FARDEEN KHAN (L/H OF LATE AR. FEROZ KHAN), MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 1588/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9381 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANJAN PRASAD
• Assessee Lawyers: GOVIND JHAVERI
• Keywords: Capital asset; Date of conversion; Fair market value
• Section: 45(2); 143(3); 2(14)

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER ./ I.T.A. NO.1588 /MUM/2013 ( / ASSESSMENT YEAR : 2008-2009 MR. FARDEEN KHAN, (LEGAL HEIR OF LATE MR. FEROZ KHAN), C-7, R.N.A. COMPLEX, ROAD NO. 3, SAMRATH NAGAR, LOKHANDWALA COMPLEX, ANDHERI WEST, MUMBAI 400 058. / VS. ASSTT. COMMISSIONER OF INCOME TAX 11(1), 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. ./ PAN : AABPK8193M ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.1589 /MUM/2013 ( / ASSESSMENT YEAR : 2008-2009 MR. FARDEEN KHAN, C-7, R.N.A. COMPLEX, ROAD NO. 3, SAMRATH NAGAR, LOKHANDWALA COMPLEX, ANDHERI WEST, MUMBAI 400 058. / VS. ASSTT. COMMISSIONER OF INCOME TAX 11(1), 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. ./ PAN : AABPK8193M ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI VIJAY MEHTA & SHRI GOVIND JHAVERI R E SPONDENT BY : SHRI RAJESH RANJAN PRASAD / DATE OF HEARING : 15-1-2015 / DATE OF PRONOUNCEMENT : 25-2-2015 [ ITA 1588 & 1589/M/13 2 !' / O R D E R PER R.C. SHARMA, A.M . : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) -3, MUMBAI DATED 27-12-2012 FOR THE A.Y. 200 8-09 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2. COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEA LS. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. IN THE ASSESSMENT ORDER A.O. OBSERVED THAT THE ASSESSEE AL ONG WITH HIS FATHER (LATE FEROZ KHAN) HAD DURING THE RELEVANT FINANCIAL YEAR ENTERED INTO PROPERTY DEVELOPMENT AGREEMENT WITH M/S. GODREJ PROPERTIES L TD (HEREINAFTER REFERRED TO AS 'GPL') VIDE AGREEMENT DATED 20.04.2007 FOR DE VELOPMENT OF ABOUT 13 ACRES OF LAND AT TUMKUR ROAD, BANGALORE AND CONSTRU CTION OF 287 VILLAS THEREIN. THE SAID LAND IS OWNED BY THE MR. FARDEEN KHAN AND HIS LATE FATHER, MR. FEROZ KHAN IN THE RATIO OF 75% AND 25% RESPECTI VELY. THE A.O. FURTHER OBSERVED THAT AS PER THE SAID DEVELOPMENT AGREEMENT , AN AMOUNT OF RS.13.75 CRORES HAS BEEN PAID BY THE GPL TO THE LAND OWNERS AS NON-REFUNDABLE ADVANCE/DEPOSIT BY THE DEVELOPER. IN TURN, AN IRREV OCABLE POWER OF ATTORNEY DATED 19.04.2007 WAS GIVEN BY THE ASSESSEE TO GPL G IVING ALL THE POWERS OF OBTAINING VARIOUS PERMISSIONS, COMMENCEMENT OF CONS TRUCTION, AND CONSTRUCTION OF ALL INFRASTRUCTURES, LEVELING OF PR OPERTY TO CONSTRUCT VILLAS AND TO SELL THE VILLAS. THE AO STATED THAT THE ASSESSEE HAS NOT OFFERED ANY CAPITAL GAINS ON THE ABOVE TRANSFER OF LAND TO GPL. THEREFO RE, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE ABOVE TRANSACTION SHOULD N OT BE CONSIDERED AS A TRANSFER AS PER SECTION 2(47) (V)/(VI) OF THE ACT A ND WHY THE PRINCIPLES LAID DOWN IN THE DECISION IN THE CASE OF CHATURBHAJ DWAR KADAS KAPADIA VS. CIT 260 ITR 491 (BOM) SHOULD NOT BE MADE APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ASSESSEE MADE WRITTEN SUBMISSIONS WHICH A RE REPRODUCED BY THE AO AT PARA 3.2 OF THE ASSESSMENT ORDER. IN SUM UP, IT WAS STATED THAT LATE ITA 1588 & 1589/M/13 3 FEROZ KHAN AND MR. FARDEEN KHAN (COLLECTIVELY REFER RED TO AS 'FK' HEREINAFTER) OWNED CERTAIN PARCELS OF LAND AT BANGALORE WHICH WA S AGRICULTURAL LAND TILL ABOUT 31.03.2005, AND THEREAFTER THE SAID LAND WAS CONVERTED INTO NON-AGRICULTURAL LAND FOR WHICH FK HAS EXECUTED AN AGREEMENT WITH GPL FOR CONSTRUCTION OF VILLAS ON THE LAND IN APRIL, 2007. AS PER THE AGREEMENT, FK HAS RECEIVED DEPOSIT OF RS.13.75 CRORES ON THE SIGNING OF AGREEMENT IN APRIL, 2007. FURTHER, 30% OF THE PROCEEDS WAS TO BE RECEIVED BY THE DEVELOPER FROM SALE OF VILLAS TILL TOTAL AMOUNT RECEIVED INCLUDING DEPOSIT OF RS.13.75 CRORES REACHED THE FIGURE OF RS.55 CRORES. THE GPL HAS NOT ASSURED THAT FK SHALL DEFINITELY BE ENTITLED TO RS.55 CRORES OR DEFINITE TIMING OF PAYM ENT OF MONEY TO FK. IF BY VIRTUE OF THE FORMULA PRESCRIBED THE REVENUE TO FK FALLS SHORT OF RS.55 CRORES OR PROJECT DOES NOT TAKE OFF, FK DOES NOT HAVE A LE GAL RIGHT OF RECOVERY OF SHORTFALL. THE MARKET PRICE OF THE LAND AT THE TIME OF SIGNING OF AGREEMENT WAS IN THE RANGE OF RS.67 CRORES ONLY. THE PROPERTY WAS TREATED AS STOCK IN TRADE W.E.F. 01.04.2007 BY FKS WITH AN INTENTION TO DEVEL OP THE PROPERTY. EVEN THOUGH THE GPL PAID AN ADVANCE, THE AGREEMENT WAS I N THE NATURE OF MOU WHICH WAS VOID AB INITIO OR NON-CONCLUDED AGREEMENT . THE AGREEMENT WAS NOT REGISTERED U/S.17(1A) OF INDIAN REGISTRATION ACT, 1 908. THEREFORE, THERE WAS NO TRANSFER OF ANY IMMOVABLE PROPERTY FOR THE PURPO SE OF SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 (IN SHORT TPA). 4. WITHOUT PREJUDICE, IT WAS FURTHER STATED THAT TH E PROVISIONS OF SECTION 2(47) (V) APPLY ONLY FOR THE DETERMINATION OF CAPIT AL GAINS WHEREAS IN THIS CASE, TRANSACTION WAS IN THE NATURE OF STOCK IN TRADE, HE NCE, THE PROVISIONS OF SECTION 2(47) WERE NOT APPLICABLE. PROVISIONS OF SE CTION 2(47)(V) PROVIDES THAT TRANSFER INCLUDES ANY TRANSACTION INVOLVING THE POS SESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF TPA. HOWEVER, THESE CONDITIONS ARE NOT SATISFIED IN THE CASE OF ASSESSEE. AS THE AGREEMENT WAS NOT A CONCLUDED CONTRACT, THE PROVISIONS OF SECTION 53A OF TPA ARE NOT APPLICABLE. EVEN AFTER ITA 1588 & 1589/M/13 4 MORE THAN 3.5 YEARS OF SIGNING MOU, THERE HAS BEEN NO GROUND BREAKING BEEN HAPPENED AND THE AGREEMENT AND POWER OF ATTORNEY AR E NEITHER STAMPED NOR REGISTERED AND FRESH TERMS ARE GETTING NEGOTIATED. THEREFORE, IT WAS CLAIMED THAT RATIO OF DECISION IN THE CASE OF CHATURBHAJ DW ARKADAS KAPADIA 260 ITR 491 (BOM) IS NOT APPLICABLE, BECAUSE THIS IS A CASE OF SALE OF STOCK-IN-TRADE WHILE THE SAID DECISION WAS IN THE CONTEXT OF