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TMI Blog2014 (4) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the assessee - the CIT(A) was justified in deleting the addition made by the AO in that behalf – thus, the order of the CIT(A) upheld – Decided against Revenue. Determination of sale consideration – Rejection of claim with regard to cost of improvement – Validity of re-computation of capital gain – Held that:- The assessee was disputing the adoption of anything other than the disclosed sale consideration for the semi-finished apartment sold, and thus disputing the SRO rate as per S.50C, in terms of sub-section (2) of S.50C - the CIT(A) should have directed the AO to refer the matter to the Valuation Officer - Having failed to do so, the order of the CIT(A) cannot be sustained – the CIT(A) has not adhered to the procedure as per S.50C in its totality, which mandated, in the event of dispute by the assessee as to the adoption of value as per SRO, a reference to the valuation cell – thus, the order of the CIT(A) set aside and the matter is remitted back to the AO for examination of the matter after following the procedure envisaged in S.50C of the Act – Decided partly in favour of Revenue. In view of the above discussion in the impugned order of the CIT(A) and the reman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7.2003. It was further noted that the assessee has handed over the possession of the property within one week of the development agreement, and the developer was authorised to construct and has got the right over the 50% built up area in exchange for the 50% built up area to be constructed and handed over by the developer to the assessee. Considering this factual background, the Assessing Officer arrived at the capital gains at the first stage, relying upon the decision of Hyderabad Bench A of the Tribunal in the case of Dr.Maya Shenoy Secunderabad (23 DTR (Hyd) 140), and brought to tax short term capital gains amounting to Rs.44,47,200. 5. On appeal before the CIT(A), the assessee contested the action of the Assessing Officer in bringing to tax the short term capital gains of Rs.44,47,200 in the year under appeal, and reliance in that behalf was placed on the decision of the Tribunal in the case of Smt.K.Radhika and others dated 9.8.2011 in ITA no.208/Hyd/2011 for assessment year 2006-07 and others. The CIT(A), following the said decision of the Tribunal in the case of Smt. K.Radhika and Others (supra), duly extracting relevant portion thereof in the impugned order, deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the Transfer of Property Act. It is thus clear that 'willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of Section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of Section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer under Section 2(47)(v) of the IT Act. Let us therefore consider whether the transferee, on the facts of the present case, can be said to have 'performed or is willing to perform' its obligations under the agreement. 49. Even a cursory look at the admitted facts of the case would show that the transferee had neither performed nor was it willing to perform its obligation under the agreement in the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertake the performance of the agreement which are the primary ingredient that make a person eligible and entitled to make the construction. The act and conduct of the developer in this assessment year shows that it had violated essential terms of the agreement which tend to subvert the relationship established by the development agreement. Being so, it was clear that in the year under consideration, there was no transfer of not only the flats as superstructure but also the proportionate land by the assessee under the joint development agreement. As per clause no. 12.11 and 19.1 of Development Agreement-cum Power of Attorney, time is the essence of the contract and as per clause No.12.11 the said property is to be developed and hand over the possession of the owners allocation to the owners and or their nominees within 24 months from the date of receiving the sanction of the plan from HUDA and Municipality/Gram Panchayat with a further grace period of 3 months. But the fact remains that the transferee was not only failed to perform its obligations under the agreement, but also unwilling to perform its obligations in the assessment year under consideration. Even otherwise, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the said judgment supports the case of the assessee inasmuch as 'willingness to perform' has been specifically recognized as one of the essential ingredients to cover a transaction by the scope of Section 53A of the Transfer of Property Act. Revenue does not get any assistance from this judicial precedent. The very foundation of Revenue's case is thus devoid of legally sustainable basis. 