TMI Blog2021 (2) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... and not tenable. We are not in agreement with the argument of the learned AR that the transfer took place in the assessment year 2005-2006 and has been rightly brought to tax by the AO in the year 2012-2013, since the assessment in the year 2012-2013 the assessee received duly developed and constructed area into his possession out of his share of constructed area. Thus, the additional ground raised by the assessee is dismissed. Disallowance of non-consideration of commission paid to Bentley Investment while computing cost of acquisition of the property - AO disallowed the commission amount from cost of acquisition on the grounds as the Payment of commission did not add value to the property, the transfer was in the nature of adventure of trade, cost was not incurred within the time limit as prescribed U/s 48(1) and 55(1)(b) of the Act, such expenditure was not indicated in the return of income,such transaction should have reflected as receivable in the books of M/s Bentley and transaction did not suffer TDS and payment was not supported by any agreement - HELD THAT:- Reasons given by the AO for not considering the payment of commission as cost of acquisition is not justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted on the basis of guidance value of this property as on the date of Sale Agreement only, not on the date of Sale Deed dated 9.3.2007. Accordingly we allow the grounds taken by the assessee as there was no applicability of section 50C in the year 2007-08 - Thus we direct the A.O. to consider the guideline value of the impugned residential flats as in the financial years 2006-2007 and 2007- 2008 as the sale agreement are entered in the earlier assessment years and not in the assessment year 2012-2013. Taking the consistent view, we allow the ground of appeal of the assessee. Action of the AO with regard to treatment of interest on fixed deposits which was prematurely closed and interest paid was reversed on premature closure of fixed deposits - HELD THAT:- After hearing both the parties, we are of the opinion that the Assessing Officer has to bring on tax the correct income earned from fixed deposits while going through the bank statements / certificate issued by Vijaya Bank, Hassan Branch in respect of fixed deposit prematurely closed by the assessee. The assessee shall produce bank statements / interest certificate in support of the income earned from the fixed deposit fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT (Appeals) erred in not considering the judicial decisions of the jurisdictional Court/ tribunal on the issue, which was placed before him; Applicability of provisions of Sec. 50C for sale of apartments 11. The Learned CIT (Appeals) erred in confirming the action of the A.O in applying the provisions of Section 50C for flats booked much earlier to the date of sale and applying the guideline value as on the date of execution of sale deed; 12. The Learned CIT (Appeals) erred in confirming the action of the A.O, by ignoring the fact that the prices were agreed and sale agreements were entered into during the time of constructions and not at the time of sale; 13. The Learned CIT (Appeals) erred in confirming the action of the A.O. without appreciating that if the prevailing guideline value on the date of sale deed is adopted for the purpose of arriving the deemed sale consideration, then the guideline value will be much more than the sale consideration. 14. The Learned CIT (Appeals) erred in not considering the judicial decisions of the jurisdictional Court/ tribunal on the issue, which was placed before him; Income from Other Sources 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR prayed for admission of additional grounds by relying on the judgment of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC) and also Gundathur Thimmappa Sons v. CIT, (1968) 70 ITR 70 (Mys). 5. On the other hand, the ld. DR strongly opposed admission of additional grounds and submitted that there is no reasonable cause for raising these grounds at this stage and submitted the same should not be admitted. 6. We have heard the parties and perused the material on record on admission of additional grounds. The additional grounds raised by the assessee being a legal issue and there is no question of investigation or examination of any new facts otherwise on the record of lower authorities. Being so, we are inclined to admit the additional grounds in view of the judgment of the Hon ble Supreme Court in National Thermal Power Co. Ltd. (supra) for adjudication. 7. The facts of the case are that the assessee is an Individual and for the AY 2012-2013 filed return of income on 30.09.2012 declaring a total income of ₹ 43,91,87,250/-comprising of following income:- Particulars Amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Sq. ft, being the builder's cost of construction. To confirm the cost of construction at ₹ 1,500/- per Sq ft, the developer issued a certificate dated 20.09.2014. However, the AO disregarded the submissions of the assessee and adopted ₹ 2,200/- per sq.ft as deemed consideration. The value adopted by the AO is based on the guideline value issued by Government of Karnataka in Notification No. CVC/BUD/5/200607 dated 17-04-2007. c) During the FY 2006-2007 and 2007-2008, the assessee and M/s Brigade Enterprises Pvt Ltd had taken booking advances from the prospective buyers and in certain cases had entered into an agreement to sell. Subsequently, on completion of project, sale deeds were executed during the FY 2011-2012 to conclude the transactions entered into by way of agreement to sell in the FY 2006-2007 and 2007-2008. As per the scheme of JDA, the assessee was entitled to 21.94% share in the revenue. The AO brought to tax an amount of ₹ 48,82,428 (21.94% share in revenue), being the difference between the value prevailing at the time of agreement to sell/booking date and guideline value at the time of execution of sale deeds. 