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2015 (3) TMI 935 - ITAT HYDERABAD

2015 (3) TMI 935 - ITAT HYDERABAD - TMI - Capital gains - assessee have entered into a development agreement with M/s. Sun Mark Builders on 04-11-2003 for development of property for construction of residential flats sharing the built up area in the ratio of 39:61 - Year of Taxability - Held that:- There is no dispute with the fact that before entering in to this agreement with M/s. Sun Mark Builders, assessees have entered into many agreements which did not fructify. However, that does not mean .....

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ing the impugned year.

Sale Consideration to be adopted - A.O. while considering the sale consideration has taken two amounts for consideration, one amount is ‘sale consideration received under the guise of refundable deposit’ and other ‘value of constructed area of flats received in lieu of asset given for development’ in each case. - Held that:- A.O. cannot take both the amounts into consideration as it will be a double addition. To that extent, A.O. action cannot be upheld. It is a .....

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lats in view land parted with, after giving due opportunity to the assessee. Assessees contention should be considered in its correct perspective and should not be brushed aside without any valid reason. With this direction, the issue of adopting value of sale consideration is restored to the file of A.O. - Decided in favour of assessee for statistical purposes.

Cost of Acquisition - Held that:- Assessing Officer adopted amount of ₹ 1,18,835 in each case as cost of acquisition. .....

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isition. Subject to verification and furnishing necessary evidences, the A.O. is directed to examine, assessees contentions and allow the indexed cost of acquisition on the basis of facts and law. This issue also accordingly restored to the file of A.O. for fresh consideration.- Decided in favour of assessee for statistical purposes.

Claim of deduction under section 54 and 54F - Held that:- Since assessees have entered into a development agreement of constructing residential properti .....

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ion of capital gains to the file of Assessing Officer, he is directed to examine the aspect of claim of deduction under section 54/54F.- Decided in favour of assessee for statistical purposes.

Assessment exparte - Failure of filing return of income itself will call for best judgment assessment - Held that:- Since no returns of income were filed by these assessees summons under section 131 dated 15.11.2011 were issued and served on the assessees. Assessees did appear on 22.11.2011 and .....

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within his rights to complete assessment exparte. Assessee was informed that capital gain will be levied and asked to explain under the provisions of Sec.131 itself. Eventhough a separateshow cause was not issued giving final opportunity this may at best be a procedural lapse. Since we are setting aside the assessments to the A.O. for redoing it, on the issue of computation of capital gains on merits, we are of the opinion that there is no merit in these contentions, as assessee themselves have .....

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are seven appeals by respective assessees against separate but common orders of the Commissioner of Income Tax(Appeals), Vijayawada having concurrent jurisdiction over Hyderabad vide order dated 31-01-2014. Since common issues are involved, these are heard together and decided by this common order. 2. We have heard the Ld.Counsels and Ld.DR and perused the Paper Books placed on record by the respective parties. 3. Briefly stated, assessees herein along with four others are coowners of a propert .....

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ome Tax Act (Act) in order to consider the capital gains arising to the assessees. Assessing Officer was of the opinion that assessees have received refundable security deposit which was not repaid, also received further amounts from the said developer as confirmed by them and further assessees have given possession of the property for development, therefore, capital gains arise on the day of agreement i.e., 04-11-2003 relevant to the impugned assessment year. 4. In the course of assessment proc .....

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med Qaiser and Mohammed Sabir. Assessing Officer completed the assessments u/s.144 of the Act and brought to tax capital gains at ₹ 75,90,290/- in each case. In arriving at the above amount, Assessing Officer took the 1/11th portion of the security deposit received to an extent of ₹ 11,00,165/- each and also considered the value of constructed area of flats to be received in lieu of area given for development and arrived at the value, based on the SRO, Valuation multiplied by the are .....

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elled in earlier period also and therefore till the final handing over of the developed area, there is no capital gains arising to the assessees. In addition to the year of taxability of capital gains, assessees also brought to the notice of CIT(A) the various litigations, the permission granted by municipality subsequently in year 2006 and actual handing over in 2011. While contending that capital gains does not arise in the impugned assessment year, as an alternate contention, it was also cont .....

