DCIT Vs Muppala Bhasker Reddy (ITAT Bangalore)
The next question is how to appropriate the sale consideration for the transfer of land and building if a lump-sum monetary consideration is received by the transferor from the transferee when the transfer is effected through a single conveyance deed. As per section 50C as amended by the Finance Act 2009, where the consideration received or accruing as a result of transfer of land and/ or building is less than the value adopted or assessed or assessable by an authority of the State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gains. In all the registered conveyance deeds, wherein transfer of land and building is involved, an Annexure is appended or there are documents wherein the market values are furnished for the land and the building separately for the purpose of stamp duty valuation. The market value of the immovable property transferred as indicated in the sale deed will be equivalent to the actual sale consideration received by the transferor from the transferee. If this value exceeds the value adopted or assessable by the Registration Authority for stamp duty purposes, the said sale consideration as appropriated to land and building as per Annexure or other documents attached with the registered sale deed could be adopted for the purpose of computing the capital gains. If the sale consideration is lesser than the value adopted or assessable by the Registration Authority for stamp duty purposes, then such value so adopted by the Registration Authority as appropriated between the land and building could be adopted as deemed sale consideration for the respective assets for the purpose of computing the capital gains.
20. We are of the view that it would be just and appropriate to direct the AO to examine the issue afresh in the light of the directions as given above.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal by the Revenue against the order dated 21.01.2019 of CIT(A)-1, Bengaluru, passed under section 143(3) of the Income Tax Act, 1961 (hereinafter called ‘the Act’), relating to Assessment Year 2015-16.
2. The main issue that needs adjudication in this appeal is as to whether the Revenue authorities were justified in holding that the assessee is entitled to deduction under section 54F of the Act on the long-term capital gain on sale of property of the assessee under Joint Development Agreement (JDA) as against the claim of the Revenue that the income in question has to be assessed under the head “Income from Business”. The following are the grounds of appeal raised by the Revenue:
1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case.
2. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in deleting the disallowance of the deduction claimed under section 54F of the Income Tax Act, 1961 for an amount of Rs.4,48,10,155/- on the ground that nature of transaction in the instant case attracts capital gains and not business income.
3. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in holding that the assessee did not exploit the asset for commercial benefit ignoring the fact that the Joint Development Agreement was entered with the “sole Intention” of profit maximisation.
4. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in deleting the disallowance of the deduction claimed under section 54F of the Income Tax Act, 1961 by holding that the assessee did not venture into activities which were similar to adventure in nature of trade.
5. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in directing the A O to allow the deduction under section 54F of the Income Tax Act, 1961 for an amount of Rs.4,48,10,155/- without examining the fact that the said asset was never held as a long term capital asset.
6. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the Ld. CIT (A) be reversed and that of the Assessing Officer be restored.
7. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of appeal.
3. The assessee is an individual. The assessee along with Ms. Bejawada Swarupa purchased property measuring 1 acre in survey No.102/1, situated at Harlur Village, Varthur Hobli, Bangalore South Taluk, (hereinafter referred to as ‘the property’) under a sale deed dated 28.03.2005. On 31.03.2006, the assessee and Ms. Bajawada Swarup along with two others Mrs. Janki and Mr. Muppala Sudhakar Reddy, entered into a deed of partnership under which they agreed to carry on the business of purchase of immovable properties and dealing with the same for construction, development, marketing, maintenance, etc., under the name and style M/s. Sri Harsha Developers. It is not in dispute that the property purchased by the assessee along with M/s. Bejawada Swarupa in the year 2005 was not brought in firm as property of the firm. In fact, the firm did not do any business whatsoever right from the date of its formation. The assessee and Ms. Bejawada Swarupa entered into a JDA on 11.11.2010 with Mr. T. Krishna Reddy whereby the property was given on a JDA basis to the developer. The Assessee and Ms.Bejawada Swarupa were to get 40% of the built up area. As between the Assessee and Ms.Bejawada Swarupa, they were to get built up area under the JDA, of 39,208 sq.ft. and 16,781 sq. ft. respectively. The assessee had 70% share in the property and Ms. Bejawada Swarupa had 30% of share in the property.
4. During the relevant previous year, the assessee sold the following flats and received the following sale consideration:
