TMI Blog2015 (1) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, we are of the view that the Ld CIT(A) was justified in upholding the action of the assessing officer in assessing the Capital gain in assessment year 2000-01. - Decided in favour of assessee. Validity of reassessment proceedings - Held that:- Notice from the order of the Ld CIT(A) that the first appellate authority has given a finding that the assessing officer has explicitly discussed about assessing Capital gain in the assessment order relating to AY 2004-05 and has also recorded the same reasons before issuing notice u/s 148 of the Act for AY 2000-01. Before us, the assessee could not produce any material to contradict the findings given by the Ld CIT(A). Accordingly we do not find any merit in the grounds relating to validity of reassessment and accordingly dismiss them. - Decided against assessee. Determination of sale consideration - Held that:- Set aside the order of Ld CIT(A) on this issue passed in the hands of both the assessees and restore the matter to the file of the assessing officer with the direction to compute the sale consideration by following the decision rendered in the case of G. Raghuram [ 2010 (4) TMI 712 - ITAT, HYDERABAD] wherein held the Real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into a development agreement with M/s Niwara Construction around December 1999 through a Memorandum of Understanding (MOU). The construction was completed in the financial year 2003-04 relevant to the assessment year 2004-05 and the assessees got their share in the construction in that year. Hence both the assessees offered the capital gains arising out of development agreement in the assessment year 2004-05, i.e., in the year in which the assessees got their share. However, the assessing officer held that the Capital gain is assessable in the financial year 1999-2000 relevant to the assessment year 2000-01, i.e., in the year in which MOU was signed. The AO further noticed that the compensation originally granted to the assessees was enhanced subsequently. Accordingly, the AO assessed the capital gain arising on original compensation on substantive basis in assessment year 2000-01 and on protective basis in assessment year 2004-05. However, the AO assessed the capital gain arising on enhanced compensation on substantive basis in assessment year 2004-05. The Ld CIT(A) also confirmed the view taken by the assessing officer. 3. Hence the principal issue urged before us relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees was enhanced, i.e., the amount payable to them was enhanced to ₹ 1,52,88,800/- and further the carpet area of the shops was also enhanced to 780 sq.ft.. Thus, the assessees got additional amount of ₹ 52.88,800/- and additional constructed area of 180 sq.ft. It is an admitted fact that the developer completed the construction during the financial year 2003-04 and handed over the possession of the constructed areas to the assessees in that year. 7. The assessees offered the Capital gains arising on account of the MOU in assessment year 2004-05. However, as stated earlier, the assessing officer assessed the capital gains computed as per the initial compensation in AY 2000- 01 and the capital gains computed on enhanced amount in AY 2004-05. As stated earlier, the capital gains assessed in AY 2000-01 on substantive basis was also assessed on protective basis in AY 2004-05. The Ld CIT(A) also confirmed the order of the assessing officer. 8. The main contention of the assessee was that the developer did not comply with the terms and conditions of the MOU and hence the date of MOU cannot be considered as date of transfer. To substantiate this contention, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural for the developer to delay the payment of installments. Though the assessees contend that they had to serve legal notice to the developer, yet we notice that the said notice was duly addressed by the developer and the same has also been accepted by the assessees. There was no record to show that the assessee was not convinced with the reply given by the developer. Finally, the assessees have got possession of the constructed areas and also received the agreed amount, which shows that the terms of MOU has been complied with even though there was some delay. Hence, in our view, the tax authorities are justified in placing due reliance on the MOU, since it has ultimately been given effect to. 10. We notice that the Ld CIT(A) has considered all these points and accordingly has rendered his decision. For the sake of convenience, we extract below the operative portion of the order passed by Ld CIT(A) on this issue:- 5. I have gone through the assessment order and the written submissions filed by the appellant during the course of appellate proceedings. After examining all the relevant facts of the case and the legal position on various issues involved in this appeal, the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . within a period of less than one month from the date of approval of the plan. The project was delayed only because of the writ petition ( No 349 of 2000 ) filed in the Bombay High Court and the consequent order dated 02/12/2000 of TMC withholding its earlier sanction as per plan submitted to it. As a result of this, the developer had to intervene in the writ petition filed in the Bombay High Court and eventually the developers were able to get the go ahead signal from the TMC on 19/10/2001 to complete the project as per the originally sanctioned plan. This intervening period (from 02/12/2000 