TMI Blog2012 (9) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration chargeable to tax u/s. 50C. Decides in favour of assessee - I.T.A. No.686/Bang/2011 - - - Dated:- 29-6-2012 - SMT. P. MADHAVI DEVI, AND SHRI JASON P. BOAZ, JJ. Appellant By : Shri Guruswamy H. Respondent By : Dr. Satya Sai Rath. O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-I, Bangalore dated 15.2.2011 for Assessment Year 2007-08. 2. The facts of the case, in brief, are as under : 2.1 The assessee filed his return of income for Assessment Year 2007-08 on 22.6.2007 admitting total income of Rs. 2,66,127. The return of income was processed under section 143(1) of the Income Tax Act, 1961 (herein after referred as 'the Act') and the case was taken up for scrutiny by issue of notice under section 143(2) on 25.8.2008. The Assessing Officer completed the assessment by an order under section 143(3) of the Act on 30.12.2009 determining the income of the assessee at Rs. 20,94,883. This was inclusive of Short Term Capital Gains (STCG) attributable to the share of the assessee, being 50% arising out of the Joint Development Agreement (JDA) dt.2.6.2006 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able for tax since it is sub-summed in the total deemed consideration of Rs. 23,96,000 quantified by the Assessing Officer under section 50C of the Act in respect of transfer of 55% of the undivided portion of land equivalent to 5990 sq. ft. at the guidance value of Rs. 400 per sq. ft. prescribed for the purpose of levy of stamp duty. Before the CIT(A) the assessee contended that he was not liable for levy of Capital Gains Tax in pursuance of the JDA dt.2.6.2006 which he submitted did not constitute transfer of land as per section 45 of the Act. The assessee placed reliance for its contention on the decision of the Bangalore Bench of the Tribunal in ITA Nos.534/Bang/1999 147/Bang/2003 dt.29.4.2004 in the case of H.B. Jairaj Vs. DCIT wherein it had been held that the levy of Capital Gains Tax was not exigible in a scheme of Joint Development which is not a sale or transfer of asset for cash and thus it was held that section 45(1) of the Act was not applicable in respect of Joint Development Schemes. The assessee also contended that the Assessing Officer was not justified in determining the deemed consideration by invoking the provisions of section 50C of the Act in the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )-I, Bangalore ought to have not held that the case for the Assessment Year 2007-08 was selected for scrutiny merely on the submission of the Assessing Officer without any corresponding evidence on record to justify the selection for scrutiny within the parameters of the scrutiny guidelines. 6. The appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing. For these and other grounds that may be urged at the time of hearing, it is respectfully prayed that your Hon'ble Authority be pleased to pass orders directing the Assessing Officer to delete the additions made in the assessment order and to restore the income declared by the appellant and further be pleased to pass orders that the appellant was liable for Short Term Capital Gains Tax on the strength of the Joint Development Agreement and further be pleased to pass such other orders granting such other relief that your Hon'ble Authority may deem fit in the interest of equity and justice. 5.1 The ground raised at S.No.1 is general in nature and no adjudication is therefore called for thereon. 5.2 The ground of appeal raised at S.No.5 has not been pressed in this appeal by the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed consideration of 55% of the undivided portion of the land measuring 5990 sq.ft at Rs. 23,96,000/- at the rate of 400 per sq ft as per Section 50C of the Act. However, before determination of the deemed consideration the Learned Assessing Officer has not provided any opportunity to the Appellant for filing of his objections as required under Sub Section 2 of Section 50C of the Act. The Learned Assessing Officer was bound to provide under the law an opportunity to the Appellant for filing his objections before the determination of the deemed consideration u/s. 50C of the Act. Providing an opportunity u/s. 50C(2) of the Act is a mandatory requirement of law, which has not been followed by the Learned Assessing Officer. The Learned AO has unilaterally determined the deemed consideration without providing any opportunity to the Appellant of being heard in the matter. The Appellant in this connection, submits that the Learned Assessing Officer was not justified to invoke the Provisions of Section 50C of the Act as the said Provisions are not applicable to the Applicant as the Stamp Valuation Authorities have not adopted or assessed any value in respect of the transfer of undivided p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion relevant for computation of Capital Gains is not in accordance