TMI Blog2020 (8) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... AOP by a member and second limb is an essential deeming fiction for determining the value of consideration without which the charging provision would fail. We also noted that the provisions of section 50C of the Act also deeming fiction deems only the value of consideration for the purpose of calculating capital gains in the transfer of capital asset from one person to another. In view of the above, we are of the view that the provisions of section 50C of the Act are not applicable in the instant case and provision of section 45(3) of the Act will be applied. Hence, we reverse the orders of the lower authorities and allow the appeal of the assessee on this issue. - ITA No. 2279/MUM/2017 - - - Dated:- 11-8-2020 - Sri Mahavir Singh, VP And Sri Manoj Kumar Aggarwal, AM For the Appellant : Shri Dr. K. Shivram, AR For the Respondent : Ms. Kavita P. Kaushik, DR ORDER PER MAHAVIR SINGH, VP: This appeal of Assessee is arising out of the order of the Commissioner of Income Tax (Appeals)]-3, Mumbai, [in short CIT(A)], in ITA No. CIT(A)-98/16-17/ NSK (Old 89/15-16/THN) dated 28.02.2017. The assessment was framed by the Asst. Commissioner of Income Tax, Circle-2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Joint Venture agreement dated 01.07.2010, assessee has agreed to contribute the said remaining development right as capital contribution for an agreed consideration of ₹ 5 crores to the AOP, M/s. Benchmark Properties. The Assessing Officer while framing assessment treated transfer of the development right in the three buildings under Section 50C of the Act inspite of claim made by assessee that provisions of Section 45(3) of the Act will apply. The Assessing Officer accordingly treated the same as capital asset and computed the value as per Stamp Valuation authority at ₹ 10,10,47,000/-, thereby assessing the long term capital gains at ₹ 5,10,47,000/-. 5. Aggrieved, assessee preferred appeal before the CIT(A). The CIT(A) also confirmed the action of the Assessing Officer by holding that this is transfer of capital asset covered by provisions of Section 50C of the Act by relying on the decision of ITAT, Lucknow Bench in the case of Carlton Hotels Pvt. Ltd. by observing in Para 7.5 as under :- 7.5 Another ground taken by the appellant that the transaction under review is covered by section 45 which is a special provision whereas section 50C has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, assessee has acquired total development rights to develop 7 buildings out of which assessee-firm had developed and sold 4 buildings on its own and disclosed the profit earned as business profit in its return of income. The development right in respect of the remaining 3 buildings were shown in the asset side of the Balance sheet under the head Investments as on 31.03.2010 relevant to assessment year 2010-11. Thereafter, assessee entered into Joint Venture agreement with M/s. Benchmark Properties, an AOP, vide agreement dated 01.07.2010 and assessee had agreed to contribute the remaining development rights as capital contribution at an agreed consideration of ₹ 5 crores. Accordingly, the amount was credited the same to Capital Gains account in the books of M/s. Benchmark Properties and claimed the said amount by way of capital contribution under the special provisions of Section 45(3) of the Act. The learned counsel for the assessee argued that under the provisions of Section 45(3) of the Act, the difference between the amount credited to the Capital account, i.e. deemed consideration, and the indexed cost of acquisition and improvement was to be taxed as capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2010 and agreed to contribute the said development rights as capital contribution at an agreed contribution of ₹5 crores to M/s Benchmark Properties and AOP. Accordingly, this same was credited in the assessee s capital account in the books of M/s Benchmark properties. We noted that the Assessing Officer treated this as transferred and assessed the same under section 50C of the Act by treating the consideration received as per circle rates and assessed the amount of ₹ 5,10,47,000/- as a long term capital gain under section 50C of the Act instead of declared by assessee as long term capital gain amounting to ₹ 1,28,953/- under section 45(3) of the Act. Now before us, the learned Counsel for the assessee drew our attention to the provision of section 45(3) of the Act which read as under: - 45(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purpose of section 48, the amount recorded in the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dissolved or the partner retires. It evidences no doubt due by the rim to the partner. Indeed, the capital represented by the notional entry to the credit of the partner s account may be completely wiped out by loses which may be subsequently incurred by the firm, even in the very accounting year in which the capital account is credited. Having regard to the nature and quality of the consideration which the partner may be said to acquire on introducing his personal asset into the partnership firm as his contribution to its capital, it cannot be said that any income or gain arises or accrues to the assessee in the true commercial sense which a businessman would understand as real income or gain. 12. The learned Counsel for the assessee specifically relied on the Mumbai Tribunals decision in the case of Voltas Ltd Vs. ITO [2016] 74 taxmann.com 99 (Mumbai), wherein it is held that the provisions of section 50C of the Act could not be applied to sale development rights of land owned by the assessee. We noted that the provisions of section 45(3) provides that when a person transfer his capital asset to a firm or a body of individual or to AOP by way of capital contribution for bec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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