TRANS FER OF CAPITAL ASSETS. FURTHER, THE PROVISIONS OF SECTION 2(47)(V) CANNOT BE APPLIED AS THE CONDITIONS ENUMERATED THEREIN ARE NOT SATISFIED. HOWEVER, THE A.O. DID NOT AGREE WITH THE ASSESSEES CONTENTION AND HELD THAT THIS ALLEGED CO NVERSION OF LAND INTO STOCK- IN-TRADE IS AN AFTERTHOUGHT TO ESCAPE CHARGEABILITY OF CAPITAL GAINS. THUS ASSESSEES CONTENTION THAT THE LAND HAS BEEN CONVER TED INTO STOCK-IN-TRADE WAS NOT ACCEPTED. THE A.O. ALSO HELD THAT THE TRANS ACTION IS COVERED BY PROVISIONS OF SECTION 2(47)(V) OF THE ACT AND ACCOR DINGLY THE ASSESSEE WAS LIABLE FOR CAPITAL GAINS. WHILE COMPLETING THE ASSE SSMENT, THE MAJOR ADDITION MADE BY ASSESSING OFFICER IS ON ACCOUNT OF CAPITAL GAIN EARNED BY FK PURSUANT TO DA ENTERED WITH GPL. IN THE OPINION OF THE ASSESSING OFFICER, PURSUANT TO THE DA AND POWER OF ATTORNEY, FK TRANSF ERRED LAND TO GPL AND HENCE, PROVISIONS OF SECTION 2(47)(V) AND SECTION 2 (47)(VI) WERE ATTRACTED. THE ASSESSING OFFICER CONSIDERED RS.55 CRORES STATED IN DA AS FULL VALUE OF CONSIDERATION FOR TRANSFER OF THE LAND TO GPL. THE ASSESSING OFFICER NOTED THAT DATE OF CONVERSION OF LAND INTO STOCK IN TRADE WAS 01.04.2007 AS CLAIMED BY FK AND HELD THAT IF THE CONVERSION AND SALE OR TRAN SFER IS IN THE SAME FINANCIAL YEAR, THE TAX LIABILITY WILL ARISE IN THA T YEAR. BY THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE ADDITION MADE BY ASSESSIN G OFFICER ON ACCOUNT OF CAPITAL GAINS ARISING FROM ALLEGED TRANSFER OF THE SAID LAND. HOWEVER, THE LD. CIT(A) ALLOWED DEDUCTION ON ACCOUNT OF COST OF ACQU ISITION AND COST OF IMPROVEMENT FROM THE ALLEGED SALE CONSIDERATION OF RS. 55 CRORES. THE LD. CIT(A) OBSERVED THAT FK HAD SHOWN THE LAND IN WEALT H TAX RETURNS U/S.2(EA) (V) OF WEALTH TAX ACT, 1957. THIS ESTABLISHES THAT LAND WAS NOT CONVERTED INTO 'STOCK-IN-TRADE' INITIALLY AND THIS CONTENTION OF C ONVERSION IS AN AFTERTHOUGHT. ITA 1588 & 1589/M/13 5 THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF A.O. HO LDING THAT THERE WAS TRANSFER OF RIGHT WITHIN THE MEANING OF SECTION 2(4 7) OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE HAS PREFER RED THESE APPEALS BEFORE THE TRIBUNAL, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN :- 5. THE GROUNDS TAKEN IN THE APPEAL FILED BY MR. FAR DEEN KHAN IN ITA NO. 1589/MUM/2013 READ AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW: 1. A) THE LD COMMISSIONER OF INCOME TAX'(APPEALS) E RRED IN ASSESSING CAPITAL GAINS ON ACCOUNT OF ALLEGED 'TRANSFER' OF C APITAL ASSET AND FAILED TO TAKE INTO CONSIDERATION THAT ON THE DATE OF AGRE EMENT, THE IMPUGNED PROPERTY AT BANGALORE WAS NOT A CAPITAL ASSET WITHI N THE MEANING OF SECTION 2(14) OF THE INCOME TAX ACT ['ACT'], AS THE SAME HAD BEEN CONVERTED INTO STOCK-IN-TRADE. B) THE LD COMMISSIONER OF INCOME-TAX' (APPEALS) ERR ED IN IGNORING THE VOLUMINOUS EVIDENCE FILED BEFORE HIM IN THIS REGARD . 2. WITHOUT PREJUDICE, THE LD COMMISSIONER OF INCOME -TAX (APPEALS) ERRED IN NOT HOLDING THAT CAPITAL GAINS ARE NOT CHA RGEABLE BECAUSE IN THIS CASE CONSIDERATION RECEIVED OR ACCRUING IN RES PECT OF THE SAID ASSET IS NOT ASCERTAINABLE OR CANNOT BE DETERMINED AND HE NCE MACHINERY PROVISIONS FAIL AND THE GAINS ARISING FROM THE TRAN SFER OF ASSET ARE NOT LIABLE TO TAX. 3. WITHOUT PREJUDICE THE LD COMMISSIONER OF INCOME- TAX (APPEALS) ERRED IN NOT GIVING A FINDING THAT CAPITAL GAIN HAS NOT ACCRUED DURING THE YEAR UNDER APPEAL AND THAT CAPITAL GAIN SHALL A RISE ONLY WHEN GODREJ PROPERTIES LTD['GPL'] ENTERS INTO SPECIFIC A GREEMENTS WITH PROSPECTIVE BUYERS. 4. A. WITHOUT PREJUDICE THE LD COMMISSIONER OF INCO ME-TAX (APPEALS) ERRED IN HOLDING THAT BY VIRTUE OF SIGNING A DEVELO PMENT AGREEMENT WITH GPL IN RESPECT OF BANGALORE PROPERTY, THERE HAS BEE N A 'TRANSFER' OF PROPERTY U/S. 2(47)(V)J(VI) OF THE I. TAX ACT, 1961 , ALTHOUGH THERE WAS NO CONCLUDED AGREEMENT, THERE WAS NO CONTRACT FOR TRAN SFER OF PROPERTY AND FURTHER THAT THE SAID AGREEMENT HAS BEEN ANNULL ED. B. WITHOUT PREJUDICE ALL THE CONDITIONS SPECIFIED I N SEC. 53A OF TRANSFER OF PROPERTY ACT, HAVE NOT BEEN SATISFIED AND THEREF ORE NO 'TRANSFER IX] S. 2(47) (MORE SPECIFICALLY CONDITIONS OF 'TRANSFEREE NOT BEING READ AND WILLING TO PERFORM HIS PART OF CONTRACT AND THE CON TRACT HAS NOT BEEN REGISTERED). ITA 1588 & 1589/M/13 6 5. WITHOUT PREJUDICE THE LD COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN COMPUTING THE CAPITAL GAINS, BY ADOPTING R S. 41.25 CRORES (I.E. 75% OF RS. 55 CRORES) AS THE FULL VALUE OF CONSIDER ATION. HE ERRED IN PRESUMING THAT THE VALUE OF THE PROPERTY AT RS. 55 CRORES AS FULL VALUE OF CONSIDERATION ALTHOUGH I.. THE APPELLANT , AS SELF AND LEGAL HEIR, HAS ONL Y RECEIVED A DEPOSIT OF 13.75 CRORES, ARISING FROM A NON-STAMPED , NON-REGISTERED AND ANNULLED AGREEMENT; II. FOR THE PURPOSES OF COMPUTING THE SALE CONSIDER ATION, THE FAIR MARKET VALUE OF THE PROPERTY PROPOSED TO BE DEVELOP ED, SHOULD NOT EXCEED EITHER OF THE FOLLOWING :- 75% OF RS. 4,86,37,508/- (FMV AS PER THE VALUATIO N REPORT) OR 75% OF 13.75 CRORES (TOTAL DEPOSIT RECEIVED) 6. WITHOUT PREJUDICE THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) ERRED IN HOLDING THAT NO REFERENCE WAS RE QUIRED TO BE MADE TO THE DVO U/S 55 WHEN ALTHOUGH THE APPELLANT HAD TAKE N AN ALTERNATIVE GROUND OF ADOPTING THE SALE CONSIDERATION AT A VALU E WHICH IS LOWER THAN THE ALLEGED FAIR MARKET VALUE OF RS. 55 CRORES AS IS ADOPTED BY THE LD AO, WHICH IS WITHOUT ANY BASIS. 