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TMI Blog2023 (10) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... lued determining market value at Rs. 6.0 crores which is more than the cost to the assessee and the land was then contributed to the newly constituted partnership firm as capital contribution and the surplus of Rs. 4.80 crores arising from the said transaction was credited in the P L Account of the assessee firm and the value of the land was credited in the capital account of the assessee partner in the books of the firm. Special Bench of the Tribunal in DLF Universal [ 2010 (1) TMI 54 - ITAT DELHI-B ] held that the provisions of section 45(3) also applies when stock-in-trade is introduced into a firm because the transaction on the capital account and stock-in-trade does not retain its character as stock-in-trade at the point of time of introduction. No infirmity in the order of the learned CIT (A) confirming that there was a transfer resulting in capital gain for the year under consideration and thereby confirming the addition made by the assessee. Accordingly, the grounds of appeal 3 raised by the assessee is dismissed. Deduction u/s 80IB (10) - addition due to transfer of land in question - HELD THAT:- As deduction u/s 80IB(10) is applicable to an undertaking developi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I.T. Act, 1961 according to which any contribution by the partner of a firm by way of capital asset shall be chargeable to tax as his income of the previous year in which such transfer takes place and for the purpose of section 48 the amount recorded in the books of the firm shall be deemed to be the full value of the consideration received as accruing as a result of such transfer He noted that in the assessee s case, the amount recorded is Rs. 6 crores as per the books of account maintained and the cost of acquisition is only Rs. 1.20 crores and therefore, the difference of Rs. 4.8 crores shall be treated as capital gains. 4. The Assessing Officer therefore, after recording reasons reopened the assessment u/s 147 with the prior approval of the appropriate authority as per section 151(2) of the I.T. Act, 1961, for the A.Y 2008-09 and accordingly issued notice u/s 148 of the I.T. Act to the assessee. The assessee, in response to the same vide letter dated 12.8.2013 submitted that the return of income for the A.Y 2008-09 filed on 5.4.2010 may be treated as the return filed in response to the notice issued u/s 148 of the I.T. Act. 5. The Assessing Officer during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(47)(iv) of the I.T. Act, 1961, capital gain arises in the year of transfer irrespective of consideration accrued in the year of transfer. Further transfer shall take place once JDA is entered with. Since, the assessee itself has acknowledged the same in the show cause notice, the Assessing Officer once joint development agreement had entered into. He accordingly held that the assessee is liable to pay capital gain tax. Since the cost of acquisition of the property as per Sale Deed (Doc. No.2091/2006), amounts to Rs. 1,20,00,000/- and as per the MOU, the cost of property i.e. the capital contribution is valued at Rs. 6.00 crores, the Assessing Officer made addition of Rs. 4,80,00,000/- as short - term capital gain in the hands of the assessee. 6.1 Before the learned CIT (A), the assessee apart from challenging the addition on merit challenged the validity of the re-assessment proceedings. However, the learned CIT (A) was not satisfied with the arguments advanced by the assessee and upheld the validity of the re-assessment proceedings. So far as the addition of Rs. 4.80 crores as capital gain in the hands of the assessee is concerned, he also dismissed the same. While doing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No.3 is concerned, the same relates to the order of the learned CIT A) in confirming the addition of Rs. 4,80,00,000/- made by the Assessing Officer. The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in sustaining the addition made by the Assessing Officer. He submitted that the Assessing Officer in the instant case failed to understand the fact that there was no consideration derived in the hands of the assessee for keeping the stock-in-trade of land into the joint venture and therefore, wrongly applied the decision of the jurisdictional High Court in the case of Potla Nageswara Rao (Supra). Referring to the said decision, he submitted that in the case of Potla Nageswara Rao (Supra), it was held that when the transfer of capital asset is complete, sale consideration has to be taken into consideration for the purpose of assessment even though the payment of consideration deferred till other A.Y and therefore, the said decision was on different set of facts. However, in the instant case there was neither any transfer of capital asset nor any sale consideration. Therefore, the said decision is not applicable. 13. Referring to the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al contribution of Rs. 6.00 crores into the firm SMR SAI TEJA ESTATES, whereas the cost of the land as shown in the books of account was only Rs. 1.20 crores and therefore, the Assessing Officer was fully justified in invoking the provisions of section 45(3) of the I.T. Act. Referring to the order of the learned CIT (A) at Para 6.3.7, he submitted that the learned CIT (A) has held that the conduct, motive and intention of the assessee while making over the land in question as capital contribution to a firm in which he became a partner is also essential. He submitted that the assessee is following a system of accounting wherein he values his closing stock-in-trade of its business at cost or market price whichever is less. Therefore, when the land in question as well as the other plots of land held by the assessee as stock-in trade were used to be valued as per the said method of valuation at the end of the year when accounts of the assessee were made out and only in the current year under consideration, the assessee got the land in question valued determining the market value at Rs. 6.00 crores and subsequently contributed the same land to the newly constituted partnership firm as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired 2.0 acres of land at Madenaguda Village on 26.10.2007 for a consideration of Rs. 1.20 crores which was transferred by the assessee to a partnership firm under the name and style SMR Sai Teja Estates and the value of the said land was recorded at Rs. 6.00 crores as capital contribution of the assessee in the books of the said firm. We find the provisions of section 45(3) read as under: 45 (3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. 19.1 Thus a plain reading of the above provision clearly shows that the amount recorded in the books of the firm should be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as per the method of valuation at the end of the year when accounts of the assessee were made out. However, in the current year under consideration, the assessee got the land in question revalued determining market value at Rs. 6.0 crores which is more than the cost to the assessee and the land was then contributed to the newly constituted partnership firm as capital contribution and the surplus of Rs. 4.80 crores arising from the said transaction was credited in the P L Account of the assessee firm and the value of the land was credited in the capital account of the assessee partner in the books of the firm. Further the Special Bench of the Tribunal held that the provisions of section 45(3) also applies when stock-in-trade is introduced into a firm because the transaction on the capital account and stock-in-trade does not retain its character as stock-in-trade at the point of time of introduction. In view of the above discussion and in view of the detailed reasoning given by the learned CIT (A) on this issue, we do not find any infirmity in the order of the learned CIT (A) confirming that there was a transfer resulting in capital gain for the year under consideration and thereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place;(and) (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand sq. feet, whichever is less. (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely: (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in SMR Sai Teja Estates and deduction, if any, can only be claimed by the said firm upon fulfilling the requisite conditions. Therefore, the grounds of appeal 3 4 raised by the assessee for the A.Y 2010-11 are dismissed. ITA No.652/Hyd/2017 A.Y 2012-13. 27. Grounds raised by the assessee read as under: 1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law. 2. The learned Commissioner of Income-Tax (Appeals) erred in holding that the appellant is not entitled for deduction u/s 80IB(10) of the Income-Tax Act. 3. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the income derived of Rs. 81,25,295/- by the appellant is attributable to the business which is eligible for deduction u/s 80IB(I0) of the I.T. Act. 4. Any other ground that may be urged at the time of hearing. 28. Grounds of appeal 1 and 4 being general in nature are dismissed. 29. So far as grounds of appeal No. 2 and 3 are concerned, these relate to the claim of deduction u/s 80IB(10). The above grounds are identical to the grounds of appeal No. 3 and 4 in ITA No.877/Hyd/2016 for the A.Y 2010-11 wherein we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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