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TMI Blog2015 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... under the proviso to section 151(1) for issue of notice has not been complied with? - Held that:- Ongoing through the provisions of section 151(1), we find that the said provisions have no application to the facts and circumstances of the case as the said provisions of section 151(1) applies only to cases where assessments were completed either under section 143(3) or 147 of the Act. - Decided against assessee. Whether there is a transfer within the meaning of section 2(47) or not in respect of property given for development? - Held that:- Ongoing through the order of the Commissioner of Income-tax (Appeals) and the clauses of the agreement of sale and joint development agreement dated December 30, 2002 read with supplemental agreement dated February 15, 2003 and power of attorney dated December 30, 2002 executed by the assessee in favour of the builder authorising the builder to sell and register the flats in the name of prospective buyers, we are of the view that there is a transfer within the meaning of section 2(47) by virtue of entering into an agreement of sale and joint development. Though the assessee submits that the possession was given at later point of time, i.e., after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered, the provisions of section 50C have no application - Decided in favour of assessee. Deduction towards cost of building existing on the land with indexation benefit for the purpose of computation of long-term capital gains - CIT(A) allowed the claim - Held that:- The Commissioner of Income-tax (Appeals) taking note of the principles of the decision of Dhun Dadabhoy Kapadia v. CIT [1966 (10) TMI 52 - SUPREME Court] allowed the claim of the assessee in respect of indexation on building existed on land as on the date of entering into an agreement observing as per the agreement of sale and joint development what is transferred is only the land, but the fact that on executing the said agreement the appellant also cedes right over the building located on the said land and hence for the purpose of working out capital gain the cost of the building and indexation of benefit thereon should also to be deducted to arrive at the cost for the purpose of computing taxable capital gain. Capital gain tax is assessed in the hands of the transferor and the transfer is to be seen from the point of view of transferor and statutory deductions are to be provided. - Decided against revenue. Reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration for the land foregone to the developer is the guideline value of the property as on April 1, 1981 instead of taking the cost of construction of 9 flats allotted to the appellant as the sale consideration." 4. The brief facts are that for the assessment year 2003-04, the assessee filed return of income on April 2, 2003 admitting income of ₹ 41,012. The assessee along with the return enclosed a note in respect of her house property at 29, Cenotaph II Lane, Chennai stating that the assessee has entered into a joint venture with M/s. Golden Homes Properties P. Ltd. in December, 2002 for promoting flat construction and received ₹ 1,00,00,000 as advance out of which ₹ 70,00,000 has been invested in 7 per cent. tax- free savings bonds, 2002 on January 9, 2003. The return was processed under section 143(1) on July 16, 2003 accepting the income returned. Later, the Assessing Officer while completing the assessment for the assessment year 2006-07 under section 143(3) of the Act found that the assessee entered into an agreement of sale and joint development agreement on December 30, 2002 relevant to the assessment year 2003-04 and by virtue of this agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty at 29, Cenotaph II Lane, Chennai had already been furnished at the time of filing of return of income on March 28, 2003 by way of note and therefore reopening of assessment is bad since primary facts were already available in the return before the Assessing Officer when the return was processed under section 143(1) and no new facts have come on record for initiation of reassessment proceedings. 6. As far as merits are concerned, the assessee contended that there is no transfer under section 2(47) of the Act as the agreement of sale and the joint development was entered into only to develop the property and there was no transfer of any ownership rights for the said property. It was contended that the possession was handed over to the builder only to enable furtherance of the project and not as a transfer of ownership rights over the property. It was also the submission of the assessee that possession was not given before March 31, 2003, i.e., during the assessment year 2003-04 under consideration. It was also the contention of the assessee that the guideline value as notified by the registration department cannot be adopted in the assessee's case as the transaction is deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 143(1) without any scrutiny and therefore, the Assessing Officer is right in invoking the provisions of section 147 as he has come to the conclusion that the assessee had transferred the property by entering into agreement of sale and joint development agreement during the assessment year 2003-04 while completing the scrutiny assessment of the assessee for the assessment year 2006-07 where the assessee sold certain flats acquired in the financial year 2002-03 by virtue of this agreement. 