2013 (9) TMI 475
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....State Bank of India. The Total carpet area of all the flats taken together was 29666 square feet. Flats have been allotted to the share holders who are the members of society and in occupation of the respective flats. The society in the special general meeting on 4.11.2007 passed a resolution, for re-development of the society property and in pursuance of the said resolution entered into a development rights agreement (DRA) with M/s Ankur Reality Pvt. Ltd., which was approved by the society members and the DRA was registered on 12.2.2009 by the developer who had paid the desired stamp duty. 2.1 The property was having floor space index (FSI) of 2803.60 Square meter and additional FSI of 2803.60 sq. meter in the form of TDR. Further, FSI of 33% was also available on account of new notification of the State Government. In terms of the DRA, M/s Ankur Reality was authorized to demolish and reconstruct the existing residential building and reconstruct the additional building having ground plus of 9 floors along with basement for storage. The developer was required to provide residential units with an additional 28% carpet area to the existing members. The developer was also authorized ....
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.... to pay Rs. 1000/- per square feet to the society members individually. The clause (17) of the consent terms also provided that the developer shall pay to the assessee the legal cost including IT matters, professional tax and solicitor tax if any incurred by assessee. 2.3 In the backdrop of above factual position the issue which required consideration at the level of AO was whether assessee was entitled to declare capital gain on account of Development Rights Agreement (DRA). AO noted that assessee in the return of income filed for assessment year 2009-10 had not declare any capital gain. AO asked the assessee as to why capital gain should not be taxed in respect of development agreement. Assessee submitted that it had claimed long term capital loss of Rs. 2,02,92,400/- in its return of income. AO however, noted that the assessee had not declared any long term capital loss in the return of income and it was only the auditor who in the notes on account had stated that assessee had incurred long term capital loss of Rs. 2, 02,92,400/- on transactions with the developer. The said loss had been computed after deducting the indexed cost of acquisition of land and building from the cons....
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....he developer, it will be bought by the developer at the rate of 10,200/- per square feet. Therefore, AO computed the market value of the area constructed by developer for members at Rs. 38,88,99,072(38127.36 x10,200) in addition, the society was entitled to receive Rs. 4.85 crore and also entitled to get additional parking space which was estimated by AO at Rs. 50,00,000/-. Thus the total consideration was computed at Rs. 44,23,99,072/-. AO also noted that as per the consent terms, the cost relating to the Income tax matters was to be borne by the developer. Income tax liability was computed by AO at Rs. 16,47,86,520/-. Thus he computed the long term capital gain at Rs. 538629592/- after deducting the indexed cost of acquisition of Rs. 6,85,56,000/- (4,42,39,99,072-6,85,56,000+ 16,47,86,520). AO also observed that long term capital had been computed without prejudice to the application of section 50C which if in future is found to be applicable, the capital gain would have to be computed on the basis of stamp duty value. 3. Assessee disputed the decision of AO and submitted before CIT (A) that in terms of the DRA it was the members who had the entitlement for accommodation in the ....
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....see itself had agreed that income was taxable in case of assessee which was clear from the fact that it had itself admitted capital loss on the transaction and also filed the opinion of tax consultant Shri Praful L. Vora as per whom long term capital gain was chargeable at Rs. 8,64,44,000/- on the basis of stamp duty value which had been accepted by assessee before the Hon'ble High Court of Bombay during the writ proceedings. As regards the year of taxability, CIT (A) observed that assessee had received the part of consideration of Rs. 1.10 lakh on 2.6.2008 and, therefore in terms of the provisions of section 2(47) (v) long term capital gain was taxable in this year in respect of the developments right agreement. CIT (A) also upheld the computation of long term or the gain made by AO at Rs. 53,86,29,592/- and observed that in case it was found that provisions of section 50C, the capital gain would have to be computed under that section, aggrieved by the decision of CIT (A) assessee is in appeal before Tribunal. 4. Before us, learned AR for assessee giving the background of the case submitted that the society building had been constructed in the year 1967-68 and the flats had been ....
