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TMI Blog2012 (5) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... – Held that:- No material brought on record by the AO that the new land purchased for agricultural purposes is being actually put to use for any other purpose - only an apprehension on the part of the AO cannot be accepted to disallow the claim – Observation by AO that the assessee had ventured into a real estate business and therefore there was no possibility of the assessee undertaking agriculture on the new land purchased leads to no conclusion to disallow the claim - in favour of assessee. - IT APPEAL NOS. 594 TO 597 AND 727 & 728 (PUNE) OF 2010 - - - Dated:- 29-3-2012 - SHAILENDRA KUMAR YADAV, G.S. PANNU, JJ. S.U. Pathak for the Appellant. Ms. Ann Kapthuama for the Respondent. ORDER G.S. Pannu, Accountant Member Since common issues are involved in the captioned appeals, they were heard together and a consolidated order is being passed for the sake of convenience and brevity. 2. Since the facts are common and arguments raised by the parties are identical, we shall take up the appeal filed by the assessee Shri Mahesh Nemichandra Ganeshwade (ITA No 594/PN/2010) as a lead case. 3. The Grounds of appeal raised in this appeal are as follows: "1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer for the capital asset and in accordance with the provisions of section 45(3) of the Act, the consideration of Rs 2,50,00,000/- subsequently revised to Rs 4,90,00,000/- was the consideration on transfer which was liable to be considered for computation of capital gain in assessment year 2006-07. When confronted with the above stand of the Assessing Officer, the assessee objected to taxation of the capital gain in assessment year 2006-07, and contended that it should be considered in the assessment year 2007-08 since the joint venture agreement was registered on 23.1.2007 and only after which it was acted upon and implemented. The Assessing Officer rejected this contention of the assessee and concluded that the transfer had actually taken place on account of the development agreement in assessment year 2006-07 itself. As per the Assessing Officer, in so far as the year of taxability was concerned, it was the year in which the transfer took place in accordance with the development agreement and as to the amount to be taxed, it was in accordance with the total consideration including the revised consideration recorded in the books of accounts as per the provisions contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e development, they entered into a joint venture with Rohan Builders Developers P. Ltd in terms of an agreement dated 12.7.2005 placed at pages 7 to 32 of the Paper Book. At the outset, the learned Counsel submitted that in so far as the assessment year under consideration is concerned, the authorities below have wrongly interpreted the same to hold that a transfer has occurred for the purposes of determination of capital gains in the instant assessment year. Countering the claim of the Revenue that a transfer within the meaning of section 2(47) of the Act has taken place on account of the joint venture agreement dated 12.7.2005 in the instant assessment year itself on the basis of the judgment of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia ( supra ), it has been contended that the said decision is inapplicable in the present case, inasmuch as the rights in the land have not been passed in favour of Rohan Builders as a transferee, but it is a case where in terms of a joint venture agreement, assessee and Rohan Builders have come together to jointly develop the land and share the profits. In this connection, reference has been made to the various cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Revenue, has supported the orders of the authorities below by pointing out that the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia ( supra ) clearly brings out that after insertion of clauses ( v ) and ( vi ) in section 2(47) of the Act, the expression 'transfer' will include any transaction which allowed possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 and, therefore, in this case, the assessee granted possession with an irrevocable permission for development of the land in favour of the builder, i.e . Rohan Builders and, therefore, the date of development agreement dated 12.7.2005 is liable to be treated as the date of transfer for the purpose of ascertaining the year of taxability of capital gains. 8. We have carefully considered the rival submissions. Chapter IVE of the Act provides for taxability of capital gains. Section 45(1) provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to tax under the head 'capital gains' and it is further explained that such profits shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract of the nature referred to in section 53A of the Transfer of Property Act would come within the ambit of the expression 'transfer'. It has been explained that for this purpose there should be a contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to transfer of an immovable property; transferee should have taken possession of the property; lastly, transferee should be ready and willing to perform the part of contract. As per the Hon'ble High Court, even arrangements confirming privileges of ownership without transfer of title also fall under section 2(47) of the Act. In this manner, the plea of the assessee before the Hon'ble High Court that no transfer takes place till execution of the conveyance was rejected by the Hon'ble High Court. The High Court dealt with a situation where the assessee was found to enter into contract for developing property with the builders and in terms with the arrangement with the builders, it conferred privileges of ownership without executing conveyance and to plug that loophole as per the Hon'ble High Court, clause ( v ) was inserted in section 2(47) of the Act with effect from 1.4.198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in respect of the investment in eligible bonds. As per the Assessing Officer, the investment in eligible bonds was not made by the assessee within the stipulated period of 6 months from the date of transfer of land. The contention of the assessee was that the investment was made within 6 months from the date of receipt of sale consideration and, therefore, it was entitled to exemption under section 54EC of the Act. The Assessing Officer noticed that the assessee was making the investments in the specified bonds only after receiving the payments from time to time during the assessment year 2006-07, 2007-08 and 2008-09, etc., and, therefore, he did not grant exemption under section 54EC, considering the date of transfer of the land as 12.7.2005. Being aggrieved, assessee took up the matter in appeal to the Commissioner of Income-tax (Appeals). 