10. Aggrieved with the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action under the ambit of capital gains, the receipt or accrual must have originated in a transfer within the meaning of section 45(1) read with section 2(47) of the Act. In the assessee s case though there is receipt in the form of super built-up area of commercial space, the receipt is originated out of the transfer which has taken place during the FY 2004-2005 via JDA dated 08-01-2004 and as such the receipt ought to have been considered in the FY 2004-2005 and not in the FY 2011-2012. 14. The Hon'ble Supreme Court of India in the case of Alapati Venkataramiah vs. CIT (1965) 57 ITR 185 (SC) held as under:- that before section 12B of the Indian Income-tax Act, 1922, could be attracted, title must pass by any of the modes mentioned in section 12B, i.e., sale, exchange or transfer. In the context transfer meant effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property could not by itself be treated as equivalent to conveyance of the immovable property 15. It was submitted that in the case of assessee, the date of transfer stands crystalized on the date of entering into the JDA coupled with GPA. In the FY 2011-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a provides that no tax shall be levied or collected except by the authority of law. The Income Tax Authority does not have an unbridled power to tax the income which is not chargeable to tax. As a corollary, if the income is not chargeable to tax, then the retention of tax paid on such income shall be breach of provisions of Article 265 of the Constitution of India. The transaction of the assessee cannot be given the color of income as it is only a subsequent event on transfer of property via JDA. The Hon'ble High Court of Bombay in the case of Nirmala L. Mehta vs. A. Balasubramaniam, C.I.T. (2004) 269 ITR 1 (Bom) held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. 20. It was submitted that the AO as well as the CIT(Appeals) have erroneously held the transaction of taking over the possession of commercial area under the head capital gains. Reliance was placed on CBDT Circular No. 14(XL-35) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f commercial space by the developer or on issuance of completion certificate by the competent authority. Section 45(5A) cannot be read retrospectively as the legislature intends to tax the capital gains from the specified agreement entered into on or after 01.04.2017. 24. The ld. AR submitted that the facts of the case in the latest decision of the Hon'ble Supreme Court in the case of Seshasayee Steels P Ltd Vs ACIT reported in 421 ITR 46 is distinguishable from the assessee's case as it was held therein that mere giving of licence to the developer could not be said to be possession within the meaning of section 53A of the Transfer of Property Act, 1882, and the developer has to get the control over the land and not actual physical occupation of land. The Hon'ble Supreme Court observed that on the date of agreement to sell the owners rights were completely intact and the further held that the assessee's right in the immovable property were extinguished on the receipt of last cheque and compromise deed could be stated to be the transaction which had the effect of transferring the immovable property in question. 25. In the case of Seshasayee Steels P Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) amounting to 40,09,49,500/- be deleted in the interest of justice. 28. On the other hand, the ld. DR submitted that the assessee has already taken possession of his share of construction area and also entered into sale agreement or sale deed with various parties in respect of commercial as well as residential space, as such there is no difference between the registration and non-registration of the JDA. Further in the FY 2004-05 relevant to AY 2005-06, it cannot be as a transfer as the condition laid down in section 2(47)(v) of the Income-tax Act, 1961 [the Act] is not complied. However, in the FY 2011-12 relevant to AY 2012-13 all the conditions laid down in section 2(47)(v) of the Act have been complied with and the assessee has also taken the constructed area of property as well as entered into sale of the same with various buyers, therefore it should be construed as transfer in the present assessment year under consideration. 29. We have heard both the parties and perused the orders of the Revenue authorities and other materials on record. The short dispute arising for consideration in this case by way of additional ground by the assessee relates to the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P : 1.1 The First Party hereby permits the Second Party to enter upon the Schedule Property for development of the Schedule Property in terms of this Agreement. 