Case law on the identical issue is furnished below:
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'A' HYDERABAD
Assessment Year : 2005-06
DY DIRECTOR OF INCOME TAX
(INTERNATIONAL TAXATION), HYDERABADVsSHRI G RAGHURAM
INCOME TAX OFFICER
WARD-6 (3), HYDERABAD Vs SMT PRAMEELA DEVI, (GPA)
INCOME TAX OFFICER WARD-6 (3), HYDERABADVsSMT PRAMEELA DEVI, (GPA)
INCOME TAX OFFICER WARD-6 (3), HYDERABADVs SMT G MADHURIKIRAN
INCOME TAX OFFICERWARD-6 (3), HYDERABADVs SMT G MADHURIKIRAN
DY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), HYDERABADVs SHRI G RAGHURAM
Income Tax - Sections 2 (47), 48 - Whether for the purpose of calculating capital gains in a case where the land is devolved to the developer the market value of land is to be taken as sale consideration or the value of superstructure received in lieu of land.
The AO took the view that there is transfer in this case, as per the provisions of section 2(47) and capital gain is chargeable and for that purpose the market value, superstructure is to be taken as sale consideration - CIT(A) directed the AO to tax the income from the amenities under the head income from other sources and also allowed depreciation and other expenses - for the purpose of capital gain the CIT(A) directed the AO to consider the market value of land, as on the date of transfer, as sale consideration – Matter went to the Tribunal.
After hearing both the parties the Bench has held that
10. The next common grounds in ITA Nos.6, 7 & 69/Hyd/2010 is regarding determining of the sales consideration u/s 48. The learned counsel for the assessee submitted that this issue is covered in his favour by the order of this Tribunal dt.9-6-2006in the case of Smt.Shanta Vidyasagar Annam, Hyderabad in ITA No.885/Hyd/2003 for the assessment year 1997-98. We have carefully gone through this decision and this order is relating to the whether there is a transfer u/s 2(47) (vi) of the I.T.Act or not on transfer, in which possession was handed over in the process of exchange of 40% of the constructed area of the building, which is to be constructed in future, which enables the developer to enjoy 60% of the undivided share of land. In our considered opinion, this decision will not come to the rescue of the assessee. In our opinion, the consideration for the transfer of capital asset is what the transferer receives in lieu of the assets he parts with and therefore the very asset transferred or parted with and full value of consideration cannot be construed as having a reference to the market value of asset transferred and the said expression only means that full value of the asset received by the transferer in exchange for the capital asset transferred by him. Since the development agreement specifies that certain part of constructed area shall be surrendered to the owner by the builder on the completion of the contract and the value of the constructed area to be transferred to the assessee to be considered as consideration received and as such full value of consideration in the case of not by applying the ratio of the order of the Delhi Bench of the Tribunal in the case of M/s Vasavi Pratap Chand Vs. DCIT (89 ITD 73) (Del.) is the only the cost of construction of proposed building to the extent of which were falls to the assessee in the ultimately constructed area and not the market value of such share of constructed area which may be after the completion of the construction. In view of this, we do not find any infirmity in the order of the assessing officer on this issue as he has followed the order of the Tribunal in the case of M/s Vasavi Pratrap Chand Vs. DCIT (supra). Accordingly, this ground taken by the Revenue is allowed.
11. The assessee relied on the judgement of Madras High Court in the case of M/s T.V. Sundaram Iyengar & Sons Ltd. Vs. CIT Madras (37 ITR 26) wherein it was held as follows:
As on the facts there was nothing to show that the price was to be of any future time, the price of the assets transferred to company C became payable forthwith, viz., in the accounting year, the assessees obtained the right to receive the price in the accounting year and the capital gains in respect of the sale of those assets arose in that year: what the parties did subsequent to that year did not have any bearing on the liability of the assessees to tax in respect of that year. There was, therefore, material to support the assessments made on the assessees.
12. In our opinion, the above judgement supports the view taken by us rather than the assessee.
13. Since the issues involved in the other appeals are identical, applying the same reasoning herein above, those appeals are also allowed.