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TMI Blog2018 (5) TMI 1772X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual transfer took place in the year 2003. The provisions of capital gains are attracted in the year 2003. Hence, the stand of the AO to charge the capital gains in the year 2010-11 is not proper. Secondly, the reason for bringing to tax in the year 2010-11 was the letter of the developer to announce that the building is ready for occupation without complying to the ‘JDA’ and approval norms. Even though the same was brought to the notice of the AO, according to us, the reason for reopening the assessment is on faulty ground. The income chargeable to tax falls only in the AY 2003-04 and not in AY 2010-11. Therefore, the assessment completed u/s 144 r.w.s. 147 is held to be not in accordance with law, hence, the same is quashed - Decided in favour of assessee. - ITA No. 1583/H/17, 1584/H/17 , 1585/H/17 , 1586/H/17 , 1587/H/17 , 1588/H/17, 1589/H/17 , 1590/H/17 , 1591/H/17, 1592/H/17 - - - Dated:- 25-5-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER Assessee by: Shri A.V. Raghuram Revenue by: Smt. M. Narmada O R D E R PER BENCH: These appeals are filed by the Assessees, who are family members, against orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d settlement amounts to be paid and stated that the construction of the portion allotted to landlords was complete and requested the landlords to take possession of the completed share (i.e.45%) of the built-up area. Thus, according to the Assessing Officer, though there was an agreement in the year 2000, the construction work was completed in F. Y 2009 - 10 and therefore capital gains arising, if any, in the hands of the landlords were assessable to tax only in the AY 2010-11. 2.2 In view of the above observations, the AO issued a notice u/s. 148 to the assessee and later a letter was issued, asking the assessee to show cause as to why the Capital Gains arising on account of transfer of property in question, should not be taxed in view of the provision of Section 5OC of the I.T. Act, 1961. In response to the said notice, the assessee submitted its objections, which are as under: (I) A combined reading of the charging section 45 and section 2(47) showed that Capital Gains in its case would arise either in the previous year 1999-2000 when development agreement was entered into or in the previous year 2003-04, when all the tenants were vacated and construction was started and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing if any, in the hands of the landlords were assessable to tax only in the assessment year 2010-11. According to the Assessing Officer, alterations/additions/ deletions if any, in keeping with the development agreement to the existing completed construction were subject matters of appeal etc. and were not relevant for determining the capital gains. 2.4 The Assessing Officer observed that the proposed construction consisted of 108,000 sq. ft. which the builder and the land lord had agreed to share in the ratio of 55:45. The land lords belonged to two families Viz. Telukunta and Dandoo, each having equal share of the land transferred. Hence, out of the total built-up area, both Telukunta and Dandoo families got 50% share each i.e. 50% of 48,600 sq. ft. which came to 24,300 sq. ft. each. The assessee, a member of Telukunta group, owned 4.16% of the land lords' portion. In view of the same, sale consideration attributable to its share was proportionately worked out by adopting the value of the completed construction as per the SRO rates. Taking the cost per square feet at ₹ 2,100/- as per SRO in the year 2009, the Assessing Officer recalculated the cost of constructed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Commissioner (Appeals) erred in sustaining the reopening of assessment under section 148 of the Income Tax Act. The Commissioner (Appeals) failed to appreciate that as per the settled position of law, there was no escapement of income to tax in the previous year relevant to asst. year under consideration and therefore the reopening is bad in law. 3. Without prejudice to above, The Commissioner (Appeals) erred in sustaining the action of the Assessing Officer in bringing to tax the alleged capital gains in the asst. year under consideration. 4. Without prejudice to above grounds, the Commissioner (Appeals) erred in upholding the action of the Assessing Officer in adopting the cost of land surrendered for development at ₹ 5.98 crores. The Commissioner (Appeals) ought to have appreciated that what the Appellant got on surrender of land is the super structure, which costed the builder ₹ 1.93 crores, and therefore the same ought to have been adopted. For these and other grounds that may be urged at the time of hearing, it is prayed that the Hon ble Tribunal may be pleased to allow the appeal. 6. The ld. AR of the assessee submitted that the AO has issued no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e calculation of capital gain is the stamp duty value of the land or stamp duty value of constructed portion whichever is higher. According to ld. AR, the sale consideration should be the cost of construction of the structure and not the stamp duty value of the land. The same has been held in the case of ITO Vs. N.S.Nagraj ITA No.676/Bang/2011. The cost of construction of the semi-finished building is ₹ 4,30,00,000/- as per the sale deed executed by the builder on 27-08-2008. Out of this 45% i.e. ₹ 1,93,50,000/-. The assessee's family share is half of this i.e. ₹ 96,75,000/-. The AO has to adopt this value as full value of consideration instead of stamp duty value of land. 6.5 Ld. AR submitted that there is also a mistake apparent from records with respect to the cost of structure i.e. the indexation has been done from 2009 onwards instead of 1981. If done from 1981 the value would be ₹ 6,00,000 (Rs.12,00,000/2)*632/100 = 37,92,000/-. Instead, the AO has taken the indexed value as ₹ 9,75,808/-. 7. On the other hand, ld. DR relied on the orders of revenue authorities. 8. Considered the rival submissions and perused the material on record. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given. Here, factually it was found that both the aforesaid aspects took place in the previous year relevant to the assessment year 2003-04. From the above decision, when the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the AY when the agreement was entered into and possession was given. Therefore, in the given case, the assessee has entered into JDA in the year 10/01/2000 and possession was handed over for development. But due to occupation of the property by the tenants, the developer was able to vacate the tenents only in the year 2003. Hence, it can be construed that the actual vacant possession was handed over to the developer only in 2003. Therefore, the actual transfer took place in the year 2003. The provisions of capital gains are attracted in the year 2003. Hence, the stand of the AO to charge the capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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