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....rged in assessment year 2009-10. 4.2 It was also pointed out that assessee had not received any part of the consideration. The assessee had received only the earnest money of 1.10 lakh which was nothing but reimbursement of expenses incurred by assessee which were at Rs. 1,21,276/- as per details given at page 106 of the paper book. Assessee neither having received any substantial part of the consideration nor the possession of the property, having not been parted with the provisions of section 4 (47) (v) could not be applied and no capital gain could be charged. Reliance was placed on the decision of Tribunal in case of Geeta Devi Pasari (104 TTJ 375) which it was pointed out has been held by the Hon'ble High Court of Bombay in the same case as reported in (17 DTR 280). Reliance was also placed on the decision of Tribunal in case of Megji Mathura Das Vs. JCIT (75 ITD 2) and another decision of Tribunal in case of Land Breez Coop. Housing Society Ltd.(55 SOT 103). 5. Leaned DR appearing for the revenue on the other hand strongly supported the orders of authorities below. It was argued that the date of development agreement is the date transfer for the purpose of application of se....
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....ng TDR certificates. As the developer could not obtain IOD and CC within the prescribed time limit as per the terms and conditions of DRA the society vide resolution dated 26.9.2010 decided to cancel the DRA. In response to which the developer filed arbitration petition before the Bombay High Court. Subsequently, consent terms were arrived at between the two parties dated 26.10.2011 under the seal of the High Court. The main terms and condition of DRA were retained in consent terms in which there was additional provision for providing compensation for alternate accommodation to the members, to allocate 22 car parking space to the society without any cost and to reimburse the legal cost including the Income Tax matters, professional fee and solicitor fee if any incurred by the society. The developer however has still not obtained IOD and CC nor the old building had been demolished till date. The issue is whether on the facts of the case capital gain can be charged on account of Development Rights Agreement in the assessment year 2009-10 and, in case, capital gain is chargeable what would be the quantum of the capital gain. 8. The authorities below applied the provisions of section ....
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.... Vs. Geeta Devi Pasari (Supra) in which it has been held that transfer of property under the Development Rights Agreement could be said to have taken place when the possession was handed over to the developer and not on the date of agreement when only a small portion of the consideration had been received as earnest money deposit. The said decision of Tribunal has been upheld by Hon'ble High Court of Bombay as reported in (17 DTR 280). The argument raised on behalf of the department is that the date of development agreement itself constitute transfer date. Revenue has relied upon the judgment of Hon'ble High Court of Bombay in case of Chaturbhuj Dwarka Das Kapadia Vs. CIT (260 ITR 491). We have carefully gone through the said judgment. In that case the assessee had agreed to sell his share of property for a sum of Rs. 1.85 crore. The assessee agreed in clause (8) to execute limited power of attorney authorizing the builder to deal with the property and also to obtain permission and approval of authorities for construction of building. The clause (9) of the agreement provided that after obtaining necessary permission and approval by the builder and upon receipt of no objection certi....
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....ssessee was entitled. The assessee had not transferred nor was required to transfer the land of which the assessee was absolute owner and the building occupied by the members. The transfer could take place only in respect of additional FSI which the assessee had acquired as per the Government policy and there was no cost of acquisition involved. Therefore, it has been argued that no capital gain can be charged in such a case in view of the judgment of Hon'ble Supreme Court in case of B.C. Shrinivas Shetty (Supra). The argument of assessee is supported by the decision of Mumbai bench of Tribunal in case of Jetha Lal D Mehta (2 SOT 422). The reliance has also been placed on the decision of Mumbai bench of Tribunal in case of Maheshwari Housing Property Ltd (118 ITD 223). In that case also, the issue was chargeability of capital gain on account of additional FSI available to the assessee related to the old building. The Tribunal observed that entire FSI of the land having been exhausted there was no right of additional construction embedded into the land. The additional FSI became available to the assessee due to operation of development control regulation which did not involve any co....