with the law and hence the Assessment Order dated 30-12-2009 passed by the Learned Assessing Officer is not sustainable under the law and the same is liable to be cancelled. The Appellant before the Learned CIT(A)-I, Bangalore has agitated the issue regarding determination of deemed consideration u/s. 50C of the Act. The Learned CIT(A)-I, Bangalore has addressed the issue in para 7.1 of the Appellate Order which is reproduced as under :- 7.1 In the words of A.R 3. Deemed Consideration u/s. 50C of the Act : - The Learned Assessing Officer has adopted the Deemed Sale Consideration amounting to Rs. 23,96,000/- as per the Guidance Value stated to have been obtained from the Sub-Registrar, K.R. Puram, Bangalore, as per the Notification No. IGR/CVC/3/2004-05, dated 07-10-2005 issued by the Government of Karnataka. In this connection, the Appellant has objected that the Learned Assessing Officer has not followed the procedure laid down under Sub-section 2 of Section 50C of the Act. The Appellant submits that the application of Section 50C of the Act arises only in a circumstance where a Property has been regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of Provisions of Section 50C of the Act. However, he has addressed the issue in para 7.3 of the Appellate Order as under:- 7.3 I have gone through the above. I observe that the initial objection of the A.O for determination of the full value of the consideration of the property transferred to the developer @ Rs.400/- is no longer agitated during the appellate hearing after getting the full details in this respect from the A.O. during remand stage. I observe withholding of information goes against the proper delivery of the justice. At the assessment stage, the A.O had utilized such information without confronting the same to the assessee. The Learned CIT(A)-I, Bangalore in spite of the Appellant s objections as regards applicability of Section 50C of the Act has not given any clear finding whether the Provisions of Section 50C of the Act are applicable or not, but confirmed the addition of Rs. 23,96,000/- which was quantified by the Learned AO as full value of the consideration of the undivided portion of land transferred to the Developer. The Learned CIT(A)-I, Bangalore has held in the Appellate Order in para 7.3 at Page 40 of the Appellate Order as under :- I see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of land was found to be inadequate by the Learned Assessing Officer and therefore the deemed consideration was determined u/s. 50C of the Act and hence the non-refundable deposit being the less than the deemed consideration is not separately chargeable to tax. The Learned CIT(A)-I, Bangalore has confirmed the addition of nonrefundable deposit of Rs. 15,00,000/- for the reasons stated in the Appellate Order on page 29 and 30 which are reproduced as under:- Thus after being open to each other the only dissension remain in respect of addition of the non-refundable deposit of Rs. 15 Lakhs. The AR pleads for the deletion on the ground that once the market value of the property is deemed as per the Sub-Registrar s estimation at Rs. 23.96 Lakhs, it should also cover within it the receipt of Rs. 15 Lakhs as non-refundable deposit. Further addition would inflate the fair market value and such is not the proper way of computation of capital gains. The AO on the other hand submitted that the full value of consideration considered at Rs. 23.96 Lakhs relates to the land portion only and not the value of the cost of construction of the 12 no of flats with 12 parking slots built on 45% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for which the assessee was entitled to 12 flats and 12 car parking slots corresponding to 45% of the built up area in lieu of the transfer of 55% of the undivided portion of the vacant land in favour of the developer/builder comprising 16 flats and 16 car parking slots. The assessee has also been paid non-refundable deposit of Rs. 15 lakhs. On consideration of the facts and circumstances of the case, we are in agreement with the finding of the Assessing Officer that the transfer of rights in 55% of the undivided portion of the land in favour of the developer by virtue of the JDA dt.2.6.2006, rendered this transaction liable to levy of capital gains in the period relevant to Assessment Year 2007-08. In coming to this finding, we draw support from the finding in the decisions of the Hon'ble High Court of Bombay in the case of Chaturbhuj Dwarka Das Kapadia (supra) and decision of the Hon'ble High Court of Karnataka in the case of CIT V. Dr. T.K. Dayalu in ITA No.3209 of 2005 dt.20.6.2011. 5.8 The other issue for our consideration is whether the non-refundable deposit of Rs. 15 lakhs is exigible to tax separately in addition to the deemed consideration of Rs. 23,96,000 quantified b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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