6. IT WAS ARGUED BY THE LD. A.R. THAT THE A.O. HAS WRONGLY ASSESSED CAPITAL GAINS FOR ALLEGED TRANSFER OF LAND PURSUANT TO DEVE LOPMENT AGREEMENT DATED 20-04-2007 ENTERED WITH GPL. THE ASSESSEE WAS HAVIN G AGRICULTURAL LAND AND THE SAME WAS HELD AS AGRICULTURAL LAND TILL 31-3- 2005 AND THEREAFTER CONVERTED INTO NON-AGRICULTURAL LAND WITH AN INTE NTION TO DEVELOP THE LAND AND EXPLOIT IT COMMERCIALLY. AS PER THE LD. A.R., IN ORDER TO EXPLOIT THE SAID LAND COMMERCIALLY, THE ASSESSEE TOOK FURTHER SEVERA L STEPS SUCH AS CONSTRUCTION OF COMPOUNDING WALL, APPOINTMENT OF AR CHITECTS TO FORMULATE PLANS, DEVELOPMENT OF LOGO, APPROACHING FINANCIAL I NSTITUTION FOR FINANCIAL ASSISTANCE, SUBMISSION OF PLANS TO BANGALORE DEVELO PMENT AUTHORITY ETC. FOR THIS PURPOSE, HE INVITED OUR ATTENTION TO THE FOLLO WING DOCUMENTS:- ITA 1588 & 1589/M/13 7 DOCUMENTS EVIDENCING CONVERSION OF LAND TO STOCK-IN -TRADE A) CONVERSION ORDER FROM KARNATAKA REVENUE DEPARTM ENT FOR CONVERSION OF LAND TO NON-AGRICULTURE DATED 23-09-2005. B) ACKNOWLEDGMENT OF SUBMISSION OF LAYOUT PLANS TO BANGALORE DEVELOPMENT AUTHORITY (BDA) DATED 16-11-2005. C) APPLICATION TO KARNATAKA STATE POLLUTION CONTRO L BOARD FOR GRANTING NO OBJECTION CERTIFICATE FOR THE PROJECT DATED 25-11-2 005. D) LETTER ADDRESSED TO BANGALORE ELECTRICITY SUPPL Y CO. LTD FOR GRANTING NOC FOR THE PROJECT. E) LETTER ADDRESSED TO BANGALORE WATER SUPPLY & SEW ERAGE BOARD FOR GRATING NOC FOR THE PROJECT. F) NOC ISSUED BY BANGALORE ELECTRICITY SUPPLY CO. LTD. DTD. 12-12-2005. G) NOC ISSUED BY KARNATAKA STATE POLLUTION CONTR OL BOARD FOR DEVELOPMENT OF NEW RESIDENTIAL PROPERTY DTD. 23-02- 2006. H) REMINDER LETTER TO BDA FOR APPROVAL OF RESIDEN TIAL LAYOUT DTD. 3-3-2006. (I) LETTER ADDRESSED TO HONG KONG & SHANGAI BANKING CORPORATION FOR CREDIT FACILITY FOR THE HOUSING PROJECT DTD. 18-4-2 006. (J) RELEVANT EXTRACT OF PROJECT REPORT FORMING PA RT OF LETTER TO HSBC DTD.18.4.2006 (K) CONTRACT DOCUMENTS BY SIRAJ & RENU. (L) DETAILS OF TENDER NEGOTIATION MEETING WITH SIRA J & RENU (ARCHITECTS AND INTERIOR DESIGNERS) DATED 10.05.2006. (M) TENDER FORM ISSUED BY MANJUNATHA ENTERPRISES TO SIRAJ & RENU FOR CIVIL WORKS FOR THE PROJECT (N) LETTER FROM SIRAJ & RENU DATED 15-5-06 DEFINING SCOPE OF SERVICES FOR ARCHITECTURAL CONSULTANCY FOR THE PROJECT. (O) INVOICE ISSUED BY SIRAJ & RENU AND ACKNOWLEDGED RECEIPT OF PAYMENT OF' 3,50,000/- DATED 17-7-2006 FOR PROFESSIONAL CONSULT ANCY. ITA 1588 & 1589/M/13 8 (P) LETTER OF ANUP S. SHAH, SENIOR ADVOCATE DTD. 20 .7.2006 CONFIRMING THE LAND IN SURVEY NO. 52 TO 68 PRESENTLY VESTS WITH MR . FEROZ KHAN AND MR. FARDEEN KHAN. (Q) LETTER ADDRESSED TO HONG KONG & SHANGHAI BANKIN G CORPORATION FOR CREDIT FACILITY FOR THE HOUSING PROJECT DTD. 8-8-20 06. (R) LETTER DATED 10-09-2006 ADDRESSED TO BANGALORE DEVELOPMENT AUTHORITY INFORMING THAT ALL CHARGES IN RESPECT OF THE APPROVAL HAVE BEEN MADE. (S) LETTER DATED 16-2-2007 ADDRESSED TO BANGALORE D EVELOPMENT AUTHORITY FOR APPROVAL OF ADDITIONAL RESIDENTIAL LAYOUT.(T) L ETTER ADDRESSED BY BANGALORE DEVELOPMENT AUTHORITY IN RESPECT OF APPRO VAL OF RESIDENTIAL LAYOUT PLAN DTD. 8-3-2007. 7. OUR ATTENTION WAS ALSO INVITED TO VARIOUS CLAUSE S OF DEVELOPMENT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND GOD REJ PROPERTIES LIMITED, DEVELOPMENT AGREEMENT BETWEEN FARDEEN KHAN AND LAIL A KHAN AND GODREJ PROPERTIES LIMITED, GENERAL POWER OF ATTORNEY, SUPP LEMENTAL AGREEMENT BETWEEN FARDEEN KHAN AND LAILA KHAN AND GODREJ PROP ERTIES LTD. TO DEMONSTRATE THAT THERE WAS NO TRANSFER OF LAND WITH IN THE MEANING OF SECTION 2(47) V/VI OF THE I.T. ACT. ALL THESE DOCUMENTS ARE PLACED ON RECORD. THE LD. A.R. ALSO INVITED OUR ATTENTION TO THE REMAND REPOR T GIVEN BY THE A.O. AND THE REJOINDER FILED BY THE ASSESSEE. THE LD. A.R. CONT ENDED THAT ALTHOUGH THE CONVERSION OF AGRICULTURAL LAND INTO NON-AGRICUL TURAL LAND TOOK PLACE IN THE YEAR 2005, THE SAID LAND WAS NOT SHOWN IN THE BALAN CE SHEET AS STOCK-IN- TRADE TILL YEAR ENDED 31-3-2007. SUBSEQUENTLY, IN THE BOOKS OF ACCOUNT THE ASSESSEE TREATED THE LAND AS STOCK-IN-TRADE I.E W .E.F. 1-4-2007. AS PER THE LD. A.R., LATER ON THE ASSESSEE REALIZED THAT DEVELOPIN G THE LAND REQUIRE EXPERIENCED ASSOCIATION AND WITH A VIEW TO DEVELOP THE LAND MORE PROFITABLY, THE ASSESSEWE ENTERED INTO AGREEMENT WITH GODREJ PR OPERTIES LTD. AND GRANTED LICENCE TO THE GPL TO ENTER UPON THE PROPERTY AND D O THE NECESSARY THINGS TO ITA 1588 & 1589/M/13 9 EXECUTE THE PROJECT. OUR ATTENTION WAS ALSO INVITED TO THE RELEVANT CLAUSE IN DEVELOPMENT AGREEMENT EVIDENCING THAT POSSESSION OF THE LAND WAS RETAINED AND CONTINUED WITH THE ASSESSEE EVEN THOUGH ASSESSE E HAD EXECUTED POWER OF ATTORNEY IN FAVOUR OF GPL. OUR ATTENTION WAS FU RTHER INVITED TO THE FACT THAT RATE OF THE LAND THAT PREVAILED AT THE TIME OF SIGNING OF DEVELOPMENT AGREEMENT WAS ABOUT RS. 4.86 CRORES. AS PER THE LD. A.R., ON THE BASIS OF MARKET REPORT THE GPL FOUND THAT THE SIZE OF THE VI LLAS PROPOSED TO BE CONSTRUCTED OVER THE LAND AS PLANNED BY THE ASSESSE E HAD VERY FEW BUYERS AND ALSO THAT SUCH VILLAS WERE NOT EASILY SALEABLE AND ACCORDINGLY NO CONSTRUCTION WAS UNDERTAKEN ON THE SAID LAND BY GPL PURSUANT TO THE DEVELOPMENT AGREEMENT. OUR ATTENTION WAS ALSO INVI TED TO THE FACT THAT SUBSEQUENTLY THE PLAN TO CONSTRUCT VILLAS WAS SHELV ED AND DEVELOPMENT AGREEMENT DTD. 20-4-2007 WAS ANNULLED. HOWEVER, FRE SH DEVELOPMENT AGREEMENT WAS ENTERED INTO ON 26-3-2011 WITH REVISE D PLANS AND WITH A NEW POWER OF ATTORNEY. THUS THE CONSTRUCTION ACTIVITY A S PER SECOND DEVELOPMENT AGREEMENT WAS STARTED BY GPL IN THE YEAR 2012. 8. IN VIEW OF ALL THESE DOCUMENTARY EVIDENCES, LD. A.R. CONTENDED THAT A.O. WAS NOT JUSTIFIED IN TREATING THE DEVELOPMENT AGREE MENT AS SALE OF LAND AND THEREBY TAXING THE CAPITAL GAINS IN FINANCIAL YEAR 2007-08 RELEVANT TO A.Y. 2008-09 UNDER CONSIDERATION. RELIANCE WAS PLACED BY THE LD. A.R. ON THE DECISION OF HYDERABAD BENCH OF ITAT IN THE CASE OF FIBARS INFRATECH (P.) LTD. VS. ITO, [2014] 46 TAXMANN.COM 313 (HYDERABAD TRI B). FURTHER RELIANCE WAS PLACED IN THE DECISION OF MUMBAI BENCH OF ITAT IN T HE CASE OF RAMESH ABAJI WALAVALKAR VS. ADDL. CIT, [2012] 150 TTJ (MUM) 725 IN WHICH IT WAS HELD THAT THERE WAS A CONVERSION OF LAND BY THE ASSESSEE INTO STOCK-IN-TRADE ON 15 TH MAY, 2002 WITHIN THE MEANING OF SECTION 45(2) AND H ENCE THE PROFITS OR GAINS ARISING FROM THE TRANSFER BY WAY OF SUCH CONVERSION WERE CHARGEABLE TO TAX AS THE INCOME OF THE ASSESSEE UNDER THE HEAD CAPITAL GAINS IN THE YEAR WHEN SUCH STOCK-IN-TRADE WAS SOLD BY THE ASSESSEE. IN TH IS CASE ALSO, ON THE BASIS ITA 1588 & 1589/M/13 10 OF VARIOUS STEPS TAKEN BY THE ASSESSEE PRIOR TO ENT ERING INTO DEVELOPMENT AGREEMENT, IN THE MATTER OF DEVELOPMENT OF THE SAID LAND WHICH WERE SUFFICIENT TO SHOW THAT THE BUSINESS OF REAL ESTATE DEVELOPMENT HAD NOT ONLY BEEN COMMENCED BY THE ASSESSEE BUT THE SAME WAS PRI OR TO THE DATE OF DEVELOPMENT AGREEMENT. 9. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. CREST HOTELS LTD. [2001] 78 ITD 213 WHEREIN THE CAPITAL ASSET COMPRISING THE HOTEL BUSINESS WAS CONVERTED BY THE ASSESSEE INTO STOCK-IN-TRADE OF THE CONSTRUCTION BUSINESS. T HE SAID STOCK-IN-TRADE WAS HELD TO BE LIABLE TO CAPITAL GAIN ON CONVERSION, WA S OFFERED TO TAX BY THE ASSESSEE IN THE YEAR IN WHICH STOCK-IN-TRADE WAS SO LD. IT WAS HELD BY THE TRIBUNAL THAT THE TAX ON CAPITAL GAINS WOULD BE LEV IABLE IN THE SAME YEAR IN WHICH THE BUSINESS PROFIT ON SALE ACCRUED TO THE AS SESSEE AS PER THE PROVISIONS OF SECTION 45(2) OF THE ACT. 10. FURTHER RELIANCE WAS ALSO PLACED ON THE DECISIO N OF CHENNAI BENCH OF ITAT IN THE CASE OF R. GOPINATH (HUF) VS. ACIT (201 0) 133 TTJ (CHENNAI) 595. 11. ON THE OTHER HAND, THE LD. CIT DR CONTENDED TH AT AGRICULTURAL LAND WAS ACQUIRED IN THE YEAR 1981 AND 1991 BY FATHER AN D SON. THE LAND WAS CONVERTED INTO NON-AGRICULTURAL LAND IN THE YEAR 20 05 AND THE LAND WAS SHOWN BY THE ASSESSEE AND HIS FATHER IN THEIR BALAN CE SHEET WITH RETURN OF INCOME FOR A.Y. 2008-09 AS CAPITAL ASSET. AS PER T HE LD. D.R., IN THE WEALTH TAX RETURN FILED BY THE ASSESSEE FOR A.Y. 2008-09, THE LAND WAS SHOWN AS URBAN LAND WHICH MEANS THE ASSESSEE HIMSELF AT THE TIME OF FILING WEALTH TAX RETURN ALSO TREATED THIS LAND AS CAPITAL ASSET AND NOT AS STOCK-IN-TRADE. THE LD. D.R. ALSO INVITED OUR ATTENTION TO THE FACT THA T ASSESSEE HAD SHOWN THIS LAND U/S 2(EA) OF THE WEALTH TAX ACT, 1957. THE LD . D.R. VEHEMENTLY ARGUED THAT AS PER THE DEVELOPMENT AGREEMENT DATED 20-4-20 07 ENTERED INTO BETWEEN THE ASSESSEE AND GPL, THE RIGHT FOR 13 ACRES OF LAN D WITH REGARD TO ITS ITA 1588 & 1589/M/13 11 DEVELOPMENT ABSOLUTELY WAS TRANSFERRED TO GPL IN LI EU OF RS. 13.75 CRORES AS DEPOSIT AND REVENUE UP TO RS. 55 CRORES WAS TO BE T REATED AS LAND VALUE. AS PER THE LD. D.R., IN TERMS OF POWER OF ATTORNEY 19- 4-2007, GPL WAS GIVEN THE POWERS OF OBTAINING VARIOUS PERMISSIONS, COMMENCEME NT OF CONSTRUCTION, AND CONSTRUCTION OF ALL INFRASTRUCTURES, LEVELING OF PR OPERTY AND SALE OF VILLAS. THEREFORE THERE WAS TRANSFER OF RIGHT WITHIN THE ME ANING OF SECTION 2(47)(VI) OF THE ACT. HE ACCORDINGLY ARGUED THAT VIDE DEVELOPME NT AGREEMENT DATED 20-4- 2007 THERE WAS TRANSFER OF PROPERTY WITHIN THE MEAN ING OF SECTION 2(47)(V)/(VI) OF THE ACT. THE LD. D.R. ALSO RELIED ON THE OBSERVA TIONS MADE BY THE LOWER AUTHORITIES AND CONTENDED THAT ASSESSEE HAS TRANSFE RRED LAND TO GPL AND EARNED CAPITAL GAIN IN THE YEAR OF ENTERING INTO AG REEMENT FOR DEVELOPMENT OF PROPERTY. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CA REFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THE IR RESPECTIVE ORDER AS WELL AS CITED BY LD. A.R. AND LD. D.R. DURING THE COURSE OF HEARING BEFORE US. THE MAIN ISSUE FOR CONSIDERATION IS WHETHER THE LAND OW NED BY FK IS A CAPITAL ASSET OR WAS CONVERTED INTO STOCK-IN-TRADE, WHETHE R THERE WAS TRANSFER OF LAND WITHIN THE MEANING OF PROVISIONS OF SECTION 2(47)(V ) AND SECTION 2(47)(VI) OF THE ACT AND WHETHER ANY INCOME CAN BE SAID TO HAVE ACCR UED TO FK WHEN THE AMOUNT OF SALE CONSIDERATION COULD NOT BE DETERMINE D AS PER THE TERMS OF DA. BEFORE REACHING TO THE CONCLUSION THAT CAPITAL ASSE T WAS CONVERTED INTO STOCK-IN-TRADE OR NOT SEVERAL STEPS TAKEN BY THE ASSESSEE FOR CONVERSION OF LAND IS TO BE TAKEN INTO ACCOUNT. AFTER PERUSAL OF VARIOUS DOCUMENTS PLACED ON RECORD AS NARRATED AT PARA 5 HEREINABOVE, WE FOU ND THAT LAND WAS INITIALLY ACQUIRED IN 1981 BY LATE FIROZ KHAN JOINTLY WITH MS . SONIA SAHANI. SUBSEQUENTLY THE LAND OWNED BY MS. SONIA SAHANI WAS TRANSFERRED TO MR. FARDEEN KHAN IN 1991 AND CONSEQUENTLY THE ASSESSEE MR. FARDEEN KHAN BECAME OWNER OF THE AGRICULTURAL LAND. AS PER THE D OCUMENTS PLACED ON ITA 1588 & 1589/M/13 12 RECORD WE FOUND THAT IN ORDER TO EXPLOIT THE LAND C OMMERCIALLY, THE ASSESSEE FILED AN APPLICATION TO BANGALORE DEVELOPMENT AUTHO RITY ON 12-4-2005 TO CONVERT AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND SO THAT IT CAN BE USED FOR RESIDENTIAL PURPOSES. THUS IT WAS THE FIRST STE P TAKEN BY THE ASSESSEE TO CONVERT HIS AGRICULTURAL LAND INTO STOCK-IN-TRADE. THE ASSESSEE HAS ALSO INCURRED AN AMOUNT OF RS. 13,66,991/- ON CONSTRUCTI ON OF COMPOUND WALL ON THE SAID LAND. THE BANGALORE DEVELOPMENT AUTHORITY (BDA) CONVERTED THE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND ON TER MS CONTAINED IN OFFICIAL MEMORANDUM DATED 23-09-2005. AFTER RECEIPT OF CONVE RSION ORDER, THE ASSESSEE HAS SUBMITTED LAY OUT PLAN FOR PROPOSED VI LLAS TO THE BDA ON 16-11- 2005. THE ASSESSEE HAS ALSO FILED APPLICATION BEFO RE THE KARNATAKA STATE POLLUTION CONTROL BOARD FOR TREATMENT OF DOMESTIC E FFLUENT, ETC. APPLICATION WAS ALSO FILED BEFORE BANGALORE ELECTRICITY SUPPLY COMPANY LTD. [BESCOM] FOR APPROVAL OF RESIDENTIAL LAYOUT AND PROPOSED ELE CTRICAL LOAD ESTIMATE FOR PROPOSED 28 RESIDENCES, BOREWELL AND CLUB HOUSE. AF TER RECEIPT OF THESE DOCUMENTS, BESCOM ISSUED NOC TO THE ASSESSEE IN DEC EMBER, 2005 PURSUANT TO THE PROPOSED LAY OUT SUBMITTED BY THE A SSESSEE. NOC WAS ALSO ISSUED TO THE ASSESSEE BY KARNATAKA STATE POLLUTION CONTROL BOARD IN FEBRUARY AND MARCH 2006. THEREAFTER ASSESSEE MADE A PPLICATION TO HONGKONG AND SHANGHAI BANKING