50. That is clearly an erroneous assumption, and an the provisions of deemed transfer under Section 2(47)(v) could not have been invoked on the facts of the present case and for the assessment year in dispute before us. In the present case, the situation is that the assessee has received only a meager amount' out of total consideration, the transferee is avoiding adhering to the agreement and there is no evidence brought on record by the revenue authorities to show that there was actual construction has been taken place at the impugned property in the assessment year under consideration and also there is no evidence to show that the right to receive the sale consideration was actually accrued to the assessee. Without accrual of the consideration to the assessee, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share of this plot of land, which was given to M/s. Yashoda builders and Developers for the construction of a residential apartments in July,2003 vide development agreement dated 24.7.2003. As per this agreement 50% of the area was to be given to the developer in lieu of the development work while the other 50% of the area alongwith the developed apartments would belong to the assessee. The assessee s share consisted of a developed area of 12,155 sq.ft consisting of 6 apartments. Fived of these apartments were handed over to the assessee between August, 2005 to February,2006, while the sixth one was handed over in September, 2006. During the financial year in question, the assessee sold the sixth apartment and disclosed the following amount of capital gains- Sale Consideration of one Flat Rs.22,68,000 (Received on giving land for development- Possession received and sold in September, 2006) Less: Cost of Acquisition of flat Rs.21,26,230 (Total cost of land X Undivided land sold in sq. yards Total share of land received on development) i.e. 99,29,500X 100/467 _____________ Short term Capital Gains Rs. 1,41,770 The Assessing Officer held that the capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determination of sale consideration at Rs.38,56,040 and the rejection of the claim with regard to cost of improvement. 10. The Learned Departmental Representative submitted that the sale consideration should be taken at Rs.70 lakhs only, since the purchaser has clearly stated that Rs.22,68,000 has been paid to flat owner and the balance amount of Rs.47,32,000 has been paid to M/s. M. Bhoopal Reddy and Co., towards additional work done in the flat. However, it is to be seen that the sum of Rs.47,32,000 paid to M/s. M.Bhoopal Reddy and Co. has not been subjected to TDS, which would prove that it is not payment towards a contract work for furnishing the flat but part of sale consideration only. Hence, the entire sum of Rs.70 lakhs, i.e Rs.22,768,000pauid to flat owner and Rs.47,32,000 paid to Bhoopal Reddy and Co. should be taken as the sale consideration for the flat. Even otherwise, the Learned Departmental Representative also pointed out that the CIT(A) had wrongly reduced the additional expenditure claimed of Rs.2,71,000 from the Sub-Registrar s Value. The CIT(A) ought to have appreciated that as per the agreement, the apartment was to be handed over to the owner/landlord in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an, Hyderabad in ITA No.1451 1452/Hyd/2008, a copy of which has been furnished before us by the learned counsel for the assessee. While doing so, the CIT(A) has not adhered to the procedure as per S.50C in its totality, which mandated, in the event of dispute by the assessee as to the adoption of value as per SRO, a reference to the valuation cell. That apart, there is a dispute with regard to the nature as to the condition of the apartment sold. While it is the case of the assessee that what is sold is a semi-finished one and not a completed one, the case of the Revenue is that the works got done through Bhoopal Reddy and Co. cannot be accepted as genuine, and what the assessee got in terms of development agreement and sold by him is only an apartment, construction of which was complete in all respects. With regard to the works got done through Bhoopal Reddy and Co., the assessee has to substantiate his claim. 13. Considering totality of facts and circumstances of the case, we set aside the impugned order of the CIT(A), and restore the matter to the file of the Assessing Officer, with a direction to re-examine the matter after following the procedure envisaged in S.50C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra- 5.6 The document (sale deed) registered by the HUDA speaks that the land is developed by them and handed over/sold to the assessee and two others and the statement of the Managing Partner of the firm to whom the land was given for development which states that there is no rock on the ground at the time of taking the site for development clearly shows that the contention of the assessee is false and devoid of any merit and requires to be dismissed. In view of the above discussion in the impugned order of the CIT(A) and the remand report of the Assessing Officer to him, which discussed at length the overwhelming evidence against the assessee, and in the absence of any evidence brought on record by the assessee, even before us, to counter the findings and observations of the Revenue authorities for denying the claim of the assessee with regard to the expenditure incurred on improvement, i.e. rock cutting, we find no justification to interfere with the order of the CIT(A) on this aspect. We accordingly uphold the view taken by the Revenue authorities in denying the assessee s claim with regard to expenditure incurred on the improvement of the asset, rejecting the grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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