TMI Blog2022 (5) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... ual transfer of land and assessee has not received any consideration also. It is also observed from the copies of the returns of Income filed by the assessee in the paper book, that the assessee has shown Long Term Capital Gain from sale of the impugned land in subsequent years as and when the assessee has received consideration. Assessee has also paid Tax on the said Long term capital gain. Therefore, in the facts and circumstances of this case it is held that there is no capital gain chargeable in AY 2012-13 on the impugned Joint Development agreement. Thus ground number 1 is allowed. Whether the appellant has converted the land into stock-in-trade as claimed? - It is an admitted fact that assessee could not demonstrate conversion of land into stock-in-trade by showing entries in the books of accounts. As per accounting, whenever land is converted into stock-in-trade, it shall appear as closing stock at the end of the year in which it was converted into stock-in-trade. In the case of the assessee it should have appeared as closing stock for the A.Y. 2012-13 and 2013-14. However, we have verified from the profit and loss account filed by the assessee in the paper book that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visaged u/s 2(47) of the Income Tax Act, in the previous year relevant to Assessment Year 2012-13 under consideration and no Capital Gains have arisen in Assessment Year 2012-13 in respect of the Joint Venture Agreement dated 28-09-2011. 2. The Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that nopossession of the land was given, and no sale consideration was received and no final sale deed was executed in the previous year relevant to Assessment Year 2012-13 under consideration. 3. As the assessee has duly declared the Capital Gains, arising in respect of land given for development under the Joint Venture Agreement, in Assessment Years 2013-14 to 2017-18, subjecting the Capital Gains to tax in Assessment Year 2012-13 also, amounts to double taxation. Accordingly without prejudice, if the contention raised by the assessee that Capital Gains on transfer of land has not arisen and is accordingly not taxable in Assessment Year 2012-13, is not accepted by the Hon ble Income Tax Appellate Tribunal it may issue directions to the Assessing Officer to exclude the Capital Gains from the income assessed for Assessment Years 2013-14 to 2017-18 in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of stamp duty and registration charges. 3.1 Appellant s case was selected for scrutiny assessment. Notice u/s 143(2) dated 02.09.2014 of the I.T Act was served on the assessee. Subsequently, notice u/s 142(1) was also served. Appellant filed written submissions dated 29.12.2014 before the Assessing Officer. The assessment order was passed on 03.03.2015 after considering the appellant s submissions and after hearing the Authorized Representative of the appellant. It is mentioned in the assessment order that the appellant sold land at Wagholi, Gat No.743 on 28.09.2011 for Rs.4,21,38,000/-. In this sale consideration assessee s share is 1/3rd which works out to Rs.1,40,46,000/-. Since it was ancestral land, for calculating long term capital gain, the assessee had considered cost of acquisition for the said land as fair market value of the land was on 01.04.1981. Appellant-assessee worked out long term capital gain of Rs.1,03,81,628/- and claimed the deduction of Rs.1,03,81,628/- u/s 54F of the I.T. Act.During the assessment proceedings, appellant-assessee submitted that he will be getting 6 flats and accordingly claimed 54F for all the 6 flats. Assessing Officer, in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. (iii) As evident from the above, the impugned section provides that on conversion of a capital asset into stock-in-trade, the capital gain earned on conversion as well as the profit on account of sale of the converted stock in trade will be chargeable to tax in the year of sale under two heads. First, under the capital gain head and second under the business profit head. For the purpose of claiming this benefit, the appellant was required to make such claim in the return income itself or even by filing revised return of income. However, such claim is made after a gap of three years which is nothing but an apparent case of afterthought, which is fabricated to avoid the tax liability in the year under consideration. The appellant had the knowledge of violation of section 54F with regard to taxation of capital gain on remaining 19 flats hence the impugned method was adopted to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise transferred. 4.1 The stock-in-trade in the shape of land has not been sold or otherwise transferred in Assessment Year 2012-13. 4.2 It is respectfully submitted that even otherwise the Capital Gains was not chargeable in Assessment Year 2012-13 even in respect of Joint Venture Agreement dated 28-09-2011, because: (a) At the time of entering into the Joint Venture Agreement and issuing the irrevocable power of attorney, the co-owners have however not given the possession of the land to the developers. As per clause (n) on page 10 of the Joint Venture Agreement the developers have been allowed to enter the property only to carry on the development work. (b) As per the Joint Venture Agreement, the co-owners were to receive 53,200 sq. ft. of the constructed area in the shape of flats, as sale consideration for the transfer of land. Subsequently, the constructed area to be received by the co-owners was increased to 57,690 Sq. Ft. The assessee was entitled to receive 19,230 sq. ft. of the constructed area as his 1/3rd share. The sale consideration in the shape of the constructed area was received in Assessment Years 2013-14 to 2017-18. (b) As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings before the Assessing Officer, the assessee however could not raise the issue of non-chargeability of the said capital gains, in Assessment Year 2012-13 mistakenly declared by him in the return of income. 8.1 During the assessment proceedings, the assessee has however inter-alia filed the copy of the Joint Venture Agreement before the Assessing Officer, vide letter dated 05-03-2015. 8.2 Nevertheless specific grounds of appeal (Ground No s.3 to 10) were raised before the Commissioner of Income Tax (Appeals), pleading that the capital gains was wrongly/mistakenly declared in the return of income and that no Capital Gain was chargeable in Assessment Year 2012-13. 8.3 The Ld. Commissioner of Income Tax (Appeals) has rejected these pleas of the assessee and the relevant ground Nos 3 to 10 have been dismissed. 