TMI Blog2017 (11) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue has been decided against the assessee by virtue of decision of the Tribunal, Mumbai Bench, in Capt. Animesh Chandra Batra (2016 (5) TMI 155 - ITAT MUMBAI). In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground no.2 raised by the assessee. Computing long term capital gain on sale of Salt Pan Land - sale of development rights - year of taxability - Held that:- The amount of ₹ 50 crore having neither been received by the assessee nor accrued in the financial year relevant to the assessment year under dispute, it cannot be considered as a part of sale consideration for computing capital gain in the impugned assessment year. The Assessing Officer is free to proceed in accordance with law if and when such income arises. With the aforesaid observation, ground no.3, is allowed. Adoption the cost of property shown by the assessee as per the report of the registered value - Held that:- It is manifest from the assessment order that the Assessing Officer being of the view that cost of acquisition shown by the assessee on the basis of registered valuer’s report is more than FMV had made a reference to the DVO fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial Assets Management Co. Ltd. From the information obtained, it was found that as per the income and expenditure statement, there was a deficit of ₹ 3,58,789 during the year. Further, it was found that the assessee has derived a net gain of ₹ 14,41,964 on sale of securities. When this fact was confronted to the assessee, it was submitted by the assessee that the transaction relating to investment made in ICIC Prudential PMS being in the nature of business, the loss suffered by the assessee amounting to ₹ 4,15,973 should be treated as business loss and set off against income against other sources. The Assessing Officer, however, did not find merit in the submissions of the assessee. On verifying the details of transactions, the Assessing Officer was of the view that gain derived from sale of securities is to be treated as capital gain as it was an investment activity of the assessee and not adventure in the nature of trade. He, therefore, assessed the net gain derived from sale of securities as short term capital gain. While doing so, he disallowed PMS expenditure claimed by relying upon the decision of the Tribunal. Though, the assessee challenged the addition m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been decided against the assessee by virtue of decision of the Tribunal, Mumbai Bench, in Capt. Animesh Chandra Batra (supra). In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground no.2 raised by the assessee. 9. In ground no.3, the assessee has challenged the addition of an amount of ₹ 50 crore while computing long term capital gain on sale of Salt Pan Land. 10. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has offered an amount of ₹ 162,73,59,506 as short term capital gain on sale of a property. After calling for necessary details from the assessee regarding the sale of property and verifying the same, the Assessing Officer found that in the relevant previous year, the assessee has sold development rights on 500 acres of Salt Pan Land at Village Kanjur and Bhandup to Shapoorji Pallonji And Company Ltd., for a total consideration of ₹ 521 crore vide agreement dated 13th August 2009. He also found that the lease rights over the major part of land was acquired by the assessee prior to 1981 and a part of it was acquired by virtue of decree of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of development right of the total sale area, the assessee is to receive sale consideration of ₹ 521 crore in four stages. He observed, the payment of ₹ 50 crore at the fourth stage is to be made on pro rata basis according to the area realized for development. He observed, however, as per the agreement the mutually agreed total consideration is ₹ 521 crore. Hence, capital gain has to be computed on the total sale of consideration of ₹ 521 crore. 12. The learned Authorised Representative submitted, though, the total sale consideration as per sale agreement is ₹ 521 crore, however, as per clause 3.4 of the said agreement, an amount of ₹ 50 crore out of the total sale consideration would be payable towards the area which are covered by the CRZ notification, rules and regulations of Government of India. Hence, the said amount would be payable to the assessee only in the event, the said area is permitted to be developed and/or utilised for development purpose on pro rata basis to the area realized for development by the competent authority. The learned Counsel submitted, since, till date the area remains under CRZ regulation, no permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessary to examine the sale agreement dated 13th August 2009, between the assessee and M/s. Shapoorji Pallonji And Company Ltd., the developer. As per the sale deed, the assessee agreed to sell development right of about 500 acres of Salt Pan Land to the developer. As per clause K of the agreement, certain areas out of the property sold are