CORPORATION IN APRIL 2006 TO P ROCURE FINANCE FOR THE RESIDENTIAL PROJECT NAMELY 'GOLD COUNTY' WHEREIN CO ST OF PROPOSED CONSTRUCTION OF 29 VILLAS, INFRASTRUCTURE WITH PROJ ECT REPORT WAS EXPLAINED TO THE FINANCIAL INSTITUTION I.E. BANK FROM WHOM ASSES SEE WANT TO TAKE LOAN FOR THE PROPOSED PROJECT. CHANGES IN PROJECTS WERE ALSO DULY INTIMATED TO BANK IN AUGUST 2006. FOR LOOKING AFTER THE PROJECT THE ASSE SSEE HAS ALSO APPOINTED ARCHITECTS M/S SIRAJ & RENU IN MAY 2006 TO HANDLE T HE PROJECT, TENDER DOCUMENTS FOR CONTRACTOR WAS ALSO PREPARED. THE ASS ESSEE HAD PAID ARCHITECTS' FEES IN JULY 2006. TO CONFIRM THE CORRE CTNESS OF ASSESSEES CLAIM OF TITLE OF THE PROPERTY FOR THE PURPOSE OF CREATING E QUITABLE MORTGAGE IN FAVOUR OF FINANCIAL INSTITUTION, THE ASSESSEE OBTAINED TIT LE CERTIFICATE FROM ANUP S ITA 1588 & 1589/M/13 13 SHAH LAW FIRM IN JULY 2006.THE ASSESSEE HAS ALSO MA DE PAYMENTS TO BDA FOR EXECUTION OF LAYOUT PLANS TO THE TUNE OF RS. 20.60 LAKHS IN SEPTEMBER 2006. AFTER DETAILED DISCUSSION WITH BDA, LAY OUT PLAN WA S ALSO APPROVED IN MARCH, 2007. ALL THESE STEPS TAKEN BY ASSESSEE TO CONVERT ITS AGRICULTURAL LAND INTO STOCK-IN-TRADE WERE BRUSHED ASIDE BY LOWER AUTHORIT IES AND BY IGNORING OTHER DOCUMENTARY EVIDENCES MOSTLY ISSUED BY GOVERNMENT A GENCIES LIKE BANGALORE DEVELOPMENT AUTHORITY, KARNATAKA STATE POLLUTION CO NTROL BOARD, BANGALORE ELECTRICITY SUPPLY CO., BANGALORE WATER SUPPLY AND SEWERAGE BOARD, HONG KONG AND SANGHAI BANKING CORPORATION ETC. ETC., TH E A.O. JUMPED INTO THE CONCLUSION THAT ASSESSEE HAD SOLD ITS LAND TO GODRE J PROPERTIES LTD. BY ENTERING INTO DA WITH GPL 13. THE ABOVE VOLUMINOUS DOCUMENTS EVIDENCING VARIO US ACTS UNDERTAKEN BY THE ASSESSEE CLEARLY SHOWS THAT THE ASSESSEE HAD TAKEN VARIOUS DEFINITIVE STEPS FOR EXPLOITATION OF LAND BY PREPARING PROJECT FOR CONSTRUCTION OF VARIOUS VILLAS FOR WHICH LAND WAS CONVERTED INTO STOCK-IN-T RADE IN APRIL 2005 BY CONVERTING THE SAME INTO NON-AGRICULTURAL LAND. T HUS, THE ACT OF THE ASSESSEE LIKE ACTUAL CONVERSION OF LAND TO NON-AGRICULTURAL USE I.E. RESIDENTIAL PURPOSE, APPOINTMENT OF ARCHITECT, INCURRING RELATED EXPENDI TURE, APPOINTMENT OF CONTRACTOR, SUBMISSION OF PLAN TO BANGALORE DEVELOP MENT AUTHORITY AND SEEKING ITS APPROVAL ETC. ALL COLLECTIVELY ESTABLIS H THAT ASSESSEE HAD ALREADY VENTURED INTO BUSINESS OF DEVELOPMENT OF PROPERTY. THE FACT THAT THE LAND WAS CONVERTED BY BANGALORE DEVELOPMENT AUTHORITY IN YEA R 2006 ITSELF ESTABLISHES THAT THE ASSESSEE NO LONGER HELD LAND AS INVESTMEN T BUT TREATED IT AS STOCK- IN-TRADE. THE ALLEGATION OF THE A.O. THAT NO PROP ER ENTRY HAS BEEN PASSED IN THE BOOKS OF ACCOUNT SO AS TO TREAT THE CONVERTED L AND AS STOCK-IN-TRADE, WE ARE OF THE VIEW THAT MERE ENTRIES IN THE BOOKS OF A CCOUNT ARE NOT CONCLUSIVE FOR DECIDING THE NATURE OF TRANSACTION AND ITS IMPA CT UNDER INCOME TAX ACT, HOWEVER TRUE NATURE OF TRANSACTION HAS TO BE ASCERT AINED FROM THE TOTAL FACTS AND CIRCUMSTANCES OF THE CASE. THUS, WHEN VARIOUS A CTS UNDERTAKEN BY ITA 1588 & 1589/M/13 14 ASSESSEE AS STATED HEREINABOVE ARE CUMULATIVELY CON SIDERED, IT ESTABLISHES BEYOND ANY DOUBT THAT THE ASSESSEE HAD CONVERTED LA ND INTO 'STOCK IN TRADE' AND IT NO LONGER REMAINED 'CAPITAL ASSET'. THE INTE NT OF THE ASSESSEE TO TREAT THE LAND AS 'STOCK IN TRADE IS APPARENT FROM SERIE S OF ACTIVITIES UNDERTAKEN BY ASSESSEE AS DISCUSSED ABOVE. COMING TO THE OBSERVAT ION OF THE LOWER AUTHORITIES TO THE EFFECT THAT ASSESSEE HAS PAID WE ALTH TAX ON THE LAND BY SHOWING THE SAME IN WEALTH TAX RETURN, AS PER OUR C ONSIDERED VIEW MERE PAYMENT OF WEALTH TAX ON THE LAND CANNOT BE CONSIDE RED AS EVIDENCE CONTRARY TO THE INTENT OF THE ASSESSEE INSOFAR AS THE PAYMEN T OF TAX BY THE ASSESSEE WAS BASED ON HIS LIMITED UNDERSTANDING OF LAW ON TH E SUBJECT THAT EXEMPTION FOR AGRICULTURAL LAND HELD AS STOCK-IN-TRADE IS AVA ILABLE ONLY FOR FIRST 10 YEARS FROM THE DATE OF ACQUISITION OF LAND AND THE PERIOD OF 10 YEARS FROM THE DATE OF ACQUISITION HAD ALREADY EXPIRED. HOWEVER, ASSUMI NG THAT THERE WAS SUCH A MISTAKE IT CANNOT DEBAR THE ASSESSEE FROM MAKING RI GHTFUL CLAIM UNDER THE ACT, MORE PARTICULARLY WHEN GLARING CONTEMPORARY EV IDENCES FROM SEVERAL GOVERNMENT OFFICES SUCH AS BDA, KARNATAKA REVENUE D EPARTMENT, ETC. SUPPORT THE CLAIM OF THE ASSESSEE AS DISCUSSED ABOV E. 14. THE OBSERVATION OF THE A.O. TO THE EFFECT THAT ASSESSEE WAS PROMINENT CINE CELEBRITIES THEREFORE CANNOT UNDERTAKE SUCH PR OJECT. MERELY BECAUSE ASSESSEE WAS A CELEBRITY DO NOT LEAD TO CONCLUDE TH AT HE WILL NOT UNDERTAKEN ANY CONSTRUCTION ACTIVITY ON THE LAND CONVERTED BY HIM TO NON-AGRICULTURE. SIMILARLY NOT REFLECTING THE AMOUNT AS OPENING WIP AND CLOSING WIP IS NOT FATAL. THE ASSESSEE HAD CARRIED OUT SERIES OF ACTIV ITIES NARRATED HEREINABOVE BUT HAD NOT SHOWN THE LAND AS OPENING WIP AND CLOSI NG WIP. HAD THE ASSESSING OFFICER HAVE BELIEVED AND ACCEPTED SUCH C ONVERSION OF LAND FROM CAPITAL ASSET TO 'STOCK IN TRADE' MERELY ON THE BAS IS OF ITS REFLECTION IN FINANCIAL STATEMENTS. AS PER OUR CONSIDERED VIEW THE LAND CEA SED TO BE A CAPITAL ASSET FROM THE DATE WHEN THE ASSESSEE FILED APPLICATION B EFORE BDA FOR CONVERSION OF LAND FROM 'AGRICULTURE' TO 'NON-AGRICULTURAL'. WE F OUND THAT THE INTENT OF THE ITA 1588 & 1589/M/13 15 ASSESSEE TO HOLD THE LAND AS 'STOCK IN TRADE' IS FU RTHER FORTIFIED BY THE FACT THAT IN THE RECORDS OF REVENUE DEPARTMENT LAND WAS REGIS TERED AS 'N.A. LAND' WITHOUT WHICH NO RESIDENTIAL PROJECT COULD BE CARRI ED THEREON. THE APPROVAL OF PLANS TO CONSTRUCT RESIDENTIAL VILLAS BY BDA FURTHE R PROVES THE INTENTION OF THE ASSESSEE TO TREAT THE LAND AS COMMERCIAL ASSET. THU S VARIOUS STEPS TAKEN BY THE ASSESSEE ARE VERY MUCH PART OF BUSINESS ACTIVIT IES INVOLVED IN REAL ESTATE DEVELOPMENT. SERIES OF ACTIVITIES HAD BEEN UNDERTAK EN BY THE ASSESSEE WHICH ESTABLISHES THE FACT THAT ASSESSEE HAS CONVERTED TH E AGRICULTURAL LAND TO NON-AGRICULTURAL FOR UNDERTAKING DEVELOPMENT PROJ ECT THEREON. ON THE CONTRARY HAD THE ASSESSEE NOT CARRIED OUT SERIES OF ACTIVITIES STATED HEREINABOVE BUT HAD MERELY SHOWN THE ENTRY FOR OPEN ING AND CLOSING STOCK WILL NOT ENTITLE HIM TO TREAT MERE SUCH ENTRY AS SU FFICIENT FOR ACCEPTING ASSESSEES CONTENTION REGARDING STOCK-IN-TRADE MER ELY ON THE BASIS OF ITS REFLECTION IN FINANCIAL STATEMENTS. 