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Sri. V. Pushparaj, Bangalore vs Assessee on 5 June, 2012

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This appeal by the assessee is directed against the order of the Commissioner of Income Tax

(Appeals)-I, Bangalore dated 15.2.2011 for Assessment Year 2007-08.

2. The facts of the case, in brief, are as under :

2.1 The assessee filed his return of income for Assessment Year 2007-08 on 22.6.2007 admitting

total income of Rs. 2,66,127. The return of income was processed under section 143(1)  of the

Income Tax Act, 1961 (herein after referred as 'the Act') and the case was taken up for scrutiny by 

issue of notice under section 143(2)  on 25.8.2008. The Assessing Officer completed the

assessment by an order under section 143(3) of the Act on 30.12.2009 determining the income of 

the assessee at Rs. 20,94,883. This was ITA No.686/Bang/11 inclusive of Short Term Capital

Gains (STCG) attributable to the share of the assessee, being 50% arising out of the Joint

Development  A greement (JDA) dt.2.6.2006 entered into by and between the assessee and the

Developers M/s. S.V. Developers in respect of   land bearing Survey No.115/2, B. Narayana Pura

 Village, K.R. Hobli, Bangalore East Taluk measuring 10 guntas, equivalent to 10,890 sq. ft.

 According to the terms of the JDA, the assessee was entitled to 12 flats with corresponding 12 car

parking slots, being 45% of the built up area in lieu of transfer of 55% of the undivided portion of 

the vacant land in favour of the developers for construction of 16 flats with an equal number of 

parking slots. Thus the total number of flats agreed to be constructed were 28 out of which the

assessee was entitled to get 12 flats with equal number of parking slots and the developer was

entitled to the remaining 16 flats with equal number of parking slots. The assessee received a

non-refundable deposit of Rs. 15 lakhs. Apart from this deposit, the assessee had not received any 

other consideration in the relevant period. The Assessing Officer held that the transfer of 55% of 

the land in favour of the developer was a deemed transfer under section 53A   of the Transfer of 

Property Act, 1882 rws 2(47)(v) of the Act and the same was exigible to levy of Capital Gains Tax

in the year in which the JDA was entered into. According to the Assessing Officer, as the JDA was

entered into on 2.6.2006, accordingly the assessee was liable for levy of Capital Gains in the

period relevant to Assessment Year 2007-08. In support of his finding, the Assessing Officer

placed reliance on the decision of the Hon'ble High Court of Bombay in the case of Chaturbhuj

Dwaraka Das Kapadia V. CIT  (2003) 260 ITR 491. In order to quantify the amount of 

consideration for the purpose of Capital Gains, the Assessing Officer relied on the guidance value

prescribed by the State Government authorities as communicated by the Sub-Registrar in

response to information called for by the Assessing Officer under section 133(6) of the Act and on

the basis of the value of Rs. 400 per sq. ft. communicated by the Sub- Registrar valued the

deemed consideration of the undivided portion of land at Rs. 23,96,000 as per section 50C of the

 Act.

2.3 The learned CIT(A) did not accept the contentions of the assessee and held that the Capital

Gains arising out of the Joint Development  Agreement  are chargeable to tax in view of the

decision of the Hon'ble High Court of Bombay in the case of Chaturbhuj Dwaraka Das Kapadia

(supra). The learned CIT(A) also held that the non-refundable deposit of Rs. 15 lakhs is

chargeable to tax for the reason that the cost of 12 flats and 12 parking slots constructed on 45%

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of the land by the developer is not commensurate with 16 flats and 16 parking slots constructed

on 55% of the land of the Joint Developer and that it may therefore indirectly be said that Rs. 15

lakhs represented the cost of sale of 4 flats with 4 parking slots by the assessee to the

developer/builder. The assessee's appeal was disposed off allowing the assessee marginal relief of 

Rs. 5,21,433 on account of recomputation of capital gains by taking the cost of acquisition of the

property at Rs.

ITA No.686/Bang/11 13,62,800 as per the purchase deed in place of Rs. 4,33,614 estimated by the Assessing Officer.

3.1 Aggrieved by the order of the learned CIT(A), the assessee is before us. The grounds of appeal

raised are as under :

" 1. The appellate order dt.15.2.2011 is opposed to law and facts of the case in so far as

it is opposed to the interest of the appellant.

2. The learned Commissioner of Income Tax (Appeals)-I, Bangalore ought to have not

held that the Short Capital Gains are chargeable to tax for the Assessment Year 2007-

08 within the ambit of section 45(1)  of the Act in respect of the deemed transfer of 

55% of the land in favour of the Developer in the Scheme of Joint Development Agreement, dated 2.6.2006.

5. The learned Commissioner of Income Tax (Appeals)-I, Bangalore ought to have not

held that the case for the Assessment Year 2007-08 was selected for scrutiny merely 

on the submission of the Assessing Officer without any corresponding evidence on

record to justify the selection for scrutiny within the parameters of the scrutiny 

guidelines.

6. The appellant craves leave to add, alter, amend and delete any of the grounds at the

time of hearing.

For these and other grounds that may be urged at the time of hearing, it is respectfully 

prayed that your Hon'ble Authority be pleased to pass orders directing the Assessing

Officer to delete the additions made in the assessment order and to restore the income

declared by the appellant and further be pleased to pass orders that the appellant was

liable for Short Term Capital Gains Tax on the strength of the Joint Development

 Agreement  and further be pleased to pass such other orders granting such other

relief that your Hon'ble Authority may deem fit in the interest of equity and justice."

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