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2019 (7) TMI 540 - HC - Income TaxCapital gain - development agreement entered - nature of transaction between the assessee and the developer would fall within the definition of “transfer” u/s 2(47) - whether the Tribunal was right in interpreting the terms of development agreement and rejecting the contentions that the entire transfer took place in an earlier year and no portion of capital gains is taxable in the year under consideration, viz., 2001-2002? - HELD THAT:- The Tribunal was of the view that the assessee was only a licensee. We do not agree with the said finding on account of a crucial fact which cannot be disputed by the Revenue, viz., the No Objection Certificate issued by the Appropriate Authority under Section 269-UL of the Act. The approval clearly states the extent of land which has been agreed to be transferred. So far as the development agreement dated 27.03.1994 is concerned, the extent of land agreed to be transferred is 47.5% of undivided share in 18675 sq.ft., the extent of built-up area which was agreed to be transferred measure 6500 sq.ft. The apparent sale consideration for the land and building was ₹ 98,99,100/- which was approved by the Appropriate Authority. So far as the second development agreement dated 24.05.1995 is concerned, the extent of land agreed to be transferred was 3997 sq.ft, i.e., 45% of undivided share in 8882 sq.ft. However, in the said agreement, there was no building. These agreements were considered by the Appropriate Authority and noting there is an agreement to transfer property with reasonable certainty and on being satisfied about the apparent sale consideration, no objection was granted. Therefore, it would be incorrect to state that the development agreement do not contemplate transfer of immovable property, but we may say that there is a clear certainty in the extent to be transferred. Therefore, in our considered view, the transaction would continue to qualify under the definition of 'transfer' as defined under Section 2(47)(v) of Act. Value of cost of construction - appellate authority reckoned the delay in completing the project, obtained information from the developer and uniformly fixed the cost at ₹ 717/- per sq.ft., for both the agreements as against ₹ 450 per sq.ft., and ₹ 550/- per sq.ft., respectively, as mentioned by the assessee - HELD THAT:- In the absence of any material to doubt the cost of construction, which was consciously agreed to between the parties, question of adding the damages paid by the developer on account of non fulfilment of the condition in the agreement with regard to the time limit of handing over the possession of the constructed area can in no way increase the cost of construction at the hands of the appellant/assessee. Therefore, the finding in this regard requires to be set aside and accordingly, it is hold that the cost of construction as mentioned in the agreement, namely, ₹ 480/- and ₹ 550/- respectively, are confirmed and the second substantial question of law is answered accordingly. Inclusion of entire damages, deposit and rent free accommodation to be assessed as capital gain - HELD THAT:- The development agreement makes it abundantly clear and the first of the covenants states that the developer shall provide free of rent for the owners alternate residential accommodation. Admittedly, rents were paid by the developer, rental deposit was paid by the developer and the agreement does not provide for any adjustment of these payments as against the consideration payable under the development agreement. Therefore, the Tribunal committed an error in including the same to be assesseed as capital gains. Accordingly, this finding is set aside and the substantial question of law is answered in favour of the assessee. Exemption u/s 54 - Tribunal rejected the claim of the assessee on the ground that the transfer as per the development agreement dated 27.03.1994 was only land and not building - HELD THAT:- So far as the development agreement dated 27.03.1994 is concerned, the schedule to the agreement clearly contemplates transfer of not only the land, but also building thereon. This is evidently clear from the order of the Appropriate Authority dated 22.06.1994, which shows that the extent of building is 6,500 sq.ft. This document of transfer was accepted and No Objection Certificate was issued by the Appropriate Authority. Therefore, there could be no better document to establish that what was transferred was not only the land, but also that the building standing thereon. So far as the development agreement dated 24.05.1995 is concerned, we find there is no building thereon and in fact, a readjustment of schedule A of the property has been mentioned in the agreement which in fact, is the schedule property in the development agreement dated 27.03.1994. Thus the assessee is entitled to exemption under Section 54 of the Act. - Decided in favour of the assessee.
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