TMI Blog2014 (12) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the market value of the land to be transferred to the developer as on the date of the joint development agreement should be adopted as a consideration - full consideration is the cost of construction incurred by the builder on the assessee's share of constructed area, because the assessee would receive constructed area in lieu of the land share - whatever is the expenditure incurred for constructing that area is a consideration in kind to the assessee - there cannot be any fault in the computation of capital gain made by the AO – thus, CIT (A) was not justified in holding that no capital gain has accrued to the assessee on account of transfer of land in this year – thus, the order of the CIT (A) is set aside and that of the AO is restored – decided in favour of revenue. - ITA No.676/Bang/2011, C O No.45/Bang/2013 - - - Dated:- 1-12-2014 - Rajpal Yadav, JM And Abraham P. George, AM,JJ. For the Petitioner : Shri C H Sundar Rao, CIT (DR) For the Respondent : Shri C Ramesh, CA ORDER Per: Rajpal Yadav: The Revenue is in appeal before us against the order of the learned CIT (A) dated 2nd February, 2011 passed for assessment year 2007-08. On recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area i.e. 1.50 lakh sft, whose cost was to be borne by the builder. Thus, in the opinion of the Assessing Officer, transfer of the land has taken place within the meaning of section 2(47)(v) of the Income Tax Act and the assessees are assessable for long term capital gain. The Assessing Officer has computed the Long Term Capital Gain in the case of assessee as under: By adopting the value of cost of construction At ₹ 800/- per sft Sale consideration received/receivable = 150000/2x800 =6,00,000,00 Less indexed cost of land (cost of land as on 16.04.2003) ₹ 4,00,000) = 4,76,026 Long Term Capital Gain = ₹ 5,95,23,974/- 4. The Assessing Officer has adopted the consideration of the land at ₹ 800/- per sft, because this was the expenditure which the builder will incur for constructing the area. In lieu of this the assessee's have relinquished their rights in the land in favour of the builder who will get 50% of the land as well as 1.50 lakhs sft constructed area. 5. The assessee was not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the Hon'ble Karnataka High Court in the case of CIT vs. Dr. T.K. Dayalu reported in 60 DTR (Kar.) 403/ 202 Taxman.com 531. He placed on record a copy of the Hon'ble High Court decision. He also relied upon the decision of the ITAT Hyderabad Bench in the case of ACIT vs. A. Ram Reddy. He pointed out that in this case the Tribunal has considered the definition of transfer provided in section 2(47). He also relied upon the judgment of the Hon'ble Madras High Court in the case of T.V. Sundaram Iyengar Sons reported in 37 ITR 26. 8. On the other hand the learned Counsel for the assessee relied upon the order of the CIT (A) and contended that the assessee has given conditional possession to the developer. The developer could not use the possession according to his choice. In a way, a license was given to enter into land and construct the building, more than that no rights were transferred to the builder. He relied upon the judgment of the AAR in the case of Jasbir Singh Sarkaria, 294 ITR 196. He also relied upon the judgment of the Karnataka High Court in the case of CIT vs. Ved Prakash Rakhar reported in 210 taxman 605. 9. In support of the cross object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further conversion into or for commercial use, the developer will be liable. Clause 2 deals with consideration and clause 3 with plans/license, clause 4 possession by way of an irrevocable license, clause 5 power of attorney. The reading of the agreement would suggest that the owners i.e. the assessee and his brother have executed an irrevocable license in favour of the builder to enter into the scheduled property and develop the same by putting up the construction. They have also executed the power of attorney. The owner has further authorized the builders to sell, transfer its constructed area to their clients sub clause 5.2 and 5.3 are worth to refer in this respect which read as under: 5.2 Further the OWNERS shall expressly, empower the DEVELOPER to sell/transfer, the DEVELOPER'S CONSTRUCTED AREA to their clients/nominees or their successors along with undivided share of land, on completion of the project. 5.3 The OWNERS agree to execute such other papers and documents required for the purpose of plan sanctions from the requisite statutory authorities, statutory bodies and/or departments including CMC, Bangalore Development Authority, Bangalore Mahanagara Palike, Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of Hon'ble Madras High Court in the case of T.V. Sundaram Iyengar Sons Ltd. (supra) and also the judgment of Hon'ble Supreme Court in the case of Alapati Venkataramiah vs. CIT (1965) 57 ITR 185 (SC). The Hon'ble Court has observed that to attract the liability to tax under s. 45, it is sufficient if in the accounting year, profits have arisen out of the transfer of capital assets, in other words, the assessee had a right to receive the profit. Actual receipt of profit is not a relevant consideration. Once profit have arisen in the accounting year out of the transfer of the capital assets, that would be sufficient to attract liability under s. 45 of the Act. 13. The contention of the assessee that it is exchange of asset and transfer would materialize when the assessee would receive the constructed portion. In this situation, the assessee and his brother would agree to develop the property jointly with the developer, they would contribute the capital in the shape of land and the builder would contribute the capital in the shape of cost of construction. In such situation, it would be a business income in the hands of AOP. But that is not the case here. They h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eloper. Section 48 nowhere talks of fair market value. It talks of full consideration. Full consideration in this case is the cost of construction incurred by the builder on the assessee's share of constructed area, because the assessee would receive constructed area in lieu of the land share. Whatever is the expenditure incurred for constructing that area is a consideration in kind to the assessee. The Assessing Officer has estimated this consideration at ₹ 800/per sft which is the minimum rate adopted by him on the basis of the expenditure accounted by the developer. Thus there cannot be any fault in the computation of capital gain made by the Assessing Officer. Taking into consideration of these facts and circumstances, we do not find any merit in the cross objection filed by the assessee, it is dismissed. The learned CIT (A) was not justified in holding that no capital gain has accrued to the assessee on account of transfer of land in this year. The order of the learned CIT (A) is set aside and that of the Assessing Officer is restored. 16. In the result appeal of the Revenue is allowed and the cross objection of the assessee is rejected. Order pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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