1.2 The Second Party is hereby authorized and empowered by the First Party to develop the Schedule Property and to construct Buildings therein and the First Party shall not revoke the rights so granted till completion of the development and sale except as provided in this agreement. Such permission to enter Schedule Property shall however not be construed as delivery of possession under Section 53A of the Transfer of Property Act read with Section 2(47)(v) of the Income Tax Act, 1961. The legal possession of Schedule Property by way of licence to develop the same. The Second Party shall not be entitled to possession and transfer of the proportionate share in the land in Schedule Property in part performance until completion of structure of the respective building/s. 2) PLANS / LICENCES : 2.1 The Second Party shall at their cost prepare necessary plans / drawings/ designs etc., for construction of multi-storeyed residential and commercial buildings as per building Bye-laws. Rules and regulations in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nected with the development and sale of the Schedule Property which shall be in force until Joint development and transfer of Second Party s share of land and building are completed in all respects unless otherwise revoke for reasons set out in this Agreement. In addition thereto the First Party shall sign and execute such other documents, papers and other agreements, applications that may be required by the Second Party for securing permission and licence and effectively developing the Schedule Property. However, the cost thereof shall be met and borne by Second Party. The parties shall co-operate with each other for completion and mutual success of the joint development of the Schedule Property. 2.5 The Second Party shall develop the Schedule Property comprising of residential buildings and commercial buildings and such other development as per the zoning regulations and the Second Party will be entitled to implement the developmental activity without any interruption or interference from the First Party. Based on the market conditions, the Second Party shall solely decide about the composition / proposition in which residential and commercial buildings are to be built. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction and issue of commencement certificate by Bangalore Development Authority and / or other sanctioning authorities which period does not include the time taken for obtaining of the Occupancy certificate / completion certificate from the Bangalore Development Authority or other authorities and Electrical water and sanitary connections from the respective departments. However the second party shall not incur any liability for any delay in delivery of possession of the OWNER S CONSTRUCTED AREA by reason of non-availability of Government Controlled Materials, and / or by reason of Governmental restrictions and / or civil commotio, transporters strike, Act of God or due to any injunction or prohibitory order (not attributable to any action of the Second Party) or conditions force majeure. In any of the aforesaid events, the Second Party shall be entitled to corresponding extension of time for delivery of the said OWNER S CONSTRUCTED AREA. The time taken for obtaining occupancy certificate, power / water / sanitary connections by the Second Party shall be excluded at the time of computing the period stipulated for construction. In the event of any delay in completing the constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he incomplete construction of OWNER S CONSTRUCTED AREA and provide all access and facilities and recover the entire cost incurred from Second Party. The Second Party will be liable and responsible for all the claims and demands arising out of default by second party and also the claims of persons with whom the first party would have contracted for sale of lease or transfer or otherwise pursuant to this Agreement in schedule property and second party agree to settle all such and other claims and demands and protect the first party and the schedule property therefrom and accordingly offer indemnity. In addition thereto the second party is also liable and answerable to the persons who would have dealt with them. 7.4 In the event of first party completing the balance of development under the circumstances stated above, the parties shall assess the cost of development undertaken by the second party and the first party in the first instance. The first party shall be entitled to reimbursement of the cost of development undertaken by him on account of second party and failure to complete the balance development, assess the quantum of damages suffered by the first party herein and app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions laid down in section 2(47)(v) of the I.T. Act cannot be invoked so as to bring the capital gains into tax in the assessment year 2005-2006 and thus the very foundation of the assessee s case is devoid of merits and not tenable and more so there is a specific clause in the JDA as enumerated earlier that the assessee is only permitted to give licence to the vendee to develop the Schedule Property and the legal ownership remains with the assessee and there cannot be any transfer in the assessment year 2005-2006 and it has rightly brought into taxation by the A.O. in the assessment year 2012-2013 as in the assessment year 2012-2013, the assessee received duly developed and constructed area into his possession coming into his share. Accordingly, we are not in agreement with the argument of the learned AR that the transfer took place in the assessment year 2005-2006 and has been rightly brought to tax by the AO in the year 2012-2013, since the assessment in the year 2012-2013 the assessee received duly developed and constructed area into his possession out of his share of constructed area. Thus, the additional ground raised by the assessee is dismissed. 34. Coming to the meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment has to be made. The assessee has paid the commission amount exclusively for the purchase of property and cost of acquisition includes all the expenses incurred by way of commission or brokerage towards purchase of a capital asset. The finding of the AO that tax must be deducted at source on payment of commission amount is absurd as the profits are chargeable under the head income from capital gains. The provisions contained under the head capital gains doesn't stipulate the assessee to deduct tax at source to claim commission amount as part of cost of acquisition. 