Income Tax Appellate Tribunal - Hyderabad
G.Sailaja, Hyd, Hyderabad vs Ito, Ward-11(3), (Now Acit, ... on 30 November, 2017
ITA No 51 of 2016 and others.
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' A ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri S.Rifaur Rahman, Accountant Member
ITA Nos.51 & 579/Hyd/2016, 716/Hyd/2015 & 52/Hyd/2016
(Assessment Years: 2006-07, 2007-08 & 2011-12)
Smt. G. Sailaja Vs I. T. O, Ward 11 ( 3 )
Hyderabad Hyderabad
PAN: ADHPG 4321 L
(Appellant) (Respondent)
For Assessee : Shri A.V. Raghuram
For Revenue : Smt. Suman Malik, DR
Date of Hearing: 12.09.2017
Date of Pronouncement: 30.11.2017
ORDER
Per Smt. P. Madhavi Devi, J.M.
All the above are assessee's appeals against assessments u/s 143(3) of the Act for the A.Ys 2006-07, 2007-08 and 2011-12 respectively. ITA Nos. 51 & 52/Hyd/2016 are against the order of the CIT (A)-5 Hyderabad, dated 29.09.2015 for A.Ys 2006-07 & 2011-12, while ITA No.716/Hyd/2016 is against the order of the CIT (A)-5, Hyderabad, dated 12.3.2015 for the A.Y 2007-08. ITA No.579/Hyd/2015 is against the order of the CIT (A)-5, Hyderabad, dated 22.3.2016 confirming the penalty levied by the AO u/s 271(1)(c) of the Act for the A.Y 2006-07.
ITA No.51/Hyd/20162. At the outset, it is seen that, there is a delay of 38 days in filing of this appeal before us. The assessee has filed an Page 1 of 25 ITA No 51 of 2016 and others.
application for condonation of delay along with her affidavit stating that since she is a senior citizen, the affairs of the property are looked after by her son, Mr. G. Madhav Prasad and that on receipt of the order of the CIT (A), she had handed over the same to her son, and they were under the impression that the appeals in respect of the A.Ys 2006-07 and 2011-12 are not required to be filed in view of the fact that the assessee's appeal No.716/Hyd/2015 for the A.Ys 2007-08 is pending before the Tribunal and if the relief sought for in the A.Y 2007-08 is granted, it would apply to these A.Ys as well and therefore, the appeals were not filed. It is further stated that the assessee's son had thereafter left for their native place and after returning from the native place and after discussion with the assessee's Counsel, they realized that the appeals have to be filed for these years also and therefore, the appeals were filed before the Tribunal on 14.03.2016 resulting in the delay of 38 days. Therefore, she prayed that the delay may be condoned.
3. The learned DR however, opposed the condonation of the delay stating that the assessee has failed to explain the reasonable cause for the delay of 38 days.
4. Having regard to the rival contentions and the material on record, we are satisfied that the delay is neither wilful nor wanton and that there is a reasonable cause for not filing of the appeal before the Tribunal in time. The delay is accordingly condoned.
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5. As regards the merits of the case, brief facts are that the assessee being an individual, had filed her return of income for the A.Y 2006-07 on 29.9.2006 declaring total income of Rs.11,292. The AO learnt that the assessee was the 1/6th owner of a landed property admeasuring 1 acre and 39 guntas in Survey No.77/B Hyderbagar Village, Balanagar Mandal, R.R. Distt. which was purchased by her vide document No.7569/2993 dated 27.10.2003 and that subsequently, all the owners entered into a development agreement-cum-GPA with M/s Vertex Homes Pvt. Ltd on 9.1.2006 vide document No.1370/2006 and as per the said deed, the total area to be built up was two lakh sft and the estimated market value of such built up property was Rs.8.80 crores. Further, as per the deed, the owners were entitled to 46% share in the constructed area. He observed that though the capital gain has arisen to the assessee on account of the development agreement, she has not offered it for taxation in her return of income for the A.Y 2006-07.
