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TMI Blog2018 (2) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the stamp duty authority in respect of the farm house as per the size of the farm house but have not been considered by DVO. Therefore, these aspects are required to be taken into consideration while determining the fair market value of the land in question. We find that the DVO has not given a due waitage to these factors while determining the valuation, therefore, the same is not sustainable. We set aside this issue to the record of the AO/DVO for determination of fair market value after considering all the relevant factors such as the land use, restriction of built up area, the circular dated 14.07.2014 specifying as per rates for the farm house land in accordance with the area of the land and acquisition by Government. The circular dated 14.07.2014 is a useful and relevant guidance for determining the fair market value. Disallowance of cost of improvement - Held that:- Since, this issue of date of acquisition of the land in question has been decided by us by holding that the assessee has acquired the land vide agreement dated 11.04.2007 and therefore, the expenditure incurred for improvement of the land after the said date of acquisition is an allowable claim as per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and in law in holding that the agricultural land sold by the assessee is a capital asset by not considering that the land was situated beyond 8 Kms of the municipal limits as per Notification No. 9447 dt. 06.01.1994. 5. The assessee crave to amend, alter and modify any of the grounds of appeal. 6. The appropriate cost be awarded to the assessee. 2. Ground No. 1 is regarding the long term capital gain arising from sale of land was treated by the AO as short term capital gain. The assessee is a company and engaged in the business of agency. The assessee filed its return of income for the assessment year 2011-12 2012-13 declaring total income at ₹ 9,83,704/- and loss of ₹ 29,06,564/- respectively. The case was selected for scrutiny and during the scrutiny assessment the AO noted that the assessee company has purchased agricultural land vide sale deed dated 13.04.2010. The assessee sold the land vide sale deed dated 07.03.2011 and 04.05.2011 and claim long term capital gain arising from the sale of the land. The AO rejected the claim of the assessee and held that the land was purchased by the assessee vide sale deed date 13.04.2010 and therefore compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.05.2011 to M/s Galaxy Greem Power Pvt. Ltd. for a consideration of ₹ 2,30,88,000/-. The capital gain arising from these two sales were offered as long term capital gain for the assessment year 2011-12 2012-13 respectively. The ld. AR has referred to clause-5 of the agreement and submitted that the assessee was handed over the physical possession of the land as as per clause 3 of the agreement dated 11.04.2007. The sellers of the land accepted that the sale deed would be executed as directed by the assessee. Thus, the transfer of land from original owners to assessee was completed as per terms of section 2(47) (v) of the Act and therefore, the holding period needs to be considered from 11.04.2007 and not from 13.04.2010. He has further submitted that as per section 53A of transfer of property Act, where the transferee in part performance of the contract has taken possession of the property and willing to perform his part of the contract then the transferor shall be debarred enforcing against the transferee any right in respect of the property of which the transferee has taken or continued in possession. From the agreement dated 11.04.2007 it is evident that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The ld. DR has further submitted that as per Registration Act, 1908 any contract for transfer of immovable property for the purpose of section 53A of transfer of property Act shall be registered if the said contract has been executed on or after commencement of registration and other related law Amendment Act 2001 and therefore, if the agreement for transfer of land is required to be registered. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as relevant material on record. The assessee claimed to have purchased the agricultural land measuring 2.74 hectare at Newata, Tehsil Sanganer, Jaipur vide agreement dated 11.04.2007 for a consideration of ₹ 50 lacs. As per clause-2 of the agreement the assessee paid ₹ 40,00,000/- vide three pay orders dated 10.04.2007 and one cheque dated 11.04.2007 of ₹ 10 lacs each. The details of the payments given in clause 2 are as under:- Thus, it is clear that out of the total consideration of ₹ 50 lacs the assessee paid ₹ 40 lacs at the time of agreement. The vendors have also acknowledged receipt of the consideration of ₹ 40 lacs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the sale deed was executed by the vendors on 13.04.2010. As it is clear from these act and events that it is continuous process of transfer which begins with the agreement to sale dated 11.04.2007, conversion of the land use on 03/05.02.2010 and ultimately execution on sale deed on 13.04.2010. The sale deed dated 13.04.2010 is a performance of obligation under the agreement to sale dated 11.04.2007, therefore, the conversion of the land after the execution of agreement to sale is a post facto conversion and the transfer would effects from the date of agreement to sale specifying all the conditions as stipulated u/s 2(47) (v) of the Act r.w.s. 53A of the Transfer of Property Act. Once, the sale deed is executed in pursuant to agreement to sale and all the conditions stipulated u/s 2(47) of the Act are satisfied it would constitute transfer and would be effective from the date of agreement to sale itself. 7. Though as per the amendment brought to the registration Act 1908 vide amendment Act 2001 an agreement for sale of any immovable property without registration shall have no effect of transfer however, the agreement in question has to be seen along with the sale deed executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word transfer in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word transfer is as under: '2(47) transfer , in relation to a capital asset, includes,- ( i)** ** ** ( ii) the extinguishment of any righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endee but that is not the case at hand. 22. In addition to the fact that the term transfer has been defined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house. Thus, it was held by the Hon ble Supreme Court that when agreement to sale in respect of immoveable property is executed a right in personae is created in favour of the vendee and thereby the vendor is restrain from selling the property to someone else because the vendee gets the legitimate right to enforce specific performance of the agreement. In view of the above facts and circumstances of the case as well as the decision of Hon ble Supreme Court we hold that the transfer of the land in question would be regarded as on the date of agreement to sale dated 11.04.2007. The order of the authorities below qua this issue are set aside. 8. Ground No. 2 is regarding the fair market value adopted by the AO as per Section 50C of the Income Tax Act. During the course of assessment proceeding, the AO invoked the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of sale. Hence, the ld. AR has submitted that the registered valuer has determined the fair market value of the land by considering all these factors which should have been accepted by the authorities below. 10. On the other hand, ld. DR has submitted that the DVO determined the valuation after considering the objection of the assessee as well as the valuation report of the registered valuer submitted by the assessee. The fair market value of the property has to be determined on the date of sale deed and therefore, the circular dated 14.07.2014 was not available at the time of sale deed and consequently is not applicable in the case of the assessee. He has relied upon the orders of the authorities below. 11. We have considered the rival submissions as well as relevant material on record. We find that the stamp duty authority has adopted the rates as provided for residential purpose whereas undisputedly the land in question was allowed only for farm house purpose. As per the orders of the competent authority the construction on the farm house land cannot exceed more than 5%, therefore, all these facts are relevant for determining the fair market value as per section 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale deed dated 13.04.2010. Thus, the AO has disallowed the expenditure which was incurred prior to the sale deed and after the date of agreement to sale dated 11.04.2007. The ld. CIT(A) has confirmed the action of the AO. 13. We have heard ld. AR as well as DR and considered the relevant material on record. Since, this issue of date of acquisition of the land in question has been decided by us by holding that the assessee has acquired the land vide agreement dated 11.04.2007 and therefore, the expenditure incurred for improvement of the land after the said date of acquisition is an allowable claim as per section 48 of the Income Tax Act. Even otherwise if an expenditure is incurred by the assessee for improvement of the land after the agreement to sale dated 11.04.2007 and prior to the sale deed dated 13.04.2010 the fact remains that the expenditure was incurred for improvement of land by the assessee and acquired by the assessee. Therefore we are of the considered view that the expenditure incurred cannot be disallowed when the purchase consideration paid by the assessee prior to the sale deed was accepted and therefore, the expenditure incurred by the assessee prior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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