9911796707
TMI Blog2021 (7) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... / shops as consideration as against the consideration as returned by the assessee. 2. The learned CIT (Appeals) erred on facts and in law in upholding the AO's action of applying section 45(5A) of the Act to the present case when in fact the said section was not applicable to the relevant agreement executed by the assessee as also to the relevant assessment year. 3. The learned CIT (Appeals) erred on facts and in law in not appreciating the nature of transaction. He also erred in upholding fair market value of the constructed area particularly when the construction was not even complete / started." 4. Briefly, the appellant is an individual engaged in the business of trading. The return of income for A.Y. 2015-16 was filed on 31.08.2015 declaring a total income of Rs. 1,83,08,370/-. Against the said return of income, the assessment was completed by the Assessing Officer at a total income of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,000 sq. ft of built-up area always lies with the appellant, it cannot be adopted. However, the Assessing Officer by rejecting the contention of the appellant had proceeded to adopt the ready reckoner value of the saleable residential area as well as commercial area placing reliance on provisions of Sec.48 of the Act. Accordingly, computed the full value of consideration at Rs. 9,11,53,660/- and accordingly, computed the Capital Gains at Rs. 8,01,69,010/-. 7. Being aggrieved with the order of Assessing Officer, assessee preferred appeal before the learned Commissioner of Income Tax (Appeals), who vide impugned order confirmed the action of the Assessing Officer. 8. Being aggrieved with the order of ld.CIT(A), the appellant is in appeal before us. 9. The learned counsel 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he permission for construction from the local administration. (4) The developer is also required to obtain the occupancy certificate for building corresponding to the share of the assessee. (5) The developer has to borne the whole cost of the electricity deposit with State Electricity Board for such separate connections, transformer, cabling etc. and (6) The developer was to bear the cost of the stamp duty on the salable built up area given to the assessee. He also distinguished the case laws relied upon by the learned counsel for the appellant. 13. We have heard the rival submissions and perused the material on record. The issue in the present appeal relates to the quantum of sale consideration to be taken for the purpose of computing the capital gains 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 Developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/-. The above clause of the JDA cannot be construed in any other manner except to mean that the total agreed consideration is only Rs. 8,76,70,000/-. It is also clear from the material on record that the value adopted for stamp duty purpose is only Rs. 5,90,00,000/- which is lower than the agreed consideration of Rs. 8,76,70,000/-. Therefore, the provisions of Sec.50C have no application to the facts of the present case nor is it the case of the Department. Then the question that crops up for consideration, is under what provisions of the Income Tax Act, the AO can disturb appurtenant consideration by substituting the agreed consideration by Fair Market Value of the capital asset ? The provisions of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable from the A.Y. 1999-2000. Perhaps, the provisions of Sec.50C were enacted by the Parliament by the Finance Act, 2002 w.e.f 01.04.2003, to remove this lacuna in the provisions of Income Tax Act providing that where value adopted or assessed by the Stamp Valuation Authorities in respect of transfer of land or building or both for the purpose of payment of stamp duty exceeds the consideration received or accrued by the assessee for such transfer, the value so adopted or assessed assessee shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. The facts of the present case does not justify the invocation of provisions of Sec.50C. Apart 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with the construction of the Residential Apartment. The exchange value as specified in the project development agreement can be taken as the basis for computation of the construction in joint development. The cost incurred by the developer need not necessarily represent only a cost of construction. The detailed particulars are not given. The transaction of Joint development is one of exchange. The consideration specified in the said document represents the market value on the date of entering into the agreement. The assessment made by assessing authority is contrary to law. Hence, we hold issue No.2 against the Revenue." 18. Hon'ble Karnataka High Court subsequently 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 Rs. 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reported in 223 ITR 572 Bom. 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. 21. The 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 situations 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 here ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
