N.A. Haris Vs Add. CIT (ITAT Bangalore)
In this case, there is no dispute that the agreement to sale the impugned residential flats were entered into financial years 2006-2007 and 2007-2008. There is no dispute for this fact. Now the contention of the assessee is that for determining guideline value by invoking the provisions of section 50C of the Act, it should be considered the year in which the assessee entered into the agreement and not the year in which the sales were effected in view of the proviso to section 50C(1) of the Act, which was inserted by the Finance Act, 2016 with effect from 01.04.2017, which reads as under:-
“Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer.”
The contention of the learned DR is that this provision is only prospective and not retrospective and cannot be applied to the assessment year 2012-2013. As discussed earlier, the sale agreement actually entered in the financial years 2006-2007 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 20072008, 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 assessee, being the vendor. There is encumbrance created over the flats in favour of the respective flat purchasers. Since there is a gap between the date of execution of sale agreement and sale deed and if the guideline value changes, the guideline value as on the date of agreement has to be considered as the full value of the consideration of the capital gains. In the present case, since enforceable agreement was entered in the financial years 2006-2007 and 2007-2008 and for the purpose of computation of capital gains in the hands of the assessee, the A.O. has to be adopted the guideline value as on the date of sale of the agreement and not on the date of sale deed.
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.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order of the CIT(Appeals) dated 03.01.2018 for the assessment year 2012-13.
2. The assessee has raised the following grounds:-
“1. The order of Learned CIT (Appeals) is erroneous, both on facts and on law.
Commission payment as part of cost of Acquisition
2. The Learned CIT (Appeals) erred in not adjudicating on this issue, even though a specific ground of appeal was taken in this regard;
3. The Learned Assessing Officer erred in not considering that the commission was paid to the agent who negotiated on behalf of the appellant for purchase of the property and as such was a genuine payment;
4. The Learned Assessing Officer erred in not considering that the provisions of law relating to cost of acquisition and cost of improvement does not specify any time frame for making such payments, as mentioned.
Sale Consideration — Commercial Space
5. The Learned CIT (Appeals) erred in confirming the action of the A.O in adopting the Guidance Value for computing capital Gains for commercial area;
6. The Learned CIT (Appeals) erred in confirming the action of the A.0 in adopting the Guidance Value, without appreciating that the transaction in a Joint Development Agreement is one of exchange of asset and hence the value as incurred by the developer will be the cost of construction and not the market value
7. The Learned CIT (Appeals) erred in confirming the action of the A.O in adopting the Guidance Value, without appreciating that 21.94% transfer of land was against 78.06% construction of building and as such cost of construction should have been considered;
8. The Learned CIT (Appeals) erred in confirming the action of the A.O in adopting the Guidance Value, without appreciating that the cost of construction of flat by the builder is equivalent to the cost of acquisition of flat by the appellant.
9. The Learned CIT (Appeals) erred in not adjudicating on the above issues, raised before him;
10. The Learned 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. The Learned CIT (Appeals) erred in confirming the action of the A.0, without appreciating that the appellant had prematurely closed the fixed deposit and the interest paid was reversed on premature closure of Hi
16. The Appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing.
For these and such other reasons that may be urged at the time of hearing, it is respectfully prayed that the Hon’ble Tribunal be pleased to pass orders granting such relief as it may deem fit in the interest of equity and justice.”
3. The assessee has also filed petition for admission of additional grounds under Rule 11 of the ITAT, Rules, 1963 as follows:-
“a) The Learned CIT(Appeals) as well as the authorities below erred in law and facts in holding that the Sale Consideration amounting to Rs. 40,09,49,500/- is chargeable to tax in the AY 2012-2013 even though there is no transfer of capital assets as per the provisions of section 2(47) of the Act.
b) The Learned CIT(Appeals) as well as the authorities below ought to have appreciated the fact that in the financial year 2011-2012 relevant to the assessment year 2012-2013 the developer has partially handed over the possession of commercial and residential built-up area in lieu of land transferred as per the scheme of JDA dated 08-01-2004 and it cannot, ipso facto, be construed as transfer as per provisions of section 2(47) of the Act.
c) The Learned CIT(Appeals) as well as the Authorities below erred in not following the instructions contained in CBDT Circular No. 14 dated 11.04.1955, wherein the subordinate authorities are bound to assess the correct income as per Law despite the fact that the appellant had inadvertently offered to tax the capital gains on receiving the possession of super built up area in lieu of land transferred as per the scheme of JDA, as the transaction per se cannot be construed as transfer within the meaning of section 2(47) of the Act.”
4. The ld. AR stated that these are legal grounds arising out of the orders of lower authorities which were inadvertently not raised before the lower authorities and the same may be admitted since there is no involvement of examination or investigation of any facts otherwise on the record of the department and the issues involved goes to the very root of the validity of assessment. Therefore, 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 Rs.43,91,87,250/-comprising of following income:-
