CIT Vs. N. SRIRAMA REDDY (DECD.)

JUDGEMENT

(1.) THE above appeal is filed by the revenue challenging the orders passed by the Tribunal, Bangalore Bench 'C' in Misc. Petn. No. 104/Bang/2003 and in ITA No. 864/Bang/1996, dated 13 -11 -2003 and 17 -4 -2003 respectively. The above appeal came to be admitted by this court on 12 -7 -2004 and the substantial question of law formulated for consideration by this court at the time of admission is as follows:

(2.) ONE N. Srirama Reddy had filed original return of income on 6 -2 -1982 in respect of the assessment year 1981 -82 and the assessment came to be completed on 13 -3 -1983. The said assessment proceedings was reopened under Section 147 after issuing of notice under Section 14 'In pursuance to the said notice the assessee filed revised return of income on 31 -10 -1993 and declared the income from capital gains amounting to Rs. 11,00,615 out of transfer of land at No. 20, Palace Cross Road, Bangalore. The assessee Sri N. Srirama Reddy had purchased property bearing No. 20, Palace Cross Road, Bangalore measuring 84,758,500 s.q. ft. with old building under two independent sale deeds dated 30 -11 -1957 and 30 -12 -195' The said property came to be leased out by the said Sri N. Srirama Reddy in favour of S.V. Properties under a perpetual lease agreement dated 27 -11 -1980. The asessee under the said lease was being paid annual rent of Rs. 3,000 from 1 -6 -1986 and as consideration towards lease and 16,525 sq. ft. of the built -up area of the residential flats together with Rs. 6 lakhs non -refundable security deposit was paid to the assessee by the lessee, i.e., S.V. Properties. It seems that the construction of the flats was extended by number of years.

(3.) THE assessing officer proceeded to hold that as the sale transaction though took place for the year 1988 the original agreement had been entered into in November, 1980 and as per the directions of the Commissioner, the capital gains had to be taxed for the assessment year 1981 -82 by discounting the actual sale consideration to that on 27 -11 -1988, the date on which the property was leased out. Consequently the assessing officer adopted actual sale consideration for the 10 flats sold at Rs. 46,61,000 and added to it, the value of the unsold flat (valuing the same at the average sale consideration for the above 10 flats) at Rs. 8,33,837 and the total of the two being Rs. 54,94,837 and came to the conclusion that the actual sale consideration for the total built -up area received by the assessee as on 1 -7 -1998' The assessing officer by multiplying this by variable discounting to the value of the fiats as on 27 -11 -1980 arrived at Rs. 28,81,767 and came to the conclusion that the sale consideration for 11 flats including the unsold flat would be Rs. 46,61,000 and the average sale consideration for each square feet was arrived at Rs. 332.335 by adopting the said value. Further the assessing officer also added the interest -free advance received by the assessee for the entire period of perpetual lease in computing the capital gains tax and accordingly passed the assessment order on 31 -3 -1994.