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2019 (6) TMI 654

..... ender in the entire deal of the transactions - HELD THAT:- Assessee did not have any occasion to receive any consideration on the transfer of such lands on the agreement to sell. It is because the assessee has not incurred any cost on the purchase of the land, registration of the land, conversion of the land and the development of the land. Thus the assessee being a representative of Abellon Agrisciences Ltd (AAL) had no occasion to receive the consideration on the transfer of the land either at the time of agreement to sell or registration of sale deed. Therefore we are of the view that the provisions of section 53A of the Transfer of Property Act can be applied in the case on hand There was a property transfer by the assessee to the companies as discussed above in the A.Y.2009-10. Accordingly, we are of the view that the subsequent registration of the conveyance deed in the A.Y. 2011-12 will not amount to transfer of property under the provisions of section 2(47). Accordingly, the question of capital gain for the year under consideration does not arise. The impugned land transferred by the assessee in the A.Y.2009-10 when it was an agricultural land which does not fall within the .....

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..... ces of the case as well as in law, the learned Commissioner of Income Tax (Appeals), Ahmedabad-5, Ahmedabad has grossly erred in holding that the direction u/s. 144A of the I.T. Act issued by the Additional Commissioner of Income Tax, to the AO to finalize the assessment by applying a particular judgment of Supreme Court is not prejudicial to the interest of the assessee and that the directions are in the nature of what line of investigation is to be made and therefore requirement of providing an opportunity to the assessee is not necessary. 1.3 It is therefore prayed that the addition made in the assessment order as per the direction issued u/s. 144A by the Additional CIT, which has been issued in contravention of the provisions of Section 144A itself, may please be deleted. 2.1 In the facts and circumstances of the case as well as in law, the learned Commissioner of Income Tax (Appeals), Ahmedabad-5, Ahmedabad has grossly erred in confirming the action of the AO in making addition for an amount of ₹ 85,00,658/- on account of short term capital gain on transfer of immovable property at Survey No. 197 and 213 at Village Gokharva, Sabarkanta in utter disregard to the fact that .....

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..... ltural land not in his personal capacity but as an agent and representative of Abellon Clean Energy Private Limited and Abellon Properties Private Limited to whom the properties had ultimately been transferred. The entire amount of consideration for purchase of the land from the agriculturist and also the expenditure on account of development of the land, land filling, registration fees and other related expenses, etc. were fully paid & borne by the above said companies and the role of the appellant assessee in the entire transaction was that of an agent/representative of the company. Therefore, on the facts & circumstances of the case, which the AO has failed to recognize, understand & appreciate, the addition on account of short term capital gain is wholly unjustified, wrong and requires to be deleted in full. 5.2 It is therefore prayed that the impugned addition made by the AO may please be deleted. 6.1 In the facts and circumstances of the case as well as in law, the learned Commissioner of Income Tax (Appeals), Ahmedabad-5, Ahmedabad has grossly erred in confirming action of the AO in computing the short term capital gain at ₹ 85,00,658/- without considering .....

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..... ir Kantilal, Village Gokharva 2558/ 20-09-2008 Sub Registrar, Modasa Sabarkantha Modasa Gokharva 213 23472 28-12-2010/ ₹ 1224652 Patel Maganbhai karsanbhai villabe Gokharva 2589/ 20-09-2008 Sub Registrar, Modasa 3(iii) During the assessment proceedings the assessee also furnished agreement to sale dated 15-01-2009 and 31-03-2009 in respect of land bearing survey no. 197 and ₹ 213. The complete details of these agreement to sale are as under: Dist/ Taluka/ Village Block/ survey No. Area Date of agreement/ Amount of consideration Name of the party in favour agreement to sale made Serial No. of agreement to sale Name of Sub Registrar Sabarkantha Modasa Gokharva 197 26507 sq. Me 15-01-2009 ₹ 5965000 Abellon Clean Energy Pvt. Ltd. 1-005/2009 Notary, Government of India Sabarkantha Modasa Gokaharva 213 23472 31-03-2009 ₹ 5285000 Ablon Properties Pvt. Ltd. D-024/2009 Notary, Government of India 3.1 The assessee also claimed that he had not received the sale consideration against the transfer of such lands. The assessee in support of his contention claimed that there was no credit entry for the receipt of the consideration appearing in the bank account. The assessee .....

