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TMI Blog2018 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Some of the agreement holders also sold the flats in semi-finished condition or in fully developed condition, whereas few like assessee retained the flats as such. Therefore assessee did hand over the possession and provisions of Section 2(47) regarding transfer certainly get attracted. Since there is part performance of the contract in the nature referred to in Section 53 of Transfer of Property Act, 1882, Clause(v) of Section 2(47) is clearly attracted. Therefore, I agree with the stand of AO that the capital gains did arise during the year under consideration as the agreement was entered on 12-05- 2008. Accordingly, the issue of bringing to tax the capital gains during the year is to be upheld. Arguments raised by the Ld. Counsel is that new Section 45(5A) has been introduced which defers the capital gains to the year of completion of the project by the Finance Act, 2017. This being substantive provision, I am of the opinion that this cannot be applied to the development agreement entered into earlier, in which 2(47)(v) would certainly get attracted. Whether property is held for sufficient period so as to attract Short Term Capital Gain or Long Term Capital Gain - Hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri S. Rama Rao, AR For Revenue : Smt. N. Swapna, DR ORDER These are two appeals by two assessees against the orders of the Commissioner of Income Tax (Appeals)-5, Hyderabad, for the AY. 2009-10. Since common issues are involved in both of these appeals, these are heard together and decided by this common order. For the purpose of convenience, the facts in ITA No. 1561/Hyd/2016 in the case of Smt. K. Vijaya Lakshmi are adjudicated here under: 2. Briefly stated, assessee is an individual, deriving income from salary. Assessee filed her return of income admitting income from salary at ₹ 2,01,270/- for the AY. 2009-10 on 08-06-2009. She entered into an agreement with M/s. Diamond Infra. She was the owner of 270 Sq.Yds. of land situated at Sy.No.145 (part), Plot No.9, Hydernagar Village, Balanagar, Kukatpally Municipality, Ranga Reddy District having acquired the same from the owners in the year 2000. There are 17 other persons who acquired plots in the said survey number from the same vendors. All the plot owners including assessee entered into a Development Agreement on 12-05-2008. According to the Development Agreement, each land owner would receive construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. Ld.CIT(A) after analyzing the legal position, noticed that the return was processed u/s. 143(1) of the Act only and since development agreement has come to the knowledge of the AO, assessment was property reopened, following the principles laid down by the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., [291 ITR 500] (SC). Ld.CIT(A) rejected the contentions that there was a change of opinion and also the contention that there was no tangible material. Ld.CIT(A) noted that the information has come to the knowledge of the AO as there were survey operations u/s. 133A of the Act in the case of M/s. Diamond Infra, from whom the details of the development agreement and sale of various properties has come to the knowledge. Both on facts and on law, Ld.CIT(A) analysed the issue and upheld the reopening of assessment. 3.1. Coming to the issue of computation of Short Term Capital Gain, Ld.CIT(A) did not accept assessee s contention and distinguished various case law relied upon and after analyzing the provisions of the Act, upheld the assessment as such thereby dismissing the appeal filed by assessee. In coming to the conclusions Ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e plot as early as 29-03-2001 with payment of ₹ 3,50,000/- made through her husband. Further, an amount of ₹ 1,50,000/- was paid on 29-08-2005 and substantial purchase consideration was paid much before the registration. 4.2. Ld. Counsel also argued that in the present case, the possession in the property under consideration has not been transferred to the developer and the possession of the impugned land was continuously enjoyed by assessee. Therefore, no capital gain arises in the year under consideration. 4.3. Ld. Counsel also contended that judgment of Hon'ble Jurisdictional High Court in the case of Potla Nageswara Rao Vs. DCIT (supra) is distinguishable. He argued that the facts of the case of the assessee are completely different than that of the facts of case of Sri Potla Nageswara Rao Vs. DCIT (supra). In the case of Sri Potla Nageswara Rao Vs. DCIT (supra), the Hon'ble High Court was only dealing with the question in respect of incidence of capital gains basing on passing of consideration. In the case of Sri Potla Nageswara Rao Vs. DCIT (supra), on the issue of transfer of possession of land and performance of contract there were no disputes. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual registration, whereas assessee was in possession of the property much before. It was fairly admitted that these aspects were not examined by the AO. Further, it was also contended that the valuation adopted on the basis of the development at the time of completion cannot be considered as value for bringing to tax the capital gain at the time of entering JDA and on transfer of 50% of land, it was also contended that AO wrongly considered the entire value rather than 50% share of the land. 6. I have considered the rival contentions and perused the material placed on record and case law relied on. While completing the assessment, AO considered the period of holding of the property to be less than 36 months and the gains arose in this transaction was considered as short term only. Further, while valuing the property transferred, the AO has considered the entire 267 Sq. Yds., entered into agreement by assessee, ignoring the fact that only 50% of the above was transferred, whereas assessee retained the balance of 50%. To that extent, the order of AO is to be modified. 6.1. Coming to the valuation also, the valuation taken by the AO at the date of his survey and at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in Section 53 of Transfer of Property Act, 1882, Clause(v) of Section 2(47) is clearly attracted. Therefore, I agree with the stand of AO that the capital gains did arise during the year under consideration as the agreement was entered on 12-05- 2008. Accordingly, the issue of bringing to tax the capital gains during the year is to be upheld. Even though Ld. Counsel tried to distinguish the jurisdictional High Court judgment in the case of Sri Potla Nageswara Rao Vs. DCIT (supra) that it applies to a case, where there is no sale consideration and the issue is on non-receipt of sale consideration. I do not agree with that as the issue of transfer in the case of development agreement and consequent levy of capital gain in the year of entering into development agreement has been crystalised by the said judgment of the jurisdictional High Court in the case of Sri Potla Nageswara Rao Vs. DCIT (supra). Ld. Counsel relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Balbir Singh Maini (supra), where the entire transaction of development of land envisaged in JDA fell through. In those facts of the case, the Hon'ble Supreme Court held that no profits or gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from HUDA etc., so that the issue can be finally concluded on facts whether the property has to be considered as long term capital asset or short term capital asset. Therefore, this issue is restored to the file of AO to examine, after giving due opportunity to assessee. 6.6. Next issue to be considered is the full value of consideration, for computation of capital gains. As per the agreement, assessee has parted with only 50% of the impugned property. However, AO has taken the cost of construction of the properties which are given in lieu at the time of completion of the project and gave certain discount so that the value is fixed at 1097 per Sft. This is not a correct method. Since the agreement was entered into in May, 2008 either the cost of the land [at 50% of 266.66 Sq. Yds.,] should have been considered for sale consideration or the probable value of the cost of construction on that date has to be considered. It is not proper on the part of the AO to consider the subsequent cost which may involve escalation of cost from 2008 to 2013. Therefore, I direct the AO to consider the probable cost of construction as on May 2008 or the SRO Value of the land-in-question on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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