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g the same while computing the capital gain. In addition to the above, assessees also contended that they are eligible for deduction u/s.54 / 54F as they have obtained residential flats in lieu of the residential building parted with. Assessees filed detailed submissions before the Ld.CIT(A) including reliance on various case laws, which was extracted by the Ld.CIT(A) in the order. 6. Ld.CIT(A) however, did not agree with assessee s contentions. On the issue of year of taxability, Ld.CIT(A) noti .....

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x the capital gain during the year on entering the development agreement. With reference to the cost of construction, CIT(A) did not accept the evidence submitted by assessee and as Assessing Officer requested the details from SRO, office for the fair market value, she confirmed the adoption of cost of construction. However, there is no finding on the issue of adoption of security deposit as well as cost of construction by the Assessing Officer, as sale consideration. Like-wise, there is also no .....

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upon are distinguishable, without specifying the distinguishing factors. In the result, assessee s appeals were dismissed by the Ld.CIT(A). 7. In all the appeals, the common issue contested by assessees is with reference to: a. Year of taxability; b. Sale consideration to be adopted; c. Cost of acquisition to be considered; d. Claim of deduction u/s.54 or 54F 8. In addition to the above four common issues, the three assessees who have not filed returns before the Assessing Officer also raised is .....

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to consideration the fact of receipt of deposit and also handing over the possession, while invoking the definition of transfer u/s.2(47). He relied upon the following decisions: i. Chaturbhuj Dwarkadas Kapadia Vs. CIT [260 ITR 491] ii. Jasbir Singh ..in RE AAR (2007) 294 ITR 196 (AAR); iii. Dr. T.Atchuta Rao Vs. ACIT [106 ITD 388 (Hyd)] 10. In view of the facts and the law relied upon by the Assessing Officer, he held that the transaction satisfies the conditions of Section 53A of Transfer of P .....

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int development agreements at various points of time which have not been fructified. In support they filed various copies of the agreements in the Paper Book as under : 1. Copy of the Joint Development entered into between the applicants & 7 others and Mohd. Maher alam Khan dated 30.8.1994. 2. Irrevocable General Power of Attorney executed by the appellants in favour of Mohd. Mahel Alam Khan executed on 30.8.1994. 3. Deed of cancellation of Irrevocable GPA mentioned at S.No.2 above executed .....

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s on 04-11-2003. It was further submitted that property was under unauthorised occupation of hut dwellers and a suit was filed before the Land Grabbing Court. The Hon ble Court stayed the implementation of the development agreement. After prolonged conciliation proceedings, substantial amounts were paid for getting them vacated. Assessees Counsels referred to payments listed in annexure before the CIT(A). It was submitted that implementation of the development agreement started only after 22-11- .....

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ey are not fully conversant with the legal proceedings. It was also further submitted that the developer had spent lot of amounts on behalf of assessees and therefore according to them, there was no capital gains arising in the transaction. It was submitted that relying on various case laws, the mere permission for development does not attract the provisions of Section 2(47) so as to impose the capital gains tax in the impugned year. 13. Ld. DR, however, supported the orders of the authorities. .....

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ted by the Owners to develop the Schedule mentioned property by constructing thereon a Residential Complex consisting of Cellor for parking and Ground + Four Upper Floors. The developer shall construct according to the MCH permission cover the entire land or site comprised in the Schedule mentioned property. (b) It is hereby specifically agreed and declare that the Developer shall construct and completely utilizing fully entitlement areas as sanctioned by the Municipal Corporation of Hyderabad. .....

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onies etc., in all floors of the proposed complex or mutually agreed between the parties to the owners free of cost in lieu of utilisation of their land comprised in the schedule mentioned property for the above said development and construction. The remaining 61% of the constructed area would be retained by the Developer. The earmarking of the portions shall be made after receipt of the approved plans. (b) The developer shall have the rights over the site and terrace floors of the proposed resi .....

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ll be paid at the time of delivery of constructed areas. (d) It is also hereby specifically agreed and declared that the flats constructed areas to be allotted to the owners shall be completed in all respected and the possession of the said flats or constructed areas shall be handed over to the owners. (e) Any deposits and expenses payable to APSEB Transformer, Services Lines, Sewerage Boards, Water Departments, Generator and Erection charges will be borne by the owners to the extent their share .....

