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M.M. Exports Versus I.T.O., Ward-42 (1) [merged with ITA-Ward-43 (1) , Kolkata

2018 (2) TMI 303 - ITAT KOLKATA

Assessment of STCG in the hands of the Assessee - Transfer u/s 2(47) - full value of consideration received should be considered for sale of the property under the agreement - property was ultimately sold to a third party - section 50(1) applicability - Special provision for computation of capital gains in case of depreciable assets - Held that:- Admittedly there was no power of attorney whatsoever given by the assessee in favour of Shri Sanjay Todi. We are therefore are of the view that there i .....

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DV of the block of building as on 1.4.2006 to arrive at the Short Term capital gain. Admitted factual position is that the Assessee was to receive only a sum of ₹ 32 lacs from S.K.Todi as sale consideration in respect of the property. The admitted position is that the difference between ₹ 32 lacs and ₹ 56 lacs has already been taxed in the hands of S.K.Todi. In this factual background, we are of the view that the STCG on sale of the property has to be determined in the hands of .....

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ing to A.Y.2007-08. 2. The Assessee is a partnership firm. It owned a property in M.G.Road, Bangaluru. By an agreement dated 20.10.2005 the partnership firm .i.e. assessee agreed to sell the property to one Shri Sanjay Todi alias Shri Sanjay Kumar Todi, who is also an incidentally one of the partners in the partnership firm. The sale consideration was agreed between the parties at a sum of ₹ 32,00,000/-. The assessee had paid a sum of ₹ 5,00,000/- as advance at the time of signing of .....

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days from the date of katha transfer or execution, registration and delivery of vacant possession in favour of the assessee, whichever is earlier. 3. On 27.03.2007 the assessee and Mr. Sanjay Todi by registered sale deed sold the property to a third party Shri V.V.Kak and Smt. Meeta V.Kak. for a sale consideration of ₹ 56,00,000/-. In the assessment of Shri Sanjay Kumar Todi for A.Y.2007-08 the question that arose for consideration was as to whether the difference between the price at whic .....

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at M.G.Road, Bangaluru which was the subject matter of the discussion in the earlier paragraphs was part of the block of asset Building on which the assessee had claimed depreciation. The AO was of the view that there was a transfer of the aforesaid property during the previous year relevant to A.Y.2007-08. The AO was of the view that in view of the provision of section 50(1) of the Income Tax Act, 1961 (Act) the short term capital gain on transfer of the asset should be brought to tax. It is n .....

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000/- as full value of consideration received on transfer and not ₹ 56,00,000/-. The assessee submitted that the difference between ₹ 32,00,000/- and ₹ 56,00,000/- (price for which property was sold to a third party) should be brought to tax in the hands of Shri Sanjay Todi. The AO however rejected the contention of the assessee for the following reasons : The contention of the assessee firm in this regard is not tenable, because, Mr.Sanjay Todi, a partner of the assessee firm, .....

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on dt.25.06.2014, the assessee firm also admitted that the above facts. Hence, as per provisions of section 50(1) of the I.T.Act,1961, the entire Short Term Capital Gain earned by the M/s. M.M.Export, on the sale of the above Flat of ₹ 54,84,3701- (Rs.56,00,000 -115630) is treated as profit and added to the total income of the assessee firm. 5. Aggrieved by the aforesaid order of the AO determining the short term capital gain as per section 50(1) of the Act and treating ₹ 56,00,000/- .....

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filed before CIT(A). Even in the written submission filed before CIT(A) the very same contention was put forth by the assessee. The CIT(A) however rejected the contention of the assessee and he held that the action of the AO in bringing to tax the short term capital gain in A.Y.2007-08 was correct for the following reasons : I have gone through the above contention of the asseessee. In this regard it is to point out that though the 'appellant claims that agreement of sale was entered on 22- .....

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hereas A.O had treated the transaction as income from other sources in the hands of Shrl Todi considering the fact that the property was not be the capital asset of the assesee since full payment was not made and possession was not taken. In this regard it is pertinent to mention here that before C.I.T(A) the facts of the case of M.M Export were not placed. Had it been placed before C.I.T(A) that the assessee M/s M.M Export. from where Mr. Sanjay Todi stated to have purchase in F.Y 2005-06. has .....

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has preferred the present appeal before the Tribunal. 7. The assessee has raised several grounds of appeal. The sum and substance of which is that the short term capital gain pertains to A.Y.2006-07 and not A.Y.2007- 08. Alternatively the assessee has submitted that Capital Gain should be computed by considering the full value of consideration received or accrued on transfer of capital asset at ₹ 32,00,000/-. The ld. Counsel for the assessee submitted before us that there was a transfer of .....

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question before the Hon ble Bombay High Court was whether the assessee had transferred any capital asset or not. The Hon ble Bombay High Court held that the right to purchase the property and agreement was a capital asset and money received to relinquish such right gave rise to capital gain. In our view the aforesaid decision is not applicable to the facts of the present case because the assessee in this case was the owner of the property and the assessee cannot convey ownership unless he execu .....

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t or any arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of, any immovable property. The Ld. Counsel for the assesee drew our attention to CBDT Circular No.495 dt. 22.09.1987 explaining the aforesaid provision which reads as follows :- Definition of transfer widened to include certain transactions 11.1 The existing definition of the word transfer in section 2(47) does not include transfer of certain rights accruing to a purchaser, by .....

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mode of acquiring flats particularly in multistoreyed constructions in big cities. The definition also does not cover cases where possession is allowed 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. New sub-clauses (v) and (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. 11.2 The newly inserted sub- .....

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to force with effect from 1-4-1988 and will accordingly apply to the assessment year 1988-89 and subsequent years. [Section 3(g) of the Finance Act] 9. According to him the effect of the agreement for sale between the assessee and Shri S.K.Todi dated 20.10.2005 was that there was a transfer enabling the enjoyment of immovable property by Shri Todi. We do not find this argument to be acceptable as we have already seen, the assessee never gave possession of the property under the agreement dated 2 .....

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f doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon .....

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ore us but has made reference to only few decisions. The first decision is of the Hon ble Madhya Pradesh High Court in the case of CIT vs Laxmidevi Rathani and Ors (2008) 296 ITR 363 (MP).We have perused the aforesaid decision and it is on the same line as that of the decisions of the Hon ble Bombay High Court in the case of Tata Services Ltd. (supra). It was a case in which the question for consideration before the Hon ble Court was as to whether giving up right to claim performance extinguishe .....

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ions of Registration Act. The decision was rendered in the context of sale which usually takes place by executing agreement for sale coupled with an instrument of power of attorney in favour of the purchaser without registration of the sale deed. The court held that such transaction are not in accordance with law. The Hon ble court however held that the transactions which were being done in the past should be recognised as valid mode of transfer of immovable property. This decision is not applic .....

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ission which is to the effect that if for any reason the Tribunal upholds assessment of STCG in the hands of the Assessee for AY 2007-08, then the full value of consideration received should be considered at ₹ 32,00,000 which is the agreed consideration which the Assessee has to receive from the purchaser as consideration for sale of the property under the agreement dated 20.10.2005 and not the sum of ₹ 56,00,000 for which the property was ultimately sold to a third party. 14. We hav .....

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been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications:- (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of assets during the previous year, exceeds the aggregate of the follo .....

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