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..... under the head capital gain u/s 45 of the Income Tax Act. 3.6 The AO further observed that the details and mode of payment were not mentioned in the sale deed and also the assessee not received any advance/part payment in respect of agreement to sell executed. 3.7 The AO further conducted inquiries u/s 133(6) from the companies and found that there was a huge time gap between the agreement to sale and incorporation of the company. Furthermore, the assessee did not provide any evidence that the company was in the process of incorporation. 3.8 The AO also noted that the assessee during the assessment proceeding submitted that he was acting as an agent of the group companies. However, from the purchase deed, it is clear that the assessee was the owner of the properties and he transferred the properties to the group companies as evident from the sale deed. However, the assessee did not submit any evidence to prove that he acted as an agent of the respective companies. In view of the above, the AO worked out the short term capital gain amounting to ₹ 85,00,658/- as detailed under: Block / survey no. Date of sale Sale consideration Date of purchase Cost of purchase/value of stamp .....

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..... rs at the time of entering into ATS (Pgs.129-142 @ 133 of P/B and Pgs.164-178 @ 169 of P/B) It was categorically mentioned in ATS that duration of such ATS was "three years" and during such period, seller (i.e. assessee ) was to obtain permission for conversion of land from "agricultural land" to "non-agricultural land" (Pgs.129- 142 @ 134 of P/B and Pgs. 164-178 @ 170 of P/B). Post conversion of such land to Non-agricultural land, final sale deeds were executed during the year under consideration as follows: Survey No. Date of deed Purchaser Pgs. P/B 197 15.02.09 Abellon Clean Energy Ltd. 42-56(Gujarati) 143-163(English) 213 28.12.10 Abellon Properties Pvt. Ltd 83-89 (Gujarati) 179-199 (English) The AO was of the view that since final sale deeds have been executed during the year under consideration, resultant capital gain, which has been worked out at ₹ 85,00,6587-, is chargeable to tax during year under consideration. Hence, he made the impugned addition which was confirmed by CIT (A). 5.1 "Transfer", in terms of S.2(47)(v), was effected in AY 09-10: As per S.2(47)(v), "transfer" includes any transaction involving the allow .....

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..... ns a clause that possession is handed over while executing sale deed, it is submitted that such words were part of the standard format of the sale deed. From the ATS, it absolutely clear that possession was handed over to the prospective buyers while entering into the ATS. Neither AO nor CIT (A) has brought any clinching evidence to controvert the fact that "possession" was handed over while entering into ATS, as duly mentioned in such ATS. In fact, AO has, on Pg.19 of Asst. Order, simply stated that there was no "part payment" pursuant to ATS and hence, conditions of section 53A of TP Act are not fulfilled. Even CIT (A) has, on Pg.23 of CIT (A)'s order, held that in absence of "part payment", it cannot be said that "transfer" took place when ATS were entered into. The AO and CIT (A) failed to appreciate that the definition of "transfer" under the Act is to be considered and not the provisions of S.53A of TP Act. S.2(47)(v) does not mandate that "part consideration" must be passed on to the seller so as to ensure that "transfer" of immovable property takes place. As and when "Agreement to sale" is e .....

