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TMI Blog2019 (11) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... als) has erred in law and facts in confirming the action of the Assessing Officer in determining income under the head 'Capital Gains' amounting to Rs. 1,65,61,535/- 4. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and facts in holding that the provisions of s. 50C of the Act are applicable in respect of transfer of development rights. 5. The learned CIT(A) has erred in law and facts in confirming the action of the Assessing Officer in determining the sale value as per stamp duty valuation without referring the matter to the valuation officer. 6. The learned CIT(A) has erred in law and facts in confirming the action of the Assessing Officer in failing to grant indexation benefit in respect of cost of improvement incurred in respect of the partly constructed project in A.Y. 2011-12 amounting to Rs. 33,31,171." 3. As could be seen from the grounds raised, the first issue which arises for consideration is, whether the income earned from sale of development rights in respect of a partially constructed project should be assessed under the head "Capital Gain" or as "Business Income". The other aspects of the issue are, in case the aforesaid income is treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. He observed, it is for the assessee to establish that income received by him was on account of adventure in the nature of trade. He observed, at the time of purchase of development rights of the subject property on 7th May 2007, the assessee had shown it as investment in the Balance Sheet and it was not routed through Profit & Loss account as stock-in-trade. Thus, he observed, the entry in the books of account makes assessee's intention clear that the development right was purchased towards investment and not for business purpose. Thus, he observed, income received from the sale of development rights is a capital receipt and has to be assessed under the head "Capital Gain". Accordingly, by applying the provisions of section 50C of the Act, he treated the stamp duty value of Rs. 3,22,08,000, as deemed sale consideration and after allowing cost of acquisition and cost of improvement, he determined the net long term capital gain atRs. 1,65,61,535. The assessee challenged the aforesaid addition before the first appellate authority. 5. After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) observed, while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of improvement for indexation purpose, learned Commissioner (Appeals) agreed with the Assessing Officer that such amount cannot be treated as cost of construction as they are mere advances to certain parties. Thus, ultimately, he sustained the addition made by the Assessing Officer. 6. Reiterating the submissions made before the Departmental Authorities the learned Authorised Representative submitted, the development rights of the project has been shown under the head "Current Assets" in the balance sheet. In this context, he drew our attention to the copy of the balance sheet as on 31st March 2012 is placed at Page-18 of the paper book. He submitted, similar accounting treatment was given in the assessment years 2010-11 and 2011-12. The learned Authorised Representative submitted, the assessee followed the aforesaid accounting method consistently. Drawing our attention to the copy of MoU dated 8th April 2011 placed at Page-26 of the paper book, the learned Authorised Representative submitted, as per the terms of the agreement, the assessee was required to complete construction up to plinth level. Further, he submitted, by agreement dated 29th November 2011, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the assessee to acquire the development rights as investment is also revealed from accounting treatment given by the assessee at the time of purchase as the same was not routed through the Profit & Loss account. Thus, he submitted, the income from sale of development right was rightly assessed as income under the head "Capital Gain". As regards applicability of section 50C of the Act, the learned Authorised Representative submitted, since the assessee did not object to the value determined by the stamp valuation authority and sought a reference to the DVO for determining the value of the property, the Assessing Officer was not under any obligation to refer the valuation of the property to the DVO. As regards claim of indexation benefit for cost of improvement, the learned Departmental Representative submitted, assessee's claim may be verified and decided in accordance with law. 8. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. The first issue which needs to be decided is, whether the income from sale of development right is to be assessed under the head "Capital Gain" or "Business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Therefore, assessee's claim of business income has to be considered after taking into account of other relevant facts and materials including the nature of business carried on by the assessee. Undisputedly, the assessee is engaged in the business of developing real estate. It is also the claim of the assessee that it is developing or has developed various other housing projects and the development rights of the subject property was also acquired for development purpose. In fact, learned Commissioner (Appeals) himself has stated that in respect of some other housing projects developed by the assessee, the receipts and expenses have been routed through Profit & Loss account and the income has been offered subsequently as business income. In that view of the matter, assessee's claim that development rights acquired were for the purpose of business requires consideration. While concluding that the income from sale of development rights is capital gain, since, neither learned Commissioner (Appeals) nor the Assessing Officer have properly appreciated the submissions of the assessee and examined all the attending facts and materials relating to the issue and have merely harped upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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