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TMI Blog2018 (3) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... om the owners in the year 2000. There are 17 other persons who acquired plots in the said survey number from the same vendors. All the plot owners including assessee entered into a Development Agreement on 12-05-2008. According to the Development Agreement, each land owner would receive constructed area of 3365.29 Sq. ft. Assessee is of the view that - a) A perusal of all the transactions would indicate that the development agreement is not a transfer which results in any gain to her; b) The land is a Long Term Capital Asset as the said land was held by assessee for a period of more than 36 months; c) The capital gain does not arise on the date of entering into the Development Agreement; d) The capital gain, if any, would be exempt in view of Section 54F of the I.T. Act; Assessee also submitted that: a) Assessee approached the land owners for purchase of land with a view to construct residential house; b) After the consideration was paid, the land owners and assessee faced problems with regard to mutation in the revenue records and the registration of the plot got delayed; c) There were disputes with regard to the layout as the approach road could not be provided to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gain, Ld.CIT(A) did not accept assessee's contention and distinguished various case law relied upon and after analyzing the provisions of the Act, upheld the assessment as such thereby dismissing the appeal filed by assessee. In coming to the conclusions Ld.CIT(A) also relied on the jurisdictional High Court decision in the case of Potla Nageswara Rao Vs. DCIT [365 ITR 249] (AP). Aggrieved, assessee is in appeal before us. 4. Before us, Ld. Counsel for assessee argued that the Ld.CIT(A) erred in upholding the re-assessment made u/s. 147 of the Act without there being any new material on record. The Ld.CIT(A) ought to have appreciated the fact that it is a settled position of law that no re-assessment can be made merely on change of opinion without there being any new tangible material on record. The addition is made merely on the basis of development agreement entered by assessee. However, nothing is happened in the year of entering development agreement, even no permission was obtained from GHMC to start construction. Hence, there is no transfer of property which was effected in the year under consideration and tere was escapement of income to reopen the case. Ld. Counsel argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion in respect of incidence of capital gains basing on passing of consideration. In the case of Sri Potla Nageswara Rao Vs. DCIT (supra), on the issue of transfer of possession of land and performance of contract there were no disputes. The judgment of the Hon'ble High Court was only restricted in respect of consideration in case of JDA. However, in the present case, the dispute is with respect to transfer of possession of property and performance of the contract. Therefore, the reliance placed by the authorities on the judgment of Hon'ble High Court is completely misplaced. 4.4. Ld. Counsel further contended that in view of the amended provisions of Section 45(5A) by the Finance Act, 2017, the taxation of capital gain in case of Joint development agreement arises in the year in which the land owner receives his share of property from the builder and same is applicable retrospectively. Hence, there is no capital gain arise to assessee in the year under consideration as there is nothing received from the builder. In this regard Ld. Counsel placed reliance on the case law of Ansal Land Mark Township (P.) Ltd vide [2015] 61 taxmann.com 45 (Delhi). 5. Ld.DR, however, submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was transferred, whereas assessee retained the balance of 50%. To that extent, the order of AO is to be modified. 6.1. Coming to the valuation also, the valuation taken by the AO at the date of his survey and at the time of completion of project cannot be basis for considering the sale consideration on the date of development agreement. These aspects will be considered at a later point of time. 6.2. Coming to the issue of reopening contested by assessee, that is not valid, it is noticed that assessee filed return of income without admitting any capital gain nor there is any mention in the return about the development agreement entered by assessee. The information has come to the knowledge of the AO consequent to the survey proceedings in M/s. Diamond Infra which led to the reopening of assessment u/s. 147 not only in assessee's case but also in other cases, where all the owners have entered into development agreement with the said party. After examining the facts, I am of the opinion that the AO correctly invoked the provisions of Section 147 and therefore, the proceedings are valid in law. I fully agree with the opinion of the Ld.CIT(A) who elaborately discussed the issue base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of CIT Vs. Balbir Singh Maini (supra), where the entire transaction of development of land envisaged in JDA fell through. In those facts of the case, the Hon'ble Supreme Court held that no profits or gains arose from the transfer of capital asset so as to attract Section 45 and 48 of the Act. However, in the present case, the agreement has been undertaken and has been completed, therefore the jurisdictional High Court decision still holds good. Accordingly, I agree with the order of the CIT(A), confirming the capital gains during the year. 6.4. One of the arguments raised by the Ld. Counsel is that new Section 45(5A) has been introduced which defers the capital gains to the year of completion of the project by the Finance Act, 2017. This being substantive provision, I am of the opinion that this cannot be applied to the development agreement entered into earlier, in which 2(47)(v) would certainly get attracted. In view of that, I reject the contention and uphold the taxability of the capital gains in the year under consideration. 6.5. However, the matter does not end there. There are two issues which require further consideration. One is that whether property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent cost which may involve escalation of cost from 2008 to 2013. Therefore, I direct the AO to consider the probable cost of construction as on May 2008 or the SRO Value of the land-in-question on the date of agreement should be considered as full value of consideration for the purpose of computation of capital gains on the transfer of 50% of the land holding for development. Therefore, while upholding the reopening of assessment and also bringing to tax the capital gains in the impugned year, the issue whether the land is short term capital asset or long term capital asset and the value for considering the capital gains computation is restored to the file of AO for fresh examination. Needless to say that assessee should be given due opportunity. For this purpose, the order of AO and CIT(A) on the above issues are set aside to the re-done as per the facts and law. In case the property was held to be long term capital asset, assessee may be eligible for consequent benefit u/s. 54/54F of the Act, which should be considered on the facts of the case. Assessee is free to raise necessary arguments in this regard before the AO. Grounds of assessee are considered partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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