15. IN VIEW OF THE ABOVE DISCUSSION, WE CAN CONCLUD E THAT LAND CEASED TO BE A CAPITAL ASSET FROM THE DATE WHEN ASSESSEE FILED A PPLICATION BEFORE THE BANGALORE DEVELOPMENT AUTHORITY FOR CONVERSION OF L AND FROM AGRICULTURE TO NON-AGRICULTURE. THE INTENT OF THE ASSESSEE TO HOLD THE LAND AS 'STOCK IN TRADE' IS FURTHER ESTABLISHED BY THE FACT THAT IN THE RECO RDS OF REVENUE DEPARTMENT LAND WAS REGISTERED AS 'N.A. LAND' WITHOUT WHICH NO RESIDENTIAL PROJECT COULD BE CARRIED THEREON. THE APPROVAL OF PLANS TO CONSTR UCT RESIDENTIAL VILLAS BY BDA FURTHER PROVES THE INTENTION OF THE APPELLANTS TO TREAT THE LAND AS COMMERCIAL ASSET. THUS VARIOUS STEPS TAKEN BY THE A SSESSEE ARE VERY MUCH PART OF BUSINESS ACTIVITIES INVOLVED IN REAL ESTATE DEVELOPMENT. 16. IF WE ANALYSE THE ACTS UNDERTAKEN BY THE ASSESS EE IN A CHRONOLOGICAL WAY, WE FIND THAT THE PROCESS OF CONVERSION HAD BEE N STARTED IN 2005-06 WHEREAS THE DEVELOPMENT AGREEMENT WAS ENTERED INTO WITH GPL IN THE YEAR 2007. THUS THE ACTUAL CONVERSION OF LAND HAS TAKEN PLACE IN ASSESSMENT ITA 1588 & 1589/M/13 16 YEARS 2005-06 AND NOT ON 1-4-2007 I.E. THE DATE ON WHICH THE ASSESSEE HAD DECLARED IT AS IN THE FINANCIAL STATEMENTS. FURTHER MORE TERMS IN THE DEVELOPMENT AGREEMENT HAS ASSURED ANY RETURN TO THE ASSESSEE AND HE WAS ENTITLED TO SHARE FROM REVENUE GENERATED ITSELF IN DICATES THAT THE ASSSSEE AS A BUSINESSMAN, HAS BORNE RISK OF EVEN INCURRING A LOS S IN EVENT THE PROJECT FAILED AS IT IS EVIDENCED FROM VARIOUS TERMS OF DEV ELOPMENT AGREEMENT. 17. THE MUMBAI TRIBUNAL IN THE CASE OF RAMESH ABA JI WALAVALKAR VS. ACIT [150 TTJ 725] WHEREIN UNDER SIMILAR CIRCUMSTAN CES THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ABLE TO PROV E THE CONVERSION OF LAND GIVEN FOR DEVELOPMENT AND BY PLACING RELIANCE ON JU DGMENT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA [260 ITR 461 (BORN)] T AXED CAPITAL GAINS IN THE HANDS OF THE ASSESSEE IN THE YEAR IN WHICH DEVE LOPMENT AGREEMENT WAS ENTERED INTO I.E. PREVIOUS YEAR RELEVANT TO A.Y.200 3-04. THE CIT(A) AGREED WITH THE ASSESSING OFFICER. HOWEVER, ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THE ASSESSEE HAD CONVERTED LAND INTO STOCK IN TRADE IN THE YEAR 2002 WHEN THE ASSESSEE HAD TAKEN SEVERAL STEPS LIKE ENTERING INTO CORRESPONDENCE WITH CIDCO TO GET APPROVAL FOR PROPOSED DEVELOPMENT OF P ROPERTY, PROCURING COMMENCEMENT CERTIFICATE, ETC. AND GAINS ARISING ON CONVERSION OF LAND WAS LIABLE TO BE TAXED AS 'CAPITAL GAINS' IN ACCORDANCE WITH THE PROVISIONS OF SECTION 45(2) OF THE ACT. HOWEVER THE INSTANT CASE IS ON MUCH MATTER FOOTING WHICH IS EVIDENT FROM VARIOUS PERMISSIONS/APPROVAL TAKEN BY THE ASSESSEE. 18. NOW WE DEAL WITH THE CONTENTION OF A.O. THAT TH ERE WAS TRANSFER OF LAND WITHIN THE PROVISIONS OF SECTION 2(47)(V) AND SECTI ON 2(47)(VI) OF THE ACT. WE FIND THAT THE ASSESSING OFFICER HAD HELD THAT LAND WAS 'CAPITAL ASSET' AND THEREFORE, THERE IS TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE INCOME-TAX ACT, 1961 ('ACT') WHICH PROVIDES THAT 'A NY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERT Y TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REF ERRED TO IN SECTION 53A OF ITA 1588 & 1589/M/13 17 THE TRANSFER OF PROPERTY ACT, 1882. THE ASSESSING O FFICER HAS MAINLY RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CHATURBHUJ DWARKADAS KAPADIA (2003) 260 ITR 491 TO SUPPORT HIS CONCLUSION. AS PER OUR CONSIDERED VIEW FOR APPLICATION OF SECTION 2(47)(V) OF THE ACT, IT IS ESSENTIAL THAT LAND SHOULD BE A 'CAPITAL ASSET'. HOWEVER, IN THE INSTANT CASE THE LAND NO LONGER REMAINED 'CAPITAL ASSET' AS THE SERIES OF AC TIVITIES UNDERTAKEN BY THE ASSESSEE DISCUSSED HEREINABOVE CLEARLY SHOW THAT TH E LAND HAD BEEN CONVERTED INTO' STOCK-IN-TRADE' IN THE YEAR 2005 IT SELF AND NOT IN THE PREVIOUS YEAR RELEVANT TO A.Y.2008-09. THUS THE ASSESSING OF FICER AND THE CIT(A) HAVE FAILED TO CORRECTLY AND TRULY APPRECIATE THE SERIES OF ACTIVITIES UNDERTAKEN BY THE ASSESSEE AND WRONGLY HELD THAT THE ASSESSEE HA VE CONVERTED LAND IN THE PREVIOUS YEAR RELEVANT TO A.Y.2008-09. 19. WE HAVE CAREFULLY GONE THROUGH THE CLAUSES OF D EVELOPMENT AGREEMENT AND FIND THAT [UNDER CLAUSE 6 DEALING WITH 'RIGHTS AND OBLIGATIONS OF THE DEVELOPER', IT HAS BEEN SPECIFICALLY PROVIDED T HAT THE DEVELOPER (I.E. GPL) WAS GRANTED MERE 'LICENCE' TO ENTER UPON THE P ROPERTY AND THAT BY ITSELF SHOULD NOT BE CONSTRUED AS PART PERFORMANCE OF AN A GREEMENT UNDER TRANSFER OF PROPERTY ACT, 1882 OR U/S 2(47)(V) OF INCOME-TAX ACT, 1961. THE DA ALSO PROVIDES UNDER CLAUSE 14 (B) THAT THE OWNERS (I.E. ASSESSEE) SHALL CONTINUE TO BE IN POSSESSION OF ENTIRE PROPERTY TO BE DEVELOPED . IN THIS RESPECT, RELIANCE CAN BE PLACED ON THE ORDER OF THE TRIBUNAL, CHENNAI BENCH, IN THE CASE OF R. GOPINATH (HUF) V ACIT 133 TTJ 595. WE ALSO FIND THA T THE A.O. HAS WRONGLY INVOKED PROVISIONS OF SECTION 2(47))V) OF THE ACT B ECAUSE IT DEALS WITH CONTRACTS OF PART PERFORMANCE REFERRED TO IN SECTI ON 53A OF THE TRANSFER OF PROPERTY ACT. 20. SECTION 53A OF THE TOPA PRESCRIBES FOLLOWING CU MULATIVE CONDITIONS TO BE SATISFIED FOR APPLICATION OF DOCTRINE OF 'PART P ERFORMANCE':- ITA 1588 & 1589/M/13 18 A) THERE SHOULD BE A WRITTEN CONTRACT FOR CONSIDERA TION; B) THE CONTRACT SHOULD BE SIGNED BY THE TRANSFEROR; C) THE CONTRACT SHOULD PERTAIN TO TRANSFER OF IMMOV EABLE PROPERTY; D) THE TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF T HE PROPERTY; - AS PER