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TMI Blog2016 (8) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... authority is excessive for the reasons stated above and also that the assessee had exchanged property of value of ₹ 1,30,89,000/- with the property valued at ₹ 94,51,000/- and hence it exceeds the fair market value of the property on the date of transfer. In our considered view, this plea of the assessee augers well on merits and deserves to be allowed and we are inclined to set aside and restore the issue to the file of the AO to refer the determination of valuation of the property to DVO in terms of provisions of Section 50C(2) of the Act. The assessee shall be allowed to submit relevant evidences and explanation in its defense which shall be admitted and adjudicated on merits. Needless to say proper and adequate opportunity of being heard shall be provided to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly. Finally, we may reiterate that the AO shall de-novo adjudicate the issue on merits after duly considering our decisions in the preceding para’s as well report of DVO, valuation of the property as determined by stamp duty valuation authorities for stamp duty purposes, relevant evidences adduced by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have acquired a piece of land bearing Plot No.68 , Bhatwadi, Village Kirol , Ghatkopar (West) now in Taluka Kurla , Mumbai (Survey no. 24, Hissa Nos 4(Part) and 6(Part) and City Survey No. 68(Part) ) for ₹ 4,50,000/- in the year 2000 on which school is run by Vatsalabhai Dattatray Sawant Charitable Trust on this plot of land . The Vatsalabhai Dattatray Sawant Charitable Trust owns another plot Bearing No.27 , Bhatwadi , Village Kirol, Ghatkopar now in Taluka Kurla, Mumbai( Survey No. 26, Hissa No.6(Part) and City Survey No. 27 and 27/1 to 20/20) admeasuring 500 square yards equivalent to 416.7 square meters. The AO observed that Vatsalabhai Dattatray Sawant Charitable Trust exchanged plot No. 27 whose Market value is ₹ 94,5l,000/- with the assessee , and in exchange the assessee had given plot No. 68 to Vatsalabhai Dattatray Sawant Charitable Trust , the Municipal valuation of which is ₹ 1,30,89,000/-. The plot received in exchange by the assessee i.e. Plot no 27 is then gifted to his son on 11th June, 2008. The A.O. issued show cause notice to the assessee as there was exchange of plots between Vatsalabhai Dattatray Sawant Charitable Trust and the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amp duty valuation might not be good in law. The assessee submitted that it had not received any monetary consideration, hence, there is no income earned as per the Act. The assessee also submitted that the entire arrangement was accepted with a social and philanthropic motive that children in near vicinity should not be deprived of educational facility. It was observed by the A.O. that the assessee has not submitted its Balance Sheet for the current year or the previous year s showing the said plot of land as its stock-in-trade. No documents have been submitted by the assessee with respect to the construction activity undertaken by it during the year or the earlier years to support its stand that the assessee purchased the piece of land for carrying out the business activity and not as an investment The assessee has merely made the statement that the assessee has acquired the land as stock-in-trade which is not enough as the assessee is not trader of land. No evidence is given by the assessee that assessee is a trader of land. Thus, the contention of the assessee is not correct and the AO observed that the said land had never been shown by the assessee as stock-in-trade. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is main trustee of the Vatsalabai Dattatray Charitable Trust. The property received by the assessee in exchange is gifted to his son who is builder and is developing the property for which a gift deed is registered . The AO passed the assessment order dated 28.12.2011 u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 28.12.2011 passed by the AO u/s 143(3) of the Act, the assessee filed its first appeal before the learned CIT(A). 5. Before the learned CIT(A), the assessee submitted the following written submissions :- FACTS The assessee is Hindu Undivided Family (HUF) where Mr. Dattatray Namdeo Sawant is a Karta of HUF. The said HUF had agreed to purchase a piece of land in the year 1996 from Bai Zaverbai Purshottam Nathu Charitable Trust .The assessee had initially paid an amount of ₹ 1,00,000 and the balance amount of ₹ 3,50,000 was paid in the year 2001. Since the seller was a trust the permission from the office of the Charity Commissioner was required. Therefore the process of sale took a long time to reduce to registration of the agreement till 2006. Subsequently the purchase agreement for the land was registered in the same year. