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TMI Blog2024 (11) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... d property is governed by section 49(1) of the Act. Since, the agreement dated 03.11.2011 and the subsequent unregistered agreement dated 10.02.2012 with M/s R.K. Construction, a proprietary concern of Dr. Malaya Mukherjee, could not materialise, therefore, subsequently the assessee entered into another joint development agreement with M/s Tanvee Green City (P) Ltd. on 26.09.2014 which was a registered development agreement. The powers of attorney were also issued in the name of the directors of the company for getting all the formalities completed. The developer adjusted the amount of Rs. 62,00,000/- received by the assessee earlier and accordingly, the assessee was to receive only the balance of Rs. 1,00,00,000/- along with one flat and one car par. The total consideration was therefore, Rs. 1,62,00,000/- plus market value of one flat and one car park from which the cost of land owned by the assessee, which was gifted to him by his mother was to be deducted to arrive at the capital gains, which was assessable in AY 2015-16. The assessee contends that if the transfer is considered in AY 2013-14 then there is no discussion regarding the taxation of Rs. 90,00,000/- received in AY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 263 which says commissioner may call for and examined the records of the proceeding if he consider any order passed there in, by the AO is erroneous in so far as prejudicial to the interest if revenue whereas in present case the AO had already conducted the inquiry, allowed the deductions as permissible. 4. That the Ld. Pr. CIT erred in law in setting aside the assessment order on ground of capital gain arising from transfer of a long term asset of year 1998 as short term capital gain. 5. That the Ld. Pr. CIT erred in law to deny the deduction u/s 54E and 54F in impugned year on the ground that transfer took plakhe in earlier year 2012-13 (AY:2013-14) but at same time directed to tax the consideration received on such transfer in impugned assessment year 2015-16, itself. 6, That Ld. Pr. CIT erred on facts about taxability of capital gain on transfer of long term capital Assets in earlier Assessment Year 2013-14 and 2014-15 to rely on his judgment. That even otherwise Ld. Pr. CIT erred on facts too. 7. That the appellant carves leave to add alter, modifying or omit any ground of appeal and/or adduce the additional evidence(s) during the appellate proceeding. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would cause irreparable damage and losses to the appellant. 12. That the above information and explanation are true and correct and the deponent adheres to them. 3.1. The impugned order passed u/s. 263 of the Act is dated 29.05.2020 which is passed during the period of Covid-19 pandemic. The assessee had filed the present appeal on 05.05.2022 and the delay is attributable to the COVID pandemic. Thus, the period from May 2020 upto the date of filing of appeal is covered by the decision of the Hon ble Supreme Court. This period has been excluded by the Hon ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly, we hold that there is no delay and proceed to admit the appeal for hearing. 4. Brief facts of the case are that the assessee is a salaried employee, regularly assessed to tax under PAN: AFMPC9030R. On and around 15.12.1998, the mother of the assessee acquired a property situated at Bamunara, Durgapur, District: B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year b. Computation sheet c. Capital gains calculation d. Supporting working for Deduction under the head Capital gains e. All Bank statements 8. The assessee attended the hearings before the Jurisdictional Assessing Officer (JAO) from time to time. On requisition, the assessee filed current registered development agreement and Power of attorney registered under the agreement, both dated 26.09.2014, Income Tax Returns of the past three assessment years, AY 2013-14, AY 2014-15 AY 2015-16 wherein inter alia he had offered capital gains on considerations received under earlier JDA in each assessment years as also under the fresh JDA respectively, copies of MOU dated 03.11.2011 and old unregistered development agreement dated 10.02.2012. 9. The assessee filed the required details and the assessment order was passed on 29.05.2017 by the JAO who added Rs. 10,00,000/- to the returned income u/s 50C of the Act for shortfall in consideration shown at Rs. 90,00,000/- as against the market value of the new joint development agreement at Rs. 1,00,00,000/-. He also disallowed the claim of Rs. 12,24,360/- u/s 54F of the Act for construction cost of new residential property for want of suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim is not based on evidence. e. There is no error in such computation of income. The order of the JAO is not erroneous on the facts of the case. f. More so there is no loss of revenue as the entire sum of Rs. 162 Lakh was offered for tax. g. Alternatively, if we go by the observation of the Ld. PCIT then Rs. 90 Lakh will not be subject to tax as his order is silent on year of taxability of the said receipt of money. The Ld. PCIT merely harped upon the claim of deduction u/s 54F and 54EC, on wrong ground that such capital gains has wrongly been claimed in AY 2015-16. The Ld. Pr. CIT failed to order the year of taxability of such capital gains. 