39. It was submitted that the AO has irrationally held that the commission paid to M/s Bentley Investment is only afterthought and devise to reduce the taxable capital gains. It was submitted that the AO has misguided himself and has travelled beyond the scope to ascertain the facts. The assessee before the Learned CIT(Appeals) has produced the evidence in form of confirmation letter for having paid the commission amount and as such it overriders the irrational, preponderance findings of the AO to refute the genuineness of transaction. Therefore, the disallowance of the commission amount of ₹ 1 cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital receipts; and on the other hand claims to have agreed to make certain payment as commission not at the time of he acquiring the property, but only after he starts receiving the fruits of his subsequent transfer to the Developer. Obviously, the latter claim indicates that the intention of the assessee purchasing the said property was to transfer it to a Developer for the purpose of development and earning higher returns. In such case, the transaction of the assessee amounts adventure in the nature of trade, necessitating accounting such returns as business receipts. Thus, the claims of the assessee are contradictory. (c) The assessee's contention that no time limit is prescribed by the provisions of section 48(1) and 55(1)(b) of the Income Tax Act, 1961 is far-fetched for the simple reason that cost of acquisition is consideration paid for and till the time of legally recognised transfer (acquisition), while cost of improvement is cost incurred for value addition to the property from the time of legally recognised acquisition to the time of subsequent legally recognised transfer. (d) Without prejudice to the claim of the assessee following cash system of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted to reduce the taxable capital gains with similar claim that can be related to the acquisition of the property also. in this context, it needs to be noted that the assessee did not have much time left from the date of acquisition of the property to the date of transfer of the same to the Developer to car out/claim any improvement to the property, during the period of its possession by him. Hence, the only option left for reducing tax liability is to claim expenditure in relation to the acquisition itself but not to later period/events. 44. In our opinion, the above reasons given by the AO for not considering the payment of commission as cost of acquisition is not justified. The party who has received the commission payment confirmed that they have received the commission and payment has been made by cheque. The AO cannot doubt the genuineness of these payments. These payments are inextricably linked to the acquisition of the impugned property and it should be considered as cost of acquisition while determining the capital gain on entering into JDA. Accordingly, we direct the AO to consider the payment of ₹ 1 crore as part of cost of acquisition and thereafter comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment of stamp duty. Therefore, applying the provisions of section 50C is irrational as the assessee has received the constructed area in lieu of JDA and the same cannot be considered as transfer for the purpose of invoking provisions of section 50C of the Act. 49. It was further submitted that the authorities below have grossly erred in adopting the guideline value for the purpose of determining consideration with regard to the taking over of possession of commercial space. In the scheme of JDA the assessee is receiving the super built-up area of the commercial space and the full value of consideration as per section 48 of the Act is the cost incurred by the developer and not the guideline value as per section 50C of the Act. Section 50D which was introduced in statute book in the Finance Act, 2012 enumerates that when consideration received or accruing is not ascertainable, then the fair market value of the said asset on the date of transfer shall deemed to be the full value of consideration. Therefore, it can be unequivocally argued that the full value of consideration need not necessarily be the fair market value of the asset. Even the said provision cannot be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea earmarked for assessee / land owners share, as the consideration received by the assessee. The Assessing Officer estimated this consideration at ₹ 2,200 per sq.ft. being the guideline value adopted for registration by State Registration Authority. The assessee adopted at ₹ 1,500 per sq.ft. being the cost of construction incurred by the developer. First of all, section 50C of the I.T.Act have no application of this point. Section 50C of the Act is applicable only when there is actual registration of property on transfer. In this case, the assessee s share of constructed area is not the subject matter of any registration in the name of the assessee in the assessment year under consideration. The assessee is getting his share of constructed area in the developed property vide JDA dated 08.01.2004. The Assessing Officer cannot apply the guideline value by invoking the provisions of section 50C of the Act when the subject matter of developed property is not the subjected to registration in the assessment year under consideration. The Assessing Officer has to consider the cost of construction incurred by the developer on the construction of assessee s share of developed pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration at ₹ 2,22,52,725/-. The assessee s share in the sale consideration is 21.94% and accordingly, a sum of ₹ 48,82,428 (₹ 2,22,52,725 x 21.94%) was added to the agreed consideration. 56. The CIT(Appeals) confirming the additions of the AO held that booking of flats cannot be construed as transfer of flats because in many cases the buyers are susceptible to cancel the booking and more so the flats are not in existence and are not in saleable condition. 