Raju Shantaram Mandavkar Vs ITO (ITAT Mumbai)
Conclusion: Long term/short term capital gain is liable to be assessed when the income will accrued to assessee for the relevant period.
Held: Assessee was basically contractor for carrying on business under the name and style M/s. P Construction. During proceedings, AO found that assessee had entered into a development agreement with M/s. V Associates on 07.07.2009 upon the market value of the property of Rs.32,66,000/- for the purpose of registration stamp duty. AO assessed this consideration under the head ‘short-term capital gain’. Assessee argued that the transaction was liable to tax in the A.Y. 2015-16 only when assessee received the flat, therefore, assessing the short term capital gain in the present assessment year was wrong against law and facts, therefore, the same was liable to be set aside. In the case of M/s. Bindusaria properties Pvt. Ltd. Hyderabad Vs. ACIT Central Circle-4, Hyderabad in ITA. No.157/Hyd/2011 dated 04.04.2014 and CIT Vs. Balbir Singh Maini Civil Appeal No.15619 of 2017 (Arising Out of SLP (Civil) No. 35248 of 2015), dated 04.10.2017, it was held after the accrual of consideration, the capital gain was liable to be assessed in the hands of assessee and income from short term capital gain/long term capital gain was only liable to tax when it accrued to assessee. In the present case, assessee in pursuance of execution development agreement dated 07.07.2009 received no consideration if any. In view of law mentioned above, it was concluded that long term/short term capital gain is liable to be assessed when the income will accrued to assessee. It is settled law that it is the real income that is to be taxed and not the hypothetical income.
FULL TEXT OF THE ITAT JUDGEMENT
The assessee has filed the present appeal against the order dated 14.12.2015 passed by the Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2010-11.
2. The assessee has raised the following grounds: –
“1.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the appellant is liable to pay capital gain tax
2. Whether on the facts and in the circumstances of the case and m law the Ld. CIT(A) was justified in holding that the transfer of asset has taken place as per section 2 (47) of the Income tax Act, 1961 r.w.s 53A of the Transfer of Property Act, when, in fact, there is no such transfer, hut, handing over of property for development in lieu of some construed portion to be received in future.
3. Whether on the facts and in the circumstances of the case, the Ld. CJT(A) was justified in concluding that the appellant had transferred the property situated at Badlapur during the previous year relevant to the assessment year 2010-11
4. Whether on the facts and in the circumstances of the case, the Ld. C1T(A) was justified m holding that the action of the AO not allowing registration and other expenses capitalized by the assessee. is correct
5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in holding that capital gain has arisen as per section 45 of the Income tax Act, 1961.
6. Whether on the facts and in the circumstances of the case, the assessee is not hearing deprived of doling exemption u/s 54F of the income tax Act, 1961.”
3. The brief facts of the case are that the assessee filed its return of income declaring total income to the tune of Rs.10,19,000/- on 15.10.2010. The return was accompanied by statement of total income, audited Trading, Profit & Loss account, capital account and Balance-sheets along with tax audit report in prescribed Form No. 3CB & 3CD and enclosures thereto. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case was selected for scrutiny under CASS. Notices u/s 143(2) & 143(2) of the Act were issued and served upon the assessee. The assessee was basically contractor for carrying on business under the name and style M/s. Prathamesh Construction. The assessee’s work includes collection of garbage from the houses and also from the streets and to dump the same in the dumping area. The assessee was also the partner in M/s. Neha Construction, Badlapur. The assessee had shown the purchase of plot at Belvali, Ambernath in sum of Rs.5,25,000/-. The source of acquisition was not on record. The notice was given. The assessee replied that the assessee purchased the plot on 08.07.2008 in sum of Rs.5,25,000/- and the assessee purchased the said plot along with Shri Arun Tamboli & Shri Sharad Gaikwad, therefore, the assessee was having his share to the extent of 1/3rd in the said property. Subsequently, the assessee along share-holder handed-over the possession of the land to the M/s.Vastusiddhi Associates, Kalyan in view of the Development Agreement dated 07.07.2009. The Assessing Officer noticed that the contention of the assessee is not supported by documents because the sale-deed dated 04.02.2009 obtained from sub-registrar speaks about that the assessee purchased the flat along with share-holder in sum of Rs.13,00,000/- and the assessee’s shares comes to the tune of Rs.4,33,333/-. The assessee entered into the development agreement dated 07.07.2009 in sum of Rs.32,66,000/- with M/s.Vastusiddhi Associates, Kalyan for the construction of the flats and agreement was executed between parties on 07.07.2009 for development of the building as per the approval given by authorities by virtue of certificate dated 06.04.2009. Since the assessee entered into the development agreement with M/s.Vastusiddhi Associates, Kalyan on 07.07.2009 upon the market value of the property of Rs.32,66,000/- for the purpose of registration stamp duty, therefore, the Assessing Officer assessed this short term capital gain in following manner.: –