6. Therefore, the case was re-opened by issuance of a notice u/s 148 of the Act. The assessee filed a letter stating that the return originally filed may be treated as the return filed in response to the notice u/s 148 of the Act. Thereafter, the AO issued a show-cause notice proposing to bring to tax the escaped income of Rs.67,46,666 (being 1/6th of the share of Rs.8.80 crores x 46%). The assessee filed a letter stating that she had admitted the capital gains in the A.Y 2011-12 on getting possession of the flats and further stated that as per the supplementary development agreement dated 10.04.2010, the entitlement of the land owners has come down to 43% from the earlier 46%. The Page 3 of 25 ITA No 51 of 2016 and others.
assessee also relied upon the grounds raised by the Revenue before the Hon'ble High Court of Andhra Pradesh in the case of Dr. Maya Shenoy (124 TTJ 692) for the A.Y 2006-07, to argue that the capital gains only arises in the year, in which, the possession of the flats is given. The AO, however, was not convinced with the assessee's arguments and held that since the assessee and the other owners have handed over the possession of the property to the developer in the relevant P.Y only on execution of the development agreement, there is a transfer in the relevant financial year and that the capital gains arising therefrom has to be brought to tax in this year. Thereafter, he proceeded to accept the share of the constructed area to the land owners at 43% as per the supplementary agreement and calculated 1/6th share of the assessee thereon. For the purpose of computing the sale consideration for transfer of land, he adopted the SRO value being Rs.2200 per sq. yard and determined the short term capital gain at Rs.19,24,956.
7. Aggrieved, the assessee preferred an appeal before the CIT (A), challenging (i) the validity of the reopening of the assessment; (ii) the year of the taxability of the capital gain; and
(iii) the adoption of the SRO value as the sale consideration. The CIT (A) confirmed the validity of the re-assessment proceedings by holding that the assessee has failed to offer the capital gains to tax in the year of transfer and further that the return was only processed u/s 143(1) of the Act and no scrutiny assessment was undertaken.
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8. As regards the year of taxability, he considered the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs. CIT (2003) 260 ITR 491, to hold that the year of execution of the development agreement coupled with the handing over of the possession of the land to the Developer, is the year of taxability. The CIT (A) did not therefore accept the assessee's contention that the year of receipt of constructed area in the year of taxability or in the alternative, since the supplementary agreement has been entered into subsequent to the development agreement has been entered into, and therefore, the year in which the supplementary agreement has been executed should be considered as the year of taxability.
9. As regards the quantum of the capital gains, the CIT (A) observed that the development agreement itself contains the market value of the property at Rs.8.80 crores and observed that the assessee's share being 1/6th share of the 43% of the constructed area, would come to Rs.67,46,666. He observed that the AO has adopted the sale price at Rs.2200 per sq. yard which is much lower than the value mentioned in the development agreement. He therefore, issued a show-cause notice for enhancement of the capital gain. The assessee submitted that the value of Rs.8.80 crores is not only a composite value of the super structure and the land but is also for the entire land and that such composite value is fixed based on sale price quoted by the builder. The assessee submitted that the value that is likely to arise after an uncertain period cannot be the basis for adopting the sale consideration in the year of agreement. The CIT (A), however, was not convinced and held that the instance of the Page 5 of 25 ITA No 51 of 2016 and others.
transfer of the land and the sale consideration is already mentioned in the agreement and therefore, the said consideration should be taken into consideration for computing the capital gain. The CIT (A) directed the AO accordingly. Thereafter, the CIT (A) also examined the assessee's claim of expenditure of Rs.80.00 lakhs, which is claimed to have been paid to one Shri Gnaneshwar for arranging the development agreement. In the absence of any evidence to support this contention, the CIT (A) disallowed the claim.
10. Against this order of the CIT (A), the assessee is in appeal before us. In the grounds of appeal filed along with Form No.36, the assessee has challenged the order of the CIT (A) in confirming the assessment u/s 147 of the Act even though, there is no escapement of income in the hands of the assessee for the A.Y under consideration as the assessee has admitted the income arising under the development agreement in the year of delivery of the flats in A.Y 2011-12. The assessee has also challenged the A.Y 2006-07 as the year of the taxability and the computation of the capital gain by the CIT (A) and disallowance of the claim of expenditure of Rs.80.00 lakhs by the CIT (A).