to 19/10/2001 ) delayed the implementation of the project by the developer and had its impact on the payment schedule of the consideration. In spite of this serious problem and the financial crisis resulting therefrom, the developers did their best to pay substantial amount, i.e. more than 50 % of the consideration to the appellant by February, 2002. The appellant was all the time aware of the problems being faced by the developers. The appellant has contested that the MOU did not confer any 'legal ownership' or any 'beneficial ownership' on the developers. It has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant by the developers. We have at no point avoided or sought to avoid any of our obligations under the aforementioned memorandum of understanding and are wanting to comply with each one of the obligations. It is only due to the said delay caused in implementing the development project for no fault of ours and the said unwarranted loss , hardship and prejudice caused to us and the shadow cast on the development project, that we sought more time to comply with our obligations under the said Memorandum of Understanding and your clients were kind enough to agree to the same. We have at all times apprised your clients of the developments taking place and your clients have all along been kind enough to accommodate us. Your clients are fully aware of the stage of the construction and your clients calling upon us at this stage of the development project despite being fully aware of the facts to comply with the requisitions is not justified.With reference to your said letter dated 24 March, 03, we have to state that our client has already made substantial payments of more than Rupees One Crore which have been accepted by your clients. Further, the time taken in making payments has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. The most important ingredient of the above judgment and section 2(47)(v) of the IT Act is that the contract should be of the nature referred to in section 53A of the Transfer of Property Act. The Hon'ble Bombay high Court has analyzed this ingredient and has come to the conclusion that the most important thing to be seen in this context is the transferee's willingness and readiness to perform his part of the contract in terms covenanted there under. The willingness of the transferee has to be absolute, unconditional and unqualified. In the instant case, as discussed above, the developers were always ready and willing to perform their part of the contract and their bonafide in this respect could not be doubted even by the appellant. The developers' commitment to the project was absolute unconditional and unqualified. The minor difference in payment schedule crept in because of the writ petition filed in the Bombay High Court. This situation was beyond the control of the developers and the co-owners of the land were aware of the situation. This cannot be taken as a tool to doubt the intentions of the developers. The developers have complied with all the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in upholding the action of the assessing officer in assessing the Capital gain in assessment year 2000-01. 11. Since we have upheld the assessment of Capital gain arising on original consideration in AY 2000-01, we direct the assessing officer to delete the protective assessment made in the hands of the assessees in AY 2004-05. 12. In assessment year 2000-01, both the assessees have raised grounds relating to validity of reassessment proceedings on the ground that the assessing officer has reopened the assessment without recording reasons. We notice from the order of the Ld CIT(A) that the first appellate authority has given a finding that the assessing officer has explicitly discussed about assessing Capital gain in the assessment order relating to AY 2004-05 and has also recorded the same reasons before issuing notice u/s 148 of the Act for AY 2000-01. Before us, the assessee could not produce any material to contradict the findings given by the Ld CIT(A). Accordingly we do not find any merit in the grounds relating to validity of reassessment and accordingly dismiss them. 13. The next issue relates to the determination of sale consideration. We notice that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees and restore the same to the file of the AO with the direction to examine the same afresh by duly considering the report of the Registered Valuer furnished by the assessee. 16. The next issue relates to the deduction claimed u/s 54 of the Act. Both the assessees claimed exemption u/s 54 of the Act in respect of the value of two flats each obtained by them. According to the assessees, both the flats are contiguous to each other and should be considered as one flat. However, the AO rejected the said claim by holding that the said flats do not fall under the category of either purchase or construction stated in sec. 54 of the Act. The Ld CIT(A) also confirmed the same. 17. Before us, the Ld A.R placed reliance on the decision rendered by the coordinate bench of Tribunal in the case of Jatinder Kumar Madan Vs. ITO (2012)(21 taxmann.com 316) to contend that the tax authorities are wrong. We notice from the said decision that the co-ordinate bench of Tribunal has held that the flats obtained under development agreement is eligible for deduction u/s 54 of the Act if the new flat had been constructed within a period of 3 years from the date of transfer. Thus, we notice tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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