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TMI Blog2015 (7) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the same. On perusing the reason shown for delay, we are satisfied with the same and condone the delay of 3 days and admit the appeal for hearing on merit. 3. The only issue raised by the department in this appeal is in relation to the decision of ld. CIT(A) in deleting the addition made by AO on account of capital gain. 4. Briefly the facts relating to this issue are, assessee is a state public sector undertaking and is in the business of land leveling, hiring and sales of tractors. For the AY under consideration, assessee filed its return of income declaring 'nil' income after setting off brought forward losses of Rs. 2,38,74,504. Subsequently, assessee filed a revised return on 01/11/2003 declaring 'nil' income after setting off brought forward loss of Rs. 10,36,36,461. During the assessment proceeding, AO noticed that initially assessee had shown an amount of Rs. 19,70,83,862 as total sale consideration from the property situated at Nalgonda, Warangal and Hyderabad and worked out long term capital gain at Rs. 19,53,14,791. However, in the foot note to the computation of income, it was stated by assessee that no capital gain arose during the relevant PY in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase to the extent that it cannot be set off against brought forward losses, which may subsequently result in tax, assessee has sought to withdraw long term capital gain on the property at AC Guards. AO also observed that in the returns for 2003-04 and 2004-05, assessee has not offered capital gain in respect of the property at AC Guards. AO observed, though, as per assessee's submission it will appear that it has transferred land to the income-tax department, but, actually assessee has transferred the land to the State Government, for a consideration equivalent to the loans to be paid by it to the govt. of AP. AO referring to the GOMS No. 33 dated 03/07/2001 of state govt. for handing over possession of the property to the income-tax department, observed that the Act of the state govt. passing G.O. transferring land to a third party indicates that state govt. has taken over ownership/possession of the land. As far as consideration was concerned, the said G.O. also makes it clear that necessary orders in respect of the cost of land and its adjustment against loan amount payable by assessee to the govt. would be issued separately. Thus, AO observed that assessee's argument that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax department and in compliance to the government's order, assessee handed over possession of the property to the income-tax department on 31/10/2001. Ld. CIT(A) observed that till possession of the property was handed over by virtue of the govt.'s order, assessee was the owner of the property. However, the income-tax department in exchange of land owned by it at some other place secured the said property from the govt. Thus, the transaction involving the property in question was between assessee and the govt. and the Govt. in its order has intended to issue a separate order in respect of the cost of property and adjust the same against the loan borrowed by assessee. He observed, though, govt. till the date of hearing of appeal has not issued any order fixing the cost of property, but, AO has proceeded to compute capital gain only on the ground that assessee had handed over the possession of the said property. Ld. CIT(A) after going through the provision of section 2(47)(v) of the Act, observed that as per the said provision any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, submitted before us, under no circumstances, it can be treated as transfer u/s 2(47)(v) as the conditions of sections 53A of the T.P. Act has not been fulfilled. Ld. AR submitted, as per section 53A of TP Act, only a right is conferred on the transferee and in real sense of the term there is no transfer. He submitted, in the facts of the present case, as per the order issued by govt., assessee has handed over the possession of the property to the income tax department. There is no contract in writing between assessee and state govt. so as to treat it as transfer as envisaged u/s 53A of the T.P. Act. Ld. AR referring to the govt. order submitted, it is an unilateral act of the state govt. to hand over the land in question to the income tax department. However, though, in the said order, it has been mentioned that a separate order will be passed determining the cost of land and adjusting the same against repayment of loan by assessee to the state govt., but, till date no such order has been passed. Therefore, in absence of cost of land, computation provision itself fails, hence, there cannot be any capital gain for the impugned AY. Ld. AR submitted, neither assessee has effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of Property Act, 1882'. Therefore, it is all the more necessary to look into the provision of section 53A of the T.P. Act, 1882 which reads as under: "53A. Part performance.-Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate govt., but, as yet no such order has been passed by the state govt. In the aforesaid facts and circumstances, in absence of written contract, quantification of consideration to be paid, it cannot be said that there is a transfer in terms of section 2(47)(v) of the Act. As far as the decision of Potla Nageswara Rao (supra) is concerned, on careful analysis of the same, it is found that the same is factually distinguishable and will not apply to present case. In case of Potla Nageswara Rao (supra), assessee has entered into a development agreement and in terms with the development agreement, assessee has handed over possession of the property to the developer, whereas, in the present case there is no written agreement between the parties. 9.4 One more aspect, which needs consideration is, another reason for AO to conclude that capital gain has arisen is due to the fact that assessee has credited market value of the cost of land to P&L A/c and simultaneously removed the property in question from the list of fixed assets. In our view, entries made by assessee in the books of account are neither conclusive nor determinative factor to conclude accrual of real income at the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons for not adding back prior period expenses, it was submitted by assessee that prior period adjustment was on account of VRS of employees. It was submitted by assessee that prior period expenditure relating to AYs 1997-98, 98-99 and 99-2000 on account of VRS is and are therefore required to be allowed in instalments, whereas, expenditure incurred on VRS for the impugned AY amounting to Rs. 3,47,59,447 is required to be allowed in full. AO, however, was not convinced with the submissions of assessee and held that prior period adjustment of Rs. 10,82,16,659 is not allowable. As far as the expenditure incurred towards VRS for the impugned AY is concerned, AO observed that only 1/5th of the amount claimed is allowable. Being aggrieved of the disallowance made, assessee preferred appeal before ld. CIT(A). 13. In course of appeal proceeding, it was submitted by assessee that as assessee has incurred expenditure towards VRS for the AYs 1997-98, 1998-99 and 2000-01 as well as for the current AY, such expenditure is to be amortized and allowable in five AYs commencing from AY following the PY in which it was first incurred in terms with the provisions contained u/s 35DDA of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from AO and accordingly decided the issue himself. In the aforesaid view of the matter, we are inclined to set aside the order of ld. CIT(A) on the issue and remit the matter back to his file for deciding the issue afresh on merit after due opportunity of being heard to assessee. If necessary ld. CIT(A) may call for a remand report from AO before deciding the issue. 17. In the result, C.O. filed by assessee is allowed for statistical purposes. ITA Nos. 214 & 215/Hyd/2010 by assessee 17. The issue raised by assessee in its appeals is pertaining to deduction u/s 35DDA. Since the claim of assessee in these years are consequential to and dependent upon the decision to be taken by ld. CIT(A) on similar issue in AY 2002-03, we think it appropriate to remit the matter back to the file of ld. CIT(A) for deciding the same in accordance with the decision to be taken in AY 2002-03. 18. In the result, both the appeals of assessee are treated as allowed for statistical purposes. 19. To sum up, appeal of revenue in ITA No. 256/Hyd/06 is dismissed and the appeals of assessee in ITA Nos. 214 & 215/Hyd/10 as well as C.O. No. 32/Hyd/06 are allowed for statistical purposes. Pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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