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer erred in applying section 5OC for the above transaction and considering the market value as the sales value. The Market Value Specified in the exchange deed of ₹ 1,30,89.000 was considered as sales value and Long Term Capital Gains of ₹ 1,24,43.926.00 were computed by the Assessing Officer and demand of ₹ 38,18,700/- was raised. SUBMISSION Whether the plot was purchased with the intention of business or investment? The assessee had purchased the piece of land for business purpose .The land was considered as stock in trade by the assessee and not as an investment. Hence section 5OC would not be applicable. The following points given below support this point of view: (A) Purchase agreement for land states for development purpose The Agreement was registered by the HUF in the year 2006 .The Paragraph 4 of Page 4 of the purchase agreement clearly states that this additional piece of land was purchased for the purpose of developing the plot. A copy of the agreement has been submitted for your reference. Thus the intention of the assessee to purchase the land for the purpose of business is clear. (8) Family background ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 1993 of the land , that the Jankalyan Seva Sanstha subsequently got merged with Vatsalabhai Dattatray Sawant Charitable Trust wherein the assessee was one of the trustee along with 18 other individuals and application was made u/s.36(1)(a) of Bombay Public Trusts Act, 1950 vide application No. 60 of 2009 by Bai Zaverhai Purushottam Nathu Charitable Trust asking for sanction order to sell immovable property i.e. Survey No.24, Hissa No 4 6, admeasuring 136 sq.mtr and right of using F.S.I of 54 square meters for consideration of ₹ 4,50,000/- to Shri Dattatray Namdeo Sawant, the appellant of the same land bearing survey No. 24, Hissa No. 4, City Survey No. 68, admeasuring (part) of Village Kirol, Ghatkopar (W) admeasuring 100 square yards and then another piece of land with the same survey number,Hissa No. and City Survey No., admeasuring 52.39 square meters purchased by the assessee alongwith a copy of order passed u/s.36(1)(a) of Bombay Public Trusts Act, 1950 on application No. J-4/91 of 2002 passed by Joint Charity Commissioner permitting to alienate the land which was property of the trust in said application i.e. Bai Zaverbai Purshottam Nathu Charitable Trust alongwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd benefit of the School already existing on the said original plot. The existing school Dnyan Prakash Vidyalaya was run by a Janakalyan Seva Sanstha, a public Charitable Trust since 1990. It is also specified in the agreement dated 27-03-2006 that vendors i.e. Bai Zaverbai Purushottam Charitable Trust had difficulty in recovering possession and hence made application before Joint Charity Commissioner to get the sanction for alienation of property and also permission to sell for the consideration amount based on registered valuer's report for the said property. The said Mr Dattaray Namdev Sawant had without permission and / or authority of the vendor i.e. Bai Zaverbai Purushottam Charitable Trust had constructed a structure consisting of ground and one upper floor on the said land , which said Mr Dattaray Namdev Sawant since the year 1990 permitted the said structure constructed by him on the original plot to be used by Primary School known as Dnyan Prakash Vidalaya then run by Janakalyan Seva Sanstha . The said plot of land was then sold by the said Bai Zaveribai Purshottam Nathu Charitable Trust for lumpsum consideration of ₹ 1,00,000/- whereby first agreement to sale w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to approval of the Charity Commissioner in the year 2004 and this plea of the assessee was accepted by the learned CIT(A) . Thus, in nut-shell the learned CIT(A) held that the exchange of property by the assessee was transfer liable to capital gains tax u/s 45 of the Act as the said asset was capital asset held by the assessee as defined u/s 2(14) of the Act and the exchange constitute transfer within the meaning of provisions of Section 2(47) of the Act. The indexation is to be allowed w.e.f. the year 2004 i.e. from assessment year 2005-06 on cost of acquisition of ₹ 4,50,000/- for computing long term capital gains on sale consideration of ₹ 1,30,89,000/- , vide appellate order passed by the learned CIT(A) vide orders dated 11.01.2013. 