9911796707
TMI Blog2011 (12) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... CDA) had invited tender for allotment of a plot of land measuring 3 Acres on lease for a period of 99 years for developing Hotel project in Marine Drive, Cochin. One Mr.Om Prakash Monga on behalf of a limited company to be formed, had made offer of ₹ 6,25,000/- per cent. At the tender/auction held on 28.10.1994, the offer of Mr.Om Prakash Monga was accepted by GCDA vide its letter dt.4.11.1994. The acceptance of the offer was subject to certain conditions. Some of the conditions relevant for a decision in the present appeal are the following "9. The amount quoted for the plot shall be paid by the allottee within 30 days of receipt of allotment letter failing which EMD will be forfeited and alternate arrangements made for the allotment as the authority deems fit. If the allottee desires to remit the amount by instalments it can be permitted on the following conditions: 50% of the total bid amount has to be paid within 30 days of the receipt of the allotment letter and the remaining in six equal monthly instalments with 21% interest. Penal interest of 22% will also be charged if the instalment amount is not remitted on the due dates. 10.No extension of time will be grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period upto 31.08.1997. The Assessee also agreed to pay the balance amount due to the Authority (towards price + interest + penal interest) for the 7140.87 Sq. H of land and also to pay the future interest thereon till the date of realization. The Assessee also agreed that in case it fails to discharge the dues, the Authority will be at liberty to realise the due amount with future interest etc. thereon by charging it from the said 7140.87 Sq.M of land (balance land allotted to Assessee) either by way of sale of the said property or through any other means which the Authority deems fit to make in the circumstances. 5. Thus after the allotment of an area of 1.25 acres to Centurions Housing and Constructions Pvt. Ltd. as requested by the Assessee from the 3 acres of land allotted to the Assessee at Cochin Marin Drive Scheme area was as follows (vide GDCA's letter dt. 7.10.97 at Page-27 of paper book) 1. Total price of the said 1.25 acres (125 cents) of land was ₹ 8,84,17,000/- as on 31.8.97 (This includes price + interest + penal interest as on that date). 2. This amount of ₹ 8,84,17,000/ was to be adjusted from the amount already paid by the Assessee. 3. The bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this fact established it rights over the entire property, the balance part of which was sold during the previous year. 8. The AO however was of the view that the assessee has made a tender application dated 28/10/1994 to M/s. GCDA. No contract what-so-ever was signed between M/s. GCDA and assessee company. Further, the assessee company was never handed over the possession of the said land. In the circumstances, the AO held that the ownership on the said capital asset of the assessee company was not created in the year 1994. In other words, according to the AO, it was only in the year 2004 when the consideration was paid to GDCA the right of the Assessee to purchase the property became complete. In that view of the matter, the AO held that the year of acquisition of the capital asset by the Assessee was 2004 and since the transfer of the capital asset took place in 2004, the AO computed short term capital gain arising from the purchase and sale of the said property in the previous year as under :- Sale Purchase Capital gain Short Term FY 2004-05 104700000 FY 2004-05 99802527 4897473 Sale of Cochin property 480 305 104700000 99802527 4897473 Thus, a sum of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The CIT(A) held as follows: "7. I have carefully considered the information record. From the careful reading of assessment order it is evident that the AO recognized that there was a capital asset. In the instant case, the capital asset is right in the property. He also recognized that there was transfer of such right. The only issue is such right was acquired in the year 1994 or in the year 2004? At this juncture, it is necessary to go through the judicial precedents on this issue. CIT V/s. Tata Services Limited (122 ITR 594) Bombay High Court: The word property u/s.2(14) is of widest amplitude and includes any right which can be included in definition of Capital Asset. Ponds (India) Ltd. V/s. DCIT (64 ITD 33) Mumbai ITAT: The facts of the case are, by an agreement dated 18.04.81, the assessee agreed to purchase immovable property from 'K' and took the possession. By another agreement dated 03.01.1991, the assessee gave up his rights acquired for certain consideration. It was held that the compensation received on giving up right to purchase was treated as long Term Capital Gain. J.K.Kashyap V/s. ACIT (302 ITR 255) Delhi High Court: Capital gains - Transfer-Defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the asset and the cost of improvement thereto. Capital asset has been defined in Sec.2(14) of the Act to mean property of any kind held by an assessee, whether or not connected with his business or profession. The right under the letter of allotment by the GCDA to obtain lease for 99 years 3 Acres of land at Marine Drive, Cochin is a capital asset. Even the AO does not dispute this fact. The AO also does not dispute that there was a transfer of the right (capital asset) by the Assessee in favour of Abad Constructions. The only dispute is as to the year in which the Assessee acquired the capital asset. This is necessary because depending upon the period for which the capital asset is held by an Assessee, capital assets are classified as Short Term Capital Asset and Long term capital Asset. Capital gain or loss arising from transfer of a short term capital asset gives raise to STCG and transfer of a long term capital asset gives raise to LTCG. The Assessee will be entitled to benefit of indexation on cost when LTCG is computed. No such benefit is allowed when STCG is computed. Therefore the main issue to be decided in this case is as to whether the Assessee acquired the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the Assessee offered to purchase leasehold rights for 99 years of the property measuring 3 Acres in Marine Drive, Cochin from GCDA. GCDA by its letter dt.4.11.1994 accepted the said offer. As we have already seen the offer was subject to the condition that 50% of the cost of the property should be paid within 30 days and this condition has been duly complied with by the Assessee. There has therefore been a concluded contract between the Assessee and GCDA. The payment of the remaining consideration by the Assessee as specified in the agreement was only performance of the terms of the contract. The Assessee had a right to obtain a conveyance of leasehold right over the property by virtue of the letter of allotment dated 4.11.1994. That right was transferred by the Assesseee on 28.1.2004 when the Assessee addressed a letter to GCDA to transfer the area of 1.75 acres of land to M/S.Abad Constructions Pvt.Ltd. The GCDA in its proceedings dated 26.5.2004 accepted the request of the Assessee and on 31.5.2004 executed a registered deed of conveyance for 1.75 acres of land in favour of M/S.Abad Constructions Pvt.Ltd. It cannot be therefore said that the Assessee acquired rights under th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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