12. Before the Commissioner of Income-tax (Appeals), assessee filed detailed written submissions challenging the order of the Assessing Officer. The Commissioner of Income-tax (Appeals), after considering the submissions of the assessee, affirmed the decision of the Assessing Officer by holding as follows: "5.3 I have considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment 05.01.06 2500000 2 31.05.06 Janata sah. Bk. 583873 2500000 National Highway Authority of India 31.08.06 250000 3 12.02.07 HDFC BANK LTD 368096 1250000 Rural Electrification Corporation LTD. 03.08.07 1250000 4 14.05.07 19.06.07 03.07.07 HDFC BANK LTD Janata sah. Bk. HDFC BANK LTD 413183 672122 413300 1175000 1250000 1250000 }Rural Electrification Corporation 27.10.07 3750000 5 17.09.07 HDFC BANK LTD 45024 2325000 NIL 12250000 10000000 In so far as the investment of Rs 25 lakhs on 5.1.2006 is concerned, the Assessing Officer granted relief under section 54EC of the Act as it was invested within a period of six months from the date of transfer, i.e . 12.7.2005. Before us, the assessee has staked his claim for relief under section 54EC on account of investments of Rs 12,50,000/- and Rs 37,50,000/- made on 3.8.2007 and 27.10.2007 respectively. The Revenue has denied the claim on the ground that such amounts have not been investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire consideration had not been received. Further reliance has also been placed on the CBDT Circular No 791 dated 2.6.2000 wherein also the purpose and spirit of the sections 54EA, 54EB and 54EC prevailed on the CBDT to clarify that reliefs under the said sections are available even in cases where technically the assessee had not invested in specified Bonds within a period of 6 months. In this view of the matter, the learned Counsel has submitted that the assessee be granted relief under section 54EC with respect to the investments of Rs 12,50,000/- and Rs 37,50,000/- made in specified Bonds on 3.8.2007 and 27.10.2007 respectively. 15. On the other hand, the learned Departmental Representative, appearing for the Revenue, has pointed out that the aforesaid relief is not allowable, inasmuch as the phraseology of section 54EC makes it mandatory that investments have to be made in specified asset within a period of six months from the date of transfer and, in this case, such condition has not been fulfilled with regard to the amounts of Rs 12,50,000/- and Rs 37,50,000/- paid on 3.8.2007 and 27.10.2007 respectively. 16. We have carefully considered the rival submissions. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee into stock-in-trade and not the date on which such stock-in-trade is sold or otherwise transferred by the assessee. Thus, as per the aforesaid understanding it may not be possible for an assessee to make the required investment under the aforesaid sections at the point of conversion of capital into stock-in-trade because right to collect sale consideration in such cases arises only at the point of sale or transfer otherwise of stock-in-trade. The CBDT in consultation with the Ministry of Law decided that the period of six months for making investment in specified assets for the purpose of sections 54EA, 54EB and 54EC of the Act should be taken from the date such stock-in-trade is sold or otherwise transferred in terms of section 45(2) of the Act, though the taxability of capital gain was on the basis of 'transfer' as understood in section 45(2) of the Act. Therefore, having regard to the impossibility of performance to invest the amount in specified assets within six months from the date of transfer ( i.e . the date of conversion of capital asset into stock-in-trade) the CBDT appreciated and has clarified that the period of six months for making investment in specified asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of joint venture for the said purpose, it could not be accepted that the land was purchased by the assessee for being used for agriculture purposes. According to him, since the assessee was venturing into real estate business, the land could not have been purchased for agriculture purposes and, therefore, he denied the claim made by the assessee under section 54B of the Act. 23. In appeal before the Commissioner of Income-tax (Appeals), assessee made detailed written submissions assailing the order of the Assessing Officer. The Commissioner of Income-tax (Appeals) held that the Assessing Officer's inference was without any basis. According to him, the assessee had a background of having been involved in agricultural activities and merely because by way of the stated joint venture development agreement assessee and the three co-owners of the family entered into a real estate business did not de bar them to purchase land for being used for agriculture purposes. He accordingly directed the Assessing Officer to allow the claim of the assessee under section 54B of the Act subject to fulfillment of other conditions prescribed under the section. The findings of the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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