57. The ld. AR submitted that all the booking advances are received by developer M/s Brigade Enterprises through banking channel. The confirmation of booking on receiving amount through cheques, itself, is an agreement of purchase of the flat. The booking of flat coupled with the payment made by buyers in pursuant to the booking of the flat constitute an agreement. Reliance was placed upon the decision of the ITAT, Jaipur in the case of Radha Kishan Kungwani vs ITO in ITA No.1106/JP/2018 dated 19/08/2020, held as under:- Thus, even if there is no separate agreement between the parties in writing but the agreement which is registered itself shows that the terms and conditions as contained in the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submission. We find that there is no dispute on these facts that Agreement of sale was entered on 12.08.1995 because this fact is noted by CIT (A) also in Para 5.3 of his order dated 05.01.2016 in the case of Shri V. M Harikrishna. In the same para of his order, this is also noted by CIT (A) that against the agreed sale consideration of ₹ 15 lacs for 1/3rd share, total value ₹ 45 lacs, an amount of ₹ 7.03. Lacs was received as advance and the details of this amount of ₹ 7.03 lacs is available in the said Agreement of sale as noted above. In the light of these facts, when we examine the applicability of these two tribunal orders cited by the learned AR of the assessee having been rendered in the case of Bharathi Dev Anandani vs. ACIT (Supra) and in the case of M/s Universal Power Transformer Pvt. Ltd. Vs. DCIT (Supra), we find that these are squarely applicable and since the evidence about receipt of part sales consideration by way of Account Payee Cheques before the date of sale deed is also available in the present case as discussed above, we do not feel any necessity to remand the matter to AD. Respectfully following these tribunal orders, we hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2007-2008. In such circumstances, the guideline value prevailing in the financial year 2011-2012 could not be applied to the agreement entered into earlier assessment years. In all fairness, the guideline value prevailed in the relevant assessment year to be considered as a consideration so as to bring the capital gains into taxation. Since there is no dispute regarding the fact that the agreement for sale of flats were entered into the financial years 2006-2007 and 2007- 2008, right over such flat has been transferred from the assessee to the respective purchasers. The only pending was the actual registration of sale deed. In other words, by way of sale agreement, the right in persona is created in favour of the purchaser. When such a right is created in favour of the purchaser and the assessee is refrained from selling such flats to someone else because the purchaser of the flat in whose favour right in persona is created, has legitimate right to enforce such specific performance on the agreement if the assessee-vendor have some reason or other reason has not executed the sale deed. Thus, by virtue of agreement to sale, the same right is given to the respective buyers by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding balance was only ₹ 1,005 and the entire payment was made by cheque and the same was mentioned in the Sale Deed dated 9.3.2007. Further, the possession of property was also handed over to the Purchaser mentioning Sale Agreement as on 8.3.1993. It is also brought on record that this property has been mentioned as address of R.K. Sipani as evident from Form 32 filed by Sipani Automobiles Ltd. before ROC on 17.12.1996. Further Katha of said property has been transferred on 9.2.2000 in the name of M/s. KPCBPPL. Thus, the major payment of ₹ 9,79,455 was received by the assessee vide Sale Agreement dated 8.3.1993 which was much before the Sale Deed executed on 9.3.2007. As observed earlier, section 50C provides that where the consideration received or accruing as a result of transfer by an assessee of a capital asset, being land or building or both, if less than value adopted or assed by any authority for the purpose of stamp duty in respect of such transfer, the value adopted or assessed shall for the purpose of section 48 be deemed to be the full value of consideration. The question before us is, what could be the full value of such consideration i.e., whether value on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the parties vide Sale Agreement dated 8.3.1993 and possession of property has already been handed over on 24.10.1989. Therefore, transfer has taken place vide Sale Agreement dated 8.3.1993 and full value of consideration for the purpose of computing long term capital gain in the hands of the assessee has to be adopted on the basis of guidance value of this property as on the date of Sale Agreement only, not on the date of Sale Deed dated 9.3.2007. Accordingly we allow the grounds taken by the assessee as there was no applicability of section 50C in the year 2007-08. 62. Accordingly, we direct the A.O. to consider the guideline value of the impugned residential flats as in the financial years 2006-2007 and 2007- 2008 as the sale agreement are entered in the earlier assessment years and not in the assessment year 2012-2013. Taking the consistent view, we allow the ground of appeal of the assessee. 63. The last ground is that the CIT(Appeals) erred in confirming the action of the AO with regard to treatment of interest on fixed deposits which was prematurely closed and interest paid was reversed on premature closure of fixed deposits. 64. The ld. AR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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