6. Aggrieved by the appellate orders dated 11.0.2013 passed by the ld. CIT(A), the assessee filed second appeal before the Tribunal. 7. The ld. Counsel for the assessee submitted that there is a transaction of exchange of property between the assessee and the Vatsalabhai Dattatray Charitable Trust in June, 2008 vide deed of exchange executed on 03-06- 2008 and the issue is to deal with whether the exchange of these properties has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income on sale of the plot . No Balance Sheet was filed by the assessee but this is the only asset owned by the assessee which is now transferred under exchange was the contention of the learned counsel for the assessee. No income has been earned from letting of this property as school was running on this property by the Vatsalabai Dattatray Charitable Trust. It is submitted that section 2(47) is not applicable as it did not constitute transfer as contemplated u/s 2(47) of the Act is it is family settlement which is a genuine and bonafide settlement entered into to exchange the plots. As per the exchange deed dated 3rd June, 2008 total market value was considered as ₹ 1,30,89,000/- which consists of the land of 136 sq. meters and structure of 387.55 meters . It is submitted that valuation is excessive as in 2006, the value was ₹ 17 lacs while in 2008 , the value is computed at ₹ 130.90 lacs. The ld. Counsel relied upon the decision of Hon ble Madras High Court in the case of CIT v. R. Ponnammal, (1986) 54 CCH 0058(Mad.HC) and in the case of CIT v. M/s Thiruvengadam Investments Pvt. Ltd. [2010]320 ITR 345 (Mad.) . The ld. Counsel also submitted if Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to tax on account of exchange of plots between the assessee and the Trust . The plot of land being business asset held as stock-in-trade cannot be treated as capital asset u/s 2(14) of the Act and Section 50C of the Act has no application and it cannot be invoked.The learned counsel for the assessee reiterated the submissions which were made before the authorities below. 8. The ld. D.R. relied upon the orders of the learned CIT(A) and submitted that it is not a bona fide family arrangement/ settlement . He submitted that the plea that this exchange of properties is a family settlement has not been taken before the authorities below and this plea is taken for the first time before the Tribunal. This plea is mixed question of fact and law and requires investigation of facts by the AO. The list of trustees of Vatsalabai Dattatray Charitable Trust has never been submitted before the authorities below and the plea that all the coparceners of the assessee are Trustee s of the Vatsalabai Dattatray Charitable Trust was never verified by the AO . The copy of Balance Sheet were not submitted before the authorities below to prove that the assessee is holding the said property as busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land of the said original plot being occupied by the said Mr Dattatray Namdev Sawant , Karta of the assessee without permission and authority . The said plot of land of 83.61 square meters was then sold by the said Bai Zaveribai Purshottam Nathu Charitable Trust for lumpsum consideration of ₹ 1,00,000/- whereby first agreement to sale was executed on 30-07-1996 by the said Bai Zaveribai Purshottam Nathu Charitable Trust in favour of the assessee and thereafter on 31-07-1996 irrevocable general power of attorney was executed in favour of Mr Dattatray Namdev Sawant and his son Mr Rajendra Dattatray Sawant to execute conveyance deed in respect of the plot in favour of the assessee while further for ₹ 3,50,000/- said Bai Zaverbai Purushottam Charitable Trust further agreed to sell additional 52.39 square meters along with benefit of consumption of FSI of 54 square meters for use and benefit of school recorded in supplementary agreement dated 24-01-2001 (PB/Page 10-19). These details are duly recorded in deed of indenture dated 27-03-2006 whereby the said Zaverbai Purushottam Charitable Trust conveyed title of the said plot in favour of the assessee. Thus, the said p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner. Moreover, it is mentioned in the purchase agreement dated 27-03-2006 with Zaverbai Purushottam Charitable Trust that the plots were acquired by the assessee for advancement of educational purposes for running school. Under the above circumstances, it is far-fetched to assume that the assessee acquired the said property as stock-in-trade or business asset for doing any