11. In addition to these grounds of appeal, the assessee has also raised an additional ground of appeal contending that in view of the clarificatory amendment brought in by Finance Act of 2017, by way of insertion of sub-section (5A) to section 45 of the I.T. Act, 1961, the orders of the authorities below bringing the capital gains to tax in the A.Y under consideration is erroneous Page 6 of 25 ITA No 51 of 2016 and others.
and unsustainable. In the application seeking admission of the additional ground, it is stated that this provision has been brought in by the Finance Act, 2017 and that, it being a legal ground, should be admitted and remanded to the file of the AO as per the law laid down by the Hon'ble Supreme Court in the case of CIT vs. NTPC (229 ITR 393). The learned Counsel for the assessee also relied upon the following judgments of the Hon'ble Supreme Court to plead that the above provision is applicable retrospectively:
(i) CIT vs. Alom Extrusion Ltd (2010) 1 SCC 489
(ii) CIT, Delhi vs. Vatika Township P Ltd (2015) 1 SCC 1.
12. Since the additional ground of appeal as to the applicability of the said provision with retrospective effect is a legal issue, we deem it fit and proper to consider its admissibility at this stage. Finance Act 2017 has inserted sub-section (5A) to section 45 of the I.T. Act, 1961 which provides that the capital gains shall be taxed in the year in which the certificate of completion for the whole or part of the project is issued by the competent authority and where the property is transferred before the date of issue of the said certificate of completion, the capital gains should be deemed to be the income of the previous year in which such transfer takes place. This provision has been introduced w.e.f. 1.4.2018 and it is a substantive provision introduced by the Act and not a proviso or an explanation. In the case of Vatika Township Pvt Ltd, the Hon'ble Supreme Court was considering the prospective/retrospective applicability of the proviso to section 113 introduced by the Finance Act of 2002 and held it to be prospective in operation as it intended to create a charge or burden on the assessees. The Hon'ble Supreme Court Page 7 of 25 ITA No 51 of 2016 and others.
has elaborately discussed the law relating to interpretation of taxing statues particularly the prospective/retrospective operation of amendments. At paras 27 to 36, the Hon'ble Supreme Court culled out the general principles concerning the retrospectivity of a legislation as under:
"General Principles concerning retrospectivity
27. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of 'Interpretation of Statutes'. Vis-à- vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre[3], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first Page 8 of 25 ITA No 51 of 2016 and others.
time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
29. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd[4]. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later
30. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association[5], the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors.[6] It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here.Page 9 of 25
ITA No 51 of 2016 and others.
31. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors.
32. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as "declaratory statutes". The circumstances under which a provision can be termed as "declaratory statutes" is explained by Justice G.P. Singh[7] in the following manner:
"Declaratory statutes:
The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court : "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In Page 10 of 25 ITA No 51 of 2016 and others.
determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law."
The above summing up is factually based on the judgments of this Court as well as English decisions".
13. Thus, only declaratory, explanatory or clarificatory statues or amendments are applicable retrospectively. Therefore, it is necessary to examine if the sub-section (5A) to section 45 is declaratory or clarificatory. The notes on clauses and memorandum of Finance Bill of 2017 would shed some light on this aspect. The relevant portion of the bill reads as under:
"Special provisions for computation of capital gains in case of joint development agreement.
Under the existing provisions of section 45, capital gain is chargeable to tax in the year in which transfer takes place except in certain cases. The definition of 'transfer', inter alia, includes any arrangement or transaction where any rights are handed over in execution of part performance of contract, even though the legal title has not been transferred. In such a scenario, execution of Joint Development Agreement between the owner of immovable property and the developer triggers the capital gains tax liability in the hands of the owner in the year in which the possession of Page 11 of 25 ITA No 51 of 2016 and others.
immovable property is handed over to the developer for development of a project.
With a view to minimise the genuine hardship which the owner of land may face in paying capital gains tax in the year of transfer, it is proposed to insert a new sub-section (5A) in section 45 so as to provide that in case of an assessee being individual or Hindu undivided family, who enters into a specified agreement for development of a project, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority.
