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TMI Blog2014 (12) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2003-04 to 2008-09. Assessee responded to the notice u/s 153C by filing return of income for the impugned AY on 07/09/09 declaring income of Rs. 78,046. During the assessment proceeding, AO on verification of the seized material found that the same is a development agreement entered into by assessee and E. Govinda Redy with M/s BPR Infrastructure Ltd. on 04/05/2006 under which a land admeasuring 4 acre 36 guntas in survey Nos. 78,79,80, 81 & 82, situated at Attapur, Rajendra Nagar Mandal was handed over to the developer M/s BPR Infrastructure Ltd. for the purpose of development activity. He further noticed that development agreement was registered at SRO, Rajendra Nagar by document No. 6657/2006. As per the terms of the development agreement, in lieu of the land given for development, owners were entitled for 50% of the total residential area constructed as per the mutual understanding. He further noted that subsequently on 23/04/07, a ratification deed was executed which was also registered on 23/04/2007 vide document No. 4999/2007 to include B. Raghavendra Reddy, B. Srinivasa Reddy, B. Madhusudan Reddy and E. Pratap Reddy as partners to the development agreement being owners o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , AO worked out assessee's share at Rs. 20,80,000. Thus, total sale consideration receivable by assessee was worked out to Rs. 3,72,74,900. By allowing cost of acquisition of Rs. 3,11,400, long term capital gain was computed at Rs. 3,69,63,500. Being aggrieved of the determination of long term capital gain in the impugned AY, assessee preferred appeal before ld. CIT(A). 5. Before the first appellate authority, assessee challenging the assessment order, submitted that AO erred in holding that transfer has taken place on execution of development agreement. Further, it was submitted that even if development agreement is taken as date for recognizing capital gain, then, sale consideration is also to be adopted as prevailing on the date of agreement and not as per the cost incurred by the builder, which is arrived at after completion of the total construction by the builder from the future course of action. It was submitted that cost incurred by builder was rightly made available to AO because search took place in the premises of the builder on 22/10/2008 after a lapse of 2 ½ years from the date of development agreement. It was submitted, if AO opined that capital gain arises in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee by observing that assessee could not produce any material to contradict the valuation of AO. On the aforesaid finding, ld. CIT(A) upheld, the long term capital gain computed by AO. 7. Ld. AR mostly reiterated the submissions made before the first appellate authority. The first contention of ld. AR is, transfer has not taken place on execution of the development agreement on 04/05/2006, hence, capital gain is not taxable in the impugned AY. Ld. AR referring to clause 5 and 14 of the development agreement, a copy of which is at page 22 of the paper book, submitted that aforesaid clauses make it clear that possession was never delivered to the developer on execution of the development agreement, hence, the conditions of section 2(47)(v) read with section 53A of the TP Act is not fulfilled. Second contention of ld. AR is, AO has totally erred while considering the sale consideration at Rs. 3,72,74,900 to be assessee's share on the basis of the cost of construction incurred by the builder. Ld. AR submitted that sale consideration has to be taken on the basis of fair market value as on the date of execution of the development agreement on 04/05/06. Ld. AR referring to the dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's contention that possession was not handed over to developer cannot be accepted. It is highly improbable that without being handled over possession over land, the developer would have started the development activity. In that view of the matter as material facts available on record indicate that developer was handed over possession of land for starting development activity on execution of development agreement on 04/05/06, transfer in terms of section 2(47(v) read with section 53A of TP Act for all intent and purpose has taken place in the impugned AY. In support of such view, we rely on the decision of Hon'ble jurisdictional High Court in case of Potla Nageswara Rao Vs. CIT, 365 ITR 249. So far as adoption of sale consideration at Rs. 3,72,74,900, we find merit in the contention of ld. AR that sale consideration cannot be taken on the basis of cost of construction to the developer. Moreover, the sale consideration deemed to have been received by assessee has to be arrived at on the basis of FMV as on the date of development agreement i.e. on 04/05/06. On a reference to registered development agreement, a copy of which is at page 22 of paper book, it is evident that the SRO has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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