Pankaj Enterprises Vs JCIT (ITAT Mumbai)
Held that as per the agreement there was only permissible possession given to the developer and the same cannot be treated as transferred under section 2(47)(4).
Facts-
The assessee is a partnership firm and during relevant years shown income under various heads including “income from house property” and “income from other sources”. The assessee disclosed LTCG of ₹21,08,973/- on the sale of development rights of a plot of land. The assessee treated total sale consideration on transfer of interest in Development Agreement (DA) based on the cost of constructed area at 42% of ₹5,46,27,440/- including ₹4,28,96,000/- for allowing loading of TDR, which was claimed as exempt.
AO held that taxability of the capital gain arises in AY 2009-10 as possession of the land was given to the developer in previous year corresponding to AY 2009-10. He rejected the computation of LTCG and assessed the same on protective basis. The assessment for AY 2009-10 was reopened. AO assessed capital gain at ₹9,37,03,413/- on substantive basis.
CIT(A) partly allowed the appeal by holding that capital gain is taxable in AY 2012-13 rather than AY 2009-10. Being aggrieved both assessee and revenue has preferred the present appeal.
Conclusion-
Held that it was clear from the agreement that possession was permissible possession and the developer was not authorised to exercise the right as owner thereof and enjoy such plot of land without interference on the part of the owner. In such circumstances, provisions of section 2(47)(4) are not attracted.
Hon’ble Supreme Court in the case of Seshasayee Steel (P) Ltd has held that permission is not possession under section 53A of the transfer of property Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These appeals by the Revenue and the assessee and the cross-objection by the assessee are directed against two separate orders passed by the Ld. CIT(Appeals)-37, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2012 -13 and 2009-10 respectively. Since the issue in dispute involved is common in both the assessment years, therefore these appeals and cross objection s have been heard together and disposed off by way of this consolidated order for convenience.
2. In these appeals, year of taxability on transfer of development rights in a plot of land as well as quantum of long-term capital gain thereon, have been disputed. The assessee offered the long-term capital gain on transfer of part interest in plot of land under development agreement in assessment year 2012 -13, whereas according to the Assessing Officer the transfer took place in previous year corresponding to assessment year 2009 -10 and therefore he has assessed the long-term capital gain on substantive basis in assessment year 2009 -10 and on protective basis in the assessment year 2012 -13. We find that assessment year 2012 -13 has been assessed first and thereafter assessment year 2009 -10 has reopened. The Ld. CIT(A) has also decided the issue in assessment year 2012-13 and therefore facts have been elaborated in assessment year 2012 -13, accordingly firstly, we are taking up the appeal and cross objection for assessment year 2012 -13 for adjudication. The grounds of the appeal of the Revenue in ITA No. 4876/Mum/2017 are reproduced as under:
1. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax(Appeals) has erred in not considering the fact that Sec. 2(47) (v) with Sec 53A of the Transfer of Property Act, 1882 clearly states that once ingress to the property is handed over to the transferee i.e. Vidhi Enterprises, the provisions of Sec 53A of Transfer of Property Act are attracted. In this case, clause 9B, 22(b) and 26 of the DA clearly establish that the Developer had complete access to the property and that he was liable for the actions thereon. Therefore, transfer has been effected in AY 2009 – 10 and not AY 2012-13.
2. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax(Appeals) has erred in not considering the fact the amount arrived at for calculating the consideration on registration of DA was based on the Stamp Duty paid which is a clear indication of the value attributed by the Land Revenue Department of the State Government at of Rs.18,74,74,699/- on transfer of the land and therefore the question of TDR
3. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax(Appeals) has erred in dividing the TDR /FSI and original plot bifurcation for the calculation of capital gains stating 50 C is not applicable on TR. However, the amount arrived at for calculating the consideration on registration of DA was based on the Stamp Duty paid which is a clear indication of the value attributed by the Land Revenue Department of the State Government at of Rs.18,74,74,699/- on transfer of the land and therefore the question of TR does not arise.
3. The sole ground raised in cross-objection by the assessee in CO No. 312/Mum/2018 in respect of the appeal of the Revenue has been withdrawn vide letter dated 15/06/22, therefore, same is dismissed as infructuous .
3.1 The assessee has also filed appeal separately for assessment year 2012-13 whi 3773/Mum/2017 and as under: has been registered as ITA No. the grounds raised in which are reproduced as under:
1. Ld. CIT(A) erred in holding that cost of construction of 42% of the area exchanged for transfer of appellant’s right under Development Agreement, being computed at 42% of Rs.18,74,74,699/- i.e. Rs.7,87, 73,911/-, without properly considering the components of cost of construction as determined by District Valuation Officer in its valuation report. Such cost of construction is consisting of:
