TMI Blog2018 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from the purchase deed also, there are recitals that Shri Bala Swamy, father of vendor has himself developed the property and then obtained permissions but later on made four gift settlements to his son and after obtaining HUDA permissions, has registered the property on that date. Even though the receipt of sale consideration date-wise has not mentioned, it is the contention that assessees have paid the amounts much earlier also. This aspect has not been examined by the AO at all. Therefore, in the interest of justice, the issue of having possession of the property at the time of purchase of property by assessee, before registration is to be examined in the light of the payments made by assessee, permissions obtained from HUDA etc., so that the issue can be finally concluded on facts whether the property has to be considered as long term capital asset or short term capital asset. Therefore, this issue is restored to the file of AO Full value of consideration for computation of capital gains - eligibility to benefit u/s. 54/54F - Held that:- We 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and also bringing to tax the Short Term Capital Gain during the year consideration. Ld.CIT(A) after analyzing the legal position, noticed that the return was processed u/s. 143(1) of the Act only and since development agreement has come to the knowledge of the AO, assessment was property reopened, following the principles laid down by the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., [291 ITR 500] (SC). Ld.CIT(A) rejected the contentions that there was a change of opinion and also the contention that there was no tangible material. Ld.CIT(A) noted that the information has come to the knowledge of the AO as there were survey operations u/s. 133A of the Act in the case of M/s. Diamond Infra, from whom the details of the development agreement and sale of various properties has come to the knowledge. Both on facts and on law, Ld.CIT(A) analysed the issue and upheld the reopening of assessment. 3.1. Coming to the issue of computation of Short Term Capital 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ); iii. Fibars Infratech (P.) Ltd Vs. ITO, ward-1(2), Hyderabad [2014] 46 taxmann.com 313 (Hyderabad-Trib;); iv. Smt. Bhavya Anant Udeshi Vs. ITO, (International Taxation)-1, Hyderabad [2014] 51 taxmann.com 415 (Hyderabad-Trib.); v. Suraj Lamp and Industries Pvt. Ltd Vs. State of Haryana Anr dated 11-10-2011 in Special Leave Petition (C) bearing No.13917 of 2009 (Supreme Court); vi. Mr. Parbodh Chander Bali Vs. Rakesh Singh and Others in SLP(C) No. 13917/2009 dated 12-08-2014 (Supreme Court); 4.2. Ld. Counsel also contended that judgment of Hon'ble Jurisdictional High Court in the case of Potla Nageswara Rao Vs. DCIT (supra) is distinguishable. He argued that the facts of the case of the assessee are completely different than that of the facts of case of Sri Potla Nageswara Rao Vs. DCIT (supra). In the case of Sri Potla Nageswara Rao Vs. DCIT (supra), the Hon'ble High Court was only dealing with the question 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 judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of 50% of land, it was also contended that AO wrongly considered the entire value rather than 50% share of the land. 6. I have considered the rival contentions and perused the material placed on record and case law relied on. While completing the assessment, AO considered the period of holding of the property to be less than 36 months and the gains arose in this transaction was considered as short term only. Further, while valuing the property transferred, the AO has considered the entire 267 Sq. Yds., entered into agreement by assessee, ignoring the fact that only 50% of the above 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 ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinguish the jurisdictional High Court judgment in the case of Sri Potla Nageswara Rao Vs. DCIT (supra) that it applies to a case, where there is no sale consideration and the issue is on non-receipt of sale consideration. I do not agree with that as the issue of transfer in the case of development agreement and consequent levy of capital gain in the year of entering into development agreement has been crystalised by the said judgment of the jurisdictional High Court in the case of Sri Potla Nageswara Rao Vs. DCIT (supra). 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 issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be considered. It is not proper on the part of the AO to consider 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the date of registration of the property to the date of agreement as short term capital asset and re-computed the Short Term Capital Gain in both the hands taking the value of apartments to be received at 1097 Sq. ft. AO thus, determined the Short Term Capital Gain. Assessee has contested on both the issues- of reopening u/s. 147 as well as bringing to tax during the year under consideration. The ground being similar to the grounds raised in the case of Shri Bali Reddy discussed in detail above, there is no need to separately consider the issues. In these cases assessees however, have placed on record the payment receipts also made earlier to Shri Bala Swamy and subsequent registration of property by Shri Srikanth. For the detailed discussions made in the above appeals, I agree with the Ld.CIT(A) to the extent of confirming the reopening of assessment and computation of capital gains during the year under consideration, whereas the issue of capital asset being short term or long term and issue of full value consideration for the purpose of computation are restored to the file of AO in these cases as well. Needless to say that assessees should be given due opportunity. For this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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