9. The assessee has challenged the impugned order of the Commissioner of Income Tax (Appeals) before the Hon ble Income Tax Appellate Tribunal, in this regard, by way of very elaborate, descriptive and complex grounds of appeal. 11.1 It is respectfully submitted that there is no estoppel against the law. A rightful claim can be made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Rs.4,02,72,057/- declared in A. Ys. 2013-14 to 2017-18 in the returns of income filed by him. A table in this regard is placed at Page No. 117 of the Paper Book. This fact was clearly brought to the notice of the CIT(A) by the assessee in his written submissions filed before the CIT(A). Relevant portion of the same is reproduced by the CIT(A) on Page 8 of his order. Till the appeal stage before the CIT(A), as mentioned in the said written submissions, the returns of income have been filed for A. Ys. 2013-14 to 2015-16, and the details of the assessment year wise taxes paid on the business income and the capital gains, were furnished before the CIT(A). The copies of his returns of income are placed from Page 4 to Page 20 of the Paper Book. The returns of income for A. Ys. 2016-17 and 2017-18 were filed subsequently to the proceedings before the CIT(A). The copies of these returns are placed from Page No. 21 to 30 of the Paper Book. 11.3 Although the value of the land converted into / treated as stock in trade exceeded Rupees One Crore, the assessee had not filed the Tax Audit Report u/s 44AB of the Income Tax Act as he was not properly advised in this regard. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the land and the assessee has given the consent for the same, this clause however, does not in any way have the effect of completing the sale or transfer otherwise of the land in favour of the builder. As per the joint development agreement and the power of attorney, the builders have to complete the construction of the project as per the plans approved by the Municipal / Gram Panchayat Authorities, in accordance with the provisions of the Development Control Rules and Regulations, the Bombay Provisional Municipal Corporations Act, 1949 and the Maharashtra Regional Town Planning Act 1966, (reference clause A and E of the terms and condition of the Joint Development Agreement). The eventuality of selling the F.S.I. / T.D.R. if any remains available will arise only after completion of the project as per the aforementioned regulations. Moreover, the clause concerning the consent given by the assessee to the builders for sale of the F.S.I / T.D.R. is a standard clause in all the Joint Development Agreements. This cannot be taken to mean that the sale or otherwise transfer of the land has taken place in A. Y. 2012-13. 11.5 Even if it is considered that the land was not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Balbir Singh Maini[2017] 86 taxmann.com 94: 251 Taxman 202: 398 ITR 531 : 298 CTR 209 (SC). It is respectfully submitted that the Hon ble Supreme Court in this judgment has held that, there are three necessary ingredients to constitute transfer under a joint development agreement i.e., there has to be a contract between the owner and the developer, that the possession of the land should have been given to developers and some real income should have arisen to the land owner. The Hon ble Supreme Court has further held that in order to constitute transfer under a joint development agreement, there should be a transfer of title in substance in favour of the developer and the developer should be able to enjoy the property as its owner. The Hon ble Income Tax Appellate Tribunal, Pune has taken similar view in the case of Shri Deepak Shivram Pathare ITA No. 779/PUN/2014, (Annexure R of the compilation of the Judgments) and Dr. Arvind S. Phadke (2014) 46 taxmann.com 335 (Pune Trib.) (Annexure I of the compilation of the Judgments), which have been approved by the Hon ble Bombay High Court in the case of Dr. Arvind S. Phake (2018)89 taxmann.com 307 (Bombay)(Annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted that there is a capital gain on transfer of land. The appellant assessee has also accepted the valuation done by Stamp Duty Officers. The ld.DR further argued that at this stage, assessee cannot raise the ground that capital gain is not taxable in A.Y. 2012-13. The ld.DR submitted that by offering the capital gain in the return of income, assessee has precluded the AO from any investigation. Therefore, ld.DR submitted that assessee s claim cannot be entertained. 7.1 The ld.DR submitted regarding the claim of the assessee about conversion of land into stock-in-trade that assessee has never made his claim before the AO. The ld.DR invited our attention to the return of income, profit and loss account filed by the assessee which was part of the paper book of the assessee. The ld.DR submitted that the profit and loss account does not contain any closing stock for A.Y. 2012-13, A.Y. 2013-14, if assessee has converted land as stock-in-trade, then it should have appeared as closing stock. But there is no closing stock. The ld.DR further submitted that since value of the land is more than Rs.1 crore, which should have appeared as closing stock and assessee should have submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Maini. Hon ble High Court observed that the facts needs to be ascertained in each case. The Appellant assessee has filed copy of JDA (page 32-77) including English translation. As per clause k of the said JDA , the owner has agreed to transfer the impugned property by sale deed in the name of proposed Co-Operative society and/ or in the name of individual prospective buyers. As per the said JDA the owner has only granted right to Developer to enter the impugned property for the purpose of development. As per JDA, the developer has given Rs.1 crore as deposit. No other consideration paid. It transpires from the JDA that there is no actual transfer of land and assessee has not received any consideration also. It is also observed from the copies of the returns of Income filed by the assessee in the paper book, that the assessee has shown Long Term Capital Gain from sale of the impugned land in subsequent years as and when the assessee has received consideration. Assessee has also paid Tax on the said Long term capital gain. Therefore, in the facts and circumstances of this case it is held that there is no capital gain chargeable in AY 2012-13 on the impugned Joint Development ..... X X X X Extracts X X X X X X X X Extracts X X X X
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