CLAUSE NO 14(B) POSSESSION CONTINUED WITH AP PELLANT E) THE TRANSFEREE SHOULD BE READY AND WILLING TO PE RFORM HIS PART OF CONTRACT AND F) THE CONTRACT SHOULD BE REGISTERED AS PER THE PRO VISIONS OF THE REGISTRATION ACT, 1908 (THIS CONDITION HAS BEEN INT RODUCED WITH EFFECT FROM SEPTEMBER 2001). THIS PART HAS BEEN ELA BORATED BELOW. SECTION 17(LA) OF THE REGISTRATION ACT, PROVIDES AS UNDER: 'THE DOCUMENTS CONTAINING CONTRACTS TO TRANSFER FOR CONSIDERATION, ANY IMMOVABLE PROPERTY FOR THE PURPOSES OF SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 (HEREINAFTER REFERRED TO AS 'TOPA') SHALL BE REGISTERED IF THEY HAVE BEEN EXECUTED ON OR AFTER THE COMMENCEMENT OF THE R EGISTRATION AND OTHER RELATED LAWS (AMENDMENT) ACT, 2001 AND IF SUCH DOCU MENTS ARE NOT REGISTERED THEY SHALL HAVE NO EFFECT FOR THE PURPOS ES OF SAID SECTION 53A.' 21. AMENDMENT MADE IN SECTION 53A IN 2001 IS ALSO RELEV ANT WHEREIN AN ADDITIONAL CONDITION FOR REGISTRATION OF THE WRITTE N AGREEMENT WAS INTRODUCED AS A RESULT OF WHICH IF THE AGREEMENT BETWEEN TRANS FEROR AND TRANSFEREE IS NOT REGISTERED, THE TRANSFEROR CAN DISPOSSESS THE TRANS FEREE FROM THE PROPERTY. SIMULTANEOUSLY, A CONSEQUENTIAL AMENDMENT WAS ALSO BEEN MADE IN THE REGISTRATION ACT, 1908 TO PROVIDE THAT UNLESS THE D OCUMENTS CONTAINING CONTRACTS TO TRANSFER ANY IMMOVEABLE PROPERTY FOR T HE PURPOSE OF SECTION 53A OF THE TOPA IS REGISTERED, IT SHALL NOT HAVE EFFECT FOR THE PURPOSES OF SECTION 53A OF THE TOPA. A PERUSAL OF THE SECTION REVEALS T HAT REGISTRATION OF DOCUMENT IS A SINE QUA NON FOR APPLICABILITY OF SEC TION 53A OF TOPA WHICH ENTITLES THE TRANSFEREE TO REMAIN IN POSSESSION OF THE PROPERTY. 22. IN THE INSTANT CASE, DEVELOPMENT AGREEMENT WAS EXECUTED ON STAMP PAPER OF RS. 100/- AND THE SAME WAS NOT REGISTERED, HENCE, PROVISIONS OF SECTION 2(47)(V) OF THE ACT ARE NOT APPLICABLE SINC E THE CONDITIONS STIPULATED IN SECTION 53A OF TOPA ARE FULFILLED. ITA 1588 & 1589/M/13 19 23. WITH RESPECT TO THE DECISION OF THE HON'BLE BOM BAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA, WE FOUND THAT THE SAID DECISION IS NOT APPLICABLE BECAUSE THE SAID DECISION WAS IN THE CONTEXT OF TRANSFER OF CAPITAL ASSET. ALTHOUGH THE SAID DECISION WAS RENDE RED IN FEBRUARY 2003 THE ASSESSMENT YEAR UNDER ITS CONSIDERATION WAS A.Y.199 6-97. FURTHER FOR THE PURPOSE OF ASSESSMENT OF CAPITAL GAINS IN THE SAID CASE, ALL THE CONDITIONS SPECIFIED IN SECTION 53A OF THE TOPA WERE SATISFIED . HENCE, THE JUDGMENT WAS DELIVERED QUA THE LAW PREVAILING IN THE YEAR OF THE TRANSACTION. ACCORDINGLY, THE HON'BLE BOMBAY HIGH COURT HAS DISCUSSED ALL THE CONDITIONS REQUIRED TO BE COMPLIED UNDER SECTION 53A OF THE TOPA, OTHER TH AN THE CONDITION OF REGISTRATION, SINCE THE LAW PROVIDED ONLY FIVE COND ITIONS AT THE TIME. THUS THE CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPRA) IS OF NO HELP TO REVENUE TO BRING THE TRANSACTION WITHIN THE PURVIEW OF SECTION 53A OF TOPA. AS PROVISIONS OF SECTION 53A WAS AMENDED IN 2001 BY WH ICH ADDITIONAL CONDITION OF REGISTRATION OF THE WRITTEN AGREEMENT WAS INTROD UCED AND SINCE IN THE INSTANT CASE THE AGREEMENT WAS NOT REGISTERED, THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPRA) WITH RESPECT TO RELEVANT PROVISIONS OF SECT ION 53A APPLICABLE IN A.Y. 1996-97 WILL NOT BE APPLICABLE TO THE FACTS OF INST ANT CASE. WE CAN THEREFORE SAFELY CONCLUDE THAT THE CONDITIONS STIPULATED IN S ECTION 53A OF TOPA ARE NOT SATISFIED N THE CASE OF ASSESSEE AS DISCUSSED ABOVE , THERE IS NO TRANSFER AS PER THE PROVISIONS OF SECTION 2(47) OF THE ACT. 24. IN THE INSTANT CASE THE ASSESSING OFFICER HAS I NVOKED PROVISIONS OF SECTION 2(47) (VI) OF THE ACT MERELY BECAUSE DA IS SILENT ABOUT ITS APPLICATION. IMPLIEDLY, THE ASSESSING OFFICER HAS ACCEPTED THAT IF THERE IS SPECIFIC MENTION IN DA ON ISSUE OF APPLICABILITY OF PROVISIONS OF TH E ACT, THEN SUCH PROVISION OF DA IS ACCEPTABLE. ACCORDINGLY, THE ASSESSING OFFICE R HAS ACCEPTED THAT SECTION 2(47)(VI) OF THE ACT IS NOT APPLICABLE AS IT FINDS SUCH SPECIFIC MENTION IN DA. ITA 1588 & 1589/M/13 20 25. IT IS CLEAR FROM THE ABOVE THAT THE ASSESSING O FFICER HAS OVERLOOKED THE FACT THAT DA SPECIFICALLY EXCLUDES APPLICATION OF P ROVISIONS OF SECTION 2(47)(VI) OF THE ACT IN CLAUSE 6(B) OF THE AGREEMENT. 26. WITH REGARD TO THE A.O.S CONTENTION REGARDING APPLICABILITY OF CLAUSE (VI) OF SECTION 2(47) OF THE ACT, WE FOUND THAT CLAUSE ( VI) IS APPLICABLE TO THE MEMBERS OF CO-OPERATIVE SOCIETY, COMPANY OR OTHER A OP AND AS SUCH, ARE NOT APPLICABLE TO THE ASSESSEE, BEING INDIVIDUALS. 27. IN VIEW OF ABOVE DISCUSSION WE HOLD THAT THE A. O.S ACTION FOR COMPUTING CAPITAL GAIN ON THE BASIS OF DEVELOPMENT AGREEMENT IS NOT WELL FOUNDED AND AS SUCH THERE WAS NO TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) AND 2(47)(VI) OF THE ACT. WITH REGARD TO A.O.S OBJECT ION THAT GODREJ PROPERTIES LTD. HAD ACTED UPON THE DEVELOPMENT AGREEMENT BY CONSTRU CTING ITS SITE OFFICE AND ALSO ENTERED INTO CONTRACT AGREEMENT WITH THE CONTR ACTOR, WE FOUND THAT GPL HAD MERELY CONSTRUCTED SITE OFFICE BUT NOT CARRIED OUT ANY DEVELOPMENT ACTIVITY ON THE LAND OWNED BY THE ASSESSEE IN THE P REVIOUS YEAR RELEVANT TO A.Y.2008-09. SIMILARLY, GPL HAD NOT ASSIGNED ANY CO NTRACT OR APPOINTED M/S ASHED PROPERTIES P. LTD. AS CONTRACTOR PURSUANT TO DA. IN FACT, AFTER EVALUATING THE MARKET CONDITIONS, GPL FOUND THAT TH E PROJECT AS ENVISAGED BY THE ASSESSEE WAS NOT VIABLE AND HENCE, DA WAS ANNUL LED. THIS IS EVIDENT FROM THE 2ND DA ENTERED INTO BETWEEN ASSESSEE AND GPL WH ICH FOUND PLACE AT PB PAGE 194. 28 IT IS ALSO A MATTER OF RECORD THAT GPL HAS UNDER TAKEN DEVELOPMENT OF REVISED PROJECT AND THE 2ND DA IS ALSO LATER ON REV ISED BY EXECUTING SUPPLEMENTAL AGREEMENT DATED 27.07.2012. 