governed by the CRZ regulation. As per clause 2.1 of the sale agreement, the developer shall pay to the lessees (assessee) total sum of ₹ 521 crore for the entire land admeasuring 500 acres including the FSI available to the said property. As per clause 2.3 of the agreement, the sale consideration shall be payable by the developer to the assessee as under: i) ₹ 175 crore paid before execution of sale deed; ii) ₹ 200 crore paid in favour of the lessee in proportion to and as per the lessee s direction; iii) ₹ 96 crore to be paid to the lessees within 90 days of execution of the sale deed; and iv) Finally as per clause 2.3.4 of the sale deed, the balance sum of ₹ 50 crore is payable to lessees towards the areas which are covered by the CRZ notification, rules and regulations of Government of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 50 crore even in future. Therefore, the assessee cannot be subjected to capital gain on the amount of ₹ 50 crore, though, it may be a part of the total sale consideration mentioned in the agreement, considering the fact that the assessee was supposed to receive the said amount on fulfillment of certain conditions and as per the facts on record, the assessee has not received the said amount, since, the conditions have not been fulfilled. 16. The observations of the Departmental Authorities that capital gain has to be computed on the total sale consideration, whether or not the assessee has received the amount of ₹ 50 crore, in our view, is legally untenable. In this context, we may refer to the relevant statutory provisions governing the issue. At first, we shall refer to section 45 of the Act which reads as under: Capital gains. 45. [( 1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [***] [54, 54B, [***] [54D, [54E, [54EA, 54EB,] 54F [54G and 54H]]]]], be chargeable to income-tax under the head Capital gains , and shall be deemed to be the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities cannot assess any hypothetical or notional income to tax. Having held so, we feel it appropriate to refer to the decision of the Hon'ble Jurisdictional High Court in Mrs. Hemal Raju Shette (supra). The facts of the case are, by virtue of an agreement the assessee transferred its share holding in a particular company. As per the terms of agreement, initial consideration of ₹ 2.70 crore was to be received immediately and deferred consideration of ₹ 20 crore was to be received over a period of four years based on a formula. As per the working of the formula a situation may arise where no amount on account of deferred consideration could be receivable by the assessee. It so happened, the assessee could not receive part of the deferred consideration in assessment year 2006 07. However, the Assessing Officer held that, since, as per the terms of the agreement, assessee was to receive the deferred consideration in four assessment years, it is liable to pay capital gain tax. When the issue ultimately came up for consideration of the Hon'ble Jurisdictional High Court, the Hon'ble Court after relying upon a number of decision of the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re must be as is otherwise expressed debitum in presenti, solvendum in futuro . . . . In this case all the co-owners of the shares of M/s. Unisol have no right in the subject assessment year to receive ₹ 20 crores but that is the maximum which could be received by them. This amount which could be received as deferred consideration is dependent/contingent upon certain uncertain events, therefore, it cannot be said to have accrued to the respondent-assessee. The Tribunal in the impugned order has correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize. In this case ₹ 20 crores cap in the agreement is not income in the subject assessment year. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Government. Therefore, he was of the view that the valuation done by the registered valuer cannot be accepted. Accordingly, he made a reference to the District Valuation Office (DVO) under section 55A(a) of the Act for determining fair market value of the capital asset as on 1st April 1981. The DVO in his report dated 25th February 2013, determined the value of capital asset at ₹ 23,14,33,000. The Assessing Officer adopting the value determined by the DVO computed the capital gain. The assessee challenged the decision of the DVO before the learned Commissioner (Appeals). 23. The learned Commissioner (Appeals) following the decision of the Hon'ble Jurisdictional High Court in CIT v/s Pooja Prints, [2014] 360 ITR 697, decided the issue in favour of the assessee by holding that as per the existing provisions under section 55A(a), the Assessing Officer could not have made a reference to the DVO for determining the FMV in a case where he is of the opinion that the value shown by the assessee is less than the FMV. 24. We have heard rival contentions and perused the material available on record. It is manifest from the assessment order that the Assessing Officer be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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