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TMI Blog2021 (7) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... ntirety not in part i.e., only by adopting the value for stamp duty purpose of the saleable area, (2) not applying other limb of provisions, which determines the tax of chargeability of Capital Gains to tax. It is suffice to say that the action of the Assessing Officer is bad-in-law without delving into issue whether the said provisions have retrospective effect or not. Secondly, the Assessing Officer should not have adopted ready reckoner value for the purpose of determining fair market value of the saleable constructed area, in as much as, it does not reflect the Fair Market Value as held by the jurisdictional High Court in the case of CIT Vs. Nirman Laxmanarayan Grovver [ 1994 (12) TMI 3 - BOMBAY HIGH COURT ] Thirdly, the Assessing Officer can adopt only discounted value of the ready reckoner value even if ready reckoner value is held to be Fair Market Value. Arguments advanced by the ld.CIT D.R. are only on the aspect of computation of the fair market value, since we held that in the absence of any enabling provision under the Income Tax Act, 1961 the Assessing Officer is not empowered to substitute the agreed consideration by fair market value except in the situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was completed by the Assessing Officer at a total income of ₹ 8,01,69,010/-. The disparity between the returned income and the assessed income is on account of addition under the head Capital Gains arising on entering into the Joint Development Agreement (JDA) of land by adopting a higher value of consideration by the Assessing Officer. 5. The brief factual matrix leading the above additions reads as under : The appellant along with two other family members namely (Mr. Amit Vishnu Pashankar (Brother) and Mr. Vishnu Pundilik Pashankar (Father) owning a property situated at Sl.No.37/1, Hinjewadi, Mulshi, Pune admeasuring 7,900 sq.mtrs. During the previous year relevant to the assessment year under consideration, the appellant along with two other family members entered into a Joint Development Agreement (JDA) on 30.06.2014 with M/s. Icon Reality in respect of the said property. In terms of the said JDA, the total sale consideration was fixed at ₹ 8,76,70,000/-. Out of this, a sum of ₹ 3,75,00,000/- was paid by way of cheques and the balance to be settled by handing over saleable constructed area of 60,000 sq .ft (residential 30,000 sq. ft + commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel of the assessee Shri Ajay Singh objected the action of the Assessing Officer adopting the ready reckoner value of the saleable residential and commercial flats on the following grounds : 1) The ready reckoner value is inclusive of the value of the land. 2) In the present case, the appellant never parted with the share of the land appurtenant to 60,000 sq.ft of built-up area which always remained with the assessee. 10. The substance of transaction i.e., entering into the JDA means transfer of part of land to the builder for a consideration of ₹ 8,76,70,000/- and the full value of the transaction is to be arrived at by adopting the monetary consideration plus cost of construction of saleable area of the appellant. The Assessing Officer cannot make resort to the provisions of Sec.45(5A) of the Act which are brought into the statute by the Finance Act, 2017 w.e.f. A.Y. 2018-19. Since the appurtenant consideration stated in the Joint Development Agreement is more than the value adopted for stamp duty valuation purpose, the appurtenant consideration stated in the sale deed should be taken as a conclusive evidence of full value consideration . He also placed relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns on transfer of property in terms of the JDA entered into between the appellant with builder. The undisputed facts of the case are that the appellant along with his two other family members namely (Mr. Amit Vishnu Pashankar (Brother) and Mr. Vishnu Pundilik Pashankar (Father) owns a property situated at Sl.No.37/1, Hinjewadi, Mulshi, Pune admeasuring 7,900 sq.mtrs. The appellant along with other two co-owners entered into Development Agreement on 30.06.2014 with M/s. Icon Reality for the purpose of developing the said property. In terms of the JDA, the appellant along with two others have to receive monetary consideration of ₹ 3.75 lacs and the balance to be settled by handing over saleable constructed area of 60,000 sq .ft (residential 30,000 sq. ft + commercial 30,000 sq. ft) to all the three members of the family and the share of each co-owner comes to ₹ 1,25,00,000/- by way of cheque and were entitled for a constructed area of 20,000 sq. ft i.e., (10,000 sq. ft commercial and 10,000 sq.ft