Itxa/859/2016 Of Pr Commissioner Of Income Tax 19 v. The Executor Of Estate Of Late Smt Manjula A Shah

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.859 OF 2016 The Pr. Commissioner of Income Tax-19 .. Appellant v/s. The Executor of Estate of Late Smt. Manjula A. Shah .. Respondent Mr. Ashok Kotangle a/w Ms. Padma Divakar for the appellant None for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 11[th] DECEMBER, 2018. 1.The Revenue is in appeal against the judgment of the Income TaxAppellate Tribunal (“the Tribunal” for short) dated 31.7.2015. 2.Following question has been presented for our consideration :- “Whether on the facts and circumstances of the case and in law,the Tribunal was justified in dismissing the appeal filed by theRevenue by accepting the sale consideration at Rs.2,51,00,000/-,accepted by the Revenue in order u/s 269 UL(3) in place ofRs.4,63,73,500/- considered by the Assessing Officer on the basisof valuation made by the Stamp Duty Authority?” 3.Brief facts are that the respondent assessee for Assessment Year2005-06 had filed the return of income declaring total income ofRs.1,63,86,880/-. The return was taken in scrutiny. It was noticedthat the assessee had entered into a Memorandum of Understanding(“MOU” for short) with Mahavir Builders, agreeing to assign themdevelopment rights in respect of the immovable property for aconsideration of Rs.2.51 crores (rounded off). This was done afterobtaining necessary NOC under Section 269UL of the Income Tax Act,1961 from the competent authority. This MOU however, could not beconverted into a formal development agreement till September, 2004.At the time of execution of the agreement, the stamp duty authorityassessed the value of the property for the purpose of stamp dutycollection at Rs.4,63,73,500/-. The Assessing Officer invoked Section50C the Act and computed capital gain on the basis of stamp dutyvaluation of the property in question. 4.The assessee carried the matter in appeal. The CIT(A) allowedthe appeal in part. In relation to the dispute on hand, thecommissioner accepted the assessee's two primary contentions. Firstly,that the MOU was executed in the year 2001 after obtaining noobjection from the Revenue authorities, whereas the formal development agreement was executed in September, 2004 which wason the same terms and conditions as the MOU. The stamp dutyauthority had assessed the value of the property on the date of theexecution of development agreement. The assessee also contendedthat the valuation made by the stamp duty officer was on larger piece ofland, admeasuring 7644 sq.meters whereas the assessee had sold only3872 sq.mters out of such larger area. The CIT(A) accepted both thesecontentions and allowed the appeal of the assessee, upon which theRevenue approached the Tribunal. Tribunal by the impugnedjudgment dismissed the Revenue's appeal, making followingobservations :- “2.1 We have considered the rival submissions and perused thematerial available on record. The facts, in brief, are that theestate was the owner of the property known as Vijay Mahallocated at Malad. The assessee entered into a MOU withMahavir Builders providing them with development rights inrespect of property for a consideration of Rs.2,51,00,000/-.The appropriate authority (Income Tax Department) gave noobjection to grant of development rights at the agreedconsideration of Rs.2,51,00,000/- u/s 269UL(3) dated12.06.2001. The said MOU was converted into a formaldevelopment agreement in September, 2004 on the same termsand conditions. The stamp duty authorities stamped / assessed “2.1 We have considered the rival submissions and perused thematerial available on record. The facts, in brief, are that theestate was the owner of the property known as Vijay Mahallocated at Malad. The assessee entered into a MOU withMahavir Builders providing them with development rights inrespect of property for a consideration of Rs.2,51,00,000/-.The appropriate authority (Income Tax Department) gave noobjection to grant of development rights at the agreedconsideration of Rs.2,51,00,000/- u/s 269UL(3) dated12.06.2001. The said MOU was converted into a formaldevelopment agreement in September, 2004 on the same termsand conditions. The stamp duty authorities stamped / assessed the value at Rs.4,63,73,500/-. The Assessing Officer invokedsection 50C of the Act on the basis of valuation made by thestamp duty authorities. The claim of the assessee was that thefair market value should have been taken which has beenaccepted by the Department u/s 269UL(3) of the Act. Reliancewas placed upon the decision in Meghraj Vaid 114 TTJ841(Jodh.) and National Thermal Power Corporation 229 ITR383 and Jute Corporation of India 187 ITR 688 (SC). 2.2If the observation made in the assessment order, leadingto addition made to the total income, conclusion drawn in theimpugned order, material available on record, assertions madeby the ld. respective counsel, if kept in juxtaposition andanalyzed, we find that there is no dispute to the fact that thetransaction price as mentioned in the agreement isRs.2,51,00,000/- for the land measuring 4630 sq.yards. It isalso a fact that the Department in order u/s 269UL(3) of theAct accepted the same value. The assessee sold / givendevelopment right of the same property which was owned by it.The assessee was unable to sale more than the land which wasnot owned by the assessee. The assessee can be taxed only onthe gain which is oozing out from the sale consideration, thus,no adverse inference can be drawn while invoking the provisionof section 50C of the Act. No evidence has been produced bythe Revenue at any stage that the assessee actually received thevalue which was adopted by the stamp valuation authority.Even the development agreement clearly mention the area and the assessee is not the owner of the TDR, thus, cannot besaddled with the value adopted by the stamp duty purposes asthe assessee is only the owner of 3872 sq.mts. for which hereceived the consideration of Rs.2,51,00,000/-, thus, the capitalgain has to be computed on the amount which the assesseeactually received, consequently, we are in agreement with thefinding of the ld. Commissioner of Income Tax (Appeals) thaton the basis of deeming provision of section 50C, no additioncan be made. We affirm the stand of the ld. Commissioner ofIncome Tax (Appeals), thus, appeal of the Revenue isdismissed.” 5.From the record, it can thus be seen that there were twosignificant factors why the CIT(A) and the Tribunal did not adopt thevaluation of the stamp authority for the purpose of collecting capitalgain tax in the hands of the assessee. Firstly, there was a gap of nearly3 years between the date of execution of the MOU and the execution ofa formal development agreement. Obviously, the valuation made bythe stamp authority was as on the date of the execution of thedevelopment agreement. Secondly and more importantly, the stampvaluation of Rs.4.63 crores was for a larger area of 7644 sq. meterswhere the assessee had assigned the development rights only withrespect to 3872 sq. meters. 6.Under the circumstances, we do not find that the Tribunal has committed any error. No question of law arises. 7.The tax appeal is dismissed. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)