10. Heard both sides. Perused the orders of lower authorities and the case law relied on by both parties. As far as the reopening of assessment under section 147 is concerned, the Assessing Officer while completing the assessment for the assessment year 2006-07 and computing the long-term capital gains on the sale of flats received by the assessee as consideration in lieu of transfer of land in the assessment year 2003-04 by virtue of agreement of sale and joint development agreement, issued notice under section 148 so as to bring to tax the income escaped assessment in the assessment year 2003-04 as there was a transfer within the meaning of section 2(47) of the Act in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of property given for development, the Commissioner of Income-tax (Appeals) had considered the submissions of the assessee and held that there is a transfer within the meaning of section 2(47) after examining the agreement entered into by the assessee with the developer observing as under : "4.2 The authorised representative argued that the Assessing Officer has wrongly presumed that the possession of the property was handed over to the developer/builder during the financial year whereas clause 5 of the agreement states that the assessee shall handover the vacant possession on or before March 31, 2003 and hence the recorded facts are wrong. Further the authorised sentative pointed out that the Assessing Officer has inferred that the consideration of ₹ 1 crore was not returnable consideration whereas clause 3 of the agreement clearly states that it is a refundable/adjustment advance, which has also been reproduced by the Assessing Officer in page 4 of the order. He also submitted that the appellant obtained possession of 6 flats much later based on planning permit issued on July 7, 2003 and hence the Assessing Officer had no evidence to state that such handing ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of earmarked flats. The other ingredient of handing over possession to the developer has also not been done. In the absence of the above two requirements, invoking section 2(47)(v) is not tenable in law. But analysis of the facts of the case of the appellant reveal that a substantial sum was paid as advance and as held in the decision relied on by the authorised representative written agreement was executed in the year concerned which constitute 'essential ingredient' to decide the year of chargeability of capital gain. 4.5 In view of the decisions reported in T. V. Sundaram Iyengar and Sons Ltd. v. CIT [1959] 37 ITR 26 (Mad) and Chaturbhuj Dwarkadas Kapadia v. CIT reported in [2003] 260 ITR 491 (Bom) it is clear that considering the facts of the case of the appellant, the chargeability of capital gain arose on execution of the agreement of sale and joint development dated December 30, 2002 as the appellant obtained the right to receive the price on this date and hence charge ability to tax arose as a consequence. The subsequent date of actual handling over of vacant possession or subsequent receipt of constructed flats do not change the chargeability in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) and the clauses of the agreement of sale and joint development agreement dated December 30, 2002 read with supplemental agreement dated February 15, 2003 and power of attorney dated December 30, 2002 executed by the assessee in favour of the builder authorising the builder to sell and register the flats in the name of prospective buyers, we are of the view that there is a transfer within the meaning of section 2(47) by virtue of entering into an agreement of sale and joint development. As per clause 5 of the agreement of sale and joint development, the owner shall handover vacant possession of schedule "C" mentioned property along with original title deeds pertaining to the schedule mentioned property on or before March 31, 2003. Though the assessee submits that the possession was given at later point of time, i.e., after March 31, 2003, there is no evidence on record to suggest that possession was given at a later point of time, even though the construction permit was given by the municipal authorities on July 11, 2003 and planning permit was given on May 26, 2003 and demolition certificate on February 19, 2003. As per clause 21 of the agreement, the promoter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered, the provisions of section 50C have no application. A similar view has been expressed by the Lucknow Bench of the Tribunal in the case of Carlton Hotel P. Ltd. v. Asst. CIT [2009] 122 TTJ (Lucknow) 515 and Jaipur Bench of the Tribunal in the case of Smt. Vijay Laxmi Dhaddha v. ITO [2009] 20 DTR (AT) 365 (Jaipur). Respectfully following the above decisions, we reverse the order of the Commissioner of Income-tax (Appeals) on this issue and allow the ground of appeal No. 6 raised by the assessee. 15. In the result, the appeal of the assessee is partly allowed. I.T.A. No. 972/Mds/2012 16. This appeal is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) stating that the Commissioner of Income-tax (Appeals) has erred in allowing deduction towards cost of building existing on the land with indexation benefit for the purpose of computation of long-term capital gains. 17. The Departmental representative referring to paragraphs 6 and 6.1 of the impugned order submits that the Commissioner of Income-tax (Appeals) is not justified in holding that the assessee did not index the cost of building. 18. Counsel for the assessee relied on the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denying benefit under section 54F of the Act and other grounds. 23. The assessee has also raised additional grounds in both these two appeals contending that the assessment orders passed by the Assessing Officer under section 143(3) read with section 147 are beyond the due date for completion of the assessment and therefore bad-in-law. The additional grounds raised by the assessee are admitted and taken on record as these grounds are purely legal grounds and going to the root of the matter and the validity of the assessment orders passed. 24. Counsel for the assessee submits that notice under section 148 was served on the assessee on March 18, 2009 as per the assessment order in both these assessment years. Counsel submits that as per the provisions of section 153(2) of the Act, the assessment should have been completed within one year from the end of the financial year in which the notice under section 148 was served. As per the assessment order, notice was served on March 18, 2009, therefore, assessments should have been completed by March 31, 2010, whereas the assessments were completed for these two assessment years only on December 31, 2010, which is beyond the due date of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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