TMI Blog2022 (1) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... asset by an assessee is not ascertainable. Section 50D inserted by Finance Act, 2012 with effect from 01.04.2013 would throw some light on the said issue. As per the memorandum to Finance Bill, 2012, the reasoning for inserting Section 50D cost of construction would not be the appropriate method to arrive at the full market value of consideration When the scheme of the Act does not contemplate the method of computation, no capital gains could be computed - As to overcome this aspect, a machinery provision has been introduced by way of Section 50D of the Act. Though the said provision has come into effect from 1.4.2013, it certainly throws some light on the mode of computation under Section 48 of the Act. In the circumstances, we are of the considered opinion that the guidance value of the land or the guidance value of the building would be appropriate mode to determine the full value of consideration in the case of a transfer where consideration for the transfer of a capital asset is not attributable or determinable. Hence, guidance value adopted by the Tribunal cannot be faulted with. Having regard to the facts and circumstances of the case, the Tribunal having exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment Year 2006-07. 5. The respondent assessee (ITA No.653/2016) claims to be a company involved in the business of transport and had filed the return of income for the period under consideration i.e., assessment year 2006-2007. The assessee company had entered into a Joint Development Agreement ( JDA for short) with Sri Ramesh Kumar on 31.8.2005 with respect to 4.4 acres of property situated at Kodihalli Village. As per the terms of the said agreement, the assessee was entitled to receive 25% of the built up area with proportionate undivided share in common areas and facilities. With respect to the said property, the assessee entered into a sale deed with Sri Ramesh Kumar and same was transferred for a consideration of ₹ 3.00 crores which was not reflected in the balance sheet as it was not realized as claimed by the assessee. Accordingly, proceedings under Section 147 of the Act were initiated and an order came to be passed on 26.2.2014 treating the cost of construction as the full value of consideration. 6. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), which came to be allowed thereby directing the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer would be deemed to be consideration accrued to the assessee as on the date of the transfer. Referring to Section 50D of the Act it was submitted that where the value of the consideration is not ascertainable as on the date of the transfer, as in the present case, the same market value of the capital asset shall be deemed to be the full value of consideration received or accruing as a result of such transfer. This provision indicates that the same is clarificatory in nature. Reliance was placed on CIT v. Podar Cement (P) Ltd., reported in (1997) 226 ITR 625 (SC) and CIT v. Vatika Township (P) Ltd, reported in (2014) 367 ITR 466 (SC). It is also argued that when the entire issue being revenue neutral, no addition is required. 10. We have carefully considered the rival submissions made by the learned counsel appearing for the parties and perused the material on record. 11. Section 45 of the Act reads thus: Capital gains. 45. (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer: Provided .. Section 50D of the Act reads thus; Fair market value deemed to be full value of consideration in certain cases. 50D. Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. 13. Now the main controversy revolves around the determination of full value of consideration. The expression full value of consideration has been dealt by the Hon ble Supreme Court in the case of Commissioner Of Income-Tax, West V/s. George Henderson And Co. Ltd. [(1967) 66 ITR 622 (SC)] as under: It is manifest that the consideration for the transfer of capital asset is what the transferor receives in lieu of the asset he parts with, namely, money o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, and (2) that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 12B. If the conditions of this proviso are not satisfied the main part of section 12B(2) applies and the Income-tax Officer must take into account the full value of the consideration for the transfer. Fourthly, a related objection has been raised in Para 9 of your letter dated 02.06.2014. You have stated that, full value of consideration cannot be construed as having a reference to the market value of the asset transferred. 14. Learned counsel for the Revenue argued that Section 50C is applicable where the consideration is less than the guidance value and as such the same is not applicable to the facts of the present case. Similarly, Section 50D is also not applicable which has come into force with effect from 01.04.2013; thus, cost of construction would be the appropriate mode. However, we are not inclined to accept the arguments of the Revenue in entirety for the reason that the entire issue is revenue neutral. The Tribunal has categorically observed that even otherwise, if any capital gains to be accrued in favour of assessee after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find from the various statements produced before us, that the entire exercise, arising out of change of method from completed contract method to deferred revenue expenditure, is revenue neutral. Therefore, we do not wish to interfere with the impugned judgment of the High Court. 15. In the present case (ITA.No.11/2017), Assessing Officer has adopted the rate of ₹ 1250/- per square feet merely based on the letter given by the developer which is not supported with any particulars. It cannot be ruled out the possibility of the developer giving an inflated figure to suit his requirements in order to gain minimum tax on his profits by inflating his costs. As such, the basis for determination of full value of consideration by the Assessing Officer based on the letter of the developer cannot be appropriate. No doubt at the relevant period, no provision was available in cases where the consideration received or accruing as a result of transfer of a capital asset by an assessee is not ascertainable. Section 50D inserted by Finance Act, 2012 with effect from 01.04.2013 would throw some light on the said issue. As per the memorandum to Finance Bill, 2012, the reasoning for ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case for this reason alone. 17. It was argued by the learned counsel for the assessee that when the scheme of the Act does not contemplate the method of computation, no capital gains could be computed, placing reliance on B.C.Srinivasa Setty supra. It appears to overcome this aspect, a machinery provision has been introduced by way of Section 50D of the Act. Though the said provision has come into effect from 1.4.2013, it certainly throws some light on the mode of computation under Section 48 of the Act. In the circumstances, we are of the considered opinion that the guidance value of the land or the guidance value of the building would be appropriate mode to determine the full value of consideration in the case of a transfer where consideration for the transfer of a capital asset is not attributable or determinable. Hence, guidance value adopted by the Tribunal cannot be faulted with. 18. Though the Tribunal in ITO, Ward-7(2), Bangalore V/s. N.S.Nagaraj [(2014) 52 Taxman 211], has held that full consideration would be the cost of construction incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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