development etc rather the assessee acquired the plot which was used by the trusts whereby the coparceners of the assessee are stated to be Trustees of the Trust running the school. Thus, intentions to acquire the plots by the assessee was to bring within its fold by way of ownership of the plots of land which was earlier occupied ( 100 square yards plot) by the assessee without permission of the lawful owner so that the continuation of the education imparted by the school can be smoothly continued and further advanced , and we have no hesitation in holding that the said plots of land aggregating to 136 square meters so acquired by the assessee from Zaverbai Purushottam Charitable Trust was held as capital asset u/s 2(14) of the Act. It is for the assessee to have brought on record cogent evidences to disprov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty so transferred by the assessee to Vatsalabhai Dattatray Sawant Charitable Trust was constructed by the assessee (PB/Page 96) , thus leading to presumption that the assessee was the owner of the plot along with constructed structure on ground floor and four floors admeasuring 387.55 square meters which was owned by the assessee and not the Trust unless this presumption is rebutted by the assessee with cogent material/evidences . The onus was on the assessee to bring on record cogent and conclusive material/evidences to prove that the constructed structures were owned by the Trust running the school . The assessee did not even produce its Balance Sheet as well balance Sheets of the Trust for the instant previous year or earlier years during assessment proceedings or during appellate proceedings before the learned CIT(A) or before the Tribunal to prove the sources of construction cost being incurred for school building and determination of cost of construction actually incurred towards the same and consequently to establish the ownership of school building. Thus, we are inclined to set aside this issue to the file of AO with direction to verify , examine and enquire about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s/ settler or their relatives or concerns in which they are interested. The Public Charitable Trust are not family enterprises/ concerns existing for the welfare of individuals who have ownership interest but are created for public welfare . There are restrictions / prohibitions with grave consequences on Public Charitable Trust on diversion of funds / properties for benefit of trustees/settler or relatives of the trustees/settler or concerns associated with the trustees/settler and funds / properties of Public Charitable Trust can only be utilized for the charitable and welfare objects for public welfare as laid down in the object clause in the Trust deed. Even on dissolution of the Trust there is a bar on distributing the funds/properties available at the time of dissolution to settler or trustees or their relatives or the associated concerns and the remaining funds/properties on dissolution is to be disposed of as per the Laws applicable to Charitable Trust for transfer to other charitable Trust etc.and that too with the permissions of Charity Commisisoner. In the instant case , the approval was obtained from Charity Commissioner who granted the approval on the grounds that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies valued the property consisting of plot of 136 square meters along with benefit of FSI of 54 square meters at ₹ 17,76,500/- on 27- 03-2006 which the assessee acquired from Bai Zaverbai Purushottam Charitable Trust as the said Bai Zaverbai Purushottam Charitable Trust only sold the plots admeasuring 136 square meters with benefit of FSI as we have seen earlier the construction was done by the asssessee firstly as unauthorized structure in 1990 i.e. ground and one upper floor which later was expanded to four floors as we discussed in preceding para s, while on 03-06-2008 when exchange took place the stamp duty valuation authorities valued the property consisting of plot of 136 square meters and constructed area of structure admeasuring 387.5 square meters for stamp duty purposes which aggregatedto ₹ 1,30,89,000/- . It is the contention of the assessee that the plot of land occupied by the Trust namely Vatsalabhai Dattatray Sawant Charitable Trust was occupied by 20 hutments and thus additional costs are to be incurred by the assessee also suffers from infirmity as the perusal of the Judgment dated 15-03-2008 delivered by Hon ble Joint Charity Commissioner, Mumbai u/s 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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