It is further proposed to provide that the stamp duty value of his share, being land or building or both, in the project on the date of issuing of said certificate of completion as increased by any monetary consideration received, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
It is also proposed to provide that benefit of this proposed regime shall not apply to an assessee who transfers his share in the project to any other person on or before the date of issue of said certificate of completion. It is also proposed to provide that in such a situation, the capital gains as determined under general provisions of the Act shall be deemed to be the income of the previous year in which such transfer took place and shall be computed as per provisions of the Act without taking into account this proposed provisions.
It is also proposed to define the following expressions "competent authority", "specified agreement" and "stamp duty value" for this purpose.
It is also proposed to make consequential amendment in section 49 so as to provide that the cost of acquisition of the share in the project being land or building or both, in the hands of the land owner shall be the amount which is deemed as full value of consideration under the said proposed provision.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.
It is also proposed to insert a new section 194-IC in the Act so as to provide that in case any monetary consideration is payable under the specified agreement, tax at the rate of ten per cent shall be deductible from such payment. This amendment will take effect from 1st April,2017".Page 12 of 25
ITA No 51 of 2016 and others.
14. From the above, it is clear that by insertion of sub section (5A), it is intended to minimize the genuine hardship which the owner of land may face in paying capital gains tax in the year of transfer. The existing legal position has been enumerated before setting out the purpose of insertion of the sub- section. Thus, the clear intention of the Legislature is not to cure any defect, but it is to give benefit prospectively.
15. The Special Bench of the Tribunal at Mumbai in the case of M/s. Bharati Shipard Ltd, in ITA No.2404/Mum/2009 (SB) dated, 9.9.2011 has considered the retrospective and prospective effect of a substantive provision while considering the effect of amendment to section 40(a)(ia) by Finance Act of 2010 and at Paras 35 to 41 has culled the principles as under:
"35. From the above discussion it is crystal clear that retrospective effect to a provision cannot be ordinarily given by judicial or quasi judicial authorities unless it is expressly given by the legislature. There may be certain situations requiring the giving of retrospective effect. The scope for the courts to validly give retrospective effect to a provision, despite not being clearly given so by the legislature, is limited. It extends to cases where the legislative intent has later been made explicit which was earlier implicit in the provision or the existing provision led to the unintended consequences and made the intention of the legislature unworkable. Any amendment which has not been given retrospective effect by the legislature, can't be construed as retrospective on the solitary ground that the original provision caused some hardship to the assessees. The relevant criteria to be taken into consideration for arriving at the decision about the retrospective or prospective effect of a later provision, is to unearth the intention of the legislature at the time of introducing the original provision and not whether it caused hardship to the taxpayers. If it was very well known at the time of inserting the original provision that it is going to be harsh, then any subsequent relaxation in it will not be retrospective unless expressly stated. The reason for not holding such later amendment as retrospective is manifest that the legislature in its wisdom intended to impose a harsh levy. In such a case the judicial or quasi judicial authorities Page 13 of 25 ITA No 51 of 2016 and others.
cannot help the situation by grabbing the legislative power in holding such later relaxation as retrospective, when the legislature has itself made it prospective.
36. In our considered opinion the border line between a substantive provision having retrospective or prospective effect, is quite prominent. One needs to appreciate the nature of the original provision in conjunction with the amendment. Once a provision has been given retrospective effect by the legislature, it shall continue to be retrospective. If on the other hand if the statute does not amend retrospectively, then one has to dig out the intention of the Parliament at the time when the original provision was incorporated and also the new amendment. If the later amendment simply clarifies its intention of the original provision, it will always be considered as retrospective. Like the case of Gold Coin Health Food P. Ltd. (supra) in which the Hon'ble Supreme Court held that the amendment to Explanation 4 to section 271(1)(c)(iii) simply clarified the position which was existing since inception of the provision that the penalty is leviable on concealment irrespective of the fact whether ultimately assessed income is positive or negative. Similarly in the case of Kanji Shivji And Co. (supra), the Hon'ble Supreme Court held that the purpose of Explanation 2 to section 40(b) was simply to clarify that the Income-tax Act recognizes individual statues of a person as different from his representative capacity. This Explanation did not bring in a new provision but clarified that the position was so since the introduction of the provision itself. In this category of clarificatory or explanatory amendments to the substantive provisions, the object is always to clarify the intention of the legislature as it was there at the time of insertion of the original provision. That is the reason for which the clarificatory amendments are always retrospective irrespective of the date from which effect has been given to them by the legislature.
37. The second category includes the cases in which there was no ambiguity in the language of the provision at the time of its introduction and the object sought was fully attainable. But while making the provision workable, besides the desired results, certain unintended consequences also crop up. In other words, the section was introduced originally with a particular purpose but while giving effect to the provision in the attainment of that purpose, certain outcomes which were never desired or intended by the legislature, also follow. Any amendment to remove such unintended effects, is also always considered to be retrospective from the date of the insertion of the main provision.
38. The second category of cases are to be differentiated from the first category. In both these categories, there is no difficulty in implementing the provision as such. Whereas, the first category refers to the cases in which the intention of the legislature behind the provision was not properly understood, the second refers to the cases Page 14 of 25 ITA No 51 of 2016 and others.
in which while giving effect to such provision, certain unintended consequences follow. The cases of Allied Motors (P.) Ltd. (supra) and Alom Extrusions Ltd. (supra) fit into this second category of cases. In Allied Motors (P.) Ltd. (supra) the amendment was held to be retrospective on the ground that it was impossible to pay sales-tax for the last quarter before the close of the year as the liability to pay would arise only on or after 1st April. As it could never have been the intention of the legislature to require the assessee to do impossible, the amendment made to section 43B was held to have retrospective effect from the date of insertion of the provision. Similarly in Alom Extrusions Ltd. (supra), the implementation of the provision led to the denial of deduction for all times notwithstanding the intention the legislature to allow deduction on payment basis.
39. Here it is important to note that the cases of Allied Motors (P.) Ltd. (supra) and Alom Extrusions Ltd. (supra) are based on the proposition that the implementation of the earlier provisions led to the consequences which were never envisaged. The emphasis is on the removal of unintended consequences and not intended consequences, even if harsh. It is settled legal position that there cannot be any equity about the tax. It is for the Parliament to decide as to in what manner the tax is to be levied and collected. If a provision is made which is harsh but otherwise constitutional and practical of implementation, there cannot be any question of reading down such provision on the ground of equity or hardship. Intervention becomes necessary when as a result of implementation of a provision, certain such consequences follow which were never intended. If subsequently the rigor of the provision is toned down for addressing to such unintended hardship to the assessees, it would be considered as retrospective. On the other hand if it was clear at the time of the insertion of the provision that some hardship from the assessee's perspective is going to be caused, then a subsequent amendment to reduce such hardship from a higher level to lower level, cannot be considered as retrospective unless expressly stated. The reason is obvious that in such cases the hardship which was faced by the assessees at the time of introduction of the provision was very much intended and foreseen and the subsequent amendment is reduction in the intended hardship and not the removal of unintended hardship.
40. On the contrary where the amendment is carried out to the provision with the purpose of adding some additional burden or reducing the existing burden of the assesses, it is always prospective unless expressly stated to be retrospective or falling within the exceptions discussed above such as clarificatory or to remove the unintended hardship. The case of Reliance Jute and Industries Ltd. (supra) deals with a situation in which the amendment was carried out to the substantive provision taking away certain benefit to the assessees in terms of extended period for setting off of the brought Page 15 of 25 ITA No 51 of 2016 and others.
forward losses. The case of Varadaraja Theatre Pvt. Ltd. (supra) is based on facts in which the subsequent amendment granted a benefit to the assessee which was not available as per the earlier provisions. Thus we have noticed that in both types of cases in which the later provision has taken away some right which was earlier available or granted some benefit which was not earlier available, such amendments have been held to be prospective from the dates of insertion as these were neither clarificatory nor intended to remove any unintended hardships. 41. From the above discussion it clearly emerges that there is a clear distinction between the cases in which the later amendment is impliedly retrospective or prospective. That is probably the reason that a question was raised before the Hon'ble Supreme Court in CIT & Ors. VS. Varas International (P.) Ltd. (2006) 283 ITR 484 (SC) for deciding as to whether : "For the amendment of a statute to be construed as being retrospective, should not the amended provision itself indicate, either in terms or by necessary implication, that it is to operate retrospectively?" In the light of this question, the Hon'ble Supreme Court was called upon to reconsider its earlier judgments in Allied Motors (P.) Ltd. (supra), Suwalal Anandilal Jain (supra), Brij Mohan Das Laxman Das and Podar Cement. The Bench of five Hon'ble Judges in this case noted that there is no conflict between the judgments which requires resolution by way of reference. From this judgment it is apparent that those earlier cases before the Hon'ble Supreme Court for a decision as to whether the amendments considered therein were retrospective or prospective, were decided on the basis of the nature of amendment and the concerned benches rendered appropriate judgments after taking into consideration all the relevant criteria".
16. Thus, it can be seen that every benefit conferred by the Legislature is not always retrospective in nature.
17. By virtue of above amendment, the Legislature intends to confer a benefit which was hitherto not available and hence it is applicable prospectively. The Legislature, was very clear that this provision is applicable w.e.f. 1.4.2018. While, inserting sub- section (5A) to section 45, the consequent amendment to section 49 was also made by inserting sub-section (7) thereto w.e.f. 1.4.2018 and section 194IC was also inserted for tax deductions at source at the time of payment, applicable w.e.f. 1.4.17. Thus, the Legislature was aware of the consequences of the Page 16 of 25 ITA No 51 of 2016 and others.
amendments and intended to confer the benefit only from 1.4.2018. Therefore, we are of the opinion that this ground, though is a legal ground cannot be admitted at this stage as no useful purpose would be served in remanding the issue to the file of the AO as the sub-section itself is not applicable for the relevant A.Y. The additional ground of appeal raised by the assessee under Rule 11 of the ITAT Rules is accordingly rejected.
18. As regards the validity of the re-assessment proceedings, we find that the assessee has filed the return of income but has not offered the capital gains arising out of the development agreement in her return of income for the relevant A.Y. Therefore, the AO had the material to form a reasonable belief that the income of the assessee has escaped assessment. Therefore, we uphold the validity of the re-assessment proceedings. As regards the year of the taxability, we find that this issue is now covered in favour of the Revenue by the decision of the Hon'ble jurisdictional High Court in the case of Shri Potla Nageswara Rao vs. DCIT in ITTA No. 245 OF 2014 Dated 09-04- 2014. Therefore, the assessee's grounds of appeal on the year of taxability are rejected.
19. As regards the enhancement of the income by the CIT (A), we find that the AO has adopted the SRO value of the land on the date of transfer for the purpose of computing the short term capital gains, while, the CIT (A) has adopted the estimated value of the property adopted by the parties to the development agreement, for registering the development agreement. In the Page 17 of 25 ITA No 51 of 2016 and others.
development agreement, the estimated value of the property is mentioned as Rs.8.80 crores. In our opinion, the CIT (A) has clearly erred in adopting this value for computation of the short term capital gains. At the time of development agreement, what is transferred by the assessee is only her share of the land and not the entire super structure along with the land. The estimated value of the property as mentioned in the development agreement is clearly for the land as well as the super structure to be built up on such land which is given for development. Though the development agreement does mention the period of completion of the project, it certainly remain uncertain as to whether the construction would be completed within the stipulated period. The market condition and the market rate when the constructed area is handed over to the assessee may also vary and it may be more or less than the estimated value of the property. Therefore, the same cannot be adopted for the computation of the capital gains. In our view, the value adopted by the AO i.e. Rs.2200 per sft being the SRO value of the land on the date of transfer is reasonable and correct. We, therefore, uphold the order of the AO on the computation of the short term capital gains.
20. As regards the allowability of the expenditure of Rs.80.00 lakhs which she claimed to have paid to one Shri Gnaneshwar for arranging the development agreement, the assessee has not been able to produce any evidence of making the payment during the relevant previous year even before the Tribunal in support of her contention. Therefore, we are constrained to confirm the disallowance of the same.
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21. In the result, assessee's appeal for the A.Y 2006-07 is partly allowed.
