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2015 (7) TMI 520

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..... d facts and circumstances, in absence of written contract, quantification of consideration to be paid, it cannot be said that there is a transfer in terms of section 2(47)(v) of the Act. It is clear from the GOMS issued by govt. that the cost of land will be determined by the state govt. through a separate order. However, as yet no order has been passed by the govt. determining the cost of land. It is also evident from the statement of audited accounts of assessee, though, assessee has credited the market value of the property to P&L A/c, but, it has been shown as receivable and has not been adjusted against loan repayable to the state govt. In the aforesaid facts and circumstances, in our view, in absence of determination of cost of land by state govt., no capital gain can be computed in the impugned AY. Ld. CIT(A), in our view, is therefore justified in deleting the addition made by AO on account of long term capital gain. - Decided in favour of assessee. Deduction claimed on payment of VRS - direction of ld. CIT(A) amounts to setting aside the issue to AO - Held that:- we are of the view that ld. CIT(A) instead of directing AO to verify assessee’s claim and decide the issu .....

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..... income after setting off brought forward loss of ₹ 10,36,36,461. During the assessment proceeding, AO noticed that initially assessee had shown an amount of ₹ 19,70,83,862 as total sale consideration from the property situated at Nalgonda, Warangal and Hyderabad and worked out long term capital gain at ₹ 19,53,14,791. However, in the foot note to the computation of income, it was stated by assessee that no capital gain arose during the relevant PY in respect of the land at 10- 2-3, AC Guards, Hyderabad as it was not through a registered conveyance deed and there was no transfer within the meaning of section 2(47)(v) of the Act. During assessment proceeding, assessee also filed a revised computation of income working out the long term capital gain at ₹ 1,16,33,336 after excluding capital gain shown earlier in respect of the property at AC Guards, Hyderabad. AO issued show cause notice calling upon assessee to explain why the capital gain earlier shown with regard to the property sold at AC Guards, Hyderabad should not be taxed in the impugned AY. In reply to the show cause notice, it was submitted by assessee as under: 1. In view of some arrangement be .....

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..... nding over possession of the property to the income-tax department, observed that the Act of the state govt. passing G.O. transferring land to a third party indicates that state govt. has taken over ownership/possession of the land. As far as consideration was concerned, the said G.O. also makes it clear that necessary orders in respect of the cost of land and its adjustment against loan amount payable by assessee to the govt. would be issued separately. Thus, AO observed that assessee s argument that neither consideration was determined nor transfer took place u/s 2(47)(v) is acceptable. AO referring to section 2(47)(v) of the Act, stated that as per the said provision transfer of the property has in fact taken place. AO further opined that assessee corporation has itself removed the land from its balance sheet as on 31/03/2002, which indicates transfer of land to the state govt. AO observed, even assessee has handed over the possession of property in compliance to the GO issued by the state government. On the basis of the aforesaid facts, AO observed that transfer of property has taken place and only adjustment entry has to be passed in respect of land towards loan amount payable .....

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..... ed, though, govt. till the date of hearing of appeal has not issued any order fixing the cost of property, but, AO has proceeded to compute capital gain only on the ground that assessee had handed over the possession of the said property. Ld. CIT(A) after going through the provision of section 2(47)(v) of the Act, observed that as per the said provision any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 is to be treated as transfer. Keeping in view aforesaid provision, ld. CIT(A) while examining the facts of the case found that though property in question was handed over by assessee to income tax department as per the govt. order, but, there is no contract of the nature referred to u/s 53A of the Transfer of Properties Act between assessee and the state govt. Therefore, provisions of section 2(47(v) are not applicable. As far as the allegation of AO that assessee has credited market value of the said property to P L A/c, ld. CIT(A) observed that mere entry made by assessee unilaterally in the books of account, pendi .....

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..... act of the state govt. to hand over the land in question to the income tax department. However, though, in the said order, it has been mentioned that a separate order will be passed determining the cost of land and adjusting the same against repayment of loan by assessee to the state govt., but, till date no such order has been passed. Therefore, in absence of cost of land, computation provision itself fails, hence, there cannot be any capital gain for the impugned AY. Ld. AR submitted, neither assessee has effected any transfer nor any consideration has been received. It was submitted, even the market value of the land credited in the books of account has been shown as receivable and not adjusted against loan. In this context, he referred to the balance sheet and P L a/c of assessee company. Further, he submitted, entries made in the books of account with regard to market value or removing the land from fixed assets are neither determinative nor conclusive factor for accrual of income so as to tax it in the hands of assessee. Ld. AR relying upon a decision of the Hon ble Supreme Court in case of K.P. Varghese, 135 ITR 591 submitted, what is not received or accrued cannot be consid .....

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..... of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. 9.2 On carefully analyzing the aforesaid provision, it is very much clear, a contract in writing between the parties from which intention of the parties to transfer can be ascertained with reasonable certainty is a sine qua non for applying the provision of section 53A. Further, though, section 2(47)(v) recognizes delivery of possession in pursuance to a contract in the nature envisaged u/s 53A of T.P. Act, 1882 as deemed transfer for ch .....

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..... , whereas, in the present case there is no written agreement between the parties. 9.4 One more aspect, which needs consideration is, another reason for AO to conclude that capital gain has arisen is due to the fact that assessee has credited market value of the cost of land to P L A/c and simultaneously removed the property in question from the list of fixed assets. In our view, entries made by assessee in the books of account are neither conclusive nor determinative factor to conclude accrual of real income at the hands of assessee. It is clear from the GOMS issued by govt. that the cost of land will be determined by the state govt. through a separate order. However, as yet no order has been passed by the govt. determining the cost of land. It is also evident from the statement of audited accounts of assessee, though, assessee has credited the market value of the property to P L A/c, but, it has been shown as receivable and has not been adjusted against loan repayable to the state govt. In the aforesaid facts and circumstances, in our view, in absence of determination of cost of land by state govt., no capital gain can be computed in the impugned AY. Ld. CIT(A), in our view, is .....

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..... mpugned AY is concerned, AO observed that only 1/5th of the amount claimed is allowable. Being aggrieved of the disallowance made, assessee preferred appeal before ld. CIT(A). 13. In course of appeal proceeding, it was submitted by assessee that as assessee has incurred expenditure towards VRS for the AYs 1997-98, 1998-99 and 2000-01 as well as for the current AY, such expenditure is to be amortized and allowable in five AYs commencing from AY following the PY in which it was first incurred in terms with the provisions contained u/s 35DDA of the Act. It was submitted by assessee, though it has debited the consolidated expenditure of ₹ 15,56,36,411 pertaining to all the assessment years to P L A/c for AY 2002-03 and claimed ₹ 9,37,98,122 being 1/5th as deduction u/s 35DDA, but, AO has only considered the expenditure incurred during the relevant PY and allowed 1/5th out of the same while disallowing the expenditure relating to earlier AYs. Ld. CIT(A) after considering the submissions of assessee, decided the issue as under: 5.2 The AR was heard and the appellant's written submissions duly considered. I find from the relevant part of the impugned order that the .....

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