12. According to the assessee, it was after considering the facts, claims and supporting documents that the AO passed the order, hence it cannot be said that order is erroneous on want of enquiry. The AO has rightly treated such capital gains on long term capital asset only. The asset was acquired in 1998 and gifted to the assessee in 2011. As per section 49(1), the cost of acquisition and period of holding of the donor are considered in the hands of donee. Thus the Ld. PCIT erred on fact that the property is not a long term asset when the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad also borrowed money and paid interest which was claimed u/s 24(b) of the Act. The PCIT was of the view that the transfer of property had taken place in the AY 2013-14 thus the capital gains accrued in that year and not in the impugned assessment year 2015-16. Since the transfer had taken place in earlier AY 2013-14 and not in the impugned assessment year 2015-16, therefore, the deductions u/s 54EC and 54F were incorrectly claimed in AY 2015-16. The assessee had offered for tax Rs. 38,00,000/- in AY 2013-14 and Rs. 24,00,000/- in AY 2014-15 and hence on the same asset he cannot claim capital gains on asset as long term capital gains on which short term capital gains was claimed therefore, he set aside the assessment order to frame the assessment order afresh after considering his observations. One of the contentions raised during the course of the appeal by the assessee was that the Ld. PCIT failed to consider that the assessee had entered into two different agreements dated 03.11.2011 for which part consideration was received in AY 2013-14 and 2014-15 and the second on 26.09.2014. Thus, the observations that the capital gains arose in the AY 2013-14 only is incorrect. Further, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e donor are considered in the hands of donee. Thus the Ld. PCIT erred on fact that the property is not a long term asset when same was acquired in 1998. xix. The Ld. PCIT erred on law that the capital gain arising on such long term capital asset is not eligible for deduction u/s 54F and 54EC, which says deduction are available on capital Gain on transfer of Long term Capital asset, not on Long term capital Gain. xx. The order of Ld. PCIT is vague and ambiguous as it failed to assert the decision on taxability of capital Gain, if the taxability is not in this year then there is no question of allow-ability of deductions u/s 54EC and 54F. On alternate argument then there is no question of taxability of Rs. 90, 00,000 in this year. 14. Before proceeding further, it would be pertinent to mention that the assessee is one of the directors in M/s Tanvee Green City (P) Ltd. with which second joint development agreement was executed. 15. The Ld. DR relied upon the order of the Ld. PCIT and requested that the order of the Ld. PCIT may be confirmed. 16. We have examined the matter and also gone through the submissions made. Section 45(1) relating to capital gains is reproduced as under: 45. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s upon construction. The total consideration therefore, was not only Rs. 1,95,00,000/- but the fair market value of the 8 flats and car park which the assessee was to receive from the developer. However, instead of showing capital gain in the year of transfer i.e. AY 2012-13, the assessee showed capital gains of Rs. 38,00,000/- in AY 2013-14 and Rs. 24,00,000/- in AY 2014-15 which is not in accordance with the provisions of the Act relating to computation of capital gains. The capital gains is to be computed in the year of transfer, which was AY 2012-13 and after reducing the cost of acquisition. The cost of acquisition in the case of gifted property is governed by section 49(1) of the Act. Since, the agreement dated 03.11.2011 and the subsequent unregistered agreement dated 10.02.2012 with M/s R.K. Construction, a proprietary concern of Dr. Malaya Mukherjee, could not materialise, therefore, subsequently the assessee entered into another joint development agreement with M/s Tanvee Green City (P) Ltd. on 26.09.2014 which was a registered development agreement. The powers of attorney were also issued in the name of the directors of the company for getting all the formalities complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the second registered agreement and the balance payment was received from M/s Tanvee Green City (P) Ltd., therefore, the Ld. PCIT was not correct in holding that claiming and allowing the date of transfer as the date of registration was not in order for availing exemption u/s 54EC and 54F in FY 2014-15. The AO allowed the claim of deduction u/s 54EC but disallowed the claim of deduction u/s 54F of Rs. 43,00,000/- since as per the Inspector s report, the residential house was not completed till date and he had also added the sum of Rs. 10,00,00,000/- on account of difference in market value for development agreement and computation of income. Thus, the order of the Ld. PCIT needs to be modified as under: (a) The date of transfer is to be considered as on 26.09.2014 being the date of registered joint development agreement with M/s Tanvee Green City (P) Ltd. as the earlier agreement with M/s. R. K. Construction had been rescinded and was not in operation. (b) As per terms of the fresh joint development agreement, the sale consideration of Rs. 1,92,00,000/- along with one flat and one car park was to be considered. (c) Appropriate deduction of the cost of acquisition, which in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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