'THUS, DUR ING THE PREVIOUS YEAR RELEVANT TO A.Y.2008-09 UNDER CONSIDERATION, GPL HA D NOT UNDERTAKEN ANY DEVELOPMENT ACTIVITIES PURSUANT TO DA AND AS SUCH T HERE IS NO TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT. IN THIS RESPECT WE PLACE RELIANCE ON ITA 1588 & 1589/M/13 21 THE ORDER OF THE TRIBUNAL, HYDERABAD BENCH, IN THE CASE OF S. RANJITH REDDY VS. ACIT [144 ITD 461 HAVING SIMILAR FACTS. 29. WE HAVE CAREFULLY GONE THROUGH THE DEVELOPMENT AGREEMENT ENTERED INTO WITH GODREJ PROPERTIES LTD. AND FOUND THAT GOD REJ PROPERTIES LTD. HAS NOT PAID ANY SALE CONSIDERATION TO THE ASSESSEE AND AS SUCH NO SALE CONSIDERATION WAS RECEIVED BY THE ASSESSEE AGAINST THE ALLEGED SA LE OF LAND. WITH REFERENCE TO THE A.O.S OBSERVATION REGARDING VALE OF RS. 55 CRORES STATED IN THE DEVELOPMENT AGREEMENT, WE FOUND THAT THE VALUE OF R S. 55 CRORES INDICATES COST OF LAND WHICH IS NOTIONAL AND PROVIDE ONLY B ENCHMARK TO COMPUTE THE CONSIDERATION PAYABLE TO THE ASSESSEE FOR THE PURPO SE OF ADJUSTMENT OF RS. 13.75 CRORES PAID AS DEPOSIT TO THE ASSESSEE AND PR OBABLE SALES THAT MAY TAKE PLACE DURING THE PROJECT. THUS THERE WAS NEITHER AN Y SALE OF LAND NOR ANY TRANSFER OF LAND AS ALLEGED BY THE A.O. THIS VIEW I S SUPPORTED BY THE PROPOSITION LAID DOWN BY OF HYDERABAD BENCH OF ITAT IN THE CASE OF BINJUSARIA PROPERTIES P. LTD. VS. ACIT, 164 TTJ 417 . 30. THUS IN THE ABSENCE OF ANY CONSIDERATION FLOWN FROM GODREJ PROPERTIES LTD. TOWARDS THE LAND OWNED BY THE ASSESSEE AS WELL AS TOWARDS PROJECT TO BE EXECUTED, NO INCOME HAS ACCRUED TO ASSESSEE. FURTH ERMORE, KEEPING IN VIEW THE FACT THAT THERE IS NO CERTAINTY OF QUANTUM OF S ALES, NO INCOME HAS ACCRUED TO THE ASSESSEE. OUR THIS INFERENCE IS SUPPORTED BY THE PROPOSITION LAID DOWN BY MUMBAI BENCH OF ITAT IN THE CASE OF DCIT VS. MRS . HEMAL RAJU SHETE IN ITA NO. 2198/MUM/2010. 31. THE CONTENTION OF THE LD. D.R. THAT ASSESSEE HA S ACCEPTED RS. 13.75 CRORES FROM GODREJ PROPERTIES LTD. PURSUANT TO THE DEVELOPMENT AGREEMENT, THEREFORE, IT AMOUNTS TO TRANSFER OF THE LAND TO GO DREJ PROPERTIES LTD. DOES NOT FIND ANY MERIT. THERE WAS NO TRANSFER OF LAND AS PE R AMENDED PROVISIONS OF SECTION 53A OF TOPA APPLICABLE FOR THE RELEVANT A.Y . 2008-09 UNDER CONSIDERATION ACCOMPANIED BY FACT THAT THERE WAS NO TRANSFER OF POSSESSION TO ITA 1588 & 1589/M/13 22 GPL AND THE POSSESSION OF LAND WAS WITH ASSESSEE ON LY AND THE SAME HAS BEEN EXPRESSLY STATD IN CLAUSE 6 OF DEVELOPMENT AGR EEMENT. FURTHERMORE THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION FROM GO DREJ PROPERTIES LTD. BUT HAD RECEIVED ONLY DEPOSIT WHICH WAS TO BE ADJUSTE D AGAINST THE SALE OF VILLAS ON COMPLETION OF THE PROJECT. IT IS ALSO A MATTER OF RECORD THAT GODREJ PROPERTIES LTD. HAS NOT CARRIED OUT ANY CONSTRUCTIO N/DEVELOPMENT ACTIVITY AS PER THE PROJECT ENVISAGED IN DEVELOPMENT AGREEMENT RELIED ON BY A.O. WHAT WAS MENTIONED IN THE DEVELOPMENT AGREEMENT WAS ONLY THE VALUE OF LAND TO PROVIDE BENCHMARK FOR THE PURPOSE OF SHARING PROFIT S AND ADJUSTMENT OF DEPOSIT OF RS. 13.75 CRORES PAID BY GODREJ PROPERTI ES LTD. IT IS ALSO A MATTER OF RECORD THAT NEITHER A SINGLE VILLA WAS CONSTRUCTED NOR SOLD PURSUANT TO THE DEVELOPMENT AGREEMENT. IT IS ALSO A MATTER OF RECOR D THAT DEVELOPMENT AGREEMENT WHICH IS RELIED UPON BY THE A.O. FOR THE PURPOSE OF ARRIVING AT THE CONCLUSION THAT ASSEASSEE HAS EARNED CAPITAL GAINS HAS BEEN ANNULLED IN THE YEAR 2011. ACCORDINGLY, WE DO NOT FIND ANY MERIT I N THE ACTION OF A.O. MAKING ADDITION ON THE BASIS OF DEVELOPMENT AGREEMENT. 32. NOW COMING TO THE ARGUMENT OF THE LD. D.R. THAT DATE OF CONVERSION OF LAND INTO STOCK-IN-TRADE SHOULD BE TAKEN AS PER T HE BOOKS OF THE ASSESSEE I.E. APRIL, 2007. AS PER OUR CONSIDERED VIEW, THE TREATM ENT GIVEN IN THE BOOKS OF ACCOUNT IS NOT A SOLE FACTOR TO DETERMINE THE YEAR IN WHICH LAND WAS CONVERTED INTO STOCK-IN-TRADE BUT SERIES OF EVENTS UNDERTAK EN, FACTS AND CIRCUMSTANCES OF THE CASE WHICH ARE VERY MUCH RELEVANT WHILE CONS IDERING THE YEAR IN WHICH CAPITAL ASSET IS CONVERTED INTO STOCK-IN-TRADE. THUS DEVELOPMENT AGREEMENT HAS TO BE HARMONIOUSLY CONSTRUED WITH REF ERENCE TO THE RELATED FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE REACHI NG TO THE CONCLUSION, WE CANNOT FORGET THE FACT THAT THE OWNERSHIP AND POSSE SSION OF LAND WERE ALWAYS RETAINED WITH THE ASSESSEE AND THE SAME HAS BEEN EX PRESSLY STATED SO IN CLAUSE 6 OF THE DEVELOPMENT AGREEMENT. THE ASSESSE E HAS NOT RECEIVED ANY CONSIDERATION FROM GODREJ PROPERTIES LTD. NOR WAS T HERE ANY ASSURANCE ABOUT ITA 1588 & 1589/M/13 23 PROFIT GIVEN BY THE GODREJ PROPERTIES LTD. IN THE P ROJECT, THE PROJECT HAD NOT MATERIALIZED AND ULTIMATELY DEVELOPMENT AGREEMENT W AS ANNULLED IN 2011. IF WE ANALYSE ALL THESE FACTS, WE CAN SAFELY CONCLUDE THAT THERE WAS NEITHER ANY TRANSFER OF LAND TO GODREJ PROPERTIES LTD. NOR ANY GAINS ARISEN TO THE ASSESSEE DURING THE RELEVANT A.Y. 2008-09 UNDER CONSIDERATIO N. 33. THE LD. D.R.S CONTENTION THAT ASSESSEE HAD ENT ERED INTO SHAM TRANSACTION, WE FOUND THAT NEITHER IT IS THE CASE O F A.O. NOR THAT OF LD. CIT(A) THAT THE ASSESSEE HAS ENTERED INTO ANY SHAM TRANSAC TION TO AVOID ANY TAX. ACCORDINGLY, THIS CONTENTION OF THE LD. D.R. CANNOT BE ACCEPTED AT THIS JUNCTURE. EVEN OTHERWISE, IF THE DEVELOPMENT AGREE MENT IS TO BE IGNORED, THERE IS NO TRANSFER AND NO INCOME AS THE A.O. AS W ELL AS LD. CIT(A) HAVE COMPUTED AND TAXED THE ASSESSEE ON THE BASIS OF DEV ELOPMENT AGREEMENT ONLY. 34. IN VIEW OF THE ABOVE DISCUSSION, THE A.O. IS DI RECTED TO DELETE THE CAPITAL GAINS COMPUTED IN THE HANDS OF THE ASSESSEE. 35. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2015. !' # $% &! ' 25-2-15 ( ) SD/- SD/- (VIVEK VARMA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 25-02-2015 [ .6../ RK , SR. PS ITA 1588 & 1589/M/13 24 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 8,, MUMBAI 4. 7 / CIT -4, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI H BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI