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2015 (9) TMI 66 - ITAT AHMEDABAD

2015 (9) TMI 66 - ITAT AHMEDABAD - TMI - Addition on account of long term capital gain u/s.50C - whether the correct thing is to adopt the stamp duty valuation as on the date of sale of agreement? - Held that:- As evident from a copy of the income tax return and computation of income filed by the assessee for the assessment year 2003-04 the assessee had duly disclosed the fact of this sale transaction and resultant capital gains for the relevant assessment year. We have also noted that the buyer .....

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year before us i.e. 2007-08.

Thus the erudite discussions about applicability of Section 50C in the present assessment year are wholly irrelevant and do not call for any adjudication. That aspect of the matter is academic. Once we hold, as we have held in this case, that an item of income is not taxable in the present assessment year, it is wholly academic to examine modalities of quantifying that income. - Decided in favour of assessee. - ITA. No. 487/Ahd/2011 - Dated:- 21-8-2015 - S .....

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in law and on facts in dismissing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. I. ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN U/S. 50C - ₹ 16,64,836/- 1. The Ld. CIT(A) has grossly erred in law and on facts in confirming the addition on account of long term capital gain u/s.50C of the Act by observing that the correct thing is to adopt the stamp duty valuation as on the date of sale of agreement. 2. The .....

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the assessment proceedings, the Assessing Officer noted that while, as per AIR information available to him, the assessee had transferred an immovable property for the assessed value (for stamp duty purposes) of ₹ 32,65,440/-, the assessee s income tax return does not reflect any such transaction or capital gains thereon. It was in this background that the assessee was apparently called upon to explain as to why capital gains on sale of property is not reflected in the income tax return. A .....

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r section 2(47), is required to be treated as having taken place on that day. The fact of formal sale deed having been registered on 9.2.2007 does not, therefore, have any relevance for determination of capital gains. It was for this reason, according to the assessee, that the transaction of sale deed registration was not reflected in income tax return. Without prejudice to this line of argument, assessee further contended that if at all the date transfer is to be taken as 9.2.2007 and capital g .....

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uty as per the stamp duty valuation done by the Valuation Authority of the State Govt. Thus, the assessee has accepted the valuation of property done by the State Govt. Authority at ₹ 32,65,440/-. The provision of Section 50C(2) provides for valuation of the capital asset by Valuation Officer of the Department where the assessee claims that the value adopted by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer and that the value so adopt .....

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ich has never been challenged by the assessee before any appellate authority of the State Govt. Rather the assessee has accepted the valuation by making the payment of stamp duty as worked out by the State Govt. Authority. Now when under the I. T. provisions the assessee is against the wall, he submits that the valuation of stamp duty authority is challenged and therefore he proposes for valuation to be done by the Valuation Officer of the IT. Department. Assessee's claim is prima facie reje .....

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estion for reference to Valuation Officer is rejected. 3. Aggrieved, assessee carried the matter in appeal before the CIT(A) but in vain. Learned CIT(A) upheld the stand of the Assessing Officer and justified the same on the basis of following reasoning: 2.3.1 I have considered the submission made by the appellant and observation of the AO. Admittedly the agreement of sale was executed on 09/02/2007 and on this date the stamp duty authorities have valued the property at ₹ 32, 65, 440/-. Th .....

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y made and possession is given as per the agreement to sale. However, it is also true that the properties are generally undervalued in the agreement to sale, and because of this reason provisions of section 50C was brought on the statute. As per this provision, the valuation adopted by the stamp authorities is required to be taken for the purpose of calculating capital gain on the sale of an immovable property. If the claim of the assessee is accepted then the purpose of section 50C will be defe .....

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2 Further, there is no evidence that the possession was given on 23-5-2002, Neither before the Assessing Officer nor during the appellate proceedings such an evidence is given. In view of this reason and in the absence of availability of stamp duty valuation of this property as on the date of sale agreement, the action of the AO is confirmed and this ground of appeal is dismissed. 4. The assessee is not satisfied and is in further appeal before us. 5. We have heard the rival contentions, perused .....

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xability of capital gains is thus transfer of the capital asset. The expression transfer is defined under section 2(47) as follows: (47) transfer , in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by .....

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way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. [Explanation 1].-For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA.] [Explanation 2.-For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or a .....

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uation in which possession of an immovable property is allowed to be taken in part performance of a contract of the nature referred to in Section 55A of the Act, such a possession being given will also amount to transfer . Elaborating upon this aspect of the matter, Hon ble Bombay High Court, in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT(A) (260 ITR 491), has observed as follows: 6. At the outset, we may point out that in this case, the assessee does not deny transfer. The only dispute in .....

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). That, in order to attract section 53A, the following conditions need to be fulfilled. There should be a contract for consideration; it should be in writing; it should be signed by the transferor; it should pertain to transfer of immovable property; the transferee should have taken possession of the property; lastly the transferee should be ready and willing to perform his part of the contract. That even arrangements confirming privileges of ownership without transfer of title could fall under .....

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o be introduced in the Act. It was argued on behalf of the assessee that there was no effective transfer till grant of irrevocable licence. In this connection, judgments of the Supreme Court were cited on behalf of the assessee, but all those judgments were prior to introduction of the concept of deemed transfer under section 2(47)( v). In this matter, agreement in question is a Development Agreement. Such Development Agreements do not constitute transfer in general law. They are spread over a p .....

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ts. That such agreements are only a mode of remunerating the builder for his services of constructing the building - Gurudev Developers v. Kurla Konkan Niwas Co-operative Housing Society [2000] 3 ML J 131. It is precisely for this reason that the Legislature has introduced section 2(47)(v ) read with section 45 which indicates that capital gains is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the gen .....

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payments were effected during that year and substantial permissions were obtained. In such cases of Development Agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is in view of section 2(47)(v ) of the Act. Before us, it was argued on behalf of the assessee that the date on which possession is parted with by the transferor is the date which should be taken into account for determining th .....

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partment that since substantial payments were made during the financial year ending 31st March, 1996 and since majority of permissions were obtained during that year, the liability to pay capital gains tax accrued during assessment year 1996-97. In this case, the agreement is a Development Agreement and in our view, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. We have taken this view for the reason that Development Agreement do .....

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contended that because of substantial compliance of the contract during the financial year ending 31st March, 1996, the transfer is deemed to have taken place in that year. Such interpretation would result in anomaly because what is substantial compliance would differ from Officer to Officer. Therefore, if on a bare reading of a contract in its entirety, an Assessing Officer comes to the conclusion that in the guise of agreement for sale, a Development Agreement is contemplated, under which the .....

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ntemplated between limited Power of Attorney authorising the developer to deal with the property vide para 8 and an irrevocable licence to enter upon the property after the developer obtains the requisite approvals of various authorities. In fact, the limited power of attorney may not be actually given, but once under clause 8 of the agreement a limited power of attorney is intended to be given to the developer to deal with the property, then we are of the view that the date of the contract viz. .....

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ent of the assessee that the Court should go only by the date of actual possession and that in this particular case, the Court should go by the date on which irrevocable licence was given. If the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability. 8. We have noted, as evident from a copy of the income tax return and computation of inco .....

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