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ons and for the purpose of fulfilling the obligations in terms of this agreement. The owners hereby agree not to interfere in the construction or other works being carried out by the developer in or over the schedule mentioned property provided the said works or construction are not inconsistent with the terms and conditions incorporated in this agreement. 20. It is mutually agreed upon and always provided that in the event of the works at the schedule mentioned property suffered or otherwise in .....

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therein. One of the conditions was also for payment of rent per month from the date of dismantling of house and if project was not in stipulated time of 3 ½ years, then a penalty of ₹ 10,000/- per month shall be paid till the completion of construction. However, six months grace period was allowed. By perusing the above terms of the agreement and the fact that the receipts obtained from the tenants indicate that most of the tenants have been settled and paid by the time agreement wa .....

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ound to proceed with the matter. On March 7, 2003, the assessee entered into an agreement with a developer and the plan of the building was approved on March 31, 2003. These dates fell in the previous year 2002-03, relevant to the A.Y. 2003-04. Thus, the Tribunal held that the land being a capital asset was transferred by the assessee to the developer during the A.Y. 2003-04, for construction and it was enough if the assessee had received the right to receive consideration on a later date, so as .....

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s given. In the case of the assessee, factually it was found that both the aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the assessee was liable to pay tax on the capital gains for the assessment year 2003- 04. 17. Considering the judgment of the jurisdictional High Court and the facts of the case, we are of the opinion that the agreement entered into by assessees also satisfies the provisions of Section 53A of Transfer of Property Act, and therefore, th .....

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it was considered that there was no willingness to perform for the purpose of section 53A. In those cases, it was held unless the party has performed or is willing to perform its obligations under the contract and in the same sequence in which these are to be performed, it cannot be said that the provisions of section 53A of the Transfer of Property Act will come into play on the facts of that case. It is further held that unless provisions of section 53A of T.P. Act are satisfied on the facts o .....

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he impugned year is consequently upheld. B. Sale Consideration to be adopted 19. As briefly stated above, the A.O. while considering the sale consideration has taken two amounts for consideration, one amount is sale consideration received under the guise of refundable deposit of ₹ 11,00,165 and other value of constructed area of flats received in lieu of asset given for development at ₹ 63,71,290 in each case. assessee did contest that both the amounts cannot be taken and value of co .....

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ments and assessee s were not given any opportunity to place their submissions. Since most of the orders are exparte, the assessee s contentions that cost of construction of the builder should be adopted has not been examined at all. Therefore, in the interest of justice, we set aside this issue to the file of A.O. with a direction to adopt value of constructed area of flats in view land parted with, after giving due opportunity to the assessee. Assessees contention should be considered in its c .....

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ings on the said land which were demolished and the cost of which was also to be adopted. Therefore, cost of land alone cannot be adopted. Cost of buildings at the time of entering into agreement should be considered. In addition, assessee also claims to have paid lot of amounts to the tenants, unauthorized hutment dwellers as part of clearing the title along with litigation expenses. This expenditure also will form part of cost of acquisition. Subject to verification and furnishing necessary ev .....

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ad no occasion to examine this aspect as the assessment was completed exparte. Before the Ld. CIT(A), assessee made this claim which Ld. CIT(A) rejected on the reason that provisions of section 54F are not applicable. Ld. CIT(A) ignored the fact that alternate contention under section 54 is eligible to the assessee. Since we are setting aside the entire computation of capital gains to the file of Assessing Officer, he is directed to examine the aspect of claim of deduction under section 54/54F, .....

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rder. All the expenditure claimed by the assessee should be considered and detailed discussion may be made if they are not accepted by the A.O. so that the appellate authorities can examine the correctness of the contentions. 23. With these observations/directions entire computation of capital gain in all the seven cases is restored to the file of A.O. to do according to law and facts. Assessing Officer is free to make necessary enquiries if required. Needless to state again that assessees shoul .....

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ious case law including Hon ble Supreme Court Judgment in the case of Blue Moon Hotels 321 ITR 364. We are afraid that we cannot accept assessees contentions on the issue. First of all, in spite of receiving notices from the A.O. these three assessees have not filed any returns of income. Therefore, failure of filing return of income itself will call for best judgment assessment. Moreover, A.O. has issued notice on 30.03.2011 for which assessees were filed their letter dated 03.05.2011. Since no .....

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