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..... tax: As per S.45, capital gain arising on transfer of "capital asset" can be charged to tax. The term "capital asset" is defined u/s 2(14). As per such definition, "agricultural land" is excluded from the ambit of "capital asset". Hence, gain on transfer of "agricultural land" is not chargeable to tax. In assessee's case, "transfer" took place in AY 09-10 and that point in time, the concerned lands were "Agricultural lands". In fact, time gap of three years was fixed so as to ensure that assessee gets such "agricultural lands" converted into "non-agricultural lands". Post such conversion, final sale deeds came to be executed during the year under consideration. Status of capital asset at the time of "transfer" is relevant in order to decide the chargeability of tax. In assessee's case, "transfer" took place in AY 09-10 and at that point in time, the concerned lands were "agricultural lands". Thus, such lands were not "capital asset" at the time of "transfer" and hence, gain arising thereon cannot be charged to tax. Even on that score, .....

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..... gs.57-59, 98-100, 110-115 of P/B). Thus, in reality, assessee was merely acting as "agent" and "representative" of the Abellon group for effecting the final transaction of purchase of lands in order to meet the requirements of the revenue laws. In such a scenario, no tax liability, emanating from such transactions can be fastened upon the assessee. Hence, impugned addition must be deleted. 5.6 Alternatively, deduction of "cost of improvement" in terms of S.48(ii) be given to the assessee: Alternatively, substantial expenditure has been incurred on development of the lands in question and hence, while the same must be deducted while capital gain in light of provisions of S.48(ii). Total sale consideration is equivalent to aggregate of "cost of land" and "cost of improvement" thereto. Hence, once such benefit is given, there is no capital gain. Even on that score, impugned addition must be deleted. CIT (A) denied such benefit by merely stating that such expenditure was carried out by "company" and not by the assessee (Pg.23 of CIT (A's order). At this stage, it is clarified that "genuineness of expenses" and so .....

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..... d M/s Abellon Cleanenrgy Pvt Ltd. (for short ACPL) through an agreement dated 15-01-2009 and 31-03-2009 respectively. However, the assessee executed the sale deed in the name of the above companies in the A.Y. 2011-12 after the conversion of agriculture land into non-agriculture land. The AO accordingly treated the transfer of land by the assessee to these two companies as a transfer in the year under consideration. 7.2 Thus the AO worked out the short-term capital gain on the transfer of the lands amounting to ₹ 85,00,658/-only. The Ld. CIT (A) subsequently confirmed the view taken by the AO. Now the following questions before us arise for education: Question 1 Whether there was a valid transfer of land by the assessee to the companies described above based on an agreement to sell executed in the A.Y.2009-10. Question 2 Whether the assessee can be treated as an agent of the group companies described above in the given facts and circumstances 7.3 Regarding the question no. 1, an agreement to sell shall amount to transfer of the property if it is supported with the valid consideration and handing over the possession of the property in pursuance to the provisions of section 53A .....

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..... eted in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract : Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." 7.5 However before concluding, we note that the facts of the case on hand are different from the facts as discussed above. Regarding this, we note certain undisputed facts as detailed under: 1. The assessee is an employee of the AAL as per the finding of the AO which is reproduced as under: During the year the assessee is having income from salary from Abellon EPC Technologies Limited. 2. The AAL has paid the money directly to the landowners which was recorded in its books as an advance for the acquisition of land. This fact can be verified from the copy of the ledger placed on pages 57 & 98 of the PB in respect of the land survey no. .....

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..... er of such lands on the agreement to sell. It is because the assessee has not incurred any cost on the purchase of the land, registration of the land, conversion of the land and the development of the land. Thus the assessee being a representative of AAL had no occasion to receive the consideration on the transfer of the land either at the time of agreement to sell or registration of sale deed. Therefore we are of the view that the provisions of section 53A of the Transfer of Property Act can be applied in the case on hand for the reasons as discussed above. 7.7 It is also important to understand that the assessee has agreed to sell the land to the company namely Abellon Properties Pvt. Ltd. which was not in existence during the relevant time. Thus the question arises about the validity of the agreement with the company which was not there in existence. Regarding this, we note that the agreement between the assessee and the company was made as on 31st March 2009 whereas the company was registered as on 21st June 2010 almost after 15 months from the date of the agreement. Thus a doubt may arise about the genuineness of the impugned agreement to sell. However, on perusal of the agree .....

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