ITA No.716/Hyd/2015 - A.Y 2007-0922. For the relevant A.Y, the brief facts are that the assessee owned two pieces of adjoining land measuring 0.35 guntas in survey No.76/B and 0.16 guntas in survey No.76/B by two separate purchases made by her and by document No.1808/2007, dated 9.3.2007, she entered into a development agreement cum GPA with M/s. Vertex Homes Pvt. Ltd as per which the total built up area was worked out at 1,25,000 square feet and the estimated market value of the property was Rs.6,00,00,000/-. As per the deed, the owners were entitled to 46% share in the constructed area while the developer was entitled to 54% share. The AO noticed that the assessee has not offered the capital gains arising out of the above development agreement cum GPA for the A.Y 2007-08. Therefore, observing that there is an escapement of income pursuant to the above transactions, the AO issued a notice u/s 148 to reopen the assessment u/s 147. In the re-assessment proceedings the AO called for the assessee's explanation as to why the capital gain should not be brought to tax in the hands of the assessee, the assessee submitted that the assessee has offered the capital gains in the year when the built up area was actually handed over to the assessee. The AO was however, not convinced and brought the long term capital gains to tax by adopting the SRO value @ 35174/- per sft as the sale consideration. Aggrieved, the assessee preferred an appeal before the CIT (A) both on account of re- opening of the assessment as well as computation of capital gain.
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The CIT (A) confirmed the order of the AO on both the counts. The assessee is in second appeal before us.
23. The facts of this case are similar to the facts in A.Y 2006-07 and for the detailed reasons given therein, we uphold the validity of the assessment proceedings u/s 147 and also the computation of the long term capital gain.
24. Further, in addition to the above grounds, the assessee vide letter dated 28.10.2015 has raised an additional ground of appeal and has filed additional evidence in support thereof and prayed for admission of the same. It is stated that the assessee could not raise the said ground earlier, as she was agitating on the year of taxability and prayed that if the year of taxability is advanced to A.Y 2007-08, then the additional ground on the allowability of the expenditure in connection with the transfer should be considered.
25. The learned DR, however, opposed the admission of both the additional ground and additional evidence on the ground that they are pure factual issues.
26. Having regard to the rival contentions and the material on record, we find that the assessee has offered the long term capital gain to tax in the year of receipt of constructed area and has also claimed the payment of Rs.80.00 lakh to Mr. Gnaneshwar was as expenditure incurred in connection with the development agreement. Therefore, the claim is not a fresh claim but it is shifted to A.Y 2007-08 i.e. the year of payment as the Page 20 of 25 ITA No 51 of 2016 and others.
long term capital gain is also brought to tax in this year. Therefore, we are inclined to admit the additional ground as well as the additional evidence and deem it fit and proper to remit it to the file of the AO for verification of the additional evidence and adjudication of the additional ground of appeal in accordance with law after allowing the assessee, sufficient opportunity of being heard.
27. In the result, assessee's appeal for the A.Y 2007-08 is partly allowed for statistical purposes.
ITA No.52/Hyd/2016 - A.Y 2011-1228. At the outset, it is noticed that there is a delay of 38 days in filing of this appeal before us and the reasons given are the same as given for the delay in A.Y 2006-07. For the reasons given by us in assessee's appeal for A.Y 2006-07, the delay is condoned.
29. As regards the merits of the case, the facts for the relevant A.Y are that pursuant to the development agreement cum GPA entered into during the financial year 2005-06 relevant to the A.Y 2006-07, the assessee has offered capital gains to tax in the A.Y 2011-12 on the ground that she has received actual possession of the built up area in the first instalment. The AO observed that for the A.Y 2006-07, the AO has already held that the capital gain is to be taxed in the year of execution of the agreement of sale. However, since the assessee itself has offered the long term capital gain in the A.Y 2011-12, the AO has brought it to tax along with the capital gains on sale of the flats. While computing the long term capital gains on sale of land and on sale Page 21 of 25 ITA No 51 of 2016 and others.
of the flats, the AO disallowed the claim of expenditure on brokerage. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the AO. Aggrieved, the assessee is in second appeal before us against the taxing the capital gain and also the disallowance of the claim of expenditure of Rs.80.00 lakhs being the brokerage paid by the assessee.
30. The learned Counsel for the assessee submitted that the capital gain has been brought to tax in both the A.Y 2006-07 as well as A.Y 2011-12 for the very same property. He submitted that the assessee had offered the capital gain to tax in the A.Y 2011-12 while the AO has brought it to tax in the A.Y 2006-07 and therefore, he ought not to have brought the same to tax again in the A.Y 2011-12. We find that merely because the assessee has offered the long term capital gain on sale of land as well as the flat in the A.Y 2011-12, the AO need not bring the capital gain on sale of land to tax for the A.Y 2011-12, particularly after bringing it to tax in the A.Y 2006-07. Therefore, the capital gains brought to tax on transfer of land alone for the A.Y 2011-12 is deleted. The AO is directed to compute only the capital gain arising out of the sale of the flat along with the undivided share of land of the said flat.
31. As regards the disallowance of the claim of expenditure on brokerage, we have considered the allowability of the same for the A.Y 2007-08 and we have remitted it to the file of the AO. Therefore, the grounds of appeal raised by the assessee for the A.Y 2011-12 are all rejected except to the extent of the directions Page 22 of 25 ITA No 51 of 2016 and others.
given to the AO to bring to tax only the capital gains on the sale of the flat.
ITA No.579/Hyd/2016 A.Y 2006-0732. This is assessee's appeal for the A.Y 2006-07 against the levy of penalty u/s 271(1) (c) of the Act. The AO has initiated the penalty proceedings u/s 271(1)(c) of the Act for the A.Y 2006- 07 on the ground that the assessee has entered into a development agreement cum GPA but has not offered the long term capital gain to tax in her return of income.
33. The learned Counsel for the assessee submitted that the assessee has offered the income to tax for the A.Y 2011-12 i.e. on receipt of the possession of the property and therefore, there was no concealment and furnishing of inaccurate particulars of income. He submitted that the issue of the year of taxability in case of joint development agreement was a debatable issue at the relevant point of time and the assessee, under a bonafide belief, has offered the capital gain to tax only in the year of receipt of possession of the developed area. Therefore, according to him, there is no case for levy of penalty u/s 271(1)(c) of the Act.
34. The learned DR, on the other hand, submitted that the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarakadas Kapadia was very much available for the relevant period and the assessee ought to have offered the capital gains to tax in the A.Y 2006-07.
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35. The learned Counsel for the assessee, in rebuttal submitted that the decision of the Hon'ble jurisdictional High Court in the case of Potla Nageswara Rao was delivered much later and therefore, the issue was a debatable one till such time the jurisdictional High Court has delivered the judgment.
36. Having regard to the rival contentions and the material on record, we find, that the return of income for the A.Y 2006-07 was filed on 29.09.2006, while the decision of the Hon'ble jurisdictional High Court in the case of Potla Nageswara Rao was delivered in 2014. Till such time, there were decisions of the Tribunal both in favour of and against the assessee. Therefore, it was a debatable issue. It is not the case of the assessee not offering the capital gains to tax at all but it is the case where she has offered it in the year of receipt of possession of the property. Therefore, it cannot be said that the assessee had not offered the capital gains to tax with an intention to evade the tax. Therefore, we are of the opinion that it is not a fit case for levy of penalty u/s 271(1)(c).
37. In the result, assessee's appeal is allowed.
38. To sum up, assessee's appeals against the assessments made for the A.Ys 2006-07 & 2007-08 and 2011-12 are partly allowed and the assessee's appeal against penalty u/s 271(1)(c) of the Act for the A.Y 2006-07 is allowed. Order pronounced in the Open Court on 30th November, 2017.
Sd/- Sd/-
(S.Rifaur Rahman) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 30th November, 2017.
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ITA No 51 of 2016 and others.
Vinodan/sps
Copy to:
1 A.V.Raghuram, Advocate, 610 Babukhan Estate, Basheerbagh
Hyderabad-1
2 ITO Ward 11(3) IT Towers, AC Guards, Hyderabad 500004
3 CIT (A)-5 Hyderabad
4 Pr. CIT - 5 Hyderabad
5 The DR, ITAT Hyderabad
6 Guard File
By Order
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