. In our considered view, the method adopted by the AO is in accordance with law and does not called for any interference from our end. Hence, we uphold the computation of long term capital gains with regard to transfer of both the properties and reject argument taken by the assessee. Admission of additional grounds - We find that petition filed by the assessee for admission of additional grounds is not maintainable because, the assessee failed to make out a case that grounds taken by the assessee in the petition is legal issues, which can be taken at any time of proceedings including proceedings before the Tribunal. Secondly, the assessee has also failed to make out the case that facts with regard to the issues are also on record before the AO and the AO has examined the same. Since, the additional grounds taken by the appellant is purely on question of fact, in our considered view, petition filed by the assessee is not maintainable There is no proof, that the assessee has transferred those lands in the impugned assessment year or in subsequent assessment years. Therefore, if at all the assessee claims fair market value of exchanged lands as cost of acquisition for computation of capital gains, the AO is directed to deal with the claim of the assessee in accordance with law, wherever the issue arises. But, for this year, we reject petition filed by the assessee for admission of additional grounds. Appeal filed by the assessee is dismissed

Issues Involved:
1. Confirmation of the assessment order by CIT (Appeals) without detailed consideration.
2. Application of Supreme Court decision regarding net value in capital gains.
3. Consideration of net value in exchange transactions for capital gains.
4. Following precedents regarding net consideration in capital gains.
5. Excessive assessment opposed to law and facts.
6. Admission of additional grounds of appeal.

Issue-wise Detailed Analysis:

1. Confirmation of the assessment order by CIT (Appeals) without detailed consideration:
The appellant argued that the CIT (Appeals) erred in confirming the order of the Assessing Officer (AO) without going into the merits of the submission. The CIT (Appeals) upheld the AO's computation of long-term capital gains by considering the guideline value of the property as per section 50C of the Income Tax Act, 1961, and did not find any error in the AO's method which was in accordance with the law.

2. Application of Supreme Court decision regarding net value in capital gains:
The appellant contended that the CIT (Appeals) quoted a Supreme Court decision that speaks of net value and treated the net gain as taxable. However, the CIT (Appeals) did not apply this principle correctly in the appellant's case, resulting in an erroneous capital gain calculation. The CIT (Appeals) referenced the Supreme Court decision in Orient Trading Co. Ltd vs. CIT, which emphasized comparing the cost price of the original asset with the market price of the exchanged asset to determine capital gains.

3. Consideration of net value in exchange transactions for capital gains:
The appellant argued that in the transaction of exchange, only the net consideration should be taken, which in this case is the guideline value of both properties. The CIT (Appeals) and AO computed the capital gains by taking the full value of consideration as per section 50C of the Act, which was supported by the Supreme Court's decision in Orient Trading Co. Ltd vs. CIT. The AO's method of using the guideline value for the property transferred and the indexed cost of acquisition was upheld.

4. Following precedents regarding net consideration in capital gains:
The appellant cited various judicial decisions to support their argument that only the net consideration should be considered in exchange transactions. However, the CIT (Appeals) found these decisions distinguishable and relied on the Supreme Court's decision in Orient Trading Co. Ltd vs. CIT, which was more relevant to the facts of the case.

5. Excessive assessment opposed to law and facts:
The appellant claimed that the assessment was excessive and opposed to law and facts. The CIT (Appeals) and AO computed the capital gains by considering the full value of consideration as per section 50C and the indexed cost of acquisition, which was found to be in accordance with the law.

6. Admission of additional grounds of appeal:
The appellant filed a petition for the admission of additional grounds, arguing that the fair market value of the land received in exchange should be treated as the cost for computing capital gains. The Tribunal found the petition not maintainable as it was purely a question of fact and not a legal issue. The Tribunal noted that the appellant could consider the fair market value of exchanged lands as cost for future capital gains computation when those lands are transferred, but not for the current assessment year.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the computation of long-term capital gains by the AO and CIT (Appeals) as per the provisions of section 50C and section 48 of the Income Tax Act, 1961. The Tribunal also rejected the petition for admission of additional grounds, finding it not maintainable.

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