Madras High Court
Commissioner Of Income Tax Coimbatore vs M/S Dhandayuthpani Foundry (P) Ltd on 16 September, 2014
Bench: R. Sudhakar, G.M. Akbar Ali
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:16.09.2014 CORAM THE HON'BLE MR.JUSTICE R. SUDHAKAR AND THE HON'BLE MR.JUSTICE G.M. AKBAR ALI T.C.(A) No.378 of 2014 Commissioner of Income Tax Coimbatore ...... Appellant vs M/s Dhandayuthpani Foundry (P) Ltd 131/4B, Vilankurichi Road, Coimbatore 35 .... Respondent Appeal filed under Sec.260A of the Income Tax Act, 1961 against the order passed by teh Income Tax Appellate Tribunal, Madras "D"Bench, dated 29.10.2013 in ITA No.1549/Mds/2012 For Appellant : Mr.T.R. Senthil Kumar JUDGMENT
(Judgment of the Court delivered by R. SUDHAKAR,J.,) The Revenue has filed the present appeal, challenging the order of the Income Tax Appellate Tribunal, which upheld the order of the Commissioner of Income Tax (Appeal), and held that the capital gains on transfer of the property through joint development is assessable as income of the previous year relevant to assessment year 2008-2009 and rejected the contention of the Revenue that it should be assessable as income of the year relevant to the assessment year 2006-2007.
2. The respondent/assessee is a Company engaged in the business of manufacturing and trading. In respect of the Assessment Year 2006-2007, returns were filed on 13.04.2007, declaring loss of Rs.19,64,300/-. The same was summarily processed on 22.8.2007 and the assessee's income was assessed at Rs.10,79,320/-. Thereafter, the Assessing Officer was of the opinion that the income of the assessee, liable to be assessed under the head long term capital gains of Rs.10,11,12,800/-, had escaped assessment. This prompted him to issue notice under Sec.148 of the Income Tax Act dated 24.12.2010 on the assessee.
3. The assessee pleaded before the Assessing Officer that it had owned a factory building at Coimbatore, which he intended to transfer through joint development agreement and accordingly on 28.12.2005, he entered into a joint development agreement with partnership firm by taking an advance of Rs.1.74 crores. Thereafter, the Coimbatore Corporation accorded approval to the development plan only on 27.09.2007 i.e, relevant to assessment year 2008-2009 and the possession was handed over to the developer who commenced the construction. Since approval was granted on 27.9.2007 and possession was handed over thereafter, the assessee claimed long term capital gains in Assessment Year 2008-2009.
4. The Assessing Officer, by Proceedings dated 01.12.2011, rejected the explanation and held that the transfer under section 2(47)(v) of the Act should be deemed to have been completed only in the impugned assessment year 2006-2007, since the joint development agreement had been registered on 28.12.2005. A Protective Assessment order was also passed in respect of the year 2008-09 including the capital gains.
5. The Assessee preferred appeals before the Commissioner of Income Tax (Appeals) against both orders. Both appeals were disposed of by order dated 16.5.2012 insofar as the assessment year 2006-2007. At the time of hearing the appeal in relation to the impugned assessment year 2006-2007, the Commissioner of Income Tax (Appeals) relied upon the earlier order in assessee's appeal for assessment year 2008-2009 holding that the long term capital gains are to be substantively assessed in the said assessment year. In the order dated 16.5.2012, the Commissioner of Income Tax (Appeals) held that capital gains in respect of transfer of property should be assessed during the year 2008-09, as it satisfied all the conditions required under sec.53A of the Transfer of Property Act as well as under section 2(47)(v) of the Act. The assessee has complied with the requirements of Law during the assessment year 2008-09.
6. The specific finding given by the Commissioner of Income Tax (Appeals) to the Assessing Officer is to treat the income offered on capital gains for the assessment year 2008-09 on substantive basis and not on protective basis as mentioned in the assessment order. The order reads as follows:
6.13. The Assessing Officer in his order admits that possession of the property was handed over during the assessment year 2008-09. The Honourable Madras High Court in the case of CIT vs Saroja 301 ITR 124 held that for invoking the provisions of Section 53A of the Transfer of Property Act handing over possession is very relevant. The Chennai Bench of the Tribunal in the case of C. Venkatachalam vs ACIT by its order dated 31.10.2009 held that in respect of the joint development agreement, the transfer is complete only when the land owner gets the built up area in accordance with the agreement. Similar decision has been rendered by the Delhi High Court in the case of CIT vs Atam Prakash & Sons in 219 CTR 164 where it has been held that unless the transferor is handed over built up area as per the agreement, the transfer is not complete. In the case of appellant, the possession of the land was handed over pursuant to the joint development agreement, in the assessment year 2008-09. Taking into consideration of the facts discussed above, in my opinion, the appellant is right in offering the capital gains for the assessment year 2008-09 satisfying all the conditions u/s 53A of the Transfer of Property Act. The Assessing Officer is directed to treat the income offered on capital gains for the assessment year 2008-09 on substantive basis and not on protective basis as mentioned in the assessment order. This ground of appeal is allowed.
7. In view of above order, which has become final and not appealed by the Department, the Tribunal held that the Order of the Commissioner (Appeals) insofar as the Assessment Year 2008-09 treating it as substantive assessment and not on presumptive is correct basis and that the Revenue has no justification to claim that the capital gains on transfer of property should be reckoned in respect of assessment year 2006-07.
8. We perused paragraph 5 of the Tribunal Order, which reads as follows:
5. In the course of hearing, the only argument advanced by the Revenue is that the CIT(A) has wrongly held that the long term capital gains assessed by the Assessing Officer, are not liable to be assessed in assessment year 2006-2007, but in 2008-2009 only. On this issue, the assessee has submitted that in assessment year 2008-2009, the Revenue has not filed any appeal. In this view of the matter, we once again deem it proper to observe that the Assessing Officer had substantively assessed the impugned long term capital gains in the impugned assessment year. The CIT (A) has held that same deserve to be assessed substantively in assessment year 2008-2009. undisputedly, the Revenue has not come up in appeal in assessment year 2008-2009. In other words, the said findings have attained finality. Therefore, we affirm the order of the CIT (A).
9. In the light of the above facts, it cannot be now pleaded by the department that capital gains in respect of transfer of property should be made in relation to the assessment year 2006-07. The department cannot plead that capital gains will be applicable for two different assessment years. The Order of the Commissioner of Income Tax (Appeals) is binding on the Assessing Officer, and is not entitled to take a different view. We hold that the Tribunal was correct in deciding as above.
10. We find no merit in the appeal. No substantial question of law arises in this appeal.
11. In the result, the appeal is dismissed. No costs.
(R.S.J.,) (G.M.A.J.,)
16-09-2014
sr
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To
Commissioner of Income Tax Coimbatore
R. SUDHAKAR,J.,
AND
G.M. AKBAR ALI,J.,
sr
T.C.(A) No.378 of 2014
16-09-2014