residential). It is agreed that the exchange value of 60,000 sq. ft is arrived at by the parties to the JDA at ₹ 5,01,70,000/- calculated at construction cost of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec.48 of the Income Tax Act which deal with the computation of income chargable under the head Capital Gains reads as under : The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 15 The provisions of Sec.48 of the I.T. Act refers to the term full value of consideration received, accrued as a result of transfer of the capital asset. The term Fair Market Value had come up for interpretation before the Hon'ble Supreme Court in the case of CIT Vs. George Henderson Co., Ltd reported in 66 ITR 622 (SC) wherein it was held that the term full value means the whole price without any deduction whatsoever and it cannot refer to the adequacy or inadequacy of the price bargained for. Nor has it any necessary reference to the market value of the capital asset which is the subject-matter of the transfer. The ratio of this deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from provisions of Sec.50C of the Act, we do not see any other provisions under the I.T.Act, 1961 enabling the Assessing Officer to substitute the actual sale consideration received, accrued by the Fair Market Value. 16. Recently, the Hon ble Delhi High Court in the case of Arjun Malhotra Vs. CIT reported in (2018) 403 ITR 354 after referring to the old provisions of Sec.52 of the Income Tax Act and the decision of Hon'ble Supreme Court in the case of CIT Vs. George Henderson Co., (supra) and CIT Vs. Gillanders Arbuthnot Co., (supra) and the judgment of the Hon'ble Supreme Court in the case of K.P. Varghese Vs. ITO (supra) in the context of Sec.52 of the I.T.Act as omitted by the Finance Act 1987 as existing upto A.Y. 1998-99 held that the Assessing Officer should not substitute the actual consideration by Fair Market Value. The relevant paragraph reads as under : 25. As noted above, Section 52 of the Act was omitted by Finance Act, 1987 with effect from 1st April, 1988. The said provision, therefore, was not applicable in the Assessment Year 1999-2000. We have referred to the aforesaid judgment in K.P. Verghese (supra) as this judgment was referred to and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the case of CIT Vs Khivraj Motors Pvt. Ltd., 380 ITR 215 held that the agreed exchange value of the land for construction area should be taken as a full value consideration for the purpose of computing the Capital Gains which reads as under : 14. The cost of construction having been agreed upon between parties at ₹ 800/- per sq. ft. and same being the full value of consideration which was agreed to between the parties and which was not rejected by the Assessing Officer by assigning reasons, same ought to have been accepted. We are of the considered view that amount of ₹ 1,40,00,000/- paid to the land lord to be accepted as part of actual construction and as such we are of the view that the finding arrived at by the Appellate Commissioner at Paragraph 6 by holding payment of ₹ 1.40 crores made to owner and amount paid to assessee to vacate the premises had nothing to do with the construction and it is also held that same is in consonance with the Tripartiate Agreement entered into between the parties and in that view of the matter it is to be held that the Appellate Authorities were correct in holding that the addition of ₹ 56 lakh made by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuations envisaged under the provisions of Sec.50C of the Act. we need not deal with arguments of the ld.CIT D.R. 22. Therefore, what follows from the above discussion is that first of all the Assessing Officer ought not have embarked upon exercise of substituting the agreed consideration by Fair Market Value of the salable area in the facts of the present case nor the values adopted can be approved in the light of the discussions cited above. Thus, according to us, the orders of the lower authorities are contrary to the law. Therefore, we hereby set aside the orders of ld.CIT(A) and the Assessing Officer and allow the grounds of appeal filed by the assessee. 23. In the result, the appeal of assessee in ITA No.427/PUN/2019 is allowed. 24. Now we will take up the remaining appeals i.e., ITA Nos.428 and 429/PUN/2019. 25. We have already decided the issue under identical facts in favour of the assessee in ITA No.427/PUN/2019 and allowed the appeal in favour of the assessee . Therefore, our decision in ITA No.427/PUN/2019 shall apply, mutatis mutandis, to these appeals also i.e., ITA Nos.428 429/PUN/2019 and accordingly, these appeals are allowed. 26. In the result, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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